# Foothills Land Conservancy v. Creekside Estates Partnership

> Court of Appeals of Tennessee · October 22, 2024

URL: https://www.frixlaw.com/law-library/cases/10621381

## Case

- **Court:** Court of Appeals of Tennessee
- **Decided:** October 22, 2024
- **Precedential status:** Published
- **Opinion:** Opinion
- **Judges:** Judge John McClarty
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

10/22/2024
IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
July 16, 2024 Session

FOOTHILLS LAND CONSERVANCY v. CREEKSIDE ESTATES
PARTNERSHIP, ET AL.

Appeal from the Chancery Court for Knox County
No. 202559-1 John F. Weaver, Chancellor
___________________________________

No. E2023-01647-COA-R3-CV
___________________________________

This case involves dueling declaratory judgment actions arising out of a deed of
conservation easement dated December 31, 2007, encumbering property located within the
Town of Farragut in Knox County. The trial court found in favor of Foothills Land
Conservancy and awarded the nonprofit its damages, expenses, and attorneys’ fees. Upon
review, we affirm.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
Affirmed; Case Remanded

JOHN W. MCCLARTY, J., delivered the opinion of the court, in which THOMAS R.
FRIERSON, II, and KRISTI M. DAVIS, JJ., joined.

Lewis S. Howard, Jr. and Erin J. Wallen, Knoxville, Tennessee, for the appellant,
Creekside Estates Partnership.

W. Morris Kizer, Knoxville, Tennessee, for the appellee, Foothills Land Conservancy.

Matthew A. Grossman and Richard E. Graves, Knoxville, Tennessee, for the appellees,
Chad A. Lankford and Bianca B. Lankford.

OPINION

I. BACKGROUND

Foothills Land Conservancy (“Foothills”) is a tax-exempt nonprofit Tennessee
corporation and is a “qualified organization” under Sections 501(c)(3) and 170(h) of the
Internal Revenue Code. Its primary purpose is to preserve land, water, air, wildlife, scenic
quality, and open space by implementing programs for protecting unique or rare natural
areas, waterfront, stream corridors, and watersheds, primarily through accepting grants of
conservation easements and enforcing their terms.

Placemakers Partnership1 (“Placemakers”) was a Tennessee general partnership and
the owner of a 42.46 acre tract of real property located in the Town of Farragut, Knox
County, with an address of 600 McFee Road (“Property”). The Property comprised Phase
II of a residential, single-family development known as Bridgemore, which phase was
approved for construction of seventy to eighty houses. In 2007, the partners of
Placemakers, who included attorney David Long, undertook to sell the Property portion of
Bridgemore. Long discussed the sale with Joseph K. Ayres, who indicated an interest in
developing large, estate lots, rather than seventy to eighty smaller lots, on the Property in
conjunction with a conservation easement. Long introduced Ayres to William Clabough,
Foothills’ Executive Director. After Long prepared the legal documents for both
Placemakers and Foothills, Ayres purchased a 99.8% partnership interest in Placemakers
with the intent that Placemakers execute a Deed of Conservation Easement (“Easement”)
for the purpose of obtaining a deduction on its 2007 federal income tax return for a
charitable contribution of a conservation easement. Ayres became the managing partner of
Placemakers and signed a “Baseline Documentation” report containing baseline data
regarding the Property. Long, at various times, acted as a partner of and legal counsel to
Placemakers, a member of the Foothills Board of Directors and legal counsel thereto, and
legal counsel to Creekside and Ayres.

The Tennessee Conservation Easement Act of 1981, Tennessee Code Annotated
section 66-9-301, et seq. (“Conservation Easement Act”), defines a conservation easement
as a nonpossessory interest in real property imposing limitations or affirmative obligations
on the owner of the land, its heirs and assigns, with respect to the use and management of
the land, structures, or features thereon, which limitations and affirmative obligations are
intended to preserve, maintain, or enhance the present condition, use, or natural beauty of
the land, the open-space value, the air or water quality, the agricultural, forest, recreational,
geological, biological, historic, cultural or scenic resources of the land. As the “donee” of
the Easement, or as the “Holder” as that term is used in the Conservation Easement Act,
Foothills is required, both by law and by contract, to enforce the limitations and affirmative
obligations of the document so as to preserve, maintain, or enhance the natural beauty, the
open-space value, the air and water quality, and the scenic resources of the land. Pursuant
to the terms and conditions of the Easement, Foothills is required to undertake this
enforcement obligation in perpetuity.

The Easement before us states that the grant of the conservation easement on the
Property was intended by Placemakers and Foothills to be a “qualified conservation

1
Creekside Estates Partnership (“Creekside”), a Tennessee general partnership, is successor in
interest to Placemakers, having acquired the property by quitclaim deed dated April 10, 2018.
-2-
contribution under the [Internal Revenue] Code and 26 C.F.R. Section 1.170A14…” (the
“Regulations”) governing tax deductible conservation easement donations. The Easement
states that the “Purpose” (as opposed to the Conservation Purposes) of the Easement is as
follows:

It is the purpose of this Easement to assure that the Property will be retained
forever in its undeveloped, natural, scenic, forested and/or open land
condition and to prevent any use of the Property that will impair or interfere
with the Conservation Values of the Property, subject only to the terms and
provisions set forth herein.

The Easement defines “Conservation Values” as the “ecological, natural, scenic, forested
land, and wildlife habitat values” possessed by the Property (collectively, “Conservation
Values”) and provides that “the specific Conservation Values of the Property are further
documented in” the Baseline Documentation.

Under the Regulations, a perpetual easement on real property is a “qualified real
property interest,” and an income tax deduction may be allowed for the value of a qualified
real property interest, including a conservation easement, granted to a qualified
organization such as Foothills if the easement is perpetual and is “exclusively for
conservation purposes.” The Regulations define the term “conservation purposes” to
include the following:

The protection of a relatively natural habitat of fish, wildlife, or plants, or
similar ecosystem…

The preservation of certain open space (including farmland and forest land),
if such preservation is…

Pursuant to a clearly delineated Federal, state, or local governmental
conservation policy and will yield a significant public benefit…, or

For the scenic enjoyment of the general public and will yield a significant
public benefit.

Placemakers as “Grantor” and Foothills as “Grantee” incorporated in the Easement
the foregoing conservation purposes stated in the Regulations and agreed that those
conservation purposes would be served by preservation of the Property, as follows:

WHEREAS, preservation of the Property shall serve the following purposes
(the “Conservation Purposes”):

Preservation of the Property as a relatively natural habitat of fish, wildlife, or
-3-
plants or similar ecosystems; and

Preservation of certain open space (including farmland and forest land)
where such preservation is for the scenic enjoyment to the general public and
will yield a significant public benefit; and

Preservation of certain open space (including farmland and forest land)
where such preservation is pursuant to a clearly delineated Federal, State or
local governmental conservation policy and will yield a significant public
benefit; and

WHEREAS, Grantor and Grantee desire to perpetually conserve the natural,
scientific, educational, open space and scenic resources of the Property to
accomplish the Conservation Purposes; and

WHEREAS, Grantor intends to grant the easement and impose the restrictive
covenants on the Property as set forth in this Easement to accomplish the
Conservation Purposes.

The requirement of the Regulations that the grant of a conservation easement must
be “exclusively for conservation purposes” does not preclude the reservation by the donor
of certain limited rights, but only if such reserved rights “conform to the requirements of”
the Regulations. The Regulations state that “a deduction will not be allowed for the
preservation of open space . . . if the terms of the easement permit a degree of intrusion or
future development that would interfere with the essential scenic quality of the land or with
the governmental conservation policy that is being furthered by the donation.” The
Regulations further denote that a contribution made for the preservation of open space for
the scenic enjoyment of the general public will qualify for a deduction if, without the
conservation restriction, “development of the property would impair the scenic character
of the local rural or urban landscape or would interfere with the scenic panorama that can
be enjoyed from a park, nature preserve, road, waterbody, trail, or historic structure or land
area, and such area or transportation way is open to, or utilized by, the public.” The
Regulations indicate that “a deduction will not be allowed if the contribution would
accomplish one of the enumerated conservation purposes but would permit destruction of
other significant conservation interests.” The Regulations additionally require affirmative
steps for the “[p]rotection of (the) conservation purpose where a taxpayer reserves certain
rights,” noting that if any reserved rights “may impair the conservation interests associated
with the property,” the donor must provide baseline documentation “designed to protect
the conservation interests associated with the property, which although protected in
perpetuity by the easement, could be adversely affected by the exercise of the reserved
rights.” By making the Easement pursuant to the Regulations, Placemakers and Foothills
incorporated the provisions of the Regulations limiting the exercise of any development
rights reserved by Placemakers.
-4-
Under the Regulations, the Internal Revenue Service (“IRS”) would allow an
income tax deduction for the grant of a conservation easement only if the grant is found by
the IRS to be “exclusively for conservation purposes,” requiring a finding that “any rights
reserved by the donor … conform to the requirements of …” the Regulations. As required
by 26 U.S.C. section 170, Placemakers submitted to the IRS the “Market Value Appraisal”
prepared by Robert J. Fletcher (“Appraisal”), the purpose of which was “to evidence and
support the value of a charitable donation of a conservation easement.” The Appraisal
valued the Property before the grant of the conservation easement at $4,200,000.00, and
after the grant of the conservation easement, and as restricted thereby, at $475,000.00. The
“after” value of the Property was 11.3% of the “before” value. After reviewing the
Appraisal, and without requesting any changes to it, Ayres signed Placemakers’ 2007
federal income tax return under penalty of perjury, wherein Placemakers claimed the
$3,725,000.00 deduction.2

As part of the Appraisal, Fletcher included a map labeled “Potential Lot Layout.”
Ayres asserted that this Potential Lot Layout did not represent the development plan of
Placemakers as of December 31, 2007; he claimed that he would “consider this one of
many different possibilities.” Creekside, however, acknowledged that the Potential Lot
Layout was provided to Fletcher by Placemakers for use in the Appraisal, that the Potential
Lot Layout was in the Appraisal when Ayres reviewed it, that Ayres requested no changes
to the Appraisal, and that the Potential Lot Layout was the future development plan “taken
into account” by Fletcher in his “after” valuation of the Property and was submitted as part
of the Appraisal to the IRS to evidence and support the tax deduction. The Potential Lot
Layout depicts a type of development of the Property identified at trial as a “clustered”
type development (concentrated with houses close together), with ten “Single Family Lots”
located around two cul-de-sacs, with each cul-de-sac having five lots clustered around it,
and with the ten lots containing a combined total of 2.71 acres. The Potential Lot Layout
included in the Appraisal also shows a right of way (“ROW”) area of 4.03 acres, and a
“conservation easement” area of 35.49 acres.

Among the reserved rights stated in Section 4 of the Easement is the conditional
right to construct up to ten single family dwellings on up to ten “Residence Structure
Areas” on the Property (“RSAs”), together with other accessory improvements, driveways,
and underground utilities to service the residence structures, subject to Foothills’ approval.
The conditions stated in Subsections 4(d)(i)-(iii) of the Easement require that the location
and dimensions of each RSA and the location and dimensions of a road or driveway and
underground utility facilities proposed to serve each RSA shall have been reviewed and
approved by Foothills. The approval is not to be unreasonably withheld or delayed, and the
location of the RSAs, and the location and dimension of the roads, driveways, and
underground utility facilities “must not, in (Foothills’) reasonable judgment, result in any

2
The tax return included copies of the Easement and the Appraisal.
-5-
material adverse effect on any of the Conservation Purposes or Conservation Values.” The
final paragraph of Section 4(d) of the Easement permits Placemakers to construct, in
compliance with the requirements of the Easement, a single family dwelling within each
of the RSAs along with other ancillary buildings thereto, such as garages, swimming pools,
tennis courts, pool houses, outdoor fire places, gazebos, garden sheds, and other similar
structures, provided that the dwelling houses and the other structures “must not
unreasonably interfere with the Conservation Values of the Property.”

As required by the Regulations, the Easement contains numerous provisions
limiting and restricting the exercise of Placemakers reserved rights in general, including
the right to build the RSAs and ancillary structures in particular. Those include the
prevention of any use of the Property that will impair or interfere with the Conservation
Values of the Property, subject only to the terms and provisions of the Easement, and
allows only such activities that are not inconsistent with the Conservation Purposes of the
Easement. The Easement explicitly provides that there is no assurance that the reserved
rights for which Foothills’ consent is required may be exercised in the manner proposed by
Placemakers, and that the reserved rights for which Foothills’ consent is required may not
be exercised unless and until Foothills is satisfied that the exercise of the reserved right in
the manner proposed by Placemakers can be done without an adverse or detrimental effect
on the Conservation Purposes, Conservation Values, or other significant ecological values
of the Property, or prohibited by or inconsistent with the restrictions set forth in the
Easement.

Section 5(a) of the Easement applies to requests by Placemakers for the exercise of
reserved rights. It requires Placemakers to notify Foothills thirty days prior to undertaking
an activity, giving notice of the nature, scope, design, location, timetable, and any other
material aspect of the proposed activity in sufficient detail to permit Foothills to make an
informed judgment as to its consistency with the purposes of the Easement, and, as required
by 26 C.F.R. section 1.170A-14(g)(5)(ii), to give notice in writing before exercising any
reserved right that may impair the conservation interests associated with the Property.
Section 5(b) of the Easement sets forth the requirements for Foothills to respond to a
“written request” from Placemakers given in accord with Section 5(a):

Grantee’s Approval. When Grantee’s approval is required, as set forth in
Paragraph 3(c) or Paragraph 4, Grantee shall grant or withhold its approval
in writing within thirty (30) days of receipt of Grantor’s written request
therefor. Grantee’s approval may be withheld only upon a reasonable
determination by Grantee that the action as proposed would be inconsistent
with any of the conservation purposes of this Easement, detrimental to the
Conservation Values of this Easement, prohibited by or would be
inconsistent with the restrictions set forth in this Easement. If Grantee does
not approve or withhold approval of the requested action within thirty (30)
days of receipt of Grantor’s written request therefor, Grantee is deemed to
-6-
have granted approval of such requested action and Grantor is expressly
authorized to proceed therewith EXCEPT WHERE the requested action is
clearly prohibited by the terms of this Easement or would be clearly
destructive of the Conservation Purposes. (Capital letters in the original;
emphasis added.)

In a May 1, 2017 email to Long, Ayres declared, despite having submitted the
Appraisal to the IRS with a development plan of ten lots totaling 2.71 acres, “I know we
will need to submit something to Foothills for approval but we were hoping we could
maximize our deedable acreage to potential purchasers.” Later that year, Long sent a
memorandum to Foothills’ Land Protection Committee (“LPC”) asserting that “Ayres was
advised by the Town of Farragut earlier this year that cluster/planned unit development
type housing would more than likely not be approved; hence, Placemakers Partnership’s
proposal to come up with alternative plans for 8 to 10 house sites for both the Town of
Farragut and (Foothills) to approve.” Contrary to Long’s assertions, Mark Shipley, the
Town of Farragut’s Community Development Director, testified that the Potential Lot
Layout included in the Appraisal, an example and depiction of a “type of clustered
housing,” was encouraged at that location, and that there would not be a minimum lot size
for a clustered development on the Property. However, after Long’s assertions, further
discussions regarding clustering were dropped.

Between September 13, 2017, and October 19, 2017, Ayres sent three maps to Long,
which Long forwarded to Foothills requesting approval (collectively, the “2017 Maps”).
The first 2017 Map showed ten lots on the Property, and the second and third 2017 Maps
showed eight lots on the Property. The concept of an eight lot plan was neither requested
nor approved by Foothills. None of the three 2017 Maps was submitted to the Foothills
Board. The 2017 Maps did not show any driveways or underground utilities locations,
which Long acknowledged would be necessary for any approval of RSAs under Section
4(d) of the Easement. Furthermore, the RSAs on the third 2017 Map covered virtually the
entirety of each lot. As of the end of October 2017, Michael Parish, the Chairman of
Foothills’ LPC, told Long the position of the LPC was that Placemakers’ plan was “not
specific enough for us to recommend.” Parish anticipated that Placemakers would present
a development plan setting forth more specific building areas.

By an email to Parish and Clabough dated March 19, 2018, Long submitted another
map from Ayres requesting review and approval by Foothills.3 The map attached to the
email, however, was not a “revised” layout at all; rather, it was an identical copy of the
third 2017 Map, showing the RSAs taking up essentially the entirety of each of the eight
lots. Long confirmed that this map failed to reveal the “more specific and smaller
permissible building areas” Foothills “had said that they needed.” By an email dated April
9, 2018, Long sent to Parish and Clabough a map dated October 30, 2017, with a

3
By then, Ayres was calling the project “Creekside Estates.”
-7-
“Revisions” date of April 9, 2018 (“April 9, 2018 Map”). This map, however, was virtually
identical to the third 2017 Map, with the RSAs occupying the “maximum area that could
be covered on the lot.” The maps submitted by Placemakers in 2018 were not approved by
Foothills.

By email of August 3, 2020, to Long, Ayres sent a map which he claimed “updated
the development plat,” which Long forwarded to Clabough. The August 3, 2020 map,
however, was the same as the third 2017 Map and the 2018 Maps, showing virtually the
entirety of each of the eight lots covered by the proposed RSAs, and failing to address no-
build areas, green space and specific sites. Parish responded to Long, reminding him of the
previous requests for revision of site plans “to indicate much more precisely where each
home would be built in order to show us that the conservation values and purposes listed
in the (Easement) would be protected,” and listed among the “primary values and
purposes” the “scenic view from McFee Road; large natural area; preservation of open
space and preservation of the natural habitat.” Parish indicated that the plat submitted has
“virtually all of the McFee Rd frontage filled with buildable area.” Thereafter, Long
responded to Parish by email of August 13, 2020, stating that a “revised proposal is being
worked on to present to you.”

In an email to Long, dated September 2, 2020, Ayres sent a “new map for Creekside
Estates” (“Creekside Map”), stating that “in response to the requests of Foothills, we have
substantially increased the building setbacks off of McFee Road and between each lots
(sic).” Long forwarded the September 2, 2020 email to Parish on the same date, stating,
“Just received. Are you available this week or next to discuss and get back to Joe? Look’s
(sic) like some progress is being made.” The Creekside Map attached to those emails is
titled “Boundary Survey of Property of Creekside Estates Partnership McFee Road
Farragut, TN” and is dated August 28, 2020. The map, however, did not show the location
and dimensions of driveways or underground utilities or the dimensions of the RSAs,
which are required by Section 4(d) of the Easement. The Creekside Map did revise the
previous maps submitted to reduce the RSAs; however, as Parish testified, the reduction of
the RSAs shown on the map “only marginally reduced the footprint of the RSA and not
nearly to the extent it protected the conservation values as what we had requested”; “it
seemed to us to be apparent that those larger RSAs still negatively impacted the
conservation values”; “still blocked most of the frontage of McFee Road; and the lot
coverage was still way beyond what we had hoped for.” Ayres testified that it is Creekside’s
position that the September 2, 2020 emails with the Creekside Map attached was the written
notice to Foothills prior to exercising Creekside’s reserved rights as required by Paragraph
5(a) of the Easement.

Following an inspection of the Property on September 9, 2020, by Clabough and
Parish, Clabough sent an email to Long commenting on the Creekside Map. He remarked
after noting the Property’s conservation values, including “ecological, natural, scenic,
forested, open land, and wildlife habitat,” that “collectively we are concern (sic) that
-8-
building 8 houses that could have swimming pools, tennis courts, garage, and ect. (sic)
would destroy all of the above conservation values.” He noted language in the Easement
stating that any exercise of reserved rights “resulting in any material adverse effect on any
of the conservation purposes or conservation values will not [be] allowed.” By September
9, 2020, Parish believed that “Creekside’s proposed development as shown on the
Creekside Map would be clearly destructive of the Conservation Values and Conservation
Purposes of the Easement and clearly prohibited by the terms of the Easement.” Parish
observed that “[t]he RSAs are taking up a substantial portion of the McFee Road frontage.
So they definitely destroy the scenic view from McFee Road. There’s virtually no open
space. So the large natural area is destroyed. The fact that the RSAs are so deep, there is
very little wildlife habitat remaining.” Parish “participated in the decision by Foothills to
engage Karin Heiman, an independent biologist, to give an independent decision on the
effects that the approval of the Creekside Map would have on the conservation values and
purposes of the Easement.”

In response to Clabough’s September 9, 2020 email, Long sent emails to Clabough,
Parish, and Ayres acknowledging a conflict of interest but offering to give both parties a
legal opinion as to the terms of the conservation easement and how its restrictions work
vis-à-vis the reserved rights permitting the building of up to 10 houses. It appears Long
later suggested that Ayres “may want to ask if you can replace (Foothills) with another
qualified land trust.”

On September 15, 2020, Clabough sent Long an email on behalf of himself, Parish,
and Dan Barnett, a Foothills Board member, addressed to Ayres, which states in part:

Section 5(a) and 5(b) of the conservation easement document addresses in
the event of a land owner requesting to exercise a reserved right and the
process the Foothills Land Conservancy’s Board and Staff must followed
[sic] to determine if any conservation values or purposes are adversely
effected [sic] by the purposed [sic] development plan presented to the
Conservancy. This email acknowledges the receipt of the purposed [sic]
development plan. Also as of September 15th, 2020 the Board of Foothills
Land Conservancy has not reached a decision on your request. We have hired
an independent biologist to help the Conservancy to make a decision on your
development proposal. Staff along with the Board member that was ask [sic]
by the Board to help with the decision will make a recommendation to the
appropriate committee and entire Board at the October board meeting. We
will inform you of the decision by the Board.

According to Clabough, he met with Ayres regarding the Property on October 1,
2020, in an attempt to give Ayres an opportunity to make any final suggestions regarding
changes in the Creekside Map or development plan, as it was his opinion that the Creekside
Map would not be approved by the LPC and the Foothills Board. Despite the personal
-9-
opinions of Parish and Clabough, Foothills allowed Ayres to make a presentation to the
LPC at its October 8, 2020 meeting, with the “Board at large” also present. After Ayres
made both an oral and written presentation of the development plan shown on the
Creekside Map, the minutes of the LPC meeting reflect that the plan as presented was
denied and the Foothills Board of Directors’ minutes indicate the plan was not approved.
Parish recalled that it was discussed at the meeting of the Board that the “plan was clearly
destructive.”

At the invitation of Steve Arnett, a Foothills Board member, Ayres and his son met
with Arnett and Clabough on October 10, 2020, at which time Ayres testified that
“Clabough informed me that our plan was not going to fly and that maybe we should look
at reducing the number of residence structure areas.” According to Ayres, however, he
believed that he had approval to proceed with the Creekside Map because Foothills neither
granted nor denied the request within thirty days from Ayres’ September 2, 2020 email.
Accordingly, on or around October 21, 2020, Creekside recorded the Creekside Map in the
Knox County Register’s Office and sold Lot 6 to Chad A. Lankford and his spouse, Bianca
B. Lankford (collectively the “Lankfords”).4

Foothills filed its “Complaint for Declaratory Judgment and Additional Relief” on
May 28, 2021, seeking a declaration that it is entitled to disapprove and prohibit the
development of the Property by Creekside. Thereafter, Creekside filed a counterclaim
seeking a declaration that Foothills is deemed to have granted approval of the Creekside
Map pursuant to Paragraph 5(b) of the Easement. After Creekside’s motion for summary
judgment was denied, trial was held on July 11, 12, and 13, and September 6 and 7, 2022,
with the final argument on October 24, 2022.

At the trial, Creekside called David Jackson as an expert witness. Jackson has a
bachelor’s and master’s degrees in geology and is a registered professional geologist and a
certified professional hydrologist with a groundwater emphasis. He opined that
Creekside’s development plan for the Property depicted on the Creekside Map would result
in “no harm at all to any of the Conservation Values or Conservation Purposes” of the
Easement. According to Jackson, the home sites depicted on the Creekside Map would not
diminish the wetland and spring, which are the most significant attributes of the Property,
the wildlife habitats, or the open space attributes of the Property when considered in
contrast with the surrounding densely-built subdivision and the open space left by
preserving the wetland and spring. Foothills asserted that Jackson had no experience in
evaluation of residential subdivisions involving conservation easements, other than his
work involving the Property. Jackson acknowledged that prior to this case, he had never
testified in any court proceeding involving conservation easements and had no experience
regarding siting or location of homes on property subject to a conservation easement. He

4
The Lankfords are named as defendants as a result of their ownership interest in the Property. At
trial, the Lankfords called no witnesses, presented no proof, and did not examine any witnesses.
- 10 -
further admitted at trial that he could not cite any Tennessee statute referring to or
governing conservation easements. When Jackson wrote his report for Creekside, he had
no previous experience involving analyzing or applying any federal statute or regulations
applicable to conservation easements.

Foothills utilized Edward Lloyd Raleigh as an expert witness, a conservation
biologist with degrees from the University of South Carolina and Yale University’s School
of Forestry and Environmental Studies. Raleigh testified that he has written baseline
documentation reports and ecological management plans for conservation easements; has
performed work as a regional ecologist doing management plans for the islands region in
Massachusetts, including Martha’s Vineyard and Nantucket; has worked with conservation
easements in China and in east Tibet for the World Wildlife Fund; and has worked with
many other conservation groups in monitoring their conservation restrictions or easements.
He described experience with the siting of building envelopes on conservation easement
properties; determining how the conservation values of the sites could best be preserved,
and training board members and staff of conservation organizations on how to conduct
monitoring of conservation easements. Raleigh claimed to have worked on approximately
17,000 acres of baseline documentation reports since 2013 for various land trusts involving
management recommendations of conservation easement areas.

Raleigh testified that the Creekside development depicted “looks just like a
residential development” and opined that he would not “consider it viable for a
conservation easement.” He related that although there would be “open spaces” between
the RSAs, with the equal spacing of the RSAs on the highest end of the fragmentation
spectrum there would be no significant, threshold scenic view of benefit to the public. He
testified that such construction would have a “devasting impact on the scenic views for
everybody in that area.” Raleigh noted that his opinion also took into account the fact that
the Regulations attach significance to the interference to the panoramic view from a public
roadway, in this case primarily McFee Road. His opinion regarding the “clearly
destructive” impact on the scenic view Conservation Purpose took into account the fact
that the combined front boundaries of the RSAs on the Creekside Map would take up 60.5%
of the total of McFee Road bordering the Property.

Raleigh observed that the clustering design is “basically well known among experts”
to be “much better in terms of protecting the conservation values of the community for the
public benefit,” because “it allows the other areas to be open space” and provides “some
scenic views that can be protected.” He opined that “it could be possible” to have a
clustered type development on the Property that would “minimize the impacts below a
certain threshold,” and that a clustered development on 2.71 acres as shown in the
Appraisal Report might “pass muster.” He noted that the development plan as shown on
the Creekside Map would be “clearly destructive” of the open space Conservation Purpose
as a result of the fragmentation at the “highest end of the spectrum that I could image.” He
testified that the fragmentation presented by eight evenly spaced residence structures across
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the Property would clearly destroy the open space Conservation Purpose, because there
would remain no “significant public benefit.” Raleigh asserted that the implementation of
the development plan shown on the Creekside Map would render the purpose of the
Easement impossible to accomplish, because it “crosses the threshold of the Conservation
Values being destroyed,” noting that the purpose of the Easement is “intertwined
inseparably” with those Conservation Values.

The trial court filed its Memorandum Opinion on January 31, 2023, granting relief
to Foothills and dismissing Creekside’s counterclaim. The court held that (1) development
of the Property pursuant to the Creekside Map is prohibited; (2) the Creekside Map is of
no force or effect; and (3) Foothills is awarded its damages, expenses, and attorney fees.
On October 27, 2023, the trial court entered its Final Order and Judgment, wherein it
granted Foothills a judgment against Creekside in the amount of $231,167.47 for attorney
fees, expert fees, and expenses.

The trial court agreed with the testimony of the expert for Foothills “that Creekside’s
proposed development would be clearly destructive of the Conservation Purposes.” The
court found that “Creekside’s proposed plan is clearly prohibited by the terms of the
Easement.” The court determined that Creekside was “not authorized to proceed with the
proposed 8 estate lot development of the property.” As observed by the trial court:

The court has already found that the proposed development would be
prohibited by the terms of the Easement or clearly destructive of the
Conservation Purposes. Therefore, Foothills’ granting or withholding of
approval for the proposed development would, in effect, not be required by
the Easement for prohibition of the development. Moreover, with the
proposed development being prohibited by the terms of the Easement or
clearly destructive of the Conservation Purposes, the proposed development
is prohibited irrespective of any such determination by Foothills. With that
substantive finding, there is no reason to revisit whether Foothills could
reasonably determine that the proposed development would be inconsistent
with the Conservation Purposes, detrimental to the Conservation Values, or
prohibited by or inconsistent with the restrictions ….

Despite Creekside relying upon Foothills’ failure to give written notice of its withholding
of its approval as “deemed” approval or approval by default under the Easement, the court
determined that Creekside never provided a written request or notice and never provided
information sufficient to trigger approval of its proposed development by default under the
Easement.

II. ISSUES

We restate the issues raised by Creekside on appeal as follows:
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a. Whether the trial court erred, as a matter of law, in interpreting the
Easement and Creekside’s proposed exercise of a reserved right.

b. Whether the trial court erred in finding Creekside’s proposed action, as
depicted on the Creekside Map, is clearly prohibited by the terms of the
Easement or would be clearly destructive of the Conservation Purposes:

(1) Whether the trial court erred in considering the Appraisal
Report; and

(2) Whether the trial court erroneously relied upon Raleigh’s
testimony as to whether Creekside’s proposed action would
qualify for a deductible charitable contribution.

c. Whether the trial court erred in finding the Creekside Map is not deemed
approved:

(1) Whether the trial court erred in finding that Creekside never
provided a written request or notice sufficient to trigger approval
by default under Paragraph 5(b) of the Easement; and

(2) Whether the trial court erred in finding that Creekside waived
its right to deemed approval or is estopped from receiving deemed
approval.

d. Whether the trial court erred, as a matter of law, in awarding Foothills its
attorney fees and costs.

Foothills requested that it is entitled to recover from Creekside the attorney fees and
expenses that it has incurred in connection with Creekside’s appeal.

III. STANDARD OF REVIEW

Our review of the findings of fact by the trial court in a bench trial is de novo upon
the record, accompanied by a presumption of the correctness of the findings, unless the
preponderance of the evidence is otherwise. Tenn. R. App. P. 13(d). Questions of law are
reviewed de novo, with no presumption of correctness. Id.; Moore v. Lee, 644 S.W.3d 59,
63 (Tenn. 2022).

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IV. DISCUSSION

Issues a & b

Creekside asserts that the Easement was created encumbered by the right to
construct ten residential structures. Creekside argues that the trial court erred in its specific
finding of fact that the development plan submitted by Creekside, as shown on the
Creekside Map, is clearly prohibited under the Easement and clearly destructive of the
Conservation Purposes.

Creekside acknowledges Foothills’ authority to review the proposed manner of
exercise and to reject proposals deemed materially adverse to the Conservation Purposes.
However, it contends Foothills’ authority to reject a proposal must be reasonable and
provided in writing within thirty days of the request for approval in order to avoid being
deemed as approved. Creekside admits that its right to deemed approval is tempered by the
caveat that any action which is clearly prohibited by the Easement or would be clearly
destructive of the Conservation Purposes will not receive such approval.

Paragraph 5(b) of the Easement comes into play when Foothills’ approval is
required as set forth in Paragraph 4; Foothills will grant or withhold its approval in writing
within thirty days of its receipt of Creekside’s request. Such approval may be withheld only
upon the reasonable determination that the action as proposed “would be inconsistent with
any of the Conservation Purposes of this Easement, detrimental to the Conservation Values
of this Easement, prohibited by or would be inconsistent with the restrictions set forth in
this Easement.” If Foothills does not approve or withhold approval of the requested action
within thirty days of receipt of Creekside’s written request therefor, Foothills is deemed to
have granted approval of such requested action and Creekside is expressly authorized to
proceed “EXCEPT WHERE the requested action is clearly prohibited by the terms of this
Easement or would be clearly destructive of the Conservation Purposes.” (Capital letters
in the original; emphasis added). In other words, and as found by the trial court, “the
Easement contains an expressed exception or proviso that this procedure for approval, by
default, does not apply where the requested action is clearly prohibited by the terms of the
Easement or would be clearly destructive of the Conservation Purposes. No such
prohibitive or destructive action is permissible and no authority for such prohibitive or
destructive action exists irrespective of what either party to the Easement has done or not
done.”

Creekside correctly asserts that it has reserved rights under the Easement permitting
it to establish ten RSAs. However, the Easement does not permit Creekside to establish ten
RSAs in any manner it may choose; indeed, in establishing the RSAs, Creekside must
comply with the terms of the Easement, including securing the consent of Foothills.
Creekside’s reserved rights must conform to the requirements of the Regulations. A
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deduction will not be allowed if the terms of the Easement “permit a degree of intrusion or
future development that would interfere with the essential scenic quality of the land . . .”
or “if the contribution would accomplish one of the enumerated conservation purposes but
would permit the destruction of other significant conservation interests.” Paragraphs 4(o),
5(b), and 5(e) of the Easement provide that there is no assurance that the reserved rights
for which Foothills’ consent is required may be exercised in the manner proposed by
Creekside, and that the reserved rights for which Foothills’ consent is required may not be
exercised unless and until Foothills is satisfied that the exercise of the reserved right in the
manner proposed by Creekside can be done without an adverse or detrimental effect on the
Conservation Purposes, Conservation Values, or other significant ecological values of the
Property, or prohibited by or inconsistent with the restrictions set forth in the Easement.

Paragraph 4(o) of the Easement directs that Creekside “may not exercise any of their
rights reserved under this Easement in such a manner to adversely impact the Conservation
Values of the Property.” The Conservation Values of the Property are adversely impacted
when Creekside exercises its reserved rights in a manner which is clearly destructive to the
Conservation Values of the Property, as established by the testimony of Foothills’ expert.
This is best illustrated by the Potential Lot Layout of the Appraisal, showing ten RSAs
sited on 2.71 acres of the Property, which obviously satisfied the requirements of the
Regulations, as evidenced by the approval of Placemaker’s charitable deduction by the
IRS. However, Creekside did not desire to pursue the development of the Property in
accordance with the Potential Lot Layout, or anything similar to it. Rather, Ayres knew he
had “to submit something to Foothills for approval but we were hoping we could maximize
our deedable acreage to potential purchasers.” Clearly, selling eight lots containing five
acres each is more profitable than selling ten lots all sited on 2.71 acres. As argued by
Foothills, the crux of this dispute is not that the Property could not be developed in
accordance with the terms of the Easement; rather, it is that Ayres could not make as much
money by developing the Property in accordance with the terms of the Easement.

Based on the testimony of Raleigh, Foothills’ expert, the trial court properly found
and concluded that the Creekside Map is prohibited by the terms of the Easement and
would be clearly destructive of the Conservation Purposes; therefore, Foothills is not
deemed to have granted approval of the proposed development and Creekside is not
authorized to proceed with the proposed development. Creekside’s Issue a is without merit.

In the next issue, Creekside asserts that the trial court was in error in considering
the Appraisal as evidence of the parties’ intent. Creekside asserts that “[e]vidence which is
not relevant is not admissible,” and relevant evidence is that which has “any tendency to
make the existence of any fact that is of consequence to the determination of the action
more probable than it would be without the evidence.” Tenn. R. Evid. 401-402. Creekside
notes that even relevant evidence “may be excluded if its probative value is substantially
outweighed by the danger of unfair prejudice, confusion of the issues, misleading the jury,
or by considerations of undue delay, waste of time, or needless presentation of cumulative
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evidence.” Tenn. R. Evid. 403. Citing Biscan v. Brown, No. M2001-02766-COA-R3-CV,
2003 WL 22955933 (Tenn. Ct. App. Dec. 15, 2003), affirmed 160 S.W.3d 462 (Tenn.
2005), Creekside states that a trial court’s decision to admit or exclude evidence rests
within its sound discretion such that “trial courts are accorded a wide degree of latitude in
making such determinations, and will be overturned on appeal only upon a showing of
abuse of discretion” such as “appl[ying] an incorrect legal standard, or reach[ing] a
decision which is against logic or reasoning or that causes an injustice to the party
complaining.” Id. at *11 (internal citations omitted). We find no abuse of discretion in the
instant case.

The amount of the charitable deduction obtained by Placemakers is relevant. The
fact that Ayres reviewed the Appraisal before it was submitted to the IRS, did not ask for
any changes to it, and under penalty of perjury signed the Placemakers 2007 federal tax
return, to which the Appraisal was attached in support of the $3,725,000.00 deduction, is
also relevant. Additionally, the Potential Lot Layout of the Appraisal is relevant and
probative because it shows that the Property can be developed with ten RSAs in a manner
which is not prohibited by the Easement nor destructive of it. It is significant that the
Potential Lot Layout of the Appraisal satisfied the requirements of the Regulations, as
evidenced by the approval of Placemakers’ charitable deduction by the IRS. No prejudice
to Creekside has been demonstrated by the admission of the Appraisal. Any error would
be harmless and would not justify the reversal of the trial court’s rulings. See Tenn. R. App.
P. 36(b). We find this issue to be without merit.

Issue c

Another issue raised by Creekside is that the trial court erred in finding that
Creekside’s proposed plan of development is not deemed approved. In its opinion, the trial
court held as follows:

Creekside never provided a written request or notice and never provided
information sufficient to trigger approval of its proposed development by
default under the Easement. Additionally, the easement requires that any
such notice “be served personally or sent by first-class mail, postage prepaid
….” The writing relied upon by Creekside was sent by email. The email does
not expressly request approval of the attached map. The email does not set
forth, and Creekside had not otherwise provided, the “location and
dimensions of a road or driveway and underground utility facilities proposed
to serve each of the Residence Structure Areas,” for review and approval by
Foothills.

***

Moreover, even if the proposed development was not clearly prohibited by
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the terms of the Easement or would not be clearly destructive of the
Conservation Purposes, Creekside never provided the information and
notice, sufficient in content, form and manner, to trigger the default provision
of the Easement for deemed approval of Creekside’s proposed development.

The Easement requires that notices be in writing and be personally served or sent
by first class mail. The September 2, 2020 email sent by Ayres to Long, who then
forwarded it to Foothills, is what Creekside claims is the applicable notice. Because it was
neither personally delivered nor mailed by first class mail, Ayres’ September 2, 2020 email
is not proper notice.

Further, Paragraph 4(d) applies to requests for approval of the location and
dimensions of each RSA; additionally, it also applies to requests for approval of the
location and dimensions of a road, driveway, and underground utility facilities proposed to
serve each of the RSAs, all of which locations and dimensions shall be identified and
surveyed by Creekside and such survey information provided to Foothills before Foothills’
approval is granted, as provided by Paragraph 4(d)(iii). The Creekside Map before us does
not depict, as required, the location and dimensions of roads, driveways, or underground
utilities, nor does it show the dimensions of any of the RSAs. Ayres’ September 2, 2020
email does not make or contain any request for approval.

Accordingly, Creekside did not send notice, and even if Ayres’ September 2, 2020
email is considered proper notice for purposes of Paragraph 15 of the Easement, it did not
request approval and it did not contain the required information. Thus, the Ayres’
September 2, 2020 email was not a proper request under Paragraph 5(a) of the Easement
and did not require any response from Foothills under Paragraph 5(b) of the Easement, so
that Foothills could not have been deemed to have given its approval by default. We further
find unpersuasive Creekside’s claim that Foothills waived strict compliance with the notice
provisions of Paragraph 15 of the Easement when Clabough sent an email to Long, dated
September 15, 2020, with the request that Long forward it to Ayres.

We note that in Clabough’s September 15, 2020 email, he informed Ayres that the
Foothills Board had not reached a decision on his request, that Foothills had hired an
independent biologist to help it make a decision on the development proposal, and that staff
and an assisting board member will make a recommendation to the entire Board at the
October board meeting. If Ayres’s September 2, 2020 email satisfies the requirements of
Paragraphs 4, 5, and 15 of the Easement, then Clabough’s September 15, 2020 email to
Ayres satisfies the provisions of Paragraph 5(b) of the Easement inasmuch as it informs
Ayres that Foothills is withholding its approval, which was admitted by Ayres when he
stated that Clabough’s September 15, 2020 email indicated to him that Foothills’ decision
on the Creekside Map was being deferred or postponed. Foothills therefore complied with
its obligations under Paragraph 5(b) of the Easement by advising Creekside within thirty
days of its decision to withhold approval, and there is no basis for Creekside to say that the
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Creekside Map is deemed approved. Creekside’s Issue c is without merit.

Issue d

Creekside lastly argues that Foothills is not entitled to an award of attorneys’ fees.
Initially, Creekside asserted that Foothills did not request attorneys’ fees with specificity,
contending that Foothills’ complaint contains no direct reference to any contractual,
statutory, or other substantive provision which would provide a basis for the recovery of
attorneys’ fees. We find that there are a number of references to attorneys’ fees and/or legal
fees recoverable by Foothills in the Conservation Easement. Those references arise in
Sections 5(d), 6(c), 6(f), 8(g), and 8(h) of the Easement. Ayres, having signed the Easement
in 2007, thereby adopting each and every provision set forth therein, and having included
the Easement with Placemakers’ federal income tax return thereby further adopting the
provisions of the document to his ultimate benefit given his 99.8% partnership interest,
cannot claim to be unaware of the contents thereof and that attorneys’ fees may be
recoverable by Foothills. Therefore, even had Foothills failed to include specific references
to attorneys’ fees in its complaint, such failure would not be fatal to Foothills’ recovery of
those fees, given that the parties were aware that attorneys’ fees may be recovered per the
wording of the Easement.

In this action, Foothills alleged that “the construction of the Residence Structures
on the Residence Structure Areas shown on the Creekside Map are inconsistent with, and
prohibited by, the purpose of the Easement, including the Conservation Values and
Conservation Purposes, and that any such development would constitute a violation of the
terms of the Easement, entitling (Foothills) to exercise any or all of its remedies set
forth in the Easement, including but not limited to those set forth in Section 6 of the
Easement, titled ‘Grantee’s Remedies.’” (Emphasis added). Paragraph 6 of the Easement
declares Foothills’ entitlement to both “attorneys’ fees” and “legal fees,”5 and is a specific
reference to a contractual basis for the recovery of attorneys’ fees. Foothills further asserted
that the court should award such injunctive relief and/or damages as to which (Foothills)
may show entitlement, including all reasonable expenses incurred, including legal
fees.” (Emphasis added). As noted by Foothills, the last phrase of paragraph 44 is a direct
quote from paragraph 6(c) of the Easement – “all reasonable expenses incurred, including
legal fees.” Furthermore, in paragraph 4 of its prayers for relief, Foothills requests “that

5
Included in Section 6 of the Easement is Subsection 6(c), titled “Damages,” which provides that
“if a court of competent jurisdiction determines that a violation has occurred hereunder, the owner shall
reimburse Grantee, as applicable, for all reasonable expenses incurred, including legal fees whether in or
out of court .... “Likewise, Subsection 6(f) of the Easement, titled “Costs of Enforcement,” provides:

All reasonable, actual costs incurred by Grantee in enforcing the terms of this Easement
against Grantor, including, without limitation, actual costs and expenses of suit, actual,
reasonable attorneys’ fees, and any costs of restoration necessitated by Grantor’s violation
of the terms of this Easement shall be borne by Grantor ….
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this Court award (Foothills) damages, expenses, and attorneys’ fees, in an amount to be
shown at a hearing or hearings for such purpose.” (Emphasis added). Given the plain
language, as well as the specific reference to “legal fees” in paragraph 44 of the complaint
and the request for attorneys’ fees in paragraph 4 of Foothills’ prayers for relief,
Creekside’s contentions on this issue lack merit.

Creekside also asserts that the action is only for declaratory relief and is not an
action for the enforcement of the Easement; thus, Creekside contends that this matter does
not come within the provisions of Paragraph 6 of the Easement. We disagree.

Paragraphs 11 and 13 of the complaint make reference to Foothills’ “right to
enforce” the terms and conditions of the Easement and that “(Foothills) is required, both
by law and by contract, to enforce the limitations and affirmative obligations of the
document so as to preserve, maintain, or enhance the natural beauty, the open-space value,
the air and water quality, and the scenic resources of the land.” Paragraph 13 of the
complaint provides that “(Foothills) is required to undertake this enforcement obligation in
perpetuity.” Further, in paragraph 40 of the complaint, Foothills alleges that Creekside’s
specific development plan and the construction of residence structures as shown thereon,
are inconsistent with, and prohibited by, the purpose of the Easement, and that any such
development would constitute a violation of the terms of the Easement. Foothills sought in
its prayers for relief that the trial court “declare the rights, status, or other legal relations of
the parties under the Easement, and enter a declaratory judgment thereon, declaring
(Foothills’) right to disapprove and prohibit Creekside’s development plan as shown on the
Creekside Map.” Accordingly, Foothills was attempting to enforce the Easement terms
specifically to prohibit development under Creekside’s development plan at issue. We
agree with the trial court’s finding that Foothills was seeking to obtain enforcement—not
only interpretation—of the Easement. As noted by the trial court, “Foothills, as plaintiff,
brings this action to, among other things, prohibit development proposed by Creekside ….”

Creekside additionally claims that Foothills never provided it with written notice of
any purported violation of the Easement and a right to cure the same, as provided for in
Section 6(a) of the Easement. Creekside therefore asserts that Foothills cannot recover
attorneys’ fees pursuant to Section 6 of the Easement. Foothills responds that its alleged
failure to give notice of a violation of the Easement and a right to cure pursuant to Section
6 of the Easement was an affirmative defense pursuant to Rule 8.03 of the Tennessee Rules
of Civil Procedure. Because Creekside did not raise this affirmative defense in its answer,
Foothills asserts that the affirmative defense of lack of notice was waived. The trial court
agreed.

Pursuant to Rule 8.03, Creekside was obligated to assert all of its affirmative
defenses in its answer. Although Creekside asserted certain affirmative defenses, lack of
notice is not among them. We agree with the trial court that this affirmative defense, as an
alleged bar to Foothills’ claim for attorneys’ fees, was waived.
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The plain language of Foothills’ complaint clearly and specifically gave notice to
Creekside that Foothills was seeking to recover attorneys’ fees pursuant to Section 6 of the
Easement. Alternatively, Foothills’ alleged failure to give notice has been excused, given
the extensive record of communications regarding the disputed subject matter between
Foothills and Creekside, beginning in 2017 and running through 2020. As the trial court
observed:

Putting aside the technicalities of the Easement used by both sides to fortify
their positions, Creekside had no cause to believe anything, at any time
material to this case, but that Foothills was withholding its approval of
Creekside’s plan of development as presented.

(Emphasis added).

Foothills’ complaint satisfies all of the notice requirements set forth in Paragraph 6
of the Easement. Paragraph 6(c) specifies that the form of the notice shall be a “written
instrument.” The complaint is a written instrument that was personally served on Joseph
K. Ayres, Creekside’s general partner, at 918 Cherokee Boulevard, Knoxville, Tennessee.
The personal service of the complaint on Ayres satisfies the notice provision set forth in
Paragraph 15 of the Easement, the formal “Notice” provision, which says notice to
Creekside must be in writing and served personally or by first class mail to the attention of
Ayres at 918 Cherokee Boulevard, Knoxville, Tennessee, the address where Ayres, as
Creekside’s general partner, was personally served with the summons and the Complaint.
Therefore, to the extent “Notice” was not waived by Creekside’s failure to set forth lack of
notice as an affirmative defense in its answer, or was not excused, the service of the
complaint on Ayres fully satisfies any such notice requirement.

As it is clear that Foothills demonstrated its entitlement to attorneys’ fees and
expenses on the basis of paragraphs 6(c) and 6(f) of the Easement, those provisions of the
Easement also entitle Foothills to recover the attorneys’ fees and expenses that it has and
will continue to incur in connection with Creekside’s appeal.

As Creekside has not prevailed in its appeal, there is no reason for the matter to be
remanded to the trial court for a determination that Foothills is entitled to the alternative
relief asserted in paragraphs 41-43 of its Complaint for Declaratory Judgment and
Additional Relief, that being that the trial court should terminate or extinguish the
conservation easement in accordance with its terms.

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V. CONCLUSION

For the reasons stated above, we affirm the decision of the trial court. The case is
remanded for a determination of the amount of attorneys’ fees and expenses Foothills Land
Conservancy is entitled to recover from Creekside as a result of this appeal and for any
further proceedings as may be necessary. Costs of the appeal are taxed to the appellant,
Creekside Estates Partnership.

_________________________________
JOHN W. MCCLARTY, JUDGE

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---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10621381. Public record. Not legal advice.