Daily Development for
Tuesday, August 11, 1998

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; COVENANTS; RESTRICTIVE COVENANTS; ENFORCEMENT: If a court finds that restrictions contained in an unambiguous restrictive covenant are unreasonable because inconsistent with surrounding uses, the court must balance the equities and decide whether the public interest would dictate partial enforcement only or even non enforcement of the restrictions.

Crowell v. Shelton, 948 P2d 313 (Oklahoma 1997).

In 1992, pursuant to the terms of a testamentary trust, property was distributed to Crowell with "the specific restriction that said 43.9 acres never be used for residential or commercial development." Apparently the trustor had used at least a portion of the property as a bird sanctuary. She had left the property to a church for church purposes only, and subject to the use restrictions above. The trust further stated that if the church refused the grant, the property would go to Crowell subject to the same restrictions.

Crowell accepted the property upon distribution of the trust, aware of the restrictions and without making any objection to them. Five years later, Crowell brought suit to declare the restrictions unenforceable. Both the trial and appeal court granted summary judgement to the estate of the trustor, holding that the restrictions were clear and reasonable and were known by Crowell.

On appeal: held: reversed and remanded. The Oklahoma Supreme Court held that covenants are not enforceable unless the court views them as "reasonable;" and here the court concluded that there was a material issue of fact as to whether the restrictions were reasonable. It stated that in order to determine reasonableness, the lower court should have reviewed such material facts as use of land adjoining the property, other potential uses of the property and the benefit of the restriction to the individual and the public.

"On remand, the trial court is first to determine if the restrictions were reasonable by assessing evidence the use of the land in the area. For example, if the use of the area surrounding the property is comprised of shopping centers, a commercialdevelopment restriction is more likely to be unreasonable than if the surrounding property is made up of residences on large acreages. If the trial court determines that the restrictions are reasonable, then they will be upheld. If the trial court determines that the restrictions are unreasonable, then it must balance the equities. In weighing the equities, the trial court may consider such evidence as Ms. Newlin's use of her property including the evidence that she only used one tract of the property as a bird sanctuary.

Although not admissible for purpose of constructing the terms of the will, one factor in weighing the equities is Ms. Newlin's intent as to the use of the property after her death. In balancing the equities, the trial court may refashion the restrictions so that they are reasonable. For example, the trial court might uphold the restrictions on one tract of land while finding that they are unreasonable as to the remaining tracts. By considering all the circumstances, balancing the equities, and refashioning the restrictions so that they are reasonable, the court gives effect to the deed by enforcing its reasonable terms without completely invaliding the restrictions."

The court cited to prior Oklahoma authority that had stated, in dicta, that restrictions would be evaluated as to reasonableness in order to be enforced, but had upheld the restrictions. Here the court seems to be inviting the court below to invalidate the restriction at least in part.

Comment 1: Note that the reasonableness of the restriction is not to be measured as of the time of the grant, when the grantor willingly accepted the terms, but as of five years later. Basically, the Oklahoma doctrine leaves the court with complete discretion as to the enforceability of the restriictive covenants based upon its own judgments as to the desireability and appropriateness of the restriction at any given time. This extremely broad view of the authority of a court to overturn acknowledged property interests is unusual, if not unprecedented. The prior authority spoke in terms of very broad public policy constraints on the operation of contracts generally, and not in terms of specific analysis of the appropriateness of a particular land use restriction.

Comment 2: It may be that the court views this case simply as one involving the appropriate carrying out of the probable scheme of the testator, and would not authorize such broad discretion in connection with bargained for covenants. But there is nothing in the opinion to make that clear.

Comment 3: This case may be useful to parties seeking to invalidate inconvenient covenants in failed shopping centers and residential subdivisions. It may be a lot cheaper just to hie all the covenant beneficiaries into court rather than to bargain with them about obtaining releases. In fact, the threat that the court may invalidate the restrictions with no compensation may ease the negotiations over their release.

Comment 4: But if a court refuses to enforce covenants simply because it disagrees with their usefulness, is it fulfilling its role as a protector of property interests? Isn't our system predicated on the notion that private parties (not government, and certainly not courts) own property; and that desireable land uses are achieved when they buy and sell their property interests?

Why can't the court leave the parties to strike a bargain in this case? The case does not appear to be about "public policy," but about which of two parties will have a valuable property right. The last time the editor checked, bird sanctuaries per se were not inconsistent with the public policy of any state. The Oklahoma case here is a split decision, and somewhat special facts. Maybe there is still time for reason to prevail when the Oklahoma court has the opportunity to narrow this case by limiting it to special facts involving testamentary trusts.

Comment 5: The new Restatement of Servitudes would bundle all easements and covenants together, subject to uniform application of enforceability rules. Although the authors of the Restatement probably would not have intended that courts be able to reject covenants such as those at stake here, they certainly included language that permitted the courts generally to refuse enforcement to clear, intentionally created, bargained for servitudes, including easements. The editor railed against that idea while the Restatement was in draft, and still views the notion as a bad idea that ought to be ignored. The editor doesn't like the further watering down of servitude enforcement, including that occuring in this case, but courts already had developed a number of doctrines that had reduced such enforceability. The editor believes that courts traditionally have more rigorously enforced easements, and hopes that the Restatement will not invite further judicial intrusions into expectations created by easement agreements.

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 16, 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

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.