Deed Restrictions

Diamondback Funding, LLC v Chili's of Wisconsin, 276 Wis 2d 81, 687 NW2d 89 (Wis App Ct 2004).

Facts: Diamondback Funding's corporate affiliate operates a Mexican restaurant on a lot purchased from Home Depot. Home Depot agreed to create a deed restriction on its other lot, as part of the sale, prohibiting any theme-type restaurants specializing in Mexican food. Home Depot later sold the other lot to Rose Properties, and the parties agreed that no portion of the lot may be used for a Mexican restaurant and that the restriction was to run with the land. Around two years later, Home Depot and Rose modified the deed restriction to allow the operation of a Chili's Grill & Bar (Chili's) on the lot. Diamondback Funding was not a party to the modifications. Rose then sold the lot to Chili's.

Diamondback Funding filed a complaint seeking to enjoin Chili's from operating its restaurant on the lot. The trial court granted summary judgment to Chili's, finding that the "specializing in Mexican food" language was too ambiguous to be enforceable because a jury would be reasonably unable to come to consensus as to its meaning. Diamondback Funding appealed.

On appeal, Diamondback Funding argued that the purported modification allowing the operation of a Chili's restaurant was invalid because Diamondback was not a party to the modification, did not consent to it, and the modification negated a contract provision it agreed to that was for its benefit. Chili's argued that the "specializing in" and "primarily" language of the deed restrictions was too ambiguous to be enforceable.

Holding: Reversed. The court held that the modification to the restrictive covenant was a nullity because Diamondback was a third-party beneficiary of the restrictive covenant and not included in the modification agreement. Furthermore, the language "specializing in" or "primarily" is not too ambiguous to be enforceable because fact finders commonly make similar determinations, such as "beyond a reasonable doubt" or "ordinary care."

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