Eagle Enterprises v. Gross

CASE NAME	Eagle Enterprises, Inc., Appellant, v. Bob Gross, Respondent
CITATION, DATE	39 N.Y.2d 505; 349 N.E.2d 816; 384 N.Y.S.2d 717; 1976 N.Y. LEXIS 2676. May 11, 1976
COURT	Court of Appeals of New York

PROCEDURAL HISTORY
TRIAL COURT: (ustice Court, Town of Monroe)		APPEAL COURT (for appeal cases only):
PLAINTIFF	Eagle Enterprises	APPELLANT	Eagle Enterprises, Inc.
DEFENDANT	Bob Gross	RESPONDENT	Bob Gross

DESCRIPTION OF EVENTS
"In 1951, Orchard Hill Realties, Inc., a subdivider and developer, conveyed certain property in the subdivision of Orchard Hill in Orange County to William and Pauline Baum. The deed to the Baums contained the following provision: "The party of the first part shall supply to the party of the second part, seasonably, from May 1st to October 1st, of each year, water for domestic use only, from the well located on other property of the party of the first part, and the party of the second part agrees to take said water and to pay the party [507] of the first part, a fee of Thirty-five ($ 35.00) dollars per year, for said water so supplied." "In addition, the deed also contained the following: "It is expressly provided that the covenants herein contained shall run with the land * * and shall bind and shall enure to the benefit of the heirs, distributees, [818] successors, legal representatives and assigns of the respective parties hereto". Appellant is the successor in interest of Orchard Hill Realties, Inc., and respondent, after a series of intervening conveyances, is the successor in interest of the Baums. The [*719] deed conveying title to respondent does not contain the afore-mentioned covenant to purchase water and, in fact, none of the deeds following the original deed to the Baums contained the mutual promises regarding water supply. While some of the deeds in the chain of title from Baum contained a provision that they were made subject to the restrictions in the deed from Orchard Hill Realties to Baum, the deed to respondents contained no such covenants, restrictions or "subject to" clause. According to the stipulated facts, respondent has refused to accept and pay for water offered by appellant since he has constructed his own well to service what is now a year-round dwelling.

REMEDY SOUGHT	Appellant, therefore, instituted this action to collect the fee specified in the covenant (contained only in the original deed to Baum) for the supply of water which, appellant contends, respondent is bound to accept. "

ARGUMENT FOR PLAINTIFF
A covenant in a deed shall run with the land and bind successive grantees if it was so intended by the original parties.

ARGUMENT FOR DEFENDANT
I. The decisions of both the trial court and the Appellate Term were based upon facts not found in the stipulation of agreed facts. II. The covenant to supply water to the land is not a covenant running with the land otherwise it would compel plaintiff to maintain pumps and a water system forever, therefore defendant who was not a party to the covenant cannot be compelled to forever purchase water from plaintiff. III. The covenant is now academic as plaintiff has submitted to the jurisdiction of the Public Service Commission.

COURT OPINION
"In order for an affirmative covenant to run with the land, the original grantor and grantee must have intended that it run with the land, privity of estate must exist between the party claiming the benefit of the covenant and the right to enforce it and the party upon whom the burden of it is to be imposed, and the covenant must be deemed to "touch and concern" the land with which it runs. The subject covenant satisfies the first two requirements, but not the third.... the covenant does not substantially affect, or relate in any significant degree to, the ownership rights of respondent and other property owners in the subdivision, and, accordingly, does not "touch and concern" the land, as that requirement has been interpreted." "The "running" of affirmative covenants is disfavored in the law, because of the fear that this type of covenant imposes an undue restriction on alienation or an onerous burden in perpetuity. The subject covenant, which contains no outside limitation on the obligation to purchase water from appellant, falls prey to the criticism that it creates a burden in perpetuity, and purports to bind all future owners, regardless of the use to which the land is put. For this reason also, it should not be enforced." Touch and concern "presents the obstacle to appellant's position and ... was the focus of our decisions in Neponsit and Nicholson v 300 Broadway Realty Corp. (7 NY2d 240, 244, supra). Neponsit first sought to breathe substance and meaning into the ritualistic rubric that an affirmative covenant must "touch and concern" the land in order to be enforceable against subsequent grantees. Observing [509] that it would be difficult to devise a rule which would operate mechanically to resolve all situations which might arise, Judge Lehman observed that "the distinction between covenants which run with land and covenants which are personal, must depend upon the effect of the covenant on the legal rights which otherwise would flow from the ownership of land and which are connected with the land "( Neponsit, supra, p 258). Thus, he posed as the key question whether "the covenant in purpose and effect substantially [alters] these rights"" "The covenants in issue in Neponsit* required the owners of property in a development to pay an annual charge for the maintenance of roads, paths, parks, beaches, sewers and other public improvements. The court concluded that the covenant substantially affected the promisor's legal interest in his property since the latter received an easement in common and a right of enjoyment in the public improvements for which contribution was received by all the landowners in the subdivision (supra, pp 259-260)." "A close examination of the covenant in the case before us leads to the conclusion that it does not substantially affect the ownership interest of landowners in the Orchard Hill subdivision."

DISPOSITION OF CASE
"Two of the lower courts found that the covenant "ran" with the land and, hence, was binding upon respondent as successor to the Baums, but the Appellate Division reversed and held that the covenant could not be enforced against respondent." "Order affirmed" to "dismiss the complaint."

ECONOMIC ANALYSIS