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| Did someone say "sewer"? |
By Elizabeth Kruska
Longtime readers of our fair blog know that we here at SCOV Law keep an eye on Vermont Supreme Court trends. We know the current hot issues tend to be shenanigans with probation conditions and shenanigans with homeowners associations. This is the latter. Sort of.
Did you know—and it is entirely possible you did not know this—that individual people are allowed to own sewer systems? I’m looking around my workspace right now and I see that I own a lot of things, many of which I probably don’t need. One thing I know I don’t own, nor do I want to, is a sewer system. Because the problem, apparently, is if you own a sewer system, that when you die (and really, I’m not trying to be grim but we’re all going to die), it probably ought to be clear what’s going to happen with that sewer system. And you know what, as an added bonus, let’s throw in some roads and a water system, also, just so that we’ve got a big problem to untangle.
Let’s back up to the late 1970s. Mr. and Mrs. Hayes owned some land in Manchester and decide to develop that land in to a housing subdivision. It was a different time. There was still lead in our gasoline. Coca-Cola came in glass bottles. “Bad President” was defined as “Peanut Farmer.”
So, the Hayeses developed the land and put in roads and a sewer and whatnot, and many people bought homes in the development. And then, as humans will do, both Mr. and Mrs. Hayes died. When they died they owned lots of stuff, including, but not limited to, the neighborhood with its attendant roads, water system, and sewer.
Their kids, Jeffrey Hayes and Deborah Hayes McGraw, petitioned the probate court in 2004 to open their parents’ estates. As soon as they were appointed as co-executors, they notified the homeowners in the neighborhood that they (being the homeowners) would now be responsible for road maintenance. The neighbors unified and intervened in the probate court, seeking to protect their rights with respect to the road, water and sewer. The probate court ordered the estate to set aside a million dollars in trust for upkeep and repair of the infrastructure.
The administrators were not happy and appealed to the superior court. Side note—this all started so long ago that we still called the Civil Division “Superior Court.” We were all much younger then.
They had a five-day trial in Superior Court, where various homeowners testified that Richard Hayes, before he died, told them that the Hayeses were responsible for the infrastructure upkeep until it got turned over to the Town of Manchester. They also showed their deeds, which also showed that the Hayeses were responsible for this upkeep.
The executors objected to this testimony under the “dead man statutes,” and the trial court ruled halfway through the trial that there could be no more testimony about what the Hayses said or didn’t say about infrastructure upkeep. The court wouldn’t consider the various homeowners’ testimonies about the fact they bought their properties in reliance on Mr. Hayes’s representations. Barring all this evidence, the court found that the homeowners couldn’t prove an oral contract and ordered that the probate court’s order for a trust be vacated. By the by, I feel like oral contracts generally aren’t a great idea. You don’t always have to bring ink and paper into every transaction, but when it’s a matter of land, it has to be in writing.
Unsurprisingly, the homeowners appealed back in 2014 (again, when we were all much younger). SCOV reversed and remanded to the trial court, ordering that the court consider the excluded evidence because of an equitable exception to the Statute of Frauds.
So, back it goes, and in January of 2017, the court holds a hearing, and this time admitted the homeowners’ testimony about Mr. Hayes’s promises regarding the infrastructure. The court found that there was an equitable exception to the Statute of Frauds, and that the promises Mr. Hayes made were enforceable. And guess what? Since the estate had an obligation to the homeowners to maintain the infrastructure, there needed to be a trust created to fund the maintenance of the same. This is like déjà vu all over again. Anyway, there wasn’t any evidence presented at that particular hearing about how much needed to go into the trust, so that’s a hearing that’s going to happen at some future point.
The estate administrators were, in a word or two, not happy. The administrators felt this ruling constituted a windfall to the homeowners and the Town of Manchester, and that the promises made by the Hayeses weren’t binding. The court denied their motion to amend the judgment, and the estates appealed.
SCOV starts off by saying that this might not even be the right court, because the Superior Court’s (Civil Division, at this point) ruling was actually on appeal from the Probate Division, so the matter should have gone there. SCOV says that what the administrators tried to do was actually an interlocutory appeal for which they didn’t seek or get permission. However, because of the procedural posture of this case and because a dismissal would very likely result in an appeal anyway, and the case is already there, SCOV will consider it.
The thing is that yes, per the Statute of Frauds, land contracts have to be in writing. But there is an exception to this. If a party to a land deal makes a promise to his or her own detriment, and the promisee acts in reliance on this promise, it becomes an enforceable agreement. I suggest now everyone go binge watch every episode of Arrested Development having to do with bad land deals so that you feel smart and ethical about real estate transactions.
A court can enforce one of these oral contracts if four criteria are met. First, that there's an oral contract. Second, that it's reasonably relied upon. Third, that the promisee relies on that oral contract such that they can’t go back to their earlier position. Last, that the other party know about the reliance. Basically, here, there were some homeowners who bought their homes in this particular neighborhood because Mr. Hayes promised he’d maintain the infrastructure until it was turned over to the Town. And since real estate isn’t cheap and as Tony Soprano told his son A.J., “God ain’t making any more of it,” it’s not as if the homeowners could go out and buy another home once they already had one. They were basically locked in to the contracts they had. And it seems like Mr. Hayes knew that the homeowners relied on what he promised.
SCOV reviews the trial court for abuse of discretion in finding that there was an oral contract.
Let’s start with the water and sewer systems, since that’s where SCOV starts. SCOV finds that the trial court did not abuse its discretion in finding the oral contract with respect to the water and sewer systems. The evidence supported the finding that the homeowners believed that water and sewer were to be provided by the Town, and that at some point the Hayeses were going to turn over the private system to the Town. This seems to be an open, well-understood fact in this neighborhood. Also, the Town billed certain homeowners for water and sewer services. However, it also came out that there was a private water and sewer system, which was maintained by Mr. Hayes until he died. People didn’t find out until after he died that the Hayeses still owned part of the system.
Now SCOV turns to the roads. The estate argues that although Mr. Hayes promised to maintain the roads, that was a personal promise by him and wasn’t binding on the estates. SCOV disagrees with this, too.
Normally, if there’s a rule about land, and that the rule, or covenant, is meant to run with the land, it’s got to meet some criteria. One of those criteria, unsurprisingly, is that it has to be in writing. Also, the parties have to intend that the covenant runs with the land, it must “touch and concern the land,” and there must be privity of estate between the parties. Again, though, the writing requirement may go away if the beneficiary of the promise changes its position in justifiable reliance on the promise.
The estates argued that there was no intent by Mr. Hayes that his promise to maintain the roads ran with the land. They pointed to a deed that didn’t indicate that the road maintenance was meant to be ongoing, and so the promise of road maintenance was just between Mr. Hayes and that particular homeowner. SCOV is unconvinced. The promise was to maintain the roadway until it was turned over to the Town. Homeowners come and go, but if the road hadn’t been given to the Town yet, someone’s got to maintain it. It makes perfect sense that Mr. Hayes was meaning to maintain the road until it wasn’t his road anymore.
The estates then argue that their obligation to maintain the roads was only until there was an offer made to the Town for the roads. Apparently the trial court said there needed to be funds in trust until the Town accepted the roads as their own roads. SCOV finds that the language was about when the infrastructure was going to be “turned over” to the Town. That means the Town had to accept it. It’s not like in August when you accidentally grow too many zucchinis so you leave them on your neighbor’s porch in the dead of night. This is a big enough transaction that there needs to be actual acceptance of the roads being turned over.
Now there’s a problem, though. The Town apparently has indicated there need to be some upgrades to the roads and water/sewer systems before it’ll take it over. And as a result, the estates are going to have to sink a lot of money into this infrastructure before turning it over. Thus, the Town is going to get essentially the Cadillac of infrastructure on the estates’ dime.
SCOV mentions this, but can’t do anything with it because the contracts at issue were between Mr. Hayes and the homeowners. The Town doesn’t exactly have anything to do with it.
So, what’s the remedy to all this? There has to be a trust, funded sufficiently to maintain the infrastructure, but that it need not necessarily be enough to make improvements necessary for the infrastructure to be turned over to the town. If it’s too much for Town upgrades, the trust can be maintained indefinitely to continue with the existing level of repair and maintenance.
My real regret here is that I could not somehow work in a Teenage Mutant Ninja Turtle reference. If you can make one work, leave it in the comments.
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