Runyon v. Paley

Supreme Court of North Carolina
416 S.E.2d 177 (1992)

ELI5:

Rule of Law:

A successor in interest to the original grantor's retained property may enforce a restrictive covenant if the covenant touches and concerns the land, privity of estate exists, and the circumstances surrounding the conveyance indicate the original parties intended the benefit to run with the land, even if the deed does not expressly state who may enforce it.

Facts:

On May 17, 1937, Ruth Bragg Gaskins acquired a four-acre tract of land on Ocracoke Island.
On May 1, 1954, Gaskins conveyed a one-and-one-half-acre sound-front portion of this tract to plaintiffs, the Runyons.
On January 6, 1960, the Runyons reconveyed the one-and-one-half-acre tract back to Gaskins.
On January 8, 1960, Gaskins conveyed a lake-front lot and a fifteen-foot strip of land (for sound access) back to the Runyons.
On January 9, 1960, Gaskins conveyed the remainder of the one-and-one-half-acre parcel to the Brughs with a deed containing restrictive covenants limiting the property to two residences and prohibiting commercial or apartment use.
At the time of the conveyance to the Brughs, Gaskins owned and resided on adjacent property.
Plaintiff Williams, Gaskins' daughter, subsequently acquired the property that Gaskins had retained.
Defendant Warren D. Paley subsequently acquired the restricted property originally conveyed to the Brughs and, with partners, began constructing condominium units on it.

Procedural Posture:

Plaintiffs Runyon and Williams filed suit in the Superior Court, Hyde County (trial court) to enjoin defendants from constructing condominiums.
Defendants moved to dismiss the complaint for failure to state a claim, and plaintiffs moved for summary judgment.
The trial court granted the defendants' motion to dismiss.
Plaintiffs appealed to the North Carolina Court of Appeals.
The Court of Appeals affirmed the trial court's decision, holding the covenants were personal to Gaskins and unenforceable after her death.
A Court of Appeals judge dissented regarding the dismissal of plaintiff Williams' claim.
Plaintiffs appealed to the Supreme Court of North Carolina.

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Issue:

Does a restrictive covenant that does not expressly state who can enforce it run with the land, thereby allowing a successor in interest to the original grantor's retained property to enforce it against a successor in interest to the burdened property?

Opinions:

Majority - Meyer, J.

Yes, for the successor to the grantor's retained land, but no for a neighboring landowner who acquired their property before the covenant's creation. A restrictive covenant runs with the land and is enforceable by a successor to the original covenantee's retained land (Williams) if it meets the three-part test for a real covenant. First, the covenant 'touches and concerns' the land, as the residential use restriction enhances the value of the dominant estate (Williams' land) and decreases the value of the servient estate (Paley's land). Second, both horizontal and vertical 'privity of estate' exist; horizontal privity was created by the conveyance from Gaskins to the Brughs, and vertical privity exists because Williams succeeded to Gaskins' estate and Paley succeeded to the Brughs' estate. Third, although the deed is ambiguous regarding who can enforce the benefit, the parties' 'intent' for the benefit to run with the land can be inferred from the nature of the residential restriction and the fact that Gaskins retained adjacent property, indicating a purpose to protect the value of her retained land. However, the Runyons cannot enforce the covenant as a real covenant because they lack vertical privity, having acquired their land before the covenant was created and not succeeding to any interest Gaskins held at the time of the covenant. They also cannot enforce it as an equitable servitude because there is no evidence in the deed or public record showing an intent to benefit them or their property.

Concurring - Mitchell and Webb, JJ.

Concurred in the result without a separate written opinion.

Analysis:

This case provides a detailed framework for analyzing the enforceability of restrictive covenants by non-parties in North Carolina. It clarifies that when a deed is ambiguous as to whether the benefit of a covenant runs with the land, courts will look beyond the four corners of the instrument to extrinsic evidence, such as the nature of the covenant and the situation of the parties. The decision establishes that a grantor retaining adjacent land is strong circumstantial evidence of intent for the covenant to benefit that land. It also reaffirms the strict requirement of vertical privity for a covenant to run at law, effectively precluding neighbors who acquired their land before a covenant's creation from enforcing it without being named as beneficiaries.

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