Relating to Real Estate

In Dumbarton Improvement Association, Inc. v. Druid Ridge Cemetery Company, 434 Md. 37, 73 A.3d 224 (Aug. 22, 2013), the Maryland Court of Appeals held that a restrictive covenant dating back to 1913 on a 200 acre tract of land was clear and unambiguous and that radically changed demographic and economic circumstances did not render the restrictive covenant unenforceable.
Druid Ridge Cemetery Company (“Druid Ridge”) entered into a contract to sell approximately 36 acres of approximately 200 acres owned by it as part of its cemetery operations. The purchaser intended to develop the 36 acres as semi-detached residences.
Neighboring community associations initiated an action in the Circuit Court for Baltimore County alleging that the proposed development violated the restrictive covenant contained in the 1913 Deed which transferred the 200 acres to Druid Ridge. That covenant required that the property be “maintained and operated as a cemetery.” Druid Ridge and the purchaser argued that the covenant was ambiguous and, alternatively, that radically “changed circumstances” with respect to the property and the cemetery industry rendered the restrictive covenant ineffective and unenforceable.
The Baltimore County Circuit Court found in favor of Druid Ridge and the purchaser, holding that the language of the restrictive covenant was ambiguous and that the changed circumstances in the area surrounding the cemetery rendered the covenant ineffective and unenforceable. The Maryland Court of Special Appeals affirmed the Circuit Court ruling.
In an opinion written by now retired Chief Judge Robert Bell, the Court of Appeals reversed the decisions of the Circuit Court and the Court of Special Appeals, holding that (1) the language of the restrictive covenant was unambiguous, and (2) the nexus between the changed circumstances and the unambiguous purpose of the restrictive covenant was not sufficient to render the restrictive covenant unenforceable.
Unambiguity
Judge Bell found that the analysis of the trial court in holding the restriction to be ambiguous was flawed for two reasons. First, an ambiguity in the actual restrictive language used by the parties must be identified before consulting and introducing extrinsic evidence. Second, once an ambiguity in the restrictive language has been identified, any extrinsic evidence should be used only to resolve that ambiguity. These principles precluded using extrinsic evidence to interpret the restrictive covenant because its wording so clearly required that the property was to be maintained and operated only as a cemetery. The absence of such factors as a reasonable time limit on the restrictive covenant or the application of the covenant on only a certain portion of the property originally burdened by the restrictive covenant did not render it ambiguous or otherwise diminish its continued effectiveness.
The fact that the cemetery company had previously conveyed certain portions of the cemetery property to other parties for non-cemetery uses and those parties so used the property conveyed was found by Judge Bell to be only evidence that the covenant had been violated on several occasions. Because “a burdened party cannot waive an obligation through non-compliance and there was no evidence that the plaintiffs seeking to enforce the covenant waived its enforcement,” Judge Bell concluded that, as a matter of law, the restrictive covenant, as written, clearly and unambiguously restricted the use of the 200 acres for only a cemetery.

Changed Circumstances
In response to Druid Ridge’s alternative argument that, even if the restricted covenant is unambiguous and was intended to preclude the use of any portion of the original 200 acres for any activity other than a cemetery, changed circumstances such as the surrounding demographics and land uses, changing trends in the cemetery industry, and fiscal pressures on cemeteries, should render the covenant as unenforceable, Judge Bell held that there must be a determination that the relevant changes are so radical that the covenant cannot achieve the purpose for which it was created in order to render it unenforceable.
For changed circumstances to render the restrictive covenant unenforceable, such circumstances must be of a magnitude that they clearly and demonstrably frustrate the ability of the covenant to achieve the purpose expressed in its language or affect its ongoing validity. Mere hardship or inconvenience in complying with the clear stated intent and purpose of the restrictive covenant will not render it unenforceable.
Judge Bell rejected Druid Ridge’s argument that it would be in a better financial condition to maintain the balance of the cemetery for cemetery use as intended by the restrictive covenant by selling the 36 acres to the purchaser, concluding that ensuring the best fiscal outcome is not the test for the ongoing validity of a covenant.
Judge Bell did recognize that due to the increase in government regulation of land use, especially of wetlands, the use of the property as a cemetery might be impractical. However, impracticality or economic hardship is not sufficient to render the restrictive covenant unenforceable unless it is clearly demonstrated that the requisite governmental permits for use of the property as a cemetery cannot be obtained or that the high costs of complying with the governmental regulations cannot be recovered.
Practice Note
In conclusion, the Dumbarton holding clearly raises the bar for owners of property seeking relief from a burdensome, and perhaps no longer seemingly appropriate or useful, restrictive covenant. Absent clear and demonstrable evidence that the intent and purpose of the restrictive covenant cannot be achieved, and notwithstanding changed surrounding demographics or uses, different industry circumstances, and/or more costly fiscal factors, the restrictive covenant is likely to be held as being effective and enforceable.
For questions about this, please contact Tim Chriss at (410) 576-4237.