ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA.
Gibbons, Becker, Circuit Judges and Lacey,*fn* District Judge.
This appeal arises out of a diversity suit seeking recognition under Pennsylvania law of an implied easement of access to a sewage treatment plant. Appellant Motel 6, a Delaware corporation, owns a ninety-five unit motel in Belle Vernon, Pennsylvania, which it purchased from defendants Ira Vernon Pfile and Virginia V. Pfile. Motel 6 is unable to operate the motel because its only sewer connection is to a sewage plant owned and operated by the Pfiles, who refuse to service the motel.
Motel 6 originally built and operated the motel under a long-term lease agreement with the Pfiles, under which the Pfiles agreed to provide sewage service. After the motel was partly destroyed by fire, Motel 6 purchased the motel from the Pfiles and rebuilt it at a cost in excess of two million dollars. The purchase agreement, however, did not provide for sewage service. Alleging that no other sewer connection was available to the motel, Motel 6 sought a permanent injunction in the district court requiring the Pfiles to furnish sewage treatment. After trial, the court denied the injunction. Because we conclude that the district court misapplied the Pennsylvania law of implied easements, and that the record establishes that Motel 6 is entitled to relief as a matter of law, we will reverse. We will also remand for further proceedings to determine the compensation to which the Pfiles are entitled for access to their sewage treatment plant.
The basic facts, most of which are uncontradicted, are set forth in the district court's findings of fact. In 1971 the Pfiles, who own several tracts of land and buildings in Belle Vernon, entered into an agreement with Motel 6. Motel 6 agreed to build a 95-unit motel on one of the Belle Vernon tracts, and to lease the newly built motel from the Pfiles for 65 years. Both the lease and the construction contract made the Pfiles solely responsible for providing sewage facilities to the motel. In the course of construction, sewage pipes were laid from the motel to the property line, which were subsequently connected to the Pfiles' sewage treatment plant 1,200 feet north of the motel. The connections were made across intervening tracts owned by the Pfiles.*fn1 The sewage plant serviced other establishments situated on land leased from the Pfiles and continues to serve those establishments.
Motel 6 operated the motel under the lease until December 31, 1977. During that time, the Pfiles provided sewage service as required by the lease. On that date, and again on January 2, 1978, accidental fires severely damaged the motel and rendered it uninhabitable. Under an agreement dated May 8, 1979, the parties agreed to terminate the lease and Motel 6 agreed to purchase the damaged motel and the land on which it sat.*fn2 The purchase was completed by delivery of a deed, dated and recorded on May 16, 1979. The matter of sewage disposal was never raised in the negotiations concerning the agreement to purchase, and it is not mentioned in either the agreement of sale or the deed.
In September 1979, while the motel was being rebuilt, Mr. Pfile informed Motel 6 that the transmittal of sewage from the motel to the Pfiles' sewage plant was continuing without permission, and allegedly without legal authority or right. The Pfiles subsequently demanded that Motel 6 purchase the plant for $250,000 and agree to service the other properties connected with the plant in perpetuity free of charge; Pfile threatened to cut off the motel's sewage service if an agreement to that effect was not reached. Motel 6 offered to pay a reasonable fee for continued use of Pfiles' plant, but the parties could not reach an agreement.
Motel 6 began operating the reconstructed motel on May 14, 1980. The Pfiles provided sewage service until the time of the trial in January 1981.*fn3 Service was discontinued in June of 1981, and has not been restored. The motel remains unoccupied. Labor troubles have plagued the motel, and have been a factor in its inability to operate. The motel cannot, however, be operated without sewage services.
Motel 6 applied to the Township of Rostraver for permission to construct a sewage treatment plant on its property, but the Township refused to grant the application because the Pfiles' sewage treatment plant had sufficient capacity to handle the motel's sewage requirements.*fn4 The closest public sewer line is two miles from the motel. In order to connect with this public system, Motel 6 would have to purchase easements over intervening land and lay pipe at a substantial cost, which was not quantified in the record.*fn5
The district court's discussion of the applicable law began with a reference to the doctrine of mutual mistake. The court stated that, although the failure of the parties to include in the agreement of sale a representation required by state law as to availability of sewage service in the agreement of sale was a result of mutual mistake,*fn6 the failure to provide that defendants would provide sewage treatment services for plaintiff was not a result of mutual mistake.
The district court made three other conclusions of law. First, the court wrote that "[a] servitude to defendants' sewage treatment facility was not continuous but depended on the need of the motel for the services, and was not self-acting but depended on the willingness of ...