Neponsit Property Owners' Association, Inc. v. Emigrant Industrial Savings Bank

CASE NAME	Neponsit Property Owners' Association, Inc., Respondent, v. Emigrant Industrial Savings Bank, Appellant
CITATION, DATE	278 N.Y. 248; 15 N.E.2d 793; 1938 N.Y. LEXIS 1292; 118 A.L.R. 973. May 24, 1938
COURT	Court of Appeals of New York

PROCEDURAL HISTORY
TRIAL COURT:		APPEAL COURT (for appeal cases only):
PLAINTIFF	Neponsit Property Owners' Association	APPELLANT	Emigrant Industrial Savings Bank
DEFENDANT	Emigrant Industrial Savings Bank	RESPONDENT	Neponsit Property Owners' Association

DESCRIPTION OF EVENTS
"Plaintiff's assignor, a realty company, owned a described tract of land which it developed as a strictly residential community, conveying lots therein to purchasers by reference to a filed map and to roads and streets shown thereon. A portion of such tract, now owned by defendant, was conveyed to two of its predecessors in title by such a deed containing a covenant, which, it was provided, should run with the land, that they, their heirs, successors and assigns would pay not to exceed a stated sum each year to the grantor, its successors or assigns, which might include a property owners' association, for maintenance of roads, paths, parks, beach, sewers and such other purposes as shall be determined by the grantor, its successors and assigns." "Every subsequent deed of conveyance in the defendant's chain of title, including the deed to it, contained a provision that it was subject to the covenants and restrictions of former deeds of record. Plaintiff, a property owners' association, was organized to receive the sums payable by the property owners and expend them for the benefit of such owners" "The plaintiff, as assignee of Neponsit Realty Company, has brought this action to foreclose a lien upon land which the defendant owns." According to the deed: "These covenants shall run with the land and shall be construed as real covenants running with the land until January 31st, 1940, when they shall cease and determine."

REMEDY SOUGHT	In this action to foreclose a lien for lot charges on defendant's land made in accordance with the covenant, where the issue raised by the pleadings was whether defendant's land is subject to any lien or charge which the plaintiff may enforce, defendant's motion for a dismissal of the complaint was properly denied and plaintiff's motion to strike out separate defenses and a counterclaim was properly granted.

ARGUMENT FOR PLAINTIFF
"Defendant's motion for judgment on the pleadings was properly denied.... Plaintiff's motion to strike out the seven defenses and one counterclaim contained in the answer was properly granted."

ARGUMENT FOR DEFENDANT
"The complaint fails to allege that plaintiff has title to the roads, paths, parks, beach and sewers nor to any land for the benefit of which the covenant was created. It follows that there is no privity of estate between plaintiff and its assignor; therefore, plaintiff has no foundation upon which to base the action and its complaint should be dismissed. "The alleged lien based upon the covenant set forth in the complaint is an interest or estate in land which plaintiff seeks to foreclose. Said alleged lien is not created by any writing signed by defendant's predecessors in title and is, therefore, unenforceable under section 242 of the Real Property Law"

COURT OPINION
"A covenant will run with the land and will be enforceable against a subsequent purchaser of [*3] the land at the suit of one who claims the benefit of the covenant, only if it appears that grantor and grantee intended that the covenant should run with the land; that the covenant is one "touching" or "concerning" the land with which it runs and that there is "privity of estate" between the promisee or party claiming the benefit of the covenant and the right to enforce it, and the promisor or party who rests under the burden of the covenant." "it seems clear that the covenant may properly be said to touch and concern the land of the defendant; that its burden should run with the land; and that in substance, if not in form, there is privity of estate between the plaintiff and the defendant" "The covenant is not excluded from the classification of covenants which "touch" or "concern" the land by the fact that it calls for payment of a sum of money to be expended for public purposes upon land other than that conveyed to defendant's predecessor in title. By that conveyance the grantee obtained not only title to particular lots, but an easement or right of common enjoyment with [6] other property owners in roads, beaches, public parks or spaces, and improvements in the same tract, for full enjoyment of which such places must be maintained. A covenant that the burden of paying the cost of such maintenance should be inseparably attached to the land which enjoys the benefit cannot properly be classified as not touching or concerning the land." "An argument that the plaintiff has no sufficient privity of estate to permit it to enforce the covenant cannot be upheld. The corporate plaintiff has been formed as a convenient instrument by which the property owners may advance their common interests. It acts as the agent or representative of such owners and it cannot properly be held that such a corporation, under such conditions, owns no property which would benefit by enforcement of common rights and has no cause of action in equity to enforce the covenant upon which such common rights depend." "a determination by a court in one case upon particular facts will often serve to point the way to correct decision in other cases upon analogous facts. Such guideposts may not be disregarded. It has been often said that a covenant to pay a sum of money is a personal affirmative covenant which usually does not concern or touch the land. Such statements are based upon English decisions which hold in effect that only covenants, which compel the covenanter to submit to some restriction on the use* of his property, touch or concern the land, and that the burden of a covenant which requires the covenanter to do an affirmative [*17] act, even on his own land, for the benefit of the owner of a "dominant" estate, [796] does not run with his land" "It has been suggested that a covenant which runs with the land must affect the legal relations -- the advantages and the burdens -- of the parties to the covenant, as owners of particular parcels of land and not merely as members of the community in general, such as taxpayers or owners of other land. That method of approach has the merit of realism. The test is based on the effect of the covenant rather than on technical distinctions. Does the covenant impose, on the one hand, a burden upon an interest in land, which on the other hand increases the value of a different interest in the same or related land?" Privity of interest is a new question in this situation, since "no right to enforce even a restrictive covenant has been sustained in this State where the plaintiff did not own property which would benefit by such enforcement so that some of the elements of an equitable servitude are present." However, "the corporate plaintiff has been formed as a convenient instrument by which the property owners may advance their common interests. We do not ignore the corporate form when we recognize that the Neponsit Property Owners Association, Inc., is acting as the agent or representative of the Neponsit property owners."

DISPOSITION OF CASE
The order should be affirmed, with costs, and the certified questions answered in the affirmative. (1) deny the motion of the defendant for judgment on the pleadings, and (2) grant the motion of the plaintiff to strike out the seven defenses and the one counterclaim in the defendant's answer

ECONOMIC ANALYSIS

This case makes it possible for homeowner associations to fund common-area improvements. Assessments can be built into deeds as enhancing the overall value of the members' properties, even though individual owners may be tempted to opt out.