Title: Heatherwood Holdings, LLC v. First Commercial Bank, Jonathan L. Kimerling, and HGC, Inc.
Citation: N/A
Docket Number: 1091016
State: Alabama
Issuer: Alabama Supreme Court
Date: October 22, 2010

REL: 10/22/2010
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
0649), of any typographical or other errors, in order that corrections may be made before
the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2010-2011
____________________
1091016
____________________
Heatherwood Holdings, LLC
v.
First Commercial Bank, Jonathan L. Kimerling, and HGC, Inc.
Certified Questions from the United States Bankruptcy Court,
Northern District, Southern Division
(No. 09-76-TOM-11; AP-09-17-TOM)
SMITH, Justice.
The United States Bankruptcy Court for the Northern
District of Alabama, Southern Division, has certified three
questions to this Court pursuant to Rule 18, Ala. R. App. P.
1091016
2
Facts and Procedural History
In its certification to this Court, the Bankruptcy Court
provided the following background information:
"In the 1970's, United States Steel Realty
Development Division ('USR') began development of
the Heatherwood subdivision [in Shelby County].
Part of the development included a parcel to be used
as a golf course.  Recorded plat maps of the
development show or depict this parcel as a golf
course.  In 1999, HGC Inc. was formed by members of
the Heatherwood golf course/club and homeowners in
the area.  HGC was to operate the Heatherwood golf
course and tennis facility.  In September 1999, the
real property comprising this facility was deeded by
USR to HGC.  Although the Deed contained various
restrictions, covenants and easements, there was no
specific provision that required, provided for or
referenced the actual or continued use of the
property as a golf course.
"In 2000, HGC entered into an Asset Purchase
Agreement ('APA') with Pine Cone Capital ('PCC')
whereby PCC purchased all of HGC's interest,
including 
the 
real 
property, 
that 
was 
the
Heatherwood golf course.  There were numerous drafts
before the final agreement was executed.  This APA
provided that PCC was required to improve the
property and to maintain it as a golf course for at
least 25 years.  PCC assigned all of its rights in
the APA to Heatherwood Holdings LLC ('HH').  HGC
then executed a Warranty Deed transferring the
property to HH. The restriction or requirement
regarding the limited use of this property was not
contained or included in the Deed from HGC to HH.
At the time the Deed was prepared, an agreement was
also drawn up and executed that required HH to
operate the golf course for 25 years.  This
agreement was recorded simultaneously with the Deed.
1091016
HGC filed a counterclaim and a cross-claim in the
1
adversary proceeding.
First Commercial Bank, which holds a first mortgage on
2
the golf-course property, and HH filed summary-judgment
motions on the claims asserted in HGC's counterclaim and
cross-claim.
3
"HH began operating the golf course and in 2001
borrowed $4 million from First Commercial Bank and
executed a Note and Mortgage on this property.
There is also a second Mortgage on this property for
over 
$1.5 
million 
that 
is 
held 
by 
Jonathan
Kimerling.  HH began having financial problems and
in late 2008 notified HGC members that the golf
course was about to cease operation.  On January 6,
2009, this chapter 11 case was filed and this
Adversary Proceeding was filed by the Debtor [HH]
seeking to sell the property for any use, not
limited to the golf course.
"HGC argues that there is an implied restrictive
covenant, that the Agreement is essentially an
express covenant, and that the Deed should be
reformed because of a mutual mistake.
  HGC relies
[1]
in part on non-Alabama cases to support its
position.  HH and First Commercial Bank assert that
these cases are not applicable; they argue that
Alabama case law applies and none of HGC's arguments
are valid.[2]
"This Court views the facts in one non-Alabama
case cited[, Shalimar Ass'n v. D.O.C. Enterprises,
Ltd., 688 P.2d 682 (Ariz. Ct. App. 1984),] as
similar to the facts presented whereas the Alabama
cases do not appear to have the same facts. ...
[T]his Court finds no clear Alabama precedent, and
thus the legal issues presented should be certified
to the Alabama Supreme Court to decide these issues.
"Therefore, 
the 
following 
questions 
are
certified to the Alabama Supreme Court:
1091016
4
"1.  Whether Alabama law recognizes or will
imply a restrictive covenant as to a golf course
constructed as part of a residential development
consistent with a case with similar facts, Shalimar
Ass'n v. D.O.C. Enters., Ltd., 688 P.2d 682 (Ariz.
Ct. App. 1984)?
"2.  Whether Alabama law recognizes an implied
restrictive covenant that runs with the land when
the Deed conveying the property did not contain an
express covenant or restriction but a separate
Agreement recorded simultaneously with the Deed and
recorded immediately thereafter provided that 'Buyer
covenants that it will operate the purchased assets
[the real property] as a golf course for the
twenty-five (25) years from the date of execution of
this Agreement'?
"3. Whether Alabama law permits the owner of
real property to re-sell that property for any use,
not limited to the use of a golf course, when the
Deed conveying the property did not contain an
express covenant or restriction but a separate
Agreement recorded simultaneously with the Deed and
recorded immediately thereafter provided that 'Buyer
covenants that it will operate the purchased assets
[the real property] as a golf course for the
twenty-five (25) years from the date of execution of
this Agreement'?"
Discussion
I.
To address the first certified question, we first provide
a 
brief 
background 
of 
Alabama 
law 
regarding 
implied
restrictive covenants.  In Collins v. Rodgers, 938 So. 2d 379
(Ala. 2006), this Court stated:
1091016
Collins includes the following cases in that discussion:
3
Ex parte Frazer, 587 So. 2d 330 (Ala. 1991); Swanson v. Green,
572 So. 2d 1246 (Ala. 1990); Hall v. Gulledge, 274 Ala. 105,
145 So. 2d 794 (1962); Virgin v. Garrett, 233 Ala. 34, 169 So.
711 (1936); Scheuer v. Britt, 218 Ala. 270, 118 So. 658
(1928); and Sanborn v. McLean, 233 Mich. 227, 206 N.W. 496
(1925).
5
"[T]he existence of an implied restrictive covenant
is not to be inferred lightly.  This Court has
recognized that express restrictive covenants are
disfavored under Alabama law and are to be strictly
construed, with all doubts resolved in favor of the
free and unrestricted use of land and against the
covenants.  See Whaley v. Harrison, 624 So. 2d 516
(Ala. 1993); Lange v. Scofield, 567 So. 2d 1299
(Ala. 1990).  Logically, if express restrictive
covenants are disfavored under the law, implied
restrictive covenants are to be viewed with even
less favor.
"Despite the disfavor with which Alabama law
views implied restrictive covenants, this Court has
enforced implied restrictive covenants under certain
situations.  See Hall v. Gulledge, 274 Ala. 105, 145
So. 2d 794 (1962); Virgin v. Garrett, 233 Ala. 34,
169 So. 711 (1936); Scheuer v. Britt, 218 Ala. 270,
118 So. 658 (1928).  However, in more recent cases,
this 
Court 
has 
refused 
to 
find 
an 
implied
restrictive covenant.  See Ex parte Frazer, 587 So.
2d 330 (Ala. 1991); Swanson v. Green, 572 So. 2d
1246 (Ala. 1990)."
938 So. 2d at 385.  Through a discussion of several cases,
this Court in Collins outlined the development of the law in
Alabama regarding implied restrictive covenants.  See Collins,
938 So. 2d at 385-93.  
3
1091016
6
In Hun Es Tu Malade? # 16, LLC v. Tucker, 963 So. 2d 55
(Ala. 2006), this Court stated:
"This Court has recognized repeatedly that an owner
of property may adopt a common scheme of development
for his property by dividing his property into
smaller lots or parcels and conveying those parcels
with uniform restrictions.  See Collins v. Rodgers,
938 So. 2d at 393 (discussing numerous cases
involving reciprocal negative easements).
"For example, in Scheuer v. Britt, 218 Ala. 270,
118 So. 658 (1928), this Court stated:
"'"Where 
the 
owner 
of 
a
tract of land adopts a general
scheme 
for 
its 
improvement,
dividing 
it 
into 
lots, 
and
conveying 
these 
with 
uniform
restrictions as to the purposes
for which the lands may be used,
such 
restrictions 
create
equitable easements in favor of
the owners of the several lots,
which may be enforced in equity
by any one of such owners.  Such
restrictions are not for the
benefit of the grantor only, but
for 
the 
benefit 
of 
all
purchasers.  The owner of each
lot has as appurtenant to his lot
a right in the nature of an
easement upon the other lots,
which he may enforce in equity.
"'"Whether such restriction
creates a right which inures to
the benefit of purchasers is a
question of intention, and to
create such right it must appear
from the terms of the grant, or
1091016
7
f r o m  
t h e  
s u r r o u n d i n g
circumstances, that the grantor
intended to create an easement in
favor of the purchaser."  4
Thompson on Real Property, §
3398.
"'....
"'... [T]he equitable right to enforce
such mutual covenants is rested on the fact
that 
the 
building 
scheme 
forms 
an
inducement to buy, and becomes a part of
the consideration.  The buyer submits to a
burden upon his lot because of the fact
that a like burden is imposed on his
neighbor's lot, operating to the benefit of
both, and carries a mutual burden resting
on the seller and the purchaser.'
"218 Ala. at 271, 118 So. at 660 (emphasis omitted).
Thus, Alabama has recognized that a grantor may
create reciprocal negative easements by dividing and
conveying his property in smaller lots or parcels
if, in conjunction with the conveyances, he includes
common restrictions in the deeds to some or all of
those parcels.  If the grantor so intended, those
common restrictions inure to the benefit of all
purchasers from that grantor.
"'The question of law which exists in
such cases is whether or not the grantor in
the deed containing the restriction agreed
expressly or impliedly that the restriction
is for the benefit of the owner of other
property in the subdivision, whether it had
been sold or not.  Such a contract may be
inferred from the circumstances and terms
of 
the 
instrument, 
and 
need 
not 
be
expressed either verbally or in writing.
The test is said to be the intention of the
grantor in creating the restriction.'
1091016
8
"Virgin v. Garrett, 233 Ala. 34, 37, 169 So. 711,
713 (1936).
"Thus, we must determine whether the evidence
establishes that Clarence Beasley [the grantor]
intended a common scheme of development."
963 So. 2d at 65-66.
In Tucker, this Court cited the following five methods of
establishing that the original grantor "intended a common
scheme of development":  "'"1) universal written restrictions
in all of the deeds of the subdivision; 2) restrictions in a
substantial number of such deeds; 3) the filing of a plat
showing the restrictions; 4) actual conditions in the
applicable subdivision; or 5) acceptance of the actual
conditions by the lot owners."'"  963 So. 2d at 66 (quoting
Collins, 938 So. 2d at 393, quoting in turn Swanson v. Green,
572 So. 2d 1246, 1248 (Ala. 1990), citing 7 Thompson on Real
Property § 3163, p. 124 (1962 repl. vol.)).  This Court found
that there was sufficient evidence in Tucker indicating an
intent to develop the property in accordance with a common
scheme.  Specifically, this Court noted:
"[T]he property owners presented evidence indicating
that [the grantor] owned a large tract of land; that
he sold that tract by conveying numerous smaller
parcels; that he included in the vast majority of
the deeds involved in those conveyances [64 of the
1091016
9
76 deeds in evidence] the same or substantially
similar restrictive covenants against commercial
development and subdividing the property; that at
least some of the purchasers of those parcels relied
on the reciprocal nature of those restrictive
covenants in deciding to purchase the property; and
that, in addition to the three property owners named
as plaintiffs in this action, at least some of the
other purchasers of property in [the subdivision]
believed that [the grantor] had developed his
property pursuant to a common scheme."
963 So. 2d at 68.  
In Collins, by contrast, this Court concluded that there
was not substantial evidence indicating a common scheme of
development that included the specific restriction at issue in
that case, i.e., a 100-foot building setback.  Collins
specifically 
stated: 
"The 
residents 
in 
this 
case
unquestionably cannot establish a common building scheme using
methods 1, 2, or 3 of those recognized in Swanson [v. Green,
572 So. 2d 1246 (Ala. 1990)]," 938 So. 2d at 395, and the
opinion notes that, because of a lack of evidence regarding
them, methods 4 and 5 in Swanson could not be addressed. 
With this background in mind, we turn to the first
certified question: "Whether Alabama law recognizes or will
imply a restrictive covenant as to a golf course constructed
as part of a residential development consistent with a case
1091016
10
with similar facts, Shalimar Ass'n v. D.O.C. Enters., Ltd.,
[142 Ariz. 36,] 688 P.2d 682 (Ariz. Ct. App. 1984)?"  Shalimar
involved a residential-land development consisting of a golf
course and residential lots surrounding the golf course (the
property on which the golf course and the surrounding lots are
located 
is 
hereinafter 
referred 
to 
as 
"the 
Shalimar
property").  The original developer, Karl Guelich and
Associates, acquired the Shalimar property in March 1960, and
a golf course began operations on the Shalimar property in
1961.  In 1978, the original developer sold the Shalimar
property to D.O.C. Enterprises, Ltd.  When D.O.C. attempted to
develop the golf-course property for other purposes, the
surrounding homeowners sued, seeking a declaration that an
implied restriction existed limiting the use of the property
to a golf course.  142 Ariz. at 37, 688 P.2d at 683.  The
trial court ruled in favor of the homeowners, and the Arizona
Court of Appeals affirmed its judgment.  142 Ariz. at 37, 47,
688 P.2d at 683, 693.
The Arizona Court of Appeals provided the following
relevant background information:
"Upon 
acquiring 
this 
land, 
Guelich 
and
Associates designed a golf course which was intended
1091016
11
as an integral part of the general plan for the
development and improvement of all the Shalimar
property.  The plan, including the golf course, was
for the purpose of inducing people to buy property
in the Shalimar subdivisions and was intended to be
for the benefit of those purchasers and their
successors in interest.  A map showing the proposed
development was shown to potential lot buyers and
was recorded in the office of the Maricopa County
Recorder in August 1960.
"Guelich and Associates also caused to be
recorded for Shalimar Estates certain restrictions
which contained three paragraphs referring to a golf
course:
"'5. No structure shall be located nearer
than thirty feet to any property line
abutting on the golf course property ....
"'....
"'9. No fence, wall or hedge over 2 ½ feet
high shall be constructed or maintained
within the area lying between the front of
any building and the front or street
property line.  No fence, wall or hedge
over 6 feet high shall be constructed or
maintained on any portion of a lot.
Landscaping shall be planned in this area
so as to avoid undue obstruction of the
view of the golf course from the lots, and
all property lines abutting on the golf
course shall be fenced with 3 feet high
grape stake fencing or equivalent.
"'...
"'17. It is contemplated that a golf course
may be constructed on that certain part
designated 
as 
Tract 
'A' 
in 
SHALIMAR
ESTATES, 
and 
the 
terms 
'golf 
course
1091016
12
property' and 'golf course' as used herein
shall mean the golf course which may be
constructed on those tracts as shown by the
recorded 
plat 
of 
SHALIMAR 
ESTATES.
(emphasis added)[.]'"
"No restrictions were recorded against the golf
course property itself (sometimes referred to as
'Tract A').  The golf course was constructed in 1960
and 1961 in accordance with the configuration and
dimensions shown on the recorded plat.
"After this, on October 29, 1963, restrictions
were recorded for the residential lots in Shalimar
Estates 
addition 
number 
one, 
which 
included
essentially the same provisions as those earlier
quoted, allowing for minor changes.
"Other 
recorded 
documents 
included 
references 
to
golf course restrictions.  For example, the recorded
plat for the Shalimar West subdivision shows an
easement for a golf cart path, and the recorded plat
for Shalimar Estates addition number four contains
a grant of a private irrigation easement to Shalimar
Golf Club for its 'use and enjoyment and its
attendant liabilities of upkeep, maintenance and
care.' In addition, brochures and sales materials
which depict and describe the golf course were
placed on file as a public record with the Arizona
Department of Real Estate.
"Residential lot sales began in 1961. The
brochures provided to lot purchasers showed a golf
course surrounded by numbered home lots.
"Sales were made with representations that the
golf course would be maintained as such until the
year 2000, with provision for an extension of 25
years.  The duration of this promise was to be the
same as the period of the recorded restrictions,
which provide that the restrictions shall run 'until
January 1, 2000 A.D., after which time they shall be
1091016
13
automatically extended for a period of 25 years
unless an instrument signed by a majority of the
then owners of the lots has been recorded agreeing
to change the same in whole or in part.'
"Salesmen for Guelich 
and 
Associates 
promised 
to
develop, maintain, and operate the Shalimar Golf
Course for the benefit of residential lots developed
by Guelich and Associates.  A higher price was
charged for lots adjoining the golf course, and they
have a greater value because of the existence of a
golf course.  The homeowners chose lots after
looking at the plat prepared by Guelich and
Associates showing the golf course and after
considering the location of the lots with respect to
the golf course.
"The trial court found that when the homeowners
acquired their property, sales materials, brochures,
maps, and plats were shown and given to them and
representations and statements were made to them on
the basis of which they had reason to, and did,
understand and believe that the golf course would
continue to be maintained and used as a golf course.
In addition to the specific representations made by
salesmen of the developer, Guelich and Associates,
there were representations made in the sales
materials that:
"'All residents of the subdivision will
have access [to the golf course] by
membership .... You automatically receive
a family membership in Shalimar Country
Club .... A special 'drawing card' for home
buyers is the fact that Shalimar Estates
homes encircle the attractive Shalimar Golf
Course ....
"'Golf course memberships included at no
charge ....
1091016
14
"'Shalimar 
Estates 
is 
an 
exclusive
subdivision with 150 homesites.  Included
in the plans are a new clubhouse for the
nine 
hole 
golf 
course 
to 
which 
all
residents will have access by membership
....
"'Free membership in Shalimar Country Club
....'
"The trial court also found that the homeowners
relied 
on 
the 
plats, 
sales 
materials, 
and
statements, and were induced to buy property and to
build homes, in part, because the golf course
provided an open space and park-like environment for
their families, because the continued use and
maintenance of the golf course insured that it would
not be developed for other homes or businesses, and
because they, the homeowners, would be able to join
the golf club and play golf next to their homes.
"The trial court found that the homeowners who
purchased lots adjoining the golf course had a right
to 
rely 
and 
did 
in 
fact 
rely 
upon 
the
representations made to them that the use of the
golf course was restricted to that purpose for the
term of the restrictions.
"The court also found that the homeowners who
purchased lots adjoining the golf course would not
have bought those lots except for the presence of
the golf course and representations that its use was
restricted to a golf course and that it would be
maintained for that purpose for the term of the
restrictions.
"Shalimar 
Golf 
Club, 
Inc., 
an 
Arizona
corporation, was formed by the principals of the
developer and others for the purpose of maintaining
and operating the Shalimar Golf Course and it did so
from 1961 until July 2, 1979, when the appellants
acquired it. In 1976, L.B. Hill and Jane Hill, his
1091016
15
wife (the Hills) purchased the subject property from
Guelich and Associates and Shalimar Golf Club, Inc.
The Hills continued to maintain and operate it as a
golf course until July 2, 1979, when they sold it to
appellants. All of the prior owners believed the
golf course property was required to be used as a
golf course and operated it as such."
142 Ariz. at 37-39, 688 P.2d at 684-85 (capitalization in
original).
The Shalimar court affirmed the trial court's findings
(1) "that an implied covenant restricting the use of the
property to a golf course arose from the sale of adjacent lots
to the homeowners;" (2) "that [the implied covenant] was
enforceable against appellants as subsequent purchasers who
took their ownership with notice of the restriction."  142
Ariz. at 43, 688 P.2d at 689.  In support of its decision, the
Shalimar court stated:
"In Ute Park Summer Homes Association v. Maxwell
Land Grant Co.[, 77 N.M. 730, 427 P.2d 249 (1967)],
the developer had sold lots in a subdivision of land
and distributed maps containing an area marked 'golf
course.'  The map was never recorded, nor did any of
the deeds contain any reference to the map or to any
interest in a golf course.  After the lots had been
sold, the developers sought to sell the golf course
area without restriction to its use.  The New Mexico
Supreme Court held that lot owners had a legal right
to use of the area as a golf course.  This right,
the court held, came into existence because of maps
and representations of the developer's agents.  The
court said:
1091016
16
"'[W]here land is sold with reference to a
map or plat showing a park or like open
area, the purchaser acquires a private
right, 
generally 
referred 
to 
as 
an
easement, that such area shall be used in
the manner designated. As stated, this is
a private right and it is not dependent on
a proper making and recording of a plat for
purposes of dedication.'
"77 N.M. at 734, 427 P.2d at 253.  Ute Park is not
directly on point because it involved a suit by lot
owners directly against the developer and not his
successor.  Moreover, the court found an implied
'easement' which is not urged here.  See Bradley v.
Frazier Park Playgrounds[, Inc., 110 Cal. App. 2d
436, 242 P.2d 958 (1952)]; Hackert v. Edwards, 22
Conn. Sup. 499, 175 A.2d 381 (1961); Cree Meadows,
Inc. (NSL) v. Palmer, 68 N.M. 479, 362 P.2d 1007
(1961); Putnam v. Dickinson[, 142 N.W.2d 111 (N.D.
1966)].
"This brings us to the problem of terminology.
We recognize that the rights we uphold here have
been referred to by courts as equitable easements,
implied easements, equitable servitudes, implied
equitable 
servitudes, 
implied 
grants, 
implied
restrictive 
covenants, 
and 
rights 
arising 
by
estoppel. The nomenclature used in the reported
decisions is not consistent.  Suffice it to say we
are satisfied that 'implied restrictive covenant'
sufficiently describes what exists here.
"We next discuss the imposition of the implied
restrictive 
covenant 
against 
appellants 
as
successors in interest to the developer. The record
shows beyond dispute that the intervening purchasers
from the developers ... knew of the restrictions and
complied with them, operating the golf course
continuously during their ownership.  As for
appellants, the trial court found:
1091016
In a footnote, the Shalimar court stated:
4
"The privity requirement for real covenants is
replaced by the notice requirement for equitable
restrictions.  5 Powell on Real Property, ¶ 673 [2],
p. 60-68, n.142 (1980). The requisite notice can be
one of three types: actual, constructive or inquiry
notice.  Id. at 60-69."
142 Ariz. at 44 n.1, 688 P.2d at 690 n.1.
17
"'At 
or 
prior 
to 
the 
time 
the
[appellants] acquired their interest in the
subject property, they had actual or
constructive notice, they should have
known, and they had information on the
basis of which they had a duty to inquire
and thereby would have learned, of the golf
course restrictions. The defendants are not
bona fide purchasers without notice.'[ ]
4
"Appellants argue that their sole duty of inquiry
was to check recorded documents and, because they
did so and found no restrictions, they should not be
bound by an implied restrictive covenant.  For this
they refer to Neal v. Hunt, 112 Ariz. 307, 541 P.2d
559 (1975).
"Neal v. Hunt involved an unrecorded agreement
reserving certain water rights to the former owner
of ranch property which changed hands several times.
When the property was sold to Hunt, the seller told
him the former owner, Neal, 'had some claim to water
rights on the ranch.'  112 Ariz. at 310, 541 P.2d at
562.  Hunt searched the county records and found no
document of record purporting to reserve any water
rights on the ranch.  The court commented upon these
facts as follows:
"'We believe that when Collins told
Hunt, prior to the sale, that defendant had
a water right claim this was sufficient to
1091016
18
put Hunt on inquiry.  We believe further
that absent other notice, a search of the
record was sufficient under the facts in
this case.  Defendant, in order to protect
his interest, had an obligation to record
the instrument, and Hunt had an obligation,
once Collins told him of defendant's
possible water rights, to ascertain if they
were 
correct 
.... 
We 
will 
construe
recording acts so as to afford the greatest
possible protection to the person who in
good faith endeavored to comply with them.
(Citation omitted.)  We believe Hunt acted
reasonably under the circumstances by
searching the Mohave County recorder's
office. Finding nothing to confirm the
existence of the agreement, he cannot now
be charged with having had constructive
notice 
of 
its 
existence. 
(emphasis
added)[.]'
"112 Ariz. at 311, 541 P.2d at 563.
"That case is similar to the present case in
that the claimed rights were not recorded in the
office 
of 
the 
county 
recorder 
and, 
thus,
constructive notice could not arise from that
source.  The cases diverge, however, with respect to
actual notice.  A subsequent purchaser of a servient
tenement is bound to take notice of rights that may
be evident upon an inspection of the premises as
well as those of which he may learn by an inspection
of the records.  See Davis v. Kleindienst, 64 Ariz.
251, 169 P.2d 78 (1946); Luke v. Smith, 13 Ariz.
155, 108 P. 494 (1910).  Where a reasonably careful
inspection of the premises, followed by inquiry,
would disclose the existence of a property right,
the grantee of the servient tenement takes title
subject to the property right to the extent that his
grantor is bound thereby.  Putnam v. Dickinson,
quoting McHugh v. Haley, 61 N.D. 359, 237 N.W. 835
(1931).  Stated another way, every person having
1091016
19
actual notice of circumstances sufficient to put a
prudent man upon inquiry as to a particular fact is
charged with constructive notice of the fact in all
cases in which, by prosecuting such inquiry, he
might have learned such fact.  Bradley v. Frazier
Park Playgrounds.
"In Neal v. Hunt, inspection of the ranch
property apparently would not have put Hunt on
notice of Neal's water rights.  The court determined
that since Hunt inspected the records, he had
fulfilled his duty of inquiry.  In the present case,
the trial court found that appellants did not
satisfy their duty of inquiry.  This conclusion is
supported by the record.  There is ample evidence
that appellants had actual knowledge of the facts
upon which the golf course restriction was based.
Appellants were told by their seller that the
property was restricted to a golf course. In
addition, appellants had actual knowledge of the
existence and operation of the golf course.  The
recorded plat and restrictions were further evidence
of the golf course use restriction.  Finally,
appellants knew that the golf course was surrounded
by residential lots which were designed to, and did
in fact, take advantage of the views afforded by the
golf course.  The trial court could properly
conclude 
that 
appellants 
were 
not 
bona 
fide
purchasers without notice.  Consequently, they will
not be afforded the protection the law gives to an
innocent purchaser.  See Putnam v. Dickinson;
Hackert v. Edwards."
142 Ariz. at 43-45, 688 P.2d at 689-91.
The questions in the present case have been certified to
us while summary-judgment motions are pending in the
Bankruptcy Court.  The briefs filed with this Court, however,
indicate that the parties vigorously dispute whether the facts
1091016
As set forth in the remainder of our opinion, there are
5
a 
number 
of 
questions--e.g., 
questions 
of 
economic
feasibility, estoppel, notice, etc.--pertaining to the
continuing 
enforceability or vitality of the 
implied
restrictive covenant that may exist in this case.  
Faced with a similar situation in addressing a certified
6
question, this Court has stated:
"As phrased, the certified questions ask this
Court to decide an abstract question of law.
Unfortunately, the parties here have, for the most
part, focused their arguments on the facts of the
case rather than on the wisdom of adopting any of
the various answers to this abstract question.
Basically, the question is, if all facts are as the
plaintiff alleges:  Is there a theory upon which the
plaintiff may recover in this case? ... The
20
in the underlying action are analogous to the facts in
Shalimar.  We agree with the Bankruptcy Court's statement that
the facts in the present matter are similar to the facts in
Shalimar, at least insofar as those facts concern most of the
matters surrounding the initial development of the property.5
Thus, we think that the facts in the present matter, when
construed in favor of the nonmovants for a summary judgment in
the bankruptcy action, are sufficiently similar to the facts
in Shalimar for us to decide, as an abstract question of law,
whether the rationale employed in the Shalimar decision is
consistent with Alabama law regarding implied restrictive
covenants.   We answer that question in the affirmative. 
6
1091016
certification of a question of law does not place
this Court in a position to decide questions of
fact.  The defendants' motions for summary judgment
are pending in the Federal court.  The resolution of
factual questions necessary to reach the certified
questions is therefore assumed to be in the
plaintiff's favor, and we set out the essentially
uncontested facts of the case merely to provide a
context within which our answer may be understood."
Brown Mach. Works & Supply Co. v. Insurance Co. of North
America, 659 So. 2d 51, 52-53 (Ala. 1995).
21
As noted in our discussion of Tucker, supra, and Collins,
supra, our caselaw has recognized at least five methods of
establishing that an original grantor of property to be
developed as a subdivision intended a common scheme of
development.  Thus, a party seeking to prove that an original
grantor intended a common scheme of development may do so by
offering evidence of one or more of the following:
"1) universal written restrictions in all of the
deeds of the subdivision; 2) restrictions in a
substantial number of such deeds; 3) the filing of
a 
plat 
showing 
the 
restrictions; 
4) 
actual
conditions in the applicable subdivision; or 5)
acceptance of the actual conditions by the lot
owners."  
Tucker, 963 So. 2d at 66 (emphasis added; additional citations
omitted).  
In the present case, it is undisputed that before any of
the residential lots were sold, the original grantor, United
1091016
In its brief to this Court, HH suggests that an express,
7
unambiguous restriction must exist in some of the documents of
record in order for a common plan or scheme and an implied
restrictive covenant to exist.  See HH's initial brief, pp.
22
States Steel Realty Development Division ("USR"), filed a plat
that identified the property at issue as a golf course,
although the plat did not include language expressly stating
that the property could be used only as a golf course.
Additionally, it is undisputed that all the deeds to the
residential lots in the subdivision include some reference to
the property at issue as a golf course.  Specifically, the
deeds were subject to restrictive covenants that were recorded
and that required each residential lot to have a storage area
for a golf cart and that prohibited the construction of a
fence on any lot adjacent to a fairway, tee, or green on the
golf course.  Further, it is undisputed that the property at
issue has consistently been used exclusively as a golf course.
This evidence in sufficiently similar to the above-recognized
methods for proving the existence of an intent on the part of
USR for a common scheme of development; in particular, the
evidence summarized above falls under methods (3) ("the filing
of a plat showing the restrictions") and (4) ("actual
conditions in the applicable subdivision").   Tucker, 963 So.
7
1091016
12-14.  We disagree.  A party seeking to prove that an
original grantor intended a common scheme of development may
do so by offering evidence of one or more of the methods cited
in Collins and Tucker to establish a common plan or scheme.
Those methods include express restrictions, but they also
include the "actual conditions in the applicable subdivision"
or an "acceptance of the actual conditions by the lot owners."
23
2d at 66. 
"'Nor is it necessary that the restrictive
covenant 
running 
with 
the 
land 
should 
be
incorporated in the defendant's deed to take it out
of the influence of the statute of frauds; the
servitude may be laid on the property by a separate
writing, to which he is not a party, if he is in
privity with and claiming under one of the parties
thereto, and has notice thereof.
"'Here the servitude was laid on the property by
the conveyance made by Brown, Duskin & Heilpern to
complainant in pursuance of the general scheme of
improvement, affecting not only the lots conveyed to
complainant, 
but 
unsold 
lots 
then 
held 
by
complainant's 
grantors, 
including 
the 
lots
afterwards sold to the defendant.
"'This 
doctrine 
is 
neither 
strange 
nor
anomalous, as appears from the numerous authorities
collected in the note to 21 A.L.R. pages 1300-1326,
and finds a striking analogy in the doctrine, often
recognized by the court, that where the owner of
land lays it off in lots, blocks, and streets, as a
subdivision, and the sale of lots is made in
reference thereto, and purchases are made on the
faith of the act, this operates as a dedication of
the street and gives the several lot owners an
easement thereon, and this is so without reference
to the statute.
"'On the other hand, it would be strange indeed
to hold that one may lay off a subdivision for
1091016
24
strictly residential purposes, as a general scheme
of improvement, and sell and convey to numerous
purchasers on the faith thereof, incorporating in
their deeds restrictive covenants as to the use in
pursuance of such scheme, that the promoters of the
general scheme could destroy the scheme, to the
detriment of such purchasers, by selling to others
without such restrictions, when they had notice of
such general scheme.'"
Collins, 938 So. 2d at 387 (quoting Scheuer v. Britt, 218 Ala.
270, 273-74, 118 So. 658, 662 (1928) (opinion on rehearing)).
This Court has also stated, in Virgin v. Garrett, 233 Ala. 34,
37-38, 169 So. 711, 713 (1936) (quoted in Collins, 938 So. 2d
at 387-88):
"'One of the most practical tests, supported by
common sense and common business experience, is,
whether the restriction imposed by the grantor or
proprietor upon the granted premises would naturally
operate to enhance the value of his adjacent
premises, whether retained by him or conveyed to
another.  If this be so, it is a strong circumstance
to indicate that the restriction was not intended
for the mere personal benefit of the grantor, but as
a permanent servitude beneficial to the owner of the
land, whoever he may be, and appendant to the
premises.  Parker v. Nightingale, 6 Allen [Mass.]
341, 83 Am. Dec. 632. The reported cases are
numerous, and almost infinite in their phases of
variety, where tracts of land in cities are
subdivided 
into 
lots, 
and 
sold 
to 
separate
purchasers, subject to restrictions as to the kind
of occupations which may or may not be carried on
upon them, and even as to the nature and dimensions
of the buildings to be erected on the premises.  The
inquiry, in these cases, has generally been, whether
the servitudes or restrictions imposed were of such
1091016
The documents included a document entitled "General
8
Information: Heatherwood GOLF CLUB."  In part, this document
states:
"HEATHERWOOD, a planned residential and golf
community, is a development of [USR]. ...
25
a nature as to operate as an inducement to
purchasers; and, if so, the inclination of the
courts has been to construe them as appurtenant to
the estate, and intended for the protection, rather
than personal to the grantor. If appurtenant, it of
course follows the land, being assignable with it,
and each grantee can enforce it in equity against
each other grantee having notice of it.'"
(Quoting McMahon v. Williams, 79 Ala. 288, 291 (1885)
(emphasis added).)
In addition to the recorded plat maps and the recorded
restrictive covenants in the instant case, there is evidence
indicating that USR provided many of the original purchasers
of residential lots with general information about the
subdivision in a set of documents the parties refer to as the
"Heatherwood 
Documents." 
 
These 
documents, 
which 
USR
frequently incorporated into the sales contracts for the
residential lots, include several references to the property
at issue as a golf course and state that each owner of a
residence in the subdivision will be required to be a member
of 
the 
"Heatherwood 
Golf 
Club" 
in 
some 
capacity.  
8
1091016
"HEATHERWOOD Golf Club (Club) will include
recreations facilities which are described on the
attached Exhibit '1'.  USR will retain sole
discretion of design and construction of such
facilities.  USR will construct and own these
facilities."
(Capitalization in original.)  Listed first on Exhibit "1" is
"[a]n 18-hole golf course with approximately 6,600 yards in
length."  The general-information document also states:
"USR intends to sell the Club facilities and (1)
grants to the Club membership the option to buy the
facilities for $1,500,000.00 or (2) in the event
Club membership does not exercise said option, USR
reserves the right to sell the facilities to others,
or (3) USR has the option to sell the facilities to
the Club membership in an as-is condition at the
time of sale for the amount of the Club Member
Escrow Account including accumulated interest."
The general-information document notes that the "Club Member
Escrow Account" was "established for the sole purpose of
purchasing the Club facilities."
Finally, the general-information document provides that
"[e]ach homeowner in HEATHERWOOD must be a member of
the Club in one of the following classifications of
membership: 
"Full Membership
"Golf Membership
"Swim & Racquet Membership
"Social Membership.  
"In the event a homeowner sells his home, the
26
1091016
successor homeowner must become a member of the Club
and will be eligible for the same membership
classification as the former homeowner."
(Capitalization in original.)
27
Additionally, 
USR 
distributed 
marketing 
materials 
and
advertisements describing the subdivision as a golf-course
community, and the sign identifying the neighborhood describes
it as "a golf course community."  As the court in Shalimar
concluded based on similar materials, these materials, along
with the recorded plat map and the recorded restrictions, are
substantial evidence indicating that the original grantor
intended a common scheme of development that included the
golf-course property as an integral part of that development
and as an inducement to purchasers of the residential lots. 
Accordingly, we answer the first question in the
affirmative.  In doing so, however, we emphasize that our
answer should not be construed as an expression of an opinion
on the merits of the underlying case, because it appears that
a number of factual disputes remain to be developed.  For
example, the extent to which the subsequent purchaser of the
property at issue would be bound by the implied restriction
that the property be used as a golf course may turn on the
1091016
28
extent to which the purchaser had notice of the implied
restriction.  See Shalimar, 142 Ariz. at 43-45, 688 P.2d at
689-91 (discussing the issue of notice).  
Additionally, there may be questions regarding the
duration of the implied restrictive covenant and whether
changed economic circumstances would warrant a judicial
declaration terminating the implied restrictive covenant.  See
Collins, 938 So. 2d at 386 ("'For want of a better descriptive
term this is styled a reciprocal negative easement.  It runs
with the land sold by virtue of express fastening and abides
with the land retained until loosened by expiration of its
period of service or by events working its destruction.  It is
not personal to owners, but operative upon use of the land by
any owner having actual or constructive notice thereof.'"
(quoting Sanborn v. McLean, 233 Mich. 227, 229-30, 206 N.W.
496, 497 (1925) (emphasis added))).  In Shalimar, the court
considered the argument "that economic frustration render[ed]
the golf course restriction unenforceable."  142 Ariz. at 45,
688 P.2d at 691.  The trial court in Shalimar had rejected
that argument on the facts before it, and in affirming the
trial court's judgment, the Arizona Court of Appeals stated:
1091016
29
"[The subsequent purchasers] point out that the
trial court found that historically the golf course
had not been profitable to its owners.  They
acknowledge that they have never attempted to
operate the golf course themselves, but argue that
they should not be required to do so and suffer a
loss just to show that the golf course is not
profitable. Appellants further argue that to require
them to actively operate the golf course, even at a
loss, amounts to 'outright bondage' rather than just
a negative restraint on the use of the land.
"Although changed circumstances may occur that
would justify granting of relief from restrictive
covenants, see Williams v. Butler, 76 N.M. 782, 418
P.2d 856 (1966), such changes must frustrate and
defeat the original purpose of the restrictions in
order to warrant voiding them.  Murphey v. Gray, 84
Ariz. 299, 327 P.2d 751 (1958); Riley v. Stoves, 22
Ariz. App. 223, 526 P.2d 747 (1974); Decker v.
Hendricks, 7 Ariz. App. 162, 436 P.2d 940 (1968).
The trial court determined that the purpose of the
golf course has not been defeated nor frustrated by
any change affecting the golf course and the
Shalimar subdivisions.
"A mere change in economic conditions rendering
it unprofitable to continue the restrictive use is
not alone sufficient to justify abrogating the
restrictive covenant. Welshire, Inc. v. Harbison, 33
Del. Ch. 199, 91 A.2d 404 (1952); Murph[e]y v. Gray.
In Williams v. Butler, the Supreme Court of New
Mexico held that lack of economic feasibility to
develop a tract as a golf course, tennis courts,
swimming pool and other athletic facilities was not
a ground for relieving landowners of the covenants.
The court noted that if the original purpose of the
covenant can still be realized, it will be enforced
even though unrestricted use of the property would
be more profitable to its owner, citing Marra v.
Aetna Construction Co., 15 Cal. 2d 375, 101 P.2d 490
(1940).  See Continental Oil Co. v. Fennemore, 38
1091016
30
Ariz. 277, 299 P. 132 (1931).  We conclude that the
record supports the trial court's denial of the
claim that changed circumstances warrant abrogating
the golf course restriction.
"....
"We recognize that problems may arise regarding
the operation of the golf course and, if they do, it
may be necessary for the trial court to consider
further orders relating thereto.  The trial court
believed that proper management on the part of [the
subsequent purchasers], together with cooperation
from the homeowners, could make the operation of the
golf course feasible.  We find the judgment of the
court to be a reasonable equitable remedy under the
difficult circumstances of this case and will not
assume that the possibility of future intervention
by the court should render the present judgment
unenforceable."
142 Ariz. at 45-46, 688 P.2d at 691-92.
II.
The second certified question asks:
"Whether 
Alabama 
law 
recognizes 
an 
implied
restrictive covenant that runs with the land when
the Deed conveying the property did not contain an
express covenant or restriction but a separate
Agreement recorded simultaneously with the Deed and
recorded immediately thereafter provided that 'Buyer
covenants that it will operate the purchased assets
[the real property] as a golf course for the
twenty-five (25) years from the date of execution of
this Agreement'?"
The third certified question asks:
"Whether Alabama law permits the owner of real
property to re-sell that property for any use, not
1091016
In one sense, the second question appears to be
9
contingent upon a negative answer to the first certified
question.  In other words, it is possible to read the second
question as asking, in the event this Court answered the first
question in the negative, whether the transaction between HGC
and HH would create an implied restrictive covenant that runs
with the land.  To the extent the second certified question
may be construed as asking a question dependent upon a
negative answer to the first question, we decline to answer it
because we have answered the first certified question in the
affirmative.  
31
limited to the use of a golf course, when the Deed
conveying the property did not contain an express
covenant or restriction but a separate Agreement
recorded simultaneously with the Deed and recorded
immediately 
thereafter 
provided 
that 
'Buyer
covenants that it will operate the purchased assets
[the real property] as a golf course for the
twenty-five (25) years from the date of execution of
this Agreement'?"
These questions refer to the transaction between HGC and
HH.   It is possible that these questions are asking whether
9
the transaction between HGC and HH is evidence that an implied
restrictive covenant did not exist at the time USR created the
Heatherwood subdivision.  It is also possible that these
questions are inquiring as to the applicability of the defense
of estoppel to HH or HGC.  For example, the second question
may be asking whether HGC, as the conveyor of the property at
issue in a warranty deed to HH, should be estopped from
attempting to enforce against HH the implied restrictive
1091016
32
covenant that the property would not be used for purposes
other than as a golf course.  The third question could be
seeking guidance on the applicability of the defense of
estoppel to HH.  Related to these readings of the second and
third questions is an inquiry as to the effect of HH's notice,
if any, of an implied restrictive covenant that existed before
the transaction between HGC and HH.
Thus, the second and third questions could be interpreted
in multiple ways.  They also appear to be centered on issues
of estoppel and notice under Alabama law--issues on which it
appears to us, in light of our answer to the first certified
question, that existing Alabama law is sufficient to guide the
Bankruptcy Court as the matter proceeds before it.  We
therefore decline to answer them and decline to attempt to
rephrase the questions in an effort to answer them.  See
generally Sparks v. Total Body Essential Nutrition, Inc., 27
So. 3d 489, 492 (Ala. 2009) (rephrasing the question certified
by the federal district court).  If it appears to the
Bankruptcy Court after subsequent developments in the matter
before it that there is no clear Alabama precedent to guide
that court, it may submit any remaining questions to this
1091016
33
Court under Rule 18, Ala. R. App. P.
Conclusion
We answer the first question in the affirmative.  We
decline to answer the second and third questions.
QUESTION 1 ANSWERED; QUESTIONS 2 AND 3 DECLINED.
Cobb, C.J., and Lyons, Woodall, Stuart, Bolin, Parker,
and Shaw, JJ., concur.  
Murdock, J., concurs in the result.