Opinion ID: 4242640
Heading Depth: 4
Heading Rank: 1

Heading: Pre-1871 Acts

Text: With respect to the pre-1871 Acts, the parties’ competing interpretations stem from the Supreme Court’s differing descriptions of the rights conveyed by the acts. Townsend squarely described the interest conveyed as a fee simple determinable, or in more modern parlance, a fee simple defeasible: The estate in fee simple defeasible is a present interest that terminates upon the happening of a stated event that might or might not occur. The subcategories historically known as the 20 WELLS V. UNION PAC. R.R. CO. fee simple determinable, the fee simple subject to a condition subsequent, and the fee simple subject to an executory limitation are no longer recognized but are absorbed under the term fee simple defeasible. Restatement (Third) of Prop.: Wills & Other Donative Transfers § 24.3 (Am. Law Inst. 2011). In describing the grant “as though the land had been conveyed in terms to have and to hold the same so long as it was used for the railroad right of way,” Townsend, 190 U.S. at 271, the Court used the classic language of limitation. See Restatement (Third) of Prop.: Wills & Other Donative Transfers § 24.3 cmt. e (Am. Law Inst. 2011) (“The language that characterized the fee simple determinable . . . was called ‘language of limitation’— language such as ‘during,’ ‘until,’ ‘while,’ ‘so long as,’ or ‘for so long as.’”). Its description of the government’s “implied condition of reverter,” 190 U.S. at 271, was also a clear reference to the fee simple determinable. See Restatement (Third) of Prop.: Wills & Other Donative Transfers § 24.3 cmt. b (Am. Law Inst. 2011) (“A fee simple determinable could be followed by either a reversionary or a nonreversionary future interest. If the following future interest was a reversionary future interest, it was called a ‘possibility of reverter.’”). As the owner of the fee, the railroad could do anything an owner in fee simple absolute could do, as long it was not inconsistent with the language of limitation. See Restatement (First) of Prop. § 49 (Am. Law Inst. 1936) (“The privilege of the owner of a possessory estate in fee simple defeasible to use the land is identical with that of an owner of a possessory estate in fee simple absolute, except that the privilege is limited by a duty not to commit waste.”). For example, as the WELLS V. UNION PAC. R.R. CO. 21 Court held in Townsend, alienation would be inconsistent with the limitation. The “limited fee” described in Townsend does not restrict use of the right of way to railroad purposes and would, therefore, resolve the first certified issue in favor of Union Pacific, at least with respect to the pre-1871 Acts. The California Court of Appeal and the district court, however, both relied on the later statement in Union Pacific that “[t]he most that the ‘limited fee’ cases decided was that the railroads received all surface rights to the right of way and all rights incident to a use for railroad purposes.” 353 U.S. at 119. While Union Pacific’s narrowing of Townsend and the other “limited fee” cases is binding and those cases therefore do not control the outcome here, neither does Union Pacific lead to the opposite result. The Court in Union Pacific laid great emphasis on the nature of the claimed right: extraction of oil from the subsurface mineral estate under the right of way. Accordingly, it was not inappropriate for the Court to invoke the proviso in section 3 of the 1862 Act expressly excluding “mineral lands” from the grant. We disagree with the district court (and the California Court of Appeal) that “the railroad’s lease of the portions of the subsurface of the servient estate is a use essentially no different than the use of extracting oil and gas.” In re SFPP Right-of-Way Claims, 2016 WL 3456985, at . While oil and mineral resources may be located beneath the surface, it is not correct to say that the “subsurface” and “mineral lands” are synonymous. Rather, the legally relevant distinction is between the “surface estate” and the “mineral estate,” not the “surface” and the “subsurface”: 22 WELLS V. UNION PAC. R.R. CO. A grant or reservation of minerals effects a horizontal severance of the rights in the land and creates two separate estates—one in the minerals and one in the surface. (“Surface” is defined as the entire estate, including the subterranean estate, other than the severed minerals.) 9 Richard R. Powell et al., Powell on Real Property § 63.06[2] (Michael Allan Wolf ed., 2017) (emphasis added). By its terms, section 3’s proviso prevents the grantee from extracting mineral resources, not from using the subsurface for any other purpose. This is in keeping with the common law’s distinction between an ordinary easement (“a nonpossessory right to enter and use land”) and a profit à prendre (“an easement that confers the right to enter and remove timber, minerals, oil, gas, game, or other substances”). See Restatement (Third) of Prop.: Servitudes § 1.2 (Am. Law Inst. 2000). Thus, Union Pacific’s observation that the railroads “received all surface rights to the right of way” under the 1862 Act, 353 U.S. at 119, should not be understood to mean that the railroads received no rights in the subsurface. We acknowledge that the Eighth and Tenth Circuits did not make the same distinction in the ETSI Cases. Both courts took Union Pacific’s reference to “surface rights” to refer to the physical surface of the land, to the exclusion of any rights in the subsurface. In our view, however, that reading was subsequently undermined by Brandt, which reaffirmed the longstanding consensus that the 1875 Act reflected a major shift in policy from the pre-1871 Acts. See 134 S. Ct. at 1264 (“The Court accepted the Government’s position that prior WELLS V. UNION PAC. R.R. CO. 23 cases describing the nature of pre-1871 rights of way . . . were ‘not controlling,’ because of the shift in congressional policy after that year.” (citing Great N. Ry., 315 U.S. at 277–78 & n.18)). If Union Pacific means what the California Court of Appeal and the district court took it to mean, then the interest conferred by the pre-1871 Acts is essentially the same as that conferred by the 1875 Act (as explained below). For these reasons, we hold that, while Union Pacific modified Townsend’s holding to stand only for the proposition that the railroads obtained at least the rights necessary to carry out railroad purposes under the pre-1871 Acts, it did not go further and hold that “railroad purposes” actually defined the outer limits of the grants. In other words, Union Pacific instructs us that Townsend does not control the result in this case, but does not itself tell us whether the pre1871 Acts require a railroad purpose. Instead, we find the answer in Brandt, which reaffirmed that the 1875 Act conveyed an interest different from that conveyed by the pre-1871 Acts. Because the landowners’ position would eliminate that difference, we hold that the pre1871 Acts conferred a fee simple defeasible in everything except the mineral estate. That interest entitles Union Pacific to lease the subsurface as well as the surface of its right of way to SFPP as long as it continues to use the right of way to operate a railroad, regardless of whether the pipeline itself serves a “railroad purpose.”