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Thursday, August 05, 2021

Possession vs. Ownership in Property—First of a Lakefront Series

The following post is by Joseph Kearney (Dean, Marquette) and Thomas Merrill (Columbia). It is the first in a series of guest posts about  Lakefront: Public Trust and Private Rights in Chicago (Cornell University Press).

“Possession is nine-tenths of the law,” a common version of an old saying holds. More recently, Carol Rose, one of our most distinguished property scholars, has argued that this understates the point. Possession matters, she has written, largely because when we see someone in possession of something, we assume that person to be its owner. (See her chapter in Law and Economics of Possession, Yun-chien Chang, ed., Cambridge University Press, 2015.)

Among its other virtues (we respectfully suggest), our new book, Lakefront: Public Trust and Private Rights in Chicago (Cornell University Press), allows us to consider both the dictum and Professor Rose’s critique of it. In particular, the book documents a number of episodes in the history of Chicago (its lakefront, that is) in which someone either was in possession of some resource but had no clear right of ownership or, by contrast, had a fairly clear legal right of ownership but lacked possession. Who was more likely to prevail: the possessor without ownership, or the owner without possession?

With great thanks to Howard Wasserman and his PrawfsBlawg colleagues for the introduction and opportunity, let us proceed.

We can begin with the early part of the story, which involves the Illinois Central Railroad and its quest to secure a grant of submerged land under Lake Michigan to construct an outer harbor, supplementing the existing (inner) harbor of the Chicago River and the railroad’s lake trackage and lakefront facilities. In 1869, the railroad got what it wanted: With some skillful lobbying and at least a little graft (the former is quite clear, the latter clear enough), it persuaded the state legislature to grant it 1,000 acres of submerged land “in fee,” for purposes of building an outer harbor in the lake. In effect, in the Lake Front Act, the state granted the railroad ownership of the submerged land.

Because of dire economic conditions in the early 1870s, the railroad did little to implement the grant, i.e., to take possession of the submerged land and begin constructing a harbor. Chicago politicians, who had wanted the right to construct such an outer harbor themselves, capitalized on the railroad’s inactivity and public unhappiness and secured a repeal of the grant to the railroad in 1873 (the Lake Front Steal was the popular local name for the 1869 act, and the more general Granger Movement against the railroads helped the city).

The 1873 legislators were insufficiently impressed by the arguments of the railroad’s lawyers that the 1869 grant was a “vested right” that could not be repealed consistently with the Constitution’s Contracts Clause. Many of the legislators were lawyers, but it cannot have helped the railroad’s cause that its claim of ownership was not accompanied by possession.

Many years later, in 1892, the U.S. Supreme Court had to decide whether the 1873 repeal of the original grant was constitutional. Although the railroad’s lawyers had weighty precedent on their side in support of the claim of vested rights, a four–to–three majority of the Court held that the grant was, if not void altogether, properly revocable.

The winning point, as articulated for the Court in an opinion by Justice Stephen J. Field, was that the submerged land was impressed with a “trust” in favor of “the people,” so that “they may enjoy the navigation of the waters, carry on commerce over them, and have liberty of fishing therein freed from the obstruction or interference of private parties.” Thus was announced, as it would come to be called, the American “public trust doctrine.”

By itself, this public trust would seem to have doomed much of the Illinois Central’s existing facilities along the lakefront. The railroad had constructed, by the time of the 1892 decision, a massive complex of terminals, engine houses, grain elevators, and piers, much of it on landfill in the lake—both north and south of the area targeted for construction of the outer harbor. (Map C in the Supreme Court’s report of the case, also known as the Morehouse map, gives a sense of this, as of course does Lakefront in any number of ways.) These facilities would seem to constitute an “obstruction or interference” with the public’s access to the lake.

Field nevertheless discussed two arguments that might support allowing the railroad’s various improvements constructed in the lake to stay. One was based on language in the Illinois Central’s 1851 state legislative charter, which allowed the carrier to use “any lands, streams and materials of every kind” owned by the state if needed by the railroad to construct depots, shops, yards, etc. Perhaps this charter language justified the railroad’s construction in the lake.

The other was based on the common-law privilege of a riparian landowner to “wharf out” from the shore if necessary to reach water deep enough to float a boat. If sufficiently modest in size, Field observed, such landings—such wharves, piers, docks, and the like—were consistent with the public trust, since they enhanced the ability of the public to access navigable waters. The case was accordingly remanded to the lower courts for an inquiry whether the railroad had constructed any facilities in the lake that went beyond the point of practical navigability (and thus could not be sustained by the wharfing-out privilege).

On remand, both the district court and the newly created U.S. Court of Appeals for the Seventh Circuit held that the railroad’s massive complex did not violate the public trust identified by the Supreme Court. Focusing in particular on the right to wharf out, the lower courts concluded that the Illinois Central’s various landfilling did not intrude into the lake beyond the point of practical navigability, especially given the emergence of a new class of lake steamers with a much deeper draft than the schooners of bygone days. In short, the construction in the lake was sustained as properly implementing the railroad’s right as riparian owner to access the lake’s navigable waters.

Consider the implications of all this for our question. To recap: On the one hand, the Supreme Court upheld the repeal of the grant “in fee” to the railroad to construct an outer harbor. This was, at most, an abstract right of ownership, for the railroad had never converted it to actual possession. On the other hand, the lower courts sustained the right of the railroad to retain all the terminals, elevators, repair facilities, and track that it actively possessed, even though the better part of these had been constructed on landfill never explicitly authorized by the state.

It gets better. Between the Supreme Court’s 1892 decision and the time the remand worked its way back to the Seventh Circuit in 1899, the Illinois Supreme Court, in other litigation, repudiated both of the arguments that Justice Field had suggested might justify the railroad’s keeping the various facilities it had constructed in the lake. In 1898, the state court repudiated the right to wharf out, at least as applied to Lake Michigan. That same year, it also held that the Illinois Central’s charter did not justify landfilling in the lake, since the lake was neither land nor a stream nor (apparently) “materials of [any] kind” owned by the state.

Naturally, then, the state argued that the railroad had no legal right to remain in the lake. The Seventh Circuit dodged the issue. It ruled that the only question open for consideration on remand was whether the Illinois Central’s various improvements extended into the lake beyond the point of practical navigation. Nothing else could be considered. When the matter returned to the Supreme Court in 1902, the high court adopted the same dodge.

So it was that the Illinois Central, which had no viable argument to support its being in the lake, was allowed to remain there, with respect to the facilities that it had actively possessed at least since the late 1880s. The courts were willing to validate the repeal of the Lake Front Act. But they had no desire to dismantle one of the major rail complexes in the United States.

In both 1873 and 1892, the relevant legal actors (the Illinois legislature and the U.S. Supreme Court) were willing to strip the railroad of its claim to ownership of land that it had never possessed. In 1899 and 1902, the relevant legal actors (the Seventh Circuit and the U.S. Supreme Court) upheld the right of the railroad to retain control of facilities that it did actively possess, even though it no longer had any viable claim of ownership to them.

So far in the story, it would seem that possession is more powerful than ownership in determining the attitude of legal actors regarding the allocation of control over valuable resources. Our second entry (the series will entail five posts) will consider the power of possession in the context of the public dedication doctrine (not to be confused with the public trust doctrine)—that is, in the case of the Chicago lakefront, in determining the fate of various challenges to constructing buildings in Grant Park.

Joseph D. Kearney and Thomas W. Merrill

Posted by Howard Wasserman on August 5, 2021 at 10:21 AM in Books, Property | Permalink


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