Eagle Enterprises, Inc. v. Gross

New York Court of Appeals
39 N.Y.2d 505 (1976)

ELI5:

Rule of Law:

For an affirmative covenant to run with the land and bind subsequent grantees, it must not only be intended by the original parties and be created in privity of estate, but it must also 'touch and concern' the land in a substantial way and not impose a burden in perpetuity.

Facts:

In 1951, Orchard Hill Realties, Inc. conveyed property to William and Pauline Baum.
The deed contained a covenant requiring Orchard Hill to supply water seasonally (May 1 to Oct 1) and the Baums to purchase it for $35 per year.
The deed also included a clause stating that all covenants would 'run with the land' and bind all successors and assigns.
After a series of intervening conveyances, the respondent became the successor in interest to the Baums.
The respondent's deed did not contain the covenant to purchase water, nor did it reference the original restrictions.
The respondent constructed his own well to obtain water for his dwelling, which is now used year-round.
The respondent subsequently refused to accept or pay for water offered by the appellant, the successor to Orchard Hill Realties, Inc.

Procedural Posture:

Appellant, the successor to Orchard Hill Realties, Inc., instituted an action against the respondent, the successor to the Baums, in a lower court to collect the annual fee for water.
Two lower courts found in favor of the appellant, holding that the covenant was binding upon the respondent.
The respondent appealed to the Appellate Division (an intermediate appellate court).
The Appellate Division reversed the lower courts' findings, holding that the covenant could not be enforced against the respondent.
The appellant then appealed to the Court of Appeals of New York, the state's highest court.

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Issue:

Does a covenant in a deed requiring a landowner to purchase a seasonal water supply from the original grantor 'run with the land' and bind a subsequent purchaser who did not expressly agree to the covenant and has secured an independent water source?

Opinions:

Majority - Gabrielli, J.

No, the covenant does not run with the land to bind the subsequent purchaser. For an affirmative covenant to be enforceable against subsequent grantees, it must satisfy a three-part test: (1) the original parties intended it to run with the land, (2) there is privity of estate, and (3) the covenant 'touches and concerns' the land. While the first two prongs are met here, the covenant fails the third. The covenant does not 'touch and concern' the land because it does not substantially affect the ownership rights of the landowners; it resembles a personal, contractual promise to purchase a utility rather than a significant interest attaching to the property. The record does not show that the land would be waterless without the supply, as evidenced by the respondent obtaining his own water source. Furthermore, the covenant is disfavored because it creates a 'burden in perpetuity' with no time limit, which unduly restricts the land.

Analysis:

This case refines the 'touch and concern' element required for an affirmative covenant to run with the land. It clarifies that a mere contractual obligation for services, even if stated to run with the land, will not bind subsequent owners unless it substantially affects the legal rights connected to property ownership. The decision reinforces the judiciary's historical reluctance to enforce affirmative covenants, especially those that create perpetual burdens on real property. It signals that courts will look past the formal language of a deed to the substantive effect of the covenant on the land itself, protecting future owners from being bound by outdated or unnecessary service agreements.

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