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Duneland Properties, LLC v. Northern Indiana Public Service Co.

Court of Appeals of Indiana

July 30, 2014

DUNELAND PROPERTIES, LLC, DUNELAND SAND, INC., DUNELAND SAND ENTERPRISES, LLC, DUNELAND HOLDINGS, LLC, DAVID LASCO and LASCO FAMILY, TRUST, Appellants/Defendants,
v.
NORTHERN INDIANA PUBLIC SERVICE COMPANY, Appellee/Plaintiff

Page 96

APPEAL FROM THE NEWTON SUPERIOR COURT FORMERLY FROM THE PORTER SUPERIOR COURT. The Honorable Daniel J. Molter, Judge. Trial Court Cause No. 56D01-1109-PL-6, Formerly Cause No. 64D01-0710-PL-9891.

ATTORNEY FOR APPELLANT: MICHAEL RILEY, Rensselaer, Indiana.

ATTORNEYS FOR APPELLEE: PAUL A. RAKE, GREGORY A. CRISMAN, Eichhorn & Eichhorn, LLP, Hammond, Indiana.

VAIDIK, Chief Judge. NAJAM, J., and BROWN, J. concur.

OPINION

Page 97

VAIDIK, Chief Judge.

Case Summary

In 1955 Northern Indiana Public Service Company (NIPSCO) acquired a 100-foot-wide easement for electrical lines in Porter County. In 2007 NIPSCO filed a complaint for a permanent injunction alleging that its easement--which went across property that was later determined to be held by Duneland Holdings, LLC--had been violated by the previous landowners by mining the sand on the easement, causing difficulties in maintaining and servicing its poles. The trial court ordered that the easement be relocated and that Duneland Holdings pay NIPSCO $245,858 for the costs of reconstructing the power lines on the new easement.

Duneland Holdings now appeals. First, it contends that NIPSCO's failure to mitigate damages is a bar to relief. Second, it contends that the trial court erred in admitting Plaintiff's Exhibit 5--a material and labor estimate prepared by a long-time NIPSCO engineer for relocating the power lines onto the new easement--into evidence because it is hearsay. Because mitigation of damages is not a defense to liability and NIPSCO in fact mitigated its damages, this issue is not a bar to NIPSCO's recovery. In addition, experts may testify to opinions based on inadmissible evidence, provided that it is of the type reasonably relied upon by experts in the field. Here, NIPSCO's engineer testified that he relied on data from other NIPSCO departments in arriving at his material and labor estimate. The trial court therefore did not abuse its discretion in admitting Plaintiff's Exhibit 5. We affirm the trial court.

Facts and Procedural History

NIPSCO is a public utility whose primary purpose is to furnish natural gas and electrical power to northern Indiana, including Porter County. In 1955 NIPSCO acquired a 100-foot-wide easement on property in Porter County in order to install, maintain, operate, repair, and replace towers and poles for the transmission, distribution, and delivery of electrical power to the public. Appellee's App. p. 6-7.

Page 98

Pursuant to that grant, NIPSCO built a 138,000-volt transmission circuit between substations near Crown Point and Valparaiso. NIPSCO's easement passes along the southern edge of a sand mine located on a 374-acre tract of land.

In the 1970s Jerry Lambert became involved with this 374-acre tract of land when he formed a partnership with three other people to operate a sand-mining operation. NIPSCO's easement was properly recorded, and the partners were aware of it. Later, during the 1990s, Lambert acquired all right, title, and interest in the 374-acre tract from the other partners and continued operating the sand mine as a sole proprietor.

In 1999 James Hayward, a NIPSCO engineer, was asked to address the property owner's desire to remove sand near NIPSCO's easement. Hayward visited the property and prepared an estimate to move the power lines to a different location on the property in order to accommodate the property owner's desire to mine sand on NIPSCO's easement. Id. at 101. NIPSCO's estimate was approximately $125,000. Tr. p. 66. Sand excavations did not begin at this time.

In 2000 Lambert created two business entities to further pursue sand mining from the tract of land: Duneland Properties, LLC (which owned the land) and Duneland Sand, Inc. (which operated the sand-mining business). Lambert and his son-in-law, John Durachta, each owned a 50% interest in the entities. Durachta acted as general manager of Duneland Sand until late 2003. During this time, Durachta directed the removal of sand from both the tract of land and NIPSCO's easement. The mining took place over several months. In June 2003 NIPSCO's attorney sent a letter to Durachta directing Duneland Sand to cease and desist its sand mining on NIPSCO's easement:

We are contacting you because NIPSCO has discovered that the Easement has been materially adversely violated by [Duneland Sand]. Specifically, excavation activity by, through or under [Duneland Sand] encroaches along the Easement a distance of approximately 2,200 feet. The excavation activity has significantly compromised the structural integrity of four (4) structures and made it unsafe, and in certain cases impossible, to gain access to the structures with the equipment required to maintain and operate the Electric Transmission Facility. Moreover, the excavation activity has made it impossible for NIPSCO to gain access between the structures to maintain and operate the Electrical Transmission Facility. . . .
The Electric Transmission Facility is a major facility and the adverse consequences of [Duneland Sand's] excavation activity are significant. On behalf of NIPSCO, we demand that your company immediately stop, directly or by, through or under any third parties, any further excavation activity in the Easement.

Appellee's App. p. 56-57. NIPSCO's estimate, prepared in August 2003, showed that the cost of moving the power lines was now $155,389. Def.'s Ex. D.

Although Duneland Sand stopped mining NIPSCO's easement for a period of time following its receipt of the letter from NIPSCO's attorney, it resumed mining NIPSCO's easement in 2006 because Lambert said the sand was " too valuable." Appellee's App. p. 69. Then, in December 2006, Lambert, as President and Managing Member of Duneland Sand and Duneland Properties, respectively, entered into an agreement with Kevin Misch to sell both companies. Pursuant to the agreement, Misch assumed the obligation for the defense of any claim by NIPSCO for Duneland

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Sand's and Duneland Properties' alleged infringement of NIPSCO's easement and agreed to hold both companies harmless. Id. at 13, 38. Eventually, Duneland Properties, Duneland Sand, Duneland Sand Enterprises, LLC, Duneland Holdings, LLC, David Lasco, and the Lasco Family Trust (" Duneland Entities" ) became the responsible parties answerable to NIPSCO's claims. See Appellee's Br. p. 2. This was in part because Lambert sold his interests in Duneland Sand and Duneland Properties. Later, during the litigation, Lasco established Duneland Holdings and had the property transferred to it. Finally, Misch was removed from the litigation, which left Lasco as the principal behind the remaining defendants. Id. at 3.

In October 2007 NIPSCO filed a complaint for a permanent injunction alleging, among other things, that the then-relevant defendants, Duneland Sand and Duneland Properties, while operating a sand mine in Porter County, " encroached upon, wasted and damaged NIPSCO's easement causing it property damage by changing grade and undermining the integrity of its power transmission facilities thereby jeopardizing the reliability of electrical service to the public." Appellee's App. p. 3. NIPSCO therefore requested the court to issue a mandatory injunction " directing the . . . defendants to be jointly and severally responsible for fill and moving fill in a timely manner to and around the excavated areas around the NIPSCO towers per NIPSCO's specifications" and " be permanently enjoined from encroaching upon or damaging the property interests of NIPSCO in the continued unencumbered use of its easement for electric transmission or distribution lines as is the subject of its original grant." Id. at 3-4 (quotation omitted). The Duneland Entities then filed a cross-claim against Lambert.

In February 2011 the trial court ordered that the Duneland Entities were permanently enjoined from further encroaching or otherwise committing additional waste within NIPSCO's easement. Appellants' App. p. 24. After numerous court-sponsored settlement discussions, in August 2011 the parties submitted a stipulated order that the court entered. The order states, in relevant part:

The Court reaffirms its prior order that NIPSCO is entitled to remediation to secure its easement. . . . With the consent of the parties, NIPSCO and the Duneland Entities including Duneland Holdings, LLC, the Court further orders that the scope of remediation will encompass NIPSCO's relocation of its power lines to a new 100 foot wide easement as put forth into evidence with remediation of the remaining grade.

Id. at 26. The court reserved its ruling to determine the costs of remediation and the allocation of costs among the parties. Id.

Nearly two years later, in April 2013, the court held a hearing to determine the costs of remediation and how to allocate the costs among the parties. At the hearing, NIPSCO presented the testimony of Timothy Kizer, a state-licensed civil engineer and NIPSCO employee. Kizer testified about the costs of relocating the power lines onto the new 100-foot-wide easement. Kizer talked about Plaintiff's Exhibit 5, which is a material and labor estimate generated by NIPSCO's internal computer software using the current labor index for labor costs and its purchasing ledger for material costs. The estimate, which is for $245,858, was prepared in March 2013.

In May 2013 the court entered findings and conclusions. The court found that NIPSCO did not fail to mitigate its damages by failing to protect its easement during years of obvious Duneland excavation

Page 100

into the easement. Id. at 9. In fact, the court found that NIPSCO mitigated its damages because it is the one that proposed moving the easement to a new location because restoring the existing easement would have cost $2.7 million. Id. The court concluded:

[NIPSCO] has an equitable right to be made whole for the loss of its easement rights in their current location. There is no adequate remedy at law. Damages will not alone suffice to protect its transmission facilities or to allow for the future use of its extended utility corridor or to assure that it is not unduly compromised by problems at this location.
No objection has been presented to the proposed equitable solution of requiring that the servient estate owner grant [NIPSCO] an alternate easement in the form as set forth in Plaintiff's Exhibit 8. Upon proper demonstration of the record title holder's authority, the same should be executed and delivered by it to [NIPSCO].
That grant when conferred will allow for a relocation of the current transmission circuit upon payment therefore as set forth below. Upon completion of the reconstructed circuit, the old easement will be ...

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