Daily Development for Thursday, September 13, 2002

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

EASEMENTS; CHARACTERIZATION; RAILROADS: A deed to a railroad that it is transferred for purposes of a railroad right of way and that if use as a right of way is not commenced or is discontinued for six months, the property shall revert to the grantor, does not create and easement, but rather a fee subject to a condition subsequent. Consequently, the grantor's interest is subject to the California Marketable Title Act and is void if not recorded within five years of the adoption of the Act.

Severns v. Union Pacific Railroad Co., 2002 WL 31008149 (Cal. App. 9/9/2002)

The case involved a sixty foot wide strip of land running through the center of the city of Los Angeles, apparently part of an original electric trolley car line. The plaintiff alleged that he was the successor in interest to the grantors under the 1901 deed, and that the railroad purpose had been abandoned. He alleged that the interest created was an easement, and that, upon abandonment (in 1994), the possessory interest reverted to him as the holder of the servient estate.

The court, reversing the trial judge, concluded that there was no ambiguity on the face of the deed, and that consequently it would restrict its analysis to the language of the deed, which in its view unmistakably created a fee interest.

The case is interesting particularly because it deals with a number of aspects of the deed to conclude that a complete ownership was intended.

For instance, the deed described the property as a "strip of land." The court indicated that the use of the term "land" in this phrase indicated that the land, and not simply a use right, was the intended object of the conveyance.

The court further noted that the use of the terms "grant, bargain, sell, convey and confirm" - particularly "grant" - which is the operative word in California for a warranty deed, suggested that the grantor intended to warrant complete title. Similarly, the statement that the grant included "tenements, hereditaments and appurtenances thereunto belonging . . . and the reversion and reversions, remainder and remainders, rents, issues and profits" also indicated that complete ownership was the intent. The court also relied upon the fact that words of inheritance were used: "to its successors and assigns forever."

The court acknowledged that there is authority indicating that when the deed states on its fact that the intent of the parties is that the property will be used for purposes as a railroad right of way, the language suggests that only an easement is intended. But it distinguished the other California case law to this effect because in those cases the statement of intent appeared earlier in the deeds, and not following six paragraphs of granting language. The statement of purpose was not in the granting clause of the deed, and the court regarded it merely as stating what motivated the parties in carrying out the transfer, and not as stating that the transfer was for a limited use.

Plaintiff also argued that the statement on the deed of nominal consideration is often used by courts to reach the conclusion that the parties intended only a limited use. Plaintiff noted that the deed stated a consideration of $5 in gold coin, and alleged that this amount was "nominal." The court did not necessarily agree that $5 in gold was "nominal" in 1901, but elected to base its rejection of this argument on a different ground - the presence of the six paragraphs of granting language, which dissipated any suggestion that a mere use right was intended. Further, the court noted that the agreement of the grantee railroad to continue to operate a train at a stipulated schedule, at peril of loss of the fee title through exercise of the condition, also established consideration, and that there was no indication even that the stated $5 included the total cash consideration, as opposed to being a simply recitation of "symbolic consideration" such as appears in many deeds.

All of this analysis may be quite helpful in future cases for railroads defending a claimed outright ownership as against a party claiming reversion under an easement following abandonment.

But probably the fact that most influenced the court here was the fact that the deed stated expressly that in the event that the railroad was not operated to a certain standard, there would be a reversion to the grantor.

The required standard was considerably higher than simply avoiding "abandonment," but of course included abandonment.

Comment 1: One problematic aspect of the court's opinion is that it went on to characterize the fee interest in question as a "fee subject to a condition subsequent." Such a conveyance normally entails the creation of a right of reentry. There was no such right of reentry here. The language stated simply that "should" the required level of railroad activity not be carried out for six months, "then said right of way herein conveyed shall revert to the parties of the first part." This certainly reads like an automatic forfeiture, more in the line of a fee simple determinable, even though the words "so long as" or "until" were not used.

It is true that courts sometimes stand on their head to move to a conditional construction and away from an automatic forfeiture, but usually the head standing is more apparent on the face of the opinion.

Perhaps other California authority resolved this problem for the court.

Comment 2: Assuming that there was an automatic termination, then it would be quite likely that the railroad would have obtained adverse possession under the ridiculously short five year California statute. Even though it ripped out the tracks in 1994, it is quite likely that the required "ten stops a day" under the defeasance clause had not occurred in many, many years. Of course, California requires that taxes be paid and that the adverse possessor either "enclose" or cultivate the claimed property if it does not hold under color of title. Maybe that was a problem for the railroad.

MARKETABLE TITLE ACTS; CONSTITUTIONAL VALIDITY:

California court upholds application of California Marketable Title Act as against a right of reentry under fee subject to a condition subsequent that had not been recorded within five years following enactment of the Act. Constitutional "contract clause" objections do not avail because a right of reentry is not a contract right, but an interest in property.

Severns v. Union Pacific Railroad Co., 2002 WL 31008149 (Cal. App. 9/9/2002), discussed under the heading: "Easements; Distinguished from Ownership; Railroads."

This aspect of the court's opinion tracks most of the cases on this issue, many of them quite old, to conclude that a Marketable Title Act does not deprive the holder of a future interest in the property of a contract right, because a future interest in land is not a contract interest. Further, such a statute does not unconstitutionally deprive future interest holders of a property interest, but simply establishes procedural requirements for the exercise of that interest. Such a procedural requirement is rationally related to an important public goal of clearing title of difficult problems relating to future interests when, in most cases, these future interests are little valued by their holders.

The court collects numerous authorities, including the two leading cases (in New York and Florida) that have found marketable title acts unconstitutional in certain applications. There is also an interesting discussion of a California Supreme Court decision from 1957 that raised some questions concerning the California Act under the California Constitution, but did so only in dicta. The liklihood is that the modern California Supreme Court will not find that dicta all that persuasive in light of the widespread use and application of these marketable title acts.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

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