Opinions Released June 15, 2017

In this weekly blog, the Law Offices of Brandy Wingate Voss, PLLC will summarize recent decisions from the Thirteenth Court of Appeals and provide links to decisions on the court’s website.

State v. Luby’s Fuddruckers Restaurants, LLC, No. 13-16-00173-CV (Memorandum Opinion by Justice Rodriguez; Panel Members: Chief Justice Valdez and Justice Hinojosa)

In this direct appeal from a condemnation case, the Thirteenth Court of Appeals analyzed whether Luby’s could recover lost profits in addition to their condemnation award.

Luby’s owned a cafeteria along U.S. 290 and 34th Street in northwest Houston, Texas. In August 2012, the State filed a condemnation suit to take part of the cafeteria parking lot to expand U.S. 290. Without this land, the cafeteria had inadequate parking space in violation of a Houston City Ordinance and a deed restriction on the land, and it could not continue to operate. Luby’s thus decided to demolish the cafeteria and build a smaller cafeteria with a smaller parking lot on the same plot of land.

The State conceded that Luby’s was entitled to compensation for the taking and cafeteria demolition, but the parties could not agree on the amount of compensation. Moreover, Luby’s filed counterclaims for lost profits, claiming it was entitled to recover lost profits for each month that the cafeteria would be closed during demolition and reconstruction. The State filed a plea to the jurisdiction, arguing that lost profits were not recoverable against the State under Texas law. The trial court denied the plea and the case proceeded to trial.

Luby’s presented evidence that the cafeteria earned approximately $40,000 in net profits each month and that it anticipated a 12-month closure for demolition and reconstruction. Luby’s also called an appraisal expert, Mark Sikes, who valued the property using the “cost approach.” Under the cost approach, Sikes testified that the difference in the market value of the property before and after the taking was approximately $2,959,737. This figure included approximately $444,000 in permanent fixtures such as kitchen equipment.

The State countered Sikes’s testimony with its own appraisal expert, Mike Welch. Welch valued the taking using 3 different methods: the cost approach, the comparable sales approach, and the income approach. Welch testified that the cost approach was the least reliable method, and he also disputed that the kitchen equipment constituted a permanent fixture that could not be salvaged. Relying on all three methods, Welch ultimately estimated the difference in market value as $1,334,183. This figure excluded all fixtures other than the walk-in freezer.

At the charge conference, Luby’s requested a jury question asking the jury to value the whole property including the building and fixtures, while providing an accompanying instruction with the legal definition of fixtures. The court refused the question and instruction.

The jury returned a verdict awarding $1,334,183 for the taking and $480,000 in lost profits. Both parties appealed. The case was transferred from the First Court of Appeals to the Thirteenth Court of Appeals pursuant to a docket equalization order.

Held: Luby’s recovery of lost profits was an impermissible double recovery. And, the trial court did not abuse its discretion when it refused to submit Luby’s proposed jury question and instruction regarding fixtures. The trial court’s judgment awarding $480,000 in damages for lost profits was reversed and the Thirteenth Court rendered judgment that Luby’s take nothing on the claim.

Lost Profits

First, the Thirteenth Court determined whether lost profits were recoverable. The court noted that, in cases involving partial takings, the property owner is entitled to compensation not only for the portion of the land taken, but for damage done to the remainder. However, only certain damages are recoverable as a matter of law.

Generally, the damage to the remainder property is valued based on the difference in market value immediately before and after the condemnation, calculated using either the cost approach, the income approach, or the comparable sales approach. The comparable sales approach—which relies on the sale price of similar property, adjusted upward or downward to account for the differences—is preferred. However, a party may offer testimony based on the income approach—which focuses on the difference in rental income the property would generate—or the cost approach—which focuses on the cost of replacing the condemned property. Lost profits are recoverable only where the taking or damaging of the property caused a material and substantial interference with access to the property. To show a material or substantial interference with access, the property owner must establish a temporary but total restriction of access, a partial but permanent restriction of access, or a temporary limited restriction caused by illegal activity or negligence.

The State argued that Luby’s lost profits were taken into consideration in the $1,334,183 valuation of loss based on the market value of the property. Luby’s however, relied on State v. Whataburger, 60 S.W.3d 256 (Tex. App.—Houston [14th Dist.] 2001, pet. denied) for the rule that lost profits were allowed because there was interference with Luby’s access to the property. In Whataburger, Whataburger recovered lost profits in addition to its condemnation award after the State condemned a portion of Whataburger’s parking lot and forced it to rebuild elsewhere. The Fourteenth Court of Appeals held that this was not double recovery as long as lost profits were not considered in determining the market value of the condemned property. However, the parties focused exclusively on the cost approach in Whataburger, while the State presented evidence of all three valuation methods to calculate Luby’s damages. The comparable sales and income approaches both take lost profits into account in the property’s valuation. Welch emphasized these approaches, and the jury awarded damages in line with his testimony. Thus, the award of lost profits constituted a double recovery.

Jury Charge

Luby’s also challenged the trial court’s refusal to submit a jury question or instruction regarding compensation for fixtures and the definition of fixtures. The trial court instead held that the submissions would invade the purview of the jury because whether to include fixtures was a fact-finding.

The First Court of Appeals has held that a trial court has discretion to submit a jury charge as long the questions submitted control the disposition of the case, are raised by the pleadings and evidence, and are properly submitted for resolution of the disputed issues. To establish that the trial court erred in its ruling on the requested instruction and definition, Luby’s was required to establish that the submissions were reasonably necessary to enable a proper verdict. Not every statement of the law is reasonably necessary, or even appropriate for a broad-form jury charge.

Although Luby’s argued that a question and instruction regarding fixtures was necessary, they could not cite any authority holding that a trial court abused its discretion by failing to submit a similar definition. In fact, the courts of appeals have generally held that similar phrases such as “permanent improvement” are not necessary because the common meaning is within the reasonable intuition of the jury.

Here, the broad-form jury question asked the jury to assess damages based on the change in the market value of “the whole property owned by Luby’s.” The charge defined market value in line with controlling case law. Although the charge “could have stated the law more adequately” by including the definition of fixtures, the trial court did not abuse its discretion by allowing the jury to determine whether fixtures should be included.  

Read the Full Opinion Here

Texas Department of Public Safety v. Pena, No. 13-15-00280-CV (Memorandum Opinion by Chief Justice Valdez; Panel Members: Justices Longoria and Hinojosa)

In this appeal from a county court judgment reversing an administrative license suspension, the Thirteenth Court of Appeals discussed the application of the Fourth Amendment when a defendant is detained by an off-duty peace officer.  

On March 21, 2014, Stacy Jorgensen—an off-duty peace officer working for a school district—saw a driver later identified as Jason Daniel Pena swerve out of his lane, hit the median, and drive onto a sidewalk before parking his truck at a bar. Jorgensen reported these observations to the police and waited for Pena to exit the bar. When Pena exited, Jorgensen requested Pena’s driver’s license and held onto the license until Officer Alan McCollom arrived at the scene. Officer McCollom confirmed with Jorgensen that Pena was the same person Jorgensen had observed driving erratically. Officer McCollom then noted that the man’s eyes were bloodshot, he smelt of alcohol, his speech was slurred, and his balance was unsteady. Pena refused to perform field sobriety tests or give a breath sample. Officer McCollom arrested Pena for DWI, and the Department sought suspension of his driver’s license.

At a hearing on the issue, Pena claimed that Officer McCollom lacked reasonable suspicion for the stop or probable cause for the arrest. The Department offered Officer McCollom’s written report into evidence, and Pena countered the report with his testimony that he drove to the bar completely sober and obeyed all traffic laws. Pena stated that he drank alcohol at the bar and exited for a smoke break thirty minutes later, only to be arrested for DWI. The administrative law judge suspended Pena’s driver’s license, finding that Jorgensen’s observations constituted reasonable suspicion, and Officer McCollom’s subsequent observations of intoxication constituted probable cause for arrest.

Pena appealed to the county court, which reversed and held that there was no substantial evidence to support the ALJ’s decision.

The Department appealed.

Held: The ALJ’s decision was supported by substantial evidence. The county court’s judgment was reversed, and the Thirteenth Court rendered judgment reinstating the suspension.

An ALJ’s decision is presumed to be based on substantial evidence, and the party challenging the suspension bears the burden to prove that no reasonable basis exists in the record to support the ALJ’s holding. Any ambiguity or credibility determination is resolved in favor of the ALJ’s decision.

Reasonable Suspicion to Support Detention

The Thirteenth Court of Appeals first noted that, as a commissioned police officer employed by a school district, Jorgensen qualified as a “peace officer” under the Code of Criminal Procedure and was subject to the statutory requirements for police conduct. Although Jorgensen stopped Pena off school district property, Jorgensen nonetheless had the legal authority to stop Pena if there was reasonable suspicion for the stop. The State presented evidence that Jorgensen observed Pena swerve, hit the median, and drive on the sidewalk. It was thus rational for Jorgensen to infer that Pena was intoxicated. Although Pena testified that he complied with traffic laws while driving to the bar, the ALJ was not required to believe Pena’s testimony.

The county court however, held that Jorgensen did not have authority to stop Pena while off duty without school district approval, as required by the Texas Education Code. However, the Thirteenth Court noted that the school district’s policy incorporated the provisions of the Code of Criminal Procedure regarding DWI stops outside an officer’s jurisdiction. Moreover, Jorgensen’s employment for the school did not change the fact that Jorgensen was a peace officer, with the corresponding duties and powers. Thus, the ALJ’s finding of reasonable suspicion was supported by substantial evidence.

Probable Cause to Support Arrest

The Thirteenth Court of Appeals next analyzed whether there was probable cause to arrest Pena. The State presented evidence to the ALJ that Pena swerved out of his lane, hit the median, and drove on the sidewalk. Furthermore, Pena exhibited signs of intoxication—he had bloodshot eyes, slurred speech, unsteady balance, and he refused field sobriety tests. Although Pena testified that did not drink alcohol until after he arrived at the bar, the ALJ was entitled to disregard this testimony. Thus, the ALJ’s finding of probable cause was supported by substantial evidence.

Since the ALJ’s decision was supported by substantial evidence, the county court erred by reversing the suspension. The Thirteenth Court reversed the county court’s judgment and rendered judgment reinstating the suspension.

Read the Full Opinion Here