Real Estate & Property Law

Cal. Ct. Appeal: Nominal Compensation In Takings Of Railroad Property

By Robert Thomas (inversecondemnation.com)

In City of Oakland v. Schenck, 197 Cal. 456 (1925), the California Supreme Court held that when a railroad's property is being taken, nominal compensation and not fair market value may be the appropriate measure of "just compensation."

Schenck held that "where a street is opened across a railroad right of way, the rule as to the amount of compensation to be allowed the railroad company is different from the rule which prevails in the case of the taking of the property of an individual for like uses." Schenck, 197 Cal. at 460-61. Nominal compensation may be due if the property's use as a railroad will not be greatly impacted by placing a road across it. In other words, putting a road across railroad tracks don't substantially impact the value of the railroad tracks.

In City of San Jose v. Union Pacific Railroad Co., No. H033503 (June 11, 2010), the California Court of Appeal (Sixth District) applied the Schenck rule to a condemnation by the City of easements over the railroad's property in order to widen an existing road across the tracks. The trial court concluded that the taking of the portions of the railroad's property within the "Necessary Track Clearance Width" resulted in nominal compensation under the rule of while the taking of the railroad's property outside that area was not subject to the Schenck rule because Union Pacific did not use that property for its tracks. Both parties appealed. The court of appeals summed up the case:

At the heart of the dispute is whether City of Oakland v. Schenck (1925) 197 Cal. 456 (Schenck), is controlling authority. We conclude that it is. We therefore affirm the judgment.

Slip op. at 1. Union Pacific conceded the facts were indistinguishable from Schenck but argued that the case had been decided under a statute which was later superceded by the 1975 Eminent Domain Code (Cal. Code. Civ. P. § 1230.010 et seq.). The court rejected the argument and concluded that the result in Schenck was compelled by the "constitutional concept of reasonable compensation rather than the condemnation statute then in effect." Slip op. at 6. The court continued:

Schenck made this point in the language we emphasized earlier by explaining that the rule as to the amount of compensation to be allowed a railroad company for a public crossing is different from the ordinary rule because one of the incidents of the public use to which a railroad company dedicates its property used as a right of way is the right of the public to construct street crossings wherever and whenever reasonably necessary. Thus, in condemning an easement for a street across a railroad right of way, the inquiry must be directed to ascertaining the extent to which the value of the company?s right to use the land for railroad tracks will be diminished by the opening of the street across it.

Slip op. at 7-8. The City's taking of an easement within the Necessary Track Clearance Width to widen a road no different, and the court applied the nominal compensation rule.

The court, however, also rejected the City's claim that the same rule applied to the Union Pacific land outside of the Necessary Track Clearance Width. The court held that on that land, the taking would have more than a nominal impact on Union Pacific's right to use the land for railroad tracks (since it did not have tracks there).

Full post as published by inversecondemnation on June 12, 2010 (boomark / email).