Red Rock Granite, Inc. v. Kafka Properties, LLC

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
February 9, 2021
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2019AP1633 Cir. Ct. No. 2019CV43

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT III

RED ROCK GRANITE, INC.,

PLAINTIFF-APPELLANT,

V.

KAFKA PROPERTIES, LLC,

DEFENDANT-RESPONDENT.

APPEAL from a judgment of the circuit court for Marathon County:
MICHAEL K. MORAN, Judge. Affirmed.

Before Stark, P.J., Hruz and Seidl, JJ.

Per curiam opinions may not be cited in any court of this state as precedent

or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).

¶1 PER CURIAM. Red Rock Granite, Inc., (Red Rock) appeals from a
summary judgment that dismissed its claim seeking enforcement of a restrictive
No. 2019AP1633

covenant against Kafka Properties, LLC. We conclude that Red Rock’s materials
filed in opposition to summary judgment failed, as a matter of law, to establish a
violation of the restrictive covenant. Accordingly, we affirm.

BACKGROUND

¶2 The restrictive covenant at issue in this case was agreed upon and
recorded by predecessors in interest to the current parties. The covenant provides,
in relevant part, that the owner of the property subject to the covenant agrees “not
to mine, excavate, sever, sell or remove nonmetallic minerals upon, within or
under the surface” of the property.

¶3 In 2018, Kafka Properties, LLC, purchased a portion of the property
subject to the restrictive covenant, referred to as Lot One. A related entity,
Kafka Granite, LLC, (Kafka) thereafter took possession of Lot One and
constructed a mineral fabrication facility upon it. At the facility, Kafka processes
large blocks of granite, marble and quartz quarried off-site into finished products,
such as stone veneer, for use in building construction projects. Kafka stores the
finished products on Lot One for some time before transportation to other
locations for distribution or sale. Both finished and unfinished rocks stored
outside on Lot One are visible from an adjacent state highway.

¶4 Kafka does not conduct any ongoing mining or quarrying activities
on Lot One. However, during the construction of the facility and an adjacent
parking lot, Kafka excavated a substantial amount of dirt containing nonmetallic
minerals from Lot One and transported the excavated dirt to a nearby property that
it also owns. Kafka crushes and sells rock on that nearby property.

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¶5 Red Rock sued Kafka alleging an ongoing violation of the restrictive
covenant. Kafka moved for summary judgment supported by an affidavit denying
that it was engaging in any of the activities prohibited by the restrictive covenant.
Red Rock did not conduct any discovery, but it filed affidavits opposing the
motion. In its affidavits, Red Rock asserted that: (1) the intent of the restrictive
covenant was to “prohibit all commercial activity on the Restricted Property that
would adversely impact … [Red Rock] in any way”; (2) splitting larger rocks into
smaller pieces by a mechanical means is an “integral part of mining and selling
rock to the general public”; and (3) the only purpose for displaying finished and
unfinished rock to the public along the highway is to advertise products as part of
the sales process.

¶6 The circuit court rejected Red Rock’s proposed construction of the
restrictive covenant as prohibiting “all commercial activity” adversely impacting
Red Rock in any way, characterizing it as an overly broad expansion of the
specifically enumerated prohibited activities. The court concluded that none of the
activities Kafka was engaged in constituted any of those enumerated activities. It
explained:

Mining is the process by which rock is removed from the
earth. Selling is the transaction by which ownership of the
rock is transferred. Finishing the rock can only happen
after the rock has been mined, and it will generally happen
before the rock has been sold. (In any event, the finishing
process has no effect on ownership.) Likewise, “selling”
cannot reasonably be viewed as including the act of storing
or displaying rock on the property. Selling refers to the
transfer of ownership, not the steps that might precede such
a transfer, including advertising or display.

….

[T]he term “sever” must, in [the context of the list in which
it appears] refer to severing minerals from the property.

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¶7 The circuit court further determined that to the extent the term
“sever” was subject to an alternative, albeit “strained,” reading proposed by
Red Rock that would include severing minerals from themselves, the restrictive
covenant was ambiguous and unenforceable. The court then granted summary
judgment in Kafka’s favor and dismissed Red Rock’s claim.

DISCUSSION

¶8 This court reviews a summary judgment decision de novo, using the
same methodology as the circuit court. Water Well Sols. Serv. Grp. v.
Consolidated Ins. Co., 2016 WI 54, ¶11, 369 Wis. 2d 607, 881 N.W.2d 285. We
examine the parties’ submissions in support of and in opposition to the summary
judgment motion to determine whether the movant has made a prima facie case for
judgment and, if so, whether there are any material facts in dispute that would
entitle the opposing party to a trial. Frost v. Whitbeck, 2001 WI App 289, ¶6, 249
Wis. 2d 206, 638 N.W.2d 325; see also WIS. STAT. § 802.08(2) (2017-18).1

¶9 When a motion for summary judgment is made and supported with
appropriate evidentiary materials, “an adverse party may not rest upon the mere
allegations or denials of the pleadings.” WIS. STAT. § 802.08(3). If the adverse
party does not respond with affidavits made upon personal knowledge, answers to
interrogatories, and other documents or materials that would be admissible in
evidence, summary judgment shall be entered against such party. Id.

1
All references to the Wisconsin Statutes are to the 2017-18 version unless otherwise
noted.

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¶10 Generally speaking, “[c]ourts use the rules of contract interpretation
to ascertain the meaning of restrictive covenants.” Solowicz v. Forward Geneva
Nat’l, 2009 WI App 9, ¶42, 316 Wis. 2d 211, 763 N.W.2d 828 (2008), aff’d, 2010
WI 20, 323 Wis. 2d 556, 780 N.W.2d 111. When the meaning of a contract can be
determined from its face with “reasonable certainty,” a court need not consider
evidence beyond the contract and should enforce the clear language itself. Id.
Deed restrictions, however, are generally disfavored by Wisconsin law. Public
policy therefore requires that the language in a restrictive covenant “be strictly
construed to favor unencumbered and free use of property.” Forshee v.
Neuschwander, 2018 WI 62, ¶16, 381 Wis. 2d 757, 914 N.W.2d 643 (citation
omitted).

¶11 Here, both parties contend that the terms of the restrictive covenant
are clear and unambiguous, even though they each advance different
interpretations of the covenant and its application to the facts of this case.
Red Rock asserts that the plain purpose of the covenant was to protect it from
commercial activity on that land that would adversely affect its economic interests.
Red Rock then argues that Kafka violated the covenant by excavating and
removing dirt containing nonmetallic minerals from Lot One incident to the
construction of the fabrication facility and then selling the excavated minerals
from another location. Red Rock further argues that Kafka continues to violate the
covenant by displaying finished rocks outside of the facility in order to advertise
them as part of the “selling process.”

¶12 Kafka asserts that the plain purpose of the covenant was to prohibit
quarrying activity on Lot One. It argues that removing dirt incident to
construction was not quarrying activity and, therefore, it did not constitute the
excavation and removal of minerals. Kafka further contends that the covenant

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does not prohibit it from selling the incidentally excavated minerals from another
site, or from selling minerals quarried off-site on Lot One.

¶13 We conclude that the terms of the restrictive covenant are
unambiguous, although we do not fully agree with the interpretations advanced by
either party. In particular, Red Rock’s assertion that the covenant prohibits
commercial activity on the land that would harm its economic interests is too
broad because the covenant makes no mention of competition and does not define
Red Rock’s business. Conversely, Kafka’s assertion that the covenant restricts
only quarrying activity is too narrow, because mining and excavation may be
broader than quarrying, and selling may occur without quarrying.

¶14 The noscitur a sociis canon of construction provides that “words
grouped in a list should be given related meaning.” Third Nat’l Bank in
Nashville v. Impac Ltd., Inc., 432 U.S. 312, 322 (1977). In relation to
“nonmetallic minerals upon, within or under the surface” of Lot One, the list of
terms “mine, excavate, sever, sell or remove” plainly refer both to physically
separating any nonmetallic minerals originating on the property from the property
and to selling any minerals originating on the property.

¶15 Here, the parties agree that merely removing dirt from Lot One
incident to construction would not violate the covenant. Red Rock maintains,
however, that selling minerals contained in the excavated dirt violated the
covenant. The problem with Red Rock’s contention is that there is nothing in the
summary judgment materials evidencing that Kafka actually sold any of the
excavated minerals.

¶16 Red Rock’s affidavits averred generally that Kafka made sales from
the property to which the excavated dirt had been transferred, but they did not cite

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a single sale that involved minerals originating on Lot One. Red Rock’s general
assertion was insufficient to rebut Kafka’s more specific assertion that it processed
only rocks quarried off-site in its facility on Lot One before sending them for sale
on its other property. Moreover, even if there was a basis to conclude that Kafka
violated the restrictive covenant, Red Rock’s general assertion did not provide any
basis for a damages award.

¶17 Red Rock now claims that it is entitled to conduct discovery in order
to determine the amount of nonmetallic minerals contained in the excavated dirt
sold, and its sale price. However, our review of the circuit court’s decision is
based upon what was before the court at the time its decision was made.
Red Rock could have asked the court for additional time to conduct discovery
before proceeding on the summary judgment motion. See WIS. STAT. § 802.08(4).
It did not.

¶18 Next, Red Rock argues that selling is a process that involves more
than the transfer of ownership—it necessarily includes offering products for sale.
Even if there is some truth in that statement, we would distinguish between sales
activities involving specific customers and advertising to the general public.
There is nothing in the summary judgment materials to suggest that Kafka’s
employees ever brought or allowed potential customers onto the property to view
the piles of rock stored there. To the extent that the mere visibility of its products
could be considered a form of advertising, we agree with Kafka that such
advertising did not constitute “selling” in violation of the covenant, particularly
given the disfavor with which restrictive covenants are viewed under Wisconsin
law. We conclude that the circuit court properly granted summary judgment in
Kafka’s favor.

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By the Court.—Judgment affirmed.

This opinion will not be published. See WIS. STAT.
RULE 809.23(1)(b)5.

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