City of Pearland v. Alexander ( 1972 )

STEAKLEY, Justice.

This is an eminent domain proceeding. The City of Pearland, petitioner, acquired from the Alexanders a surface tract of ten acres as a site for a sewage disposal plant, together with 2.04 acres for a public street easement, .046 acres for a pipeline easement and certain temporary construction easements. The award of damages in these respects is not in question. What is questioned by the City is the manner in which the award of severance damages of $143,000 to the remainder Alexander tract of 810.724 acres was reached. The trial court judgment was affirmed by the court of civil appeals. 468 S.W.2d 917.

Pursuant to the order of the trial court¹ in response to the motion in limine of the landowners, the court in the course of trial restricted the City in showing by direct examination of its own witnesses or by cross-examination of the witnesses for the landowners, the actual uses of the ten acre site which at the time of the taking were reasonably foreseeable and probable, and hence would be a factor in the market value determinations as to the remainder tract.

In its submission of the case to the jury, the trial court gave the following special instruction immediately preceding the crucial market value issues pertaining to the remainder tract:

“You are instructed that the surface estate of the ten (10) acre tract of land condemned by the City of Pearland in this case and described as Tract One in the evidence before you will be used by the City of Pearland as a site for a sewerage disposal plant and you are to presume that the City of Pearland will exercise its rights and use and enjoy this property to the full extent for such a sewerage disposal plant.”

We granted the writ of error of the City of Pearland to resolve the problem of whether these trial procedures, particularly the giving of the above special instruction, conformed to the established willing-seller willing-buyer method of determining market value in the assessment of severance damages, see City of Austin v. Cannizzo, 153 Tex. 324, 267 S.W.2d 808 (1954) and State v. Carpenter, 126 Tex. 604, 89 S.W.2d 194, ibid 979 (1936); and if error was committed, whether the error was prejudicial within the requirements of Rule 503, Texas Rules of Civil Procedure; see Gomez Leon v. State, 426 S.W.2d 562 (Tex.1968). Our conclusion is that reversible error was committed by the trial court and we accordingly reverse the judgments below and remand the cause for another trial.

This Court in G. C. & S. F. Ry. Co. v. Fuller, 63 Tex. 467 (1885), early established the fair market value criterion in the determination of severance damages. Charges given by the trial court to such effect were approved as fairly submitting to the jury the law for the government of the case: “. . . the measure of damage is for the actual loss thereby sustained in the fair, reasonably salable value of plaintiff’s said property: that is to say, if by reason of defendant’s acts complained of, plaintiff’s property is lessened in value, he is entitled to recover the fair and actual difference between the fair valuation of said property. . . .”

Later, in St. Louis, A. & T. Ry. Co. v. Henderson, 86 Tex. 307, 24 S.W. 381 (1893), this Court quoted another authority with approval in saying that all damages, present and prospective, that are the natural, necessary or reasonable incident of the improvement constitute the compensation which our Constitution requires to be made in advance. The Court concluded that severance damages are those which would naturally or necessarily flow from the taking and proper construction and operation of the improvement; and that other damages caused to the balance of the tract which may be known with reasonable certainty would be included.

This rule became even more settled in State v. Carpenter, supra. It was there reaffirmed that where a part of a tract of land has been taken for a public use, damages to the remainder tract are to be determined by ascertaining the difference between its market value immediately before and after the appropriation, taking into consideration the nature of the improvement, the use to which the land taken is to be put, and all circumstances which tend to increase or diminish the present market value. The recovery is for damages which reasonably could have been foreseen and determined at the time of condemnation. City of LaGrange v. Pieratt, 142 Tex. 23, 175 S.W.2d 243 (1943). The willing-seller willing-buyer test of market value is to be applied and those factors are to be considered which would reasonably be given weight in negotiations between a seller and a buyer. City of Austin v. Cannizzo, supra.

In Texas Electric Service Co. v. Campbell, 161 Tex. 77, 336 S.W.2d 742 (1960), we ruled evidence based on possibilities rather than reasonable probabilities to be incompetent, citing State v. Carpenter, supra, that “evidence should be excluded relating to remote, speculative, and conjectural uses, as well as injuries, which are not reflected in the present market value of the property.” This is but saying, as in Cannizzo, that the question of the competency of evidence bearing on the issue of market value at the time of the taking rests on those factors of reasonable weight in the factual determination of what a willing seller would sell for and what a willing buyer would pay. See also Andrews v. Cox, 127 Conn. 455, 17 A.2d 507 (1941); Taft v. Commonwealth, 158 Mass. 526, 33 N.E. 1046 (1893); and Chicago & S. L. R. Co. v. Kline, 220 Ill. 334, 77 N.E. 229 (1906). The Nichols treatise states the following:

“The use to which the condemnor proposes to devote the property taken must be considered in ascertaining the damages to the remainder area. . . . The condemnee is entitled to consideration of the damage which the condemnor has a right to inflict although it cannot be assumed that the property will be put to its most damaging use.” 4-A NICHOLS ON EMINENT DOMAIN sec. 14.24.

It has been uniformly recognized in the development and refinement of the market value test for determining severance damages that the State v. Carpenter method of trial and submission is appropriate in all but exceptional cases. The jury is instructed that the term market value is the price the property will bring when offered for sale by one who desires to sell, but is not obliged to sell, and is bought by one who desires to buy, but is under no necessity of buying. The jury is asked to find the market value of the remainder tract immediately before the taking and the market value thereof immediately after the taking. In the determination of the latter, the jury is instructed to take into consideration the uses to which the land taken is to be subjected. The answers to the issues are to be determined in the light of the evidence offered by the parties and admitted under the rulings of the trial court. As said in State v. Carpenter, everything which affects the market value of the land itself, having due regard for past and probable future injuries, may be accurately reflected by ascertaining the difference in value, when all the legitimate testimony is properly submitted to the jury for consideration ; and it is proper to admit evidence upon all matters which tend to increase or diminish the present market value. The landowner may recover damages which are reasonably foreseeable, and he may show the reasonably probable uses of the tract taken that are calculated to depress the value of the remainder tract and thus enhance the recovery of damages. See Can-nizzo, supra, where it was recognized that the determination of the value of a tract taken permits consideration of all uses to which the property was reasonably adaptable and for which it was, or in reasonable probability would become, available within a reasonable time. But the public authority should not be required to pay severance damages on the basis of uses of the tract taken which are not at the time of the taking so reasonably probable as to be reflected in present market value and the jury should be permitted to give such weight to this factor as a prospective purchaser of the remainder tract would give. In our view this was erroneously precluded under the procedures of the trial court here, and the harm to the City would appear manifest.

The testimony of the three value witnesses of the landowners was based on the premise that the City would use the whole of the site for a plant and the City was restricted to this approach in the cross-examination of these witnesses. These three witnesses for the landowners expressed the opinion that the damages to the remainder tract, i. e., its diminished market value, was, $165,000, $162,500 and $98,400. The finding of the jury was in the sum of $143,000, which, it is seen, was more than $14,000 in excess of the mean estimates of these witnesses. In contrast, the value witnesses presented by the City testified to the opinion that the remainder tract suffered no consequential damages.

Further, the court admitted into evidence photographs depicting the large Lockwood and La Porte sewage plants of the City of Houston. This evidence was admitted under the testimony of a landowner witness that he knew of these two plants which in his opinion would be “probably comparable.” He testified, however, that each plant was in an industrial area “vacant all around it” and “no homes within a good distance from it.” The testimony was unclear and disputed regarding the acreage which would be required for a plant of the size and with the capacity of the Lockwood plant, although it was shown that the Lockwood plant had a rated capacity of thirty million gallons a day, thirty times the size of the plant constructed by the City after the taking of the ten acre site. The issue drawn by the parties is seen in the objection of the City to the photographs and the reply of counsel for the landowners.² The photographs were admitted into evidence consistent with other evidence rulings of the trial court, and their display to the jury undoubtedly conveyed the impression that the market value issues as to the remainder tract were to be determined upon the assumption that the entire site would be covered by a physical plant. This was the purpose of their introduction by the landowners as shown by the reply to the objection of the City copied in the margin.

As is evident, the overriding issue between the parties concerned the actual uses the City would make of the ten acre site, together with the right of the City to establish those which were reasonably probable. The court told the jury by the special instruction not only that the City would use the tract as a site for a sewage disposal plant, but that in determining the before and after market value of the remainder tract it was required “to presume that the City of Pearland will exercise its rights and use and enjoy this property to the full extent for such a- sewerage disposal plant.”³ In our view, this instruction could only be understood by the jury as a mandate to presume a full use of the entire ten acres for an actual plant, rather than as a site for the plant and facilities that would be reasonably required; and as a further directive that in answering the market value issues the jury was to be governed by this presumption regardless of any evidence to the contrary, and whether or not such presumed use of the entire site for an actual plant was reasonably probable at the time of taking and would, or would not, be reflected in the market value of the remainder tract at such time. As such, the instruction was clearly erroneous as a comment on the weight of the evidence. Moreover, the opinion testimony of the value witnesses offered by the landowners rested on this same presumption and it is not surprising that the market value findings of the jury reflected the weight of their estimates of damages to the remainder tract.

We will not detail the evidence rulings of the trial court in this lengthy record. Suffice it to say that in view of the state of the evidence, it is our opinion that the jury was materially influenced in its market value findings by the special instruction ; and that the error of the trial court in this respect, if for no other, was “reasonably calculated to cause and probably did cause the rendition of an improper judgment” under Rule 503, Texas Rules of Civil Procedure.

The landowner-respondents rely almost entirely on Perkins v. State, 150 S.W.2d 157 (Tex.Civ.App.1941, writ dismissed), and cases which followed. We have not construed Perkins as prescribing the rules or procedures for determining the measure of severance damages, see Texas Power & Light Co. v. Cole, 158 Tex. 495, 313 S.W.2d 524 (1958); and White v. Natural Gas Pipeline Co. of America, 444 S.W.2d 298 (Tex.1969), but only as recognizing the ineffectiveness of promissory statements to reduce or mitigate damages. See also the annotation in 7 A.L.R.2d 364. Thus, the City would not be permitted under the Perkins rule to elicit testimony in the nature of a promise or representation that the physical structures erected on the ten acre site after the taking and before the trial, would not be increased in the future; and that the question of damages to the remainder tract should be determined on the basis of such a promise or representation. We agree that this would not be consistent with the whole taking. But we do not understand that the City sought to do this, or claims the right to do so. As we understand the record, the City claimed the right to show the reasonably foreseeable and probable uses of the ten acre site which at the time of taking would be required in accomplishing the municipal purposes for which it was taken; and that the jury should have been permitted to hear evidence upon, and to consider, this factor with all else a prospective purchaser would consider in reaching a market value determination respecting the remainder tract. This was not the problem in Perkins.

We are in general agreement with the rulings of the court of civil appeals on the other points of error urged by the City there, and here. We note, however, that most of these points present problems not likely to arise again.

The judgments below are reversed and the cause is remanded for trial conformable to this opinion.

1 . “It is therefore further ordered that it is legally presumed that Plaintiff will exercise its rights in regard to the entirety of the surface estate in the ten acre tract being condemned herein as Tract No. One for use as a sewerage disposal plant site, to the fullest extent and for the highest use for which it is taken, and Plaintiff is hereby prohibited from introducing any evidence to the effect that less than the full ten acres will be used for such a sewer plant.”

2 . “ . . . The jury is limited to reasonable probabilities as can be shown from the evidence, and should not be permitted by this court just to speculate that on any type of improvement that could be put there. . . . One that might in all reasonable probability be put on this property and not because the City of Houston or somebody else has constructed something of this type somewhere else, your honor.

“ . . . Your honor, the jury is not entitled to go on reasonable probabilities. Tbe jury in this ease is to presume that they will fully develop and fully use this ten aere site for a sewage disposal plant. That is what the cases and the motion in limine stood for this morning, and if they didn’t need ten acres they shouldn’t have taken ten acres, but when they walk out of this courthouse they are entitled to cram every square inch with a sewer disposal plant to service two-thirds of the City of Pearland and on into the future forever, and we are entitled to show them what a ten acre sewer plant looks like.”

3 . Our emphasis.