City of Arlington, Tex. v. Golddust Twins Realty Corp.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 93-1127
CITY OF ARLINGTON, TEXAS,
Plaintiff-Counter Defendant
Appellant-Cross Appellee,
versus
GOLDDUST TWINS REALTY CORPORATION,
Defendant-Counter Plaintiff
Appellee-Cross Appellant,
B/R RANGERS ASSOCIATES, LTD.,
Defendant-Appellee.
Appeals from the United States District Court
for the Northern District of Texas
(December 21, 1994)
Before JOHNSON, HIGGINBOTHAM, and DAVIS, Circuit Judges.
HIGGINBOTHAM, Circuit Judge:
The City of Arlington, Texas appeals the district court's
judgment invalidating Arlington's condemnation of a leasehold
interest owned by the Resolution Trust Corporation and Golddust
Twins Realty Corporation. We find that Arlington exercised its
eminent domain power for a valid public purpose. That Arlington's
stated purpose for taking the property differed from its actual
purpose is not a basis for invalidating this condemnation.
Accordingly, we reverse and remand so that the district court may
determine the compensation due the condemnees.
I.
A.
Arlington owns parcel C, the land at issue in this case.
Parcel C was encumbered by a long-term lease of which the RTC and
Golddust each owned a fifty percent interest.1 In October 1989,
Arlington and the Texas Rangers baseball club began discussing the
feasibility of creating a new ballpark complex at the site of the
old baseball stadium. The Rangers considered the old stadium
inadequate and were considering moving to another city. On
December 4, 1990, Arlington and the Rangers entered into a Master
Agreement for the development of a new ballpark complex. Pursuant
to the Agreement, Arlington created the Arlington Sports Facilities
Development Authority, Inc. (ASFDA), which was charged with acting
on behalf of Arlington in the construction, development, and
financing of the project. Under the Master Agreement, ASFDA agreed
to build a new ballpark, a ballpark for children, a learning center
for children, a hall of fame facility, an amphitheater, a ballpark
complex transportation system, a riverwalk, and a linear park.
The Master Agreement also provided for a land swap. The
Agreement contemplated that the Rangers would transfer to Arlington
12.714 acres of land, designated as parcels A and B. In exchange,
Arlington would transfer to the Rangers parcel C, containing
roughly the same acreage. These parcels of land are close to the
1
The RTC has since assigned its interest in this lawsuit
to B/R Rangers Associates, Ltd. The Rangers elected not to file a
brief in this appeal, and the organization does not adopt the
position of either Arlington or Golddust. The remainder of this
opinion refers to RTC and Golddust as simply "Golddust."
2
new ballpark. See Appendix. The Master Agreement does not
restrict the Rangers' use of parcel C, and Golddust introduced
evidence that the Rangers intended to construct office buildings on
the land at some future time.
On November 12, 1991, the Board of ASFDA passed a resolution
declaring a need to acquire the land encumbered by the leasehold
estate. Realizing that it would be awkward for ASFDA to condemn
land owned by Arlington, ASFDA decided to let Arlington condemn the
leasehold interest. On December 3, 1991, the Arlington City
Council resolved to condemn the leasehold interest so that the land
could "be improved and used as a parking facility . . . ." On May
5, 1992, Arlington took possession of the unimproved property.
Shortly thereafter, Arlington graded and asphalted the tract at a
cost of more than $644,000. Parcel C was used for parking for the
old stadium during the 1992 baseball season. The Rangers operated
the parking lot and received all parking revenue. For the priority
use privileges and right to receive all revenue generated by the
leasehold property, the Rangers agreed to pay Arlington $1.00 per
year. This arrangement would terminate once Arlington transferred
the property to the Rangers.
On June 23, 1992, ASFDA leased the new ballpark facilities to
the Rangers. Although parcel C is not considered part of the
facilities, section 5.1(b) of the Master Lease requires that the
Rangers:
agree[] to consider, and to cause the provision for, adequate
parking space and facilities for the Facilities in connection
with any proposed development of . . . (ii) the land
designated as Parcel C . . . . The term "adequate" as used in
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this Section 5.1(b) shall mean in compliance with all
applicable zoning and code requirements of the City and the
rules and regulations of the Commissioner and the League.
B.
This appeal arises out of the condemnation proceeding
Arlington filed in 1991 against the RTC and Golddust. Arlington
filed the action in state court, but the RTC removed to federal
court. Golddust challenged Arlington's right to condemn the
leasehold, claiming that the actual use to which Arlington sought
to put the condemned land was not a public use.
The district court bifurcated the trial. The first phase
would determine the propriety of Arlington's condemnation, and the
second would examine the issue of statutory recovery. In the first
phase the court asked the jury the following question:
Do you find from a preponderance of the evidence that when
City of Arlington undertook to condemn the leasehold estate in
question it did so with the intent that the property in
question would be improved and used as a parking facility?
The jury answered "No." The district court properly hedged the
question of whether the issues were for judge or jury by adding its
own finding. The court found that "[t]he evidence developed by
Golddust and RTC . . . made an exceptionally strong case that
[Arlington] has not been honest in its assertions that the taking
was for use of the property as a parking facility . . . ." Once
the evidence established that Arlington had not been honest in its
statement of purpose, the court held that the burden was on
Arlington to come forward with a valid public purpose. The court
recognized that "any public purpose might be deemed to be
sufficient to uphold [Arlington's] taking inasmuch as there is no
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remainder of the property taken that must be valued in the light of
the use to which the property taken is to be put." Believing that
Arlington's failure to discharge its burden to state a true public
purpose was dispositive, it concluded that Arlington had not
properly exercised its eminent domain power. The court also held,
however, that Golddust was not entitled to damages because
Arlington's temporary possession did not reduce the value of the
leasehold. The court awarded costs and fees to Golddust and the
RTC.
Arlington appeals the district court's finding that the
condemnation was wrongful, and Golddust appeals the district
court's refusal to award damages.
II.
A.
Article I, section 17 of the Texas Constitution mandates that
"[n]o person's property shall be taken, damaged or destroyed for or
applied to public use without adequate compensation . . . ." The
public use limitation of the Texas Constitution is also found in
the Legislature's delegation to municipalities of the power of
eminent domain. See Tex. Loc. Gov't Code Ann. § 251.001(a) (Vernon
1988). Section 251.001(a)(5) authorizes a municipality to condemn
land "for any . . . municipal purpose the governing body considers
advisable." However, taking property for private use under the
guise of public use violates due process and constitutes a legal
fraud upon property owners even if there is no fraudulent intent.
5
Saunders v. Titas County Fresh Water Supply Dist. No. 1, 847 S.W.2d
424, 427 (Tex. App.--Texarkana 1993, no writ); Whitfield v. Klein
Indep. Sch. Dist., 463 S.W.2d 232, 235 (Tex. Civ. App.--Houston
[14th Dist.], writ ref'd n.r.e.), cert. denied, 404 U.S. 882
(1971); City of Wichita Falls v. Thompson, 431 S.W.2d 909, 910
(Tex. Civ. App.--Fort Worth 1968, writ ref'd n.r.e.).
Public use presents a judicial question. Maher v. Lasater,
354 S.W.2d 923, 925 (Tex. 1962); Davis v. City of Lubbock, 326
S.W.2d 699, 704 (Tex. 1959); Housing Auth. of City of Dallas v.
Higginbotham, 143 S.W.2d 79, 83 (Tex. 1940). At the same time, a
legislative declaration of public use is entitled to considerable
deference. See Maher, 354 S.W.2d at 925; see also Tenngasco Gas
Gathering Co. v. Fischer, 653 S.W.2d 469, 475 (Tex. App.--Corpus
Christi 1983, writ ref'd n.r.e.) (legislative declaration "is
binding on the court unless it is manifestly wrong or unreasonable,
or the purpose for which the declaration is enacted is clearly and
[palpably] private") (citation and internal quotation marks
omitted); Daniel B. Benbow, Public Use as a Limitation on the Power
of Eminent Domain in Texas, 44 Tex. L. Rev. 1499, 1502 (1966) ("The
issue is not . . . whether the use is public, but rather whether
the legislature could have reasonably considered it to be
public."). A municipality's exercise of the power of eminent
domain is a legislative act. Luby v. City of Dallas, 396 S.W.2d
192, 197 (Tex. Civ. App.--Dallas 1965, writ ref'd n.r.e.); see also
Burch v. City of San Antonio, 518 S.W.2d 540, 542-43 (Tex. 1975).
6
B.
The district court held that since parking was not the true
purpose of the condemnation, Arlington had the burden to state an
alternative purpose. When Arlington failed to come forward with an
alternative purpose, the court concluded that Arlington wrongfully
condemned Golddust's interest.2 We must disagree. The district
court's decision is narrowly tailored and does not purport to hold
that Arlington condemned for an impermissible private purpose or
that Arlington's true purpose was a permissible public purpose. As
we see it, burdens of proof notwithstanding, Golddust's evidence
that Arlington was dishonest in its statement of purpose,
ironically, established that Arlington's actual purpose in
condemning parcel C was a public purpose.
The district court relied on Franklin County Water Dist. v.
Majors, 476 S.W.2d 371 (Tex. Civ. App.--Texarkana 1972, writ ref'd
n.r.e.). In Majors, the property owners challenged the water
district's right to condemn land above a certain elevation on the
2
Both state and federal procedure require that a
condemning authority state the purpose for which it intends to
condemn a property interest. See Fed. R. Civ. P. 71A(c)(2) (must
state "use"); Tex. Prop. Code Ann. § 21.012(b)(2) (Vernon 1984)
(must state "purpose"). The district court relied on Texas law for
this requirement; however, Rule 71A(k) mandates that, except for
the issue of whether a jury may hear the case, a federal court
hearing a condemnation case under a state's power of eminent domain
must follow the procedures in Rule 71A. See Village of Walthill,
Neb. v. Iowa Elec. Light & Power, 228 F.2d 647, 653 (8th Cir.
1956). The district court's erroneous application of section
21.012 was not harmful because Rule 71A(c)(2), like section 21.012,
requires that the condemnor's complaint contain a statement of the
purpose or use for which the property is to be taken. See Davis,
326 S.W.2d at 709 ("The words 'public purpose' are no narrower than
the words 'public use'").
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basis that it was taken for the improper purpose of cabin sites and
trailer camps. The court upheld the Majors' challenge on the
grounds that when the district condemned excess lands for purposes
not authorized by the statute, it abused its discretion as a matter
of law. Id. at 374.
We disagree with the district court's reading of the rule in
Majors. In Majors, the landowners demonstrated that the district
condemned their property for the unauthorized purpose of leasing
the land for cabin sites and trailer camps. Id. at 373-74. In
this case, by contrast, the district court found only that
Arlington did not intend to condemn parcel C for use as parking;
the court did not make any findings as to actual purpose.
Golddust's burden should have been to show that Arlington condemned
parcel C for an unauthorized purpose. See Thompson, 431 S.W.2d at
910. Texas cases evidence a reluctance to invalidate an exercise
of eminent domain power except when there is a finding of
unauthorized purpose. See Majors, 476 S.W.2d at 373-74; Brazos
River Conservation & Reclamation Dist. v. Harmon, 178 S.W.2d 281,
289-90 (Tex. Civ. App.--Eastland 1944, writ ref'd w.o.m.).
Golddust argues that misstatement of purpose alone invalidates
a condemnation, pointing to cases holding that land condemned for
one purpose cannot be used permanently for a different purpose.
See Muhle v. New York, Tex. & Mexican Ry. Co., 25 S.W. 607, 609
(Tex. 1894); O'Neal v. City of Sherman, 14 S.W. 31 (Tex. 1890); see
also 32 Tex. Jur. 3d Eminent Domain § 92 (1984); Dan Moody, Jr.,
Condemnation of Land for Highway or Expressway, 33 Tex. L. Rev.
8
357, 364 (1955). Golddust also cites dicta in City of Dallas v.
Malloy, 214 S.W.2d 154, 156-57 (Tex. Civ. App.--El Paso 1948, writ
dism'd), for the proposition that
while property condemned for one purpose may be used
temporarily for another, it may not be condemned for one
purpose and appropriated to another use. . . . [T]he City
having designated the purpose to which the property was to be
devoted as the site of a City Auditorium, it may not abandon
that purpose and devote it permanently to an automobile pound,
or if it had the intention to so use it rather than for the
purpose stated, then the property owner had the right to
challenge the use and make proof of the allegations if it
could be done.
In rebuttal, Arlington points to Malloy's concurring opinion,
in which two of the three judges took issue with the majority
author's dicta, stating:
[W]here the use for which property is sought to be taken under
the power of eminent domain is public, the necessity and
expediency of exercising the power, and the extent to which
the property thereunder is to be taken, are political or
legislative, and not judicial, questions, the legislative
determination of which is conclusive, and not reviewable by
the courts. These questions rest solely within the
legislative discretion. . . . If it had any ulterior motive as
to its intended use of the property, the better rule and the
usual practice is that such may not be shown in the
condemnation proceeding.
Id. at 157 (concurring opinion) (emphasis added; internal quotation
marks omitted).
We are persuaded that the concurring opinion in Malloy
correctly states Texas law. Golddust and the majority author in
Malloy both rely on cases involving condemnation of an easement or
of property for a specific use. In those cases, an accurate
statement of purpose is necessary to provide the appropriate
measurement of damages. In O'Neal v. City of Sherman, for
instance, the landowners deeded a portion of their property to the
9
city "for street purposes and none other." 14 S.W. at 31. When
the city began boring a number of wells on the property, the
O'Neals sought an injunction. The court held for the O'Neals,
explaining that "[t]he rule that land taken by the public for a
certain use cannot be appropriated to another use to the detriment
of the owner affords the only adequate protection of the citizen's
constitutional right to be compensated for the condemnation or use
of his property for the public benefit." Id. at 32; see also
Muhle, 25 S.W. at 609; Lyon v. McDonald, 14 S.W. 261, 263 (Tex.
1890). If the taking is of the entire interest, on the other hand,
the condemnor's intended use of the property is irrelevant to the
issue of damages. See Uehlinger v. State, 387 S.W.2d 427, 432
(Tex. Civ. App.--Corpus Christi 1965, writ ref'd n.r.e.) (where
entire property is condemned, court cannot consider the condemnor's
purpose in fixing the owner's compensation).3
In sum, as the district court noted, there is a significant
distinction between condemning property for a specific use and
condemning an entire fee. A court's invalidation of a condemnation
on the grounds that land condemned for one purpose may not be used
for another is only proper when the situation specifically requires
an accurate statement of purpose. We are persuaded that under
Texas law when a political entity condemns the entire interest in
land, stating that the condemnation is for A when, fully stated,
3
Because Arlington owns the underlying fee interest in
parcel C, when it condemned Golddust's leasehold interest, the
result was that it owned the entire fee. Thus, this case does not
fall into the category of a partial taking.
10
the purpose includes B there is no cause for setting aside the
condemnation, so long as B is also a public purpose. See Malloy,
214 S.W.2d at 157 (concurring opinion).
C.
Jurisdictions define "public use" in different ways. Some
have adopted a "public benefit" or "public advantage" approach
under which "any use which serves to enlarge resources, encourage
industry, or promote the general public welfare is a valid public
use." Benbow, supra, 44 Tex. L. Rev. at 1500 n.8. Other
jurisdictions, including Texas, have adopted a narrower view.
Under the "use by the public" approach, property can only be taken
when "there results to the public some definite right or use in the
business or undertaking to which the property is devoted." Borden
v. Trespalacios Rice & Irrigation Co., 86 S.W. 11, 14 (Tex. 1905),
aff'd per curiam, 204 U.S. 667 (1907); see also Coastal States Gas
Producing Co. v. Pate, 309 S.W.2d 828, 833 (Tex. 1958). It follows
then that one of the tests for public use is whether the property
taken is "reasonably essential" to successful completion of a
project. Atwood v. Willacy County Navigation Dist., 271 S.W.2d
137, 142 (Tex. Civ. App.--San Antonio 1954, writ ref'd n.r.e.),
appeal dismissed, 350 U.S. 804 (1955).
Neither Golddust nor Arlington disputes the fact that stadium
parking is a valid public use. Instead, Golddust claims that
transferring the property to the Rangers with the alleged knowledge
that at some future date the property will be the site of an office
complex renders the use private. However, the evidence introduced
11
at trial establishes that Arlington's taking was for a public use.
It is undisputed that parcel C is currently being used for parking.
In addition, section 5.1(b) of the Master Lease obligates the
Rangers to provide adequate parking space for the ballpark
facilities. Finally, the Master Agreement's land swap provision
that necessitated the condemnation of parcel C's leasehold estate
was part of the larger ballpark project. Tom Schieffer, president
of the Rangers, testified that inclusion of the land swap provision
in the Master Agreement was "essential" to the Agreement.
These undisputed facts tie the condemnation to a public use.
In Davis, the Texas Supreme Court upheld the Urban Renewal Law
against a challenge that it authorized taking of property for
private use. The law authorized cities to condemn land designated
a slum area. The land would then be cleared for development by
private enterprise. The court held that the property was condemned
for an authorized public purpose because "the property may not
simply be resold for private use; it must be sold subject to
restrictions and covenants which are designed to insure that (1)
the plans for renewal will be carried out, and (2) that the slum
conditions will not recur within the foreseeable future." 326
S.W.2d at 706. One commentator, remarking on the Davis decision,
noted that the opinion "at best must be viewed as honoring the
narrow public-use concept only in the breach." Benbow, supra, 44
Tex. L. Rev. at 1508.
A similar result was reached in Atwood. Atwood involved the
condemnation of land "for the purpose of constructing a port and
12
attendant facilities to be used in connection with the development
and operation of navigable waters of the State." 271 S.W.2d at
139. The landowners challenged the constitutionality of a
provision in the enabling statute that authorized the condemning
authority to lease condemned land to private individuals or
corporations. The court rejected this argument, "hold[ing] that
the acquisition of land for the purpose of leasing the same as
industrial sites in proximity of a port is reasonably necessary to
the successful operation of such port." Id. at 142.
Finally, in Coastal States, the court upheld the taking of an
easement for the purpose of drilling an oil well because one-fourth
of the production was reserved to the state and dedicated to the
Permanent School Fund. 309 S.W.2d at 833. In connection with its
holding, the court found that "[t]he lessee may make a profit out
of the venture, but this in itself does not make the use private
rather than public. Since the public has a direct, tangible and
substantial interest and right in the undertaking, it is our
opinion that the land will be devoted to a public use within the
meaning of the Constitution." Id.
By holding that Arlington had the burden to state its actual
purpose for condemning parcel C, the district court overlooked the
fact that the very evidence offered to prove that the stated
purpose was false itself offered a valid public purpose. So, true
statement of purpose or not, Arlington condemned Golddust's
interest for a public purpose. We lack the authority to intrude
into the legislative domain to invalidate an exercise of eminent
13
domain power that so clearly falls within the constitutional limits
of public use.
III.
We REVERSE the decision of the district court and REMAND for
proceedings to determine the compensation due to Golddust for the
condemnation.
14