Nicholson v. 300 Broadway Realty Corp.

• Decision Date: 30 December 1959
• Citation: 7 N.Y.2d 240,196 N.Y.S.2d 945
• Parties: , 164 N.E.2d 832 Frederick A. NICHOLSON et al., Appellants, v. 300 BROADWAY REALTY CORPORATION, Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 945

196 N.Y.S.2d 945

7 N.Y.2d 240, 164 N.E.2d 832

Frederick A. NICHOLSON et al., Appellants, v. 300 BROADWAY REALTY CORPORATION, Respondent.

Court of Appeals of New York.

Dec. 30, 1959.

John R. Davision, Albany, for appellants.

Arthur J. Harvey, Albany, for respondent.

FULD, Judge.

On this appeal, here our permission, the plaintiffs seek a reversal of an order dismissing their complaint. The action was brought for specific performance of an agreement, made some 30 years ago by The Embossing Company, the defendant's predecessor in title, to furnish heat to the building on the land belonging to the plaintiffs, and for damages resulting from the defendant's failure to perform that agreement. The plaintiffs recently sold their property to the defendant and, while this renders impossible a decree of specific performance, it does not render the appeal moot or academic, since there still remains the possibility of damages stemming from breach of the agreement.

The facts to be gleaned from the complaint, which, of course, we read in a light most favorable to the plaintiffs, date from 1929. In that year, The Embossing Company, desiring to build a switch branch track from its factory, located on Church Street in Albany, to the main track of the railroad owned and operated by the Delaware & Hudson Company, applied to that company and to the City of Albany for permission to do so. To accomplish this, it was also necessary for Embossing to obtain the consent of Aaron Nicholson who owned the adjoining premises. As a condition to giving his consent, Nicholson insisted upon a contract whereby Embossing agreed 'to furnish steam heat' to the building on his property and 'to furnish and maintain all necessary steam pipes and return pipes for that purpose' and, in consideration, Nicholson agreed to pay $50 a year. The agreement, dated October 7, 1929, expressly provided that it 'applies to and is binding upon the heirs, executors, administrators and assignees of the parties'. Embossing's application was granted and the branch track was constructed. In fulfillment of its covenant, Embossing set up the necessary steam pipes and return pipes, undertook to furnish steam heat to the adjoining building and for some 27 years, from 1929 until 1956, continued to carry out its agreement and to furnish heat to the plaintiffs' premises in return for the stipulated fee of $50. ¹

The defendant purchased Embossing's property in 1956, and it was this sale which precipitated the present lawsuit.

More particularly, and we continue to cull from the complaint, in March of 1956, Embossing entered into a contract with one Jack Spitzer to sell the property to him. In making this contract, Spitzer 'intended that title to said premises would be conveyed to the defendant, 300 Broadway Realty Corporation, and was acting for and on behalf of (said) defendant * * *, then or about to be organized and incorporated by the said Spitzer'. And Spitzer, on behalf of himself and his assignees, 'agreed upon the conveyance of said premises * * * to perform' Embossing's obligation under the 1929 agreement. Then, on April 25, 1956, Spitzer, still 'acting for and on behalf of the defendant', assigned the contract to Betty Thompson who was also 'acting solely as the (defendant's) agent * * * and on its behalf' and, on the same day, Embossing, at Spitzer's request, executed a deed of the property to her. This deed, signed and acknowledged by Thompson as grantee, recited that the premises 'are conveyed subject to the terms of (Embossing's 1929) agreement * * * pertaining to the heating' of the premises and that the grantee, by her execution of the instrument, 'agrees to perform' those terms. And, more or less contemporaneously, Thompson executed another deed, conveying the premises to the defendant, but this one made no reference to the 1929 agreement.

The complaint goes on to charge that the defendant, having 'actual, as well as constructive, notice and knowledge' of the 1929 agreement, adopted the procedure outlined solely 'for the purposes of attempting to avoid performance of the obligation of supplying steam heat'. And, finally, after characterizing the obligation as 'a covenant running with the land', the complaint recites that the plaintiffs made demands upon the defendant to furnish the heat, that the latter refused to do so and that the plaintiffs were damaged thereby.

As noted above, the complaint was dismissed on the ground that it fails to state a cause of action. Reasoning that a covenant to furnish heat, being affirmative in nature, is not one which may run with the land, the courts below concluded that Embossing's obligation was not enforcible against the defendant as a subsequent grantee, and that frames one of the questions for decision: does the affirmative character of the covenant exclude it from the classification of covenants which 'touch' or 'concern' the land?

It has long been the rule in this State, and it finds expression in the leading case of Miller v. Clary, 210 N.Y. 127, 103 N.E. 1114, L.R.A.1918E, 222, that 'a covenant to do an affirmative act, as distinguished from (one) merely negative in effect, does not run with the land so as to charge the burden of performance on a subsequent grantee.' Guaranty Trust Co. of New York v. New York & Queens County Ry. Co., 253 N.Y. 190, 204, 170 N.E. 887, 892; see Booth v. Kinpe, 225 N.Y. 390, 395, 122 N.E. 202, 203; Morehouse v. Woodruff, 218 N.Y. 494, 501, 113 N.E. 512, 514. In this, New York has followed the English view, not adopted elsewhere in this country, which undoubtedly owes its development to a desire to prevent burdensome incumbrances upon title. However before our decision in the Miller case (210 N.Y. 127, 103 N.E. 1114, supra), as well as thereafter, we recognized a number of exceptions to the rule. ²

In addition, some 20 years ago, in Neponsit Property Owners' Ass'n v. Emigrant Industrial Sav. Bank, 278 N.Y. 248, 15 N.E.2d 793, 118 A.L.R. 973, this court, in treating an affirmative covenant to pay a sum of money each year to maintain and improve a residential area as one which touched and concerned the land, indicated a strong disposition to look to 'substance' rather than 'technical form' and adopt a more realistic and pragmatic approach to the problem. See, also, 165 Broadway Bldg. v. City Investing Co., 2 Cir., 120 F.2d 813, certiorari denied 314 U.S. 682, 62 S.Ct. 186, 86 L.Ed. 546; 5 Powell, Real Property (1956), p. 184; Clark, Real Covenants (2d ed., 1947), p. 133. Recognizing that it might be 'inexpedient and perhaps impossible to formulate a rigid test or definition' to cover all cases, the court declared that a covenant should be held to touch or concern the land, to run with the land, if it affects 'the legal relations the advantages and the burdens of the parties to the covenant, as owners of particular parcels of land and not merely as members of the community in general, such as taxpayers or owners of other land'. This 'method of approach,' added the court, 'has the merit of realism. The test is based on the effect of the covenant rather than on technical distinctions. Does the covenant impose, on the one hand, a burden upon an interest in land, which on the other hand increases the value of a different interest in the same or related land?' 278 N.Y. at pages 257-258, 15 N.E.2d at page 796. And, significantly, the court continued, 'unless we exalt technical form over substance, the distinction between covenants which run with land and covenants which are personal, must depend upon the effect of the covenant on the legal rights which otherwise would flow from ownership of land and which are connected with the land. The problem then is: Does the covenant in purpose and effect substantially alter these rights?' 278 N.Y. at page 258, 15 N.E.2d at page 796.

Having in mind the question now presented for decision, the law may be briefly summarized. The burden of affirmative covenants may be enforced against subsequent holders of the originally burdened land whenever it appears that (1) the original covenantor and covenantee intended such a result; (2) there has been a continuous succession of conveyances between the original covenantor and the party now sought to be burdened; and (3) the covenant touches or concerns the land to a substantial degree. In the case before us, it is clear that all three of these essentials are present; indeed, it is only with the third that we need concern ourselves.

If, as our decision in Neponsit makes clear, the test as to whether a covenant touches or concerns the land is 'based upon substance rather than upon form', on 'the (covenant's) effect * * * rather than on technical distinctions' (278 N.Y. at page 258...