Gallagher v. Bell

Brief Fact Summary. A covenant was made between Gallagher (Defendant) and Bell (Plaintiff) with the intent to develop a subdivision. The covenant provided that, in exchange for a right of way, the Defendant agreed “for themselves, their heirs and assigns, that they will dedicate one-half of the streets bounding their property and shall share pro-rata the cost of installation of said streets and the utilities by the Plaintiffs.”

Synopsis of Rule of Law. In order for a covenant to run with the land four elements must be satisfied: 1) the covenant must ‘touch and concern’ the land; 2) the original covenanting parties must have intended for the covenant to run; 3) there must be some privity of estate; and 4) the covenant must be in writing.

Facts. A covenant was made between the Defendant, who purchased a tenant house on one half-acre from the Sisters of Mercy, and the Plaintiff, who bought the remainder of the tract (34 and one-half acres) and they intended to develop the tract with a subdivision. The covenant provided that, in exchange for a right of way, the Defendants agreed “for themselves, their heirs and assigns, that they will dedicate one-half of the streets bounding their property and shall share pro-rata the cost of installation of said streets and the utilities by the Plaintiffs.” This covenant was entered into by the parties on June 16, 1961. Then, in October of 1979, Defendant sold the half-acre property and tenant house to Deborah Camelier. Camelier became aware of the covenant between the Plaintiff and Defendant and insisted on an indemnity agreement from the Defendant. In July of 1983, Plaintiff initiated construction on the roads around the Camelier property and demanded $18,000 from Camelier based on
the covenant. Camelier refused payment based on the indemnity agreement with Defendant, which caused the Plaintiff to make demand upon the Defendant for the $18,000, which Defendant refused to pay. This lawsuit was then filed. The Defendant argued that the 1961 covenant was a covenant running with the land, which terminated when the property was sold to Camelier in 1980. The Defendant also argued that if there was any continuing liability on the covenant then it would attach to Camelier or Sindelar, who purchased the property from Camelier in December 1983. The lower court found the question of the nature of the covenant to be a question of fact and submitted the case to a jury, who returned a $7,000 verdict for Plaintiff. The Defendant appealed on the basis that the issue of the nature of the covenant was a question of law, and should not have been submitted to the jury. Also the Defendant contended that the covenant was such that it ran with the land, and that the Defendant’s liabil
ity ended when they sold the property to Camelier.

Issue. Did the covenant run with the land or was it personal as between Plaintiff and Defendant?

Held. The covenant ran with the land. Judgment reversed.
In order for a covenant to run with the land four elements must be satisfied: 1) the covenant must ‘touch and concern’ the land; 2) the original covenanting parties must have intended for the covenant to run; 3) there must be some privity of estate; and 4) the covenant must be in writing.
The court held that the covenant touched and concerned the land, even though it was a covenant to pay money. The Defendant made the covenant to pay money to provide, in return for the promise to share in the burden of building streets, a right of way for themselves to avoid being landlocked.
The court found that the parties intended the covenant to run with the land. The facts revealed that when the Plaintiff bought the land from the Sisters of Mercy, the covenant was put in writing, which evidences the intent to bind whomever bought the half-acre and not particularly the Defendant. The covenant also extends to the heirs and assigns of the Defendant. The Defendant has consistently maintained that the covenant ran with the land. At trial the attorney for the Plaintiff asserted that the covenant ran with the land.
When there is vertical privity between the parties who seek enforcement of a covenant and those against whom enforcement is sought, the requirement of privity will be satisfied. In other words, because the Plaintiff made the covenant with the Defendant, it did not prevent Plaintiff from seeking enforcement against the current landholder. Thus, along with the covenant being in writing, the elements of a covenant running with the land have been met.
The liability of the Defendant terminated when the land was sold to Camelier. Any further liability under the covenant would attach to Camelier and not the Defendant.

Discussion. As the court noted, agreements to pay money for improvements have been held to be covenants running with the land. The Defendant, it may be argued, should not have entered into a covenant, which was such a burden to the estate, but it would be equally true that Camelier should not have simply relied on an indemnity agreement to avoid liability under the covenant.