A recent NC Court of Appeals decision provides some clarity in disputes between neighbors when one seeks contribution from the other for improvements. The Watauga County case  – Foxx v. Davis (COA22-1014)  – concerned the paving of a gravel road easement and an effort to force contribution for its cost. The easement at issue was a common “deed easement” whereby a landowner conveys a back parcel (not fronting a public right of way) to a third party, with language in the deed granting an easement from the back parcel across the seller’s parcel to a public right of way. Often, as in this case, the deed language addresses common maintenance of the easement, essentially creating a contract between the seller (“grantor”) and the buyer (“grantee”). The deed language in the Foxx case required the grantee to pay 80% “of the cost of maintenance and repair” of the 12-foot gravel road which the grantors had built through the easement to the public right of way. The language also promised that as the grantors sold other parcels to parties along with a conveyance of the same easement, that grantee’s 80% contribution would be reduced accordingly.

At some point following the conveyance to the grantees, the grantors conveyed a separate 55 acre parcel to the Blue Ridge Conservancy, and while also granting them use of the easement, released them from any contribution toward its maintenance.

In late 2019, grantors pursued a plan to pave the gravel easement road. After sending the grantees a paving contractor’s proposal and a request for grantees’ “equal” (50%) contribution to the cost of paving (which grantees refused), the grantors proceeded to pave the gravel easement road at a cost of $64,900. [Of that amount, $19,800 was for preparation of the stone base prior to paving, and $45,120 was for application asphalt]. The grantors thereafter sought contribution from the grantees in Watauga County superior court under theories of unjust enrichment and breach of contract, as well as a request to terminate the easement.

The Trial

The trial court considered several issues upon claims by both grantors (the plaintiffs) and grantees (defendants). First, whether the paving of the road constituted “maintenance and repair;” 2) whether the letter requesting “equal” (i.e. 50/50) contribution was a correction of a “mutual mistake” which created the “80/20” contribution requirement contained in the original conveyance; 3) whether relieving Blue Ridge Conservancy of maintenance obligations was a breach of grantors’ promise to reduce the grantees’ share as parcels were sold; and 4) whether the grantees breached the easement agreement by not paying for some of the easement improvement. Lastly, the trial court was tasked with ruling whether the grantees’ continued use of the easement after paving amounted to “unjust enrichment” in accepting the benefit of the “improved” road at no cost. Finding for grantees/defendants, the trial court ruled that paving was beyond the scope of the contractural obligation of “maintenance and repair,” and that the “50/50 letter” otherwise revealed a “mutual mistake” between the parties regarding the original “80/20” contribution requirement for maintenance. Also, the trial court dismissed the unjust enrichment claim, in that the defendants had declined the offer to contribute to paving, and were nonetheless entitled to use of the easement per the original conveyance.

However, in finding for the grantors/plaintiffs, the trial court ordered the grantees to pay grantors (the parties who paved the easement) $9,900, reflecting one-half the cost of laying down the foundation prior to applying asphalt (see above). (The parties dropped the issue concerning Blue Ridge Conservancy’s release and its effect on grantees’ contribution.)

The Appeals Court 

Both parties appealed. In affirming the Watauga County court’s decision as to the first question regarding maintenance, the NC Court of Appeals considered the easement conveyance language a matter of contract, and thus looked to the plain meaning of the terms “maintenance” and “repair” to ascertain the parties’ intent when they agreed to those terms. Quoting a prior case, the Court stated: “In construing contracts[,] ordinary words are given their ordinary meaning unless it is apparent that the words were used in a special sense… The terms of an unambiguous contract are to be taken and understood in their plain, ordinary and popular sense.”[1]  Citing the Merriam-Webster Dictionary, the court thus interpreted the word “maintenance” to mean “to keep in an existing state (as of repair),” and the word “repair” to mean “restore to good condition.” The court found that paving the gravel road did neither, but was instead an improvement, in that it “did not keep the gravel road in an existing state or restore the gravel road to good condition.” [2] The court found the intent of the language to indicate the parties agreed to maintain a gravel road.

As to the second question, the grantees argued that the letter requesting “equal” contribution essentially revealed a mutual mistake the parties had made as to the original ’80/20″ language [i.e. that the parties intended a “50/50” split as requested by the letter alerting grantees that the road was to be paved.] The Court held that an argument for reformation of contract based on mutual mistake was barred by a three-year statute of limitations. The Court found in the record that  – due to a conveyance in 2016 of the grantees’ land to a trust  – mistake should have been discovered, and the claim of mistake was not made until 2021. [3]

Regarding the trial court order that grantees/defendants contribute to the cost of preparing the road for paving, the court reviewed the trial record testimony of the paving company’s employees who described the materials and process of laying the base prior to paving. This testimony revealed that the preparation work exceeded somewhat the cost for materials and labor that would otherwise have been incurred from a contract for simple repair. However, holding to the legal premise that the trial court is in the “best position to weigh the evidence, determine the credibility of witnesses and the weight to be given their testimony, and draws the reasonable inferences therefrom,”[4] the trial court did not dispute the trial court’s award of contribution based on the easement contract obligation to do so. However, because the “contract reformation” claim was barred by a statute of limitations, the Court of Appeals could not affirm a 50/50 split on costs as awarded by the trial court, given that the original split of 80/20 would still be in place (meaning that grantees/defendants probably were ordered to pay less than their share). The Court of Appeals thus remanded this question back to the trial court for determination of the contribution based on the 80/20 language from the original easement.

The Takeaway

The best easement is one that created in writing, but disputes will often arise. While this Court of Appeals decision provides clarity on how a trial court will read the words “maintenance and repair” a shared easement, neither party should rely on such language to change the easement surface. For example, if the easement is a grass path, laying a gravel road would likely be an improvement beyond a maintenance definition. When drafting such language in a deed or stand alone easement, attorneys should discuss with their clients any improvements they see over the time horizon and have the “back and forth” discussion between parties. North Carolina law is fairly clear that contract terms are given their plain meaning to determine the parties original intent as to their mutual obligations under the contract, so evidence of negotiations may not be admissible. If the parties mean to improve the surface of an easement beyond its state at the time it is conveyed, the language should address that eventuality.

Endnotes

[1]   Badin Shores Resort Owners Ass’n, 257 N.C. App. at 557, 811 S.E.2d at 208

[2]  Foxx v. Davis at page 12.

[3]. See N.C. Gen. Stat. § 1-52

[4]. Citing Shear v. Stevens Bldg. Co., 107 N.C. App. 154, 160, 418 S.E.2d 841, 845 (1992)