Texas Eminent Domain — Material and Substantial Interference
Texas Eminent Domain — Material and Substantial Interference
In Texas, can your client’s business income/lost profits be used in the calculation of partial condemnation damages? When a client cannot access their property from an abutting public road or highway as a result of the condemnation (even when other access points remain), Texas case law says, “Yes.”
Exceptions to the Rule on Lost Profits.
As a general rule, lost profits are not available in an eminent domain proceeding. State v. Harrell Ranch, LTD., 268 S.W.3d 247, 253 (Tex. App. — Austin 2008). The exception to this rule is where there is a “material and substantial interference” with access to the property consisting of a total temporary restriction of access, a partial permanent restriction of access, or a temporary restriction of access resulting from illegal or negligent activity. City of Austin v. Avenue Corp., 704 S.W.2d 11, 13 (Tex. 1986). See also State v. Heal, 917 S.W.2d 6, 9 (Tex. 1996); State v. Schmidt, 867 S.W.2d 769, 774–75 (Tex. 1993); City of Austin v Ave Corp., 704 S.W.2d 11, 13 (Tex. 1986). In determining whether access to the remainder is materially and substantially impaired by the taking, “the court first looks to whether access points [to public roads] remain after the taking and whether those access points are reasonable.” State v. Dawmar Partners, Ltd., 267 S.W.3d 875, 878 (Tex. 2008) (finding remainder had access to two public roads); see also State v. Heal, 917 S.W.2d 6, 9 (Tex. 1996) (finding that, while narrower, public road was still accessible). Material and substantial impairment of access can be found even though there has not been a deprivation of all reasonable access. City of Waco v. Texland Corp., 446 S.W.2d 1, 1 (Tex. 1969) (finding material and substantial impairment despite continued access to public road). However, the Texas Supreme Court has also opined that “what constitutes material and substantial impairment of access remains indeterminate and is, indeed, perhaps impossible to generally resolve.” City of Waco v. Texland Corp., 446 S.W.2d 1, 5 (Tex. 1969).
Partial Permanent Restriction of Access.
A landowner’s property suffers from partial permanent restriction of access when the construction has resulted in an inability to access the property from any public highway or road. For example, in State v. Munday Enterprises the Texas Supreme Court held that there was material and substantial impairment of property access because the property owner could no longer access the public roadway along 249 feet of the 893-foot perimeter of the property fronting the highway. 868 S.W.2d 319, 320 (Tex. 1993). Another parallel case is City of Waco v. Texland Corp where the court found material and substantial impairment of access because the street affected was the primary means of ingress and egress to the properties, and construction caused difficulty in parking, backing, and maneuvering vehicles. 446 S.W.2d 1, 1 (Tex. 1969). While access to and from the street in question was difficult but not impossible, the Court found that the restriction was an “impairment of an adjacent easement of access caused by the construction of a public improvement.” Id. at 4.
However, material and substantial impairment will not be found when one means of public road access is impaired while another remains open. Archenhold Auto Supply Co. v. City of Waco, 396 S.W.2d 111, 114 (Tex. 1965); see also Moorlane Company v. Highway Department, 382 S.W.2d 415 (Tex. App. 1964, writ ref. n.r.e.) (finding no material and substantial impaired access where a street had been narrowed, but trucks were still able to access the property from the street). Contrast this to situations where a TxDot construction project has left the landowner’s property without a single access point of ingress directly to the property.
Another distinguishable case is County of Bexar v. Santikos where the Court found no material and substantial impairment to access because, in part, the property had “no businesses, homes, driveways, or other improvements of any kind” and had continued “easy access to the frontage road.” 144 S.W.3d 455, 460 (2004). Clearly, a distinction is drawn where the property is improved with a brick and mortar, making the absence of ingress from any public road especially impactful. Also, in State v. Dawmar Partners, Ltd., the Court found no material and substantial impairment of access given that the property was unimproved, and the remainder had direct access to two public roads running virtually the entire length of the remainder. Obviously, the presence of a brick and mortar is expected if counsel if considering the inclusion of business income/lost profits in the calculation of damages.
Constitutional Implications.
A property owner whose land abuts a public road possesses a private access right to that public road. DuPUY v. City of Waco, 396 S.W.2d 103, 109 (Tex. 1965). An “access right is an easement judicially recognized as appurtenant to tangible property to protect the benefits of private ownership.” Id. In fact, “the most important of the private rights is the right of access to and from the highway. State v. Meyer, 403 S.W.2d 366, 369 (Tex. 1966). This right of access “includes not merely the ability of the abutting landowner to enter and leave his premises by way of the highway, but also the right to have the premises accessible to patrons, clients, and customers.” Id. at 371. This right is so well-settled as to require no citation of authority. Id. at 369.
For example, in DuPUY, the Texas Supreme Court found substantial and material impairment to access where the property fronted only one street and was left as a cul-de-sac after construction. DuPUY, 396 S.W.2d at 103 (Tex. 1965). The Court reasoned that the property owner possessed a constitutional private right of access to the public road that was infringed on after the road became a cul-de-sac. Id. at 109. See State v. Meyer, 403 S.W.2d at 371 (holding right of access “includes not merely the ability of the abutting landowner to enter and leave his premises by way of the highway, but also the right to have the premises accessible to patrons, clients, and customers.”).
Opposing Arguments to Prepare for.
It should be noted that landowners cannot recover damages from noise, dust, increased traffic, and other inconveniences incident to building of highways. Felts v. Harris County, 915 S.W.2d 482 (Tex. 1996) (“[T]hese temporary inconveniences are incident to city life and must be endured.”). And, mere increase of circuity of travel is not enough to make damages compensable in an eminent domain proceeding. County of Bexar v. Santikos, 144 S.W.3d 455, 460 (2004); see also State v. Wood Oil Distrib., Inc. 751 S.W.2d 863, 865 (Tex. 1988) (“It is well settled that damages to a condemnee’s business which result merely from traffic being required to travel a more circuitous route to reach a condemnee’s property are not compensable.”). Also, injury or benefit that the property owner experiences in common with the general community will not be considered. State v. Heal, 917 S.W.2d 6, 8–9 (Tex. 1996).
Watch out for arguments that there is no material and substantial impairment to access because the landowner’s injury is common with the general community and involves mere circuity of travel because the landowner and his customers have access to the property through alternative means. However, it is not enough that the traveling public can get to a landowner’s building, and the Texas Supreme Court has made clear that a landowner’s lack of access to their property from an abutting highway or public road is both unconstitutional and sufficient for material and substantial impairment. DuPUY v. City of Waco, 396 S.W.2d 103, 110 (1965). And even if the landowner’s injury is common to all other property holders on the street, this fact does not bar their right of recovery. Texarkana & N.W.R.R. v. Goldberg, 68 Tex. 685, 5 S.W. 824, 836 (1887).
Conclusion.
Your client’s business income can be included in the calculation of damages in a condemnation case when there is material and substantial impairment to access. Material and substantial impairment of access occurs when there is partial permanent restriction of access. Partial permanent restriction of access occurs when your client nor their customers have access to the property from an abutting public road or highway.