Gambrell v. Nivens

Court of Appeals of Tennessee at Jackson
Filed February 27, 2008 (2008)

ELI5:

Rule of Law:

A restrictive covenant that is unenforceable at law due to a formal defect in the deed may still be enforced in equity as an equitable servitude against a remote grantee who took title with actual notice of the covenant.

Facts:

In 1991, Joe and Jeri Gambrell purchased 69 acres of land, which they subdivided into four lots, retaining one for themselves.
In 1992, the Gambrells sold one lot to Frank Foshee.
The deed to Foshee left the space for encumbrances blank, but an unsigned, undated page listing restrictions, including one for 'residential purposes only,' was attached to the deed upon recording.
The Foshee deed did not reference or incorporate the attached page of restrictions.
In 1996, Foshee sold the lot to Sonny and Carrie Nivens via a deed that affirmatively stated there were no encumbrances.
Prior to the sale, the Nivenses' real estate agent received a copy of the restrictions and, according to her testimony, provided them to the Nivenses.
After purchasing the property, the Nivenses began constructing a large commercial wedding chapel and facility known as Carahills Estate.

Procedural Posture:

Joe and Jeri Gambrell (Plaintiffs) filed suit against Sonny and Carrie Nivens (Defendants) in the Fayette County trial court, seeking an injunction to enforce restrictive covenants.
The trial court initially granted summary judgment to the Nivenses, finding the attachment containing the covenants had no legal effect.
On the Gambrells' motion, the trial court modified its order to grant partial summary judgment to the Nivenses only on the issue of constructive notice, reserving the issue of actual notice for trial.
After a bench trial, the trial court found the Nivenses had actual notice of the restrictions and ruled in favor of the Gambrells, deciding to issue a permanent injunction.
The Nivenses' initial appeal was dismissed by the intermediate appellate court for lack of a final judgment on the remedy.
On remand, the trial court entered a final judgment issuing a permanent injunction against the Nivenses but stayed its enforcement pending appeal.
The Nivenses (Appellants) appealed the final judgment to the Court of Appeals of Tennessee, with the Gambrells as Appellees.

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Issue:

Does a restrictive covenant bind a remote grantee as an equitable servitude when it was contained in an unsigned attachment to a prior deed that did not incorporate it by reference, but the remote grantee had actual notice of the restriction before purchase?

Opinions:

Majority - Farmer, J.

Yes, the restrictive covenant binds the remote grantees as an equitable servitude. A covenant respecting the use of land is enforceable in equity against a successor owner who purchased with notice, regardless of whether the covenant is enforceable at law. The court found that all three elements for an equitable servitude were met: (1) the covenant to use the property for residential purposes 'touches and concerns' the land; (2) the original parties, the Gambrells and Foshee, intended for the covenant to run with the land, as evidenced by the express language in the attachment stating it was 'TO RUN WITH THE LAND'; and (3) the Nivenses had actual notice of the covenant prior to their purchase, a finding they did not dispute on appeal. The court rejected the Nivenses' argument that estoppel by deed applied, reasoning that their actual notice precluded any reasonable reliance on the deed's failure to list encumbrances. Furthermore, the court held that a 'common plan of development' was not required for enforcement where the original grantor is the party suing and the defendant had actual notice of an express covenant intended to run with the land.

Analysis:

This decision reaffirms the power of equity to enforce the substance of an agreement over formal defects in documentation. The court clarifies that while a 'common plan of development' is often used to imply intent or standing in restrictive covenant cases, it is not an absolute requirement, especially when the original grantor seeks to enforce an express covenant against a remote grantee with actual notice. This holding strengthens the position of original grantors and emphasizes that a purchaser cannot ignore restrictions they are aware of simply because of a flaw in how those restrictions were recorded. The case serves as a critical reminder that actual notice can cure even significant defects in the chain of title, making it a powerful tool for enforcing land use restrictions that might otherwise fail at law.

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