Daily Development for
Thursday, October 26, 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
RESTRAINTS ON ALIENATION;
USE RESTRICTIONS: New Mexico court upholds 65 year old forfeiture condition on
sale of alcohol; use restraints do not amount to direct restraints on
alienation.
Prieskorn v. Maloof, 991
P.2d 511 (N.M. 1999).
Plaintiff 's parcel was
located in a larger tract was subject to a provision in a 1935 deed that no
building erected on the land shall at any time be used for immoral purposes or
for the manufacture and sale of any intoxicating liquors and that, if said
condition would be broken, the land, right, title and interest of the land will
revert to the grantor, his successors and assigns.
The land covered by the
reversionary clause had been subdivided and developed. Plaintiff had taken
title to her parcel with notice of the reversionary clause. Part of her land
was vacant and part was occupied by a trailer park. Residential subdivisions
occupied other parts of the original tract. Plaintiff claimed that she was unable to obtain title insurance on
her property due to the reversionary clause and that therefore the value of her
land had been adversely affected.
The trial court denied
Plaintiff's request for a decree quieting title, ruling that the reversionary
clause did not constitute a restraint on alienation, but was simply a restraint
on the use that may be made of the land. It further held that the circumstances
surrounding the property had not changed to such a degree that it would be
inequitable to enforce the reversionary clause.
The New Mexico Supreme
Court affirmed. It found that there was no indication that the use restriction
made the property any less alienable than any other property and that a lower
sales price in and of itself does not make the restraint on the property one of
alienation rather that use.
The court commented that
it made no difference whether the estate was regarded as a fee simple
determinable or a fee on condition subsequent (the language was ambiguous and
ambiguity usually leads to the condition subsequent construction). Regardless
of the type of future interest involved or the method for invoking it, there
clearly was a property right in the holders of the grantor's interest that
remained viable.
As to the trial court's
consideration of whether changed circumstances warranted avoidance of the
condition, the court commented that there was considerable doubt as to whether
the "changed circumstances" doctrine, sometimes applied to use
restrictions in servitudes, had any function in the case of conditional
estates. But in any event, the court concluded that there was substantial
evidence to support trial court's conclusion that there was no showing that the
burden of the restriction operating inequitably or that benefits of the
covenant could not be realized. Other parcels of the restricted tract had been
sold and developed in the past, and most of the uses of the land within the
tract were residential in character, a use which not only was not inconsistent with
the restriction but which might benefit from it.
Comment 1: Here's the text
of the restraint:
"[T]his conveyance is hereby made and the land conveyed under
the following conditions: That no building now on said premises or to
be erected on said land shall at any time be used for immoral purposes,
or for the manufacture and/or sale of any intoxicating liquors
by the grantee, its succe[s]sors, heirs, and assigns, and that
in the event of said condition being broken, then this deed shall
become null, void, and of no effect, and all right, title, and interest
of, in and to the premises of said above described land hereby
conveyed, shall revert to the grantor, his successors and assigns."
Comment 2: Many of the nation's cities are loaded with
"ticking time bombs" in the nature of these forfeiture conditions
relating to the sale of alcohol. Usually, courts find ways to defuse the bombs
and clear the title. This case is noteworthy because the court refuses to do
so, and leaves the landowner in real jeopardy. In fact, the lawsuit creates a greater
concern than before, because now people will have to take the restraint
seriously.
The editor owns land in
California subject to a similar restraint, with an executory interest over to
the city in the event of a breach. The title company took the position that
forfeiture restraints of this nature would not be enforceable in California,
and insured over the issue, although the editor had to go high up in the
company before he got the coverage.
Comment 3: The immoral
conduct restriction is even more troublesome. Of course, the first difficulty
is the vagueness of the term. The second issue is that, although the restraint
language appears to limit the restriction on the sale of intoxicating liquors
to the landowner only, and not to tenants, the language concerning immoral
conduct, if we take the grammatical construction seriously, applies to any
person using buildings on the land. Consider what happens, for instance, if a
resident of plaintiff's trailer park starts operating a pornography website. Would
this be "immoral" conduct justifying a forfeiture? Of course, the plaintiff could recover
damages from the tenant, but would the trailer park tenant really be in a
position to pay?
Readers are urged to respond, comment, and argue with the daily
development or the editor's comments about it.
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