Opinion
No. 51664-7-1-I.
Filed: February 17, 2004.
Appeal from Superior Court of King County. Docket No: 02-2-17551-1. Judgment or order under review. Date filed: 12/13/2002. Judge signing: Hon. Donald D. Haley.
Counsel for Appellant(s), Michael Duane Daudt, Tousley Brain Stephens PLLC, 700 5th Ave Ste 5600, Seattle, WA 98104-5056.
Paul W Moomaw, Attorney at Law, 700 5th Ave Ste 5600, Seattle, WA 98104-5029.
Kim D. Stephens, Tousley Brain Stephens PLLC, 700 5th Ave Ste 5600, Seattle, WA 98104-5056.
Counsel for Respondent(s), Constance Susan Mano Martin, Short Cressman Burgess, 999 3rd Ave Ste 3000, Seattle, WA 98104-4088.
Diamond Parking, Inc. (Diamond) conveyed a parcel of property to CHG, International, Inc. Contemporaneously, the parties executed a Reservation of Rights Agreement (Agreement) stipulating that CHG, International, Inc. and all future owners of the property were required to contract with Diamond for current and future parking operations on the property for as long as parking was offered. Washington State Convention and Trade Center and Convention Place, LLC, CHG's successors in interest, sought a declaratory judgment that the Agreement was a personal contract, not a covenant, and thus not binding on them as successors in title. Diamond counterclaimed. The trial court granted Diamond's motion for summary judgment, entering a declaratory judgment that the Agreement was a covenant running with the land Washington State Convention and Trade Center and RREEF Management Company, Convention Place, LLC's successor in interest, appeal. We reverse.
FACTS
The facts in this case are not in dispute. In 1984, Diamond Parking, Inc. (Diamond), conveyed to CHG International, Inc. (CHG) a parcel of property known as 'Block 65.' At the time of conveyance of each separate lot of Block 65, the parties executed substantially identical documents, entitled 'Agreement and Reservation of Rights for Diamond Parking, Inc. to Operate All Parking in Block 65 of an Addition to the Town of Seattle, as Laid Out by A.A. Denny as per Plat Recorded in Volume 1, of Plats in the Records of King County' (Agreement). The Agreement stated in relevant part: In the event the Property is developed by Purchaser or Purchaser's assigns or successors in interest, Diamond or its successors and assigns shall have the right, in perpetuity, so long as the Property or any improvements thereon or any part thereof are used for automobile (vehicle) parking now or in the future, to operate all parking on the premises or in any improvements or garages constructed or developed on the Property.
The Agreement did not require CHG or its successors to construct or maintain parking facilities; it merely stated that Diamond had the right to operate such facilities in the event they were developed. CHG and its successors were free to remove any existing parking facilities or to improve the property without new parking facilities. The Agreement was recorded in the King County Recorder's Office in 1984. It appears on the appellants' title report as an encumbrance on the property. The appellants do not deny having actual and constructive knowledge of the Agreement.
In 1987, the WSCTC acquired part of Block 65 from CHG to develop the Convention Center, and conveyed part of it to Convention Place, LLC (Convention Place). In 2000, Convention Place requested bids from third parties for the operation and management of its parking garage. Diamond filed suit against Convention Place, asserting that its acts were a breach of the Agreement. Convention Place disagreed, but when Convention Place gave Diamond a contract to operate and manage the parking facility, Diamond dismissed its suit.
In 2002, Convention Place and WSCTC sought a declaratory judgment against Diamond, requesting that the Agreement be held a personal contract between Diamond and CHG, rather than a covenant running with the land They also sought to quiet title. Diamond counterclaimed, seeking a declaratory judgment that the Agreement was a covenant running with the land and, therefore, binding on WSCTC and Convention Place.
Both parties filed motions for summary judgment. The trial court denied the appellants' motion. The trial court granted Diamond's motion requesting a declaratory judgment that the Agreement be deemed a covenant running with the land and, therefore, binding upon the appellants and their assigns and successors in interest. WSCTC and RREEF Management Company, Convention Place's successor in interest, appeal.
ANALYSIS I. Standard of Review
We review a grant of summary judgment de novo, engaging in the same inquiry as the trial court. Youngblood v. Schireman, 53 Wn. App. 95, 99, 765 P.2d 1312 (1988). Summary judgment is appropriate 'if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' CR 56(c). 'The facts and all reasonable inferences therefrom must be considered in the light most favorable to the nonmoving party.' Nivens v. 7-11 Hoagy's Corner, 133 Wn.2d 192, 197-98, 943 P.2d 286 (1997). Questions of law are reviewed de novo. Rivett v. City of Tacoma, 123 Wn.2d 573, 578, 870 P.2d 299 (1994).
II. Discussion
We are asked to decide as a matter of law whether the parking provision in Diamond's Agreement with the appellants' predecessor, CHG, was a covenant which ran with the land, or whether the Agreement was a collateral personal covenant and, therefore, unenforceable against appellants as successive owners.
Washington State requires that five elements be met for a covenant to run with the land:
(1) a promise which is enforceable between the original parties; (2) which touches and concerns; (3) which the parties intended to bind successors; and (4) which is sought to be enforced by an original party or a successor, against an original party or a successor in possession; (5) who has notice of the covenant or has not given value.
1515-1519 Lakeview Boulevard Condo. Ass'n v. Apartment Sales Corp., 146 Wn.2d 194, 203, 43 P.3d 1233 (2002) (citing William B. Stoebuck, Running Covenants: An Analytical Primer, 52 Wash. L. Rev. 861, 909-10 (1977)). The parties dispute only the touch and concern element in this appeal.
'[I]in settings other than subdivisions,' the court 'has not relaxed the touch and concern requirement for the enforceability of covenants.' Lakeview, 146 Wn.2d at 204. Washington courts have not adopted a 'strict test' for 'touch and concern;' rather, it has 'established an analytical approach.' Lakeview, 146 Wn.2d at 203. The Supreme Court cited this approach in Lakeview:
The Lakeview Court also noted:
The recently published Restatement (Third) of Property has abolished 'touch and concern' as an element of enforceable covenants. In its stead, the Restatement provides that a servitude is valid unless it is illegal, unconstitutional, or violates public policy. Restatement (Third) of Prop: Servitudes sec. 3.1 (2000). Whether this Court should adopt the Restatement was not raised until the motion for reconsideration to the Court of Appeals opinion, and will not be considered for the first time on review to this Court.
Lakeview, 146 Wn.2d at 203, n. 4. Likewise, the parties to this appeal did not address whether this court should adopt the Restatement (Third) of Property.
'Generally speaking, a covenant touches or concerns the land if it is such as to benefit the grantor or the lessor, or the grantee or lessee, as the case may be. As the term implies, the covenant must concern the occupation or enjoyment of the land granted or demised and the liability to perform it, and the right to take advantage of it must pass to the assignee. Conversely, if the covenant does not touch or concern the occupation or enjoyment of the land, it is the collateral and personal obligation of the grantor or lessor and does not run with the land' Lakeview, 146 Wn.2d at 203-04 (quoting Rodruck v. Sand Point Maintenance Comm'n, 48 Wn.2d 565, 574-75, 295 P.2d 714 (1956)).
The main consideration in deciding whether a covenant runs with the land appears to be whether the covenant in question is so related to the land as to enhance its value and confer a benefit upon it [or conversely, impose a burden upon it].
Rodruck, 48 Wn.2d at 575.
The appellants assert that the Agreement does not touch and concern the land because it does not benefit or burden the land, affect the land's value, or have a significant impact upon ownership rights. They maintain the Agreement in this case was a personal contract rather than a covenant running with the land and, therefore, Bremmeyer Excavating v. McKenna, 44 Wn. App. 267, 268, 721 P.2d 567 (1986) is controlling.
In Bremmeyer, an excavating company executed a written agreement with the opposing party's predecessor in title, giving it the exclusive right, for a period of five years, to provide labor and materials to fill the property. Bremmeyer, 44 Wn. App. at 268. After the subsequent purchasers filled the property using another company's fill services, the excavator filed an action against the purchasers, alleging breach of the fill contract and claiming that the contract had created a covenant that ran with the land Bremmeyer, 44 Wn.App at 268. The excavator appealed when the trial court dismissed its claims. This court affirmed the trial court's dismissal of his claims, reasoning:
Arguably, a contract requiring a landowner to place fill on his property or accept the placement of fill on his property could be said to benefit and/or burden that property. However, this contract does not require or prevent fill. It does not impose a benefit or a burden on the property at all. It imposes a burden on [the respondent's predecessor] and then only with respect to his choice of a contractor to provide fill and site improvements.
Bremmeyer, 44 Wn.App at 269-70.
Bremmeyer also based its holding on the lack of privity between the parties; whereas in this case privity is not at issue. In Bremmeyer, 'the record . . . lack[ed] evidence that the fill contract passed between the original parties in conjunction with an estate in land . . .' Bremmeyer, 44 Wn. App. at 270-71.
The agreement here gives Diamond the right to operate all parking on the premises. This provision is neither a lease nor an option to lease. It does not require parking services on Block 65 nor prohibit them. The sole requirement is that Diamond or its successors or assigns have the exclusive right to be the contract operator if parking services are offered. This is a preemptive right. A preemptive right does not create a present interest in land As explained in Robroy Land Co. v. Prather, 95 Wn.2d 66, 622 P.2d 367 (1980):
We reject the view that a preemptive contract of any duration, long or short, creates an interest in land at the time of its inception. Even in an ordinary option contract, until the option is exercised, the optionee acquires no equitable estate or interest in the optioned land [citations omitted]. The holder of a right of first refusal has far less of an interest in land than the holder of an ordinary option. The preemptioner has no power or right to affect the property in any way until its owner expresses a desire and willingness to sell. . . .
If the preemption holder elects to purchase the property, a new contract ensues which may give him a contract in land An election not to purchase, however, does not release a property interest. It is but the exercise of the contract right in first refusal.
Robroy, 95 Wn.2d at 71 (emphasis in original) (citations omitted).
Applying the analysis presented in Robroy, we conclude Diamond held only a contract right, not a present interest in the land This conclusion is in accord with the application of Robroy in Feider v. Feider, 40 Wn. App. 589, 699 P.2d 801 (1985) (analyzing a right of first refusal to purchase) and Bremmeyer (analyzing the preemptive right to provide fill). Only personal rights are affected in each case. Neither the agreements in Feider and Bremmeyer nor the Agreement at issue here are covenants running with the land
Diamond argues that Bremmeyer should not control because its reasoning is based on the Robroy line of cases which was supplanted by Manufactured Housing Comm'n of Wash. v. State, 142 Wn.2d 347, 364-69, 13 P.3d 183 (2000). We disagree.
In Manufactured Housing, the Supreme Court held that the Mobile Home Park Resident-Ownership Act constituted an unconstitutional taking. The grant to tenants of a first right of refusal to purchase the property affected a mobile home park owner's right to dispose of land, one of the three "fundamental attribute[s] of property ownership." Manufactured Housing, 142 Wn.2d. at 364 (quoting Guimont v. Clarke, 121 Wn.2d 586, 595, 854 P.2d 1 (1993)).
Chapter 59.23 RCW.
Diamond argues the Agreement restricts the right of use of Block 65 under Manufactured Housing's definition of property. Manufactured Housing states that '[p]roperty in a thing consists not merely in its ownership and possession, but in the unrestricted use, ownership and disposal.'
Manufactured Housing, 142 Wn.2d at 364-65 (emphasis in original). However, the Agreement does not restrict the use, ownership, or disposal of the land at issue. Particularly, the Agreement does not require parking services, nor prohibit them, on Block 65. The Agreement only specifies who shall operate parking services if, in the sole discretion of the owner, parking services are offered. The Agreement is not a restriction on use under Manufactured Housing.
It is true that Manufactured Housing recognized that a holder of a right of first refusal (a preemptive right) may have a compensable property interest:
The diverse array of cases above clearly demonstrates that a right of first refusal, although a preemptive right for the grantee, can also constitute a property interest even as to a grantee. For the grantor, the power to grant a right of first refusal is part and parcel of the power to dispose of property. Until granted, such right remains indivisible from the 'bundle of sticks' representing the valuable incidents of ownership along with the right to possess, use and exclude others.
Manufactured Housing, 142 Wn.2d. at 366. But recognition of a property interest does not conflict with Feider or Robroy. Manufactured Housing did not expressly overrule Robroy; rather, the court distinguished it as not applying in the context of takings:
Robroy analyzes the right of first refusal in the hands of the grantee, which is inapplicable when analyzing the grantor's property rights.
Distinguishing a right of first refusal in the hands of a grantee is important because such a right is generally regarded as only preemptive. However, the right to grant first refusal is a part of 'the bundle of sticks' which the owner enjoys as a vested incident of ownership.
Manufactured Housing, 142 Wn.2d. at 367 (emphasis in original).
The Court went on to explain that the loss of preemptive rights may give rise to compensable losses when triggered by eminent domain proceedings by virtue of the contract creating such preemptive rights. The Court referred to cases including its earlier decision in Spokane School Dist. v. Parzybok, 96 Wn.2d 95, 104, 633 P.2d 1324 (1981). Manufactured Housing, 142 Wn.2d at 367-68. In Spokane School Dist., the Court stated: It is not necessary to hold that an optionee has an estate in land, or that a lien claimant has an interest comparable to that of an option holder, in order to conclude that the nature of the optionee's right is such that in equity and fairness, he should be permitted to recover from the condemnor the amount of damage which he has suffered.
Spokane School Dist., 96 Wn.2d at 103. In both Spokane School Dist. and Manufactured Housing, the Court stopped short of defining the property interest as an interest in land Instead, the Court treated the property interest of the preemptioner as a contract right. This is the same status accorded the interest under the Robroy analysis. Therefore, we conclude that Manufactured Housing does not supplant the analysis of the Robroy line of cases.
Diamond asserts that Lakeview and Lake Arrowhead Cmty. Club, Inc. v. Looney, 112 Wn.2d 288, 770 P.2d 1045 (1989), support a conclusion that the Agreement at issue here 'limits rights normally associated with ownership' of the land and thus satisfies the touch and concern element of a running covenant. Br. of Respondent at 9, citing Lakeview, 146 Wn.2d at 205. Neither Lakeview nor Lake Arrowhead is analogous to this case.
In Lakeview, the City of Seattle (city) granted a developer building permits for a condominium development on the condition that it 'grant and record a covenant releasing the city from liability for damages caused by soil movement, except for damages caused by the city's sole negligence.' Lakeview, 146 Wn.2d at 198. After the developer had built and sold the condominium units, heavy rains caused a severe landslide, rendering the homes uninhabitable. Lakeview, 146 Wn.2d at 199-200. The city was among the parties the homeowners sued. The trial court granted summary judgment for the city. On appeal, the homeowners argued that the covenant did not touch and concern the land and, therefore, was not binding on them as successor owners of the land Lakeview, 146 Wn.2d at 203-04. The Court declined to support the city's argument that the Court should abandon the touch and concern requirement in entirety, but found that in that case the requirement was met because, '[r]ead as a whole, the covenant burdens the use of land, since the covenant is limited to the reasonable enjoyment of the land and limits rights normally associated with ownership.' Lakeview, 146 Wn.2d at 205.
In Lake Arrowhead, a neighborhood association brought action against a landowner who had acquired his property at a foreclosure sale, seeking to enforce a covenant to pay assessments for maintenance of the neighborhood facilities. Lake Arrowhead, 112 Wn.2d 288. The trial court entered judgment in favor of the neighborhood association. On appeal, the homeowner asserted that the covenant did not concern the use of land in part because it concerned the payment of money. Lake Arrowhead, 112 Wn.2d at 294. Relying upon Rodruck, the Supreme Court held that the covenant at issue satisfied the touch and concern requirement because under Washington law, 'an obligation to pay assessments for the maintenance of neighborhood property touches and concerns the land' Lake Arrowhead, 112 Wn.2d at 295 (citing Rodruck, 48 Wn.2d 565).
In both Lakeview and in Lake Arrowhead, the covenants at issue met the touch and concern element because they burdened the use of the land at the time of inception. Here, in contrast, Diamond's Agreement limited CHG's choice of contractors only should it elect to establish a parking facility on portions of Block 65. The Agreement neither mandates that a parking facility be constructed or maintained, nor that existing facilities be maintained or improved. The Agreement therefore does not either burden or benefit the land as contemplated in Lakeview or Lake Arrowhead. Therefore these cases do not contradict our analysis under Robroy.
The Agreement between Diamond and CHG does not satisfy the touch and concern element requisite for a covenant to run with the land
Accordingly, we hold that the trial court erred in denying the appellants' motion for summary judgment and in entering declaratory judgment in favor of Diamond.
Reversed and remanded to quiet title in favor of appellants.
APPELWICK, ELLINGTON and KENNEDY, JJ., concur.