Opinion
No. 2-068 / 01-0396.
Filed December 30, 2002.
Appeal from the district court for Bremer County, STEPHEN P. CARROLL, Judge.
Defendants appeal a district court ruling that restrictive covenants were enforceable against their farmland. REVERSED.
Gerald Carney, Waverly, for appellants.
Mark Mershon, of Mershon Law Firm, Cedar Falls, for appellee.
Considered by SACKETT, C.J., and ZIMMER and VAITHESWARAN, JJ.
The question we need to decide is whether a restrictive covenant contained in a contract for sale of real estate can be enforced against the buyer after the seller has conveyed the property by warranty deed without restrictions. The district court enforced the covenant. We reverse.
Plaintiff-appellee, Russell Lee Knock, and defendant-appellants Milan Kirchhoff and Mary Kirchhoff, own adjoining tracts of land in rural Bremer County. Both parties purchased their land from one Thompson.
Initially the land was owned by husband and wife, but the husband died and the wife apparently inherited the land, as she gave the deeds.
The first parcel was sold to defendants Milan and Mary Kirchhoff on contract on December 28, 1989. The contract was recorded on March 2, 1990. The contract contained the covenants at issue here, which, according to the contract, were to run with the land. There was no indication as to the covenants being connected to the other parcel, nor was there a description of the other parcel, nor did the contract indicate that the covenants were in any way attached to the parcel Thompson retained.
The contract contained the following:
That the following shall constitute covenants running with the land: (1) no hogs will be permitted on the west half of the Southwest Quarter of Section 9, Township 91 North, Range 13 West of the 5th p.m. at any time prior to February 15, 2015; (2) buyers will raze and remove all existing buildings located on the real estate not later than October 1, 1993; (3) no building housing livestock shall be constructed or placed on the west half of the Southwest Quarter of Section 9, Township 91 North, Range 13 West of the 5th P.M. at any time prior to February 15, 2015.
On February 28, 1994 defendants received a warranty deed to the property. The warranty deed said it was in fulfillment of the earlier contract but had no reservations of any right and made no reference to the covenants. The warranty deed was recorded on May 3, 1994.
The second parcel was sold to plaintiff Russell Lee Knock on contract on October 24, 1991. The contract between plaintiff and Thompson made no mention of the covenants. This contract was recorded on March 19, 1992. On May 29, 1993 plaintiff received a warranty deed from Thompson. The deed, given in fulfillment of the earlier contract, did not reference the covenants or convey any interest Thompson may have had therein. The only recorded document that makes reference to the covenants is defendants' contract with Thompson.
On May 4, 2000 plaintiff filed this suit seeking to enforce the covenants in the Thompson contract with defendants entered more than ten years earlier. Plaintiff contends his property was the benefited property and as successor to Thompson, he was entitled to enforce the covenants. The district court agreed with plaintiffs and held that the warranty deed conveying fee simple title did not vitiate the contract provisions regarding the covenants. In reaching this conclusion the district court determined the covenants were collateral agreements and as such survived the deed for purposes of their enforcement. In doing so the court relied in large part on Phelan v. Peters, 260 Iowa 1359, 1362, 152 N.W.2d 601, 603 (1967). In Phelan, the court discussed the rule that a contract merges in a deed and its many qualifications, and said:
The broad rule is that a contract to convey land presumptively becomes merged in the subsequent deed executed in performance thereof and that the deed speaks and the contract is silent as to all matters of conflict between them. The rule has many qualifications, one of which is that collateral agreements or conditions not incorporated in the deed or inconsistent therewith will be deemed to survive for the purpose of enforcement. . . . " Where a contract for the sale of land embraces stipulations other than those relating to the conveyance of the subject-matter, and imposes upon the vendor the duty of performing acts other than those required to assure to the vendee the character of title stipulated for, the contract is something more than one for the mere conveyance of the subject-matter at a designated time, hence the execution and delivery of the deed . . . is merely the performance of the provisions relative to the transfer of the title. It is one of several executory acts stipulated for, therefore its performance does not affect the vitality of the original contract as to collateral matters which the vendor has obligated himself to perform. Accordingly, where there are collateral undertakings in such contract which are not satisfied by a subsequently executed deed of the subject matter, these undertakings survive the acceptance of the deed, unless there are provisions in the deed inconsistent with the survival of such covenants or stipulations."Phelan, 260 Iowa at 1362, 152 N.W.2d at 603. (Emphasis added). (Citations omitted).
Phelan does not support qualifying in this case the rule that a contract to convey land presumptively becomes merged in the subsequent deed executed in performance thereof and that the deed speaks and the contract is silent as to all matters of conflict between them. See id. In Phelan, the seller made promises to put in streets as a part of his contract to sell. The seller gave buyers a warranty deed but failed to put in the streets. The buyers subsequently sued the seller for failing to put in the streets. The seller contended that any agreements in the contract to sell merged with the deed. The court said "no." Unlike Phelan, here the plaintiff is the vendee. Therefore it is not the seller, as in Phelan, who claims the covenants are not binding, rather it is the buyer who received the warranty deed that merged the contract so that the deed spoke and the contract was silent. See id. Furthermore, the stipulation for putting in streets was one for other than the conveyance of land. Here the warranty deed given by Thompson conveys all interest Thompson has in the property which extinguishes any interest Thompson had retained by virtue of the contract.
Furthermore, in Phelan, the agreement was not an encumbrance on the land, while the covenants here are. And unlike Phelan, here the agreement was not to do something for the buyers' land; it was an agreement to restrict the buyers' land. Additionally, there is nothing, even if one looks at the contract between Thompson and defendants that would show that the covenants benefit the land sold to the plaintiff or that they specifically run with that land. Nor is there any conveyance to plaintiff of any rights Thompson may have had in defendants' land.
To enforce the covenants in the Thompson contract with defendants is inconsistent with the warranty deed to the property. There is no basis in this case to qualify the broad rule that a contract to convey land presumptively becomes merged in the subsequent deed. We reverse and dismiss plaintiff's action.
REVERSED.
VAITHESWARAN, J., dissents.
I respectfully dissent. I agree that, generally, the provisions of a real estate contract merge with the deed in fulfillment of the contract. In re Estate of Epstein, 561 N.W.2d 82, 86 (Iowa Ct.App. 1996); see also 77 Am. Jur.2d Vendor and Purchaser § 286 at page 317 (1997). However, there is an exception. The merger doctrine does not apply to covenants in the contract that are collateral to or independent of the deed provisions. Phelan v. Peters, 260 Iowa 1359, 1362, 152 N.W.2d 601, 602-03 (1967); 77 Am.Jur.2d Vendor and Purchaser § 290 at page 321-22 (1997).
The district court determined that the covenants contained in the Thompson-Kirchoff real estate contract were collateral to the Kirchoffs' deed and did not merge with it. The court reasoned that there were no provisions in the deed which were inconsistent with the survival of the covenants. The court also pointed out that, shortly after Mr. Thompson died, the Kirchoffs tried to eliminate the covenants, but Mrs. Thompson declined to do so.
I agree with the district court's determination. The primary consideration in determining whether an agreement merges with a subsequently executed deed is the intention of the parties. Thordson v. Kruse, 173 N.W.2d 268, 274, 155 N.W. 334, 335 (1919). The intent of the parties was expressly set forth in the agreement, which stated that the covenants were to run with the land. See 21 C.J.S. Covenants § 25 at pages 316-17 (1990) (stating "[c]ovenants running with the land are such as so affect the land that their benefits or obligations pass with the ownership"). Although the subsequently executed deed stated it was made "in fulfillment of the contract" no language in the deed purported to override the prior covenants. Cf. Phelan, 260 Iowa at 1362, 152 N.W.2d at 603-04 (finding deed contained no provision addressing or negating collateral agreement to extend utilities to plaintiff's home); Huxford v. Trustees of Funds and Donations for Diocese of Iowa, 193 Iowa 134, 138-39, 185 N.W. 72, 74 (1921) (finding successors to seller could introduce evidence of prior contract requiring church trustees to build and maintain a church on the conveyed land despite later execution of warranty deed); Carey v. Walker, 172 Iowa 236, 243, 154 N.W. 425, 426-27 (1915) (stating "[a] contract for a deed antedates the execution of the deed, and may and often does contain many provisions which the execution of the deed neither adds to nor takes away"); Saville v. Chalmers, 76 Iowa 325, 326, 41 N.W. 30, 31 (1888) (stating "[t]here are many things pertaining to the contract which it is manifest are never inserted in the deed"); 52 A.L.R.2d 647 § 5 (holding generally a promise by the vendee, as part of a contract of sale, to construct a building or other structure was not merged in a subsequent deed not incorporating such promise). Under these circumstances and, in the absence of any question that the parties lacked notice of the covenants, I would conclude that the covenants in the Thompson-Kirchoff contract did not merge with the subsequently executed deed.
See Huxford, 193 Iowa at 138, 185 N.W. at 74 (noting that "[b]oth the contract and the deed were duly recorded, but no rights of an innocent purchaser are involved, nor any question of constructive notice presented").