PACIFIC MILLS ACQUISITION LLC v. ESSEX COMPANY and LAWRENCE HYDROELECTRIC ASSOCIATES

The complaint filed by plaintiff Pacific Mills Acquisition LLC (“Pacific Mills”) on April 12, 2004, seeks relief on three counts: Count 1 seeks declaratory judgment that Pacific Mills owns and controls certain water rights known as “mill powers”; Count 2 seeks declaratory judgment that defendant Essex Company (“Essex”) must maintain the North Canal; and Count 3 seeks specific performance of Essex’s obligation to maintain North Canal. The Counterclaim of Essex and the Lawrence Hydroelectric Associates (“LHA”) filed on December 29, 2004, seeks relief on the following three counts: Counterclaim 1 alleges Pacific Mills is committing “waste” by drawing water from the North Canal to which plaintiff is not entitled; Counterclaim 2 seeks equitable relief pursuant to the “Termination of Lease Agreement,” namely, that Essex may enter the Pacific Mills property to seal certain penstocks to abate the alleged waste; and Counterclaim 3 seeks declaratory judgment that Pacific Mills has no right to the thirty-three mill powers that are the central issue in this litigation.

Earlier during this litigation, Pacific Mills moved for partial summary judgment: on Plaintiff’s Count 1 and Defendant’s Count 1, Count 2, and paragraphs 35-37 of Def’s Count 3. The Defendants filed opposition to plaintiff’s motion, and a cross-motion for summary judgment as to Count I of the plaintiff’s complaint (which was recast and refiled prior to hearing on the motions).

On June 29, 2009, the court issued an Order Denying in Part Plaintiff's Motion For Summary Judgment and Granting in Part Defendants’ Cross Motion For Summary Judgment, see 17 LCR 411 (2009) (Misc. Case No. 04 MISC 298282) (Piper, J.) (“2009 Order”). In its 2009 Order, the court determined that the 1978 LHA Assignment of thirty-three mill powers from the predecessor of Pacific Mills to LHA was valid, and granted a partial summary judgment in favor of the defendants as to Count 1 and Counterclaim 3. The court also ruled that the question presented in Counterclaims 1 and 2, whether Pacific Mills was committing “waste” as defined by the indentures, and if so, whether Essex had a right of entry to seal the penstocks, presented material disputes of fact and required trial.

After a stay of all proceedings as a result of the bankruptcy of Pacific Mills, and relief from the stay by the Bankruptcy Court, on June 22, 2010 the court held a pretrial conference in advance of which the defendants reported they would waive Counterclaims 1 and 2. As a result of this waiver, the only disputes remaining in this case were Count 2 and Count 3 of Pacific Mills’ Complaint, namely, the request by Pacific Mills for a declaration that Essex must maintain the North Canal, and a request that the court specifically enforce against Essex that obligation of maintenance. On July 15, 2010, the defendants moved for summary judgment on Count 3 of Pacific Mills’ complaint. Pacific Mills filed its opposition on August 6, 2010 and hearing was held on September 7, 2010.

The facts of this case are as stated in the June 29, 2009 Order. (Many of the terms used in this Order have the meaning and explanation provided for them in the 2009 Order.) No material facts are in dispute. What follows are the facts relevant to this motion.

1. By 1939, Pacific Mills’ predecessor-in-title had acquired the “lower site” and its associated thirty-three mill powers.

2. The thirty-three mill powers, although conveyed out from Essex at different times, were all granted according to certain “Proposals By The Essex Company For The Sale Of Their Mill Power And Land, On Merrimack River in Massachusetts” (“Proposals”).

3. Relevant here are the following Articles in the Proposals:

a. Article III, which states in part: “The grantors are to construct and forever keep in good repair the principal canals and from time to time, as occasion may require, they are to remove and clear out the obstructions that may accumulate therein. They are also forever to maintain the dam in the Merrimack River, and the head of said principal canals, of such length and height as may be necessary and as they may lawfully do in order to turn the water into the canals.”

b. Article VI provides that “[i]f any grantee shall sustain any injury from deficiency of water happening from any cause whatever, other than his own neglect or misconduct,” the grantee may withhold rent during the deficiency, and “if such deficiency should happen through the misconduct or willful neglect of the grantors, the grantee shall have a right to recover damages.”

c. Article VII provides that “[i]f any grantee shall suffer damage from want of water from causes not arising from his own neglect or misconduct, and which may be removed or remedied, and the grantors shall . . . unreasonably fail to remove the obstructions or remedy the mischief, the grantees injured or any of them, may in the best manner they may be able, remove or remedy the causes of injury...” and goes on to provide the mechanism by which a grantee may be reimbursed for such efforts.

d. Article VIII states “The grantees are not to use more water than is granted, nor waste it, nor permit it to be wasted for want of repairs or through the deficiency of their works or otherwise; and if so wasted, or more be used than granted, the grantors may stop the water from entering their flumes by closing the gates across them, or by any other method, until such waste or excessive use be sufficiently guarded against; and may also at the same time have their action at law for damages; and other grantees who shall suffer thereby may also have their action at law for damages.”

4. In 1978, Rowland Industries, Pacific Mills’ predecessor-in-title, and LHA executed an instrument, agreed to by Essex, titled “Assignment of Mill Powers and Other Rights” (“Assignment”) recorded at Book 1363, Page 96 at Essex (North District) Registry of Deeds. The Assignment, in the first numbered paragraph, provides that, “The Lessor hereby transfers, leases and sets over to LHA the following rights of the Lessor in and to the flow of the Merrimack River (hereinafter referred to as the “Leased Water Rights”): all its Mill Powers (be they of the number stated hereinabove or otherwise), rights to Surplus Water Power and all rights of every name and nature to take water from the Merrimack River, or from the canals of the Essex Company....”

5.

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Pacific Mills concedes that even if a triable issue of fact might exist as to whether or not Essex is actually in current breach of its obligations to maintain the North Canal, that issue would only be relevant if Pacific Mills possesses a right to enforce the relevant covenants of Article III. Essex, for its part, conceded that when the term of the LHA Assignment ends, and the mill power easements revert to Pacific Mills, Essex would be bound by Article III and Pacific Mills then could exercise its rights under that article.

For substantially the reasons set forth in the moving papers, and the additional reasons set forth below, the court GRANTS summary judgment in favor of the defendants, and rules that during the term of the assignment now in effect, Pacific Mills has no right to compel Essex to maintain the North Canal.

Pacific Mills argues that the LHA Assignment transferred some, but not all, of the rights and obligations contained in the Proposals, and that to the extent the LHA Assignment did not expressly convey the right to enforce Article III of the Proposals, that right remained with Pacific Mills’ predecessor, and may be enforced today by Pacific Mills. The language of the LHA Assignment does not support this contention by Pacific Mills. In addition to transferring the mill powers specifically, the LHA Assignment broadly included all additional “rights of every name and nature to take water” among those rights transferred. The right to enforce Article III was included in the rights which were assigned. The mill powers are easements. See 2009 Order, supra. “[W]hen an easement or other property right is created, every right necessary for its enjoyment is included by implication.” See Post v. McHugh, 76 Mass. App. Ct. 200 , 206 (2010) and cases cited. The right to compel Essex Company to maintain the canals is clearly one of those rights necessary to enjoy fully a mill power easement, and is fully bound up with the right to take and make productive use of the water.

Pacific Mills attempts to read the language “rights of every name and nature to take water” as language of limitation – as language limiting the right transferred by the LHA Assignment to the basic right to take water. To support this reading, Pacific Mills argues that Article III encompasses an obligation that Essex maintain the canals for reasons totally independent of the right of a mill to draw water. Pacific Mills claims that the remedies in Article VII are the remedies for lack of water, and thus, for Article III not to be superfluous, a mill owner must be able to enforce Article III without regard to whether the mill owner possessed any mill powers.

But this is not so. There are myriad reasons why a mill might suffer from want of water which have nothing to do with obstructions in the canal. For example, another mill up-stream could be drawing more water than it is entitled to, or Essex might fail to direct sufficient water into one of the canals, even though that canal, deprived of water, might be clear of obstructions and maintained in pristine condition. The separate treatment in the quoted Articles other than Article III of rights of grantees when the grantors bring about a “want of water” at a grantee’s location along the canal has legal signficance apart from the more limited circumstances of water deprivation caused by obstruction and poor maintenance of the canal system. There is nothing superfluous about creating a duty to maintain the canals (Article III), and then including in the Proposals a further ample array of remedies for lack of water resulting from a variety of causes whatsoever (Article VI), and for lack of water caused by a range problems which could be resolved by the grantees’ self help and a right of set off. (Article VII).

Pacific Mills argues that the Article III covenant is not “necessary” to LHA’s enjoyment of the mill power easements because as a practical matter, LHA would never need to enforce the covenant against Essex--given that the two entities are closely related. Pacific Mills also argues that, in any event, LHA owns land on the South Canal, and owns (as opposed to leases) certain mill powers associated with that land, and thus could enforce Article III of the proposals without having obtained that right through the LHA Assignment. This argument is not convincing. There is nothing in the LHA Assignments that requires Essex and LHA to be and to remain related entities; were the Essex Company to become independent from the entity holding the benefit of the mill power easements, there would be great value to that holder in being able to enforce against Essex the covenants in Article III of the Proposals.

Finally, Pacific Mills argues that the obligation to maintain the canal has significance independent of the right to draw water, and that such benefits would naturally continue to inure to Pacific Mills’ benefit. In support of this, Pacific Mills argues that because the canal wall forms the boundary of its fee, and failure on the part of Essex to maintain the canal might cause Pacific Mills’ site to collapse into the river, the LHA Assignment did not transfer the Article III covenants for the duration of the assignment. This argument has no merit. Nothing in the Proposals has taken away from landowners abutting the canals the rights and obligations of lateral support as between abutting fee owners; these are common law rights and may be enforced in any court with jurisdiction to hear claims for damages resulting from a breach of the obligation of lateral support, or to enjoin such an imminent breach upon proper showing. At issue in the pending case is only the question of who currently holds, while the Assignment is in effect, the covenantal rights under the Proposals to have canal maintenance performed, and obstructions cleared.

To the extent that Pacific Mills would have the court in this action order defendants to do this work now, based on some theory that the failure to do so would, when the assignment by its terms ends many years from now, leave the Pacific Mills land (with its reacquired mill powers) harmed, that contention lacks any reasonable support in the record, even applying the deferential standard under Rule 56, which calls for all reasonable inferences to fall to the opposing party. There is no reasonable inference on this record that by deferring canal maintenance today, the rights of Pacific Mills to draw water when the term of the assignment concludes will be impaired in a way which judicial relief sought at that time could not adequately redress.

Even if Pacific Mills did have the right to insist that the canal be maintained today (which the court expressly rules is not the case), the remedy Pacific Mills asks for would not be available to it. The remedy for this alleged breach of the Proposals is the one set in them, in the contract creating the right. The remedy is that set forth in Article VII, and it requires, after notice, that Pacific Mills itself clear the obstructions at its own expense, “and to pay and indemnify them for the expense and charge thereby incurred, such grantee shall, after expiration of thirty days from the time the amount of such expense shall have been adjusted and agreed to by the parties, or ascertained by final judgment at law, or by awards of referees, have a lien upon all the rents which may have been reserved to the grantors upon the sale of any mill power and which may become payable after the expiration of said thirty days, and may in the name of the grantor or otherwise demand, sue for and receive the same, until they shall be fairly reimbursed as aforesaid.” The contract which establishes the obligation prescribes the relief for disregard of the obligation. The relief sought by Pacific Mills--that the court by injunction order Essex to perform work, or award in the first instance damages against them--is unavailable given the express and binding terms of the Proposals.

Accordingly, it is

ORDERED that summary judgment is GRANTED in favor of the defendants on Count 2 of the complaint. The Judgment that enters in this case will declare that the LHA Assignment transferred, along with the mill power easements, for the duration of the assignment, the right to enforce Article III of the Proposals, and that that right to enforce does not currently inure to the benefit of Pacific Mills or its site. It is further

ORDERED that within fourteen (14) days of the date of this Order, defendants file and serve a proposed form of judgment they would have entered by the court. Within fourteen (14) additional days, plaintiff may either file and serve a written assent to the defendants’ proposed judgment (without waiving any rights), or may file and serve a competing form. Judgment will enter without further hearing unless otherwise ordered.

So Ordered.

By the Court. (Piper, J.).