Orange & Rockland Utilities, Inc. v. Philwold Estates, Inc.

Brief Fact Summary.

Plaintiff sued to extinguish a deed’s restrictive covenant effectively rendering Plaintiff’s land useless.  The trial court dismissed the action as barred by the statute of limitations. The appellate division reversed and held that the covenant should be extinguished because the covenant served no purpose and rendered Rockland’s land valueless. Defendant appealed.

Synopsis of Rule of Law.

To determine whether a restrictive covenant should be cancelled by the doctrine of relative hardship, a court may extinguish a restrictive covenant if the restriction confers no actual and substantial benefit to the covenantee while rendering the burdened land valueless.

Facts.

Bradford once owned land on both sides of the Neversink River. In 1923, he sold portions of the land on both banks to Crane, retaining some of the land reserving an easement for hunting and fishing on the rest of the land. The west bank portion was sold via a deed that restricted its use solely for the construction, operation, and maintenance of a hydroelectric plant along with any facilities and structures necessary for that purpose. In 1927, Crane sold the land, subject to the covenant and easement, to Rockland Light and Power Company, now Orange and Rockland Utilities, Inc. (Plaintiff). The property that Bradford had retained was ultimately sold to PhilwoldEstates, Inc. Wechsler (Defendant) was a partner in the company that owned Philwold Estates. Defendant withdrew from that partnership, receiving Bradford’s former property along with the hunting and fishing easement. In 1940, New York City condemned all of Plaintiff’s riparian rights in the Neversink River. Plaintiff sued to extinguish the covenant because the condemnation deprived it of any meaningful use of its property. The trial court dismissed the action as barred by the statute of limitations. The appellate division reversed and held that the covenant should be extinguished because the covenant served no purpose and rendered Plaintiff’s land valueless. Defendant appealed.

Issue.

Whether the doctrine of relative hardship provides for a court to extinguish a restrictive covenant if the restriction confers no actual and substantial benefit to the covenantee while rendering the burdened land valueless.

Held.

Yes. The court of appeals’ ruling is affirmed. To determine whether a restrictive covenant should be cancelled by the doctrine of relative hardship, a court may extinguish a restrictive covenant if the restriction confers no actual and substantial benefit to the covenantee while rendering the burdened land valueless.

Discussion.

Section 1951 of the Real Property Actions and Proceedings Law was enacted to provide relief to owners of land burdened with outmoded restrictions that render the property virtually useless. Such restrictive covenants are contrary to public policy and unreasonable because they make property unmarketable. In assessing the hardship that enforcing the covenant will cause the covenantor relative to the covenantee’s benefit, the most important factor is whether the covenantor can make no use of the burdened land. As for the benefit, the question is not whether the covenantee gets any benefit from the restriction, but whether the benefit is actual and substantial. In this case, the subject land is valueless because the condemnation makes it impossible for Plaintiff to use the land for the one purpose that the covenant does allow. Meanwhile, Plaintiff must continue to pay taxes and remain liable for possible injury to persons using the easement. On the other hand, although the covenant may increase the value of Defendant land and easement over the subject parcel, Defendant has offered no evidence that the benefit would be substantial. Moreover, cancellation of the covenant does not necessarily impact his ability to use and enforce his easement rights. Against the burden faced by Plaintiff, the benefit to Defendant is not substantial enough to warrant enforcement of the covenant.