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Home > Underwriting > Title News > Fourteen Volume Four

SERIES: Fourteen VOLUME: Four DATED: April, 1999

~ THIRD PARTY BENEFICIARIES PERMITTED TO ENFORCE RESTRICTIVE COVENANT DESPITE ABSENCE OF PRIVITY WITH GRANTOR WHO ESTABLISHED RESTRICTION ~

In an Appellate Division case this March the issue decided on appeal was whether the plaintiffs could enforce a restrictive covenant as third party beneficiaries despite the absence of any privity between them and the grantor of the restriction (The Nature Conservancy et al vs. Congel and Milestone Materials, et al, Appellate Division, 4th Department; decided March 19, 1999). The Supreme Court decision appealed from had concluded that the plaintiffs as "strangers to the deed" could not enforce the restrictive covenant.

The plaintiffs in this action owned residential property located in the Town of DeWitt, Onondaga County. Their properties were adjacent to a picturesque rural area known as the "Buffer Lands" containing White Lake Swamp, wetlands and forest with some rare and endangered species. The area was previously owned by Allied Corporation which operated a quarry that was separated from the residential lots of the plaintiffs on Woodchuck Hill Road by the undeveloped Buffer Lands. In 1986, Allied sold its property to General Crush Stone Company which subsequently became Milestone by merger. The deed from Allied to General Crush Stone contained the following restrictive covenant which was at issue in this action:

"The grantee covenants on behalf of itself, its successors and assigns, that so long as any part of the premises hereby conveyed is used as a quarry, the Buffer Lands will remain in their natural state. This covenant shall be a covenant running with the land, binding on and enforceable against the grantee, its successors and assigns. This covenant is for the benefit of and enforceable by all parties owning property adjoining the premises hereby conveyed and the grantor, its successors and assigns. This covenant is also enforceable by The Nature Conservancy."

In 1997, defendant Congel purchased 461.45 acres of the Buffer Lands from Milestone. Congel intended to develop the property by constructing a personal residence and erecting a parameter fence. The deed conveying the premises to Congel recited that it was "subject to all other title matters of record." The plaintiffs commenced this action to enforce the restrictive covenant in the Allied deed and to enjoin Congel from destroying the natural state of the Buffer Lands by construction of his residence and erecting barriers around the property. When the plaintiffs' moved in Supreme Court for a preliminary injunction each defendant cross- moved to dismiss the plaintiffs' complaint.

In a lengthy written decision, the lower Court agreed with the defendants that the plaintiffs could not enforce the restrictive covenant because they are strangers to the deed. The Court concluded that the covenant did not run with the land, was unenforceable by injunction by reason of RPAPL Section 1951(1), and denied the plaintiffs' motion for an injunction and granted the defendants cross-motions to dismiss the complaint.

On appeal, the Appellate Division reversed the lower Court decision and reinstated the plaintiffs' complaint and granted the plaintiffs' motion for a preliminary injunction against the residential construction. In its decision, the Court recited that although "the law has long favored free and unencumbered use of real property, and the covenants restricting use are strictly construed against those seeking to enforce them..."[and despite the fact that] "...such covenants will be enforced only where the dominant landowner has established their existence by clear and convincing proof, ..." the Court of Appeals [has] enumerated three classes of cases in which restrictive covenants may be enforced by persons other than the grantor or covenantee. Those classes are: (1) a uniform restriction imposed by a common grantor is part of a general plan or scheme for the benefit of all of the grantees in a real estate subdivision or development may be enforced by all such grantees against each other; (2) a covenant imposed for the benefit of the grantors remaining land may be enforced by the grantor against any grantees of the restricted land; and (3) mutual covenants between the owners of adjoining lands producing corresponding benefits to such owners may be enforced by the owners or their assigns against each other."

The Appellate Court went on to state that although: "...the Supreme Court concluded that, because plaintiffs did not fall within any of the three classes [enumerated by the Court of Appeals], the covenant was a mere 'gratuitous restriction' on behalf of persons not involved in the deed. That was in error. The Court [of Appeals] went on to note that it did 'not mean to intimate that special circumstances may not exist in which a case not within the three classes above referred to may present considerations which would justify the enforcement of such a covenant in a court of equity...'. Subsequently, New York Courts adopted the view that an owner of neighboring land, for whose benefit a restrictive covenant is imposed by a grantor, may enforce a covenant as a third party beneficiary despite the absence of any privy of estate between the grantor and the neighbor... New York Courts are now committed to the view that the third party beneficiary is entitled to enforce the restrictive covenant in a situation of this kind... Plaintiffs, as owners of the property adjoining the Buffer Lands, for whose benefit the restrictive covenant was included in the deed from Allied to defendants predecessor in title, may enforce the covenant as third party beneficiaries despite the absence of any privity between the original grantor and the plaintiffs... The covenant states that it is 'for the benefit of and enforceable by all parties owning property adjoining the premises hereby conveyed'. In addition, plaintiffs submitted evidentiary proof establishing the original grantor's intent to benefit them as adjoining owners...

Accordingly, the order should be reversed, plaintiffs motion for a preliminary injunction granted, defendants' cross-motions denied and the complaint reinstated."


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