Case Title: REICHERT v WEEDEN

Citation: 

Docket Number: 80-008

State: montana

Court: Montana Supreme Court

Date: 1980-11-03T00:00:00Z

Document:
N o . 80-08 I N THE S U R P E M E COURT O F T H E STATE O F M O N T A N A 1980 DAVID REICHERT and IRENE L. REICHERT, P l a i n t i f f s and Appellants, -vs- WILLIAM W E E D E N , MARINETTE W E E D E N , JAMES HERTZ, C O N S T A N C E HERTZ, P A U L STRAW, e t a l . , Defendants and Respondents. Appeal from: D i s t r i c t Court of t h e T h i r t e e n t h J u d i c i a B D i s t r i c t , I n and f o r t h e County of Yellowstone, The Honorable Robert H. Wilson, Judge presidinq. Counsel of Record: For Appellant: Berger, Anderson, S i n c l a i r & Murphy, B i l l i n g s , Montana Donald Molloy argued, B i l l i n g s , Montana For Respondent : Crowley, Haughey, Hanson, Toole & D i e t r i c h , B i l l i n g s , Montana Jack R a m i r e z argued, B i l l i n g s , Montana Submitted: September 12, 1980 $'$"/ j - ' I ! Filed: d % : 3 Mr. Justice John Conway Harrison delivered the Opinion of the Court. This is an appeal from the District Court of the Thirteenth Judicial District which upheld the validity of a document entitled "Agreement and Land Use Restrictions" and granted summary judgment allowing the agreement to be enforced by the defendants against the plaintiffs. We will address the following issues on this appeal: 1. Whether a valid and enforceable covenant running with the land can be created by written agreement and in the absence of a formal "grant" of an estate in land, and whether the covenants contained in the written agreement between the parties were intended to and do run with the land, so that plaintiffs and any subsequent purchasers or assignees are obligated to perform those covenants. 2 . Whether the written agreement between the parties purporting to be restrictions on land use violates a statute which prohibits a contract in restraint of trade. Plaintiffs, the Reicherts, own property in Yellowstone County upon which they operate a restaurant and bar known as the Echo Inn. Plaintiffs acquired this property in 1970 by a warranty deed. Defendants are various resident landowners in the vicinity of the Echo Inn, although none of them own land immediately adjacent thereto. In 1969 plaintiffs applied for a liquor license for the premises, which was conditionally approved. Defendants filed a complaint with the Montana Liquor Control Board in 1970 protesting the approval of plaintiffs' application. The Board denied their request for relief. Defendants then appealed to the District Court, and during the pendency of the action, the liquor license application was stayed. Defendants and other area landowners proceeded simultaneously on a second front by filing a petition with the Yellowstone County Commissioners for the creation of a county planning and zoning district. Such a district was created on August 25, 1970, and thereby prohibited use of any property within the district--including the Echo Inn--for any use other than single family residential. Plaintiffs appealed the resolution of the County Commissioners creating the zoning district to the District Court. In settlement of these controversies, the parties entered into an agreement on December 28, 1970, pursuant to which defendants consented to judgment in the pending District Court actions and agreed not to challenge the use of the property as a restaurant and bar for a period of ten years. This agreement was recorded and provides that the plaintiffs' property shall not be used for the sale of beer or liquor after January 1, 1981, and that the covenants "shall run with the land and bind thejresent owners and their heirs and assigns." (Emphasis supplied.) Plaintiffs brought this action in 1979 to have the agreement declared void and not enforceable. The pertinent section of the agreement states: "IT IS FURTHER AGREED, that the covenants, promises, and restrictions set forth in this ....................... agreement shall run with the land and bind the - - present owners, their heirs - - - - - and assigns; and any and allparties claiming - by, through, or under them, shall - be taken to agree and covenant with each of the parties to this aqreement, his heirs and assiqns, to conform to the covenants. promises, -and restrictions as to the use of the above described real property and the improvements thereon. Each of the parties to this agreement, his heirs and assigns, shall have the right to sue for and obtain an injunction, prohibitive or mandatory, to prevent the breach of, or to enforce t h e observance o f , t h e covenants, promises, and r e s t r i c t i o n s s e t f o r t h above, i n a d d i t i o n t o t h e o r d i n a r y l e g a l a c t i o n f o r damages; and t h e f a i l u r e of any of t h e p a r t i e s , h i s h e i r s and a s s i g n s , t o e n f o r c e t h i s a g r e e m e n t a t t h e t i m e o f a n y v i o l a t i o n t h e r e o f s h a l l n o t be c o n s t r u e d a s a waiver of t h e r i g h t t o do s o . The r e s t r i c t i o n s c o n t a i n e d h e r e i n concerning t h e u s e of t h e above d e s c r i b e d r e a l p r o p e r t y and t h e i m p r o v e m e n t s t h e r e o n cannot be changed w i t h o u t t h e unanimous w r i t t e n consent of a l l of t h e p a r t i e s t o t h i s agreement, t h e i r h e i r s and a s s i g n s , s a i d c o n s e n t t o be d u l y acknowledged and recorded i n t h e o f f i c e of t h e C l e r k and Recorder of Yellowstone County, Montana. The term ' h e i r s and a s s i g n s ' a s used i n t h i s agreement s h a l l i n c l u d e t h e d e v i s e e s and t r u s t e e s of t h e p a r t i e s . " (Emphasis added.) The agreement's purpose and scope is c l e a r . The d o c u m e n t ' s l e n g t h y and d e t a i l e d n a t u r e p r e c l u d e s a n y c h a l l e n g e a s t o i t s meaning o r t h e i n t e n t of t h e p a r t i e s . The "Agreement and Land Use R e s t r i c t i o n s " v o l u n t a r i l y e n t e r e d i n t o almost t e n y e a r s ago by t h e p a r t i e s , each w i t h t h e a d v i c e of c o u n s e l , is v a l i d and b i n d i n g on each of t h e p a r t i e s and t o t h e i r s u c c e s s o r s i n i n t e r e s t . The agreement was e x p r e s s l y intended t o c o n s t i t u t e a covenant running w i t h t h e l a n d and t o bind t h e p r e s e n t owners, t h e i r h e i r s and a s s i g n s . Having been f i l e d a s a m a t t e r of r e c o r d i n Yellowstone County, t h a t agreement is, i n f a c t , a covenant running w i t h t h e p l a i n t i f f s ' p r o p e r t y and c r e a t e d a n e g a t i v e easement i n f a v o r of d e f e n d a n t s . The p r e s e n t d i s p u t e a r i s e s when p l a i n t i f f s , owners of t h e s e r v i e n t tenement, contends t h a t a " g r a n t " of an e s t a t e is a s t a t u t o r y requirement f o r t h e c r e a t i o n of a covenant running w i t h t h e l a n d , and s i n c e d e f e n d a n t s d i d n o t g r a n t an i n t e r e s t of t h e land t o p l a i n t i f f s , t h e agreement is n o t e n f o r c e a b l e . S e c t i o n 70-17-201, MCA, s t a t e s : " C e r t a i n covenants c o n t a i n e d i n g r a n t s of e s t a t e s i n r e a l p r o p e r t y a r e a p p u r t e n a n t t o such e s t a t e s and p a s s w i t h them s o a s t o bind t h e a s s i g n s of t h e covenantor and t o v e s t i n t h e a s s i g n s of t h e covenantee i n t h e same manner a s i f t h e y had p e r s o n a l l y e n t e r e d i n t o them. Such covenants a r e s a i d t o run w i t h t h e l a n d . " S e c t i o n 70-17-203(1), MCA, s t a t e s : "Every covenant c o n t a i n e d i n a g r a n t of an e s t a t e i n r e a l p r o p e r t y , which is made f o r t h e d i r e c t b e n e f i t of t h e p r o p e r t y o r some p a r t of it t h e n i n e x i s t e n c e , r u n s w i t h t h e l a n d . " P l a i n t i f f s i n s i s t t h a t no covenant r u n s w i t h t h e land and w i l l n o t be binding u n l e s s c e r t a i n words a r e c o n t a i n e d i n t h e document. S i n c e t h o s e words a r e n o t found i n t h i s document, they m a i n t a i n t h a t no g r a n t of an e s t a t e i n r e a l p r o p e r t y took p l a c e , and t h e covenants do n o t run w i t h t h e land. W e d i s a g r e e . P l a i n t i f f s were aware of t h e i r a c t i o n s , and t h e i r i n t e n t was c l e a r . Not o n l y d i d t h e y g r a n t away a p r e s e n t i n t e r e s t , b u t a l s o a f u t u r e i n t e r e s t t h a t w i l l bind t h e i r h e i r s and a s s i g n s . T h i s i n t e r e s t i n t h e l a n d is t h e r i g h t t o s e l l l i q u o r o r o p e r a t e a bar on t h e land a f t e r a p a r t i c u l a r d a t e . P l a i n t i f f s took away from t h e l a n d t h a t i n t e r e s t and conveyed it t o d e f e n d a n t s by means of a w r i t t e n , recorded agreement. They gave away an i n t e r e s t i n t h e land by c r e a t i n g a n e g a t i v e easement binding n o t o n l y themselves, b u t t h e i r h e i r s and a s s i g n s . Montana r e c o g n i z e s n e g a t i v e easements. Northwestern Improvement Co. v. Lowry ( 1 9 3 7 ) , 104 Mont. 289, 66 P.2d 792. A n e g a t i v e easement c r e a t e d by an agreement, a deed o r a l e a s e is e n f o r c e a b l e a g a i n s t g r a n t e e s o r p u r c h a s e r s of t h e s e r v i e n t tenement. Easements may be c r e a t e d by a c o n t r a c t o r covenant; such agreements a r e g r a n t s i n e f f e c t . Montana s t a t u t e s a l l o w f o r t h e c r e a t i o n of covenants and easements governing t h e r i g h t t o t r a n s a c t b u s i n e s s on land. S e c t i o n 70-17-101(6), MCA. P l a i n t i f f s ' p r e s e n t c l a i m s t h a t t h e m a g i c a l words " g r a n t o r convey" were n o t used, cannot now be used by them t o s e t a s i d e t h a t which t h e p a r t i e s intended and l a t e r e n t e r e d i n t o . "The term 'conveyance' a s used [ h e r e ] . . . embraces e v e r y i n s t r u m e n t i n w r i t i n g by which any e s t a t e or i n t e r e s t i n r e a l p r o p e r t y is c r e a t e d , a l i e n e d , mortgaged, o r encumbered o r by which t h e t i t l e t o r e a l p r o p e r t y may be a f f e c t e d . . ." S e c t i o n 70-21-301, MCA. T h i s d e f i n i t i o n of a conveyance of r e a l p r o p e r t y is s u f f i c i e n t l y comprehensive t o i n c l u d e t h e w r i t t e n agreement t h a t placed a covenant on t h e r e a l p r o p e r t y which is t h e b a s i s of t h e p r e s e n t c o n t r o v e r s y . Kosel v. Stone ( 1 9 6 5 ) , 146 Mont. 218, 404 P.2d 894. A n e g a t i v e easement can be c r e a t e d by a g r a n t o r a g r e e m e n t , t h e a g r e e m e n t b e i n g c o n s t r u e d a s a g r a n t , and is binding upon p u r c h a s e r s of t h e s e r v i e n t tenement who have a c t u a l o r c o n s t r u c t i v e n o t i c e of it. I n an e a r l i e r Montana c a s e , Orchard Homes D i t c h Co. v. Snavely ( 1 9 4 5 ) , 117 Mont. 484, 489, 159 P.2d 521, 523, i n comparing t h e s i m i l a r i t i e s of p r e s e n t C a l i f o r n i a law w i t h Montana law, t h i s Court quoted f a v o r a b l y from a t r e a t i s e i n t e r p r e t i n g t h e C a l i f o r n i a law. ". . .although t h e Code of C a l i f o r n i a p r o v i d e s t h a t a covenant can n o t be made t o run w i t h t h e l a n d e x c e p t where s u c h c o v e n a n t i s made i n connection w i t h and a s a p a r t of t h e conveyance o r t r a n s f e r of t h e l a n d i t s e l f , an e x p r e s s agreement t h a t such a covenant s h a l l r u n w i t h and -- b i n d t h e l a n d is e f f e c t u a l . . ." (Emphasis added.) T h u s , a n e g a t i v e e a s e m e n t may b e c r e a t e d by a n agreement executed by an owner of t h e s e r v i e n t tenement, j u s t a s it may be c r e a t e d through a conveyance o r a l e a s e . The e a s e m e n t is a t t a c h e d t o t h e l a n d and b i n d s a l l subsequent p u r c h a s e r s who have c o n s t r u c t i v e n o t i c e of t h e easement. The written agreement creating the negative easement is recorded; all subsequent purchasers have constructive notice thereof, and the easement may be enforced against them. See Northwestern Improvement Co. v. Lowry, supra. Finally, plaintiffs contend the "Agreement and Land Use Restrictions" at issue restrains plaintiffs from exercising a lawful profession and, as such, is void as a violation of section 28-2-703, MCA: "Any contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, otherwise than is provided for by section 28-2-704 or 28-2-705, is to that extent void. " We do not find any credence in this argument. The agreement created a negative easement on a particular piece of property. The restrictive covenants run with the land and not with plaintiffs. The restrictive covenants' purpose is not designed to prevent competition. Their purpose is to insure that the area remains as single family residential. A recognized restraint of the right to do business does exist with the proper creation of a negative easement. Northwestern Improvement Co. v. Lowry, supra. The agreement is not merely a personal contract between the parties, but creates a property interest which is not within the scope of the statute. Plaintiffs are not restricted from conducting a lawful profession. On the contrary, its purpose is to limit a particular conduct on a particular piece of land. The agreement between the par ties does not restrict plaintiffs' ability to conduct any trade or business and does not purport to prevent plaintiffs from engaging in the business of selling alcoholic beverages. If plaintiffs wish to transfer their license to another location, or apply for a new license for another location, they are free to do so. The agreement between the parties only states that plaintiffs may not use their piece of property in Echo Canyon for the operation of a liquor business. Affirmed. We concur: w Chief Justice f-', / Justices i Y