Pizza Hut of America, LLC v. Houston Community College System ( 2017 )

Opinion issued December 19, 2017
In The
Court of Appeals
For The
First District of Texas
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NO. 01-17-00101-CV
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PIZZA HUT OF AMERICA, L.L.C., Appellant
V.
HOUSTON COMMUNITY COLLEGE SYSTEM, Appellee
On Appeal from the County Civil Court at Law No. 4
Harris County, Texas
Trial Court Case No. 1043516
MEMORANDUM OPINION
In this condemnation proceeding, appellant Pizza Hut of America, L.L.C.
(“Pizza Hut”), challenges the trial court’s judgment dismissing its claims for lack
of standing. Pizza Hut was a tenant of the Woodridge Plaza Shopping Center
(“Woodridge Plaza”) at the time that appellee Houston Community College
System (“HCCS”) condemned the property. As part of the condemnation
proceedings, a condemnation award of $427,100 was designated to be paid to all of
Woodridge Plaza’s tenants, and Pizza Hut sought $7,100 as its pro rata share from
that amount. The trial court concluded, based on language in Pizza Hut’s lease for
the Woodridge Plaza location, that Pizza Hut had suffered no impairment of its use
of the premises as a result of the condemnation proceedings and, thus, Pizza Hut
lacked standing and was not entitled to any portion of the condemnation award. In
its sole issue on appeal, Pizza Hut contends that it has standing to participate in the
condemnation proceedings and to seek a portion of those funds awarded to the
Woodridge Plaza tenants.
We affirm.
Background
In February 2014, HCCS filed its petition for condemnation against
Compass Investors Group, L.L.C. (“Compass”) to acquire Woodridge Plaza for
educational purposes and the case was referred to special commissioners. In
October 2014, the special commissioners awarded Compass $12,500,000 for its
ownership interest in Woodridge Plaza. HCCS then filed a second condemnation
petition naming the tenants of Woodridge Plaza as defendants. After two hearings,
the special commissioners awarded $427,100 to all of the Woodridge Plaza
tenants. The special commissioners specifically apportioned $7,100 of the total
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funds to Pizza Hut because it was a tenant at the time of the special
commissioners’ hearings. HCCS then deposited the $427,100 into the registry of
the court. All parties contested the special commissioners’ award, and the trial
court consolidated causes of action against Compass and the tenants for further
judicial proceedings.
In October 2015, HCCS gained possession of Woodridge Plaza and
continued operating it based on the operating leases the tenants had with Compass,
including Pizza Hut’s lease with Compass. That lease for Pizza Hut’s restaurant
space was a standard form lease provided by Pizza Hut. It contained a section
pertaining to remedies in the event of a condemnation. The lease stated:
Condemnation means any impairment of Tenant’s use of the
Premises or the Common Area, or both, by act or omission of
government authority, including without limitation, a change in
applicable law, exercise of the power of eminent domain, or exercise
of other government authority such as alteration of a public street
directly serving the Premises or the Common Area, or both. . . .
The Condemnation Award shall belong to the Landlord,
however, Tenant shall be entitled to the Unamortized Cost of Tenant
Improvements, plus Tenant’s relocation expenses as determined by
the condemning entity or court of law. Unamortized Cost of Tenant
Improvements means that portion of all costs of developing and
constructing Tenant Improvement which, if amortized on a straight
line basis over the Term, has not been recovered by Tenant as of the
date of the Condemnation. . . .
Under HCCS’s operation as the premises owner, Pizza Hut continued
operating its business at the Woodridge Plaza location—using its established
equipment and improvements—at a profit and without interruption of physical
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impairment by the condemnation. In April 2016, while the condemnation
proceedings were still pending, Pizza Hut sold all ninety of its Houston locations,
including the Woodridge Plaza location. The sale price included improvements to
the Woodridge Plaza location but not the leasehold interest. Pizza Hut retained the
leasehold interest due to the pending condemnation proceedings.
In December 2016, HCCS filed a plea to the jurisdiction challenging Pizza
Hut’s standing as a party to the condemnation proceedings. The trial court granted
HCCS’s motion and dismissed Pizza Hut as a party from the proceeding without
prejudice. The remaining parties subsequently settled and the trial court granted a
joint motion to dismiss with prejudice. This appeal between Pizza Hut and HCCS
followed.
Standing
In its sole issue, Pizza Hut argues that, as an owner of a leasehold interest at
the time of the taking, it had standing to participate in the condemnation
proceeding.
A. Standard of Review and Applicable Law
Standing is implicit in the concept of subject-matter jurisdiction, and
subject-matter jurisdiction is essential to the authority of a court to decide a case.
Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443 (Tex. 1993). Thus,
standing is never presumed, cannot be waived, and can be raised for the first time
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on appeal. Id. at 443–45. We review standing under the same standard by which
we review subject-matter jurisdiction generally. Id. at 446. Whether the trial court
has subject-matter jurisdiction is a question of law that we review de novo. Tex.
Dep’t of Transp. v. A.P.I. Pipe & Supply, LLC, 397 S.W.3d 162, 166 (Tex. 2013);
Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex 2004).
A trial court decides a plea to the jurisdiction by reviewing the pleadings and
any evidence relevant to the jurisdictional inquiry. See Bland Indep. Sch. Dist. v.
Blue, 34 S.W.3d 547, 555 (Tex. 2000); see also A.P.I. Pipe & Supply, LLC, 397
S.W.3d at 166 (“Evidence can be introduced and considered at the plea to the
jurisdiction stage if needed to determine jurisdiction.”). We review a trial court’s
ruling on a plea to the jurisdiction de novo, construing the pleadings liberally in
favor of the plaintiff while considering the pleader’s intent. Miranda, 133 S.W.3d
at 226–28.
When a party cannot establish a viable takings claim, the trial court “lacks
jurisdiction and should grant a plea to the jurisdiction.” A.P.I. Pipe & Supply, LLC,
397 S.W.3d at 166; see also Tex. Ass’n of Bus., 852 S.W.2d at 446 (“The general
test for standing in Texas requires that there (a) shall be a real controversy between
the parties, which (b) will be actually determined by the judicial declaration
sought.” (internal quotation omitted)). “Further, ‘[i]t is fundamental that, to recover
under the constitutional takings clause, one must first demonstrate an ownership
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interest in the property taken.’” A.P.I. Pipe & Supply, LLC, 397 S.W.3d at 166
(quoting Tex. Dep’t of Transp. v. City of Sunset Valley, 146 S.W.3d 637, 644 (Tex.
2004)). A lessee generally has standing in condemnation proceedings and is
entitled to share in a condemnation award when part of its leasehold interest is lost
by condemnation. Texaco Ref. & Mktg., Inc. v. Crown Plaza Grp., 845 S.W.2d
340, 342 (Tex. App.—Houston [1st Dist.] 1992, no writ). However, a tenant may
waive this right in the lease or elsewhere. See, e.g., Motiva Enters., LLC, v.
McCrabb, 248 S.W.3d 211, 214 (Tex. App.—Houston [1st Dist.] 2007, pet.
denied) (holding that where parties contracted for lease to terminate in event of
condemnation of leased premises, lessee of condemned property had no
compensable leasehold interest following automatic termination of its lease); Fort
Worth Concrete Co. v. State, 416 S.W.2d 518, 521 (Tex. Civ. App.—Fort Worth
1967, writ ref’d n.r.e.) (“A tenant whose lease provides for its termination upon the
taking of the leased premises for a public use, is entitled to no compensation when
it is condemned.”).
B. Analysis
Pizza Hut argues on appeal that it has standing in the condemnation
proceedings with HCCS because, as a lessee, it is entitled to share in the
condemnation award. However, to have standing, Pizza Hut must establish more
than its mere identity as a leaseholder—it must show that it has a viable takings
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claim. See A.P.I. Pipe & Supply, LLC, 397 S.W.3d at 166. Here, that involves
construing Pizza Hut’s lease that sets forth specific terms concerning its interest in
the event of a condemnation. See Motiva Enters., LLC, 248 S.W.3d at 214
(recognizing that parties have right to contract for different remedies in event of
condemnation such as, in that case, termination of lease in event of condemnation).
In construing a written lease, we must “ascertain the true intentions of the
parties as expressed in the instrument.” Valence Operating Co. v. Dorsett, 164
S.W.3d 656, 662 (Tex. 2005). The terms of the lease must be “given their plain,
ordinary, and generally accepted meanings unless the [lease] itself shows them to
be used in a technical or different sense.” Id.
The lease states that “[c]ondemnation means any impairment of Tenant’s use
of the Premises or the Common Area, or both, by act or omission of government
authority” and that, although any “Condemnation Award shall belong to the
Landlord,” Pizza Hut as the tenant is entitled to “the Unamortized Cost of Tenant
Improvements, plus Tenant’s relocation expenses as determined by the
condemning entity or court of law.” Thus, without a showing of impairment—
specifically, costs of tenant improvements and relocation expenses—Pizza Hut
cannot show a viable takings claim or any harm resulting from the condemnation
that would be resolved by its continuing as a party to the condemnation
proceedings. See A.P.I. Pipe & Supply, LLC, 397 S.W.3d at 166 (discussing
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standing principles in constitutional takings cases); see also Tex. Ass’n of Bus., 852
S.W.2d at 446 (discussing general standing principles).
Pizza Hut acknowledges that the condemnation did not impair its physical
access to or use of the Woodridge Plaza location; rather, it argues that the
uncertainty created by the condemnation constituted an impairment. Pizza Hut
asserts that it did not know how long it would be able to continue operating in the
building after HCCS became the owner. However, the uncontested jurisdictional
evidence indicates that during the time HCCS had control over Woodridge Plaza,
Pizza Hut was able to continue operating in that location at a profit until it sold its
franchise for that location to a third-party buyer in April 2016, when it was paid for
the costs of all improvements to the store by the new owner. There was likewise no
evidence that Pizza Hut incurred any relocation costs related to the condemnation.
We conclude that Pizza Hut has failed to demonstrate, under the terms of its
lease, a viable interest in HCCS’s condemnation of Woodridge Plaza. Accordingly,
the trial court properly dismissed it from the case. See A.P.I. Pipe & Supply, LLC,
397 S.W.3d at 166; see also Tex. Ass’n of Bus., 852 S.W.2d at 446.
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Conclusion
We affirm the judgment of the trial court.
Evelyn V. Keyes
Justice
Panel consists of Chief Justice Radack and Justices Keyes and Caughey.
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