MAY LUO v. CITY OF BOSTON

May Luo (Plaintiff) filed this action for declaratory judgment pursuant to G. L. c. 231A, on July 25, 2016, seeking a declaration that certain deed restrictions (Restrictions) imposed on her property located at 187 Calumet Street in Boston (Premises), are invalid. She argues the Restrictions violate public policy by imposing an unreasonable restraint on alienation. Defendant the City of Boston (City) moved for summary judgment on August 30, 2017, asserting that the Restrictions serve rational and legitimate purposes and are valid and enforceable against Plaintiff as a matter of law.

The summary judgment record includes a statement of material facts filed by the City and Plaintiff's responses to those facts, in which she admits each asserted fact, except one (number 18), which is not material to this motion. In her response, Plaintiff included four additional facts/conclusions of law to which the City did not respond. While taking them into consideration, this court finds they are not material to the sole issue before the court on summary judgment. Following review of the record and taking into consideration the arguments at the hearing held November 28, 2017, this court determines that the City is entitled to summary judgment in its favor. A judgment will issue, validating the Restrictions under the facts presented by this case.

The uncontested record establishes the following material facts:

On or about August 19, 1991, the City conveyed the Premises, comprising 4,428 square feet, to Robert M. Kean for consideration of $2,790 (Kean Deed). [Note 1] At the time of the conveyance, Mr. Kean owned the property known as and numbered 236 Parker Hill Avenue, abutting the Premises (Parker Ave Property). The Kean Deed provided that the Premises were conveyed subject to restrictions "for the benefit and use of the owner(s) (which term shall include their heirs, devisees, administrators, executors, legal representatives, successors and assigns)" of the Parker Ave Property. The "open space" restriction required that the Premises "be used and maintained for open space purposes, including but not limited to, gardening, landscaping and off-street residential parking." The "no-build restriction" mandated "no structures are to be erected, constructed, or installed upon the premises, whether permanent or temporary in nature; provided however, notwithstanding any term [or] provision to the contrary contained herein, the Grantee may [construct] upon the premises an addition to the existing dwelling unit located at [the Parker Ave Property]" (collectively, Restrictions).

According to the Affidavit of Sheila Dillon, Director of the City's Department of Neighborhood Development (DND), the conveyance to Mr. Kean was part of the City's "Yard Sale Program", previously known as the "Abutter Lots Program," under which the City conveyed small parcels of land to abutting Boston residents with the Restrictions limiting the use of such land to open space purposes. The purpose of the program was to retain "the public benefits of open space in and of itself" as well as "the preservation of reasonable density in Boston neighborhoods." The nominal sales price for the Premises reflected the reduced value of the lot due to the existence of the Restrictions.

In connection with the Kean Deed, Mr. Kean executed a mortgage on the Premises in favor of the City, securing his compliance with the Restrictions (Kean Mortgage). In it, he covenanted and agreed on behalf of himself (and his heirs, assigns, devisees, administrators, executors, legal representatives, successors and assigns) "to perform all of the covenants, restrictions, and conditions contained or referenced in this Mortgage, the Purchase and Sale Agreement and the Deed, the terms of which are expressly incorporated" into the Kean Mortgage. The Kean Mortgage contained a statutory power of sale in the event Mr. Kean defaulted in the performance of or breached any of the covenants and agreements contained in the Kean Mortgage, "the Purchase and Sale Agreement and the [Kean] Deed." Further, the Kean Mortgage provided that it could be assigned to or assumed by a successive owner of the Premises "only upon the express prior written consent of the [City]."

On or about March 10, 2010, the City gave its consent to the conveyance of the Premises from Mark G. Kean, Executor of the Estate of Michael R. Kean (a/k/a Robert Kean a/k/a Robert M. Kean) to Plaintiff. Plaintiff's deed (Luo Deed) [Note 2] sets forth the same Restrictions contained in the Kean Deed, but provides expressly that they benefit "the City of Boston." This language replaces the language in the Kean Deed that the Restrictions benefit "[the owner(s) of the Parker Avenue Property]."

Like Mr. Kean, Plaintiff granted a mortgage (Luo Mortgage), [Note 3] in which she covenanted and agreed to perform covenants, restrictions, and conditions in the Kean Deed. Through the express language of the Luo Mortgage, Plaintiff binds herself and her "heirs, devisees . . . successors and assigns" to the open space and no-build restrictions set forth in the Kean Deed. As in the Kean Mortgage, the Luo Mortgage contains a statutory power of sale in the event Plaintiff defaults in the performance of any of the covenants or agreements. The stated consideration for the Luo Deed was one dollar ($1.00) paid to the Executor of Mr. Kean's estate.

Summary Judgment

Pursuant to Mass. R. Civ. P. 56(c), summary judgment is appropriate when there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Plaintiff asserts the Restrictions are invalid under the Restatement Third, § 3.1. [Note 4] She asserts that the City's interest in preserving open space is irrational given the fact that building a conforming two-family residential structure on the Premises will increase the housing stock and the real estate tax base, both of which outweigh any public benefit in maintaining the premises in an un-built state. Further, Plaintiff argues any unjust enrichment she would gain from buying the Premises for One Dollar because it was encumbered by the Restrictions is outweighed by the benefit to the City's housing inventory and increased tax base. [Note 5] The city argues that the Restrictions for open space, including the no-build requirement, are valid and do not violate public policy by imposing an unreasonable restraint on alienation. This is a question of law that is ripe for summary judgment on the record presented.

I. The Restrictions Are Not Invalid Under Sections 3.4 and 3.5 of the Restatement (Third) of Property (Servitudes).

For a covenant to run with the land, it must 1) be evidenced in a writing signed by the covenantor; 2) express the covenantor's intention that the covenants run with the land; 3) grant, in the deeds, mutual easements sufficient to satisfy the requirement that the parties be in privity of estate; and 4) have both the benefit and the burden of the covenant "touch and concern" the affected parcels of land. G. L. c. 184, § 27; Well-Built Homes, Inc. v. Shuster, 64 Mass. App. Ct. 619 , 626 (2005), citing Whitinsville Plaza, Inc. v. Kotseas, 378 Mass. 85 , 90 (1979).

The requirements of Well-Built are met by the instruments constituting the summary judgment record. When the City conveyed the Premises to Plaintiff's predecessor-in-title, Mr. Kean, the Kean Deed contained the Restrictions (including covenants). They were recited in the Kean Mortgage, signed by Mr. Kean. When the executor of his estate conveyed the Premises to Plaintiff in 2010, the Premises were expressly subject to the same Restrictions. Moreover, the Luo Mortgage, granted by Ms. Luo to the City, contained the same agreements originally found in the Kean Mortgage: to perform all covenants, restrictions and conditions in the Kean Deed.

Mr. Kean and Plaintiff each had notice of the Restrictions and agreed to abide by them. The City, Mr. Kean, and Plaintiff are in privity of estate, as the City sold the Premises to Mr. Kean, and Mr. Kean (through his estate) conveyed to Plaintiff. Mr. Kean and Plaintiff each executed mortgages in favor of the City to secure compliance with the Restrictions, and the mortgages were recorded. The Kean Mortgage bound his heirs, devisees, administrators, executors, legal representatives, successors and assigns (of which Ms. Luo was one), indicating an intent and knowledge that the Restrictions run with the land. In addition to being bound by the Restrictions in her Deed, Ms. Luo executed the Luo Mortgage when she received the Luo Deed for nominal consideration of one dollar.

The Restrictions also relate directly to the use of the Premises, burdening the Premises by prohibiting certain development and preserving open space for the benefit of the neighborhood. Accordingly, the Restrictions "touch and concern" the land. [Note 6]

a. Direct Restraint on Alienation

Plaintiff argues the Restrictions are invalid as a matter of public policy because they constitute an unreasonable restraint on alienation under §§ 3.4 and 3.5 of the Restatement (Third) of Property (Servitudes) (2000) (Restatement). Section 3.4 governs "Direct Restraints on Alienation," such as absolute prohibitions on some or all types of transfers, transfers without another's consent or to a particular person, options to purchase and rights of first refusal. Section 3.4 states that direct restraints on alienation like these listed "[are] invalid if the restraint is unreasonable. Reasonableness is determined by weighing the utility of the restraint against the injurious consequences of enforcing the restraint."

The following factors, though not dispositive, support a conclusion that a restraint on alienation is reasonable: "1) the one imposing the restraint has some interest in land which he is seeking to protect by the enforcement of the restraint; 2) the restraint is limited in duration; 3) the enforcement of the restraint accomplishes a worthwhile purpose; 4) the type of conveyances prohibited are ones not likely to be employed to any substantial degree by the one restrained; 5) the number of persons to whom alienation is prohibited is small." Franklin v. Spadafora, 388 Mass. 764 , 766 (1983), citing Restatement (First) of Property § 406 comment i (1944).

Here, the Restrictions are imposed by the City, former owner of the Premises, which, as original grantor to Mr. Kean, and as the benefitted party under the Yard Sale Program, has an interest in the land; the Restrictions serve the worthwhile purpose of conserving open space; and pertain to a small number of abutting property owners who have purchased properties from the City under the program. Because the Restrictions are not unreasonable, this section is not applicable. The nominal consideration of one dollar paid by Plaintiff for the Premises recognizes the entirety of the program through which Plaintiff was able to purchase the Premises for nominal consideration.

b. Indirect Restraint on Alienation

Under Section 3.5, Comment (d) of the Restatement:

[u]se restrictions on property are valid even though they severely reduce the value of the property, so long as there is some rational justification for the restriction. Use of property for open space, protection of views, historic preservation, and conservation of habitat for plants and animals provides a rational justification for restrictions that severely limit the value and potential market for property. Limitations on use of property to serve various governmental and charitable purposes are also generally valid so long as the limitations are rationally related to serving a legitimate purpose.

Section 3.1, Comment (j) further provides:

[a]bsent extraordinary circumstances, if a servitude serves some purpose that the purchasers might rationally have agreed to, and its meaning should have been apparent to the purchasers, a court should not invalidate it simply because the court believes that most people would not have agreed to it, or that it produces little benefit.

The meaning and import of the Restrictions were apparent on the face of both the Kean and Luo Deeds, each reciting nominal consideration and referencing the Restrictions. Ms. Luo expressly secured her performance under the Restrictions by executing a mortgage in favor of the City. Their purpose – preserving open space and reasonable density – is one to which a rational purchaser may have agreed. See 135 Wells Avenue, LLC v. Hous. Appeals Comm., 478 Mass. 346 , 360 (2017) (describing the protection of certain areas as "open space" as a benefit). This is particularly so where, as here, Ms. Luo paid only one dollar consideration and is permitted to build within the open space in the event she wanted to add to her residential structure on her abutting property. Accordingly, the Restrictions are permissible under Section 3.5.

II. The Restriction in Favor of the City of Boston is Valid.

Plaintiff argues that the difference in the language between the Kean Deed and the Luo Deed affects the validity of the Restrictions. In the Luo Deed the Restrictions "are for the benefit and use of the City of Boston," rather than for the benefit and use of "the owner(s) of 236 Parker Hill Avenue," as set forth in the Kean Deed. This court concludes that, given the totality of the circumstances, the difference is not material, as the set of documents executed in the context of the City Yard's program are not misleading, and Mr. Kean's Executor recognized that the City was the holder of the Restrictions under the Kean Deed and Mortgage. This case presents a situation "where instruments might have been drafted with greater precision but where particular covenants nonetheless were deemed to run with the land." Well-Built Homes, 64 Mass. App. Ct. at 628. Further, "restrictions have to be construed with a view of avoiding results which are absurd, or inconsistent with what was meant by the parties to or the framers of the instrument." Kline v. Shearwater Assn., Inc., 63 Mass. App. Ct. 825 , 831 (2005).

The Restatement allows for the creation of a servitude benefitting a third party, pursuant to § 2.6, Comment (c) and Comment (e). Comment (c) provides

[d]epending on the nature and object of the arrangement, the parties may create servitudes whose benefits will be held personally, in gross, or appurtenant to another interest in land . . . . The parties may create servitude benefits to be held by many different holders in different capacities, concurrently and successively. . . . [T]here are no limits on the kinds or combinations of servitude benefits that can be created.

Given the context evident from the record, such as the City Yards program, coupled with the nominal consideration for the Luo deeds and the express provisions of their mortgages in favor of the City, setting forth the Restrictions, it is clear that the City of Boston is a third-party beneficiary to both deeds. Under the City's Yard Sale Program, through which the City conveyed small parcels of land to abutting Boston residents with the Restrictions limiting the use of such land to open space purposes for the benefit of the neighborhood and the purchaser, while allowing limited expansion of the grantee's property through additions to their houses.

Comment (e) further provides "the parties to a transaction creating a servitude may freely create benefits in third parties, whether the servitude is a covenant, easement, or profit . . . . A servitude benefitting a third party may be created in a document that simultaneously conveys the burdened estate to another." Section 2.6 is new, and incorporates several sections from the Restatement (First) of Property and the Restatement (Second) of Contracts. Specifically, comment (e) is based on § 302 of the Restatement (Second) of Contracts, "Intended and Incidental Beneficiaries."

While Massachusetts generally does allow a property owner to create an equitable easement or restriction in favor of land owned by a stranger, Hodgkins v. Bianchini, 323 Mass. 169 , 172 (1946), citing Hazen v. Mathews, 184 Mass. 388 , 393 (1903), and has not fully adopted the law set forth in Comment (e), above, it does recognize the validity of covenants and restrictions in favor of third party beneficiaries in certain circumstances, such as those created in connection with a common scheme in a residential subdivision. Also, there is recognition of the validity of restrictions for open space purposes.

The Restrictions contained in the Kean and Luo deeds and mortgages are similar to conservation restriction, though not covered by the relevant statutory scheme. A conservation restriction is defined in G. L. c. 184, § 31: "[a] conservation restriction means a right, either in perpetuity or for a specified number of years . . . to retaining land . . . predominantly in [its] natural, scenic or open condition . . . ." The Restrictions in the Kean Deed and the Luo Deed state that the Premises are to be used and maintained for "open space purposes," and also limit the construction of any structures other than an addition to the adjacent properties in the same ownership. [Note 7] The additional restriction that the Premises cannot be cannot be severed and conveyed to someone who is not also the owner of the Parker Ave Property, as Ms. Luo is, is reasonable and serves the valid goals of the Yard Sale program.

There is nothing about the operation of the City's Yard documents that offends public policy, as alleged by Plaintiff, therefore this court rules the Restrictions are not void as a matter of public policy. Plaintiff purchased the Premises for one dollar, as only an abutter to the Premises had the right to do under the program; she took title through a deed that expressly referenced the Restrictions to which the Premises were subject at the time of her acceptance of the Luo Deed; and she covenanted and promised to adhere to the Restrictions by executing the Luo Mortgage in favor of the City to secure her performance under the Restrictions.

Accordingly, the City's motion for summary judgment is ALLOWED.

Judgment to enter accordingly.