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05A0154n.06 Filed: February 25, 2005 No. 03-6429 UNITED STATES

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05A0154n.06 Filed: February 25, 2005 No. 03-6429 UNITED STATES NOT RECOMMENDED FOR PUBLICATION File Name: 05a0154n.06 Filed: February 25, 2005 No. 03-6429 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT GEORGE WINKLER, FLOYD E. BROWN, DEIDRE W. BROWN, JAMES A. THAGARD, FRANCES S. THAGARD, THOMAS F. HUNTINGTON, SUSAN K. HUNTINGTON, Plaintiffs-Appellees, v. On Appeal from the United States District Court for the FRANK PETERSILIE; CENTRAL FLORIDA Eastern District of Tennessee CAPITAL ENTERPRISES, INC., Defendants-Appellants. / Before: GUY and ROGERS, Circuit Judges; DOWD, District Judge.* RALPH B. GUY, JR., Circuit Judge. Defendants appeal from the judgment entered in favor of the plaintiffs following a nonjury trial on claims and counterclaims arising from a dispute over the plaintiffs’ right to access and use Watauga Lake, which is located on abutting property owned by defendant Central Florida Capital Enterprises, Inc. (CFCE). Rejecting the competing claims of trespass as well as the plaintiffs’ claims for conversion, the district court found CFCE vicariously liable for malicious destruction of plaintiffs’ *The Honorable David D. Dowd, Jr., United States District Judge for the Northern District of Ohio, sitting by designation. No. 03-6429 2 property and awarded a total of $33,525 in damages. That amount was offset by an award of $1,000 to CFCE to cure the encroachment of a portion of a patio constructed by plaintiffs Susan and Thomas Huntington. The district court awarded punitive damages against Frank Petersilie, a director, principal shareholder and CEO of CFCE, totaling $200,000. The district court also found Petersilie liable for outrageous conduct (or intentional infliction of emotional distress) and awarded plaintiffs a total of $100,000 in compensatory damages. Defendants first challenge the district court’s determination that plaintiffs’ easements included the right to build walkways, stairs, and docks as permitted by the Tennessee Valley Authority (TVA). Petersilie argues that the evidence was insufficient to establish liability to plaintiffs for outrageous conduct or to support the award of compensatory and punitive damages. Without denying it may be held vicariously liable for Petersilie’s actions, CFCE seeks reversal of the judgment in favor of the Huntingtons for malicious destruction of property and the order transferring property to the Huntingtons to cure the encroachment. After a review of the record and the arguments presented on appeal, we REVERSE the judgments in favor of plaintiffs on their claims of outrageous conduct and AFFIRM in all other respects. I. All of the property at issue in this case was once part of a single tract of land owned by Betty Managoff located in Johnson County, Tennessee. A portion of that land was permanently flooded after the TVA constructed a dam across the Watauga River pursuant to a Flowage Easement dated March 11, 1948, granting the TVA permanent easement rights to land lying below elevation 1980’ Mean Sea Level (MSL) (TVA 1980 elevation line). The No. 03-6429 3 Flowage Easement expressly granted the TVA the right to permanently overflow the land, to enter and clear the land of anything that would interfere with navigation or flood control, and to “excavate, erect structures, and do such other work as is desirable in connection with the needs of navigation.” There is no dispute that TVA approval is required to construct, operate or maintain any obstructions on property in the TVA’s custody and control, including not only TVA-owned land but also land subject to TVA flowage easements. The TVA also has authority to cancel permits and require the removal of any structure on such land. Managoff’s property lay beneath and on both sides of a part of Watauga Lake known as Cobbs Creek Cove. She operated a fishing camp on one side and developed a subdivision on the other. The plat for the Managoff Subdivision, recorded with the county in 1966, described each lot by metes-and-bounds and noted the southeastern border of those lots to be the “TVA 1980 elevation.” Although the TVA’s easement extends up to the TVA 1980 elevation line, the waters of Watauga Lake have never been that high. The waters have fluctuated between an all-time high water mark of 1963’ MSL and a low water mark of between 1930’ and 1940’ MSL. A second plat of the same date showed the boundary to be the TVA 1960 elevation line, but that plat was never recorded.1 Plaintiffs and their predecessors purchased multiple lots in the Managoff Subdivision before Managoff sold the tract of property on which the lake is located to CFCE’s predecessors in title. Specifically, plaintiffs Floyd and Deidre Brown owned lots 7, 8, and 9 (the Browns); James and Frances Thagard owned lots 13, 14, and 15 (the Thagards); 1Plaintiffs have abandoned any claim to ownership of property below the TVA 1980 elevation line based on the unrecorded plat, errors in the placement of boundary markers, or adverse possession. No. 03-6429 4 George Winkler owned lots 16 and 17 (Winkler); and Thomas and Susan Huntington owned lots 18, 19 and 20 (the Huntingtons). The deeds for these lots expressly granted either (1) “the right of egress and ingress to and from said lot and extending to the waters of Watauga Lake on the southeasterly side thereof, which rights shall be coextensive with the width of said lot and extending to said lake”; or (2) “water front privileges adjacent to the aforesaid property with the free right to ingress and egress along the 1980 TVA elevation line.” Each deed also granted all appurtenances appertaining to those lots. The plaintiff property owners all obtained permits from the TVA to erect or maintain stairs and floating docks within the TVA’s Flowage Easement. Pursuant to those permits, all the plaintiffs, except for the Huntingtons, erected or maintained stairs and docks extending from their property into Watauga Lake. The undisputed evidence showed that the slope from the plaintiffs’ lots to the water was steep and rocky, with several lots having an incline of as much as 60 degrees. One witness, a former owner of lot 9, testified that the slope was so steep that one could not walk up from the lake without holding onto the trees. Plaintiffs testified that it was difficult, if not dangerous, either to access the lake from their property without stairs or to get in or out of a boat without a dock. CFCE’s predecessors in interest, Charles and Edith Weathers, purchased the property under the lake and extending up to the TVA 1980 elevation line. They were also parties to state court litigation brought by the owner of lot 11, which is not owned by any of the plaintiffs in this case. Managoff was deposed during that litigation, but died before this case was commenced. An agreed judgment was entered declaring an easement on what is now CFCE’s property allowing the owner of lot 11 to build stairs and a dock as permitted by the No. 03-6429 5 TVA and ordering that the Weathers not attempt to interfere with the TVA’s permitting decisions. That judgment also stated, however, that it did not affect the rights of the Weathers with respect to any other lots in the Managoff Subdivision. The final modified judgment in that case was entered in July 1992.2 CFCE bought the property in September 1999, and Petersilie began managing the marina. Petersilie insisted that plaintiffs did not have the right to build or maintain stairs, anchor floating docks, or otherwise access Watauga Lake without paying rent to CFCE. Over the next two years, Petersilie directly confronted some of the plaintiffs on their docks and told them they could not swim, boat, or use the lake unless they paid CFCE. Petersilie had “no trespassing” signs posted along the TVA 1980 elevation line. In September 2001, Petersilie directed that the stairs extending below the TVA 1980 elevation line be cut off with a chain saw, the wood piled on the docks, and the docks cut loose and towed outside the cove. Only the Huntingtons did not have stairs or a dock at that time. Petersilie had the TVA 1980 elevation line spray-painted, and docks placed in front of the plaintiffs’ lots to block their access to the lake. Plaintiffs testified that they felt threatened by Petersilie’s actions and had been denied their right to use the lake since September 2001. The Browns paid dock fees to CFCE’s predecessor until 1999, when they secured 2Managoff testified that in granting “waterfront privileges” she intended that the property owners would be able to “walk down to the water to swim or fish, or if somebody wanted to drop them off.” She also explained that she understood nothing could be permanently placed below the TVA 1980 elevation line because that property was subject to the TVA’s Flowage Easement. The magistrate judge ruled before trial in this case that Managoff’s deposition was not admissible because Tennessee law does not allow the admission of parol evidence to vary or explain the terms of an agreement when the ambiguity is patent. Coble Sys., Inc. v. Gifford Co., 627 S.W.2d 359, 362 (Tenn. Ct. App. 1981). Defendants offered Managoff’s deposition into evidence in this case. The district judge received the deposition, indicating he would determine whether it was admissible, but did not refer to it in his written decision on the merits. No. 03-6429 6 their own permit from the TVA. In the spring of both 2000 and 2001, Petersilie confronted Floyd Brown on his dock, insisted that the state court judgment relating to lot 11 was invalid, demanded that the Browns pay rent to CFCE, and threatened to have their dock removed.
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