Daily Development for Tuesday, August 1, 2000

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu

SERVITUDES; SCOPE; PROPERTY OUTSIDE OF SUBDIVSION: Utah narrows equitable servitude notion to subdivision regimes. Even where there is knowledge and intent, developer/owners cannot subject property outside of subdivision to subdivision regime.

Dansie v. High Country Estates Homeowners Assocs., 987 P.2d 30 (Utah 1999).

Bagley and two others acquired certain property and recorded a subdivision declaration, including a system of streets and roads. While the subdivision was still in development, and no lots had been sold, one of the other subdividers sold to Bagley two forty acre parcels adjacent to the subdivision. Here is the court's description of the contract (the court's exact description is important in light of the court's later characterization of these facts):

"Bagley received the right to use the Association's roads in the Subdivision for access to the property he was purchasing. In return, Bagley would become a member of the Association and pay a proportionate share of the costs of road maintenance and other services. Although the 1973 Contract's terms specifically bound Bagley's assigns and successors, it was not recorded in the Salt Lake County Recorder's Office."

No question was raised as to whether the grantor had the power to subject the subdivision to these rights in favor of Bagley. Apparently it did have such power as agent of the subdividers.

In 1983, Dansie, who had been working with the subdividers on various improvement projects relating to the subdivision for ten years, acquired two subdivision lots and also, eventually, both of the forty acre parcels. The court seems to assume that Dansie was aware of the terms of the 1973 contract and in fact used the subdivisions roads to access his parcels in and out of the subdivision.

At some later time, the Association assessed one of the forty acre parcels as part of its subdivision assessment pattern. This was in addition to the assessments that Dancie already was paying for his subdivision parcels. He objected, and this suit followed. The trial court found that a quitclaim deed that Dancie later executed to himself and his wife imposed the subdivision covenants on the property. The appellate court reversed this conclusion, and the discussion of this issue is not worth further consideration here.

What is of interest is the court's disposition of the association's follow up argument that an equitable servitude had been imposed on the forty acre parcel when Bagley owned it and that this servitude passed to Dancie because Dancie had knowledge of the facts giving rise to the servitude. The court dismissed this argument out of hand.

First, the court concluded that there was no express contract imposing the CC&R's of the subdivision:

"While it may well have been the intent of the developers to impose the covenants on additional phases of the Subdivision which might be developed later, that was never done by a written instrument. Moreover, even if Dansie had notice or even knowledge of the developers' intent and knew of the obligation to subject the Property to the CC&Rs that the 1973 Contract imposed upon Bagley, Dansie was not a party to that contract, nor is it contended that he is a successor or assign of that contract so as to be bound by its terms. The Association cites no legal authority that would obligate Dansie to burden the Property with the CC&Rs simply because he had notice of the intent of the original developers and knowledge of the 1973 Contract. "

Then the court concludes that even if the 1973 Contract might be viewed as imposing CC&R's upon the property, this obligation was destroyed by merger. The court never identifies or describes the deed that resulted in the merger, but simply mentions "deeds subsequent to the contract." But the only deed that could have effectuated a merger, as the editor understands the doctrine, would have been a deed from the original development company to Bagley in accordance with the 1973 contract. There is no mention of this deed in the opinion, other than the vague reference to "subsequent" deeds.

The developers went on to argue that even if the express terms of the 1973 deed did not bind successors such as Dansie, there was an implied equitable servitude that arose from the intent of the parties at the time of the conveyance to Bagley that attached to Dansie as Dansie had notice of it. The court held that even if there was such an intent, and even if Dansie had knowledge of it, the servitude could not bind Dansie's 40 acre parcel because it was not part of the subdivision and because the rule of implied equitable servitudes can apply only to lots within the subdivision that are the subject of the implied understanding.

"In the instant case, the Subdivision's developers placed the CC&Rs by written instrument on Phase I alone. The developers' written, signed, and recorded Protective Covenants expressly limit their application to "the described property," which is Phase I. Furthermore, while the Association's certificate of incorporation refers to "any addition[al property] as may hereafter be brought within the jurisdiction of the Association," the Property has never either been part of Phase I or been brought under the Association's purview. Therefore, if Association membershipwith its corresponding fees, assessments, and CC&Rsas is currently imposed upon Phase I lot owners is to be impliedly imposed upon the Property, it must be done in plain and unmistakable language. That has not been done here; thus, the Association's theory of implied equitable servitudes is not applicable here."

Comment: The editor has emphasized the complete and entire analysis of the court on this issue because it strikes the editor as a significant narrowing of the concept of equitable servitude to parcels that are identifiably within the subdivision that was the original plan. It appears that the intent of the developers to add the additional 40 acre parcels arose at a time when no lots in the subdivision had been sold. So no plan had been implemented.

It would be understandable if some other lot owner within the subdivision were objecting that Dansie's 40 acre parcel could not have the benefit of the subdivision roads or otherwise benefit from subdivision amenities because there had been no notice to lot owners of Dancie's parcel. But that issue doesn't arise here.

Rather, we are talking about whether Dansie, who (for purposes of analysis), took his parcel knowing that it was the intent of his predecessor to include the parcel in a common scheme. The court appears to be saying that Dansie gets out because his parcel had never formally been incorporated into the subdivision that was part of the common scheme. This strikes the editor of a somewhat narrow view of the concept of equitable servitudes. The equitable concept becomes necessary precisely because ordinary formalities have not been carried out.

There are lots of reasons to conclude that the equitable servitude notion is too much of a stretch in general, and creates too great a danger of making up contractual understandings that didn't actually exist. But if we recognize the doctrine at all, which confine it in the narrow and formalistic cage devised here by the Utah court?

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

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