Land trust fights to overturn fraud ruling

Agency appeals finding that it misled property owners about easement

April 16, 2002|By Andrea F. Siegel | Andrea F. Siegel,SUN STAFF

In a dispute raising concerns within the land conservation community, the Maryland Environmental Trust is locked in a legal battle over whether the agency lied to an Elkridge couple who surrendered development rights on their property in return for tax breaks.

In the case, now before the Maryland Court of Appeals, the Environmental Trust is looking to erase lower court findings that it committed fraud. The National Trust for Historic Preservation and the Land Trust Alliance fear that those rulings, if allowed to stand, could undermine conservation efforts by opening the door to cases of "buyer remorse" in easement transactions.

"It would make it very hard to negotiate an easement and have that easement stand," said James Martin, a board member of the Severn River Land Trust, whose group holds easements on several hundred acres in Anne Arundel County. He said the issue will take on growing importance because the stakes in land conservation keep rising as a growing population vies for shrinking land and property values increase.

Douglas G. Worrall, lawyer for the nonprofit National Trust for Historic Preservation and the Land Trust Alliance, said that if the property owners prevail in rescinding their easement "it will be an invitation to the next guy to hire some smart ... lawyer to try to get it overturned."

At the heart of the dispute is a claim by Kevin Gaynor and his wife, Cathy Cook Gaynor, who operate the Heron Run Refuge for animals on their property next to Patapsco Valley State Park. They said that the Maryland Environmental Trust, a state agency, misled them into believing that giving up their right to subdivide the property for one home was a condition of accepting the easement.

In September 2000, an Anne Arundel County Circuit judge ruled in favor of Kevin Gaynor, who is a former MET board member, and his wife. The Court of Special of Appeals upheld that finding a year later.

MET's lawyer, Andrew H. Baida, said the issue is of importance for two reasons.

"There is a published decision that holds that the trust has committed fraud, which is a serious matter," he said. Also, he said the decision could set a legal precedent about disclosure that could render many gifts and business transactions susceptible to allegations of fraud.

But Kevin Gaynor said the case's ramifications are far narrower. Paul F. Strain, a lawyer representing the Gaynors in the case, said the issue boils down to this: A state agency promised to provide accurate information but instead was misleading, and the resulting contract should be thrown out.

MET Director John Bernstein said he would not discuss the matter because it is in litigation.

The easements at the heart of the legal fight were created in 1989. Gaynor took the lead to arrange for MET easements for a total of about 100 acres crossed by Rockburn Branch, a tributary to the Patapsco River. The land includes woods, meadows, open space and homes, two of them historic houses.

The properties, bordering the Patapsco Valley State Park in Howard County, are owned by the Gaynors and three neighbors. In 1997, three years after becoming a MET trustee, Gaynor learned that one neighbor was legally able to build a second house on his property under a deal that the neighbor made in 1989 with MET.

The Gaynors had agreed to give up all rights to subdivide their property in return for tax breaks that reflect the lower value of land that can no longer be developed. The development rights of each easement were valued at between $750,000 and $1 million, according to the Anne Arundel County Circuit Court ruling.

Gaynor sought to have his agreement changed, but the board refused to negotiate or mediate the issue, he said, and the couple sued in 1998. He quit the MET board not long after.

Anne Arundel Circuit Judge Ronald A. Silkworth rescinded the easement agreement. MET appealed, but in a 2-1 ruling the Court of Special Appeals agreed that MET's board misled the Gaynors into thinking that agreeing not to subdivide the property was necessary for them to enter into an easement agreement.

"We would have wanted to have that option, had we known we could have that option and still receive that easement," Gaynor said.

The dissenting judge said MET did not require the provision, but requested it, leaving the owners to think about it.

In arguments last week before Maryland's highest court, Baida told the Court of Appeals that the MET was aboveboard in dealing with the Gaynors. He likened the situation to a hypothetical scenario in which the Walters Art Museum might tell Bill Gates that it would name a wing for him in return for a $10 million gift, knowing it would do so for a lesser contribution.

During the hearing, two Court of Appeals judges seized upon MET's use of the word "request" in a letter to the Gaynors as meaning that MET clearly was asking for, not requiring, the provision.

But Strain replied that in talks, MET indicated the restriction was necessary to the deal. A MET employee said at the Circuit Court trial that he recalled no such conversation.

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