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Doughty Road, LLC v. A.E. Stone

November 17, 2009


On appeal from the Superior Court of New Jersey, Chancery Division, Atlantic County, Docket No. C-138-04.

Per curiam.


Argued October 7, 2009

Before Judges Graves, Sabatino and J. N. Harris.

Doughty Road, LLC ("Doughty Road"), Stephen A. Gross and Martha I. Gross (collectively "plaintiffs"), appeal the Chancery Division's order dated August 14, 2008, which followed several days of evidential hearings. The order permits A.E. Stone, Inc. ("Stone") and Thomas K. Ritter ("Ritter") (collectively "defendants") to "stack" or "stage"*fn1 railroad cars temporarily across plaintiffs' property for the purpose of allowing those cars to be unloaded upon defendants' property and then backed up, in succession, onto plaintiffs' property. The Chancery judge's decision was partly based upon a 2000 deed authorizing an easement across the plaintiffs' property for "railroad service" purposes, and predominantly based upon the terms of a 2005 agreement (the "Settlement Agreement") between the parties, which granted defendants "full and uninterrupted rail service into and out of [plaintiffs'] and [defendants'] property."

Plaintiffs maintained at trial, and reiterate on appeal, that the "staging" process substantially and wrongfully interferes with their business operations. They argue that such staging was not contemplated in either the deed or in the later Settlement Agreement, and that the trial court misinterpreted those documents in finding such an implied right of staging.

Because we are satisfied that the Chancery judge's contractual interpretation is reasonably supported by the evidence at trial and is consistent with applicable law, we affirm the order.



Stone is in the business of manufacturing hot-mix asphalt. It operates on a parcel of property that straddles the boundary line between Pleasantville and Egg Harbor Township. The Stone property abuts plaintiffs' property, which they acquired from Stone.

As part of its manufacturing process, Stone receives approximately four hundred truck deliveries of crushed stone and concrete directly to its facility each week. Additional crushed stone is delivered by rail to a nearby lumberyard leased by Stone. Trucks then transport that additional material to Stone's facility. The deliveries from the rail services to the lumberyard arrive on twenty-five car trains.

To reduce the extensive trucking needed for its business, Stone contracted with Pennoni Associates ("Pennoni"), an engineering firm, in the mid-1990s, to design a railroad spur. The design generated by the firm is referred to in the record as the "Pennoni Plan."

In July 1996, Stone obtained a CAFRA permit from the New Jersey Department of Environmental Protection ("DEP") authorizing the construction of the rail spur. The permit referenced the design of the Pennoni Plan, which was a basis for the DEP's approval.

Meanwhile, Doughty Road, through its principal, Mr. Gross, entered into discussions with Stone's principal, Ritter, to acquire a portion of Stone's property. Mr. Gross hoped to expand his existing building supply business, Tri-County Building Supplies ("Tri-County"), by moving to a site that had railroad access.

Eventually, in 1999, Mr. Gross agreed to purchase a parcel of the Stone property on the Pleasantville side of the municipal border for $255,000. An agreement of sale was signed in August 1999, and Mr. Gross closed on the parcel on October 18, 1999.

In September 2000, Mr. and Mrs. Gross signed an agreement to purchase more adjoining parcels of property from Stone for $82,500. This second purchase was for two lots in Pleasantville and four lots on the Egg Harbor side of the municipal border. It was contemplated that these additional lots would support the rail line.

The closing of the second acquisition took place on December 28, 2000. The deed associated with that purchase contained the following language, which later became relevant to this litigation:

It is the intention of the Grantor [Stone] and Grantee [Mr. and Mrs. Gross] that a railroad line will be constructed across a portion of the [p]roperty to provide railroad service to [Stone's] adjacent property in Egg Harbor Township . . . and Grantee's adjacent properties. . . . The specific location of the railroad has yet to be determined and will be subject to the reasonable consent of both parties. The

[p]roperty herein conveyed shall be subject to an irrevocable and permanent easement to [Stone] and for the benefit of [Stone's] property, for the construction of such railroad to provide railroad service to and from [Stone's] [p]roperty. [(Emphasis added).]

Over the next few years, Mr. and Mrs. Gross proceeded to obtain the necessary governmental approvals for construction of the new Tri-County facility. In addition, the parties jointly pursued the extension of the rail line onto their respective properties. As proposed, the rail line needed to cross Washington Avenue (also known as County Route 608) in Pleasantville, a highway under the jurisdiction of Atlantic County.

To address the rail crossing issues, an on-site diagnostic team meeting was convened on October 2, 2003, by the New Jersey Department of Transportation ("DOT"). The meeting was attended by, among others, DOT representatives; Mr. Gross; Thomas C. Roesch, a project engineer hired by Mr. and Mrs. Gross; Steven Kurtz, Stone's vice-president of operations; and Thomas Collard, the Vice-President of the Southern Railroad Company of New Jersey ("SRNJ").*fn2 During that meeting, Collard allegedly described for the DOT representatives how close the "stacked" railroad cars servicing Stone's property would be expected to come to the Washington Avenue intersection.

Following the October 2003 meeting, the DOT issued a "Memorandum of Record" on December 11, 2003, which summarized the meeting. Among other things, the DOT's memorandum noted that the persons in attendance had been "briefed [as to] the proposed at-grade crossing project, and the proposed train activity." The memo further stated that "[t]he new rail line will be established to provide service to Tri-County Building Suppl[ies] and the A.E. Stone asphalt plant." Additionally, the memo indicated that "[t]he lumber train is estimated to be 4 cars and the stone train will consist of 25 cars."

Eight months later, the Commissioner of the DOT approved the proposed rail line. The approved rail line, designated as the "Cambria Industrial Track," was partially funded by public funds. It was to be constructed by SRNJ.

In late 2004, litigation ensued between Stone and Ritter, on one side, and Mr. and Mrs. Gross, Doughty Road and Tri- County, on the other, relating to certain environmental and drainage issues affecting their respective properties. That litigation was settled between the parties on July 18, 2005, when they entered into the Settlement Agreement. The Settlement Agreement provides at Paragraph 5(a) that:

[All parties] shall proceed, promptly, diligently, and cooperatively, using their best efforts, to facilitate the implementation of full and uninterrupted rail services into and out of the[ir respective] property as referenced in the CAFRA permits[.] [(Emphasis added).]

Paragraph 5(b) of the Settlement Agreement further provides that:

[All parties] shall enter into all agreements that may be reasonably requested or necessary to implement such rail service; those agreements include, but are not intended to be limited to, an easement for the rail line to run across Gross'[s] property to provide rail service into Stone's property, which easement agreement shall be entered into by [all parties] within thirty days of receipt of metes and bounds descriptions. [(Emphasis added).]

Paragraph 8(c) also provides:

Notwithstanding anything to the contrary in this Agreement, Gross's development plans and street vacations shall in no way interfere with the immediate development and uninterrupted implementation of the rail service extending into and out of the Stone property[.] [(Emphasis added).]

Notably, the previously-issued CAFRA permit referenced in Paragraph 5(a) of the Settlement Agreement provided, in relevant part:

5. Prior to construction the applicant [Stone] must obtain all necessary easements as required by the project. Copies of the executed easements must be submitted to the Land Use Regulation Program. [(Emphasis added).]

Another section of the CAFRA permit recites that "[t]he proposed 2,676 linear foot railroad siding ...

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