North Bay Avalon, Lllp v. Speedway, LLC
797 S.E.2d 610
Ga. Ct. App.2017Background
- In May 2002 Speedway SuperAmerica, LLC conveyed property at Bouldercrest Rd. & I-285 and included recorded deed restrictions limiting use as a truck stop for 25 years and restricting sale of certain fuel brands for 15 years; the deed stated the restrictions were covenants running with the land.
- North Bay Avalon, LLLP purchased the property in 2013 with actual notice of the recorded restrictive covenants.
- Two months after purchase North Bay filed a quiet-title action seeking removal of the restrictive covenants from its chain of title.
- Speedway (the grantor) no longer owned the burdened or adjacent property but sought to enforce the covenants as a beneficiary.
- The trial court held the covenants run with the land and that Speedway has standing because the covenants confer a competitive advantage; it also rejected North Bay’s argument that the covenants are unconstitutional restraints on trade.
Issues
| Issue | Plaintiff's Argument (North Bay) | Defendant's Argument (Speedway) | Held |
|---|---|---|---|
| Enforceability of restrictive covenants | Covenants unenforceable because benefits are held in gross and prior Georgia cases won’t enforce such covenants | Covenants concern land use and are enforceable in equity against purchasers with notice regardless of technical running of benefits | Covenants enforceable in equity; enforceable against purchaser with notice whether called running or equitable servitude |
| Standing to sue to enforce covenants | Speedway lacks interest in burdened or adjacent land and thus lacks standing | Speedway was intended to benefit; party entitled to benefit may enforce covenant even without ownership of burdened land | Speedway has standing; parties intended benefit to Speedway and factual finding of legitimate interest upheld |
| Whether covenants are void ab initio because grantor retained no interest | Covenants should be invalid if grantor never owned interest during restriction period | Covenants cannot be interpreted as void from inception; courts construe covenants to effect parties’ intent | Covenants not void ab initio; construed to carry out parties’ intention |
| Constitutional restraint on trade challenge | Restrictions are illegal restraints on trade under Georgia Constitution/statute | Restrictive covenants regarding real property use are not barred by the constitutional provision/statute | Covenants are not unenforceable restraints on trade in this context; public policy permits such property-use agreements |
Key Cases Cited
- Timberstone Homeowner’s Assn. v. Summerlin, 266 Ga. 322 (1996) (restrictive covenants/enforceability against subsequent grantees with notice)
- Jones v. Gaddy, 259 Ga. 356 (1989) (beneficiary of covenant may enforce it; inference of intent where benefit is obvious)
- Barton v. Atkinson, 228 Ga. 733 (1972) (party entitled to benefit has standing to enforce covenant)
- Barton v. Gammell, 143 Ga. App. 291 (1977) (discussion of covenants held in gross)
- Smith v. Gulf Refining Co., 162 Ga. 191 (1926) (covenants construed to effect parties’ intent)
- Godley Park Homeowners Assn. v. Bowen, 286 Ga. App. 21 (2007) (Georgia rule that constitutional restraint-on-trade provision does not bar restrictive covenants on land use)