In Caffe Ribs, Inc. v. State of Texas, the State of Texas filed an eminent domain suit to obtain property from Caffe Ribs to use for a storm water detention pond as part of an expansion of Interstate 10. The property is near the intersection of Beltway 8 and Interstate 10.
Prior to ownership by Caffe Ribs, the property was used to store and manufacture oil field equipment, which resulted in environmental contamination on the property. Weatherford owned the property from 1977 to 1988, until the property was foreclosed on by Paul Revere Variable Annuity Insurance Company. Weatherford continued operations on the property as a lessee into the 1990s.
In February 1995, Paul Revere sold the property “as is” to Caffe Ribs for $487,000. Ribs expressly agreed “to accept the conveyance of the Property subject to any presently known or subsequently discovered Hazardous Materials or Hazardous Materials Contamination.” Paul Revere retained the exclusive right to evaluate and analyze the environmental condition of the property and take any actions that Paul Revere determined to be necessary regarding environmental conditions. Subsequently, Weatherford and Paul Revere began remediation of the property. They were well into that process when their efforts were interrupted by the condemnation lawsuit.
During the condemnation suit, the trial court allowed the State to present evidence of contamination and show how the contamination lowered the value of the condemned property. On the other hand, the trial court refused to allow Ribs’ witnesses to testify that the property would have already been cleaned up, and thus worth almost twice as much, except for the delays caused by the condemnation suit. The jury awarded Ribs approximately $4,900,000 as the value of the property, even though Ribs evidence what have showed that, had the property been remediated, it would have been worth over $9,000,000.
The Texas Supreme Court determined that the exclusion of Ribs evidence was error. The Court noted that Texas follows the “project influence” rule, that is, the market value of the property to be condemned shouldn’t include either positive or negative impacts on market value because of the public works project for which the land is being condemned. The Court stated that “(a)s just discussed, an evidentiary exclusion is not an essential component of the project influence rule. Indeed, in this case, the evidentiary exclusion was antithetical to the rule’s substantive purpose of ensuring that the compensation award did not reflect the deflationary effects of the government’s project. As the United States Supreme Court has observed, ‘it would be manifestly unjust to permit a public authority to depreciate property values by a threat of the construction of a government project and then to take advantage of this depression in the price which it must pay for the property when eventually condemned.’ ”
After the evidence by Ribs (that the condemnation proceedings delayed remediation of the property) was excluded, the attorneys for the state argued to the jury that the former property owners weren’t serious about remediation and had been dragging their feet! That’s a lot like asking someone to defend themselves after you’ve tied both hands behind their back. Luckily for Ribs, the Texas Supreme Court was the voice of reason here and sent the case back to a trial with all the evidence being heard. Let’s hope the Texas Attorney General settled this one rather than go through all this again. As a side note, apparently Caffe Ribs could get a $9,000,000 return on a $487,000 investment. Not bad!