Case of the Day – Friday, August 26, 2016

CHUTZPAH, CONNECTICUT STYLE

You like your wild mountain property, with its clean, sparkling streams and majestic trees. You like to think that it will always look as pristine and undeveloped as it does right now. To make certain, when you finally sell it, you place some restrictions on the deed, so that there won’t be any double-wide trailers, pre-fab A-frame chalets or tar paper shanties.

“God Bless Our Home” – why the seller of the property preferred some lousy forest and lake over a beautiful home with nice attached garage still baffles us …

Seems reasonable, doesn’t it? But eventually the people you sold the land to sell it to someone else, and the someone else has a really good lawyer. “This is Connecticut!” the solicitor tells his client. “We can beat this restriction!”

And lo and behold, that’s just what he does. It seems in Connecticut, the terms on which you were originally willing to sell your land don’t much matter. In today’s case, the heirs of the original nature-lovin’ owner suffered a lot of angst when they finally sold off most of the lake property. But the buyer won them over, even agreeing to a development restriction on part of the land, in order to preserve its natural character. A few years later, that buyer sold the land to the Williams, who had been convinced by their lawyer that the restriction wasn’t enforceable. The new owners promptly sued for a declaratory judgment that the restriction was void.

The Connecticut court agreed that it was. It fell outside of the three traditional categories of restrictions that ran with the land. Even so, the Court said, it could be enforced under equitable principles. But it wouldn’t do that, the Court said, because it would be so unfair to the buyers of the land. After all, the Court said, it wasn’t clear who the beneficiary of the restriction was or who could enforce it. Therefore, the Court held it would be unfair to the buyers because — and we’re not making this up — they “bought the property because they thought the restriction was unenforceable. If the restriction is found enforceable, the property could only be developed for recreational purposes and would be far less valuable. Devaluing property without a clear beneficiary is not reasonable.”

The decision certainly turns common sense on its head. Where a seller is unwilling to sell unless a restriction is placed on the land, it’s hard to argue that the continuing restriction harms marketability. It’s more marketable than if the seller doesn’t sell at all. And for that matter, should it be the law’s business to promote marketability over a seller’s free will?

It seems safe to imagine that as conservation — and especially forest preservation because of “climate change” concerns — is of increased public policy importance, the notion of “marketability” and the free right to develop may become less of a holy grail. As it probably should.

Williams v. Almquist, 2007 WL 3380299 (Conn. Super., Oct. 30, 2007) (unreported). Robert Bonynge bought a 150-acre tract of land at Lake Waramaug in 1898, which he later conveyed away in several parcels. Although some of the original tract was sold in the 1930s, and some of the heirs owned certain parcels outright, a 105-acre tract was eventually sold to Lee and Cynthia Vance by the Bonynge heirs in 2001. The negotiations for that sale were a difficult and emotional process, with the primary concern of the heirs to conserve the natural condition of the property. The Vances agreed to give some of the land and a conservation easement to the Weantinoge Heritage Land Trust. Also, they agreed a restriction on 8.9 acres of the property: “There shall be no construction or placing of any residential or commercial buildings upon this property provided that non-residential structures of less than 400 square feet may be constructed for recreational or other non-residential purposes and further provided that the property may be used for passive activities such as the installation of septic and water installations, the construction of tennis courts, swimming pools and the construction of facilities for other recreational uses.”

The sellers were disinclined to see their paradise turned into a trailer park.

The sellers were disinclined to see their paradise turned into a trailer park.

David and Kelly Williams bought part of the 8.9-acre tract in 2005 from the Vances, still still subject to the restriction agreed upon in February 2002. Shortly thereafter, the Williams entered into an agreement with the Vances in which the Vances waived their right to enforce the restriction. The Williams then sued for declaratory judgment against the Bonynge heirs, asking the court to declare the restriction in their deed void and unenforceable.

Held: The restriction on the Williams’ land is unenforceable. The Court noted that restrictive covenants generally fall into one of three categories: (1) mutual covenants in deeds exchanged by adjoining landowners; (2) uniform covenants contained in deeds executed by the owner of property who is dividing his property into building lots under a general development scheme; and (3) covenants exacted by a grantor from his grantee presumptively or actually for his benefit and protection of his adjoining land which he retains. Here, the restrictive covenant did not fall under the first category because it originally arose from the sale of the Bonynge heirs’ land to the Vances, not from an exchange of covenants between adjoining landowners. Likewise, the second category did not apply. Rather, that category applies under a general developmental scheme, where the owner of property divides it into building lots to be sold by deeds containing substantially uniform restrictions, any grantee may enforce the restrictions against any other grantee. But in this case, the Court ruled, the evidence suggested that a common plan or scheme did not exist.

conservThe restrictive covenant did not fall under the third category either. Where the owner of two adjacent parcels conveys one with a restrictive covenant and retains the other, whether the grantor’s successor in title can enforce, or release, the covenant depends on whether the covenant was made for the benefit of the land retained by the grantor in the deed containing the covenant, and the answer to that question is to be sought in the intention of the parties to the covenant expressed therein, read in light of the circumstances attending the transaction and the object of the grant. The question of intent is determined pursuant to the broader principle that a right to enforce a restriction of this kind will not be inferred to be personal when it can fairly be construed to be appurtenant to the land, and that it will generally be construed to have been intended for the benefit of the land, since in most cases it could obviously have no other purpose, the benefit to the grantor being usually a benefit to him as owner of the land, and that, if the adjoining land retained by the grantor is benefitted by the restriction, it will be presumed that it was so intended. Here, three of the Bonynge heirs retained property near the 105-acre tract, but did not own property directly adjoining or overlooking the restricted tract. As such, the Court said, there was no presumption that the restriction was meant to benefit their land. The deed didn’t say as much: in fact, the deed didn’t indicate that the restriction was meant to benefit anyone at all. With no mention of beneficiaries in the deed and no testimony regarding the intent of the retaining landowners, the Court held, the restriction could not fall under the third category.

The trial court said it could properly consider equitable principles in rendering its judgment, consistent with Connecticut’s position favoring liberal construction of the declaratory judgment statute in order to effectuate its sound social purpose.

Some might argue that maintaining the forest as a carbon sink was a worthwhile social purpose

Some might argue that maintaining the forest as a carbon sink was itself a worthwhile social purpose.

Although courts before have approved restrictive covenants where they benefited a discernable third party, the Court here found that the restriction was not reasonable because it had no clear beneficiary and limited the marketability of the property. The possible beneficiaries were the Bonynge heirs, only those heirs who retained property in the Lake Waramaug area, the other residents in the Lake Waramaug area, the Vances, or simply nature itself. Without a discernible beneficiary, the Court ruled, it was difficult to determine who could enforce the restriction and for how long.

The restriction also unreasonably limited the marketability of the property. Although restrictions are often disfavored by the law and limited in their implication, restrictive covenants arose in equity as a means to protect the value of property. Here, no identifiable property was being protected by the restriction. The plaintiffs bought the property because they thought the restriction was unenforceable. If the restriction is found enforceable, the property could only be developed for recreational purposes and would be far less valuable. Devaluing property without a clear beneficiary, the Court said, was not reasonable.

TNLBGray140407

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