Utah Assoc. Mun. Power Sys. v. 3 Dimensional Contractors Inc.

547 P.3d 829

2024 UT App 35

UTAH ASSOCIATED MUNICIPAL POWER SYSTEMS, Appellee,

v.3 DIMENSIONAL CONTRACTORS INC. and Benzer Development Solutions LLC, Appellants.

No. 20210935-CA

Court of Appeals of Utah.

Filed March 21, 2024

Fifth District Court, St. George Department, The Honorable Eric A. Ludlow, No. 180500577

Lewis P. Reece and Devon J. Herrmann, St. George, Attorneys for Appellants

James K. Tracy, Salt Lake City, J. Jacob Gorringe, and Hyrum J. Bosserman, Salt Lake City, Attorneys for Appellee

Judge Ryan M. Harris authored this Opinion, in which Judges Gregory K. Orme and John D. Luthy concurred.

Opinion

HARRIS, Judge:

¶1 During development of a residential subdivision, the city and the developers each made a critical mistake: the city platted a public street directly on top of existing structures, including a support pole, erected by Utah Associated Municipal Power Systems (UAMPS), and the developers (3 Dimensional Contractors, Inc. and Benzer Development Solutions, LLC (collectively, Benzer)) constructed a house partially inside the boundaries of UAMPS’s easement for support pole guy wires. After efforts to solve the problems failed, UAMPS and Benzer sued each other, with Benzer seeking (among other things) an order requiring UAMPS to remove the support pole from the roadway, and UAMPS seeking (among other things) an order requiring Benzer to remove the house from its easement. In one of its claims, Benzer invoked a Utah statute that it claimed gave it the right to realign the easement, at its expense, and thereby relocate the guy wires away from the encroaching house.

¶2 While the litigation was ongoing, UAMPS voluntarily removed the support pole from the roadway. But the dispute over the house remained, and boiled down to whether Benzer had the statutory right to realign the easement. Eventually, in a series of rulings, the district court dismissed Benzer's realignment claim, concluding that Benzer had the burden of demonstrating the feasibility of realignment and that Benzer could not meet that burden because the court excluded its expert witnesses from testifying. After dismissing Benzer’s realignment claim, the court entered judgment in UAMPS’s favor on its affirmative claims, and it ordered Benzer to "remove" from UAMPS’s easement "any portions of" the house "that currently encroach on" the easement.

¶3 Benzer now appeals, challenging (among other things) the court’s interpretation of the relevant statute and its decision to exclude Benzer's experts. We agree with the court’s interpretation of the statute, but we agree with Benzer that the court erroneously excluded Benzer's experts. We therefore reverse the court’s ruling on that point, vacate in part the court’s dismissal of Benzer's counterclaim, and remand the case for further proceedings.

BACKGROUND

¶4 UAMPS is "a full-service interlocal agency" that was created to provide "comprehensive wholesale electric energy services, on a non-profit basis, to community-owned power systems throughout the Intermountain West" See UAMPS Smart Energy, www.uamps.com [https://perma.cc/B9PM-B5SC]. UAMPS is a political subdivision of the state of Utah whose individual members are all public agencies, mostly cities and towns but also water conservancy districts, utility districts, and other similar entities. See UAMPS Members, UAMPS, www.uamps.com/members [https://perma.cc/3BWG-B7JW]; see also Utah Associated Mun. Power Sys. v. Public Service Comm'n of Utah, 789 P.2d 298, 299 (Utah 1990) ("UAMPS is comprised of cities, towns, and local public agencies … whose aim is to construct [electric energy] generating and transmission facilities for their mutual use.").

¶5 As relevant here, UAMPS has, since 1996, possessed "an express right-of-way easement in perpetuity over certain real property in Washington County, Utah" (the Easement). UAMPS obtained the Easement by condemning the affected property rights through exercise of its eminent domain authority. Thereafter, UAMPS installed various electric-energy-related structures on the Easement, including the structures at issue in this case. In recent years, Benzer—a real estate development group—has been engaged in residential development in Washington County, and the Easement runs through one of Benzer’s projects known as "Zion’s Gate Estates."

¶6 Under the terms of the Easement, UAMPS—as the dominant estate holder—is allowed to construct, operate, and place within the Easement "electric systems" and "communication systems" along with equipment "necessary and/or convenient for such operations." The Easement generally allows Benzer—as the servient estate holder—"the right to fully use the surface of" the Easement as long as Benzer's use "does not interfere with" UAMPS’s use, but the Easement contains one crucial specific limitation on Benzer's use: Benzer may not "erect[ ] buildings and/or structures within" the Easement. Indeed, the Easement grants UAMPS authority to "clear the [E]asement of all structure[s], obstructions, and/or other objects" to the extent that those structures "interfere with or threaten to endanger the operation or maintenance of" UAMPS’s systems.

Construction at Zion's Gate Estates

¶7 In or about 2017, the Zion’s Gate Estates subdivision was platted by Hurricane City. A mistake was apparently made during the platting process, because the plat map dedicated a public street right on top of certain UAMPS structures; as relevant here, the plat map showed a UAMPS support pole (the Guy Pole) located right in the middle of a street. Later, UAMPS and Hurricane City discovered the problem and began discussing ways to solve it.

¶8 In the meantime, in the summer of 2018 Benzer began construction of a house on Lot 55 of the Zion’s Gate Estates development. A portion of Lot 55 is subject to the Easement, and UAMPS had already placed guy wires¹ there that were used to support a nearby power pole. These guy wires are obvious and visible to any observer, and Benzer was fully aware of their existence prior to beginning any construction on Lot 55. At the time, documents setting forth the scope of the Easement (the Easement Documents) were on file with the Washington County Recorder’s Office, although Benzer apparently did not obtain a copy of the Easement Documents prior to starting construction. However, Benzer had received—prior to starting construction—a title insurance commitment that identified the Easement and indicated that UAMPS had the right to construct, operate, and maintain equipment that may run "over, under and across a portion of" Lot 55.

¶9 Notwithstanding the visible guy wires and its knowledge of the existence of the Easement, Benzer elected to proceed with construction of a house on Lot 55 that encroaches on the boundaries of the Easement; one exterior wall of the house is located only inches from the guy wires. This positioning of the house was apparently strategic on Benzer's part, because it allowed for the inclusion of an additional parking stall on the side of the lot opposite from the guy wires, a factor Benzer thought would make the lot more desirable for potential buyers.

¶10 Not long after Benzer began construction on Lot 55, an employee of the Hurricane City power department drove through Zion’s Gate Estates and noticed that the house being constructed on Lot 55 was in extremely close proximity to the UAMPS guy wires. Fearing that this might interfere with the Easement, a different Hurricane City employee (Employee) called Benzer’s manager (Manager) to discuss the issue. In response, Benzer temporarily halted construction on Lot 55. Over the next few weeks, a series of communications ensued, and in one message, Employee told Manager that, as he understood the matter, UAMPS was having difficulty locating an actual copy of the Easement Documents and therefore UAMPS was not, at that time, making any attempt to force Benzer to halt construction. But Employee indicated that UAMPS personnel would be meeting soon to discuss the issue and decide how UAMPS wished to proceed. Benzer did not wait to hear what UAMPS had decided and, without further ado, recommenced construction of the house on Lot 55, making no adjustments to its positioning.

¶11 In September 2018, UAMPS sent Benzer a demand letter, telling Benzer that it was indeed encroaching on the Easement and demanding that Benzer either (a) move the house on Lot 55 or (b) pay to have the existing power pole and guy wires replaced "with a standalone pole without a guy wire." UAMPS estimated that installing a standalone pole would cost approximately $105,500, not including labor. Following receipt of the letter, Benzer did not agree to either option: it refused to move the house, and it refused to pay the costs of installing a standalone pole. Instead, Benzer continued with its development plans and proceeded to complete construction of the house on Lot 55.

The Litigation

¶12 Some months later, in December 2018, UAMPS initiated this lawsuit by suing Benzer.² Its chief requests were for a judicial declaration that Benzer was violating the Easement and for an injunction commanding Benzer to remove or re-situate the house on Lot 55 so that it would no longer encroach on the Easement. UAMPS also asserted trespass and nuisance claims against Benzer and, in connection with those claims, sought as alternative remedies both an injunction and damages.

¶13 Benzer answered UAMPS’s complaint, and included several affirmative defenses, including an assertion that it had "the affirmative right to realign" UAMPS’s "guy wire easement" pursuant to a Utah statute (the Realignment Statute). See Utah Code § 10-8-14.5. Later, Benzer amended its answer to include a counterclaim, which in its first iteration included damages claims for trespass and civil conspiracy but, as later amended, included only two lion-damages claims against UAMPS. First, Benzer complained about the Guy Pole being located in the middle of a platted public street, and it asked for declaratory and...