Wetlands America Trust, Inc. v. White Cloud Nine Ventures, LLC duplicate letter

Wetlands America Trust, Inc. v. White Cloud Nine Ventures, L.P., No. 78462 (20th Jud. Cir. Va. June 19, 2014), aff’d 782 S.E.2d 131 (Va. Feb. 12, 2016) Wetlands America Trust (WAT) is the land trust affiliate of Ducks Unlimited (DU). In 2001, WAT accepted a donated conservation easement on a 407-acre parcel in Middleburg. The easement permitted certain 'agricultural pursuits' and 'agricultural activities,' as well as 'farm buildings and structures' of less than 4,500 square feet of ground area. The easement also prohibited structures within 200 feet of any stream or pond or more than 400 feet from the main road, and prohibited all but de minimis commercial recreational uses. The easement apparently permitted some level of division, as the parcel was subsequently split into two equal lots. In 2008, White Cloud Nine Ventures, L.P. (White Cloud) purchased one of the lots. White Cloud owned an abutting parcel on which it operated a commercial vineyard, and intended to expand the vineyard and open a creamery and bakery on the easement-protected parcel. White Cloud's owner had discussions with DU employees about her plans prior to and after completing her purchase. In these discussions, DU expressed concerns, especially about the retail aspects of her plans. White Cloud eventually constructed a building to encompass a creamery, bakery, tasting room, and retail store. The building would also be used to host private events such as weddings and music festivals. White Cloud viewed the building as a permitted 'farm building,' and pointed to an expansive definition of this term in a state statute. White Cloud also built a bridge that was within 200 feet of a stream. WAT objected to the building, the bridge, and other proposed activities and structures, and eventually filed suit claiming 14 specific violations. White Cloud counterclaimed, seeking to declare either the easement or specific provisions unenforceable on account of vagueness.

Holding: After a non-jury trial, the court issued a lengthy decision in which it held as follows: (1) Ambiguous terms in easements and restrictive covenants must be construed in a way that least restricts free use of the land. Although the court did not explicitly say so, conservation easements deserved no special consideration with respect to this rule of construction. (2) The terms 'farm,' 'agriculture,' and 'farm building' are ambiguous. (3) WAT's contention that farming does not encompass the processing of agricultural products originating outside of the protected property was too broad, given that all sorts of such agricultural components (grain, seed, hay, fertilizer, tools, parts, equipment, etc.) typically originate outside of the farm proper. (4) Processing of agricultural products such as occurs in a creamery and bakery, as well as tasting activities, do fall within the scope of a 'farm building.' (5) The retail sale of goods that have a nexus to the property or that are agricultural in nature are permitted within a 'farm building.' The sale of other goods beyond these limitations is not permitted. (6) Because WAT's complaint (the document that launches a lawsuit) did not mention the bridge as a violation, and it was only raised later in the litigation, WAT waived its right to raise the issue at trial. (7) Despite the provision in the easement prohibiting structures located more than 400 feet from the main road, because WAT employees had indicated to White Cloud prior to the litigation that this provision did not apply to this particular parcel, WAT was prevented from enforcing it at trial. (8) Although a provision of the easement prohibited structures on 'highly erodible areas as identified by the U.S. Department of Agriculture,' erodibility could be determined after a site was regraded in preparation for building construction. Because WAT's expert witness based his determination of erodibility prior to the land being regraded, there was no evidence that the site of the building was highly erodible. (9) A parking lot is a permitted accessory structure to the 'farm building,' as to hold otherwise would defeat the allowed retail sales and tastings. (10) Temporary mounds of dirt that would ultimately be used in the final grading of a site were permitted under the easement. (11) Although White Cloud had violated the easement by not obtaining a government permit for the bridge, it was in the process of obtaining the permit, which would cure the violation. (12) A buried utility line impaired the flow of a stream and was a violation of the easement and therefore had to be corrected. (13) The farm building was not more than 4,500 square feet in ground area because its foundation fell within that limit. A deck area supported by piers was not included within the term 'ground area.' (14) The type of crushed stone used by White Cloud to construct a road satisfied the 'permeable materials' requirement of the easement. (15) Music festivals and weddings would be commercial recreational uses and are therefore prohibited if more than de minimis. (16) White Cloud did not prove the elements to meet the defenses of laches, estoppel or waiver. ?

March 2016 Update: The Virginia Supreme Court, in a 5 to 2 decision, affirmed the trial court's decision in all respects. In particular, the Supreme Court noted that the Virginia conservation easement enabling statute is not 'directly and irreconcilably opposed' to the common law rule in which restrictive covenants are strictly construed in favor of the free use of land. On the major substantive issue, the Court noted that production, preparation and marketing were inherent components of agricultural activities and therefore permitted under the terms of the easement; thus, the multi-purpose building did indeed fall within the definition of a 'farm building.' Furthermore, the Court affirmed that soil erodibility could be determined after the building site was regraded in preparation for construction. ?

Analysis and Notes: Easement drafters and land trust stewardship staff should read this case carefully, as there are many lessons to be drawn here. It is the latest in a number of cases to distinguish what kinds of activities fall within the definition of farming or agriculture. For another recent case in which neighbors opposed a creamery on an agricultural easement property, see Long Green Valley Ass'n v. Bellevale Farms, Inc., above. Also note the ruling regarding 'ground area,' because this term (as well as 'footprint') can lead to all sorts of complications if not precisely defined. The court's reasoning on how to determine erodibility seems rather strained. All in all, there were a number of close calls to be made by the court, and the common law rule that restrictive covenants are to be construed in favor of free use of the land made a big difference. It is unclear whether the easement included a construction clause that favored an interpretation in favor of conservation. Unlike certain other states, Virginia's conservation easement enabling statute does not contain a pro-conservation construction clause.

March 2016 Update: This is a troubling decision for land conservation proponents in Virginia, with possible repercussions nationwide. In general, the decision points to the importance of including a liberal (pro-conservation) construction provision in the easement proper, and for pushing for such a provision to be included in state enabling statutes; the easement in this case had no such provision. A key section of the Supreme Court's analysis on the rule of construction issue pointed to the Virginia enabling act's provision that conservation easements are to be 'created, conveyed, recorded, assigned, released, modified, terminated, or otherwise altered or affected in the same manner as other easements.' (Emphasis in court's opinion.) This is the same language as Section 2(A) of the Uniform Conservation Easement Act (UCEA), and is included in 29 different state enabling statutes. For another recent case in which a similar phrase proved dispositive, see Carpenter v. Commissioner, T.C. Memo 2012-1 (U.S.T.C. 2012)(Carpenter I); T.C. Memo. 2013-172 (U.S.T.C. 2013)(Carpenter II). As noted in that analysis of that case, section 2(a) of the UCEA has been identified as open to differing and potentially troubling interpretations. See Land Trust Alliance, A Guided Tour of the Conservation Easement Enabling Act Statutes 17 (2014), available at http://tlc.lta.org/clearinghouse/documents/768. As of March 2016, only three states (California, Pennsylvania, and West Virginia) have liberal construction provisions in their enabling statutes, and these provisions have helped courts reach conservation friendly decisions in at least two instances. See Stockport Mountain Corporation LLC v. Norcross Wildlife Foundation, Inc., No. 3:11cv514, 2012 U.S. Dist. 2013 WL 4538822 (M.D. Pa. Aug. 27, 2013) (Memorandum Decision Granting Summary Judgment); Building Industry Assn of Central California v. Cty. of Stanislaus, 190 Cal. App. 4th 582 (Cal. App. 2010). On the 'farm building' issue, land trusts are well advised to precisely define the term 'agriculture' in their conservation easements. In particular, careful thought should be given to whether and to what extent marketing and processing activities may be permitted.

State: Virginia

Date: 2016

Procedural Status: Case concluded.

Keywords: Agriculture; ambiguous; baseline documentation; commercial uses; construed in favor of free use; de minimis; enabling statute; estoppel; laches; liberal construction provision; private conservation easement; purpose clause; recreation; road; size of structure; structure; surface alterations; Uniform Conservation Easement Act; vagueness; violation; waiver; weddings.

Summary of Facts and Issues: Wetlands America Trust (WAT) is the land trust affiliate of Ducks Unlimited (DU). In 2001, WAT accepted a donated conservation easement on a 407-acre parcel in Middleburg. The easement permitted certain “agricultural pursuits” and “agricultural activities,” as well as “farm buildings and structures” of less than 4,500 square feet of ground area. The easement also prohibited structures within 200 feet of any stream or pond or more than 400 feet from the main road, and prohibited all but de minimis commercial recreational uses. The easement apparently permitted some level of division, as the parcel was subsequently split into two equal lots. In 2008, White Cloud Nine Ventures, L.P. (White Cloud) purchased one of the lots. White Cloud owned an abutting parcel on which it operated a commercial vineyard, and intended to expand the vineyard and open a creamery and bakery on the easement-protected parcel. White Cloud’s owner had discussions with DU employees about her plans prior to and after completing her purchase. In these discussions, DU expressed concerns, especially about the retail aspects of her plans. White Cloud eventually constructed a building to encompass a creamery, bakery, tasting room, and retail store. The building would also be used to host private events such as weddings and music festivals. White Cloud viewed the building as a permitted “farm building,” and pointed to an expansive definition of this term in a state statute. White Cloud also built a large parking lot to service the building, as well as a bridge that was within 200 feet of a stream. WAT objected to the building, parking lot, bridge, and other proposed activities and structures, and eventually filed suit claiming 14 specific violations. White Cloud counterclaimed, seeking to declare either the easement or specific provisions unenforceable on account of vagueness.

Holding: After a non-jury trial, the court issued a lengthy decision in which it held as follows: (1) Ambiguous terms in easements and restrictive covenants must be construed in a way that least restricts free use of the land. Although the court did not explicitly say so, conservation easements deserved no special consideration with respect to this rule of construction. (2) The terms “farm,” “agriculture,” and “farm building” are ambiguous. (3) WAT’s contention that farming does not encompass the processing of agricultural products originating outside of the protected property was too broad, given that all sorts of such agricultural components (grain, seed, hay, fertilizer, tools, parts, equipment, etc.) typically originate outside of the farm proper. (4) Processing of agricultural products such as occurs in a creamery and bakery, as well as tasting activities, do fall within the scope of a “farm building.” (5) The retail sale of goods that have a nexus to the property or that are agricultural in nature are permitted within a “farm building.” The sale of other goods beyond these limitations is not permitted. (6) Because WAT’s complaint (the document that launches a lawsuit) did not mention the bridge as a violation, and it was only raised later in the litigation, WAT waived its right to raise the issue at trial. (7) Despite the provision in the easement prohibiting structures located more than 400 feet from the main road, because WAT employees had indicated to White Cloud prior to the litigation that this provision did not apply to this particular parcel, WAT was prevented from enforcing it at trial. (8) Although a provision of the easement prohibited structures on “highly erodible areas as identified by the U.S. Department of Agriculture,” erodibility could be determined after a site was regraded in preparation for building construction. Because WAT’s expert witness based his determination of erodibility prior to the land being regraded, there was no evidence that the site of the building was highly erodible. (9) A parking lot is a permitted accessory structure to the “farm building,” as to hold otherwise would defeat the allowed retail sales and tastings. (10) Temporary mounds of dirt that would ultimately be used in the final grading of a site were permitted under the easement. (11) Although White Cloud had violated the easement by not obtaining a government permit for the bridge, it was in the process of obtaining the permit, which would cure the violation. (12) A buried utility line impaired the flow of a stream and was a violation of the easement and therefore had to be corrected. (13) The farm building was not more than 4,500 square feet in ground area because its foundation fell within that limit. A deck area supported by piers was not included within the term “ground area.” (14) The type of crushed stone used by White Cloud to construct a road satisfied the “permeable materials” requirement of the easement. (15) Music festivals and weddings would be commercial recreational uses and are therefore prohibited if more than de minimis. (16) White Cloud did not prove the elements to meet the defenses of laches, estoppel or waiver.

March 2016 Update: The Virginia Supreme Court, in a 5 to 2 decision, affirmed the trial court’s decision in all respects. In particular, the Supreme Court noted that the Virginia conservation easement enabling statute is not “directly and irreconcilably opposed” to the common law rule in which restrictive covenants are strictly construed in favor of the free use of land. On the major substantive issue, the Court noted that production, preparation and marketing were inherent components of agricultural activities and therefore permitted under the terms of the easement; thus, the multi-purpose building did indeed fall within the definition of a “farm building.” Furthermore, the Court affirmed that soil erodibility could be determined after the building site was regraded in preparation for construction.

Analysis and Notes: Easement drafters and land trust stewardship staff should read this case carefully, as there are many lessons to be drawn here. It is the latest in a number of cases to distinguish what kinds of activities fall within the definition of farming or agriculture. For another recent case in which neighbors opposed a creamery on an agricultural easement property, see Long Green Valley Ass’n v. Bellevale Farms, Inc. Also note the ruling regarding “ground area,” because this term (as well as “footprint”) can lead to all sorts of complications if not precisely defined. The court’s reasoning on how to determine erodibility seems rather strained. All in all, there were a number of close calls to be made by the court, and the common law rule that restrictive covenants are to be construed in favor of free use of the land made a big difference. It is unclear whether the easement included a construction clause that favored an interpretation in favor of conservation. Unlike certain other states, Virginia’s conservation easement enabling statute does not contain a pro-conservation construction clause.

March 2016 Update: This is a troubling decision for land conservation proponents in Virginia, with possible repercussions nationwide. In general, the decision points to the importance of including a liberal (pro-conservation) construction provision in the easement proper, and for pushing for such a provision to be included in state enabling statutes; the easement in this case had no such provision. A key section of the Supreme Court’s analysis on the rule of construction issue pointed to the Virginia enabling act’s provision that conservation easements are to be “created, conveyed, recorded, assigned, released, modified, terminated, or otherwise altered or affected in the same manner as other easements.” (Emphasis in court’s opinion.) This is the same language as Section 2(A) of the Uniform Conservation Easement Act (UCEA), and is included in 29 different state enabling statutes. For another recent case in which a similar phrase proved dispositive, see Carpenter v. Commissioner, T.C. Memo 2012-1 (U.S.T.C. 2012)(Carpenter I); T.C. Memo. 2013-172 (U.S.T.C. 2013)(Carpenter II). As noted in that analysis of that case, section 2(a) of the UCEA has been identified as open to differing and potentially troubling interpretations. See Land Trust Alliance, A Guided Tour of the Conservation Easement Enabling Act Statutes 17 (2014), available at http://tlc.lta.org/clearinghouse/documents/768. As of March 2016, only three states (California, Pennsylvania, and West Virginia) have liberal construction provisions in their enabling statutes, and these provisions have helped courts reach conservation friendly decisions in at least two instances. See Stockport Mountain Corporation LLC v. Norcross Wildlife Foundation, Inc., No. 3:11cv514, 2012 U.S. Dist. 2013 WL 4538822 (M.D. Pa. Aug. 27, 2013) (Memorandum Decision Granting Summary Judgment); Building Industry Assn of Central California v. Cnty. of Stanislaus, 190 Cal. App. 4th 582 (Cal. App. 2010). On the “farm building” issue, land trusts are well advised to precisely define the term “agriculture” in their conservation easements. In particular, careful thought should be given to whether and to what extent marketing and processing activities may be permitted.