from the Iowa District Court for Johnson County, Sean W.
Land Company appeals from an adverse judgment in its claims
against the City of Iowa City and the intervening party, Iowa
Interstate Railroad, Ltd. AFFIRMED.
Potter, Cedar Rapids, and Jon M. McCright and Matthew J.
Nagle of Lynch Dallas, P.C., for appellant.
R. Goers, Assistant City Attorney, Iowa City, for appellee
Stephen J. Rynn and James D. Helenhouse of Fletcher &
Sippel LLC, Chicago, Illinois, and Onna B. Houck, Cedar
Rapids, for appellee railroad.
by Danilson, C.J., and Vaitheswaran and Bower, JJ.
DANILSON, Chief Judge.
Land Company appeals from an adverse judgment in its claims
against the City of Iowa City and an intervening party, Iowa
Interstate Railroad, Ltd. The central issue is which
entity-Hawkeye Land Company or Iowa Interstate Railroad,
Ltd.-has the right to grant at-grade crossings in Iowa
City. The district court found in favor of Iowa
Interstate Railroad, Ltd. We agree and therefore affirm.
Background Facts and Proceedings.
2011, The City of Iowa City wanted to develop a new
industrial park. As a part of the development, the city
wanted to construct a new street-Compass Drive-over the
right-of-way of Iowa Interstate Railroad, Ltd. (IAIS). The
construction involved the right to construct the street but
also utility crossing rights and accompanying sidewalks. In
short, an issue arose concerning who had the authority to
grant the rights sought by the City. To answer this question,
we are required to review the property rights the parties
purchased from the original owner, the Chicago, Rock Island
and Pacific Railroad Company.
property rights of the Chicago, Rock Island and Pacific
Railroad were ordered liquidated during bankruptcy
proceedings, and its assets were abandoned, sold, disbursed,
or scrapped. In 1983, a reorganized company known as Chicago
Pacific Corporation (CPC) became the successor to the
railroad's remaining assets, which included the
"bundle of rights" CPC had in the rail line from
Council Bluffs, Iowa, to Bureau, Illionois. The bundle of
rights was divided into three categories: (1) the rail
corridor and operating rights, (2) the utility and associated
easement rights, and (3) the mineral rights. CPC also had
rights in rail lines facing abandonment and in various
ancillary properties and defunct rail lines.
1984, Heartland Rail Corporation (Heartland) bought the rail
corridor running from Council Bluffs to Bureau to prevent its
abandonment and preserve rail access for its shareholders.
Heartland later transferred its interest in the rail line
between Council Bluffs and Chicago-including the tracks in
Iowa City-to IAIS, an interstate common carrier operating
the bankruptcy, CPC made the decision to divest itself of its
remaining rights, and approached Rick Stickle, who previously
was a salvage contractor for CPC and is the owner of Hawkeye
Land Company. On July 1, 1985, Hawkeye purchased the utility
and associated easement rights from CPC.
additional background information in a prior supreme court
case, Hawkeye Land Co. v. Iowa Utilities
In 2000, the Iowa Senate issued a concurrent resolution
"relating to a study of the issues involving railroad
rights-of-way crossings by utilities." S. Con. Res. 119,
78th G.A. (Iowa 2000). Senate Concurrent Resolution 119
proposed that representatives from Iowa utilities-including
electricity, natural gas, telephone service, and rural water
service-meet with railroad representatives to consider
legislative solutions that might "resolve legal and
practical problems and differences of opinion" between
the parties. Id. [The Iowa Utilities Board] IUB was
to facilitate the meetings. Id.
The problems referred to in the resolution related to the
requirements utilities had to fulfill in order to secure a
railroad crossing and the fees railroads charged utilities
for crossings. The utilities were dissatisfied with the
complexity of the application process and the time it took to
obtain permission to cross railroad tracks. The utilities
also complained that the railroads charged excessive fees for
crossings. The utilities proposed a pay-and-go system under
which utilities could notify a railroad of a desired
crossing, pay a one-time fee, and then move forward with
construction- without awaiting individual review and approval
by the railroads. The railroads sought to ensure that utility
crossings would be safe and would not create liability for
the railroads. The railroads also advocated for their right,
as property owners, to set their own fees for railroad
crossings. Legislators had introduced and considered bills in
the house and senate relating to these issues, and the
resolution sought additional input from the interested
Hawkeye Land was actively involved in the resulting
discussions. Hawkeye Land owns the right to grant easements
along more than two thousand miles of Iowa railroad track,
but does not own the railroad track itself. It purchased this
property right in 1985, during bankruptcy proceedings for the
Chicago, Rock Island and Pacific Railroad. The bankruptcy
trustee separated ownership of the physical railroad tracks
from the right to grant easements along and across the
tracks. . . .
Hawkeye Land wrote a letter to IUB in August 2000 presenting
its position on railroad-crossing issues. Hawkeye Land noted
that easement fees were the company's revenue source and
commented: "Hawkeye incurs costs in generating those
easements and when one considers the lack of regard for a
recorded document and the exposure that Hawkeye incurs
because of this ignorance, overall the revenue does not match
the risk." Hawkeye Land offered to meet with IUB and the
other parties to discuss crossing issues.
Both the railroads and the utilities acknowledged Hawkeye
Land as an interested party. The Iowa Utility Association
pointed to Hawkeye Land as a source of the problems they
identified; namely, that Hawkeye Land's crossing
application process took too long and it charged exorbitant
fees.The railroads summarized the progress the
railroads and utilities had made in negotiations. Under the
topic of "Absentee Managers/Land Management Companies,
" the railroads commented "Hawkeye is a unique
situation that the Railroads are powerless to address, but it
appears that Hawkeye is at the table and will participate in
resolving the issues."
847 N.W.2d 199, 202-03 (2014).
negotiations between the utilities and Hawkeye broke down and
the utilities companies turned their efforts to legislation,
resulting in a pay-and-go process under Iowa Code section
476.27 (2009). See Hawkeye Land, 847 N.W.2d at 203.
"Pursuant to section 476.27 and its related regulations,
a public utility can erect a crossing over a railroad
right-of-way by submitting a notification of intent to
construct and paying a onetime standard crossing fee of $750
for each crossing." Id. Hawkeye challenged the
statute, asserting the provision did not apply to its
property interest and the $750 crossing fee for utilities was
an unconstitutional taking. Id. at 209.
supreme court concluded Hawkeye was a successor in interest
to a railroad corporation and, thus, subject to section
If the right to grant easements had never been separated from
ownership of the remaining fee, Union Pacific would be
required to comply with section 476.27 as the railroad owning
the tracks. Separating the right to grant easements from the
bundle of property rights does not exempt the easement from
section 476.27. We also reject the notion that the owner must
obtain its property rights directly from a railroad in order
to be a successor in interest to a railroad corporation.
Under Hawkeye Land's interpretation of section 476.27, a
railroad could avoid the pay-and-go procedure by using a
straw man to transfer ownership of a crossing easement to a
third party. We will not open such a loophole. Rather, we are
to "'seek a reasonable interpretation which will
best effectuate the purpose of the statute.'"
The legislative history of section 476.27 reinforces our
conclusion that the legislature intended that statute to
cover Hawkeye Land. Hawkeye Land participated in the meetings
and discussions leading up to the passage of section 476.27.
The legislature was aware of Hawkeye Land's existence and
its interest in the railroad crossings, which explains why
the legislature did not simply limit the ambit of section
476.27 to railroads. The legislature knew Hawkeye Land had
purchased the right to grant easements indirectly from the
Chicago, Rock Island and Pacific Railroad. By defining
"railroad right-of-way" broadly to include
successors in interest to railroad corporations, the
legislature ensured the procedures of section 476.27 could
not be avoided by conveying crossing easements to separate
Id. at 212-13 (citations omitted).
supreme court did not reach Hawkeye's constitutional
claim because it found the party seeking to invoke the
pay-and-go provision-ITC Midwest, an independent transmission
company-was not a public utility and could not invoke the
provision. Id. at 219.
February 25, 2011, the City sent a "notice of intent to
construct utility crossing" to Hawkeye, which stated
that in connection with the City's construction of
Compass Drive, the City "intends to construct three
utility crossings (storm sewer, potable water, and sanitary
sewer) under the railroad right-of-way and railroad tracks,
the easement rights to which Hawkeye Land Company lays
claim." The City enclosed a check for $2250 ($750 for
each of the three crossings). The City sent another notice
and another check for $2250 to Hawkeye on May 16, 2011,
because the project had not begun "within the 120 days
allowed under Iowa Administrative Code [rule]
September 6, 2011, IAIS and the City entered into an
"agreement for railroad crossing improvement project,
" acknowledging that IAIS operated a railroad upon
tracks going east/west in the City and the City had
"initiated a project to construct a new north/south
street to be named Compass Drive, and to improve an already
present agricultural crossing there to urban standards with
accompanying utilities, " which "require[d] the
installation of a new street-railroad grade crossing with
crossing signals and gate arms and with associated drainage
improvements on [IAIS's] railroad
October 12, 2011, Hawkeye filed this action against the City
for damages based upon the City's installation of Compass
Drive crossing the rail line. IAIS intervened in the action.
The parties waived ...