Opinion
11-P-689
03-12-2012
PACIFIC MILLS ACQUISITION LLC v. ESSEX COMPANY & another.
NOTICE: Decisions issued by the Appeals Court pursuant to its rule 1:28 are primarily addressed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, rule 1:28 decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28, issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The plaintiff, Pacific Mills Acquisition LLC (Pacific), appeals from a judgment in favor of the defendants, Lawrence Hydroelectric Associates (LHA) and the Essex Company (Essex). After careful review of the undisputed facts and governing case law, a Land Court judge concluded that the 1978 assignment from Rowland Industries (Rowland) to LHA of thirty-three mill powers associated with the Lower Mill Site for a specified period of years was permissible because nothing in the indentures that created the mill powers, law, or public policy prohibited such an assignment when agreed to by all parties.
A mill power, which is the right of the owner of a mill site (the dominant estate) to take and use a quantity of water power generated by the dam and canals (the servient estate), is characterized as an easement. See Essex Co. v. Lawrence, 214 Mass. 79, 89 (1913).
On appeal, Pacific contends that the judge erred in (1) concluding that the 1978 assignment was valid, and (2) relying on the Restatement (Third) of Property (Servitudes) § 5.6(2) (2000).
Discerning no error, we affirm substantially for the reasons set forth in the judge's well reasoned memorandum of decision.
1. Background. In 1845, Essex received a charter from the Legislature to build the Great Stone Dam and canals on the Merrimack River and sell mill powers generated by the fall of water. Subsequently, Essex conveyed land to various manufacturing companies (mill sites), together with specified mill powers, using indentures which provided that Essex would maintain the dam and canals for the benefit of the easement holders, and the easement holders would pay a perpetual annual rent to Essex for the associated mill powers.
In 1978, Rowland, Pacific's predecessor in title as owner of the Lower Mill Site, assigned the thirty-three mill powers associated with that site to LHA for a fifty-year period. The assignment is one of thirteen such assignments acquired by LHA from various other mill sites to create a hydroelectric generation facility adjacent to one of the canals. During the period of assignment, the mill powers were no longer to be used in connection with activities at the Lower Mill Site, but were to be used off-site by LHA for the generation of electricity.
According to the assignment, LHA could renew for an additional twenty-five year period.
1. Validity of the assignment. The judge concluded that although the indentures did not contemplate free transferability of mill powers among the various mill sites, no language in the indentures expressly forbade transferring them from a site with which they were associated to a different site. Rather, a clause in the 'proposals' attached to the indentures reserved to Essex the right to modify the terms of the proposals in bargains with future mill site owners and assured that Essex could 'modify the balance of mill power terms by later agreement with a particular holder of particular powers.' In consequence, Essex remained free to negotiate with individual holders of mill powers and amend the mill power indentures in any way not prohibited by law. We agree with the judge's assessment.
The mill powers at issue here have been described as easements 'appurtenant to the land.' See Essex Co. v. Lawrence, 214 Mass. at 90 (as owner of the entire water power development and contiguous land, Essex 'had a right to carve its property by selling fractional parts as sites for mills with power rights appurtenant . . . ').
Pacific does not dispute that mill powers may be transferred separately from mill sites if certain formalities are employed. Indeed, it concedes the validity of a 1939 transaction in which twenty-two of the mill powers now at issue were transferred from another mill site, the Atlantic Site, to the Lower Mill Site. Pacific characterizes and distinguishes the 1939 transaction as an abandonment because it permanently severed the mill powers from the Atlantic Site, and the parties used indentures to transfer the mill powers from the Atlantic Site to Essex and then from Essex to the Lower Mill Site. We are not persuaded that the LHA assignment is invalid because of the failure to observe the same formalities.
The judge rejected, as do we, Pacific's formalistic argument that Massachusetts law prohibits the transfer of appurtenant mill powers separate from the site to which they are appurtenant without an amendment to the original indenture. We agree with the judge that although there was no express amendment of the original indentures, 'there can be no doubt that the [assignment] executed by Essex, as well as by LHA and Rowland, accomplishes as to those parties the same purpose as any amendment of the original indentures.' See Patterson v. Paul, 448 Mass. 658, 665 (2007) (parties to easement control terms and manner of exercise of the easement 'so long as no forbidding principle of law is violated'). We also agree with the judge's reasoning in rejecting Pacific's argument:
'A rule, such as that suggested by [Pacific], that even a bilateral agreement to change the terms of an easement would be forbidden by the law, in spite of the clear intentions of the parties, is inconsistent with the developing trend of the law of easements in the Commonwealth. Such a strict and unbending rule, which would maximize the costs associated with easements, by increasing the risk the easement will prevent future beneficial development, and which would exalt form over the fair intentions of all interested parties, is not part of the law in Massachusetts.'
Here, Rowland, Essex, and LHA all agreed to a transaction that furthered beneficial use of the land and did not increase the burden on the servient estate: Rowland assigned to LHA mill powers that it had long since ceased to use productively despite its ongoing obligation to pay rent; LHA put the mill powers to productive use in the generation of electricity and assumed Rowland's obligation to pay rent; and Essex continued to receive rent with no increased burden on its estate. See M.P.M. Builders, LLC v. Dwyer, 442 Mass. 87, 90-91 (2004) (adopting easement relocation rule that maximizes over-all property utility and minimizes costs associated with easements).
We observe no impediment to the validity of the LHA assignment in the cases relied upon by Pacific because there, unlike here, consent of the necessary interested parties was lacking. See, e.g., Holyoke Water Power Co. v. Whiting & Co., 276 Mass. 528, 530-535 (1931) (interchangeable use of mill powers appurtenant to different parcels not permissible where property owner lacked riparian owner's consent and tiered canal system required complicated balancing of canals).
2. Restatement (Third) of Property (Servitudes) § 5.6(2).
Pacific's contention that the judge erroneously relied on the Restatement (Third) of Property (Servitudes) § 5.6(2) also lacks merit. Because Essex consented to the assignment, and neither the indentures nor governing legal principles prohibited the transaction, that provision of the Restatement was not essential to the judge's decision. Nevertheless, we agree with the judge that the principles embodied in the Restatement provide further support for the validity of the LHA assignment:
'It is true that the general rule in the law of servitudes is that '. . . an appurtenant benefit may not be severed and transferred separately from all or part of the benefitted property.' . . . This general principle is subject, however, to important exceptions, including at least one which is controlling here. 'Unless contrary to the terms of the servitude, a benefit consisting of the payment of money, or other benefit that can be severed and transferred without increasing the burden of performance on the obligor may be severed and transferred.' . . . Here, on the facts in the record, there is nothing to show that the transfer of the benefit of the mill powers from the Pacific Mills site to the LHA site brought about any greater burden to the obligor -- Essex -- than it shouldered with the mill powers appurtenant to the Pacific Mills site. . . .'
Judgment affirmed.
By the Court (Grasso, Fecteau & Sullivan, JJ.),