Joe and Jeri Gambrell bought roughly sixty-nine acres in Fayette County, subdivided it into four lots, sold three, and retained a twenty-one-acre lot. In 1992, they conveyed the disputed lot to Frank Foshee. The deed left blank its space for encumbrances, but an untitled, unsigned, undated page of restrictions was attached and recorded with it. The deed did not incorporate that attachment. The restrictions stated that they would run with the land for thirty years, bind all persons claiming under the parties, limit lots to residential use, and prohibit offensive or nuisance activity.
Foshee later sold the lot to Sonny and Carrie Nivens by a warranty deed stating that the land was unencumbered. But during the sale negotiations, Foshee's agent gave the restrictions to the Nivenses' agent, and the trial court found that the Nivenses had actual notice of them before purchasing. The Nivenses began building and operating a wedding chapel and commercial wedding facility, Car-ahills Estate. The Gambrells sued to enforce the residential-use restriction, seeking an injunction and damages.
The trial court initially granted the Nivenses summary judgment, then modified that ruling to hold only that the recorded attachment did not give constructive notice, leaving actual notice for trial. Following a bench trial, the court found actual notice and held the restrictions enforceable. It ultimately permanently enjoined commercial operation of the chapel, although it awarded no damages. The Nivenses appealed, also relying on a later mutual release signed by themselves and the owners of the other two sold lots.
Issue #1
Whether estoppel by deed barred the Gambrells from enforcing the restrictions because their deed to Foshee left the encumbrance provision blank while the later Foshee-Nivens deed stated that the property was unencumbered.
Holding
No. Estoppel by deed did not apply because the Nivenses had actual notice of the restrictions and therefore could not reasonably rely on any contrary recital in the deeds.
Reasoning
Estoppel by deed prevents a party to a deed, and that party's privies, from asserting rights inconsistent with material facts stated in the deed. The Nivenses relied on Patterson v. Cook, where a grantor who represented land was unencumbered was barred from later enforcing a restriction against the grantee. But Patterson involved the original parties to the conveyance and a grantee who could reasonably rely on the grantor's affirmative representation.
The facts here were materially different. Foshee, the original grantee, understood that his purchase was subject to the restrictions; his deposition confirmed that the restrictions were part of his agreement with the Gambrells and were intended to run with the land. More importantly, the trial court found that the Nivenses themselves had actual notice of the restrictions before the purchase, and they did not challenge that finding on appeal.
Reasonable reliance is essential to estoppel. A buyer who knows of a restriction cannot reasonably rely on the absence of a listed encumbrance in an earlier deed, or on a later warranty deed's statement that the property is unencumbered. The Nivenses' actual knowledge therefore defeated their estoppel-by-deed defense.
Issue #2
Whether the restrictions were enforceable against the Nivenses as an equitable servitude even though the attachment was unsigned, undated, unacknowledged, and not incorporated into the Gambrell-Foshee deed.
Holding
Yes. The restrictions created an equitable servitude enforceable against the Nivenses because the original parties agreed to them, they touched and concerned the land, they expressly were intended to bind successors, and the Nivenses took with actual notice.
Reasoning
The court agreed that the attachment was not legally part of the deed. Under Tennessee law, unsigned and undated material placed below a deed's signatures and acknowledgment does not become part of the deed merely because it is attached. Thus, the restrictions did not satisfy the formal requirements for enforcement as real covenants at law.
Equity, however, may enforce a land-use agreement against a later purchaser with notice even if the agreement does not create a valid real covenant at law. For an equitable servitude, the restriction must touch and concern the land, the original parties must intend it to run with the land and bind remote grantees, and the remote grantee must have notice.
The evidence established an actual agreement between the Gambrells and Foshee. Foshee testified that the restrictions formed part of the sale terms, that he understood his land to be burdened by them for thirty years, and that he never believed the property was unencumbered. The defect was therefore one of form in documenting the agreement, not a failure to prove the parties' substantive agreement.
The restrictions plainly touched and concerned the land because they governed its permitted use and the type of activity allowed on it. They also expressly declared that they would run with the land and bind all persons claiming under the original parties. Finally, the Nivenses had actual notice before accepting their deed. Actual notice is sufficient even when a restriction is not properly placed in the purchaser's chain of title.
The court analogized the case to Tulk v. Moxhay: equity prevents a purchaser with notice from using land in a manner inconsistent with the agreement made by that purchaser's predecessor. Permitting a known restriction to disappear simply because of a formal documentary defect would allow a purchaser with notice to obtain a greater right than the predecessor possessed.
Issue #3
Whether the Gambrells had to prove a common plan of development or show that their retained lot was similarly restricted before they could enforce the equitable servitude.
Holding
No. A common development plan was unnecessary on these facts because the Gambrells, as original covenanting grantors, sought enforcement of an express restriction that otherwise satisfied every substantive element of an equitable servitude.
Reasoning
The Nivenses argued that no equitable servitude could exist without a common development plan and without evidence that the Gambrells subjected their retained land to the same restrictions. They relied on cases involving reciprocal negative easements and enforcement among purchasers within a common development.
The court explained that a common plan serves particular purposes that were not implicated here. A plan may allow a court to imply restrictions on a grantor's retained land, permit one grantee to enforce restrictions against another grantee, or supply evidence that restrictions were meant to bind successors when the written language is otherwise incomplete.
This case did not require implication. The Gambrells were parties to the original agreement with Foshee and were enforcing Foshee's express promise against a remote grantee with actual notice. The written restrictions expressly stated that they would run with the land and bind successors and assigns. Thus, the evidence already established the intent that a development plan might otherwise help infer.
The cases denying equitable enforcement without a development plan involved substantive deficiencies, such as restrictions that did not indicate an intent to bind successors. Here, by contrast, the restrictions failed as legal covenants because of a formal defect: they were attached to but not incorporated into the deed. Since the substantive elements of an equitable servitude were independently proven, no inquiry into a common plan or identical restriction on the Gambrells' retained land was required.
Issue #4
Whether the restrictions were released or otherwise terminated by a mutual release signed by the Nivenses and the other two lot owners, or by the Nivenses' zoning exception.
Holding
No. The mutual release was ineffective without the Gambrells' assent, and the zoning exception did not terminate the private restrictions.
Reasoning
Restrictive covenants may be released only with the agreement of those for whose benefit they were imposed. The Gambrells were the direct and undisputed beneficiaries of the Foshee covenant because they were the original grantors and parties to the agreement. The Nivenses and neighboring lot owners could not extinguish the Gambrells' rights through a release that the Gambrells neither signed nor accepted.
The Nivenses also argued that the restrictions no longer served a useful purpose because they had received governmental permission to operate wedding services. But a change in zoning, standing alone, does not automatically eliminate a private restrictive covenant. In any event, there was no rezoning here; the Nivenses obtained only a special exception. That governmental approval did not displace the separately enforceable private residential-use restriction.