Opinion
No. 05-09-01249-CV
Opinion Filed January 27, 2011.
On Appeal from the 101st Judicial District Court Dallas County, Texas, Trial Court Cause No. DC-08-15622.
Before Justices MOSELEY, BRIDGES, and O'NEILL.
MEMORANDUM OPINION
This is an inverse condemnation case involving property the State acquired as part of the expansion of State Highway 183. Appellant Continental Foods, Inc. appeals the trial court's order granting the State's first amended plea to the jurisdiction and dismissing the cause of action. Appellant argues genuine issues of material fact exist that cannot be adjudicated as a matter of law regarding whether it has a "compensable interest" to protect. We affirm the trial court's order.
Background
In 1977 D, L, M Joint Ventures #1 entered into a Master Lease with JoJo's Restaurants, Inc. for property located in Irving, Texas along State Highway 183. Denny's Inc. later became a successor-in-interest to JoJo's Restaurants, Inc. under the Master Lease. The Master Lease states that in the event the entire leased premises, or a substantial part are taken, and the leased premises are no longer suitable for continuation of the business, the lease shall terminate on the date of condemnation. It also contains the following reservation of rights clause:
D. Lessor and Lessee shall each be entitled to receive and retain such separate awards and portions of lump sum awards including severance damages, if any, as may be allocated to their respective interest in any condemnation proceedings. Lessee shall also be entitled to any award made to it for depreciation to or loss of and cost of removal of furniture, fixtures, equipment and inventory. Termination of this Lease shall not affect the rights of the respective parties to such awards.
In 2001, appellant entered into a sublease with Denny's, Inc. to operate a restaurant on the property. The sublease provides:
In the event title or possession to the whole or part of this Premises shall be taken by eminent domain, and the Master Lease shall terminate by reason thereof, this Sublease shall likewise terminate. . . . Any award to the Sublessee shall belong to and be paid to Sublessor, including any amount attributable to any leasehold interest, except that Sublessee shall receive from the award a sum, if any, allocated for damage, destruction or taking of Sublessee's furniture, trade fixtures or equipment; provided, however, that Sublessee is not in default hereunder. Sublessee may also pursue and retain any award from the condemning authority, payable solely and specifically to Sublessee for the loss of Sublessee's business.
Appellant was also an assignee of all rights arising out of the Master Lease relative to condemnation, which included "[Denny's] right to any separate awards and portions of lump sum awards, including severance damages, if any, as may be allocated to its interest in any condemnation proceedings."
On November 29, 2007, the State acquired the property for a highway expansion project. Appellant was not named as a condemnee in any proceedings involving the property, nor did it participate in the agreement between the State and property owner. Thus, appellant received no compensation from the State for the loss of any real property interest, specifically its alleged rights arising from the Master Lease and sublease.
Appellant filed its inverse condemnation claim against the State in September 2009 seeking damages. The State filed its amended plea to the jurisdiction arguing appellant had no compensable damages based on the termination language in the leases. The trial court granted the State's plea. This appeal followed.
Standard of Review
A governmental entity enjoys immunity from suit for actions undertaken in the exercise of its governmental functions. City of Dallas v. Zetterlund, 261 S.W.3d 824, 827-28 (Tex. App.-Dallas 2008, no pet.). A valid immunity defense defeats the trial court's subject-matter jurisdiction and is properly asserted in a plea to the jurisdiction. Id. at 828; see also Tex. Dep't of Parks Wildlife v. Miranda, 133 S.W.3d 217, 225-26 (Tex. 2004). We review the trial court's ruling on a plea to the jurisdiction under a de novo standard. Miranda, 133 S.W.3d at 228.
If the plea to the jurisdiction challenges the existence of jurisdictional facts, the trial court must consider relevant evidence submitted by the parties. If the evidence creates a fact question regarding jurisdiction, then the trial court cannot grant the plea to the jurisdiction, and the fact issue will be resolved by the fact-finder. But if the relevant evidence is undisputed or fails to raise a fact question on the jurisdictional issue, the trial court rules on the plea to the jurisdiction as a matter of law. Id. at 227-28; see Zetterlund, 261 S.W.3d at 828.
Discussion
The Texas Constitution waives sovereign immunity from suit for an inverse condemnation claim. Tex. Const. art. I, § 17. To recover on an inverse condemnation claim, a party must establish (1) the State or other governmental entity intentionally performed certain acts, (2) that resulted in a "taking" of property, (3) for public use. Bell v. City of Dallas, 146 S.W.3d 819, 825 (Tex. App.-Dallas 2004, no pet.). Further, a party is required to show it has a compensable interest in the property at issue. See Fort Worth Concrete Co. v. State, 416 S.W.2d 518, 522 (Tex. Civ. App.-Fort Worth 1967, writ ref'd n.r.e.). Under Texas law, parties have a right to contract for termination of a lease in the event of condemnation. Motiva Enter., L.L.C. v. McCrabb, 248 S.W.3d 211, 214 (Tex. App.-Houston [1st Dist.] 2007, pet. denied). Likewise, a lessee is entitled, as a matter of law, to share in a condemnation award when part of its leasehold interest is lost by condemnation. Id.; see also Texaco Ref. Mktg., Inc. v. Crown Plaza Group, 845 S.W.2d 340, 342 (Tex. App.-Houston [1st Dist.] 1992, no writ). Unless a lease provides it terminates upon condemnation, the tenant will recover compensation for the unexpired term. Motiva Enter., L.L.C., 248 S.W.3d at 214; Texaco Ref. Mktg., Inc., 845 S.W.2d at 342. But if a lease provides that it terminates upon condemnation, the lessee has no interest in the condemnation award. Motiva Enter., L.L.C., 248 S.W.3d at 214; Texaco Ref. Mktg., Inc., 845 S.W.2d at 342 (noting this is "fundamental" Texas law).
Here, the terms of the sublease specifically state if part of the property is taken by eminent domain and the Master Lease terminates, then "this Sublease shall likewise terminate." The terms make it clear the sublease terminated once the whole property was condemned. The clause further states "Any award to the Sublessee shall belong to and be paid to Sublessor . . . except the Sublessee shall receive from the award a sum, if any, allocated for damages, destruction or taking of Sublessee's furniture, trade fixtures or equipment. . . ." Thus, if appellant has a right to anything, it would be these specific damages. However, a condemnor may only acquire title to real property and the property listed in the lease provision is personal property. See Tex. Transp. Code Ann. § 203.051 (West 1999), § 203.052 (West Supp. 2009). Therefore, appellant was not entitled to receive such damages from the State. Likewise, appellant made no allegations in its petition that the State damaged, destroyed or took its furniture, trade fixtures, or equipment. Appellant relies on State v. Rebota, Inc. to support its position that the trial court improperly considered the "effects of condemnation" by holding, as a matter of law, that it waived its right to recover condemnation proceeds. State v. Rebota, Inc., 03-93-00640-CV (Tex. App.-Austin 1993, no writ) (per curiam) (not designated for publication). Appellant's reliance on Rebota is misplaced. The issue in that case was whether an expert's testimony regarding the valuation of condemned property was properly excluded. Here, appellant is asserting its right to share in condemnation proceeds, which is not the same as valuation discussed in Rebota, Inc. Further, as discussed below, appellant has no right to any property for valuation.
Appellant pleaded the State's appropriation and invasion resulted in permanent and total restriction of access to the property to its detriment. The restricted access would cause damages in the form of the value of the leaseholds taken and the value and costs associated with the removal of the leasehold improvements.
The State relies on Motiva Enterprises, L.L.C. v. McCrabb. Despite appellant's claim it is an "anomaly" and unreasoned opinion, we find it controlling. In that case, Motiva argued based on its reservation of the right to recover its "special damages," it was entitled to recover damages for its loss of a leasehold. 248 S.W.3d at 214. The court noted Motiva had a right to part of the condemnation award unless it waived that right in the lease elsewhere. Id. The lease agreement specifically provided the lease would "terminate as of the date when possession is required to be given" in condemnation. Id. at 216. The court concluded Motiva's construction of the term "special damages" conflicted with the specific language in the lease stating it terminated upon condemnation. Id. Thus, because the lease terminated upon condemnation, Motiva, as a matter of law, was not entitled to recover any damages for its "lost leasehold." Id.
Similar to Motiva Enterprises, L.L.C., the Master Lease and sublease contain provisions stating the lease terminates upon condemnation and also contains a reservation of rights clause. The law is clear that parties may contract for such termination provisions. It is "fundamental" Texas law that if a lease terminates upon condemnation, then the lessee has no interest in the condemnation award. See Texaco Refining Mktg., Inc., 845 S.W.2d at 342; see also Motiva Enter., L.L.C., 248 S.W.3d at 214. Reading a reservation of the leasehold interest into the clause would render the termination clause meaningless and award an interest the lessor clearly intended to reserve for itself. The termination language of the Master Lease and sublease makes it clear the intent of the parties was that in the event of condemnation, the leasehold interest would be extinguished.
We conclude, as a matter of law, the Master Lease and sublease terminated upon condemnation. Appellant did not reserve its right to receive condemnation proceeds and therefore has no compensable interest to protect. Thus, the State's actions did not result in a "taking" for which appellant could recover through an inverse condemnation proceeding. Accordingly, the trial court properly granted the State's first amended plea to the jurisdiction.
Conclusion
The trial court's order granting the State's first amended plea to the jurisdiction is affirmed.