Peabody Heights Co. v. Willson

Robinson, C. J., delivered the opinion of the Court. William Holmes being the owner of a tract of land adjoining Baltimore City, containing thirty-six acres, leased the same to the Peabody Heights Company for ninety-nine years, renewable forever, upon the payment of a yearly rent of nine thousand dollars, with the right of redemption at any time within ten years, on the payment of one hundred and fifty thousand dollars. After the execution of the lease, which is dated 14 October, 1870, but before its delivery an agreement was, on the 19th October of the same year, entered into between Mr. Holmes and the Peabody Heights Company, by which, after reciting that there were matters of detail connected with the sale and purchase of the property which could not be conveniently set forth in the lease, the parties covenanted with each other that an agreement dated 20 September, 1870, with a memorandum attached thereto dated the 13th of the same month, should be binding on them and their assigns, and “ that .the covenants, requirements, restrictions and reservations therein should be as fully complied with and carried out as if they had been embodied in the lease.” The memorandum of September 13th attached to the agreement purports to be and is a report to Holmes, the lessor, by his agent, Tinges, of the basis of an agreement for the sale of the property to the parties therein named, and who afterwards were to form a joint stock company. By the terms proposed, the purchase money .was not to exceed one hundred and seventy-five thousand dollars, of which sum twenty-five thousand dollars was to be paid within a stipulated time, and the balance, one hundred and fifty thousand dollars, was to be secured by a ground rent payable and redeemable in the manner heretofore set forth. Holmes reserved for himself and his heirs and assigns, out of the tract of land, four hundred feet on the west side of St. — 197 — Paul street, and agreed to build thereon a “ good dwelling house as soon as practicable, setting it back twenty feet from the building line of said street.” The purchasers were to form a joint stock company, with a capital of $500,000, of which Holmes was to have one-fourth interest, and to be one of its directors, so long as he retained his said interest. The purchasers were to open and develop the property as fast as practicable, but were not to call on the lessor for his one-fourth part of the expenses, but were to charge the same to his account against the unpaid portion on ground rent. The memorandum then set forth the plan of the company, embracing its name, its object, capital stock, &c., and the following proposed “ by-laws : ” No. 1. No land to be sold or leased without a pledge to build speedily; design of buildings to be approved by the directors. 2. Buildings to be 20 feet back of building line, and front to be ornamented with shrubbery and flowers. 3. No nuisance, factories, lager beer saloons, &c.,to be permitted, clause in deed to this effect. 4. “&c., to regulate other proceedings.” In accordance with the agreement and memorandum, which forms a part of it, the Peabody Heights Company was organized, and Holmes, the lessor, became the owner of one-fourth of its capital stock; was elected one of its directors, continuing as such until his death in 1881. During his lifetime, and since his death, the company has made sundry conveyances to third parties of parts of said tract of land, in some of which there are no restrictive covenants at all, and in others, the grantees covenanted to erect no building of less than a certain number of front feet, and to build twenty feet back of the building line of the street, and not to erect any lager beer saloons, factories, See. In two instances, one to Mrs. Polk and the other to Charles F. Pitt, the conveyances are made subject to the rules and requirements of the company in reference to the character — 198 — of the buildings to be erected as provided by the by-laws of the company. Since Mr. Holmes’ death, the square containing 400 feet on St. Paul street, reserved by him, and on which he built a dwelling house, has been sold and conveyed to “the Kelso Home” for Orphans of the Methodist Episcopal Church, without any restrictions or conditions, and that corporation, by deed 25th April, 1889, released all the land originally leased to the Peabody Heights Company, from the restrictive covenants and by-laws contained in the memorandum of the 13th September. And on April 27th, 1893, John V. L. Findlay, trustee of the estate of William Holmes, the lessor, conveyed to the company the reversion to all the property leased to it by the lessor, thereby vesting the fee in the company. In this state of the title, the company sold to the appellee a lot on the west side of St. Paul street, and he is willing to accept a deed with the restrictive covenants therein contained, except such covenants as require him to “buildspeedily, the designs to be subject to the approval of the Directors',’ and the other “to regulate other proceedings.” These covenants or agreements, he contends, being made part of the lease finally executed and delivered, are binding on all purchasers with notice, and as such could be enforced by any of the grantees against the defendant or his assigns. This is a bill filed by the company to enforce the specific performance of the contract of purchase by the defendant, and the question is whether the restrictive covenants to which we have referred impose a servitude or easement in the nature of an incorporeal hereditament on the property, which may affect the defendant’s title ? or in other words, whether the company can convey a title to the land sold to the defendant free and clear of the restrictions imposed as to the mode of improvement and use of the property ? When these restrictive covenants were before us, in Newbold v. Peabody Heights Company, 70 Md. 493, we said, that although the covenants or agreements were not such, strictly — 199 — speaking, “ to run with the land,” yet they were of such a character as to create a right and equity in favor of the lessor and those claiming under him, which a Court of Equity would enforce against the company and its grantees with notice, and for the reason that one who takes an estate with full knowledge of a covenant or agreement concerning it, cannot equitably refuse to perform it. And we further said, that'these restrictive covenants were in all respects legal and such as the owner of the land had a right to impose, and this being so, they were enforceable not only by the owner, but by those holding under him, against the company and its lessees and grantees with notice. The reversionaiy interest of Holmes in the thirty-six acres had not been conveyed to the company when Newbold’s case was decided; and the contention now is, that these restrictive covenants were intended solely for the benefit of Holmes and his assigns and not for the benefit of the company’s grantees, and as the company has now obtained a conveyance of Holmes’ reversionary interest and as “ the Kelso Home,” the present owner of the 400 foot lot, re served by Holmes, has released all the property from the restrictions objected to by the defendant, the company is now in a position to convey the lot sold to him free and discharged of the burden of such restrictions. The question whether the restrictions were merely matters of agreement between Holmes, the lessor, and the company, imposed for his own benefit and protection, or meant by him and understood by the lessee, for the common advantage of its grantees, is a question of intention. If they were intended solely for the benefit of Holmes,The grantees of the company cannot, it is clear, claim to take the advantage of them. And on the other hand, if they were intended for the common advantage of all persons purchasing lots from the company, such purchasers and their assigns may enforce them inter sese for their own benefit. Nottingham, &c., Co. v. Butler, L. R. 15, Q. B. Div. 268. And in ascertaining the intention of the parties in this case, we must — 200 — bear in mind that we are not dealing with restrictions imposed upon a piece of land consisting of several building lots merely, but a tract containing thirty-six acres adjoining Baltimore City, with some of the principal streets running through it, and as such desirable and valuable for building purposes. And such was the object for which it was bought. Before the sale was consummated, the memorandum providing for the incorporation of the company, its-capital stock, by-laws and plan of the company, was submitted to Holmes for his approval. The purpose was to make the property in every way attractive and desirable for suburban and city homes, and the covenants and agreements were made in furtherance of this general plan or scheme. They required that all plans or designs for buildings should be submitted to the directors for their approval —that the buildings should be set back twenty feet from the building line with flowers and shrubbeiy in front, and that no buildings should be erected or used for carrying on trades that might be offensive and noxious. The object of these restrictions was to prevent the erection of buildings of any kind that might diminish the value of the property or injuriously affect it as a location for better class of dwelling houses. Now, if Holmes had sold his entire interest in the property except the four hundred feet reserved for building a home for himself, it might be argued with some force that he was not interested in these restrictions except so far as they concerned himself and his assigns, and were therefore made for his protection and. benefit. But it was made a condition of the sale and lease that he was to have a fourth interest in the residue of the entire tract, and was to be owner of one-fourth of the capital stock of the company. He was therefore equally if not more interested than his associates in whatever was for the benefit and advantage of the land leased to the company. It is clear, then, it appears to us, that looking to the memorandum and agreement, and language of the covenants, and the object and purposes for — 201 — which the property was leased, and the interest retained by the lessor in the property, that the covenants were intended not merely for the benefit of the lessor and his assigns, but for the common advantage of all persons who might become lessees or grantees of the? comppany. And such being the case, it may be considered as settled since the cases of Mann v. Stephens, 15 Simons, 370; Western v. McDermott, L. R. 2 Ch. 72, and Renals v. Cowlishaw, L. R. 9 Chan. Div. 126, that all persons coming in with notice are bound by the covenants. In Keates v. Lyon, L. R. 4 Ch. 218, the Court held that the sub-purchasers were not entitled to the benefit of the covenants, because it did not appear that they had knowledge of the covenants when they became purchasers. In his judgment the Lord Justice refers with approval to the case of Whatman v. Gibson, 9 Simons, 196, in which the Vice-Chancellor said: “I see no reason why such an agreement should not be binding in equity on the parties so coming in with notice. Each proprietor is manifestly interested in having all the neighboring houses used in such a way as to preserve the general uniformity and respectability of the row.” In Master v. Hansard, L. R. 4 Ch. Div. 718, it was held that -the restrictive covenant was made for the benefit of the lessors to enable them to make the most of the property retained by them, and for the further reason, says Bramwell, J., “ It appears monstrous to hold that this covenant, the existence of which was never communicated to the plaintiff’s predecessors in title when they took their lease, is to be construed as enuring for their benefit.” So these cases cannot be said to qualify in any manner the principle laid down in Mann v. Stephens, and in other cases to which we have referred, that a purchaser taking an estate, with notice of a covenant or agreement respecting it, is bound by the terms of the covenant, even though it does not in the strict sense of the term “ run with the land." We come then to the legal effect and operation of the restrictions imposed on the land leased by Holmes to the — 202 — appellant company. By-law No. i provides, in the first place, that no land shall be “ sold or leased without a pledge to build speedily.” In the memorandum of Sept. 13th, the parties proposing to purchase the thirty-six-acre tract agreed to develop and improve it as speedily as practicable. The erection of attractive and comfortable dwelling houses on the several lots leased or sold, would necessarily enhance the value of the entire property, and operate to some extent as an inducement for others to purchase. It was therefore to the interest of Holmes, the lessor, and the company, that the lots should be improved by buildings as speedily as possible. And it was for this purpose that the first clause of the by-law was adopted. It was intended for the benefit of Holmes and the company, and not for the benefit of other purchasers; and the company being now the owner of Holmes’s reversionary interest, it has the right to extend the time for building as it may deem best for its interests and the interests of purchasers. The second part of the by-law provides that the design of the building shall be approved by the directors. The object of this provision and the further provision, requiring buildings to be set back twenty feet from the building line of the street and fronts to be ornamented with shrubbery and flowers, was to secure the erection of a better class of buildings with attractive surroundings, and to prevent the erection of inferior buildings that might diminish the value of the property and affect its elegibility for building purposes. It was intended not only for the benefit of the lessor and the company, but for the common advantage and protection of all persons coming in or taking title under the company. And such being the case, we cannot agree with the argument, that if a building erected according to a design approved by the directors should be destroyed, the owner would have the right' to rebuild without regard to the original design or in any manner he might see proper. Such a construction would in a measure put it in the power of owners to render this restriction inoperative and of no effect, or — 203 — at least would give them the right to erect an inferior class of buildings. They would have the right no doubt to rebuild according to the original design, and this too, with or without the approval of the directors. And when we say, according to the original design, we do not mean that the purchaser is obliged to conform to it in every particular. As was suggested in the argument, it rarely happens that in the erection of a dwelling house, changes from the plan or design do not become necessary. And all that could be required of a purchaser under this restriction, is that he shall not make such changes as would substantially affect the general plan approved by the directors. After all, it must be borne in mind, that in administering relief in cases of this kind, Courts of Equity would be governed by equitable principles. And although one in conveying real estate may impose certain restrictions upon its use, provided they do not deprive the owner of the beneficial use of the property, yet at the same time, Courts will always favor a liberal interpretation of the language of such restrictions, in order to impose as few difficulties as possible in' the free use and disposal of the particular estate conveyed. And it may be said that if the words are doubtful, they will be resolved in favor of keeping the restriction within the narrowest limits. In other words, if there be doubt as to the intention of the parties, Courts will naturally lean in favor of the freedom of the property. And in addition to this we may add, that it is perfectly competent for the company in selling or leasing the property, to provide in the lease or conveyance or by agreement, for the erection of buildings according to a certain designated plan or design. Now, as to the by-law, “ to regulate other proceedings,” this we agree is too vague and indefinite to be the subject-matter of enforcement by a Court of Equity. What it means, whether to regulate the general disposition or management of the property, or to regulate its use before or after sale, it is not an easy matter to say. And if it relates — 204 — to the use, in what respect the directors are to regulate it, no one can tell. They could have no power, it is clear, to so regulate its use as to deprive the purchasers of the beneficial enjoyment of the property. (Decided June 20th, 1895.) So the only objection that the defendant can fairly make to the title offered by the company is the restriction which requires the design of the building to be erected by him to be submitted for the approval of the directors. This restriction, we have said, was intended for the common benefit and protection of all purchasers and as such may be enforced against anyone coming in under title from the company with notice of such restrictive covenants. The appellant being unable, therefore, to convey the lot to' the defendant free and discharged of this restrictive covenant, the bill for the specific performance of the contract of sale must be dismissed. Decree affirmed and bill dismissed. The appeal of Devries and Ramsay v. Cone was argued by William A. Fisher (with whom were Wm. Cabell Bruce and D. K. Este Fisher on the brief), for the appellants, and John F. Williams (with whom was Samuel C. Houlton on the brief), for the appellee. In this case the decree of the lower Court was, on June 20th, 1895, affirmed for the reasons assigned in the foregoing opinion in the case of the Peabody Heights Co. v. Willson. Subsequently a motion for a re-argument was made, and in disposing of the same, Boyd, J., delivered the opinion of the Court. At the April term, 1895, of this Court, an opinion was filed in the case of the Peabody Heights Co. of Baltimore City v. Willson, which was intended to dispose of the questions raised by the appeal in this case. A motion for re-argument having been made, permission was granted to the — 205 — parties to argue the questions presented by the motion on notes to be filed by the first day of the present (January) term. The object of the motion is to have a re-argument of the case, or, if that be refused, to obtain an expression of the opinion of this Court as to what effect the dissolution of the Peabody Heights Company would have on the provision referred to in the opinion, that the design of the buildings to be erected on the lots sold was to be approved by the directors of the company. It was said in the opinion that the object of this provision and others referred to, was “ to secure the erection of a better class of buildings, with attractive surroundings, and to prevent the erection of inferior buildings that might diminish the value of the property and affect its eligibility for building purposes. It was intended not only for the benefit of the lessor and the company, but for the common advantage and protection of all persons coming in or taking title under the company. And such being the case we cannot agree with the argument that if a building erected according to a design approved by the directors should be destroyed, the owner would have the right to rebuild without regard to the original design, and in any manner he might see proper. Such a construction would in a measure put it in the power of owners to render this restriction inoperative and of no effect, or, at least, would give them the right to erect an inferior class of buildings. They would have the right, no doubt, to rebuild according to the original design, and this,' too, with or without the approval of the directors. And when we say according to the original design we do not mean that the purchaser is obliged to conform to it in every particular. As was suggested in the argument, it rarely happens that in the erection of a dwelling house changes from the plan or design do not become necessary. And all that would be required of a person, under this restriction, is that he shall not make such changes as would substantially affect the general plan approved by the directors.” We think that language is capable of an interpretation — 206 — that renders our construction of this provision narrower than was intended. If a building which has been erected according to plans approved by the directors is destroyed, or for some other reason the owner desires to rebuild it, we do not think it is necessary to again submit plans to the directors for their approval, or to follow in all its details the original plan. The latter may in course of time be impossible, as the plans may be destroyed and the architect who furnished them be dead and his papers inaccessible or lost. Nor do we think this by-law can properly be so interpreted. It provides that “ no land to be sold or leased without a pledge to build speedily, design of buildings to be approved by the directors.” The buildings referred to evidently mean those for which pledges to “ build speedily ” are to be given and not those that may be built in years to come in place of those thus intended to be speedily built. Any other construction might result in requiring some, if not all of these lots, to eventually remain unimproved, as the time may and doubtless will come when this company will go out of existence and there will be no directors. There may be circumstances, owing to the growth of the city, change of business locations or other causes that may make the houses constructed on these lots according to the designs approved by the directors altogether unsuitable for the new condition of affairs, and the contracting parties never could have contemplated when making this provision that it should be forever afterwards impossible to erect any other house on one of these lots unless it be the counterpart of the one first built. The term “design” was not used in its strictly technical sense, such as architects might understand it, but it only refers to the general plan, and not to the details of construction of the building. The object of the provision, as was said in the former opinion, was to secure the erection of a good class of buildings and prevent inferior ones from being built, and in case the original one be destroyed, or the owner desire to replace it, all that could fairly be required of him would be that the new one be equal or superior to the former — 207 — in appearance, size, materials used, &c. ; provided it be not contrary to some express requirement or prohibition of the directors in the approval of the original plan. The owner of the lot must erect the original buildings according to the plans approved by the directors, and must conform to them in size, style, &c., as far as required by his agreement, but, unless he agrees to the contrary, this bylaw will not require him to follow the original plans beyond what we have indicated. It would not be good faith on his part to utterly ignore the plans originally adopted and agreed upon, and erect a new building inferior to the original one, calculated to injure and thereby depreciate the value of the adjacent property. A Court of Equity would not permit it, and for that reason we are of the opinion that he should be required to conform to the original plan so far as would be necessary to avoid such results, but only to that extent. Having already said that it is not necessary to again obtain the approval of the directors for a building to be erected in place of the old one, the question as to what would be the effect of the company’s going out of existence, and therefore having no directors, does not seem to be very material to this case. But the company having agreed to require of purchasers of lots that the designs of the buildings to be erected on them should be approved by the directors, that should be done in all sales made by it, and in the event of a dissolution of the company and the appointment of a receiver, the Court should either require such approval by the directors last in office, or see that some provision be made to protect those who had purchased from the company, by directing the receiver to exact of purchasers that they will not erect buildings inferior to those previously authorized by the directors and already erected in the same neighborhood, or adopting some of the plans approved of by them, or in such other manner as the Court may think will best cause a compliance with the spirit of the agreement entered into between the company and its vendor, and will protect those holding title through the company. — 208 — Although what we have said will probably remove many of the objections urged, yet as Mr. Cone was not aware of these restrictions when he agreed to purchase, we cannot compel him to accept the property, and notwithstanding the modifications of the former opinion by what we have said, the results reached in this and in. the Willson case cannot be changed. The decrees must therefore stand affirmed in both cases. Decrees affirmed. (Decided March 26th, 1896.)