October 27, 2010 – Robert Dunning, Michelle Dunning, Don Marvel, Barbara Hau, Richard Goldman, Usun Goldman, Larry Wall, Betsy Wall, John Kern, Louise Kern, John Cullinan, and the Jeanne C. Compton Trust v. Nancy Buending and Penobscot Development Co., a New Mexico corporation, No. 28,836

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IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

Opinion Number:

Filing Date: OCTOBER 27, 2010

NO. 28,836

ROBERT DUNNING, MICHELLE
DUNNING, DON MARVEL, BARBARA
HAU, RICHARD GOLDMAN, USUN
GOLDMAN, LARRY WALL, BETSY
WALL, JOHN KERN, LOUISE KERN,
JOHN CULLINAN AND THE J EANNE
C. COMPTON TRUST,

Plaintiffs-A ppellants,
V.
NANCY BUENDING and
PENOBSCOT DEVELOPMENT
CO., a New Mexioo corporation,
Defendants-A ppellees.

APPEAL FROM THE DISTRICT COURT OF TAOS COUNTY
Sam B. Sanchez, District Judge

Natelson Law Firm

Jacob D. Caldwell

‘Taos, NM

for Appellants

Carol A. Neelley, P.C.
Carol A. Neelley
Taos, NM

for Appellee

OPINION
FRY, Chief Judge.
{1} 	Plaintiffs, the owners of nine lots in the Eastern Nighthawk Trail area of a
subdivision near Taos, New Mexico, appeal the district court’s entry of summary
judgment in favor of Defendant Nancy Buending, the owner of one lot in the same
area. 	Plaintiffs filed suit against Defendant for declaratory judgment, seeking
enforcement of a restriction allegedly prohibiting Defendant from subdividing her
property. Defendant filed a motion for summary judgment, arguing that the restriction
was unenforceable because Defendant had no notice of the existence of a common
development scheme at the time she purchased her property. 	The district court
granted summary judgment in Defendant’s favor, and Plaintiffs appeal. We reverse.
BACKGROUND
{2} 	In 1988, Edmund Lary formed two corporations, Penobscot Development
Company (Penobscot) and Cumberland Land Corporation (Cumberland), to own,
divide, and sell a 123-acre tract of property in Taos County, New Mexico. Lary was
the president and owner of both corporations. 	Through the two companies, Lary
acquired the majority of the 123-acre tract. Within the 123 acres was a 37.875-acre
tract on the eastern side of Nighthawk Trail, which the parties refer to as the Eastern
Nighthawk Trail tract (the Tract). Individually and through his two corporations, Lary

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then divided the 37.875 acres into thirteen individual lots. 	Of the thirteen lots,
Penobscot and Lary each owned four and Cumberland owned five. The entire 123-
acre tract was governed by a declaration of covenants (the Restriction) recorded on
July 15, 1988, that, among other things, provided that “no lot may be subdivided into
less than one acre.”
{3} 	In 1989, Defendant purchased a 4.2-acre lot in the Tract from Penobscot.
According to Defendant, when she entered into the purchase agreement for her
property, the real estate agent told her that she would be able to subdivide her 4.2-acre
lot into one-acre parcels, and she received written restrictions that reflected her ability
to subdivide. After closing, however, Defendant received a deed to the property in the
mail that contained a restriction prohibiting all subdivision. 	The warranty deed
provided to Defendant stated that it was “[s]ubject to patent reservations, restrictions,
easements, mineral rights, and water rights of record, if any, except that the
restrictions attached hereto as Exhibit B are substituted for those of record.” Contrary
to the recorded Restriction, the restrictions attached to the deed provided that “[n]o lot
may be subdivided.” 	According to Defendant, she called her real estate agent to
express her dismay and was told that the restriction in the deed “meant [that she]
would be able to subdivide if [she] lived on the property for more than three years.”
Defendant also attested that she visited the property three times prior to purchasing

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it and that none of the surrounding land had any improvements by which she could
have inferred that there was a plan for restriction other than the one-acre subdivision
limitation contained in the Restriction.
{4} 	According to the affidavit of one of Plaintiffs’ witnesses, Lary had expressed
a desire to prohibit subdivision in the Tract because he wanted to limit the density of
construction in that area due to the enhanced desirability of those lots. Of the thirteen
lots in the Tract, two comprised less than two acres each and thus, they could not be
subdivided further due to the one-acre subdivision limitation contained in the
Restriction. The deeds to three lots sold in 1989, including Defendant’s, contained
the restriction that expressly prohibited all subdivision. The remaining lots were all
sold after Lary’s death in 1990, and the deeds to those lots did not contain express
restrictions against subdivision. However, subsequent purchasers of lots in the Tract
were informed prior to their purchases that they could not subdivide their properties
and received copies of restrictions that reflected the prohibition on all subdivision.
{5} 	In 2000, Defendant sought and obtained a “corrected” warranty deed from
Penobscot that purported to revert the restrictions imposed by Defendant’s initial deed
back to the Restriction of record, thereby allowing Defendant to subdivide her
property into separate parcels as long as each parcel was at least one acre. Plaintiffs
filed suit seeking either to invalidate the corrected warranty deed or to reform the

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corrected deed and obtain a judicial declaration that Defendant is bound by the
prohibition against subdivision contained in her initial deed. Plaintiffs alleged that the
restriction in Defendant’s initial deed was intended to benefit the properties adjoining
and surrounding her lot and that the Plaintiffs relied on the existence of the restrictions
when they purchased property in the area. Plaintiffs contended they were told that this
restriction applied to all of the lots in the Tract and prohibited any subdivision.
{6} 	Defendant filed a motion for summary judgment, arguing that Plaintiffs were
seeking to enforce an implied restriction that existed solely by virtue of a common
plan of development and that she did not have actual or constructive notice of the
plan. Defendant contended that the only restriction in place at the time she purchased
her property was the Restriction’s prohibition on dividing lots into parcels smaller
than one acre and that there were no facts or circumstances putting Defendant on
notice that there was a common plan to completely prohibit subdivision. In response,
Plaintiffs argued that they were seeking to enforce the express covenant attached to
Defendant’s deed, not an implied covenant stemming from a common plan.
Following a hearing, the district court concluded that there were no issues of material
fact and that Defendant was entitled to a judgment as a matter of law. The court
entered summary judgment in favor of Defendant, and this appeal ensued.
DISCUSSION

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Standard of Review
{7} 	We review a district court’s decision to grant summary judgment de novo.
Maestas v. Zager, 2007-NMSC-003, ¶ 8, 141 N.M. 154, 152 P.3d 141. In doing so,
we view the facts in the light most favorable to the non-moving party and indulge all
reasonable inferences in support of a trial on the merits. Ocana v. Am. Furniture Co.,
2004-NMSC-018, ¶ 12, 135 N.M. 539, 91 P.3d 58. Summary judgment is appropriate
when, viewing the facts in the light most favorable to the non-moving party, there is
no genuine issue of material fact and the movant is entitled to judgment as a matter
of law. Id.
The Parties’ Arguments
{8} 	Defendant argues that summary judgment was appropriate because Plaintiffs
failed to show that there was a common development plan in existence at the time she
purchased her property that would have put her on notice of the restriction prohibiting
subdivision. 	Plaintiffs argue that summary judgment was improper because
Defendant failed to make a prima facie case for summary judgment. 	Specifically,
Plaintiffs contend that there are genuine issues of material fact regarding whether the
restriction in Defendant’s deed was intended to run with the land such that they are
entitled to enforce it. Plaintiffs argue that the fact that Defendant was not aware of
any neighborhood characteristics evidencing a common scheme or plan is irrelevant

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because Defendant had actual notice of the restriction on her property.
Servitudes versus Covenants
{9} 	As one commentator has aptly noted, “[t]he law of easements, real covenants,
and equitable servitudes is the most complex and archaic body of American property
law remaining in the twentieth century.” Susan F. French, Toward a Modern Law of
Servitudes: Reweaving the Ancient Strands, 55 S. Cal. L. Rev. 1261, 1261 (1982).
Because of this complexity, we begin our analysis of Plaintiffs’ appeal by attempting
to clarify the law of restrictive covenants and equitable servitudes in New Mexico.
Plaintiffs sued Defendant to enforce the covenant contained in Defendant’s deed. The
law relied on by both parties appears to use the terms “equitable servitude” and
“restrictive covenant” interchangeably. 	See, e.g., Lex Pro Corp. v. Snyder Enters.,
Inc., 100 N.M. 389, 390-91, 671 P.2d 637, 638-39 (1983) (using the test for an
equitable servitude to determine when “a restrictive covenant [runs] in equity”and
holding that the language created a restrictive covenant binding on the defendant);
Sharts v. Walters, 107 N.M. 414, 416, 759 P.2d 201, 203 (Ct. App. 1988) (noting that
the doctrine of implied reciprocal negative servitudes is also referred to as implied
restrictive covenants or equitable servitudes).
{10} 	Fortunately, the Restatement (Third) of Property: Servitudes recently clarified
that “[h]istorically, there were significant differences between real covenants and

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equitable servitudes” because the former were enforceable only at law and the latter
only in equity. Restatement (Third) of Property: Servitudes § 1.4, cmt. a (2000). The
Restatement explains that under modern law, “the differences between the two were
gradually reduced to the point where they made little difference in the world of land
development” and concludes that “[b]ecause continued use of the terms ‘real
covenant’ and ‘equitable servitude’ perpetuates the idea that there is a difference
between covenants at law and in equity,” those terms should be abandoned in favor
of the more accurate term, “covenant running with [the] land.” Id. (internal quotation
marks omitted). 	Because we see no practical distinction in our case law between
equitable servitudes and restrictive covenants that would necessitate the continued use
of separate terms, see Lex Pro, 100 N.M. at 390-91, 671 P.2d at 638-39, we adopt the
reasoning of the Restatement and conclude that the term “covenant running with [the]
land” is a more accurate description of these restrictions on the use of property.
Consequently, this appeal centers on whether the restrictions attached to Defendant’s
initial deed created an enforceable covenant running with the land.
{11} 	New Mexico case law sets out the following requirements to establish an
enforceable covenant running with the land: 	“(1) the covenant must touch and
concern the land[,] (2) the original covenanting parties must intend the covenant to run
[with the land,] and (3) the successor to the burden must have notice of the covenant.”

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Id. at 391, 671 P.2d at 639. The Restatement appears to have abandoned the first and
third requirements for a variety of reasons. 	See Restatement (Third) of Property:
Servitudes § 1.4, cmt. a (noting that “[t]he notice requirement of equity was never
significant in American law because constructive notice given by a recorded
instrument met the requirement, and the recording acts protected bona fide purchasers
without notice”); Restatement (Third) of Property: Servitudes § 3.2 (2000) (stating
that “[n]either the burden nor the benefit of a covenant is required to touch or concern
land in order for the covenant to be valid as a servitude”). 	However, because our
Supreme Court has not formally rejected the requirements set out in Lex Pro, we
analyze the evidence in this case in accordance with those requirements. See Aguilera
v. Palm Harbor Homes, Inc., 2002-NMSC-029, ¶ 6, 132 N.M. 715, 54 P.3d 993
(explaining that the Court of Appeals is bound by Supreme Court precedent).
Defendant Failed to Make a Prima Facie Showing Entitling Her to Summary
Judgment on Two Elements of a Covenant Running with the Land, and Plaintiffs
Established Material Issues of Fact on the Third Element
{12} 	Having established the elements of a covenant running with the land, we
consider whether summary judgment in favor of Defendant was appropriate.
Plaintiffs argue that Defendant failed to make a prima facie showing entitling her to
summary judgment because she “obfuscated the legal issue” central to the case. In the
district court and on appeal, Defendant relies exclusively on the contention that she

9
could subdivide her lot if she established that there was no general plan of
development of which she had notice that would give rise to an implied non-
subdivision restriction. We conclude that this contention begs the question of whether
the restriction in Defendant’s initial deed constituted a covenant running with the land.
{13} 	The existence of a general plan of development can be relevant to the
determination of whether an enforceable covenant running with the land exists in three
ways. First, a general development plan can be used to prove that the covenanting
parties intended a covenant to run with the land. See Rowe v. May, 44 N.M. 264, 272,
101 P.2d 391, 396 (1940) (noting that the inclusion of identical language in all deeds
in an area expressed the grantor’s intention that the restriction was for the benefit of
all lots in the area). Second, the existence of a common development plan can be used
to prove that a purchaser had notice of the covenant. Pollock v. Ramirez, 117 N.M.
187, 192, 870 P.2d 149, 154 (Ct. App. 1994) (explaining that, in the absence of actual
notice, if “the land in question exhibits a uniform appearance, and the property, along
with the buildings or other structures thereon, evidence a general plan or common
scheme of development, sufficient to place the purchasers upon notice of the plan or
scheme,” the purchaser is on inquiry notice of the existence of the restrictions). Third,
the existence of a common development plan can be used to impose restrictions on
parcels of land in a common development even if the restrictions have been omitted

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from the deeds of the property against which a party seeks to enforce the restrictions.
See Sharts, 107 N.M. at 417, 759 P.2d at 204.
{14} 	While the existence of a common development plan can be used to determine
whether a covenant is enforceable and whether a restriction applies to property in a
subdivision that is not expressly restricted, a covenant running with the land “does not
require a common scheme or plan.” 	Cypress Gardens, Ltd. v. Platt, 1998-NMCA-
007, ¶ 15, 124 N.M. 472, 952 P.2d 467. Instead, as we have explained, the covenant
will be enforceable if the covenant touches and concerns the land, if the original
parties intended the covenant to run with the land, and if the successor to the burden
is on notice of the covenant. Lex Pro, 100 N.M. at 391, 671 P.2d at 639 (analyzing
whether a restriction was intended to run with the land without considering whether
a common plan or scheme existed). Once the three requirements have been met, a
covenant may be enforced against the party who bears the burden of the covenant by
the party who receives the benefit of the burden. See Rowe, 44 N.M. at 267, 101 P.2d
at 393 (noting that surrounding property owners may enforce a covenant if it runs
within the land for the benefit of all property owners with a restricted area).
{15} 	Consequently, in order to establish her entitlement to summary judgment,
Defendant had to make a prima facie showing that one of the three requirements of an
enforceable covenant running with the land was absent. 	We conclude that either

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Defendant failed to make such a showing or Plaintiffs raised genuine issues of
material fact.
First Requirement: That the Covenant Touches and Concerns the Land
{16} 	With respect to the first element, determining whether the covenant touches and
concerns the land requires an objective analysis that focuses on the contents of the
covenant itself. Cypress Gardens, Ltd., 1998-NMCA-007, ¶ 8. A burden touches and
concerns the land if its performance renders the covenantor’s interest in the land less
valuable while rendering the covanantee’s interest in the land more valuable. Lex Pro,
100 N.M. at 391, 671 P.2d at 639. The restriction in Defendant’s initial deed by its
express terms placed a burden on Defendant’s interest in her property while placing
a benefit on Plaintiffs’ interest in their property. Defendant’s property is burdened by
the restriction prohibiting subdivision, and Plaintiffs are benefitted by being able to
enjoy a lower density of construction in their area. Defendant’s evidence established
only that she did not see anything in the area surrounding her lot suggesting that there
was a general plan limiting subdivision other than the one contained in the Restriction.
However, this absence of an observable general plan does not negate the express
language in the initial deed.
{17} 	Although Defendant’s arguments lack clarity, she appears to contend that the
only written restriction on the use of her property was that contained in the Restriction

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and that she can ignore the covenant included in her initial deed because of the
contrary representations made by her real estate agent prior to the delivery of the deed,
to the effect that Defendant would be allowed to subdivide her lot into one-acre
parcels. We fail to understand this contention, especially given the established law
that “[t]hough the terms of [a] deed may vary from those contained in the contract [to
convey], the deed alone must be looked to to determine the rights of the parties.”
Norment v. Turley, 24 N.M. 526, 529, 174 P. 999, 1000 (1918). 	In our view,
Defendant failed to make a prima facie showing that the covenant in the deed did not
touch and concern the land.
Second Requirement: That the Parties Intended the Covenant to Run with the
Land
{18} 	In assessing the second requirement, because the deed does not specify that the
covenant is to run with the land, we consider “the circumstances surrounding the
transaction and the object of the parties in making the restriction.” Lex Pro, 100 N.M.
at 391, 671 P.2d at 639. This requires us to consider whether both the burden and the
benefit of the covenant were intended to run with the land. 	Id. 	Defendant made a
prima facie showing that the grantor may not have intended the benefit of the
covenant to run with the land because all of the deeds to property in the Tract did not
contain the language Plaintiffs were seeking to enforce. Cf. Rowe, 44 N.M. at 272,
101 P.2d at 396 (noting that the inclusion of identical language in all deeds in an area

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expressed the grantor’s intention that the covenant was for the benefit of all lots in the
area).
{19} 	However, Plaintiffs presented evidence raising a question of fact on this
element. 	Specifically, Plaintiffs provided evidence that identical restrictions were
placed in the deeds to some of the lots surrounding Defendant’s lot and that
purchasers whose deeds did not contain the express restriction were told that they
were prohibited from subdividing. Further, Plaintiffs presented evidence that Lary
had expressly stated that he wanted the Tract to be bound by a restriction against
subdivision because of the unique layout of the land in that area and his desire to limit
the density there. 	This evidence raises a question of fact regarding whether the
grantor’s intent was to create a covenant running with the land.
Third Requirement: That Defendant Had Notice
{20} 	Finally, with respect to the third requirement, notice, Defendant’s primary
argument on appeal is that Plaintiffs failed to produce evidence that she had
knowledge of a common development plan at the time she purchased her property.
Defendant contends that knowledge of the plan is the “sin[e] qua non for enforcement
of a ‘common plan.’” Contrary to Defendant’s argument, however, “[w]hen a party
has actual notice, there is no legal need to imply notice from the existence of a
common scheme or plan.” Cypress Gardens, Ltd., 1998-NMCA-007, ¶ 15. Thus, if

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Defendant 	had 	actual 	knowledge 	of 	the 	covenant, 	it 	is 	irrelevant 	that 	the
characteristics of the neighborhood did not alert her to the fact that she was prohibited
from subdividing her property.
{21} 	Defendant acknowledges that the deed she received contained an express
restriction on her ability to subdivide her property. 	Despite this acknowledgment,
Defendant argues that she did not have actual notice of the restriction because her real
estate agent told her prior to the purchase that she could subdivide as long as the
ensuing parcels were not less than one acre each.
{22} 	As previously noted, “[t]hough the terms of the deed may vary from those
contained in the contract, the deed alone must be looked to to determine the rights of
the parties.” Norment, 24 N.M. at 529, 174 P. at 1000. Because the deed Defendant
accepted expressly stated that she was prohibited from subdividing her property,
Plaintiffs had a factual basis for arguing that Defendant had actual notice of the
covenant, despite her agent’s oral representations. As a result, Defendant failed to
make a prima facie showing that she did not have notice.
CONCLUSION
{23} 	For the foregoing reasons, we reverse summary judgment in favor of Defendant
and remand for proceedings consistent with this opinion.
{24} 	IT IS SO ORDERED.

WE CONCUR:

JAMES J. WECHSLER, Judge

TIMOTHY L. GARCIA, Judge

CYNTHIA A. FRY, Chief Judge

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