Daily Development for Friday, September 22, 2000

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu

EMINENT DOMAIN; RAILROADS; FOREIGN CORPORATIONS: A domestic railroad corporation loses its eminent domain rights under state law to condemn property for an additional track when it merges with a foreign corporation to become a foreign corporation.

Eaton Asphalt Paving Company, Inc. v. CSX Transportation, Inc., 8 S.W.3d 878 (Ky. Ct. App. 2000)

The owner and lessee appealed, asserting that as a Virginia corporation, the railroad could not exercise any right of eminent domain in the State of Kentucky. The Court of Appeals analyzed both the state's legislative and constitutional provisions prohibiting foreign railroad corporations from exercising the powers of eminent domain held by domestic railroads in the state to arrive at a broad holding supporting the landowner/lessee's property rights and extending far beyond the subject controversy.

[W]e hold that a foreign corporation which is the result of a merger with a domestic corporation is a foreign corporation for all purposes other than the limited purpose of conferring jurisdiction in the courts of this state to litigate issues concerning corporate property located in this state."

Therefore, the railroad could not exercise a power of eminent domain in this case.

Reporter's Comment: Interestingly, the applicable Kentucky statute provided further that a foreign railroad corporation could revive its powers of eminent domain by filing a boardadopted resolution with the secretary of state accepting the provisions of the Kentucky Constitution which would then "domesticate" that foreign railroad corporation for these purposes. Had the railroad been 'on track' with this simple filing, it could have successfully condemned the subject property and avoided the Court's sweeping and restrictive holding against foreign corporations.

EMINENT DOMAIN; RAILROADS; DUTY TO BARGAIN: A railroad, in seeking to exercise its domestic power of eminent domain, need not accept a subject landowner's legal arguments regarding the nature and value of access rights to be lost via condemnation and must only make a reasonable effect in good faith to acquire the land by private sale at a reasonable price.

Eaton Asphalt Paving Company, Inc. v. CSX Transportation, Inc., 8 S.W.3d 878 (Ky. Ct. App. 2000) discussed further under the heading: "Condemnation by Foreign Railroad Corporation."

The owner and lessee of a 95acre tract of land that was divided by existing railroad tracks were unable to reach agreement with a railroad upon a condemnation value for a 1.4 acre parcel of land the railroad was attempting to condemn for construction of a passing track. The railroad then brought an eminent domain action and prevailed at the circuit court level. While the railroad's powers of eminent domain were denied due to its status as a foreign corporation, the Court of Appeals affirmed the circuit court's holding to the extent that it found the railroad bargained in good faith for the subject land to be acquired.

The east half of landowner and lessees' property, as divided by the existing railroad tracks, was landlocked until these parties obtained a private access easement from neighboring landowners. Landowner had, in addition, reached a private crossing agreement (terminable at will) with the railroad a number of years prior to the instant condemnation action under which the landlowner and lessee constructed a railroad crossing for additional access to the east. The railroad maintained the crossing at its own expense.

Landowner and lessee's claim on appeal was that the increased number of trains on the passing track would so interfere with the private crossing that they would require either a railroadconstructed bridge over the tracks or a sum in condemnation equal to the value of the entire eastern half of their property. In addition, appellants argued that the crossing agreement implied a grant of a way of necessity that was compensable.

The appellants did not, in fact, challenge the condemnation sum offered by the railroad for the subject 1.4 acres being condemned. The Court stated a rule of reasonableness (reasonable efforts by the condemnor, reasonable price offered to landowner) as the standard for bargaining in good faith in an eminent domain context. The issue of compensation for access, was, however, not adjudicated by the lower court, so the Court did not issue an opinion therefor, but reasoned that the railroad was not mandated to accept the appellant's theories of access liability in arriving at a reasonable value for the land being condemned. As the court commissioners had arrived at a value only slightly higher than the railroad's last offer to appellant landowner / lessee, the condemnation would have been allowed to proceed and would not have been dismissed for lack of good faith bargaining.

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