Commercial Litigation

Senate Bill 18: Important Changes for Texas Landowners in Condemnation

Recently enacted Senate Bill 18 (“SB 18”) takes effect September 1, 2011, and alters the Texas property, education, government, local government, transportation, and water codes.  Among the provisions of SB 18 are new procedures emphasizing the importance of the offer process in condemnation and affording landowners additional rights with respect to property access and repurchase.

Offer Process Emphasized

 Texas law has long required condemning authorities to make offers to purchase property before initiating formal condemnation proceedings.  Much debate in the Texas Legislature has transpired over the fairness of the offer process to landowners facing a condemnor’s exercise of its “super power” to take land for public use.  For example, debate has circled around landowners’ concerns about receiving “lowball” offers, being unable to truly negotiate with condemnors in the offer process, and being unable to recover any attorneys’ fees if condemnors do not negotiate in good faith.

 Although SB 18 does not fully assuage all landowner concerns, it does put in place new requirements with a renewed emphasis on the “good faith” offer process.  For example, Texas law requires a “bona fide” offer by the condemnor, which SB 18 defines to require, among other things, written initial and final offers delivered by certified mail/return receipt requested, at least 30 days between offers, minimum limits for final offers, and additional time (14 days) for landowners to respond to final offers.  In addition, landowners are now entitled to 20 days notice (rather than the prior 11 days) before a condemnation hearing, giving the parties further time for purchase negotiations after a final offer has been made.  The new requirements give the offer process more structure, a slightly longer timeline, and more standards for assessing fairness in the amounts of offers and the manner in which offers are made.

To further emphasize the importance of the offer process, the Texas Legislature has now given landowners the right to recover some attorneys’ fees in condemnation lawsuits, albeit under only limited circumstances.  For example, if a court determines that a condemnor did not make a bona fide purchase offer conforming with all of the new statutory requirements, the court is required to abate the condemnation suit, order the condemnor to make a bona fide offer, and order the condemnor to pay reasonable attorneys’ fees and other professional fees (e.g., appraiser fees) that the landowner has incurred up to that point in the condemnation proceedings.  Attorneys’ fees are also now recoverable for compelling a condemnor to produce various documentation, such as appraisals, that the condemnor is required to provide to the landowner in the offer process.

These new limited rights to recover attorneys’ fees do not go as far as the law in some other states, where a successful landowner can recover all attorneys’ fees in a condemnation case.  Likewise, SB 18 may not protect landowners from final offers based on “lowball” appraisals.  But the new law does afford landowners in Texas more protection than they previously had and should hopefully incentivize condemnors to heed the Texas Legislature’s clear call for the offer process to be carried out more fairly to landowners.

Property Access and Repurchase

 In addition to emphasizing the offer process, SB 18 also puts in place new protections for landowners’ access to their property.  For example, in partial takings cases where the landowner will continue to own a remainder tract, SB 18 requires a landowner be paid for damage to the remainder where there is a “material impairment” to access between the landowner’s property and adjoining public roads.

SB 18 also impacts landowners’ ability to repurchase property a condemnor has previously taken.  While a repurchase right previously existed, SB 18 adopts additional circumstances under which the right to repurchase may be exercised.  At the same time, however, SB 18 imposes a short, 1-year statute of limitations to exercise the repurchase right once it arises, which can be triggered by actions the landowner has to take.  The new law thus broadens landowners’ repurchase rights in certain respects, but at the same time imposes burdens on landowners when seeking to exercise their rights.

Although the above-discussed changes to Texas condemnation law and others under SB 18 are a step in the right direction, there is still more to reform in Texas condemnation law for private landowners.  In addition, private landowners should be careful navigating the new law in order to protect their rights.

 by J. Allen Smith and Michael R. Steinmark

Commercial Litigation Firm News

Surface Water: Valuable Resource or Common Enemy?

Water flowing throughout Texas in defined watercourses such as rivers, lakes, and streams belongs to the state. However, much of the water in Texas is surface water that has yet to reach a clearly defined watercourse, and instead flows over and around private property, much to the delight or chagrin of private landowners.

When it comes to commercial or residential property, surface water is never a good thing, and landowners will do almost anything to get rid of it – including sending it next door. This can not only create a strain on neighbor relations, but can wreak havoc on anything from landscaping and signage to foundations and property values.

There are two competing legal theories on the diversion of surface water in the United States: Natural Flow and Common Enemy. The natural flow approach has its roots in the idea that water is a valuable resource, and that each landowner should be entitled to rely on the natural flow of water. Actions taken to divert the natural flow of water subject the diverter to liability for potential damages caused by any such diversion.

The common enemy approach, however, regards surface water as the common enemy of all landowners, and as such, entitles landowners to take any measures necessary to impound or divert water away from their property, including diverting water onto neighboring parcels of land.

In Texas, as in most Western states, the law of the land is natural flow. The Texas Legislature officially adopted this approach when it enacted Section 11.086 of the Texas Water Code. Section 11.086 prohibits a landowner from diverting or impounding the natural flow of surface water in a manner that damages the property of another. This section also provides a private cause of action for any landowner whose property has been damaged by an unlawful diversion or impoundment.

Unlawful diversion under Section 11.086 can result in either temporary or permanent harm to a landowner’s property. Where the harm is temporary; i.e. sporadic and contingent on some irregular force such as rain, the appropriate remedy is an injunction against the person causing the diversion or monetary damages equal to the cost of repairs for anything damaged by the diversion. However, where the diversion causes permanent harm to property, the measure of damages is the difference between the fair market value of the property without the harm and the fair market value of the property as it exists with the harm.

Section 11.086 has largely replaced the common law causes of action for the diversion of water such as nuisance and trespass to real property. This is due to the fact that these common law causes of action require a showing of culpability on the part of the person causing the diversion. For nuisance, a plaintiff has to prove that the diversion was caused negligently, while for trespass, a plaintiff has to prove that the diversion was intentional. Section 11.086 can be utilized in the absence of any such showing of culpability. As such, Section 11.086 represents the most attractive cause of action for a party aggrieved by an unlawful diversion of water.

By J. Allen Smith and Braden M. Wayne

Commercial Litigation

The United States Supreme Court Ruling on Campaign Finance

"The founders realized there has to be some place where being right is more important than being popular or being powerful, and where fairness trumps strength—and in our country, that place is supposed to be the courtroom." Retired Justice Sandra Day O’Connor speaking at Keynote Address at Georgetown Law School Conference January, 2010.

The controversial ruling by the United States Supreme Court in Citizens United v. Federal Election Commission, January 21, 2010, determining that the Federal Government may not ban political spending by corporations or unions in candidate elections is sure to have fallout across the country and will impact state held elections ultimately. This includes judicial elections in the State of Texas, as it is only a matter of time, experts say, before laws will be challenged in courts or repealed by state legislature.

Currently, all state court judicial positions in the State of Texas are elected by the general public. This has been a controversial issue for many years, as judges must raise campaign funds in order to run for re-election and much of the money raised for judges are from donations from lawyers and lawfirms. Invariably, these same judges will have to decide cases that involve their contributors and the question is raised…is justice for sale?

A study by Chris Bonneau and Damon Cann in their paper The Effect of Campaign Contributions on Judicial Decisionmaking reveals that attorney contributions have a significant effect on judicial decisions. The study indicated a campaign contribution shifts the predicted probability to a virtually certain win for the side offering the contribution (Page 18 of Article).

As a result, the debate will open up again on whether judicial elections in the State of Texas are appropriate, and this recent Supreme Court decision will revive consideration of an alternative system to the partisan election process of selecting judges in the State of Texas.

Stay tuned…

By J. Allen Smith.