Property Class Notes 4/15/04


Moseley v. Bishop


Moseley owns some farmland.  Bohn does too.  There was an easement for a drainage ditch to go across Bohn’s property from Moseley’s property.  Moseley’s property goes to one of his descendents.  Bohn sells to Gates and others.  Gates has the portion of the farm with the pipeline running through it.  So what was the covenant here?  They put some tiles into the drain.  The drain was on Bohn’s property, and Bohn agreed to maintain the drain tiles.  Moseley gave him some money in consideration.  So Bohn will permanently maintain the drain tile so that Moseley’s land will drain properly.  But his successors failed to maintain the tiles.


Did this covenant “touch and concern” the land?  Yes!  It related directly to the use of the land.  “Drain tile” is like pipe!  Was there vertical privity of estate?  Yes there is!  How come?  You’re in vertical privity if you own the same property that one of the covenanters held.  What about horizontal privity of estate?  The court says that it’s mutual privity of estate in that they are covenanting with respect to property for which they both own an easement.  The court holds that there is horizontal privity of estate.


Then there is a long footnote.  What is it all about?  There is some debate whether horizontal privity should be required.  Horizontal privity of estate is frequently said to be a “roadblock” that courts put up that don’t really fulfill any useful purpose.  The court says that they doubt whether the requirement of horizontal privity of estate is useful anymore.


Why not enforce this as an equitable servitude?  Equitable servitudes must be done in equity.  In this case, the plaintiff is looking for money damages, not an injunction.  The Moseleys had to pay the farm bureau to clean out the tile, and they want Gates and others to pay a share of the cost.  If they were trying for enforcement in equity, they wouldn’t have to show horizontal privity of estate.  Therefore, the issue here is whether the covenant runs at law.  This is probably the only remaining distinction between a real covenant and an equitable servitude: the remedy.  In fact, there may be no difference.


Who is liable here?  It looks like only Gates is on the hook.  The “touch and concern” requirement is said to not be met by owners other than Gates.  The original ditch only went across Gates’s land!  But if the servient estate is one parcel and then becomes subdivided, aren’t all the parcels still part of the servient estate?  Braunstein finds this perplexing.  “Touch and concern” is just a metaphor.  The court doesn’t really tell us anything except the fact that the pipe doesn’t physically touch the residential owners’ land.  Braunstein sees how it can be fair that only the farmer has to take care of the ditch and the residential owners don’t have to, but how can you justify this as a matter of law?


Problems on horizontal privity


“Two neighbors who each promise to contribute half to the maintenance of a common sewer line that both use”: This is mutual because they both own an interest in the sewer line, or at least the land through which it runs.  That’s mutual.


“A purchaser of a lot in a subdivision who accepts a deed which includes a promise to use the land only for residential purposes”: This is successive, because it’s made at the same time that property is transferred.


“Two neighbors who each agree to use their land only for residential purposes”: The two neighbors don’t own anything in common.  They also didn’t sell anything to each other.  They’re also not landlord and tenant.  There’s no horizontal privity of estate!


“A person who buys a lot from his neighbor and promises not to build within 20 feet of the property line of the neighbor who sells him the lot”: Here, it’s successive because there’s a purchase and sale of property and there’s a promise at the same time as the sale.


Touch and concern


At least for real covenants, and maybe also for equitable servitudes, both the benefit and the burden must concern the land.  That means that all real covenants are appurtenant to land.  You can’t have a real covenant in gross.  You may be able to have an equitable servitude in gross.


Things are going to affect value if the law enforces them!  If it is enforced, it will change the value of the land.  Value is determined by law and by what the law recognizes as property rights.  You can’t use increases and decreases in value as your guide in trying to decide whether to enforce these agreements.  Some people argue that we should get away from this touch and concern requirement altogether and talk more explicitly about policy.


Whitinsville Plaza, Inc. v. Kotseas


Does this case shed any light on the touch and concern requirement?  It’s not difficult factually.  A real estate developer enters into a covenant restricting the use of the land.  Then he wants to lease the land to someone who will break the covenant, because that’s going to make him a lot of money.  The people benefited by the covenant sue to block the lease.  The court lays out the standard analysis of real covenants and horizontal privity of estate.  Here, the Massachusetts court isn’t talking about getting rid of the requirement of horizontal privity of estate.  They still take it seriously.


What is the horizontal privity of estate here?  How does the court find out that it exists?  There are mutual easements running across the land, and the court says that’s enough to satisfy the requirement.  They look at the decision of Oliver Wendell Holmes written long ago.  What’s wrong with Norcross?  It says that non-competition clauses don’t “touch and concern” land.  This court says that they do touch and concern land.  This makes the same criticism of Holmes that we made of Clark.  The point of all restrictions is to increase the market value of the promisee’s land while decreasing the value of the promisor’s land.  They all involve value.  Holmes says that if it simply tends to increase value, then it doesn’t touch and concern.  This court says that they all do, so this isn’t much of a test.


The court also says that you must recognize the historical context of Norcross.  Courts were just starting to recognize real covenants and equitable servitudes, and the courts were cautious about allowing too many of them.  They had a concern that the alienability of land would be reduced because the land would be tied up with all these promises.  The court overrules Norcross, saying that reasonable covenants against competition may run with the land when they help facilitate “orderly and harmonious” development for commercial use.  But what if the covenant is just to keep out discount stores?  These anti-competition covenants are valid if they serve that purpose.  The court says that they won’t enforce boilerplate provisions.  These covenants must be tailored to some specific need related to the development of the property.  Now we know most of the answer, but there are a lot of creative people out there thinking up things that the courts haven’t considered.


If you compare this to Willard or the Indiana case, the court says that this decision is prospective only.  But there is an exception.  The decision is made retroactive back to the date of a case where they intimated that they were going to overrule Norcross.  That’s kind of weird.  The court claims that fair notice was given that they were going to overrule Norcross soon.  The Indiana court also gives sort of fair warning, although that case is from the intermediate appellate court.


Policy restrictions on servitudes


You can’t have racially restrictive covenants in this country anymore, but they were very common up to the 50’s and 60’s.  Some of these covenants are still on the deed, but they won’t be enforced anymore.  Shelly v. Kraemer said that for a court to enforce a real covenant with a racial restriction was unconstitutional under the Fourteenth Amendment because it involves state action.  In order to violate the Constitution, there must be something done by the state or federal government or an instrumentality of the government.  The courts are an instrumentality of the state, according to this holding.  The only case that has expanded Shelly is an Ohio common pleas court.  All higher courts that have looked at this say that the case deals with a particular problem and doesn’t apply to any other covenants.  That particular kind of restrictive covenants are unenforceable.  But what about covenants dealing with religion or ethnicity?  Can you place restrictions such that only rich people can live in your neighborhood?  Should they be allowed to do it?  When we ask how should we enforce equitable servitudes, this is one thing we have to think about.


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