Court Opinion

ID: 2758965
Source: CourtListenerOpinion
Date Created: 2014-12-09 21:01:16.315199+00
Date Added: 2024-06-11T11:26:10.378005
License: Public Domain

In the United States Court of Federal Claims
                               No. 04-1544L
                         (Filed: December 9, 2014)

***********************
THE ELLAMAE PHILLIPS COMPANY,

                     Plaintiff,
                                                  Takings; Rails-to-Trails;
                                                  Abandonment of
v.
                                                  Easement; Calculation of
                                                  Damages.
THE UNITED STATES,

           Defendant,
***********************

       Cecilia C. Fex, Washington, DC, for plaintiff, with whom was George
M. Allen, Telluride, CO, of counsel.

      William J. Shapiro, Trial Attorney, United States Department of Justice,
Environment and Natural Resources Division, Sacramento, CA with whom
was Sam Hirsch, Acting Assistant Attorney General, Washington, DC, for
defendant.

BRUGGINK, Judge.

                                  OPINION

        This rails-to-trails takings case arises out of the conversion, by
operation of federal law, of a railway easement on plaintiff’s property in
Aspen, Colorado to a trail for public use. We have already established that
creation of the trail exceeded the scope of the easement. The Ellamae Phillips
Co. v. United States, 99 Fed. Cl. 483, 487 (2011). What remains is resolution
of a disagreement between the parties as to how to value the property before
and after imposition of the new easement. Specifically, the question is
whether the property in its “before” condition must take account of the railway
easement. The parties filed cross-motions for summary judgment on the issue.
The motions are fully briefed, and oral argument was heard on September 26,
2014. After oral argument, we asked for and received supplemental briefs
regarding whether Colorado state law applied to the question of abandonment.
We hold that the proper measure of damages is a comparison of the property
without the rail easement to the property with the trail easement. We thus
grant plaintiff’s motion for partial summary judgment and deny defendant’s
motion for partial summary judgment.

                              BACKGROUND

       The land subject to the taking is located in Aspen, Colorado and was
originally held by the federal government. In 1886, the government granted
a 200 foot wide railway corridor through the tract to the Grand Valley Railway
Company pursuant to the General Railroad Right of Way Act of March 3,
1875, 18 Stat. 482 (“The 1875 Act”).1 The railroad built a rail line, known as
the Aspen Branch Line, the next year. The subject property, already traversed
by the rail line, was transferred by land patent to plaintiff’s predecessor-in-
interest in 1923. The Phillips family acquired the property later that decade.2

       The rail line changed hands a number of times through acquisitions and
mergers over the years. Rail operations ceased on the Aspen Branch Line in
the 1980s. The last entity to hold the easement was the Roaring Fork Railroad
Holding Authority (“RFRHA”).3 On June 30, 1998, RFRHA submitted an
application to the Surface Transportation Board (“STB”) to convert the railway
into a recreational trail pursuant to the National Trails System Act
Amendments of 1983, Pub. L. No. 98-11, 97 Stat. 48, which gives authority
to the STB to preserve unused railways for future use by converting them to
recreational trails if a public or private entity is willing to assume

1
  This case has been the subject of three previous judicial opinions, two from
this court and one from the Federal Circuit. A fuller recitation of the factual
background and legal framework of this case can be found in those opinions.
See 77 Fed. Cl. 378 (2007) (“Ellamae I”) (holding that the conversion, by
operation of federal law, of a railway easement to a recreational trail was a
taking); 564 F.3d 1367 (Fed. Cir. 2009) (reversing and remanding, holding that
the trial court should consider the issue of the scope of the easement prior to
a finding of liability) (“Ellamae II”); 99 Fed. Cl. 483 (“Ellamae III”) (holding
that the scope of the railway easement was exceeded by the conversion to a
recreational trail easement).
2
 Plaintiff is a limited liability partnership, and its members are the three
children of the late Ellamae Phillips.
3
 RFRHA is a Colorado inter-governmental entity regulated by the Surface
Transportation Board.

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responsibility for the trail in the interim.4 See 16 U.S.C. § 1247(d) (2014).
The STB granted the application and issued a Notice of Interim Trail Use
(“NITU”) on October 15, 1998, which prevented the abandonment of the
easement and allowed for finalization of the trail plan. The railway was
converted, and the corridor is now used as a paved, public bike path.

        Plaintiff brought suit here, alleging that the conversion of the railway
right-of-way to a public path was a taking of its right to the enjoyment of its
unencumbered property, which it would have had absent the conversion to
bike path because the rail easement would have terminated. It is established
that use as a bike path exceeded the scope of the easement and that plaintiff’s
property rights have been taken. Ellamae III, 99 Fed. Cl. at 486-87. The
question remains how to value the property interest taken. The parties
undertook a collaborative valuation process, retaining separate appraisers, but
with the aim of reaching a settlement. They disagree, however, on a key
assumption going in to the appraisers’ calculus: the condition of the property
in its before-taking state. Plaintiff urges that the proper measure starts with its
land in fee simple, unencumbered by any easement; defendant argues that,
prior to the NITU and trail conversion, the property was subject to a rail
easement, and thus that is the before condition of the land.

                                 DISCUSSION

         We decide motions for summary judgment by considering whether
there is a “genuine dispute as to any material fact and the movant is entitled to
a judgment as a matter of law.” Rule 56(c)(1) of the Rules of the United States
Court of Federal Claims. The moving party has the burden of showing that it
is entitled to judgment as a matter of law, that is to say that there is no material
fact in dispute. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962).
Inferences drawn from the underlying facts should be drawn in favor of the
non-moving party. See id. at 655. The same standard applies to cross-
motions; we “evaluate each party’s motion on its own merits, taking care in
each instance to draw all reasonable inferences against the party whose motion
is under consideration.” Mingus Constructors, Inc. v. United States, 812 F.2d
1387, 1391 (Fed. Cir. 1987).

       The Fifth Amendment mandates that, when the United States takes
private property for public use, the government must pay “just compensation”

4
    This is the process known as “railbanking.”

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as “reimbursement to the owner for the property interest taken.” United States
v. Va. Elec. & Power Co., 365 U.S. 624, 633 (1961). The government must
pay for whatever interest was taken, putting the owner “in as good a position
pecuniarily as if his property had not been taken.” Olson v. United States, 292
U.S. 246, 255 (1934). Plaintiff must be “made whole but is not entitled to
more.” Id.

        What the government has taken in this case is an easement for
recreational trail use, a partial taking. The measure of compensation is the
diminution in value to the underlying tract caused by the imposition of the
easement. Rogers v. United States, 101 Fed. Cl. 287, 292 (2011); see
generally United States v. Miller, 317 U.S. 369, 376 (1943) (“If only a portion
of a single tract is taken, the owner’s compensation for that taking includes any
element of value arising out of the relation of the part taken to the entire
tract.”). In order to determine that sum, an appraiser must know what the
value of the property was before the taking and compare it to the value after
the taking.

        Defendant’s argument is straight forward. Prior to the railbanking
process, plaintiff held a piece of land that was subject to an easement for
operation of a railway. Plaintiff now holds a piece of land subject to an
easement for recreational trail use. Presumably the difference in value is
slight, or at least slighter than an unencumbered tract. Defendant makes much
of the fact that the court has not resolved the abandonment question and
highlights plaintiff’s insistence that it was not relying on a theory of
abandonment during the liability phase of the litigation. See Ellamae III, 99
Fed. Cl. at 487 (“[W]e have no need to address the contingent issue of
abandonment. Morever, Plaintiff no longer relies on abandonment.”).
Defendant goes further to argue that plaintiff has not established abandonment
prior to the conversion from rail to trail use, nor could it. Defendant states, in
fact, that RFRHA never intended to abandon its interest in a railway easement
because it purchased the Aspen Branch Line in order to preserve the rail
corridor both for future public transportation and present recreational trail use.
See Def.’s Mot. for Summ. J. Ex. 13, ¶¶ 9-10 (Newland Decl.). Defendant
points to a RFRHA plan for the possible future construction of a light rail
along the corridor to ease local traffic to the Aspen area. See id. ¶ 14-15
(Newland Decl.). In defendant’s view then, plaintiff cannot establish that the
rail easement was abandoned, and the property must be valued in an
encumbered before state.

       Plaintiff counters that the law in the Federal Circuit is settled: the

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issuance of a NITU by the STB is a taking of the possibility that the property
will return to an unencumbered state. The operation of the railbanking
process, specifically through the NITU, prevents abandonment or other
extinguishing of the easement. Plaintiff points out that the focus in a takings
damage calculation is what was taken from the owners or, in other words, the
loss suffered. The only logical starting point for a damages calculus in these
circumstances is the value of the property unencumbered, argues plaintiff.
Further, even if we considered the question of abandonment under state or
federal law, the easement was abandoned or extinguished due to the contrary
use of the trail. There is no question that the Holding Authority intended to
abandon the easement under state law, according to plaintiff, because it took
an affirmative action “manifesting an intention to abandon the easement,”
which was its application to the STB to use the corridor for a use other than
rail traffic. Westpac Aspen Inv., LLC v. Residences at Little Nell, 284 P.3d
131, 137 (Colo. Ct. App. 2011). In sum, plaintiff’s view is that, although it
need not prove abandonment, the very process of railbanking and subsequent
trail creation is proof of intent to abandon. Thus plaintiff concludes that the
measure of damages must start with unencumbered property under either legal
approach.

        We agree with plaintiff that, when the scope of the rail easement was
exceeded by the recreational trail, the measure of damages is based on
plaintiff’s unencumbered enjoyment of its property. No other basis would
make plaintiff whole.

        The Federal Circuit clarified the fundamental nature of the taking in
rails-to-trails cases in its Caldwell v. United States decision and succeeding
cases. In that case, considering the question of the timing of the taking, the
circuit held that the issuance of the NITU, “prevents the operation of state laws
that would otherwise come in to effect upon abandonment–property laws that
would ‘result in extinguishment of easements for railroad purposes and
reversion of rights of way to abutting landowners.’” 391 F.3d 1226, 1229
(Fed. Cir. 2004). The clock for statute of limitations purposes begins running
when the NITU issues because it is at that point that any recovery of the
property unencumbered is prevented, whether temporarily or permanently. See
id. at 1234, 1234 n.7. It follows that, even when no trail has been created by
the time of suit, a taking nonetheless results from the issuance of the NITU.
See Ladd v. United States, 630 F.3d 1015, 1019 (Fed. Cir. 2010).

       Justice O’Connor’s concurrence in the seminal Presault I decision is
particularly apt in describing how the law operates in these circumstances:

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“The Commission’s actions may delay property owners’ enjoyment of their
reversionary interests, but that delay burdens and defeats the property interests
rather than suspends or defers the vesting of those property rights.” Presault
v. Interstate Commerce Comm’n, 494 U.S. 1, 22 (1990) (O’Connor, J.
concurring).5 Plaintiff’s right to receive the property back in fee simple if the
railroad right-of-way is abandoned is, as Justice O’Connor stated, defeated by
the operation of the Trails Act. The logical import of these holdings for the
quantum of damages is that the property would be unencumbered absent
operation of the Trails Act. The damages inquiry thus starts with the
presumption of an unencumbered piece of land. It would be a logical nullity
to hold that the only measure of damages is the difference between the value
of the two easements when the very law that effected the imposition of the new
easement prevented the old one from expiring.

        The question of abandonment remains relevant in rails-to-trails cases
only when the scope of easement was not exceeded by the trail use. The
circuit presumed as much in its instructions to this court on remand. The court
directed us to consider whether the recreational use was encompassed in the
1875 Act’s grant of easement. Had we answered that question in the
affirmative, the court further directed us to consider “whether the railroad
terminated its right-of-way by abandonment.” Ellamae II, 564 F.3d at 1374.
We found that the trail use exceeded the scope of the easement and skipped the
question of abandonment as unnecessary.6 Ellamae III, 99 Fed. Cl. at 487.

       This court has been unanimous in its decisions considering the measure
of damages in this context. In Whispell Foreign Cars, Inc. v. United States,
we held that plaintiff need not show termination of the rail easement because
the Trails Act prevents abandonment, which necessarily presumes that the
property would be unencumbered but for the operation of the act. 106 Fed.
Cl. 635, 642 (2012) (citing Caldwell and Ladd). In Rogers v. United States,
we held that abandonment is presumed in this context because the NITU
prevents it from occurring. 101 Fed. Cl. 287, 293-94 (2011). Judge Williams

5
 The “Commission” referenced in the quote above is the Interstate Commerce
Commission, the predecessor to the STB.
6
  A plaintiff could premise its takings theory on abandonment of the rail
easement prior to the NITU or the creation of a trail, and plaintiffs have done
so in this court, but given the Federal Circuit’s holdings in Caldwell and its
progeny, that is no longer necessary to a finding of liability.

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found that the government’s insistence that plaintiff needed to prove a
common law abandonment under state law was unnecessary under the Trails
Act, in part because the federal railbanking statutory scheme subsumes the
question. See id. at 293.7

        In Howard v. United States, we considered the question of
abandonment under Indiana law, and because of the operation of a state
statute, found that the easement at issue was not abandoned. 106 Fed. Cl. 343,
354-61 (2012). Judge Horn held that the federal government could not escape
liability for imposing a new easement even though the original easement had
not been abandoned under state law because the Trails Act had, in effect,
imposed an easement “in perpetuity.” Id. at 367. We measured the value of
interest taken based on an unencumbered property. Id.

       Our recent decisions in the Ladd case followed suit, determining that
damages were to be measured based on an unencumbered state of the property
because the “trail use authorized by the NITU exceeds the scope of the
Railroad’s 1875 Act easements,” making the question of abandonment
irrelevant. 108 Fed. Cl. 609, 614-15 (2012). Judge Hodges recognized that
abandonment is only reached in these cases when “a court can find that trail
use by the general public was an acceptable purpose according to the terms of
the easement.” Id. The court went on to order the determination of damages
based on the subtraction of the value “of plaintiff’s land with easements for
recreational trails, from their land without easements–unencumbered
property.” 110 Fed. Cl. 10, 13 (2013).

       In sum, we conclude that the calculation of damages assumes a piece
of property completely unencumbered by the prior railroad easement. It is
unnecessary for plaintiff to establish abandonment.

7
 Judge Williams also provided an additional rationale for her decision, which
was that proving abandonment would “thwart a proper construction” of the
deed at issue in that case. Rogers, 101 Fed. Cl. at 294. In that case, the deed
specifically stated that the railway’s interest would revert to the holder of the
underlying land upon the cessation of rail operation. Id. This is, contrary to
defendant’s assertion, not a reason to distinguish Rogers from the present
dispute. It was an additional basis to rule for plaintiff, but not strictly
necessary to the result.

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                              CONCLUSION

       We grant plaintiff’s motion for partial summary judgment and deny
defendant’s motion for partial summary judgment. The parties are directed to
consult and file a joint status report on or before December 23, 2014,
proposing further proceedings.

                                         s/Eric G. Bruggink
                                         ERIC G. BRUGGINK
                                         Judge

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