CHAPTER 12 RECENT DEVELOPMENTS IN PIPELINE CONDEMNATION LAW
| Jurisdiction | United States |
(Nov 2004)
RECENT DEVELOPMENTS IN PIPELINE CONDEMNATION LAW
Haynes and Boone, LLP
Houston, Texas
Thomas J. Forestier is a partner in the Business Litigation Section in the Houston Office of Haynes and Boone, LLP. His practice is devoted primarily to commercial litigation in state and federal courts throughout Texas. Mr. Forestier specializes in representing parties involved in condemnation proceedings, land use controversies, and oil and gas litigation. He has extensive experience representing electric utility and pipeline companies, governmental authorities, businesses, and individual landowners in condemnation cases. In addition, he specializes in representing media entities, such as television stations and newspaper publishers, and individuals in litigation and other matters involving libel, First Amendment, and newsgathering issues.
Mr. Forestier is a 1987 graduate of the University of Texas School of Law. He earned a Bachelor of Science degree in Petroleum Engineering in 1983 from the University of Texas.
He served as a briefing attorney to the Honorable Judge James R. Nowlin, U.S. District Court for the Western District of Texas. He is admitted to practice before the United States Court of Appeals for the Fifth Circuit and the United States District Courts for the Southern, Eastern, and Western Districts of Texas.
I. Introduction
This paper will discuss recent case law and statutes relating to pipeline condemnations. While this paper addresses some basic principles of pipeline condemnation law, it focuses on recent pipeline cases that impact practitioners who represent pipeline companies or landowners. In particular, this paper will describe basic procedures that apply to the litigation of condemnation actions and the issues that commonly arise in condemnation lawsuits. This paper is intended to serve as a starting point for further research into specific pipeline condemnation issues.
II. The Power of Eminent Domain
The State of Texas has the power to condemn private property for public purposes. When this power is exercised, a landowner must be compensated for the property taken, as well as for any damage to the remainder of the property. 1
Texas statutes delegate the power of eminent domain to non-governmental entities. 2 These entities are restricted in the same way as the State; they must condemn land for a public purpose and they must adequately compensate the landowner for the land condemned and for any damage to the remaining land.
The Texas Property Code sets forth the procedures for exercising the power of eminent domain. 3 A condemning party must follow all eminent domain procedures closely as statutes related to the exercise of the power of eminent domain are strictly construed in favor of the landowner and against the condemnor. 4
III. Procedural Requirements Under the Property Code
The condemnation process in Texas consists of two stages; first, an initial administrative proceeding and then, if necessary, a judicial proceeding. 5 A condemnor has the statutory duty to negotiate in food faith with the condemnee in an effort to resolve the dispute prior to the commencement of any formal proceedings. 6
Moreover, a governmental condemnor is required to provide the condemnee with appraisal reports used in determining the final valuation offer. 7 The condemnee is likewise obligated to disclose appraisal reports used in determining the condemnee's opinion of value. 8 The Texas courts have not imposed this statutory requirement to exchange appraisal reports on non-governmental condemnors such as pipeline companies.
A. Procedural Traps for the Landowner
Although the procedural requirements in the statutes related to condemnation proceedings are construed in favor of the landowner, there are still traps into which an unwary landowner might fall. Such a landowner may waive crucial defenses he otherwise could make during the proceedings.
1. Waiving Procedural Arguments by Attending the Commissioners' Hearing
If the parties fail to negotiate an agreed amount as compensation for a taking, the condemnor will file a petition in the proper court of the county in which the land is located. 9 The court then assigns three commissioners who conduct hearings, determine the value of the land being condemned and any damages to the remaining property, and award the landowner compensation for the taking. 10
If the landowner appears at the commissioners' hearing and argues the merits of the case, the landowner waives his argument that the condemnor failed to comply with the statutory procedural requirements. 11
2. Consenting to a Taking by Accepting the Commissioners' Award
After the commissioners issue the award, the condemnor may elect to deposit the award into the court's registry and proceed to take immediate possession of the property to begin construction. 12 However, if the landowner withdraws the amount of the award from the court's registry, the landowner waives his right to claim that the taking was wrongful or that the court lacked jurisdiction. 13 In such a case, the landowner may only complain about the amount of the award. 14
If a landowner objects to the amount of the award as determined by the commissioners and does not consent to the condemnation, both the issue of the amount of the award and the propriety of the taking will be determined by a fact finder in the second stage of the condemnation proceeding. 15
If a landowner withdraws the money from the court's registry and the fact finder later determines that the fair market value of the land condemned (including any damages to the remainder property) is less than the amount withdrawn by the landowner, the landowner must return to the condemnor the excess amount. 16
B. Jurisdiction in the District Court or the County Court at Law
District courts and county courts at law have concurrent jurisdiction in eminent domain cases. 17 Prior to filing a condemnation action, condemnor's counsel must determine whether any statutes confer exclusive jurisdiction on certain courts in a particular county. For example, in Harris County, the Texas Government Code vests county courts at law with exclusive jurisdiction over condemnation proceedings. 18
In a case of first impression, the Fourteenth Court of Appeals vacated an easement in favor of a pipeline company and vacated the award to the landowner which had been granted to him by the district court. 19 The court held that, because the Government Code conferred exclusive jurisdiction over condemnation matters in the county court at law, the district court lacked jurisdiction over the condemnation proceeding. 20
C. Is Notice to All Landowners Required?
Generally, all persons having an interest in the subject property must be given notice of the condemnation action. 21 However, a condemnor does not need to serve notice of a condemnation proceeding on all owners of the property to be condemned if the condemnor does not seek an adjudication of the rights of the absent property owners.
In Metropolitan Transit Authority of Harris County, Texas v. Graham, 105 S.W.3d 754, 756 (Tex. App.--Houston 14th Dist. 2003, pet. denied), the condemnor served notice on all but two owners of undivided interests of the property to be condemned. After the condemnor notified the commissioners that it was unable to serve the two remaining property owners and that it was not proceeding against those owners, the commissioners awarded compensation for the taking to those owners who had been served. 22
The trial court agreed with the landowners' argument that the commissioners did not have jurisdiction over the matter because not all landowners had been served with notice of the commissioners' hearing. 23
On appeal, the Fourteenth Court of Appeals reversed and remanded. The appellate court held that there was no reason to prevent a condemnor from proceeding against a portion of undivided interest owners who were properly served with notice; the court stated that the condemnor impliedly abandoned its claims against the unserved owners until they could be served. 24
IV. Issues Commonly Arising In Disputed Condemnations
There are two main categories of cases that typically arise in Texas condemnation law. The first category involves concerns about compliance with the procedural mandates of the Texas Property Code. The second category involves the valuation of the land being condemned and damages to the remainder and the methods used to make those valuations.
A. The "Unable to Agree" Requirement
Texas Property Code Section 21.012(a) provides that "If ... a corporation with eminent domain authority ... wants to acquire real property for public use but is unable to agree with the owner of the property on the amount of damages, the condemning entity may begin a condemnation proceeding by filing a petition in the proper court." 25 Until a recent decision by the Texas Supreme Court in Hubenak v. San Jacinto Gas Transmission Co., 141 S.W.3d 172 (Tex. 2004), the "unable to agree" requirement had been held to be jurisdictional. 26
It takes very little to satisfy this requirement. 27 Instead of requiring parties to engage in lengthy negotiations with little chance of compromise, Texas courts now find that the "unable to agree" condition is met if the landowner rejects a single "bona fide" offer by the condemnor. 28 A condemnor makes a "bona fide" offer when its offer is made in good faith; a determination of good faith depends on the circumstances of the case. 29 An offer that is arbitrary or capricious would not be made in good faith. 30
Additionally, as discussed below, courts recently have held that a condemnor satisfies the "unable to agree" requirement even if the condemnor previously negotiated with a landowner for more rights than the condemnor would be entitled to obtain in a...
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