Watch Your Language. As established in other “Watch Your Language” articles for this Blog, as a general rule, courts will uphold language in commercial agreements, unless it is contrary to statutory law or public policy. They traditionally presume that commercial parties are on more of an equal playing field and are more sophisticated concerning commercial real estate transactions, since both parties to a commercial transaction will usually have attorneys to review their documents. Because of this judicial deference to “commercial language”, you must say what you mean, precisely, or a judge will decide what you meant. This principle is just as true with regard to easements, as it is with contracts, leases and other commercial documents.
Easements in General. An “easement” is basically a right to use the property of another for a specific purpose. Most common are drive/access easements and utility easements. While there are limited exceptions, most easements are created by separate written instruments (or are contained within deeds) and are recorded. Some easements are personal in nature and only apply while the burdened landowner owns the property, and others are “perpetual” and burden the land forever. Since forever is a long time, it makes sense to retain legal counsel and not try this at home with a $5.00 Easement from “Forms are Us.”
Easements will either spell out the specific rights to use the property granted to the easement “holder” (e.g. right to use the property to place above-ground or below ground electric lines), or be “blanket” in nature and not be limited as to use. Many easements will also contain 1) restrictions for the benefit of the easement holder which burden the land described as the “easement premises” (e.g., no buildings may be constructed upon the easement area); and 2) obligations imposed upon the easement holder for the benefit of the burdened landowner (e.g., requirements such as maintenance of the easement premises, and relocation of such premises or the facilities within the easement premises).
Easement rights (and easement obligations) are often drafted in general terms, with the parties assuming their intent is clear. The relatively recent case of J.T. Mgt. v Spencer, 2017-Ohio-892 (11th Dist. Ct. of App., Trumbull Cty.) reinforces the need to be specific and leave as little as possible to “interpretive chance.”
J.T. Mgt. v Spencer. The facts of the “J.T. Mgt.” case are simple enough (the law, not so much). J.T. Mgt., the appellant owns a residential parcel and a commercial parcel that are adjacent to each other in Warren, Ohio. The commercial parcel is a 1.4-acre lot fronting S.R. 46 that the appellant planned to build a commercial structure on. The residential parcel is known as “Lot 9” in the 9-unit residential subdivision known as Hidden Hills. J.T. Mgt. bought Lot 9 and its ancillary 1/9th interest in the private drive known as Hidden Hills Drive(which traverses the subdivision, connecting it to S.R. 46), after they bought the commercial parcel, presumably, not because of its secluded residential tranquility.
When J.T. bought the commercial parcel, it also “inherited” an easement of record, granting access to/from such parcel to Hidden Hills Drive. The easement in place was established when the area was virtually all residential in character. Even though J.T.’s commercial lot had frontage on S.R.46, it wanted to ensure that its easement rights to/from Hidden Hills Drive, and its 1/9th right as owner of such drive meant it could use the drive for any and all uses, including commercial traffic. This way, J.T. would, in effect be connecting its commercial property directly to the 9-unit residential subdivision. Consequently, On July 11, 2013, appellant filed a complaint for declaratory judgment, which, if successful would have resulted in an enforceable judicial edict of its plans for commercial connectivity. Appellees, the owners of the remaining eight lots in the subdivision and the Hidden Hills Homeowners Association filed an answer (denying the material allegations of the complaint) and a counterclaim/cross claim (demanding judgment declaring that appellant does not have an ownership interest in the private driveway, but only a right of way easement to access S.R. 46 for residential use).
The trial court ruled in favor of the appellant on the issue of ownership, declaring the appellant a one-ninth owner of Hidden Hills Drive by virtue of its ownership of Lot 9. However, on the issue of the use of the easement, the court found in favor of appellees and held that using the private driveway for commercial ingress and egress was impermissible because it would increase the burden on or materially enlarge its right in the easement. Appellant appealed this decision to the 11th District Court of Appeals (and appellees appealed the trial court’s judgment declaring the appellant a 1/9th owner of the drive).
During the appeal, the appellant set forth three “assignments of error” (claimed mistakes with the trial court’s ruling). Appellant first argued that it should be permitted to expand its express easement in the private driveway to use it for commercial purposes because the area has changed from primarily residential to primarily commercial. It cited an older Ohio Supreme Court case (Erie Railroad Co. v. S. H. Kleinman Realty Co., 92 Ohio St. 96 (1915)) that provides that changes in the use of an easement are permitted to the extent that they result from “the normal growth and development of the dominant land”. The 11thDistrict Court in J.T. Mgt., however, citing precedent of its own (Solt v. Walker, 5th Dist. Fairfield No. 95-CA-64, 1996 WL 363438 (May 13, 1996) and cases cited therein) summarized the law regarding changes in the use of an easement that is at odds with the appellant’s argument. Namely, that “While an easement or right-of-way gives a landowner the right to enter and use the land of another, [and some change in use is permitted due to normal growth and development] the owner of a dominant estate may not increase the burden nor materially enlarge his right over the servient estate.” The appellate court in J.T. outlined the following four factors (that it cited from the Fifth District in Sol) to help determine whether a dominant estate has unreasonably expanded the use of an access easement: “1) the amount of increased traffic on the easement; 2) the time of day when vehicles used the easement; 3) the extent that traffic noise increased; and (4) whether vehicles using the easement travelled at excessive speeds.”
Applying the facts to the law, the court of appeals in J.T. easily dismissed appellant’s argument that a commercial use of the easement would be a reasonable and normal increase of use. That is because both parties stipulated (agreed) to a traffic study that showed a fast food restaurant would have an average weekday traffic volume of 2,452 vehicles, resulting in a daily traffic volume increase on the easement of 6,352 per cent over the actual daily traffic count of 38 vehicles under the current residential use. The trial court and court of appeals in J.T. Mgt. also pointed out that: 1) none of the cases cited by appellant held that use of an easement can be expanded from solely residential uses to include commercial uses; 2) commercial use would result in a financial burden to appellees because the driveway is maintained by the homeowner’s association and is insured by the individual property owners via policies that insure them solely for residential use of the driveway; and 3) the increased traffic would inconvenience the property owners and impinge on their beneficial enjoyment of the right to use the driveway. Based on these findings, the courts in J.T. Mgt. concluded that the proposed commercial use of the easement would create an unreasonable burden on the easement.
Appellant’s second main argument was that the language of its express easement is stated in broad and unrestricted terms, and accordingly, it should be interpreted as allowing use of the easement for commercial purposes.
Upon first glance of the easement language, appellant’s argument seems like a good one.
The subject easement provides: “[T]he grantors, in consideration of the sum of One Dollar, paid by the Grantees * * *, do hereby grant ** * unto the grantees, their heirs and assigns forever, a right of way on and over a certain piece of land owned by the Grantors as follows (legal description omitted) * * * [f]or the grantees, their heirs and assigns, * * * to freely pass * * * on foot, or with vehicles of every description, to and from [S.R. 46] to said land of the grantees.”
Clearly, there are no restrictions as to use in the subject easement. Consequently, no restrictions means unlimited use/rights, right? Not in the legal world of contract interpretation. Silence, or overbroad language usually means the parties’ intent is not clear within the four corners of their documents, and accordingly, surrounding circumstances and extrinsic evidence need to be considered. In the words of the Ohio Supreme Court, “The language of [an] easement and the surrounding circumstances provide the best indication of the extent and limitations of [an] easement. Apel v. Katz, 83 Ohio St.3d 11, 17 (1998).
The trial and appellate courts in J.T. Mgt. had no problem finding that the surrounding circumstances of the easement at issue favored the appellees and residential use, mainly because the parties to the lawsuit stipulated that the only use ever made of the private driveway from its construction to the present was residential, to provide the property owners access to their homes in the Hidden Hills Subdivision. Additionally, the J.T. Mgt. courts recognized that Hidden Hills Drive remains zoned for residential use only. Accordingly, according to the court of appeals in J.T. Mgt., when the easement was put in writing in 1975, “the parties could not have intended its use for commercial purposes because such use was never made of the driveway and would have been prohibited by law. We therefore hold the trial court did not err in finding that the parties did not intend the driveway to be used for commercial purposes and thus the express easement does not authorize such use.”
Appellant’s “strike three” argument was that as a 1/9th owner of the drive (vs its right as an easement holder) it had the right to use the drive for any ingress/egress; residential or commercial. However, the court of appeals in J.T.held that “while appellant has an ownership interest in the private driveway, it is part of the Hidden Hills Subdivision and is therefore subject to the deed restrictions in the Declaration of Restrictive Covenants. The restrictions forbid ‘trade’ from being carried on upon any lot in the subdivision.”
What is the moral of this story? Listen to what judges are saying with regard to interpreting your easements, leases, purchase agreements and other contracts: “When the language of a written contract is clear, a court may look no further than the writing itself to find the intent of the parties [So, be clear]. In addition, we will look to the plain and ordinary meaning of the language used in the contract unless another meaning is clearly apparent from the contents of the agreement…” [So, if your meaning cannot be found in a dictionary, define it in the document so it is clearly apparent]. “The well-known and established principle of contract interpretation is that [c]ontracts are to be interpreted so as to carry out the intent of the parties, as that intent is evidenced or not evidenced by the contract language [So, evidence your intent in the document].
While I think the court in J.T. Mgt. got this one right, and the appellant did not have a chance to evidence its intent in the easement, because it “inherited it”, this case, and the accompanying time and attorneys’ fees would not have been necessary had the parties limited the easement access rights for residential purposes only.