Supreme Court At-a-Glance Contributor Katherine E. Hedges, An associate at Hage Hodes in Manchester practicing civil litigation and corporate law.

No. 2020-0370

Dec. 28, 2021

Affirmed in part, vacated in part, and remanded.

 

  • Whether a restriction in a deed created a right to reentry or a possibility of reverter; whether a right to reentry could still be transferable on the facts of this case; and whether a motion to amend a counterclaim to add a claim for declaratory relief regarding the enforcement of a restrictive covenant should have been granted.

 

A property was transferred containing a restriction that required a nine-hole golf course to be maintained and operated at the premises. If at any time the golf course was not operated for one year, the property was to, at the option of the grantor, revert to the grantor. The rights of the grantor were thereafter transferred to the defendant. Subsequently, the property was transferred again, and there was litigation over the property that did not resolve whether the defendant still had a reversionary interest in the property.

The plaintiff took title to the property thereafter and brought a petition to quiet title against the defendant, claiming that the conveyance of the grantor’s future interest in the property to the defendant was void. The plaintiff claimed that the reversionary interest was a right of reentry that was not freely transferable. The plaintiff also claimed that the defendant’s interest in the property, if any, violated the rule against perpetuities and was an unreasonable restraint on alienation. The defendant counterclaimed, seeking a declaration that it had a future interest in the property that was enforceable.

The parties filed cross-motions for summary judgment, and the defendant also filed a motion to amend its counterclaim, seeking to add a claim for declaratory judgment that it had the right to enforce its rights as a restrictive covenant. The trial court found that the interest held by the original grantor was a right of reentry that was not freely transferable. After the plaintiff’s motion for reconsideration, the trial court ruled the plaintiff held fee simple title to the property. The trial court also denied the defendant’s motion to amend, finding that because the grantor’s transfer to the defendant was void, the amendment failed to state a claim upon which relief could be granted. On appeal, the parties did not dispute which Restatement of Property applied, so the Court assumed without deciding that the Restatement (First) of Property would apply.

On appeal, the defendant argued that that the grantor of the restrictive covenant had created a possibility of reverter rather than a right of reentry, which could be freely transferable. Because it had not been asked to consider which version of the Restatement to adopt, the Court assumed that the possibility of reverter would be transferable inter vivos, while the right of reentry would not. The Court found that the deed was unambiguous and that the language in the restrictive covenant created a right to reentry rather than a possibility of reverter, because the property did not automatically revert to the grantor after it ceased being operated as a golf course. The grantor would have had to exercise its option to retake the land.

The defendant also argued that even if the interest retained by the grantor had been a right of reentry, it was still transferable. The Court found the provisions of the Restatement (First) of Property related to future interests that the defendant relied on were inapplicable. The Court also found that RSA 477:3-b did not provide for an ability to transfer rights of reentry.

The defendant also appealed the denial of its motion to amend to add another counterclaim for declaratory relief. The proposed counterclaim asked the court to declare that the defendant was a beneficiary of the golf-course restriction, the plaintiff continued to be bound by that restriction, and the defendant had standing to enforce the restriction. The Court agreed with the defendant that the original parties to the deed had intended to create an independently enforceable restrictive covenant, separate from the right to reentry. Based on the language of the deed, the Court found that the defendant may have obtained the right to enforce the golf-course restriction as a restrictive covenant. While the Court did not make a finding as to the defendant’s rights with respect to the restrictive covenant, it did find that it was improper for the trial court to deny the motion to amend only because it had found the right of reentry was not transferrable to the defendant. The Court remanded the case for the trial court to consider whether the amendment was necessary for the prevision of injustice and, if the amendment was granted, whether the defendant has a legitimate interest in enforcing the golf-course restriction.

 

Samantha D. Elliott (on the brief and orally) and Matthew V. Burrows (on the brief), Gallagher, Callahan & Gartrell, Concord, for the plaintiff.  Jeremy D. Eggleton, Orr & Reno, Concord, for the defendant. Gordon J. MacDonald, attorney general (Thomas J. Donovan, director of charitable trusts), filed no brief.