1998 -NMCA- 7, Cypress Gardens, Ltd. v. Platt

• Decision Date: 03 December 1997
• Docket Number: No. 18024,18024
• Citation: 124 N.M. 472,1998 NMCA 7,952 P.2d 467
• Parties: , 1998 -NMCA- 7 CYPRESS GARDENS, LTD., Plaintiff-Appellant, v. Terry L. PLATT and Caterina M. Platt, Defendants-Appellees.
• Court: Court of Appeals of New Mexico

Page 467

952 P.2d 467

124 N.M. 472, 1998 -NMCA- 7

CYPRESS GARDENS, LTD., Plaintiff-Appellant, v. Terry L. PLATT and Caterina M. Platt, Defendants-Appellees.

No. 18024.

Court of Appeals of New Mexico.

Dec. 3, 1997.

[124 N.M. 474] Dennis M. McCary, Nancy Augustus, Albuquerque, for Plaintiff-Appellant.

Anthony J. Williams, Los Lunas, for Defendants-Appellees.

OPINION

BOSSON, Judge.

¶1 In this case of first impression, we hold that an enforceable restrictive covenant, which includes a reserved right to approve or reject mobile homes, need not contain specific standards for granting or denying approval. The right to approve or deny shall be governed instead by a general standard of reasonableness. We reverse and remand.

BACKGROUND

¶2 On April 19, 1988, Plaintiff Cypress Gardens, Ltd., the developer, filed a Declaration of Covenants with the Valencia County Clerk. This Declaration set out use restrictions and building and planning restrictions which included the following: restrictions limiting the land to residential, single-family dwellings with minimum size restrictions; requirements for fences, signs, and animals; and restrictions on the placement of mobile homes on individual lots, including a requirement that all mobile homes meet with the prior approval of the developer. This last requirement is the subject of this appeal. Although duly recorded, this Declaration was never acknowledged, as required by NMSA 1978, Section 14-8-4 (1981).

¶3 On March 10, 1993, Plaintiff sold lot 224 to the Clines on a real estate contract. In early June 1995, the Platts (Defendants) bought the lot from the Clines, acquiring their interest under the real estate contract. Plaintiff alleges that Defendants knew of the contents of the Declaration of Covenants, and thus knew of the requirement for obtaining the developer's prior approval of mobile homes, and also knew that the developer intended this covenant to run with the land. At the time Defendants purchased lot 224, there were 92 houses and 20 mobile homes already in the subdivision, and 222 lots remained vacant. Plaintiff also alleges that no used mobile homes had been approved in the subdivision since March 1989.

¶4 In July 1995, Defendants moved a used mobile home onto lot 224 without seeking Plaintiff's approval. When Plaintiff learned of this, Defendants were immediately told that they had violated the terms of the Declaration and that they should not build a stem wall around the mobile home. Defendants ignored Plaintiff's caution; they did not remove the mobile home from lot 224 and built a stem wall around the home.

¶5 On July 26, 1995, Plaintiff filed a complaint to enforce the restrictive covenants and have the mobile home removed from the lot. On August 13, 1996, Defendants filed a motion to dismiss the complaint for failure to state a claim on the grounds that unacknowledged covenants, even though recorded, are unenforceable. On September 17, 1996, Plaintiff filed an amended complaint alleging that the covenants were enforceable as equitable servitudes because Defendants had actual notice of the Declaration and the restrictions set forth therein which intended a general plan or scheme of development. The district court dismissed the amended complaint. The court found the covenants fatally defective because they granted unlimited discretion to the developer to approve or reject mobile homes, thus defeating any idea of a common scheme or plan. Plaintiff raises two points on appeal: (1) whether the covenants qualify as enforceable equitable servitudes, and (2) whether the covenants must articulate specific standards as the grounds for the developer's approval or disapproval of a particular mobile home.

DISCUSSION

¶6 We first address the issue of whether the amended complaint alleges sufficient facts to establish an equitable servitude. We then examine the legal issue of whether the covenants must contain specific standards. A motion to dismiss under Rule 1-012(B)(6), NMRA 1997 is properly granted only when it appears that the plaintiff cannot recover or be entitled to relief under any state of facts provable under the claim. Shea v. H.S. Pickrell Co., 106 N.M. 683, 685, 748 P.2d 980, 982 (Ct.App.1987). The purpose of a motion to dismiss is to test the law of the claim, not the facts that support it. Id.; Gonzales v. United States Fidelity & Guar. Co., 99 N.M. 432, 433, 659 P.2d 318, 319 (Ct.App.1983). Only when there is a total failure to allege matter essential to the relief sought should a motion to dismiss for failure to state a claim be granted. Las Luminarias of the N.M. Council of the Blind v. Isengard, 92 N.M. 297, 300, 587 P.2d 444, 447 (Ct.App.1978).

EQUITABLE SERVITUDES

¶7 Defendant is correct that the Declaration of Covenants was legally ineffective to establish restrictive covenants that run with the land because the Declaration was not acknowledged before a notary public. See Pollock v. Ramirez, 117 N.M. 187, 189-90, 870 P.2d 149, 151-52 (Ct.App.1994). Our Supreme Court has held, however, that under certain circumstances such covenants may be enforced as equitable servitudes if they meet the following requirements: (1) the covenant must touch and concern the land; (2) the original covenanting parties must intend the covenant to run with the land; and (3) the successor to the burden must have notice of the covenant. Lex Pro Corp. v. Snyder Enters., Inc., 100 N.M. 389, 391, 671 P.2d 637, 639 (1983).

Touch and Concern

¶8 The requirement that running covenants touch and concern the land is the only one which focuses on an objective analysis of the contents of the covenant itself rather than the intentions of and relationships between the parties. 9 Richard R. Powell & Patrick J. Rohan, Powell on Real Property § 60.04[a], at 60-46 (1997). The concept of "touch and concern" has been described as one "that can be explored and felt better than it can be defined." William B. Stoebuck, Running Covenants: An Analytical Primer, 52 Wash. L.Rev. 861, 869 (1977). A covenant that meets this requirement can be one that calls for either doing physical things to the land such as building a wall, or refraining from doing physical things to the land such as a promise "not to plow the soil, not to build a structure, or not to build multifamily dwellings." Id. at 870. In the current case, the requirement that mobile homes be approved by the developer before they are placed on lots fits comfortably within this category.

¶9 Additionally, in order "[t]o run, equitable restrictions must touch and concern benefited and burdened land." Id. at 892. The Supreme Court of New Mexico has held that restrictions on the use of land are "mutual, reciprocal, equitable easements in the nature of servitudes in favor of owners of other lots within the restricted area, and constitute property rights which run with the land." Montoya v. Barreras, 81 N.M. 749, 751, 473 P.2d 363, 365 (1970). In the current case, Plaintiff has alleged that the Declaration of Covenants sets forth restrictions on land use imposed upon each lot in favor of each and every other lot within the subdivision. Restrictions on mobile homes both benefit and burden other lots within the subdivision. Thus, the Declaration appears to satisfy the first requirement of enforceable equitable servitudes.

Intent to Bind Successors

¶10 The Declaration of Covenants states that the covenants shall run with the land. Landowners who, upon the sale of the land, seek to protect property they retain by means of a restrictive covenant intend the restriction to be permanent. See Lex Pro Corp., 100 N.M. at 392, 671 P.2d at 640. Thus, the Declaration provides evidence of the covenanting parties' intent, even though it is unenforceable in law because it does not satisfy the statutory acknowledgment requirement of Section 14-8-4.

¶11 Additionally, Plaintiff alleges that the restrictions contained in the Declaration set forth a general plan or scheme of development for the Cypress Gardens Subdivision and claims that the Declaration was distributed to purchasers of lots within the subdivision. When the owner of a tract subdivides and sells under a general plan of restriction, it may be shown from the terms of the instrument, as well as from the situation and surrounding circumstances, that the grantor intended to impose reciprocal restrictions. See Sharts v. Walters, 107 N.M. 414, 416, 759 P.2d 201, 203 (Ct.App.1988). " '[E]ffect is to be given to the intention of the parties as shown by the language of the whole instrument, considered with the circumstances surrounding the transaction.' " Montoya, 81 N.M. at 751, 473 P.2d at 365 (quoting Hoover v. Waggoman, 52 N.M. 371, 376, 199 P.2d 991, 994 (1948)).

¶12 Relying on Suttle v. Bailey, 68 N.M. 283, 287, 361 P.2d 325, 327 (1961), Defendants argue that the existence of previously approved mobile homes in the Cypress Gardens Subdivision negates the developer's intent to have the equitable servitudes run with the land. In Suttle, our Supreme Court held that a grantor's reservation of a general power to dispense with restrictive covenants destroyed the mutuality or reciprocity necessary to create a covenant that runs with the land. Id. The Court stressed that, as a result, no "grantee had any assurance, other than the personal integrity of the original grantor, that the restrictions on any adjacent lot or lots in the subdivision might not be altered or annulled at any time without his consent." Id. This same point was emphasized in Montoya, in which the Court held: "To permit individual lots within an area to be relieved of the burden of such covenants, in the absence of a clear expression in the instrument so providing, would destroy the right to rely on restrictive covenants which has traditionally been upheld by our law of real property." 81 N.M. at 751, 473 P.2d at 365. Defendants assert that to allow mobile homes in some cases and not in others would destroy the reciprocity in...