Appellants, owner of property burdened by a restrictive covenant and seller of property benefitted by the covenant, and cross-appellant, buyer of property benefitted by the covenant, challenged the decision of the Superior Court of Inyo County (California), awarding cross-appellant punitive damages for breach of contract and fraud but denying them an injunction to enforce a covenant against appellant owner of the burdened property.

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Overview

Cross-appellant buyer purchased property ostensibly benefitted by a restrictive covenant from appellant seller. The property had been subject to a lis pendens arising out of litigation between appellant seller and appellant owner of the restricted property. The lis pendens was withdrawn after the parties reached a settlement in which the covenant, which prohibited renting cabins or selling groceries or gas on the restricted property, was declared unenforceable. Appellants did not inform cross-appellant about the agreement to abandon the covenant but cross-appellant had actual knowledge of the lis pendens. Cross-appellant sued for fraud and sought an injunction enforcing the covenant. The trial court awarded cross-appellant punitive damages but refused to issue an injunction. On appeal, the court reversed the judgment of the trial court. The court held that the trial court erred in excluding evidence of the withdrawn lis pendens. The court held that Cal. Civ. Proc. Code § 409.8 (repealed), which provided that the withdrawal of a lis pendens no longer afforded constructive or actual notice, applied to actions concerning priority under recording statutes but not to fraud actions.

Outcome

The court reversed the trial court’s judgment awarding cross-appellant, buyer of property benefitted by a restrictive covenant, punitive damages for breach of contract and fraud against appellants, owner of property burdened by the covenant and seller of property benefitted by the covenant, but denying an injunction to enforce the covenant. The court held that the trial court erred in excluding evidence of a lis pendens.