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Art Courtesy of GetDrawings.com.

Morale v. State is a condemnation case recently decided by the Texas Supreme Court on June 2, 2018. The landowners, Stephen and Kimberly Morale, owned and operated a vehicle collision repair business. The shop was located on a 33,000 square-foot parcel in the town of Little Elm, Texas, and was being partially condemned for the sake of expanding FM 720. Specifically, the State through TxDOT sought to obtain a 3,200 square-foot strip of land and would demolish a portion of the landowners’ property improvements as part of the taking.

The Court held:

  1. The State’s previous, but revoked, designation of the Morales’ property as “displaced” was relevant to the determination of the property’s highest and best value.
  2. Input from the landowner’s theories and evidence regarding the State’s motive for withdrawing the displacement classification were relevant.
  3. The testimonies of the city engineer and city attorney regarding the potential granting of a zoning variance for the subject property were speculative and therefore irrelevant to a determination of value.

On the first point, as part of their theory of valuation, the landowners presented evidence that the State had previously classified the landowners as being “displaced.” Displacement, according to the Texas Administrative Code, section 21.116, is a status assigned to a landowner when the construction of a State highway project forces them to relocate. Under the Code, the landowner’s relocation fees are to be paid by the State. This evidence was favorable to the landowners, who used it to support one of their valuation theories, resulting in higher compensation.

The State’s attempt to exclude the evidence was denied by the trial court. The jury awarded the landowners the amount of $1,064,335.00, an amount significantly higher than the State’s appraisal of $122,953.00. The State appealed, and the appellate court reversed the trial court’s ruling on the grounds that the displacement evidence was both irrelevant and speculative. The Morales petitioned the Texas Supreme Court for review, and the Court granted their petition.

The Texas Supreme Court took issue with the appellate court’s reasoning regarding its treatment of the displacement evidence. Firstly, the Court pointed out that the decision to admit or exclude evidence is largely within the trial court’s discretion. Further, it found fault with the appellate court’s conclusion that the displacement classification was wholly irrelevant. Rather, the Court concluded that the displaced status contributed to the ability of the Morales to prove their theory of the case.

Regarding the second relevancy ruling, the landowners, as part of their case, presented evidence to suggest that the State’s motives for withdrawal of the displacement designation were suspect. As with the displacement evidence itself, the trial court allowed the arguments, but the court of appeals disapproved. It reasoned that the landowners’ questioning of the State’s motives for revoking the displacement classification did not add new information to the case, let alone its value. The Texas Supreme Court thought otherwise. It held that the Morales’ inquiries into the State’s reasons for applying, then revoking the classification, were relevant because the application, and subsequent removal of the classification, was a piece of probative evidence for an adversarial trial.

Finally, the Texas Supreme Court held that the testimonies of the city attorney and city engineer regarding the possibility of a zoning variance were irrelevant. The Court made clear that zoning variances granted to other property owners have no relevance if they do not apply to the specific property being condemned. Because Little Elm did not commit to a variance for the landowners’ property, the testimonies of the city attorney and city engineer were impermissibly speculative. Therefore, the trial court was within its discretion to exclude the evidence, and the appellate court erred when it disagreed.

This case is important for condemned landowners as they attempt to seek just compensation for their land when displaced. Allowing landowners access to the full range of relevant facts will help them give the jury a more precise picture of exactly what their land is worth. Ultimately, the Supreme Court reversed the appellate court’s decision and reinstated the trial court’s award.