Eagle Enterprises, Inc. v. Gross, 39 N.Y.2d 505 

New York Court of Appeals

1976

Chapter

24-25

Title

Covenants

Page

507

Topic

Enforcement & Running of Covenants

Quick Notes

Gross purchased land that contained a covenant under the original deed whereby the owner of the land would purchase water from Eagle, seasonally from May 1st to Oct 1st.  Gross constructed a well and refused to buy Eagle's water.  Eagle instituted an action to collect the fee $35 for the supply of water.

o         The covenant does NOT substantially affect the ownership interest of the landowners in Orchard Hill subdivision. 

o         Property owners will NOT be deprived of water if service is terminated. 

o         The seasonal supply of water does not seem to relate in any significant degree to the ownership rights of Grosss and the other property ownership the subdivision

Book Name

Fundamentals of Modern Property Law: Rabin; Kwall, Kwall.  ISBN:  978-1-59941-053-1.

Issue

o         Whether the promise of the original grantees to accept and make payment for a seasonal water supply from the well of their grantor is enforceable against subsequent grantees and may be said to run with the land?    No, the covenant cannot be enforced.

Procedure

Trial

o         Two of the lower courts found that the covenant ran with the land and was bind upon the successors of the Baums (Gross).

Appellant

o         Reversed.  The covenant cannot be enforced against the successors of the Baums (Gross).

Supreme

o         Affirmed.

Burden (Df - Pay For Water

Gross

Injunction and/or damages

Benefit (Pl - Supply the Water

Eagle

o         Covenant herein contained shall run with the land.

o         Shall bind and shall enure [to take effect]

 L&E Intent L&E

o         Covenant herein contained shall run with the land.

o         Shall bind and shall enure [to take effect]

o         Constructive notice, found in original deed on record

 L&E Notice none

X

o         The covenant does NOT substantially affect the ownership interest of the landowners in Orchard Hill subdivision

o         Property owners will NOT be deprived of water if service is terminated

o         The seasonal supply of water does not seem to relate in any significant degree to the ownership rights of Grosss and the other property ownership the subdivision

o         The obligation to receive water from appellant resembles a personal, contractual promise to purchase water rather than a significant interest attaching to respondent's property

L&E T & C L&E

o         Water comes with the land.

o         $35 dollars per year has an impact on the land.

o         Grantor/Grantee

 L HP none

X

o         Yes, Baums to Gross was transferred in Fee.

 Strict L VP   Relaxed L

o          Yes, Orchard to Eagle was transferred in Fee.

o         The affirmative covenant is disfavored in the law because of the fear that this type of obligation imposes an "undue restriction on alienation or an onerous burden in perpetuity.

Public Policy

o          

Facts

Discussion

Reasoning

Rules

Pl Eagle Enterprises

Df Gross

Description

o         Gross purchased land that contained a covenant under the original deed containing whereby the owner of the land would purchase water from Eagle.

o         Gross constructed a well and refused to buy Eagle's water.

Court Expressed recital run with the land

o         Regardless of the express recital in a deed that a covenant will run with the land, a promise to do an affirmative act contained in a deed is generally NOT binding upon subsequent grantees of the promisor UNLESS certain well-defined and long-established legal requisites are satisfied.

For Affirmative Covenants to Run With the Land (Neponsit case)

(1)   The original grantee and grantor must have intended that the covenant run with the land.

(2)   There must exist "privity of estate" between the party claiming the benefit of the covenant and the right to enforce it and the party upon whom the burden of the covenant is to be imposed.

(3)   The covenant must be deemed to "touch and concern" the land with which it runs

Touch and Concern Analysis (Run with the land v. Personal)

o         Depends upon the effect of the covenant on the legal rights which otherwise would flow from the ownership of the land and which are connected with the land.

Key Questions

o         Whether the covenant in purpose and effect substantially alters these rights?

Neponsit (Annual charge for Maintenance Did affect promisors legal interest)

o         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.

o         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.

Court In this case (covenant does NOT substantially affect the ownership interest)

o         The covenant does NOT substantially affect the ownership interest of the landowners in Orchard Hill subdivision.

o         No claim has been advance by Eagle that the subdivision would be waterless without it water supplies.

o         The converse conclusion is that the Grosss obtained their own water supply.

Property owners will NOT be deprived of water if service is terminated.

o         The stipulation of facts does not demonstrate that other property owners in the subdivision would be deprived of water from appellant or that the price of water would become prohibitive for other property owners if the Grosss terminated Eagles water service.

Does not significantly relate to the ownership rights

o         The seasonal supply of water does not seem to relate in any significant degree to the ownership rights of Grosss and the other property ownership the subdivision.

Neponsit Easement to utilize public areas in the subdivision.

o         The interest was in the nature of a property right attached to their respective properties.

Court In this case (the obligation resembles a personal, contractual promise)

o         The obligation to receive water from appellant resembles a personal, contractual promise to purchase water rather than a significant interest attaching to respondent's property.

Circumstances of Case Whether a covenant runs with the land

o         It should be emphasized that the question whether a covenant is so closely related to the use of the land that it should be deemed to "run" with the land is one of degree, dependent on the particular circumstances of a case ( Neponsit, supra, p 258).

Insufficient record to establish that the covenant runs with the land

o         Here, the meager record before us is lacking and woefully insufficient to establish that the covenant "touches and concerns" the land, as we have interpreted that requirement.

Public Policy - Undue restriction on alienation or an onerous burden in perpetuity

o         The affirmative covenant is disfavored in the law because of the fear that this type of obligation imposes an "undue restriction on alienation or an onerous burden in perpetuity.

Allowable Perpetuity Examples

o         In Nicholson, the covenant was condition upon the continued existence of the builds on both the promisors and promisees properties.

o         In Neponsit, the original 1917 deed expressly provided for it own lapse in 1940.

o         In this case, no outside limitation has been placed on the obligation to purchase water from the appellant.

o    This would bind ALL future owners, regardless of the use to which the land is put.

Rules

Class Notes