Sunday, April 12, 2015

Montana Trial Court Upholds TNC’s Enforcement of a Conservation Easement

TNC v Deep Creek copyIn The Nature Conservancy v. Deep Creek Grazing Ass’n, No. DV 14-015 (Mont. 9th Jud. Dist. Ct., Teton County, Mar. 31, 2015), a Montana trial court held that the owner of ranchland subject to a conservation easement had violated the easement by constructing ponds and filling a wetland area without obtaining prior approval from The Nature Conservancy (TNC), which holds the easement on behalf of the public. The court ordered the landowner to promptly restore the property to its condition prior to the violations, but declined to order the landowner to pay TNC’s attorney fees.

Background

In March 2008, TNC purchased the conservation easement from Deep Creek Grazing Association (Deep Creek) for $3.5 million. The easement encumbers approximately 11,365 acres in Teton County, Montana.

The easement limits Deep Creek’s right to develop the property. The easement also permits Deep Creek to use the property in ways consistent with the easement, but identifies certain “consistent uses” as being subject to TNC’s prior approval. In particular, the easement provides that "construction of ponds requires prior approval from [TNC]." The easement also expressly prohibits the filling of wetlands or riparian areas.

In November 2013, during a routine monitoring visit, a TNC scientist and land manager observed that seven ponds had been constructed on the property without TNC’s prior approval. TNC sent a Notice of Violation informing Deep Creek that the pond construction violated the easement and requesting restoration of the pond sites to their preexisting conditions within 30 days as required by the easement. Due to winter conditions, however, TNC stated its willingness to accept Deep Creek’s agreement to undertake the restoration activities as soon as conditions permitted, provided the work was completed no later than May 1, 2014.

In early January 2014, during another routine monitoring visit, the same TNC scientist and land manager observed that gravel fill had been placed in a wetland area on the property. TNC sent a second Notice of Violation to Deep Creek regarding the fill.

Shortly thereafter Deep Creek sent a letter to TNC acknowledging that it undertook the pond construction activities “without recognizing or remembering” the requirements of the easement. As of April 2014, however, Deep Creek had not corrected the violations and TNC filed suit.

The Court’s Holdings

The Ponds

The court held that Deep Creek had clearly violated the conservation easement by constructing seven ponds on the property without obtaining prior approval from TNC as required by the easement. Despite having earlier admitted that it had violated the easement by constructing the ponds, at trial Deep Creek claimed it had not violated the easement because, according to a report it obtained from a Professor at Montana State University, the ponds were not ponds but were instead “earthen berms.” The court dismissed this argument, noting that it did “not hold water.” The court explained that (i) Deep Creek had itself repeatedly referred to the ponds as ponds, (ii) Deep Creek had filed for water rights as stock reservoirs for the ponds, and (iii) the ponds appeared to be “ordinary livestock ponds common to Montana ranches; the fact they are dry on occasion does not mean they are not ponds or that there is a factual dispute over the term.” The court further noted that Deep Creek’s post hoc attempt to have an expert opine that the ponds were “earthen berms” was not credible in the face of Deep Creek’s repeated statements to the contrary.

The court also noted that the Professor’s statements that the ponds benefited stock and wildlife were not relevant. “It is not for this Court to assess whether the ponds are a benefit to stock and wildlife,” said the court. Rather, its task was “to interpret the plain language of the easement, which requires prior notification and approval by [TNC for pond construction]."

The Filling of the Wetland

The court also held that Deep Creek had violated the conservation easement by filing a riparian or wet area on the property with material excavated from a nearby location, an action that was prohibited in four different sections of the easement. TNC was able to prove that the fill was not present at the time of the easement’s conveyance through the “baseline report,” which established the condition of the property at the time of the easement’s conveyance.

Good Faith and Fair Dealing

Deep Creek asserted that TNC breached the covenant of good faith and fair dealing that comes with every contract, presumably because TNC would not agree after the fact to allow the ponds and the fill. The court dismissed this argument, noting that Deep Creek could not claim that TNC violated the covenant of good faith and fair dealing when it was Deep Creek’s breach of the easement that led to the litigation. “Deep Creek never asked permission for its actions, which it admits were wrong,” said the court, “[r]equesting permission after the fact is not the same and violates the terms of the easement.” The court also noted that any obligations TNC might have to consider Deep Creek’s requests to construct the ponds and place fill in the wetland “were never triggered” because Deep Creek never requested prior approval from TNC as required by the easement.

Conclusion

The court concluded that Deep Creek had surrendered some of its real property interests when it granted the conservation easement and it was not for the court to determine whether filling the wetland served a beneficial purpose as Deep Creek suggested. Rather, said the court, its task was “to apply the plain language of the easement to the undisputed facts” and, based on those facts, the court found that TNC was entitled to summary judgment regarding the easement violations. The court also noted, however, that “[i]f Deep Creek had requested permission prior to constructing the ponds or filling wetland areas, the results in this case would undoubtedly be different.”

Remedies

Citing to both the terms of the easement and a recent easement enforcement case from Maryland, McClure v. Montgomery County Planning Board, 103 A.3d 1111 (Md. App. 2014), the court found that restoration of the property to its condition prior to the unauthorized activities was an appropriate remedy.

Although the easement allows TNC to undertake the restoration, the court noted that, “cognizant of Deep Creek’s ranching operations,” it would provide Deep Creek with an opportunity to undertake the restoration. The court ordered Deep Creek to, within 20 days of the court’s order, submit a restoration plan to TNC for TNC’s approval. The order also provides that, if Deep Creek fails to submit such a plan, or if the plan does not meet the requirements for prompt restoration of the property as provided in the easement, TNC can undertake the restoration and Deep Creek would be liable for the costs.

Deep Creek was not, however, required to pay TNC’s attorney fees. According to the court, the conservation easement allows for attorney fees to be awarded to TNC if TNC files an action to correct a violation of the easement, but each party must pay its own attorney fees if the Court finds that no “material” violation has occurred. The court noted that whether Deep Creek’s actions constituted “material” violations was a question of fact the court was not required to resolve. The court explained that Deep Creek did not follow proper procedures and give TNC advance notice of its actions. Accordingly, Deep Creek was required by the easement to return the property to its prior condition regardless of the whether the violations were material. “Under these circumstances” the court found it appropriate for Deep Creek to pay TNCs court costs, but for each party to pay its own attorney fees.

Nancy A. McLaughlin, Robert W. Swenson Professor of Law, University of Utah S.J. Quinney College of Law

https://lawprofessors.typepad.com/nonprofit/2015/04/montana-trial-court-upholds-tncs-enforcement-of-a-conservation-easement.html

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