Supreme Court of Virginia, Record No. 141577, February 12, 2016: Conservation easement ambiguity resolved in favor of allowing construction.
This controversy arose because of construction activities and proposed uses of land subject to a conservation easement. The legal questions were whether a Virginia conservation easement should be construed “strictly” (i.e., narrowly) against restrictions on land, whether certain provisions of the conservation easement itself were ambiguous, whether the lower court had a reasonable basis to find that no violation of the ambiguous terms of the easement had occurred, and whether the lower court had a reasonable basis to find that the construction activities would not violate the conservation purposes of the easement. Five of the seven member appeal court upheld the trial court, but two justices dissented.
Wetlands America Trust, Inc. (WAT) holds a conservation easement on Virginia property owned by White Cloud Nine Ventures, L.P. (White Cloud). White Cloud purchased the property to lease it to a related entity to use for a vineyard, grazing and milking cows, raising wheat, constructing a building to be used for a creamery, bakery, wine storage, and the tasting, sampling and sale of wine, cheese and bakery products. White Cloud began construction of the building, an adjoining parking lot, a new road and a new bridge. WAT sued, seeking a declaratory judgment that the construction and intended “commercial use” violated the conservation easement’s restrictive covenants. The trial court denied the declaratory judgment.
The first issue decided on appeal was whether the trial court was wrong to apply the common law principle that if the conservation easement, as a contract, was at all ambiguous, it must be strictly construed against WAT, the party seeking to enforce it. WAT argued that in Virginia a conservation easement should not be subject to that rule because the 1988 Virginia Conservation Easement Act (“VCEA”) (VA Code §§ 10.1-1009 through -1016), especially favors land conservation and sets conservation easements apart from other restrictions. The court said that under settled principles of statutory construction, “[s]tatutes in derogation of the common law are [themselves] to be strictly construed and not to be enlarged in their operation by construction beyond their express terms.” The court then said it found nowhere that the VCEA specifically addresses the principles of contract construction to be applied to conservation easements, and thus – construing VCEA narrowly — it does not directly exempt such easements from the common law principle favoring use of land free from restrictions. That reasoning meant that if restrictive covenants in the conservation easement are determined to be ambiguous, they must be strictly construed against restriction and in favor of White Cloud.
The dissenting opinion disagreed, saying that the common law principle of strict construction in favor of free use of land does not apply to conservation easements. The dissent took note that Virginia public policy, as embodied in the Constitution of Virginia, VCEA and statutes preceding VCEA strongly favors the conservation of land and open spaces. The dissent wrote, “The oft-stated policy of the Commonwealth in favor of conservation easements such as the type at issue here could not be a clearer rejection of the common law strict construction principle.” The majority opinion, according to the dissent, ignores the common law principles of contract interpretation which provide that “where, as in this case, an easement is created by deed, the easement should be interpreted in accordance with Virginia’s rules of construction for deeds.” (The majority asserted in a footnote that the rules for interpretation of deeds are applicable “where there is a dispute, not over the meaning of restrictions placed on the use of certain land, but rather over the nature and extent of the estate the grantor intended to convey” [citation omitted].)
After having held that ambiguous provisions of the conservation easement should be interpreted in favor of White Cloud, the court then turned to the provisions of the easement which WAT claimed White Cloud violated.
The first provision at issue was whether the trial court was reasonable in finding that White Cloud’s building and uses are “farm buildings or structures” which are allowed by the easement. The court said that “farm building” is synonymous with “agricultural building,” and looked to the easement itself, Virginia’s Uniform Statewide Building Code and Webster’s Third New International Dictionary to interpret “farm buildings or structures.” The easement’s prohibition on new buildings which allows “farm buildings or structures” did not define “farm buildings” or “farm structures” but another section of the easement refers to various structures including farm buildings, as “agricultural buildings.” The court cited sections of the Building Code that define the term “[f]arm building or structure” to include storage, handling, production, display, sampling or sale of agricultural, horticultural, floricultural or silvicultural products produced in the farm, and handling, processing or sale of agricultural animals or agricultural animal products. The court cited the dictionary’s definition of “agriculture” as including “the science or art of the production of useful to man and in varying degrees the preparation of these [plant and animal] products for man’s use and their disposal (as by marketing).” The court concluded that production, preparation and marketing are components of agricultural activities included in the phrase “farm building” as used in the easement and that the permitted “farm/agricultural buildings” may be used for agricultural activities that are commercial and/or industrial in nature. On that basis, the court held that White Cloud’s intended use was allowed by the easement so long as the agricultural products involved were at least in part grown or derived from plants and livestock grown or grazing on the easement property.
The court turned to the conservation easement’s prohibition against constructing a building on “highly erodible areas as identified by the U.S. Department of Agriculture.” The court agreed with the trial court’s interpretation of the easement to mean the erodibility was to be tested after the construction site for the new building had been graded. This interpretation involved reconciling the construction prohibition cited above with another provision of the easement which allows grading, which says, “Grading… shall not materially alter the topography of the Protected Property except . . . as required in the construction of permitted buildings. . . .” Under this interpretation the court also found that it would be “completely incongruous and unreasonable to conclude” that White Cloud could grade the site for the new building but not for the parking area serving the building.
WAT also tried, unsuccessfully, to argue that in addition to the specific prohibitions analyzed above, White Cloud’s activities were prohibited as contrary to the conservation purpose of the easement. The stated purpose was, “to assure that the Protected Property will be retained in perpetuity predominantly in its natural, scenic, and open condition, as evidenced by the [Baseline Document] Report [BDR], for conservation purposes as well as permitted agricultural pursuits, and to prevent any use of the Protected Property which will impair significantly or interfere with the conservation values of the Protected Property, its wildlife habitat, natural resources or associated ecosystem.”
While the court acknowledged what it called “inherent tension” between the conservation purposes (which, the court said, were undefined) and the expressly “permitted agricultural pursuits,” it also said that the easement calls for retention of the property for conservation purposes and permitted agricultural pursuits, and “therefore the character of the property is in no way frozen in perpetuity” (Emphasis added.) The court concluded that the trial court reasonably ruled that, “under the Easement, White Cloud was not required to retain its property in the condition established by the [BDR] to the extent it has engaged in permitted uses.” The court also found the trial judge could make the determination that the expert witnesses for White Cloud were more persuasive that the expert for WAT in showing that White Cloud’s construction and use of its new facilities “did not significantly impair or interfere with the Easement’s conservation values and/or the property’s environment.”
Lastly, the court upheld the trial court on technical civil procedure grounds in refusing to consider another WAT claim (about constructing a bridge) which WAT had not alleged in its complaint.
The opinion is available at http://www.courts.state.va.us/opinions/opnscvwp/1141577.pdf.