As properties age, it is not uncommon for lingering easements to exist on record which were originally created to serve needs that no longer exist or are practically speaking outdated.  Recorded easements can affect a property’s value even for buyers or sellers who have no intent to utilize an easement, particularly an outdated one.  In that situation, questions arise surrounding the viability and enforceability of the easement.

In a recent case called Visitacion Investment, LLC v. 424 Jessie Historic Properties, LLC, the court grappled with some of these issues in connection with a railroad easement which was no longer in use but was actively marketed as part of a property for sale.  Clarifying the legal doctrine of abandonment, the court explained that an easement can be considered abandoned once it is deemed practically useless and the owner shows an intent not to engage in the uses authorized by the easement, regardless of the owner’s subjective intent regarding relinquishment of the easement.

Facts of Visitacion Investment, LLC v. 424 Jessie Historic Properties, LLC

A large plot of land in San Francisco was originally owned by a railroad company, Southern Pacific Transportation Company.  Southern Pacific eventually divided the parcel in two and conveyed one portion away (the servient tenement).  At the time of conveyance, Southern Pacific reserved an easement across the servient tenement to support its railroad-related business operations.

At some point, railroad activities on the dominant tenement ceased.  Later, the two parcels were acquired by Visitacion Investment, LLC (“Visitacion”) and 424 Jessie Historic Properties, LLC (“JHP”), with Visitacion acquiring the servient tenement and JHP acquiring the dominant tenement.

Prior to selling the dominant tenement to JHP, Union Pacific (Southern Pacific’s successor) conducted a “very formal and extensive” internal review and determined that it had no use or planned use for conducting railroad operations on the dominant tenement or the easement.  Nonetheless, at the time of the sale, Union Pacific marketed the easement as part of the property.  Once JHP emerged as the buyer of the property, Union Pacific understood that JHP intended to use the property for residential or commercial development and not for railroad-related activities.  Moreover, at the time, there was no railroad equipment in the easement.

Once it acquired the servient tenement, Visitacion began planning a large, mixed-use residential development on its property and brought a quiet title action against JHP, alleging that the easement had been extinguished under the doctrine of abandonment.  Visitacion claimed the easement had been abandoned by Union Pacific due to the cessation of railroad activities and the sale of the property to JHP, a real estate development company with no intent to use the easement for railroad purposes.

At the trial court level, JHP argued that the easement had not been abandoned, because Union Pacific and JHP never intended to abandon the easement and the easement still had value.

The trial court disagreed with Visitacion and concluded as a matter of law on summary judgment that Union Pacific and JHP had not abandoned the easement, citing the fact that Union Pacific had actively marketed the easement as part of the JHP property.

Court of Appeal:  Reversed; Intent to Abandon Easement Does Not Require Intent to Relinquish It

On appeal, the appellate court reversed the trial court’s decision and clarified the proper standard and focus of an abandonment analysis.  The appellate court explained that the trial court had improperly focused on the intent (or lack thereof) of Union Pacific to relinquish the easement at the time of sale to JHP.  The fact that Union Pacific had marketed the easement as part of the property showed it did not intend to relinquish the easement, but focusing on these facts constituted a “misunderstanding of the law.”

Instead, the court explained that abandonment stems from an intent not to engage in the uses authorized by an easement and does not require a subjective intent to give up the easement.  The appellate court further explained that a finding of intent to abandon is appropriate when the uses authorized by the easement have no further practical value to the dominant tenement’s owner.  The fact that the easement may have economic value, including for example stemming purely from the burden it places on the servient tenement, has little bearing on the intent to abandon analysis.

Focusing on the facts of this case, the appellate court cited cases from several other states and federal courts whereby courts have consistently found an intent to abandon a railroad easement, notwithstanding the railroad’s subjective intent, when the railroad ceases operations in the easement and conveys the property to a buyer who does not intend to use the easement for authorized purposes.  Applying the same rationale to this case, the appellate court reversed the trial court’s grant of summary judgment and remanded the case back to the trial court to apply the proper standard for abandonment and for further fact finding.

Lessons

The Visitacion case provides clarity and a helpful reminder about the legal standards governing abandonment of easements.  As both a buyer and seller of a property, it is important to understand the concept of abandonment and how it may impact any recorded easements and their influence on the value of a property.  For example, one may be tempted to devalue a parcel of land simply because it is burdened by a recorded easement; however, if that easement is vulnerable to the doctrine of abandonment, then the assumed value may be inaccurate.

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