Summary of Eagle Enterprises v. Gross, N Y Ct of App [1976]

Enforcement and Running Covenants-Possible Exception to Prohibition Affirmative Covenants.

Relevant Facts: The original developer, Orchard, conveyed by deed to Baum for a subdivision parcel w/ a provision that water shall be supplied at a yearly costs of $35.  That promise was to run and benefit heirs, assigns, successors of the respective parties.  Appellant is the successor of Orchard, and Respondent the successor in the chain to Baums.  The respondents deed contained no covenants, restrictions or “subject to,” clause.  After the original deed, none of the subsequent deeds contained the mutual promises.  Respondent built his own well and refused to accept or pay for water offered by the Appellant.

Legal Issue(s): Whether the promise of the original grantees to accept and make payment for water from the grantor’s well is enforceable against subsequent grantees, and if it runs with the land?

Court’s Holding: No it does not run with the land to the subsequent purchasers.

Procedure: 2 lower cts “ran”; App Div Reversed; S. Ct Affirmed.

Law or Rule(s): 1) The original grantee and grantor must have intended that the covenant run w/ the land;   2) There must exist Privity of Estate btwn party claiming benefit and party burdened by the covenant; 3) The covenant must touch and concern the land w/ which it runs.

Court Rationale: Although the intentions of the original parties is clear and privity of estate exists, the covenant must still satisfy the requirement that it touch and concern the land in order to be enforceable against subsequent grantees.  “The distinction btwn covenants which run w/ 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 w/ the land.” A close examination of the covenant in this case lead us to conclude that it does not substantially affect the ownership interests of the landowners in the subdivision.  The obligation to receive seasonal water resembles a personal, contractual promise to purchase water rather than a significant interest attaching to Respondent’s property.  The affirmative covenant is disfavored in the law as an “undue restriction on alienation or an onerous burden in perpetuity.”  Here, no outside limitation has been placed on the obligation to purchase water.  The covenant 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.

Plaintiff’s Argument: (Ant) The covenant expressly provided that it would run to heirs, etc, Res had constructive notice of the covenant, the covenant benefitted the Dominant and burdened the Servient estates.

Defendant’s Argument: (Res) The covenant to pay and supply seasonal water, when it is not vital to the property, is a personal covenant and not a significant ownership interest running w/ the land.