Summary
holding that the question of whether to enforce a restriction "is a traditional equity action which does not lend itself to summary disposition"
Summary of this case from Thiel v. GoyingsOpinion
Calendar No. 10, Docket No. 51,441.
Decided June 6, 1967.
Appeal from Court of Appeals, Division 2; T.G. Kavanagh, P.J., Holbrook and McGregor, JJ., affirming Macomb, Noe (Alton H.), J. Submitted November 10, 1966. (Calendar No. 10, Docket No. 51,441.) Decided June 6, 1967.
2 Mich. App. 389, reversed.
Sun Oil Company, a New Jersey corporation, presented a complaint for injunction against Trent Auto Wash, Inc., a Michigan corporation, to restrain defendant from erecting gasoline storage and dispensing equipment in derogation of an alleged restrictive covenant on defendant's property. Judgment for plaintiff. Judgment affirmed by Court of Appeals. Defendant appeals. Reversed and remanded for further hearing.
Robert E. Childs, for plaintiff.
Anthony A. Vermeulen, for defendant.
On September 28, 1962, Clara Williams gave a warranty deed to Sun Oil Company by which she conveyed to that company two lots. Contained in her deed is the following agreement:
"Grantor agrees that property now owned by grantor lying north of and adjacent to the within described premises shall not be used for or in connection with the operation of a gasoline service station or filling station for the sale of gasoline, motor fuel, petroleum products, automotive accessories or automotive services generally." (Emphasis added.)
On February 1, 1964, Clara Williams executed a land contract to defendant, Trent Auto Wash, Inc. It is admitted that the land contract covered "that property now owned by grantor lying north of and adjacent to" the lots Clara Williams conveyed to Sun Oil Company. The defendant also "admits that it had knowledge of the alleged covenant; that plaintiff's agents informed it that plaintiff would attempt to enforce said covenant, and that defendant intends to construct underground storage tanks and above ground pumps," et cetera.
It is unnecessary to determine whether the above agreement is a covenant running with the land to afford plaintiff the relief it seeks. The agreement relates to the property purchased by Trent Auto Wash and it is equally clear that it was intended for the benefit of the adjacent property of Sun Oil Company. The agreement does not relate to any activities on the part of Clara Williams, but, rather, contemplates a restriction upon the use of property retained by her. Whatever she could not do, chancery may also enjoin those in privity with her and with notice of the restriction from doing.
The principle is stated by the Lord Chancellor in the case of Tulk v. Moxhay (1848), 2 Ph 774 (41 Eng Rep 1143), affirming 11 Beav 571 (50 Eng Rep 937):
"The question does not depend upon whether the covenant runs with the land * * * if there was a mere agreement and no covenant, this court would enforce it against the party purchasing with notice of it; for if an equity is attached to the property by the owner, no one purchasing with notice of that equity can stand in a different situation from the party from whom he purchased."
The principle of Tulk has been widely recognized and followed in numerous cases. In the case of Langenback v. Mays (1950), 207 Ga. 156 ( 60 S.E.2d 240), the defendants sold to plaintiffs a small tract of land on which several tourist cabins were located, and orally agreed not to use their remaining land for a tourist camp. The defendants constructed a tourist camp in violation of their contract and, when enjoined from operating it, executed an instrument purporting to be a lease to their daughter for the tourist camp. The daughter operated the business with actual knowledge of the injunction granted against her parents. The supreme court of Georgia's opinion states:
"Equity will enforce a lawful restrictive agreement concerning land against a person who takes with notice of the contract. In such a case, the person violating the agreement, though not a party to it, is a privy in conscience with the maker. 31 Yale Law Jour 127, 131; Francisco v. Smith, 143 N.Y. 488 ( 38 N.E. 980); Rosen v. Wolff, 152 Ga. 578 ( 110 S.E. 877)."
In the case of Thodos v. Shirk (1956), 248 Iowa 172 ( 79 N.W.2d 733), plaintiff, owner of certain lots in a subdivision, brought an action in equity asking that defendants be enjoined from using their property as a trailer court in violation of the restrictive covenant in their deed which provided: "No building shall be placed or erected on said premises except for residence purposes." The court in discussing the doctrine of equitable servitudes said (p 179):
"Since the doctrine of equitable servitudes rests upon the theory of a servitude imposed upon the land, enforceable against all subsequent purchasers of the land who are charged with notice actual or constructive, the requirement of the special words such as `and assigns' is unnecessary in the deed. The sole test for the running of the burden in equity is the intention of the parties to impose a servitude upon the land as distinguished from a personal promise of the present owner."
In Hodge v. Sloan (1887), 107 N.Y. 244 ( 17 N.E. 335), a grantee bound himself by a covenant in his deed to limit the use of land purchased so as not to interfere with the trade or business of the grantor and the property was subsequently sold to defendant without covenant on his part but with notice of the covenant in the deed to his grantor. The court said (p 250):
"There seems no reason why he and his grantee, taking title with notice of the restriction, should not be equally bound. The contract was good between the original parties, and it should in equity at least bind whoever takes title with notice of such covenant. By reason of it the vendor received less for his land, and the plain and expressed intention of the parties would be defeated if the covenant could not be enforced as well against a purchaser with notice, as against the original covenantor. In order to uphold the liability of the successor in title, it is not necessary that the covenant should be one technically attaching to and concerning the land and so running with the title. It is enough that a purchaser has notice of it."
In the case of Coomes v. Aero Theatre and Shopping Center, Inc. (1955), 207 Md. 432 ( 114 A.2d 631), the complainant and his grantee intended that land should be restricted to uses not in conflict with the use of complainant's remaining land. The restrictive covenant read:
"Subject also the further restriction that the grantees or their tenants therein will not engage in any business which shall compete with or be of a similar nature of those businesses conducted and maintained on the property known as the Aero Theatre and Shopping Center, Inc."
Defendants, who took from plaintiff's grantee, had notice of the restriction at time of conveyance. The restriction was held binding on them. The court said (p 437):
"We reaffirm the doctrine [the doctrine of Tulk] that if the owner of land enters into a covenant concerning its use, subjecting it to an easement or personal servitude, and the land is afterwards conveyed to one who has notice of the covenant, the grantee will take the land bound by the covenant and will be compelled in equity to specifically execute it or will be restrained from violating it; and it makes no difference, with respect to this liability in equity, whether or not the covenant is one which runs with the land. Thruston v. Minke, 32 Md. 487, 494; Halle v. Newbold, 69 Md. 265, 270 ( 14 A 662); Newbold v. Peabody Heights Co., 70 Md. 493 ( 17 A 372, 3 LRA 579); Peabody Heights Co. of Baltimore City v. Willson, 82 Md. 186 ( 32 A 386, 1077, 36 LRA 393); Clem v. Valentine, 155 Md. 19 ( 141 A 710); Turner v. Brocato, 206 Md. 336 ( 111 A.2d 855); 2 Pomeroy, Equity Jurisprudence (5th ed), § 689. * * *
"While most courts have accepted the theory that restrictive agreements should be enforced as an easement or servitude, Mr. Tiffany took the view that the more satisfactory theory is that equity regards such an agreement as vesting in the promisee a right to specific enforcement by means of an injunction or otherwise, not only as against the original promisor, but also as against a subsequent holder of the property, if not a purchaser for value without notice. He argued that if the right to equitable relief could not thus be asserted as against a subsequent holder of the property, the result would be that the promisee could be deprived of such right, in practically every case, by a collusive transfer on the part of the promisor. 3 Tiffany, Real Property (3d Ed), § 861. * * *
"It is understood, however, that it is not necessary that the expression of intention shall take any particular form. Of course, if the promise purports to bind successors by the use of such words as `successors' or `assigns', little question can arise as to the existence of the necessary intention. But as the language employed becomes less plain and precise, the conclusion that the successors were intended to be bound must rest in a correspondingly greater degree upon an inference drawn from the circumstances under which the promise was made. The circumstances of a particular transaction may yield such an inference without the aid of any specific language in the terms of the promise."
For further annotated statements of the equitable doctrine, see Pomeroy's Equity Jurisprudence (5th ed), §§ 689 and 1295; Tiffany, Real Property (3d ed), § 859; Thompson on Real Property (1962 Replacement), § 3170; 20 Am Jur 2d, Covenants, Conditions, and Restrictions, § 26; 23 ALR2d p 520 et seq.
The agreement between Clara Williams and Sun Oil Company is not so ambiguous as to be incapable of enforcement against those who have taken with notice of it. The commitment is that "that property * * * shall not be used for or in connection with the operation of a gasoline service station." There is nothing personal as to Mrs. Williams in this language. It clearly refers to the land. While the time of the commitment is not expressed, this is no insuperable obstacle. Courts are quite accustomed to making determinations of what is a reasonable time in terms of the presumed intent of the parties. Finally, if the agreement is not enforced by equity, it becomes completely vitiated. Obviously, plaintiff has no adequate remedy at law. If equity cannot grant relief, a covenantor need only convey the land to destroy today the covenant he made yesterday — or, as in Mrs. Williams' case, the covenant made by her a short 16 months before her conveyance to defendant.
Both the trial judge and the Court of Appeals disposed of this matter by holding that the covenant or agreement of the parties ran with the land, a determination I do not regard as necessary for disposition of this case. The chancellor also recognized the equitable doctrine as being applicable if the covenant did not run with the land. I would remand to him for such hearing as may be required to apply that doctrine. Determination of possible questions such as a change in circumstances relating to the lands in question may be necessary. Other aspects of the transaction not presently before us may bear upon the equities of the parties. This is a traditional equity action which does not lend itself to summary disposition. Upon the conclusion of a full hearing, the chancellor will be in a position to shape a proper decree.
I agree that the covenant does not violate CL 1948, § 750.151 (Stat Ann 1962 Rev § 28.348).
I would remand, with costs to abide final result.
KELLY, BLACK, and T.M. KAVANAGH, JJ., concurred with ADAMS, J.
Two questions are presented by this appeal on our leave granted from the Court of Appeals ( 2 Mich. App. 389). The first is whether the restrictive covenant here involved is personal and limited in its application to the grantor who executed it, or whether it is a covenant running with the land and binding upon subsequent purchasers. The second is what is the effect, if any, of the covenant upon a purchaser who takes with notice thereof. The relevant facts are as follows:
Appellant Sun Oil Company bought 3 lots in a desirable location in St. Clair Shores. It built and equipped a filling station upon them and leased out its operation. In the fractional plat there was a total of 9 lots. The 6 remaining after Sun's purchase were owned by a Clara Williams. They were adjacent to and north of the 3 Sun had previously purchased. Thereafter Sun Oil bought 2 of those lots as a protective measure against the erection of competitive filling stations upon any of the remaining 4. To this end it required that its grantor, Mrs. Williams, include in the warranty deed conveying the 2 lots the following reservation:
"Grantor agrees that property now owned by grantor lying north of and adjacent to the within described premises shall not be used for or in connection with the operation of a gasoline service station or filling station for the sale of gasoline, motor fuel."
It is stipulated that the remaining lots constitute "the property" which is the subject of this litigation.
Subsequent to this conveyance, appellee Trent purchased the 4 lots on land contract. Prior to the purchase, its attorney examined the reservation affecting the 4 lots and Trent was advised by counsel for Sun that Sun would seek to enforce it.
The case was tried in the circuit court on a stipulated record. No fact questions are involved. The trial judge found the restrictive covenant to be a covenant running with the land and hence binding upon the subsequent purchaser. The court added in its opinion:
"Even if this be considered under defendant's theory to be a personal covenant, defendant having admittedly taken title with knowledge of its existence, then equity will enforce its observance by enjoining defendant's violation of said covenant for defendant is `privy in conscience with the maker of restrictive agreement.'"
The Court of Appeals affirmed. Its rationale was that the restriction was not clear and unambiguous. Therefore, that case precedent holding that such restrictions cannot be extended beyond the plain meaning of the words used in them did not control. From this premise the court proceeded to a determination of "the nature of the subject matter, and the apparent purpose in making the agreement," citing Moore v. Kimball (1959), 291 Mich. 455, 461. Thereupon, the court found that purpose "patently is the limitation of competition on this land." In expanding its opinion, our able intermediate Associates used the following language:
"We acknowledge that our decision is not in accord with the case of Lowe v. Wilson (1952), 194 Tenn. 267 ( 250 S.W.2d 366) or the authorities cited therein for we are not persuaded that blind adherence to such a technical rule is required by or desirable (in our view) for the jurisprudence of Michigan." (Emphasis this Court's.)
In its conclusionary paragraph the court adds:
"Finally we mention that our view is not in accord with that expressed in 5 Restatement of Property, § 537. We do not share the concern there expressed in the comment (f) on that section (p 3221) anent the social harm involved."
We are compelled to disagree. First, we do not believe that to hold with appellant we adhere blindly to a technical rule. Rather, we believe we follow wise precedent efficacious as applied to transactions involving the transfer of and limitations upon the use of real property. We might well agree that the apparent purpose of appellee Sun in phrasing the restriction was to limit competition on the lots not owned by it and contiguous to those which it purchased from grantor Williams. Such unilateral intention on its part, however, in our view is not sufficient to establish that such was the intention of the grantor and binding upon subsequent grantees. If Sun intended the restriction to be a covenant running with the land, it was Sun's obligation to phrase the restriction or to insist upon phrasing that would create no ambiguity at the peril of having any ambiguity resolved in favor of the free use of land. To follow the Court of Appeals, we would do violence to the rule enunciated in Bastendorf v. Arndt, 290 Mich. 423, 426 (124 ALR 445):
"Where restrictions are ambiguous, it is axiomatic that uncertainties are resolved in favor of the free use of property. Kelly v. Carpenter, 245 Mich. 406; Phillips v. Lawler, 259 Mich. 567."
We agree with the Court of Appeals that the restrictions "might be read as an undertaking on the part of the covenantor that the property would never be used or it might be read as an undertaking that it would not be used so long as the grantor had title." (Emphasis added by the Court of Appeals.) To read "never" into the restriction here involved is to resolve the ambiguity against the free use of property and is to abrogate the salutary rule of Bastendorf to the exact contrary. We follow the established rule.
Next we consider the language of the learned chancellor that even if the covenant be interpreted as a personal covenant, appellant having taken with notice equity will enforce its observance. We have no quarrel with the statement of principle. We believe, however, it contains an omission that would render its application inequitable rather than equitable. The omission is the answer to the question "notice of what?" It is stipulated that appellee had notice that a restriction had been included in the deed from Mrs. Williams to Sun and made applicable to the lots not conveyed which she retained. Even the plenary power of equity cannot decree the effect of notice to be greater than that which the thing noticed creates. A purchaser with notice of the restriction, as was appellee Trent, is as the chancellor held "privy in conscience with the maker of [the] restrictive agreement." Equity would have no great problem in knowing what the "conscience" of Sun was. It wanted to keep filling stations off 4 lots that it did not buy that were contiguous to 2 lots it did buy, all owned by the same person. We cannot, however, span the wide gap from Sun's "conscience" to Mrs. Williams' "conscience" on the language of the deed. In examining the conveyance of the 2 lots from Mrs. Williams to Sun, counsel for Trent had a right to conclude that the restriction was personal to the grantor under well-settled law, and that when the lots passed to Trent the restriction no longer applied. Trent could well have been "privy in conscience" to Mrs. Williams and still be free to use the 4 lots it purchased as it chose. Having held the covenant personal and not binding on appellant Trent, we do not reach or pass upon its contention that if it were valid, the intended use was not in fact violative of the language of the restriction.
Appellant Trent further urges that if the restriction does run with the land and thus is binding upon it, the limitation is in restraint of trade and violative of the applicable State statute. Strictly speaking, for decisional purpose in this Court, we need not pass upon it. However, because the Court of Appeals held the restriction binding on Trent, it had to pass upon this issue. It is important to the jurisprudence of our State and likelihood exists that the question will arise. For this reason we here approve the position of the Court of Appeals and for the reasons assigned.
CL 1948, § 750.151 (Stat Ann 1962 Rev § 28.348), which reads: "All contracts, agreements, understandings and combinations made, entered into, or knowingly assented to, by and between any parties capable of making a contract or agreement which would be valid at law or in equity, the purpose or object or intent of which shall be to limit, control, or in any manner to restrict or regulate the amount of production or the quantity of any article or commodity to be raised, or produced by mining, manufacture, agriculture or any other branch of business or labor, or to enhance, control or regulate the market price thereof, or in any manner to prevent or restrict free competition in the production or sale of any such article or commodity, shall be illegal and void, and every such contract, agreement, understanding and combination shall constitute a criminal conspiracy. And every person who, for himself personally, or as a member, or in the name of a partnership, or as a member, agent or officer of a corporation, or of any association for business purposes of any kind, who shall enter into or knowingly consent to any such void and illegal contract, agreement, understanding or combination, shall be deemed a party to such conspiracy.
"All parties so offending shall be guilty of a misdemeanor, punishable by imprisonment in the county jail for not more than 6 months or by a fine of not more than $250. And the prosecution for offenses under this section may be instituted and the trial had in any county where any of the conspirators become parties to such conspiracy, or in which any one of the conspirators shall reside: Provided, however, That this section shall in no manner invalidate or affect contracts for what is known and recognized as common law and in equity as contracts for the `good will of a trade or business'; but all such contracts shall be left to stand upon the same terms and within the same limitations recognized at common law and in equity."
The judgment of the Court of Appeals affirming the circuit court is reversed. The cause should be remanded to the circuit court with directions to vacate its judgment, to dissolve the permanent injunction, and to enter judgment for defendant-appellant Trent Auto Wash, Inc. Appellant may tax costs of all courts.
DETHMERS, C.J., and SOURIS, J., concurred with O'HARA, J.
BRENNAN, J., did not participate in the decision of this case.