## Facts

- A residential subdivision was subject to a recorded covenant barring sale, lease, or conveyance of covered lots to Black persons and purporting to create forfeiture/reversion rights in favor of prior owners or neighbors upon breach.
- The covenant provided that a breach could trigger forfeiture based on notice procedures, without a separate merits determination on the validity of the racial restriction.
- The Smiths, a Black married couple, acquired and occupied a lot covered by the covenant.
- The covenant’s recorded terms created a cloud on the Smiths’ fee title and were invoked by Capitol Federal (a predecessor in title) and others to assert a claim to a future interest in the property.
- The Smiths sued to quiet title and for declaratory relief that the covenant and any forfeiture/reversion rights arising from it were void.
- The trial court concluded judicial enforcement would violate the Fourteenth Amendment and entered judgment quieting title in the Smiths in fee simple free of the covenant.
- Capitol Federal appealed.

## Issues

1. Whether a racially restrictive covenant may be enforced in court when drafted as a forfeiture, right of reentry, or other future interest rather than as a simple restraint on alienation.
2. Whether judicial recognition of covenant-based forfeiture/reversion claims constitutes unconstitutional state action under the Fourteenth Amendment.
3. Whether the Smiths were entitled to a decree quieting title eliminating any cloud created by the covenant.

## Decision

- The Colorado Supreme Court affirmed the judgment quieting title in the Smiths.
- The court held the racial covenant was unenforceable and legally ineffective, and that no valid forfeiture, reversion, or future interest could arise from it.
- The court rejected the argument that labeling the restriction as a “future interest” avoided constitutional limits; judicial enforcement in any form would constitute prohibited state action.
- Title was properly quieted in the Smiths in fee simple, free and clear of any covenant-based claim.

## Legal Principles

- Judicial enforcement or recognition of private racially restrictive housing covenants constitutes state action prohibited by the Fourteenth Amendment.
- Constitutional invalidity turns on the substance and effect of court enforcement, not on formal property-law labels such as conditions subsequent, rights of reentry, forfeiture clauses, or reversions.
- A racially discriminatory covenant cannot serve as the basis for any enforceable remedy or legally cognizable property interest, including forfeiture or reversion claims.
- Quiet title relief is appropriate to remove a recorded race-based covenant and any asserted interests derived from it as clouds on title.

## Conclusion

The court held that state courts may not enforce or give legal effect to racially restrictive covenants, including provisions drafted as forfeiture or reversion interests, and it affirmed a decree quieting the Smiths’ fee simple title free of any covenant-based claim.


Capitol Fed. Sav. & Loan Ass’n v. Smith, 136 Colo. 265, 316 P.2d 252 (Colo. 1957)