Malcomson Road Utility District v. Frank George Newsom

Opinion issued May 20, 2005

In The

Court of Appeals

For The

First District of Texas

NO. 01-00-01163-CV

NO. 01-00-01169-CV

MALCOMSON ROAD UTILITY DISTRICT, Appellant

V.

FRANK GEORGE NEWSOM, Appellee

On Appeal from the County Civil Court At Law No. 3

Harris County, Texas

Trial Court Cause Nos. 691,631 & 691,632

OPINION ON REHEARING

Appellant, Malcomson Road Utility District (“the District”), has moved for

rehearing. So has appellee, Frank George Newsom. We grant the District’s rehearing

motion, deny Newsom’s, withdraw our opinion of June 5, 2003, and substitute this

opinion in its stead.

The District appeals from two final judgments that denied its motions for

partial summary judgment; granted Newsom’s motions for summary judgment;

denied the District the right to condemn Newsom’s property ; awarded Newsom

attorney’s fees and possession of and improvements on the property that the District

had sought to condemn; and dismissed the causes for want of jurisdiction. We

determine if fact issues exist precluding summary judgment for either party on the

following matters: (1) whether the property was sought for public uses; (2) whether

the District’s determinations of public necessity were arbitrary and capricious or were

made in bad faith; (3) whether the District and Newsom were unable to agree on

damages before filing suit; (4) whether the takings violated due process or equal

protection; (5) whether the District improperly “delegated” its eminent domain

powers to private developers competing with Newsom; and (6) whether Newsom may

raise, for the first time on rehearing, a new challenge to the condemnation. We

reverse the judgments and remand the causes.

Background

Newsom owned a northern and a southern tract of undeveloped land outside

the District’s boundaries. A drainage ditch lay along the eastern boundary of

Newsom’s northern tract. David Garrett, the vice-president of a corporate landowner

that wished to develop its nearby tract into a residential subdivision , tried to purchase

2.6178 acres along the eastern edge of Newsom’s northern tract to expand the

drainage ditch, which Harris County Flood Control District (“HCFCD”) required for

development of Garrett’s subdivision, called Lakewood Grove. Similarly, John

Santasiero, the owner of nearby property that included a residential subdivision, tried

to purchase 2.58 acres at the southern end of Newsom’s southern tract to build a

retention pond that HCFCD required for development of Santasiero’s subdivision,

called Villagio. Newsom rejected the offers .

After Newsom rejected their offers, the developers asked the District to

condemn the portions of Newsom’s land that they had tried to purchase. The

District’s board eventually determined that the taking of Newsom’s land in the

requested amounts for the retention pond and ditch expansion was a public necessity

that would serve the public purpose of drainage. The District made an offer to

Newsom for each piece of land. Newsom rejected outright the placement of a pond

on his property. He also rejected the amount offered for the land for the ditch

expansion and counter-offered with a higher price.

Upon Newsom’s rejections and counter-offer, the District filed separate

condemnation proceedings in county court for each piece of property. See Tex. Prop.

Code Ann . §§ 21.012, 21.013 (Vernon 2004). We designate these suits the “pond

case” (trial court cause number 691,631; appellate cause number 01-00-01163-CV)

and the “ditch case” (trial court cause number 691,632; appellate cause number 01-00-01169-CV), denoting the purpose for which the District sought to condemn the

land . In each case, the trial court appointed special commissioners, who, after a

hearing, awarded damages of $49,021 in the pond case and of $49,739 in the ditch

case. See Tex. Prop. Code Ann . §§ 21.014, 21.015 (Vernon 2004). The District

deposited the determined amounts into the court’s registry, took possession of those

portions of Newsom’s land, and began improvements on the property . See Tex.

Prop. Code Ann. § 21.021(a)(2) (Vernon 2004).

Newsom timely filed original and amended objections to the commissioners’

awards. See Tex. Prop. Code Ann . § 21.018(a) (Vernon 2004). He simultaneously

filed original and amended pleas to the jurisdiction, arguing that the District had not

made good-faith offers of damages before filing suit, that his property was being

taken for private uses and without public necessity, that the takings were arbitrary and

capricious and fraudulent, and that the District improperly “delegated” its eminent-domain powers to the nearby competing developers .

By original and supplemental motions for partial summary judgment, the

District argued that (1) under rule 166a(c), it had satisfied all conditions entitling it

to condemnation, leaving only the land’s value for determination, and that (2) under

rule 166a(i), Newsom could produce no evidence supporting his defenses that the

District’s determinations of public necessity for the condemnations were arbitrary and

capricious or unreasonable . See Tex. R. Civ. P. 166a(c), (i). By his own motions for

summary judgment under rule 166a(c), Newsom argued in both cases that (1) the

District’s determinations of public use and necessity were arbitrary and capricious,

resulted from fraud or bad faith, or were abuses of discretion; (2) the District did not

show that the parties were unable to agree on damages before the District filed suit

because the District did not make good-faith offers of damages; (3) the District

improperly delegated its eminent-domain powers to the competing developers; and

(4) the takings violated equal protection and due process.

Without specifying its reasoning, the trial court denied the District’s motions

for partial summary judgment, granted Newsom’s motions for summary judgment,

and dismissed the causes for want of jurisdiction. The District appealed. During the

trial court’s plenary power, Newsom moved to recover statutory attorney’s fees,

damages arising from the District’s temporary taking of Newsom’s property, and

possession of the property that the District had temporarily taken. See Tex. Prop.

Code Ann. § 21.019 (Vernon 2004), §§ 21.044(a), 21.062 (Vernon 2000). While

appeal was pending, we granted the parties’ joint motion to abate the appeal and to

remand the cause for the trial court to dispose of Newsom’s pending motions . On

remand, the trial court entered final judgments in each cause, reaffirming its summary

judgment rulings, dismissing the District’s condemnation suits for want of

jurisdiction, awarding Newsom his attorney’s fees from trial and contingent

attorney’s fees for appeal, awarding Newsom damages for the District’s temporary

taking of his property, and returning to him possession of the disputed property,

including awarding him the improvements made by the District to that property

during the District’s temporary possession .

Standard of Review and Burden of Proof

Because the parties moved for rule-166a(c) and rule-166a(i) summary

judgment, we apply the well-established standards of review applicable to summary

judgments. Summary judgment under rule 166a(c) is proper only when a movant

establishes that there is no genuine issue of material fact and that he is entitled to

judgment as a matter of law. Randall’s Food Mkts., Inc. v. Johnson , 891 S.W.2d 640,

644 (Tex. 1995). A defendant is entitled to summary judgment if the evidence

disproves as a matter of law at least one element of each of the plaintiff’s causes of

action or if it conclusively establishes all elements of an affirmative defense. Id.

A party may move for a “no-evidence” summary judgment under rule 166a(i)

“if there is no evidence of one or more essential elements of a claim or defense on

which an adverse party would have the burden of proof at trial.” Flameout Design

& Fabrication, Inc. v. Pennzoil Caspian Corp. , 994 S.W.2d 830, 834 (Tex.

App.—Houston [1st Dist.] 1999, no pet.). A no-evidence summary judgment is,

therefore, like a directed verdict. See id. “The trial court must grant the motion

unless the nonmovant produces more than a scintilla of evidence raising a genuine

issue of material fact on the challenged elements.” Id. In reviewing either type of

summary judgment, we indulge every reasonable inference in favor of the non-movant, resolve any doubts in its favor, and take as true all evidence favorable to it.

Johnson , 891 S.W.2d at 644 ; Flameout Design , 994 S.W.2d at 834 .

When both sides move for summary judgment and the trial court grants one

motion and denies the other, we can consider both motions, their evidence, and their

issues and may render the judgment that the trial court should have rendered. See CU

Lloyd’s of Tex. v. Feldman , 977 S.W.2d 568, 569 (Tex. 1998). When an order

granting summary judgment does not specify the grounds upon which the trial court

ruled, we must affirm to the extent that any of the summary judgment grounds is

meritorious. See Star-Telegram, Inc. v. Doe , 915 S.W.2d 471, 473 (Tex. 1995).

On rehearing, Newsom urges us to apply a different standard of review from

the one applicable to summary judgments. Specifically, Newsom relies on the

standard of review adopted in Hubenak v. San Jacinto Gas Transmission Co. , which

this Court issued shortly before the District filed a supplemental brief on original

submission. See 65 S.W.3d 791, 798 (Tex. App.—Houston [1st Dist.] 2001)

(“ Hubenak II ”), aff’d , 141 S.W.3d 172 (Tex. 2004) (“ Hubenak III ”).

In Hubenak II , the landowners appealed from an adverse condemnation

judgment, arguing that the trial court lacked subject-matter jurisdiction because the

condemnor had failed to show that it was unable to agree with the landowners on

damages, which, they argued, was a jurisdictional prerequisite to filing suit. Id. at

796. Although the judgment was rendered on cross-motions for summary judgment,

we determined that the proper standard of review for determining whether the unable-to-agree jurisdictional requisite had been satisfied was legal sufficiency of the

evidence. Id. at 797-98. That is, we deemed the trial court implicitly to have made

a plenary factual determination that the condemnor had satisfied this jurisdictional

prerequisite, even though the procedural mechanism for that ruling was summary

judgment. See id. at 798. We then looked for more than a scintilla of evidence in the

summary judgment record to support the implied ruling. See id. Of course, that

standard of review is generally the inverse of the standard applicable to a summary

judgment ruling.

We first note that the Hubenak II court applied the cited standard of review

only to the determination of whether the parties were unable to agree, not to any other

determination relevant to a condemnation proceeding. See id. at 798. Assuming (as

Newsom does) without deciding that the Hubenak II standard of review could apply

to determinations other than the unable-to-agree requirement, and further assuming

without deciding that Newsom may even urge the application of the Hubenak II

standard of review on appeal,

we hold that that standard has been overruled. We

reach this conclusion for two reasons.

First, after having noted that the courts of appeals involved in the suits that it

was reviewing had applied different standards of review to summary judgment rulings

on the unable-to-agree requirement,

the Hubenak III court held:

The procedural vehicle chosen by the condemnors to determine whether

they were “unable to agree” with the landowners in the cases before us

was a motion for partial summary judgment. Trial courts can, however,

resolve “unable to agree” issues through other procedural vehicles, as

they resolve many threshold pre-trial matters, including ruling on a plea

in abatement. Because the issue was raised in the present cases in

motions for partial summary judgment asserting that the condemnors

established as a matter of law that they were “unable to agree” with the

landowners, we must determine whether there are any questions of fact.

Hubenak III , 141 S.W.3d at 184-85 (footnote omitted). The supreme court thus

applied a summary judgment standard of review in the same suit in which we had

applied a legal-sufficiency standard of review. See id . By so doing, the supreme

court implicitly overruled the standard of review that we had espoused in Hubenak

II .

Second, when Hubenak II was decided, the unable-to-agree requirement was

generally considered jurisdictional. See, e.g. , Hubenak II , 65 S.W.3d at 796 . Our

standard-of-review holding in Hubenak II was grounded on the jurisdictional nature

of the unable-to-agree requirement. See id. at 797-98 . For our holding, we relied

heavily on State v. Hipp , 832 S.W.2d 71 (Tex. App.—Austin 1992), rev’d on other

grounds sub nom State v. Dowd , 867 S.W.2d 781 (Tex. 1993). Hubenak II , 65

S.W.3d at 797-98 . In Hipp , the trial court did not decide the unable-to-agree

jurisdictional requirement as a preliminary matter, but submitted the issue to the jury,

which failed to find that the State had negotiated in good faith. Hipp , 832 S.W.2d at

74 . Based on the jury’s findings, the trial court dismissed the condemnation suits for

lack of subject-matter jurisdiction. Id. On appeal, the Hipp court held that the

determination of the unable-to-agree requirement was a preliminary matter for the

court, reasoning:

If . . . a factual dispute as to the fulfillment of this statutory

prerequisite is a question for the jury, an entire eminent-domain

proceeding would be void and the case dismissed if, at the conclusion

of the trial, the jury found that the condemnor had failed to satisfy the

unable-to-agree requirement. . . . Such a process obviously results in an

enormous waste of time and money for all parties involved, including

the judicial system. The purpose of requiring the condemnor to plead

and prove that it made a bona fide effort to agree is to prevent needless

litigation. A process that permitted a complete jury trial simply to

determine if the trial court had jurisdiction over the cause would

frustrate that purpose.

We conclude that the trial judge should determine as a threshold

matter whether the condemnor has satisfied the unable-to-agree

prerequisite to bringing suit. Such a process comports with the general

rule that the determination of jurisdiction is made by the court, not the

jury. A matter of first consideration by any court is the determination of

its own jurisdiction. Moreover, a court has the power to determine any

facts on which its jurisdiction depends. Indeed, Texas courts must often

resolve factual issues in making jurisdictional determinations. . . . Thus,

our conclusion that the judge, not the jury, should decide whether the

condemnor has satisfied the statutory requirement comports with

traditional Texas practice as to the determination of jurisdictional

matters.

Id. at 75-76 (citations omitted).

Based on this reasoning, the Hipp court held that, although the jury had

determined the unable-to-agree issue, there was “nothing in the record . . . to indicate

that the trial court felt bound by the jury’s verdict on this issue”; the Hipp court thus

presumed that, in dismissing the suit, the trial court had made an implied finding that

paralleled the jury’s verdict and reviewed that implied finding accordingly. Id. at 76 .

It was this reasoning and holding of Hipp that we applied to our review of the

summary judgment ruling in Hubenak II . See Hubenak II , 65 S.W.3d at 798 .

After Hipp and Hubenak II issued, however, the Texas Supreme Court held that

the unable-to-agree requirement is not jurisdictional. Hubenak III , 141 S.W.3d at

183 . Accordingly, the basis for our applying a legal-sufficiency review to a summary

judgment ruling in Hubenak II no longer exists. For this reason, too, Hubenak III has

implicitly overruled our standard-of-review holding from Hubenak II .

Before Hubenak III , the issue of which standard of review applied to a

determination, rendered upon summary judgment, of the unable-to-agree requirement

had been described as a “thorny” one. See Cusack Ranch Corp. v. MidTexas Pipeline

Co. , 71 S.W.3d 395, 398 (Tex. App.—Corpus Christi 2001), aff’d sub nom Hubenak

III , 141 S.W.3d 172 (Tex. 2004); compare Hubenak II , 65 S.W.3d at 798 (applying

legal-sufficiency standard of review to ruling on unable-to-agree requirement, despite

fact that order appealed was summary judgment ruling) with Hubenak v. San Jacinto

Gas Transmission Co. , 37 S.W.3d 133, 135 (Tex. App.—Eastland 2001, pet. denied)

(applying summary judgment standard and rejecting sufficiency standard when order

appealed was summary judgment ruling concerning unable-to-agree requirement).

The Hubenak III court cut through that Gordian knot in a way contrary to the position

that Newsom takes on rehearing.

In accordance with Hubenak III , we hold that the summary judgment standard

of review applies in an appeal from an adverse condemnation ruling rendered upon

motion for summary judgment . We thus overrule Newsom’s rehearing argument

concerning the standard of review.

Public Use

In issue one, the District argues that the trial court erred in denying its rule-166a(c) motions for partial summary judgment in each suit because the District

proved that it had satisfied all conditions entitling it to condemnation . One of those

conditions was that the acquisition of Newsom’s property was for a public use. In his

responses to the District’s summary judgment motions, Newsom argued that fact

issues existed on whether (1) the takings were for a public use because the

improvements benefitted only the developers’ lands or (2) the District fraudulently

or arbitrarily and capriciously concluded that the takings were for a public use. In his

rule-166a(c) summary judgment motions, Newsom argued that he had conclusively

proved that the takings were not for a public use because the improvements allegedly

benefitted only the developers’ lands . In issue two, the District argues that the trial

court erred in granting Newsom’s rule-166a(c) summary judgment motions on this

ground.

A. The District’s Statutory Basis for Eminent Domain

The District is clothed with the following authority:

(a)A district shall have the functions, powers, authority, rights, and

duties which will permit accomplishment of the purposes for which it

was created.

(b)A district is authorized to purchase, construct, acquire, own,

operate, maintain, repair, improve, or extend inside and outside its

boundaries any and all works, improvements, facilities, plants,

equipment, and appliances necessary to accomplish the purposes of the

district authorized by the constitution, this code, or other law, including

all works, improvements, facilities, plants, equipment, and appliances

incident, helpful, or necessary to:

. . .

(3)gather, conduct, divert, and control local storm water or

other local harmful excesses of water in a district; . . . .

Tex. Water Code Ann. § 54.201(a), (b)(3) (Vernon Supp. 2004-2005).

The District sought to condemn Newsom’s property under the following

statute:

A district . . . may acquire by condemnation any land, easements, or

other property inside or outside the district boundaries . . . necessary for

water, sanitary sewer, storm drainage, or flood drainage or control

purposes or for any of its projects or purposes, and may elect to

condemn either the fee simple title or a lesser property interest .

Id . § 49.222(a) (Vernon 2000) (emphasis added); see also id. § 49.218(a)-(c) (Vernon

Supp. 2004-2005) (granting districts right to purchase land or interest in land

considered necessary for districts’ purposes).

B. The Requirement That the Taking Be for Public Use

“The Constitution itself protects private property from any taking except for

the public use . . . .” Borden v. Trespalacios Rice & Irrigation Co. , 86 S.W. 11, 15

(Tex. 1905); see Tex. Const. art. I, § 17. What constitutes a public use is a question

of law for the court. Tenngasco Gas Gathering Co. v. Fischer , 653 S.W.2d 469, 474

(Tex. App.—Corpus Christi 1983, writ ref’d n.r.e.); Atwood v. Willacy County

Navigation Dist. , 271 S.W.2d 137, 140 (Tex. Civ. App.—San Antonio 1954, writ

ref’d n.r.e.) . However, “the legislative declaration that a use is public and the

delegation of power of eminent domain [are] to be given great weight by the court”

in determining whether a particular use is public or private. Fischer , 653 S.W.2d at

475 ; accord Atwood , 271 S.W.2d at 140 . Put another way, the legislative declaration

is binding unless the use is “clearly and palpably” private. Hous. Auth. of the City of

Dallas v. Higginbotham , 143 S.W.2d 79, 83 (Tex. 1940).

What is important in the public-use determination is the character of the right

inuring to the public, not the extent to which the public’s right is exercised. Fischer ,

653 S.W.2d at 475 . As the Texas Supreme Court has explained,

[i]t is immaterial if the use is limited to citizens of a local neighborhood,

or that the number of citizens likely to avail themselves of it is

inconsiderable, so long as it is open to all who choose to avail

themselves of it. The mere fact that the advantage of the use inures to

a particular individual or enterprise, or group thereof, will not deprive

it of its public character.

Higginbotham , 143 S.W.2d at 84 (quoting West v. Whitehead , 238 S.W. 976, 978

(Tex. Civ. App.—San Antonio 1922, writ ref’d)). “Public use” has, accordingly, been

defined in various ways, one of which is that the use is public when the public obtains

some definite right or use in the undertaking to which the property is devoted. See

Coastal States Gas Producing Co. v. Pate , 309 S.W.2d 828, 833 (Tex. 1958). The

Texas Supreme Court thus construes “public use” rather liberally, although the court

has rejected a definition that means nothing more than public welfare or good or

under which any business that promotes the community’s prosperity or comfort might

be aided. See id.

C. Application of the Law to the Summary Judgment Evidence

We begin by noting that the Legislature has declared that the District’s

purposes, for which it has been delegated the power of eminent domain, extend to

conducting activities like the building of retention ponds and the expanding of

drainage ditches. See Tex. Water Code Ann. § 54.201(a), (b)(3) . This is a

legislative determination that such projects are public uses. That declaration is

binding unless the uses are “clearly and palpably” private. See Higginbotham , 143

S.W.2d at 83 .

The District’s board determined that both the ditch expansion and the retention

pond were for public uses . The District presented summary judgment evidence that

the expanded ditch and the pond were for the public purpose of regulating excess or

flood waters. There was also evidence that any water to the north of the pond, not

just water from the Santasiero property , could drain into the pond. In response,

Newsom pointed to the following evidence: (1) the District’s board resolutions stated

that the pond was necessary to “serve” Santasiero’s property and that the expansion

was necessary to widen the “Lakewood Grove ditch”; (2) the pond was of a size to

handle the amount of estimated overflow from the Santasiero developments only,

even though the pond could receive water from anywhere upland; and (3) the ditch

was being built to facilitate HCFCD’s approval of the Lakewood Grove subdivision.

The Legislature has indicated that projects like these are for public purposes,

and t he District produced evidence that both the ditch expansion and the pond

construction would serve the public purpose of draining excess water from the area.

That showing sufficed. It is immaterial whether the District wanted the pond and the

ditch expansion to assist other developers’ properties, as long as the public could

benefit from or use the improvements and the improvements were not “clearly and

palpably private.” See Higginbotham , 143 S.W.2d at 83 ; Pate , 309 S.W.2d at 833 .

Furthermore, with respect to the retention pond, no one disputes that water

from any uphill areas could flow into it. This fact distinguishes the pond from the

private roads in the cases on which Newsom relies.

Given that water from public

areas generally can flow into the pond, it is immaterial that the pond was built in the

size necessary to accommodate estimated water run-off from Santasiero’s

development. What is important is that water from anywhere upland could flow into

the pond, not the extent to which others’ water would flow there or the extent to

which the pond might not, with later development in the area, suffice adequately to

serve all properties. See Higginbotham , 143 S.W.2d at 84 (“It is immaterial if the use

is limited to the citizens of a local neighborhood, or that the number of citizens likely

to avail themselves of it is inconsiderable, so long as it is open to all who choose to

avail themselves of it. ”); Fischer , 653 S.W.2d at 475 (explaining that character of

right inuring to public, not extent to which public’s right is exercised, is the important

consideration ).

D. Conclusion

The District thus conclusively proved that the retention pond and the ditch

expansion were for public uses. Newsom did not raise fact issues on these matters

or conclusively prove that these improvements were not for public uses.

Accordingly, the trial court erred to the extent that it denied the District’s

motions for partial summary judgment on the ground of public use and to the extent

that it granted Newsom’s motions for summary judgment on the ground that no public

use existed as a matter of law.

We sustain those portions of issues one and two concerning the takings’ being

for public uses.

Public Necessity

Also under issue one, the District argues that the trial court erred in denying its

rule-166a(c) motions for partial summary judgment in each suit because the District

proved that there was a public necessity for the acquisition of Newsom’s property.

In issue two, the District argues that the trial court erred in overruling its rule-166a(i)

motions for partial summary judgment on Newsom’s defense that the District’s

determinations of public necessity were arbitrary and capricious or unreasonable . In

his responses to the District’s summary judgment motions, Newsom argued that fact

issues existed on whether the District fraudulently or arbitrarily and capriciously

concluded that using his property for the projects was necessary. In his rule-166a(c)

summary judgment motions, Newsom argued that he had conclusively proved the

same thing . In issue two, the District argues that the trial court erred in granting

Newsom’s rule-166a(c) summary judgment motions on this ground.

A. The Requirement That the Taking Be Necessary for the Declared Public

Use

The applicable eminent-domain statute requires that takings be necessary for

the declared public purposes. See Tex. Prop. Code Ann. § 49.222(a) (Vernon 2000) .

The condemnor’s discretion to determine what and how much land to condemn for

its purposes—that is, to determine public necessity—is nearly absolute. See Jones

v. City of Mineola , 203 S.W.2d 1020, 1022 (Tex. Civ. App—Texarkana 1947, writ

ref’d); Ludewig v. Houston Pipeline Co. , 773 S.W.2d 610, 614 (Tex. App.—Corpus

Christi 1989, writ denied). Courts do not review the exercise of that discretion

without a showing that the condemnor acted fraudulently, in bad faith, or arbitrarily

and capriciously, i.e. , that the condemnor clearly abused its discretion. Meaney v.

Nueces County Navigation Dist. No. 1 , 222 S.W.2d 402, 405, 408 (Tex. Civ.

App.—San Antonio 1949, writ ref’d); Ludewig , 773 S.W.2d at 614 ; Bradford v.

Magnolia Pipeline Co. , 262 S.W.2d 242, 246 (Tex. Civ. App.—Eastland 1953, no

writ) (holding same even when eminent-domain statute requires finding of necessity,

as does statute at issue in present case). The rationale for this rule is that, otherwise,

one factfinder

might hold on competent evidence that land in question in the suit (a

constituent part of the whole of a larger amount necessary to the

accomplishment of the objective of the condemning authority) was not

necessary to such purposes and the accomplishments of an entire project

destroyed because of the inability to obtain the small part of land which

[was] made the subject of the particular condemnation suit.

Wagoner v. City of Arlington , 345 S.W.2d 759, 763 (Tex. Civ. App.—Fort Worth

1961, writ ref’d n.r.e.); accord Bradford , 262 S.W.2d at 246 . The landowner has the

burden to establish these defenses. Ludewig , 773 S.W.2d at 614 ; Snellen v. Brazoria

County , 224 S.W.2d 305, 310 (Tex. Civ. App.—Galveston 1949, writ ref’d n.r.e.).

In the condemnation context, f raud means “any act, omission or concealment,

which involved a breach of legal duty, trust or confidence, justly reposed and is

injurious to another, or by which an undue and unconscientious advantage is taken

of another.” Wagoner , 345 S.W.2d at 763 ; accord Boucher v. Texas Turnpike Auth. ,

317 S.W.2d 594, 601 (Tex. Civ. App.—Texarkana 1958, no writ).

In the same context, arbitrary and capricious, like abuse of discretion, means

“willful and unreasoning action, action without consideration and in disregard of the

facts and circumstances . . . .” Wagoner , 345 S.W.2d at 763 ; see Brazos River

Conservation & Reclamation Dist. v. Harmon , 178 S.W.2d 281, 292-93 (Tex. Civ.

App.—Eastland 1944, writ ref’d w.o.m.) (explaining abuse of discretion in terms of

arbitrariness, capriciousness, partiality, and the like). Therefore, when “there is room

for two opinions, an action cannot be deemed arbitrary when it is exercised honestly

and upon due consideration, regardless of how strongly one believes an erroneous

conclusion was reached.” Ludewig , 773 S.W.2d at 614 ; see Meaney , 222 S.W.2d at

408 ; Wagoner , 345 S.W.2d at 763, 764. Similarly, a showing that alternate plans are

feasible or better does not make the condemnation determination arbitrary or

capricious. Ludewig , 773 S.W.2d at 614 ; Wagoner , 345 S.W.2d at 763.

Accordingly, to show that the District acted arbitrarily and capriciously,

Newsom had to negate any reasonable basis for determining what and how much land

to condemn for the pond and the ditch expansion. See Wagoner , 345 S.W.2d at 763

(noting that non-movant landowner could “have raised the issue [of arbitrary and

capricious determination of necessity] only if it was unquestionably established in the

evidence that there could have been no actual public necessity for the city to seek the

land in question . . . .”); cf. Ludewig , 773 S.W.2d at 614-15 (in reviewing the granting

of judgment notwithstanding verdict in favor of condemnor, despite jury’s answer

that condemnor acted arbitrarily and capriciously in determining route and amount

of land to be condemned, holding that landowners’ evidence that condemnor could

have adopted plans circumventing landowners’ property or taking less of it was no

evidence of arbitrary or capricious behavior).

One way that Newsom could negate any reasonable basis for the District’s

determining what and how much land to condemn—that is, one way that he could

show arbitrary and capricious action by the District—was to show that the District

had completely abdicated its responsibilities in determining whether, what, or how

much land to condemn. Put another way, Newsom could show that the District had

declined to exercise discretion that the law required it to exercise .

If Newsom could

show that the District had failed to exercise discretion that it was required to exercise,

then, necessarily, he would also have raised a fact issue regarding any bases on which

the District showed that it had acted: evidence showing a failure to exercise any

discretion on a given occasion counters evidence showing that discretion was actually

exercised in particular ways or for particular reasons on that occasion.

On rehearing, the District argues that we have improperly “imposed an added

level of scrutiny” to the review of condemnation decisions by having recognized a

failure-to-exercise-discretion means of showing arbitrary and capricious action.

Specifically, the District argues that (1) abuse of discretion in the context of

condemnation proceedings differs from abuse of discretion in other contexts, given

that, in the former, a landowner must negate any reasonable bases for the condemning

authority’s action and, thus, (2) the non-condemnation authority on which we rely for

our challenged holding does not apply in this case. We disagree.

First, it is not unusual in administrative law to label as arbitrary and capricious

an agency’s failure to exercise discretion that it is required to exercise.

Second, in

administrative law, the concept of arbitrary and capricious agency action is sometimes

explained in terms of an agency’s abuse of discretion .

Accordingly, authority

concerning the general standard for abuse of discretion outside the realm of

administrative law can be instructive in the administrative-law context under

appropriate circumstances. Third, the Landon opinion—on which we rely and which

the District claims does not apply because Landon concerned review of a judicial

decision—itself analogized review for arbitrary and capricious agency action to

review for abuse of discretion in judicial decisions. See Landon , 724 S.W.2d at 935.

Finally, as a matter of logic, evidence showing a complete failure to exercise

discretion in taking an action also negates any reasonable basis for the agency’s

action . For these reasons, we reject this rehearing argument of the District.

B. Application of the Law to the Summary Judgment Evidence

1. The District’s Evidence

Regarding the pond, a land planner testified for the District that, as HCFCD

had concluded, a pond was necessary. Santasiero’s engineer, Newsom’s engineer,

and Newsom’s land planner agreed that a retention pond was necessary, but did not

specify a location. HCFCD did not require that the pond be placed on Newsom’s

property, but Ray Zobel, president of the District’s board, testified that the board

selected Newsom’s property for the pond because that location would have allowed

Villagio to have more homes, thus increasing the tax base more than if Newsom had

been allowed to develop his own land .

Regarding the ditch expansion, an engineer and a land planner testified for the

District that, as HCFCD had concluded, the project was necessary. Newsom’s own

land planner agreed that HCFCD “would prudently require” the ditch expansion. The

existing ditch ran along the eastern boundary of Newsom’s northern tract of land.

The only direction in which the ditch could be expanded was westward, onto

Newsom’s property, because the land to the east of the ditch had already been

developed.

2. Newsom’s Evidence

Regarding the pond, it was undisputed that HCFCD did not care where the

pond was placed, and none of HCFCD ’s regulations required that the pond be placed

on Newsom’s property. Rather, HCFCD recognized that the pond could have been

placed on Santasiero’s property, on Newsom’s property, or in a downland location

on neither’s property. For this reason, HCFCD did not tell anyone with the District

that Newsom’s land had to be condemned for the pond. Santasiero’s engineer also

concluded that the pond could be placed in any of those three places, although he was

not asked to assess which location was best. Nonetheless, the District’s offer letter

to Newsom stated that HCFCD required the taking specifically of his property for the

pond, although board president Zobel later admitted that HCFCD required only a

pond, not the placement of that pond on Newsom’s property.

The District’s summary judgment evidence showed that the board chose

Newsom’s land for the pond because doing so would increase the tax base more than

if Newsom had been allowed to keep his land and develop it himself. However,

board president Zobel admitted that the District did not have its engineer confirm

Santasiero’s claim that it would be more profitable for the District to place the pond

on Newsom’s property, i.e. , that developing Villagio would increase the tax base

more than developing Newsom’s land. Rather, the District evidently took

Santasiero’s word as true, even though his interest was adverse to Newsom’s. In fact,

it was Santasiero who chose the pond’s location . Likewise, the District did not ask

its own engineer to evaluate the need for this condemnation, even though the District

would have looked to its engineer to advise it whether to condemn this land.

Additionally, board president Zobel admitted that he was not advised that

Santasiero’s engineer had identified alternative locations for the pond . Zobel also

testified that he had “no idea” why the board took Newsom’s land in fee simple,

rather than in easement.

Regarding the ditch expansion, Newsom produced evidence that the District

did not consider or investigate the scope of the taking. For example, HCFCD did not

require that the rights-of-way for drainage ditches such as this be taken in fee simple,

but instead required only easements. HCFCD would have approved Villagio’s

expansion had only an easement been taken there. Nonetheless, the District sought

to condemn Newsom’s land in fee simple, even though the sole alleged basis for the

taking was that HCFCD required the ditch expansion, and despite the fact that

HCFCD never required a taking in fee. In fact, board president Zobel could not recall

that anyone had consulted the board on why Newsom’s land was being taken in fee,

rather than in easement, and Zobel himself did not know the difference between a fee

interest and an easement.

Viewing the evidence in the light most favorable to Newsom and taking all

reasonable inferences in his favor, for purposes of the District’s motions for partial

summary judgment, we hold that the above evidence raises a fact issue on whether

the District declined to exercise its discretion in determining whose land to condemn

for the pond and in deciding whether to condemn Newsom’s land in easement or in

fee for the ditch expansion . That is, the evidence raised a fact issue on whether the

District reached its condemnation decisions arbitrarily and capriciously or by abusing

its discretion. Cf. Landon , 724 S.W.2d at 938-40 . We also hold that, viewing the

evidence in the light most favorable to the District and taking all reasonable

inferences in its favor, for purposes of Newsom’s motions for summary judgment ,

Newsom did not conclusively prove that the District acted arbitrarily and capriciously

in determining necessity.

Further evidence regarding both tracts of land raises a fact issue, as well. The

District signed agreements with both Santasiero and Garrett (the “condemnation

agreements”) soon after it voted to condemn Newsom’s property. In the

condemnation agreements, the developers agreed to pay all costs of condemnation,

including attorney’s, expert, and appraisal fees. If the condemnation succeeded, and

if bonds were passed and approved, the District agreed to reimburse the developers

pursuant to previously-executed prefunding agreements

with the same developers.

The condemnation agreements further provided as follows: “If the condemnation of

the above referenced tract is held to be invalid either judicially or otherwise, you will

not be reimbursed by the District for any of the costs associated with the

condemnation.” The developers also agreed to furnish the following items, among

others, to the District: a legal description of the sought-after property, plans and

specifications for the pond and the ditch enlargement, and an appraisal of the sought-after land.

The condemnation agreements were separate contracts from the prefunding

agreements. The condemnation agreements paralleled the earlier prefunding

agreements in that the condemnation agreements required the developers to front all

costs of condemnation and allowed for reimbursement “pursuant to the Prefunding

Agreement[s]” if condemnation was completed and bonds were sold and approved.

The condemnation agreements differed from the earlier prefunding agreements,

however, in that the condemnation agreements essentially indemnified the District for

any costs should condemnation fail for any reason.

The District argues that the condemnation agreements were merely prefunding

agreements, the use of which is common and legal. Newsom does not contest the

validity of prefunding agreements generally. Rather, Newsom’s position is that the

condemnation agreements exceeded mere prefunding agreements to the extent that

they provided that the District would not have to reimburse the developers if the

condemnation proceedings were unsuccessful for any reason—allegedly taking away

the District’s statutory disincentive to condemn property improperly or without

adequate investigation. Additionally, Newsom points to the fact that the

condemnation agreements made the competing developers solely responsible for

determining the appraised value and the parameters of the land to be taken. He

argues that this provision supports his theory that the District abdicated its duty to

determine whether and what to condemn.

Without deciding the legality or propriety of this type of agreement generally,

we note that the condemnation agreements here relieved the District of certain

statutory burdens that are intended as safeguards for landowners. Those safeguards

are found in Property Code section 21.019. See Tex. Prop. Code Ann. § 21.019 .

Section 21.019 either requires or allows the trial court to award the landowner its

“reasonable and necessary fees for attorneys, appraisers, and photographers and for

the other expenses incurred by the property owner” through the time of dismissal or

judgment when a condemnation is voluntarily or involuntarily dismissed or when the

trial court denies the right to condemn. See id. § 21.019(b), (c) . The effect of section

21.019(c), which applies here because it applies when the trial court grants the

landowner’s motion to dismiss or otherwise denies condemnation, is to allow the trial

court to make landowner whole if he prevails and to discourage the condemnor from

seeking condemnation unfairly or irresponsibly. Cf. State v. Tamminga , 928 S.W.2d

737, 740 (Tex. App.—Waco 1996, no writ) (holding that purpose of section

21.019(b), concerning voluntary dismissal, is to reimburse landowner for expenses

incurred in abandoned condemnation proceeding and “to discourage the

commencement and subsequent abandonment of condemnation proceedings” ); Brazos

County Water Control & Improvement Dist. No. 1 v. Salvaggio , 698 S.W.2d 173, 176

(Tex. App.—Houston [1st Dist.] 1985, writ ref’d n.r.e.) (noting that enactment of

predecessor to section 21.019(b) in 1969 “indicate[d] the legislature’s intent to

require condemnors to act more responsibly and fairly toward landowners”).

Viewed in the appropriate light, the condemnation agreements at issue here

removed that disincentive by, in effect, indemnifying the District for any costs or fees

associated with the condemnation proceedings, regardless of whether the District

acted arbitrarily, capriciously, or fraudulently. In light of Newsom’s other evidence,

from which one could reasonably infer that the District abdicated its discretion in

deciding what land to condemn for the pond and whether to condemn Newsom’s land

in easement or in fee for the ditch expansion, the condemnation agreements raised an

inference that the District abdicated its discretion because it knew that it would not

have to pay should condemnation fail for whatever reason—including, for example,

because the District’s decisions to condemn were later found to be arbitrary or

capricious.

C. Conclusion

We hold that Newsom raised a fact issue on whether the District abdicated its

discretion to determine whether and how much to condemn, i.e. , that the District

acted arbitrarily and capriciously. Cf. Landon , 724 S.W.2d at 938-40 . Therefore, the

trial court did not err to the extent that it denied the District’s rule-166a(c) and rule-166a(i) motions for partial summary judgment on the grounds of the District’s

determination of public necessity or on Newsom’s defenses to that determination.

However, we further hold that Newsom did not prove conclusively his entitlement to

summary judgment on his defenses to the District’s determination of public necessity.

Therefore, the trial court erred to the extent that it granted summary judgment for

Newsom on this ground.

Accordingly, we overrule that portion of issue one and sustain the

corresponding portion of issue two concerning the necessity for taking Newsom’s

land.

Unable-to-Agree Requirement

In issue one, the District argues that the trial court erred in denying its rule-166a(c) motions for partial summary judgment on the ground that the District proved

that it had fulfilled the unable-to-agree requirement by having made a good-faith offer

of damages, which Newsom rejected, before suit . Newsom’s summary judgment

responses argued that fact issues precluded the granting of summary judgment on this

ground. He later moved for rule-166a(c) summary judgment on the ground that he

had conclusively negated the existence of good-faith offers of damages and, thus, had

also negated the fulfillment of the unable-to-agree requirement. In issue two, the

District argues that the trial court erred in granting Newsom’s rule-166a(c) summary

judgment motions on this ground.

A. The Law

The District had the burden to plead and to prove that, before it filed the

condemnation proceeding, it was unable to agree with Newsom on the amount of

damages that would result from the taking. See Hubenak II , 65 S.W.3d at 796 ; Tex.

Prop. Code Ann. § 21.012(a), (b)(4) (allowing condemnor that is “unable to agree”

with the landowner on amount of damages to begin condemnation proceeding and

requiring petition to allege same) . A condemnor is generally not required to continue

to attempt negotiations when further attempts appear futile. Id.

Before Hubenak III , our Court (along with other courts of appeals) had held

that “[t]he ‘unable-to-agree’ condition refers to a bona fide attempt to agree on

damages and includes a bona fide offer by the condemnor to pay the estimated true

value of land.” Hubenak II , 65 S.W.3d at 797 ; see Hipp , 832 S.W.2d at 77 . The

courts adopting this standard had generally held that a bona fide offer is one that is

made “[i]n or with good faith; honestly, openly, and sincerely; without

deceit or fraud.” In the context of eminent domain proceedings, the

offer must not be arbitrary and capricious; rather, it must be based on a

reasonably thorough investigation and honest assessment of the amount

of just compensation due the landowner as a result of the taking.

Hipp , 832 S.W.2d at 78 (citations omitted); accord Hubenak II , 65 S.W.3d at 798 .

This “good faith” standard was subjective. We applied this subjective standard on

original submission in this case and, under that standard, held that a fact issue existed

on whether the District had made a good-faith offer for damages.

However, after our opinion issued, and during the pendency of rehearing, the

Texas Supreme Court issued its opinion in Hubenak III , on which the District relies

by post-submission brief. The Hubenak III court rejected a good-faith, subjective

analysis in determining whether the unable-to-agree requirement is met, disapproving

of any courts-of-appeals opinions to the contrary. Hubenak III , 141 S.W.3d at 186-87 . The Hubenak III court reasoned that (1) despite applying a good-faith standard,

most courts of appeals had required minimal evidence anyway to satisfy the unable-to-agree requirement; (2) the statutory condemnation scheme does not contemplate

scrutiny of the offer’s dollar amount—which in most cases will be the measure of

whether an offer was made in good faith—at the preliminary point at which the court

considers the unable-to-agree issue because such an inquiry would be duplicative of

the later determination of damages; and (3) the statutory scheme does not contemplate

subjective inquiry into good faith because the purpose of the unable-to-agree

requirement is simply to forestall litigation and to prevent needless appeals. Id.

Simply put, the Hubenak III opinion clarified that subjective, good-faith analysis is

irrelevant to evaluating the unable-to-agree requirement in condemnation cases.

B. Application of the Law to the Summary Judgment Evidence

The District points to the following summary judgment evidence that it

produced below: (1) the appraiser based his valuation of $19,000 per acre ($49,020

and $49,738 for the land for the pond and for the ditch, respectively) in part on recent

sales of local property lacking utilities, which Newsom’s property also lacked; (2) the

District offered these amounts to Newsom and even increased the offer in an

unspecified amount for the land for the pond; (3) Newsom rejected the offers,

demanding $43,560 per acre for the land for the ditch, requiring a commitment that

his entire property would be annexed and serviced by the District and would be able

to drain into the ditch, and rejecting altogether the placement of a pond on his

property; and (4) Newsom’s appraiser, David Bolton, concluded that both tracts

would have an unspecified lower value than the value that the tracts were given in

Bolton’s appraisal if they could not get access to utilities.

Under Hubenak III , this

sufficed to carry the District’s burden to show that the parties were unable to agree

on damages. See Hubenak III , 141 S.W.3d at 187 (“The condemnors have established

that they made offers to each of the landowners before filing condemnation

proceedings. Those offers were rejected or ignored by the landowners. That is

enough to satisfy section 21.012’s requirement that the parties were ‘unable to

agree.’”); see also Hardwicke , 150 S.W.3d at 715 (holding that trial court did not err,

based on Hubenak III , if it concluded that condemnor had satisfied unable-to-agree

requirement because condemnor had sent offer letters to landowner, despite

landowner’s argument that condemnor had left all “negotiations to developer” to

conduct).

In response, Newsom produced summary judgment evidence relating to

whether the District’s offer was made in good faith.

Under Hubenak III , that

evidence is irrelevant to the unable-to-agree inquiry. See id. , 141 S.W.3d at 186-87 .

C. Conclusion

We hold that the trial court erred in denying the District’s rule-166a(c) motions

for partial summary judgment because the District conclusively proved that the

parties were unable to agree on damages before suit’s filing. We further hold that the

trial court erred to the extent that it granted Newsom’s rule-166a(c) summary

judgment motions on the ground that he conclusively proved that the District did not

show that the parties were unable to agree on damages.

Accordingly, we sustain both the portion of issue one and the corresponding

portion of issue two concerning the unable-to-agree requirement.

Improper Delegation

In issue two, the District argues that the trial court erred in granting Newsom’s

rule-166a(c) summary judgment motions on the ground that the District improperly

delegated its eminent-domain powers to the competing developers .

Newsom’s argument below was that the District “improperly delegated its

legislative and discretionary authority to the Developers and essentially abdicated its

power of eminent domain to these Developers and thus deprived Mr. Newsom of the

necessary constitutional and statutory safeguards ordinarily guaranteed potential

condemnees.” The facts on which he relied in support were essentially those on

which he relied in his other summary judgment grounds. Newsom also argued that

the District “sold” its eminent-domain powers by entering into the condemnation

agreements. These arguments are merely other ways of alleging that the District

determined where, what, and how much to condemn by fraudulent or arbitrary means.

We have already held that fact issues precluded summary judgment on those defenses.

Newsom relied on the test set out in Proctor v. Andrews , a case in which the

plaintiffs alleged that a statute improperly delegated legislative authority to private

entities. 972 S.W.2d 729, 732, 734-35 (Tex. 1998). As the District points out in its

reply brief, no such statute or rule delegated legislative authority to the developers

here, and Proctor ’s non-delegation paradigm simply does not fit under the facts of

this case. Here, the District exercised the power of condemnation, albeit, Newsom

alleges, in collusion with the developers. And whether the District colluded or acted

improperly with local developers, as Newsom alleges, is a matter that relates to fraud

or arbitrariness in the District’s condemnation decision, rather than a matter showing

that the District improperly delegated the power to condemn altogether.

Accordingly, we hold that the trial court erred to the extent that it granted

Newsom’s rule-166a(c) summary judgment motions on this ground. We thus sustain

that portion of issue two concerning improper delegation.

Equal Protection and Due Process

In issue two, the District argues that the trial court erred in granting Newsom’s

rule-166a(c) summary judgment motions on the ground that the exercise of eminent

domain to take his property for the developers’ benefit violated due process and equal

protection. See Saunders v. Titus County Fresh Water Supply Dist. No. 1 , 847

S.W.2d 424, 427 (Tex. App.—Texarkana 1993, no writ) (noting that condemnation

of property for non-public use may violate due process) ; King v. Harris County Flood

Control Dist. , 210 S.W.2d 438, 440 (Tex. Civ. App.—Galveston 1948, writ ref’d

n.r.e.) (same). In support of this ground, Newsom relied on the same facts on which

he relied in his other summary judgment grounds. Because we have held that

Newsom did not prove as a matter of law any of his other challenges to the

condemnation, we hold that he did not prove this summary judgment ground

conclusively, either. Therefore, the trial court could not properly have rendered

summary judgment for Newsom on this ground.

Accordingly, we hold that the trial court erred in granting Newsom’s rule-166a(c) summary judgment motions on this ground. We thus sustain that portion of

issue two concerning equal protection and due process.

Newsom’s Additional Rehearing Argument

In his rehearing motion, Newsom argues for the first time that the District

improperly sought to condemn a fee-simple interest, rather than an easement, because

the Property Code allegedly creates a presumption against a taking in fee simple and

because the District’s board resolution did not recite that it intended to take a fee-simple interest. Because Newsom did not raise this argument on original submission,

but could have, we decline to reach it. See McGuire v. Fed. Deposit Ins. Corp. , 561

S.W.2d 213, 216 (Tex. Civ. App.—Houston [1st Dist.] 1977, no writ) (op. on reh’g)

(holding that party generally may not raise for the first time on rehearing new matters

that could have been raised earlier); Trice Prod. Co. v. Dutton Drilling Co. , 333

S.W.2d 607, 617 (Tex. Civ. App.—Houston 1960, writ ref’d n.r.e.) (op. on reh’g)

(same). Additionally, it does not appear that Newsom preserved this challenge below

by raising it in his summary judgment motions or responses.

See McConnell v.

Southside Indep. Sch. Dist. , 858 S.W.2d 337, 341, 343 (Tex. 1993).

Conclusions Concerning Summary Judgment

We hold as follows:

●The trial court erred in granting Newsom’s rule-166a(c) summary

judgment motions in all respects.

●The trial court erred in denying the District’s rule-166a(c)

motions for partial summary judgment on the ground that the

condemnations were for public uses.

●The trial court did not err in denying the District’s rule-166a(i)

motions for partial summary judgment on Newsom’s defense of

fraud, bad faith, and arbitrariness to the District’s determination

of public necessity.

●The trial court did not err in denying the District’s rule-166a(c)

motions for partial summary judgment on the ground that the

takings were public necessities.

● The trial court erred in denying the District’s rule-166a(c)

motions for partial summary judgment on the ground that the

parties were unable to agree, before the District initiated

condemnation proceedings, on the damages to be awarded

Newsom for the taking.

The District’s Supplemental Issues

By supplemental brief, the District challenges the trial court’s final judgment

in the following respects: (1) the trial court erred in awarding Newsom contingent

appellate attorney’s fees because the Property Code allows the award of attorney’s

fees only through judgment and (2) the trial court erred in awarding Newsom the

improvements made by the District during its temporary possession of his property

because the trial court dismissed the suit for want of jurisdiction, which disposition

allegedly precludes awarding possession.

Given that we reverse the final judgments, we need not reach the District’s

supplemental issues.

Conclusion

We reverse the judgments and remand the causes.

Tim Taft

Justice

Panel consists of Justices Taft, Keyes, and Higley.

Justice Keyes, dissenting.