Rick split up his land and sold off lots with a covenant
that they'd only be used for single-family homes. He sold a lot to West
who built a home.
Unable to sell the remaining lots, Rick attempted to have
the area rezoned as an industrial zone. A buyer came forth, but West
refused to release the covenant so the deal fell through.
Rick then attempted to sell the land to a company trying
to build a new hospital, but again, West would not release the covenant.
Rick sued in order to get the covenant declared unenforceable.
The Trial Court found for West. Rick appealed.
The Trial Court found that there had not been any
substantial changes within the neighborhood nor within Rick's unsold
lots, so there was no reason to void the covenant.
The New York Supreme Court found for West.
The New York Supreme Court acknowledged that the land
would be a good location for a hospital, and that a hospital would
benefit the community.
However, the Court held that even if there is only one
member of a covenant that wants to enforce the covenant,
then it is still enforceable and protected by law.
West relied upon the covenant when deciding
whether or not to buy the home, so they have a right to continue to rely
upon them (equitable estoppel).
The Court found that this is not a matter of equity for
the hospital but for the landowner, as despite West's insistence in
remaining on the land, they deserve to be protected by the original covenant.
Rick unsuccessfully argued that maybe they could just pay
damages to West to get out of the covenant, but the Court found
that wasn't acceptable. That's similar to the idea in contract law about specific
performance.
Typically contract disputes involving land are solved
with specific performance. Monetary damages are usually not
considered sufficient.
Some States do allow monetary damages under certain
conditions.
In theory, West would be entitled to the diminished
fair market value of her house. So, if it was worth $200k before the
hospital was built and only $120k afterwards, she would be entitled to
$80k. But is that fair? Rick offered her a lot of money to sell and she
didn't. There was probably some sentimental value that is not
quantifiable.
Plus, what happens if her house's value increases? Does
she get $0 in damages?
The city had another option. They could have simply used eminent
domain and taken the land in question.
