Case Title: Arkansas State Highway Commission v. McNeill

Citation: 381 S.W.2d 425

Docket Number: 5-3274

State: arkansas

Court: Arkansas Supreme Court

Date: 1964-06-01T00:00:00Z

Document:
381 S.W.2d 425 (1964) ARKANSAS STATE HIGHWAY COMMISSION, Appellant, v. Troy McNEILL et ux., Appellees. No. 5-3274. Supreme Court of Arkansas. June 1, 1964. Rehearing Denied September 14, 1964. Mark E. Woolsey and Don Langston, Little Rock, for appellant. Hardin, Barton & Jesson, Ft. Smith, for appellees. GEORGE ROSE SMITH, Justice. This is a suit by the appellees, Troy McNeill and his wife, to enjoin the State Highway Commission from constructing a cloverleaf interchange upon a highway near the McNeills' home, unless the Commission first files a bond to secure any damages that the McNeills may suffer as a result of the construction. The Commission contends that the presence of the completed interchange will not cause any legally compensable damage to the plaintiffs. The chancellor, rejecting this defense, granted the injunction but withheld any determination of the McNeills' damages until the principal question has been decided by this court. The McNeills own a residence in Crestview Estates, an addition to Fort Smith. The Crestview bill of assurances provides that property in the addition shall be used only for residential purposes. The highway department does not propose to take any of the appellees' land. It is, *426 however, acquiring a tract that is comprised of eleven lots within the addition and that abuts the appellees' north boundary line. When the interchange is completed the area behind the McNeills' home will be a busy highway instead of a quiet residential district. Expert witnesses testified that this transition will diminish the value of the plaintiffs' property by $10,000 or more. In their complaint the McNeills bottomed their right to damages upon two separate grounds: First, the value of their property would be reduced by the presence of the highway, with its attendant noise, dust, fumes, glaring lights, and vibration. Secondly, the value of their property would be reduced by the highway department's violation of the residential restriction contained in the bill of assurances. The chancellor rejected the first count in the complaint but upheld the second count. There is no appeal from the trial court's denial of compensation upon the first count. In fact, in the oral argument counsel for the landowners candidly conceded that this count does not state a cause of action. Despite the fact that the merits of the first count are not now in issue we think it best to begin our discussion by considering this count, for our decision upon the main question is really based upon the lack of merit in the first count. It is well settled in Arkansas that a landowner whose land is not being taken is not entitled to compensation for damage of the same kind as that suffered by the public in general, even though the inconvenience and injury to the particular landowner may be greater in degree than that to others. Hot Springs R. Co. v. Williamson, 45 Ark. 429, aff'd 136 U.S. 121, 10 S. Ct. 955, 34 L. Ed. 355; Little Rock & H. S. W. R. Co. v. Newman, 73 Ark. 1, 83 S.W. 653. On the other hand, a compensable injury occurs when there is a special damage to the plaintiff, as by a change in the grade of the street abutting his property or by a destruction of his access to a public street. Campbell v. Ark. State Highway Comm., 183 Ark. 780, 38 S.W.2d 753. It cannot be doubted that the first count in the McNeills' complaint does not state a cause of action. They merely assert that after the project has been completed their back property line will border a public highway rather than a privately owned residential lot. Such an inconvenience is of the same nature as that suffered by the public in general whenever a highway is built in a residential district. There is no cause of action in the landowner for the resulting diminution in the value of his property. We turn to the principal issue: Does the fact that the proposed interchange will violate the restrictive covenant render the appellant liable for the decrease in the market value of the McNeills' property? This problem has arisen in some twenty jurisdictions, with the decisions about equally divided between the allowance of compensation and its denial. The cases are discussed in Nichols, Eminent Domain (3d Ed.), § 5.73, and in a Comment, 53 Mich.L.Rev. 451. When compensation is allowed it is ordinarily measured by the diminution in market value. United States v. Certain Land in City of Augusta, D.C. Maine, 220 F. Supp. 696; United States v. 11.06 Acres, D.C.Mo., 89 F. Supp. 852; Town of Stamford v. Vuono, 108 Conn. 359, 143 A. 245; Johnstone v. Detroit, G. H. & M. R. R., 245 Mich. 65, 222 N.W. 325, 67 A.L.R. 373. The American Law Institute indicates that compensation may be proper in some instances, but it refuses to express an opinion about the correct measure of damages. Restatement, Property, § 566. Many of the decisions denying compensation are discussed in Anderson v. Lynch, 188 Ga. 154, 3 S.E.2d 85, 122 A.L.R. 1456. The courts seem to have had some difficulty in finding a sound basis for refusing an award, some saying that the plaintiff has no property interest in the land being taken, others that the restrictive *427 covenant does not confer a property right, and still others that the public power of eminent domain should not be impaired by private contract. We have no quarrel with an award of compensation if, as in Missouri, the same award would have been made if there had been no restrictive covenant. Peters v. Buckner, 288 Mo. 618, 232 S.W. 1024, 17 A.L.R. 543. But, as we have seen in considering the first count in the appellees' complaint, that is not the law in Arkansas. Any cause of action asserted by the McNeills must rest solely upon the breach of the restriction. In those jurisdictions where, as here, compensation would be denied in the absence of a restriction, the decisions approving an award on the basis of the restriction alone are, in our opinion, demonstrably wrong. We need not, however, adopt the somewhat dubious reasons that have been given for the denial of compensation. We think the problem is essentially a simple one in causation. It seems almost too plain for argument that the reduction in the value of the McNeills' property is attributable not to the breach of the restriction but rather to the fact that a highway is about to pass through a residential district. Suppose, for example, that this addition, Crestview Estates, had been developed in exactly the same way that it was actually developed, as a residential district, but without any such restriction in the bill of assurances. If the interchange had then been constructed the McNeills' damage, as far as the pleadings and proof indicate, would have been the same to the penny as if the restriction had existed. Yet it would not have been compensable. Thus it is illogical to permit a recovery upon the theory that the breach of covenant is the proximate cause of the injury. Another illustration to demonstrate the fallacy in the decisions allowing compensation: Assume the existence of a purely residential area that is in part restricted and in part unrestricted. If a highway should be constructed just within the restricted section the landowners on that side of the highway would receive compensation while those on the other side, although suffering identical damage, would be without a remedy. Under such a rule it is evident that whenever the owners of property in an unrestricted neighborhood learn that a throughway is coming in their direction it is to their advantage to enter into an agreement imposing restrictions. In that way, by merely signing a piece of paper which they may destroy at will, they are able to pluck valuable causes of action from the thin air. We do not deny the existence of a property right in the appellees. It may be that the restrictive covenant gave added value to their land when they bought it. But it is not the breach of the covenant alone that is causing their damage. This same tract, instead of being taken for a highway, might have been condemned by the city as a site for a public park. That too would have involved a breach of covenant, but the value of the appellees' property might actually have been enhanced. Thus there is no logical basis for attributing the appellees' present damage to the naked breach of covenant. Even without the restriction their injury would still have occurred. We cannot permit an irrelevant clause in the bill of assurances to create a fictitious cause of action. Reversed and dismissed. McFADDIN, Justice (dissenting). I respectfully but vigorously dissent because, as I see it, a valuable property right is being taken from the appellees by the State Highway Commission and this Court is refusing to allow the appellees any compensation for such valuable property right, and all this in spite of Art. 2, § 22 of our Constitution, which says: "The right of property is before and higher than any constitutional *428 sanction; and private property shall not be taken, appropriated or damaged for public use, without just compensation therefor." In 1955 an exclusive residential addition was developed in Fort Smith called "Crestview Estates Addition," and the bill of assurance under which each lot in the district was sold contained these provisions, inter alia: Every lot in Crestview was bound by the restrictive covenants above recited, one of which was that no lot would be used for any purpose except for a residence. Naturally, this restrictive covenant rendered the lots most valuable for residential purposes. In 1957 the appellees, Mr. and Mrs. McNeill, purchased a lot and a half in Crestview and erected thereon their home in which they now live. In 1962 the Arkansas State Highway Commission purchased, by warranty deed, eleven lots in said Crestview Addition, and each lot was bound by the restrictive covenant that no lot would be used except for a residence. The Arkansas State Highway Commission purchased these lots for the deliberate use of a highway and not for residential purposes, thus deliberately intending to violate the said restrictive covenant on each lot. Is the State and its agencies above the law and superior to the rights of private persons? The Constitution answers this question in the negative in the quotation I have above given. I think the Sovereign should deal fairly with its subjects, and I decry any attempt to allow the Sovereign to buy property like a private person and then claim rights superior to private persons. The Majority Opinion says this is the issue: "Does the fact that the proposed interchange will violate the restrictive covenant render the appellant liable for the decrease in the market value of the McNeills' property?" I unhesitatingly answer this question in the affirmative. A restrictive covenant such as we have here is a property right. Such was impliedly recognized in Linder Corp. v. Pyeatt, 222 Ark. 949, 264 S.W.2d 619. See also 14 Am.Jur. 609, "Covenants" § 194. So the appellees have a property right that has been damaged. That the appellees are suffering damages different from the general public seems to me to be crystal clear. Any person owning a lot in Crestview had a property right against every other lot in Crestview. The general public had no such right: the restriction *429 was owned only by lot owners in Crestview; and that, to my way of thinking, distinguishes lot owners in Crestview from the general public. So I disagree entirely with the Majority Opinion which says that the lot owners in Crestview suffered only damages the same as the general public. Every lot owner in Crestview had bought a lot, knowing he had a restrictive covenant against every other lot. Suppose somebody had bought eleven lots in Crestview for a supermarket. Would this Court hold that the McNeills had no right for damages? Why should the State Highway Commission, acquiring property by deed, have a greater right than a citizen would have who acquired by deed? I respectfully dissent. I might close this dissent at this point; but the learned Chancellor wrote a 30-page opinion in this case, and it shows such tremendous research that I now copy extensively from it so that anyone studying this question in the future will have the benefit of the Chancellor's opinion: As to the claim of plaintiffs that defendants are violating the restrictive covenants in the Bill of Assurance to the compensable damage of their property, the defendants cite Gremillion v. Rapides Parish School Board, La.App., 134 So. 2d 700, in which court reviewed the split of authority. The result of this review reflected that the States of New Jersey, New York, Connecticut, North Carolina, Massachusetts, Michigan, Missouri, Tennessee, Virginia, and Wisconsin, through their respective Supreme Courts, were in accord that a restrictive covenant, such as the one in this case, was a property right and interest which when destroyed resulting in damage was compensable. The Courts of the States of California, Colorado, District of Columbia, Georgia, Florida, Ohio, Texas, West Virginia, and Louisiana hold otherwise. The majority of courts have held that a person in whose favor a restrictive covenant exists has a compensable interest in a condemnation proceeding which prevents compliance with the restrictions. In 2 Nichols on Eminent Domain, § 5.74 it is stated: The majority cases stand on a much stronger footing, both from a logical as well as a legal viewpoint. One of the early leading cases in this field is that of Johnstone v. Detroit, G. H. & M. Ry. Co., 245 Mich. 65, 222 N.W. 325, *430 67 A.L.R. 373 (1928). There the Supreme Court of Michigan held that owners of property within a restricted subdivision whose property was not actually taken were nevertheless entitled to compensation upon a taking of a portion of the subdivision for railroad purposes. The Court held that compensation for destruction of building restrictions in acquiring the land through the subdivision for the railroad was measured by diminution in value of the land not taken. In Johnstone the court discussed the various cases on this point prior to that time including those cases which held that where the condemnation was for public use that the public body was not subject to the building restrictions. In rejecting this view the Michigan court stated: In Peters v. Buckner, Judge, 288 Mo. 618, 232 S.W. 1024, 17 A.L.R. 543 (1921) the court held that a grantee of a lot in a subdivision, the deeds to all the lots which contain a covenant against the erection of buildings for other than residential purposes, has an easement in and to every lot in the subdivision which is also covered by *431 the covenant and that this easement is appurtenant to his lot for the enforcement of such covenant. The court further held that the easement of the owner of a lot in a subdivision in each lot is property which cannot be taken for public use without compensation. In the Peters case the Supreme Court of Missouri stated: City of Raleigh v. Edwards, 235 N.C. 671, 71 S.E.2d 396 (1952), involved a proceeding by the City against the defendant and others to condemn certain lots within the City as the site for the erection of an elevated water storage tank. An adjoining landowner intervened alleging that the erection of the proposed water tank would impair the value of his property by depriving him of the benefits of existing covenants restricting the use of the property sought to be condemned to private dwelling purposes only. The North Carolina Supreme Court held that the restrictive covenants contained in the deeds to the lots in the subdivision wherein the water tank was to be erected vested in the interveners a property right in the land sought to be condemned which must be paid for. This was the first time this question had been presented to a North Carolina court and the court discussed the underlying principles and basic decisions in this field in the following language: In Meagher v. Appalachian Electric Power Co., 195 Va. 138, 77 S.E.2d 461 (1953), the Virginia Supreme Court of Appeals faced this question for the first time. This was a suit involving the erection of high voltage transmission tower lines in violation of restrictive covenants binding upon the lands of the plaintiff and the defendant. There the court held that the restrictive covenant applicable to all of the lots in the subdivision was a property right in favor of those for whose benefit it was imposed, and that a public service corporation invading such property right because of public necessity must compensate those for whose benefit the covenant was imposed. In Meagher the court decided this question by using the following language: *435 One of the most recent cases involving this question is that of City of Shelbyville v. Kilpatrick, 204 Tenn. 484, 322 S.W.2d 203 (Tenn. 1959). There, the City brought a suit for declaratory judgment that it could erect a city water tower in a residential subdivision without paying compensation to other lot owners in the subdivision. The court held that where the recorded plat of a subdivision provided that all lots in the addition were restricted to residential purposes only, and the City acquired one of the lots for the purpose of erecting a water tower thereon, that the proposed violation of the restriction by the City would be the taking by the City of the `property' of the owners of the other lots, so that the City would be required by the Constitution to pay just compensation. The Tennessee Supreme Court used the following language in the Kilpatrick case: "* * * In Adaman Mutual Water Company v. United States, 278 F.2d 842 (ninth Circuit, 1960), the Federal Court discussed this problem by using the following language: In the quotations from the above cited cases it is noted that one of the principal factors involved is a determination of whether or not the restrictive covenants actually run with the land or are contractual in nature between the parties. In the instant case there would seem to be little room for argument but that the restrictive covenants run with the land. Indeed, the Bill of Assurance creating the restrictive covenants specifically provides that they are to run with the land and are deemed to be incorporated in every deed of the owners of any and all lots located in the addition. Also, it should be noted that in Arkansas the rule is that a covenant which is beneficial or essential to the use of the land conveyed and which is expressly made binding upon the heirs, assigns or successors of the grantor, runs with the land. Nordin v. May, 188 F.2d 411 (Eighth Circuit, 1951). The Court has extended this opinion because of the primary importance of this litigation, not only to the plaintiff, but to all litigants similarly situated. It is, therefore, the opinion and judgment of this Court that the restrictive covenants in the Bill of Assurance and extended into the deeds are property rights; that the acquisition of the eleven lots and the construction of the project thereon amounts in a constitutional sense to a taking or damaging of this property right, and the Court specifically finds and holds that as a direct result of the construction of this project in the Crestview Estates Subdivision by the defendants has materially and *438 substantially damaged and diminished the market value of plaintiffs' property; and that the property so taken and damaged are compensable under the law of Eminent Domain and the Constitution of the State of Arkansas.