Developer Liable for Damages Caused by Pond Alterations

 

Tycor, Inc., owned approximately 47 acres of undeveloped land uphill from and northwest of Hunter’s Pond. Tycor planned to develop a new subdivision on the property, and entered into an agreement with Hunter’s Pond residents to use the lake as a detention pond. Tycor agreed to repair the pond’s “dam and outlet structure,” drain the pond and lower its floor, maintain the pond and remove and dispose of accumulated post-development sediments.

Before development of the subdivision began, however, Tycor sold the property to Kennedy Development Company, Inc., and assigned its rights and obligations under the agreement to Kennedy. Kennedy immediately began clearing and grading the property to develop Newton’s Crest subdivision, a community of approximately 185 homes. In addition, Kennedy made the lake in Hunter’s Pond deeper and put in a concrete spillway.

When Kennedy began to clear the land, the amount and velocity of storm water running into the creek on the Camps’ property increased significantly. After attempting to repair some of the damage himself, David Camp complained to the city of Snellville about the storm water runoff.

The city repeatedly ordered Kennedy to remove silt from the pond and a creek leading to the pond, and sent numerous citations for noncompliance with erosion ordinances.

Based on complaints from the Camps and other property owners, the city conducted a hydrological study and ordered Kennedy to raise the pond’s spillway six inches, which it did. However, after the spillway was raised, the runoff problem was exacerbated.

The Camps filed suit, alleging Kennedy was negligent when it developed Newton’s Crest subdivision and modified the lake in Hunter’s Pond. They further alleged that Kennedy’s actions constituted a nuisance and continual trespass onto their property. Kennedy, in turn, sued Newton’s Crest Homeowners’ Association in a third-party action, contending that under the detention pond agreement, the association agreed to indemnify Kennedy for any claims, actions or damages arising from the construction, maintenance, repair or operation of the lake in Hunter’s Pond. Both parties filed motions for summary judgment. The trial court denied both motions, and both parties appealed.

Kennedy argued that the Camps failed to show that any act or omission on its part caused or contributed to the alleged damages to their property. Kennedy asserted that the Camps’ arguments were insufficient to eliminate other possible causes for the increased storm water runoff.

The court disagreed. The court noted that issues of proximate cause and contributory negligence are peculiarly questions for a jury, unless the evidence plainly and indisputably shows otherwise. The court’s ruling in Green v. Eastland Homes, 284 Ga. App. 643 (2007), contained the following statement:

In surface water runoff disputes where two lots adjoin, the lower lot owes a servitude to the higher, so far as to receive the water which naturally runs from it, provided the owner of the latter has done no act to increase such flow by artificial means. Thus, although property must accept the natural runoff of water from neighboring lands, an artificial increase or concentration of water discharge may give rise to a cause of action.

Applying the principles to this case, the question of whether Kennedy’s acts or omissions artificially increased the amount or velocity of water discharged onto the Camps’ property, and whether such acts or omissions caused or contributed to damages sustained by them, could only be decided by a jury. The trial court may only resolve these issues on a motion for summary judgment if the evidence is either plain and undisputed or based purely on speculation or conjecture. Although Kennedy presented an expert affidavit stating that Kennedy’s “development of Newton’s Crest did not increase the rate of storm water discharge onto the Camps’ property,” such evidence did not entitle Kennedy to summary judgment. The court concluded that the evidence presented was sufficient to create a jury question, and thus, the trial court did not err in denying Kennedy’s motion for summary judgment.

The court then turned to the related appeal by the association, which contended that the trial court erred in denying its motion for summary judgment. Kennedy alleged that it had entered into an “assignment and assumption agreement” with the association in which the association promised to defend and indemnify Kennedy for any claims, actions or damages related to the construction, maintenance, repair or operation of the Newton’s Crest subdivision or Hunter’s Pond lake.

The association maintained that the indemnification was void and unenforceable under Georgia law because it excused Kennedy from liability for damages resulting solely from its own negligence. The court noted that as a general rule, a party to a contract may assign liability to another party for the consequences of its own negligence without contravening public policy, except when such an agreement is prohibited by statute.

The undisputed facts relevant to the assignment and assumption agreement are that the association was not incorporated until two months after the Camps sued Kennedy. Approximately a year after the association was incorporated, it entered into the assignment and assumption agreement with Kennedy, under which Kennedy conveyed all his rights, duties, obligations and other responsibilities and interests under the declaration of covenants and the detention facility agreement. In exchange, the association agreed to be solely responsible for the maintenance, repair and operation of the subdivision and to indemnify and defend Kennedy as to all claims or judgments that arose from its development of the property. No evidence was presented to show that Kennedy notified the association of the Camps’ pending lawsuit before the agreement was signed, even though such notice was expressly required by the agreement.

The appeals court applied former O.C.G.A. § 13-8-2(b), finding that an indemnification clause in a contract is void if it meets two thresholds: (1) the agreement is related to construction, alteration, repair or maintenance of a building structure; and (2) the exculpatory clause implies that the indemnitee is protected from the consequences of its sole negligence.

The court determined that although Kennedy did not actually construct any buildings on the subdivision property, its work consisted of clearing and grading the land, installing utility lines, and putting in streets. In addition, Kennedy drained and excavated the detention pond to make it deeper and significantly altered the spillway pursuant to the aforementioned detention facility agreement. The assignment and assumption agreement requires that the association indemnify Kennedy from debts, claims actions damages, judgments or costs that “are related to the construction maintenance, repair or operation of Newton’s Crest Subdivision or are in any way related to the declaration or the detention facility agreements.” It did not exempt Kennedy from claims arising from its sole negligence. Thus, the indemnification clause shifted all of Kennedy’s liability to the association, even for claims based solely on Kennedy’s negligence. Consequently, the court concluded that the assignment and assumption agreement was void and unenforceable under the statute and the trial court erred in denying the association’s motion for summary judgment.