Caffe Ribs, Inc. v. State
| Decision Date | 01 April 2016 |
| Docket Number | No. 14–0193,14–0193 |
| Citation | 487 S.W.3d 137 |
| Parties | Caffe Ribs, Incorporated, Petitioner, v. State of Texas, Respondent |
| Court | Texas Supreme Court |
Greg W. Abbott, Warren Kenneth Paxton, Attorney Generals of Texas, Daniel T. Hodge, Charles E. Roy, First Assistant Attorney Generals, David C. Mattax, Director of Defense Litigation, Susan Desmarais Bonnen, Walter C. Brocato, James Edward Davis, Randall K. Hill, Cavitt Wendlandt, Office of the Attorney General, Austin TX, for Respondent.
Alan B. Daughtry, Attorney-at-Law, James Juranek, Juranek Law Firm, PLLC, Edward A. Mattingly, Mattingly Law Firm, Houston TX, for Petitioner.
delivered the opinion of the Court.
This condemnation case requires us to review the trial court's exclusion of evidence concerning the government's role in delaying the condemned property's environmental cleanup prior to taking.1 At trial, the government presented testimony that it would take eight years of cleanup to render the property marketable and that the condemned property's value should be substantially discounted on that basis. In rebuttal, the condemnee offered testimony from two witnesses that the government's condemnation project delayed the property's cleanup. However, at the government's request, the trial court excluded that testimony. The court of appeals affirmed the exclusion. 468 S.W.3d 94 (Tex.App.–Houston [14th Dist.] 2014)
(mem.op.). We hold that the trial court's exclusion was an abuse of discretion, and further hold that the exclusion was harmful because it allowed the government to use an eight-year holding period to reduce the property's value without allowing the jury to consider the role the government played in creating that holding period. Accordingly, we reverse the court of appeals' judgment and remand the case for a new trial.
Caffe Ribs, Inc. (Caffe) purchased the condemned property from Paul Revere Variable Annuity Insurance Company (Revere) in 1995. At that time, Revere was evaluating the environmental condition of the property. Soil and groundwater sampling conducted at the request of Revere and a previous owner, Weatherford U.S., Inc. (Weatherford), indicated that the property was contaminated. The source and the extent of that contamination, however, were unknown. Given these facts, Caffe and Revere agreed that Revere would continue its evaluation of the property's environmental condition after closing and would take such action as it deemed necessary to remediate the contamination.
In 1996, Revere and Weatherford agreed to cooperate in evaluating and remediating the property's contamination. By February 2000, Revere and Weatherford had identified the source of the contamination and placed the property into the Texas Commission on Environmental Quality's (TCEQ's)2 Voluntary Cleanup Program.
After the condemned property entered the Voluntary Cleanup Program, Revere and Weatherford began remediation, removing more than 460 cubic yards of contaminated soil in 2001. The TCEQ, however, wasn't satisfied that the extent of the contamination had been fully delineated and requested that Revere and Weatherford do so. In response to the TCEQ's request, Revere and Weatherford had additional soil and groundwater sampling performed.
In January 2003, the State notified Caffe Ribs that it intended to condemn the property, or at least part of it, in connection with the Texas Department of Transportation's project to expand Interstate 10. Initially, the State's revelation did not affect Revere and Weatherford's efforts to delineate and remediate the contamination. In the months following the revelation, additional groundwater sampling was conducted, and additional contaminated soil was removed. By December 2003, Revere and Weatherford believed that the contamination had been fully delineated, and filed an Affected Property Assessment Report (APAR) with the TCEQ outlining the extent of the contamination. In July 2004, the TCEQ responded to Revere and Weatherford's APAR with a request that at least four additional groundwater monitoring wells be installed to more fully delineate the contamination.
Revere and Weatherford, however, were not able to comply with the TCEQ's request due at least in part to the State's impending condemnation. As part of the State's conversion of Caffe's property into a stormwater detention pond, the State requested all existing groundwater monitoring wells on the property be plugged and abandoned, and any new wells be installed after construction was complete. In late 2004, Revere and Weatherford filed an amended APAR that reflected these facts. They also filed a Response Action Plan (“RAP”) containing their proposals for fully remediating the property's contamination. The TCEQ declined to approve either, however, based on its prior unsatisfied request for at least four additional groundwater monitoring wells. The TCEQ also noted that the RAP could not be approved because the existing network of groundwater monitoring wells was to be removed as part of “site construction activities.” According to the TCEQ, Revere and Weatherford's proposed response—a “plume management zone”—required that the zone's network of monitoring wells be in place before TCEQ approval.
In May 2005, the State initiated statutory condemnation proceedings against Caffe. Special commissioners were then appointed to value the property. Caffe and the State both objected to the special commissioners' valuation, and the case proceeded to trial. At trial, the State argued that the property's market value was significantly affected by potential environmental liability and remediation costs, but successfully excluded Caffe's proffered evidence that Revere and Weatherford were responsible for such liability and costs. The court of appeals concluded that the exclusion was harmful and remanded the case for a new trial. Caffe I, 328 S.W.3d at 931–33
. This appeal concerns the second trial.
Before retrial, the State designated Ashby McMullan as its environmental expert to testify that, at the time of taking, the nature and extent of the contamination were uncertain and that it would take eight years to delineate the contamination, complete cleanup, and obtain regulatory approval or closure, as evidenced by a conditional certificate of completion. In conjunction with Mr. McMullan's testimony, the State designated David Dominy as its appraisal expert to testify that, given the property's environmental condition, it would not be marketable for eight years, and accordingly its value should be discounted at an 18% rate over that eight-year holding period. According to Dominy, the property, when clean, would be worth $3,154,150, but the present value, discounted at 18% over eight years, was $803,431.
For its part, Caffe designated Richard Bost, its environmental expert, and Vince Rorick, the former TCEQ project manager responsible for overseeing the property's cleanup, to testify that, beginning in 2004, the State's revelation of the proposed future use of the property as a stormwater detention pond caused delays in progressing toward regulatory closure, and that, as of 2004, the property could have received regulatory closure in as little as one year, but for the change in proposed future use. Caffe designated Rudy Robinson as its appraisal expert to testify that the property's environmental condition did not warrant an adjustment to its market value of $9.9 million. Caffe also designated David Klein, a commercial real estate developer, to testify that the property could be developed in its current condition.
The State filed a pre-trial motion to exclude all testimony concerning its role in delaying the property's remediation on the grounds that such testimony amounted to a claim for “announcement damages” barred by Westgate Ltd. v. State, 843 S.W.2d 448 (Tex.1992)
, and that such evidence was unreliable. The State also filed a pre-trial motion in limine on the same subject. At the pre-trial conference, the trial court granted the State's motion, concluding that exclusion was required by the “project influence” rule.
At trial, McMullan testified that Revere and Weatherford's APARs and RAP were not approved by the TCEQ because Revere and Weatherford had not delineated the extent of the contamination. He concluded that the most probable timeline for obtaining regulatory closure was eight years, but conceded that it could be shorter if Revere and Weatherford sought to pursue aggressive response actions. According to McMullan, the four steps that remained to be completed to obtain regulatory closure were: (1) TCEQ approval of an APAR; (2) TCEQ approval of a RAP; (3) implementation of the RAP; and (4) completion of a Response Action Completion Report. Dominy testified that the property's value should be significantly discounted over an eight-year holding period. He justified the extended holding period with McMullan's testimony, as well as Revere and Weatherford's lack of “real financial motivation or incentive to go start spending money to do a clean-up.”
To bolster the testimony of their witnesses, the State elicited testimony from Bost, Rorick, and Klein that Revere and Weathereford's APARs and RAP were not approved by the TCEQ, because Revere and Weatherford had not installed the four additional groundwater monitoring wells the TCEQ had requested in July 2004 to more fully delineate the extent of the contamination. However, the State objected when Rorick attempted to explain that “they weren't able to do that because of the freeway.” At the bench conference, Caffe took the position that the State's questioning opened the door for evidence concerning the State's role in delaying the property's remediation. The trial court ruled that “[y]ou can't open the door on project influence,” and instructed Rorick “not to go there.”
Caffe made offers of proof of the testimony it would have...
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