Washington Suburban Sanitary Commission v. Frankel

ADKINS, Judge. The question presented in this case is whether an equitable servitude or negative easement created by a restrictive covenant is a property interest for which just compensation must be paid when the servitude or easement is extinguished by condemnation of the land that is subject to it. 1 The question arises in the following factual context: In 1956, Contee Sand & Gravel Company, Inc. owned and operated as a mining facility a 385 acre tract of land in Montgomery County, near the Prince George’s County line. Apparently in order to obtain a renewal of its mining special exception, Contee proposed that the mining operation continue for a limited period of time, after which the land would be developed as an industrial park. By declarations properly recorded on October 11, and December 11,1956, and pursuant to a general or common scheme of development, Contee and Francis S. Carnes subjected 347.4368 acres of the ⁴²² tract to a variety of restrictive covenants.

For purposes of this appeal, pertinent covenants provide that: No waste material or refuse may be dumped or permitted to remain in or upon any part of the property outside of buildings. No emission of objectionable odors outside the lot lines shall be permitted, except during periods when breakdown of equipment occurs such as to make it evident that the emission was not reasonably preventable. Additionally, the covenants prohibit use of the land as a “[d]ump or sanitary landfill.” Taking the declarations as a whole, we think it fair to say that they were and are intended to encourage the construction of attractive and appropriately-located improvements, control undesirable aspects of industrial development, and in general provide for a high-quality industrial park. As to the beneficiaries of these extensive and comprehensive restrictive covenants, each declaration in pertinent part provided: WHEREAS Grantor is the owner of the real property described in .. . this Declaration, and is desirous of subjecting the real property [so] described ... to the conditions, covenants, restrictions, reservations and easements hereinafter set forth, each and all of which is and are for the benefit of said property and for each owner thereof, and for the benefit of adjacent properties and properties in the general neighborhood and each owner thereof and shall inure to the benefit of and pass with said hereafter described property of Grantor and each and every parcel thereof and shall inure to the benefit of and pass with said adjacent property and properties and properties in the general neighborhood and each and every parcel thereof and shall apply to and bind the successors in interest and any owner thereof.

In 1980, appellant WSSC condemned some 151.48 acres of the industrial park and presently uses its property for the ⁴²³ storage and processing of sewage sludge. This tract is known as Site 2. There seems to be no dispute that this activity violates the restrictive covenants, or would do so were the activity conducted by a private party. Aside from the covenants prohibiting dumping and maintenance of waste material outside of buildings, the record contains ample evidence that the composting sludge emits highly objectionable odors “outside the lot line.” Also in 1980, prior to the conclusion of the condemnation proceedings, appellees Phillips, Peterson, Cross, and Blackburn, filed an equity suit in Prince George’s County seeking, inter alia, a declaration that the restrictive covenants imposed on Site 2 by the previously-mentioned declarations were property interests of the plaintiffs which prohibited the intended (and now existing) public use by WSSC.

Each complainant was alleged to be a resident of property adjacent to or in the general neighborhood of the industrial park. Subsequently, appellees Chesapeake and Potomac Telephone Company of Maryland and Erie Indemnity Company were permitted to intervene in this suit as plaintiffs. The two corporations were (and are) owners of land within the industrial park. The next step in this complex affair was the filing by appellant WSSC of a declaratory judgment action in the Circuit Court for Montgomery County.

The principal relief requested was, in effect, a declaration that the restrictive covenants were not compensable property rights. WSSC joined as defendants all the above listed plaintiffs in the Prince George’s County suit plus eight other individuals and corporations. The eight new parties all were owners of property within the industrial park, and all are appellees here. Yet other of the present appellees intervened as defendants.

A number of the defendants-appellees filed counterclaims against WSSC for damages. The Prince George’s County suit was transferred to Montgomery County and consolidated with the declaratory action pending there. In May 1981, appellee Chesapeake and Poto ⁴²⁴ mac Telephone Company of Maryland moved for a separate trial of an issue of law pursuant to Md. Rule 502. The issue posed was: That the underlying legal question to be resolved ... is: Under the U.S. Constitution, Maryland Constitution and/or Maryland law are the restrictive covenants ... on Site 2 compensable property rights of the parties benefited or intended to be benefited thereby, ... which ...

(WSSC) must acquire by condemnation before it can use Site 2 for a sludge composting facility which will violate or breach those covenants? Although WSSC proposed a number of other issues to be determined, on August 11, 1981, Judge John McAuliffe granted the motion. On December 8, 1982, Judge Mitchell answered the issue in a written memorandum and order holding in substance that the appellees’ restrictive covenants or negative easements were compensable property interests. This disposed of WSSC’s request for declaratory relief, although it did not dispose of all the claims pending before the court.

On January 26, 1983, Judge Mitchell signed an order pursuant to Md. Rule 605 a. He found there was no just reason for delay and entered final judgment in favor of appellees and against WSSC on WSSC’s claim for declaratory relief. From that judgment WSSC appealed. We return, therefore, to consideration of the issue defined at the outset of this opinion.

Restrictive Covenants as Compensable Property Rights The power of eminent domain is a prerogative of sovereignty and would exist in Maryland even without the sanction of the Constitution. Riden v. Philadelphia, B. & W. R.R. Co., 182 Md. 336 , 35 A.2d 99 (1943); Moale v. Baltimore, 5 Md. 314 (1854). Art. III, § 40 of the Maryland Constitution (footnote 1, supra) is not, therefore, a grant of power, but a limitation on the exercise of the power of eminent domain. Riden v. Philadelphia, B. & W. R.R. Co., supra. ⁴²⁵ The limitation imposed by that section is that private property may not “be taken for public use without just compensation . . . . ” The Fifth Amendment to the United States Constitution imposes a similar limitation, as do the constitutions of all of the states except for North Carolina.

E. Spies & J. McCoid “Recovery of Consequential Damages in Eminent Domain” 48 Va.L.Rev. 437, 441 (1962). Even in the absence of a state provision for compensation, such a requirement would be imposed by virtue of the Fourteenth Amendment. Chicago, Burlington and Quincy R.R. Co. v. Chicago, 166 U.S. 226 , 17 S.Ct. 581 , 41 L.Ed. 979 (1897); Baltimore v. Concord Baptist Church, Inc., 257 Md. 132, 140-41 , 262 A.2d 755 (1970). 2 It is within this constitutional framework that we must decide whether appellant WSSC must compensate appellees, or any of them, because it has condemned land subject to restrictive covenants in favor of land owned by the appellees, and uses the condemned land in a way that violates those restrictions. This question, not previously answered in any reported appellate decision in Maryland, in turn requires us to determine whether a restrictive covenant or negative easement is “property” which is “taken” when the land burdened by it is acquired through the power of eminent domain.

Adaman Mutual Water Co. v. United States, 278 F.2d 842, 845 , (9th Cir.1960) (quoting from United States v. General Motors Corp., 323 U.S. 373, 377-80 , 65 S.Ct. 357, 359-60 , 89 L.Ed. 311 (1945)). Ever since the leading English case of Tulk v. Moxhay, 2 Phill. 774 (1845) it has been recognized that a restrictive covenant prohibiting certain uses of land (the servient tene ⁴²⁶ ment) may be enforced in equity by the owner of other land (the dominant tenement) in favor of which the covenant runs. The principle applies in Maryland. See, e.g.

Steuart Trans. Co. v. Ashe, 269 Md. 74 , 304 A.2d 788 (1973); Turner v. Brocato, 206 Md. 336 , 111 A.2d 855 (1955); Raney v. Tompkins, 197 Md. 98 , 78 A.2d 183 (1951); McKenrick v. Savings Bank of Baltimore, 174 Md. 118 , 197 A. 580 (1938); and Halle v. Newbold, 69 Md. 265 , 14 A. 662 (1888). Such restrictive covenants, also described as equitable servitudes or negative easements, are now well-known devices for controlling the use of land by agreement between private individuals, as contrasted to public police powers, such as zoning, which attain the same end. Whether negative easements are property interests attached to the dominant tenement has not been decided in Maryland, although the problem was noted in Turner v. Brocato, supra, 206 Md. at 347 , 111 A.2d 855 .

See also Pollack v. Bart, 202 Md. 172, 176 , 95 A.2d 864 (1953): “An equitable restriction on land has been held to be a property right in the person in favor of whose estate it runs or to which it is appurtenant.” A majority of American jurisdictions that have addressed this question in the context of eminent domain have held that a negative easement is a property interest for the taking of which compensation must be paid when the easement is extinguished by condemnation of the servient tenement. Adaman Mutual Water Co. v. United States, supra; U.S. v. Certain Land in Augusta, 220 F.Supp. 696 (D.Me.S.D. 1963); So. California Edison Co. v. Bourgerie, 9 Cal.3d 169 , 107 Cal.Rptr. 76 , 507 P.2d 964 (1973) (overruling Friesen v. Glendale, 209 Cal. 524 , 288 P. 1080 (1930)); Stamford v. Vuono, 108 Conn. 359 , 143 A. 245 (1928); Ladd v. Boston, 151 Mass. 585 , 24 N.E. 858 (1890) (Holmes, J.); Allen v. Detroit, 167 Mich. 464 , 133 N.W. 317 (1911); Burger v. St. Paul, 241 Minn. 285 , 64 N.W.2d 73 (1954); Peters v. Buckner, 288 Mo. 618 , 232 S.W. 1024 (1921); Horst v. Housing Authority, 184 Neb. 215 , 166 N.W.2d 119 (1969); Meredith v. Washoe County School Dist., 84 Nev. 15 , 435 P.2d 750 (1968); Hayes v. Waverly & P.R. Co., 51 N.J.Eq. 345, 27 A. 648 (1893); Flynn ⁴²⁷ V. N.Y., W. & B. Ry. Co., 218 N.Y. 140 , 112 N.E. 913 (1916); Raleigh v. Edwards, 235 N.C. 671 , 71 S.E.2d 396 (1952); School District No. 3 v. Country Club of Charleston, 241 S.C. 215 , 127 S.E.2d 625 (1962); Shelbyville v. Kilpatrick, 204 Tenn. 484 , 322 S.W.2d 203 (1959); Meagher v. Appalachian Elec.

Power Co., 195 Va. 138 , 77 S.E.2d 461 (1953). 3 This rule has been adopted by the American Law Institute. 5 Restatement Property § 566 (1944). It is supported by other authorities, e.g. II American Law of Property (Casner Ed. 1952) § 9.40. It appears to be the rule in England.

The Long Eaton Recreation Ground Co. Ltd. v. The Midland Ry. Co., [1902] 2 K.B. 574. And we might add that at least two American jurisdictions in addition to those listed in the preceding paragraph have recognized a negative easement as a property right in condemnation proceedings, but have denied compensation under particular circumstances. Ashland-Boyd County City-County Health Dept. v. Riggs, 252 S.W.2d 922 (Ky.1952) (restrictive covenant is property right, but no compensation allowed because proposed governmental use would not violate restrictions); Fuller v. Town Board of Madison, 193 Wis. 549 , 214 N.W. 324 (1927) (restrictive covenant is property right, but no compensation allowed because of peculiar wording of Wisconsin statute).

We note, too, that the United States District Court for the District of Maryland has declined to hold as a matter of law that the beneficiary of a negative easement has no property interest in land subject to the easement and condemned by the government. United States v. 0.01 Acre of Land, 310 F.Supp. 1379 (D.Md.1970). Despite this rather formidable array of authority, WSSC urges us to adopt the minority view which denies compensa ⁴²⁸ tion to the owner of the dominant tenement when land subject to a restrictive covenant is condemned. That position is espoused by Wharton v. United States, 153 F. 876 (1st Cir.1907) (affirming U.S. v. Certain Lands in Jamestown, 112 F. 622 (CC D.R.I.1899)); Burma Hills Development Co. v. Marr, 285 Ala. 141 , 229 So.2d 776 (1969); Arkansas State Highway Comm. v. McNeill, 238 Ark. 244 , 381 S.W.2d 425, 435 (1964); Smith v. Clifton Sanitation District, 134 Colo. 116 , 300 P.2d 548 (1956) (semble); Moses v. Hazen, 69 F.2d 842 (D.C.App.1934); Board of Public Instruction v. Bay Harbor Islands, 81 So.2d 637 (Fla.1955); Anderson v. Lynch, 188 Ga. 154 , 3 S.E.2d 85 (1939); Doan v. Cleveland Short Line Ry.

Co., 92 Ohio St. 461 , 112 N.E. 505 (1915); Burke v. Oklahoma City, 350 P.2d 264 (Okl.1960); Hospital Service District No. 2 v. Dean, 345 So.2d 234 (La.App.1977); Houston v. Wynne, 279 S.W. 916 (Tex.Civ.App.1925); but cf. Houston v. McCarthy, 464 S.W.2d 381 (Tex.Civ.App.1971); and State ex rel. Wells v. Dunbar, 142 W.Va. 332 , 95 S.E.2d 457 (1956). 4 If non-compensability is the touchstone, despite recognition of a negative easement as a property right, Kentucky and Wisconsin could be added to this list. See Ashland-Boyd County City-County Health Dept. v. Riggs and Fuller v. Madison, both supra. The minority jurisdictions, like WSSC, advance a number of reasons to support the result they reach — reasons that one commentator suspects are “less the motivation for denial of compensation taken than .. . [rationalizations] for a result desired for other reasons.” W. Stoebuck, “Condemnation of Rights the Condemner Holds in Lands of Another” 56 Iowa L.Rev. 293, 306 (1970).

Be that as it may, we shall discuss those reasons. At the outset, we may readily dispose of Fuller v. Madison, which turned on the peculiar wording of a Wisconsin statute which has no parallel in Maryland. Additionally, we need give no further attention to Ashland v. Boyd, supra, ⁴²⁹ which found that the proposed public use did not violate the restrictive covenants involved. In the case sub judice, it is conceded that WSSC’s use of Site 2 violates the covenants applicable to it, or would do so were that use conducted by a private party.

The “no-violation” rationale is also the holding of cases like Wharton v. United States, United States v. Certain Lands ( 112 F. 622 ) and Moses v. Hazen, all supra. But because those cases include dicta giving other or alternative reasons for the result reached, we shall return to them later. Some of the minority cases conclude that restrictive covenants entered into between private parties are not intended to apply as against public improvements. Among these are United States v. Certain Lands, Smith v. Clifton Sanitary District, Moses v. Hazen, Houston v. Wynne, and State ex rel.

Wells v. Dunbar, all supra. This seems to be a rather strained approach. Comment “Compensation for Abrogation of a Restrictive Covenant by Public Authority.” 53 Mich.L.Rev. 451, 456 (1955). There is nothing in the restrictions before us that suggests such an intention.

When restrictive covenants are imposed upon a servient tenement, limiting uses of that land in order to enhance the value of one or more dominant tenements, it is unreasonable to find an intention on the part of anyone that the benefit produced by the restrictions are to be totally lost — uncompensated—if a public body acquires the servient tenement. This approach, in fact, appears to be a variation of another reason given to support the minority position: that restrictions, as a matter of public policy, do not apply against the government. 5 Therefore, it is argued, they are void and because they are void, no compensation need be made for their extinguishment. ⁴³⁰ In addition to the cases cited in the preceding paragraph, this view finds support in cases such as Anderson v. Lynch, Doan v. Cleveland Short Line Ry. Co., and Hospital Service District No. 2 v. Dean, all supra. In essence, these authorities argue that private parties cannot by contract limit governmental exercise of the power of eminent domain; that to hold otherwise would be to place severe economic inhibitions on the exercise of that power; hence, restrictions having that effect are void ab initio as against public policy.

The problem with this argument is that it confuses the government’s right to use the land condemned free of the restrictions with the government’s obligation to pay for property it takes. When the servient tenement is condemned, the restrictions are extinguished, to