Leeco Gas & Oil Co. v. Nueces County
736 S.W.2d 629, 30 Tex. Sup. Ct. J. 562, 1987 Tex. LEXIS 368 (1987)
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Rule of Law:
When a governmental entity that received property via a gift deed condemns the grantor's retained possibility of reverter, it must pay as compensation the amount by which the value of the unrestricted fee exceeds the value of the restricted fee, not merely nominal damages.
Facts:
- In 1960, Leeco Gas & Oil Company (Leeco) gifted fifty acres of land on Padre Island to Nueces County (the County).
- The deed specified that the County would hold the land "so long as a public park is constructed and actively maintained" on it.
- Leeco retained a possibility of reverter, which would cause ownership of the property to revert to Leeco if the County ceased using it as a park.
- The County established and maintained a park on the property as required by the deed.
- In 1983, County officials expressed a desire to use the park land for future income-producing activities that would likely violate the deed restrictions.
- To eliminate the use restriction, the County initiated condemnation proceedings to acquire Leeco's reversionary interest.
- Expert testimony at trial established the unrestricted value of the land to be between $3,000,000 and $5,000,000.
Procedural Posture:
- Nueces County initiated a condemnation suit to acquire Leeco's reversionary interest.
- Special commissioners appointed in the suit awarded Leeco $10,000 for its interest.
- Leeco appealed the commissioners' award to the county court at law, the trial court in this matter.
- The trial court granted partial summary judgment in favor of Nueces County on all issues except damages.
- Following a separate trial on the issue of compensation, the trial court awarded Leeco $10 in nominal damages.
- Leeco, as appellant, appealed the judgment to the court of appeals, which affirmed the trial court's decision.
- Leeco, as petitioner, then brought the case to the Supreme Court of Texas for review.
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Issue:
When a governmental entity that received land via a gift deed subject to a reversionary interest later condemns that reversionary interest to remove the deed's restrictions, is an award of only nominal damages to the holder of the interest considered adequate compensation under the Texas Constitution?
Opinions:
Majority - Justice Gonzalez
No. An award of only nominal damages is not adequate compensation in this situation. The constitutional requirement for adequate compensation is not met by a nominal award when a governmental entity, as the grantee of a gift deed, condemns the grantor's reversionary interest to free itself from the deed's restrictions. While a possibility of reverter may have only speculative value in cases where its activation is remote, here the County itself made the activation probable by expressing its intent to violate the deed's conditions. To allow the County to acquire the property by gift and then extinguish the donor's retained interest for a nominal sum would discourage charitable gifts and be contrary to public policy. The proper measure of damages is the value of the unrestricted fee simple minus the value of the fee simple determinable (the land with the restrictions).
Concurring - Justice Campbell
Yes, concurring in the judgment. While the majority reaches the correct result under existing precedent, a better rule for future cases would be that a grantee's initiation of condemnation proceedings against the grantor's reversionary interest constitutes a renunciation of the gift. Such an act is inconsistent with the granted use and should, by itself, trigger the reverter. This would cause the estate to terminate and revert to the grantor in fee simple absolute, requiring the governmental entity to then condemn the entire property and pay its full market value.
Analysis:
This decision creates a significant exception to the general rule that a possibility of reverter has only nominal value in condemnation cases. It establishes that when the condemnor is also the grantee of a gift deed seeking to eliminate the gift's conditions, the reversionary interest must be valued based on what the grantee gains by its extinguishment. This holding protects donors from having the terms of their charitable gifts circumvented for a pittance and reinforces the constitutional requirement for "adequate compensation." The case sets a new valuation standard for this specific factual scenario, thereby encouraging future donations of real property to governmental and charitable entities by assuring donors their retained interests have substantial value.
