James E. Koch v. J&J Ranch, LLC, a Wyoming Limited Liability Company ( 2013 )

IN THE SUPREME COURT, STATE OF WYOMING
2013 WY 51APRIL TERM, A.D. 2013
April 30, 2013
JAMES E. KOCH,
Appellant
(Defendant),
v.
S-12-0179
J&J RANCH, LLC, a Wyoming
Limited Liability Company,
Appellee
(Plaintiff).
Appeal from the District Court of Laramie County
The Honorable Thomas T.C. Campbell, Judge
Representing Appellant:
Daniel B. Frank of Frank Law Office, P.C., Cheyenne, Wyoming
Representing Appellee:
James R. Salisbury of Riske & Salisbury, P.C., Cheyenne, Wyoming
Before KITE, C.J., and HILL, VOIGT, BURKE, and DAVIS, JJ.
NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third.
Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building,
Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be
made before final publication in the permanent volume.
DAVIS, Justice.
[¶1] The parties are two rural landowners who own easements crossing a parcel of
ranchland in Laramie County, Wyoming. When Appellant James Koch improved the
common roadway and asked his neighbor to contribute to the cost of those improvements,
Appellee J&J Ranch, LLC brought suit against Koch in the District Court for the First
Judicial District. J&J sought a declaratory judgment as to the parties’ respective rights
and duties relating to maintenance and repair of the road, as well as injunctive relief and
damages for Koch’s alleged interference with J&J’s use of the easement.
[¶2] Koch responded with similar counterclaims, but also claimed the right to equitable
contribution from J&J for the costs he incurred in improving the road. We will affirm the
district court’s denial of Koch’s request for equitable contribution, but reverse its
declaration of the parties’ rights regarding any future maintenance work and as to the
rights of the parties to recover for repair and maintenance they perform. 1
ISSUES
[¶3] We restate the questions raised by this appeal as follows:
1. Was the district court’s denial of Koch’s equitable
contribution claim consistent with the principles set out in
Rageth v. Sidon Irrigation District, 2011 WY 121, 258 P.3d
712 (Wyo. 2011), and otherwise not clearly erroneous or an
abuse of discretion?
2. Did the court err as a matter of law when it declared
that:
a. Appellant had no right to repair or maintain the
easement?
b. Appellant had no right to recover a portion of the costs
of repair or maintenance from Appellee?
c. Appellant’s use of the easement could not exceed the
boundaries of his grant?
1
We decline J&J’s invitation to consider how resolution of its dispute with Koch will affect the owner of
the servient estate, who is not a party to this litigation. As a corollary to principles of standing, courts
should not ordinarily adjudicate the rights of non-parties. Olsen v. Olsen, 2011 WY 30, ¶ 14, 247 P.3d
77, 81 (Wyo. 2011); Singleton v. Wulff, 428 U.S. 106, 113-14, 96 S. Ct. 2868, 2874, 49 L. Ed. 2d 826(1976).
1
FACTS
[¶4] Dean Fogg was the original owner of the servient estate involved in this case. In
July of 1979, Fogg granted a road easement to Jerry Palen, who sold his property
(including the appurtenant easement) to Morris and Judy Perkins in 1991. Appellant
Koch purchased that property in March 2006. After Fogg died in 2004, the servient
property passed through a trust he had created to his daughter, Janet Shatto. J&J
purchased an easement over the roadway used by Palen and his successors from Shatto in
October of 2007.
[¶5] Koch’s road easement describes its width as “a minimum of thirty (30) feet,” and
it contains no provisions regarding maintenance of the road. J&J’s easement limits the
width of its road to thirty feet, but it also provides that J&J “agrees to maintain the road
easement.”
[¶6] The road used by Koch and J&J begins at Campstool Road east of Cheyenne, and
then proceeds south for approximately one mile. The road then reaches a Y, from which
Koch has to travel a short distance to the southwest to reach his property. To reach the
J&J property from that point one has to drive another mile, first bearing to the southeast,
then directly to the east, and then due south. Approximately two-thirds of this second
mile lie on a separate easement granted to J&J by Arp & Hammond Hardware Company
in May of 2008.
[¶7] For most of its history, the common portion of Koch’s and J&J’s easements “was
just a two-rutted road through the pasture” that received little or no maintenance.
Although Mr. Perkins occasionally dumped some gravel in the deepest ruts and mud
puddles on the road while he owned the property, and although others occasionally
dragged old tires down the road in an effort to smooth it, the more common practice was
to simply drive around those obstructions, thereby widening the road. The topography of
the land through which the road runs allowed snow to drift on it, at times preventing its
use for up to a week.
[¶8] By the time Koch acquired his property in 2006, years of use and the cumulative
effect of weather had lowered the roadbed nearly three feet below the adjacent
pastureland. As a result, snowmelt and rain filled the road, washed downhill, and created
large waterholes and puddles in most low-lying areas. In the one-mile course of the
easement there were approximately twenty such holes which, when full, were three feet
deep and impassable by ordinary passenger vehicles. When Koch moved onto his newly-
acquired property in 2006, he could not pull his horse trailer down the road with his dual-
wheel, four-wheel-drive Dodge pickup truck and had to wait nearly three weeks for the
road to dry out.
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[¶9] Koch is an excavating contractor, and he therefore owns heavy equipment suitable
for road maintenance. After Koch moved in, he obtained permission from Dean Fogg’s
son Dennis to fill the mudholes and level the road with a front-end loader in 2006 and
2007.
[¶10] Some time in 2006, Koch met James Johnson, J&J’s owner and manager. The two
talked about the poor condition of the road, and Johnson proposed that they work
together to fix it. He asked Koch about gravelling it. Koch believed gravelling would be
too expensive, and the two orally agreed that Koch would instead use his loader to cut a
small ditch along the road in the areas which filled with water, and that he would push the
soil excavated from the ditches to the center of the road, thus elevating it. They hoped
those measures would drain water in problem areas and allow the road to dry more
quickly. Koch performed the agreed work in 2006 and 2007, and he also periodically
smoothed the road and plowed snow from it. Johnson paid Koch for a portion of the cost
of the work, which came to approximately $800 in each year.
[¶11] In 2008, Koch decided to improve the road by transforming the small ditches he
had made into true borrow ditches and by using the soil he would remove when he
deepened and widened the ditches to increase the height of the road, which would in turn
hopefully provide still better drainage and reduce snow drifts. In March of that year he
billed Johnson $700 for what he claimed was Johnson’s share of the cost of the ditching
and elevation work he had done that January and February. When Koch informed
Johnson that $350 per month was going to be his share of the costs “from here on out,”
Johnson refused to pay the bill. After that, the two had no further discussions about snow
removal, road maintenance, or improvement of the road. Koch never again billed
Johnson for any work except for $200 for road grading in June of 2008, which Johnson
paid.
[¶12] Unfortunately, the work Koch did in 2008 did not result in improvement to the
road. The material he removed from the ditches was mainly sand, which did not compact
well when placed on the road. Consequently, it absorbed and held water rather than
allowing it to drain as Koch originally intended. The relatively soft and unstable sand
surface also made the road more difficult for cars to travel, because it developed deep ruts
in which they could become stuck.
[¶13] Koch improved the road dramatically in 2009. He obtained permission from the
owner of the servient estate to dig into adjacent hills for rock, which he then placed on
top of the sand roadway, which made it much more stable and also increased drainage.
All parties agree that the efforts produced a far better road than had existed before.
[¶14] On September 21, 2009, J&J filed a lawsuit in which it made a number of claims
against and sought various forms of relief from Koch. Only one of those claims is before
the Court in this appeal, and that is a request for a declaration of the parties’ respective
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rights and responsibilities as to maintenance of their shared road. On October 12, Koch
filed an answer and counterclaim seeking relief on two bases relevant to this appeal: he
sought a declaratory judgment claim similar to that of J&J, and he also asked for a
judgment against J&J for its equitable share of the costs he incurred in improving the
road in 2009.
[¶15] A bench trial began on October 18, 2011. The parties presented evidence as
described above, and argued about the proper application of this Court’s then-recent
decision in Rageth v. Sidon Irrigation District, 2011 WY 121, 258 P.3d 712 (Wyo. 2011),
to their claims. The district court ruled in J&J’s favor by a decision letter dated March 9,
2012, and it entered a formal Order and Judgment reflecting that earlier decision on May
15, 2012. This appeal was timely perfected.
STANDARD OF REVIEW
[¶16] We review factual findings made after a bench trial for clear error. We examine
all properly admitted evidence and not just that of the prevailing party, but we defer to
the trial court’s ability to evaluate the credibility of witnesses, and we do not reweigh
disputed evidence. We will not overturn the trial court’s findings unless the entirety of
the evidence leaves us with the definite and firm conviction that the court was mistaken.
A district court’s conclusions of law are subject to de novo review, however. BJ Hough,
LLC v. City of Cheyenne, 2012 WY 140, ¶ 8, 287 P.3d 761, 764 (Wyo. 2012) (citation
omitted).
[¶17] The district court was required to equitably balance certain factors when
considering whether Appellant Koch was entitled to recover contribution for the cost of
work on the road involved in this case. When reviewing decisions requiring the
application of principles of equity, we apply the abuse of discretion standard and
determine whether the court could reasonably conclude as it did. Kennedy Oil v. Lance
Oil & Gas Co., 2006 WY 9, ¶ 14, 126 P.3d 875, 879 (Wyo. 2006); Jacoby v. Jacoby,
2004 WY 140, ¶ 7, 100 P.3d 852, 855 (Wyo. 2004); Harber v. Jensen, 2004 WY 104, ¶
8, 97 P.3d 57, 60 (Wyo. 2004).
DISCUSSION
[¶18] The issues in this case relate to our decision in Rageth v. Sidon Irrigation District,
2011 WY 121, 258 P.3d 712 (Wyo. 2011). That case involved a dispute over how to
apportion the cost of maintaining an irrigation canal among those using it to carry water.
The plaintiffs were not members of the irrigation district that operated the canal and
sought a determination of their rights and responsibilities. To resolve the issue of
contribution, we adopted the “equitable contribution” doctrine of the Restatement (Third)
of Property: Servitudes § 4.13, as discussed in Freeman v. Sorchych, 245 P.3d 927 (Ariz.
Ct. App. 2011). Rageth, ¶¶ 21-22, 258 P.3d at 719.
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[¶19] Section 4.13(4) provides that:
The holders of separate easements or profits who use
the same improvements or portion of the servient estate in the
enjoyment of their servitudes have a duty to each other to
contribute to the reasonable costs of repair and maintenance
of the improvements or portion of the servient estate.
Restatement (Third) of Property: Servitudes § 4.13(4) (2000). Comment e to § 4.13
further explains that once a servitude beneficiary performs reasonable repairs or
maintenance on an easement, other beneficiaries have a duty to contribute their fair share
of any reasonable costs he incurred. Depending on the circumstances, factors relevant to
the apportionment of those costs may include the amount and intensity of each easement
holder’s actual use of the property and the value of repairs or maintenance they have
performed. Id., cmt. e.
[¶20] The Freeman court preceded its discussion of § 4.13 by noting that absent an
agreement forbidding him to do so, an easement holder has the right to maintain and
repair a road to which the easement relates. Freeman, 245 P.3d at 933. See also 28A
C.J.S. Easements §§ 227, 231 (updated March 2013) (repairs must be reasonably
necessary to his enjoyment of the easement). The Freeman court then reviewed
Restatement § 4.13 in light of common law decisions from other states, and concluded
that a court should balance a number of relevant circumstances when it equitably
apportions the costs of repairing and maintaining a road among easement holders.
Rageth, ¶ 22, 258 P.3d at 719-20; Freeman, 245 P.3d at 934-36.
[¶21] Those circumstances include but are not limited to: (1) the amount and intensity
of each party’s actual use of the road and the benefits they derive from that use; (2)
whether a party had notice of and an opportunity to participate in repair and maintenance
decisions; (3) whether the work consisted of reasonable and necessary repairs and
maintenance, rather than improvements to the road; (4) whether the quality and price of
the work was reasonable; and (5) the value of other monetary or in-kind contributions to
repair and maintenance made by the parties. Rageth, ¶ 22, 258 P.3d at 719-20; Freeman,
245 P.3d at 935-36.
[¶22] Although the district court did not expressly mention the Rageth/Freeman test in
its decision letter, the circumstances it did address and the amount of time it spent
discussing the application of that test to the evidence before it at trial convinces us that
the district court did in fact consider and weigh three of the five equitable factors of the
test. As to the first of those factors, the court noted that J&J was not overly concerned
with the road’s original condition because of the limited use it made of the easement. On
the other hand, Koch kept heavy equipment for his excavation and haying business on his
5
property and also provided commercial storage of trailers and tractors owned by others.
He boarded horses for a fee as well. He therefore stood to benefit financially from
improvements that make the road more useable for him and for his customers, while J&J
gained little if anything from those improvements.
[¶23] The court also spoke to the notice given J&J regarding the work done by Koch in
2008 and 2009, as well as J&J’s participation in the decision to perform that work. The
court observed that for two years J&J had paid Koch for its share of the routine road
maintenance work he performed, but that in early 2008 it refused to pay him for the more
extensive rebuilding he had done. After that rift, Koch stopped billing J&J because he no
longer expected to be paid, and J&J had no further “choice or say so in [Koch’s]
performance of the work.” Koch improved the road anyway.
[¶24] Finally, the district court viewed Koch’s work as something more than reasonable
and necessary repairs and maintenance, finding that “the uncontroverted evidence was
that [Koch] undertook what amounts to reconstruction of the road.” Koch created a
much-improved road approaching the quality of those built and maintained by the county
– he did not simply repair or maintain the road that existed prior to 2008.
[¶25] These circumstances justify the district court’s discretionary decision to deny
Koch’s claim for equitable contribution from J&J. The Rageth/Freeman balancing test
does not require an equal division of expenditures necessary to repair and maintain J&J’s
and Koch’s common easement. Rageth, ¶ 22, 258 P.3d at 719; Freeman, 245 P.3d at
935. It may require no contribution at all under certain circumstances.
[¶26] The Restatement rule adopted in Rageth and Freeman permitted Koch to perform
repairs and maintenance and to seek contribution from other users of the easement for
that work so long as it did not go beyond repairs and maintenance reasonably necessary
to his and J&J’s enjoyment of their easements. Through 2007 Koch did just that sort of
work, and J&J paid him for its share of the maintenance and repair costs. Thereafter, he
expanded his efforts and, as the district court reasonably found, completely rebuilt the
road, raising its surface instead of merely filling in troublesome low spots and
transforming rudimentary drainage ditches into much larger borrow ditches.
[¶27] By his own admission, the work Koch did in 2008 actually made it more difficult
to use the road, and that work was thus of no benefit to J&J. His work in 2009, which
further raised the road by topping the sand with stabilizing rock, was in part a successful
effort to fix the damage done the previous year. Under the circumstances, the district
court reasonably concluded that J&J should not be required to pay for Koch’s mistakes.
[¶28] The district court’s conclusion is even more reasonable in light of the “notice”
problems in this case. The equitable contribution rule requires a court to determine
whether a prospective contributing party had notice of and an opportunity to participate
6
in decisions relating to the repair and maintenance of a common road. In our view, notice
is important because it gives a party the opportunity to respond to a proposal in some
fashion, thus perhaps defining expectations.
[¶29] Koch and J&J informally agreed in 2006 that Koch would use his heavy
equipment to make necessary repairs to the road and to maintain it, and that J&J would
pay its share of the costs. That arrangement was in place in 2006 and 2007. In 2008,
Koch took it upon himself to perform additional work on the road and in March of that
year gave J&J belated notice of his intent by informing J&J that its share of the costs
would now be five times what it had been paying. J&J refused to pay for such extensive
work and, except for a mid-2008 payment for routine road grading, made no further
payments to Koch. Despite J&J’s refusal to pay and Koch’s acknowledgement at trial
that he did not expect to be paid for his work after that, Koch rebuilt the road.
[¶30] For these reasons, we conclude that the district court acted reasonably and that its
findings were not clearly erroneous. We also find that the district court properly and
equitably balanced the Rageth/Freeman factors, and that it did not abuse its discretion in
reaching the conclusion that it did.
[¶31] However, we cannot similarly affirm portions of the district court’s order granting
declaratory relief to J&J. In paragraphs b, c, and g of that order, the court held that Koch
could not widen the road or use any part of the servient estate outside the boundaries of
the Fogg/Palen easement he now owns, and that he would commit trespass if he did so.
First of all, the grant from Fogg to Palen established the minimum width of the easement,
and it does not define its maximum width, making the decision too indefinite to enforce.
J&J’s easement is limited to thirty feet, but Koch’s may be wider.
[¶32] More importantly, the district court’s ruling determines Koch’s rights to use the
easement as they relate to the correlative rights of the owner of the servient estate, who is
not a party in this case. J&J has no interest in the servient estate – its interests are limited
to assuring that it has reasonable ingress and egress to its property.2 As stated above in
footnote 1, this Court and trial courts should ordinarily refrain from adjudicating the
rights of non-parties in order to maintain consistency with well-established principles of
standing. This case presents no justification for departing from that common sense rule.
[¶33] We also conclude that the district court erred as a matter of law with respect to
paragraphs d, e, and k of its judgment, in which it held that Koch had no right to maintain
the road or to seek reimbursement from J&J if he does so, and that J&J has the exclusive
right to maintain the road, which it may do in any reasonable manner. Although
2
J&J might argue that its share of maintenance expenses might increase if the road were widened. We
believe that the Rageth/Freeman rule provides a framework for assuring a fair assessment of maintenance
use in light of J&J’s historical and current use of the common easement.
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provision d correctly states that Koch has no obligation to maintain the road, it
incorrectly holds that he has no right to maintain the road and cannot do so.
[¶34] The owner of an easement has a right to maintain it. Freeman, 245 P.3d at 933.
See also Lynch v. Keck, 263 N.E.2d 176, 183 (Ind. App. 1970); Seymour v. Harris Trust
& Sav. Bank of Chicago, 636 N.E.2d 985, 994 (Ill. App. 1994); 28A C.J.S. Easements §§
227, 231. Paragraph d cannot be reconciled with the district court’s finding that “inherent
in [Koch’s] easement and his right of access created by it, he must be permitted to
perform some level of maintenance,” which is a correct statement of the law.
[¶35] The district court did not explain the basis for the part of its ruling holding that
Koch had no right to maintain, but it may have believed that the provision in J&J’s grant
requiring it to maintain the easement created an exclusive right for it to do so. This is not
accurate. First of all, the plain language of the easement requiring J&J to maintain the
easement allocated the obligation between J&J and Ms. Shatto, the owner of the servient
estate. Koch and his predecessors were not parties to that grant or agreement.
[¶36] Secondly, Koch’s predecessor in title received his easement years before J&J did.
As part of that grant, he received the right to maintain the easement. Even if Ms. Shatto
had intended to convey the exclusive right to maintain it, that grant would have failed,
because she could not reach back in time and remove one of the “bundle of sticks” or
rights Koch’s predecessor received in an earlier grant. She no longer owned the
exclusive right to maintain the easement at the time of her grant to J&J, and she therefore
could not convey it. See, e.g. City of Boulder v. Farmer’s Reservoir & Irrigation Co.,
214 P.3d 563, 566-68 (Colo. App. 2009) (servient estate may not unilaterally alter
easement so as to adversely affect maintenance rights of dominant estate owner).
[¶37] Paragraph e of the judgment determined that Koch has no right or authority to
recover the costs of maintenance. This is correct as it relates to the expenses incurred in
the 2009 project. However, it would appear from findings j and k that the Court intended
to go farther and to hold that Koch would have no future right to recover for any
maintenance he might perform. We disagree. As we have already discussed, when
parties share in the use of a private roadway, they must ordinarily share in the costs of
repair and maintenance.3 Rageth, ¶¶ 21-22, 258 P.3d at 719; Freeman, 245 P.3d at 934-
35; Brentwood Subdiv. Rd. Ass’n v. Cooper, 461 N.W.2d 340, 342 (Iowa App. 1990);
Lakeland Prop. Owners Ass’n v. Larson, 459 N.E.2d 1164, 1169-70 (Ill. App. 1984);
Quinlan v. Stouffe, 823 N.E.2d 597, 606 (Ill. App. 2005); Restatement, supra, § 4.13(4)
and cmt e.
3
Whether the parties to an easement might agree that one will have an exclusive right to maintain or no
obligation to pay the costs of doing so is a question not raised by the facts of this case.
8
[¶38] Koch has the right to assure that his easement remains passable by performing
reasonably necessary repair and maintenance work on the road, as well as the right to
seek equitable contribution for that work from J&J. For that reason we must also reject
provision k of the district court’s declaratory order, which entrusts J&J with the sole
discretion to make all decisions concerning whether future road repairs and maintenance
will be performed at all, the manner in which any work will be performed, and the
standards the repair or maintenance work must meet.
[¶39] We will therefore reverse that portion of the district court’s judgment awarding
declaratory relief to J&J and remand for entry of an order granting relief consistent with
this opinion. We find it unnecessary to remand for a reevaluation of the district court’s
decision regarding reimbursement for the 2009 road work. As we noted above, the
record supports the trial court’s decision to deny reimbursement for work done in that
year, and to that extent this decision only establishes a right to equitable reimbursement
for future repairs or maintenance under Rageth and Freeman.
CONCLUSION
[¶40] The district court made findings which were not erroneous in light of the record
before it, and it likewise reasonably exercised its discretion in denying Koch’s claim for
an equitable contribution for the cost of rebuilding the parties’ common private road.
Consequently, we will affirm that portion of the district court’s decision.
[¶41] Because the provisions of the court’s declaratory relief order finding that Koch
cannot maintain the easement or recover a share of the cost of doing so if he does cannot
be sustained as a matter of law, we reverse and remand for entry of an order granting
declaratory relief consistent with this decision. We also reverse the district court’s
determination that Koch may not use any portion of the easement outside the boundaries
of the Fogg/Palen grant because the owner of the servient estate was not a party to this
case. Affirmed in part, reversed in part, and remanded.
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