Friday, June 6, 2014

Eminent Domain, Ultra Vires, and Adverse Possession Walk Into a Bar…

Old Railroad Bed, LLC v. Marcus, 2014 VT 23

By Nicole Killoran

Get ready to dust off your nineteenth-century-property-law hats, folks, cause this case is chock-full of neglected old cases about rail beds, public trails, adverse possession, eminent domain, and railroad corporations venturing outside the realm of their existential purpose.

The property in question is a strip of land between 50 and 82 feet wide in Manchester. The property was cobbled together in 1902 from neighboring landowners and conveyed in three deeds to the Manchester, Dorset & Granville Railroad Company (“MD&G”). Before it took title, the MD&G conducted and recorded a survey to determine where the line would be. MD&G laid tracks and used the line mostly to transport marble for about ten years. MD&G quit using it in 1918, revived it in 1924, and dismantled it in 1934. MD&G sold to Vermont Marble Company, who merged with OMYA, Inc. in 1992. In 2009, plaintiff Old Railroad Bed, LLC bought the property from OMYA to build a public recreational trail.

Defendants own the neighboring land and are the successors to the folks who originally gave the property to MD&G in 1902: the Marcuses, the Wests, and the Dykes. Defendants or their predecessors variously pastured livestock, cleared trees, grew hay, and maintained fences on the property for years. Defendants decided they didn’t want a public trail on the railbed. Plaintiff filed suit to kick defendants off their lawn recreational path and stop them from interfering.

Defendants moved for summary judgment once, and then again later on, on different theories: either MD&G took the property by eminent domain and lost it by abandonment, or defendants, or their predecessors had adversely possessed the property. The trial court denied both defendants’ motions, and granted judgment in favor of plaintiff after a two-day trial. Defendants, predictably, appealed.

On appeal the SCOV takes up the eminent domain/easement question first. Defendants’ position is that, when it bought the property from their predecessors, MD&G really only got an easement to use the land for the railroad that reverted when the line was abandoned. Defendant has two approaches to their position on this point: one by common-law and one by statute.

The logic tree for defendants’ common-law argument goes like this: MD&G got the property through condemnation, aka informal eminent domain, because it recorded its location survey before it bought the property. MD&G didn’t get full ownership, it only got an easement to use the property for the railroad. When Vermont Marble stopped using the line, it gave up the easement, and the property reverted to defendants’ predecessors. So you see SCOV, says defendants, the property is actually ours. Plaintiff has to keep its grubby recreational hands off it.

Try to keep this argument in mind as we watch the SCOV wreak havoc on defendants’ position. It gets a bit confusing.

Defendants’ main support for their position is a 1996 case out of the Federal Circuit, Presault v. United States, involving another do-gooder, this time in Burlington, Vermont, trying to convert an old railbed to a recreational trail. Two of the three parcels in Presault were acquired through eminent domain, giving the railroad an easement that would revert after the line was abandoned. The third parcel was purchased after the railroad conducted a survey such as MD&G did, a fact the court thought gave the transaction an “eminent domain flavor.” The Presault court determined that the railroad in that case got an easement in all three parcels, not just two.

The SCOV is unimpressed with the seemingly persuasive Presault case on which defendants pile their hopes and dreams of keeping hikers away. As explanation, the SCOV picks up a shovel and digs deep into the sooty recesses of Vermont’s nineteenth-century-railroad-property case law.

Presault relied on two decisions. In 1869, in Troy & Boston Railroad Company v. Potter, the SCOV rejected a neighbor’s claim that the railroad never actually took title to the property because it didn’t record a location survey until after it bought the property. The post-Civil war SCOV laughed and told the neighbor that he couldn’t profit off this slight error. The present-day SCOV finds lacking in Troy any guidance on the effect of recording a survey before buying the property.

In an 1859 decision, Hill v. Western Vermont Railroad Company, the SCOV considered whether a creditor could put a lien on a railroad’s purchased property when the SCOV concluded it only actually bought an easement. The pre-Civil war SCOV explained that, whether a railroad “buys” property or takes it through eminent domain, the landowner doesn’t have much of a choice. But, the present-day SCOV notes, the Hill SCOV also specifically said that it was entirely possible for a railroad to buy property, own it outright, and not own just an revertible easement. Neither of these decisions are helpful on the question defendant raises, says the SCOV.

The Presault court also relied on its lower court’s analysis of two turn-of-the-century decisions from Delaware and West Virginia, neither of which addressed defendants’ issue. Again, says the 21st-century SCOV, none of these cases are helpful because they don’t actually answer defendants’ issue—what happens when the location precedes a purchase under a fee-simple deed.

The SCOV isn’t satisfied with its secondary delving into the logic behind the logic behind the Presault decision that defendants think makes their case. The two cases the Chesapeake court relied on also aren’t helpful. In an 1888 case, the New York Supreme Court decided a squabble between railroad lines who thought they came first on the title. That court thought a location survey acts like a railroad’s stamp on property that gives it a superior right to buy it or take it through condemnation. In an 1889 decision, the SCOV reached a similar conclusion. It gave priority to the railroad who had recorded the first location survey, and noted that once that step was taken all that was left was for the railroad to buy it or take it.

Again, says today’s SCOV, these cases are about as helpful as a 120-pound passive-aggressive bouncer in a biker bar. None of them supports the idea that a location survey automatically prevents the railroad from taking fee simple title, and both specifically state that once a location survey is conducted the railroad can either buy or take the land, it’s not limited to taking only. Nothing else in the way MD&G bought the property indicates that defendants’ predecessors were strong-armed into selling. This wasn’t condemnation, and MD&G got more than just an easement. On this point the SCOV upholds the trial court’s conclusion that this approach is “entirely speculative.”

Defendant’s statutory argument goes like this: when MD&G bought the property, Vermont law dictated that a railroad corporation that buys (takes “voluntary grants of”) property can only use the property for use as a railway. When the railway was dismantled, the property reverted to defendants’ predecessors. Plaintiff loses.

The trial court didn’t read the statute the same way. Plaintiff obviously agrees, and point to a few provisions in the same law that allowed railroad companies to buy and transfer real estate as necessary or to “secur[e] its railroad,” implying that railroads could buy, transfer, or keep property in fee simple at the time. Plaintiff also cites to another old case from 1868, where the SCOV concluded that a railroad held a valid fee simple interest in property it bought, even though its charter said it could only buy property for use as a railroad.

It’s unclear whether these were the only arguments raised below, but in response the SCOV turns up its nose and informs the parties that it need not interpret 120-year old statutes to deny plaintiffs their land. Defendants don’t have standing to make their claim.

Why, you might ask? It’s because the SCOV interprets defendants’ statutory position as an argument that when MD&G bought the land in fee simple and not as a revertible easement, the purchase was “ultra vires,” or outside the scope of the corporation’s purpose and thus beyond the corporation’s power. An ultra vires contract isn’t automatically void, but it is voidable.

The problem is that the only “person” who can void an ultra vires contract is the state, and even subsequent transfers of land acquired ultra vires are valid unless the state gets a bee in its bonnet. No one else, including third parties like defendants, can do a damn thing about it. This is true regardless of whether the original sale was prohibited by statute or charter. The SCOV goes on a lengthy exploration through ultra vires law, noting that everyone from the SCOTUS to state supreme courts agree: ultra vires contracts are voidable, not void, and none but the sovereign may object.

The rule exists to preserve stability in real estate transactions and title ownership, and to prevent “great public inconvenience” that would likely result if landowners, or their successors, could undermine a corporation’s ability to buy property. The rule has been upheld in a number of different situations, including the one seen here, and each time in the case law the SCOV cites the conclusion has been the same: if you ain’t the state, you can’t do nothin’ about an ultra vires transaction. Not surprisingly, after delving into this area of law, the SCOV concludes that defendants have zero ability to challenge MD&G’s fee simple purchase as outside the scope of its powers.

Having soundly trounced defendants on their first argument, the SCOV turns to defendants’ second argument: that they own the property through adverse possession. If you’re not familiar with this particular oddity of the law, adverse possession in Vermont dictates that you own someone else’s property if you possess it (use it) in a way that is “open, notorious, hostile, and continuous” for fifteen years. It can’t be subtle, either—the use has to be significant enough to make all but the most oblivious landowner be all like, “hold up!”

Defendants each, for their own reasons, think they fit this bill. They don’t question whether the trial court got the facts right. They just think the trial court got the law wrong when it concluded that none of them had met the requirements.

The owners who preceded the Dyke family pastured horses on the property for 20 years, and built some wire fences to contain the horses, who wandered over the railbed. But they also got a right-of-way from OMYA to build a driveway on the disputed property, and applied with the zoning office for a garage with a specific setback from the boundary line. The SCOV agrees with the trial court here—letting your horses munch on grass, and putting up fences not to mark boundaries but to prevent a great horse escape, does not an adverse possession make, especially not when you’re at least tacitly acknowledging separate ownership.

The Marcus family bought their land in the late 1980s, allowed their horses to roam over the railbed, cleared trees, and actually tried to buy the property from OMYA at one point. They did put up a metal gate and a no-trespassing sign, but conveniently it wasn’t until after they joined the suit to get plaintiff off their land. Sorry, says the SCOV—trial court got it right when it concluded this isn’t enough for adverse possession.

The family who got the closest, but still didn’t fit the bill, was the Wests. They, and their family, owned their property since the 1930s, grew hay and corn on their property, pastured livestock near the railbed, cleared brush from the bed, and kept a barbed wire fence across their property and the railbed until the 1950s to mark their property line and keep in their livestock. The trial court didn’t think the Wests had proven with specificity exactly how or where they had used the property, and noted that they didn’t cultivate the railbed itself. Ultimately, the trial court decided not even the Wests could claim adverse possession.

While agricultural activities can qualify, using the railbed as an amusing speedbump for animals does not, and that is how the SCOV describes defendants’ use. Other courts have found similar activities insufficient too. The SCOV agrees with the trial court and upholds its legal conclusions for all the families on the adverse possession argument.

But wait! Defendants have one last misshapen card up their sleeve—if they haven’t adversely possessed the railbed, they constructively possess it. Constructive possession is possible if the neighboring landowner is operating under the assumption he actually owns the property, or when there are clear and definite marked boundaries. Sorry, says the SCOV, no constructive possession either—defendants haven’t really clearly explained which particular pieces of the property they possess, and there aren’t really any clearly marked boundaries.

Lucky for Manchester hikers, but sadly for defendants, the SCOV agrees with the trial court on all counts. Defendants have to give up their right to tell plaintiffs and their recreational patrons to get off their railbed.

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