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May/June 2007
Volume I; Issue 2
Special Report:
Conservation Easements

Big Meadows, Big Mistake

By Fred Kelly Grant

So, you want to negotiate the sale of a conservation easement on your property, maybe to secure a retirement fund for your family, or maybe to ensure your children will not turn the property into a subdivision of houses upon inheriting the land. Well, before you sign the papers, think about how you make other important property decisions. For example, consider whether you would buy a pickup under the following scenario?

At the car dealership, a salesman approaches. He proposes a special deal that gives you 20 percent off the dealership price of the vehicle. All you have to do is sign their contract, which guarantees that you will buy the truck that the salesman selects, at a price decided by the salesman. He determines make and model of the truck, all the additional upgrades such as tires and suspension, audio system, sunroof, etc. You have no say in what vehicle you will be purchasing, but in return you will receive a 20 percent discount off the price they set. Thinking of all the money you will be saving, you sign on the bottom line, only to realize you’ve just bought a 1985 quarter-ton pickup for $160,000, but it is 20 percent off of $200,000, as promised.

Would you take such a chance in buying a new pickup? No? Well, hold that thought, and remember this story if you ever consider signing a conservation easement.

Your deal on the conservation easement, including complete control of your property, is going to depend on what is written in the terms of the contract you’re given to sign. It doesn’t matter what you think you’re signing, it doesn’t matter what you intended to sign, it doesn’t matter what you wanted to sign. All that matters is what you signed. You can review any sample, or model, conservation easement form provided by the non-profit organizations and you will not find one which gives you control of your property once you have signed the contract.

The real problem is that you won’t realize your loss until you try to make a change to your farming or ranching operation that doesn’t fit the plans of the organization that signed the contract with you. Then, you will find out that you didn’t get a “new” pickup, but a 1985 model at much too high a price.

When Big Meadows Grazing Association of Flathead County, Montana found out the flaws in their contract, it was too late. In the case of the Association, it was the federal government, not a non-profit, that played the role of our 1985 pick-up salesman.

The Natural Resource Conservation Service, in the U.S. Department of Agriculture, has set up a Wetlands Reserve Program under which money was provided to landowners willing to enter into plans to “protect, restore, and enhance wetlands on their property.” The basis for the Program was the Service’s belief that wetlands were being lost at a staggering rate across the nation. The Program called for conservation easements to be purchased from landowners, with the funds then being made available for wetlands restoration.
Big Meadows wanted to rehabilitate a riparian area. So, the Association began talks with the Service. The Government told Big Meadows that the conservation plan, which would be prepared under an easement would cost Big Meadows about $80,000. The purpose of the plan would be to restore a streambed. With those understandings, Big Meadows sold a conservation easement to the government in 1999. The price was $1.9 million, and the stated purpose of the easement was to “restore, manage, maintain, and enhance” wetlands and to conserve “natural values.”

In addition to the pre-contract negotiations, Big Meadows knew two other things: (1) the statute governing the Wetlands Reserve Program provided that the Government and the landowner would agree to an easement and to implementation of a conservation plan; and (2) the Government manual provided that the Government and landowner would agree to the terms of the conservation plan. Big Meadows had ample reason to believe that the actual plan to be implemented under the easement would be agreeable to both Government and landowner.

But, Big Meadows did not give proper attention to three things, all very critical: (1) the concept of conservation easements and the language of the easement contract itself; (2) the statute would be reviewed by the Ninth Circuit Court of Appeals; and (3) the Government would not honor its pre-contract commitments.

Every landowner considering a conservation easement must keep in mind that he is selling the controlling interest in his land. The conservation easement is not some magical umbrella of protection of the land. The buyer, whether it be the Government or a non-profit organization, buys control over the use of the land. From the time the contract is signed, the buyer holds the dominant estate in the land, and the landowner holds the servient estate, which means that the landowner operates only to serve the interests of the dominant easement owner. Every change in the use of the land must be approved by the dominant easement owner; even continuation of the use of the land in place when the contract is signed is subject to continued approval by the dominant easement owner.

These dominant-servient principles are applicable in spite of pre-contract discussions, which may assure the landowner that he is protected in his right to continue current operations and make improvements to the farming/ranching operation. Those discussions will not be controlling in future disputes between the dominant easement owner and servient landowner. All that will control disputes is the specific language of the contract. And, you can be sure that the sample, model, contracts do not favor the landowner. The only “control interest” in the land, which is assured by the sample model contract, is that of the dominant easement owner.

Big Meadows negotiated with the Government under a statute, which seemed to clearly guarantee that the conservation plan to be developed under the easement would be a plan agreeable to Big Meadows and the Government. After all, how else could the parties ever expect that restoration of a streambed could be assured? Agreement of the parties, dominant and servient, would be necessary for an amicable cooperative operation.
The controlling statute, 16 U.S.C. 3837(a), provides:
“(a) In general. To be eligible to place land into the wetland Reserve under this subpart, the owner of such land shall enter into an agreement with the Secretary----
(1) to grant an easement on such land to the Secretary; [and]
(2) to implement a wetland easement conservation plan as provided for in this section.”

Seventh-grade English classes know that under ordinary sentence structure this section provides that “the Secretary and landowner shall enter into an agreement which includes an easement and a wetland conservation plan;” in other words, that both the easement and conservation plan would be “agreed to.” Ms. Roark of Central Junior High School in Nampa, Idaho, pounded that concept into the head of the author through sentence diagram after sentence diagram after sentence diagram. As a result, learning in law school that statutory construction links the “action words” to all following clauses came as no surprise. Here, the “action words” are, “shall enter into an agreement,” and they are linked to both clauses (1) grant an easement and (2) implement a conservation plan.

These rules of construction make sense from the standpoint of the natural resources involved. If the two parties are actually, rather than theoretically, interested in reclaiming a wetland, the two will work together cooperatively to meet the objective of the conservation easement.

But, unfortunately for Big Meadows, the controlling factor was not normal statutory construction and not what is best for the natural resource. Rather, it was government dominance. In December 1999, Big Meadows believed that it would have to pay $80,000 for the conservation plan, which would reclaim a streambed. But, in September 2001, the government presented a conservation plan, which would cost over $486,000, six times more than the cost represented to the landowner before the easement was signed.

What’s more, the expensive plan did not even provide for reclaiming the streambed, which caused Big Meadows to sell the easement. The plan provided for impounding water by use of a dam, rather than restoring a streambed. Big Meadows did not agree to the greatly inflated cost, or to the changed objective, or to construction of a dam to impound water. Big Meadows did not agree to the changed cost and purpose, and urged the Government to honor its pre-contract representations. Instead, the Government unilaterally began putting its plan in place in November 2001.

Big Meadows filed suit to stop this unilateral implementation of the plan. No doubt, both Big Meadows and its counsel felt confident that the wording of section 3837(a) would result in a decision that both parties must agree to the conservation plan to be implemented. But, Judge Donald W. Molloy of the Montana Federal District disagreed and on appeal, so did the Ninth Circuit of Appeals.

Judge Molloy ruled that the statute does not require “agreement” as to the easement and the plan. The Ninth Circuit agreed. Under their construction, both parties must “agree” to the easement, but then must agree only to implement a plan, which the Government puts together without agreement with the landowner. Not only does this construction fly in the face of normal statutory construction and, normal reading of the statute itself, but also common sense.

If you think about this decision for even a second, it is obvious that it would allow the Government to put the landowner out of business. All the Government would have to do is develop a plan that would cost the landowner more than the value of the land itself and then take the land off his hands at a bargain basement price. Then, owning both the easement and the land, the two would merge and the Government would own the property without having to exercise eminent domain and paying a “fair market value.” The Court does not even consider this ludicrous result.

Instead, the Court looks to the language of the easement document and points out that under its terms, the landowner sold “forever, all rights, title and interest in the land comprising the easement area…and appurtenant rights of access to the easement area.”

The Court pointed out that the only rights reserved to the landowner under the easement document were “record title, the right of quiet enjoyment, the right to prevent trespass and control public access, the right to undeveloped recreation uses, and the right to subsurface resources.” The Court’s reading of the easement document is as accurate as its reading of the statute is inaccurate. In fact, Big Meadows did convey away every important right as to control of its property – forever.

Big Meadows’ arguments as to what its intent was in entering into the easement contract fell on deaf ears. As to its reliance on the Manual which calls for agreement between the landowner and the Government, the Court rejected the argument declaring that the Manual “is nonbinding.” Even though it played a part in Big Meadows deciding to sell the easement, the Manual could not be relied upon.

The Court’s decision as to the Manual, and even its rejection of consideration of Big Meadows’ intent in selling the easement, is consistent with case law, which holds that pre-contract discussions and commitments do not control over the actual language of the contract. In other words, when a landowner signs the easement sale contract, his intent can be set aside by the buyer of the easement and by any reviewing court. The language of the easement contract controls.

So, Big Meadows sells an easement in order to reclaim a streambed at a cost of $80,000. It ends up paying six times that amount to build a dam to impound water. Why? Because it did not insist that the written terms of the easement contract provide for the cost of the conservation plan and for the specific objective of the plan. It lost control of its land because of the language in the document it signed.

Ironically, one of the reasons landowners sell conservation easements is to secure a natural, conservation future for the property. Landowners look for the sale documents to guarantee their continued open-space agricultural use of the land.

But, as shown in Big Meadows Grazing Association v. U.S., sale of a conservation easement does not allow the landowner that certainty of future use.

The landowner in Goldmuntz v. Chilmark, 651 N.E.2d 864 (Mass. App. Ct. 1995), believed that he had reserved the right to build a pool on his property. One clause of the conservation easement allowed him to provide for outdoor recreation. But, another clause put severe restrictions on constructing new “structures.” The landowner built an outdoor pool, the easement owner objected, and the Court ruled that the pool was a structure, and was built in violation of the specific restriction. The property was at water’s edge and, ironically, the Court said if the landowner had wanted to build an entirely new boathouse, for example, he could have, but not a pool.

The Goldmuntz decision, and the Big Meadows decision, both show that sale of a conservation easement, which results in a dispute between the landowner and the easement owner, leads to theRussian roulette of the courtroom – and more often than not, the decision will favor the dominant estate owner and that is the easement owner.

Third Party Enforcement

Even when there is no disagreement between the landowner and easement holder, the conservation easement does not present certainty. It is subject to attack by third parties.

The building industry and conservation organizations in San Diego County spent several years pounding out an agreement for a habitat conservation plan (in concept the same as a conservation easement) under the so-called “No Surprise” rule issued by the Fish and Wildlife Service.

Riverside County also adopted a plan to help with balancing a rapid urbanization and the open environment. But, the California plans went down in a case filed in the District of Columbia by the Spirit of the Sage Council of North Carolina.

In 2003, U.S. District Judge Emmet Sullivan ruled that the Fish and Wildlife Service did not properly provide for public comment in developing its “No Surprises” rule. So, regardless of the merits of efforts made in local areas to provide for landowner protection, as well as, environmental protection, the Court ruled with anti-private property organizations with no local vested interests.

Later, in October 2006, the San Diego area was again dealt a harsh blow by a federal judge who set aside a massive regional conservation plan entered into by local government, landowners and developers, some conservation groups and the Fish and Wildlife Service.
In 1997, the Fish and Wildlife Service of the Clinton Administration agreed to a wetlands management plan for the San Diego area, which supposedly locked in the plan for a 50-year period. Landowners and developers were assured by the Government that they would not be forced to do any more to protect species than what was required by the cooperatively developed plan. But, in a case argued by Earthjustice (formerly, the Sierra Club Legal Defense Fund), the federal judge set the plan aside because it did not do enough to protect seven vernal pool species, including two fairy shrimp and five plants.

Under the model conservation easement statute, which has become the law of most states, the easement is subject to attack for enforcement or set aside by third parties.

But, the third party must always be an organization that could hold such a conservation easement. And, under the statutes, only non-profit organizations and the government can hold such easements. Therefore, there can never be a third party challenge to an easement by a landowner or even a supporter of a landowner. All such challenges are placed in the hands of the government or non-profit organizations.

So, no landowner can be assured of the certainty of his protection under any conservation easement sale. All he can be assured of is that he has sold away control of his property forever.

Any limit on the control loss must be contained in the language of the easement contract itself. Before any landowner signs the easement sale, he and a good property attorney must read every word of the document and be sure that he is not entering into a “1985 pickup” deal.