Lawyer Cried Fraud Over Conservation Easement

There was sufficient evidence to support the trial court’s finding that the Maryland Environmental Trust committed fraud during the negotiation of a conservation easement, the Court of Special Appeals held last month.

The Maryland Environmental Trust (MET) is a public agency governed by a Board of Trustees and operating as part of the Department of Natural Resources. NR §3-202. The MET accepts donated conservation easements. See RP §3-203.1. In exchange for the conservation easements, the landowners qualify for certain property, income, and estate tax benefits.

In 1989, Kevin Gaynor, an attorney with substantial experience in environmental matters, and his wife, Cathy Cook Gaynor, contacted the MET to inquire about donating a conservation easement on their property. Several neighbors expressed interest in donating conservation easements to MET, including the Chalmers, the Servarys, and the Schumacher/Parker family.

Grant Dehart and Jim Highsaw of the MET had a meeting with the Gaynors and their neighbors. Highsaw became the primary contact person from the MET and Gaynor served as the “point man” for the property owners. Negotiations occurred throughout the summer of 1989. Notwithstanding Gaynor’s designation as the “point man” for communications between the group of property owners and the MET, individual easements were required for each property, and the terms of each easement varied.

On September 11, 1989, the properties were presented to the MET board. The board voted to accept the easements with certain conditions, including a provision against subdivision. Gaynor testified that he spoke to Highsaw by telephone after the board meeting.

Gaynor got the impression from that conversation that the board would not accept the easements unless the property owners agreed to the subdivision restriction. On September 15, 1989, Highsaw sent a letter to Gaynor which purportedly outlined the events of the September 11, 1989 board meeting.

According to Gaynor, Highsaw never specifically stated that the board would accept the easements without the subdivision restriction. Gaynor relied on the minutes of the September 11, 1989 meeting as evidence that Highsaw deceived him, because the minutes clearly stated that the Board would accept the easements without the subdivision provision if necessary, but Highsaw never made that statement to Gaynor.

Highsaw testified that he believed that he told the property owners that the board had accepted their easements without the “no subdivision” provision and that this information was conveyed in his September 15, 1989 letter.

One of the other property owners, Barbara Parker, testified at trial that Highsaw’s September 15, 1989 letter made clear that the request for a subdivision restriction was not a requirement. Parker was certain that she told Gaynor and the other property owners that she and her husband would not agree to it, and no such provision was included in the easement the Schumacher/Parker family donated.

In 1994, Gaynor joined the MET’s board. In 1997, he learned that his neighbors, Schumacher and Parker, intended to build a second home on their property and that their easement to did not include a subdivision restriction.

The Gaynors then filed suit against the MET, alleging fraud in the inducement; negligent misrepresentation; deceit, concealment and non-disclosure; andseeking a declaratory judgment for ultra vires action.

At trial, the MET moved for judgment on all counts. The court granted judgment in favor of the MET on the ultra vires claim, and held the remaining counts sub curia in order to render a written opinion.

In its written opinion, the trial court found in favor of the Gaynors on their claim for fraud and ordered rescission of the deed of conservation easement and all other written and oral agreements underlying that agreement between the Gaynors and the MET. Judgment was entered in favor of the MET on the claims for negligent misrepresentation and deceit, concealment, and non-disclosure.

The Court of Special Appeals affirmed.Broken Promise

The MET contended that the facts did not show any fraud perpetrated on the Gaynors. Specifically, it said Highsaw’s letter accurately and completely outlined the board’s decision and, therefore, there was no evidence that Highsaw misrepresented the board’s position.

The trial court’s legal conclusion that a false statement was made was supported by the undisputed facts: that Highsaw affirmatively represented to Gaynor that he would send him an outline of the board’s actions, and that Highsaw sent a letter to Gaynor which, on its face, appeared to be a complete outline of the board’s findings.

The trial court properly concluded that Highsaw’s omission of a critical portion of the meeting, namely that the board was willing to accept the easements without the “no subdivision” provision, concealed the truth of what the board decided, and resulted in an incomplete and misleading representation to the Gaynors.

Likewise, there was sufficient evidence to support the trial court’s conclusion that Highsaw had knowledge of the falsity of his representation or omission, that Highsaw’s misrepresentation was made for the purpose of defrauding the Gaynors, and that the omission contained material information that the Gaynors would have relied upon. Finally, there was no error in the court’s determination that the inclusion of the “no subdivision” clause deprived the Gaynors of both the right to subdivide and the economic value of any future sale of the second lot.

Dissent

The dissent opined that the facts were legally insufficient to support a finding that the MET made a false representation of fact to the Gaynors, and therefore to support a finding of fraud.

Highsaw’s letter stated precisely what the board had decided: that it would prefer to have a “no subdivision” clause, the dissent said.