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Monroe County Commission v. A.A. Nettles, Sr. Properties Limited

Supreme Court of Alabama

April 26, 2019

Monroe County Commission
A.A. Nettles, Sr. Properties Limited and Eula Lambert Boyles

          Appeal from Monroe Circuit Court (CV-17-900097)


         A.A. Nettles, Sr. Properties Limited ("Nettles") and Eula Lambert Boyles (hereinafter referred to collectively as "the plaintiffs")[1] filed in the Monroe Circuit Court an action seeking to quiet title to a right-of-way that had been conveyed by Alabama Railroad Company ("the railroad") to the Monroe County Commission ("the Commission") for use as a recreational trail in accordance with the National Trails System Act ("the Trails Act"), 16 U.S.C. § 1247. The trial court quieted title in favor of the plaintiffs. The Commission appealed. We affirm.

         I. Background -- The Trails Act

"As background, the Interstate Commerce Act of 1887, ch. 104, 24 Stat. 379, and the Transportation Act of 1920, ch. 91, 41 Stat. 477-78, grant the Interstate Commerce Commission, now the Surface Transportation Board ('STB'), exclusive authority over the construction, operation and abandonment of the Nation's rail lines. In order for a railroad company to terminate rail service, the railroad company must obtain the consent of the STB. To obtain consent, the railroad company may apply for permission to discontinue service, seek permission to terminate through abandonment proceedings, or file a request for an exemption from abandonment proceedings. Once the STB consents, the rail line is removed from the national transportation system and the STB's jurisdiction comes to an end.
"In 1983, Congress amended the National Trails System Act to include an alternative process for railroad companies to abandon rail lines. 16 U.S.C. § 1247(d)[2]. This process, known as 'railbanking,' preserves corridors or rights-of-way not in use for train service for possible future use as recreational trails.
"In order for a rail line to be 'railbanked,' the railroad company must first file an abandonment application under 49 U.S.C. § 10903, or a notice of exemption from that process under 49 U.S.C. § 10502. Once an abandonment application, or request for an exemption, is filed, a party interested in railbanking may request the issuance of a Certificate of Interim Trail Use ('CITU') (in abandonment application proceedings) or a Notice of Interim Trail Use ('NITU') (in abandonment exemption proceedings). If the railroad company indicates that it is willing to negotiate a railbanking and interim trail use agreement, the STB issues the CITU or NITU. The issuance of the CITU or NITU preserves the STB's jurisdiction over the rail line and allows the railroad company to discontinue operations and remove track and equipment while the parties negotiate a railbanking and interim trail use agreement.
"The NITU or CITU affords the railroad company 180 days in which to negotiate a railbanking and interim trail use agreement with the third party. If an agreement is reached, the NITU (or CITU) automatically authorizes the interim trail use. If the STB takes no further action, the trail sponsor then may assume management of the right-of-way, subject only to the right of a railroad to reassert control of the property for restoration of rail service. If no agreement is reached, the railroad company may proceed with the abandonment process."

Burnett v. United States, 139 Fed.Cl. 797, 801-02 (2018)(internal citations omitted).

         II. Facts and Procedural History

         In May 1997, the railroad conveyed, by quitclaim deed, real property to Charles W. Boyles, retaining for itself a right-of-way over Charles's property for the maintenance and operation of a railroad.[3] After Charles died, his wife Eula inherited the property subject to the railroad's right-of-way; Nettles leases the property from Eula.

         In March 2013, the railroad filed with the Surface Transportation Board ("the STB") a "Notice of Exemption," seeking to abandon approximately 7.42 miles of rail line, which included the right-of-way over the property owned by Eula and leased by Nettles. To support its invocation of the exemption, the railroad certified that it had not run trains over the line for at least two years. The railroad published its Notice of Exemption in the Federal Register on March 21, 2013. By letter dated March 22, 2013, the Commission filed with the STB a request for a public-use condition, as well as a request for interim trail use pursuant to the Trails Act. In that request, the Commission indicated its willingness to assume responsibility for the management, legal liability, and payment of taxes for the right-of-way, and it acknowledged that use of the right-of-way for trail purposes was subject to possible future reconstruction and reactivation of the right-of-way for rail service. The railroad, in turn, filed a response indicating its willingness to negotiate with the Commission for interim trail use. On April 19, 2013, the STB issued a Notice of Interim Trail Use ("NITU") permitting the Commission and the railroad to negotiate a trail-use agreement. After the railroad and the Commission reached an agreement, the railroad quitclaimed its interest in the right-of-way to the Commission. The plaintiffs thereafter filed a complaint to quiet title to the right-of-way; they sought a judgment declaring that Eula owned the right-of-way in fee simple, as well as an injunction prohibiting the Commission from proceeding with the trail project pending resolution of the quiet-title action.

         On December 20, 2017, the trial court conducted a bench trial. At the close of the plaintiffs' evidence and again at the close of all the evidence, the Commission moved for a judgment as a matter of law on the basis that the plaintiffs' quiet-title action was federally preempted. The trial court denied those motions.

         On January 10, 2018, the trial court entered a final order quieting title to the right-of-way in the plaintiffs. The trial court, applying Alabama property law, held that the right-of-way had terminated by operation of law before the railroad purported to convey its interest in the right-of-way to the Commission. Accordingly, the trial court enjoined the Commission from proceeding with the recreational trail on the property owned by Eula and leased by Nettles. The Commission thereafter filed a motion requesting that the trial court alter, amend, or vacate its judgment or, in the alternative, order a new trial on the basis of federal preemption. Following a hearing, the trial court denied that motion. This appeal followed.

         III. Discussion

         1. Federal Preemption

         The Commission contends that the trial court lacked jurisdiction to hold that the right-of-way had been abandoned under state law because, its says, the STB has exclusive jurisdiction over abandonments of regulated rail lines. "We review de novo whether the trial court had subject-matter jurisdiction." Solomon v. Liberty Nat'l Life Ins. Co., 953 So.2d 1211, 1218 (Ala. 2006). It is undisputed that the Interstate Commerce Commission Termination Act ("ICCTA") vests the STB with exclusive jurisdiction over "(1) transportation by rail carriers" and "(2) the construction, acquisition, operation, abandonment, or discontinuance of spur, industrial, team, switching, or side tracks, or facilities" and states that "the remedies provided under this part with respect to regulation of rail transportation are exclusive and preempt the remedies provided under Federal or State law." 49 U.S.C. § 10501(b). The STB has explained that there are two broad categories of state regulation that are categorically preempted:

"Indeed, the courts have found two broad categories of state and local actions to be preempted regardless of the context or rationale for the action. The first is any form of state or local permitting or preclearance that, by its nature, could be used to deny a railroad the ability to conduct some part of its operations or to proceed with activities that the [STB] has authorized.
"Second, there can be no state or local regulation of matters directly regulated by the [STB]--such as the construction, operation, and abandonment of rail lines; railroad mergers, line acquisitions, and other forms of consolidation; and railroad rates and service.
"Both types of categorically preempted actions by a state or local body would directly conflict with exclusive federal regulation of railroads. Accordingly, for those categories of actions, the preemption analysis is addressed not to the reasonableness of the particular state or local action, but rather to the act of regulation itself.
"In other words, state and local laws that fall within one of the precluded categories are a per se unreasonable interference with interstate commerce. For such cases, once the parties have presented enough evidence to determine that an action falls within one of those categories, no further factual inquiry is needed.
"For state or local actions that are not facially preempted, the section 10501(b) preemption analysis requires a factual assessment of whether that action would have the effect of preventing or unreasonably interfering with railroad transportation."

CSX Transp., Inc.--Petition for Declaratory Order, STB Finance Docket No. 34662 (STB May 3, 2005)(internal citations omitted).

         "Despite its breadth, the jurisdiction of the STB does not foreclose every conceivable state claim." Sunflour R.R. v. Paulson, 670 N.W.2d 518, 523 (S.D. 2003). Rather, "[i]n all pre-emption cases, and particularly in those in which Congress has 'legislated ... in a field which the States have traditionally occupied,' ... we 'start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.'" Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)). The United States Supreme Court has explained this assumption: "We rely on the presumption because respect for the States as 'independent sovereigns in our federal system' leads us to assume that 'Congress does not cavalierly preempt state-law causes of action.'" Wyeth v. Levine, 555 U.S. 555, 565 n. 3 (2009) (quoting Lohr, 518 U.S. at 485). "The presumption thus accounts for the historic presence of state law but does not rely on the absence of federal regulation." 555 U.S. at 566 n. 3. The idea is that, although the STB has "exclusive and preemptive jurisdiction," this expansive jurisdiction is given for a specific reason: to prevent attempts by states to impose economic regulation on rail transportation. In other words, the goal of the STB is to limit, if not prevent, state regulation of interstate rail transportation to avoid the pitfalls and nuances of laws enacted by each state's legislature that would deter a railroad's ability to operate efficiently and the possibility of divergent regulations from each state.

         In this case, we are not faced with an Alabama regulation attempting to regulate rail transportation and to limit the use of rail property to deter interstate commerce. Rather, we are dealing with state property laws that existed before the advent of railroads, and we are asked to consider the impact of a railroad right-of-way, reserved in a quitclaim deed, on the rights of an adjoining property owner when the purpose of the right-of-way has lapsed by nonuse and the holder of the right-of-way attempts to transfer its interest to create a new use, not envisioned by the reservation of rights in the initial instrument conveying the right-of-way.

         In Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1001 (1984), the United States Supreme Court stated: "[W]e are mindful of the basic axiom that '"[p]roperty interests ... are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law."'" (Quoting Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161 (1980), quoting in turn Board of Regents v. Roth, 408 U.S. 564, 577 (1972).) In Oregon ex rel. State Land Board v. Corvallis Sand & Gravel Co., 429 U.S. 363, 378 (1977), the United States Supreme Court stated that, "[u]nder our federal system, property ownership is not governed by a general federal law, but rather by the laws of the several States." See also Davies Warehouse Co. v. Bowles, 321 U.S. 144, 155 (1944)("The great body of law in this country which controls acquisition, transmission, and transfer of property, and defines the rights of its owners in relation to the state or to private parties, is found in the statutes and decisions of the state."). It is clear then that, even in a regime of federal preemption, determining the ownership of real property requires a review of state law.

         2. State-Law Quiet-Title Action

         As indicated, the plaintiffs filed a complaint seeking to quiet title to the right-of-way. It is helpful to remember that the right-of-way was created by reservation in a 1997 quitclaim deed and that the railroad, as the holder of the easement, attempted to convey the right-of-way also by quitclaim deed. As a matter of Alabama law, the precise language and nature of the rights reserved under the 1997 quitclaim deed are critical in assessing whether the railroad had any right or title to effectively quitclaim its interests in the right-of-way to the Commission. The trial court determined that, under the quitclaim deed, the railroad reserved for itself a right-of-way for the maintenance and operation of a railroad only; that the railroad had changed the character of the right-of-way from a railroad right-of-way to a right-of-way for recreational trail use; that the railroad had abandoned the right-of-way when it failed to rebuild a burnt train trestle and removed the rails and cross ties from the right-of-way; and that the right-of-way was thus extinguished by operation of law. Accordingly, the trial court concluded that, because the right-of-way had been extinguished by operation of law, the railroad had nothing to convey to the Commission. See Benedict v. Little, 288 Ala. 638, 643, 264 ...

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