§8.6 - Termination and Equitable Defenses

• Jurisdiction: Washington

§8.6 TERMINATION AND EQUITABLE DEFENSES

Running covenants that do not include terms expressly limiting their duration generally have "an indefinite life, subject to termination by conduct of the parties or a change in circumstances which renders [their] purpose useless." Thayer v. Thompson, 36 Wn.App. 794, 797, 677 P.2d 787, review denied, 101 Wn.2d 1016 (1984) (citations omitted). A covenant that has not been terminated still may be rendered unenforceable through application of an equitable defense such as laches or acquiescence. Equitable defenses, unlike termination, typically serve only as a barrier to the availability of equitable relief; the covenant in question still may be enforceable under other circumstances.

(1) Termination

The circumstances under which running covenants can be terminated include merger, agreement of the parties, action by the government, abandonment, or changed conditions. See, e.g., St. Luke's Evangelical Lutheran Church v. Hales, 13 Wn.App. 483, 488, 534 P.2d 1379, review denied, 86 Wn.2d 1003 (1975).

(a) Merger

The doctrine of merger, which applies to easements, covenants, and equitable servitudes, recognizes the principle that "one cannot have an easement in one's own property." Id. (citations omitted). If the same person becomes the owner of both the benefited land (dominant estate) and the burdened land (servient estate), the covenant will be terminated by merger. Schlager v. Bellport, 118 Wn.App. 536, 539, 76 P.3d 778 (2003). The doctrine of merger, however, is "disfavored both at law and in equity," and consequently, the

courts will not compel a merger of estates where the party in whom the two interests are vested does not intend such a merger to take place, or where it would be inimical to the interests of the party in whom the several estates have united, nor will they recognize a claim of merger where to do so would prejudice the rights of innocent third persons.

Radovich v. Nuzhat, 104 Wn.App. 800, 805, 16 P.3d 687 (2001). In addition, once there is unity of ownership, a covenant can be recreated by express language in a subsequent conveyance. See id. at 805-06 (easement can be recreated by subsequent conveyance).

At least one Washington court has recognized the doctrine of partial merger. Schlager, 118 Wn.App. at 542. In Schlager, the court held that the covenant was extinguished by partial merger when the owner of the burdened property owned one of the dominant estates, but not the other. Id. at 542.

Practice Tip: Some care must be exercised in applying merger in subdivision circumstances. If one person acquires a number of the lots, but not all of them, merger may not apply to terminate the restrictive covenants because the other lot owners still own parcels benefited by them.

(b) Agreement of the parties

A servitude may be modified or terminated by agreement of the parties. See RESTATEMENT (THIRD) OF PROP.: SERVITUDES §7.1 (2000). One type of agreement frequently used to terminate servitudes is a release. RESTATEMENT (THIRD) OF PROP.: SERVITUDES §7.1 (2000). However, a party cannot unilaterally modify a servitude through an arrangement with a third party. Fawn Lake Maint. Comm'n v. Abers, 149 Wn.App. 318, 326, 202 P.3d 1019, review denied, 166 Wn.2d 1014 (2009). A release is the conveyance of the benefit of a servitude from the beneficiary to the servient owner. See id. §7.3. At least insofar as the release is deemed a transfer of an interest in land, it requires execution of a written deed. See id. ; RCW 64.04.010, .020. In a subdivision, where lot owners purchase in reliance on the "common plan," a release to terminate an individual restriction should not be effective unless all owners within the "common plan" who are benefited by the restriction join in its execution.

(c) Governmental action

In some instances covenants can be terminated by action of the government. Three situations in which this issue may arise are (1) condemnation of the burdened land, (2) a tax sale of the burdened land, and (3) enactment of a zoning ordinance conflicting with the covenant.

(i) Condemnation

When a governmental authority acquires land burdened by a covenant through exercise of its power of eminent domain, and the intended public use of the land is inconsistent with the terms of the covenant, the covenant will be extinguished. One issue that could arise in this context is whether the owners of the land benefited by the covenant are thus entitled to compensation; and if so, in what amount. If all lot owners benefited by the extinguished covenant are entitled to compensation based upon the depreciation of their land, eminent domain could become extremely costly for the government, especially in cases involving land in a large subdivision. For further discussion, see RESTATEMENT (THIRD) OF PROP.:SERVITUDES §7.8 (2000).

(ii) Tax sales

Washington's tax sale statute is of the "in rem" variety, which means that the purchaser at the tax sale generally acquires new title rather than derivative title subject to existing encumbrances. See Ch. 36.35 RCW. For discussion of an "in personam" type statute, in which the tax sale purchaser acquires derivative title, see Mason v. Loveless, 24 P.3d 997, 1003 (Utah App. 2001).

Washington recognizes an exception to the "in rem" rule: Title acquired at a tax sale is subject to easements and covenants (both restrictive and affirmative) of record. RCW 36.35.290; Clippinger v. Birge, 14 Wn.App. 976, 547 P.2d 871 (1976); City of Olympia v. Palzer, 107 Wn.2d 225, 229-30, 728 P.2d 135 (1986); Lake ArrowHead Cmty. Club, Inc. v. Looney, 112 Wn.2d 288, 294, 770 P.2d 1046 (1989). Accordingly, covenant holders are not entitled to receive notice of a tax sale because their interests are unaffected by the sale. In re King County, 117 Wn.2d 77, 91-92, 811 P.2d 945 (1991).

(iii) Zoning

The question of whether changes to zoning ordinances may "override the constitutional contractual rights of parties to a covenant" remains unanswered in Washington. Mains Farm Homeowners Ass'n v. Worthington, 64 Wn.App. 171, 180, 824 P.2d 495, aff'd, 121 Wn.2d 810 (1993); Hagemann v. Worth, 56 Wn.App. 85, 92, 782 P.2d 1072 (1989). The courts have stated, however, that private covenants cannot be the basis for denial of a zoning variance (though they can be the basis for a separate action to enjoin the use of land). Mains Farm, 64 Wn.App. at 180; Martel v. City of Vancouver, 35 Wn.App. 250, 257, 666 P.2d 916 (1983), superseded in part by statute, RCW 7.16.120(5), as recognized in Freeburg v. City of Seattle, 71 Wn.App. 367, 859 P.2d 610 (1993). The implication seems to be that if the covenant otherwise is still enforceable, it will not be terminated by a zoning ordinance or variance even if the covenant is directly conflicting.

The Restatement (Third) of Property: Servitudes indicates that a change in zoning alone does not justify modification or termination of a covenant unless the zoning makes it impossible to use the property for any purpose allowed under the covenants. RESTATEMENT (THIRD) OF...