AgriLaw: Who Owns Surplus Railroad Lands?

Railway companies historically acquired portions of agricultural lands for the construction and operation of their railways. Upon a company’s cessation of railway operations, is the company entitled to convey the lands, or alternatively, do the lands revert to the current owner of the agricultural property?

In a recent decision of the Ontario Superior Court, the owners of agricultural lands had conveyed a portion of their lands in 1871 to a railway company pursuant to its statutory powers to acquire such lands and expressed to be “taken for the line of the said Railway” and “for the purpose of their Railway”. In 2002, the railway company determined that the lands were no longer required for its operations and the railway company subsequently conveyed the lands to the municipality to be incorporated into a municipal recreational trail. The current owners of the agricultural lands objected to this conveyance and asserted that the railway company’s interests in the lands terminated upon its cessation of use and that the lands thereby reverted to the current owners. The municipality commenced a court action against the current owners and the current owners counterclaimed with both parties seeking a declaration of their fee simple ownership.

In considering the respective claims of the parties upon the defendant current owners’ motion for judgment, the court commented:

“The over-arching principles in disputes of this kind are well settled. In order to define the nature of the interest acquired by [the railway company] the court must examine: (i) the language of the applicable statutes; (ii) the transactional documents between the original parties; and (iii) subsequent actions and declarations.”

In the case under consideration, the court noted that the relevant legislation authorized the railroad company not only to purchase lands for its operations but also “to alienate, sell or dispose of the same”. In addition, the legislation expressly provided that, following the railway company’s payment to acquire the lands, “any claim to or encumbrance upon the said lands” was limited to a claim for compensation. The court contrasted these statutory provisions to an earlier Supreme Court of Canada case in which the company’s interest was determined to be limited to a statutory easement in the nature of a right-of-way which, upon the company’s cessation of use, reverted to the current owners of the agricultural lands. In that case, the legislation itself distinguished between the railway company and the “owner” of the lands traversed by the railroad even after the lands have been acquired. In considering this difference in statutory provisions, the court concluded:

“As long as the acquisition of real property was for a purpose related to the establishment, maintenance and/or operation of a railroad, [the railway company] was statutorily empowered to acquire a fee simple interest in land. The company could do so by negotiating an agreement with a landowner or in the event of an unwillingness to sell, through a process akin to expropriation.”

Similarly, the court concluded that both the transactional documents and subsequent events in the case under consideration supported the plaintiff municipality’s claim to fee simple ownership. The court stated:

 “No wording was included within the [original conveyance] which suggested, for even an instant, that the Lands would revert to [the original vendor] or any successor in title in the event they ceased to be used for railway purposes …

“In this case, [the railway company] executed a deed/transfer of land [to the municipality]. The schedule attached to that document described the [original conveyance] [the railway company] had obtained more than a century earlier as a ‘deed’. In each case, unqualified ownership of the Lands passed from seller to buyer.”

In the result, the court granted to the municipality the requested declaration of its fee simple ownership. The court stated:

“Consideration of the applicable legislation, the transactional document and the subsequent actions and declarations of the parties support the conclusion that [the railway company] acquired a fee simple interest in the Lands in 1871 rather than an easement in the nature of a right-of-way. The interest of [the railway company] did not revert to [the original owner] or any successor. It was sold to the [municipality].”

Disposition of former railroad lands upon the railway company’s cessation of use will depend upon relevant statutory provisions, the circumstances under which the lands were acquired and the company’s subsequent dealings with the lands. Whether or not the railway company is empowered to dispose of the lands, or alternatively, whether the lands revert to the current owners of the agricultural property will depend upon the circumstances of the particular case.

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