The State of Texas, The Texas General Land Office, and The Texas Land Commissioner v. Herbert W. Holland--Appeal from 23rd District Court of Matagorda County

NUMBER 13-04-099-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI - EDINBURG

___________________________________________________________________

THE STATE OF TEXAS, THE TEXAS

GENERAL LAND OFFICE, AND THE

TEXAS LAND COMMISSIONER, Appellants,

v.

HERBERT W. HOLLAND, Appellee.

___________________________________________________________________

On appeal from the 23rd District Court

of Matagorda County, Texas.

__________________________________________________________________

O P I N I O N

Before Chief Justice Valdez and Justices Hinojosa and Rodriguez

Opinion by Justice Rodriguez

Appellants, the State of Texas, the Texas General Land Office, and the Texas Land Commissioner, bring this accelerated interlocutory appeal following the trial court s denial of their plea to the jurisdiction. // Appellants contend that the trial court erred in denying its plea to the jurisdiction because (1) appellee, Herbert Holland, failed to adequately plead a cause of action for inverse condemnation; and (2) the State acted under color of contract, and therefore, no takings claims can be brought as a matter of law. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

Over the past several years, the Texas General Land Office has worked to abate oil pollution in areas of the Gulf of Mexico by constructing filtration units along the Texas coast. Specifically, the State has been involved in the construction of these facilities at Port Isabel, Palacios, and Port Lavaca, Texas. The filtration units use a series of special polymer-based filters to remove the pollution. Holland holds the patent for those filters and for the filtration process.

In 2002, Holland sent a letter to the State claiming the State had infringed on his patent and requesting payment for the use of his patented technology. After the State refused to pay, Holland filed suit, asserting inverse condemnation under article I, section 17 of the Texas Constitution. The State responded with a general denial and a plea to the jurisdiction arguing that the trial court lacked jurisdiction because sovereign immunity barred Holland s claim, there was no intentional act as required in a takings claim, the plaintiff s case was pre-empted by federal law, and Texas does not recognize a takings claim for patent infringement. The State also asserted immunity from suit because Holland had allegedly brought a contract claim disguised as a patent infringement claim.

On February 5, 2004, the trial court held a hearing on the State s plea to the jurisdiction. After reviewing the pleadings, affidavit evidence and testimony from the parties, the trial court denied appellants plea to the jurisdiction. This appeal ensued.

II. STANDARD OF REVIEW

A plea to the jurisdiction is a dilatory plea; its purpose is to defeat a cause of action without regard to whether the claims asserted have merit. Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000). The plea challenges the trial court s authority to determine the subject matter of a pleaded cause of action. City of Midland v. Sullivan, 33 S.W.3d 1, 6 (Tex. App. El Paso 2000, pet. dism d w.o.j.); State v. Benavides, 772 S.W.2d 271, 273 (Tex. App. Corpus Christi 1989, writ denied). Because subject matter jurisdiction is a question of law, we review a trial court s ruling on a plea to the jurisdiction under a de novo standard of review. State v. Gonzalez, 82 S.W.3d 322, 327 (Tex. 2003).

When a plea to the jurisdiction challenges the pleadings, we determine if the pleader has alleged facts that affirmatively demonstrate the trial court's jurisdiction to hear the cause. Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 446 (Tex. 1993). In determining whether jurisdiction exists, rather than looking at the claim s merits, we look to the allegations in the pleadings, accept them as true, and construe them in favor of the pleader. See County of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex. 2002). We consider the facts alleged in the petition, and to the extent it is relevant to the jurisdictional issue, any evidence submitted by the parties to the trial court. Tex. Natural Res. Conservation Comm n v. White, 46 S.W.3d 864, 868 (Tex. 2001); Bland, 34 S.W.3d at 555.

III. ANALYSIS

Holland s first amended petition asserts an inverse condemnation claim pursuant to article I, section 17 of the Texas Constitution. See Tex. Const. art. I, 17. Section 17 provides that no person s property shall be taken, damaged or destroyed for or applied to public use without adequate compensation being made . . . . Id. Condemnation is the procedure by which a sovereign state exercises its right to take property of a private owner for public use, without consent, but upon the payment of just compensation. A.C. Aukerman Co. v. State, 902 S.W.2d 576, 578 (Tex. App. Houston [1st Dist.] 1995, pet. denied). Inverse condemnation occurs when a property owner seeks compensation for property taken for public use without process or a proper condemnation proceeding. Id.

Generally, sovereign immunity, unless waived, protects the State of Texas, its agencies and its officials from lawsuits for damages, absent legislative consent to sue the State. Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 405 (Tex. 1997). Under article I, section 17 of the Texas Constitution, sovereign immunity is waived for a valid inverse condemnation claim. Dahl v. State, 92 S.W.3d 856, 862 (Tex. App. Houston [14th Dist.] 2002, no pet.). If, however, a plaintiff does not allege a valid inverse condemnation claim, sovereign immunity does apply, and a court should grant the plea to the jurisdiction. Id.

A. Inverse Condemnation PleadingAppellants first contend that the trial court erred in denying their plea to the jurisdiction because Holland failed to adequately plead a cause of action for inverse condemnation and therefore, sovereign immunity is not waived. To plead a cause of action for inverse condemnation, Holland was required to assert that his property was taken, damaged or destroyed for or applied to public use. See A.C. Aukerman, 902 S.W.2d at 578. Additionally, the act which resulted in the taking must be intentional. Id. The taking, damage or destruction must be an actual physical appropriation or invasion of property, or unreasonable interference with the owner s right to use and enjoy his property. Id.

Holland s first amended petition alleges, in relevant part, the following:

9.The practice of the method used by the [General Land Office] and the use of the apparatus are physical acts that constitute an invasion of Plaintiff s property right.

10.The practice of the method used by the [General Land Office] and the use of the apparatus are physical acts that constitute an unreasonable interference with Plaintiff s exclusive right to use and enjoy his property.

11.The acts of the [General Land Office] constitute a taking of Plaintiff s property without just compensation.

12.Plaintiff s property has been taken by the [General Land Office] for or applied to public use.

13.The acts by the [General Land Office], which have resulted in the taking of Plaintiff s property, were done intentionally and are continuing to be done intentionally.

(Emphasis added). Looking at the allegations in Holland s petition, it is clear that he properly pled the elements of an inverse condemnation claim.

Appellants contend that Holland s allegations are insufficient to plead a taking within the meaning of article I, section 17 because Holland has not provided proof that his property has been destroyed or damaged. We note that taking, damaging, and destruction of one s property are three distinct claims arising under article I, section 17, although the term taking has become used as a shorthand to refer to all three types of claims. City of Dallas v. Jennings, 142 S.W.3d 310, 313 n.2 (Tex. 2004). In this case, Holland has pleaded a taking claim, not a damage or destruction claim. Therefore, Holland is not required to allege that his property was damaged or destroyed. Nor is he required to marshal proof at this time, as it is necessary only to plead facts showing the elements of the cause of action. Kerr v. Dep t of Transp., 45 S.W.3d 248, 251 n.3 (Tex. App. Houston [1st Dist.] 2001, no pet.).

Additionally, appellants argue that Holland s petition does not assert that the State had the requisite intent for an inverse condemnation claim. In support of this argument, appellants cite to Jennings, 142 S.W.3d at 314, for the proposition that in order to establish a taking, the taking entity must know (1) the act will cause an identifiable harm or (2) that specific property damage is substantially certain to result. However, we find the Jennings case distinguishable as the supreme court in that case was analyzing the required intent for a claim of damage to property. See id. at 313-15. The two prongs set out by the supreme court to establish the intent element in a damage claim are not necessary in a taking claim. As we stated earlier, a damage claim is distinctly different from Holland s taking claim. Holland alleged that the State intentionally performed acts which resulted in a taking of property for public use. Holland need not allege that the State knew the act would cause an identifiable harm or that specific property damage is substantially certain to result. We therefore find Holland s pleadings are sufficient to satisfy the intent element of his inverse condemnation claim.

Accordingly, looking at the allegations in the pleadings, accepting them as true, and construing them in favor of the pleader, see Brown, 80 S.W.3d at 555, we conclude Holland s petition clearly states a claim for inverse condemnation. Appellants first issue is overruled.B. Existence of a Contract

By their second issue, appellants argue that the trial court should have granted the State s plea to the jurisdiction based on the State s evidence that an implied-in-fact contract existed with Holland s companies for the construction and use of the Palacios facility. When the State acts within a color of right under a contract and not under its eminent domain powers, the State does not have the requisite intent under constitutional-takings jurisprudence. See Gen. Servs. Comm n v. Little-Tex Insulation Co., Inc., 39 S.W.3d 591, 598-99 (Tex. 2001). Therefore, if a contract exists in this case regarding the State s use of Holland s patented filtration process, Holland cannot plead a valid takings claim, and the State s plea to the jurisdiction should be granted. See id.

If a plea to the jurisdiction challenges the existence of jurisdictional facts, we consider relevant evidence submitted by the parties when necessary to resolve the jurisdictional issues raised, as the trial court is required to do. Tex. Dep t Parks & Wildlife v. Miranda, 133 S.W.3d 217, 227 (Tex. 2004). When the consideration of a trial court's subject matter jurisdiction requires the examination of evidence, the trial court exercises its discretion in deciding whether the jurisdictional determination should be made at a preliminary hearing or await a fuller development of the case, mindful that this determination must be made as soon as practicable. Id. In a case in which the jurisdictional challenge implicates the merits of the plaintiff s cause of action and the plea to the jurisdiction includes evidence, the trial court reviews the relevant evidence to determine if a fact issue exists. Id. If the evidence creates a fact question regarding the jurisdictional issue, then the trial court cannot grant the plea to the jurisdiction, and the fact issue will be resolved by the fact finder. Id. However, if the relevant evidence is undisputed or fails to raise a fact question on the jurisdictional issue, the trial court rules on the plea to the jurisdiction as a matter of law. Id.

The evidence introduced by appellants at the hearing included invoices, purchase requisitions and other correspondence between the General Land Office and the two companies owned by Holland, Spill Removal Products and Pollution Prevention Services. This evidence shows that the State paid money to Holland s companies for the components, installation, design and consulting for the Palacios facility. Additionally, the State introduced the testimony of Dale Smith who testified as to the existence of a contractual relationship between the State and Holland s companies. However, there is little evidence supporting the existence of a contract with Holland, the owner of the patent. The State s own witness acknowledged that there was no contract with Holland.

Based on the evidence presented by appellants, this Court cannot conclude as matter of law that an implied contract existed between the State and Holland regarding the use of Holland s patented filtration process. Accordingly, we find that a fact issue exists as to the existence of a contract which must be resolved by the fact finder. See Haws & Garrett Gen. Contractors, Inc. v. Gorbett Bros. Welding Co., Inc., 480 S.W.2d 607, 610 (Tex. 1972) (stating that the existence of an implied contract rests upon inferences which are drawn by the trier of fact from surrounding facts and circumstances). Appellants second issue is overruled.IV. CONCLUSION

Having found that Holland s pleadings contain sufficient facts to affirmatively demonstrate the trial court's jurisdiction and that the existence of an implied contract between the parties is a fact issue which must be determined by the finder of fact, we accordingly affirm the decision of the trial court.

NELDA V. RODRIGUEZ

Justice

Opinion delivered and filed

this 24th day of March, 2005.