Summary of Neponsit Property Owners’ Association, Inc. v. Emigrant Industrial Savings Bank, Ct. of Appeals of NY (1938)

Parties: PL is assignee of Neponsit Realty Co.; DF is landowner.

Cause of action/remedy sought: The following is a legal action of foreclosure of a lien.

Procedural History: Lower court denied motion by DF for judgment on the pleadings.  This court affirms.

Facts: DF purchased the land at a judicial sale.  Lien arose in the deed of conveyance from PL’s assignor to a predecessor of title to DF.  Every deed in the chain of title since the conveyance mentions this covenant.

Original grantees, the Deyers, were conveyed deed that said land was subject to an annual charge as will be fixed by the par on the first part (grantee), which may be a Property Owners’ Association to be paid the first of May every year.  The charge would be considered a lien and considered paid off.  The grantees accepted by this deed and to all successors and assigns of parties of the first part to bring action on those who do not pay.  The covenant shall run with the land.  Same provision was in every deed on down the chain of title.

Issue(s): Under NY property law, may DF landowners have their property foreclosed upon by PL’s assignee for failure to pay a yearly service charge on their land as set for in the original conveyance of the land?

Holding: Yes.  The covenant touches & concerns the land, runs with the land, and there is privity, and so there is a covenant which has been passed down to grantee who had the duty to pay but did not.  “In substance, if not form, the covenant is a restrictive covenant which touches and concerns the DF’s land, and in substance, if not in form, there is privity of estate between PL and DF….”

Court’s Rationale/Reasoning:  English law it and NY law combine to hold that the burden of a covenant which requires the covenantor to so an affirmative act, even on his own land, for the benefit of the owner of a “dominant estate,” does not run with his land so as to change the burden of performance on a subsequent grantee.

For the covenant to “touch and concern,” it must affect legal relations — the advantages & burdens — of the parties to the covenant, as owner of particular parcels of land and not merely as members of the community in general, such as taxpayers or owners of other land.  The distinction between covenants which run with the land and covenants which are personal, must depend upon the effect of the covenant on the legal rights which otherwise would flow from ownership of land and which are connected with the land.

So even as the covenant is partially to pay for lands which are not touching the covenant, the land on which the lien is paid is also part of the lands touching the covenant.  So it touches and concerns.

As to privity, it is based upon a distinction between the corporate property owners association and the property owners for whose benefit the association was created.  Enforcement of technical principles is necessary to enforce the equitable associated with privity (Tulk v. Moxhay).  Here, the association is acting as an instrument of the assignor property owners corporation..  The common rights of all the residents were preserved through such an organization.

Rule: “Essential elements of a real covenant: (1) must appear grantor & grantee intended that the covenant should run with the land; (2) covenant touches or concerns the land which it runs; (3) privity of estate between the promisee or party claiming the right to enforce it, and the the promisor or party who rests under the burden of the covenant.”

Did court avoid issues?: No, b/c this court was not to decide on the merits of the case, just the elements of covenants.

Dicta: Tests for touching and concerning the land are deemed to be done on a case-by-case basis.