Daily Development for
Friday, March 6, 1998

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

RESTRICTIVE COVENANTS; ENFORCEMENT: Property owners must demolish their newly constructed home built in violation of implied reciprocal negative easement where owners had actual knowledge of restrictions prior to completion of construction.

Webb v. Smith, 568 N.W.2d 378 (Mich. Ct. App. 1997).

This case does not make new law, but it is an application of existing law that has some real "teeth" and is worthy of note for the legal saga it appears to conclude, if nothing more.

This case is the third visit of the parties to the Michigan Court of Appeals. The litigation began in 1991, during the course of construction of the Smith's home. Webbs, and other neighbors, objected that the home violated an implied equitable restriction that permitted only one home per lot. Twice before the Smiths had prevailed at the trial court level and had seen the results reversed on appeal. Finally, having been fully instructed by two Court of Appeals panels, the trial court finally got the word and found that the Smiths project was in violation of valid equtiable servitudes and issued an injunction that it be torn down.

The Court of Appeals, not surprisingly, affirmed the trial court this time round.

What is noteworthy about the case is the application of a doctrine that some have felt has passed out of favor - the concept of "implied reciprocal negative easement". The leading case for the concept, as it has appeared in generations of law school casebooks, is Sanborn v. McLean, 206 N.W. 496 (Mich. 1925). In Sanborn, a lot owner acquired a parcel on a street that had been developed uniformly with single family homes of uniform setback from the street. All of the lots on the street had been subdivided according to a single plat. Approximately 60% of the lots had deed restrictions requiring substantial single family homes with the established setback. Almost 40% did not, including the lot in question in the litigation. But the court concluded that a uniform scheme had been intended by those from whom the developer did exact the covenants restricting development, and that this property owner, at least, was on inquiry notice of the possible existence of such covenants simply by looking "up the street and down the street" and seeing the uniform development that had occurred. Reasonable inquiry, the court concluded, would have resulted in the owner's obtaining actual knowledge of the restriction, notwithstanding the large number of unrestricted lots. The uniform scheme originally planned by the developer and the restricted lot owners imposed an "equity" upon the balance of the developer's property that became binding upon all purchasers of the property who took with actual or constructive notice of the scheme.

A few cases have gone so far as to maintain that the simple fact that a party buys property within a subdivision at all puts the buyer on notice that other deeds in the subdivision may contain restriction that evidence a common plan, even when no development has occurred.

The first trial court determination in this case concluded that the Smiths did not have actual or constructive notice of the restriction in the instant subdivision. The developer had bound a number of lots to the restriction, but had not bound the Smiths. The Court of Appeals, however, in an unpublished opinion, applied the Sanborn reasoning to find that there was constructive knowledge at the time the Smiths acquired their lot. We do not have the unpublished opinion available - it's not on Westlaw. The court here quotes from it to the extent of indicating that the constructive notice in this case was not based upon uniform development within the subdivision. But it doesn't say what the source of the inquiry duty was. (It should be noted that the "one lot-one house" restriction was also in the zoning regulations, but the City refused to try to enforce the regulation here because it had issued a building permit, apparently inadvertantly.)

The trial court, spanked once by the Court of Appeals, still apparently saw the equities differently, and made some technical interpretations of the meanings of the restrictions that would have permitted the house to remain. On appeal, the Court of Appeals spanked twice.

On second remand, the trial court got the message, as indicated, and rejected the Smiths arguments based upon changed circumstances. It further upheld the injunction to tear the house down as against the Smith's arguments that the equities compelled that it remain. The court noted that the Smiths had actual notice of the neighbor's contentions that a common scheme existed at least during the building of the foundation, and probably earlier.

The court affirmed that the equities balanced for the neighbors:

"We note that a negative easement is a valuable property right . Further, public policy favors use restrictions in residential deeds. The judiciary's policy is to protect property owners who have complied with the deed restrictions. Restrictive covenants protect property values and 'aesthetic characteristics considered to be essential constitutents of a family environment.'" 568 N.W.2d at 382. (Citations omitted)

Comment 1: One would not have been surprised to see an opinion like this in the fifties, or even into the seventies. But more recent academic thinking, at least, has been less accepting of the blind elevation of unformity or "neighborhood values" as independent policy goals for the courts to pursue even when there is no clear evidence that a given property owner knowingly has "bought in" to a common scheme. The Sanborn case was not truly a case of constructive notice, it was a case of judicially imposed burdens disguised as a notice case. We don't know enough about the notice findings in this case to make a similar judgment, but the court's emphasis of the signficance of imposing uniform restrictions to preserve a "family environment" smacks of the same reasoning that drove Sanborn.

Comment 2: The editor is a strong believer that legitimately created property rights should be strongly enforced, and is not concerned that a court may order that a newly constructed house be torn down if it was built in the face of a contrary property restriction. The editor does have a concern, however, about courts imposing phantom notice on parties in order to carry out some judicial ideal of a proper neighborhood setting. If the neighbors who thought they were getting a restricted neighborhood were disappointed in their expectations, their quarrel is with the developer, or perhaps with their own advisers (brokers, lawyers, etc.) who failed to tell them that a scheme built solely upon individual deed restrictions might not provide adequate notice to other purchasers within the subdivision.

The editor doubts that there are many jurisdictions that would take up or have taken up the Sanborn banner unfurled in Michigan, and the editor would prefer that the banner flutter quietly and alone in that cold corner of our land. (Published under the Friday exemption for outrageously extended metaphors.)

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