Hous. Unlimited, Inc. Metal Processing v. Mel Acres Ranch
| Decision Date | 22 August 2014 |
| Docket Number | No. 13–0084.,13–0084. |
| Citation | 443 S.W.3d 820 |
| Parties | HOUSTON UNLIMITED, INC. METAL PROCESSING, Petitioner, v. MEL ACRES RANCH, Respondent. |
| Court | Texas Supreme Court |
Kandice Sanaie, Texas Association of Business, Austin, for Amicus Curiae Texas Association of Business.
Christina T. Wisdom, Gardere Wynne Sewell LLP, Austin, TX, for Amicus Curiae Texas Chemical Council.
Jeffrey Civins, Jeremy Daniel Kernodle, Ryan Paulsen, Haynes and Boone, LLP, Dallas, TX, for Amicus Curiae Texas Oil & Gas Association.
Celina Romero, Druggins Wren Mann & Romero, Austin, TX, for Amicus Curiae Texas Pipeline Association.
Bruce Wilkin, Winstead PC, James Edward Smith, Porter Hedges LLP, Houston, TX, for Petitioner Houston Unlimited, Inc. Metal Processing.
A. Kent Altsuler, George R. Gibson, Seth Adam Miller, Nathan Sommers Jacobs, P.C., Houston, TX, for Respondent Mel Acres Ranch.
In this case, the owner of land that was contaminated by a neighbor seeks to recover for loss of the land's market value based on “stigma” that remained after the contamination subsided. Although some federal and other states' courts have recognized a legal right to recover stigma damages, we have never addressed the issue. We decline to do so here, however, because even if we recognized such a right, the landowner's evidence of lost market value in this case is not legally sufficient to support the trial court's judgment. We must therefore reverse and render a take-nothing judgment in the defendant's favor.
Mel Acres Ranch owns a 155–acre tract of undeveloped ranchland off Highway 290 in Chappell Hill, Texas. Across the highway, Houston Unlimited, Inc. operates a metal processing facility. Rainwater flows from the area around the metal processing facility through a culvert under the highway and into a large stock tank on the ranch. In late 2007, a rancher who was leasing the ranch complained that his calves had experienced a number of birth defects and deaths. The rancher's associate reported that he had seen a Houston Unlimited employee “dumping” contents of a large drum into the culvert and that pipes were discharging materials from Houston Unlimited's facility. Mel Acres hired an environmental consultant to test the area for contaminants. These tests revealed the presence of arsenic, chromium, copper, nickel, and zinc exceeding “state action levels”1 in water in the culvert, and the presence of copper exceeding state action levels in the water in the stock tank.
In light of these results, Mel Acres filed a complaint with the Texas Commission on Environmental Quality. Commission inspectors soon made an unannounced visit to Houston Unlimited's facility and took their own soil and water samples. In the area near the culvert behind the facility, water samples revealed the presence of chromium, copper, lead, nickel, and zinc exceeding state action levels and a “corrosive and hazardous” pH level, and soil samples revealed the presence of aluminum and chromium exceeding state action levels. From the culvert between Houston Unlimited's property and Highway 290, water samples revealed chromium, copper, aluminum, and zinc in excess of state action levels, and soil samples revealed aluminum in excess of state action levels. Water samples from the stock tank on Mel Acre's ranch revealed the presence of copper in excess of state action levels.
The Commission's inspectors discovered during their visit that Houston Unlimited was in violation of several regulations governing its discharge of hazardous waste2 and concluded that it had committed an unauthorized discharge of industrial hazardous waste that had affected Mel Acres' property. Houston Unlimited's general manager admitted to the inspectors that Houston Unlimited had dumped barrels of spent blast media (a substance used to clean metal and prepare it for further treatment) on the ground behind its facility for twenty-five years. The Commission formally cited Houston Unlimited for failing to prevent the discharge of industrial hazardous waste into or adjacent to waters of the state, ordered it to cease all discharge activity and initiate clean-up activities, and ordered it to perform an Affected Property Assessment Report regarding Mel Acres' ranch. The Commission also pursued an enforcement action in which it later assessed a fine against Houston Unlimited.
After the inspectors' visit, Houston Unlimited stopped dumping spent materials behind the facility, constructed a berm to prevent contaminated water from flowing onto the ranch, and took other steps to bring its facility into compliance. In the process, it discovered two pipe leaks in its processing system, which it admits could have caused contaminated water to flow into the ranch's stock tank. It replaced the two pipes and installed a secondary containment mechanism to protect against future leaks. It also hired a consulting company to perform the required Affected Property Assessment Report. This consultant found no constituents exceeding state action levels in the water sample from the stock tank but did find chromium and nickel exceeding state action levels in sediment samples.3 The consultant concluded that there was no evidence that Houston Unlimited's activities had any ongoing adverse impact on water quality in the stock tank. Using these test results, Houston Unlimited submitted an Affected Property Assessment Report to the Commission, followed by an Ecological Risk Assessment. The Commission approved the Ecological Risk Assessment but had not approved the Affected Property Assessment Report as of the date of trial.
Mel Acres hired its own environmental consultant, who took water and sediment samples and found that the water in the stock tank contained pH, aluminum, and iron exceeding state action levels, and detected the presence of other constituents not exceeding state action levels. The parties and their consultants disputed whether Houston Unlimited was responsible for the presence of the constituents found in excess of state action levels and what, if any, ongoing ecological impact they had and will have on the ranch. Mel Acres' consultant concluded in its report, and reiterated at trial, that the stock tank remained “adversely affected,” that the ranch has been “devastated” as a “functioning property,” and that Houston Unlimited's conduct has limited the ranch's future use. Houston Unlimited's consultant, by contrast, concluded and testified that water draining from the processing facility did not cause the elevated levels of pH, iron, and aluminum found in the stock tank.
Mel Acres sued Houston Unlimited for nuisance, trespass, and negligence. As damages, it did not seek to recover any remediation costs, but instead sought only a loss of the fair market value of the entire 155–acre ranch. The trial court's charge asked the jury to determine whether Houston Unlimited had created a “permanent nuisance,” and whether Houston Unlimited had committed a trespass causing “permanent injury.” The negligence and damages questions made no reference to any “permanent” conduct, occurrence, injury, or damages. The jury found that Houston Unlimited did not commit trespass causing permanent injury or create a permanent nuisance on the property, but it found Houston Unlimited was negligent and that negligence caused the ranch to lose $349,312.50 of its market value. The trial court entered judgment on the verdict, and the court of appeals affirmed. We granted review.
To establish its damages in this case, Mel Acres relied on an expert witness who testified that, in her opinion, the ranch had suffered a loss of market value due to stigma resulting from fear, risk, and negative public perceptions. In her opinion, although the contamination from Houston Unlimited's facility had subsided, it had “permanently impacted this market value” and “stigmatized the entire tract,” because Mel Acres would have to disclose the history of the contamination in any future sale, and the disclosure would have “a negative effect on the property value, produced by the market's perception of an increased environmental risk due to the contamination.” As she put it, when it comes to market value, “[p]erception is everything.”
“Stigma damages” essentially constitute “damage to the reputation of the realty.” Smith v. Carbide & Chems. Corp., 226 S.W.3d 52, 55 (Ky.2007). They “represent[ ] the market's perception of the decrease in property value caused by the injury to the property.” Jennifer L. Young, Stigma Damages: Defining the Appropriate Balance Between Full Compensation and Reasonable Certainty, 52 S.C. L. REV. 409, 424 (2001). Mel Acres argues that stigma damages continue to exist even after the property has been fully repaired or remediated.
For many years, American courts and commentators have struggled with the issue of whether and when to allow recovery of stigma damages:
The variety of claims, along with the often uncertain nature of stigma damage, has led to diverse and often confusing jurisprudence. Struggling with the desire to make the plaintiff whole while awarding only those damages that are proven with reasonable certainty, different jurisdictions have fashioned a variety of rules on which to base the award of stigma damages. While most jurisdictions agree that plaintiffs must experience some physical injury to their property before they may recover stigma damages, jurisdictions are divided on whether the injury must be temporary or permanent.
Id. at 409–10 (citations omitted). In addressing these issues, courts have sought to balance the need to acknowledge the actual loss for which the landowner should be compensated against the reality that the loss is based primarily on public perceptions, which can change quickly or, at least, over time. Id. at 410.
This Court has never directly addressed the recoverability of stigma damages. Houston Unlimited...
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