Opinion ID: 1827008
Heading Depth: 1
Heading Rank: 4

Heading: The merits of the case at hand.

Text: Did the chancellor err in determining that Miller was entitled to a royalty from Vulcan on the Tennessee River property? [5] The question before this Court is whether the chancellor erred in determining that the provision in the royalty agreement is a real covenant running with the land and whether Vulcan expressly assumed the obligation to pay Miller the royalty on the Tennessee River property by accepting the deed from Granite. In the Opinion and Judgement of the Court, the chancellor made the following conclusions of law: (a) The provisions in the written agreement between Miller and George and Glen Lambert dated September 27, 1968, (the Royalty Agreement) that Lambert agrees to pay a royalty of five cents per ton on materials produced from such other source, and that the obligations and responsibilities set forth herein shall be imposed on the assignee or buyer if the Lamberts were to sell or assign their rights under the Royalty Agreement, were and are real covenants running with the land, and are valid and binding on any owner or subsequent owner of the fee simple title to, or the mineral interest in, the Sanders Property, the Gant Property, the Hiawassee Property, the Reid Property, and the Tennessee River Pulp & Paper Company Property; (b) By accepting the deed dated June 3, 1988, from Granite Construction Company, Vulcan expressly assumed the obligation to pay Miller royalty on all limestone extracted and removed from all eight tracts described therein, including the Tennessee River Pulp & Paper Company Property... . The Court of Appeals affirmed the chancellor finding that all subsequent assignees or buyers are bound by the terms of the agreement between Miller and Lambert. As a result, the Court of Appeals determined that the royalty agreement was a real covenant and not merely a personal covenant. All covenants having to do with realty or the use thereof are either real or personal. The main distinction between the two lies in the nature of the rights they create. Generally speaking, a personal covenant creates a personal obligation or right enforceable at law only between the original covenanting parties, whereas a real covenant creates a servitude upon the realty (the servient estate) for the benefit of another parcel of land (the dominant estate). A real covenant binds the heirs and assigns of the original covenantor, while a personal covenant does not, except in certain circumstances where those who take land have notice of restrictive covenants pertaining to it. Put another way, a covenant may run with the land, or may simply be a matter between the grantor and the purchaser. The distinction between covenants which run with land and covenants which are personal depends upon the purpose and effect of the covenant substantially to alter the legal rights which otherwise would flow from ownership of land and which are connected with the land. 20 Am.Jur.2d Covenants, Conditions, and Restrictions § 12 (1995) (footnotes omitted). As discussed above, a covenant must meet three conditions in order to run with the land: For a covenant to be real rather than personal, it must be shown that (1) the covenanting parties intended to create such a covenant; (2) privity of estate exists between the person claiming the right to enforce the covenant and the person upon whom the burden of the covenant is to be imposed; and (3) the covenant touches and concerns the land in question. 20 id. § 13. Judge Southwick, in his dissent, argued that the royalty agreement did not meet all of the conditions necessary to constitute a real covenant. According to Judge Southwick, the royalty agreement does not touch and concern the Tennessee River property. The requirement that a covenant, to be a real rather than a personal covenant, touch and concern the land has been explicated in various terms. It has been said that to meet this requirement, the covenant must be so related to the land as to enhance its value and confer a benefit upon it, or, conversely, impose a burden on it. Other authority defines the phrase by saying that to touch and concern the land, a covenant must bear upon the use and enjoyment of the land, and must be of the kind that an owner of an estate or interest in land may make because of his ownership right. 20 Am.Jur.2d Covenants, Conditions, and Restrictions § 15 (1995) (footnotes omitted). Furthermore: The test whether a covenant will or will not run with the land depends not so much on whether it is to be performed on the land itself as on whether it tends directly or necessarily to enhance its value or render it more beneficial or convenient to those by whom it is owned or occupied. Those covenants that are generally held to run with the land and to inure to the benefit of the assignee are such as ordinarily affect the land itself and confer a benefit on the grantor. A covenant that imposes a burden on real property for the benefit of the grantor personally does not follow the land into the possession of an assignee, for such a covenant is personal to the grantor and does not run with the land, although the deed may expressly state that the covenant runs with the property. 20 id. § 19 (emphasis added) (footnotes omitted). Since the burden that would be placed on the Tennessee River property by the royalty agreement would not enhance its value or render the property more beneficial or convenient to its owner or occupant and instead merely imposes a benefit for Miller personally, the covenant does not run with the land. Thus, Vulcan would have had to assume the obligation to pay the royalty to Miller. The chancellor, however, did find that Vulcan expressly assumed the obligation to pay the royalty to Miller by accepting the deed from Granite. The deed lists all of the tracts of property and then provides the following: To have and to hold said property together with all appurtenances thereto to said VULCAN MATERIALS COMPANY and its assigns forever. And, with the exceptions of (i) the claims or rights of Edward E. Miller, his heirs, executors, administrators and assigns relating to said real property or the products thereof, and (ii) that certain unrecorded Limestone Royalty Agreement executed by and between Grantor and Real Estate Leasing Co., Inc., dated January 7, 1986, and referenced in that certain Warranty Deed filed for record in Book B117, pages 623-24 of the land records of Tishomingo County, Mississippi, which, in the case of (i) and (ii), result from Grantee's ownership or use of said property, including, without limitation, Grantee's extraction and removal of stone or other products thereof ( which obligations or liabilities Grantee hereby assumes upon acceptance of this Deed ), Grantor warrants specially to Grantee the real property conveyed hereby. (emphasis added). As noted by Judge Thomas in his majority, the parties are sophisticated businessmen with a vast amount of knowledge concerning contracts. Furthermore, Vulcan had both actual and constructive knowledge of Miller's rights to the limestone quarry. In the deed from Granite, the rights conveyed to Vulcan excepted the claims or rights of Miller. Miller's interest in the property is based solely on the royalty agreement. Vulcan reasonably should have known of the litigation which ensued from Miller's claims pursuant to the royalty agreement, yet Vulcan made no attempt to limit Miller's interest to any specific tracts of land or in any way limit Miller's rights as provided in the royalty agreement. Vulcan is obligated to pay Miller the royalty pursuant to the royalty agreement not because it is a real covenant running with the land, but because Vulcan assumed the obligation in the deed from Granite. JUDGMENT IS AFFIRMED. SULLIVAN, P.J., and PITTMAN, BANKS, JAMES L. ROBERTS, and SMITH, JJ., concur. McRAE, J., concurs in result only. DAN LEE, C.J., disssents with separate written opinion joined by MILLS, J.