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Norfolk Southern Railway Co. v. E. A. Breeden, Inc.

Supreme Court of Virginia

April 17, 2014

NORFOLK SOUTHERN RAILWAY COMPANY
v.
E. A. BREEDEN, INC

Page 421

FROM THE CIRCUIT COURT OF ROCKINGHAM COUNTY. James V. Lane, Judge.

Frank K. Friedman (Mark D. Loftis; Erin B. Ashwell; Woods Rogers, on briefs), for appellant.

Terry Lynn for appellee.

PRESENT: Kinser, C.J., Lemons, Millette, Mims, McClanahan, and Powell, JJ., and Russell, S.J. OPINION BY JUSTICE ELIZABETH A. McCLANAHAN. SENIOR JUSTICE RUSSELL, with whom JUSTICE LEMONS and JUSTICE MILLETTE join, dissenting.

OPINION

Page 422

[287 Va. 459] ELIZABETH A. McCLANAHAN, JUSTICE.

Norfolk Southern Railway Company (Norfolk Southern) appeals from the judgment of the circuit court granting permanent injunctive relief to E. A. Breeden, Inc. (Breeden) requiring Norfolk Southern to restore a private grade crossing over its railway tracks in Rockingham County. We will affirm the judgment of the circuit court.

I. BACKGROUND

The current action involves a private grade crossing across Norfolk Southern's railway tracks created pursuant to a crossing agreement dated March 26, 1940, and recorded in the circuit court clerk's office of Rockingham County (Crossing Agreement). The Crossing Agreement was entered into by the owners of the 156-acre T. L. Yancey estate (Yanceys) and Norfolk & Western Railway Company (Norfolk & Western), a predecessor to Norfolk Southern.

Pursuant to the Crossing Agreement, Norfolk & Western agreed to construct and maintain a new private grade crossing for use by the [287 Va. 460] Yanceys in exchange for the Yanceys' agreement to release their rights to the two then existing private crossings that were to be abandoned.[1] The Crossing Agreement expressly " grant[ed] unto the [Yanceys] the right and privilege of a private grade crossing about 18 feet in width, over, upon and across the right of way and tracks of [Norfolk & Western]" and obligated Norfolk & Western " to construct and maintain the said crossing." . The Crossing Agreement specifically provided:

[The Yanceys] covenant and agree that the private crossing to be constructed hereunder shall be used solely in their own interest and for their own benefit, and that they will indemnify and save harmless the Railway Company from any and all claims for damage or injury to person, including death, or property, resulting from their use of said grade crossing.

In addition, the Crossing Agreement stated that it " shall be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto."

In 1996, Breeden acquired title to a 2.56 acre tract that was originally a part of the T. L. Yancey estate tract and, in 1999, leased a house and yard located upon this tract to Todd and Michelle Ditton. In 2001, Todd Ditton was injured when his vehicle was struck by a Norfolk Southern train at the crossing. Ditton filed an action against Norfolk Southern and the parties settled the action in 2005.

In 2006, Norfolk Southern filed an action against Breeden seeking to recover the settlement amount as well as the costs and attorney's fees associated with the Ditton litigation based on the indemnity clause of the Crossing Agreement (indemnification litigation). The circuit court ruled that Norfolk Southern was not entitled to indemnification or contribution from Breeden. In reaching its decision, the circuit court ruled that the Crossing Agreement was a covenant running with the land, and that Ditton, as lessee of Breeden, was a successor to the Crossing Agreement and had a right to use the crossing.

[287 Va. 461] The circuit court further ruled that Ditton's use of the crossing was not attributable to Breeden and, therefore, Breeden was not obligated under the Crossing Agreement to indemnify Norfolk Southern for the costs incurred and damages paid by Norfolk Southern arising from Ditton's use of the crossing. Norfolk Southern filed a petition for appeal with this Court, which petition was refused by an unpublished Order. See Norfolk Southern Railway Company v. E. A. Breeden, Inc., Record No. 080429 (June 13, 2008).

At some time subsequent to the conclusion of the indemnification litigation, Norfolk Southern removed the private crossing. Breeden filed a complaint against Norfolk Southern seeking a permanent injunction requiring Norfolk Southern to replace and

Page 423

maintain the crossing. Breeden also sought compensatory and punitive damages alleging breach of contract, tortious interference with the right of way, and nuisance.

Norfolk Southern filed a demurrer to the complaint on the grounds that the prior rulings of the circuit court established, as a matter of law, that Breeden materially breached the Crossing Agreement and was not entitled to enforce it because Breeden permitted use by Ditton that was not solely in Breeden's interest and not solely for Breeden's benefit. Overruling the demurrer, the circuit court held that based on its previous rulings that Ditton was a successor in interest under the terms of the Crossing Agreement and his use of the crossing was independent of Breeden, it could not rule that Breeden materially breached the Crossing Agreement as a matter of law.[2]

Breeden filed a motion for summary judgment seeking a judgment that Norfolk Southern was obligated to maintain the crossing and an order requiring Norfolk Southern to replace the private crossing on the grounds that the circuit court's prior holdings were binding under principles of collateral estoppel. Norfolk Southern opposed the motion for summary judgment on the grounds that there were genuine issues of material fact as to whether Breeden sustained actual injury or damages to recover on a breach of contract claim and that Breeden was not entitled to injunctive relief because it had not presented evidence of irreparable harm and lack of an adequate remedy at law. In addition, Norfolk Southern argued that Breeden's motion for summary judgment failed to address the affirmative [287 Va. 462] defenses raised by Norfolk Southern, including estoppel, laches, unclean hands, and first material breach.

The circuit court denied Breeden's motion for summary judgment and held an evidentiary hearing on Breeden's request for permanent injunctive relief. Upon consideration of the evidence presented at the hearing and certain concessions made by Norfolk Southern, the circuit court granted the request for injunctive relief requiring Norfolk Southern to replace the crossing.

II. ANALYSIS

A. First Material Breach

Norfolk Southern argues that the circuit court erred in overruling the demurrer and enforcing the Crossing Agreement because Breeden committed the first material breach of the Crossing Agreement, thereby precluding Breeden from enforcing the agreement. See, e.g., Countryside Orthopaedics, P.C. v. Peyton, 261 Va. 142, 154, 541 S.E.2d 279, 285 (2001); Horton v. Horton, 254 Va. 111, 115-16, 487 S.E.2d 200, 203-04 (1997).

We have not previously applied the doctrine of first material breach to vested property rights granted under a real covenant. Indeed, this doctrine is ill-suited to address situations in which the covenantor seeks to excuse its unilateral termination of real property interests held by other landowners. Nevertheless, the circuit court did not err in concluding there was no material breach by Breeden. In previously determining the enforceability of the indemnity clause of the Crossing Agreement in the indemnification litigation, the circuit court ruled that the Crossing Agreement is a valid covenant running with the land such that Breeden, as a successor to the Yanceys, was entitled to the use and benefits of the crossing.[3] Additionally, the circuit court ruled that Ditton, as Breeden's ...


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