## Facts

- Betty Managoff owned land on the Watauga River in Tennessee.
- The Tennessee Valley Authority (TVA) built a dam and created Watauga Lake under a flowage easement allowing TVA to flood Managoff’s land up to 1,980 feet above mean sea level (the “1980’ line”).
- The lake’s water level fluctuated and did not reach the 1980’ line, often sitting 17 to 50 feet below it, leaving a strip of land between the lots and the water.
- Managoff developed part of the property as a fish camp/marina area and recorded a residential subdivision on the other side of a cove.
- The subdivision plat used the “TVA 1980 elevation line” as the boundary, so the “lakefront” lots did not extend to the water.
- The deeds to the subdivision lots granted lake-access rights, such as “the right of egress and ingress … extending to the waters of Watauga Lake” and/or “water front privileges … with the free right to ingress and egress along the 1980 TVA elevation line.”
- George Winkler and other plaintiffs bought lots in the subdivision. The terrain between their lots and the water was steep and rocky, making direct access difficult and dangerous.
- The plaintiffs obtained TVA permits to build access improvements such as stairs, walkways, and floating docks extending below the 1980’ line. The permits allowed the structures but stated they did not convey any property interest.
- Central Florida Capital Enterprises, Inc. (CFCE) later acquired the land below the 1980’ line, including land used with the marina operations. Frank Petersilie, CFCE’s director, principal shareholder, and CEO, operated the marina.
- Petersilie and CFCE asserted the plaintiffs had no right to keep or use the access structures or reach the lake without paying rent to CFCE.
- Petersilie posted “no trespassing” signs, spray-painted and marked the 1980’ line, cut stairs/walkways, and towed away docks.
- The plaintiffs sued. After a bench trial, the district court ruled that the deed language created easement rights that allowed plaintiffs to access and use the lake and to build and maintain TVA-permitted stairs, walkways, and docks.
- The district court also found CFCE liable for malicious destruction of plaintiffs’ property and awarded damages (including an offset tied to a small patio encroachment and a remedy requiring a small property transfer). It further found Petersilie liable for “outrageous conduct” (intentional infliction of emotional distress) and awarded compensatory and punitive damages on that theory.
- CFCE and Petersilie appealed.

## Issues

1. Whether the deed and plat language granting “water front privileges” and ingress/egress rights created an easement that allowed plaintiffs to construct and maintain TVA-permitted stairs, walkways, and docks below the 1980’ line to reach and use Watauga Lake.
2. Whether the evidence was sufficient under Tennessee law to support liability for intentional infliction of emotional distress (“outrageous conduct”) and to support the related compensatory and punitive damages awards.
3. Whether the district court properly held CFCE responsible for malicious destruction of plaintiffs’ property and properly resolved the minor encroachment with an offset and property-transfer remedy.

## Decision

- Affirmed the judgment that plaintiffs held easement rights granting free access to the lake and allowing construction and maintenance of stairs, walkways, and docks as permitted by TVA, despite the permits’ disclaimer of property rights.
- Affirmed the district court’s rulings on the property-destruction and encroachment-related relief, including the damages award for malicious destruction (reported as $33,525), the $1,000 offset to CFCE relating to the Huntington patio encroachment, and the order addressing the encroachment through a small property transfer.
- Reversed the judgments for plaintiffs on the “outrageous conduct” (intentional infliction of emotional distress) claims and vacated the emotional-distress compensatory award (reported as $100,000) and the punitive damages award tied to that tort (reported as $200,000).

## Legal Principles

- The scope of an easement turns on the grant’s language and the grantor’s intent, read in context of the property and the use described in the recorded instruments.
- Easements granting “water front privileges” and ingress/egress to a lake may carry implied rights to make the access usable, including building reasonable access structures where the terrain makes direct access unsafe or impractical.
- A federal agency’s permit that authorizes structures within a regulated area may support the conclusion that the structures are allowed as a matter of regulation, but the permit itself does not transfer title or create a private property right.
- Under Tennessee law, intentional infliction of emotional distress requires conduct so extreme and outrageous that it is beyond the bounds of decency, along with proof of serious mental injury; wrongful conduct in a heated property dispute may still fall short of that demanding standard.
- A corporation may be liable for torts committed by its officer acting on the corporation’s behalf in managing corporate property, including intentional damage to others’ improvements.

## Conclusion

The Sixth Circuit held that the subdivision deeds granted the plaintiffs an easement for free lake access that permitted TVA-approved stairs, walkways, and docks needed to reach Watauga Lake, affirmed CFCE’s liability and the district court’s remedies for malicious destruction and a minor encroachment, but reversed the intentional infliction of emotional distress finding and set aside the emotional-distress and related punitive damages awards.


Winkler v. Petersilie, 124 Fed. Appx. 925 (2005)