SE Texas Record

Wednesday, July 17, 2019

Texas appeals court slices Pizza Hut out of condemnation money

By David Hutton | Dec 28, 2017

HOUSTON – A Texas appeals court affirmed a lower court’s ruling that Pizza Hut of America isn’t entitled to a slice of the $427,100 that the Houston Community College System paid tenants of a shopping center it condemned.

In an opinion issued on Dec. 19, a 1st Court of Appeals panel upheld a lower court ruling holding that Pizza Hut didn’t demonstrate that it was adversely impacted by the relocation or related expenses.

Justice Evelyn V. Keyes wrote the opinion for the panel, which also included Chief Justice Sherry Radack and Justice Jennifer Caughey.

A Harris County Civil Court judge had dismissed Pizza Hut’s claims in January for lack of standing.

According to the opinion, when HCCS condemned the property, a condemnation of award of $427,100 was designated to be paid to all of Woodridge Plaza’s tenants.

At that time, Pizza Hut sought $7,100 as its pro rata share of the payout, but the lower court determined that based on language in the lease, the restaurant chain didn’t suffer any impairment of its use of the property due to the condemnation proceedings. As a result, it wasn’t entitled to any funds from the condemnation award.

Pizza Hut appealed the ruling, with its sole issue being that it had standing to participate in the condemnation proceedings and seek a share of the money awarded to Woodridge Plaza.

In April 2016, Pizza Hut sold all 90 of its locations in the Houston area, including the Woodridge Plaza location. The sale, however, did not include the leasehold interest, which Pizza Hut retained because of the pending condemnation proceedings, the opinion states.

In December 2016, HCCS filed a plea challenging Pizza Hut’s position as a party in the condemnation process and the trial court granted its motion and dismissed the restaurant chain from the proceedings.

Pizza Hut countered with its appeal, maintaining that as a lessee, it is entitled to its share of the condemnation proceedings.

“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 claim,” Keyes wrote in the opinion.

While admitting the condemnation didn’t impact its access or use of the Woodridge Plaza location, Pizza Hut said the uncertainty sparked by the condemnation equated to an impairment.

The restaurant chain also claims it didn’t know how long it would be able to operate at the location after HCCS gained ownership.

“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,” Keyes concluded in the opinion. “There was likewise no evidence that Pizza Hut incurred any relocation costs related to the condemnation.”

Citing Texas Department of Transportation v.  A.P.I. Pipe & Supply LLC and Texas Association of Business v. Texas Air Control Board, the appeals court panel concluded that Pizza Hut came up short in its effort to prove, under the terms of its lease, a viable interest in HCCS’s condemnation of Woodridge Plaza.

As a result, the appeals court affirmed the lower court’s ruling in the case.

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Court of Appeals for the 1st District of Texas