Case of the Day – Monday, July 10, 2017

CHUTZPAH, CONNECTICUT STYLE

To some, it's a dream-come-true vacation home ...

To some, it’s a dream-come-true vacation home …


So you like your wild mountain property, with its clean, sparkling streams and majestic trees? You like to think that it will always look as pristine and undeveloped as it does right now. So when you finally sell it, you place some restrictions on the deed, so that there won’t be any double-wide trailers, pre-fab A-frame chalets or tar paper shanties.

Seems reasonable, doesn’t it? But eventually the people you sold the land to sell it to someone else, and that someone else has a really good lawyer. “This is Connecticut!” the solicitor tells his client. “We can beat this restriction!”

And lo and behold, that’s just what he does. It seems in Connecticut, the terms on which you were originally willing to sell your land don’t much matter. In today’s case, the heirs of the original nature-lovin’ owner suffered a lot of angst when they finally sold off most of the lake property. But the buyer won them over, even agreeing to a development restriction on part of the land, in order to preserve its natural character. A few years later, that buyer sold the land to the Williams, who had been convinced by their lawyer that the restriction wasn’t enforceable. The new owners promptly sued for a declaratory judgment that the restriction was void.

The Connecticut court agreed that it was. It fell outside of the three traditional categories of restrictions that ran with the land. Even so, the Court said, it could be enforced under equitable principles. But it wouldn’t do that, the Court said, because it would be so unfair to the buyers of the land. After all, the Court said, it wasn’t clear who the beneficiary of the restriction was or who could enforce it. Therefore, the Court held it would be unfair to the buyers because — and we’re not making this up — they “bought the property because they thought the restriction was unenforceable. If the restriction is found enforceable, the property could only be developed for recreational purposes and would be far less valuable. Devaluing property without a clear beneficiary is not reasonable.”

The decision certainly turns common sense on its head. Where a seller is unwilling to sell unless a restriction is placed on the land, it’s hard to argue that the continuing restriction harms marketability. It’s more marketable than if the seller doesn’t sell at all. And for that matter, should it even be the law’s business to promote marketability over a seller’s free will?

It seems safe to imagine that as conservation — and especially forest preservation because of “climate change” concerns — is of increased public policy importance, the notion of “marketability” and the free right to develop may become less of a holy grail. As it probably should.

Williams v. Almquist, 2007 WL 3380299 (Conn. Super., Oct. 30, 2007) (unreported). Robert Bonynge bought a 150-acre tract of land at Lake Waramaug in 1898, which he later conveyed away in several parcels. Although some of the original tract was sold in the 1930s, and some of the heirs owned certain parcels outright, a 105-acre tract was eventually sold to Lee and Cynthia Vance by the Bonynge heirs in 2001. The negotiations for that sale were a difficult and emotional process, with the primary concern of the heirs to conserve the natural condition of the property. The Vances agreed to give some of the land and a conservation easement to the Weantinoge Heritage Land Trust. Also, they agreed a restriction on 8.9 acres of the property: “There shall be no construction or placing of any residential or commercial buildings upon this property provided that non-residential structures of less than 400 square feet may be constructed for recreational or other non-residential purposes and further provided that the property may be used for passive activities such as the installation of septic and water installations, the construction of tennis courts, swimming pools and the construction of facilities for other recreational uses.”

The sellers were disinclined to see their paradise turned into a trailer park.

The sellers were disinclined to see their paradise turned into a trailer park. What irrationality! Fortunately, the law protects us from the foolish notions of a seller …

David and Kelly Williams bought part of the 8.9-acre tract in 2005 from the Vances, still still subject to the restriction agreed upon in February 2002. Shortly thereafter, the Williams entered into an agreement with the Vances in which the Vances waived their right to enforce the restriction. The Williams then sued for declaratory judgment against the Bonynge heirs, asking the court to declare the restriction in their deed void and unenforceable.

Held: The restriction on the Williams’ land was held to be unenforceable. The Court noted that restrictive covenants generally fall into one of three categories: (1) mutual covenants in deeds exchanged by adjoining landowners; (2) uniform covenants contained in deeds executed by the owner of property who is dividing his property into building lots under a general development scheme; and (3) covenants exacted by a grantor from his grantee presumptively or actually for his benefit and protection of his adjoining land which he retains. Here, the restrictive covenant did not fall under the first category because it originally arose from the sale of the Bonynge heirs’ land to the Vances, not from an exchange of covenants between adjoining landowners. Likewise, the second category did not apply. Rather, that category applies under a general developmental scheme, where the owner of property divides it into building lots to be sold by deeds containing substantially uniform restrictions, any grantee may enforce the restrictions against any other grantee. But in this case, the Court ruled, the evidence suggested that a common plan or scheme did not exist.

conservThe restrictive covenant did not fall under the third category either. Where the owner of two adjacent parcels conveys one with a restrictive covenant and retains the other, whether the grantor’s successor in title can enforce, or release, the covenant depends on whether the covenant was made for the benefit of the land retained by the grantor in the deed containing the covenant, and the answer to that question is to be sought in the intention of the parties to the covenant expressed therein, read in light of the circumstances attending the transaction and the object of the grant.

The question of intent is determined pursuant to the broader principle that a right to enforce a restriction of this kind will not be inferred to be personal when it can fairly be construed to be appurtenant to the land, and that it will generally be construed to have been intended for the benefit of the land, since in most cases it could obviously have no other purpose, the benefit to the grantor being usually a benefit to him as owner of the land, and that, if the adjoining land retained by the grantor is benefitted by the restriction, it will be presumed that it was so intended. Here, three of the Bonynge heirs retained property near the 105-acre tract, but did not own property directly adjoining or overlooking the restricted tract. As such, the Court said, there was no presumption that the restriction was meant to benefit their land. The deed didn’t say as much: in fact, the deed didn’t indicate that the restriction was meant to benefit anyone at all. With no mention of beneficiaries in the deed and no testimony regarding the intent of the retaining landowners, the Court held, the restriction could not fall under the third category.

Some might argue that maintaining the forest as a carbon sink was a worthwhile social purpose

Some might argue that maintaining the forest as a carbon sink was a worthwhile social purpose

The trial court said it could properly consider equitable principles in rendering its judgment, consistent with Connecticut’s position favoring liberal construction of the declaratory judgment statute in order to effectuate its sound social purpose.

Although courts before have approved restrictive covenants where they benefited a discernable third party, the Court here found that the restriction was not reasonable because it had no clear beneficiary and limited the marketability of the property. The possible beneficiaries were the Bonynge heirs, only those heirs who retained property in the Lake Waramaug area, the other residents in the Lake Waramaug area, the Vances, or simply nature itself. Without a discernable beneficiary, the Court ruled, it was difficult to determine who could enforce the restriction and for how long.

The restriction also unreasonably limited the marketability of the property. Although restrictions are often disfavored by the law and limited in their implication, restrictive covenants arose in equity as a means to protect the value of property. Here, no identifiable property was being protected by the restriction. The plaintiffs bought the property because they thought the restriction was unenforceable. If the restriction is found enforceable, the property could only be developed for recreational purposes and would be far less valuable. Devaluing property without a clear beneficiary, the Court said, was not reasonable.

– Tom Root
TNLBGray

Case of the Day – Friday, July 7, 2017

THEY’RE BA-A-A-ACK!


Yesterday, we reported on the 2008
Gertz v. Estes decision, in which the Gertzes were told to remove their 8-foot tall “spite fence.” Why anyone thought that people who (a) built nail-studded fences; (b) peered at their neighbors with an array of surveillance cameras that the NSA would covet, or (c) heckled the Estes family with a PA system, would be impressed with a court order is a good question. You can just hear them through the loudspeaker:Court order? I don’t need no stinkin’ court order.”

A “spite fence,” after all, isn’t something that one constructs accidentally, or even negligently. Why the Gertzes should be expected to pay attention to some old fool in a black robe …

Hadrian's Wall - Did the Picts think it was a "spite fence?"

Hadrian’s Wall – Did the Picts think it was a “spite fence?”

Ever since the first recorded “spite fence” – not including Hadrian’s Wallwas first used by San Francisco millionaire Charles Crocker to try to force a neighbor to sell his property for the construction of the Crocker Mansion – “spite fences” have required intent.

You have to intend to harass a neighbor with the fence. And if you set out to harass and oppress, it’s not terribly likely that you’re going to be brought up short by some man or woman in a fancy black robe.

Charlie Crocker's fence (highlighted in orange) - definitely a "spite fence."

Charlie Crocker’s fence (highlighted in orange) – definitely a “spite fence.”

The Gertzes ignored the 2008 court order until the Estes family dragged them back into court. That was when the Gertzes suddenly announced that they had lopped off the top two feet of the fence. Now it was only six feet tall, studded with nails and festooned with more surveillance devices than the Trump Tower. “Gee,” the Gertzes told the trial court, “now it’s under seven feet – guess it’s not a ‘spite fence’ anymore.”

The Court did what courts do – used procedural rulings to achieve substantive ends. The Court ruled that the Gertzes were trying an “end run” on the prior decision, when they should have raised the reduced height on appeal. Thus, the Gertz motion was thrown out. The Court made clear that the Gertzes’ real problem was that they hadn’t read the 2008 order carefully: it wasn’t the height of the fence alone, it was the intent and the ugliness that made it a “spite fence.” It was still a “spite fence,” albeit it a shorter one. The fence still had to go.

Gertz v. Estes, 922 N.E.2d 135 (Ind.App. 2010). The unsavory neighbor Gertzes had been told to take down the “spite fence” which separated their home from the Estes property. The fence was a doozy, too – while the Gertzes had gotten permission from the town to build a 7-foot tall fence, they had put up an 8-foot fence just a few inches from the property line, studded it with thousands of nails protruding on the Estes side, painted “no trespassing” and “do not climb” notices all over the fence, and equipped the structure with surveillance cameras. There was a PA system, too, which the Gertzes used to make disparaging comments to and about the Estes family on various occasion.

The Berlin Wall - President Reagan could have said, "Mr. Gorbachev - tear down this 'spite fence'!"

The Berlin Wall – President Reagan could have said, “Mr. Gorbachev – tear down this ‘spite fence’!”

After a bench trial, the trial court found that the “fence was maliciously erected and now maintained for the purpose of annoying the Estes family” based upon the “course of conduct exhibited by Gertze [sic] toward Estes.” Holding that the fence was thus a nuisance, the court ordered the Gertzes to remove it. For good measure, the judge found that the “surveillance of the Estes property and the use of a loudspeaker to harass and annoy Estes constitute[d] an invasion of privacy” and said that all had to go, too.

The Gertzes appealed the trial court’s order, arguing that: (1) the trial court erred by applying the “spite fence” statute to them because they had obtained a local permit for the fence; and (2) the trial court erred by finding that the fence was unnecessary and that the public address system was used to make disparaging comments about the Estes family. The trial court was upheld in Gertz v. Estes, 879 N.E.2d 617 (Ind.Ct.App.2008), and the Indiana Supreme Court denied further review.

On September 12, 2008, the Esteses filed a petition for rule to show cause. The Esteses alleged that the Gertzes had failed to remove the fence, cameras, or public address system and had continued to harass and threaten them. The Gertzes answered by asking the trial court to let them remove the top one foot of the fence rather than the entire fence. The Gertzes said they had already removed the top two feet of the fence, so it was no longer a “spite fence.”

The trial court found that cutting a foot off of the top of the fence didn’t comply with the prior order, because the fence’s height was only one of the factors making it a spite fence. The trial court concluded that the “fence is, and remains, a nuisance.” The Gertses appealed.

Held: The Gertzes’ reduction of the fence’s height didn’t matter: the fence had to go. The Court noted that Indiana Code Section 32-26-10-1, which governs ”spite fences,” provides: “A structure in the nature of a fence unnecessarily exceeding six (6) feet in height, maliciously: (1) erected; or (2) maintained; for the purpose of annoying the owners or occupants of adjoining property, is considered a nuisance.”

The Court held that the Gertzes were just asking for a mulligan. Their petition was really just a motion for relief from the 2008 judgment under Indiana Trial Rule 60(B), and that rule won’t serve as a substitute for a direct appeal. The Gertzes filed a direct appeal of the trial court’s order requiring them to remove the fence. Although the trial court’s remedy of removal of the fence was an issue available to them, they did not raise any argument on appeal about keeping the fence if they only reduced the height.

What’s more, the trial judge’s order that they remove the fence was not based solely upon the height, but instead on a variety of factors. The appellate court held that the Gertzes showed nothing justifying the extraordinary remedy of modification of the trial court’s judgment.

Meanwhile, the Estes – who had had enough of the expensive litigation – argued that they were entitled to appellate attorney fees because the Gertzes’ appeal was meritless. The court was hesitant to award such fees where the appeal was not “utterly devoid of all plausibility.” The Court said that although “the Gertzes’ brief fails to fully comply with the Appellate Rules and that their argument on appeal fails, we cannot say that their arguments were ‘utterly devoid of all plausibility’.” It refused to order the Gertzes to pay the Esteses’ fees, but cautioned “the Gertzes that future court filings against the Estes family could be considered harassment and result in various sanctions, including but not limited to an award of attorney fees.” The Court “encourage[d] the Gertzes to fully comply with the trial court’s order and protective orders.”

Good luck with that.

– Tom Root

TNLBGray140407

Case of the Day – Thursday, July 6, 2017

LIKE A GOOD NEIGHBOR

Would you rather have your insurance agent appear? Really?

Would you rather have your insurance agent appear? Really?

The Estes, like the rest of us, have probably seen those insipid commercials where the insurance-challenged protagonist sings a major insurance company’s jingle offkey, and his or her local agent magically appears. It never made much sense to us. Meaning no disrespect to insurance – which after all is just a transaction in which you bet something bad’s gonna happen to you, and the insurance company bets it won’t – but if we could warble a stanza and have someone appear, it sure wouldn’t be an insurance agent.

Back to our topic. An article we read about an Indianapolis man having his ear bitten off by his neighbor made us think about truly rotten neighbors, you know, the ones without community relations teams and emergency satisfaction 800 numbers. The Estes probably have less of an idea of what a good neighbor is than most people, except to suspect it sure isn’t the people next door to them, the Gertzes. The Gertzes are a little bit weird, and we don’t mean that in a good way.

A dispute about a suburban boundary line ended up with the Gertzes training a battery of surveillance cameras on their former friends, the Estes. If that wasn’t enough, Mrs. Gertz began using a loudspeaker to hurl insults — rather graphic ones which left the court blushing — at the Estes daughters. And then there was the fence.

Robert Frost said that good fences make good neighbors, but he hardly had this fence in mind: an 8-foot tall monstrosity painted orange and black, studded with thousands of protruding nails and large warnings against climbing and trespassing painted on the Estes’ side like so much gang graffiti. In fact, the whole thing looked rather more like the Berlin Wall come to Hebron, Indiana.

LlamasThe Estes sued under the “spite fence” statute. The Gertzes protested that they hadn’t built a spite fence, but rather just a modest enclosure to protect some delicate saplings they had planted, as well as to permit the raising of alpacas and llamas. After all, they didn’t want any errantly roaming cattle to gnaw on the young trees or, for that matter, to let the llamas and alpacas flee to return to South America. The Court wasn’t convinced. After all, the Gertzes’ permit application called the fence “residential,” not “agricultural.” Second, the fence didn’t enclose the young trees, making it useless as a cattle barrier. Finally, the cameras, the loudspeaker and the studded fence — not to mention the testimony of deteriorating relations between the plaintiff and defendant — made it clear to the Court that the fence was erected maliciously.

Alpacas

The Gertzes could hardly let their alpaca herd hotfoot it back to Bolivia, now, could they?

The Gertzes also tried a creative technical argument that because a permit had been issued for the fence, the Indiana “spite fence” statute had been trumped by local approval. The Court noted that the permit was for a 7-foot fence, not the 8-foot plus fence the Gertzes had put up, and anyway, a local permit did not excuse compliance with the statute.

So the court settled matters, and everyone kissed and made up. There was lemonade toasts all around, right? Lest you think that, stay tuned tomorrow for … [drum roll] … Gertz v. Estes, the sequel.

Gertz v. Estes, 879 N.E.2d 617 (Ct.App. Ind., 2008). Oh, the neighbors from hell! David and Nichelle Gertz started out liking their neighbors, Douglas and Susan Estes, but that fell apart. David and Nichelle had multiple surveillance cameras trained on their neighbors — even when they purported to get along — but after the boundary line was disputed, things got so bad that the Estes notified the Gertzses that they intended to install a fence, but before they could do so, the Gertzses built one of their own. The Gertzses applied for and obtained a local permit to build a 7-foot high fence, but the final fence was 8 feet high, 720 feet long, and with thousands of nails protruding on the Estes’ side up to a half inch. The words “NO CLIMBING” and “NO TRESPASSING” were painted in orange and black on the middle horizontal slat, and two more cameras — for a total of seven surveillance cameras — were installed on top of the fence.

cameras

The Gertzes also used a public address system to aggravate the Estes, including making “lewd comments” to the Estes’ daughters, which the Court blushingly refused to repeat in the opinion. The Gertzes called the sheriff at least eighteen times to report various activities of Douglas and Susan Estes.

The Estes sued under Indiana’s “spite fence” statute for removal of the fence. The Gertzes testified that the fence was necessary to protect eighteen-inch tree seedlings they had planted. The fence did not enclose any area, but the Gertzes said they intended to enclose the fence at some point so that they could raise llamas, alpacas, or sheep. The trial court found that there was “no justifiable or necessary reason for the fence installed by [David and Nichelle] to exceed six (6) feet . . .” Furthermore, it found that “the fence was maliciously erected and now maintained for the purpose of annoying [Douglas and Susan].” The trial court ordered the fence removed, and the Gertzes appealed.

SurveillHeld: The fence had to go. The Court found that the evidence and the reasonable inferences drawn from it fully supported the trial court’s findings. As to the Gertzes’ defense that it was for agricultural purposes, the Court observed that their permit application indicated that the “use” of the fence was “residential” and the fence did not form an enclosure, making it useless for livestock. The Court said that the Gertzes’ conduct and the extraordinary nature of the fence overcame David’s assertion that the 8-foot fence was intended to protect eighteen-inch tree seedlings.

Likewise, the fact that a local permit was granted to build a 7-foot wooden fence parallel to the property line did not trump the “spite fence” statute. That statute defines as a nuisance any fence unnecessarily exceeding a height of six feet and maliciously erected for purpose of annoying neighbors. This fence exceeded six feet unnecessarily, and clearly resulted from a deteriorating, antagonistic relationship between the Gertzes and their neighbors. The nails on fence protruding between quarter- and one-half inch from the fence and the surveillance cameras clearly supported the finding that the fence was built out of malice, and was therefore a nuisance.

The Gertzes wisely didn’t challenge the trial court’s order that the PA system had to go, too.

– Tom Root

TNLBGray140407

Case of the Day – Wednesday, July 5, 2017

STICK IT TO THE MAN …

Tal Mims owned a rental house. He also owned a landscaping company. So when Rosemary Stills, his tenant, called to say a tree had fallen on the house, who better to come over to clean up the mess that Tal’s landscaping crew? It seemed like perfect synergy. It also was a bit redolent of the 60s mantra,stick it to the man.” That is, if the “man” in question is a State Farm agent.

Some would say "disaster." Tal Mims said "opportunity."

     Some would say “disaster.” Tal Mims said “opportunity.”

But things got worse. While the tree was being cut up, a large branch fell on the tenant’s son, breaking his leg. The tenant sued Tal, and then she added his homeowner’s insurance carrier as a defendant. Then both the plaintiff and the defendant Tal ganged up on the insurance company.

The policy pretty plainly excluded bodily injury and property damage “arising out of the rental or holding for rental of any part of any premises by any insured” and “arising out of premises owned or rented to any insured, which is not an insured location.” But Tal and Rosemary argued that while the falling tree related to the rental property, the accident — which occurred while it was being cut up — did not. Tal Mims argued rather disingenuously that he was acting on his own behalf at the time of the accident and that he was not engaged in any business pursuit or employment.

Here’s the problem, the Court said. While throttling insurance companies is something courts do fairly often, the companies still are free to limit coverage so long as the limitations do not conflict with statutory provisions or public policy. The business pursuits exclusion in a homeowner’s policy is intended to exclude risks that should be covered under different policies. Here, the Court said, the property on which the accident occurred was never listed in his homeowner’s policy, but instead happened on another piece of property that should have been covered by its own policy. Besides, the accident happened because Tal was removing a tree from the roof of the rental house. The Court guessed that if Tal had left the tree on the roof, it would have badly affected the value of the house.

That being true, the Court said, this was pretty clearly a project related to a rental property, and pretty clearly excluded from the Tal’s insurance policy, a happy ending for common sense but not so happy for Tal and Rosemary, both of whom hoped State Farm’s deep pocket would solve their problems.

Stills v. Mims, 973 So.2d 118 (La.App., 2007). Stills rented her home from Tal and Tommie Lee Mims. Tal operated a business named Tal’s Custom Landscaping, Inc. When a storm caused a tree to fall on the roof of the home. Stills informed Tal of the damage, and he came to remove the tree. In doing so, a limb fell from the roof onto the ground and injured Stills’ son, LeWilliam. stickit150427Stills sued Tal and Tommie Lee Mims, and added State Farm as a defendant. She alleged State Farm had in effect at the time of the accident a policy covering the Mims’ actions of the defendants.

State Farm filed a motion for summary judgment asserting that the homeowner’s policy issued to Tal Mims was for his personal residence at 2508 Lindholm Street, and that State Farm never issued a policy for 604 Central Avenue, where the accident occurred. State Farm asserted that the liability and medical payments coverages provided in the policy excluded bodily injury and property damage “arising out of the rental or holding for rental of any part of any premises by any insured” and “arising out of premises owned or rented to any insured, which is not an insured location.” The trial court granted summary judgment in favor of State Farm, finding no coverage under Mims’ homeowner’s policy. Both Stills and Mims appealed.

Held: The trial court’s dismissal of State Farm Insurance was upheld. Stills argued that her claim was based on Mims’ negligence in cutting the tree down, and not on any property defect, making the insured location issue irrelevant. Both Stills and Mims asserted that the business pursuit exclusion did not apply, because Mims’ actions fell under the exception for activities ordinarily incident to non-business pursuits.

Mims denied being in the business of renting homes. He claimed that he was acting on his own behalf at the time of the accident and that he was not engaged in any business pursuit or employment. The Court noted that insurance companies are free to limit coverage so long as the limitations do not conflict with statutory provisions or public policy. Exclusions must be strictly construed against the insurer with any ambiguities construed in favor of the insured. The insurer bears the burden of proving the applicability of an exclusion to a claimed loss.

The Court said that the business pursuits exclusion in a homeowner’s policy is intended to exclude risks that should be covered under different policies. For example, the commercial risks of a business would typically be covered by a commercial liability policy, whereas the risks associated with a rental dwelling would typically be insured by rental property insurance. The removal of the risks associated with business enterprises or rental properties helps to lower the rates of homeowner’s insurance by eliminating non-essential coverages.

Stills and Mims argue that her claim does not arise from any business pursuit by Mims, but rather, the claim is based on his personal liability and involves activities that are ordinarily incident to non-business pursuits. They cited Blue Ridge Insurance Co. v. Newman — where the Court found that such a tree mishap was covered by a homeowners’ policy – in support of their position. But the Court said Blue Ridge was different. First, plaintiff Newman’s property on which the tree was located was insured under his homeowner’s policy. Here, the house leased by Stills was not insured under Mims’ State Farm policy. Mims was not seeking coverage for an accident that occurred on his insured residence, but instead, the Court held, he sought to have his homeowner’s insurance cover an incident that occurred on an unrelated rental location that should have been insured by some other policy. The very purpose behind the business pursuits exclusion, the Court said, supported a finding of no coverage.

scamSecond, Newman’s property had been his family’s home since 1965, and had only been rented to a friend for less than a year prior to when the accident occurred. In Mims’ case, there was no indication that the Stills residence was anything other than a rental property.

Third, Newman’s house was vacant when the tree fell, whereas Stills and her son were residing in the Central Avenue home when the tree fell on it. Fourth, the damage in Blue Ridge arose when the tree from Newman’s property fell on a neighboring property. Here, the existence of the tree on the property and its falling during the storm did not cause the damage. Instead, young LeWilliam’s injury arose from Mims’ removal of the tree from the roof of the rental dwelling.

Finally, the Blue Ridge court’s major consideration was that the mere existence of the tree on the property had no bearing on the use of the property- as a rental. The fact that a tree fell on the roof of the rental home in this case, particularly if left there, would likely affect the suitability of Stills’ rental dwelling. While the existence, or maintenance, of a tree on Newman’s family property was an activity usually incident to non-business pursuits, Mims’ removal of a fallen tree from the roof of a rental dwelling by Stills was clearly not.

Pretty clever argument, the Court conceded – but State Farm was not liable.

– Tom Root

TNLBGray

Case of the Day – Friday, June 30, 2017

MURRELL II – WINNING THE BATTLE BUT LOSING THE WAR …

So many say. But it's their clients who are driving the train ...

So many say. But it’s their clients who are driving the train …

Here we are, the last day of the first half of 2017. The year is fleeting.

Meanwhile, those fun-loving Murrells of Rolling Hills, California, are back for an encore performance! The couple’s quixotic effort to hold their condo association liable for all sorts of alleged backroom dealing and breach of trust in cutting down their trees to improve the view of their neighbors, the Fullers, was covered in our Case of the Day for Thursday, June 29, 2017 (funny, it seems like only yesterday). Lest you think that the decision we covered was the end of the saga, we bring you Murrell II, the Very Expensive Sequel.

If you’re the kind of person who remembers what kind of mayo was on your sandwich at lunch a week ago last Thursday (J&D’s Baconnaise), you’ll recall that the Rolling Hills Community Association held an easement across the Murrell’s’ property for “[r]oads, streets, or bridle trails, parkways and park areas[, p]oles, wires and conduits for the transmission of electricity…; [p]ublic and private sewers, storm water drains, land drains, and pipes, water systems, water, heating and gas mains or pipes; and … [a]ny other method of conducting and performing any public or quasi-public utility service or function on, over and under the surface of the ground.” The easement gave the Association the right to trim or cut trees within its limits. The Fullers, whose view of the ocean was obscured by the Murrells’ trees, convinced the RHCA to trim back some of the Murrells’ trees and whack down a few others, so that they could enjoy the million-dollar vista they had paid for when they bought their place.

That’s “long story short.” The actual history of the tortured litigation and thundering herd of parties is byzantine with a small “b”, and is amply (if not completely) recounted in the full opinion. The Murrells ended up suing the Fullers, the RHCA, and an individual member of the RHCA board (who was seemingly picked at random). There were counterclaims and crossclaims. When the 2007 dust settled, the board member was dismissed, and judgments or pieces of judgments were rendered against the RHCA and the Murrells. Board member Donald Crocker was held not to have breached any duty. And a judge ordered the Murrells to pay more than $700,000 in legal fees for the Fullers and RHCA.

And you thought that it was confusing if you missed a couple of episodes of Better Call Saul!

Naturally, everyone appealed. And that brings us to today’s 2011 decision.

Recollect that the Murrells argued the RHCA had no right to cut down trees to improve someone else’s view. In today’s case, they added the argument that the community association should have been equitably estopped from cutting down the trees because it had approved the Murrells’ construction of an addition to their home with a wall of windows, and the Fullers had not objected. Both parties, the Murrells contended, had lulled them into building something that depended on their trees for privacy, and the defendants could not fairly be allowed to strip their privacy away by cutting down those trees, even if it otherwise had the legal right to do so.

The Court of Appeals made short work of the Murrells’ latest lament. First, it concluded that the easement let the RHCA cut down trees for any reason it liked. As for the “equitable estoppel” argument, the judges held that “[t]he Murrells fail to cite pertinent authority that RHCA should be estopped from removing a tree on its easement because of the Murrells’ addition plans.” The decision was not elegant, but then, the Court pretty clearly thought the argument was so foolish as to not deserve much analysis.

Much of the remainder of the decision is dedicated to the Murrells’ complaints about how much they were forced to pay for the RHCA’s and Fullers’ attorneys. The lengthy recitation is mind numbing (unless you happen to be a lawyer, in which case $250.00 an hour for a second-year associate who carries your briefcase is a “feel good” story). The Murrells ended up winning $30,000 from RHCA and nothing from the Fullers. It cost them $500,000 in legal fees for themselves and another $492,000 in the defendants’ legal fees, all to fight for their recently departed Aleppo pine tree.

pyrric140710“Another such victory and I am undone!” King Pyrrhus is reputed to have said. So could the Merrills. At the same time, most of us find it difficult to imagine being able to drop $1.6 million on a legal battle over some trimmed trees.

Oh, to live in Rancho Palos Verde Estates. Or at least to be able to afford to do so …

Murrell v. Rolling Hills Community Association, Case No. B202019 (Ct.App. Cal., Jan. 31, 2011). A contentious and costly feud over trees and a neighbor’s view has spawned multiple legal actions, cross-actions, five appeals and two cross-appeals. To obtain an unobstructed ocean view, the Fullers wanted certain trees on “the Murrell property” trimmed or removed. The Murrells, who sought to preserve privacy, resisted. So began a decade-plus dispute.

After many attempts to mediate, the case went to trial in 2007. The Fullers obtained judgment in full against the Murrells in the amount of $10,000, and the Murrells obtained judgment in the amount of $30,000 against RHCA on RHCA’s breach of its covenants, conditions and restrictions (CC&Rs) and breach of fiduciary duty.

The Murrells incurred $892,000 in attorney fees. They were awarded $400,000 as attorney fees against RHCA but were ordered to pay $159,000 as attorney fees to RHCA on a separate claim and $334,000 as attorney fees to the Fullers.

The Murrells claimed the CC&Rs did not authorize RHCA to “trim, top and/or remove trees and foliage on the Murrell property” for the purpose of providing the Fullers with an ocean view. The Fullers sued in turn for injunctive and declaratory relief that they had the right to have the trees cut or trimmed. The Murrells also sued RHCA for breach of the CC&Rs, breach of fiduciary duty, trespass, and conversion, alleging that by going onto the Murrell property and removing a pine tree in order to benefit the Fullers’ view at the expense of the Murrells’ privacy, RHCA acted contrary to the CC&Rs and its fiduciary duty to act in good faith and fair dealing.

In so doing, the Murrells claimed RHCA violated the CC&Rs because they did not empower RHCA “to remove trees in the easement on the Murrell property for any reason unrelated to the express and implied purposes of the easement, which are the creation of and maintenance of roads, bridle trails, utilities, parkways, park areas, above ground poles, wires and conduits as well as sewers, drains, pipes and below ground conduits.” denied the complaint’s material allegations and pleaded 17 affirmative defenses.

The trial court granted summary judgment to the RHCA. The Murrells contended summary judgment was improper on the grounds that neither RHCA nor the trial court addressed their equitable estoppel claim. The Murrells argued the CC&Rs cannot be interpreted to authorize RHCA to remove the pine tree, which was on RHCA’s easement, for the purpose of enhancing the Fullers’ view. They further argued that even if such authority existed, questions of fact existed regarding whether RHCA complied with its fiduciary duty to the Murrells in light of expert evidence that removal of the pine tree was unnecessary to improve the Fullers’ view.

The Murrells argued RHCA was estopped from asserting any right to remove the pine tree for the reason RHCA and the Fullers did not complain to the Murrells about their plans to construct an addition to their residence involving floor to ceiling windows, and in reliance on this “silence, ” the Murrells constructed this addition with the expectation that their “foliage and mature trees[, including the pine tree ]” would preserve their privacy.” The Court held that the Murrells failed to cite pertinent authority that RHCA should be estopped from removing a tree on its easement because of their addition plans. The estoppel argument failed.

Britney Spears, shown here in one of her less glam moments, spent over a million on lawyers just to get through rehab. But the Murrells and Fullers weren't far behind ...

Britney Spears, shown here in one of her less glam moments, spent over a million on lawyers just to get through rehab. But the Murrells and Fullers weren’t far behind …

The Murrells also contended RHCA was not authorized to remove the tree to enhance the Fullers’ view, which was not a reason recognized as an easement use under section 2(b) of article V under the CC&Rs. The Court held that the “fallacy of their position lies in their misinterpretation of the pertinent provisions of the CC&R’s. When viewed in context, these provisions reveal RHCA has the right to remove trees located in its easement, without regard to purpose.”

The Court said that the “language of the CC&Rs governs if it is clear and explicit, and we interpret the words in their ordinary and popular sense unless a contrary intent is shown.” The Court interpreted the CC&Rs “to make them lawful, operative, definite, reasonable and capable of being carried into effect, and [to] avoid an interpretation that would make them harsh, unjust or inequitable.” Here, it was uncontroverted that the Murrell property is burdened by an easement in favor of RHCA and that the pine tree was located on this easement portion of that property. RHCA had the right to remove trees located on that portion of the Murrell property burdened by its easement. The Court said that the unambiguous language of the CC&Rs in the phrase “in or along any easements” referred to the physical location of the tree which RHCA is authorized to remove rather than to any particular qualifying reason for its removal, for example, solely for an easement use or purpose. Thus, the fact that enhancing a member’s view is not an enumerated easement use is inconsequential.

– Tom Root

TNLBGray140407

Case of the Day – Thursday, June 29, 2017

NO, RODNEY, WE CAN’T JUST GET ALONG

Rodney King (1965-2012), whose DUI stop turned into a beating at the hands of the police, making him an unwitting icon of racial injustice and a plainspoken advocate for understanding.

Rodney King (1965-2012), whose DUI stop turned into a beating at the hands of the police, making him both an unwitting symbol of racial injustice and a plainspoken advocate for understanding.

From California, the land of pleasant living… we take you to a war zone. Compton? South LA? No, it’s the City of Rolling Hills, California, perched on the Rancho Palos Verde peninsula, a place where poverty – which in includes anyone driving a vehicle worth less than a hundred grand – appears to have been banned.

It’s unlikely Rodney King would have lived here.

Remember Rodney? Decades before #Blacklivesmatter, King was the poster child for police brutality against minorities, or – if you roll this way – he was the man who should have known better than to be driving around after dark while being black.  After some of the police officers involved in his beating were acquitted, rioting ensued. Rodney’s plaintive plea for peace, which went viral before going viral became fashionable, asked, “can we all get along?”

Amid its 23 miles of horse trails, the 690 homes and the 26 miles of roads, the people in Rolling Hills apparently cannot. The Fullers made it a habit to complain about the Murrells’ trees because it spoiled their view (something people on Rodney’s side of town probably didn’t worry much about). The Murrells kept trying to get along, acceding to trim job after trim job, until they had finally had enough. But they didn’t sue the Fullers. Instead, they sued the Rolling Hills board of directors, and specifically Donald Crocker, for having caved in to years and years of the Fullers’ fulminations about the trees.

Naturally, Mr. Crocker, who was a volunteer board member, didn’t much like being sued. After all, he said, he was just doing his job. And the Court agreed. In California, as is the case in many places, directors of corporations, for-profit and not-for-profit alike, are protected by a “business judgment rule.” The rules shields directors from liability when they have acted in good faith, haven’t engaged in self-dealing and have acted on an informed basis. (Note: the “business judgment rule” varies from state to state, and can be rather nuanced. You should not assume that the application of the “business judgment rule” in this case represents what would happen in your own state).

Besides, the Court said, the Murrells shouldn’t be allowed to benefit after leading the Board and everyone else to believe that year after year they were agreeing – however reluctantly ­­– to the tree trimming, and only when they reached the breaking point, did they decide sue for everything that had ever happened.

Sgt. Joe Friday, iconic LA cop who would not have approved of the Rodney King beating, but would have used the Murrells' prior acquiescence against them, just as the court did.

Sgt. Joe Friday, the iconic LA cop. Joe would not have approved of the Rodney King beating, but he would have used the Murrells’ prior acquiescence against them, just as the court did.

There are a couple of morals here. One is that if you just try to get along, your efforts to do so “can and will be used against you in a court of law,” as Sgt. Joe Friday liked to tell defendants. The second, and more basic moral, sadly enough, is that turning the other cheek in Rolling Hills is just an invitation to your neighbor to smite you on that one, too.

Sorry, Rodney. Guess we can’t “just get along.” That’s why there are lawyers and courts.

Murrell v. Crocker, Not Reported in Cal.Rptr.3d, 2007 WL 1839478 (Cal. App. 2 Dist., June 28, 2007). The Murrells and Fullers are neighbors in Rolling Hills, California. They are members of the Rolling Hills Community Association, a nonprofit cooperative corporation governed by a five-member board of directors, one of whom is Mr. Crocker.

A governing document called the CC&R sets out the rights and obligations among the RHCA, the Murrells and the Fullers. According to the CC&R, in order to improve the view and to protect adjoining property, the RHCA has the authority to cut back or trim trees and shrubs on a member’s property. The RHCA also has a 10-foot wide easement along the boundary of each lot in which it has the right to remove trees or shrubs.

In 1997, the RHCA passed a resolution establishing procedures for maintaining and improving views. At that time, the Fullers demanded that the Murrells remove foliage to create a view for the Fullers. To be good neighbors and to avoid a dispute, the Murrells did so. In 2000, the Fullers brought a view complaint to the RHCA, which “caused the removal” of five trees and the trimming of an additional 12 trees on the Murrell property.

In 2002, the Board adopted yet another resolution, which contained more detailed procedures to maintain and improve views.

The next year, the Fullers submitted a second view complaint to the RHCA, which recommended that two of the Murrells’ trees be trimmed. The Murrells did so, but the Fullers complained that the trees were not trimmed enough, and in 2004 the Board ordered that a pine in the RHCA easement be removed and that other trees not on the easement be severely trimmed.

Finally the Murrells had had enough. They sued Crocker and the RHCA Board for taking actions inconsistent with their fiduciary duties and the CC&Rs, including failing or refusing to inform other Board members that the CC&Rs did not permit the removal of trees or other plantings from the portion of the Murrells’ property outside of the easement; adopting resolutions inconsistent with the powers granted to the RHCA under the CC&Rs; letting the Fullers pretty much call the shots, and trimming of trees so that the trees would not grow back for three or four years.

Crocker moved for summary judgment on the grounds that he had no individual liability to the Murrells, and that the claims in the complaint were specious. He complained that the first view complaint was resolved by an agreement between the Murrells and the Fullers after meetings with the Committee and an arborist. He argued the Murrells had agreed or acquiesced to almost all of the trimming. Although George Murrell denied any such agreement, he felt that because the Committee and the Board had a negative attitude toward him and his wife, he “had no choice but to play along with the concept that some agreement had been reached as the Association Board and View Committee were claiming.” His wife said she had been trying to “avoid a confrontation in the hope that the … Board would, in the end, make some effort to protect some aspect of our privacy.”

The trial court dismissed Crocker as a party. The Murrells appealed.

The Palos Verde peninsula offers stunning vistas of the Pacific Ocean, when the neighbors' trees aren't in the way.

The Palos Verde peninsula offers stunning vistas of the Pacific Ocean, when the neighbors’ trees aren’t in the way.

Held: Crocker was dismissed as a party. The Court noted that under California law, directors of nonprofit corporations, such as a homeowners association, are fiduciaries who are required to exercise their powers in accordance with the duties imposed by the Corporations Code. A director fulfills his duty to a member of the association by strictly enforcing the provisions of the CC&Rs but has no fiduciary duty to exercise his discretion one way or the other with regard to a member so long as the director’s conduct conforms to the standard set out in § 7231 of the Corporations Code.

That section of the law sets out the standard of care for directors of nonprofit corporations, known as “California’s statutory business judgment rule,” providing that a “director shall perform the duties of a director … in good faith, in a manner such director believes to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use in similar circumstances.” In performing such duties, a director “shall be entitled to rely on information, opinions, reports or statements … prepared or presented by … one or more officers or employees of the corporation whom the director believes to be reliable and competent in the matters presented; counsel … or a committee of the board upon which the director does not serve … so long as, in any such case, the director acts in good faith, after reasonable inquiry when the need therefore is indicated by the circumstances and without knowledge that would cause such reliance to be unwarranted.” A person who performs the duties of a director according to the rule has no liability based upon any alleged failure to discharge his or her obligations as a director.

Here, Crocker provided a declaration that he performed his duties in connection with both view complaints in good faith and with due care within the meaning of the rule, and the Murrells had no evidence to the contrary. The Court found that Crocker’s only involvement with the Murrells or the Fullers has been in public meetings of the RHCA or in officially sanctioned trips to their property, that he has no personal relationship with either the Murrells or the Fullers and had no personal interest in the outcome of their dispute, that Crocker was not the “primary driving force” behind the alleged improper treatment of the Murrells, that the votes were unanimous in all Board actions regarding the Murrells and the Fullers, and that he did not knowingly or with reckless disregard for the truth take any action, or encourage any other Board member, to take any action inconsistent with a Board member’s fiduciary duties or the CC&Rs.

The Court also noted that the Murrells had admitted that they engaged in conduct leading Crocker and the RHCA to believe that the Fullers and the Murrells had come to agreements involving the removal and trimming of the trees. The Court held that because there was no reason for Crocker to suspect that the Murrells were laboring under any mistake as to their legal rights, there was no duty for him to make any disclosures on the point. Any unexpressed position on the part of the Murrells concerning the view complaints did not, the Court said, create an issue of fact as to Crocker’s good faith compliance with his duties.

– Tom Root

TNLBGray140407

Case of the Day – Wednesday, June 28, 2017

DON QUIXOTE GETS WINDMILLED

quixote150416A Yankee landowner ­– we’ll call him El Ingenioso Hidalgo Don Hamilton de la Vermancha – was furious at the Holland Town select board when it announced plans to widen the road in front of his house. He complained to the Town, and it scaled back the plans. That wasn’t good enough for our hero: He sued.

The case went to the Supreme Court of Vermont twice, where our landowner proved his point. The Court held that the Holland Town tree warden couldn’t cut down the trees in front of Don Hamilton’s house without holding a hearing first.

A tree warden is a concept unique to New England, a municipal official given powers by statute to make decisions about the cutting and trimming of diseased or hazard trees. The tree warden’s powers are defined by statute.

In today’s case, when all the legal dust had settled, the Town succeeded in widening the road, the tree warden was able to cut down the trees standing in the way of progress, and all necessary hearings were held, with everyone – including Don Hamilton receiving due process, that is, the “process that is due.”

For Don Hamilton’s considerable efforts in protecting the due process rights of all landowners who might have the tree warden try to cut down healthy trees without a prior hearing, the plaintiff was rewarded with damages … of one dollar.

Of course, Mr. Hamilton used two lawyers and spent about $30,000 in pursuit of his glorious quest, and for reasons you can read about in the full case, he didn’t win any attorneys’ fees. But he has his dollar, and the sense of satisfaction that he stepped up and made a difference.

road150416Hamilton v. Town of Holland, 950 A.2d 1183, 2007 VT 133 (Sup.Ct. Vt., 2007). Hamilton owned property on Lackey Road. In 2001, the Town select board decided to widen a half-mile section of Lackey Road because the section was not wide enough to allow large vehicles-such as a truck, snowplow or school bus-to pass each other safely. The Town engaged the assistance of the State District/Regional Highway Commission in selecting and marking the trees that needed to be removed for the road project.

As originally planned, the road-widening project required removal of many trees as well as ledge, which would have required blasting, digging drainage ditches, and installing culverts. Hamilton objected to the tree-cutting proposal. The select board voted to go ahead with the project anyway, but it scaled back the road and reduced the number of trees to be cut. Hamilton sued for a declaratory and injunctive relief, seeking to prevent the Town from cutting down the trees. Hamilton argued that the Town must follow the statutory procedures for altering a public highway, including performing a survey of the road, before proceeding with the widening project. The Town argued that it had authority to maintain Lackey Road, and that widening the road is part of the Town’s maintenance responsibility. The Town also argued that the Town’s tree warden was not required to hold a hearing before removing the trees, because they were a hazard to the public. The trial court granted summary judgment for the Town, and Hamilton appealed.

The Vermont Supreme Court reversed the decision, holding that the record did not support the court’s grant of summary judgment, because the trial court had grounded its decision in part on the fact that the trees to be cut were all located within the right-of-way for Lackey Road, and that all of the work would take place within that right-of-way, but the location of the right-of-way and the trees to be cut was an issue of fact that was not resolved. The Supreme Court also agreed with landowner that state law on tree wardens did not grant the tree warden authority to cut public shade trees under the public hazard exception if the trees themselves do not present the public safety hazard.

On remand, Hamilton amended his complaint, raising a 42 U.S.C. §1983 claim deprivation of his constitutional right to due process based on the failure of the tree warden to hold a hearing prior to removing the trees in question, a claim of trespass, and a claim of conversion of trees pursuant to state statute. The trial court concluded that the road project was “more extensive than routine maintenance,” but that it did not constitute “a major alteration to the road as that term is defined in state law.” Therefore, the court held, the project did not trigger the requirements of 19 V.S.A. §704 for a survey. The trial court also concluded that the tree warden’s failure to hold a hearing on the proposed cuttings violated 24 V.S.A. §2509, but that Hamilton wasn’t injured by the violation. The court awarded nominal damages in the amount of $1.00 for his §1983 claim, and — because of these nominal damages, Hamilton was the prevailing party under federal law and entitled to attorney’s fees. The Town appealed, and landowner cross-appealed.

dollar150416

Hamilton only won a dollar – but what a nice dollar it must have been!

Held: The trial court’s determination that the widening was not a major alteration was upheld. According to the statute, “ ‘[a]ltered’ means a major physical change in the highway such as a change in width from a single lane to two lanes.” If the change constituted an alteration, then the Town was required to comply with 19 V.S.A. §704, which required expensive studies of project before it was undertaken.

The project involved cutting fifteen trees in front of Hamilton’s property, a total of thirty to thirty-nine trees along the entire length of the road, and regarding and adding gravel. Hamilton argued that the original project was much more extensive, but the Court said that the Town’s response to Hamilton’s original complaint — to scale back the project — was an appropriate response, and the statute had to be applied to what was finally done, not what was originally planned. The Court observed that the project did not widen Lackey Road from one lane to two, but rather all of the work was done within the existing right-of-way. No culverts were installed or blasting done. Ditches were improved and gravel spread, which appeared to be maintenance under state law. Trees were removed, but such removal is specifically contemplated as a matter of maintenance by 19 V.S.A. §904. The Court agreed with the Town that all the work it performed qualified as maintenance under state law. As such, the Town did not need to perform the survey requirements found in §704.

Hamilton had spent $2,000 planting new trees, but he had admitted the took place in an area different from where the Town proposed to cut trees and was completed before any cutting by the Town. The Court thus found that Hamilton’s plantings were not related to the roadwork.

Inasmuch as Hamilton did prove a deprivation of due process and a violation of his property rights in the removal of trees located in the Town’s adjacent right-of-way, the superior court was correct to award him nominal damages of $1.00. Because the Town cut down the trees without holding a tree-warden hearing, the Court said, Hamilton’s due-process rights were violated regardless of his inability to prove loss or damage.

– Tom Root

TNLBGray140407