Takings and the Nineteenth Century Railroad

Eaton v. Boston, Concord & Montreal R.R. (B., C. & M.R.R.):

A New Hampshire Supreme Court Decision from 1872.

by

Stephan S. Dalal

April 2013

NOTE: This document is currently under edit. UPDATED: Fri, April 24, 2015 -- 12:33:30 UTC

Introduction

Eaton specifically dealt with two major legal principles within Eminent Domain, yet to be refined and expanded upon in the late Nineteenth Century: categorical takings--which I often refer to as 'strict liability'--and the coterminous relationship of the state Police Power and Takings. These two legal concepts gained a significant amount of attention and focus as a result of the need to address new and expanding issues created by the emergence and growth of the railroad in America throughout the Nineteenth Century [1]. Eaton occupies a significant space in the historical progeny of Eminent Domain and Property Right cases that attempted to deal with two deceivingly simple inquiries: (1) What is a taking? (2) What is just compensation? The force with which the iron horse raced across the landscape of late Nineteenth Century America made such inquiries especially relevant.

Eaton a New Hampshire Supreme Court Case decided in 1872 between a farmer (Eaton) and a Railroad company (B., C. & M.R.R.)[2]. The action brought to the court by Eaton asked the New Hampshire Supreme Court to decide if B., C. & M.R.R. flooding of Eaton's farm was considered a taking under the Fifth Amendment's Eminent Domain clause, and if B., C. & M.R.R. was responsible for compensating the farmer for the taking [2]. In 1851, after the construction of the road, Eaton gave the defendants a warranty deed for part of his farm where the road is located, and on the same day signed the following release: “I, the subscriber, do hereby acknowledge that I have received of the Boston, Concord, & Montreal Railroad the sum of two hundred and seventy-five dollars, in full for the amount of damages assessed to me by the railroad commissioners of the State of New Hampshire, in conjunction with the selectmen of Wentworth, on account of the laying out of the said Boston,Concord, & Montreal Railroad through and over my land; and I do hereby release and discharge the said corporation from said damages” [3] The court held "a release of all damages on account of the laying out or construction of a railroad through and over the land of the releasor, does not cover damages occasioned to the remaining land of the releasor by the construction of the railroad over the land of other persons [3]

Background

Facts of the Case

Ezra B. Eaton a farmer from Wentworth, New Hampshire brought a civil action for damages resulting from the flooding of his farm against the Boston, Concord & Montreal Railroad Company (B., C. & M.R.R..)[2]. During 'construction' of a necessary road to build the railroad, B., C. & M.R.R. made a deep cut into a protective ridge that bordered Eaton's farm, which removed the natural land barrier that prevented occasioned flooding to the surrounding farms, including Eaton's [2]. Subsequently, as a result of the cut made to the ridge, several farms including Eaton's was damaged from flooding, which deposited sand and stone onto the property preventing the damaged area from being cultivated, the case notes: "In consequence of this removal [natural barrier], the waters of the river, in times of floods and freshets, sometimes flowed on to E.'s land, carrying sand, gravel, and stones thereon"[3]. Eaton had signed a legal waiver of damages waiving liability resulting from the "laying out of railroad over his land," for which he was compensated by the the railroad company [2]. The defendants argued that a release signed by Eaton in 1851 effectively waived their liability for the damage caused by the flooding of his property. The court ruled that the waiver only protected the railroad from liability resulting from the taking of Eaton's property 'for the laying out of road' and not for damages resulting from the 'construction' of the railroad, which subsequently caused the flooding to Eaton's land, noting that "...this was a taking of E.'s property, within the meaning of the constitutional prohibition; and that the legislature could not authorize the infliction of such an injury without making provision for compensation" [3].

This case, like similar cases involving railroads during the latter half of the 19th century are important because they dealt with novel legal issues and created precedences for law that emerged from the development of the railroad system [1]. Because the railroad was a new technology, courts in the past had not been faced with these issues. Eaton specifically addressed important issues regarding Law and Regulation, that begin to emerge in the years proceeding its decision in 1872. Specifically, the issues raised in Eaton v. B., C. & M.R.R., and that would be readdressed throughout the remainder of the century and well into the 20th, surround the Exercise of Power Conferred by Charter, and Eminent Domain issues that questioned: what constitutes a taking, what is considered public good, and what is just compensation [4] Up until 1870 much of the railroad law favored the development of the industry, but as Ely notes, from 1870 onwards, "...lawmakers gradually shifted their focus toward controlling the behavior of the iron horse" [4] The ruling in Eaton's case is distinguished by Gibson v. United States and Northern Transportation Company of Ohio v. City of Chicago.

Northern Transportation Company of Ohio v. Chicago (1878)

Introduction

Transportation Company v. City of Chicago is an important case in the lineage of takings cases during the latter part of the nineteenth century which demonstrates the distinction in what a taking is and is not with the ruling in Eaton. In Transportation Company v. City of Chicago, unlike in Eaton , no invasion was made to the property holder during the course of constructing a tunnel as part of a public works project. Rather, the plaintiffs were inconvenienced by the construction, which included the erecting of a coffer-dam that effectively blocked river side access to the plaintiffs who operated a line of steamers along the Chicago River. Earlier in the century, mill cases involving private property owners brought to light the questions regarding the right over dominion of one's land, that being the right of an owner to obstruct the flow of water of an adjacent steam shared by another land owner [5]. These early cases, it was found, usually sided with the common law understanding which forbade the obstruction or manipulation of flow of water of an adjacent stream resulting in the deprivation of another land owners right to fully enjoy his land [5]. Such earlier cases and the ruling in Transportation Company v. City of Chicago would seem to contradict one another in principle.

Facts

The Northern Transportation Company of Ohio owned and operated a line of steamers that ran between Ogdensburgh and Chicago, touching at different points [6]. The company, along with a dock and wharfing rights, owned a lot in Chicago that housed their offices and a shed where the steamers were stored and maintained. The east portion of the lot faced La Salle street, and the south portion of the lot faced the Chicago River [6]. The city of Chicago commenced construction of a tunnel under the Chicago River and along the line of La Salle street in 1869 [6]. Part of the construction involved excavating a portion of La Salle street, specifically around the south east portion of Northern Transportation Company's lot. The excavation, it was alleged, caused the walls on the south east portion of the plaintiff's lot to sink considerably and crack under the natural weight of the wall [6]. In addition to the damages alleged caused by the excavation of a portion of La Salle street, the plaintiffs alleged that in the process of construction a coffer-dam was erected in front of the plaintiff's dock which prevented "the enjoyment of their land," by blocking the doors of the warehouse, only leaving access to an entrance on Water Street, and which was alleged to have left the storage and maintenance inaccessible to the plaintiffs, requiring that they rent and expend money to utilize another adjacent space [6]. In addition the plaintiffs argued that as a result of the construction of the dam the plaintiffs were unable to bring boats up to the dock or to land freight or passengers [6]. It was further alleged that the nature of the excavation on La Salle street was negligent and improper for the type of work being performed. This, the plaintiffs alleged, caused damage to their warehouse including casing some of the walls to crack and fall [6]. Although access to the lot from the river and street was, from time to time obstructed, the court held that these were "incidental inconveniences" that the plaintiffs must submit to so as to allow the public from the benefit of the construction of the tunnel [6]. Therefore according to the court the only question remaining for the jury to decide was whether the excavation on La Salle street was conducted in a way that was 'unskillful' or 'negligent,' so as to cause part of the walls of the building to fall. A judgement was decided in favor of the defendant. The court noted that unlike in Eaton's case, where there was a physical invasion of the real estate, here the construction merely caused an inconvenience to the plaintiffs and did not amount to a taking [6]

Gibson v. United States (1897)

Introduction

Gibson is important to the case history of relative eminent domain cases like that of Eaton's. Both cases deal with the Fifth Amendment's Eminent Domain clause, and both are focused on the meaning of a taking in relation to the construction of an entity which causes damage to private property. In Eaton, the damage caused was a subsidiary effect of the removal of a natural land barrier by a railroad charter (Boston, Concord & Montreal) during the construction of a road, required to continue construction of a railway line. Here, in Gibson, under the River and Harbor Act of 1884 and 1886, congress granted power to construct a dyke approximately 2,200 feet in length along a portion of the Ohio River, near Neville Island. As a result of the construction of the dyke, the landing on Gibson's farm, which occupies a portion of the location of the dyke and is necessary to navigate to the channel to deliver the produce of the farm to buyers, was partially blocked. The court in Gibson, unlike the court in Eaton, decide in favor of the government, noting that the Government is not responsible for the damage to Gibson's farm, which is alleged to be the devaluation of the acreage.

Facts

Gibson owned a farm along the Ohio river at a point off Neville Island, 9 miles west of the city of Pittsburgh [7]. The farm operated to produce and ship strawberries, raspberries, potatoes, melons, apples, and peaches to Pittsburgh and Allegheny [7]. The River and Harbor Act of July 5, 1884, 23 Stat. 133, 147, and Acts of August 5, 1886, 24 Stat. 310, 327, gave the authorization by congress to build a dyke in the length of 2,200 feet "to concentrate the water-flow in the main channel of the Ohio river, beginning at a point on said Neville island 400 feet east of the claimant's farm, and running in a northwesterly direction with the main or navigable channel of the said Ohio river to the outer point of a bar in said river known as 'Merriman's Bar'..." [8]. The construction of the dyke "substantially destroyed the landing of the claimant, by preventing the free egress and ingress to and from said landing on and in front of the claimant's farm, to the main or navigable channel of said river" [8] As a result the claimant was unable to use her land for the shipment of products from her farm to suppliers [7]. Furthermore, it was also claimed that as a result of the construction of the dyke, Gibson's land, which "was worth $600 per acre before the construction," had drastically depreciated to "$150 to $200 per acre," in which Gibson claimed a total loss of land value "exceeds[ing] the sum of $3,000" [7]. The farm, with hindered access to a navigable channel to the Ohio River, which would be necessary for the transportation of goods produced by the farm, in and out, was rendered damaged, and therefore the value of the land of said farm. The court in Gibson however held that the claimant (Gibson) should not be entitled to recovery of damages, and that the United States was not responsible for the presumptive regulatory taking of Gibson's land by the construction of a dyke which caused an obstruction to the farmer's landing, partially incapacitating the inflow and outflow of shipping from the farm [7].

The Railroad in America

The Railroad's development, connecting America during the latter half of the 19th century, did to modes of transportation what the steamboat had done to colonize the Louisiana territory and much of the south at the beginning of the century [1]. Through an intricate system of canals funded by local governments, expedient travel was made possible by the steamboat to much of the southern territory of the United States during the 19th century. Still, while the railroad was developing its infrastructure, canals continued to be expanded [1].

The effects that resulted from the creation of the railroad industry are enormous [1]. Aside from being the first industry in the history of the United States to be so extensively regulated, the impact of the railroad could be seen in nearly every aspect and facet of life [1]. America's Legal system developed as a reaction to policies attempting to regulate railroads and their effects. From 1891 to 1906, nearly 25% of appeals heard by the 9th circuit Federal Court were railroad related[1]. And, as expansive as the industry was, so too was the legislative activity that followed it. In many ways, as Ely writes, “the law of railroads reflected the goals and concerns of American Society” [1].

Property Rights: A Shift in the Classical Legal Orthodoxy

The change in a general judicial ideology concerning property rights during the beginning of the nineteenth century had far reaching effects on the later development of the railroad [5]. Beginning with mill cases in the late eighteenth century courts began to demonstrate a gradual change in how they applied common law property rights [9]. Two major common law assumptions existed that would later be challenged in emerging disputes involving the rights of mill owners to obstruct the natural flow of streams adjacent to their property. The English common law of the eighteenth century considered the artificial influence of streams to be impermissible [9]. One judge deciding a case in the New Jersey Supreme Court wrote “The right to enjoyment of land is a basic attribute of dominion over property” [10]. The premise was stipulated on the basis that any artificial influence by way of diversion or obstruction of streams adjacent to multiple property owners, without the consent of all interested parties, was an infringement of a natural right of enjoyment of one's land. Courts in this respect favored anti developmental claims over economic development [5]. “Conflicts over the use of land were invariably resolved in favor of economic inactivity” [10]. As early as 1783 courts began to uphold the rights of new property owners to develop their land for economic purposes [5]. In Shorey v. Gorrell, a case decided by the Massachusetts Supreme Court in 1783 held that, "without long usage sufficient to confer a prescriptive right, there is no legal basis for preventing newcomers from obstructing a stream." (Shorey v. Gorrell)[5]. These mill cases highlighted the pro-economic favoritism of the judiciary in a movement that defied the common law orthodoxy of the 18th century [5]. Later, as railroads would begin to emerge with great force, many cases between private land owners – such as Ezra B. Eaton – and railroads accused of violating property rights would come into contact with pro-economic judicial forces, deciding often in favor of those enterprises that yielded the greatest economic benefit for the community or state, albeit leaving common law principles of the last century isolated in the shadows of a bygone juris prudence [5]. Horwitz writes, characterizing some of the insights of this new judiciary, "…some attempted the modification of common law definition of injury to permit extensive, uncompensated use of water for business purposes" [11]. In Palmer v. Mulligan, a New York Supreme Court in 1805 asserted for the first time that upstream land owners could obstruct the flow of water for mill purposes [5]. They reasoned that to prevent any newcomer from obstructing part of a stream would inherently confer exclusive rights to "whomever first built a dam," and resolved that "competition and rivalry is always good for public" [12]. The outcome of this case spawned the use of a novel judicial standard used by pro-economic judges tasked with determining injury related to water and property rights. The reasonable use test or balancing test became the operative threshold in determining the merits of an injury caused to one property owner by the obstruction of naturally flowing water by another property owner. As the name implies, "Reasonable Use Test," for the first time, gave precedence to property owners right to use their land for economic development, regardless if such development was to the detriment of another property owner [5]. In 1818 following Mulligan, it was upheld that upstream mill owners could obstruct streams adjacent to other downstream property owners in Platt v. Johnson. The court in Johnson exemplified the shifting shape of the judiciary that favored pro-economic development land rights, ironically citing the common law maximum sic utere, "use it thus," the shortened version of sic utere tuo ut alienum non laedas, meaning "use [what is] yours so as not to harm [what is] of others," as justification for property owners to use the land to develop economic interests, diametrically contradicting the original meaning of the maxim [13][5]. With cases like Shorey, Mulligan and, Johnson the courts of the early 19th century clearly began to introduce the novel view that injury was to be determined by "relative efficiencies of conflicting property uses," as opposed to the long-standing tradition embodied in the English common law system that existed throughout the founding of America which ensured a natural right of enjoyment over favoritism to economic development[5].

Canals and Exclusive Franchise Rights

Through a system of interconnected canals and rivers, an entirely new form of transportation grasped the country with great force, connecting people from throughout the colonies and propelling them west. The utilization of steam powered boats to connect the remote territories of the United States during the first half of the 19th century did for transportation infrastructure what the railroad would do in the latter half of the century [1]. Railroads were expensive, and obtaining funding for a vast system of interconnected track that stretched throughout distinct municipalities and states was challenging. A lot of money had been invested in developing a system of canals in America, and those canals were being threatened by the emergence of a more cost effective way of transport [1]. As a result Canal charters resisted new Railroad charter grants that allowed the opportunity for new rail-lines to be built alongside existing canals [1]. Having been previously granted earlier charters, canals were quick to use this as a premise to retain exclusively in charter grants [1]. And, for some time during the 1820’s through the 1830’s, their attacks against the legitimacy of the railroad charters were successful. One case in particular in 1832, Chesapeake and Ohio Canal Company v. Baltimore and Ohio Rail Road Company, involved a dispute over the Potomac River Valley and proprietary rights over the selection of land [1]. While both parties had rights to purchase the land, the court upheld the exclusive privilege of the Canal.[14] This threatened new railroad ventures as the court’s decision effectively protected the Canal’s rights to purchase land and excluding potentially viable rail charters from doing so [1]. In 1837 however the United States Supreme Court rejected the premise of exclusive privilege in purchasing rights in the case of Charles River Bridge v. Warren Bridge [1]. Citing the jeopardy to the development of modern transportation that allowing a proprietary right to purchase land through conferred exclusivity of a charter would create, the court struck down any assumed conference of exclusive purchasing rights that Canal charters had argued existed. [15] This decision greatly benefited the railroad, as it allowed rail charters equal opportunity to purchase land for development and stimulated the growth of the railroad infrastructure.

Monopoly Model of Development

The conflict between local economic interests and a need for a national transportation network was manifest in the Erie War [16]. Railroad development primarily followed a monopoly model of development for the entire first half of the 19th century. Building railroads was expensive, and required a large, upfront capital investment. While many of the well developed canals and turnpikes remained in operation, it was becoming clearer that the flexibility and efficiency of the railroad would eclipse status quo of transportation and freight networks currently in existence. Local and state governments, having held a vested economic interest in the canals and turnpikes, and who would too hold heavier interests in railroads were prudent to protect their investment. While the early railroad was funded by local investors, it had state and local economic interests directly reliant on its performance [17]. Local governments were eager to invest in railroads through bonds as development in local municipalities promised to turnover economic benefits to the local economy [17]. In 1832 for instance, the New Jersey state legislature issued exclusive charter rights to the Camden and Amboy Railroad Company, giving them privileges to carry passengers or goods exclusively across New Jersey, and between New York City and Philadelphia [17]. “The Camden and Amboy was immediately a financial success, and the payment of dividends and transit duties constituted the principal source of revenue in the state budget” [18]. The monopoly model was advantageous as the first step in the development of the railroad because it allowed secured private investments in doubtful ventures [17]. As railroads became a promising source of revenue for local and state governments, legislative protections were taken to sustain the exchange. Mandating the differences in track gauge was one primary way for state and local governments to ensure that other out-of-state rival railroads could not connect with one another and bypass local lines.

References

1. ^ a b c d e f g h i j k l m n o Ely, James, W. Railroads and American law. Lawrence, Kansas: University Press of Kansas, 2001.)
2. ^ a b c d e Eaton v. Boston, C. & M.R.R., 51 N.H. 504 (1872)
3. ^ a b c d Eaton v. Boston, C. & M.R.R., 51 N.H. 504 (1872), p. 1
4. ^ a b Ely, James, W. Railroads and American law. Lawrence, Kansas: University Press of Kansas, 2001. p.71)
5. ^ a b c d e f g h i j k l m Horwitz, Morton, J. The Transformation of American Law: 1780-1860. Cambridge, Massachusetts: Harvard University Press, 1977
6. ^ a b c d e f g h i N. Transp. Co. v. City of Chicago, 99 U.S. 635, 25 L. Ed. 336 (1878), pp. 1
7. ^ a b c d e Gibson v. United States, 166 U.S. 269, 17 S. Ct. 578, 41 L. Ed. 996 (1897)
8. ^ a b Gibson v. United States, 166 U.S. 269, 17 S. Ct. 578, 41 L. Ed. 996 (1897), pp. 1
9. ^ a b Horwitz, Morton, J. The Transformation of American Law: 1780-1860. Cambridge, Massachusetts: Harvard University Press, 1977. p.35)
10. ^ a b Horwitz, Morton, J. The Transformation of American Law: 1780-1860. Cambridge, Massachusetts: Harvard University Press, 1977. p.36)
11. ^ Horwitz, Morton, J. The Transformation of American Law: 1780-1860. Cambridge, Massachusetts: Harvard University Press, 1977. p.36-37)
12. ^ Horwitz, Morton, J. The Transformation of American Law: 1780-1860. Cambridge, Massachusetts: Harvard University Press, 1977. p.37)
13. ^ http://en.wikipedia.org/wiki/List_of_Latin_phrases_%28S%29
14. ^ Ely, James, W. Railroads and American law. Lawrence, Kansas: University Press of Kansas, 2001. p.4)
15. ^ Ely, James, W. Railroads and American law. Lawrence, Kansas: University Press of Kansas, 2001. p.5)
16. ^ Ely, James, W. Railroads and American law. Lawrence, Kansas: University Press of Kansas, 2001. p.12)
17. ^ a b c d Ely, James, W. Railroads and American law. Lawrence, Kansas: University Press of Kansas, 2001. p.13)
18. ^ Ely, James, W. Railroads and American law. Lawrence, Kansas: University Press of Kansas, 2001. p.11-12)
-- StephanDalal - 28 Mar 2013