Rail-to-trail project stuck in court for years
SNOHOMISH — Snohomish County is closer to resolving the legal battle over the Eastside Rail Corridor, but there is still a long way to go.
Anyone who has gone to the website for details on the Centennial Trail South, to run a pedestrian and bike path from Snohomish to Woodinville, will see the message, “Design on this trail is pending the resolution of some property rights issues. Please watch this page for updates on the design resuming.”
The word “some” is being kind, as the backstory of the Eastside Rail Corridor is over a decade of twists and turns, partners turned enemies and $5 million taxpayer dollars on the line.
Charles Montange, an outside attorney representing Snohomish County regarding the rail line, said that most of the hurdles are cleared; however, if or when the County reaches a settlement, there is still red tape with the federal Surface Transportation Board, which oversees all rail in the U.S.
One consideration will most likely be the condition of the rail. As reported by the Tribune in 2015, it would cost $10 million to repair the corridor and the Snohomish River rail trestle to be safe for passenger service. Since the line has not been maintained since the litigation started, that cost could be higher.
Before deciding if the rail line will be banked for a future light rail or wholly abandoned, it must be decided who owns the rights of usage, known as an easement.
The last ones standing in this legal battle of attrition are GNP Railroad LLC. and Snohomish County. GNP filed the lawsuit on Aug. 7, 2021.
Legal counsel for GNP has not responded to the Tribune’s request for comment by email or phone.
This is an ongoing case.
Meanwhile, our neighbors in Woodinville are building their part of the Eastrail project, a plan to convert its section of the 42-mile rail line into a bike and pedestrian path.
To understand how this 136-year-old railroad became so contested, you must know its history.
After its second bankruptcy in 1970, Northern Pacific Railway, owners of the Snohomish Line — 42 miles of track connecting Renton to Snohomish since 1887 — merged with other railroads and formed Burlington Northern Railroad. In 1996, Burlington merged with Santa Fe Railway and changed its name to BNSF Railway — Burlington Northern Santa Fe Railway.
In 2009, the Port of Seattle purchased the Snohomish Line, of which the Eastside Corridor is a part, for $80 million via a quitclaim deed. In the deed, BNSF retained rights — called an easement — to continue operating as a common carrier on the rail line after purchase. BNSF sold its freight easement to GNP via a quitclaim deed on Dec. 18, 2009.
On the same day, GNP and the Port entered into an operations and maintenance agreement, and then GNP leased the line to Ballard Terminal Railroad Company, LLC.
Two years later, on Oct. 6, a bankruptcy court declared GNP insolvent and directed an order of relief under Chapter 11.
In 2013, the Snohomish County Council authorized $5 million to buy the Woodinville to Snohomish segment with property tax money dedicated to parks.
The Port of Seattle sold the 14.45-mile Eastside Rail corridor to Snohomish County in March 2016.
You would think this is where we all ride off into the sunset with our new bike trail, but life is never that easy. The brakes were hit, and the Centennial Trail South project came to a grinding halt almost as soon as the County purchased it.
On Dec. 21, 2020, after years of battles between parties stating their ownership cases to the federal Surface Transportation Board, the STB told them to take it to the courts.
On Aug. 27, 2021, GNP did just that by filing a lawsuit against Snohomish County, plus the company’s former 50% owner, Doug Engle, and just about anybody else who has had ownership of a contract with or an easement on the railroad.
The reason so many people and companies were added to the suit is to legally confirm that they do not have an interest in the Eastside Corridor. Those who claim they do can enter the legal fray.
All others in the lawsuit have since been excused, leaving us with the current legal battle of GNP vs. Snohomish County.
Bad Blood and Accusations of Revenge
The court filing states that on Jan. 26, 2011, Engle was terminated from his position as Chief Financial Officer of the company after a GNP board meeting was convened.
According to GNP’s court filing, Engle would retaliate against GNP for this firing by pushing it into Chapter 11 bankruptcy: “Engle induced some of GNP’s creditors to institute an involuntary bankruptcy proceeding against GNP…. in retaliation for having been dismissed by GNP.”
Further, GNP claims they entered a memorandum of understanding with a financier willing to fully capitalize them shortly before the Bankruptcy Court issued its order.
“GNP’s creditors filed for bankruptcy for Thomas Payne’s unlawful acts as COO,” Engle said via email. Engle claims Payne misrepresented documents to benefit him personally, and used the company’s debit card for personal expenses.
GNP’s lawyers have not responded to the Tribune by email or phone. Payne died in 2017 as a Canadian short-line railroading legend.
GNP claims that in 2011, Engle did not inform GNP or its other 50% shareholder, Tom Payne, that he “alienated” the Eastside Corridor easement without authorization and handed it to his then-wife Joanne Engle — now Skievaski — and his father, Earl Engle.
However, Engle, who also owned a company called Eastside Community Rail, said he purchased the easement through a bankruptcy proceeding on Sept. 5, 2012.
Engle had plans for the rail line. He planned to re-establish freight, which he said is necessary. Then, bring sightseeing and excursion trains on the line. “Then commuter and TOD (Transit Oriented Development) to Everett,” Engle said via email. “We would have used hybrid diesel/electric trains, so no costly overhead electrical.”
In 2022, Engle had to exit the legal arena.
“I ran out of money to fight this long ago,” Engle said by email.
How did the county
get mixed into this?
The question of how Snohomish County could come into ownership of contested property lies with a fast-sale process called a quitclaim deed. A quitclaim deed releases a person’s rights and interests without valid proof of ownership, only a legal notarization of the document.
Think of a quitclaim as buying a used car without a certificate of title — there’s no proof of ownership beyond a handshake and a note stating the sale happened.
This is essentially the process of buying a rail line or establishing rights to operate on it with the STB. You file your paperwork, maintenance agreements, and quitclaim deed as proof of ownership. There is an assumption of good-faith actors throughout the process.
Snohomish County purchased the corridor from the Port of Seattle through a quitclaim deed. Few would think selling the Port’s property to the county would need validation.
However, the quitclaim deed system — designed to help move business transactions along quickly — is arguably too simple. A notary could miss a mistake in the paperwork and enter it into the record. You can also have bad-faith actors exploit the established trust system.
It can quickly turn an easy handover into a thorny mess.
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