The Texas Supreme Court recently issued an important decision in State of Texas v. JRJ Pusok Holdings, LLC, answering the question of whether a landowner may sue the State to repurchase property when a portion of the condemned property is no longer necessary for public use.
Rural Highway / Photo via Evelyn Okay via Unsplash
Background
Three landowners owned property in Tomball, Texas. In October 2013, the State notified the landowners that it intended to acquire their property for a highway project. As required by law, the State provided the landowners with a monetary offer of $496,120, the Landowner Bill of Rights, and a copy of the Texas Property Code Chapter 21, which governs eminent domain proceedings. The Landowner Bill of Rights provides that if property is condemned and then the public use for which it was acquired is canceled, or no actual progress is made towards the project or the project becomes unnecessary within 10 years, the landowners may have the right to repurchase the property for the price paid to the owner by the condemner at the time the land was taken through eminent domain. The landowners subsequently received a final offer from the State, which they did not accept. In April 2014, the State petitioned for condemnation by initiating suit in Harris County. Three weeks later, the State and the landowners settled on a value of $681,705 for the condemned land. A special warranty deed conveyed the property to the State and provided that the landowners agreed not to “seek any additional compensation, damages, attorney’s fees, or expenses from the State of Texas.” The State moved to nonsuit its condemnation petition, and the case was dismissed.
Later, government officials decided to reroute the highway project, leaving part of the landowners’ condemned land unused. When asked if the State planned to use the remaining portion of the property, the landowners were told that the land was surplus, and the State refused to sell it back to the landowners. The landowners then assigned their rights to JRJ Pusok Holdings (“JRJ”) to pursue a repurchase claim.
Litigation
JRJ sued the State of Texas and the Department of Transportation Director, claiming violations of its repurchase rights under Property Code Chapter 21. The State claimed sovereign immunity and lack of justiciability, and the trial court granted the State’s motion to dismiss. The Fourteenth District Court of Appeals in Houston reversed the dismissal of the repurchase claim, holding that Chapter 21 demonstrates the State’s waiver of immunity for repurchase claims. The Court of Appeals also held that the property was acquired “through eminent domain” because the State filed a condemnation action. The State petitioned the Texas Supreme Court for review, which was granted.
Texas Supreme Court Opinion
The Texas Supreme Court sided with JRJ on all issues in its majority opinion.
Sovereign Immunity
Sovereign immunity provides that a state cannot be sued in its own courts without consent, and even then, only by the manner indicated by that consent. Generally, to waive immunity, consent must be found in a constitutional provision or a legislative enactment. A statutory waiver must be effected by clear and unambiguous language.
History of Repurchase Right
The Texas Constitution recognizes two limits on the State’s eminent domain power: adequate compensation and public use. The Legislature provides the process for adjudicating the adequate compensation the State must pay.
In 1980, there was a significant shift on the issue of condemnation and sovereign immunity when the Texas Supreme Court recognized inverse condemnation claims in Steele v. City of Houston. The Court held that the State had no immunity against condemnation claims when it takes property via eminent domain without paying just compensation. The Court based that decision on the idea that the Constitution authorizes compensation for the destruction of property and is a waiver of immunity for the taking, damage, or destruction of property for public use. Since that time, the Court has understood the Takings Clause to authorize suit, regardless of any statutory provision.
Next, in 2003, the Legislature created the statutory repurchase right in the Property Code. This right was strengthened in 2007 when Texans passed a constitutional amendment expressly permitting the repurchase of property at the price of acquisition. Two years later, the Constitution was amended again, further limiting the meaning of public use. In 2011, the Texas Legislature amended Property Code Chapter 21 to set the repurchase right and price at the amount paid by the government at the time of the taking, not the current market value.
Arguments
The State argued that the statutes confer jurisdiction to courts over repurchase claims but do not grant immunity to pursue them against the State. The State argued that the right to repurchase is a statutory right not found in the Constitution.
JRJ disagreed and argued that the statute authorizes relief associated with a waiver of sovereign immunity, including damages, for “all issues” in which the State occupied property under the authority of eminent domain. This, JRJ argued, is consistent with the Constitution’s authorization that the State offers a repurchase price valued as of the time of acquisition.
Holding
“We conclude that the State is not immune from repurchase claims.” First, the legislature placed the repurchase statute within the law governing eminent domain, proceedings from which the State does not enjoy immunity. Chapter 21 permits district courts to “determine all issues…in any suit…in which the State…is a party” and that involves a claim for property occupied by the State under eminent domain authority. As the Court previously held, “the government is not immune from claims on the ‘back end’ after it takes property without compensation.” The statute cannot be read consistently with the Constitution without the waiver of sovereign immunity. The statutory language is more than merely jurisdictional.
The Court then made an interesting point regarding profit from eminent domain. “What the State loses is any appreciation in the property’s value between the time it was condemned and the repurchase. But under the constitutional and statutory framework, the State was never entitled to profit from its eminent domain authority. The People amended the Constitution to permit the landowner to recover the loss of that profit, with supporters aiming to minimize the speculative overuse of condemnation authority. Any liability the repurchase right creates for the government is both limited and purposeful.”
Finally, the Court reasoned that the repurchase right serves “virtually no purpose absent the waiver of immunity.” The State and dissent contend that the repurchase statute is effective even without sovereign immunity because some private actors have the authority to condemn. Initially, however, the repurchase right applied only to property acquired by a governmental entity, not that taken by private actors. Where landowners cede their property to the State’s eminent domain power, which is limited by the public use requirement, that same requirement carries forward in subsequent claims.
Repurchase Criteria
Next, the Court considered whether JRJ’s repurchase claim met the Chapter 21 criteria.
“Through Eminent Domain”
The State contended it did not acquire the property “through eminent domain” as required by the repurchase statute because it settled upon the condemned value with the landowners. Without a final judgment adjudicating the property’s value, the State claimed the property was not taken “through eminent domain.”
The State turned to the dictionary for the definition of “through,” which means “by way of”; “passage into and out of a treatment, handling, or process” or “a function word to indicate means, agency, or intermediacy.” The court reasoned, then, that the definition of “eminent domain” is the “inherent power of a governmental entity to take privately owned property, especially land, and convert it to public use, subject to reasonable compensation for the taking.”
Thus, the Court wrote, the logical reading of “through eminent domain” is “by means of the State’s power to take private property for public use.” The State’s reading would require the Court to swap the term “eminent domain” with “condemnation judgment.” Eminent domain is not the process the State goes through; it is the State’s power. A settlement as to the property’s value does not alter the acquisition of it “through eminent domain.” The deed in this case indicated that the landowners conveyed the land because of the pending eminent domain proceedings. The landowners did not sell the property on the open market to an arms-length buyer; rather, they surrendered their property in concession to the State’s power.
“Once the state invokes its eminent domain power, landowners need not proceed to a judgment as to adequate compensation to preserve their repurchase right. The State’s forced transfer via a condemnation suit is an exercise of its power to obtain the property “through eminent domain.”
Portion of the Property
The State claimed that Chapter 21 was inapplicable when only a portion of the property–not the entire property–is no longer necessary for public use. The State pointed to the repurchase right referring to “the property,” pointing out it does not permit repurchase of a portion of the property. But, as the Court noted, neither does it refer to repurchase of “the entire property.” A portion of the property is accurately described as “property.”
Here, the State used 97% of the condemned property for the highway. The remaining 3% became surplus within 10 years of its acquisition. Once the State determines that property is no longer required for public use, as it did here, it must notify the landowner of the repurchase right.
The State then argued it was difficult to determine a price for a partial repurchase. “We are not persuaded,” wrote the Court. The State offered to sell the 3% for fair market value, which indicates it is possible to value the land. The State can use the statutory directive setting the repurchase price as the price paid to the owner at time it was acquired.
Jurisdiction
Lastly, the Court held that Chapter 21 gives district courts and county courts of law concurrent jurisdiction in eminent domain cases, and a repurchase claim is, in fact, an eminent domain case.
Conclusion
Thus, the Texas Supreme Court affirmed the court of appeals’ judgment and remanded the case to the trial court for further proceedings.
Concurring Opinion
Justice Young filed a concurring opinion. He agreed with the Court’s determination that sovereign immunity is waived as to repurchase claims. He wrote separately because he believes that determining whether a statute waives sovereign immunity can and should be simpler than prior decisions suggest.
First, he noted that the legislature’s intent to waive sovereign immunity must be clearly stated. “If sovereign immunity is waived, it is because the legislature clearly waived it–not because a court has read a waiver into a statute in a way that the legislature can later plausibly disclaim.”
Second, it is the Court’s job to interpret the statute based on the text, context, and legislative history, to determine if the required clarity is present. While an express waiver is the easiest way, it is not the only way the legislature can meet the clear indication of waiver. “Requiring clarity is not the same as requiring formulaic or magic words.”
Third, applying this standard here, he found it is clear the legislature’s waiver of sovereign immunity in repurchase cases was “manifest, albeit not ‘express,’ from the start.”
Fourth, he did not find it necessary to address other considerations included in the majority opinion.
Dissenting Opinion
Justice Hawkins authored a dissenting opinion which was joined by Justice Sullivan and Chief Justice Blacklock and was actually lengthier than the majority opinion. For the sake of space and time, we are including only a high-level summary below.
The dissent said that the majority finds waiver of immunity for repurchase claims despite “containing none of the statutory indicia that traditionally signal the waiver of immunity.” It does not mention “waiver,” and it does not require the State’s participation in a case. The majority admits the statutory scheme would still have some effect–in cases where property was taken by private actors–without the waiver of immunity. Instead, the majority turns to the constitutional backdrop, the broader statutory context, and practical concerns to hold that immunity is waived. The good news, the dissent wrote, is that today’s decision is limited to this particular statutory provision and its unique considerations, including the constitutional backdrop that makes it differ from every other statutory right. This decision has no impact on any other statutes. Regardless, the dissenting justices believed it was wrongly decided and would have issued judgment for the State dismissing the claim. From a policy perspective, the dissent warned, courts have no business letting claims proceed against a state absent unmistakably clear immunity waivers because taxpayer dollars and separation-of-powers principles are on the line.
Additionally, the dissent would find that even were sovereign immunity waived, the property was not acquired “through eminent domain,” a necessary requirement for the statutory repurchase right to apply. Instead, the dissent wrote, this property “was acquired through a privately negotiated and mutually agreed upon sale, not eminent domain.” The dissent pointed to language in the special warranty deed that says the property is conveyed “in order to avoid eminent domain proceedings…” as showing the acquisition was in order to avoid, not complete, eminent domain.
Lastly, the dissent believed the case should be dismissed because it was improperly filed in the county court at law, not the district court.
What Happens Next?
The case will be remanded back to the trial court. Because sovereign immunity is waived and the property was taken through eminent domain, the trial court will proceed with JRJ’s lawsuit against the State.
Key Takeaways
This decision is significant for Texas landowners for several reasons:
- Landowners may file suit against the State to repurchase property taken through eminent domain and not used for that purpose.
- This right to repurchase is available not only to landowners whose case resulted in a condemnation award by the court, but also to landowners against whom condemnation proceedings were filed and then settled. I do think the question of whether this right is available to landowners who received and accepted an offer under the threat of eminent domain prior to a court action being filed remains unclear in this opinion.
- If land is taken by eminent domain and only a portion of the land is used for the designated public use, the landowner has the right to repurchase the unused portion of the land.
- County courts at law have concurrent jurisdiction with district courts to hear repurchase claims. This means landowners can file suit in either court.
