No. 79-121 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1980 

RAYMOND V. GOERES, BARBARA K. GOERES, 

husband and wife; DAN L. OAKLAND and 

SHARON D. OAKLAND, husband and wife, 

Plaintiffs and Respondents, 

-vsLINDEY'S INC., a corporation, 

Defendant and Appellant. 

Appeal from: District Court of the Fourth Judicial District, 

In and for the County of Missoula, The Honorable James B. Wheelis, Judge presiding. 

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 
Mr. Justice Gene B. Daly delivered the Opinion of the Court. 

 his is an appeal from the District Court of the Fourth 

Judicial District which issued a permanent injunction against 

the appellant restraining it from making commercial use of a 

particular parcel of land located in a subdivision known as 

Seeley Lake Shore Sites. 

Seeley Lake Shore Sites is a platted subdivision which 

was filed in 1944 by a corporation later known as Seeley 

Lake Development Corp. By deed dated February 4, 1947, 

Seeley Lake Development Corp. conveyed seven lots (Lots 55, 

79, 81, and a portion of Lots 83, 85, 87 and 89) to Edward 

Coyle. This deed contained certain restrictive covenants 

which purported to apply to - all lots in the subdivision with 

the exception of several lots, including Lot 1, now owned by 

appellant, Lindey's, Inc. The covenants, as stated in the 

deed, were to provide a uniform plan for the improvement of 

the subdivision in which all uses were to be residential and 

noncommercial. They included specific restrictions on the 

type, size, and location of structures built, as well as a 

restriction indicating use by "Caucasians" only. There was 

no mention of these restrictive covenants in the original 

subdivision plat. 

By a deed dated March 4, 1948, fifty-one lots, including Lots 1, 3, 5 and 7 now owned by the parties to this 

action, were conveyed by the Seeley Lake Development Corp, 

to its principal stockholders, John and Evelyn Rahn. In the 

deed there were no restrictive covenants. On July 13, 1948, 

the Rahns reconveyed Lot 42 to Seeley Lake Development Corp. 

In the deed were the same covenants as in the previous sale 

to Coyle, which purported to restrict the use of the lots in 

the subdivision solely to residential use. 
By a warranty deed dated August 19, 1954, the Rahns 

granted to George and Eileen Steinbrenner twenty-five of the 

lotst including Lots 1, 3, 5 and 7, without any restrictions 

or reference to any restrictions. The Steinbrenners, by 

deed dated August 19, 1954, granted twenty-four of the 

twenty-five lots, including Lots 1, 3, 5 and 7, to James and 

Bertha Sullivan, again without subjecting the lots to any 

restrictions. On May 1, 1962, the Sullivans by deed granted 

to Robert and Dorothy Lee Lots 1 and 3 without restriction 

or reference to any restrictions; further, the Lees' title 

insurance policy on said lots made no reference to any restrictions as to the lots or the subdivision. 

Through a series of quitclaim deeds, ownership to Lots 

1 and 3 became recorded in the name of William Forest. 

Lindey's, Inc., intending to construct and operate a commercial restaurant and bar, acquired these lots from Forest by 

virtue of a contract for deed dated October 19, 1978. Prior 

to executing the contract, Lindey's received a title commitment from American Land Title Co. of Missoula which set 

forth a specific exception as to the covenants, conditions 

and restrictions contained in the July 13, 1948, Rahn deed. 

In spite of the mentioned restrictive covenants, 

Lindey's purchased the property and began excavation shortly 

thereafter. On November 20, 1978, plaintiffs sent a letter 

to Lindey's, pointing out the restrictive covenants and 

their application to Lot 3 and further stating that if the 

covenants were not complied with, plaintiffs would take 

legal action to enforce them. Lindey's responded by pointing out that there were no restrictive covenants in its 

chain of title. 
~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 "whether there would be a problem down there," as he was pointing 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 dispositive of the case. Lindey's, Inc., now appeals. 
Numerous issues have been raised by both parties on 

appeal, but we need only deal with the following: 

 id the ~istrict Court err in concluding that Lot 3 is 

subject to a restriction against commercial use as set forth 

in a July 13, 1948, deed of Lot 42, and thereby err in 

issuing the permanent injunction? 

Appellant contends that, since the chain of title as to 

Lot 3 contains no mention of any restrictive covenants, the 

restriction against commercial use cannot be enforced in 

this instance. Respondents contend that, as to all the lots 

in Seeley Lake Shore Sites, an implied reciprocal negative 

easement was created when the restriction against commercial use was placed in the 1948 deed of Lot 42. Respondents 

then conclude, since such an easement is enforceable even 

though not contained in a deed to each lot in the subdivision, the District Court was proper in finding that Lot 3 

was subject to the restrictive covenant of noncommercial 

use. 

Implied restrictive easements or reciprocal negative 

easements have been recognized in other jurisdictions as 

coming into play where the owner of two or more lots situated near one another (such as in a subdivision) conveys one 

of the lots with express restrictions, as to use, of benefit 

to the lots retained by the grantor. In such a case the 

servitude becomes mutual, and during the period of restraint, 

the grantor and owner of the lot retained may do nothing 

that is forbidden to the lot sold. This implied restriction 

on the use of the lot(s) retained by the grantor is called a 

reciprocal negative easement, which can be enforceable 

against the grantor or subsequent purchasers of the retained 

lot (s) whether or not said restrictions are placed in the 
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 statutory provision pertaining to such an equitable easement. 

As to the status of implied covenants in this jurisdiction, 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 grantee; 

I' (b) . . . such estate is at the time of execution of such conveyance free from encumbrances 

done, made, or suffered by the grantor . . ." 

This section was deemed to abolish - all implied covenants (other than the two enumerated exceptions not applicable 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 plaintiff. 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 in Montana" and held that the language in 

Simonson is too broad and is to be "1-imited in its application to the facts existent in that case," 

Thisted involved the construction of an apartment 

building. Before completion of the construction, a contract 

describing the apartment building as residential was executed between the builder and a "Mrs. Roberts." ~ll subsequent grantees were given a copy of this contract and a 

brochure describing the general development scheme as communal group living arrangements. None of the deeds eventually issued to Mrs. Roberts and the subsequent grantees, 

however, contained any express restrictions as to the use of 

the apartments. An attempt was made by the builder to 

convert some apartments to commercial use, but the Court 

upheld a challenge to the move by holding there was an 

implied equitable servitude attached to the units which 

requires use of them for residential purposes only. 

Respondents place a great deal of reliance upon Thisted. 

They contend that this case recognizes, at least by implication, reciprocal negative easements, and thus, it should be 

applied in this instance, We disagree, however, with the 

extension offered by respondents and conclude that this case 

can be distinguished from Thisted. 

In the application of implied restrictions on the use 

of land, principles of equity are controlling. Thus, each 

case must be determined separately after an examination of 

the particular facts and circumstances. ~dditionally, any 

implied negative easements as to a particular lot are to be 

considered with extreme caution since such an action results 

in depriving a person of the use of his property by imposing 
a servitude through mere implication. See Bellemeade Company v. Priddle (Ky. 1974), 503 S.W.2d 734; 20 Am.Jur.2d 

Covenants, Conditions and Restrictions, S173 at 735; 21 

C.J.S. Covenants, 519 at 895. With this being the case, an 

implied restriction upon the use of land should only be 

enforced as an equitable servitude against a transferee who 

takes with knowledge of its terms and under circumstances 

that would make enforcement of the restriction equitable. 

See Marra v. Aetna Construction Co. (1940), 15 Cal.2d 375, 

378, 101 P.2d 490, 492. 

In Thisted all the parties, transferee and transferor, 

were aware that the building was to be used solely for 

residential purposes. This knowledge was evident from 

descriptive brochures shown to all prospective purchasers 

describing the living arrangement, for all purposes, as 

residential. In addition, all contracts submitted to the 

prospective purchasers referred to the building solely as an 

apartment building with the capacity of only twenty apartments and one caretaker unit. Based upon these representations, which in fact were relied on by the purchasers of the 

apartments, the court attached in equity a servitude on the 

transfers of the apartments requiring their use solely for 

residential purposes. It is obvious that the failure of the 

court to so provide would have been inequitable under the 

circumstances. 

In the case at hand, however, the basis on which respondents wish to imply a restriction against commercial use 

as to Lot 3 is the July 14, 1948, deed of Lot 42, which 

purported to make the restriction applicable to every lot in 

the subdivision. In no instance was evidence presented that 

appellant or its predecessor was ever informed in a deed, 
contract, or brochure, or by representations of the seller, 

that the lots were subject to a restriction against commercial 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 purchasers of various lots in the subdivision have continued to 

use their property solely for residential purposes. Therefore, appellant was on constructive notice as to the restriction against commercial use. Respondents also note that 

appellant's title insurance report indicated that the restrictions contained in the 1948 deed of Lot 42 were excepted 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. Furthermore, 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 purchase. This is especially so when the subdivision plat 

makes no mention of any restrictions whatsoever and a single 
owner of less than all the lots in the subdivision purports 

to restrict the use of the land as to the whole subdivision. 

Equity in such a situation requires more if this Court is to 

restrict the use of land by mere implication. 

By holding tHat appellant is not bound by the restrictive covenant as to commercial use, we do not also find that 

said covenant does not exist at all as to the subdivision at 

issue. We merely hold that to enforce these implied restrictions so as to be applicable to a particular transfer of 

land it is necessary to show knowledge of the restrictions 

by the transferee at the time of purchase and that enforcement of the implied restrictions will not be inequitable. 

Respondents having failed in this regard, we must reverse 

the decision rendered by the District Court. 

The judgment of the District Court is reversed with 

instructions to enter judgment for defendant, Lindey's 

Inc. 

We concur: 

Vd4a.4 

Chief Justice 

/ Justices