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District Court of Appeal, First District, Division 3, California.

SOUTHERN PACIFIC COMPANY, a corporation, Plaintiff and Respondent, v. CITY AND COUNTY OF SAN FRANCISCO, a municipal corporation, Defendant and Appellant.

Civ. 21327.

Decided: March 31, 1964

Thomas M. O'Connor, City Atty., of the City and County of San Francisco, George E. Baglin, Deputy City Atty., San Francisco, for appellant. Lawrence L. Howe, San Francisco, for respondent.

The respondent, Southern Pacific Company, hereafter called the ‘Railroad’, brought this action against appellant City and County of San Francisco, hereafter called the ‘City’, to quiet title to certain real property, claiming fee title by adverse possession. The trial court granted judgment in favor of the Railroad and the City appeals.

The real property involved in the controversy consists of the vacated street areas, lying within a sixty-acre parcel of land granted to Railroad's predecessors by statute in 1868, St.1867–68, p. 716. The sixty-acre parcel may be generally described as lands located at Mission Bay south of Channel Street between Third and Eighteenth Streets in the City of San Francisco, and where, since the grant, the Railroad or its predecessors has maintained a railroad terminus in connection with its operations. $Tin 1868 the Legislature adopted an act to survey and dispose of certain salt marsh and tidelands belonging to the State, located in the City and County of San Francisco. Under the act the governor was required to appoint three persons, to be known as the Board of Tide Land Commissioners. Upon appointment, and pursuant to the act, the Board surveyed the tidelands at Mission Bay, established a water front line, and subdivided the area into lots and blocks, reserving various areas, as directed by the statute, for streets, docks, piers, slips, canals, drains and other uses necessary for public convenience and for purposes of commerce. The Commissioners were directed to sell off into private ownership, at public auction, all of the lots and blocks not reserved for public purposes.

The act of 1868 also granted to Southern Pacific Railroad Company and Western Pacific Railroad Company, Railroad's predecessors, a right to select 30 acres each, exclusive of streets, for use as a railroad terminus, providing each such railroad made its selection within a stated time and each expended the sum of $100,000 for improvements. Also granted to each railroad was the use of a right of way over state lands, not to exceed 100 feet in width for each company, for the purpose of reaching the terminus area granted by the State. Each railroad duly made its selection of land for its terminus. It is the street areas within the boundaries of the lands so selected which are in issue here.

The Legislature later adopted various statutes which have relevance to the dispute between the parties to this appeal. These statutes were:

(1) Act of 1872 (Stats.1871–72, ch. 490, p. 722). This act vacated the street areas within the exterior boundaries of the sixty-acre tract granted to Railroad's predecessors for a terminus, and granted such vacated street areas (together with other property) to appellant City, with power to manage, control, regulate and donate or dispose of the property for railroad or other commercial purposes.

(2) Act of 1874 (Stats.1873–74, ch. 264, p. 359). By this act the Legislature again vacated the street areas within the sixty-acre parcel granted to the railroads, and granted such lands (together with other lands) to appellant City, but denied City the right to sell or donate said lands, and restricted City's power to lease to a period not longer than five years.

(3) Act of 1878 (Stats.1877–78, ch. 219, p. 263). Parts of the act of 1874, supra, were repealed by this act, and the various basins, channels, canals and streets described were dedicated to public use for purposes of commerce and navigation, and made subject to a State Board of Harbor Commissioners.

(4) Act of 1903 (Stats.1903, ch. 265, p. 363). Here the State again vacated the street areas within the boundaries of the lands granted to respondent's predecessors, and restricted the City's right to sell the property, but gave the City the right to sell or exchange the various blocks reserved for a market place and produce exchange to a railroad having transcontinental connections, and having its terminus in San Francisco.

(5) Act of 1947 (Stats.1947, ch. 434, p. 1335). By the terms of this statute, the State of California relinquished to City all of its right, title and interest in the former street areas within the exterior boundaries of the lands donated by the act of 1868 to Railroad's predecessors.

It was Railroad's theory at trial that the vacated street areas within the boundaries of the railroad grants made by the act of 1868 were held by the City in a proprietary capacity and hence subject to adverse possession by the Railroad. One of City's basic contentions at trial was that the vacated street areas were not proprietary lands and hence not subject to adverse possession. The trial court found that after the street areas had been vacated by the act of 1872 and granted to the City the lands became proprietary in nature, alienable by the City and subject to loss through adverse possession. Since this issue was vital at trial and is equally critical on appeal, we consider it first.

Generally, where title to real property is held by the State or any of its subdivisions, and reserved for or dedicated to some public use, title may not be lost by adverse possession. (Wilhoit v. Tubbs, 83 Cal. 279, 23 P. 386; 2 Cal.Jur.2d 506.) Until the amendment of section 1007 of the Civil Code in 1935, however, title to real property held by the State or any of its subdivisions could be lost by adverse possession, if the property was held in a proprietary capacity and not reserved for or dedicated to some public use. (See Henry Cowell Lime & Cement Co. v. State of California, 18 Cal.2d 169, 114 P.2d 331; San Francisco v. Straut, 84 Cal. 124, 24 P. 814; Ortiz v. Pacific States Properties, 96 Cal.App.2d 34, 37, 215 P.2d 514; 2 Cal.Jur.2d, Adverse Possession, p. 513; 2 Witkin, Summary of California Law (7th ed.) p. 871.) Since enactment of the amendments to Civil Code section 1007 in 1935, title to property held by the governmental agencies therein described is not subject to loss by adverse possession regardless of the character of the property or how held.

In People ex rel. State Board of Harbor Com'rs v. Kerber, 152 Cal. 731, 733–734, 93 P. 878, relied upon by City, it is stated that tidelands situated on a navigable bay belong to the State by virtue of its sovereignty, and constitute property the title to which cannot be obtained by adverse possession; that such lands are held in trust for the benefit of the people, and whatever disposition that State makes of them, her grantee takes them upon the same terms upon which she holds them. ‘It is immaterial where the title—that is, the record title—is held, whether by the state at large, or by a county, or by some municipal department or other official body.’ (Id. 152 Cal. at 734, 93 P. at 879.) City argues that since these lands were situated on a navigable bay they were and now are subject to a trust for purposes of commerce, navigation and fisheries for the benefit of all of the people of the State, and that neither the State nor City may lose title to such lands by adverse possession. (People ex rel. State Board of Harbor Com'rs v. Kerber supra; People v. Banning Com'rs v. Kerber, supra; People v. Banning is City's contention also that the act of 1872 did not terminate the trust to the lands in question, but on the contrary, continued rather than extinguished the turst for purposes of commerce, since by the terms of the statute itself the vacated street areas were conveyed to City ‘for railroad and other commercial purposes.’

We think City's position cannot be sustained. In Boone v. Kingsbury, 206 Cal. 148, 189, 273 P. 797, 815, the court said: ‘The trust in which tide and submerged lands are held does not prevent the state from reclaiming tide and submerged lands from the sea where it can be done without prejudice to the public right of navigation and applying them to other purposes and uses.’ (See also Mallon v. City of Long Beach, 44 Cal.2d 199, 206, 282 P.2d 481; Atwood v. Hammond, 4 Cal.2d 31, 41, 48 P.2d 20.) It seems clear that it was the intention of the Legislature, in enacting the act of 1868, and authorizing appropriate steps to be taken thereunder, to free the lands covered by that statute from the trust for commerce, navigation and fisheries, except such lands as were reserved by the Board of Tide Land Commissioners for such purposes. A copy of the official map prepared and adopted by that Board was in evidence. It shows the various basins, channels, canals and other areas at or near the water front reserved for and dedicated to purposes of commerce and navigation. All of the remaining areas are shown subdivided into lots and blocks as directed, with appropriate street areas. Under the act, it was the duty of the Commissioners, after making proper reservations to protect the public right of commerce and navigation, to sell off into private ownership all of the remainder of the subdivided property. As to such parcels of property there can be no doubt that the Legislature intended to free them from any easement or right in the public for uses related to commerce and navigation. (Knudson v. Kearney, 171 Cal. 250, 152 P. 541.) In Atwood v. Hammond, supra, 4 Cal.2d at 41–42, 48 P.2d at 25, the court, in speaking of the act of 1868 and similar acts, said: ‘* * * One of the most notable examples of a series of grants free of the public easement is provided by the transfer of lands formerly covered by the waters of San Francisco Bay, which today constitute one of the principal business districts of the city of San Francisco. The legislative acts authorized the sale and transfer of lands then submerged, but lying shoreward of a waterfront or harbor line established in said bay. Stats.1853, p. 219, Stats.1855, p. 226, Stats.1867–68, p. 716. These acts have been interpreted as authorizing sales and transfers into private ownership free of any easement in the public for uses connected with navigation and commerce. City of Oakland v. Oakland Water Front Co., supra; Eldridge v. Cowell, 4 Cal. 80; Knudson v. Kearney, 171 Cal. 250, 152 P. 541; Shirley v. [City of] Benicia, 118 Cal. 344, 50 P. 404; Bolsa Land Co. v. Burdick, 151 Cal. 254, 261, 90 P. 532, 12 L.R.A.(N.S.) 275; 26 Cal.Jur. 336.’

It was expressly provided in the act of 1868 that if Railroad's predecessors did not promptly notify the Board of Commissioners of their acceptance of the terms imposed upon them by the donation of the lands to them, then the lands proposed to be donated should likewise be sold at public auction. Since all of the vacated street areas here in dispute lie within the boundaries of the grant to the railroads it seems plain that the Legislature intended the entire area to pass into private ownership free of any trust, except for the public easement in the street areas.

The act of 1872 (Stats. 1871–72, ch. 490, p. 722, supra) vacated all of the street areas within the exterior boundaries of the lands granted to the railroads and granted the vacated street areas to the City (together with other property) with power to donate or dispose of such lands for railroad or other commercial purposes. No reservation was made in the grant. The evident purpose of the statute was to pass full and unrestricted title to the City. As we have pointed out, the effect of the act of 1868 and the official steps taken thereunder freed the lands here in dispute from any public trust for navigation, fisheries and commerce. It necessarily follows that when by the act of 1872 the State vacated the streets and granted these lands to the City, with full power to manage, sell, or donate them to a railroad, the lands became proprietary in character, not dedicated to any public use or public purpose or impressed with any public trust. By the terms of the statute the lands were fully alienable by the City to anyone who could or would use them for railroad or commercial purposes. Since the lands were thereafter held by the City in a proprietary capacity, subsequent statutes, purporting to divest the City of title to the vacated street areas and to restrict City's right of alienation were ineffective for that purpose. In Grogan v. San Francisco, 18 Cal. 590, 612–615, the court said: ‘A legislative grant is an executed contract, and as such is within the clause of the Constitution of the United States which prohibits the States from passing any law impairing the obligation of contracts. This was expressly decided by the Supreme Court of the United States in Fletcher v. Peck (6 Cranch. 137). It cannot therefore be destroyed, and the estate be divested by any subsequent legislative enactment.’ (Id. at 613.) (See also Atwood v. Hammond, supra; City of Monterey v. Jacks, 139 Cal. 542, 73 P. 436.) We conclude, therefore, that the vacated street areas were at all times after 1872 held by City in its proprietary capacity, not subject to any public trust, alienable by City and subject to loss of title by adverse possession.

To obtain fee title by adverse possession Railroad must here establish ten years' continuous, actual, open and notorious possession or use, constituting notice to the world, under claim adverse to the City and must show payment of all taxes assessed against the land. (Code Civ.Proc. §§ 315, 325; II Am.Law of Property, 267–276; Ogden, Calif.Real Property Law, 508; 2 Witkin, Summary of Cal. Law, 870, 880; 2 Cal.Jur.2d, Adverse Possession, p. 537.)

The City argues that the Railroad possessed merely an easement of necessity in the street areas and that its use of this easement for railroad purposes could never ripen into title by adverse possession. (See 17 Cal.Jur.2d, Easements, § 16, pp. 112–115.) A way of necessity arises by operation of law, generally when a grantor conveys land shut off from access to a road to the outer world by the grantor's remaining land. (Mesmer v. Uharriet, 174 Cal. 110, 114–115, 162 P. 104.) Here it would appear that Railroad's easement is not a way of necessity, but rather an easement by implication, arising out of the situation of the parties at the time of the grant, the express language of the act of 1868 granting the sixty acres, exclusive of streets, to Railroad's predecessors, and the patent of 1875 conveying the property described as lots and blocks on the map prepared pursuant to directions in the statute itself. (See Danielson v. Sykes, 157 Cal. 686, 109 P. 87, 28 L.R.A.,N.S., 1024.) Although the Railroad's possession and use of the street areas was originally permissive, pursuant to its implied easement, it could nevertheless obtain title to the vacated street areas by adverse possession if its original permissive use was in fact converted into an adverse and hostile use and possession, under claim of right, maintained for the length of time required by statute to obtain title by adverse possession. Whether Railroad's use of the vacated street areas after the land was filled in was under open, notorious and hostile claim of right adverse to the whole world presents essentially a question of fact to be resolved by the trial court on the evidence before it, and the reasonable inferences which may be drawn from the evidence. (O'Banion v. Borba, 32 Cal.2d 145, 195 P.2d 10; Clark v. Redlich, 147 Cal.App.2d 500, 504, 305 P.2d 239; Castillo v. Celaya, 155 Cal.App.2d 469, 318 P.2d 113.)

The trial court found in substance that since June 11, 1905, the Railroad openly and publicly claimed and asserted ownership to the vacated street areas and that since that time Railroad had been in open, actual, notorious and exclusive possession of the same, claiming adverse to the whole world. The court further found that the Railroad had paid all taxes assessed against the property, and from the evidence concluded that Railroad had established its title in fee to the disputed areas. Substantial evidence supports the trial court's judgment and finding of adverse possession.

There was evidence that some of the lands granted to Railroad's predecessors, including the street areas here in issue, remained under water until about 1901. In that year, Railroad's predecessor filled in all of the lands formerly under water, so that the entire terminus area, including the vacated streets, became solid ground. The Railroad devoted the entire area to its railroad operations, and to other commercial and industrial uses. It enclosed most of the property with a high board fence topped with barbed wire and constructed permanent buildings throughout the site. Two of the permanent structures were very large storage sheds, each approximately one thousand feet long, and constructed in part on ground formerly laid out for streets. Some of the buildings were rented by Railroad to various tenants, and other structures were used by Railroad for its own purposes. From 1905 until 1947 the entire terminus area, including the vacated streets, was used by Railroad for railroad business and industrial purposes, under claim of right. This evidence, together with evidence that Railroad paid all taxes assessed against the property, is substantial evidence which supports the trial court's finding of adverse possession. In Estate of Arstein, 56 Cal.2d 239, 14 Cal.Rptr. 809, 364 P.2d 33, the court restated the familiar rule by which we are here guided in determining whether the evidence supports the finding of adverse possession: ‘When a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the finding of fact. Primm v. Primm, 46 Cal.2d 690, 693[1], 299 P.2d 231.’ (Id. 56 Cal.2d at 240, 14 Cal.Rptr. at 810, 364 P.2d at 34.) (See also O'Banion v. Borba, supra at 147, of 32 Cal.2d, 195 P.2d 10.) Measured by this standard there is an abundance of evidence in the record to support the trial court's findings.

City finally contends that at most, Railroad could acquire only an easement by adverse possession, but could not acquire the underlying fee in the former street areas. Here City points to the rule that in eminent domain proceedings a railroad may obtain only an easement for railroad purposes. (City of Oakland v. Schenck, 197 Cal. 456, 466, 241 P. 545; People, By and Through Dept. of Public Works v. Thompson, 43 Cal.2d 13, 20, 271 P.2d 507; Highland Realty Co. v. City of San Rafael, 46 Cal.2d 669, 676, 298 P.2d 15.) The rule taken from the eminent domain cases is not necessarily controlling in cases of adverse possession by a railroad. In People v. Ocean Shore Railroad, 32 Cal.2d 406, 416, 196 P.2d 570, 6 A.L.R.2d 1179, the Supreme Court pointed out that railroads, like individuals, may acquire fee title by adverse possession where the railroad is in possession under color of a fee or the user is not consistent with an easement. Generally, where the adverse use made by the railroad is for purposes of a right of way, that is, to pass from one place to another along its route, a prescriptive easement only is obtained by such adverse user, and not the fee. Where, however, as here, the lands are used not merely for a right of way, but on the contrary are put to all such commercial, business and industrial uses as the Railroad deems expedient, as well as to such uses as are necessary in the operation of a busy terminal of a transcontinental railroad at tidewater, the adverse use may encompass the fee to the disputed ground. (See 127 A.L.R. 517, 518–520.) On substantial evidence the trial court found that Railroad's use here was of such nature as to give City notice of Railroad's adverse claim to a fee interest in the vacated streets, and we must therefore affirm.

Judgment affirmed.

SALSMAN, Justice.

DRAPER, P. J., and DEVINE, J., concur.

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