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In re Schugg

United States District Court, D. Arizona

March 31, 2015

In re Michael Keith Schugg, dba Schuburg Holsteins, Debtor.
Gila River Indian Community, Defendant. In re Debra Schugg, Debtor. G. Grant Lyon in his capacity as Chapter 11 Trustee of the bankruptcy estate of Michael Keith Schugg and Debra Schugg; Wells Fargo Bank, Plaintiffs,


JAMES A. TEILBORG, Senior District Judge.

A farmer owns a parcel of land located approximately one-half mile from city limits, accessible only via an easement across another landowner's land. The farmer wishes to build a rural housing subdivision on his property, but the other landowner refuses to consent to the development. The question presented is whether the scope of the existing easement permits the increased access necessary to support the proposed subdivision. For the reasons that follow, the Court concludes that the easement permits such a use.

I. Background[1]

The property at the core of this case is a privately-owned parcel of approximately 657 acres legally known as Section 16 of Township 4 South, Range 4 East of the Gila and Salt River Base and Meridian ("Section 16"). Section 16 is located in Pinal County, Arizona but is surrounded by an Indian reservation.

A. Procedural History

In 2001, the owners of Section 16 constructed a dairy on the property. In 2003, Section 16 was conveyed to Michael Schugg and Debra Schugg (the "Schuggs"). The Schuggs declared bankruptcy in 2004, and listed Section 16 as an asset. Plaintiff G. Grant Lyon was appointed the Chapter 11 Trustee of the Schuggs' bankruptcy estate (the "Trustee"). During the Schuggs' bankruptcy proceedings, Defendant Gila River Indian Community ("the Community") filed a proof of claim asserting that it was the rightful owner of Section 16 based upon, among other arguments, aboriginal title. "In response, the Trustee initiated an adversary proceeding seeking a declaratory judgment that the Schuggs' estate had legal title and access to Section 16." Lyon v. Gila River Indian Cmty., 626 F.3d 1059, 1066-67 (9th Cir. 2010). The parties agreed to withdraw the bankruptcy reference, and this case was transferred to the Court.

The Court granted partial summary judgment for the Trustee, ruling that the Community did not hold aboriginal title to Section 16. Following a bench trial, the Court issued findings of fact and conclusions of law in which it found the Trustee could legally access Section 16 because of the existence of an implied easement over the Community's reservation (the "Reservation"). (Doc. 278). The Court declined the Trustee's invitation to rule on the scope of the implied easement, concluding that this issue was not ripe because the Trustee had failed to show the easement was inadequate for the present use of Section 16. ( Id. at 26). On appeal, the Ninth Circuit Court of Appeals ("Court of Appeals") affirmed the Court's rulings concerning aboriginal title, the existence of an implied easement, and the lack of an actual controversy concerning the scope of such easement.[2] 626 F.3d at 1074, 1079.

The parties initially agreed that no issues remained for determination following the remand from the Court of Appeals. However, the Court subsequently determined, at the Trustee's urging, that the issue regarding the scope of the easement was now ripe because the Trustee presented evidence that he intended to improve the easements pursuant to a specific development plan and the Community had denied permission to make those improvements. Specifically, the Trustee intends to construct a rural residential subdivision on Section 16 at a density of 1 house per 1.25 acres (approximately 440 houses). The Court postponed the entry of judgment and set a Rule 16 hearing on the issue of easement scope.

The Trustee moved for summary judgment, asking the Court to declare that he has the right to construct a two-lane, 40-foot wide paved roadway on the dirt road along the eastern boundary of Section 16 (Murphy Road) as well as the right to install utility lines underneath the roadway from the southern border of the Reservation to the southeast corner of Section 16. The Court granted the Trustee's motion in part and denied it in part. In particular, the Court concluded that the Trustee had presented uncontroverted evidence that the easement permitted the installation of underground utility lines under the boundaries of Murphy Road[3] and a 40-foot wide roadway was necessary for the planned development of Section 16. The Court concluded, however, that there remained a genuine issue of material fact as to whether the scope of the implied easement permitted the volume of traffic on Murphy Road that a 440-house subdivision on Section 16 would generate. (Doc. 407).

The Court held a bench trial and the parties submitted post-trial briefs on all issues. (Docs. 468, 470, 471, 472). Having considered the bench trial, closing arguments, and post-trial briefing, the Court finds and concludes as follows:

II. Findings of Fact[4]

A. Section 16's Geographic Relationship to the Reservation

The Reservation is approximately 600 square miles in size and is divided into seven districts. District 5 is approximately 100 square miles in size, and includes Section 16 near the Reservation's western boundary. The western boundary of the Reservation (and of District 5) is approximately one-half mile west of Section 16. The City of Maricopa, Arizona ("Maricopa") is approximately two miles further west from the Reservation's western boundary. The southern boundary of the Reservation (and of District 5) is approximately one-half mile south of Section 16. Maricopa is immediately south of the Reservation's southern boundary.

Two roads provide physical access to Section 16, Murphy Road and Smith-Enke Road. Murphy Road is a north-south road that runs along the eastern boundary of Section 16. Traveling south from the southeastern corner of Section 16, Murphy Road continues to Maricopa. Traveling north from the northeastern corner of Section 16, Murphy Road intersects with Casa Blanca Road after approximately two miles. Smith-Enke Road is an east-west road that runs along the southern boundary of Section 16. Traveling west from the southwestern corner of Section 16, Smith-Enke Road continues to Maricopa. Traveling east from the southeastern corner of Section 16, Smith-Enke Road changes its name to Seed Farm Road and continues to the town of Sacaton.

Although Section 16 is located within the outermost boundaries of the Reservation, the Community's police and fire departments have no obligation to serve Section 16.

B. Existing Reservation Roadways

Casa Blanca Road is an east-west road north of Section 16 that runs, in relevant part, between Interstate 10 ("I-10") and Arizona State Route 347 ("SR 347"). The intersection of Murphy Road and Casa Blanca Road is a few miles east of SR 347 and about five miles west of I-10. Casa Blanca Road is a public road and may be traveled by non-members of the Community. I-10 and SR 347 are each four-lane paved highways running north-south through the Reservation; both connect to Casa Blanca Road at interchanges. Casa Blanca Road is also the main connector between different areas of the Reservation.

Because SR 347 connects Maricopa to Phoenix (which is north of the Reservation), some Maricopa residents use SR 347 to commute to Phoenix. As of 2011, SR 347 carries an average of 41, 000 trips per day, and this is expected in the future to increase to 105, 000 daily trips. The I-10 and Casa Blanca Road interchange also connects with Arizona State Route 587 ("SR 587"), which runs north to the city of Chandler. As of 2011, over 65, 000 vehicles per day pass along the corridor containing the Casa Blanca Road/I-10/SR 587 interchange.

The Reservation has other access points to I-10 via Sundust Road, Queen Creek Road, and Riggs Road. As of 2011, the portion of Riggs Road between SR 347 and I-10 averaged 6, 000 trips per day. As of 2011, the Queen Creek Road/SR 347/I-10 interchange averages 28, 000 trips per day.

C. Present Condition of Murphy Road

The length of Murphy Road running from Maricopa to Casa Blanca Road is a dirt roadway. The road suffers from washboarding (perpendicular bumps) as well as rutting (longitudinal marks). At times, the road's poor condition forces vehicles to drive on the shoulder. Vehicles traveling on Murphy Road also generate noise as they chatter and bounce along the imperfections of the dirt roadway. Each vehicle creates airborne dust that suspends in the air for a time after the vehicle passes. The farmer-owner of Section 16 has observed twenty to twenty-five cars using Murphy Road in a half-hour to hour period of time when a nearby proving ground changes shifts. Tractors and semis also use Murphy Road, and deliver supplies to the farm on Section 16. When the semis use Murphy Road, they generate loud noises because the aluminum body of the trucks rattles upon striking the roadway's bumps.

The dairy farm on Section 16 operates 24 hours per day, 7 days per week, and ships five loads of milk each day. Vendors usually make route trips once per week to the farm, and one or two additional visits if they are delivering supplies.

D. The Community's Present Use of the Land Surrounding Section 16

The Reservation land immediately surrounding Section 16 is not highly developed. Agricultural land surrounds the south and west sides of Section 16, while the land to the north and east of Section 16 is either desert or undeveloped. Farms exist on both sides of Murphy Road south of Section 16, and a number of irrigation canals intersect Murphy Road. These canals include laterals, which are distribution canals carrying water from main canals to a point of delivery. The routine operation and maintenance of the laterals requires that irrigation operators cross Murphy Road to adjust the flow of water, among other tasks. The current volume of traffic on Murphy Road is sufficiently low such that irrigation operators have essentially unfettered access to cross the road to perform their duties.

Residential and public land uses exist further away from Section 16. For example, the village of Casa Blanca is located along Casa Blanca Road between SR 347 and I-10. This area includes schools, a senior center, and a service center. The schools are located to the east of Murphy Road, and portions of Casa Blanca Road near the schools are designated as school zones with greatly ...

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