Buffalo Academy of Sacred Heart v. Boehm Bros.
267 N.Y 242, 1935 N.Y. LEXIS 1212, 196 N.E. 42 (1935)
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Rule of Law:
A restrictive covenant does not bind a subsequent purchaser who takes title without actual or constructive notice of the covenant. A purchaser has constructive notice only of covenants recorded in their direct chain of title and is not required to search the deeds of other lots sold by a common grantor.
Facts:
- A developer subdivided a large tract of land into 'University Terrace, Part One' and 'University Terrace, Part Two' and began selling individual lots.
- The developer sold lots using deeds with inconsistent restrictions; some were for residential use only, some allowed stores, many had no restrictions, and many contained a 'saving clause' denying grantees rights in other lots.
- The developer conveyed four lots to the Kendall Refining Company.
- The deed to the Kendall Refining Company included a covenant from the grantor personally promising not to erect or permit the erection of any other gasoline stations on his remaining lots in the subdivision.
- Subsequently, the developer sold the lots in question to the plaintiff's predecessor in title.
- The deed conveying these lots, and all subsequent deeds in their chain of title, made no mention of the restriction against gasoline stations.
- The plaintiff, now owner of these lots, contracted to convey them to the defendant to discharge an indebtedness.
- The defendant refused to accept the deed, asserting that the restriction in the Kendall Refining Company's deed made the plaintiff's title unmarketable.
Procedural Posture:
- The plaintiff and defendant submitted the controversy to the New York Supreme Court, Appellate Division, to determine whether title to the real estate was marketable.
- The Appellate Division found there was no uniform building plan but held that the property was subject to the restrictive covenant from the Kendall Refining Company deed, rendering the title unmarketable.
- The Appellate Division entered a judgment for the defendant in the amount of $60,000.
- The plaintiff appealed this judgment to the Court of Appeals of New York, the state's highest court.
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Issue:
Does a restrictive covenant contained in a prior deed from a common grantor, which purports to restrict the grantor's remaining land, bind a subsequent bona fide purchaser of another parcel whose deed does not contain the restriction?
Opinions:
Majority - Finch, J.
No. A restrictive covenant in a deed from a common grantor does not bind a subsequent purchaser of a different parcel whose deed does not contain the restriction and who lacks actual notice. First, the court found the specific covenant was a personal promise by the grantor not to compete with the grantee, as it did not expressly state it would bind the grantor's assigns and was not phrased to run with the land, unlike other covenants in the same deed. Second, and more broadly, the court held that restrictive covenants must be strictly construed against those seeking enforcement. Finally, the court established that a purchaser is only charged with constructive notice of encumbrances that appear in their direct chain of title. Requiring a purchaser to search the title of every other lot sold by a common grantor would be an unreasonable burden and would undermine the purpose of recording acts, which is to provide clarity and certainty in land transactions.
Analysis:
This decision solidifies the rule in New York that a purchaser's duty to search for encumbrances is limited to their own property's direct chain of title. It protects subsequent bona fide purchasers from unrecorded or 'hidden' restrictions found in the deeds of neighboring properties, thereby promoting the marketability and certainty of land titles. By rejecting the minority view that a recorded deed from a common grantor provides notice to all subsequent grantees, the case sets a clear, practical precedent that simplifies title searches and reinforces the policy behind the recording acts. This ruling is fundamental to property law, defining the scope of constructive notice and the enforceability of restrictive covenants against those outside the original agreement.
