Love v. United States (889 F. Supp. 1548, 1994)

Table of Contents

Introduction page 1550

Background page 1550

September 28, 1991 Memorandum and Recommendation page 1553

A. Motion to Strike page 1553

B. Motion for Additional Discovery page 1554

C. Dunbar’s Motion to Dismiss All Remaining Claims for Relief page 1555

1. Subject Matter Jurisdiction Under the Quiet Title Act page 1555

2. Actual Controversy page 1556

3. Collusion page 1556

4. Unjust Enrichment page 1556

5. Injunctive Relief page 1556

6. Collateral Attack page 1557

7. Equitable Relief page 1557

D. Summary and Order page 1557

March 31, 1992 Memorandum and Recommendation page 1557

1. Assumptions by the Magistrate Judges page 1559

2. Effect of State Condemnation Action page 1560

A. Collateral Estoppel against Dunbar page 1560

B. Dunbar’s Entitlement to the Condemnation Proceeds page 1562

3. Statute of Frauds page 1564

Rule Against Perpetuities page 1565.

United States’ Claim of Title page 1566 Ü1

Equitable Title page 1567 P

Delay in Recording the 1853 Documents page 1567 <3

Waiver and Abandonment page 1573 Co

Statutes of Limitations and Laches page 1574 CO

Adverse Possession page 1575 ¡ — i p

Nature of the 1853 Documents and the Interest of the Railroad page 1576 l-i H

Remaining Issues, Injunctive Relief and Interlocutory Appeal page 1581 l — i to

Summary and Order page 1582

ORDER

MALCOLM J. HOWARD, District Judge.

This matter is before the court upon objections to Memorandum and Recommendation dated September 28,1992, and Memorandum and Recommendation and Order of March 31, 1992, entered by United States Magistrate Judges Charles K. McCotter, Jr., and Wallace W. Dixon. All remaining parties have filed objections and, in several instances, responses to objections. The matter has also been heard at oral argument. Several factors have delayed a decision in this matter including, the voluminous nature of the file, the number of issues and their 'complexity, and the press of other business. Nevertheless, the time for ruling has arrived.

BACKGROUND

This is an action to quiet title to real property in Cumberland County, North Carolina. Jurisdiction is found in 28 U.S.C. §§ 2409a, 1346(f) and 1345. The property in dispute was a former railroad right-of-way which was operated by Seaboard Systems Railroad (Seaboard), and both its predecessors and successors in interest, including CSX Transportation, Inc. (CSX). Seaboard abandoned service over this property in 1979. As framed by the initial pleadings, a number of parties, including the United States, claim title to all, or portions of, the disputed property. While a number of these claims have been resolved, disputes remain as to some portions of the property. The remaining parcels are those that have been the subject óf a pending state court condemnation action, and a small parcel located at the southern end of the disputed tract.

The property that forms the basis of this action is a strip of land approximately 80-100 feet wide and running in a northwest-southeast direction. The Fort Bragg Military Reservation borders the . strip along the southwest. For over 135 years the property has been' used for a single set of railroad tracks. Railroad use began on the property following the execution of certain documents by Duncan Murchison and Duncan McCormick in 1853. These individuals were adjacent landowners, with Murchison’s lands being to the northwest of McCormick’s. The documents are essentially identical in form, both sealed, witnessed, and signed by Murchison and McCormick, respectively. The documents recite:

For and in consideration of ONE DOLLAR, cash in hand paid, it is by this agreement witnessed that the undersig-neth doth contract to grant and convey unto the WESTERN RAIL ROAD COMPANY, in case the said Company shall locate their Road through or upon the lands of the undersigned, a sufficient quantity of land for that purpose, viz.: a strip of land not exceeding 50 feet wide (40 feet wide in the Murchison document), on each side, measuring from the centre of the Road bed. The conveyance of the lands to be made upon demand, after the actual location is traced out or determined upon.

Neither of these documents was recorded in the Cumberland County Registry until 1981. The magistrate judges found that pursuant to these documents, the railroad entered onto the lands of Duncan McCormick and Duncan Murchison and established its track prior to August 18, 1872, and that the Western Railroad and its successors in interest, including Seaboard, made exclusive use of this property until 1979, and possibly until 1984.

In 1979, in a proceeding before the Interstate Commerce Commission (ICC), Seaboard abandoned railroad service over a 3.52-mile portion of its line. The disputed property was a part of this larger abandonment. Following the abandonment, the railroad removed its tracks, except for two side tracks and a switch connecting a spur track serving Fort Bragg to the main track, located at the extreme southeastern end of the disputed strip. Following ICC proceedings, Seaboard conveyed a section of the abandoned right-of-way to Dunbar Corporation (Dunbar) through a quitclaim deed, dated September 10, 1984, and recorded in Book 3042, page 111, Cumberland County Registry. Upon receiving the deed from Seaboard, Dunbar made out-conveyances to several other parties; the most significant of which were to McCauley and McDonald Investments, Inc. (McCauley and McDonald). Three parcels were conveyed to McCauley and McDonald; of which only one remains in dispute, a “.46-Acre tract” located at the southern end of the subject property.

The North Carolina Department of Transportation (DOT) commenced a condemnation action of two parcels at the northeastern end of the property for a highway project by the filing of a complaint with a declaration of taking and notice of deposit, pursuant to N.C.Gen.Stat. § 136-103, on August 17,1984, in the Superior Court of Cumberland County. Dunbar was named as a party claiming an ownership interest in the property. The heirs of Duncan Murchison were added as parties to the state action; and by a deed dated April 3, 1986, recorded in Book 3155, at page 671, of the Cumberland County Registry, the Murchison heirs quitclaimed their interest in the condemnation property to Dunbar. The instrument also assigned to Dunbar the Murchison heirs’ interest in any condemnation award.

On May 5, 1986, the State sought to add the United States as a party claiming an interest in the subject property. The action was removed to this federal court by the United States. On October 20, 1986, United States District Judge Terrence W. Boyle entered an order dismissing the action against the United States for lack of subject matter jurisdiction. It was determined that the exclusive jurisdiction for actions to quiet title resides in the federal court, that the state court lacked jurisdiction to adjudicate title to property claimed by the federal government, and that the federal court had no such jurisdiction within the confines of a removed case. Department of Transportation v. Seaboard System Railroad Corp., et al., No. 86-45-CIV-3 (E.D.N.C. October 20, 1986).

In the state court action, Superior Court Judge Coy Brewer held that the state, through the Department of Transportation and acting as a condemnor exercising the power of eminent domain, could not assert title to the property in the context of a condemnation proceeding. This assertion of title had been based on the principles of escheat to the state, or through an inability to establish a chain of title. Judge Brewer then found that, as between those parties properly before the court and asserting an interest in the contested property as of the date of taking, the Murchison heirs had superior title. Judge Brewer did.not determine the quality of the State’s claim, nor that of any party not before the state court, and only determined the quality of the claim of Dunbar through both Seaboard and the Murchison heirs. He then decreed that Dunbar, through its acquisition of the interest of the Murchison heirs, was a party properly before the court with superior title to the property taken in the condemnation action. Department of Transportation v. Seaboard Systems Railroad, Inc., No. 84-CVS-3367 (Order of 22 June 1988). This decision was affirmed on appeal, and the issue of damages for the taking was returned to the Cumberland County Superior Court for trial. However, by an order of November 6, 1991, this court stayed the state court action pending resolution. of the title disputes at issue in the present action.

In this action, the United States originally cross-claimed as to all named defendants, asserting that it was the owner of the entire parcel of disputed property. Dunbar and McCauley and McDonald • cross-claimed against the United States, the State of North Carolina, and CSX. Dunbar and CSX have settled, and both Dunbar and the United States have dismissed their cross-claims against CSX. Dunbar, the United States, and the State of North Carolina (the State) have settled all issues between them, with the exception of the claims relating to the condemnation property. Dunbar’s interest on this point, however, is solely an assertion that it is entitled to the proceeds in the state condemnation action. It makes no claim to present title in this parcel. Also remaining for disposition are McCauley and McDonald’s cross-claim against CSX, and cross-claims between McCauley and McDonald and the United States against each other, concerning title to the “.46 Acre” tract at the southern end of the originally disputed property. The State of North Carolina has dismissed any claim to this tract.

In its cross-claim, the United States requests the court to find that the United States is the owner of the fee simple absolute title to the property and that the other defendants have no right, title, or interest in the land. Through summary judgment, the United States seeks relief on the merits of the quiet title' action. Also, the United States seeks summary judgment against Dunbar as to any claim that Dunbar may have to the state condemnation proceeds. In its motion against the State, the United States seeks to quiet title in its favor and requests that the federal court require the State to dismiss with prejudice the pending condemnation action in state court. The United States is the only party seeking a declaration as to the ownership of the com demnation property.

The United States’ position has been that the railroad merely possessed an easement for railroad purposes which was extinguished upon abandonment of the right-of-way. Thus, - the railroad had no interest to convey to Dunbar: The United States'claimed the strip of land for its entire width as an adjoining landowner of an abandoned right-of-way. This claim is founded on both the common law and N.C.GEN.STAT. § 1-44.2. Additionally, the United States claimed it acr quired title to the underlying fee by several conveyances beginning in 1918.

The United States contends that Dunbar, as the purchaser from the railroad, did not receive any interest under the, purported 1853 contracts and that the contracts are void and unenforceable. Even if the contracts were enforceable, the specific terms provide for an easement, not a fee. Even if the contracts were originally enforceable and provided for a fee, these documents are outside the chain of title and unenforceable against the current owners. Furthermore, it is contended that the Murchison heirs had no title to the northern portion of the subject property because their predecessors had previously conveyed their entire interest. The United States asserts that it is the owner of all of the subject property formerly owned by the Murchisons. ■

For Dunbar’s purposes, the only property that remains in dispute is that portion of the former railroad property that was the subject of the state condemnation action. Dunbar no longer claims a title interest in this property, but only an interest in the condemnation proceeds. It is the position of Dunbar that the title to the- condemnation tracts vested in the State on August 17, 1984, pursuant to the condemnation proceedings. However, the contract to purchase between Dunbar and Seaboard was recorded prior to, and Seaboard quitclaimed its entire interest in the property to Dunbar following, the date of condemnation. Dunbar bases its entitlement to the proceeds on four theories.

First, Dunbar claims that the Western Rail Road Company received at least equitable title, with the right to compel the execution and delivery of á deed to the property when, pursuant to the 1853 agreements with Duncan Murchison and Duncan McCormick, the company built a railroad on the property. Thus, when Seaboard sold to Dunbar, Dunbar received at least equitable title and the right to receive a deed. Second, Dunbar claims the railroad had acquired the property under seven and twenty years’ adverse possession. Third, Dunbar contends that the United States should be estopped from contesting Dunbar’s title as derived from the railroad, because prior to Dunbar’s receiving the deed from Seaboard the United States had never asserted any claim in the property and had informed both Seaboard and Dunbar that it had no interest in the property. Finally, Dunbar claims the condemnation proceeds through the quitclaim deed received in the state condemnation action from the Murchison heirs.

While the State denies the United States’ claim to the condemnation property, it does not oppose the United States’ renewed motion for summary judgment. The State has denied Dunbar’s claims to ownership of the property. The State has asserted title based upon the statutory presumption in N.C.GEN. STAT. § 146-79, premised upon its inability to determine any valid record title of the subject property. Furthermore, the State contends that pursuant to N.C.GEN.STAT. § 136-104, title to the land specified in the condemnation complaint vested in the Department of Transportation on August 17, 1984, and that the right to just compensation vested in any person owning the property at that time. McCauley and McDonald claim ownership in the .46-acre tract through their deed from Dunbar and thus are aligned in interest with Dunbar to the extent this action affects this tract.

SEPTEMBER 28, 1991, MEMORANDUM AND RECOMMENDATION AND ORDER

In the magistrate judges’ Memorandum and Recommendation and Order (M & R) of September 28, 1991, the following motions were considered: Dunbar’s Motion to Strike and in the Alternative Motion for Additional Time for Discovery and to Respond, filed July 1,1991, and Dunbar’s Motion to Dismiss All Remaining Claims for Relief, filed July 1, 1991. The magistrate judges denied the motions to strike, for discovery and further response and recommended denial of the Motion to Dismiss.

A. Motion to Strike

Dunbar filed a motion to strike the United States’ renewed motion for summary judgment and, alternatively, for additional discovery and response time. Dunbar contends that the United States’ renewed motion seeks relief not sought in its counterclaim, including ordering the State to dismiss with prejudice the state court condemnation action, declaring that the United States owned the condemnation tracts as of the date of the condemnation, and ordering a constructive trust in favor of the United States on any proceeds obtained by Dunbar in the state court action. Dunbar first contends that the federal court is without jurisdiction under § 2409a to allow the United States to collaterally attack the state condemnation award, or to grant any relief other than declaring that the United States is the present owner of the property. Second, Dunbar says that the pleading is both redundant; and of a type not contemplated by the Federal Rules of Civil Procedure. Third, Dunbar contends that the renewed motion sought indirectly to amend the cross-claims. Fourth, Dunbar contends that the United States cannot assert ownership of the property at a certain time in the past on the basis of its cross-claim.

The magistrate judges recognized that the renewed motion for summary judgment was an attempt to amend the pleadings. While Dunbar may be correct that such a procedure is somewhat irregular, any such irregularity was cured by allowing both the United States 'and the State of North Carolina to file more formal amendments. The magistrate judges noted that Fed.R.Civ.P. 15 promotes liberality in the amendment process. Nor is there any apparent prejudice to Dunbar by allowing such an amendment. In this regard, this court is not persuaded by Dunbar’s apparent contention that an assertion of past ownership by the United States works a dramatic change in the nature of this action. The theories of ownership asserted by the United States obviously stand for the proposition that it owned the property prior to the date of the state condemnation action. Nor has Dunbar’s claim of ownership been materially changed. In the interests of justice the amendments are appropriate, Dunbar’s objections are overruled, and the magistrate judges’ ruling as to the motion to strike is affirmed.

B. Motion for Additional Discovery

Dunbar objects to the M & R’s finding that the government’s renewed motion for summary judgment does not raise any factual issues, especially any which require the deposition of government counsel, Paul Newby. Dunbar contends that the renewed motion for summary judgment raises for the first time the issue of who owned the condemnation tracts as of the date of the condemnation, August 17, 1984. However, as previously discussed, this is not a new issue.

Dunbar states that it has never claimed qwnership in the condemnation tracts in this action, but only an entitlement to the proceeds in the state action. Dunbar does contend that it was the owner of the property as of August 17, 1984. The United States asserts title to the property, and also claims an interest in the proceeds of the state condemnation because of its funding of those proceeds. Dunbar’s requested discovery is not tailored toward the United States’ interest in these proceeds.

Dunbar wishes to depose government’s counsel, Paul Newby, who testified as an expert witness in the state trial proceedings. Dunbar also asserts, that during the state condemnation action it was able to discover and review certain documents which contradict the present position of the United States, that it has always asserted ownership of the condemnation tracts and asserted ownership of the condemnation tracts on or before August 17,1984. These documents may lead to the admissibility of relevant testimony favorable to Dunbar as to certain of the title questions.

Dunbar has filed a'joint affidavit from attorneys Ronald E. Winfrey and Steven J. O’Connor, who represented Dunbar in the state action. Winfrey and O’Connor recount various aspects of the state action, and have attached exhibits in support of their contention. These include an answer filed by New-by, on behalf of the United States, that the state could condemn an easement over federal lands; various representations by Newby that the United States and the DOT were working together; and his state court testimony that the United States owned only the land to the west of the center line of the railroad right-of-way.

Following Newby’s testimony in the state action, he permitted Winfrey and O’Connor to review materials contained in his files during a court’ recess. After the recess, however, Newby refused further examination of the files. Winfrey and O’Connor aver that the materials viewed included correspondence between Newby and the Corps of Engineers concerning the possibility of a quiet title action to the property; expressing doubt that the United States could prevail in such an action; expressing uncertainty over who actually.’owned the property; and, the legal significance of various deeds and other instruments involved in this action. There was also correspondence between Newby and counsel for the DOT discussing trial strategy, and the attempt to time the dismissal of the federal action in order to calendar the state action before a state judge who was felt to be favorable to the DOT’s position.

The court has serious reservations as to whether it was appropriate for Newby to enter an appearance in the state action as an “expert witness.” His appearance in the state action occurred at a time when he should have known that the United States had a claim to the property, even if its precise nature was indeterminate. Furthermore, it is readily apparent that such actions, even if technically permitted, provide potential fodder for Dunbar’s argument of collusion between the state and federal governments.

Despite such reservations, this does not mean that Dunbar is-entitled tó depose New-by, or examine the documents allegedly contained in his files. For the purposes of this motion, the court accepts that the United States has not always asserted an ownership interest in the entire right-of-way property, and that government officials may have been uncertain as to the strength of the United States’ claim; although, in its answer to the amended complaint of taking, the United States claimed that it was the sole owner in fee simple of the condemnation property. However, this does not preclude the United States from now coming forward and asserting that it has owned the property at relevant times in the past, including the date of the state condemnation.

As will be discussed further, the ownership of the property is determined by analyzing the nature of the 1853 documents, and their legal significance. Ultimately either the United States, the State, or Dunbar, actually owned the property on the date of the condemnation. In the context of this action, and particularly when dealing with the federal government, it does not matter whether the true owner actually realized the fact of its ownership. In this light, Dunbar’s request for discovery as to the opinions of Newby, or other government officials, would be relevant only to the issue of estoppel. The issue of estoppel against the government was explored at length in the March 31,1992 Memorandum and Recommendation. It is enough to say here that any such representations or opinions of federal agents or employees, will not deprive the federal government of an interest to real property.

Dunbar’s objections are overruled, and the magistrate judges’ ruling on the motion for additional discovery is affirmed.

C. Dunbar’s Motion to Dismiss All Remaining Claims for Relief

Dunbar’s motion to dismiss challenges the jurisdiction of the federal court to the extent that the United States expands upon its remedial request in its renewed motion for summary judgment. The United States responds that the court has jurisdiction under the Quiet Title Act to consider the question of the ownership of the land subject to the state condemnation. The United States also contends that it would be unjust to allow Dunbar to receive the proceeds for the taking of property that it did not own.

1. Subject Matter Jurisdiction Under the Quiet Title Act

The M & R found federal court jurisdiction under 28 U.S.C. §§ 2409(a) and 1346(f), which confer jurisdiction over title disputes involving property interests of the United States, and also under 28 U.S.C. § 1345 as providing an additional source of jurisdiction where the United States is a plaintiff. Dunbar contends that, since the original complaint against the United States has been settled, the court no longer has jurisdiction under the Quiet Title Act of the United States’ cross-claims against the other defendants. As the magistrate judges correctly observed, §§ 1346(f) and 2409a provide a broad basis for jurisdiction. Monroe Sav. Bank, FSB v. Catalano, 733 F.Supp. 595, 597 (W.D.N.Y.1990). There still remains a dispute between the United States and the State as to the title of the property. Therefore, the settlement of the original plaintiffs’ claim does not deprive the court of jurisdiction over the cross-claims.

Dunbar next contends that the United States has not offered any evidence that it will have to pay eighty per cent (80%) of any condemnation award in the state action. In the M & R the court was not considering the sufficiency of the evidence — merely whether to allow a motion to amend. The United States has provided a copy of a Federal Aid Project Agreement executed on March 31, 1983 between the DOT and the United States Department of Transportation Federal Highway Administration, appearing to cover the subject property. Reply of the United States to Response of Dunbar Corporation to Motion for Summary Judgment Against the State of North Carolina and Renewed Motion for Summary Judgment Against. Dunbar Corporation, Exhibit A.

This agreement has been amended on several different occasions. Both the original agreement and subsequent modifications indicate that federal funds will constitute approximately eighty per cent of the total stated project amount. However, the agreement does specify that the federal funds obligated are not to exceed the amount shown by its terms. Paragraph 8 of the Agreement Provisions states that the it does not create a present or immediate obligation against federal funds. While the precise role of this agreement in funding the condemnation proceeds is unclear, this submission refutes Dunbar’s claim that the government’s contention is nothing more than a bald conclusion.

Dunbar also contends that it is irrelevant whether the United States will have to fund eighty per cent of the condemnation award, since Dunbar was not a party to any agree-' ment between the United States and the State of North Carolina. Dunbar’s argument attempts to create a Catch-22 situation in which the state court was without jurisdiction to determine the superiority of the United States’ title, and awarded the proceeds to the only remaining party properly before it, yet that award cannot be questioned in this court which does not face such a jurisdictional barrier. Furthermore, the United States would have to pay a substantial portion of an award to a party who may not properly be entitled to it. Dunbar contends that the limited jurisdiction of the Quiet Title Act does not provide a jurisdictional, basis upon which to resolve the dispute over the award of proceeds. However, even if jurisdiction were limited under the Quiet Title Act, § 1345 provides the additional jurisdictional basis. Dunbar’s jurisdictional objections are overruled.

2. Actual Controversy

Dunbar objects to the findings and conclusions of the Memorandum and Recommendation that there was an actual controversy as to the ownership of the condemned property, that the true owner of the property at the time of the filing of the state condemnation action is entitled to the proceeds, that if the land involved in the state condemnation action is owned by the United States there is no jurisdictional basis for the state action, that the United States’ claim of ownership creates a controversy as to the title of the land, and in the determination of the proper party to receive the state land condemnation proceeds. Dunbar says that the United States does not have standing to contend that Dunbar will be unjustly enriched by the award of condemnation proceeds paid to it by the Department of Transportation in the state action. This court concludes that the government’s alleged interest in these proceeds provides such standing.. This objection is overruled.

3. Collusion

Dunbar objects to the court’s conclusion that the United States is entitled to have its title and ownership interest resolved in a quiet title action in federal court. Dunbar complains that the United States and the State of North Carolina have been aligned in interest. As previously discussed, this seems to be true. However, the fact that the United States claims ownership to the property does make the positions of the respective sovereigns adverse. Moreover, neither the fact that the United States is agreeable to the State’s construction of a road, or the alignment in interest of both governments in ascertaining that the condemnation proceeds are paid to the true owner, amounts to collusion. This objection is overruled.

4. Unjust Enrichment

Dunbar objects to the findings and conclusions indicating that the United States may have a claim for unjust enrichment in the nature of “money had and received,” and granting the United States and the State of North Carolina leave to amend the pleadings to allege against Dunbar any such claims for relief as to the state condemnation proceeds. Dunbar objects to this because of lack of evidentiary support of the United States’ claim that it funded eighty per cent of the condemnation proceeds. The M & R makes no determination of the evidentiary value of the allegation and merely allows amendment to pursue these claims. Furthermore, the United States has presented some evidence that it will pay a percentage of the project costs. Dunbar is free to challenge the legal significance of this agreement and the sufficiency of the evidence to support the claim as the matter progresses. Dunbar’s objections are- overruled.

5. Injunctive Relief

Dunbar objects to the court’s findings and conclusions as to injunctive relief. Essentially,' Dunbar says that the state action has gone to final judgment on the issue of entitlement to the condemnation proceeds and awarded them to Dunbar. The magistrate judges found that no final judgment has been entered pursuant to N.C. GEN. STAT. § 136-116 and that the state proceeding is still ongoing. The federal district court can fashion injunctive remedies to enforce its judgments and,- should the United States be determined to be the owner of the property, to remove any cloud on its title. Dunbar’s objections are overruled.

6. Collateral Attack

Dunbar objects to the conclusion that the United States is not attempting a collateral attack of the state court judgment. The M & R noted that state court judgments are required to be given full faith and credit by federal courts under 28 U.S.C. § 1738. However, it also stated that the judgment may be open to attack as being void for lack of jurisdiction. Both propositions are correct. Furthermore, since the United States was not a party to the state action and therefore had no opportunity to litigate its title claim, it is not barred by principles of collateral estoppel or res judicata. These objections are overruled.

7. Equitable Relief

The M & R correctly found without merit Dunbar’s argument that the United States is not entitled to equitable relief because of laches and unclean hands. Dunbar’s objection to this finding is overruled.

D. Summary and Order

Upon reviewing the pleadings and‘memo-randa of the parties and the memorandum and recommendation of the magistrate judges filed September 28, 1991, this court finds that the memorandum and recommendation is in all respects proper and in accordance with the law. Having found no error in the findings and conclusions of the magistrate judges, the court hereby adopts the memorandum and recommendation of the magistrate judges entered on September 28, 1991, as its own. Therefore, this court hereby DENIES Dunbar’s Motion to Dismiss All Remaining Claims for Relief and AFFIRMS the magistrate judges’ denial of Dunbar’s Motion to Strike and in the Alternative for Additional Discovery and Response Time.

MARCH 31, 1992, MEMORANDUM AND RECOMMENDATION

In the March 31, 1992, memorandum and recommendation (M & R) the magistrate judges ruled on the following motions: United States Motion for Summary Judgment Against Dunbar, filed June 30, 1989; Dunbar’s Motion for Summary Judgment Against the United States, filed January 6, 1990; CSX’s Motion for Summary Judgment Against McCauley and McDonald; filed March 26, 1990; United > States’ Renewed Motion for Summary Judgment Against Dunbar, filed June 13, 1991; and United States’ Motion for Summary Judgment Against the State of North Carolina, filed June 13, 1991.

The magistrate judges determined that: (1) this action is not barred by principles of res judicata or collateral estoppel; (2) the United States is not estopped from disputing Dunbar’s claims; (3) the 1853 documents were option contracts which became contracts to convey when the railroad elected to exercise the options by the placement of its tracks, thus completing performance of its obligations under the contract to convey; (4) the 1853 documents became contracts to convey land in fee simple absolute, giving the railroad an equitable fee; (5) the United States has standing to contest the enforceability of the 1853 documents; (6) the 1853 documents do not violate the statute of frauds or the rule against perpetuities; (7) the railroad’s failure to register the 1853 contracts did not deprive it of its equitable interest; (8) neither laches or statutes of limitations operate to deprive the railroad, Dunbar, or McCauley and McDonald of their interest in the property; (9) the evidence did not support summary judgment for the United States based on waiver or abandonment; (10) the railroad adversely possessed the property so that it could pass perfect title to Dunbar by the 1984 quitclaim deed; and, (11) the United States does not own any interest in the subject property.

It was recommended that the United States’ motion for summary judgment be denied; that Dunbar and McCauley and McDonald be granted summary judgment that the United States owns- no interest in the property and that the railroad -conveyed perfect, title to Dunbar by the 1984 quitclaim deed; that the title to the condemnation tracts be quieted in the State of North Carolina pursuant to N.C.Gen.Stat. § 136-104, and the complaint and declaration of taking in the state condemnation proceedings; that the rights of just compensation for land acquired by the State of North Carolina vested in Dunbar at the time the complaint and declaration of taking were filed in the state condemnation action, August 17, 1974; that the injunction as to the state condemnation action be lifted; and, that as to the “.46-Acre Tract,” further ruling be reserved pending resolution of the factual dispute concerning whether the deed from Seaboard to Dunbar conveyed this property.

While the M & R discusses a number of areas, and at considerable length, its basic proposition can be fairly simply distilled. It is based on the determination that the 1853 contracts were for the conveyance of a fee interest in the subject property. The railroad thereby obtained equitable title to the property. Upon full performance under the contract, by laying the track and occupying the property, its possession became adverse as to all others, including the original owners. Occupying ■ the property for the requisite statutory period(s) transformed the equitable title into a legal title, albeit an unrecorded one. Thus, the focus here is primarily on the concept that a fully performed contract, accompanied by possession of the subject property ultimately results in a “perfection of title.” Put differently, while the successors in interest to Duncan Murchison once held a naked legal title, they were disseized of this interest, through adverse possession. The legal title would then be joined with. the equitable title, already in the railroad’s hands, giving it complete title.

Dunbar premised its case on the idea of an equitable title which gave the railroad, and ultimately Dunbar, the right to compel a conveyance from the heirs, or successors, of the original contracting parties, Duncan Murchison and Duncan McCormick. However, this is not the same as the result reached in the M & R. Under the analysis here, there is no need to compel any conveyance from any person today. The perfection of title, through full performance coupled with possession, served to vest the actual, legal title in the railroad. Under this analysis, many of the ideas of the state and federal government concerning the current enforceability of the documents are actually irrelevant. The contracts are not to be enforced today. The actual transfer of title, which resulted from the party holding the record title being dis-seized of his interest, occurred sometime in the nineteenth century.

The United States challenges the M & R on a host of grounds. Its objections are laid out first generally and then specifically, under nineteen separate headings. These objections concern the nature of the 1853 documents; their admissibility and authenticity; their construction by the magistrate judges; the construction of the documents in light of what is represented to be the public policy of North Carolina; the applicability of the statute of-frauds and the rule against perpetuit-ies; the effect of the railroad’s delay in recording the documents; the potential bar to enforcement via statutes of limitations, or laches; and, questioning the magistrate judge’s determination of adverse possession.

Dunbar has filed only a brief objection concerning the preclusive effect of the state court condemnation action. It is Dunbar’s position that the state courts have conclusively determined that it is entitled to the condemnation proceeds, and that this issue should not be re-litigated. It should be noted that each party has its own ideas concerning the preclusive effect of the state court action and this will be discussed further.

The State of North Carolina, and the DOT have each filed objections. The State primarily focuses on a “public policy” argument, which has also been pressed by the federal government in its objections. The government entities contend that the public policy of North Carolina has been to limit title claims arising from abandoned railroad right-of-ways, and discouraging the acquisition by third parties of instruments purporting to convey such property interests. The DOT contends that Dunbar could not have acquired “perfect title” from Seaboard because the filing of the condemnation action occurred prior to the date of Dunbar’s deed from Seaboard. The filing of such an action resulted in title being vested in the DOT, and Seaboard had nothing to convey. The DOT argues that title should be quieted in its favor, and that Seaboard be declared as the party entitled to compensation.

This ease can easily be seen as a nightmare of real property law, covering numerous legal issues. It has been further complicated by the passage of over a century, and the occurrence of several significant changes in the law. Additionally, the sheer volume of material to be considered has not made the task any easier. As evidenced by the size and scope of their M & R, the magistrate judges attempted to deal with all of these difficulties and produce a thorough and carefully reasoned opinion. Their efforts in dealing with these issues, as well as their management of the case, and repeated participation in settlement discussions with the parties, is greatly appreciated.

While I have reviewed all of the objections, I find several to be repetitious, and others to be either irrelevant, or of insufficient weight to warrant any lengthy discussion. In order to deal most effectively with the objections, I have divided the discussion into areas roughly parallelling those raised by the United States. Where objections have been found to be repetitious, I have placed them in the most appropriate area for discussion. However, I have not followed the precise order of either the M & R or the government’s objections. I have deliberately reserved the later sections for those issues that I find to be the critical ones for analysis, including the construction of the 1853 documents. Until that point is reached, it will be assumed that the magistrate judges were correct in their finding that the 1853 documents were contracts to convey a fee simple interest.

1. Assumptions by the Magistrate Judges

The United States contends that the magistrate judges made several unwarranted assumptions in attempting to relate the 1853 documents to the subject property and its former railroad use. It argues that the M & R assumes that the contracts were, in fact, executed and signed by Duncan Murchison and Duncan McCormick; that the railroad over the subject property was the railroad contemplated by the contract; that no further documents were executed between Murchison, McCormick, and the railroad; that the railroad entered into the lands pursuant to the document; that the railroad made exclusive use of the property; and, that the railroad was laid across the entire property by 1872.

Prior to receiving the M & R, the government repeatedly contended that there were no genuine issues of material issues of fact in this case and that the matter was ripe for summary judgment. Nevertheless, when faced with an opinion adverse to its position, the government now attempts to raise a host of disputed issues of fact, contending that the magistrate judges have made unwarranted assumptions in their analysis. However, none of these objections are persuasive.

The government has failed to make any showing that the 1853 documents are not what they purport to be. Certainly the documents are admissible evidence. Fed.R.Evid. 901(a), '901(b)(8). There is no dispute that the documents had been in the possession of the railroad prior to their filing. No evidence has been presented that any other documents were executed by Murchison and McCormick, or that the railroad tracks were not laid pursuant to these contracts. While the railroad’s use of the property may have been equally consistent with either a fee interest or an easement, there is no evidence that its use was not exclusive. The magistrate judges are not to be faulted for failing to engage in unsupported speculation from which to draw inferences.

The government contends that the M & R erroneously assumes that the railroad was laid across the entire property by 1872, relying on two outconveyances in 1872 and 1887. While it is true that these two deed references are the only evidentiary support that the railroad was in place by 1872, this is sufficient to support a factual finding, particularly in the absence of any contrary evidence. It is also argued that these and other out-conveyances conveyed the legal fee simple to some or all of the property underlying the right of way and did not make an exception for the railroad. However, the fact that a deed does not make' exception for other conveyances is only one factor as to whether a fee was intended. There is no requirement that a fee conveyance by one deed depends upon an exception being stated in a different out-conveyance. Furthermore, under the M & R’s analysis, and the applicable law, subsequent purchasers would have taken property subject to all existing equities of which they had notice. The railroad’s existence would constitute sufficient notice to impose a duty of inquiry on such purchasers.

The government also contends that the magistrate judges assumed that these were not “personal” contracts. It is asserted that the failure of the signatories to mention their “hems” or “assigns” demonstrates that these contracts were binding only on Murchison and McCormick. However, this proposition does not square with the nineteenth century, pre-Connor Act, principle that, in an executo-ry contract for the sale of land, the payment of the purchase money gives the vendee equitable title with the right to obtain a conveyance from every person having the legal title with notice of the vendee’s claim. Wilcoxon v. Calloway, 67 N.C. 463 (1872). Similarly, the land’s possession by one other than the vendor would be sufficient to constitute notice to a subsequent purchaser. Webber v. Taylor, 55 N.C. 9 (1854); Johnson v. Hauser, 88 N.C. 388 (1883); Mfg. Co. v. Hendricks, 106 N.C. 485, 11 S.E. 568 (1890).

The United -States’ objections are overruled.

2. Effect of State Condemnation Action.

A. Collateral Estoppel Against Dunbar.

The parties have varying ideas concerning the preclusive effect of the state condemnation proceedings. The United States argues that Dunbar is precluded from arguing any title.other than that received from the Murchison heirs. While Dunbar obviously rejects this version of issue preclusion, it contends that the state courts have declared that it is the party entitled to the proceeds and that the DOT is collaterally estopped from contesting that determination.

The M & R correctly recognizes that federal courts generally accord preclusive effect to issues decided by state courts under the related doctrines of res judicata and collateral estoppel. Allen v. McCurry, 449 U.S. 90, 94-95, 101 S.Ct. 411, 414, 66 L.Ed.2d 308 (1980). Furthermore, 28 U.S.C. § 1738 requires that state determinations receive full faith and credit in federal courts. The M & R noted the state court’s recognition that it was not adjudicating title claims of the United States. Indeed, it would have been without jurisdiction to do so. The magistrate judges determined that since the question of title could not be fully , adjudicated in the state court action, this court was not bound by any determinations made there. They also rejected Dunbar’s argument that the issue of title was irrelevant,, finding that a determination that Dunbar never owned the property would indeed be relevant to its entitlement to condemnation proceeds.

In Montana v. United States, 440 U.S. 147, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979), the Supreme Court observed:

A fundamental precept of common-law adjudication, embodied in the related doctrines of collateral estoppel and res judica-ta is that a “right, question or fact distinctly put in issue and directly determined by a court of competent jurisdiction ... cannot be disputed in a subsequent suit between. the same parties or their privies _” Under res judicata a final judgment on the merits bars further claims by parties or their privies based on the same cause of action. Under collateral estoppel, once an issue is actually and necessarily determined by a court of competent jurisdiction, that determination is-conclusive in subsequent suits based on a different cause of action involving a party to .the prior litigation. Application of both doctrines is central to the purpose for which civil courts have been established, the conclusive resolution of disputes within their jurisdictions. To preclude parties from contesting matters that they have had a full and fair opportunity to litigate protects their adversaries from the expense and vexation attending multiple lawsuits, conserves judicial resources, and fosters reliance on judicial action by minimizing the possibility of inconsistent decisions.

440 U.S. at 153-154, 99 S.Ct. at 973-974 (citations omitted). The preclusive effect of a previous state court action is further protected by the Full Faith and Credit Act, which requires a federal court to “give the same preclusive effect to a state-court judgment as another court of that. State would give.” Parsons Steel v. First Alabama Bank, 474 U.S. 518, 523, 106 S.Ct. 768, 771, 88 L.Ed.2d 877 (1986).

However, one of the fundamental requirements for granting preclusive effect to a prior judgment is the previous court’s jurisdiction. Both collateral estoppel and res ju-dicata are concerned with questions and facts “directly determined by a court of competent jurisdiction.” Montana v. United States, 440 U.S. at 153, 99 S.Ct. at 973 (quoting Southern Pacific R. Co. v. United States, 168 U.S. 1, 48-49, 18 S.Ct. 18, 27, 42 L.Ed. 355 (1897) (emphasis added)). Even as to prior determinations from state courts, the Supreme Court has long recognized that no preclusive effect will attach where the court was without subject matter jurisdiction over the controversy. Lessee of Hickey v. Stewart, 44 U.S. (3 How.) 750, 11 L.Ed. 814 (1845).

This fundamental requirement of subject matter jurisdiction begs the question as to whether the state court had jurisdiction to proceed with the state condemnation action, once the United States had' asserted its claim. None of the parties disputes the proposition that the State cannot condemn federal lands. In the state action, the United States claimed that it was the owner in fee simple of the condemnation property, although its answer stated that the State could condemn an easement across the property. Judge Boyle’s order in the removed state action stated that, absent a waiver of sovereign immunity and consent to be sued, the United States could not be sued. No such waiver was present in the context of a state condemnation action and the state court therefore had no jurisdiction over the United States. The action'was therefore dismissed as to the United States, but was remanded to the state court as to the parties and issues remaining.

However, the United States’ claim of the property raises the issue of whether the federal government was a necessary or indispensable party to the condemnation action, such that the state court could not proceed. To the extent that a condemnation action is considered an action in rem, the fact that the United States claims ownership of the res would appear to deprive the state court of jurisdiction. A number of courts have concluded that, where the United States has an interest in land sought to be condemned in a state action, it is an indispensable party. City of Mesa v. Salt River Project Agricultural Improvement and Power District, 101 Ariz. 74, 416 P.2d 187 (1966), cert. denied 385 U.S. 1010, 87 S.Ct. 718, 17 L.Ed.2d 547 (1967); Public Utility District No. 1 of Pend Oreille County v. Inland Power & Light Company, 64 Wash.2d 122, 390 P.2d 690 (1964); City of Fairbanks v. Electric Distribution System, 413 P.2d 165 (Alaska 1966); Gibbs v. Oklahoma Turnpike Authority, 285 P.2d 190 (Okla.1955); see also Pocono Pines Corporation v. Pennsylvania Game Commission, 464 Pa. 17, 345 A.2d 709 (1975) (United States was an indispensable party in action to quiet title).

This jurisdictional question was not addressed further after remand. Judge Brewer may have believed that he could adjudicate the rights among the remaining parties, since questions of title in both the United States, and the State, were expressly left open. Under N.C.GEN.STAT. § 1A-1 Rule 19(b), courts are permitted to determine claims where there has not been a joinder of necessary parties, if it can do so without prejudice to the interest of those parties. The issues of title could be determined later and, conceivably, could collaterally trump any determination based on the limited decision in the condemnation action. Furthermore, since the United States had previously conceded that an easement could be established, and certainly did not oppose the existence of the road project, it would not be evident that its rights would be prejudiced.

Of course this is mere speculation as to why the action proceeded following remand and this court will not comment on whether such a course of action was advisable, given the serious title questions abounding in this case. For the purposes of this quiet title action, however, the United State’s claim constituted a sufficient jurisdictional defect to deprive the state court judgment of any preclusive effect here.

Even if the state court action was not completely without jurisdiction, its decision would still not prevent Dunbar’s current title claims. The state court addressed the claims of title of Seaboard, Dunbar, and the Murchison heirs. Of those three parties, it determined that the Murchison heirs had “superi- or title,” and that Dunbar’s acquisition of that interest entitled it to compensation. There was no elaboration as to what was meant by “superior title.” Certainly as this litigation has demonstrated, there could be any number of theories as to what lead to this conclusion.

Under North Carolina law, the application of collateral estoppel must meet a four-part test.

(1) The issues to be concluded must be the same as those involved in the prior action; (2) in the prior action, the issues must have been raised and actually litigated; (3) the issues must have been material and relevant to the disposition of the prior action; and (4) the determination made of those issues in the prior action must have been necessary and essential to the resulting judgment.

King v. Grindstaff, 284 N.C. 348, 200 S.E.2d 799, 806 (1973). The fourth requirement, that a determination have been necessary and essential, focuses the court’s attention on precisely what was determined before. This is closely related to the principle that an estoppel by a prior judgment will not apply to matters that were not expressly adjudicated, and which are merely inferred from the prior judgment, unless such an inference is inevitable. 50 C.J.S. “Judgments” § 717 (1947).

In this ease several inferences are possible. It may be that Judge Brewer determined that the railroad simply had an easement, which lapsed back to the Murchison heirs upon abandonment. However, he may also have adopted Dunbar’s theory that the Murchison heirs still held a legal title which they had conveyed to Dunbar pursuant to the-1853 contract. Significantly, the issue of. the enforceability of the 1853 documents does not appear to have been addressed. Since either view could be inferred from Judge Brewer’s ruling that the Murchison title was “superi- or,” this does not bar Dunbar’s claim through the railroad and the 1853 contracts.

B. Dunbar’s Entitlement to the Condemnation Proceeds.

The DOT objects to the M & R’s finding that the railroad conveyed perfect title to Dunbar by the 1984 quitclaim deed, and that “the right to just compensation for land acquired by the State of North Carolina vested in Dunbar at the time the Complaint and Declaration of Taking were filed in the state condemnation action, August 17, 1984.” Memorandum and Recommendation at 122. The State claims that although Dunbar had an unexercised contract to purchase as of August 17, 1984, title remained with Seaboard. Title vests in the DOT on the date the Complaint and Declaration of Taking are filed. N.C.Gen.Stat. § 136-104. In North Carolina State Highway Commission v. York Industrial Center, Inc., 263 N.C. 230, 232, 139 S.E.2d 253, 255 (1964) it was held that “the right to compensation rests in the person who owned the land immediately pri- or to the filing of the complaint and declaration of taking,”, leaving “nothing” to “sell pending ascertainment of fair compensation.” The State contends that title vested in the State on August 17, 1984 and that Seaboard had no interest to pass to Dunbar on September 10, 1984.

This objection is well taken and to the extent that the M & R found that the railroad conveyed “title” to Dunbar this was error. Under the M & R’s analysis, coupled with the condemnation statute, title would have vested in the State. However, this correction does not alter Dunbar’s entitlement to condemnation proceeds, as Seaboard conveyed to Dunbar whatever interest it had in the property.

The holder of title to real property at the time a complaint and declaration of taking are filed in a state condemnation action can later transfer any interest in the property, including a right to the condemnation proceeds, with a quit claim deed. “A quit claim deed is one that ... conveys only the grant-- or’s present interest in the land described, if the grantor has any interest.” Patrick K. Hetrick and James B. McLaughlin, Jr., Wester’s Real Estate Law in North Carolina § 155 (3rd Ed.1988). This instrument is one of conveyance and “passes whatever right,title, and interest grantors had power to convey at the time of its execution and delivery.” Hayes v. Ricard, 245 N.C. 687, 688, 97 S.E.2d 105 (1957). The court, in Coble v. Barringer, 171 N.C. 445, 448, 88 S.E. 518 (1916), stated clearly that a quit claim deed conveys no land or indefeasible title but only what the grantor has “to convey and nothing more.”

If Seaboard had no title to the property at the time of the quit claim deed to Dunbar, Dunbar could have received only Seaboard’s compensation interest in the property and nothing more. A title holder is entitled to just compensation. After title vested to the state, the prior owner’s only interest in the property was its right to proceeds from the condemnation. If Seaboard was the owner of the property at the time title vested to the state, it owned the right to proceeds resulting from the condemnation.

Generally, one party can transfer a right to proceeds to another for valuable consideration. Ledbetter Bros., Inc. v. North Carolina Dept. of Transp., 68 N.C.App. 97, 314 S.E.2d 761 (1984). Where the debtor has notice of an assignment, it is charged with the duty of making payments to the assignee. Lipe v. Guilford Nat. Bank, 236 N.C. 328, 72 S.E.2d 759 (1952). Through the quit claim deed, Seaboard assigned its interest in the property, the proceeds, to Dunbar for valuable consideration.

Not all interests, however, are assignable. The State argues that the court’s ruling in Industrial Center prohibits, the assignment of proceeds from property condemned by the State through the Department of Transportation. The court in Industrial Center states clearly that the title holder at the time of filing the complaint and declaration of taking “has nothing” to sell. 263 N.C. at 232, 139 S.E.2d 253. This statement is followed by language revealing prior law where “title was not divested until compensation was paid ...” and the owner “could sell ...” after the complaint was filed. Id. The court goes on to say that, previously, the owner at the time “the award was confirmed was the person to be compensated.” Id.

The North Carolina Department of Transportation commenced the condemnation action on August 17, 1984 in the Cumberland County Superior Court. Dunbar answered claiming title based on a contract to purchase recorded on 23 May 1984 in Book 3002 at Page 241 of the Cumberland County Registry. Seaboard executed a quit claim deed in favor of Dunbar on 10 September 1984, and this deed was recorded on 27 December 1984 in Book 3042 at Page 111 of the Cumberland County Registry.

A deed must be delivered in order for a conveyance to be valid. WEBSTER, § 156; Ballard v. Ballard, 230 N.C. 629, 55 S.E.2d 316 (1949). No deed had been delivered to Dunbar at the time of the complaint, so Seaboard still held title to the property at the time the complaint was filed. Applying the court’s analysis in Industrial Center, Seaboard, as the owner at the time of the complaint, is entitled to the condemnation proceeds. If title vested at the time the state filed its complaint, Seaboard could not transfer title to Dunbar. In Industrial Center, the court expressly stated that the title holder has nothing to transfer pending ascertainment of fair compensation. 263 N.C. at 230, 139 S.E.2d 253. The Industrial Center court, however, did not consider, expressly, whether the title holder could assign its right to compensation.

The assignment of proceeds issue was presented to the North Carolina Superior Court in the condemnation proceedings concerning the quit claim deed dated 23 April 1986, and transferred to Dunbar by the heirs of Duncan Murchison. Superior Court Judge Coy Brewer found that the Murchison heirs conveyed, through the quitclaim deed of 23 April 1986, their interest in the property and assigned their right to any condemnation award -to Dunbar. Judge Brewer then decreed that Dunbar, through its acquisition of the Murchison heir’s interest, was the party with superior title to the property. The North Carolina Court of Appeals affirmed this determination. The North Carolina Supreme Court granted a discretionary review but dismissed the action after the briefs were submitted, stating that discretionary review had been improvidently granted.

The same type of transaction occurred between Dunbar and Seaboard, as between Dunbar and the Murchison heirs. Like the transfer from the