Where have we come since Schmidt
14TH ANNUAL EMINENT DOMAIN SUPER CONFERENCE
JANUARY 30, 2014
WHERE HAVE WE COME SINCE SCHMIDT?
BY:
Philip Arnold, Assistant Attorney General
Matt Bohuslav, Assistant Attorney General
Elsa Ulloa, Assistant Attorney General[1]
This paper will review the Texas Supreme Court’s landmark opinion in State v. Schmidt[2] and discuss various opinions of Texas courts that have attempted to apply the Schmidt decision. During the two decades since Schmidt was decided, several courts have grappled with properly applying the case, and on some occasions, the Texas Supreme Court has been called upon to clarify its holdings. The following discussion will focus primarily on the application of the Campbell rule and the community damage rule to various claims for remainder damages, including access, circuity or travel, and proximity. This paper is not meant to be an exhaustive analysis of case law regarding remainder damages but will address cases that act as guide posts in helping to answer the question: Where have we come since Schmidt?
Schmidt Happens: Summary of the Case
Schmidt involved two consolidated statutory condemnation cases brought by the City of Austin on behalf of the State of Texas to acquire land for a highway improvement project on U.S. Highway 183 (Research Boulevard) in Austin, Texas. The Defendants were the owners of two adjacent tracts, the Schmidt tract and the Austex tract. Both tracts abutted Highway 183 and had direct access to the highway. In front of the Defendants’ tracts the highway project elevated the main traffic lanes 37 feet above grade. While the six lanes at grade remained in service and accessible to the tracts, most of the traffic was diverted to the elevated main highway. The project was done in phases and completed over a period of five years. The project required the expansion of the existing right-of-way a little less than seven feet into the Schmidt and Austex tracts.[3]
At trial, the defendants sought severance damages based on four factors: 1) the impairment of visibility from the main highway; 2) the inconvenience and disruption caused by construction activities extending over a period of several years; 3) the diversion of traffic from the highway at grade level; and 4) the resulting circuity of travel required to gain access to the property. In the case of the Schmidt tract, the parties stipulated to $7,559 for the strip of land being acquired and the jury awarded $74,880 in remainder damages. The jury in the Austex case awarded $18,932 for the land being acquired and $200,000 in remainder damages. The trial court entered judgment on the jury awards. The State appealed only the award of severance damages. The Court of Appeals affirmed the trial court judgment.[4]
The Supreme Court of Texas began its analysis by referencing the general rule articulated in State v. Carpenter that “everything which affects the market value of land . . . is properly submitted to the jury for consideration.”[5] It then addressed the three distinct arguments raised by the State as to why the defendants’ remainder-damage claims were noncompensable despite the broad rule just cited.
First, the State argued that, based on the Constitution and prior case law, the four elements of injury claimed by Schmidt and Austex are not the kind of injuries for which compensation is due.[6] The Supreme Court agreed that it had never allowed recovery in an inverse condemnation case for damages resulting from a diversion of traffic or circuity of travel. It noted that it had never before addressed the issue of whether impairment of visibility is compensable, but that “[j]ust as a landowner has no vested interest in the volume or route of passersby, he has no right to insist that his premises be visible to them.”[7]
Schmidt and Austex conceded that they would not be entitled to recover in an inverse condemnation action for the injuries that they had alleged.[8] They suggested, however, that the rule should be different in a statutory condemnation case where those injuries are accompanied by a physical taking of property. In statutory cases, they argued, Carpenter mandates that every factor contributing to the claimed loss must be considered.[9] The Court disagreed, noting that the defendants’ position was not supported by the Court’s prior decisions and that the Court has refused to allow recovery for injuries based on diversion of traffic and circuity of travel in both condemnation cases and inverse condemnation cases.[10] However, the Court declined to hold that the types of damages claimed by the defendants could never be recovered.[11] Instead, the Court found that the damages alleged by Schmidt and Austex were barred by the Campbell rule and the community damage rule and that the application of these rules is not inconsistent with the broad language in Carpenter.[12]
As the Court explained, the Campbell Rule bars recovery in a statutory condemnation case for injuries that arise from the condemnor’s new use of existing right-of-way or from the use of property acquired from other landowners and is derived from the United States Supreme Court decision in Campbell v. United States.[13] Although the Texas Supreme Court had never before invoked the rule by name, it applied it in principle in its decision in State v. Clark.[14] In applying the rule, the Court reasoned that the Property Code required compensation only for “the effect of the condemnation” and not the effect of the entire public project.[15] The Court recognized that the diminution in value claimed by Schmidt and Austex was due entirely to the State’s modifications of Highway 183 and not to the use of the narrow strip acquired from each tract.[16]
The Court then analyzed whether an exception to the Campbell rule applied.[17] An exception to the Campbell rule was articulated by the Ninth Circuit Court of Appeals.[18] Under the exception, the rule applies to bar compensation unless:
1) The land taken from the condemnee landowner was indispensable to the . . . project; 2) the land taken constituted a substantial (not inconsequential) part of the tract devoted to the project; and 3) the damages resulting to the land not taken from the use of the land taken were inseparable from those to the same land flowing from the condemnor government’s use of its adjoining land in the . . . project.[19]
The Texas Supreme Court held that the exception did not apply to the Schmidt and Austex properties. It noted that the acquisition was indispensable to the project—thereby satisfying the first prong. However, it found that the strip of land being acquired did not constitute a substantial part of the property devoted to the project, and that the damages caused by the use of adjoining land could not be separated from the use of the property being acquired.[20] Accordingly, the Campbell rule barred the damages claimed by Schmidt and Austex.[21]
As a separate and independent basis for finding the damages non-compensable, the Court determined that that the injuries constituted community damages.[22] It determined that Schmidt and Austex complained of damages that were “by their nature, a consequence of the change in Highway 183 shared by the entire area through which it runs.”[23] Importantly, the Court explained that the fact that Schmidt and Austex may be impacted more severely than some others in the area, is a difference of degree and not kind.[24]
Since the Schmidt holding, Texas courts have repeatedly been asked to determine whether remainder damages are compensable applying both the Campbell rule and the community damage rule. Following below is a discussion of several of those cases.
I. The Campbell Rule Since Schmidt
Several Texas courts have applied the Campbell rule in the wake of the Schmidt decision. In some ways these opinions have clarified the rule’s application, but in other ways the rule remains unclear. The cases below highlight that history.
A. Elevated Grade and Proximity
Within a year of the Texas Supreme Court’s decision in Schmidt, the Dallas Court of Appeals applied the Campbell Rule in Oddo v. State.[25] Oddo involved the acquisition of a 401-square-foot strip of land for a highway project on North Central Expressway in Dallas, Texas. The trial court excluded all evidence of remainder damages based on its reading of Schmidt, and entered a directed verdict that the property owner take nothing on those damages.[26] The Dallas Court of Appeals reversed, holding that the trial court had erred by excluding all evidence of remainder damages.[27] The court of appeals noted that some of the injuries alleged, like the loss of one parking space, were the result of the condemnation, and not the result of the State’s new use of existing right-of-way.[28] In a foot note, the court of appeals instructed the trial court that other injuries were properly excluded under the Campbell rule. Those included reduced rent due to the construction project generally, the change in grade of the right-of-way, and increased proximity of the right-of-way.[29]
The Texas Supreme Court addressed proximity damages in Interstate Northborough Partnership v. State.[30] The property owner in Interstate Northborough owned an eight-story office building that was set 96 feet away from the frontage road and had a landscaped front yard that the property owner referred to as a “buffer” zone. Of that 96 feet, 50 feet was right of way owned by the State on which no highway improvements had yet been built. The State condemned 0.365 acres of the property to widen I-45 in Houston, Texas. As a result of the condemnation and new highway alignment, the building was only 22.5 feet from the new roadway. Also, the building was only 12 feet from the new right-of-way line, in violation of a deed restriction and Houston’s set-back ordinance. [31] The property owner claimed that his remainder property’s value was diminished due to the loss of curb appeal, green space, and “buffer” zone.[32]
The Court began its analysis by clarifying the relationship between the Campbell rule and the community damages rule.[33] The Court explained that application of each rule called for a separate and distinct analysis. It therefore rejected the property owner’s position in that case that the community-damages principle applies only if the damages claimed arise from the condemnor’s use of existing right-of-way or adjacent property. The Court instructed that both tests must be independently applied to determine if damages are compensable.[34]
The State argued that it already owned fifty of the ninety-six feet of the building’s front yard, so that any proximity damages would be due to its use of its pre-existing right-of-way and barred under the Campbell rule.[35] The Court disagreed and held that the increased-proximity damages were attributable to the State’s use of the land being condemned. The Court noted that the State used the condemned land to construct a new lane on the frontage road and that the acquisition of the new strip of land resulted in the building no longer meeting the city setback ordinance or the deed restriction. Therefore, it found that the Campbell rule did not bar the damage claims.[36]
In County of Bexar v. Santikos, The Texas Supreme Court applied the Campbell rule to bar damages arising from the elevation of a roadway in Bexar County, Texas.[37] The project resulted in the property owner’s remaining land being 10 to 11 feet below the road surface.[38] Bexar County sought to condemn approximately half an acre from Santikos to serve as a sloping embankment to support the elevation of the raised roadway. Santikos sought damages related to his property being placed “in a hole,” including diminished access, diminished visibility, loss of view, and loss of curb appeal.[39] Santikos argued that his damage claims were distinguishable from those in Schmidt, because the strip of his land being condemned was being used to help elevate the roadway.[40]
The Court rejected Santikos’s argument. It noted that while the embankment will be on the condemned property, the elevated frontage road will not be. The Court reasoned that the damages alleged by Santikos arose from elevation of the frontage road, not from the method selected by the Texas Department of Transportation (TxDOT) to support it and that such damages were barred by the Campbell rule.[41] Based on the Court’s reasoning in Interstate Northborough, had a portion of the elevated roadway itself, and not just the embankment, been constructed on the condemned land, the analysis under the Campbell rule might have been different.
B. Access
In 1996, The Texas Supreme Court revisited its Schmidt analysis in a case involving claims for remainder damages due to impairment of access in State v. Heal.[42] In Heal, the State condemned 436 square feet of land from a residential property owner as part of the highway project on North Central Expressway in Dallas, Texas.[43] The Heals alleged that the new highway design would create increased traffic and a bottleneck in front of their property, resulting in remainder damages.[44] The Supreme Court would eventually hold that the access claims did not rise to the level of a material and substantial impairment of access, and were thus noncompensable.[45] However, the Court’s treatment of the access claims under the Campbell rule is noteworthy. The Court held that the access claims were not barred under the Campbell rule:
[h]ad the Heals sought damages merely for increased traffic . . . their claims would be precluded [under Campbell]. The Heals, however, specifically seek compensation for the diminution in value of their property caused by the impaired access they assert will occur from the increased traffic and bottleneck. This type of damage is not necessarily attributable to the use of the adjoining property in the sense contemplated by Campbell . . . . Although applicable under other circumstances, we have never considered Campbell to preclude recovery for impaired access.[46]
The Court’s opinion leaves open several questions regarding the application of the Campbell rule to access damages. First, the Court drew a distinction between a damage claim arising from increased traffic—barred under Campbell—and a damage claim for impaired access caused by increased traffic—not barred under Campbell. It is difficult to discern the basis for that distinction. Second, the Court did not provide a rationale for why access damages should be treated differently than other damages under the Campbell rule. The principal question in the Campbell analysis is whether the damages are caused by the acquisition of the property owner’s land or by the overall project. In essence, this question is geographical, and does not distinguish damages based on the type of damage. Finally, the Court’s assertion that it had never applied the Campbell rule to preclude damages for impaired access seems to run counter to its application of the rule to the access claims raised in Schmidt,[47] and its later application of the rule to the access claims in Santikos.[48] To what extent the Campbell rule is applicable to access claims remains an open question.
C. The Exception to the Campbell Rule
In State v. Colonia Tepeyac, Ltd., the Dallas Court of Appeals was tasked with assessing the viability of a jury instruction that invoked both the Campbell rule and the community damage rule.[49] The instruction purported to instruct the jury on an exception to the community damages rule, but the stated elements of the exception were similar to the exception of the Campbell rule. The relevant part of the instruction stated:
If: a) the land taken from the Landowner was indispensable to the Project; b) the land taken constituted a substantial part of the Landowner’s tract that was devoted to the Project; and, c) the damages resulting to the Landowner’s Remainder, from the State’s use of the land taken, are inseparable from the damages to the same land flowing from the State’s new use of its adjoining right of way in the Project, Landowner may be entitled to recover compensation for such damages even if the damages are experienced by the Landowner in common with the general community.[50]
As a preliminary matter, the court of appeals noted that the instruction improperly attempted to create an exception to the community damages rule, where no such exception exists in the law.[51] Next, the court held that the instruction misstated the exception to the Campbell rule. Subpart (b) of the instruction included the additional word “Landowner’s” that did not appear in the exception embraced by the Court in Schmidt. Citing Schmidt and Santikos, the court of appeals explained that the second element in the exception to the Campbell rule requires the taken land to be a substantial part of the larger project, not a substantial part of the landowner’s tract.[52] In Colonia, the State was acquiring roughly 6,195 square feet for the much larger highway project involving the entire interchange of I-30 and Loop 12 in Dallas, Texas. The court of appeals found that the trial court had abused its discretion in submitting the instruction and that error was harmful, requiring reversal.[53]
The application of the Campbell rule by Texas courts has been clarifying in some areas, but less so in others. For example, it is clear that if no part of the public project is constructed on the part acquired through condemnation, then the Campbell rule will likely bar recovery. However, to the extent the condemnor makes some use of the part acquired, the result may depend on the nature of that use. Whether and to what extent the Campbell rule applies to damage claims related to access is not clear. Finally, the courts have made it clear that the Campbell rule and the community damage rule are independent rules and require independent analysis. The following section discusses the community damage rule.
II. Community Damages
The Texas Supreme Court’s opinion in Schmidt recognized that the principle of community damages is “easier to articulate than to define.”[54] The Court noted that when analyzing whether a damage is community or special, one must look to the nature of the injury and whether it affects the remainder in some special, unique way.[55] Even if the condemnation affects neighboring properties similarly, “injury to several landowners on the same street is not community injury simply because they all suffer alike.”[56]
However the principle is defined, it is clear that community damages are not compensable in a condemnation case. This settled rule of eminent domain jurisprudence is codified in the Texas Property Code:
In estimating injury or benefit under Subsection (c), the special commissioners shall consider an injury or benefit that is peculiar to the property owner and that relates to the property owner’s ownership, use or enjoyment of the particular parcel of real property, . . . but they may not consider an injury or benefit that the property owner experiences in common with the general community . . . .[57]
The cases discussed below apply the community damage analysis to various claims of remainder damages.
A. Access and Circuity of Travel
As discussed above, the Texas Supreme Court decided in State v. Heal that the access damages alleged were not barred under the Campbell rule.[58] The Court then analyzed the damages under the community property rule. The Court noted that impaired access is different from mere circuity of travel and may be a compensable special damage.[59] However, the Court held that the Heals were not entitled to compensation because their access rights were not materially and substantially impaired as a matter of law.[60] The Court noted that “[a]ll of our prior impaired access cases involved physical obstructions created by a public improvement. Here, the Heals allege that traffic will impair their access. The primary difference is that traffic will fluctuate—at times there will be congestion and at other times there will be free access.” [61] The Court stated that traffic may cause a material and substantial impairment of access, but that in this case access was not impaired enough to justify damages to the remainder property.[62]
Another case discussing lost access was State v. Whataburger, which is an outlier in the larger body of case law.[63] Whataburger involved the partial taking of a Whataburger restaurant in Houston, Texas at the intersection of Loop 610 and US Highway 90A. The State’s new right of way line bisected the existing building and caused the building to be torn down and rebuilt on the remainder. After a jury trial, the State appealed only the part of the verdict that awarded damages for lost profits during the time it would take Whataburger to rebuild on the remainder. The State argued that compensation for lost profits, in addition to compensation for the land and improvements taken, constituted a double recovery.[64]
In addressing Whataburger’s access claim, the Fourteenth Court of Appeals referenced Schmidt for the proposition that diversion of traffic and circuity of travel are noncompensable.[65] However, the court of appeals noted that a material and substantial impairment of access can give rise to lost profits if the property owner shows: (1) a total but temporary restriction of access; (2) a partial but permanent restriction of access; or (3) a temporary limited restriction of access brought about by an illegal activity or one that is negligently performed or unduly delayed.[66] The court of appeals held that, “while no physical barrier prevented ingress or egress upon the remaining land, we find Whataburger was effectively denied access to the improvements thereon” because the building was razed and could not be entered.[67] Essentially, the court of appeals reasoned that because the building was torn down, there was no building to enter and this was a total denial of access to the building.[68] This opinion is an outlier in Texas case law because it implies that anytime a building is bisected, the landowner can claim lost profits. It is unclear if a landowner is denied access if they choose to rebuild on the remainder only, or if they can also recover lost profits if they relocate to a new location. The latter contradicts other cases that generally hold that a business can relocate anywhere they choose, the State is not required to pay them for lost profits, and the State does not condemn businesses.[69]
Once the court determined the threshold question that access was materially and substantially impaired due to a total but temporary denial of access, it next turned to the question of whether the lost profits, as calculated by the jury, constituted double recovery. The court’s decision turned on the fact that all the appraisal experts used the cost approach to value the building. The building was “distinctive pseudo A-frame style that is recognizable across the country as a Whataburger restaurant.” The unique style and specialty nature of the building lent itself to the cost approach to value because there are few other restaurants with which to compare it in the improved sales comparison approach. “Because the profitability of the business was never considered in calculating market value, Whataburger’s claim for lost profits does not constitute a double recovery.”[70] The lost profits were easily calculated from past business records and were not speculative.[71] In essence, the court held that the cost approach to value never includes business value or lost profits and that Whataburger was entitled to lost profits because it was totally denied access to its building while the building was torn down. Thus, (1) Whataburger was entitled to lost profits due to a total, temporary denial of access, and (2) the use of the cost approach to value the building precluded double recovery for lost profits.
Again, this opinion is an outlier from the larger body of case law and creates more questions than it answers. Does the fact that the court held that the cost approach does not include business value mean that the income and sales comparison approaches inherently include business value? If that is true, should appraisers adjust the income and sales comparison approaches to account for business value?
Perhaps the most substantial holding in an access case came from State v. Dawmar Partners, Ltd.[72] Dawmar involved an 80-acre tract of vacant land outside of Hewitt, Texas, near Waco. The State condemned 13 acres to widen and elevate FM 1695 (Hewitt Drive) at the intersection of Spring Valley Road.[73]
The remainder property was divided into two tracts, a 3.6-acre northern portion and a 63-acre southern portion. The only dispute involved the southern portion, which was denied access to FM 1965 because the new bridge that crossed over Spring Valley Road created a safety issue.[74] The remainder still had access to Ritchie Road to the north. The landowner argued that the change in access to the remainder caused a change in the highest and best use from commercial to residential. They argued that this change in value was, as a matter of law, a material and substantial impairment of access.[75]
The Texas Supreme Court held that, “[i]f we were to accept this proposition, it would be a rare case in which a reduction of access would not have some impact on the value of property, and the ‘material and substantial’ limitation would be effectively eliminated in the vast majority of cases, contrary to our body of impaired access law.”[76] The Court went on to say that a change in the highest and best use of the property is not irrelevant as to the amount of damages, but it does not determine the threshold legal question—whether or not there is a material and substantial impairment of access.[77] The remainder property still had adequate access via Ritchie Road and the denial of access to FM 1695 resulted only in increased circuity of travel, which is not compensable.[78] “In light of the considerable amount of remaining access to and from the property, we could not conclude that there is a material and substantial impairment of access in this case without imposing a requirement that there be some degree of direct access to the highway.” This holding is in line with the prior holdings of the Court that convenience is not a factor in determining material and substantial impairment of access.[79]
In State v. Johnson, the Fifth Court of Appeals in Dallas adopted an exception to the rule that increased circuity of travel is a noncompensable community damage.[80] The case involved the acquisition of a 3,569-square-foot strip of property along State Highway 183 in Irving, Texas. [81] The property was improved with a four-story office building. Prior to the condemnation, Johnson had access via the frontage road, as well as a private access road that connected to a cross street. The highway project called for closing the private access road, resulting in Johnson only having access through a one-way frontage road that makes a U-turn under the highway on its approach to Johnson’s property.[82] At trial, Johnson put on evidence that emergency vehicles would have to travel an extra 1.2 miles, or about two minutes, to reach the remainder property after the project’s completion. Johnson also put on evidence that the U-turn access road was 18 feet in width at one section and in violation of the City of Irving Fire Code. Over the State’s objections, the trial court admitted the evidence. The court of appeals affirmed claiming that the circuity of travel for emergency vehicles was a safety issue particular to the property and thus not a community damage.[83]
B. Senate Bill 18:
In 2011, the Texas Legislature passed Senate Bill 18, which changed the Texas Property Code in several respects. One of the major changes was that the Code now states the landowner can be compensated for a material impairment of direct access on or off the remaining property.[84] This seemingly changes the material and substantial standard laid out by the Texas Supreme Court by removing the “substantial” part of the test. The change also makes this a question of fact for the jury, rather than a question of law for the courts.
The first case to address this change was State v. Momin,[85] where a gas station owner sued the State in inverse condemnation for lost access. In 2009, the State built a bridge for FM 2978 that flew over Huffsmith-Kuykendahl Road and a railroad track. The purpose of the project was to allow traffic on FM 2978 to freely cross the railroad without stopping for trains. Momin Properties, Inc. owned property improved with a gas station located at the corner of FM 2978 and Huffsmith-Kuykendahl Road.[86] The project was built entirely within existing State right of way and did not close any driveways or access points to the Momin property. However, the result of the project closed the old FM 2978 where it crossed the railroad tracks in front of the Momin property and all through traffic now traveled over the new bridge.[87] The old FM 2978 became an access road to Huffsmith-Kuykendahl Road and dead ended in front of the Momin property. Momin alleged injury due to the project under the theory that it caused a partial permanent restriction of access or a temporary limited restriction of access callused by illegal or negligent activity.[88] The State moved to dismiss the case for lack of jurisdiction, which the trial court denied. The State filed an interlocutory appeal on the issue of damages and lost access.
The First Court of Appeals held that construction of the overpass was not “a compensable injury because the closure does not impair reasonable access to the gas station; instead, the closure merely requires traffic to travel a more circuitous route to reach the gas station or cross the railroad tracks.” Even if one road is closed, the property still retains reasonable access to the public streets.[89] The court went on to hold that Senate Bill 18 did not apply to this case, nor alter the material and substantial impairment of access standard in inverse claims.[90] Because the Texas Property Code governs statutory condemnation claims (filed by the government), and not inverse condemnation claims (filed by the landowner), “[n]othing in subsection 21.042(d) addresses or alters the rule that a determination of whether a taking has occurred in an inverse condemnation case is resolved by the courts as a matter of law.” “Furthermore, section 21.042 does not address the material and substantial impairment standard and does not alter the well-established rule that a property owner cannot recover for a change in the circuity of travel.”[91]
C. Proximity
In 2001, the Texas Supreme Court held that damages due to increased proximity to the roadway may be considered special damages, and thus, compensable, under limited circumstances.[92] As previously discussed the Court in Interstate Northborough instructed that the community-damages test must be independently applied to determine if damages are compensable. In that case, the property owner claimed remainder damages due to the remainder property’s increased proximity to the frontage road, which resulted in the loss of curb appeal, green space and a buffer zone.[93]
In applying the community-damages principle, the Court concluded that in this case the record established that the damages due to increased proximity to the frontage road, affected the landowner’s remainder property in a special and unique way. The Court noted that “the difference in injury to INP’s property is not one of degree, it is one of kind.” In arriving at its conclusion, the court indicated that INP had demonstrated that its increased-proximity injury was peculiar to its property because of the building’s special design and therefore, their damages were found to be special not community. The court found it significant that after the acquisition, the building would be in violation of the city’s setback ordinance and the property’s deed restrictions, due to the frontage road’s relocation.[94]
D. Visibility
The issue of whether a landowner has a right to recover for an impairment in the visibility of its premises to passing traffic was specifically addressed by the Texas Supreme Court in the Schmidt case. The Court held that such damages were not compensable:
[T]here is no reason why recovery for this type of injury should be more available than for a diversion of traffic or circuity of travel. Just as a landowner has no vested interest in the volume or route of passersby, he has no right to insist that his premises be visible to them.[95]
As further explained in Schmidt:
The benefits which come and go from the changing currents of travel are not matters in respect to which any individual has any vested right against the judgment of the public authorities. If the public authorities could never change a street or highway without paying all persons along such thoroughfares for their loss of business, the cost would be prohibitive. The highways primarily are for the benefit of the traveling public, and are only incidentally for the benefit of those who are engaged in business along its way. They build up their businesses knowing that new roads may be built that will largely take away the traveling public. This is a risk they must necessarily assume.[96]
In Santikos, the Supreme Court reaffirmed Schmidt’s holding that landowners have no right to insist that their premises be visible and extended it to hold that landowners also have no right to insist that their premises remain at grade level. The court, however, did not decide whether damages for an obstructed view from the property may be compensable. The court simply concluded that there was no evidence to support such a claim in this case because Santikos did not present evidence of any damages that might result if a future user had to endure a partially obstructed view.[97]
In 2011, the Supreme Court again addressed the issue of visibility in State v. Petropoulos.[98] In Petropoulos, the landowner argued that his remainder property was damaged because the conversion of Highway 290 into a toll road would result in less exposure to traffic, thereby, reducing the feasibility of some types of development on the remainder.[99] The Supreme Court held that the altered exposure to traffic was not compensable. In fact, since the Supreme Court’s holding in Schmidt that impairment of visibility to passing traffic is not compensable, the court has reaffirmed the holding many times.[100]
E. Noise
In 1996, the Supreme Court addressed the issue of whether roadway traffic noise was a community damage.[101] Felts involved a homeowner who filed an inverse claim against the county, alleging that he was entitled to a cost to cure which was based on the cost to build a wall to block out the traffic noise from the roadway. The court concluded that generally noise from a road “has a similar impact on the community as a whole,” and therefore, it is a community damage and noncompensable.[102] Moreover, the court noted that the fact that some noise damages may be greater if the property is closer to the roadway, is not sufficient to make those damages compensable because it merely goes to a difference in degree, rather than a difference in kind. Nonetheless, the Supreme Court left open the possibility that traffic noise might be compensable in exceptional circumstances, when it severely impairs the ownership interest in property.[103]
F. Lights
In 2004, the Supreme Court addressed the issue of lights as a community damage. Tex. Dep’t of Transp. v. City of Sunset Valley[104] involved a lawsuit brought by Sunset Valley against the State as a result of the State’s conversion of State Highway 290 into a controlled-access highway. As part of the lawsuit, Cowan, then-mayor of Sunset Valley, claimed that the high-mast floodlights installed by TxDOT shone extremely brightly on his property. However, there was evidence that the lights similarly affected others in the community. The court held that while the degree of the lights’ impact may be increased because of a property’s proximity to the highway, that is not enough to make them special damages and therefore such damages were not compensable.[105]
III. Conclusion
Over the two decades since the Texas Supreme Court’s decision in Schmidt, the phrase “Schmidt damages” has entered common usage in the lexicon of eminent domain attorneys. The phrase is shorthand for property damages that might be recognized by the market, but are nevertheless noncompensable under the law. However, as the cases discussed in this paper demonstrate, just what damages constitute “Schmidt damages” has been consistently debated by both sides of the eminent domain bar. While Texas courts have clarified some areas of the debate, others remain open. It is settled law that the Campbell rule and the community property rule should be applied independently. Schmidt and its progeny make clear that community damages are noncompensable, but the community damage principle is “easier to articulate than to define.” Claims for access damages have given rise to the greatest amount of case law, while other damage claims, such as increased noise, have never been found to be compensable since Schmidt. The debate over the exact contours of the rules discussed in Schmidt will likely continue for decades to come.
[1] The opinions expressed by the authors of this paper are their own and do not reflect the positions or opinions of the Office of the Attorney General.
[2] 867 S.W.2d 769 (Tex. 1993).
[3] Id.at 770–72.
[4] Id. at 772.
[5] Id. at 772 (quoting State v. Carpenter, 126 Tex. 604, 89 S.W.2d 194, 197–98, 200 (1936).
[6] Id. at 773.
[7] Id. at 774.
[8] Id. at 775.
[9] Id.
[10] Id. at 777.
[11] Id. at 777.
[12] Id.
[13] Id. at 777–78 (citing Campbell v. United States, 266 U.S. 368, 372 (1924)).
[14] Id. (citing State v. Clark, 161 Tex. 10, 336 S.W.2d 612 (1960)).
[15] Id.
[16] Id. at 778–79.
[17] Id.
[18] Id. at 778 (citing United States v. 15.65 Acres of Land, 689 F.2d 1329, 1332 (9th Cir. 1982).
[19] Id.
[20] Id. at 779.
[21] Id.
[22] Id. at 779–81.
[23] Id. at 781.
[24] Id.
[25] Id. at 912 S.W.2d 831 (Tex.App.—Dallas 1995, writ denied).
[26] Id. at 832.
[27] Id. at 834-35.
[28] Id. at 834.
[29] Id. at 834 n.3.
[30] 66 S.W.3d 213 (Tex. 2001).
[31] Id. at 217
[32] Id.
[33] Id. at 221–22.
[34] Id.
[35] Id.
[36] Id.
[37] 144 S.W.3d 455 (Tex. 2004).
[38] Id. at 458.
[39] Id.
[40] Id. at 462–63.
[41] Id.
[42] 917 S.W.2d 6 (Tex. 1995).
[43] Id. at 436.
[44] Id.
[45] Id. at 10.
[46] Id. at 8.
[47] 867 S.W.2d at 778–79.
[48] 144 S.W.3d at 462–63.
[49] 391 S.W.3d 563 (Tex.App.—Dallas 2012, no pet.).
[50] Id. at 569 (emphasis added).
[51] Id.
[52] Id. at 569–70
[53] Id. at 571.
[54] 876 S.W.2d at 779.
[55] Id. at 781.
[56] Id.
[57] Tex. Prop. Code § 21.042(d).
[58] 917 S.W.2d at 8.
[59] Id. at 9.
[60] Id. at 11.
[61] Id.
[62] Id.
[63] 60 S.W.3d 256 (Tex. App.—Houston [14th Dist.] 2001, pet. denied).
[64] Id. at 260.
[65] Id.
[66] Id. at 261 (citing City of Austin v. Avenue Corp., 704 S.W.2d 11, 13 (Tex. 1986)).
[67] Id.
[68] See id.
[69] See, e.g., State v. Travis, 722 S.W.2d 698 (Tex. 1987); City of Dallas v. Priolo, 150 Tex. 423, 242 S.W.2d 176 (1951); AVM-HOU, Ltd. v. Capital Metro. Transp. Auth., 262 S.W.3d 574, 579 (Tex. App.—Austin 2008, no pet.), to name a few.
[70] Id. at 263.
[71] Id.
[72] 267 S.W.3d 875 (Tex. 2008).
[73] Id. at 877.
[74] Id.
[75] Id. at 878.
[76] Id. (citations omitted)
[77] See id.
[78] Id. at 880
[79] Id.
[80] 444 S.W.3d 62 (Tex. App.—Dallas 2014, pet filed).
[81] Id. at 65-66.
[82] Id.
[83] Id. at 77.
[84] Tex. Prop. Code § 21.042(d).
[85] 409 S.W.3d 1 (Tex. App.—Houston [1st Dist.] 2013, pet. denied)
[86] Id at 3.
[87] Id. at 4.
[88] Id at 8.
[89] Id.
[90] Id. at 10.
[91] Id.
[92] Interstate Northborough, 66 S.W.3d at 223.
[93] Id. at 217.
[94] Id. at 222–23.
[95] Schmidt, 867 S.W.2d at 774 (citing Julius L. Sackman & Patrick J. Rohan, Nichols, The Law of Eminent Domain (3d ed. rev. 1992) § 14.13[2], at 14–310 (“It has been held that an impairment of this right [to be seen] is not a legally cognizable element of damage.”))
[96] Id. at 773 (quoting State Highway Comm’n v. Humphreys, 58 S.W.2d 144, 145 (Tex. Civ. App.—San Antonio 1933, writ ref’d)) (internal citation omitted).
[97] Santikos, 144 S.W.3d at 462-63.
[98] 346 S.W.3d 525, 532 (Tex. 2011).
[99] Id.
[100]State v. Petropoulos, 346 S.W.3d 525, 532 (Tex. 2011); Santikos, 144 S.W.3d at 463; Bristol, 293 S.W.3d at 175; Interstate Northborough P’ship v. State, 66 S.W.3d 213, 219–220 (Tex. 2001); State v. Heal, 917 S.W.2d 6, 10 (Tex. 1996); State v. Allen, 870 S.W.2d 1, 1–2 (Tex. 1994); State v. Munday Enterprises, 868 S.W.2d 319, 320 (Tex. 1993); State v. Dowd, 867 S.W.2d 781, 782 (Tex. 1993); State v. Edwards, 868 S.W.2d 321, 322 (Tex. 1993); and State v. Centennial Mortg. Corp., 867 S.W.2d 783, 783 (Tex. 1993).
[101] Felts v. Harris County, 915 S.W.2d 482, (Tex. 1996).
[102] Felts, 915 S.W.2d at 485–486; See also State v. Biggar, 873 S.W.2d 11, 13 (Tex. 1994) (holding that damages for noise, dust, increased traffic and other inconveniences incident to highway construction are community damages and therefore, not compensable).
[103] Felts, 915 S.W.2d at 485–486.
[104] 146 S.W.3d 637 (Tex. 2004).
[105] Id. at 647–48.
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