Case Title: GOERES v LINDEY S INC

Citation: 

Docket Number: 79-121

State: montana

Court: Montana Supreme Court

Date: 1980-11-25T00:00:00Z

Document:
No. 79-121 I N T H E SUPREME C O U R T O F THE STATE O F M O N T A N A 1980 RAYMOND V. GOERES, BARBARA K. GOERES, husband and wife; DAN L. O A K L A N D and S H A R O N D. OAKLAND, husband and wife, P l a i n t i f f s and Respondents, -vs- LINDEY'S I N C . , a c o r p o r a t i o n , Defendant and Appellant. Appeal from: D i s t r i c t Court o f t h e Fourth J u d i c i a l District, I n and f o r t h e County of Missoula, The Honor- a b l e James B. Wheelis, Judge p r e s i d i n g . Counsel of Record: For Appellant: Skelton & Luck, Missoula, Montana Robert Skelton argued, Missoula, Montana For Respondent : Worden, Thane & Haines, Missoula, Montana Ronald Bender argued, Missoula, Montana Submitted: September 9 , 1980 Decided : WkJV 2 5 1980 M r . J u s t i c e Gene B. Daly delivered the Opinion of t h e Court. his i s an appeal from the D i s t r i c t Court of the Fourth J u d i c i a l D i s t r i c t which issued a permanent injunction a g a i n s t t h e a p p e l l a n t r e s t r a i n i n g it from making commercial use of a p a r t i c u l a r parcel of land located i n a subdivision known a s Seeley Lake Shore S i t e s . Seeley Lake Shore S i t e s i s a p l a t t e d subdivision which was f i l e d i n 1944 by a corporation later known a s Seeley Lake Development Corp. By deed dated February 4 , 1947, Seeley Lake Development Corp. conveyed seven l o t s (Lots 55, 79, 81, and a portion of Lots 8 3 , 85, 87 and 89) t o Edward Coyle. This deed contained c e r t a i n r e s t r i c t i v e covenants which purported t o apply t o - a l l l o t s i n t h e subdivision with t h e exception of several l o t s , including Lot 1, now owned by appellant, Lindey's, Inc. The covenants, as s t a t e d i n t h e deed, were t o provide a uniform plan f o r t h e improvement of t h e subdivision i n which a l l uses were t o be r e s i d e n t i a l and noncommercial. They included s p e c i f i c r e s t r i c t i o n s on the type, s i z e , and location of s t r u c t u r e s b u i l t , a s w e l l a s a r e s t r i c t i o n i n d i c a t i n g use by "Caucasians" only. There was no mention of these r e s t r i c t i v e covenants i n the o r i g i n a l subdivision p l a t . By a deed dated March 4 , 1948, fifty-one l o t s , includ- i n g Lots 1, 3, 5 and 7 now owned by t h e p a r t i e s t o t h i s a c t i o n , w e r e conveyed by t h e Seeley Lake Development Corp, t o i t s p r i n c i p a l stockholders, John and Evelyn Rahn. I n t h e deed t h e r e w e r e no r e s t r i c t i v e covenants. On J u l y 13, 1948, t h e Rahns reconveyed Lot 4 2 t o Seeley Lake Development Corp. I n t h e deed were t h e same covenants a s i n t h e previous sale t o Coyle, which purported t o r e s t r i c t t h e use of the l o t s i n t h e subdivision s o l e l y t o r e s i d e n t i a l use. By a warranty deed dated August 19, 1954, t h e Rahns granted t o George and Eileen Steinbrenner twenty-five of t h e l o t s t including Lots 1, 3, 5 and 7, without any r e s t r i c t i o n s o r reference t o any r e s t r i c t i o n s . The Steinbrenners, by deed dated August 19, 1954, granted twenty-four of t h e twenty-five l o t s , including Lots 1, 3, 5 and 7, t o James and Bertha Sullivan, again without s u b j e c t i n g t h e l o t s t o any r e s t r i c t i o n s . O n May 1, 1962, t h e S u l l i v a n s by deed granted t o Robert and Dorothy Lee Lots 1 and 3 without r e s t r i c t i o n o r reference t o any r e s t r i c t i o n s ; f u r t h e r , t h e Lees' t i t l e insurance policy on s a i d l o t s made no r e f e r e n c e t o any re- s t r i c t i o n s as t o t h e l o t s o r the subdivision. Through a s e r i e s of quitclaim deeds, ownership t o Lots 1 and 3 became recorded i n t h e name of William Forest. Lindey's, Inc., intending t o c o n s t r u c t and operate a commer- c i a l r e s t a u r a n t and b a r , acquired t h e s e l o t s from F o r e s t by v i r t u e of a c o n t r a c t f o r deed dated October 19, 1978. P r i o r t o executing t h e c o n t r a c t , Lindey's received a t i t l e commit- ment from American Land T i t l e Co. of Missoula which set f o r t h a s p e c i f i c exception a s t o t h e covenants, conditions and r e s t r i c t i o n s contained i n the J u l y 13, 1948, Rahn deed. I n s p i t e of t h e mentioned r e s t r i c t i v e covenants, Lindey's purchased t h e property and began excavation s h o r t l y t h e r e a f t e r . O n November 20, 1978, p l a i n t i f f s s e n t a letter t o Lindey's, pointing o u t t h e r e s t r i c t i v e covenants and t h e i r a p p l i c a t i o n t o Lot 3 and f u r t h e r s t a t i n g t h a t i f t h e covenants were n o t complied with, p l a i n t i f f s would take l e g a l a c t i o n t o enforce them. Lindey's responded by point- i n g o u t t h a t t h e r e w e r e no r e s t r i c t i v e covenants i n i t s chain of t i t l e . ~indey's heard nothing further from plaintiffs until January 25, 1979, when plaintiffs sent a follow-up letter reiterating what was said in the first letter. Lindeyls presented testimony, however, that shortly after receiving the second letter, when asked by an agent of Lindey's "whe- ther there would be a problem down there," as he was point- ing to the restaurant construction, Dan Oakland, one of the plaintiffs herein, informed him there would be none. Lindey's continued with construction, expending over $200,000 prior to plaintiffs' commencing their suit, at which time the restaurant was 80 percent complete. On April 2, 1979, plaintiffs, as owners of Lot 7 and the north half of Lot 5 of the Seeley Lake Shore Sites subdivision, brought suit to enjoin defendant from building the restaurant, bar and lounge on Lots 1 and 3. Plaintiffs alleged that defendant, in commencing to construct the restaurant, was in violation of restrictive covenants running with the land. At the time of filing the suit, the District Court issued an ex parte injunction and an order to show cause why a restraining order should not issue. On April 4, 1979, defendant Lindey's, Inc., moved to dissolve the injunction and on April 9 filed a motion to dismiss the suit. Lindey's filed an answer to plaintiffs' complaint and memorandum in support of its motions on ~pril 11, 1979. A hearing on the matter was held after which the District Court issued a permanent injunction finding that there were enforceable covenants and that ~indey's had adequate notice of them. The court later denied a motion for a new trial filed by defendant, stating that any new evidence which Lindey's wished to introduce was available at the original hearing and, in any event, would not be dis- positive of the case. Lindey's, Inc., now appeals. Numerous i s s u e s have been r a i s e d by both p a r t i e s on appeal, b u t we need only deal with the following: id t h e ~ i s t r i c t Court err i n concluding t h a t Lot 3 i s s u b j e c t t o a r e s t r i c t i o n a g a i n s t commercial use a s set f o r t h i n a J u l y 13, 1948, deed of Lot 4 2 , and thereby e r r i n issuing t h e permanent injunction? Appellant contends t h a t , since t h e chain of t i t l e a s t o Lot 3 contains no mention of any r e s t r i c t i v e covenants, t h e r e s t r i c t i o n a g a i n s t commercial use cannot be enforced i n t h i s instance. Respondents contend t h a t , as t o a l l t h e l o t s i n Seeley Lake Shore S i t e s , an implied r e c i p r o c a l negative easement was created when t h e r e s t r i c t i o n a g a i n s t commer- c i a l use was placed i n t h e 1948 deed of Lot 42. Respondents then conclude, s i n c e such an easement is enforceable even though n o t contained i n a deed t o each l o t i n the subdivi- sion, the D i s t r i c t Court was proper i n finding t h a t Lot 3 was s u b j e c t t o t h e r e s t r i c t i v e covenant of noncommercial use. Implied r e s t r i c t i v e easements o r r e c i p r o c a l negative easements have been recognized i n other j u r i s d i c t i o n s as coming i n t o play where the owner of two o r more l o t s s i t u - a t e d near one another (such as i n a subdivision) conveys one of t h e l o t s with express r e s t r i c t i o n s , a s t o use, of b e n e f i t t o the l o t s retained by t h e grantor. I n such a case the servitude becomes mutual, and during t h e period of r e s t r a i n t , t h e grantor and owner of the l o t retained may do nothing t h a t i s forbidden t o t h e l o t sold. This implied r e s t r i c t i o n on t h e use of t h e l o t ( s ) retained by the grantor i s c a l l e d a r e c i p r o c a l negative easement, which can be enforceable a g a i n s t the grantor o r subsequent purchasers of the retained l o t ( s ) whether o r n o t s a i d r e s t r i c t i o n s are placed i n t h e subsequent deed. 20 Am.Jur.2d Covenants, Conditions and Restrictions, 5173 at 732-733; ilerJfk6r Y. Montealegre (1960), I-cc-n~kr 361 Mich. 44, 104 N.W.2d 772; Price v. Anderson (1948), 358 Pa. 209, 56 A.2d 215; McQuade v. Wilcox (1921), 215 Mich. 302, 183 N.W. 771. An easement of this type, however, has not been recognized by this Court, nor is there any statu- tory provision pertaining to such an equitable easement. As to the status of implied covenants in this jurisdic- tion, section 70-20-304, MCA, provides: " (1) . . . in any conveyance by which an estate of inheritance or fee simple or possessory title is to be passed, the following covenants and none other . . . are implied unless restrained by express terms contained in such conveyance: "(a) . . . grantor has not conveyed the same estate . . . to any person other than the gran- tee; I' (b) . . . such estate is at the time of execu- tion of such conveyance free from encumbrances done, made, or suffered by the grantor . . ." This section was deemed to abolish - all implied cove- nants (other than the two enumerated exceptions not appli- cable here) in Simonson v. McDonald (1957), 131 Mont. 494, 311 P.2d 982. In Simonson the plaintiff purchased a parcel of land from Northern Pacific Railway which had no means of access other than across the defendant's land. Plaintiff brought an action for right-of-way claiming that when Northern Pacific sold the land to the defendant it reserved by implication an easement across the land for the benefit of the retained land which was later conveyed to the plain- tiff. This Court, relying on section 70-20-304, MCA, concluded no such implied easement is valid in Montana. In Thisted v. Country Club Tower Corp. (1965), 146 Mont. 87, 405 P.2d 432, however, this Court stated, "there can be implied reservations or implied grants of easements by necessity i n Montana" and held t h a t t h e language i n Simonson i s too broad and i s t o be "1-imited i n i t s appli- c a t i o n t o the f a c t s e x i s t e n t i n t h a t case," Thisted involved t h e construction of an apartment building. Before completion of the construction, a c o n t r a c t describing the apartment building a s r e s i d e n t i a l w a s exe- cuted between t h e builder and a "Mrs. Roberts." ~ l l subse- quent grantees were given a copy of t h i s c o n t r a c t and a brochure describing t h e general development scheme a s com- munal group l i v i n g arrangements. None of t h e deeds even- t u a l l y issued t o M r s . Roberts and t h e subsequent grantees, however, contained any express r e s t r i c t i o n s a s t o t h e use of t h e apartments. An attempt w a s made by t h e builder t o convert some apartments t o commercial use, b u t t h e Court upheld a challenge t o t h e move by holding t h e r e was an implied equitable servitude attached t o t h e u n i t s which r e q u i r e s use of them f o r r e s i d e n t i a l purposes only. Respondents place a g r e a t d e a l of r e l i a n c e upon Thisted. They contend t h a t t h i s case recognizes, a t l e a s t by implica- t i o n , r e c i p r o c a l negative easements, and thus, it should be applied i n t h i s instance, W e disagree, however, with the extension offered by respondents and conclude t h a t t h i s case can be distinguished from Thisted. I n t h e application of implied r e s t r i c t i o n s on t h e use of land, p r i n c i p l e s of equity a r e controlling. Thus, each case must be determined separately a f t e r an examination of t h e p a r t i c u l a r f a c t s and circumstances. ~ d d i t i o n a l l y , any implied negative easements as t o a p a r t i c u l a r l o t a r e t o be considered with extreme caution s i n c e such an a c t i o n r e s u l t s i n depriving a person of t h e use of h i s property by imposing a s e r v i t u d e through mere implication. See Bellemeade Com- pany v. P r i d d l e (Ky. 1974), 503 S.W.2d 734; 20 Am.Jur.2d Covenants, Conditions and R e s t r i c t i o n s , S173 a t 735; 21 C.J.S. Covenants, 519 a t 895. With t h i s being t h e case, an implied r e s t r i c t i o n upon t h e use of land should only be enforced as an e q u i t a b l e s e r v i t u d e a g a i n s t a t r a n s f e r e e who takes with knowledge of i t s t e r m s and under circumstances t h a t would make enforcement of t h e r e s t r i c t i o n e q u i t a b l e . See Marra v. Aetna Construction Co. (1940), 15 Cal.2d 375, 378, 101 P.2d 490, 492. I n Thisted a l l t h e p a r t i e s , t r a n s f e r e e and t r a n s f e r o r , w e r e aware t h a t t h e building was t o be used s o l e l y f o r r e s i d e n t i a l purposes. This knowledge was e v i d e n t from d e s c r i p t i v e brochures shown t o a l l prospective purchasers describing t h e l i v i n g arrangement, f o r a l l purposes, a s r e s i d e n t i a l . I n a d d i t i o n , a l l c o n t r a c t s submitted t o t h e prospective purchasers r e f e r r e d t o t h e building s o l e l y a s an apartment building with t h e capacity of only twenty a p a r t - ments and one c a r e t a k e r u n i t . Based upon t h e s e representa- t i o n s , which i n f a c t w e r e r e l i e d on by t h e purchasers of t h e apartments, t h e c o u r t attached i n e q u i t y a s e r v i t u d e on t h e t r a n s f e r s of t h e apartments r e q u i r i n g t h e i r use s o l e l y f o r r e s i d e n t i a l purposes. I t i s obvious t h a t t h e f a i l u r e of t h e c o u r t t o s o provide would have been i n e q u i t a b l e under t h e circumstances. I n t h e case a t hand, however, t h e b a s i s on which r e - spondents wish t o imply a r e s t r i c t i o n a g a i n s t commercial use a s t o Lot 3 i s t h e J u l y 1 4 , 1948, deed of Lot 42, which purported t o make t h e r e s t r i c t i o n a p p l i c a b l e t o every l o t i n t h e subdivision. I n no instance was evidence presented t h a t a p p e l l a n t o r its predecessor was ever informed i n a deed, contract, or brochure, or by representations of the seller, that the lots were subject to a restriction against commer- cial use. Furthermore, no evidence was presented that the restriction was ever placed in the original subdivision plat. Respondents argue that even though the restriction was not placed in appellant's chain of title, subsequent pur- chasers of various lots in the subdivision have continued to use their property solely for residential purposes. There- fore, appellant was on constructive notice as to the restric- tion against commercial use. Respondents also note that appellant's title insurance report indicated that the re- strictions contained in the 1948 deed of Lot 42 were ex- cepted from their title policy as to Lot 3, thereby further indicating that appellant was on constructive notice as to those restrictions. We must disagree with respondents' contentions. As to the uniform appearance of the land, there was conflicting evidence which indicated that some commercial use of a number of lots was being made. However, even if this was not the case, the fact that a party may be aware, and thus on notice, that certain restrictions may be applicable to other parcels of property does not also create a presumption that the person has knowledge that said restrictions are applicable to the property he is purchasing as well. Fur- thermore, the fact that a party is informed by a title company of a single deed, outside his chain of title, is not enough to impute knowledge that the restrictions contained in that deed are applicable to the lot he is about to pur- chase. This is especially so when the subdivision plat makes no mention of any restrictions whatsoever and a single owner of less than a l l t h e l o t s i n t h e subdivision purports t o r e s t r i c t t h e use of t h e land a s t o t h e whole subdivision. Equity i n such a s i t u a t i o n r e q u i r e s more i f t h i s Court i s t o r e s t r i c t t h e use of land by m e r e implication. By holding tHat a p p e l l a n t i s n o t bound by t h e r e s t r i c - t i v e covenant a s t o commercial use, w e do n o t a l s o f i n d t h a t s a i d covenant does n o t e x i s t a t a l l a s t o t h e subdivision a t i s s u e . W e merely hold t h a t t o enforce t h e s e implied r e s t r i c - t i o n s so a s t o be a p p l i c a b l e t o a p a r t i c u l a r t r a n s f e r of land it i s necessary t o show knowledge of t h e r e s t r i c t i o n s by t h e t r a n s f e r e e a t t h e t i m e of purchase and t h a t enforce- ment of t h e implied r e s t r i c t i o n s w i l l n o t be inequitable. Respondents having f a i l e d i n t h i s regard, w e must r e v e r s e t h e d e c i s i o n rendered by t h e D i s t r i c t Court. The judgment of t h e D i s t r i c t Court is reversed with i n s t r u c t i o n s t o e n t e r judgment f o r defendant, Lindey's Inc. W e concur: V d 4 a . 4 Chief J u s t i c e / J u s t i c e s