The U.S. Court of Federal Claims ruled on July 7, 2026, in the case of PENLAND v. United States (Docket No. 22-62), determining that landowners did not possess property rights in a railroad corridor that had been converted into a recreational trail. This ruling affects the plaintiffs, who are landowners in North Carolina, and sets a significant precedent regarding property rights and government takings under the Fifth Amendment.
The case arose after Blue Ridge Southern Railroad, the successor to an original railroad, sought to abandon a railroad corridor in Henderson and Transylvania Counties, North Carolina. The railroad filed a Verified Notice of Exemption with the Surface Transportation Board (STB) in 2021, aiming to convert the corridor into a public recreation trail. The plaintiffs, who owned property adjacent to the corridor, claimed that this conversion constituted a Fifth Amendment taking of their property without just compensation.
Initially, the plaintiffs argued that they held a property interest in the land that was taken when the STB issued the Notice of Interim Trail Use. They contended that the original deeds, which granted the railroad rights to the land, only conveyed an easement rather than full ownership. This dispute over the nature of the property rights led to the court case.
In their filings, the plaintiffs asserted that they had retained ownership of the land once the railroad abandoned its use. They claimed that the issuance of the NITU effectively took their property rights without compensation. The government, on the other hand, argued that the original deeds conveyed a fee simple interest to the railroad, meaning that the plaintiffs did not have any compensable interest in the property.
The court's ruling, delivered by Chief Judge Matthew H. Solomson, focused on the interpretation of the original deeds under North Carolina law. The court found that the deeds clearly conveyed a fee simple interest to the railroad, thus negating the plaintiffs' claims. Judge Solomson stated, "Because Plaintiffs fail to provide any support to overcome the presumption of a fee simple conveyance, the Court finds as a matter of law that the Source Deeds granted HBR a fee simple conveyance, to which Plaintiffs retained no reversionary interest."
This ruling underscores the legal principle that only those with a valid property interest at the time of a taking are entitled to compensation. The court noted that the plaintiffs did not demonstrate any ownership interest in the corridor, stating, "It is axiomatic that only persons with a valid property interest at the time of the taking are entitled to compensation." The court's decision hinged on established North Carolina law, particularly a statute that presumes conveyances of real estate to be in fee simple unless explicitly stated otherwise.
The ruling has significant implications for future claims related to government takings, especially in cases involving railroads and conversion to trails. It clarifies that if a railroad has acquired a fee simple interest in a property, adjacent landowners cannot claim compensation when the railroad is repurposed for public use. This decision could deter similar claims from landowners in the future, as it reinforces the notion that property rights can be fully transferred to railroads.
Looking ahead, the plaintiffs may consider appealing the decision, although the court's ruling is grounded in established legal principles that may limit their chances of success. There are no related cases pending that directly address the same issues, but the outcome of this case could influence future litigation involving property rights and government actions.