Gilbert Wheeler, Inc. v. Enbridge Pipelines (E. Tex.), L.P.

• Decision Date: 29 August 2014
• Docket Number: No. 13–0234.,13–0234.
• Citation: 449 S.W.3d 474
• Parties: GILBERT WHEELER, INC., Petitioner, v. ENBRIDGE PIPELINES (EAST TEXAS), L.P., Respondent.
• Court: Texas Supreme Court

449 S.W.3d 474

GILBERT WHEELER, INC., Petitioner

v.ENBRIDGE PIPELINES (EAST TEXAS), L.P., Respondent.

No. 13–0234.

Supreme Court of Texas.

Argued Feb. 27, 2014.

Decided Aug. 29, 2014.

Rehearing Denied Dec. 19, 2014.

Don Wheeler, Wheeler & Russell, Center, TX, J. Mark Mann, Mann Tindel Thompson, Henderson, TX, Darrin M. Walker, Law Office of Darrin Walker, Kingwood, TX, for Petitioner, Gilbert Wheeler, Inc.

Julie Wright, J. Mitchell Beard, Stuart Hene, Thomas H. Buchanan, Morgan Elliott, Flowers Davis PLLC, Tyler, TX, Macey Reasoner Stokes, Baker Botts LLP, Houston, TX, for Respondent.

Opinion

Justice LEHRMANN delivered the opinion of the Court.

This case presents various issues regarding the proper manner of compensating a landowner for the destruction of trees on his property. As a general rule, when an injury to real property is temporary, the owner is entitled to damages commensurate with the cost of restoring his property, but when an injury to the same property is permanent, the owner is entitled to damages commensurate with the loss in the fair market value to the property as a whole. In today's case, we consider whether this general rule applies when the wrongful conduct causing the injury stems from breach of contract rather than tort. Concluding that it does, we also review a common law exception to this general rule, which under certain circumstances entitles the landowner to damages in keeping with the intrinsic value of the trees that were destroyed. Because we conclude that the exception properly applies in this case, and hold that any error in the jury charge related to such damages was harmless, we reverse the judgment of the court of appeals and remand the case to that court to address the remaining issues.

I. Facts

The Wheeler family, by way of closely held corporation Gilbert Wheeler, Inc. (Wheeler), owns a 153–acre tract of land in Shelby County called “the Mountain.” The property, which the Wheelers use as a family retreat, is heavily wooded and transected by a natural stream. When Enbridge Pipelines, L.P. determined that it needed to construct a pipeline across the property, it engaged INA Field Services to approach Wheeler about obtaining an easement. Wheeler agreed to grant Enbridge a right of way, but insisted that Enbridge install the pipeline by boring underground in order to preserve the trees on the property. Wheeler agreed to a contract that reflected this stipulation in explicit terms. Because this was an unusual provision, Enbridge was required to specifically approve the contract.

Soon after the parties executed the agreement, Enbridge hired a construction company to build the pipeline, but failed to inform the contractors about the provision requiring them to use the boring method to install the pipeline. As a result, in clearing the right of way the construction company cut down several hundred feet of trees and bulldozed the ground. In the process, the workers also channelized the stream that once meandered through the woods.

Wheeler sued Enbridge for breach of contract and trespass. The suit proceeded to a jury trial, and the court charged the jury on both claims. Enbridge objected to the trespass submission, arguing that Wheeler's claims sounded only in contract. Enbridge also requested a question concerning whether the damage to the Mountain was temporary or permanent, contending that the question was a necessary predicate to determine whether the jury should award damages commensurate with the cost to restore the trees and stream or damages commensurate with the loss in the Mountain's fair market value. Wheeler contended that the distinction was irrelevant. Ultimately, the trial court submitted the charge without the question, and the jury found Enbridge liable for the damage to Wheeler's property on both trespass and breach-of-contract theories. In conjunction with the breach-of-contract claim, the jury awarded $300,000 to compensate Wheeler for the reasonable cost to restore the property. In conjunction with the trespass claim, the jury found no loss in the Mountain's fair market value and awarded Wheeler $288,000 in damages for the intrinsic value of the trees Enbridge destroyed. Wheeler elected to recover the damages awarded for breach of contract.

Enbridge appealed, arguing that the trial court erred in failing to submit the predicate question of whether the injury to the Mountain was temporary or permanent. Enbridge also contended that the injury was permanent as a matter of law, that cost-to-restore damages were therefore improperly awarded, and that Wheeler could not recover damages for the intrinsic value of the trees because that measure of damages was unavailable and not properly submitted to the jury in any event. Wheeler countered that the temporary-versus-permanent distinction did not apply because its case sounded in contract. Wheeler argued in the alternative that it could recover for the intrinsic value of the trees destroyed without respect to the temporary-versus-permanent distinction. The court of appeals agreed with Enbridge and held that, because Wheeler had failed to secure a finding as to whether the injury to the property was temporary or permanent, Wheeler had waived its entitlement to a damage award. For that reason, the court of appeals rendered a take-nothing judgment in Enbridge's favor. Wheeler petitioned this Court for review.

II. Analysis

Wheeler's petition raises broad concerns about the boundaries of the temporary-versus–permanent distinction and its application to the calculation of damages for injury to real property. In order to resolve the confusion surrounding this distinction, we take this opportunity to clarify its contours.

A. Temporary–Versus–Permanent Injury to Real Property

Applying the distinction between temporary and permanent injury to real property has proven a vexing task for litigants and courts alike. After all, injury to real property often appears permanent in the sense that the exact real estate in question—a demolished house or destroyed tree—no longer exists. However, as discussed below, the law recognizes that such items frequently can be replaced in an adequate manner, rendering the landowner suitably compensated. To further complicate matters, Texas courts have attempted to categorize various aspects of a legal claim, including a party's conduct, an event or occurrence, a condition, an injury or harm, and the damages resulting from an injury or harm, as either temporary or permanent.

Further muddling things are the multiple purposes served by characterizing an injury to real property as temporary or permanent. The distinction guides courts in determining: “(1) whether damages are available for future or only past injuries; (2) whether one or a series of suits is required; and (3) whether claims accrue (and thus limitations begins) with the first or each subsequent injury.” Schneider Nat'l Carriers, Inc. v. Bates, 147 S.W.3d 264, 275 (Tex.2004). The present case illustrates a fourth application of the distinction: it guides the proper measure of damages for injury to real property.¹ To that end, we have applied the distinction in evaluating real-property damages across many different theories of liability. See, e.g., Coinmach Corp. v. Aspenwood Apartment Corp., 417 S.W.3d 909, 921 (Tex.2013) (trespass); Natural Gas Pipeline Co. v. Justiss, 397 S.W.3d 150, 152 (Tex.2012) (nuisance); State v. Bristol Hotel Asset Co., 293 S.W.3d 170, 172 (Tex.2009) (eminent domain); Coastal Transp. Co. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 235 (Tex.2004) (negligence).

In today's case, we focus on the significance of classifying injury to real property as temporary or permanent in the context of properly compensating the injured landowner. Our analysis takes into consideration the fact that the property in question was injured due to a breach of contract, as well as the fact that the injury involves loss of trees.

B. Application of Distinction to the Measure of Damages for Injury to Real Property

As early as 1889, we stated that “[i]f land is temporarily but not permanently injured by the negligence or wrongful act of another, the owner would be entitled to recover the amount necessary to repair the injury, and put the land in the condition it was at the time immediately preceding the injury, with interest thereon to the time of the trial.” Trinity & S. Ry. Co. v. Schofield, 72 Tex. 496, 10 S.W. 575, 576–77 (1889). The companion rule, of equally venerable provenance, states that “the true measure of damages in case of permanent injury to the soil is the difference between the value of the land immediately before the injury and its value immediately after.” Fort Worth & D.C. Ry. Co. v. Hogsett,

67 Tex. 685, 4 S.W. 365, 366 (1887). These rules are premised on the notion that the ordinary measure of damages is the cost to restore the property. When restoration is not possible, however, we award damages equal to the loss in fair market value of the property as a whole.

1. Application of Distinction to the Breach–of–Contract Claim

Wheeler argues that, with respect to calculating damages for injury to real property, the temporary-versus-permanent distinction has no place when those damages stem from breach of contract rather than tort. Wheeler notes that contract damages serve to give a plaintiff the benefit of his bargain, i.e., to place the plaintiff in the position he would have occupied if the contract had been performed. Wheeler contends that restoration costs will give it the benefit of its bargain under the right-of-way agreement and thus are the proper measure of damages regardless of whether the injury to the Mountain is characterized as temporary or permanent.

We have never directly addressed this issue, and the courts of appeals are not in agreement. Some have held that calculating damages for injury to real property requires application of “general principles” across causes of action, whether sounding in contract or tort. Hall v....