Property Damages for Breach of Pipeline Right-of-Way Contract in Gilbert Wheeler, Inc. v. Enbridge Pipelines (East Texas), L.P.

When the Wheeler’s agreed to allow a pipeline right of way through their wilderness retreat, known as “The Mountain,” they had one important condition.  They didn’t want construction of the pipeline to affect their trees.  After agreeing to this condition, the pipeline contractor promptly bulldozed the trees.  A jury found that the Wheelers were entitled to damages equal to the cost of restoring their property to the way it was.

This seems pretty straightforward, but a wrinkle in the case’s submission to the jury complicates things.  Under Texas law the measure for damages to real property generally depends on whether the damage is temporary or permanent.  For permanent injuries, damages are equal to the reduction in the property’s value; for temporary ones, a party can recovery the amount necessary to correct the damages.

Unfortunately for the Wheelers, they submitted their damages to the jury without a question on whether loss of their trees was a temporary or permanent injury.  As a result, the intermediate court of appeals held that the Wheelers’ jury finding lacked a necessary predicate and reversed the judgment in their favor.

With oral argument and briefing complete, the parties’ briefs force the Texas Supreme Court to confront whether to bulldoze the temporary versus permanent distinction in the context of contract damages.”

The Wheelers argue that the purpose of their contract was to protect their trees, and they lost this part of the bargain.  According to the Wheelers, distinctions between temporary and permanent shouldn’t control when a property owner loses they protection guaranteed in a right-of-way contract.  The Wheelers bargained to keep the trees, so they argue that—temporary injury or permanent—they’re entitled to the cost of restoring them.

Now all that’s left is to wait on the Texas Supreme Court.  In the meantime, it’s never a bad idea to have a right-of-way contract set out liquidated damages for a breach.  This avoids relying upon the default rule, which may be about to change.