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Doughty Road, LLC v. A.E. Stone, Inc.

A-0511-08T1 (N.J. Super. App. Div. 2009) (Unpublished)

EASEMENTS — A recorded easement granted by a property owner will be interpreted by reference to the contract or other agreement that led to the granting of that easement.

A property owner received rail deliveries at its property and “stacked” rail cars during the rail car loading and unloading process. It then sold a portion of its property, which included the area where the stacking of rail cars took place. Prior to the sale, and understanding the importance of the unloading process to its business, the owner executed an easement with a neighbor related to the stacking of rail cars and had a railroad crossing impact study prepared. In addition, the buyer had several discussions with the seller and others relating to its seller’s need to stack trains to unload deliveries before it bought the property. To protect the seller’s interest in the rail deliveries, the deed to the buyer stated, in part, that: (a) it was the grantor’s intent “to provide railroad service to [its] adjacent property;” and (b) “[t]he property conveyed shall be subject to an irrevocable and permanent easement to [the seller] for the benefit of [the seller’s] property” to construct a railroad “to provide railroad service to and from [the seller’s] property.” Despite the language in the deed, a dispute arose between the buyer and the seller This resulted in a settlement agreement being signed by the parties which provided that the buyer’s development plans for its property would not interfere with the “full and uninterrupted” implementation of the rail service extending into and out of the seller’s property and that the parties would enter into any necessary agreements required to implement such rail service, including an easement for the rail line to run across the buyer’s property to provide rail service into the seller’s property.

The buyer, after it bought the property, sought site plan approval for certain work it was performing. As part of its request, it applied for a secondary entrance if access was blocked by the staging of trains on the seller’s property. The parties attempted to negotiate an easement agreement but they disagreed as to the intensity and terms by which the seller would utilize the portion of the tracks located on the buyer’s property. Notwithstanding the impasse, the buyer signed and recorded an easement agreement containing time restrictions that the seller had rejected. The seller sued its buyer to discharge the buyer’s easement and for an order compelling the buyer to provide it with an irrevocable and permanent easement for the benefit of the seller across the buyer’s property. The buyer responded by seeking to enforce the terms of its easement. The buyer contended that, at the time it purchased the property, the seller never informed it of any anticipated “stacking of trains” and insisted it would never have agreed to allow such a process.

The lower court adopted the seller’s interpretation of the settlement agreement and permitted the seller to “stack” railroad cars on the buyer’s property, even if the stacking occurred during the buyer’s business hours. The lower court noted that since the settlement agreement did not explicitly mention staging or stacking it was ambiguous as to this issue. Because it found the agreement ambiguous, the Court turned to extrinsic proofs to ascertain the intent of the parties. It noted that the buyer had discussed the unloading process with the seller and other individuals even before it bought the property and that the buyer understood, as a practical matter, the seller would not be able to accept deliveries if it was bound by the easement that the buyer had recorded (because it imposed unreasonable time restrictions on unloading). Moreover, the lower court found there were some events that occurred even before the seller’s sale of a portion of its property, which evidenced the seller’s concern with staging, including the prior easement with another buyer and the impact study. It also noted that during the buyer’s site plan application for its property, it made specific reference to plans for a secondary entrance in the event an unloading train blocked access to its property. The buyer appealed.

The Appellate Division affirmed the order for substantially the same reasons expressed by the lower court. First, it concurred with the lower court that the settlement agreement, and the deed that preceded it, were ambiguous as to the question of whether unrestricted staging was authorized on the buyer’s property, i.e. the deed did not define “railroad service,” or what rights of access or usage it contemplated, while the settlement agreement spoke broadly spoke of “full and uninterrupted rail service.” Second, it agreed with the lower court that in such situations, the court should undertake a thorough examination of extrinsic evidence to “derive the most probable meaning intended by the contract language.” Third, the Court chose to accept the lower court’s conclusion that the extrinsic evidence supported a finding that the parties intended to permit the stacking activities on the buyer’s property even if such activities impacted the buyer’s business operations and that the easement rights of the seller necessarily and logically included “rights incident to” its use of the railroad tracks constructed for its benefit.

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