Texas Appeals Court: Property Owner Properly Pled A Valid Inverse Condemnation Claim

Recently, the Texas Court of Appeals, Third District, issued a memorandum opinion in an interlocutory appeal from a trial court’s denial of the City’s plea to the jurisdiction relating to inverse condemnation claims for flooding.  (A plea to the jurisdiction challenges the court’s authority to decide a case.)  In City of Austin v. GHI Investments, LLC f/k/a GHI Partners, LLC, 03-12-00189-CV (Tex. App. April 30, 2013), the court held that property owner/developer GHI, affirmed the trial court’s order adverse to the City and held that GHI had properly stated its claim for inverse condemnation.

The issues in the case arise out of a City-approved roadway widening project with bike lane and grocery store project. In its claims for inverse condemnation and nuisance, GHI alleges that those City-approved projects resulted in the flooding of its property. The City argued that GHI’s pleadings did not support its claims for inverse condemnation and nuisance and the City, therefore, retained its governmental immunity.  The City contended that GHI did not allege the City “intended in any way for the Property to be flooded.” The City further argued that the grocery store project from which GHI was alleging the majority of the flooding resulted was not a public use and therefore GHI had failed to allege that the taking was for public use.

In its response to the city’s plea, GHI attached city emails in which City employees, including the engineer assigned to the road widening project, expressed  concern that the existing drainage system could not handle its existing drainage much less additional water from the projects.   The engineer specifically referred to the project as a “‘band-aid’ solution” and “inadequate to solve the drainage problems in the area.”  Despite these concerns, the City permitted the two projects as designed and each project was constructed as designed.  The road project was completed in 2006 and the store grocery project was completed in approximately 2009.  In response to GHI’s inclusion of the emails in its response, the City argued that the emails were simply employees expressing concerns about possible issues or demonstrated differences of opinion among City employees.

As OCA Hawaii Member Robert Thomas pointed out in his post concerning this case here, Texas municipalities, like municipal entities in other states, enjoy limited immunity from tort claims, but that immunity has been waived under the takings clause of the Texas Constitution, which includes inverse condemnation claims.  The Texas Court of Appeals held “[t]o plead a valid inverse condemnation claim and establish waiver of immunity under the takings clause, a plaintiff must allege that the governmental agency (1) intentionally performed certain acts in the exercise of its lawful authority (2) that resulted in taking, damaging, or destroying the plaintiff’s property (3) for public use.” Slip op. at 9.

The City asserted that, at most, it negligently relied upon assurances the drainage would not be a problem and continued to assert immunity.  The court rejected that argument.  “Construing the pleadings liberally in favor of jurisdiction, looking to GHI’s intent, and accepting the allegations in the pleadings as true…we conclude that GHI’s pleadings do not complain of the City’s negligence or omissions but, instead, assert the essential intent element necesary to state a facially valid takings claim.”  Slip op. 11-12.

With respect to the City’s argument that the project which caused most of the flooding was not a public use, the court concluded that “GHI has sufficiently  pleaded the public use element of a takings claim and overrule the City’s second issue.”

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