Crosstex DC Gathering Co., J.V. v. Button

November 30, 2013 § 1 Comment

Procedural changes in suburban development are most clearly seen in Crosstex DC Gathering Co., J.V. v. Button.[1] Although their property is undeveloped, 26.26 acres was zoned as residential and the remaining 25.83 acres was zoned as commercial.[2] Crosstex, a natural gas provider, attempted to purchase an easement to build a gas pipeline across the Buttons’ 52.09 acres, and eventually filed a suit in condemnation to acquire the right to build the pipeline.[3] The special commissioners awarded a total of $44,955.00 in compensation to the Buttons, to which they objected.[4]

At trial, Jon Cross, a civil engineer, and Jamie Wickliffe, an appraiser, testified in support of the Buttons.[5] Cross testified that because of the pipeline, developers who wanted to develop the property would incur additional costs and complications.[6] Wickliffe testified that the Buttons’ property was best suited for development.[7] She believed that the highest and best use of the property was for mixed residential and commercial purposes.[8] Wickliffe assumed in her analysis that the zoning on 26.26 acres of the property would change from residential to commercial even though there was no official act by a governmental body before the date of take approving this zoning change.[9] The evidence did show that, 14 of these 26.26 acres were in the city’s future land use plan zoned as commercial.[10] Consequently, Wickliffe valued the “upzoned” acres at a value lower than she would have if the zoning were already in place on the property.[11]

Crosstex’s appraiser stated that the highest and best use of the Buttons’ property was for residential and commercial development but did not support Wickliffe’s premise that part of the residential property should be valued as if it were to change to commercial.[12] The jury awarded the Buttons total compensation of $749,843.99, including an award of $665,968.03 for damages to the remainder of their property.[13]

Crosstex appealed the jury award to the Fort Worth court of appeals, asserting that the evidence provided by Cross and Wickliffe was legally and factually insufficient to support the judgment awarding the damages to the remainder of the property.[14] It contended that both Cross’s and Wickliffe’s testimony was too remote and too speculative.[15]

In affirming the trial court’s opinion, the Court addressed the type of testimony it would allow in regard to the highest and best use of property that is currently undeveloped but could possibly be developed in the future. Generally, the Court held that appraisers and other experts have wide latitude to determine the highest and best use of the property in the future and did not restrict this analysis to the state of the property at the date of take.[16]

Button represents another favorable outcome for Texas landowners. Although a property may be currently undeveloped, Button allows appraisers the flexibility to introduce evidence that in the foreseeable future the property has the potential to be developed. However, Button also requires that appraisers support their opinions with research indicating that any zoning changes could pass possible governmental hurdles and correspond with the future market demands of a community.

Returning to a previously mentioned case, Exxon Pipeline Co. v. Zwahr, we find Texas courts granting favorable circumstances for urban landowners when faced with condemnation proceedings. Although Zwahr did not unfold in an urban setting or have a positive outcome for the landowners, its ruling has the potential to create favorable outcomes for urban landowners in Texas. As oil and gas companies seek to move natural gas and other material in and out of major urban zones, such as Houston, they will face the increased cost of running pipelines through areas with existing pipelines. Zwahr laid the foundation for appraisers to argue that areas with existing pipelines could be assigned a higher value; with a highest and best use as an existing pipeline easement (or “pipeline corridor”). However, for appraisers to successfully establish a pipeline corridor as a separate economic unit, they will want to show more than the existence of pipelines on the property. A review of other pipeline corridor cases suggest that the following factors are likely to help appraisers support their argument that a pipeline corridor exists:

(1) Segregation: characteristics setting land apart from surrounding land (e.g., severing the corridor from the rest of the property by replatting);

(2) Existing Use: existing use as a pipeline corridor;

(3) Improvements: improvements supporting use as a pipeline corridor (e.g., access roads, compressor sites, surrounding wells, gathering lines); and

(4) Sale history and private market: history of selling easements within the corridor (or existence of a private market for easements in the area).[17]

Recent ruling by courts in Texas have strengthened the ability of appraisers to offer more expansive testimony about the highest and best use of properties. In all three settings (rural recreational development, suburban development, and urban development), appraisers are able to demonstrate that pipeline easements often create more damage than acknowledged by condemnors’ appraisers.

[1] Crosstex DC Gathering Co., J.V. v. Button, No. 02-11-00067-CV, 2013 WL 257355 (Tex.App.—Fort Worth Jan. 24, 2013, no pet. h.). [2] See id. at *10. [3] Id. at *1. [4] Id. [5] Id. [6] Id. at *3-5. Specifically, Cross pointed out that Crosstex would ultimately have control over its easement thus affecting where developers could locate everything from parking lots, roadways, and fire lanes to landscaping, and fencing. Id. at *4. [7] Id. at *10. [8] Id. [9] Id. [10] Id. [11] Id. at *16. [12] See id. at *10. [13] Id. at *2. [14] Id. at *3. [15] See id. at *3, 5. [16] See id. at *14-16. In addressing whether Cross’s testimony was too speculative, the court held that evidence should not be restricted to only the uses that the land currently has but instead should allow evidence of the property’s condition and adaptability that would increase or decrease the present market value of the property. Id. at *6-8. The Court required Wickliffe to show that the changes to zoning would need to occur in a “foreseeable future” and within “a reasonable time.” Id. at *12; see also Schneider Nat’l Carriers, Inc. v. Bates, 147 S.W.3d 264, 277 (Tex. 2004) (explaining that “estimates of value normally rest on expectations not about future days but about future years”). Wickliffe’s “upzoning” was deemed reasonable because she supported her conclusion with facts that indicated that the property was likely to be zoned commercial in the foreseeable future. Button, 2013 WL 257355 at *14-16. [17] Bauer, 704 S.W.2d at 110-11, Kalmbach v. Seminole Pipeline Co., No. 03-96-00249-CV, 1998 WL 132971, at *4 (Tex.App.—Austin Mar. 26, 1998, no pet.), Bulanek v. WesTTex 66 Pipeline Co., 209 S.W.3d 98, 100 (Tex. 2006).

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