Case Information

*0 FILED IN 13th COURT OF APPEALS CORPUS CHRISTI/EDINBURG, TEXAS 11/18/2015 10:51:38 AM DORIAN E. RAMIREZ Clerk *1 ACCEPTED 13-15-00494-CV THIRTEENTH COURT OF APPEALS CORPUS CHRISTI, TEXAS 11/18/2015 10:51:38 AM Dorian E. Ramirez CLERK No. 13-15-00494-CV

__________________________________________________________________

IN THE COURT OF APPEALS FOR THE THIRTEENTH DISTRICT AT CORPUS CHRISTI, TEXAS __________________________________________________________________

THE STATE OF TEXAS,

Appellant, V.

YS & LS & LS PARTNERSHIP, LTD.

Appellee.

_________________________________________________________________

On Appeal from the County Court at Law Number Three of Nueces County, Texas; Cause No. 2013-CCV-62023-3 _________________________________________________________________

BRIEF OF APPELLANT THE STATE OF TEXAS __________________________________________________________________

KEN PAXTON ANTHONY G. BROCATO, JR.

Attorney General of Texas Assistant Attorney General

State Bar No. 03039001 CHARLES E. ROY anthony.brocato@texasattorneygeneral.gov

First Assistant Attorney General Transportation Division

P. O. Box 12548 JAMES E. DAVIS Austin, Texas 78711-2548

Deputy Attorney General for Civil Telephone: (512) 463-2004

Litigation Fax Number: (512) 472-3855

RANDALL K. HILL COUNSEL FOR APPELLANT

Assistant Attorney General

Chief, Transportation Division

ORAL ARGUMENT REQUESTED *2

IDENTITY OF PARTIES AND COUNSEL Parties

The State of Texas Plaintiff/Appellant

YS & LS & LS Partnership, Ltd. Defendant/Appellee

Prosperity Bank, Successor in Interest Defendant

by Merger with First Victoria National Bank

Counsel

Anthony G. Brocato, Jr. Trial and Appellate Counsel for

Assistant Attorney General The State of Texas

Transportation Division

P. O. Box 12548

Austin, Texas 78711-2548

Forrest J. “Jerry” Dorsey Counsel for YS & LS & LS

P. O. Box 30084 Partnership, Ltd.

Corpus Christi, Texas 78404

Christopher A. Dorsey

606 N. Carancahua St. Ste 1001

Corpus Christi, Texas 78476

James E. Cuellar Counsel for Prosperity Bank,

D. Brent Wells successor-by-merger with

Jeffrey D. Stewart First Victoria National Bank

Adam R. Swonke

WELLS & CUELLAR, P.C.

440 Louisiana, Suite 718

Houston Texas 77002

TABLE OF CONTENTS

Page IDENTITY OF PARTIES AND COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii

TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

INDEX OF AUTHORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

STATEMENT OF THE CASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

STATEMENT OF THE ISSUES PRESENTED.. . . . . . . . . . . . . . . . . . . . . . . . . viii

Whether YS & LS & LS Partnership, Ltd’s claims for damages and other relief in its Counterclaim are barred by the State of Texas’s sovereign immunity.

STATEMENT OF FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

A. The State’s Petition for Condemnation and Defendant’s Counterclaim.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SUMMARY OF THE ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

ARGUMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

YS & LS & LS Partnership, Ltd’s claims for damages and other relief in its Counterclaim are barred by the State’s sovereign immunity... . . . . . . . . . . . 5 A. Standard of review... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 B. Plea to the jurisdiction and sovereign immunity... . . . . . . . . . 5 C. YS & LS & LS Partnership, Ltd’s claims for damages and other relief under article 1, Section 17 of the Texas Constitution are barred by sovereign immunity... . . . . . . . . . . . . . . . . . . . . . . . . 7 PRAYER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

iii

CERTIFICATE OF SERVICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

APPENDIX

A. Order of September 24, 2015

iv *5 INDEX OF AUTHORITIES Cases Page

Allen v. City of Texas City, 775 S.W.2d 863 (Tex. App.— Houston

[1st Dist.] 1989, writ denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 City of Blue Mound v. SW. Water Co., 449 S.W.3d 678

(Tex. App.— Fort Worth 2014, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 City of Houston v. Biggers, 380 S.W.2d 700 (Tex. Civ. App.— Houston 1964,

writ ref’d n.r.e.), cert. denied, 380 U.S. 962 (1965) . . . . . . . . . . . . . . . . . . . 8 City of Midlothian v. Black,

271 S.W.2d 791 (Tex. App.—Waco 2008, no pet.) . . . . . . . . . . . . . . . . . . 6, 7 Dall.Cnty. Mental Health & Retardation v. Bossley,

968 S.W.2d 339 (Tex. 1998) .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Hearts Bluff Game Ranch, Inc. v. State, 381 S.W.3d 468 (Tex. 2012) . . . . . . . . 8, 9

Hubler v. City of Corpus Christi, 564 S.W.2d 816

(Tex. Civ. App.— Corpus Christi 1978, writ ref’d n. r.e.) .. . . . . . . . . . . . . . 8 Schriver v. Tex. Dep’t of Transp., 293 S.W.3d 846

(Tex. App.— Fort Worth 2009, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . 9, 10 State v. Lueck, 290 S.W.3d 876 (Tex. 2009) .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

State v. Vaughn, 319 S.W.2d 349 (Tex. Civ. App.— Austin 1958, no writ) . . . . 5, 8

Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217 (Tex. 2004) .. . . . . 5, 6

Tex. Dep’t of Transp. v. Jones, 8 S.W.3d 636

(Tex. 1999) (per curiam) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 6 v

Tex. Dep’t of Transp. v. Sefzik, 355 S.W.3d 618

(Tex. 2011) (per curiam) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Westgate v. State, 843 SW.2d 448 (Tex. 1992).. . . . . . . . . . . . . . . . . . 3, 4, 5, 7, 8, 9

Wilkinson v. Dallas/Fort Worth Int’l Airport Bd.,

54 S.W.3d 1 (Tex. App.— Dallas 2001, pet. denied), cert denied , 534 U. S. 1128 (2002).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Constitutional Provisions, Statutes, and Rules

Tex. Const. art. 1, § 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 4, 7

vi *7 STATEMENT OF THE CASE Nature of the Case: Defendant YS & LS & LS Partnership, Ltd. filed a

Counterclaim against the State of Texas, seeking damages and other relief for alleged lost rental income due to the State’s condemnation of a strip of Defendant’s property fronting the highway. CR 77– 84.

Trial Court : Honorable Deeanne Galvan, Judge of the County Court

at Law Number 3 of Nueces County, Texas Trial Court Disposition: The trial court denied the State’s plea to the

jurisdiction. CR 122 (App A).

vii *8 STATEMENT OF ISSUE PRESENTED Whether YS & LS & LS Partnership, Ltd’s claims for damages and other relief in its Counterclaim are barred by the State of Texas’s sovereign immunity.

viii

No. 13-15-00494-CV

__________________________________________________________________

IN THE COURT OF APPEALS FOR THE THIRTEENTH DISTRICT AT CORPUS CHRISTI, TEXAS __________________________________________________________________

THE STATE OF TEXAS,

Appellant, V.

YS & LS & LS PARTNERSHIP, LTD.

Appellee.

_________________________________________________________________

On Appeal from the County Court at Law Number Three of Nueces County, Texas; Cause No. 2013-CCV-62023-3 _________________________________________________________________

BRIEF OF APPELLANT THE STATE OF TEXAS __________________________________________________________________

TO THE HONORABLE COURT OF APPEALS:

Appellant, the State of Texas, submits this brief requesting that Appellee YS

& LS & LS Partnership, Ltd’s claims for damages and other relief in its Counterclaim

be dismissed for want of jurisdiction.

STATEMENT OF FACTS

A. The State’s Petition for Condemnation and Defendant’s Counterclaim

On October 31, 2013, Appellant State of Texas (“the State”) filed its Petition for Condemnation seeking to condemn 0.034 of an acre, or 1,500 square feet, of land

owned by Appellee YS & LS & LS Partnership, Ltd. (“YS”) that fronts State

Highway 358 (South Padre Island Drive). CR 5–11. The Special Commissioners held

a hearing and awarded the defendants, jointly, the sum of $150,000 (SCR). ^[1]

Thereafter, the State timely filed objections to the award. CR 74–76. YS responded

by filing its Original Answer, Request for Disclosures, Plea in Abatement, and

Counterclaim. CR 77–84.

In its Counterclaim, YS asserted that it owned property that is also described as Parcel 43 in the Exhibit 2 of the Petition for Condemnation. CR 81. YS claimed

that the State noticed its intent to take the property on November 9, 2007. Further,

YS alleged that its property has a single exit and entry point to and from South Padre

Island Drive. CR 81. According to YS, when YS attempted to lease the property to

prospective tenants, YS was unable to find a suitable tenant “due to the impending

construction and condemnation.” YS contends that it was required to disclose this to

prospective tenants and that “the State’s action caused a direct, immediate, and

substantial interference with the use and enjoyment of the property, including a cloud

on the title for which [YS] has a right to damages.” According to YS, the State acted

with a “lack of care and diligence with which its decision has been carried out.” YS

argued that this action constitutes “an intentional damaging or taking of the property

*11 in violation of Section 17 of Article 1 of the Constitution of the State of Texas.” YS

concludes by arguing that “the State had actual knowledge of the taking and that harm

would be substantially certain to occur.” CR 81. On August 3, 2015, the State

scheduled its plea to the jurisdiction for hearing on August 19, 2015 at 1:30 p.m. CR

111–112. On August 18, 2015, the State filed its Supplement to its Plea to the

Jurisdiction to Defendant YS & LS LS Partnership, Ltd.’s Counterclaim. In this

Supplement, the state argued that YS’s claims were barred by sovereign immunity as

the claims were not recognized as recoverable under the Texas Supreme Court’s case

of Westgate v. State, 843 SW2d 448, 454 (Tex. 1992). CR 113–115. YS filed its

response to the State’s plea and supplement on August 19, 2015 at 11:30 a.m. CR

116–121. Counsel for both parties presented their arguments at the hearing on

August 19, 2015. No evidence was presented at the hearing. RR 1–15. The State’s

counsel argued that YS’s claims are barred by sovereign immunity and the Westgate

opinion, while YS’s counsel argued that Westgate was inapplicable. RR 1–15.

Subsequently, on September 24, 2015, the Court denied the State’s plea to the

jurisdiction and its supplement. CR 122. From the Court’s order, the State appeals.

CR 123–124.

SUMMARY OF THE ARGUMENT Sovereign immunity deprives a trial court of subject matter jurisdiction for lawsuits in which the State has been sued unless the State consents to suit. Sovereign

immunity can be waived only by statute or legislative approval. The burden is on the

claimant, here YS, to establish subject matter jurisdiction by showing that immunity

has been waived. If the pleadings affirmatively negate the existence of jurisdiction,

the trial court may grant the plea to the jurisdiction without allowing the opportunity

to amend.

In this case, YS has not shown that sovereign immunity has been waived for

its counterclaims against the State. The facts alleged by YS do not amount to a claim

for a constitutional taking as shown by the Supreme Court’s case of Westgate v. State ,

843 S.W.3d 448 (Tex. 1992). In that case, the Supreme Court held that damages

allegedly caused by the State’s announcement of a project are not recoverable under

Texas Constitution, Article 1, Section 17 when the government has not “physically

appropriated, denied access to, or otherwise directly restricted use of the landowner’s

property.” The Supreme Court reasoned that sound public policy supports this result.

Further, the Supreme Court referred to four appellate court cases that denied recovery

under Section 17 because although the properties suffered diminished market value,

there was not actual physical appropriation of the properties.

The Westgate case is directly applicable to YS’s claim for damages and other

relief in its Counterclaim against the State. Like the landowner in Westgate, YS

claims 1) the State’s taking caused an interference with the use and enjoyment of the

property; 2) the State’s action caused a cloud on the title of the landowner; and 3) the

State’s actions caused an unreasonable delay in acquisition after the State’s

announcement of the project. Because YS’s claims do not amount to a constitutional

taking under Westgate, YS’ claims for damages and other relief in its Counterclaim

are without merit and are barred sovereign immunity. YS’s claims for damages and

other relief in its Counterclaim against the State should be dismissed for lack of

subject matter jurisdiction.

ARGUMENT YS & LS & LS Partnership, Ltd’s claims for damages and other relief in its Counterclaim are barred by the State’s sovereign immunity. A. Standard of review.

This Court reviews an order denying a plea to the jurisdiction de novo. Tex.

Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 228 (Tex. 2004).

B. Plea to the jurisdiction and sovereign immunity.

“In Texas, sovereign immunity deprives a trial court of subject matter jurisdiction for lawsuits in which the state or certain governmental units have been

sued unless the state consents to suit.” Miranda, 133 S.W.3d at 224. Sovereign

immunity from suit defeats a trial court’s jurisdiction and is properly raised in a plea

to the jurisdiction. State v. Lueck, 290 S.W.3d 876, 880 (Tex. 2009); Tex. Dep’t of

Transp. v. Jones, 8 S.W.3d 636, 638–39 (Tex. 1999) (per curiam). Sovereign

immunity can be waived only by statute or legislative approval. Tex. Dep’t of Transp.

v. Sefzik, 355 S.W.3d 618, 620 (Tex. 2011) (per curiam).

The burden is on the claimant to establish subject matter jurisdiction by showing

that immunity from suit has been waived. Jones, 8 S.W.3d at 638. This involves a

two-step inquiry. First, there must exist a cause of action for which immunity has

been waived. Second, the claimant must state a claim within that cause of action.

The courts review the pleadings and any evidence submitted to determine whether the

“real substance” of the claim falls within that cause of action. See, Dall. Cnty. Mental

Health & Retardation v. Bossley, 968 S.W.2d 339, 343–45 (Tex. 1998). The plea in

this case is based solely on the pleadings. “If the pleadings affirmatively negate the

existence of jurisdiction, then a plea to the jurisdiction may be granted without

allowing the opportunity to amend.” Miranda, 133 S.W.3d at 227.

Except when the government files a statutory condemnation action, if a governmental entity takes property without paying adequate compensation, a property

owner generally can file an inverse condemnation claim. City of Midlothian v. Black,

271 S.W.2d 791, 799 (Tex. App.—Waco 2008, no pet.). For an inverse

condemnation claim, a landowner has the burden of pleading the following elements:

“(1) the governmental entity intentionally performed an act in the exercise of its

lawful authority; (2) that resulted in the taking, damaging, or destruction of the

party’s property; (3) for public use.” Id. However, “if the plaintiff’s petition does not

properly plead the elements of an inverse condemnation claim, the immunity applies

and the inverse condemnation claim must be dismissed for lack of subject matter

jurisdiction.” Id. Whether the facts alleged constitute a “taking” is a question of

law. Id.

C. YS & LS & LS Partnership, Ltd’s claims for damages and other relief under article 1, Section 17 of the Texas Constitution are barred by sovereign immunity.

“Tex. Const. art 1, § 17 provides that ‘[n]o person’s property shall be taken,

damaged or destroyed for or applied to public use without just compensation being

made . . .’” Westgate v. State, 843 S.W.2d 448, 452 (Tex. 1992). In Westgate, the

Supreme Court addressed a counterclaim for inverse condemnation under the Texas

Constitution for damages incurred when the city and the State announced plans to

condemn the defendant’s property and allegedly the property suffered a decline in

marketability, and the defendant argued that the government unreasonably delayed

the actual acquisition. Id. The Supreme Court held that “the damages were not taken

or damaged within the meaning of Tex. Const. art 1, § 17 . . .” Id. at 456.

The Supreme Court held that damages are not recoverable when the government has not “physically appropriated, denied access to, or otherwise directly

restricted use of the landowner’s property.” Id. at 450. The Supreme Court reasoned

that sound public policy supported this result. The Supreme Court stated,

Construction of public works projects would be severely impeded if the government could incur inverse-condemnation liability merely by announcing plans to condemn property in the future. Such a rule would encourage the government to maintain the secrecy of proposed projects as long as possible, hindering public debate and increasing waste and *16 inefficiency . . .

Id. at 453. The Supreme Court referred to four appellate opinions to support its

conclusion.

In City of Houston v. Biggers, 380 S.W.2d 700 (Tex. Civ. App.—Houston 1964, writ ref’d n.r.e.), cert. denied, 380 U.S. 962 (1965), the appellate court held

that passage of an ordinance authorizing construction of a civic center on the

landowner’s property did not constitute a taking under the Texas Constitution where

the government did not impose a current, direct restriction on the property’s use.

Similarly, in State v. Vaughn, 319 S.W.2d 349 (Tex. Civ. App.—Austin 1958, no

writ), the appellate court held that the fact that tenants were vacating the landowner’s

building out of fear of the future condemnation did not amount to a constitutional

taking. The courts of appeals in two additional cases held that construction of a

rainwater levee in the first, and a proposed new drainage system in the second, did

not give rise to a constitutional taking claim because although the properties suffered

diminished market value, there was not actual physical appropriation of the

properties. See Allen v. City of Texas City, 775 S.W.2d 863, 885 (Tex. App.—

Houston [1st Dist.] 1989, writ. denied); Hubler v. City of Corpus Christi, 564 S.W.2d

816 (Tex. Civ. App.—Corpus Christi 1978, writ ref’d n. r.e.).

The Texas Supreme Court has recently approved its holding in Westgate. In Hearts Bluff Game Ranch, Inc. v. State, 381 S.W.3d 468, 480 (Tex. 2012), quoting,

Westgate , 843 S.W.3d at 453, the Court stated, referring to Westgate, “We held that

‘publicly targeting a property for condemnation’ in the future does not give rise to an

inverse condemnation.” The Court stated, “although the announcement resulted in

economic harm to the plaintiff, we confirmed that the ‘impact of the future project on

the present market value of the land was a noncompensable consequential damage.”

Id. Further, the Court stated, “We concluded that, in order for an inverse

condemnation claim to be valid, there must be a ‘current, direct restriction’ on the use

of the land, referring to a physical act or legal restriction on the property’s use, ‘such

as a blocking of access or denial of a permit for development.’” Id. at 481, quoting ,

Westgate, 843 S.W.3d at 452.

The Westgate case is directly applicable to YS’s claim for damages and other

relief in its Counterclaim against the State. Like the property owner in Westgate, YS’s

principle complaint is that it lost income due to the State’s announcement of damages.

Further, like the landowner in Westgate, YS claims 1) the State’s action caused an

interference with the use and enjoyment of the property; 2) the State’s action caused

a cloud on the title of the landowner; and 3) the State’s actions caused an

unreasonable delay in acquisition after the State’s announcement of the project. CR

81. Because YS’s claims do not amount to a constitutional taking under Westgate,

YS’s claims for damages and other relief in its Counterclaim are without merit and

are thus barred by sovereign immunity. See also Schriver v. Tex. Dep’t of Transp.,

293 S.W.3d 846 (Tex. App.—Fort Worth 2009, no pet.) (holding that TxDOT’s mere

negotiations for the purchase of property do not entitle the landowner the right to

recover damages); Wilkinson v. Dallas/Fort Worth Int’l Airport Bd., 54 S.W.3d 1, 13

(Tex. App.—Dallas 2001, pet denied), cert denied , 534 U. S. 1128 (2002). (“Proving

merely that government action has caused a diminution in value or damaged the

marketability of property is insufficient.”); City of Blue Mound v. SW Water Co., 449

S.W.3d 678 (Tex. App.—Fort Worth 2014, no pet.) (“Damage, if any, to the going

concern of a business on condemned property is generally not compensable.”).

Therefore, YS’s claims for damages and other relief in its Counterclaim against the

State should be dismissed for lack of subject matter jurisdiction.

PRAYER

Appellant, the State of Texas respectfully prays that this Honorable Court of

Appeals grant the following relief:

1) reverse the trial court’s order of September 24, 2015; 2) dismiss all of Appellee YS & LS & LS Partnership, Ltd’s claims in its Counterclaim against Appellant State of Texas for want of jurisdiction; 3) render judgment that Appellee YS & LS & LS Partnership, Ltd take nothing by its Counterclaim against Appellant State of Texas; and 4) order that Appellee YS & LS & LS Partnership, Ltd pay all costs incurred by Appellant State of Texas.

Respectfully submitted, KEN PAXTON

ATTORNEY GENERAL OF TEXAS CHARLES E. ROY FIRST ASSISTANT ATTORNEY GENERAL

JAMES E. DAVIS DEPUTY ATTORNEY GENERAL FOR CIVIL LITIGATION RANDALL K. HILL ASSISTANT ATTORNEY GENERAL CHIEF, TRANSPORTATION DIVISION /s/ Anthony G. Brocato, Jr. ANTHONY G. BROCATO, JR. Assistant Attorney General State Bar No. 03039001 anthony.brocato@texasattorneygeneral.gov Transportation Division P.O. Box 12548

Austin, Texas 78711-2548 (512) 463-2004

(512) 472-3855 - Facsimile COUNSEL FOR APPELLANT THE STATE OF TEXAS *20 CERTIFICATE OF COMPLIANCE I certify that this document contains 2,298 words as determined by the word count of the computer program used to prepare this document, excluding the sections

of the document listed in Texas Rule of Appellate Procedure 9.4(i)(1).

CERTIFICATE OF SERVICE This is to certify that on the 18th day of November, 2015, a true and correct copy of the foregoing Brief of Appellants The State of Texas has been sent via

electronic filing and e-mail to the following:

Mr. Forrest J. “Jerry” Dorsey

P. O. Box 30084

Corpus Christi, Texas 78404

Mr. Christopher A. Dorsey

606 N. Carancahua St. Ste 1001

Corpus Christi, Texas 78476

Attorneys for Defendant,

YS & LS & LS Partnership, Ltd.

Mr. James E. Cuellar

Mr. D. Brent Wells

Mr. Jeffrey D. Stewart

Mr. Adam R. Swonke

WELLS & CUELLAR, P.C.

440 Louisiana, Suite 718

Houston Texas 77002

Attorneys for Defendant,

Prosperity Bank, successor-by-merger with

First Victoria National Bank

/s/ Anthony G. Brocato, Jr. ANTHONY G. BROCATO, JR. Assistant Attorney General

[1] Appellant has requested a Supplemental Clerk’s Record (SCR) that contains the Special Commissioners’ Award.