State v. Lloyd S. McCarley

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-07-00069-CV

The State of Texas, Appellant

v.

Lloyd S. McCarley et al., Appellee

FROM THE COUNTY COURT AT LAW NO. 4 OF WILLIAMSON COUNTY

NO. 03-0400-CC2-4, HONORABLE JOHN McMASTER, JUDGE PRESIDING

C O N C U R R I N G O P I N I O N

I concur in the majority's decision to affirm the judgment of the county court, but

write separately in the interest of fully addressing the issues raised by the parties on appeal.

This appeal arises from a statutory condemnation action filed by the State of Texas

against Lloyd S. McCarley for a portion of his property needed for a highway project. The jury

awarded $371,000 to McCarley. In five issues, the State contends on appeal that (1) McCarley's

claim for damages was an inverse condemnation claim; (2) the trial court did not have subject matter

jurisdiction over the inverse condemnation claim because it was not ripe; (3) the State has sovereign

immunity because McCarley failed to plead and prove the requisite intent for an inverse

condemnation claim; (4) McCarley does not have a justiciable interest in the inverse condemnation

claim; and (5) there was no competent evidence or, in the alternative, insufficient evidence to support

the jury's award of $371,000 in damages. For the reasons that follow, I would affirm the county

court's judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In April 2004, the State brought a condemnation suit to acquire a "corner clip" of

McCarley's property located at the corner of Ranch Road 620 and Lyndhurst Street in Williamson

County. The State sought to acquire 836 square feet of land as part of its project to widen and

improve Ranch Road 620 to become State Highway 45. The project included elevating the highway

frontage road by several feet above existing grade on a solid retaining wall across McCarley's

property and elevating Lyndhurst for several hundred feet to meet the new, higher frontage road at

the former intersection with 620. The county court appointed a panel of special commissioners to

determine the amount of adequate compensation to be paid by the State. The commissioners

awarded McCarley $4,180 in damages. McCarley objected to the commissioners' award and

appealed to the county court.

At the time of the condemnation, McCarley's property, consisting of two lots and

approximately 1.75 acres, was vacant. The lot that fronted 620 ("Lot 1") was zoned, in part, "GR,

retail," and the lot that fronted Lyndhurst ("Lot 2") was zoned "interim single family." (1) The City

of Austin had approved a site plan for the two lots in 1998, requiring the "unified development" of

the two lots for water quality and stormwater detention. The permitted use under the 1998 site plan

was retail for Lot 1 and office or warehouse for Lot 2. The 1998 site plan for the two lots expired

in 2001, and McCarley did not apply for additional site development permits prior to the

condemnation suit.

Prior to trial, McCarley filed a "conditional counterclaim in inverse condemnation"

for "damages resulting from the drainage problems caused by [the State's] project." In response, the

State filed a plea to the jurisdiction and a motion to exclude McCarley's evidence. In the plea to the

jurisdiction, the State asserted that McCarley's counterclaim should be dismissed based on sovereign

immunity because he failed to plead the "intent" required for an inverse condemnation claim, that

there was a lack of ripeness because no flooding had occurred and no site plan had been denied, and

that McCarley lacked a justiciable interest because he no longer owned the property. In the motion

to exclude McCarley's evidence, the State sought exclusion on similar grounds to its plea to the

jurisdiction. The trial court denied both the plea and the motion, and the case proceeded to trial.

At trial, McCarley called three experts, a land planner/development consultant, a civil

engineer/design consultant, and a real-estate appraiser. The land planner testified that he assisted

McCarley in the site planning process, starting in 1996 and continuing through the 1998 approval

of the site plan for the lots' development. He testified that the process took "about 16 months." He

also testified that McCarley contacted him after the site plan expired about resubmitting the site

plan for approval, but that resubmission was put on hold after McCarley learned of the State's

highway project.

The engineer testified concerning the highway project's drainage system. He opined

that the system prevented McCarley's remainder property from being developed within the City of

Austin's requirements for stormwater management. The engineer testified that the City requires that

a property be designed to receive and address all stormwater from a 100-year storm event that would

flow to the property from the drainage basin upstream. It was the engineer's opinion that as a result

of the drainage system, stormwater would back up on the remaining property in a 100-year storm

event and the City of Austin would not grant a permit for any type of development for the remainder.

McCarley's appraiser testified to the market values of the property before and after

the taking and the effect of the State's drainage system on the remainder's value. He recommended

compensation for the taking of $403,000. His recommendation was based in part on the engineer's

conclusions concerning the inability to develop the property after the taking because of the highway

project's drainage system. He testified that the highest and best use for Lot 1 at the time of the

taking was commercial or retail, and he placed a value on Lot 1 prior to the taking of $400,000. He

supported his value by analyzing comparable sales in the area. He testified that Lot 2's highest and

best use was "office/warehouse," and he placed a value of $75,000 on Lot 2 prior to the taking, also

based on comparable sales in the area. He concluded that the remainder value for both lots after the

taking was $72,000. He reached this conclusion by reducing the lots' value before the taking by 85%

due to the inability to develop the property in light of the highway project's drainage system. In

reaching the remainder's value, he compared "properties that had flooding problems and those that

didn't, and then compared how much the difference of prices were." He also arrived at a similar

value for the remainder using the income approach, "what a buyer would pay for a particular income

stream." Under this approach, he compared rents for commercial sites that were used for "outdoor

vendor sales" such as Christmas trees to arrive at a value for the remainder property.

The State's witnesses were the engineer in charge of the highway project's

construction, a land planner/architect, and a real-estate appraiser. The engineer explained the design

and construction of the highway project's drainage system. The land planner/architect testified

concerning zoning for Lot 1, concluding that the "highest zoning" was "neighborhood office."

Relying in part on the State's other expert's conclusions, the appraiser recommended compensation

for the taking in the amount of $4,682, the market value of the 836 square feet. The appraiser did

not include any compensation for the remaining property as it was his opinion that the condemnation

of the 836 square feet did not reduce the remainder's value. His opinions were confined to Lot 1,

placing a value of approximately $240,000 on the lot immediately before and after the taking, and

that "neighborhood office development" was the highest and best use for the lot. He was aware of

McCarley's reports that the "drainage system would not work right," but his opinions assumed that

the property could "get a site development permit," and relied on the State's engineering report that

"the drainage worked just fine."

The jury was given one question--the difference in market value of McCarley's

property immediately before the taking and the market value of the remaining property after the

taking, with definitions of "fair market value" and "highest and best use":

On September 16, 2003, what was the difference between (a) the fair market value

of the landowner's whole property before the taking, excluding any consideration of

the condemnation or proposed project and (b) the fair market value of the remainder

only, after the taking, giving consideration to the uses to which the condemned part

is to be subjected.

"Fair Market Value" means the price which the property would bring when

it is offered for sale by one who desires, but is not obliged to sell, and is bought by

one who is under no necessity of buying it, taking into consideration all of the uses

to which it is reasonably adaptable and for which it either is or in all reasonable

probability will become available within a reasonable future period. In making your

determination of Fair Market Value, you will consider the "Highest and Best Use"

of the land involved.

"Highest and Best Use" means that legal use to which the property could have

been adapted on the date of taking, or within the reasonably foreseeable future

thereafter which was legally permissible, physically possible, financially feasible, and

provided the owner with the greatest net return.

After the jury determined the difference in value to be $371,000, the county court credited the State's

prior deposit of the amount of the special commissioner's award against the jury's award and entered

judgment against the State. The State's appeal followed.

ANALYSIS

Standard of Review

The State raises both legal and factual sufficiency issues as to the jury's award of

damages for the statutory partial taking of McCarley's property. "In determining whether a finding

is supported by legally sufficient evidence, we consider the evidence in the most favorable light, and

indulge every inference in its favor." Tarrant Reg'l Water Dist. v. Gragg , 151 S.W.3d 546, 552

(Tex. 2004). "If the record contains more than a scintilla of evidence that supports the finding, we

must sustain it." Id . Incompetent evidence is legally insufficient to support a judgment. City of

Keller v. Wilson , 168 S.W.3d 802, 812 (Tex. 2005).

In reviewing the factual sufficiency of the evidence, we consider, weigh, and examine

all the evidence presented at trial, including any evidence contrary to the judgment. Plas-Tex, Inc.

v. U.S. Steel Corp ., 772 S.W.2d 442, 445 (Tex. 1989). We set aside a finding for factual

insufficiency if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong

and unjust. Cain v. Bain , 709 S.W.2d 175, 176 (Tex. 1986). With both legal and factual sufficiency

review, the starting point of analysis is the charge that was submitted to the jury absent complaint

on appeal. Osterberg v. Peca , 12 S.W.3d 31, 55 (Tex. 2000); Golden Eagle Archery, Inc. v. Jackson ,

116 S.W.3d 757, 762 (Tex. 2003).

Whether damages for a taking are compensable under the constitution depends on the

type of damage involved, and compensability is a question of law for the court, subject to de novo

review. County of Bexar v. Santikos , 144 S.W.3d 455, 459 (Tex. 2004); Interstate Northborough

P'ship v. State , 66 S.W.3d 213, 220 (Tex. 2001).

Inverse Condemnation

The State asserts that McCarley's claim for damages due to his alleged injury from

the State's drainage system was an inverse condemnation claim and that such claim was not ripe for

determination during the statutory condemnation case because the highway project was still under

construction, no site development permit had been denied, and no flooding had occurred on the

remaining property. The State also argues that McCarley did not plead or prove the requisite intent

and that McCarley lacks a justiciable interest because he sold the property. The State contends that

although a claim concerning the drainage system may be actionable at some point in the future, the

claim can be brought only in inverse condemnation because it relates to the "anticipated effect of

drainage improvements being constructed by [the State] in its existing right-of-way, and does not

relate to the use of the 836 square feet being acquired." The State argues McCarley's claim is

inverse because the State did not seek as part of its statutory condemnation to inundate McCarley's

remainder with stormwater runoff from its drainage system.

"When the government takes private property without first paying for it, the owner

may recover damages for inverse condemnation." Gragg , 151 S.W.3d at 554 . To recover on an

inverse condemnation claim, a plaintiff must plead and prove an intentional governmental action,

resulting in a taking, damage or destruction of property, for public use without process or a proper

condemnation proceeding. See Tex. Const. art. I, § 17; General Servs. Comm'n v. Little-Tex.

Insulation Co. , 39 S.W.3d 591, 598 (Tex. 2001); City of Houston v. Texan Land & Cattle Co.,

138 S.W.3d 382, 387-88 (Tex. App.--Houston [14th Dist.] 2004, no pet.).

Although McCarley could have brought an inverse condemnation action had there

been no partial taking, a further proceeding was not appropriate or necessary in light of the already

pending condemnation proceeding. See Westgate, Ltd. v. State , 843 S.W.2d 448, 452 (Tex. 1992)

(inverse claim and statutory condemnation claim addressed in same proceeding); State v. Fiesta

Mart, Inc ., 233 S.W.3d 50, 56-57 (Tex. App.--Houston [14th Dist.] 2007, no pet.) (court had subject

matter jurisdiction to hear both State's statutory condemnation claim and leaseholder's inverse

condemnation counterclaims for damage to personal property and business loss caused by impaired

access); Texan Land & Cattle Co., 138 S.W.3d at 386-88 (damages awarded for inverse claim for

blocking access to property prior to condemnation and statutory claim for fair market value

of property in same proceeding); City of Austin v. Casiraghi , 656 S.W.2d 576, 579-80

(Tex. App.--Austin 1983, no writ) (damages for loss of business brought in separate cause of action

for inverse condemnation not allowed because not plead in statutory condemnation action); cf. Dahl

v. State , 92 S.W.3d 856, 863 (Tex. App.--Houston [14th Dist.] 2002, no pet.) (inverse condemnation

claims "duplicative" of State's condemnation action do not comprise valid inverse claims).

The trial court properly allowed McCarley as the landowner to recover all of the

damages to his property in a single action. See White v. Natural Gas Pipeline Co. , 444 S.W.2d 298,

301 (Tex. 1969) (landowner "not to be burdened with the delay and expense of future lawsuits");

City of LaGrange v. Pieratt , 175 S.W.2d 243, 246 (Tex. 1943) (landowner must raise all reasonably

foreseeable claims in statutory condemnation proceeding); Casiraghi , 656 S.W.2d at 579 (property

owner given "single opportunity" to recover for the taking of property). (2) Because McCarley was

aware of the injury to his property from the drainage system, whether his claim was "inverse" or not,

he properly brought it in the statutory condemnation proceeding. See Spindor v. Lo-Vaca Gathering

Co. , 529 S.W.2d 63, 65-66 (Tex. 1975) (recovery may be had in condemnation proceedings

for injuries to the remainder which are reasonably foreseeable at the time of condemnation); Pieratt ,

175 S.W.2d at 246 (if reasonably foreseeable claims are not brought, they may be forever barred).

1. Was McCarley's claim ripe?

The State argues that McCarley's claim concerning the State's drainage system was

not ripe because the highway project was still ongoing, there had been no flooding on his property,

and there had been no permit denial at the time of the statutory condemnation. In support of its

argument that McCarley's claim was not ripe because the highway project had not been completed,

the State cites Hubler v. City of Corpus Christi , 564 S.W.2d 816 (Tex. Civ. App.--Corpus Christi

1978, writ ref'd n.r.e.). In Hubler , the court dismissed the plaintiff's inverse condemnation claim

because the governmental drainage plan at issue was a series of projects and not all of the projects

were completed, and the plaintiff did not claim that his land's value had been decreased by the

completed projects but that the land value would be decreased at the conclusion of the series of

projects. Id . at 821-24. The court concluded that the plaintiff's evidence of a decrease in market

value was "too remote and speculative." Id . at 822. Unlike Hubler , there was evidence in this case

that the market value of McCarley's remainder had decreased at the time of the statutory

condemnation proceeding and that the decrease was caused by the substantially complete drainage

system. See id . at 822. (3) The drainage system's status of construction did not prevent McCarley's

claim from being ripe.

The State cites State v. Malone , 168 S.W.2d 292, 298 (Tex. Civ. App.--Austin 1943,

writ ref'd w.o.m.), to support its position that McCarley's claim was not ripe because there had been

no flooding on his property. In Malone , the State constructed a highway entirely in its own right-of-way and did not acquire any portion of the plaintiff's land for the highway's construction. Id. at 294 .

The plaintiff purchased the land after the project was completed and sought damages to his crops and

soil when his property flooded as a result of the highway's construction. Id . at 298. Unlike the

landowner in Malone , McCarley did not seek damages to his property from flooding. McCarley

sought damages because the drainage system precluded his remaining property from being

developed. Given McCarley's claim was that he could not develop his property, actual flooding was

not required for McCarley's claim to be ripe. See Spindor , 529 S.W.2d at 65-66 .

The State also relies on Coble v. City of Mansfield , 134 S.W.3d 449, 458-59

(Tex. App.--Fort Worth 2004, no pet.), in support of its argument that McCarley's claim was not

ripe because no permit had been denied on McCarley's property. In Coble , the landowner was

denied damages for the estimated cost of compliance with a subdivision ordinance (the cost of

required improvements) as part of his remainder damages in a partial takings case. Id. at 451 . The

court concluded that the landowner's inverse condemnation claim was not ripe because the city had

not made a final decision on the ordinance's applicability and the landowner had not shown that it

would have been futile to seek a final decision. Id . at 458-59. The court concluded that the damages

for the cost of compliance were "not reasonably foreseeable" but "remote, speculative, and

conjecture." Id . at 456. There was evidence that the ordinance might not be applicable and that,

even if it was, the landowner might be granted a variance so that the improvements would not be

required. Id . at 456-57.

In contrast, the evidence as to McCarley's remaining land was that the State's

drainage system prevented the remainder property from being permitted for development under the

City's requirements. Unlike Coble , there was no evidence that the City's requirements might not

apply to McCarley's remaining land after the taking or that a variance might be granted. (4)

On this

record, I would conclude that McCarley's claim was ripe for determination in the statutory

proceeding.

2. Did McCarley establish the requisite intent?

The State also argues that the State has sovereign immunity from McCarley's claim

because McCarley failed to establish the requisite intent. The requisite intent for a takings claim is

present when the governmental entity knows that a specific act is causing identifiable harm or knows

that the harm is substantially certain to result from an authorized governmental action. See Gragg ,

151 S.W.3d at 555 ; City of Dallas v. Jennings , 142 S.W.3d 310, 314 (Tex. 2004). McCarley

presented expert testimony that the loss in value in the remainder property was the result of the

State's drainage system "as intended." See Gragg , 151 S.W.3d at 555 (court draws distinction

between design and operation "as intended" and negligence).

There was evidence that the State designed the drainage system knowing that

stormwater would back up on McCarley's property. In addition to the evidence that the State

designed and constructed the drainage system for a 10-year storm event and the City of Austin

requires landowners to develop their land to accommodate a 100-year storm event, there was

evidence that the State designed and built a retaining wall to divert water flowing from McCarley's

property away from a nearby school. Although the engineer for the State testified that the wall that

was built at the school's property line was a "noise wall," the State's plans referred to it as a

"retaining wall." McCarley presented evidence that stormwater from his property would flow toward

the school's property, and that the wall at the school's property line was designed to function as a

retaining wall to divert water from McCarley's property from flowing on school property during

storm events. McCarley's evidence was sufficient to satisfy the requisite intent.

3. Did McCarley have a justiciable interest in his claim?

The State argues that because McCarley sold the remaining property in February

2006, he lacks a justiciable interest in his claim. But McCarley owned the property at the

determinative time, i.e., at the time of the taking. See City of Fort Worth v. Corbin , 504 S.W.2d 828,

830 (Tex. 1974). McCarley was required to present all of his claims for damages that were

reasonably foreseeable from the taking. See Pieratt , 175 S.W.2d at 246 . He, therefore, properly

sought his accrued damages due to the drainage system's effect on his remaining property's value.

McCarley had a justiciable interest in his claim arising from the drainage system.

I would overrule the State's issues on inverse condemnation.

Statutory Condemnation Award

The State does not contend on appeal that the question to the jury was an incorrect

statement of the law, but argues that there was no competent evidence or, alternatively, insufficient

evidence to support the jury's finding that the difference in value of the whole property before the

taking and the remaining property after the taking was $371,000. The State contends that the jury's

award was improper because evidence of the drainage system's effect on the remaining property's

value was incompetent evidence and, because it was the only evidence tendered by McCarley

supporting the remainder damages, there was no evidence to support the award. The State argues

that the determination of any decreased value should have been limited to the effect of McCarley's

loss of the "corner clip" and not the effect of the highway project's drainage system on his remaining

property. The State draws a distinction between the alleged damages from the drainage system in

its "existing right-of-way" and any damages from the "taking of [the] corner clip." The State argues

that it is entitled to judgment based on the only competent testimony of condemnation damages, the

value of the part taken as testified to by the State's witness. This issue goes to the compensability

of McCarley's damage claim arising from the drainage system, which we review de novo . Santikos ,

144 S.W.3d at 459 ; Interstate Northborough , 66 S.W.3d at 220 .

1. Compensability of McCarley's claim

In a statutory partial takings case, the property code provides for condemnation

damages as follows:

If a portion of a tract or parcel of real property is condemned, the special

commissioners shall determine the damage to the property owner after estimating the

extent of the injury and benefit to the property owner, including the effect of the

condemnation on the value of the property owner's remaining property.

Tex. Prop. Code Ann. § 21.042 (c) (West 2000). Section 21.042 "allows recovery only for the effects

of the State's use of the condemned land," which differs from the State's "new use of its existing

right-of-way or adjoining land." Interstate Northborough , 66 S.W.3d at 219 ; State v. Schmidt ,

867 S.W.2d 769, 777-78 (Tex. 1993). The applicable statute also limits compensable damages in

a partial takings action by prohibiting recovery for "community damages." Tex. Prop. Code Ann.

§ 21.042 (d). (5)

Consistent with the county court's charge to the jury, statutory condemnation damages

to the remainder are calculated by ascertaining the difference between the market value of the

remainder immediately before and after the condemnation, taking into consideration the nature of

any improvements and the use of the land taken. See Interstate Northborough , 66 S.W.3d at 218 ;

State v. Carpenter , 89 S.W.2d 194, 197 (Tex. 1936); see also 4A-14 Julius L. Sackman, Nichols on

Eminent Domain § 14.01 (3d ed. 2006). (6) Market value is defined as "the price which the property

would bring when it is offered for sale by one who desires, but is not obligated to sell, and is bought

by one who is under no necessity of buying it." Carpenter , 89 S.W.2d at 202 . The "willing-seller

willing-buyer" test of market value considers the factors "which would reasonably be given weight

in negotiations between a seller and a buyer." City of Pearland v. Alexander , 483 S.W.2d 244, 247

(Tex. 1972) (citing City of Austin v. Cannizzo , 267 S.W.2d 808 (Tex. 1954)). (7) Evidence of the

factors that "increase or diminish the present market value" is admissible, not as a measure of

damages or as a specific item of damage, but to allow the jury to arrive at the correct measure, the

"lessened value of the tract." Carpenter , 89 S.W.2d at 199-200 ; see also City of Sugar Land

v. Home & Hearth Sugarland, L.P. , 215 S.W.3d 503, 512 (Tex. App.--Eastland 2007, pet. denied)

(testimony admissible on factors that a "willing buyer" would consider); 7A-G12 Patrick J. Rohan

et al., Nichols on Eminent Domain § G12.03 (3d ed. 2007) (evidence admissible to show elements

of damage that will cause a present diminution in market value of remainder). Admissible evidence

includes reasonably foreseeable and probable uses of the affected property. See Alexander ,

483 S.W.2d at 249 ; Cannizzo , 267 S.W.2d at 815 ; 4-12B Julius L. Sackman, Nichols on Eminent

Domain § 12B.12 (3d ed. 2006). It also includes past and probable future injuries. See Alexander ,

483 S.W.2d at 246-47 (damages include "present and prospective" damages that are the "natural,

necessary or reasonable incident of the improvement").

The supreme court has addressed the recovery of damages for the diminution in value

to the remaining property in partial takings, placing emphasis on the particular facts and injuries

alleged in determining whether the landowner is entitled to compensable damages for a loss in value.

See Santikos , 144 S.W.3d at 462-63 ; Interstate Northborough , 66 S.W.3d at 219 ; State v. Heal ,

917 S.W.2d 6, 8 (Tex. 1996); Schmidt , 867 S.W.2d at 777-79 . In Schmidt , landowners sought

damages for their remaining property's decrease in market value due to traffic diversion, more

circuitous access, decreased visibility, and the inconvenience of the State's construction activities

when a portion of their property was condemned as part of a highway project. 867 S.W.2d at 770 .

The supreme court held the remaining property's loss in value due to the owners' alleged injuries

was not compensable because the diminution was the result of the State's use of its existing right-of-way, not from the partial taking, and the damages were community damages. Id . at 776-81. It was

the community-wide change in the highway and not the loss of the strip of property that reduced the

remaining property's value. Id . at 778-79, 781.

Several years later in Heal , the supreme court again disallowed property owners'

recovery "for the diminution in value of their remaining property not directly attributable" to the

partial taking in a condemnation case. 917 S.W.2d at 11 . The court reversed the award of damages,

disallowing the owners' claim for "noise damages and other damages incident to the overall effect"

of the highway project. Id . The court held the owners were "not entitled to compensation even if

the remainder of their property has lost some degree of value." Id .

More recently, the supreme court allowed damages for the property's loss in value

in a condemnation suit in which the State was acquiring a partial strip of commercial property to

widen a highway and its frontage road. Interstate Northborough , 66 S.W.3d at 217 . The landowner

sought diminution in value damages to the remaining property resulting from the increased proximity

to the roadway, with "attendant loss of curb appeal, green space, and 'buffer zone.'" Id . The

condemnation left the development on the property in violation of a deed restriction and a building

setback ordinance. Id . at 222. The jury awarded damages for the "decrease in the remainder

property's market value, as well as renovation costs to the remainder that the condemnation

necessitated." Id . at 218. The supreme court upheld the jury award, distinguishing the type of

damages that were disallowed in Schmidt from the "increased-proximity" damages that affected the

"remainder property in a special and unique way." Id . at 221-22.

In another recent partial condemnation action, the supreme court, addressing

recoverable damages, disallowed recovery for the loss in the remaining property's value when the

county took 0.485 acres of land for constructing a frontage road on an existing right-of-way.

Santikos , 144 S.W.3d at 455, 462-63 . The highway project was to raise the roadbed, and the

condemned land was to serve as a sloping embankment. Id . at 458. The evidence was that the 27-acre tract of raw, unimproved land was in some places five to six feet below the existing highway

before the project and that, after the project, the land would be ten to eleven feet below the existing

highway's elevation in some places. Id. at 457-58 . The experts for both sides agreed that the land's

best use was as an investment "until population and traffic grew to support development for retail

use." Id. at 458 . The landowner sought damages for the "diminished market perception of the

remainder," seeking compensation of "almost $1 million, based mostly on the cost to raise the 3.5-acre tract alongside the embankment." Id . at 462-63. The landowner did not claim that the project

prevented him from developing his land.

The supreme court reversed the jury's award, holding injury from the change in the

property's location to below the frontage road not compensable and that the jury should not have

considered the elevation change to determine the amount of damages:

From the proposition that landowners have no right to insist that their premises be

visible, it follows that they have no right to insist that they remain at grade level. . . .

We hold that any damages resulting from leaving unimproved, raw land in its natural

state while raising or lowering an adjacent roadbed in hilly terrain are community in

nature.

Id. at 463 .

With these principles in mind, I would reject the State's argument that McCarley's

damages are not compensable. McCarley's injury that forms the basis of his claim for diminution

in value to his remaining property from the State's drainage system is comparable to the type of

injury the land owners faced in Interstate Northborough , which injuries were found to be "special

and unique." 66 S.W.3d at 222 . The State agrees that the type of injury that McCarley alleges was

not "community in nature," and there was no evidence that other properties faced the same type of

injury from the State's drainage system. I would hold that McCarley's injury from the diminution

in value of his property due to the drainage system was compensable, whether sought as an inverse

condemnation claim or as part of the State's statutory claim.

2. Sufficiency of evidence at trial

Both the State's and McCarley's appraisers testified that the appraisal process for

valuing vacant land includes determining the property's highest and best use, and that this

determination is limited to "legally permissible" uses of the property. (8) McCarley's site permitting

expert, an engineer with 30 years of experience, including site work for private and public works

projects, was the only witness to testify as to the City of Austin's permit requirements for stormwater

drainage and detention and how those requirements applied to McCarley's property. He testified that

the State's drainage system precludes the property from obtaining a site development permit because

the system was designed to accommodate only a 10-year storm event and the City of Austin requires

a landowner to show that the property is able to receive and handle upstream flows from a 100-year

storm event. (9)

The State did not present evidence to dispute McCarley's engineer's testimony on this

issue. The State's engineer testified that he was not an expert on the City of Austin's requirements

for development:

Q. You've never gone out and actually done a development for a landowner like

Mr. McCarley.

A. No, sir. We never try and skimp and meet the bottom dollar; we just try and

do the right thing.

Q. Yes, sir. You have never taken a development project through the City of

Austin.

A. I have not.

Q. You don't have knowledge as to what the City of Austin requires?

A. I have some knowledge, but, no, I've never taken a project through.

The State also objected to McCarley questioning the State's engineer on "land planning issues" on

the ground that the questioning was outside the engineer's area of expertise:

I'm objecting because this witness was offered as an expert as a witness on the design

of the facilities of the highway facility. He's asking him about things having to do

with Mr. McCarley's property that he was not involved in. So he's going outside of

what he was offered as an expert on.

In sum, the evidence showed that the City of Austin's requirements precluded development of the

remainder property.

McCarley's real estate appraiser testified that because the remaining property could

not obtain a development permit, its use was comparable to a commercial site for outdoor vendor

sales such as Christmas trees. (10) The State's real estate appraiser confirmed that when a vacant lot

is being appraised in the "Austin/RoundRock market, entitlements are very important things that

[appraisers] have to look at: zoning, platting, site plans, those kinds of things." Although he

assumed for purposes of his appraisal that the remaining property could be permitted, he testified

that the property's value would be adversely impacted if it could not get a site development permit:

Q. What we're really concerned about in the regulatory climate of the City of

Austin is whether we can get a site development permit for the property,

right?

A. For the remainder, sure. Well, and the whole, yes.

Q. Because if you can't get a site development permit, you can't develop any

permanent improvements on the property, right?

A. True.

Q. And [Lots 1 and 2 are] not worth very much if you can't get a site

development permit, are they?

A. That's true.

* * *

Q. You do agree that that's the key inquiry is whether or not you could get a

permit from the City?

A. It would be--The presumption of my remainder appraisal is that you could.

Q. And you went through the four steps of highest and best use. If you can't get

it legally permitted, you can't build it, and it's not the highest and best use,

right?

A. True.

The trial court instructed the jury to consider the highest and best use. The jury

properly considered the evidence of probable uses that would be legally permissible before and after

the taking in deciding the ultimate issue of market value. See State v. Windham , 837 S.W.2d 73, 77

(Tex. 1992). Based on the evidence, the jury could have reasonably decided that the highest and best

use for the property prior to the taking was commercial development, that the highest and best use

after the taking was "outdoor vendor sales," and that the remaining property's value had been

significantly decreased by the State's condemnation and drainage system. It was within the jury's

province to resolve the conflicting evidence on value in McCarley's favor and to disregard the

State's argument that there was no diminution in value to the remaining property from the

condemnation. I would conclude the jury's award was within the range of the evidence and that the

evidence was competent and sufficient. For these reasons, I concur in the majority's decision to

affirm the judgment of the county court.

__________________________________________

Jan P. Patterson, Justice

Before Justices Patterson, Puryear and Pemberton

Filed: D ecember 20, 2007

1. The State provided evidence that Lot 1 was zoned in part GR (community commercial) and

in part single family at the time of the taking. The parties agreed, however, that prior to the taking,

the highest and best use for Lot 1 was for it to be developed commercially, although they disagreed

on the type of commercial development.

2. Because McCarley's claims concerning the drainage system in the statutory proceeding

were known to him, he had a duty to bring those claims in the condemnation proceeding or risk

losing them. See City of LaGrange v. Pieratt , 175 S.W.2d 243, 246 (Tex. 1943). In Pieratt , the

supreme court held that when a tract of land is condemned for roadway purposes and an owner

claims consequential damages to the remainder, all claims must be presented that could reasonably

have been foreseen and determined at the time, or they would be subsequently barred. Id . After the

condemnation action for a partial taking of his land had already concluded, Pieratt brought a separate

suit seeking lost profits in his business during construction of the improvements to the street. Id . at

244-45. Pieratt argued that his claim for lost profit damages was uncertain at the time of the

condemnation action. Id . at 246. In barring his subsequent suit, the supreme court stated that, in the

condemnation context, a plaintiff's damages for reasonably foreseen claims must only "be

ascertained with a reasonable degree of certainty," and the requirement is not that the damages be

"certainly or definitely proved." Id. at 246-47 .

3. The evidence showed that the drainage system's design was complete "for all intents and

purposes" and that construction was substantially complete.

4. There was evidence that resubmission of the 1998 site plan would have been futile.

McCarley's land planner testified that there was nothing that McCarley could do to comply with the

City's requirement or to obtain a site permit for development.

5. Section 21.042(d) prevents recovery for community damages:

In estimating injury or benefit under Subsection (c), the special

commissioners shall consider an injury or benefit that is peculiar to the property

owner and that relates to the property owner's ownership, use, or enjoyment of the

particular parcel of real property, but they may not consider an injury or benefit that

the property owner experiences in common with the general community.

Tex. Prop. Code Ann. § 21.042 (d) (West 2000).

6. The State asserts that none of the drainage improvements that form the basis of McCarley's

claim are within the 836 square feet that the State condemned and, therefore, any injury from the

drainage system was incompetent evidence in the statutory condemnation proceeding. But there was

evidence that the State's design included drainage improvements within the 836 square feet. There

was evidence that a drainage pipe and approach ditch to the pipe were within the 836 square feet,

that "concrete riprap" was to be built on the condemned portion to prevent erosion, and that the

condemned property was to provide an embankment area that would back up water on McCarley's

remaining property. In any event, even if the evidence was limited to the State's uses of the 836

square feet, one use was for drainage.

7. The measure of McCarley's damages is the same whether his claim is classified as an

inverse condemnation claim or as part of the statutory condemnation award. See State v. Schmidt ,

867 S.W.2d 769, 775-76 (Tex. 1993) (rules of recovery generally are the same for inverse and

statutory condemnation awards). It is the diminution in value to McCarley's remainder property due

to the State's taking under either theory of recovery. See Tarrant Reg'l Water Dist. v. Gragg ,

151 S.W.3d 546, 557-58 (Tex. 2004) (diminution in value one measure of damages in inverse

condemnation).

8. To determine the highest and best use, the testimony was that an appraiser considers four

components, "what's legally permissible, what's physically possible, what's financially feasible,

and what's maximally productive." Evidence on development issues is admissible in takings cases

as part of an expert's valuation determination and the expert's basis for the highest and best use of

property without the necessity of obtaining a definitive decision from the governmental entity

involved. See City of Austin v. Cannizzo , 267 S.W.2d 808, 815 (Tex. 1954) (testimony of existence

of zoning ordinance that prohibited prospective use admissible and "jury could weigh the

effect of the restriction against the prospective use" in determining market value); City of Sugar

Land v. Home & Hearth Sugarland, L.P. , 215 S.W.3d 503, 511-12 (Tex. App.--Eastland 2007,

pet. denied); 7A-G12 Patrick J. Rohan et al., Nichols on Eminent Domain § G12.03 (2)(a)

(3d ed. 2007); cf. City of Houston v. Kolb , 982 S.W.2d 949, 952 (Tex. App.--Houston [14th Dist.]

1999, pet. denied) (regulatory takings claim requires final decision regarding the application of the

regulation to the property at issue or showing that futility exception applies).

9. The State's motion to exclude McCarley's evidence did not seek to exclude McCarley's

experts on the basis of relevance, reliability, or qualifications. See Tex. R. Civ. P. 702. The State's

motion was based on the same issues that have been raised on appeal concerning McCarley's inverse

condemnation claim--ripeness, requisite intent, and justiciability.

10. The parties disputed which properties were included in the condemnation proceeding.

McCarley's experts included both Lot 1 and Lot 2 in their valuation determinations, and the State's

experts only included Lot 1. There was evidence supporting a damage award based on both lots.

See State v. Windham , 837 S.W.2d 73, 77 (Tex. 1992) (landowner ordinarily has right to damages

to the "entire remainder provided it is contiguous and there is unity of use").