State v. Central Expressway Sign Associates

January 3, 2014 § Leave a comment

In Central Expressway, the State of Texas (“State”) sought to condemn piece of land near a highway interchange. [1]. Central Expressway Sign Associates (“CESA”) held a billboard easement on the property being condemned. The CESA easement was in turn leased out to Viacom Outdoor, Inc. who sold advertising space on the billboard. After a special commissioners’ hearing was held on the condemnation matter, the State filed objections, transferring the condemnation proceeding from the administrative phase back into court system.

The Texas Supreme Court’s decision in Central Expressway Sign Assoc. centers on the trial court’s decision to strike Grant Wall, the State’s expert appraiser, for failing to include advertising revenue from the billboard in his appraisal. This made his testimony unreliable according to the trial court. The Dallas Court of Appeals affirmed the decision of the lower court. The Texas Supreme Court considered Wall’s exclusion by the trial court on an abuse of discretion standard.

Texas eminent domain law generally prohibits consideration of income generated from businesses located on the condemned property. [2]. In effort to establish market value of the billboard property taken, CESA argued “billboard advertising revenue is derived from the intrinsic value of the land, and therefore that revenue should be treated like rental income for purposes of a income-method appraisal.” The Texas Supreme Court rejected this argument and explained, “[b]ut Texas courts have not recognized the exception alluded to in Herndon for business profits ‘derived from the intrinsic nature of the real estate.’”

The Texas Supreme Court further concluded that Wall properly valued the easement as a whole without including advertising revenue and that his exclusion by the trial court of the condemned property’s value was an abuse of discretion constituting reversible error. Therefore, the Texas Supreme Court declined to create an exception for profits from the land on which a billboard is located, meaning its advertising revenue could not be considered for valuation purposes.

[1]. See State v. Cent. Expressway Sign Assocs., 302 S.W.3d 866, 871 (Tex. 2009).

[2]. But see City of Austin v. The Avenue Corp., 704 S.W.2d 11, 13 (Tex. 1986) (allowing lost profits to be recovered for material and substantial access interference or denial to the property occurs); City of Dallas v. Priolo, 242 S.W.2d 176, 179 (Tex. 1951) (allowing lost profits to demonstrate the effects on the remaining property in a partial takings case).

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