State of Texas v. PR Investments and Specialty Retailers, Inc.--Appeal from Co Civil Ct at Law No 4 of Harris County

Motion for Rehearing En Banc Granted; Panel Opinion of February 26, 2004 Withdrawn; Reversed and Remanded and Majority and Dissenting En Banc Opinions filed October 13, 2005

Motion for Rehearing En Banc Granted; Panel Opinion of February 26, 2004 Withdrawn; Reversed and Remanded and Majority and Dissenting En Banc Opinions filed October 13, 2005.

In The

Fourteenth Court of Appeals

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NO. 14-00-00091-CV

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THE STATE OF TEXAS, Appellant

V.

PR INVESTMENTS AND SPECIALTY RETAILERS, INC., Appellees

On Appeal from the County Civil Court at Law No. 4

Harris County, Texas

Trial Court Cause No. 691,263

D I S S E N T I N G E N B A N C O P I N I O N

I respectfully dissent from the en banc court=s disposition of the case. I do so for the reasons set forth below, as well as those in the original panel opinion.[1]

From at least February 1998 through the commissioners= hearing in May 1998, and again in March 1999, the State assured the property owners that construction in the condemned property would proceed according to the Sparks plan.[2] The calculation of damages involves considering the nature of what the condemnor intends to build and the use to which it intends to put the land. City of Houston v. Precast Structures, Inc., 60 S.W.3d 331, 336 (Tex. App.CHouston [14th Dist.] 2001, pet. denied). To calculate damages, the special commissioners heard evidence regarding the Sparks plan. In preparing for the special commissioners= hearing and trial, the property owners necessarily expended time and resources analyzing the effects of the Sparks plan on access and damages to their remainder property. On the eve of trial, the State notified PR InvestmentsCbut not Specialty RetailersCit intended to proceed under the Corder plan.

Today, the majority holds, inter alia, that the trial court erred when it concluded (1) the change in plans by the State deprived the court of Ajurisdiction@ over the trial de novo; (2) the change meant the State did not bring the condemnation proceeding properly under Texas Property Code section 21.0195(c), thus justifying an award of attorney=s fees and expenses to the property owners; and (3) the trial court could properly dismiss the condemnation action, without prejudice. Majority op. at 2. In reversing the trial court=s judgment, the majority is, in effect, replacing trial de novo with trial by ambush in condemnation proceedings.

By blurring the distinction between the trial court=s subject matter jurisdiction and the trial court=s appellate jurisdictionCor its power to proceedCin eminent domain cases, the majority is able to permit the trial court to proceed to trial de novo despite a substantial and prejudicial departure from the damages issues presented to the special commissioners. Indeed, the majority faults the dissent for making this distinction. Id. at 14 n.9. Such a distinction, however, is consistent with the manner in which courts have characterized eminent domain proceedings.

Appellate courts have consistently stated the trial court acquires subject matter jurisdiction over the eminent domain proceeding when the condemnor files a legally sufficient petition in condemnation. See State v. Nelson, 160 Tex. 515, 334 S.W.2d 788, 790 (1960) (stating filing of written statement for condemnation is initiatory step in proceeding, and it is by virtue of this step jurisdiction of subject matter is acquired); see also Lin v. Houston Cmty. Coll. Sys., 948 S.W.2d 328, 332 (Tex. App.CAmarillo 1997, writ denied) (stating it is well established that jurisdiction of condemnation proceeding does not attach unless condemnation petition includes legally sufficient description of property sought to be condemned and citing Nelson, 334 S.W.3d at 790); Aquila Sw. Pipeline Corp. v. Gupton, 886 S.W.2d 497, 501 (Tex. App.CHouston [1st Dist.] 1994, no writ) (stating, by virtue of filing petition which reflects statutory requirements, jurisdiction over the subject matter is acquired, and citing Nelson, 334 S.W.2d at 790); Seiler v. Intrastate Gathering Corp., 730 S.W.2d 133, 137 (Tex. App.CSan Antonio 1987, no writ) (same), overruled on other grounds by Schumann v. City of Schertz, 100 S.W.3d 361, 367 (Tex. App.CSan Antonio 2002, no pet.).

Appellate courts have also consistently stated eminent domain proceedings remain administrative in nature until a party files an objection to the special commissioners= award; and the trial court does not acquire the power to adjudicate until the proceeding reaches that point. See John v. State, 826 S.W.2d 138, 141 n.5 (Tex. 1992) (stating, if no party timely files objections, the trial court can perform only its ministerial function and render judgment based upon the commissioner=s award); see also Hubenak v. San Jacinto Gas Transmission Co., 141 S.W.3d 172, 179 (Tex. 2004) (describing period from filing of condemnation petition until filing of any objections to commissioners= findings as an Aadministrative proceeding@ that converts into a Anormal pending cause@ when party files objections to commissioners= findings). Moreover, the power the trial court has in the adjudicatory phase is not the same as the power of a court of original jurisdiction. See Nelson, 334 S.W.2d at 791 (stating to hold county court on appeal has all the power of a court of original jurisdiction would tend to thwart Legislature=s purpose in providing for the administrative hearing).

Given the special nature of eminent domain proceedings, it is therefore legitimate to distinguish between Asubject matter jurisdiction@ and the Apower@ of the trial court in relation to the subject matter before it. Such a distinction also has implications for whether the defect in the court=s exercise of its power is waivable and whether the defect at issue implicates the finality of a court=s action.[3] Subject matter jurisdiction, once properly acquired by the county court, may not be divested. See Dallas I.S.D. v. Porter, 709 S.W.2d 642, 643 (Tex. 1986). The power to proceed, however, is a separate issue.

In reaching its conclusion the State=s change of plans did not deprive the trial court of Ajurisdiction,@ the majority cites six cases. Majority op. at 17B18.[4] Four of the cited cases involve defects in the appointment or service of the special commissioners. In Pinnacle Gas Treating, Inc. v. Read, a judge other than the one to whom the condemnation was assigned appointed the special commissioners, and the supreme court stated any error was Acurable@ by trial de novo. 160 S.W.3d 564, 567 (Tex. 2005). In Fort Worth & Denver Northern Railway. Co. v. Johnson, the supreme court observed that, if erroneous, the appointment of commissioners when parties had agreed on other commissioners was not sufficient to invalidate the whole proceeding because the property owners had a full opportunity to contest commissioners= award. 125 Tex. 634, 84 S.W.2d 232, 234 (1935). In Gulf, Colorado & Santa Fe Railway Co. v. Ft. Worth & Rio Grande Railway Co., the property owner objected that the appointed commissioners were not disinterested because they were partially responsible for any condemnation damages; and the supreme court stated the property owner could have secured ample protection by filing objections to the award and obtaining trial de novo before the county court with the right of appeal to the court of appeals. 86 Tex. 537, 26 S.W. 54, 60 (1894). In City of Houston v. Stovall, the trial court granted the landowners= motion to dismiss, which was based on the fact only two commissioners participated in making the award; and, in reversing, the court of appeals relied on supreme court precedent upholding the validity of an award joined by only two of three commissioners. 249 S.W.2d 246, 247B48 (Tex. Civ. App.CGalveston 1952, writ ref=d n.r.e.).

Only two of the cases even arguably concern matters touching on the content of what was before the special commissioners. Blasingame v. Krueger was a mandamus action in which the property owners challenged an order quashing their subpoenas for witnesses at the commissioners= hearing. 800 S.W.2d 391, 394 (Tex. App.CHouston [14th Dist.] 1990, orig. proceeding). This court stated simply that the parties, who would have a chance to conduct regular discovery during the proceeding in county court, had an adequate remedy a law. Id.

In City of Houston v. Bankers Mortgage Co., the only Aevidence@ the City offered before the special commissioners was the City=s letter to the property owner containing its offer for the property. 514 S.W.2d 326, 327 (Tex. Civ. App.CHouston [1st Dist.] 1974, writ ref=d n.r.e.). In responding to the property owner/appellee=s argument that the lack of evidence was jurisdictional, the court of appeals concluded the burden to produce evidence was on the landowner, and also stated, AThe failure of the Commissioners to hear evidence is not a jurisdictional defect.@ Id. at 328.

The majority=s cases are not helpful in deciding the present case for three reasons. First, even if the courts were holding the defect at issue did not implicate Asubject matter@ jurisdiction, the opinions do not address the question in the present case, which is the extent to which the trial court=s adjudicatory power may or may not be limited to the damages issues before the special commissioners. The supreme court has, at a minimum, acknowledged that the trial court does not have unlimited power in eminent domain proceedings. See Nelson, 334 S.W.2d at 791.[5] Rather, a trial court in an eminent domain proceeding lacks the power to enlarge the subject matter of the cause and is limited to a review of those damages issues the special commissioners considered. See Bd. of Regents of the Univ. of Tex. Sys. v. Puett, 519 S.W.2d 667, 670B71 (Tex. Civ. App.CAustin 1975, writ ref=d n.r.e.).[6] The State conceded as much in its initial brief in this court. See State v. PR Invs., 132 S.W.3d 55, 64 (Tex. App.CHouston [14th Dist.] 2004, pet. filed)(discussing the State=s concession).

Second, none of the cited cases involve a situation in which the condemnor made substantial and prejudicial changes to its condemnation plans after presenting those plans to the special commissioners. Blassingame and Bankers Mortgage Co.Cthe only cases involving defects even arguably related to substance rather than formCconcerned only the preclusion and lack of evidence, respectively. Blassingame and Bankers Mortgage Co. did address the extent to which the condemning authority may, during the trial de novo, deviate from the damages issues and evidence before the special commissioners. The majority in the present case also does not address whether the condemnor may make unlimited changes to the damages issues and evidence it presents to the special commissioners. Because the majority has wholly failed to define the scope of the changes the condemnor may make to the damages issues upon trial de novo, bench and bar are left guessing about the legitimate scope of the trial de novo.

Third, to the extent these cases rest on the premise the defect at issue was Acurable@ by the trial de novo, the majority does not explain how the property owners= expenditure of resources analyzing the abandoned plans would be curable by the trial de novo in the present case. The majority refers to the State=s admissionCto the trial court and to this courtCthat it would be appropriate for the trial court to order the State to pay the for the increased expenses, including attorney=s fees and expert fees, caused by the switch from the Sparks to the Corder plan. Majority op. at 29, 31.

I would conclude the attorney=s fees and expenses (including expert expenses) spent analyzing and litigating the abandoned plan constitute Athe increased attorney=s fees and expenses caused by the switch from the Sparks Plan to the Corder Plan.@[7] Based on the uncontroverted testimony, the trial court awarded an amount reflecting those fees and expenses.[8]

Having reversed the trial court=s judgment, the majority does not explain how the property owners are to recoup the fees and expenses incurred in analyzing and litigating the abandoned plan. The majority, instead, suggests some lesser amount would be appropriate and apparently ties award of that amount only to the discovery abuse, not to the substantial change from the plans presented to the special commissioners.

In sum, the net effect of the majority=s decision is to allow the condemning authority to completely subvert the administrative phase of an eminent domain proceeding. Unlike a purely procedural defect, such as the appointment of commissioners in Read, releasing the condemnor from a need to present the commissioners with evidence of what the condemnor actually intends to construct does indeed render the administrative proceeding irrelevant. Cf. Read, 160 S.W.3d at 567 n.4 (rejecting property owner=s argument that to say error is curable by trial de novo renders administrative condemnation irrelevant; instead reasoning, when parties are satisfied with administrative proceeding, they may forgo right to trial, saving money and expense).

The condemning authority now has virtually no incentive to present the special commissioners with evidence of the nature of what it actually intends to build or the use to which it intends to put the land. See Precast Structures, Inc., 60 S.W.3d at 336. As the State=s attorney presciently observed in this case, AThat=s what=s weird about these [eminent domain] cases . . . essentially one party in litigation can change the facts.@

In short, the majority has, in essence, endorsed trial by ambush in the eminent domain arena. For the preceding reasons and those set forth in the original panel opinion, I respectfully dissent from the decisions to grant en banc rehearing and to reverse the judgment of the trial court.

/s/ John S. Anderson

Justice

Judgment rendered and Majority and Dissenting En Banc Opinions filed October 13, 2005.

En banc (Justices Yates, Hudson, Fowler, and Guzman join the Majority Opinion; Chief Justice Hedges and Justices Edelman and Seymore join the Dissenting Opinion.) (Anderson, J., dissenting.)

[1] State v. PR Invs., 132 S.W.3d 55 (Tex. App.CHouston [14th Dist.] 2004, pet. filed).

[2] This is the same plan to which the panel referred as the ASparks and Barlow plan.@ See PR Invs., 132 S.W.3d at 57 n.2.

[3] In support of its contention Asubject matter jurisdiction,@ Ajurisdiction,@ Aappellate jurisdiction,@ and Apower to act,@ are interchangeable terms, lack of any of which implicates finality, the majority cites University of Texas Southwestern Medical Center at Dallas v. Loutzenhiser, 140 S.W.3d 351, 358B59 (Tex. 2004). Majority op. at 14 n.9. Loutzenhiser was not an eminent domain case. It is also clear from the context the Loutzenhiser court was analyzing whether a statutory requirement implicated subject matter jurisdiction concerns. See id. at 358B59. The court wrote, AThe failure of a jurisdictional requirement deprives the court of the power to act . . . and ever to have acted, as a matter of law.@ Id. at 359 (emphasis added). The converse (i.e., that lack of power to act results in a loss of subject matter jurisdiction), however, does not necessarily follow.

[4] Throughout its opinion, the majority also refers to Hubenak v. San Jacinto Gas Transmission Co., 141 S.W.3d 172 (Tex. 2004). Hubenak involved an alleged defect related to the statutory requirement that the condemnation petition state that the condemning entity and the property owner were unable to agree on damages. See id. at 174, 176 (citing Tex. Prop. Code Ann. ' 21.012 (Vernon 2004)). Unlike Hubenak, the present case does not involve a defect in the petition, but a defect in the substance of what was before the commissioners as compared to that before the trial court, a defect which occurred when the administrative phase of the condemnation converted into the judicial phase and which implicates the trial court=s power to proceed, not its subject matter jurisdiction. Hubenak is inapposite.

[5] The majority contends the statements in Nelson on which the dissenters rely are obiter dicta. Majority op. at 19. In Nelson, however, the supreme court was delineating the eminent domain jurisdiction of the county court. See State v. Nelson, 160 Tex. 515, 334 S.W.2d 788, 790B91 (1960). When the supreme court makes a statement very deliberately after mature consideration and for future guidance in the conduct of litigation, that statement is judicial, not obiter, dictum and is A>at least persuasive and should be followed unless found to be erroneous.=@ Edwards v. Kaye, 9 S.W.3d 310, 314 (Tex. App.CHouston [14th Dist.] 1999, pet. denied) (quoting Palestine Contractors, Inc. v. Perkins, 386 S.W.2d 764, 773 (Tex. 1964)).

[6] The majority contends the Austin Court of Appeals incorrectly stated that the trial de novo is limited to issues involved in the administrative proceeding before the special commissioners. Majority op. at 21 (citing Bd. of Regents of the Univ. of Tex. Sys. v. Puett, 519 S.W.2d 667, 670B71 (Tex. Civ. App.CAustin 1975, writ ref=d n.r.e.)). The majority then observes the trial court has the power to determine the condemnor=s right to condemn, whereas the commissioners are limited to findings on compensation. Id. It is clear from the context of the Puett opinion that the Austin court was referring to Amatters as were properly before the commissioners.@ Puett, 519 S.W.2d at 671 (emphasis added).

[7] I reach this conclusion in the present case because the record reflects the Sparks Plan was the focus of the condemnation proceeding virtually from its inception. This conclusion is also consistent with what a condemnee is to be awarded under Texas Property Code section 21.0195, if Aa court dismisses a condemnation proceeding on the motion of the [Texas Department of Transportation] or as a result of the failure of the department to bring the proceeding properly.@ Tex. Prop. Code Ann. ' 21.0195(c) (Vernon Supp. 2004); see also Board of Regents of the Univ. of Houston Sys. v. FKM Partnership, Ltd., CS.W.3dC,C, 2005 WL 851178, at *5 (Tex. App.CHouston [14th Dist.] Apr. 14, 2005, no pet. h.) (stating, under Texas Property Code section 21.019, landowner=s damages include reasonable and necessary fees for attorneys, appraisers, photographers, and for the other expenses incurred by property owner). In FKM Partership, Ltd., this court remanded for a hearing on the damages related to the portion of land the condemning authority sought to dismiss. Id. at *5.

[8] With the exception of credits if the case were not appealed, the trial court=s award of fees and expenses reflects the property owners= uncontroverted testimony. The trial court, however, gave the State a greater credit against the fees awarded to PR Investments than the testimony supported if the case were not appealed.