>Daily Development for Tuesday, July 8, 2008
>by: Patrick A. Randolph, Jr.
>Elmer F. Pierson Professor of Law
>UMKC School of Law
>Of Counsel: Husch Blackwell Sanders
>Kansas City, Missouri
>dirt@umkc.edu
>
>DEEDS; INTERPRETATION; SERVITUDES: Restrictive covenants listed on an undated and unsigned attachment to a deed that does not show on its face any encumbrances to the property can be enforced as an equitable servitude against a remote grantee if (1) the restrictions touch and concern the land, (2) the original parties intended them to run with the land (particularly if the covenant expressly states that intent), and (3) the remote grantee has actual notice of the restrictions.  In such a situation, equity does not require a common plan of development if the grantor is the party seeking enforcement and if the remote grantee took title with actual notice.

>
> Gambrell v. Nivens, 2008 WL 539310,  ___ S.W.3d ___ (Tenn. Ct. Appl. 2008).
>
>The Gambrells purchased 69 acres in Fayette County in 1991 and subdivided the parcel into four lots, selling three and retaining one 20-acre lot.  In the deed for two of the lots (one of which was sold to Foshee), the Gambrells did not include any encumbrances in the applicable section of the deed.  However, they did attach to the deed an untitled, undated, and unsigned page which listed several restrictions, and this page was recorded with the deed.  Apparently recognizing their error, the Gambrells expressly incorporated the attachment into the third deed. 

>
>Foshee subsequently conveyed his lot to the Nivenses in 1996.  The warranty  deed evidencing that conveyance affirmatively represented that there were no encumbrances on the property.  However, when Foshee put the lot on the market, he provided his real estate agent with a copy of the restrictions, and the agent later provided the copy to the Nivenses’ agent, giving the Nivenses actual notice of the restrictions.

>
>After acquiring the lot, the Nivenses began construction of a large wedding chapel and facility, which was in violation of the restrictions prohibiting commercial uses.  The Gambrells filed suit seeking injunctive relief and damages, arguing that the restrictions precluded the Nivenses from constructing the wedding facility.  In response, the Nivenses contended that their lot was unencumbered, the restrictions did not run with the land, and they had no notice of the restrictions when they took title to the property.

>
>At trial, the court held in favor of the Gambrells, granting a permanent injunction against the Nivenses.  The trial court reasoned that (1) the Nivenses had actual notice of the restrictions prior to the transfer of title, and (2) the attachment at least constituted a cloud on the title.  On appeal, the court addressed three primary issues:

>
>On appeal, the Nivenses argued first that under Patterson v. Cook,  655 S.W.2d 955 (Tenn. Ct. App. 1983), a plaintiff/grantor is estopped by the equitable doctrine of estoppel by deed from enforcing restrictive covenants that contravene the deed’s apparent  recital that the property is unencumbered.  The court agreed that unsigned paper that the Gambrells had attached to the Foshee deed was not part of that deed, and that the warranty deed showed no encumbrances.  Thus, to that extent it could be argued that the Gambrells were attempting to negate the quality of the title passed by their deed, which is grounds for invocation of the doctrine of estoppel by deed.   The court, however, distinguished Patterson from the current situation on a variety of technical grounds, but most importantly because, unlike the party to be bound in Patterson, the Nivenses had actual notice of the restrictions in this case and accordingly, did not detrimentally rely on any express or implied represent

ation that the property was unencumbered.  Of course, estoppel by deed, like any estoppel, is an equitable doctrine, and Nivens had full awareness that the Gambrells and Foshee, Nivens’ predecessor, regarded the property as encumbered and also the nature of those encumbrances. 

>
>Nivenses next argued that the restrictions could not be enforced as an equitable servitude because there was no common plan of development and the Gambrells did not similarly restrict their retained lot, as evidenced by the Gambrells growing their grass too long and Mr. Gambrell “strategically discharging his shotgun” during a wedding ceremony at the “wedding chapel” site.  The court concluded simply that, although common plan analysis often was useful in the recognition of an equitable servitude, it was not a necessary element of the concept in every case.

>
>To establish  an equitable servitude in Tennessee, three basic requirements exist:, (1) a restriction must touch and concern the land, (2) the original parties to the restriction must have intended that it run with the land, and (3) the remote grantee must have had notice of the restriction.  All of those factors were abundantly clear here. The court held that each of these elements was satisfied in this situation. The existence of a common plan might be useful to identify those persons whom the originally parties intended to benefit.  Or it might be useful to demonstrate that a parcel was burdened by a set of restrictions by implication even though no express promise was made by a grantee of that parcel to be bound.  But Tennessee courts have not established the existence of a common plan as a condition to recognition of an equitable servitude in every case.

>
> First, the “touch and concern” requirement was satisfied by the building restrictions here.  The court did note that the case did not clearly raise the question of whether an “covenant in gross” - with no benefitted parcel, would run with the land.  Although it was not clear that the parties intended that Gambrells’ successors could enforce the covenant, there was no question that Gambrells’ land was benefitted by promise in the requisite way. 

>
>With respect to the second element,  the record revealed that Foshee firmly believed that the terms of his contract included the restrictions (which he understood would run with the land for thirty years) despite the fact that this intent was embodied in undated and unsigned writings located below the signatures that did not constitute “part of the deed.”  While the written covenants failed in form, “the original covenanting parties confirmed their substance,” and the firm language in the attachment clearly indicated Gambrell’s intent that the covenants run with the land.  Finally, the record established that the Gambrells had notice of the restriction.

>
>Nivenses finally argued that when Foshees gave a warranty deed that stated on its face that there were no encumbrances, they released the covenants.  The court quickly disposed of the last issue.  All beneficiaries of the restrictions (most notably the shotgun toting Gambrells) must agree to a release in order for it to be effective.

>
>Comment: An interesting further inquiry might be what liability Foshee might have on the warranty deed that denied the existence of covenants.  Remember that simultaneously with delivery of the deed Foshee delivered a statement of the covenants and had informed the Nivenses of their existence.  Although some might argue that some technical argument such as merger by deed or a Statute of Frauds bar might be used, a court, operating in equity, can and often will make happen what the parties clearly intended to happen, nothwithstanding the absence of technical niceties. 

>
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