Northwest Real Estate Co. v. Serio

A deed in fee simple for a lot of ground contained, in addition to various building and use restrictions, a provision that the land should not be subsequently sold or rented, prior to a designated date, without the consent of the grantor. The decisive question in this case is whether the restraint thus sought to be imposed upon the alienation of the property is void as being repugnant to the granted estate.

The covenant to be considered is in the habendum clause of a deed dated August 19th, 1927, from the Northwest Real Estate Company to Carl M. Einbrod and wife, conveying a building lot in Ashburton, a suburb of Baltimore City, and is in the following form: "7. And for the purpose of maintaining the property hereby conveyed and the surrounding property as a desirable high class residential section for themselves their successors heirs executors administrators and assigns that until January 1st, 1932, no owner of the land hereby conveyed shall have the right to sell or rent the same without the written consent of the grantor herein which shall have the right to pass upon the character desirability and other qualifications of the proposed purchaser or occupant of the property until January 1st, 1932, and the said grantor further agrees that all deeds or leases hereinafter made by it of the remaining unimproved lots on the plat of Ashburton Section 6 heretofore referred to shall contain the same covenant as to the sale or renting of such property."

On March 27th, 1928, the grantees contracted in writing to sell the lot to Charles Serio and wife, and, upon payment of the purchase price, to convey the property to them, "by a good and merchantable title," "subject however to the residential restrictions prevailing in Ashburton." The Northwest Real Estate Company declined to give its consent to the sale and transfer for which the contract provided. The purchaser then brought this suit against the vendors and the company to compel the specific performance of the agreement without the consent of the company, on the theory that the quoted covenant is void, or with the judicially enforced consent of the company, if the covenant should be held to be valid, the averment being made in the bill of complaint that the company's refusal to consent was arbitrary and unreasonable. The vendors in their answer stated their willingness to perform the contract of sale, but asserted that a compliance with its terms was not contingent upon the consent of the Northwest Real Estate Company, since the contract provided that the property was to be conveyed subject to the existing "residential restrictions." That position was not tenable, because the right of the vendors to make the sale was involved in the restriction which is the occasion of this suit. In its answer the company admitted and explained its refusal to consent to a sale or transfer of the property to the plaintiffs, and defended the covenant in controversy as a valid and reasonable provision. A demurrer to the bill was embodied in the company's answer, and it in turn was challenged by a demurrer which the plaintiffs filed. After a hearing on the questions thus raised, the demurrer to the bill was overruled, and the demurrer to the answer was sustained, with leave to file an amended answer within five days. The company did not avail itself of that privilege, but appealed from the order overruling its demurrer to the bill of complaint. No appeal bond being filed, the case was brought to a final hearing, which resulted in a decree declaring the disputed covenant to be void and directing a specific performance of the contract of sale, upon payment of the purchase money, by a conveyance of the property subject to all of the prescribed restrictions except the one declared to be inoperative. From the decree a further appeal was entered by the Northwest Real Estate Company. The purchaser also appealed, upon the theory that such action might be a proper precaution in view of the pendency of the company's appeal from the decision on the demurrer.

The objections, urged on demurrer, that the bill is multifarious and that there was a misjoinder of parties, are not sustainable. It was an essential purpose of the specific performance suit to remove the obstacle to the plaintiff's purchase presented by the assertion of a right on the part of the original grantor to prevent subsequent sales and conveyances, by refusal of consent, during the specified period. The fact that relief was sought by the alternative means of the invalidation or the judicial control of the covenanted right did not render the bill multifarious, and the grantor corporation was properly joined as a defendant in a suit by which its interests were thus affected.

The final decree of the circuit court is in accordance with the policy of the law in this state with respect to provisions in restraint of alienation. In Clark v. Clark, 99 Md. 356, where this court had under construction a will which, after a devise of an absolute estate to the seven children of the testator, provided that the property should not be sold within ten years for partition purposes without their unanimous consent, it was said in the opinion: "This provision of the will if effective would practically amount to a restraint for ten years of all alienation by any child of its share of the estate. We have no difficulty in arriving at the conclusion that this attempted imposition of restrictions upon the method of alienation and enjoyment of the absolute estate given to the testatrix' children was contrary to the policy of the law and therefore inoperative and void. The authorities agree that conditions or limitations in restraint of alienation or essential enjoyment of an estate in fee cannot be validly annexed to the deed or devise by which the estate is created, because they are repugnant to the inherent nature and qualities of the estate granted and tend to public inconvenience. 4 Kent's Com., 143-4; Vin. Ab., p. 103;Gray's Restraints upon Alienation, par. 47 to 54; Stansbury v.Hubner, 73 Md. 231; Warner v. Rice, 66 Md. 440; Downes v.Long, 79 Md. 390; Blackshere v. Samuel Ready School, 94 Md. 777;Mandelbaum v. McDonnell, 29 Mich. 78; Potter v. Couch,141 U.S. 296." The principle of that decision has been applied in later Maryland cases (Brown v. Hobbs, 132 Md. 559; Gischell v.Ballman, 131 Md. 260), and it is controlling in the present litigation.

The restriction imposed by the deed of the Northwest Real Estate Company upon sales by its grantees and their successors was clearly repugnant to the fee simple title which the deed conveyed. Its object was to deprive the grantees, until 1932, of the unrestrained power of alienation incident to the absolute ownership which the granting clause created. In Clark v. Clark,supra, the attempted restraint was for a period of ten years, and consisted of a requirement for consent by six other devisees, while here it is for a shorter period and the consent of a single but corporate grantor is the condition of a transfer. But in each instance the intended interference with the normal alienability of the fee simple estate devised or granted is equally apparent. As stated in Tiffany on the Law of Real Property (2nd Ed.) p. 2311, "The fact that a restriction upon the right to alienate a vested estate in fee simple is to endure for a limited time only does not, by the weight of authority, render the restriction valid." In addition to the cases cited by the author in support of that statement are a number collected in a note to Latimer v.Waddell, 119 N.C. 370, as reported in 3 L.R.A. (N.S.) 668. InMurray v. Green, 64 Cal. 367, it was said: "It is difficult to conceive of a condition more clearly repugnant to the interest created by the grant of an estate in fee simple than the condition that the grantees shall not alienate the same without the consent of the grantor. With such a condition, if valid, annexed to the grant, it would be neither a fee simple nor any other estate known to the law."

In practical effect the reservation in the deed before us would give the grantor company unqualified control for a term of years over the disposition of the property by sale or lease. The recital that the purpose of the restriction is to maintain "a desirable high class residential section" and to enable the grantor "to pass upon the character desirability and other qualifications of the proposed purchaser or occupant" was evidently designed to explain rather than to limit the reservation of the power to forbid a transfer of the property by the grantees to any purchaser or lessee who failed to conform, in the opinion of the grantor's officers, to those indefinite standards. The existence of such a discretionary control would be plainly incompatible with the freedom of alienation which is one of the characteristic incidents of a fee simple title.

In Jones v. Northwest Real Estate Company, 149 Md. 271, the court considered a restriction, which is included also in the deed, from the same grantor, involved in this case, that no building should be erected on the property without the grantor's approval in writing, which could rightfully be refused if the proposed structure did not reasonably conform to the general plan of development in the area of which the granted lot formed a part, and it was held that such restrictions "did not interfere with the fee of the land to such an extent as to render them void."

It has been argued that the real object of the clause now under consideration is simply to regulate the use and occupancy of the property described in the deed. But the provision does not thus qualify its effect. It is a prohibition of any sale of the property prior to 1932, without the grantor's consent, and such a restraint on its alienation cannot be reconciled with the right of disposition inherent in the fee simple estate which has been granted.

Certain motions to dismiss the various appeals will be overruled, as they suggest no sufficient reason why the substantial question in the case should not be determined by this court upon the record now presented.

Order and decree affirmed, with costs to the appellees in thefirst and third appeals.