Covenants Running With the Land

This tale begins in 1984 with the recording of a "Site Development Plan/Preliminary Plat" for the Spring Hill Farm subdivision in St. Louis County, Missouri. The plan called for development of residential town homes and amenities in four phases, with acreage east of the homes labeled "common ground."







Development proceeded and several hundred homes were sold. In 1994 the developer approached the County with a proposed plan for development of Phase 4 which included 12 acres previously labeled "common ground" now designated for "future developments." The County declined to approve this plan, so it was re-done and, as finally approved, the Phase 4 plan showed the 12 acres as "West Un-Platted Area."







In the meantime, the original developer agreed to sell surplus land, including the 12 acres now labeled "West Un-Platted Area," to Lawless Homes, Inc. Lawless Homes looked to develop the 12 acres with town homes. The original developer and Lawless Homes jointly petitioned the City of Valley Park to annex contiguous lands, including the 12 acres. This petition led to a public hearing--but apparently homeowners in the nearby Spring Hill Farm subdivision did not get personal notice of the hearing. At the hearing there was no opposition to the annexation, and it was approved.







Lawless Homes completed its purchase of the 12 acres, and First American insured it as the new owner. Our agent was aware of the labeling of the 12 acres as "common ground" on the 1984 "Site Development Plan/Preliminary Plat," but the decision was made not to show this in any way as an exception because the common understanding of a "preliminary plat" was that it was a document subject to modification and change. In St. Louis County, final plans are customarily recorded as a "Final Plat."







Lawless Homes submitted a plan to the City of Valley Park for development of the 12 acres with town homes--to be called the "Glenn Brooke" subdivision. There was a public hearing which resulted in the 12 acres being re-zoned and approved for development. This hearing was attended by one James Hostler, a resident of the Spring Hill Farm subdivision and a Trustee of its homeowners' association, but Hostler voiced no concerns about the proposed plan for the Glenn Brooke subdivision.







After Lawless Homes had built and sold 41 town homes, Hostler and other trustees of the Spring Hill Farm homeowners' *****ociation filed suit to (1) enjoin further construction, (2) to eject Lawless Homes and remove improvements from the land, (3) to quiet title in six acres in favor of plaintiffs, (4) to award damages for trespass, including punitive damages, and (5) to set aside annexation of the land by the City of Valley Park. The suit didn't name new homeowners. First American agreed to defend its insured, Lawless Homes.







The case was tried before a judge, who ruled in favor of defendant Lawless Homes on counts 1,2, 3 and 5 above, and in favor of plaintiffs on count 4--awarding them trespass damages of $205,000, plus punitive damages of $75,000.







The case was appealed, and the Court of Appeal affirmed in part and reversed in part.







First, the Court of Appeal surprised us by finding that the "Preliminary Plat" was more like a final plat. The Court pointed to a recital at the bottom of the plat--in print so small as to be barely legible on our copy--saying:







"(The original developer)...in consideration of being granted a permit to develop said property under the provisions of (County zoning ordinances for development of a 'Planned Environmental Unit') do(es) hereby agree, declare and covenant that from the date of recording this plan, the property shall be developed only as shown herein. This covenant shall run with the land, and shall be enforceable ...by St. Louis County or its successor as a plan of development adopted by the St. Louis Planning Commission to promote orderly development. This plan may be amended or superseded by the Planning Commission or modified by the Department of Planning or voided by order or ordinance of the St. Louis County Council, each as more particularly authorized by the St. Louis County Zoning Ordinance now or hereafter in effect."







The Court also pointed to an "Indenture of Trust and Restrictions for the Spring Hill Farm Subdivision," recorded in 1985 and akin to CC&R's in empowering the Trustees to hold common land in the subdivision for the benefit of all homeowners. Specifically, the Court noted this "Indenture of Trust and Restrictions" referred to the 1984 "preliminary plat"--by its recording number in the public records--as a "final development plan."







Replying to Lawless Homes' argument that the evidence failed to prove that plaintiffs had any enforceable right to the six acres--as indicated by the trial court's decision on the quiet title and ejectment counts--the Court disagreed, saying the issue was controlled by its recent decision in Hoag v. McBride & Son Inv. Co., Inc., 967 S.W.2d 157 (Mo. App. 1998).







Summarizing the holding in the Hoag case, the Court said:







"Developers of residential property create a covenant benefiting all future landowners of the development by restricting the use of a particular piece of property in one of three ways: (1) placing the restriction on use of the burdened property in the deeds it gives to both the person seeking to enforce the restriction and the person who owns the burdened property; (2) recording the terms of the covenant; or (3) developing and selling the land pursuant to a common plan or scheme of improvement."







So, said the Court, under this standard the recording of the 1984 "preliminary plat" created a "final plat," giving all future homeowners in the Spring Hill Farm subdivision enforceable rights in the six acres labeled "common ground." Lawless Homes had constructive notice of these rights, and the City of Valley Park could not change them except through condemnation.







While affirming the trial court's award of trespass damages, the Court reversed the award of punitive damages, saying there was no evidence of malice--as required by MO law for imposition of punitive damages.







Comment: While it doesn't affect the outcome, this case sure looks like it was decided on equitable principles (common scheme and prior knowledge of Lawless Homes) rather than the legal right of a covenant running with the land.







And the Court seems to have "cherry-picked" language to support its holding from the "preliminary plat" and the "Indenture of Trust." Drafted by the original developer, these documents were vague and equivocal about the developer's rights to change plans.



By Bert Rush--------------------------------------------