E.A.D.D., Inc. v. North Alamo Water Supply Corp.

                              NUMBER 13-03-096-CV

                         COURT OF APPEALS

                     THIRTEENTH DISTRICT OF TEXAS

                         CORPUS CHRISTI - EDINBURG

E.A.D.D., INC.,                                                                                 Appellant,

                                                             v.

NORTH ALAMO WATER

SUPPLY CORPORATION,                                                              Appellee.

                       On appeal from the County Court at Law No. 2

                                        of Hidalgo County, Texas.

                               MEMORANDUM OPINION

         Before Chief Justice Valdez and Justices Hinojosa and Yañez

                            Memorandum Opinion by Justice Yañez

Appellant, E.A.D.D., Inc. (AEADD@),^[1] appeals from a judgment in an eminent domain proceeding.  In a single issue, EADD challenges the trial court=s pre-trial ruling restricting the issue at trial solely to the adequacy of the compensation for the property at issue.^[2]  We affirm.

                                                                  Background 

Appellee, North Alamo Water Supply Corporation (ANorth Alamo@), initiated eminent domain proceedings on an 8.59 acre tract owned by EADD.^[3]  In its original petition seeking to acquire the property by eminent domain, North Alamo named as defendants the property owner, EADD, and the lienholder of the property, Alamo Bank of Texas (AAlamo Bank@).  Following a hearing before the special commissioners on May 1, 1998, the commissioners awarded $34,360.00 jointly to EADD and Alamo Bank; the funds were deposited in the registry of the court.^[4]  On May 20, 1998, EADD filed objections to the award, challenging North Alamo=s condemnation authority and the amount of the award.  EADD requested a jury trial. 

On July 23, 1998, counsel for Alamo Bank hand-delivered a letter to the trial court requesting disbursement of the funds held in the court=s registry to Alamo Bank.  The letter notes that by copy of the letter, notice of Alamo Bank=s disbursement request was  provided to counsel for all parties.  On July 27, 1998, the trial court signed the order and disbursed the funds to the bank.^[5]

On April 7, 2000, North Alamo filed a Motion to Limit and/or Restrict Issues, in which it argued that by failing to object to Alamo Bank=s withdrawal of the funds, EADD waived any right to challenge the taking of the property except for complaints regarding the amount of the award.  Following a hearing on May 17, 2000, the trial court denied North Alamo=s motion.^[6]    

On May 23, 2002, North Alamo filed its First Amended Original Petition and Original Answer to Objections to Award of Commissioners, in which it asserted the affirmative defenses of estoppel and waiver that EADD was barred from challenging North Alamo=s authority to condemn the property.  On June 25, 2002, the morning of trial, EADD filed its Motion to Strike [North Alamo=s] Affirmative Defenses.  At the pretrial hearing immediately before trial, EADD presented arguments in favor of its Motion to Strike.  North Alamo responded with arguments presented in its May 23, 2002 answer and urged the trial court to reconsider its earlier ruling denying North Alamo=s Motion to Restrict Issues.  After hearing the arguments of counsel, the trial court ruled that because EADD had Ataken the money or the benefit of it,@ it was barred from challenging North Alamo=s authority to condemn at trial.  Thus, the trial court=s ruling granted North Alamo=s Motion to Restrict or Limit Issues and denied EADD=s Motion to Strike.^[7]

The only issue before the jury was the adequacy of the compensation paid for the property. The jury determined that the fair market value of the property was $60,000.00  and awarded North Alamo $20,000.00 in attorney=s fees.  On September 12, 2002, the court signed a final judgment ordering that EADD recover from North Alamo $25,640.00, the amount by which the jury=s verdict exceeded the amount of the commissioner=s award which was deposited in the court=s registry and withdrawn by Alamo Bank.

On October 10, 2002, North Alamo filed a motion for new trial, arguing, among other things, that it was entitled to recover its attorney=s fees pursuant to section 21.047 of the property code.^[8]  On October 28, 2002, the trial court signed a second final judgment, awarding EADD the same amount of damages as awarded in the September 12, 2002 judgment, but also awarding North Alamo attorney=s fees in the amounts awarded by the jury, which were $20,000.00 for trial, $6,000.00 for an appeal to the court of appeals, and $8,000.00 for an appeal to the supreme court. On November 27, 2002, EADD=s counsel filed a motion for new trial, contending that he was not present at the October 28, 2002 hearing on North Alamo=s motion for new trial because he did not receive notice of the hearing.^[9]  EADD=s motion for new trial was not set for hearing and was overruled by operation of law.^[10]  This appeal ensued.

On August 30, 2005, this Court abated the appeal and ordered the trial court to enter findings of fact and conclusions of law regarding (1) the notice, if any, provided to EADD and North Alamo of Alamo Bank=s motion to disburse funds prior to the disbursement and (2) any determination of EADD=s interest in the award made by the trial court prior to the disbursement.  On April 18, 2006, the trial court=s findings of fact and conclusions of law were filed with this Court by means of a supplemental clerk=s record.

                                                            Standard of Review

We review the trial judge's exclusion of evidence under an abuse of discretion standard.^[11]  A trial court abuses its discretion when it acts without regard for any guiding rules or principles.^[12]  To obtain reversal of a judgment based on error in the admission or exclusion of evidence, an appellant must show the trial judge's ruling was in error and the error probably caused the rendition of an improper judgment.^[13]

 Findings of fact and conclusions of law as a general rule are not available after a jury trial.^[14]  Here, however, the issue raised on appeal results from findings made by the trial court independent of the jury=s verdict and is, as to the issue raised by the appeal, a court-tried case.^[15]  Findings of fact in a case tried to the court have the same force and dignity as a jury's verdict upon questions.^[16]  The trial court's findings of fact are reviewable for legal and factual sufficiency of the evidence by the same well‑established standards applied in reviewing the sufficiency of the evidence supporting a jury's finding.^[17]  Under a sufficiency analysis, we do not serve as a fact finder, pass upon the credibility of witnesses, or substitute our judgment for that of the trier of fact, even if there is conflicting evidence upon which a different conclusion could be supported.^[18]  Appellate courts review a trial court's conclusions of law as a legal question.^[19]

                                                                Applicable Law

In Tigner v. City of Angleton, the Fourteenth Court of Appeals explained the procedures applicable in condemnation proceedings:

Generally, when a petition is filed in a condemnation proceeding seeking condemnation of property through eminent domain, the trial court appoints special commissioners who set a hearing on the amount of the property owner's damages. Once the special commissioners file their award, the condemnor, if satisfied, must either pay the amount of the award to the condemnee or deposit that amount in the registry of the court. If the landowner is dissatisfied with the award, he or she must timely file objections in the trial court.  Once the objections are filed, the award of the special commissioners is vacated and the administrative proceeding converts into a normal civil case before the county court with the condemnor as plaintiff and the landowner as defendant.  When a landowner properly contests a condemnor's right to condemn by timely filing objections and obtaining citation, the condemnor bears the burden of going forward with the case and the consequences of abandoning the case. 

Thus, when objections are filed by the landowner, and the landowner does not in any way consent to the taking of the property, both the condemnation and the amount of compensation are issues to be resolved by the trial court and the factfinder. However, if the landowner withdraws the award from the registry of the court, the validity of the award ceases to be an issue.  By withdrawing the award from the registry of the court, the landowner in effect, consents to the taking and the only issue remaining is the appropriate amount of compensation.

After an award has been made, and the money deposited in the registry of the court and the landowner has withdrawn the same, he cannot thereafter contend that the taking was unlawful.^[20]

Section 21.021 of the property code provides, in relevant part, that after the special commissioners have made an award, a condemnor may take possession of the condemned property pending the results of further litigation if the condemnor:

(1) pays to the property owner the amount of damages and costs awarded by the special commissioners or deposits that amount of money with the court subject to the order of the property owner.^[21]

A party to a condemnation proceeding need not have been the actual holder of the tract=s title to have a justiciable interest in the tract.^[22]  It is sufficient that the party possessed a lien in the property at the time of the taking.^[23]  Once an award is made and the amount thereof is placed in the registry of the court to the order of the condemnees, and the land is occupied by the condemning authority, Athe interest of each condemnee is established in and attaches to that fund as security for any possible damage suffered by reason of his dispossession.@^[24]  A lienholder may be treated as a Aproperty owner@ so as to permit a single suit Abecause only when every interest of every character in the land is acquired can the property be devoted fully and without restraint or interference to the public purpose.@^[25]  AWhere the whole of the mortgaged property is taken in eminent domain proceedings, the mortgagee is entitled to all of the award or so much of it as necessary to satisfy the mortgage indebtedness.@^[26]  In such circumstances, when condemnation proceeds are deposited, the interest of a condemnee lienholder vests in the condemnation proceeds as compensation for the destruction of the lien.^[27]  Thus, a mortgagee who has a security interest in property subject to condemnation is Aentitled to the first of any proceeds realized, to the extent of the unpaid debt when the whole of the property is taken, or to the extent of any impairment of his security interest when only a part of the property is taken.@^[28]

                                                                      Analysis

On January 26, 2006, North Alamo filed (in the trial court) its Amended Motion to Enter Supplemental Findings of Fact and Conclusions of Law.  Attached to the motion are various documents, including (1) an affidavit by Terry Key, Alamo Bank=s counsel at the time of the events surrounding the disbursement, (2) a copy of a Apartial release of lien@ noting Alamo Bank=s release of lien on the property in question, and (3) a copy of a letter dated July 30, 1998, from Key to North Alamo=s counsel, noting Alamo Bank=s order for non-suit and noting its assumption that by execution of the partial release of lien, it is no longer a party to the condemnation proceedings (the letter notes copies were sent to EADD=s counsel). The trial court=s findings of fact and conclusions of law, signed by the trial court on March 20, 2006, state:

Findings of Fact:

a.  EADD Inc. F/k/a DEA Incorporated (AEADD@) had notice of Alamo Banks [sic] of Texas= Motion to Disburse Funds by July 22, 1998.  EADD had notice of Alamo Banks [sic] of Texas= tender to the Court of an Order to disburse the funds by July 23, 1998.

b.  EADD, despite such notice, did not contest or object to the motion or to the entry of the Order.

c.  Alamo Bank of Texas was made a party to the suit because Alamo Bank of Texas was the holder of a note dated January 18, 1991, in the original amount of $74,783.95 made by D.E.A. Incorporated to The Border Bank (Athe Note@).

d.  The Note was secured by a lien on a part of the Property that was the subject of the suit. Said Property and lien were described in a Deed of Trust dated January 18, 1991, executed by D.E.A. Incorporated, recorded in Volume 304d, Page 203 of the Official Records of Hidalgo County Texas (Athe Lien@).

e.  Alamo Bank of Texas succeeded to all rights and interest that The Border Bank had in the Note and the Lien.

f.  The disbursed funds were applied by Alamo Bank of Texas to the Note for the benefit of the debtor D.E.A. Incorporated.

g.  On February 12, 1999, Alamo Bank of Texas executed a Partial Release of Lien dated February 8, 1999, releasing its Lien against the property at issue in the suit.

h.  EADD, by and through its lender Alamo Bank of Texas, withdrew the funds deposited in the registry of the Court pursuant to Tex. Property Code ' 21.021.

Any finding of fact that should be deemed a conclusion of law should be so deemed.

Conclusion of Law:

a.  As a result of the withdrawal of the funds from the registry of the Court, EADD is barred from contesting any aspect of the taking except for the adequacy of the compensation for the Property.

Any conclusion of law that should be deemed a finding of fact should be so deemed.

Terry Key=s sworn affidavit states, in pertinent part:

6.  On July 22, 1998, the court held a hearing wherein the parties discussed disbursing the funds in the registry of the court to Alamo Bank to satisfy the Note and Lien obligations of D.E.A. Incorporated.  There was no dispute amongst the parties regarding the withdrawal of the funds by Alamo Bank.  On July 23, 1998, my office hand delivered to the Honorable Homero Garza, the judge then presiding over the case, the attached letter enclosing an AOrder Disbursing Funds Held in the Registry of the Court@ (Athe Order@).  A copy of the letter and the Order were sent via facsimile transmission to J.W. Dyer, counsel for North Alamo Water Supply Corporation, and to Alex Moreno, counsel for D.E.A. Incorporated to notify counsel of the request for the courts=[sic] entry of the Order to disburse the funds to pay the note owed by D.E.A. Incorporated to Alamo Bank of Texas. Prior to presenting the Order to the Judge, I had personally discussed with Alex Moreno that Alamo Bank of Texas would be seeking a disbursement of the funds to satisfy the debt his client D.E.A. Incorporated owed to Alamo Bank of Texas.  At no time did Alex Moreno state that his client was opposed to the disbursement or otherwise contest that the monies were owed by his client to Alamo Bank of Texas.

7.  Without further hearing, the Court signed the Order on July 27, 1998.  No opposition to the Order was ever filed.

8.  The disbursed funds were applied by Alamo Bank of Texas to the Note for the benefit of the debtor D.E.A. Incorporated.

9.  On February 12, 1999, Alamo Bank of Texas executed the attached Partial Release of Lien dated February 8, 1999 releasing its Lien against the property at issue in the suit.

10.  On July 30, 1998, I sent to the parties a Motion and Order for Non-Suit in the case. The Order of Non-Suit was entered by the Court without objection.  

EADD has not filed any response or objections to either Key=s affidavit or the trial court=s findings of fact and conclusions of law.   

Allegations contained in verified motions and affidavits that are not controverted are accepted as true.^[29]  Accordingly, we conclude that Key=s affidavit constitutes legally and factually sufficient evidence to support the trial court=s findings of fact.  We further conclude that EADD (1) had notice of Alamo Bank=s motion to disburse funds by July 22, 1998 and failed to object to the trial court=s disbursement on July 27, 1998, and (2) benefitted from the disbursement because the disbursement satisfied EADD=s debt to Alamo Bank and released Alamo Bank=s lien on the property.  We hold that the trial court did not abuse its discretion in restricting the issue at trial solely to the adequacy of the compensation for the property at issue. We affirm the trial court=s judgment.

LINDA REYNA YAÑEZ,

Justice

Memorandum opinion delivered and filed

this the 8th day of June, 2006.

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^[1] EADD was formerly known as D.E.A., Incorporated.  D.E.A. Incorporated was the owner of the property at the time eminent domain proceedings were initiated.  For ease of reference, we refer to appellant throughout this opinion as EADD.   

^[2] At a pretrial hearing, the trial court considered and denied EADD=s Motion to Strike Affirmative Defenses of appellee, North Alamo Water Supply Corporation. Similarly, it granted North Alamo=s Motion to Limit and/or Restrict Issues.  EADD=s Motion to Strike is not included in the record, but a copy of the motion is attached to North Alamo=s brief.  However, our review is limited to the appellate record.  See Till v. Thomas, 10 S.W.3d 730, 733 (Tex. App.BHouston [1st Dist.] 1999, no pet.).  Accordingly, we will review EADD=s issue as a challenge to the trial court=s ruling granting North Alamo=s Motion to Limit and/or Restrict Issues.  In its brief, EADD states the issue as A[t]he trial court erred in denying appellant the opportunity to present evidence that challenged appellee=s authority to condemn appellant=s land.@

^[3] See Tex. Water Code Ann. ' 49.222 (Vernon 2000) (providing generally that a water supply corporation may acquire property by condemnation pursuant to the manner prescribed in chapter 21 of the property code).

^[4] See Tex. Prop. Code Ann. ' 21.021 (Vernon 2004). 

^[5] Alamo Bank was the holder of a note in the original amount of $74,783.95. The note was secured by a lien on a part of the EADD property at issue in the condemnation proceeding. 

^[6] North Alamo=s Motion to Restrict Issues was initially heard and denied by Judge Homero Garza, presiding judge of County Court-at-Law No. 3, Hidalgo County, Texas.

^[7] EADD argues that the trial court=s ruling in favor of North Alamo=s estoppel position Ain effect constituted a summary judgment on such issues without proper pleadings, without notice to Appellant and without adequate grounds.@  We look to the substance of a pleading to determine its nature, rather than its title.  See Tex. R. Civ. P. 71; State Bar v. Heard, 603 S.W.2d 829, 833 (Tex. 1980).  Here, the granting of North Alamo=s Motion to Restrict had the effect of prohibiting EADD from presenting certain evidence to the jury.  Accordingly, we view North Alamo=s motion as a motion to exclude certain evidence, rather than a motion for summary judgment.  Moreover, we note that North Alamo asserted its estoppel argument in its May 23, 2002 Answer to EADD=s objections, filed thirty-three days before the trial court heard argument and issued its ruling on June 25, 2002.  Accordingly, we find EADD=s argument that the trial court granted summary judgment without proper notice to be without merit.   

^[8] See Tex. Prop. Code Ann. ' 21.047 (Vernon 2000).

^[9] North Alamo=s motion for new trial contains a certificate of service stating that a copy of the motion was served on EADD=s counsel by mail.  Moreover, at the September 9, 2002 hearing to enter judgment (attended by North Alamo=s and EADD=s counsel), the trial court ordered that the jury=s verdict stand Aalong with the attorneys= fees, too.@ The court was informed that neither counsel had prepared an order.  At the October 28, 2002 hearing (attended by North Alamo=s counsel only), North Alamo=s counsel informed the court that two Afinal judgment@ orders were submitted: one which did not include attorney=s fees (submitted by EADD), and one that awarded attorney=s fees (submitted by North Alamo).   Counsel advised the court that it had Ainadvertently signed the wrong order@ and provided the court with a copy of the proposed modified judgment.  The court noted that it was granting North Alamo=s Amotion for modifying the judgment.@ The final judgment (including the award of attorney=s fees to North Alamo) was signed by the trial court the same day, October 28, 2002.  We conclude that EADD had actual notice of the trial court=s decision to enter judgment awarding attorney=s fees to North Alamo.  In addition, although EADD=s brief notes that its motion for new trial was based on the alleged lack of notice of the October 28, 2002 hearing, it does not contain any citations to authority regarding this issue.  Accordingly, we conclude that any issue regarding the alleged lack of notice is inadequately briefed and presents nothing for review.  See Tex. R. App. P. 38.1(h).

^[10] See Tex. R. Civ. P. 329b (e). 

^[11] See Owens‑Corning Fiberglas Corp. v. Malone, 972 S.W.2d 35, 43 (Tex. 1998) (admission or exclusion of evidence is a matter within trial judge's discretion).

^[12] Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241‑42 (Tex. 1985).

^[13] See Tex. R. App. P. 44.1; Owens‑Corning Fiberglas Corp., 972 S.W.2d at 43. 

^[14] Roberts v. Roberts, 999 S.W.2d 424, 433 (Tex. App.BEl Paso 1999, no pet.). 

^[15] See Rothwell v. Rothwell, 775 S.W.2d 888, 890 (Tex. App.BEl Paso 1989, no writ).

^[16] Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991).

^[17] Id.

^[18] Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003); Wal‑Mart Stores, Inc. v. Garcia, 30 S.W.3d 19, 21 (Tex. App.BSan Antonio 2000, no pet.).

^[19] BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002).

^[20] Tigner v. City of Angleton, 949 S.W.2d 887, 890 (Tex. App.BHouston [14th Dist.] 1997, no writ) (citations omitted). 

^[21] See Tex. Prop. Code Ann. ' 21.021(a)(1) (Vernon 2004).

^[22] Olivares v. Birdie L. Nix Trust, 126 S.W.3d 242, 250 (Tex. App.BSan Antonio 2003, pet. denied) (citing Wynnewood Bank and Trust v. State, 767 S.W.2d 491, 493 (Tex. App.BDallas 1989, no writ)). 

^[23] Id. 

^[24] Id. (citing Fort Worth Concrete Co. v. State, 400 S.W.2d 314, 317 (Tex. 1966)).

^[25] State v. First Interstate Bank of Tex., N.A., 880 S.W.2d 427, 430 (Tex. App.BAustin 1994, writ denied) (quoting Houston N. Shore Ry. v. Tyrrell, 98 S.W.2d 786, 793 (Tex. 1936)).   

^[26] Olivares, 126 S.W.3d at 250 (quoting Buell Realty Note Collection Trust v. Cent. Oak Inv. Co., 483 S.W.2d 24, 27 (Tex. Civ. App.BDallas 1972, writ ref=d n.r.e)).

^[27] Id.

^[28] First Interstate Bank, 880 S.W.2d at 431; see also Wynnewood, 767 S.W.2d at 493 (a lienholder is entitled to participate in condemnation proceedings and may, under appropriate circumstances, recover a portion of condemnation proceeds).   

^[29] See Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 270 (Tex. 1992) (court accepts as true the clear, direct, and positive evidence of an undisputed affidavit); Whitehead v. Julian, 476 S.W.2d 844, 844-45 (Tex. 1972) (uncontroverted affidavit must be accepted as true).