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TC&C Real Estate Holdings, Inc. v. ETC Katy Pipeline, Ltd.

Court of Appeals of Texas, Tenth District

December 20, 2017

TC&C REAL ESTATE HOLDINGS, INC., Appellant
v.
ETC KATY PIPELINE, LTD., AS SUCCESSOR IN INTEREST TO ETC TEXAS PIPELINE, LTD., Appellee

          From the 87th District Court Limestone County, Texas Trial Court No. 27, 197-B

          Before Justice Davis, Justice Scoggins, and Judge McFarling [2]

          MEMORANDUM OPINION

          AL SCOGGINS Justice

         On February 23, 2004, ETC Texas Pipeline, Ltd.[1], filed a Statement and Petition in Condemnation against TC&C Real Estate Holdings, Inc. After a hearing, the Special Commissioners awarded TC&C $2591.00 as compensation for the easements sought by ETC. TC&C objected to the award and filed a plea to the jurisdiction and a motion to dismiss. The trial court granted ETC's partial motion for summary judgment and denied TC&C's partial motion for summary judgment. On February 22, 2016, a jury was empaneled; however, some issues were tried to the trial court. The jury awarded TC&C $50, 000 for the value of the easement and for damages. In accordance with the jury verdict, the trial court ordered that TC&C recover from ETC $50, 000. TC&C appeals from the trial court's judgment. We affirm.

         Jurisdiction

         In the first seven issues on appeal, TC&C argues that the trial court erred in its findings on jurisdiction. Conclusions of law are reviewed de novo. Perez v. Old West Capital Company, 411 S.W.3d 66, 75 (Tex.App.-El Paso 2013, no pet.). The trial court's findings of fact have the same weight as a jury verdict, and we review the legal and factual sufficiency of the evidence as we would a jury's findings. Perez v. Old West Capital Company, 411 S.W.3d at 74. If there is more than a scintilla of evidence supporting a finding of fact, we will overrule a legal sufficiency challenge. Id. In reviewing a factual sufficiency challenge, we consider all of the evidence and will set aside a finding only if it is so against the great weight and preponderance of the evidence as to be clearly wrong and unjust. Id. The trial court concluded as a matter of law:

• This Court has jurisdiction over the subject matter and parties hereto.
• Public use and necessity for the pipeline and the Easements are established by one or more of the following: (1) legislative declaration, (2) classification and regulation of the pipeline at issue as part of ETC's gas utility pipeline system, (3) ETC's ownership or operation for compensation in Texas of equipment or facilities to transmit or distribute combustible hydrocarbon natural gas for sale or resale in a manner not subject to federal jurisdiction, and, or (4) ETC's ownership, management, operation, lease, or control in Texas of a gas utility pipeline system for a business that transports, conveys, distributes, or delivers natural gas for public use or service for compensation or its ownership, operation, or management of a pipeline that is for transporting or carrying natural gas whether for public hire or not and for which right-of-way has been acquired by exercising the right of eminent domain.
• ETC is a gas corporation and ETC's pipeline at issue is part of a gas utility pipeline system as gas utility is defined in the Texas Utilities Code.
• As a gas corporation under the Texas Utilities Code, ETC has the power to enter on, condemn, and appropriate the land, right-of-way, easement, or other property of any person or corporation, including the Easements on, over, across, and under the Property.
• ETC's pipeline and gas utility system of which said pipeline is a part, serve the public use and ETC duly and properly declared the necessity of the pipeline extension (at issue in this case) to its existing gas utility pipeline system and the necessity of the lands rights and easements needed in connection therewith, including the Easements on, over, across and under the property.
• ETC has strictly complied with the statutes authorizing this eminent domain proceeding.
• ETC has the legal capacity to bring this eminent domain proceeding and the legal capacity to be entitled to recover the Easements.

         TC&C first argues that ETC failed to satisfy jurisdictional requirements because it did not show that the pipeline is for an actual public use. TC&C argues that it is the condemnor's burden to show constitutionally sufficient actual public use of the property to be condemned citing Texas Rice Land Partners, Ltd., v. Denbury Green Pipeline-Texas, LLC, 363 S.W.3d 192 (Tex.2012) as authority.

          The Texas Constitution safeguards private property by declaring that eminent domain can only be exercised for "public use." Tex. Rice Land Partners, Ltd. v. Denbury Green Pipeline-Tex., LLC, 363 S.W.3d at 194 (quoting Texas Constitution art. I, § 17). The ultimate question of whether a particular use is a public use is a judicial question to be decided by the courts as a matter of law. Tex. Rice Land Partners, Ltd. v. Denbury Green Pipeline-Tex., LLC, 363 S.W.3d at 198 n. 16; Housing Authority of Dallas v. Higginbotham, 135 Tex. 158, 143 S.W.2d 79, 84 (1940); Saner v. BridgeTex Pipeline Company, LLC, No. 11-14-00199-CV, 2016 Tex.App. Lexis 7764 *3 (Tex.App.-Eastland July 21, 2016, pet. den'd).

         Denbury involved a carbon dioxide (CO sub2) pipeline company that had been granted the power of eminent domain by the Railroad Commission as a "common carrier" pipeline company pursuant to the provisions of the Natural Resources Code. Tex. Rice Land Partners, Ltd. v. Denbury Green Pipeline-Tex., LLC, 363 S.W.3d at 194-95; see Tex. Nat. Res. Code Ann. § 111.002(6) (West 2011). The Texas Supreme Court held that a landowner can challenge the eminent-domain power of the pipeline company by contesting whether the proposed pipeline will in fact be public, rather than private. Id. at 195.

         In Denbury, the Court held that to qualify as a common carrier with the power of eminent domain, the pipeline must serve the public; it cannot be built only for the builder's exclusive use. Tex. Rice Land Partners, Ltd. v. Denbury Green Pipeline-Tex., LLC, 363 S.W.3d at 200. The Court noted that extending the power of eminent domain to the taking of property for a private use cannot survive constitutional scrutiny. Id.

         The Court established a test to determine what qualifies as public use for a carbon dioxide pipeline and held that, "for a person intending to build a CO sub2 pipeline to qualify as a common carrier under Section 111.002(6), a reasonable probability must exist that the pipeline will at some point after construction serve the public by transporting gas for one or more customers who will either retain ownership of their gas or sell it to parties other than the carrier." Tex. Rice Land Partners, Ltd. v. Denbury Green Pipeline-Tex., LLC, 363 S.W.3d at 202; Saner v. BridgeTex Pipeline Company, LLC, at *4. The Court in Denbury court stated "Our decision today is limited to persons seeking common-carrier pipeline status under Section 111.002(6). We express no opinion on pipelines where common-carrier status is at issue under other provisions of the Natural Resources Code or elsewhere." Tex. Rice Land Partners, Ltd. v. Denbury Green Pipeline-Tex., LLC, 363 S.W.3d at 202 n. 28.

         ETC is claiming the right of eminent domain under the Texas Utilities Code rather than the Natural Resources Code used in Denbury. Therefore, the holding in Denbury requiring a person intending to build a CO sub2 pipeline to qualify as a common carrier and demonstrate a "reasonable probability" that the pipeline will serve the public by transporting gas for one or more customers is not applicable in this case. We recognize that courts have extended the holding in Denbury to other provisions in the Natural Resources Code; however, we have found no cases extending the holding to provisions in the Texas Utility Code. Moreover, we note that ETC met the standard in Denbury by providing evidence of public use by producing evidence that it has unaffiliated customers.

         The Texas Utility Code provides that, "a gas or electric corporation has the right and power to enter on, condemn, and appropriate the land, right-of-way, easement, or other property of any person or corporation." Tex. Util. Code Ann. § 181.004 (West 2007). Gas utility means:

a person who owns, manages, operates, leases, or controls in this state property or equipment or a pipeline, plant, facility, franchise, license, or permit for a business that:
(1) transports, conveys, distributes, or delivers natural gas:
(A) for public use or service for compensation;
(B) for sale to municipalities or persons engaged in distributing or selling natural gas to the public, in a situation described by Subdivision (3);
(C) for sale or delivery to a person operating under a franchise or contract with a political subdivision ...

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