Value of railroad corridor for just compensation purposes must include remnants of railroad’s use

by Hannah Dankbar and Gary Taylor

Rasmuson, et al v. United States
U.S. Court of Appeals for the Federal Circuit, October 5, 2015

Rasmuson and others own land adjacent to three railway corridors in Central Iowa. Pursuant to the National Trail System Act Amendments of 1982, the Surface Transportation Board issued Notices of Interim Trail Use (NITUs) for the corridors. NITUs “preserve established railroad rights-of-ways for future reactivation of rail service” and permit the railroad operator to cease operation without abandoning any “rights-of-way for railroad purposes.” The trial court found that “but for issuance of the NITUs, under Iowa law the railway easements would have reverted back to plaintiff adjacent landowners upon cessation of railroad operations, and plaintiffs would have enjoyed land unencumbered by any easement.”  The trial court thus found that a taking occurred, then held a bench trial to determine just compensation.  The trial court determined just compensation to be the value of the land as raw land (without any of the railroad’s improvements), and the United States appealed.

A landowner subject to a taking is entitled “to be put in as good a position … as if his property had not been taken.” In the case of an easement, the conventional method of valuation is the difference between the value of the property before and after the government’s easement was imposed.  The issue before the Court was a narrow one: Whether, as the government argued, the “before” condition was the property with the physical remnants of the railway’s use (with tracks, ties, earthen embankments, poor soil conditions) or, as the plaintiffs argued, without such physical remnants (raw land pre-railroad development).

The Court concluded that the fair market value of the land “before” the taking was the value including the physical remains of the railway.  The “before” condition was the property “before” the issuance of the NITUs.  Without the NITUs the land would have returned to the landowners with the physical remains of the railway since the railroad was under no legal obligation to remove the physical remnants of railroad use, and no evidence was introduced that the railroad would have done so on its own.  An appraisal of the land to determine just compensation must therefore take into account the remnants of the railway.

The trial court’s decision was vacated and remanded.

US Supreme Court deals blow to rails-to-trails efforts

by Gary Taylor

The US Supreme Court has issued its opinion in the rails-to-trails case discussed previously in this blog.  In an 8-1 decision, the Court sided with the landowner that claimed the railroad corridor reverted to the landowners when it was abandoned by the railroad.  This decision has the potential to block plans for the completion of several currently planned rail trails, and would also threaten existing rail trails and public highways across America that utilize federally granted rights-of-way.  According to the Rails-to-Trails Conservancy, there are hundreds of abandoned railroad corridors across the country that have been converted into publicly accessible trails. Some of the better-known rail-trails that occupy federally-granted rights-of-way include the George S. Mickelson Trail in South Dakota, the Foothills Trail and the John Wayne Pioneer trails in Washington, the Weiser River Trail in Idaho and the Rio Grande Trail in Colorado.

Marvin M. Brandt Revocable Trust v. United States
(United States Supreme Court, March 10, 2014)

(Adapted from the syllabus of the Court)

Congress passed the General Railroad Right-of-Way Act of 1875 to provide railroad companies “right[s] of way through the public lands of the United States.” One such right of way, obtained by a railroad in 1908, crosses land that the United States conveyed to the Brandt family in a 1976 land patent. That patent stated, as relevant here, that the land was granted subject to the railroad’s rights in the 1875 Act right of way, but it did not specify what would occur if the railroad later relinquished those rights. Years later, a successor railroad abandoned the right of way with federal approval. The Government then sought a judicial declaration of abandonment and an order quieting title in the United States to the abandoned right of way, including the stretch that crossed the land conveyed in the Brandt patent. Petitioners contested the claim, asserting that the right of way was a mere easement that was extinguished when the railroad abandoned it, so that Brandt now enjoys full title to his land without the burden of the easement. The Government countered that the 1875 Act granted the railroad something more than a mere easement, and that the United States retained a reversionary interest in that land once the railroad abandoned it. The District Court granted summary judgment to the Government and quieted title in the United States to the right of way. The Tenth Circuit affirmed.

The United States Supreme Court held that the right of way was an easement that was terminated by the railroad’s abandonment, leaving Brandt’s land unburdened. According to the Court, the Government loses this case in large part because it won when it argued the opposite in Great Northern R. Co. v. United States. There, the Government contended that the 1875 Act (unlike pre-1871 statutes granting rights of way) granted nothing more than an easement, and that the railroad in that case therefore had no interest in the resources beneath the surface of its right of way. This Court adopted the Government’s position in full. It found the 1875 Act’s text “wholly inconsistent” with the grant of a fee interest, agreed with the Government that cases describing the nature of rights of way granted prior to 1871 were “not controlling” because of a major shift in congressional policy concerning land grants to railroads after that year,  and held that the 1875 Act “clearly grants only an easement.” Under well-established common law property principles, an easement disappears when abandoned by its beneficiary, leaving the owner of the underlying land to resume a full and unencumbered interest in the land.

The Government asked the Court to limit Great Northern’s characterization of 1875 Act rights of way as easements to the question of who owns the oil and minerals beneath a right of way. But nothing in the 1875 Act’s text supports that reading, and the Government’s reliance on the similarity of the language in the 1875 Act and pre-1871 statutes directly contravenes the very premise of Great Northern: that the 1875 Act granted a fundamentally different interest than did its predecessor statutes.

Finally, later enacted statutes, do not define or shed light on the nature of the interest Congress granted to railroads in their rights of way in 1875. They instead purport only to dispose of interests (if any) the United States already possesses.

Writing in a lone dissent, Justice Sotomayor argued that the majority opinion placed on the Great Northern precedent “more weight than that case will bear.” The Court has long considered railway rights apart from the usual common-law regime, she said.  “By changing course today, the Court undermines the legality of thousands of miles of former rights of way that the public now enjoys as means of transportation and recreation. And lawsuits challenging the conversion of former rails to recreational trails alone may well cost American taxpayers hundreds of millions of dollars.”

Supreme Court update

We’ve had a bit of action on the four land use related cases pending before the US Supreme Court, discussed here and here.  Oral arguments are being held today in the case of Marvin M. Brandt Revocable Trust v. United States.  The issue in the case:

Whether the United States retained an implied reversionary interest in rights-of-way created by the General Railroad Right of Way Act of 1875 after the underlying lands were patented into private ownership.

Tomorrow, oral arguments will be held in McCullen v. Coakley, the issues of the case being:

(1) Whether the First Circuit erred in upholding Massachusetts’s selective exclusion law – which makes it a crime for speakers other than clinic “employees or agents . . . acting within the scope of their employment” to “enter or remain on a public way or sidewalk” within thirty-five feet of an entrance, exit, or driveway of “a reproductive health care facility” – under the First and Fourteenth Amendments, on its face and as applied to petitioners; (2) whether, if Hill v. Colorado permits enforcement of this law, Hill should be limited or overruled.

The case of Mount Holly v. Mount Holly Gardens Citizens in Action was settled prior to oral arguments.  A copy of a press briefing about the terms of the settlement is here.  The issue of the case was whether disparate impact claims are cognizable under the Fair Housing Act.  An interesting audio article about the case is here (approximately 6 minutes).

Rails-to-Trails on the US Supreme Court docket

This article discussing cases of interest to local governments recently accepted for argument by the US Supreme Court was originally posted on the International City/County Management Association website here.  Of particular concern to readers of this blog is Marvin M. Brandt Revocable Trust v. United States.

“In Marvin M. Brandt Revocable Trust v. United States the Court will decide who owns an abandoned railroad right-of-way:  the United States or a private land owner living next to the right-of-way.  In 1875 Congress passed a law granting rights-of-way to railroads through public land. Over the course of the next century, as trucking became a more popular method of transport, numerous railroads abandoned these rights-of-way.  The United States argues that a 1922 federal statute allows the United States to retain the railroad right-of-way if it is abandoned. If that is the case and the abandoned right-of-way is located in a city, the city automatically receives it from the federal government for free. If the abandoned right-of-way is located elsewhere, a state or local government receives it for free if it establishes a “public highway” on the right-of-way within one year.  State and local governments typically convert abandoned railroad rights-of-way into “Rails-to-Trails.”

Local governments often own and maintain abandoned railroad rights-of-way. In fact, the Supreme Court usually accepts cases where at least two federal circuit courts of appeals have ruled differently on the same issue. In Marvin M. Brandt Revocable Trust v. United States the Tenth Circuit ruled in favor of the United States. In a similar case, Samuel C. Johnson 1988 Trust v. Bayfield County, Wisconsin, the Seventh Circuit ruled against Bayfield County, which intended to build snowmobile trials on the abandoned railroad right-of-way.”

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