Alamogordo Improvement Co. v. Prendergast.

• Decision Date: 25 May 1939
• Docket Number: No. 4426.,4426.
• Citation: 43 N.M. 245,91 P.2d 428
• Parties: ALAMOGORDO IMPROVEMENT CO.v.PRENDERGAST.
• Court: New Mexico Supreme Court

43 N.M. 245

91 P.2d 428

ALAMOGORDO IMPROVEMENT CO.

v.PRENDERGAST.

No. 4426.

Supreme Court of New Mexico.

May 25, 1939.

Appeal from District Court, Otero County; Numa C. Frenger, Judge.

Suit by Alamogordo Improvement Company, a corporation, against C. A. Prendergast for an injunction restraining the defendant from selling intoxicating liquors on a certain lot. From a judgment for the defendant, the plaintiff appeals.

Reversed with directions.

In enacting statute providing that title passing by tax deed was a perfect and complete title in fee simple free and clear of all liens and incumbrances, Legislature would be presumed not to have intended to destroy property values and thus reduce its tax income. Laws 1925, c. 102, § 27.

Shipley & Shipley, of Alamogordo, for appellant.

W. C. Whatley, of Las Cruces, and C. V. Clayton, of Tularosa, for appellee.

MABRY, Justice.

This is an appeal from a judgment in favor of defendant below, C. A. Prendergast, and involves the question of the effect of forfeiture to the state and a sale for taxes of a certain lot in the original townsite of Alamogordo upon a reciprocal negative easement. The easement claimed by the townsite company arises by virtue of certain covenants in the deed from said townsite company conveying the lot in question, and is found as well, in deeds to all other lots in that part of the townsite, all of which deeds contained a uniform clause and provision against the sale of intoxicating liquors in the restricted area.

[1] That is to say, the question here presented is whether under the circumstances of the case as hereinafter more fully set out, such restrictive clause against the sale of liquor survives and may be enforced against a purchaser from the state after a forfeiture and sale for delinquent taxes, in view of the fact that under our statute a tax deed from the state conveys the property not by a “derivative” title, but by “a new and paramount title in fee simple absolute, created by an independent grant from the sovereign, striking down all previous titles and interest in the property.” Alamogordo Improvement Co. v. Hennessee, 40 N.M. 162, 56 P.2d 1127, 1129.

For convenience we refer to the parties as they were designated in the trial court, the townsite company as plaintiff, and Prendergast as defendant.

It was upon defendant's demurrer to plaintiff's first amended complaint that the issue was decided. The demurrer was sustained and plaintiff appeals.

The complaint to which the demurrer was directed in substance contained the following allegations: Plaintiff townsite company had organized for the purpose and was engaged since 1898 in the business of promoting and developing the townsite upon which now stands the town of Alamogordo, plaintiff being at the time owner in fee simple of all the lands platted and thereafter sold, including the lot in question; lots were platted and sold for both business and residential purposes; that the plaintiff, acting through its board of trustees, in the establishment of the town of Alamogordo, deemed it advantageous to the development of the town and to the best interests of its inhabitants, to restrict the manufacture, sale or other disposition of intoxicating liquors in said town to a certain area described as Block 50 thereof.

That, in furtherance of this decision, they adopted a general scheme or plan in the sale of its lots and plats of land, calculated to limit the manufacture, sale and other disposition of intoxicating liquors to said one block; that to this end there was inserted by plaintiff in each and every contract for sale and deed to land disposed of by it within said platted area, a covenant whereby the purchaser, as a part of the consideration, agreed for himself, his heirs and successors that intoxicating liquors would never be sold or otherwise disposed of as beverage in any place of public resort in or upon said premises; that this general scheme and plan of the townsite promoters was for the purpose of making the proposed town a desirable residence town, free from the unrestricted sale of intoxicating liquors. There is the further allegation that such scheme and plan was intended to and did in fact, enhance the value of the lots so sold, as well as those retained by the plaintiff.

It is then alleged that in the year 1905 plaintiff sold and conveyed lot 12 of block 12 of said town, which was one of the lots within the restricted area, conveying title by warranty deed containing the usual covenant and restriction against the sale of intoxicating liquors on said premises, and that this deed was duly and regularly recorded, and gave notice to all. That thereafter there were other sales and transfers but that all deeds carried the liquor restriction and all were in due course placed of record.

That defendant Prendergast purchased the lot in question at tax sale, securing first a certificate and then after expiration of redemption period, a tax deed was executed by the county treasurer as required by law; that defendant since then has been and now is the owner of the lot, and that he acquired the same with full knowledge of the general plan and scheme for restricting the sale and disposition of intoxicating liquors in said town and on the lot in question; that defendant has erected a building upon the lot for the purpose of selling, and now threatens to sell upon the lot, as a place of public resort, intoxicating liquors for beverage purposes, and that unless he be by the court restrained, he will do so. Plaintiff then prays for the ordinary equitable relief of injunction, after alleging such conduct would result in continuing damage, and would violate the property rights of plaintiff and others likewise situated in said area.

The deed likewise contained a clause and covenant providing that the title should revert to the original vendors of the property conveyed, in the event the liquor clause be violated. We had this phase of the covenant under consideration in the Hennessee case, supra. It is, however, not involved here.

It is clear from the record and briefs of counsel that there is here presented for review the one question of law, which is, adopting the language from appellant's brief in chief: “Where an area has been platted under a general plan of development under which reasonable building or use restrictions have been imposed by the common vendor upon all the property within such area, and for the benefit of all the property within the area, and where such restrictions have entered into the consideration for every lot sold within said area, does the valid sale of one lot for taxes to a purchaser, with full notice of the restrictions and of the general plan of development under which they are imposed, operate to divest said common vendor and other owners of lots within said area of their equitable right to the enforcement of such restrictions as against such purchaser and as to such lot?”

Defendant claims and ably urges that in view of the character of title which passes under a tax sale, such right of negative easement and covenant of restriction in this respect, like any other right, interest, or lien in, to or upon the property so sold, is struck down by virtue of the superior force of the new title emanating from the sovereign as a new and paramount title, and relies principally upon the authority of Alamogordo Improvement Co. v. Hennessee, supra, in support of his position.

It becomes necessary to examine somewhat into the character of right claimed by plaintiff by virtue of this building and use scheme and plan adopted. For its protection, if there be any, we must look to the language of the deed covenant and the allegations of the complaint to which the demurrer was directed. It would probably not be questioned by defendant (though as much is not directly conceded by him), were it the rule in this state that a sale of property for taxes passed merely a “derivative” as distinguished from a “new and paramount” title, that easements of all kinds are preserved and survive such sale.

The Hennessee case is held up to us as an inescapable obstacle to surmount before plaintiff can prevail. We have no desire to and will not disturb the rule there laid down in arriving at a determination of the issues here involved. The Hennessee case involved a different question. It had to do with the right of reversion of title for violation of a use covenant and restriction which, incidently, was however, the very same form of covenant which we now have under consideration. This court in that case held that in view of the character of title which under our tax statutes passed upon forfeiture of property to the state, the right of reversion of title to land in event the restrictive covenant against sale of liquors be violated, was wiped out by forfeiture to state and sale for taxes of the property burdened with this conditional subsequent interest and right. That case decided nothing more, and the question of whether a violation of such a clause against sale or disposition of liquors by a purchaser from the state at a tax sale could be reached through equitable relief was, of course, not involved.

Plaintiff urges that each and every property owner in the platted area which is burdened with the common restriction, has a property right or interest which equity will protect, in seeing that the common restriction imposed for the benefit of all, and which is reflected in the increased value for which each lot was, theoretically at least, assessed, is uniformly observed by all who purchased with notice, whether from the state or otherwise.

[2] It may be said that generally, all easements or rights which are subject to separate valuation for assessment purposes, and which have been carved out of the servient estate, since they are, theoretically at least, taxed as a part of the dominant estate, remain inviolate upon sale of the servient estate. This we hold, is the majority rule...