February 27, 2008

Actual notice of restrictive covenants prevents estoppel argument, even when the covenants were not technically part of the deed

JOE GAMBRELL, ET AL. v. SONNY NIVENS, ET AL. (Tenn.Ct.App. February 27, 2008).

This case involves the enforcement of restrictive covenants in equity. After subdividing their property, imposing restrictions on the three lots they sold, and retaining the remaining land, vendors brought suit against remote grantees to enforce the restrictive covenants and to enjoin them from operating a wedding chapel, for commercial use, on the land.

The central issue on appeal is whether the restrictions bind the remote grantees when the covenants were listed on an undated and unsigned attachment to a deed that neither identified encumbrances nor incorporated the attached restrictions. Following a trial on the matter, the trial court permanently enjoined the commercial activity because the remote grantees took title with actual notice of the restrictions. Finding ample support for the imposition of an equitable servitude, we concur in the trial court's judgment. Affirmed and remanded.

Cases available at the Tennessee Bar Association website:

"[T]he Nivenses had actual notice of the restrictions. Generally, factual assertions contained in a deed bind the grantor and the grantee. Duke v. Hopper, 486 S.W.2d 744, 748 (Tenn. Ct. App. 1972). To assert estoppel, however, a party damaged by a false factual assertion must establish (1) its lack of knowledge, without fault, of the true facts, (2) its reliance upon the false factual assertion, and (3) its consequent action based upon that untrue statement. Id. ... They could not have reasonably relied on the face of the Gambrell-Foshee deed when they had actual notice of the restrictions." Id.

"An equitable servitude is a “covenant respecting the use of land enforceable against successor owners or possessors in equity regardless of its enforceability at law.” 2 American Law of Property § 9.31 (A.J. Casner ed. 1952). ... For a covenant to bind remote grantees in equity, (1) it must “touch and concern” the land; (2) the original parties to the covenant must intend that it run with the land and bind remote grantees; and (3) the remote grantee must have had notice of the covenant. Id. at *1-*2 (quoting 5 Richard R. Powell & Patrick J. Rohan, The Law of Real Property § 673 (1991)). To have binding effect, valid restrictions on property need not be in the chain of title if the purchaser had actual notice of them. [citations omitted]. Nonetheless, even where the remote grantee takes title with actual notice, the first two requirements - - that the covenant “touch and concern” the land and that the original parties intend the covenant to run - - must still be established." Id.

"Under Tennessee law, undated and unsigned writings located below the signatures and the certificate of acknowledgment in a deed do not constitute part of that deed. Anderson v. Howard, 74 S.W.2d 287, 390 (Tenn. Ct. App. 1934). To conclude otherwise would “open wide the door to the perpetration of fraud.” Id. But there is no dispute regarding the agreement between the Gambrells and Mr. Foshee at the time of the conveyance. The record makes clear that the language of the deed itself did not express the true intention of the parties. In his deposition, Mr. Foshee unequivocally stated that the terms of their contract included the restrictions, that he understood the restrictions would run with the land for thirty years, and that the list was attached to the deed and duly recorded. Despite the omission of encumbrances on the face of the Gambrell-Foshee deed, Mr. Foshee never believed his property to be unencumbered. Certainly, the undated, unsigned, and unacknowledged written covenants fail in form; however, the original covenanting parties confirmed their substance." Id.