Opinion ID: 6316646
Heading Depth: 2
Heading Rank: 2

Heading: Enforceability of the Transfer Restriction

Text: {¶ 22} In general, deed restrictions or agreements that impose restrictions on real property may impede a property’s transferability. See First Fed. S. & L. Assn. of Toledo v. Perry’s Landing, Inc., 11 Ohio App.3d 135, 141-42, 463 N.E.2d 636 (6th Dist.1983) (analyzing a clause in a mortgage agreement). We also recognize that some use restrictions may by their nature limit marketability and inherently affect future transfers. Were this court to require or establish separate analyses for use and transfer restrictions, we may in some situations create distinctions without a difference and in others, impose conflicting results when applied to both in the same or related transactions. Again, when analyzing the appellate decision in this case, the question to be decided is simply whether a transfer or agreement effecting or affecting a transfer of interest in the property conflicts with the property’s agreed use and operation as a green-space park area. See Ohio Const. Article VIII, Section 2o; R.C. 164.22. And while the caselaw contains threads specific to the nuances of differing types of restrictions, we find that the property-law principles over time are sufficiently woven to create a sturdy fabric that at this time needs no additional support, repair, or bolstering from new theories or tests molded from the facts of this particular situation. {¶ 23} Appellants argue that for a restriction on transfer to be enforceable as to any part of the property, or even at all, the legislature must create and authorize “such restraint on alienation in a statute by express terms or unmistakable implication.” Appellants seek legal clarity on this issue, urging that transfer restrictions and essentially all deed restrictions on transferability are inherently void as against public policy, unless they are specifically legislated. Restraints on the use and transferability of real property are subject to significant scrutiny as they may violate public policy encouraging the free use, enjoyment, and transfer of real property. Yet, this court has time and again recognized and respected the fundamental rights of parties to contract freely with the expectation that the terms 10 January Term, 2022 of their agreement will be enforced. See Wildcat Drilling, L.L.C. v. Discovery Oil & Gas, L.L.C., 164 Ohio St.3d 480, 2020-Ohio-6821, 173 N.E.3d 1156, ¶ 16. {¶ 24} In balancing these important and sometimes competing publicpolicy interests, legal jurisprudence has generally threaded the needle toward keeping the agreement of the parties stitched together when deed restrictions are unambiguous and reasonable and has required that both the terms of a restrictive covenant and the intent of the parties in rendering the covenant as clearly expressed in its restrictive language be upheld. See Cleveland Baptist Assn. v. Scovil, 107 Ohio St. 67, 72, 140 N.E. 647 (1923); DeRosa v. Parker, 197 Ohio App.3d 332, 2011-Ohio-6024, 967 N.E.2d 767, ¶ 9-10, 12 (7th Dist.); Head v. Evans, 1st Dist. Hamilton No. C-790831, 1981 WL 9628,  (Feb. 11, 1981). {¶ 25} Courts have often also evaluated the purpose and the duration of a restriction with a view toward its reasonableness and whether it violates public policy, finding that indefinite and absolute restraints on transferability are void when there is no linkage between the purpose of the restraint and an indefinite duration. See Raisch v. Schuster, 47 Ohio App.2d 98, 101, 352 N.E.2d 657 (1st Dist.1975). In probate law, a testator’s devise of real property that contains restrictions on its future sale has been held void. See Anderson v. Cary, 36 Ohio St. 506 (1881). Cases cited by appellants and amici attempt to limit dead-hand control of property and are distinguishable from cases in which the restrictions are for some designated purpose or by agreement, including when the testamentary transfer of real property is charitable in nature. See, e.g., Bragdon v. Carter, 4th Dist. Scioto No. 17CA3791, 2017-Ohio-8257, ¶ 2, 11-12, 14 (adhering to Anderson and finding that a restriction on sale of property so “ ‘that [the testator’s] children and their heirs shall always have a place to live’ ” was void). But see First Fed. S. & L., 11 Ohio App.3d at 141-142, 463 N.E.2d 636 (noting the tension between freedom of alienation and freedom of contract but holding that no restraint on alienation existed); Ohio Soc. for Crippled Children & Adults, Inc. v. McElroy, 175 11 SUPREME COURT OF OHIO Ohio St. 49, 52-53, 191 N.E.2d 543 (1963) (upholding testator’s devise of his property to a charitable organization for a charitable purpose with the condition that said property was “ ‘not to be sold or leased’ ” by the charitable organization). {¶ 26} We hold that these principles governing restraints on real property, and any exceptions to those principles, are workable, valid, and enforceable here. CDC contracted with OPWC for quasi-public funding to acquire the property for the Leatherwood Creek Riparian Project. CDC accepted the grant and executed the deed as it had agreed with OPWC in the grant agreement with full knowledge of OPWC’s terms and restrictions. There is no ambiguity in the documents about either the terms of the restrictions or the parties’ intent in agreeing to them. Moreover, the grant documents, including the application and project description, all public records, provide further explanation of the purpose of and need for the agreed restrictions. It is clear that OPWC and CDC contracted for clearly stated restraints on real-property use and transfer, which are reasonable in light of the project purpose. See Raisch at 101. {¶ 27} And while the duration of the deed restrictions is indefinite, the restraints are not absolute. The indefinite duration recognizes the public purpose of land conservation and preservation. Yet, the transfer clause is not so restrictive; transfers can occur with OPWC permission. The “Perpetual Restrictions” clause in the deed implies that modifications of the project are possible with the consent of OPWC: 2. Perpetual Restrictions. The restrictions set forth in this deed shall be perpetual and shall run with the land for the benefit of, and shall be enforceable by, Ohio Public Works Commission (OPWC). This deed and the covenants and restrictions set forth herein shall not be amended, released, extinguished or otherwise 12 January Term, 2022 modified without the prior written consent of OPWC, which consent may be withheld in its sole and absolute discretion. (Underlining sic.) {¶ 28} Thus, by the terms of the deed, CDC may seek permission from OPWC to transfer or lease the green-space property, and CDC could presumably request to modify the project in the event of a conflict with the use of the property as a green-space area. {¶ 29} Moreover, because this particular transfer of property involves the transfer of land for a charitable or public purpose, the conventional rules against restraints are subject to exceptions. This court has held that there are distinct exceptions to the rule against restraints on alienation in cases of charitable or public purposes. See Ohio Soc. for Crippled Children & Adults, 175 Ohio St. at 52-54, 191 N.E.2d 543. In Ohio Soc. for Crippled Children & Adults, we reaffirmed that “ ‘charities form an exceptional class in reference to the rule against restraints of alienation,’ ” because “ ‘a normal characteristic of property devoted to charitable purposes [is] that it is inalienable.’ ” Id. at 53, quoting Dickenson v. Anna, 310 Ill. 222, 230-231, 141 N.E. 754 (1923). And generally, transfer of property for conservation purposes requires or involves perpetuity. See 26 U.S.C. 170(h) (requiring that a “conservation purpose [be] protected in perpetuity” in order to qualify as a “qualified conservation contribution” of land under the Internal Revenue Code); see also R.C. 5301.85 and 5301.89(A) (specifying that an environmental covenant runs with the land and is perpetual unless subject to an exception). {¶ 30} Thus, in applying caselaw that has addressed a variety of situations over time, we find that it is appropriate to recognize the state’s interest in encouraging charitable giving and in instilling confidence in charitable grantors that 13 SUPREME COURT OF OHIO their purpose for giving will be observed and preserved with integrity over time. Gearhart v. Richardson, 109 Ohio St. 418, 431-432, 434-435, 142 N.E. 890 (1924). {¶ 31} Appellants argue that R.C. 164.26, which authorizes OPWC to administer the Clean Ohio grant program, does not specifically or impliedly confer the authority to restrict alienability of property. Appellants meld a variety of cases involving zoning ordinances, statutes of a penal nature, and other state-sanctioned restrictions on use or transfer of land to support their theory. Appellants also cite the holding in Hamilton v. Link-Hellmuth, Inc., that “any such statutory restriction [on alienation] must be specifically stated and not implied.” 104 Ohio App. 1, 8, 146 N.E.2d 615 (2d Dist.1957). The Second District noted in that case that if the statute in question were found to be ambiguous (which it was not), they would have been obligated to construe any doubt in favor of alienability. Id. {¶ 32} Neither Hamilton nor any of the other cases cited by appellants apply here. R.C. 164.26 is not a zoning ordinance or a statute of penal nature; it does not create or impede any rights with respect to property owners. R.C. 164.26 is an authorizing statute that instructs OPWC to create policies consistent with administering the grant program envisioned by voters when they adopted the program by amending the state’s constitution. The restrictions in the deed before us are the mechanism to ensure that the Leatherwood Creek Riparian Project reaches fruition and fulfills its purpose. Nothing was unilaterally imposed upon CDC, and if CDC did not wish to abide by the terms of the grant and thereby the deed restrictions for the property purchased with grant funding, it could have sought funding for this project elsewhere. {¶ 33} Amici Gulfport, Axebridge Energy, and Whispering Pines urge us to find that the deed restrictions violate public policy in so far as they impede oil and gas development, citing this court’s opinion in Newbury Twp. Bd. of Trustees v. Lomak Petroleum, 62 Ohio St.3d 387, 583 N.E.2d 302 (1992). In Newbury, we recognized that it is the public policy of Ohio to encourage oil and gas production 14 January Term, 2022 in a manner consistent with the health, safety, and welfare of the citizens of Ohio. Id. at 389. We applied that public policy in the context of reviewing a local zoning ordinance regulating oil and gas exploration, holding the ordinance to be preempted by former R.C. 1509.39. Id. at 389-392. The issue of preemption is not before us, and as we noted, the authorizing statute in question, R.C. 164.26, is not a zoning ordinance and does not create or impede any particular rights in property owners. {¶ 34} There is, therefore, no need to establish a new test to determine the enforceability of the deed restrictions on transfer in cases such as this. We cannot say, as the dissent would seem to have it, that the law requires that all restraints on alienation are invalid. The general rule may favor alienability, but no rule, statute, or other authority supports a complete ban on transfer restrictions. 61 American Jurisprudence 2d, Perpetuities and Restraints on Alienation, Sections 90-91 (2021). The transfer restriction in this case is sufficiently supported by the public-policy purpose authorized by the Ohio Constitution in Article VIII, Section 3, and moreover, was contracted for by the parties for that specific public purpose. {¶ 35} It has been said, especially regarding questions involving environmental law, that judges can bring integrity and certainty to the process of environmental protection, and help to ensure environmental responsibility and accountability within the government and the private sector.