Chicago, R.I. & P.R. Co. v. City of Iowa City

• Decision Date: 20 February 1980
• Docket Number: No. 63033,63033
• Citation: 288 N.W.2d 536
• Parties: CHICAGO, ROCK ISLAND AND PACIFIC RAILROAD COMPANY, Appellee-Cross-Appellant, v. CITY OF IOWA CITY, and all unknown claimants and all persons unknown claiming any right, title or interest in and to the following described real property situated in the County of Johnson, State of Iowa, to-wit the East 160 feet of a parcel of land known as South Market Square in the City of Iowa City, Iowa, Appellant-Cross-Appellee.
• Court: Iowa Supreme Court

Page 536

288 N.W.2d 536

CHICAGO, ROCK ISLAND AND PACIFIC RAILROAD COMPANY, Appellee-Cross-Appellant, v. CITY OF IOWA CITY, and all unknown claimants and all persons unknown claiming any right, title or interest in and to the following described real property situated in the County of Johnson, State of Iowa, to-wit the East 160 feet of a parcel of land known as South Market Square in the City of Iowa City, Iowa, Appellant-Cross-Appellee.

No. 63033.

Supreme Court of Iowa.

Feb. 20, 1980.

Robert H. Bowlin, Iowa City, for appellant-cross-appellee.

James D. Polson and William W. Graham, of Gamble, Riepe, Burt, Webster & Davis, Des Moines, for appellee-cross-appellant.

Considered by REYNOLDSON, C. J., and HARRIS, ALLBEE, McGIVERIN and LARSON, JJ.

HARRIS, Justice.

This dispute between the plaintiff railroad and defendant city is over ownership of land in Iowa City. The question is whether the railroad or the city owns the east half of South Market Square and an easement over a part of the west half of South Market Square. South Market Square is a block located within the city. We adopt as our own the following from the findings of fact of the trial court:

This lawsuit has its origins a century ago when, in 1878, the city enacted ordinance no. 340 perpetually granting to the Burlington, Cedar Rapids & Northern Railway Company right of way within the city and granting the use, perpetually, of South Market Square "on which to erect either a passenger station or stations, or freight depots or both, and on and over which to construct and operate any and all railroad tracks, sidetracks and switches, which may, in the judgment of said railway company, be or become necessary in constructing and operating the railroad of said company through and using said depot or station grounds in Iowa City."

Section 7 of the ordinance provides: "This ordinance may be repealed and the grants and privileges herein conveyed, revoked, by the city council of Iowa City, upon the failure of the said railway company, its successors or assigns, to comply with the terms or conditions herein; but no such action shall be taken or had until after thirty days' notice to said railway company, its successors or assigns, of such failure, and the refusal or right of said company, its successors or assigns to comply with said terms or conditions within thirty days thereafter."

Plaintiff railroad is the legal successor in interest and assignee of all the rights and properties of the Burlington, Cedar Rapids & Northern Railway Company. Ordinance no. 340 was never repealed. Plaintiff owned railroad tracks traversing South Market Square and used those tracks.

On June 3, 1937, John Nash, a wholesale grocer, leased from the railroad about 52 feet of the eastern-most usable portion of South Market Square. This leasing is hereinafter referred to as the railroad-Nash lease. The lease provided that the leased premises were to be used exclusively as a location for a warehouse for wholesale groceries. The city advised the railroad that it owned the property, so on August 27, 1937, a lease was entered into between the city and Nash, hereinafter referred to as the city-Nash lease. This lease is "for warehouse purposes and incidental uses," and provides: "Lessee shall have the right to erect the necessary buildings to use for warehouse purposes and incidental uses and shall have the right to remove the same whenever this lease is finally terminated." The lease also grants to the lessee an option to renew the lease for an additional 25 years upon the same terms and conditions at the expiration of the initial 25-year period provided for in the lease.

Nash built and operated a grocery warehouse on the premises he leased. He paid $50 a year rent, but he testified that he does not recall whether he paid the rent to the city or to the railroad.

In 1946 the city and the trustees of the railroad entered into an agreement providing for the division of South Market Square between the parties by exchange of quitclaim deeds to the east and west halves thereof, and pursuant to that agreement the railroad conveyed by quitclaim deed to the city the west 160 feet of South Market Square and the city conveyed by quitclaim deed to the railroad the east 160 feet of South Market Square. Shortly thereafter, the city assigned to the railroad its interest as lessor under the city-Nash lease.

In 1961 Nash assigned to Eljon, Inc., his interest as lessee under the city-Nash lease. The assignment recites that Nash would exercise the 25-year renewal option, and this apparently was done. From 1965 to September 1, 1973, the warehouse building on the leased premises was subleased to the United States Post Office.

In 1968 the city took possession of the east half of South Market Square (except the warehouse building) and has retained possession continuously to the present. This possession by the city has never been acquiesced in by the railroad. The city used the property for parking.

In November of 1973 Nash and Eljon, Inc., assigned to the city the lessee's interest in the city-Nash lease.

In the summer of 1974, the city tore down the warehouse building.

Since taking possession of the east half of South Market Square, the city has removed therefrom railroad tracks and ties, paved a substantial portion thereof with asphalt, and installed parking meters.

Under date of October 29, 1975, the railroad notified the city that it considered the city to be in default on the city-Nash lease and that the lease would be cancelled within ten days from the mailing of the letter. Under date of January 12, 1976, the railroad wrote to the city reiterating that the leasehold interest of the city was terminated as of November 8, 1975, reciting the land's development as a municipal parking lot, a use inconsistent with the original lease terms, and reciting "radical changes made to the property without the consent of the Rock Island Railroad."

This lawsuit was commenced October 10, 1974.

The trial court found for the railroad, and upheld its title to the east half of the square and its easement on the west half where its tracks had run. The city was found to be the lessee under the city-Nash lease under its assignment from Nash and Eljon, Inc., but the lease was held terminated on November 10, 1975. The railroad was awarded immediate possession of the entire east half of the square. Damages were allowed for use of that area, less the leasehold, from October 10, 1969, to November 10, 1975, and for use of the whole east half of the square from November 10, 1975, to October 31, 1978, the date of the judgment.

The damages, computed according to the property's fair rental value, amounted to $107,106.10, plus statutory interest and costs. The city was found justified in removing the warehouse. The trial court found that the railroad failed to prove any damages resulted from the removal of the tracks. Also, although the city's affirmative defenses were refused, it was allowed a setoff of $23,000 for its permanent improvement to the lot.

I. We should first review the trial court's conclusion that the city-Nash lease was valid and subsisting until November 10, 1975. This ruling is challenged by the railroad on cross-appeal. The railroad argues that in 1937, when the city-Nash lease was executed, the railroad held the sold possessory interest in the property because of ordinance 340. Hence, the railroad argues, the city had no power to grant the leasehold purportedly created.

The city, in support of the trial court's holding, contends that ordinance 340 conveyed to the railroad a franchise, amounting to a mere incorporeal hereditament. Because only a franchise was granted, the argument continues, it did not amount to an easement that was an alienable interest in realty. The railroad counters by pointing to language in ordinance 340, "granting the right of way . . . ."

It is obvious that the argument on this issue turns on the granting authority of the city at the time ordinance 340 was adopted. We agree with the trial court, and the city, that the city, for lack of power to do so, did not grant an easement by ordinance 340.

The ordinance was adopted long prior to the advent in 1968 of the Iowa municipal home rule amendment. Iowa Const. amend. XXV. Prior to that time municipalities enjoyed only such powers as were specifically accorded them by the general assembly. The home rule amendment reversed this principle and granted municipalities those powers and authorities, except for tax-levying authority, which were not inconsistent with the laws of the general assembly. Green v. City of Cascade, 231 N.W.2d 882, 885 (Iowa 1975).

Under the law then in effect the authority of a municipality to grant even a franchise for railroad purposes was often disputed. Power to grant a franchise for railroad purposes in city streets was originally not accorded Iowa...