Daily Development for Tuesday, January 28, 2008
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri

SERVITUDES; RESTRICTIVE COVENANTS; DURATION: A duration of forever in a restrictive covenant is unreasonable as to time, making the covenant invalid. 

Citibrook II, L.L.C. v. Morgan Foods of Missouri, Inc., ___ S.W.3d ___ (Mo. Ct. App. 2007).

Citibrook owned property in St. Louis and held franchise rights to operate a Kentucky Fried Chicken (KFC) restaurant on the property.  In 1982, Citibrook transferred ownership of the property to Kirkwoods by general warranty deed, which provided in pertinent part that the grantor for itself and its successors in interest forever restricts the above described transfer in the following manner: [] The use of the described property is hereby restricted to the erection and operation of a Kentucky Fried Chicken store and may be used for no other purpose. 

Kirkwoods acquired franchise rights to operate a KFC and operated a KFC on the property until transferring it to Morgan's Foods in 1999.  Until 2004, Morgan's Foods also operated a KFC on the property.  In April 2005, however, Morgan's Foods executed a lease for the property with a J.J.'s Fish and Chicken outlet.  Subsequently, a J.J.'s Fish and Chicken restaurant opened on the property.

Citibrook filed for injunctive relief against Morgan's Foods in October 2005, alleging that the restrictive covenant in the 1982 warranty deed prohibited any business from being operated on the property except for a KFC.  It also filed a motion for summary judgment, asserting that by operating a J.J's Fish and Chicken on the property, Morgan's Foods violated the restrictive covenant.  Morgan's Foods countered with its own motion for summary judgment, arguing that the restrictive covenant contained in the deed was void and unenforceable because it violated public policy and constituted an unreasonable restraint on trade and alienation of the property. 

The trial court granted Morgan's Foods motion, finding that the restrictive covenant was unenforceable, invalid, void, and of no effect . . . because it is unreasonable on its face, unreasonable in duration, repugnant to trade and commerce, contrary to business interests and endeavors in the area [of the property], is not favored by law, and has the effect of creating a monopoly.

On Citibrook's appeal, the primary issue the Missouri Court of Appeals addressed in determining the covenant's validity was whether the duration of forever was unreasonable as to time.  The court began by noting that Citibrook's alleged purpose of the restrictive covenant (to provide a well-recognized, top of the line national franchise on the property) was not expressed in the language of the covenant itself, and thus couldn't justify it.  Instead, the court found the language of the covenant (the use is restricted to the erection and operation of a [KFC] store and may be used for no other purpose) unambiguous.  Therefore, it refused to incorporate any other purpose.

The court stated that Missouri law provides that a restrictive covenant will not be upheld unless it is clear that the restriction against the use of land is reasonable as to time, citing both Hall v. American Oil Co., 504 S.W.2d 313, 317 (Mo. Ct. App. 1973), and Dean v. Monteil, 239 S.W. 2d 337, 340 (Mo. 1951).  Citibrook responded that Hall, in fact, upheld a competition restriction and stood for the proposition that such restrictions should be upheld. 

In Hall, the plaintiffs wished to enter into a lease with Shell Oil Company, which intended to build an auto filling station on the plaintiffs land.  American Oil Company, however, owned land adjacent to the plaintiffs land, and the plaintiffs deed contained a restrictive covenant that burdened their land, providing that use was restricted against the erection and operation of an Auto Gas Filling Station and the dispensing and sale of Petroleum Products . . . for as long as an Auto Filling Station shall be operated on [American Oil Company's] property.  The court in Hall refused to strike down the time limitation in the restrictive covenant, reasoning that it was not necessarily oppressive, it could be compatible with the purpose of the covenant, and in many instances was less onerous than a restriction for a large number of years where the purpose of the restriction ceases to exist.

In the present case, the court of appeals distinguished Hall for two reasons.  First, the indefinite time limitation in Hall (as long as an Auto Filling Station shall be operated on [American Oil Company's] property) and the restrictive covenant's purpose of preventing plaintiffs from operating an auto filling station on their property were compatible because they involved the same subject matter and were directly related to one another.  Here, the indefinite time limitation forever and the purpose of the restrictive covenant (as noted above) were not directly related.  Second, while the time limitation in Hall was indefinite, there was still a potential end to the covenant if American Oil Company ceased to operate an auto filling station on its property.  Because there is no potential end to forever, it is impossible for the indefinite time limitation in this case to be less onerous than a restriction for a large number of years.  For those reasons, the court ultimately h
eld that the duration forever was unreasonable as to time, making the restrictive covenant invalid.           = ;    

Comment 1: The editor was not aware that there was a public policy declaring that perpetual easements are unenforceable per se as this case suggests.  Indeed, there is significant authority, backed up by the Restatement of Servitudes, that where no duration is stated in a restriction, the duration is presumed to be perpetual.  Restatement of Property (Third) - servitudes Sec. 4.3 (2000).  See, generally, Gerald Korngold, Private Land Use Arrangements: Easements, Real Covenants and Equitable Servitudes (Juris 2nd Ed. 2004). Sec. 11.01.

The editor remains dubious that the a perpetual servitude is invalid per se, even in a jurisdiction, like Missouri, that states that it interprets restrictions strictly to preserve the free enjoyment of land. 

Comment 2: The cases cited by the Citibrook court, and those relied upon by those cases, all involve anti-competition covenants.  In what might be the classic case, Shephard v. Spurgeon, 365 Mo. 989, 291 S.W. 2d 162 (Mo. 1956), landowners transferred a 300 acre parcel along the Iowa/Missouri border highway and reserved for themselves a one acre parcel along the highway.  Covenants provided that for 100 years there could be no commercial use of the 300 acre parcel, but that the one acre parcel was free from any commercial constraints.  The obvious purpose, stated the court, was to create a 100 year monopoly for the sellers and their successors.  The court deemed this to be repugnant to public policy, and the 100 year term was relevant to the evaluation of the covenant.  Dean v. Monteil, 239 S.W. 2d 337, 340 (Mo. 1951), quoted by the Citibrook court, had similar facts.  Indeed the court did say that covenants had to be reasonable as to time, but this was just part of a larger statem
ent addressing specifically anti-competitive covenants, and why they should be treated differently.  Duration was only part of the analysis, and the analysis clearly did not apply to covenants that were not anti-competitive in nature:

The restrictions in this case cannot be sustained on the theory that a residential district was created. That was not the main purpose of the agreement. To uphold the restrictions now would serve the sole purpose of restricting competition in business. Such restrictions have been upheld within certain limitations. In Mallinckrodt Chemical Works v. Nemnich, 83 Mo.App. 6, as page 14, the court said, 'The general doctrine is that agreements in restriction of trade will be upheld when the restriction does not go beyond some particular locality, is founded on a sufficient consideration, and is limited as to time, place and person.' Then at page 16 of 83 Mo.App. we find the following: 'This class of contracts is always regarded with suspicion by the courts, as their effect usually is to create a monopoly, and before any one of them will be upheld, it should clearly appear that no monopoly is created by it; that its enforcement will not prejudice the public; that it is reasonable as to
time, space and person, not oppressive or injurious, and that the contract is founded on a good consideration, and that its enforcement will be useful and beneficial to the promisee.'

It is from that analysis that the instant court got the general statement that covenants that are not reasonable as to time offend public policy, leading to the conclusion that perpetual covenants will almost always offend public policy.  Neither of these conclusions is supported by the authority cited by the court or, the editor's knowledge, by any other authority.  The court retains the tool of the changed circumstances doctrine to delimit the impact of a covenant when too much time has passed.  But there is no reason to strike down the covenant at the outset on the basis of its perpetual nature.

Comment 3: Turning to the covenant in this case, it appears to be questionable whether the purpose of the covenant was to create a monopoly.  Indeed, the benefitted parties argued that the purpose was to maintain a high end (if that possible) fast food outlet at the location, and KFC was chosen because that's what was there.  There is no indication that the benefitted parties had a specific profit interest in KFC. 
Comment 4: Gerry Korngold, author of the treatise cited above, contacted by the author, opined  that the outcome is sound, but not for the reasons stated by the courts:

The restriction is functionally similar to a direct restraint on alienation, as it in effect limits the ownership of the property to a very limited group of people (i.e., KFC or a franchisee). Who else but such a party could own the property? This creates a significant restraint on alienation. Private arrangements between parties are generally a good thing, deserving enforcement except in rare circumstances. A major clog on the marketplace, such as is created by the perpetual covenant here, is a circumstance where there should be no enforcement.

Comment 5: Susan French, Reporter of the Servitudes Restatement, also contacted by the author, had this to say:  

I think this covenant could properly be held invalid either as an unreasonable restraint on alienation or an unreasonable restraint on competition. Duration is relevant in both those determinations. For many other kinds of servitudes, however, unlimited or indeterminate duration is entirely appropriate, as the Restatement recognizes. Context matters.

Comment 6: The editor agrees with both of the above comments, in general, although he doesn't see why this particular covenant could be regarded as anti-competitive. 

But neither of these comments really supports the case as it is written.  The court's opinion cannot be read so narrowly as to apply only to anticompetitive covenants or covenants that very narrowly constrict transfer rights.  Rather it appears to say that a perpetual covenant is unreasonable, at least in most cases.  This does not support precedent, and is likely to cause havoc as precedent in the future.  In short, the court completely messes up precedent and misapplies the rules to reach an anomalous result.   A poorly analyzed decision.  Fortunately, this being a St. Louis court, the judge's clerk likely was not one of UMKC's graduates. 

Items reported here and in the ABA publications
are for general information purposes only and
should not be relied upon in the course of
representation or in the forming of decisions in
legal matters.  The same is true of all
commentary provided by contributors to the DIRT
list.  Accuracy of data and opinions expressed
are the sole responsibility of the DIRT editor
and are in no sense the publication of the ABA.

Parties posting messages to DIRT are posting to a
source that is readily accessible by members of
the general public, and should take that fact
into account in evaluating confidentiality


DIRT is an internet discussion group for serious
real estate professionals. Message volume varies,
but commonly runs 5 to 15 messages per work day.

Daily Developments are posted every work day.  To
subscribe, send the message

subscribe Dirt [your name]



To cancel your subscription, send the message
signoff DIRT to the address:


for information on other commands, send the message
Help to the listserv address.

DIRT has an alternate, more extensive coverage that includes not only
commercial and general real estate matters but also focuses specifically upon
residential real estate matters.  Because real estate brokers generally find
this service more valuable, it is named BrokerDIRT.  But residential
specialist attorneys, title insurers, lenders and others interested in the
residential market will want to subscribe to this alternative list.  If you
subscribe to BrokerDIRT, it is not necessary also to subscribe to DIRT, as
BrokerDIRT carries all DIRT traffic in addition to the residential discussions.

To subscribe to BrokerDIRT, send the message

subscribe BrokerDIRT [your name]



To cancel your subscription to BrokerDIRT, send the message
signoff BrokerDIRT to the address:


DIRT is a service of the American Bar Association
Section on Real Property, Probate & Trust Law and
the University of Missouri, Kansas City, School
of Law.  Daily Developments are copyrighted by
Patrick A. Randolph, Jr., Professor of Law, UMKC
School of Law, but Professor Randolph grants
permission for copying or distribution of Daily
Developments for educational purposes, including
professional continuing education, provided that
no charge is imposed for such distribution and
that appropriate credit is given to Professor
Randolph, DIRT, and its sponsors.

DIRT has a WebPage at:
https://e2k.exchange.umkc.edu/exchweb/bin/redir.asp?URL=3D http://cctr.umkc.edu/dept/dirt/
     &nbs p;             ;      


To be removed from this mailing list, please go to
<https://e2k.exchange.umkc.edu/exchweb/bin/redir.asp?URL=3D http://listserv.umkc.edu/listserv/wa.exe?SUBED1=3DBROKERDIRT%26A=3D1& gt;
or send an email message to the address listserv@listserv.umkc.edu,
with the text SIGNOFF BROKERDIRT in the body of the message. Problems
or questions should be directed to manager@listserv.umkc.edu.