Richart v. Jackson

Richart v. Jackson (98-157); 171 Vt. 94; 758 A.2d 319 

[Filed 26-May-2000]
[Motion for Reargument Denied 18-Jul-2000]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision  before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions, 
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that  corrections may be made before this opinion goes
  to press.


                                 No. 98-157


Frank and Barbara Richart, Fred and	         Supreme Court
Nancy Seigler, James & Peggy Sharp,
Mark and Claudia Pfaff, Paul and 
Catherine Arthaud, et al.
                                                 On Appeal from
     v.		                                 Chittenden Superior Court

Bryan S. Jackson and Nancy F. Jenkins	         March Term, 1999



Linda Levitt, J.

Douglas D. Le Brun of Dinse, Knapp & McAndrew, P.C., Burlington, for 
  Plaintiffs-Appellees.

Vincent A. Paradis and Daniel P. O'Rourke of Bergeron, Paradis & Fitzpatrick, 
  Essex Junction, for Defendants-Appellants.


PRESENT:  Amestoy, C.J., Dooley, Johnson and Skoglund, JJ., and Jenkins, 
          Supr.J., Specially Assigned


       SKOGLUND,  J.    Defendants appeal from a summary judgment of the
  Chittenden Superior  Court enforcing plaintiffs' right to the use and
  enjoyment of certain improvements located in a  common beach area on
  defendants' property, and requiring defendants to pay a share of the
  insurance  costs for the beach area and improvements.   Defendants contend
  the court erred in ruling that they  were bound by the terms of a
  Declaration of Conditions, Restrictions and Uses relating to the beach 
  area and improvements because: (1) the failure to record the Declaration
  prior to the conveyance of  their property to a predecessor-in-title
  extinguished any easements or covenants as applied to  defendants; and (2)
  the Declaration was recorded outside defendants' chain of title. 
  Plaintiffs have  cross-appealed, contending the court erred in failing to
  enforce a provision in the Declaration  requiring defendants to contribute
  to the overall maintenance costs of the beach-front improvements.  We
  affirm in part and reverse in part.   

 

       Defendants and plaintiffs own properties located in the Town of
  Charlotte.  All of the  properties in question derive  from a common
  grantor, J. Graham Goldsmith.  In 1986, Goldsmith   began to develop the
  property by dividing and selling lots.  The first eight developed lots
  comprised  Black Willow Farms Phase I.  Because not every lot had beach
  access to Lake Champlain, Goldsmith  granted to each Phase I lot that was
  sold an easement for a right-of-way leading to a common beach  area on two
  lots he continued to own.  Reference to this easement and right-of-way
  appeared in every  deed of the Phase I lots as they were sold.  The deeds
  provided: 

     Included herewith in common with others is an easement and right of 
     way over a ten foot wide pedestrian access trail as the same is shown 
     on the aforementioned Plan to provide access to the shores of Lake 
     Champlain, together with the use of a 60' x 60' beach area as shown 
     on the aforementioned Plan.

  Plaintiffs are the owners of five lots in Phase I of the subdivision and
  members of the Black Willow  Farms Homeowners Association.  The use
  easements encumber Lots 10 and 11 of what became  known as Black Willow
  Farms Phase II development.

       In March 1987, Goldsmith and the Association executed a Declaration
  that subjected the  access and beach area to several conditions,
  restrictions, and uses and recognized the Association's  right  to
  construct and maintain a ten-by-ten foot storage shed and to use, maintain,
  and store a fifty-foot dock.  The Declaration also required the owners of
  Lots 10 and 11 to each pay one-tenth of the  annual budget for maintenance
  of the area, including the purchase of general liability and 
  indemnification insurance.  For unexplained reasons, the Declaration was
  not recorded until March  17, 1992.

       On May 10, 1991, Goldsmith conveyed Lot 11 to Barry J. Mossman,
  defendants' predecessor- in-interest.  The 1991 warranty deed from
  Goldsmith to Mossman stated in part:

     The within parcel is subject to and has the benefit of a pedestrian 
     easement and right of way along the southerly boundary, in common 
     with others, in the area generally depicted on the Plat as "10 Foot 
     Wide Right of Way," and in the beach area on the within parcel as 
     generally shown on the Plat.

  Although the warranty deed contained the easement, no mention was made of
  the Declaration, and 

 

  Mossman did not recall receiving a copy of the Declaration or being aware
  of its existence. The  Association installed a dock in the beach area in
  the summer of 1992.   Thereafter, the dock was used  by residents to access
  boats during the summer, and was stored on land adjacent to the beach area 
  during the winter.  On May 31, 1994, Mossman conveyed Lot 11 by warranty
  deed to defendants.   The deed contained the same easement language that
  was in the Goldsmith-to-Mossman deed, but  again did not reference the
  Declaration.  

       A dispute arose between defendants and the Association over the
  applicability of provisions  in the Declaration, culminating in defendants'
  removal of the dock from their property.   Plaintiffs   thereupon filed a
  complaint against defendants, seeking a permanent injunction prohibiting 
  defendants from interfering with their use and enjoyment of the
  right-of-way, beach area, and dock.   Defendants filed an answer denying
  plaintiff's right to use the dock and storage area, and a  counterclaim
  seeking to enforce certain provisions of the Declaration against
  plaintiffs, including the  obligation to obtain general liability insurance
  to cover the common beach area and improvements.   The parties filed
  cross-motions for summary judgment.

       The court issued two separate decisions.   In the first, it ruled in
  favor of  plaintiffs' right to  use and maintain the shed and dock in the
  common beach area.  In the second, it ruled that  defendants were obligated
  to pay one-tenth of the cost of insurance for the common beach area and 
  structures thereon, but not the costs of construction and maintenance of
  the improvements.  Plaintiffs'  motion for reconsideration was subsequently
  denied, and these appeals followed.  

       In reviewing a grant of summary judgment, we apply the same standard
  as the trial court:   summary judgment should be granted when, taking all
  allegations made by the nonmoving party as  true, there are no genuine
  issues of material fact and the movant is entitled to judgment as a matter
  of  law.  See Madden v. Omega Optical, Inc., 165 Vt. 306, 309, 683 A.2d 386, 389 (1996).

       Defendants contest the court's ruling that their property was subject
  to plaintiffs' use and  enjoyment of the beach improvements.  The court
  grounded its decision on several theories. We  address only its conclusion
  that defendants were on inquiry notice of the improvements, as we find

 

  that ruling to be dispositive. (FN1)  Plaintiffs averred in their statement
  of undisputed material facts  that "[a]t the time the defendants purchased
  the Property, a dock existed on the beach easement, and  was in regular use
  by the owners of Black Willow Farms Phase I, including plaintiffs and their 
  predecessors-in-title."  Defendants' responsive statement disputed only the
  representation that the  dock was in "regular use" by plaintiffs.  Thus the
  existence of the dock at the time of defendants'  purchase was admitted and
  uncontroverted.  See V.R.C.P. 56(c)(2); Samplid Enters., Inc. v. First 
  Vermont Bank, 165 Vt. 22, 25-26, 676 A.2d 774, 776 (1996).   Based upon its
  finding that  "the dock  was in use at the time Defendants purchased the
  property," the court concluded that  "[d]efendants  should have been on
  inquiry notice" concerning plaintiffs' interest.   

       The principle of inquiry notice is a venerable one in Vermont.  We
  have explained the  concept as follows:

     [T]he courts of equity are vigilant . . . to see that . . . a purchaser 
     shall not be allowed to take any benefit resulting from any want of 
     care and watchfulness.  If there exist any circumstance of suspicion, 
     whereby he might be said to be fairly put upon his guard, and he 
     neglects to follow out the inquiry, he is affected with notice of all 
     facts, which such inquiry would have brought to his knowledge, and 
     if he purchases with his eyes shut, he acquires only the title of his 
     grantor impeded with its attendant equity.
      
  Hart v. Farmers & Mechanics Bank, 33 Vt. 252, 264-65 (1860).   This
  principle has been continually  reaffirmed  in Vermont and elsewhere.  See,
  e.g.,  Tomasi v. Kelley, 100 Vt. 318, 323, 137 A. 196,   198-99 (1927)
  ("The circumstances being such as then to put defendant on inquiry, he is
  chargeable  with notice of all such facts as his inquiry, had it been made,
  would have revealed."); In re Ryan, 851 F.2d 502, 507 (1st Cir. 1988)
  ("Inquiry notice follows from the duty of a purchaser, when he has  actual
  or constructive notice of facts which would lead a prudent person to
  suspect that another  person might have an interest in the property, to
  conduct a further investigation into the facts.");  Methonen v. Stone, 941 P.2d 1248, 1252 (Alaska 1997) ("It is well established that a purchaser
  will 

 

  be charged with notice of a interest adverse to his title when he is aware
  of facts which would lead a  reasonably prudent person to a course of
  investigation which, properly executed, would lead to  knowledge of the
  servitude."); Hall v. Allen, 771 S.W.2d 50, 53 (Mo. 1989) (en banc)
  (purchaser of  real estate is charged with notice of easement where
  existence of servitude is apparent upon ordinary  inspection of premises).

       The uncontroverted facts supported the court's finding that the dock
  was in use at the time of  defendants' purchase, and this finding supported
  the conclusion that defendants were on inquiry  notice of plaintiffs'
  interest.  See Methonen, 941 P.2d  at 1252 (purchaser "is considered
  apprised of  those facts obvious from an inspection of the property").   A
  diligent inquiry, in turn, would have  readily revealed the existence of
  the Declaration, which was discovered and disclosed in defendants'  own
  title insurance report.  Accordingly, it is immaterial whether, as
  defendants claim, the  Declaration was technically outside their chain of
  title, as defendants were not bona fide purchasers  without notice.  See
  Hemingway v. Shatney, 152 Vt. 600, 602-604, 568 A.2d 394, 396 (1989) 
  (Vermont is "notice" state and timing of recording affects only rights of 
  subsequent purchaser  "without actual or inquiry notice"); see also Hall,
  771 S.W.2d  at 53  (although easement was not  recorded in defendants' chain
  of title, ordinary inspection would have revealed existence of boat dock 
  and footpath leading to it, and thus defendants may "properly be charged
  with notice of a servitude in  favor of the plaintiffs").

       While not disclaiming knowledge of the dock and shed, defendants
  nevertheless argue that  plaintiffs' interest in the use of these
  improvements was extinguished when defendants purchased  their lot from a
  predecessor-in-title who had no notice of plaintiffs' interest when he
  purchased the  property.  The argument is premised on a doctrine known as
  the "shelter rule," which generally  provides that "[o]ne who is not a bona
  fide purchaser, but who takes an interest in property from a  bona fide
  purchaser, may be sheltered in the latter's protective status."  Sun Valley
  Land & Minerals,  Inc. v. Burt, 853 P.2d 607, 613 (Idaho Ct. App. 1993) ;
  see also Reiner v. Danial, 259 Cal. Rptr. 570,  574  (Cal. Ct. App. 1989)
  (successors in interest to bona fide purchaser entitled to receive same 

 

  protection against unrecorded encumbrance; any knowledge by successor
  irrelevant).  Because  defendants' predecessor, Mossman,  purchased prior
  to the recording of the Declaration, defendants  claim that it cannot be
  enforced against them.

       The premise of the argument is flawed, however, as the record does not
  support the  conclusion that Mossman lacked notice of plaintiffs' interest. 
  Although he purchased the property  one year before the Declaration was
  recorded, the Goldsmith-to-Mossman deed plainly referenced  the existing
  easement in favor of plaintiffs in the "beach area."   While the deed did
  not specify the  permitted uses of the beach area, the record demonstrates
  that a dock and shed for swimming and  boating purposes were fully
  compatible with the parties' intentions.  See Directors of Seasons on 
  Mount Snow Owners Ass'n v. Seasons Assocs., 166 Vt. 618, 618, 693 A.2d 735,
  737 (1997) (mem.)  (character of easement depends upon intent of parties). 
  The deed to Mossman referenced a State  land use permit which noted that a
  variety of moorings and docks existed along the shoreline of the  area; the
  Declaration underscored the parties' understanding that a dock and shed
  were compatible  with the beach easement; and the dock was installed a year
  after Mossman's purchase and remained  in seasonal use thereafter without
  objection.  Accordingly, we are not persuaded that Mossman was a  bona fide
  purchaser without notice of plaintiffs' interest. (FN2)

       We hold,  therefore, that the court correctly enforced plaintiffs'
  right to the use and enjoyment  of the beach area and improvements.  

       In their cross-appeal, plaintiffs challenge the court's separate
  ruling that the provisions of the 



  Declaration requiring defendants to pay one-tenth of the costs of
  maintaining and insuring the beach  area and improvements constituted
  restrictive covenants which were unenforceable because  defendants had
  succeeded to Mossman's status as a bona fide purchaser without notice.
  (FN3) As  discussed above, the premise of the court's ruling was flawed, as
  Mossman was not a bona fide  purchaser without notice.  Furthermore, as
  noted, a diligent inquiry about the dock would have  readily revealed
  plaintiffs' interest.  Accordingly, we conclude that defendants were on
  notice of, and  subject to, the terms of the Declaration requiring their
  contribution of one-tenth of the annual budget  for the beach area and
  improvements.  

       That portion of the judgment enforcing plaintiffs' right to the use
  and enjoyment of the beach  area and improvements is affirmed.  That
  portion of the judgment declining to enforce defendants'  obligation under
  the Declaration to contribute one-tenth of the annual budget for the beach
  area and  improvements is reversed; plaintiffs may enforce defendants'
  obligation under the Declaration.


                                       FOR THE COURT:



                                       _______________________________________
                                       Associate Justice



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                                  Footnotes


FN1.  The court also ruled, without elaboration, that "[b]ecause the
  Declaration was recorded before  the conveyance to Defendants, the
  Defendants are charged with constructive notice of the easements  contained
  therein." 
       
FN2.  While it was not a basis of the court's ruling, this conclusion would
  equally support a finding  that defendants were also on notice of
  plaintiffs' interest pursuant to the beach-access easement in  their deed. 
  Although the court briefly noted that it would not "imply a right to
  maintain a shed and  dock from the language of the deeds,"the court was not
  considering the record as a whole, which  demonstrated indisputably that
  the improvements were within the scope of the beach easement. See  Hutner
  v. Kellogg, 563 N.E.2d 1338, 1339-40 (Ind. Ct. App. 1990) (finding that
  parties intended  lakeshore easement to include right to construct and
  maintain pier for swimming and boating  purposes); Badger v. Hill, 404 A.2d 222, 226 (Me. 1979) (evidence supported conclusion that  easement granting
  access to river included right to construct and maintain dock); but see
  Edwards v.  Fugere, 130 Vt. 157, 162-63, 287 A.2d 582, 586-87 (1972)
  (evidence did not support conclusion that  original grantor's reservation
  of right-of-way to lake included use of dock).     
  
FN3.  The court nevertheless ordered defendants to contribute one-tenth of
  the costs of insurance  under an unjust enrichment theory.