Background
The Tennessee Valley Authority condemned property in Swain County, North Carolina in 1943 to relocate a stretch of railroad tracks around the lake formed by the new Fontana Dam—a critical World War II aluminum-production project. TVA took a 150-foot-wide strip of the DeHart family’s land in fee simple and reconstructed the line. TVA later conveyed the entire relocated railroad corridor to Southern Railroad Company, which in turn deeded it to the State of North Carolina in 1988. NCDOT then leased and ultimately deeded the property to Great Smoky Mountains Railroad, LLC in 1996; that deed is recorded in Swain County. The remaining DeHart property, which the 1943 condemnation had bisected, changed hands through a succession of private conveyances and eventually passed to Mach 2 Investments, LLC.
Beginning in 2021, Mach 2 subdivided its acreage into residential lots, purporting to convey to buyers and Impact Church an easement to use a one-lane soil-and-gravel “farm crossing” over the active railroad tracks—a crossing that had existed for decades. Great Smoky Mountains Railroad sued for trespass, to quiet title, for a declaratory judgment, and for an injunction, asserting it owned the railroad corridor in fee simple and that Mach 2 had no right to convey any crossing easement. Mach 2 and the individual lot owners moved to dismiss under Rule 12(b)(6), arguing that the NCDOT deed to the railroad was ineffective because the state had not complied with N.C. Gen. Stat. § 146-74—75 (requiring Governor’s signature, Council of State approval, and the great seal for conveyances of State lands in fee). The Swain County Superior Court granted the motion. Great Smoky Mountains Railroad appealed.
Because counterclaims remained pending in the trial court, the appeal was technically interlocutory. The Court of Appeals nevertheless accepted it, relying on the settled rule that interlocutory orders affecting title to real property implicate a substantial right requiring immediate review.
The Court’s Holding
Reversed and Remanded. Judge Tyson, writing for a unanimous panel, held that the defendants lacked standing under the jus tertii doctrine to challenge the railroad’s deed from NCDOT. Under North Carolina law, a defendant generally “cannot lawfully challenge [a] deed” by asserting a third party’s rights—here, the State’s interest—unless the defendant can connect itself to that third party. Mach 2 and the purchasers are strangers to the NCDOT-to-railroad conveyance; the only parties who could challenge it are the State and, potentially, its agencies.
Beyond jus tertii, the court held that any defect in the 1996 deed would render it merely voidable—not void. N.C. Gen. Stat. §§ 146-66 and 143-341(e) provide that conveyances of State land made outside the prescribed statutory scheme are voidable only “in the discretion of the Governor and Council of State.” A voidable deed is valid until the State elects to annul it. No such challenge had been made. The court also addressed the statutory exemption: N.C. Gen. Stat. § 146-65(1) exempts from the standard state-lands conveyance regime “[t]he acquisition of highway rights-of-way… or other interests or estates in land acquired for the same or similar purposes, or to the disposition thereof, by the Board of Transportation”—language broad enough to cover NCDOT’s transfer of a railroad corridor. Finally, on remand, the trial court must determine whether TVA’s 1943 successors in interest must be joined as necessary parties, and must examine the scope and history of the “farm crossing” easement to determine whether Mach 2’s subdivision activities overburdened whatever access rights may exist.
Key Takeaways
- Under the jus tertii doctrine, a private landowner cannot defeat a plaintiff’s quiet-title or trespass claim by pointing to a defect in the plaintiff’s chain of title from the State—only the State itself can raise that challenge. Adverse claimants whose title derives from a different source must show better title, not merely impugn the opponent’s deed.
- A conveyance of North Carolina State lands made without the Governor’s signature and Council of State approval is voidable at the State’s discretion, not automatically void. A recorded deed in that posture remains effective against private parties unless and until the State moves to annul it.
- N.C. Gen. Stat. § 146-65(1)’s transportation exemption covers NCDOT’s disposition of railroad corridor property, exempting such transfers from the standard state-lands conveyance requirements of N.C. Gen. Stat. §§ 146-74–76.
- Subdivision or commercial development that significantly increases the number of crossings over an active railroad may overburdened a preexisting “farm crossing” easement, exposing the developer and lot purchasers to injunctive relief. The court noted that any easement is limited to the use contemplated at its creation, and expansion beyond that use can be enjoined.
Why It Matters
For western North Carolina real estate practitioners and title examiners, Great Smoky Mountains R.R. is a reminder that active railroad corridors carry complex layered title histories—federal condemnations, state conveyances, and long-term leases—that can surface unexpectedly when adjacent land is developed. The jus tertii ruling protects railroad and transportation-infrastructure owners against collateral title attacks by neighboring developers who have no direct claim to the disputed corridor.
The decision also has practical significance for developers near active rail lines statewide. Purporting to convey a “farm crossing” easement across a railroad right-of-way as part of a subdivision plat—without confirming that the easement actually exists and that the conveyance scope covers the anticipated use—exposes developers and their grantees to trespass suits, quiet-title actions, and injunctions. Federal railroad safety regulations (49 C.F.R. § 234.5) and NCDOT’s reserved right to control grade crossings add further layers that must be cleared before any crossing easement can be safely marketed.