Leigh v. Village of Los Lunas

Decision Date11 August 2004
Docket Number No. 674, No. 23, No. 731.
PartiesMondy LEIGH and Sylvia Leigh, Plaintiffs-Appellees, v. VILLAGE OF LOS LUNAS, Defendant-Appellant.
CourtCourt of Appeals of New Mexico

Nicholas R. Gentry, Law Offices of Nicholas R. Gentry, L.L.C., J. Brent Ricks, Albuquerque, for Appellees.

Stephen S. Hamilton, Montgomery and Andrews, P.A., Santa Fe, Laurence P. Guggino, Jr., Los Lunas, for Appellant.

OPINION

CASTILLO, Judge.

{1} In this case, we are asked to decide if restrictive covenants are considered property for purposes of eminent domain. Specifically, the question before this Court is whether Defendant Village of Los Lunas (Village) must compensate Plaintiffs Mondy Leigh and Sylvia Leigh (Leighs), owners of Tract 2 in a subdivision, based on the Village's construction of a drainage pond on Tract 1 in violation of the restrictive covenants imposed on both properties. The Village additionally argues that the district court erred by admitting an appraiser's report and challenges the sufficiency of the evidence for the damages award. We hold that the government is required to compensate for the diminution in value of the property benefitted by the restrictive covenants. We agree with the Village that the award was unsupported by the evidence; we therefore reverse the district court's judgment and remand for recalculation of damages in accordance with this opinion.

I. BACKGROUND

{2} In 1995, the Leighs purchased Tract 2 for $21,000. Tract 2 is a lot in a subdivision containing five lots, all of which are subject to covenants restricting use of the land to residential purposes. There is no dispute that the restrictive covenants are valid and run with the land of all lots in the subdivision. The Village acquired Tract 1 for $30,000 for the purpose of constructing a storm drainage pond. The subdivision is located outside the Village, but it is undisputed that the Village may condemn property outside its boundaries "to protect its inhabitants from damage by flood waters." Tract 1 is adjacent to the Leighs' Tract 2. On September 26, 2000, the Village began construction of a storm drainage pond on Tract 1; the pond was substantially completed by February 14, 2001. No part of the storm drainage pond was built on the Leighs' Tract 2.

{3} On January 19, 2001, the Leighs filed an action for damages against the Village, claiming breach of restrictive covenants, inverse condemnation, and trespass. The jury trial was limited to the breach of restrictive covenants and inverse condemnation claims. At the close of the Leighs' case, the Village moved for judgment on the breach of restrictive covenants claim on the ground that inverse condemnation was the Leighs' exclusive remedy; the motion was granted. Following trial, the district court entered judgment against the Village, awarding the Leighs $50,000 in inverse condemnation damages for the diminution in the value of their land caused by the Village's violation of the restrictive covenants. The Village appealed this judgment and filed a motion for judgment notwithstanding verdict (JNOV), remittitur, or new trial. The district court denied the Village's motion, and the Village appealed that order as well. The Village's two appeals were consolidated under case number 23,674.

II. DISCUSSION

{4} This case relates to the power of eminent domain, under which a government may take or damage private property. City of Sunland Park v. Santa Teresa Servs. Co., 2003-NMCA-106, ¶ 43, 134 N.M. 243, 75 P.3d 843. This power is limited by the constitutional requirement that just compensation be paid to the owner of the property. Id.; see also N.M. Const. art. II, § 20; NMSA 1978, §§ 42A-1-1 to -33 (1981, as amended through 2001) (setting forth the procedure for condemnation). The usual procedure is for the appropriate governmental entity to condemn property it wishes to put to public use. See § 42A-1-2(C). When a property owner believes property has been taken or damaged by the government but no condemnation petition has been filed, the property owner may institute an inverse condemnation action against the condemnor for taking or damaging the property. See § 42A-1-29. The Leighs proceeded in their claim against the Village under this inverse condemnation provision.

A. Restrictive Covenant as a Compensable Property Right

{5} Article II, Section 20, of the New Mexico Constitution mandates that "[p]rivate property shall not be taken or damaged for public use without just compensation." Whether the taking of a restrictive covenant falls within the constitution's mandate presents a purely legal issue. As such, we review it de novo on appeal. See Fed. Express Corp. v. Abeyta, 2004-NMCA-011, ¶ 2, 135 N.M. 37, 84 P.3d 85

(stating that legal issues are reviewed de novo).

{6} The subdivision in question is known as the "Lands of Jayson Epstein," Epstein being the owner who established and recorded restrictive covenants binding on all purchasers of his land and on their successors in interest. The portion of the covenant at issue specifies that "[n]o lot shall be used except for residential purposes." The Village constructed a storm drainage pond on the lot but nevertheless asserts that the use of property by a public entity in contravention of a restrictive covenant does not result in a compensable taking under the New Mexico Constitution.

{7} Restrictive covenants are sometimes described as equitable easements or negative easements. Montoya v. Barreras, 81 N.M. 749, 751, 473 P.2d 363, 365 (1970) (stating that restrictions on the use of land are mutual, reciprocal, equitable easements in the nature of servitudes); Restatement (Third) of Prop.: Servitudes § 1.3 cmt. c, at 25 (2000) (referring to restrictive covenants as negative easements). It is well established in New Mexico that restrictive covenants in a subdivision's general plan convey property rights in the lots burdened by the covenant. See Cunningham v. Gross, 102 N.M. 723, 725, 699 P.2d 1075, 1077 (1985)

(stating that restrictive covenants "constitute valuable property rights of all lot owners therein"); Montoya, 81 N.M. at 751-52,

473 P.2d at 365-66 ("Where the covenants manifest a general plan of restriction to residential purposes, such covenants constitute valuable property rights of the owners of all lots in the tract."); Gorman v. Boehning, 55 N.M. 306, 310, 232 P.2d 701, 704 (1951) ("A restrictive covenant is something of value to all lots in a tract...."); Aragon v. Brown, 2003-NMCA-126, ¶ 10, 134 N.M. 459, 78 P.3d 913 ("[W]e have repeatedly recognized that reliance on restrictive covenants is a valuable property right."); Wilcox v. Timberon Protective Ass'n, 111 N.M. 478, 485, 806 P.2d 1068, 1075 (Ct.App.1990) ("Restrictive covenants... constitute valuable property rights for all lot owners within the restricted area."). The purpose of a subdivision's general plan of restrictions is "to assure uniformity of development and use of a residential area to give the owners of lots within such an area some degree of environmental stability." Montoya, 81 N.M. at 751,

473 P.2d at 365.

{8} Without question, easements constitute valuable property rights, and their taking requires compensation. See, e.g., Yates Petroleum Corp. v. Kennedy, 108 N.M. 564, 567-68, 775 P.2d 1281, 1284-85 (1989)

(determining proper compensation for the partial condemnation of private property for an easement); 2 Julius L. Sackman, Nichols on Eminent Domain § 5.07[2][b], at 5-354-57 (3d ed., rev.vol.2004) [hereinafter Sackman]. Given New Mexico's determination that restrictive covenants, as equitable easements, also constitute property rights, we conclude that the covenants are protected by Article II, Section 20, of our state's constitution. See S. Cal. Edison Co. v. Bourgerie, 9 Cal.3d 169, 107 Cal.Rptr. 76, 507 P.2d 964, 965 (1973) (en banc) (concluding that "a building restriction constitutes `property' within the meaning of [the state constitution's Takings Clause], and compensation must be paid whenever damage to a landowner results from a violation of the restriction"); Hartford Nat'l Bank & Trust Co. v. Redevelopment Agency of Bristol, 164 Conn. 337, 321 A.2d 469, 471-72 (1973) (reiterating that restrictive covenants are in the nature of equitable easements in the land restricted and that when the restricted land is taken, "the owner of the property for whose benefit the restriction is imposed is entitled to compensation"); Dible v. City of Lafayette, 713 N.E.2d 269, 274 (Ind.1999) (concluding that restrictive covenants are property rights in the lots restricted and that the owners of those property rights must be compensated when the government condemns a restricted lot for public use); Horst v. Hous. Auth. of Scotts Bluff, 184 Neb. 215, 166 N.W.2d 119, 121 (1969) (same); Meredith v. Washoe County Sch. Dist., 84 Nev. 15, 435 P.2d 750, 752 (1968) (same); see also Restatement (Third) of Prop.: Servitudes § 7.8 cmt. a, at 381 (2000) ("Servitude benefits like other interests in property may be condemned under the power of eminent domain and taken by inverse condemnation.") and reporter's note, at 383 ("[I]n this Restatement, all servitude benefits are treated as property rights and thus should be entitled to the protection of the Takings Clause.").

{9} We recognize that there is a split among jurisdictions on the question of whether restrictive covenants are protected property interests: jurisdictions, including those cited above, that consider restrictive covenants to be equitable easements and compensable property interests reflect the "majority view"; jurisdictions that insist the covenants do not convey property rights, thus refusing compensation, reflect the "minority view." See Sackman, supra § 5.07[4][a], [b], at 5-378-83 (discussing both views and collecting cases); see also Restatement, supra § 7.8, reporter's note, at 383 (noting that it is "generally accepted" that the benefits of restrictive covenants are protected...

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