MacErich Real Estate Co. v. City of Ames

Citations: 433 N.W.2d 726; 1988 Iowa Sup. LEXIS 338; 1988 WL 136854Docket: 87-1754

Court: Supreme Court of Iowa; December 21, 1988; Iowa; State Supreme Court

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The case involves a dispute over title to a strip of abandoned railroad land in Story County, Iowa, between Macerich Real Estate Company and Midwest Centers (collectively referred to as Macerich) and the City of Ames. Macerich claims title based on Iowa Code sections 327G.76 and .77, arguing that the original deeds to the railroad conveyed only an easement, which was extinguished when the railroad abandoned the property. The City of Ames, however, contends that the deeds granted a fee simple title, which it received through a quitclaim deed from the railroad in 1985.

The district court ruled in favor of Macerich, leading to the city’s appeal. The Supreme Court of Iowa affirmed this ruling, focusing on three main issues: (1) whether the original deeds to the railroad constituted an easement or a fee; (2) if the railroad's interest was indeed an easement, whether it was extinguished under Iowa Code section 327G.76; and (3) the constitutionality of applying section 327G.77. The original deeds, known as the Black and Hoggatt deeds, described the transfer of a right-of-way for railroad purposes, and Macerich argued that, per Iowa case law, these deeds only conveyed an easement. The court agreed with Macerich’s interpretation, determining that the city received no substantive interest under its quitclaim deed.

In Hawk v. Rice, 325 N.W.2d 97, 99 (Iowa 1982), the court examined a deed granting a railroad a right-of-way for construction and operation purposes. The granting clause specified the conveyance to the railroad, while the habendum clause indicated perpetual rights, contingent upon the railroad being constructed by June 1, 1882, and not ceasing permanent use thereafter. Hawk contended the deed conveyed only an easement, while Rice argued it granted a determinable fee. The court referenced a precedent in Iowa law, asserting that similar language in deeds typically conveys only an easement for railroad purposes rather than a fee. The court emphasized that the grantor's intent, determined by the deed's language, is paramount, and concluded that the deed in question conferred an easement for railroad purposes.

The ruling then turned to the second issue regarding the extinguishment of the easement. The court analyzed Iowa Code section 327G.76, which governs the extinguishment of railroad property rights upon cessation of service. It stipulates that rights are extinguished when the railroad authority removes track materials or, if not removed, one year after final abandonment authorization is obtained. This interpretation is crucial for both parties, as it affects the potential transfer of title to adjoining property owners under section 327G.77. Macerich claimed the easement was extinguished, while the city contested this assertion.

Section 327G.76 addresses the extinguishment and divestment of railroad property rights upon cessation of service. The statute indicates that these rights extinguish when a railroad or the railway finance authority removes track materials from the right-of-way. The distinction between "extinguishment" and "divestment" is central to the case. The city interprets the statute as applying only to rights already extinguished, while Macerich asserts that it applies to rights that extinguish upon cessation of service. The court rejects the city's interpretation, affirming that section 327G.76 does effectuate extinguishment, supported by section 327G.77, which states that property passes to adjacent property owners upon extinguishment. The historical context of the statute also reinforces this interpretation, as prior versions explicitly provided for rights to extinguish upon railroad abandonment.

The court concludes that the cessation of service before 1985 resulted in the extinguishment of the railroad’s easement. Additionally, section 327G.76 outlines that rights divest when track materials are removed or, if not removed, one year after authorization to do so is obtained. The city contends that it received a quitclaim deed from the railroad between cessation of service and before rights divested, implying the railroad retained conveyable rights. Conversely, Macerich argues that, at the time of the quitclaim deed in December 1985, the railroad's rights had already been extinguished, despite not yet having divested. The court agrees with Macerich, clarifying that "divest" pertains only to the loss of the right to remove track materials and does not affect the extinguished easement. Legislative history indicates the statute aims to prevent reversionary rights from vesting until track materials are removed. Ultimately, the court finds that when the quitclaim deed was issued, the railroad had no rights to convey beyond those necessary to remove track materials.

The city's position lacks evidence of intent to maintain railroad operations. The railroad's easement has been extinguished under Iowa Code section 327G.76, with property rights transferring to adjacent property owners, specifically Macerich, upon abandonment as per Iowa Code section 327G.77. The city raises a constitutional issue, claiming that applying section 327G.77 infringes on its property rights. However, the district court determined that the city lacks standing to contest the statute's constitutionality, as standing is contingent on demonstrating a legally recognizable harm. The city's claim to the property is derived solely from a quitclaim deed from the railroad, which conveyed no interest. Thus, the city does not qualify as harmed by the alleged unconstitutional deprivation and cannot assert such claims. The court affirms the district court's ruling, rejecting the constitutional argument and finding no grounds for reversal.