Takings / inverse condemnation claims: When is the govermental entity immune?

Dallas Court of Appeals analyzes the current state of the law on governmental takings

Dallas City Hall

The City of Dallas v. CKS Asset Management, Inc.  



The Texas Constitution provides that “[n]o person's property shall be taken, damaged, or destroyed for or applied to public use without adequate compensation . . . .” Tex. Const. art. I, § 17(a). Therefore, to establish a takings or inverse-condemnation claim, a claimant must show: (1) an intentional act by the government (2) in a taking of the claimant's property (3) for public use. State v. Holland, 221 S.W.3d 639, 643 (Tex. 2007); see also City of Dall. v. VRC, LLC, 260 S.W.3d 60, 65 Tex. App.-Dallas 2008, no pet.) (inverse condemnation); Brownlow v. State, 251 S.W.3d 756, 760 (Tex. App.-Houston [14th Dist.] 2008) (claimant must also have compensable interest in the property at issue), aff'd, 319 S.W.3d 649 (Tex. 2010). By this express constitutional waiver, governmental immunity does not shield a municipality from an action for compensation under the takings clause. Sw. Bell Tel., L.P. v. Harris Cnty. Toll Rd. Auth., 282 S.W.3d 59, 61 (Tex. 2009). Whether particular facts are sufficient to constitute a taking is a question of law. Brownlow, 251 S.W.3d at 760.

The City's argument that it does not have the requisite intent to satisfy a takings claim under the constitution derives from supreme court precedent describing actions by a state under “color of right.” As stated in General Services Commission v. Little-Tex Insulation Company:

 

The Texas Constitution provides that “[n]o person's property shall be taken, damaged, or destroyed for or applied to public use without adequate compensation . . . .” Tex. Const. art. I, § 17(a). Therefore, to establish a takings or inverse-condemnation claim, a claimant must show: (1) an intentional act by the government (2) in a taking of the claimant's property (3) for public use. State v. Holland, 221 S.W.3d 639, 643 (Tex. 2007); see also City of Dall. v. VRC, LLC, 260 S.W.3d 60, 65 Tex. App.-Dallas 2008, no pet.) (inverse condemnation); Brownlow v. State, 251 S.W.3d 756, 760 (Tex. App.-Houston [14th Dist.] 2008) (claimant must also have compensable interest in the property at issue), aff'd, 319 S.W.3d 649 (Tex. 2010). By this express constitutional waiver, governmental immunity does not shield a municipality from an action for compensation under the takings clause. Sw. Bell Tel., L.P. v. Harris Cnty. Toll Rd. Auth., 282 S.W.3d 59, 61 (Tex. 2009). Whether particular facts are sufficient to constitute a taking is a question of law. Brownlow, 251 S.W.3d at 760.  

As described by the Houston court of appeals, the intricacies of the definition of “color of right” in the immunity context have not yet received a thorough treatment, although courts have attempted to delineate some boundaries. See MBP Corp. v. Bd. of Tr. of the Galveston Wharves, 297 S.W.3d 483, 489-90 (Tex. App.-Houston [14th Dist.] 2009, no pet.). For instance, the mere existence of a contract between the governmental entity and a private party “does not build an impenetrable wall nullifying the possibility of other waivers of and exceptions to that immunity.” Tex. Parks & Wildlife Dep't v. Callaway, 971 S.W.2d 145, 150 (Tex. App.-Austin 1998, no pet.); see also Little-Tex, 39 S.W.3d at 601 (Abbott, J., concurring) (“[M]ore than the mere existence of a contract is required to overcome a taking claim[.]”). And, when determining which “hat” the state is wearing for purposes of an immunity analysis, some courts have not been persuaded that “the State's subjective belief regarding its title to property, by itself, changes or dictates the capacity in which the State acts.” Koch v. Tex. Gen. Land Office, 273 S.W.3d 451, 458-59 (Tex. App.-Austin 2008, pet. filed).

Although courts have suggested subjective belief by, and the mere existence of a contract with, a governmental unit do not establish immunity, the supreme court recently indicated “color of right” is not limited only to circumstances involving a written contract. See Holland, 221 S.W.3d at 643. In Holland, the General Land Office contracted with two companies to provide services for a construction project. Id. at 641. Holland was the “managing member” of one company and the president of the other. Id. After Holland received a patent for technology that had been utilized by the GLO in its construction project, he demanded royalties from the GLO; when the GLO refused to pay royalties, Holland filed suit, asserting a takings claim. Id. at 641-42. The supreme court examined whether the state had the requisite intent for a takings claim, stating that the “absence of an express contract between Holland and the State, or uncertainties about the existence of an implied contract between them, are immaterial to determining the capacity in which the State is acting.” Id. at 643. Because the “State accepted Holland's products and his services under color of its contracts” with the two companies, the state lacked the requisite intent to take Holland's patented process under its eminent-domain powers. Id. at 644.

This Court and others have expanded on the takings analysis, focusing on whether a government acted “akin to a private citizen” or whether the government's conduct necessitated the use of sovereign powers. See, e.g., Gulf Coast Waste Disposal Auth. v. Four Seasons Equip., Inc., 321 S.W.3d 168, 176 n.5 (Tex. App.-Houston [1st Dist.] 2010, no pet.) (“Here, the record affirmatively negates jurisdiction because it shows that Gulf Coast was acting 'akin to a private citizen' when it acquired the crane; it was not acting pursuant to its sovereign powers.”); MBP, 297 S.W.3d at 491 (“[B]ecause a private landowner could have acted as the Wharves did, we conclude MBP has not shown the Wharves' requisite intent to act under its sovereign powers.”); Dall. Cnty. Cmty. Coll. Dist. v. Clear Channel Outdoor, Inc., No. 05-07-00701-CV, 2008 WL 3307085, at *3 (Tex. App.-Dallas July 31, 2008, pet. denied) (mem. op.) (“In other words, the District was acting as any private party could, and not a sovereign, in exercising its right under the lease, and its assertion of that right was not a taking.”).

Here, the parties have a significant dispute as to ownership of the downtown property. The City asserts ownership by detailing a chain of title arising from 1989 and 1991 abstracted judgments, related foreclosure sales , and its purchase of the property for $972,120 in September 2000 by special warranty deed granted by a third party, Downtown Joint Venture. Pointing to alleged defects in the City's chain of title, CKS claims the City never obtained ownership through valid conveyances. CKS asserts ownership based on execution on a 1995 abstracted judgment and purchase for $50,000 at a December 2000 foreclosure sale.

We conclude the City has a “color of right” to the property as evidenced by the certified documents presented in support of its plea to the jurisdiction. The City's claim does not involve circumstances in which (1) it asserted a right to property without any evidence of ownership, (2) it merely claimed statutory ownership, or (3) it asserted a self-interested interpretation of an allegedly ambiguous contract between CKS and the City. Instead, the City presented extensive evidence that it behaved akin to a private party in its purchase of the downtown property from a third party for $972,120, conduct that did not necessitate use of its sovereign powers.

CKS argues that the supreme court's analysis in Holland should not apply in instances of real property, citing two cases from Austin in which petitions for review by the supreme court have been filed. See State v. BP Am. Prod. Co., 290 S.W.3d 345 (Tex. App.-Austin 2009, pet. filed); Koch v. Tex. Gen. Land Office, 273 S.W.3d 451 (Tex. App.-Austin 2008, pet. filed). In those cases, the court concluded that “absent such a determination [that the State is, in fact, the property owner], the State's intentional act of taking property for public use is an exercise of its eminent domain powers.” BP Am., 290 S.W.3d at 364; Koch, 273 S.W.3d at 458. We acknowledge the court in these cases has reached a different conclusion from the one we reach today. Yet we are not bound by these cases. See Satterfield v. Crown Cork & Seal Co., 268 S.W.3d 190, 206 n.17 (Tex. App.-Austin 2008, no pet.). These cases also are distinguishable-they do not involve a governmental entity purchasing property through a third-party contract for a substantial consideration with a chain of title evidencing the claim of right. See BP Am., 290 S.W.3d at 348-49 (government claiming statutory ownership of once-fast land submerged by river); Koch, 273 S.W.3d at 453 (government claiming right to remove limestone through ownership of mineral estate). We cannot conclude, given relevant supreme court authority, that a governmental entity is presumed to have the requisite intent for a takings claim, regardless of whether it has contracted for ownership of the real property in dispute.

Based on the record before this Court, we conclude CKS has not shown the City had the requisite intent to act under its sovereign powers as required for a constitutional takings claim. See Holland, 221 S.W.3d at 644 (citing with approval A.C. Aukerman Co. v. State, 902 S.W.2d 576, 578-79 (Tex. App.-Houston [1st Dist.] 1995, writ denied) for conclusion that, having acquired disputed property through third-party contract, “the State lacked the intent necessary to establish a takings claim”). CKS has asserted no other claim against the City. Accordingly, the trial court erred when it denied the City's plea to the jurisdiction. In light of this conclusion, we need not address the City's remaining arguments. See Tex. R. App. P. 47.1.

SOURCE: Dallas Court of Appeals - 05-10-01010-CV -7/7/11

CASE DETAILS: Case Number: 05-10-01010-CV
Style: The City of Dallas v. CKS Asset Management, Inc.
Date Filed: 08/13/2010 Original Proceeding (Y/N): N
Type Case: INTERLOCUTORY APPEAL
Trial Cause#: CC-09-08099-B
Trial Court: COUNTY COURT AT LAW NO 2 - DALLAS COUNTY  
Trial Court Judge: Fifer, King County: DALLAS

RELATED TERMS: eminent domain, inverse condemnation, government taking, constitutional takings claim, governmental immunity to suit and/or liability, plead to the jurisdiction, jurisdictional plea, motion to dismiss for lack of jurisdiction