Natland Corp. v. Baker's Port, Inc.

• Decision Date: 30 June 1993
• Docket Number: No. 13-90-483-CV,13-90-483-CV
• Citation: 865 S.W.2d 52
• Parties: NATLAND CORPORATION, et al., Appellants, v. BAKER'S PORT, INC., and Baker Marine Corporation, Appellees.
• Court: Texas Court of Appeals

Page 52

865 S.W.2d 52

NATLAND CORPORATION, et al., Appellants, v. BAKER'S PORT, INC., and Baker Marine Corporation, Appellees.

No. 13-90-483-CV.

Court of Appeals of Texas,

Corpus Christi.

June 30, 1993.

Opinion Overruling Motion for

Rehearing Oct. 14, 1993.

Rehearing Overruled Nov. 30, 1993.

Charles R. Porter, Jr., Rick Foster, Porter, Rogers, Dahlman, Gordon & Lee, Corpus Christi, Linda Broocks, Stephen Krebs, Baker & Botts, Houston, Liz Bills, Asst. Atty. Gen., Energy Div., Dan Morales, Atty. Gen., Joe R. Greenhill, Bob E. Shannon, Baker & Botts, Austin, Peter M. Oxman, Baker & Botts, Houston, Ken Cross, Asst. Atty. Gen., Environmental Protection Div., Ed Salazar, Asst. Atty. Gen., Nancy Lynch, Asst. Atty. Gen. Chief, Environmental Protection Div., Austin, for appellants.

Richard B. Stone, Law Offices of Stone & Stone, Corpus Christi, Richard A. Schwartz, Richard A. Schwartz & Associates, Houston, for appellees.

Charles Butler, Corpus Christi, for intervenor.

Lawrence A. Dio, Port Lavaca, Eli Mayfield, Palacios, Kathryn F. Green, Kleberg & Head, J. Michael Mahaffey, Kleberg & Head, Corpus Christi, for other interested parties.

Before NYE, C.J., ^* and DORSEY and FREDERICO G. HINOJOSA, Jr.

OPINION

DORSEY, Justice.

This appeal concerns title to 2,800 acres of coastal land sold by Natland Corporation, National Steel Corporation and NS Land Company (collectively "Natland") to Baker's Port, Inc. and Baker Marine Corporation (collectively "Baker"). Baker did not develop the property as planned, claiming that defects of title and encumbrances against the land prohibited the intended uses. Baker sued Natland for fraud, violations of the Texas Deceptive Trade Practices-Consumer Protection Act, ¹ and breaches of warranty. The State became a party, seeking a declaratory judgment that it owned 36 acres of the land in dispute and that another part of the 2,800 acres, consisting of 229 acres, was subject to restrictions for the benefit of the public under the "public trust doctrine."

The trial court entered a partial summary judgment against the State on both claims, from which it appeals. After a jury trial, Baker took judgment against Natland for $360,000 for certain title defects and $22,000,000 for fraud and DTPA violations in connection with the sale of the property. ² We affirm the summary judgment against the State, but reverse and remand the remainder of the judgment for new trial.

In 1981, Larry Baker, Sr., of Baker Marine Corporation, approached Natland about purchasing 2,800 acres of coastal land in San Patricio, Aransas, and Nueces Counties, near the City of Ingleside. Mr. Baker had leased one end of this property for a shipyard business for many years. He intended to use the 2,800 acres to develop a private shipbuilding community of both homes and businesses, to be called Baker's Port, with four private channels controlled by Baker, and with access to public waters--the Corpus Christi Ship Channel, the Intracoastal Waterway, and the Gulf of Mexico. In the summer of 1981, Natland sold the property to Baker, subject to certain restrictions and encumbrances, for $31,668,000, consisting of cash and notes.

In early 1988 Baker learned of title defects and other encumbrances and claims against the property not reserved or excepted in the deed. Mr. Baker complains that Natland showed him an inaccurate 1962 survey, the Huston map, which Natland represented to show the property that it owned, but which incorrectly identified its boundaries. In particular, the Huston map incorrectly represented that Natland owned the Garrett, Brashear, and Overbid tracts of land along the northern border of the property, as well as approximately 29 acres of State-owned submerged lands off the eastern shoreline and parallel to the Intracoastal Waterway. Baker alleges that Natland's attorney persuaded Baker's attorney to accept an inaccurate metes and bounds description derived from the Huston map and to include it in the General Warranty Deed conveying the property.

Baker also contends that Natland failed to disclose certain other title defects and encumbrances against the property. The first, a 229 acre tract of partially submerged lands in the center of the property, was allegedly encumbered by a right of the public to use it for public recreation and by an implicit restriction that the land could only be used for navigation purposes. This tract is referred to as Patent 198. Baker also complained of the existence of a perpetual spoil easement in favor of the United States, and a claim by the State of Texas to 36 acres of dry land along the shore that would make the Baker's Port channels inaccessible to the water.

These defects and encumbrances allegedly hindered development of the Baker's Port project, and the company abandoned it. Baker sued Natland for breach of warranty, fraud, and violations of the DTPA, based on the title defects and undisclosed encumbrances against the property.

The State entered this suit seeking a declaratory judgment (1) that it owned 36 acres of dry land that had been added to the shoreline by the gradual migration of soil deposited along the shoreline by the United States Army Corps of Engineers while dredging the adjacent Intracoastal Waterway, and (2) that a public trust encumbrance attached to the 229 acre tract. The trial court granted a partial summary judgment disposing of the State's claims, declaring that Natland had title to the 36 acres, and that the 229 acre tract was free of any public trust encumbrance.

The central issues at trial between Natland and Baker were the effect of the encumbrances and title defects on Baker's ability to develop the land in accordance with its plans, and the damages flowing from such defects. (See appended map) Specifically, Baker alleged breaches of the warranty against encumbrances with regard to the Patent 198 reservations on the 229 acre tract and with regard to the spoil disposal easement. Baker alleged breaches of the warranty of title with regard to the tracts of land incorrectly included in the Huston map. Baker also alleged violations of the DTPA, and fraud with regard to Natland's misrepresentation of the property conveyed and failure to disclose the various defects and encumbrances.

The jury returned a verdict generally in favor of Baker. On the claims for breach of the warranty against encumbrances, the jury found $6,330,000 in damages resulting from the Patent 198 reservations on the 229 acre tract, but no damages resulting from the spoil disposal easement. On the claims for breach of the warranty of title, the jury found breaches with regard to the Garrett, Brashear, and State-owned submerged-land tracts, but not the Overbid Tract. It found damages in the amount of an $8,800 fair market value for the Brashear Tract and a $360,000 fair market value for the State-owned submerged lands, but found no damages were proximately caused by the breach of title with regard to the Garrett Tract. On the DTPA and fraud claims, the jury found $22,000,000 as the difference between the value of the property as it was received and as represented. The trial court granted final judgment, generally in accordance with the jury's verdict in favor of Baker, against Natland for $360,000, and ordered that Baker's $19 million dollar debt to Natland was fully offset by $22,000,000 in damages. ³

I. STATE'S APPEAL

We first address the State's appeal from partial summary judgment rendered in favor of Natland, both (1) that 36 acres of land along the shore of Redfish Bay adjacent to the westerly right-of-way line of the Intracoastal Canal belonged to Natland under the doctrine of accretion, and (2) that 229 acres of partially submerged lands granted to Natland's predecessor in title under Patent 198 were conveyed in fee simple, subject only to the specific reservations therein, and that no implied "public trust" restriction applied to the land.

A. The Creation of Dry Land

By its first point of error, the State contends that the trial court erred in holding that 36 acres of land along the shoreline belonged to Natland and not the State. The State argues that the eastern boundary of Natland's property should be the shoreline as it existed in 1958, before the additional 36 acres of dry land was created.

The undisputed facts are that the 36 acres at issue are presently dry land that had been submerged prior to the dredging of the intracoastal waterway. The dredging was done by the U.S. Army Corps of Engineers and its contractors in 1959 and 1960. The spoil dredged in the process of creating the canal was piled on dry land inland from the shore during those years, pursuant to a spoil disposal easement granted by Natland's predecessor in title. ⁴ In subsequent years, by the action of rain, wind and gravity, some of the spoil gradually was washed from the piles toward the sea, extending the land seaward. The State argues that it still owns this 36-acre extension which had formerly been submerged lands.

Title to land covered by the bays, inlets, and arms of the Gulf of Mexico within tidewater limits is in the State, and those lands constitute public property that is held in trust for the use and benefit of the people. Lorino v. Crawford Packing Co., 142 Tex. 51, 175 S.W.2d 410, 413 (1943); City of Corpus Christi v. Davis, 622 S.W.2d 640, 643 (Tex.App.--Austin 1981, writ ref'd n.r.e.); Butler v. Sadler, 399 S.W.2d 411, 415 (Tex.Civ.App.--Corpus Christi 1966, writ ref'd n.r.e.).

However, the general rule is that a riparian or littoral owner acquires or loses title to the land gradually or imperceptibly added to or taken from his shoreline. Erosion is the process of wearing away the land, while accretion is the process of gradual enlargement. Coastal Indus. Water Auth. v. York, 532 S.W.2d 949, 952 (Tex.1976); State v. Balli, 144 Tex. 195, 190 S.W.2d 71, 100-01 (1944). Specifically, accretion denotes the natural process of increasing real property by the gradual and...