April 2001
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April 2001 |
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A PUBLICATION OR THE TITLE COMPANY OF NORTH CAROLINA |
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RESTRICTIVE
COVENANTS -
RE-SUBDIVISION OF LOTS, THE
"ONE HOUSE ON ONE LOT" RESTRICTION AND DONALDSON V. SHEARIN The case of Donaldson
v. Shearin
N.C. App., S.E.
2d
(N.C. Court of Appeals No. COA00-276 filed February 6, 2001)
should be noted. The
developer recorded a plat subdividing land into Lots 1 through 7.
Subsequent to that, the developer recorded restrictive covenants which
stated that the restrictive covenants shall apply to "Lots 1 through
7 inclusive as shown on [the recorded plat]." The restrictive
covenants provided as follows: 1. No lot shall be used except for
residential purposes. No building shall be erected, altered, placed or
permitted to remain on any lot, other than one detached single family
dwelling not to exceed two and one-half stories in height and a private
garage and/or workshop for personal use, and other out buildings
incidental to residential use of the lot... 8. On
Lots 1, 2, 3 and 4 there shall only be permitted double wide mobile homes
of good quality with brick underpinning or conventionally constructed homes
containing at least 1,200 square feet of heated area. The developer conveyed of record Lot 3 to the
plaintiff subject to the restrictive covenants. Next, the developer and
the defendants entered into a contract of record to convey Lot 4 to the
defendants subject to the restrictive covenants. A plat was recorded that
subdivided original Lot 4 into Lot 4(1) and Lot 4(2). Next, the defendants
recorded their deed for original Lot 4 from the developer. The defendants placed a mobile home on each of Lots
4(1) and 4(2). The plaintiff stated that this constituted placing two
dwellings on original Lot 4 in violation of the covenants. The defendants
admitted that their land was subject to the restrictive covenants but that
those restrictive covenants did not prohibit re-subdivision of lots and,
therefore, applied to the lots after their re-subdivision rather than as
originally platted. The Court of Appeals reversed the lower court and
ruled for the plaintiff. The Court of Appeals stated that in this case, the
covenants limited construction on each "lot" to "one
detached single family dwelling" and that the restrictions described
the lots as Lots 1 through 7 on the original recorded plat. This evidenced the intent of the
developer to restrict the number of structures on each of the original
seven lots. The court noted that the defendants' position would allow the
defendants to frustrate the intent of the covenants by re-subdividing the
original lots into as many lots as zoning ordinances would allow. The court noted the defendants' reliance upon Robinson
v. Pacemaker Investment Co., 19 N.C. App. 590,200 S.E. 2d 59 (1973),
cert. den., 284 N.C. 617,201 S.E. 2d 689 (1974) and Callaham
v. Arenson, 239 N.C. 619, 80 S.E. 2d 619 (1954), but disagreed with
the defendants' interpretation of those cases. In those cases, the
covenants contained restrictions on the minimum area of the lots in the
originally platted subdivision. Since those minimum areas in the covenants
were less than the areas of the lots as originally platted, Callaham
and Robinson held that the intent of the covenants must have been for
them to apply to the lots as re-subdivided.
Otherwise, the minimum area requirements would be meaningless. By
contrast, the covenants in Donaldson
did not contain any restrictions on the minimum area of the lots. Judge Tyson dissented, citing the rules of strict
construction against limitation on use and that restrictions cannot be
enlarged by implication or extended by construction, with the intent of
the restricting party governing. The dissent cited the restriction that
"[n]o building shall be erected, altered, placed or permitted to
remain on any lot, other than one detached single family dwelling..."
Since the covenants did not prohibit re-subdivision or address re-subdivision in
any respect, the dissent stated that the plain meaning of the covenants
did not prohibit the defendants from placing "one detached single
family dwelling" on "any lot." The Title Company of North Carolina has considered
this issue before. Callaham and
Robinson were decided correctly because those cases involved covenants
stating that a lot had to contain a minimum number of square feet, which
requirement was less than the size of the originally subdivided lots in
question. Those cases stand for the proposition that, by virtue of the
covenants' express provisions, re-subdivision in accord with minimum lot
size requirements was permitted and the restrictions would then apply to
those re-subdivided lots. In Donaldson,
since there is no minimum lot size restriction, and re-subdivision is
not prohibited, the original lots can be re-subdivided but not for the
purpose of building more than one dwelling on what were the originally
platted lots. That might make an implied right to re-subdivide for the
most part meaningless but the defendants' theory would allow relatively
easy circumvention of a covenant that limited each lot to one dwelling.
The real issue is, what did the developer mean when he said "on any
lot"? It is reasonable to say that he meant "on any lot on the
plat to which these covenants refer above," since the covenants
identified the lots to which the covenants applied as "Lots 1 through
7 inclusive as shown on [the original recorded plat]." While it is
true that restrictive covenants should be strictly construed against
property being restricted, it is also true that the intent of the
restrictions is important and the covenants should not be construed in a
way that makes a provision nearly meaningless when it was easy for the
developer to draft the covenants in accord with Callaham
and Robinson or even clearer than the covenants in those cases. We
believe that Donaldson was decided correctly. This is consistent with our past
analysis of covenants. If Donaldson is
correct, consider two other situations. First, if A buys Lot 1 and
one-half of Lot 2 adjacent to Lot 1 after Lot 2 is re-subdivided, what can
A do with his land? If A puts a dwelling on Lot 1 and keeps one-half of
Lot 2 to give A a bigger area of land for A's house and yard, the Donaldson restrictions would permit this. The reason is that implied
re-subdivision is permitted and the restrictions are not violated since
there is one dwelling on Lot 1 and no dwelling on one-half of Lot 2. However, if A builds a house over the dividing
property line between Lot 1 and one-half of Lot 2 there is some argument
to be made that A has not placed "one detached single family
dwelling" on "any lot" of "Lots 1 through 7 inclusive
as shown on [the recorded plat]" but instead, A has placed only part of a dwelling on original Lot 1 - in violation of the
covenants. The actual path a court would take is uncertain. Scott
v. Board of Missions, 252 N.C. 443, 114 S.E. 2d 74 (1960), involved
restrictions stating that "[t]here shall not be constructed on said
lot more than one (1) dwelling
house," and "[N]o building shall be constructed nearer than
fifteen (15') feet from the side lines of said lot, nor nearer than twenty-five (25) feet
from the line of the river shore." (Emphasis added.) Defendants
bought three lots and wanted to construct a church covering portions of
the three lots. The court held: It is clear that the owners of lots in the
subdivision under consideration may not build more than one residence On
each lot owned, but there is no restriction limiting the use of the
property for residential purposes only, or prohibiting the building of a
residence or other building on more than one lot. The court also stated: Furthermore, we hold that the restriction, "No
building shall be constructed nearer than fifteen (15') feet from the
sidelines of said lot***" is applicable only to the outside lines of
the lots involved. The first quote from Scott, as applied to A's second situation above, seems to be dicta. If it were not dicta, it would be somewhat supportive of A's position. However, the restriction in Scott stated that one may not build on a lot "more than one (1) dwelling house..." (Emphasis added) By contrast, in Donaldson, the restriction prohibited "other than one detached single family dwelling" on a 10. (Emphasis added.) So it could be argued that Scott merely prohibited "more than one" but did not by implication prohibit "less than one" whereas Donaldson is phrased in terms of "just one" - no more and no less. It will be interesting to see what the courts of our state do in such a situation. Also, where restrictions do not preclude
re-subdivision and a dwelling is placed on each of the new
lots, our courts have held that the new lots must meet the restrictive
covenants' requirements as to lot size, frontage and setbacks. Callaham,
Robinson and Scott, supra.
And, if the lots are originally platted from east (front) to west (rear)
and are re-subdivided, consistent with the covenants, to run from north
(front) to south (rear), the original front 50 foot setback is violated on
the west side of the new lot by building the west side of the house 31
feet from what was the street on which the original lot fronted. See lngle
v. Stubbins, 240 N.C, 382, 82 S.E. 2d 388 (1954). EASEMENTS
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EASEMENT OR FEE SIMPLE -
A RAILROAD CASE We note the case of Fisher v. Carolina Southern Railroad, N.C. App. , 539 S.E. 2d 337 (2000). Whether an instrument conveys an easement or a fee simple is sometimes confusing but ultimately is a question of law. Fisher, citing International Paper Co. v. Huffman, 81 N.C. App. 606, 345 S.E. 2d 231, disc. rev. den., 318 N.C. 506, 349 S.E. 2d 860 (1986). In Fisher, language that the grantors "have given, granted and surrendered and by these present do give, grant and surrender to the said [Railroad], the Right and privilege...to enter upon each and every tract... belonging to...us" and which then specified railroad uses and contained "to have and to hold" language which referred to the lands "with the rights and privileges aforesaid unto the said [Railroad] and their assigns for the uses and purposes aforesaid forever" was held to create an easement and not a fee simple title. The title examiner should review the document
carefully. In certain cases, particularly involving railroads, a document
might be entitled "Right of way" but will actually be a grant of
certain land in fee simple. (G.S. 39-1 creates a presumption of a fee
simple.) The Title Company can help analyze the instrument and give
insurance consistent with its interpretation. JUDGMENTS
-SUMMARY JUDGMENTS, INTERLOCUTORY IN NATURE In one case, our approved attorney customer was
confronted with a partial summary judgment, on the issue of liability,
against a defendant owner-seller. The document stated G.S. 1A-1, Rule 56(c), allows rendition of a summary
judgment, interlocutory in nature, on the issue of liability alone
although there is a genuine issue as to the amount of damages. Rule 56(d) allows further proceedings on the issue of
damages. Once an amount of
damages is established, a subsequent order will be entered. Since G.S. 1-233 and G.S. 1-234 refer to judgments affecting
the right to property or requiring the payment of money, and since a
judgment on the issue of liability is interlocutory and not final, it
would seem that only the order or judgment setting forth the amount of
damages can be a lien under G.S. 1-233 and G.S. 1-234.
See G.S. 1A-1, Rule 56(c). G.S.
1A-1, Rule 54(a) refers to interlocutory and final judgments.
In such a case, there would seem to be no relation back to the
entry of the interlocutory order. Other
statutes seem to support this point.
See G.S. 1-302; G.S. 1-306; G.S. 1-339.46 and G.S. 1-339.70. These refer to money judgments. AD VALOREM TAXES - STATEMENT OF AMOUNT OF TAXES DUE - WHAT YOU GET MIGHT NOT BE WHAT YOU SEE (OR THINK YOU ARE SEEING Did you know…that a G.S. 105-361 statement of
amount of taxes due does not protect against subsequent "discovered
property" according to certain tax officials? G.S.
105-361(a) allows an owner, occupant, lienor, contract purchaser or the
authorized agent or attorney of any of those parties to request a
certificate from the tax collector stating the amount of any taxes and
special assessments for the current year and for prior years "in his
hands for collection (together with any penalties, interest, and costs
accrued thereon) including the amount due under G.S. 105-277.4(c)" if
the property should lose eligibility under G.S. 105-277.2, et seq.,
"that are a lien on a parcel of real property…" G.S.
105-312 pertains to "discovered property."
The tax collector must see that property not listed during the
regular listing period is listed and assessed.
G.S. 105-312(b). The
discovered property shall be deemed discovered on the date the abstract is
made or corrected under G.S. 105-312(e).
G.S. 105-312(d). Regardless
of how filed, the listing shall have the same force and effect as if it
had been submitted during the regular listing period.
G.S. 105-312(e). When
property is discovered, it shall be taxed for the year in which it is
discovered and for any of the preceding five years during which it escaped
taxation. G.S. 105-312(g).
Discovery can be based upon understatement of value, quality, or
other measurement and can include omission from the tax list.
G.S. 105-312(g). The
total figure shall be deemed to be a tax for the fiscal year beginning on
July 1 of the calendar year in which the property is discovered.
G.S. 105-312(i). G.S. 105-312(j) provides that tax receipts prepared penalties
imposed upon discovered property shall be delivered to the tax collector,
and he shall be charged with their collection.
Such receipts shall have the same force and effect as if they had
been delivered to the collector at the time of delivery of the regular tax
receipts for the current year, and the taxes charged in the receipts shall
be a lien
upon the property in accordance with the provisions of G.S. 105-355.
Therefore, the taxing authorities argue that until the tax
collector is charged with a collection under G.S. 105-312(j), the tax for
the year in which taxes should have been charged are not "in his
hands for collection" under G.S. 105-361(a) cited above.
Therefore, the title examiner should be aware that if the property
is improved in 2000 but the listing in 2001 for 2001 taxes incorrectly
shows a vacant lot, discovery pursuant to G.S. 105-312 is possible and a
certificate under G.S. 105-361 may not be binding as to a discovery after
the certificate is issued. While
certificates under G.S. 105-361 are not used most of the time in
residential transactions, the real key to avoiding problems under G.S.
105-312 is to be on guard for property that appears to be undervalued on
whatever information the title examiner is obtaining from the tax office. REAL
PROPERTY SECTION OF THE NORTH CAROLINA BAR ASSOCIATION One of the best investments that a real property attorney can make is to join the Real Property Section ("RPS") of the North Carolina Bar Association. Membership in the section costs $35 per year. The RPS produces a newsletter several times a year. It contains articles pertaining to matters of interest, case law discussions and status of bills impacting upon real property. The RPS has a Council comprised of member attorneys to consider issues affecting the real property practice and related parties and groups such as sellers, buyers, lenders, paralegals and title insurers. The RPS also sponsors CLE seminars. The next one is the 2001 Real Property Section Annual Meeting, April 20-21, 2001 in Williamsburg, VA, with subsequent video replays in other towns. "Predatory lending," the internet, UCC Article 9 revisions, commercial leasing, recent decisions, reverse exchanges and ethics will be covered. There are obviously many benefits to membership in the RPS. Membership inquiries can be directed to: Jane Weathers, NCBA, 1-800-662-7407; fax: 919-657-1585. The website for the RPS is www.ncbar.org. We recommend membership in and support of the RPS as a way to stay informed and participate in an excellent group compromised of fellow practitioners, with the RPS Council being comprised of hardworking professionals. |