906 P.2d 1314 (Cal. 1995)
In the 1950s Joseph and Claire Stadler subdivided land into approximately sixty residential lots known as Skywood Acres.1 On June 5, 1958, they recorded a declaration expressing their desire to establish a general plan for the improvement and development of the property.2 The declaration subjected the property to conditions, restrictions, covenants, and reservations that would run with the land and bind all parties claiming under them, including limits to residential use only and restrictions on keeping animals.3
In 1977 Cowper-Hamilton Building, Inc. subdivided a four-lot tract known as the Friars subdivision.4 It recorded a declaration stating an intent to subject the property to mutual equitable covenants and servitudes for the protection and benefit of each property.5 The declaration limited use to single-family residences and prohibited commercial activities and animals other than household pets or horses.6
The Andersons acquired one lot from the Skywood Acres subdivision through a chain of title that began with a 1958 grant deed from the Stadlers.7 They acquired one lot from the Friars subdivision through a chain that began with a 1977 warranty deed from Cowper-Hamilton.8 No deed in either chain of title, including the original deeds, referred to the recorded declarations, although title insurance reports identified them.9
After purchasing the two adjacent parcels the Andersons entered a limited partnership to operate a winery under the name Chaine d'Or Vineyards.10 They obtained permits from the Town of Woodside to grow grapes and produce wine.11 The Andersons kept seven llamas on the property.12 Citizens for Covenant Compliance, an unincorporated association of homeowners in the two subdivisions, together with individual lot owners, filed suit against the Andersons to enforce the restrictions in both declarations.13 The suit alleged that the winery operation and the llamas violated the residential-use and animal limitations.14 The superior court entered judgment for the Andersons.15 The Court of Appeal affirmed.16 The Supreme Court of California granted review.17
Whether a declaration of restrictions recorded before any sales in a subdivision creates enforceable land-use restrictions on all lots when no deed in the chain of title references the declaration?18
If a declaration establishing a common plan for the ownership of property in a subdivision and containing restrictions upon the use of the property as part of the common plan is recorded before the execution of the contract of sale, describes the property it is to govern, and states that it is to bind all purchasers and their successors, subsequent purchasers who have constructive notice of the recorded declaration are deemed to intend and agree to be bound by, and to accept the benefits of, the common plan; the restrictions, therefore, are not unenforceable merely because they are not additionally cited in a deed or other document at the time of the sale.19
Yes. The Skywood Acres declaration recorded by the Stadlers on June 5, 1958, before any lots sold, expressed their desire to establish a general plan and stated that all conditions and restrictions shall run with the land and bind all parties claiming under them, including limits to residential use only and restrictions on animals.20 The Friars subdivision declaration recorded by Cowper-Hamilton on May 10, 1977, before any lots sold, stated an intent to subject the property to mutual equitable covenants and servitudes for the protection and benefit of each property, limited use to single-family residences, prohibited commercial activities and animals other than household pets or horses, and provided that each grantee accepts a deed subject to the covenants.21 The Andersons acquired one lot from each subdivision through chains beginning with those original deeds, none of which referenced the declarations, yet the rule deems purchasers with constructive notice from recordation to intend and agree to the common plan.22
The declarations therefore took effect upon the first conveyances and bind the Andersons' parcels as equitable servitudes and covenants running with the land.23
The recorded declarations create enforceable land-use restrictions on all lots in the subdivisions even without deed references.24
Related opinions on this issue
Justice Kennard dissents on the ground that the majority's rule dispenses with the statutory requirement of actual mutual assent between grantor and grantee.25 She explains that under Civil Code sections 1105 and 1113 an unrestricted grant deed conveys the grantor's entire fee simple estate free of encumbrances.26 A prior recorded declaration cannot unilaterally reserve servitudes because it is not itself a conveyance that creates or transfers an interest in land.27
Kennard concludes that the CC&Rs never came into existence because no deed expressed the joint intent required by Werner v. Graham and Riley v. Bear Creek, and that the majority's constructive-agreement theory violates settled real-property statutes.28
Whether subsequent purchasers whose deeds contain no reference to the recorded declaration are bound by the restrictions based solely on constructive notice from recordation?29
When a declaration of restrictions is recorded before any sales, subsequent purchasers are deemed to have constructive notice of its contents under the recording statutes, and the purchase of property with such notice evinces the buyer's intent to accept the burdens and benefits of the common plan, binding the purchaser even without additional reference in the deed.30
Yes. Both declarations were recorded in the chain of title before the original sales of the Andersons' parcels, and the Andersons' title insurance reports identified the Skywood Acres and Friars CC&Rs, establishing constructive notice.31 The rule holds that a purchaser who knows of the recorded restrictions takes the property with the understanding that it and all other lots are subject to them.32 The purchase evinces the buyer's intent to be bound, creating mutual servitudes at the moment of conveyance.33
Because the declarations stated the intent to bind successors and described the governed property, the Andersons are bound by the residential-use and animal restrictions despite the absence of any deed reference.34
Subsequent purchasers with constructive notice from recordation are bound by the restrictions even when their deeds contain no reference to the declaration.35
Whether any rule recognizing the enforceability of such recorded declarations applies retroactively?36
A decision of a court of supreme jurisdiction overruling a former decision operates retrospectively unless fairness or policy considerations dictate otherwise.37
Yes. The rule is applied to the 1958 Skywood Acres and 1977 Friars declarations even though they predate the decision, because the holdings of Werner and Riley involved either no recorded uniform plan at all or restrictions recorded after conveyance.38 The prior intermediate-court decisions had created a confusing pattern of enforceability that no one could reasonably have relied upon.39
The Andersons therefore cannot claim vested rights to operate a winery and keep llamas free of the restrictions, as the declarations became enforceable upon the original conveyances under the clarified rule.40
The rule recognizing enforceability of recorded declarations without deed references applies retroactively to the subdivisions at issue.41
Related opinions on this issue
Justice Kennard dissents from the retroactivity holding, arguing that giving the new rule full retroactive effect impairs vested rights in real property.42 She notes that before this decision purchasers could rely on settled law that a recorded declaration alone did not create enforceable restrictions unless referenced in at least one deed.43 Retroactivity will revive long-dormant restrictions on thousands of subdivided lots while potentially destroying others that had been enforceable under prior case law.44
Kennard concludes that the majority's refusal to limit the rule to prospective application violates the principle that new decisions should not impair contracts or property rights acquired under prior law.45