Opinion ID: 3008274
Heading Depth: 4
Heading Rank: 1

Heading: Direct Governmental Restriction

Text: We have held that a lack of a direct governmental restriction of the owner’s use of her land or a lack of regulatory authority over the land-use decision at issue is dispositive in takings cases. See, e.g., Westgate, Ltd. v. State, 843 S.W.2d 448, 450 (Tex. 1992); see also San Antonio River Auth. v. Garrett Bros., 528 S.W.2d 266, 271 (Tex. Civ. App.—San Antonio 1975, writ ref’d n.r.e.). However, where courts have found direct governmental actions in which the governmental defendant had regulatory authority over the matter causing the plaintiff’s harm, they have generally found a taking. See, e.g., City of Austin v. Teague, 570 S.W.2d 389, 393–94 (Tex. 1978). Those cases generally involve current, direct restrictions on the property and may be combined with facts tending to show bad faith. See, e.g., Westgate, 843 S.W.2d at 452, 454; see also Teague, 570 S.W.2d at 393. While a statement of intent influencing another actor with final regulatory authority, as is the case - 14 - here, lies somewhere in the middle of these two factual scenarios, we conclude that the factual pleading in this case and the evidence25 considered along with it do not support a regulatory taking. The State’s argument likening this case to our opinion in Westgate has merit. In that case, we concluded there was no taking when the State and the City of Austin publicly announced plans to condemn the plaintiff’s land, impairing the plaintiff’s ability to lease its shopping center. Westgate, 843 S.W.2d at 450–51, 453. We held that “publicly targeting a property for condemnation” in the future does not give rise to an inverse condemnation. Id. at 453. The plaintiff sought to recover lost profits for the three year period between the public announcement of the State’s plans for the property and the actual condemnation. Id. at 451. Although the announcement resulted in economic harm to the plaintiff, we confirmed that the “impact of the future project on the present market value of the land was a noncompensable consequential damage.” Id. at 453 (citing Hubler v. City of Corpus Christi, 564 S.W.2d 816, 821 (Tex. Civ. App.—Corpus Christi 1978, writ 25 See Defendant’s First Amended Motion to Dismiss, Hearts Bluff Game Ranch, Inc. v. Texas, __ S.W .3d __ (Tex. 2012) (No. D-1-GN-08-002450) (Exhibit A, Plaintiff’s First Amended Original Petition; Exhibit B, Letter from Chief, Regulatory Branch, USACE, Fort W orth District to Hearts Bluff Game Ranch, 2006; Exhibit C, Region C W ater Plan, 2001; Exhibit D, W ater for Texas, 2002; Exhibit E, Region C W ater Plan, 2006; Exhibit F, W ater for Texas, 2007; Exhibit G, Letter from Texas W ater Development Board to Regulatory Branch, USACE, 2004; Exhibit H, W ater for Texas 1997; Exhibit I, Texas W ater Plan 1990; Exhibit J, W ater for Texas, 1984; Exhibit K, Texas W ater Plan 1968; Exhibit L, Hearts Bluff’s Objections, Answers & Responses to State’s First Set of Interrogatories & Request for Production). The State requested the trial court to admit these exhibits as evidence because they: constitute official records of a state or federal agency, court pleadings, or responses to discovery, and the sources do not indicate a lack of trustworthiness. Accordingly, as allowed by Tex. R. Evid. 801 & 803, Defendants request that these exhibits be admitted as evidence for consideration by the Court. See Bland Indep. Sch. Dist. v. Blue, 34 S.W .3d 547 (Tex. 2000). (Defendants’ First Amended Motion to Dismiss at ¶ 18; Defendants’ Supplemental Motion to Dismiss at ¶ 18). The trial court considered the “motions, responses and replies and the evidence and arguments of counsel” in making its ruling. Order Denying Defendants’ Motion to Dismiss. Hearts Bluff asserted no objections to the evidence, submitted evidentiary exhibits of its own in response to the motion to dismiss and relied on the State’s exhibits in its response to the motion to dismiss at the trial court. In this Court, both parties also rely on and argue information from the trial court exhibits. W e will likewise consider the evidence in reviewing the issues in the case. See Miranda, 133 S.W .3d at 227 (evidence necessary to the plea is to be considered). - 15 - ref’d n.r.e.)). We concluded that, in order for an inverse condemnation claim to be valid, there must be a “current, direct restriction” on the use of the land, referring to a physical act or legal restriction on the property’s use, “such as a blocking of access or denial of a permit for development.” Id. at 452. The threat of “some possible future loss” was insufficient to establish an inverse condemnation. Id. at 453. Hearts Bluff asserts that the denial of the permit itself is a current, direct restriction on Hearts Bluff’s ability to develop its property. The State, along with some 300 other parties, responded to the USACE’s public request for information and lobbied it with respect to the State’s interest, as pled by Hearts Bluff. The State did not, however, under any facts pled or evidence in the record, have the authority to deny the federal permit. In fact, Hearts Bluff admits that only the Corps had the authority to deny the mitigation banking permit. Even if the State had a persuasive role in the Corps’ action, just as an announcement to condemn is not a direct restriction on the land, identifying bottomland as a potential water storage site is not a direct restriction. See Westgate, 843 S.W.2d at 453. The State’s plans for the reservoir in this case are even less concrete than the public statement by the State in Westgate of its intention to condemn the land in the future. In Westgate we held that “publicly targeting a property for condemnation, resulting in economic damage to the owner, generally does not give rise to an inverse condemnation cause of action unless there is some direct restriction on use of the property.” 843 S.W.2d at 453 (citations omitted). It would strain our precedent to conclude that publicly targeting a property for condemnation when the delay of the actual condemnation caused the landowner damages is not a taking, but a mere identification of a location as a potential reservoir that may never be condemned is a taking. Governmental conduct - 16 - in combination with such a designation that legally restricts or prevents private development or use of the land may change the analysis, but such conduct is not at issue in this case. However, because the plaintiff in Westgate did not allege that the government intentionally acted to depreciate the value of the property at issue, the dissent points to language in that opinion that “[t]he policy reasons that support our decision today might not be applicable where the condemning authority is accused of intentionally injuring a landowner.” Id. at 454. The dissent takes a different approach from the Court. In Westgate, the Texas State Department of Highways and Public Transportation announced its decision to condemn the developer’s property after it had already approved the developer’s planned shopping center development and physical construction had begun. Id. at 450. The State approved the developer’s site plan and the developer had started construction, yet the State had not given Westgate notice of its pending plans to expand its highway project into the development. Id. In Westgate, the State had the authority to approve or refuse the developer’s plans and the State’s condemnation was certain—it happened. See id. at 450-51. For each of these key facts, in the instant case the result is the converse. The State’s identification of the site as a potential reservoir occurred decades before Hearts Bluff sought to commercially develop it, Hearts Bluff was on notice of the designation and its investment backed expectations were different from those in Westgate. There are no allegations in this case that the State misled the owner while it proceeded furtively with plans that would damage the property interest.26 Here the facts were known and the State properly gave the Corps its honest and longstanding assessment of the State’s potential plans for the Marvin Nichols Reservoir site. And, importantly, the State did not 26 Hearts Bluff alleged that the Corps misled it on the permit. The Federal Circuit dismissed these claims. Hearts Bluff Game Ranch, Inc. v. United States, 669 F.3d 1326. See further discussion infra __ S.W .3d at __. - 17 - have the authority to approve Hearts Bluff’s development plans. Westgate’s holding that “publicly targeting a property for condemnation” is not a taking is broader than necessary to squarely support our decision. See id. at 453. In Garrett Brothers, in which there was evidence of intentional action, the governmental entity at issue was found not liable for a taking. See Garrett Bros., 528 S.W.2d at 273. A landowner sued both the City of San Antonio and the San Antonio River Authority (SARA) after San Antonio purposely delayed the plaintiff’s development of a subdivision, acting on the advice of SARA. Garrett Bros., 528 S.W.2d at 269–70. The plaintiff began developing its land after obtaining a permit from San Antonio. Id. at 269. However, SARA and San Antonio developed alternate plans for the property, realizing that it would be more expensive to acquire the plaintiff’s land if the plaintiff continued to build the subdivision. See id. at 268–69. After repeated discussions with SARA, San Antonio instructed various municipal agencies and departments to discontinue services to the plaintiff’s subdivision to impede the plaintiff’s development. Id. at 270. After a delay of over five months, SARA informed San Antonio that the plaintiff’s further development no longer presented a problem, at which point the plaintiff was allowed to continue its development. Id. When the plaintiff sued both parties for damages arising from the delay, the court of appeals affirmed a jury award against the City of San Antonio. Id. at 280. However, the court also concluded that, because SARA did not possess any regulatory authority over the governmental entities that caused the damage—the municipal agencies and San Antonio—it could not be liable for a regulatory taking, notwithstanding the fact that SARA urged San Antonio to intentionally delay the development until it decided whether it wanted to acquire the plaintiff’s land. Id. at 269, 271–72. - 18 - The opinion observes, “SARA wholly lacked the authority to interfere with plaintiff’s development of the subdivision under any circumstances.” Id. at 271. Garrett Brothers is close to directly on point, as both SARA and the TWDB are similarly situated and their communications were similar. Each communicated its desires and opinions to a governmental entity with regulatory authority to take action affecting the property. Like SARA in relation to San Antonio, the TWDB made its opinion known to the Corps but had no authority to take the action affecting the owner’s property rights. SARA further sought a cooperation agreement between it and San Antonio. As Westgate’s focus on direct action implies, causation is an issue to be considered by Courts in takings cases.27 This is not the first time courts have addressed causation in a takings action. In 1941, we held that the “true test” is whether the State’s intentional acts “were the proximate cause of the taking or damaging of such property.” State v. Hale, 146 S.W.2d 731, 737 (Tex. 1941) 27 As both the State and Hearts Bluff observed during argument, because this is a plea to the jurisdiction, this Court must construe the facts pled liberally in favor of Hearts Bluff unless those facts are rebutted by evidence submitted with or against the plea. See Miranda, 133 S.W .3d at 226–27. Because Hearts Bluff pled that the State was the factual cause of the Corps’ denial of the permit, the State conceded that was Hearts Bluff’s position, but the State repeatedly asserted that it was not the cause. At oral argument, the State confirmed this: W e don’t agree that we have any power over the [Corps] to do that. Now I think what we asked the court was to please site your habitat for migratory water fowl somewhere else. Now whether that “please” had an influence on the Corps I think we have to accept for the purposes of appeal that [as] a factual matter it did, but we disagree that the Corps. [sic] The Corps had discretion to deny it. Perhaps the State could have been more precise; however, the State has consistently maintained throughout its briefing and argument in this Court, at the court of appeals, and in the trial court that it lacked the authority to grant or deny the federal permit, lacked any regulatory authority over the Corps, and that it believed it could not be held responsible for Hearts Bluff’s harm. See, e.g., Defendant’s First Amended Motion to Dismiss at 10. (“Hearts Bluff’s assertions that the Defendants[’] actions constitute ‘direct restrictions’ are spurious, since the decision to deny the application was made by the Corps.”); Brief of Appellants at 13, 313 S.W .3d 479 (Tex. Civ. App.— Austin 2010) (No. 03-09-00598-CV) (“[T]he denial of the mitigation-banking permit cannot constitute a taking by the State of Texas or TW DB because they are powerless to grant or deny such permits . . . ”); Respondent’s Brief on the Merits at 4. (“[T]he State had no regulatory authority over the action (the refusal to enter into a mitigation banking agreement) that is the centerpiece of Hearts Bluff’s complaint.”). - 19 - (holding that a “direct, physical invasion of the property” was not necessary under the 1876 Constitution for a taking to occur); see Roberson v. City of Austin, 157 S.W.3d 130, 138 (Tex. App.—Austin 2005, pet. denied); Brandywood Hous., Ltd. v. Tex. Dep’t. of Transp., 74 S.W.3d 421, 426 (Tex. App.—Houston [1st Dist.] 2001, pet. denied); City of Dallas v. Ludwick, 620 S.W.2d 630, 632 (Tex. Civ. App.—Dallas 1981, writ ref’d n.r.e.) (showing proximate cause is necessary in a takings case where city denied building permit). Proximate cause is an essential element of a takings case. “[W]ithout causation, there is no ‘taking.’” Tarrant Reg’l Water Dist. v. Gragg, 43 S.W.3d 609, 615 (Tex. App.—Waco 2001), aff’d, 151 S.W.3d 546 (Tex. 2004). We affirmed that the State’s construction of a reservoir was the cause of flood water damage to farmland. Id. at 555. The Supreme Court identified the role of proximate cause in takings cases in Penn Central, noting that “whether a particular restriction will be rendered invalid by the government’s failure to pay for any losses proximately caused by it depends largely ‘upon the particular circumstances [in that] case.’” Penn Cent. Transp. Co. 438 U.S. at 124 (citing Cent. Eureka Mining Co., 357 U.S. at 168). We have also used the terms “occasioned by the fault of,” “to result from,” and “arise out of” as proxies for the requirement that the State’s intentional acts be the proximate cause of the taking, destruction, or damage to private property. See Steele v. City of Houston, 603 S.W.2d 786, 791 (Tex. 1980); City of Del Rio v. Felton, No. 04-06-00091-CV, 2007 WL 247655, at  (Tex. App.—San Antonio Jan. 31, 2007, no pet.) (mem. op.); San Antonio Hous. Auth. Found., Inc. v. Smith, No. 04-10-00759-CV, 2011 WL 3627699 at  (Tex. App.—San Antonio Aug. 17, 2011, no pet.) (mem. op.). We also addressed causation in Westgate, concluding that there must be a “direct restriction” on the use of the land to establish a taking. 843 S.W.2d at 452–53. The word “direct” seems plainly to indicate that the governmental entity must be the cause of the harm. This “direct restriction” language is - 20 - often quoted by other Texas courts analyzing takings allegations.28 The Ninth Circuit has held that the plaintiff in takings cases must establish all elements of proximate causation. Esplanade Props., LLC v. City of Seattle, 307 F.3d 978, 984 (9th Cir. 2002) (citations omitted). Construing Penn Central’s reference to proximate causation, Chief Justice Rehnquist also argued that ordinary principles of proximate cause govern the causation inquiry for takings claims. Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Planning Agency, 535 U.S. 302, 344–45 (2002) (Rehnquist, C.J., dissenting). Causation is intrinsic to a takings claim. The governmental entity sued must have taken direct governmental action, or have been the proximate cause, of the harm. Here, neither TWDB nor the State of Texas satisfied that requirement. Instead, that characterization fits the Corps, as the only body with regulatory authority to grant or deny mitigation banking permits. In State v. Biggar, the government defendant had the authority to and imposed direct restrictions on the use of property and we held its actions made the State liable for inverse condemnation. 873 S.W.2d 11, 11–12, 14 (Tex. 1994). The State denied the plaintiffs an otherwise routine real estate transaction in order to lower the value of the plaintiffs’ property before acquiring the land by eminent domain. Id. The plaintiffs obtained initial approval of a site development plan (SDP) from the City of Austin, contingent upon the completion by a given date of a routine easement exchange with the State. Id. at 11–12. The State initially approved the easement exchange. Id. at 12. Later, however, the State realized it needed the plaintiffs’ land for a highway expansion but 28 See, e.g., Schriver v. Tex. Dep’t of Transp., 293 S.W .3d 846, 850 (Tex. App.—Fort W orth 2009, no pet.); Cozby v. City of Waco, 110 S.W .3d 32, 38 (Tex. App.— W aco 2002, no pet.); City of Grand Prairie v. M.B. Capital Investors Inc., No. 05-95-00921-CV, 1996 W L 499790, at  (Tex. App.— Dallas Aug. 27, 1996, writ dism’d) (not designated for publication). - 21 - plaintiffs declined to sell at the value offered. Id. The State then denied the easement exchange, and the SDP lapsed nearly five months later. Id. The State then condemned the land at a significantly lower price. Id. Plaintiffs asserted that the State acted in bad faith. Id. at 13–14. In Biggar, we recognized an inverse condemnation claim in part because of the State’s bad faith in using its power to gain an unfair economic advantage over the property owner. Id. at 13. Although the State operated well within its discretion in denying the easement exchange, and although the State was not directly involved with the SDP’s expiration, the State intentionally refused to participate in the routine easement transaction to allow the SDP to expire and enable it to acquire the land at a lower cost. The State took action within its power to halt a prerequisite to Biggar’s development plan, apparently specifically designed to decrease the value of the landowners’ property. Id. at 14. As the dissent observes, this case presents some factual similarities to Biggar. However, legally this case is materially different. First, in Biggar, the State had the authority and the ability to take the action, rejecting the conveyance of its easement, that injured the landowners. The City had approved the SDP. The State unilaterally acted to push the landowners past the deadline to act on the City’s SDP and foreclosed the landowners’ opportunity to develop, thereby causing reduction in the value of their land. Id. at 14. The State made the decision and had the authority to take the intentional act that halted the plaintiff’s development. In this instant case, the State did not change its decision to convey a public easement, deny a permit, or refuse a zoning change. It provided accurate and honest input requested by the Corps. The dissent argues, “The Court incorrectly suggests that the State cannot have acted in bad faith in this case because the State ‘merely responded’ to the Corps’ request for public comment on Hearts Bluff’s mitigation banking - 22 - application. Yet all the State did in Biggar was ‘merely’ refuse to relinquish an easement it owned.” __ S.W.3d __ (Hecht, J., dissenting). We do not equate the mere provision of information in this case with the State’s intentional countermanding in Biggar of its agreement to exchange the easement, which resulted in harm to the property owner. The Corps alone had the authority to grant or deny the mitigation banking permit. The Corps could have shunned or accepted the State’s best arguments about plans for the Marvin Nichols Reservoir. The State had no authority over the Corps and none over Hearts Bluff’s desired mitigation bank. It had no opportunity to cause a crucial project-ending delay, as did the State in Biggar. Hearts Bluff argues that identifying the land as a potentially valuable reservoir site to the Corps is tantamount to causing the denial of the permit. The parties cite no cases in which a party stated a takings claim against a state government when the federal government had the sole and exclusive authority to deny the development permit at issue and did so. Without more, we decline to recognize such a claim. The dissent concedes that Teague and Garrett Brothers support the Court’s opinion. __ S.W.3d __ (Hecht, J., dissenting) (“The court noted that in both Teague and Garrett Brothers, takings liability was imposed on the entity with regulatory power.”). In Teague, we concluded that actions by the City of Austin resulted in a taking when, after unsuccessfully requesting that the State acquire a scenic easement in the plaintiff’s land, Austin denied the plaintiff’s water development application, despite his compliance with all of the requirements of the existing ordinance. 570 S.W.2d at 390. After denying the plaintiff’s second application and refusing to purchase his land, Austin passed an ordinance requiring any developer to preserve “the natural and traditional character of the land and waterway to the greatest extent feasible.” Id. at 390–91. The ordinance foreclosed - 23 - development of plaintiff’s land and imposed a scenic servitude upon the property. Id. at 394. We held that Austin could not accomplish through an ordinance of general application what it had no power to do specifically, which was to essentially acquire a scenic easement in the plaintiff’s land without just compensation. Id. In Teague, Austin had the authority to pass the ordinance that would cause harm to the claimants, and it did. Whereas, here, the harm from the permit denial was not at the hands of the State. Hearts Bluff pled, as the dissent points out, that the Corps told it there were no impediments to the mitigation bank’s creation. Hearts Bluff assented, “The Corps told Hearts Bluff that the rumored but never established Marvin Nichols Reservoir would not inhibit the granting of a mitigation banking permit for Hearts Bluff.” The State advised the Corps, in evidence submitted with the plea to the jurisdiction, that it confirmed to the Corps that “the [Hearts Bluff mitigation bank] does not prevent construction of a reservoir.” But alleged misrepresentations, or even changes in positions, on the possibility of creating a mitigation bank in an actual reservoir was an issue Hearts Bluff had with the Corps. The Federal Circuit reviewed these allegations in Hearts Bluff’s case against the Corps and held that these alleged misrepresentations are not actionable: [R]elying on representations by the Corps in purchasing the land in the hope that the government will grant a discretionary mitigation banking permit does not create a compensable property interest. At its core, Hearts Bluff argues that it detrimentally relied on the promises and representations of the Corps. Such detrimental reliance, however, does not create a property right under takings law. Hearts Bluff Game Ranch, Inc. v. United States, 669 F.3d at 1332. Federal case law on the authority of relevant governmental actors in a takings case also reinforces our reasoning in this case. In B & G Enterprises, the court held that state action could only be attributable to the federal government in regard to takings liability if state actors were - 24 - “agents” of the federal government. B & G Enters. v. United States, 220 F.3d 1318, 1325 (Fed. Cir. 2000). In that case, the owner and operator of vending machines in California alleged a regulatory taking against the federal government based on the California Legislature’s enactment of restrictive regulations on the use of tobacco vending machines. Id. at 1322. A federal agency conditioned California’s receipt of grant money on its passing and enforcing laws regulating minors’ access to tobacco products. Id. at 1321. “The proposed [federal] regulation did not make tobacco vending machine restrictions a condition of the receipt of the federal block grant, but the [regulating body] did suggest that states ban tobacco vending machines or restrict their placement . . . .” Id. The Court held that the federal government was not a regulator and thus could not be held liable for a taking for several reasons. Id. at 1323–24. One reason was that California’s Legislature could not be considered as acting under federal authority. Id. at 1324. Specifically, California had the discretion to enact the law or to decline to do so, making it irrelevant that the federal government advised California that it should pass the regulations. Id. The California Legislature in B & G Enterprises and the City in Garrett Brothers occupy positions similar to the TWDB in this case. In B & G Enterprises, while the federal government’s advice may have influenced California’s enactment of the restrictive regulations, the decision to act on or ignore that advice was solely California’s. Id. Similarly, in Garrett Brothers, while SARA’s land-use plans may have motivated and, perhaps, guided San Antonio in impeding the plaintiff’s development, the City of San Antonio was the entity liable for taking the plaintiff’s property because only it had the power to regulate. Garrett Bros., 528 S.W.2d at 271. Here, the decision was the Corps’. It would strain the concept of federalism to contend that the Corps acted under the authority of the State. See Rapanos v. United States, 547 U.S. 715, 721 - 25 - (2006) (“In deciding whether to grant or deny a permit, the [Corps] exercises the discretion of an enlightened despot, relying on such factors as ‘economics,’ ‘aesthetics,’ ‘recreation,’ and ‘in general, the needs and welfare of the people.’”) (citing 33 C.F.R. § 320.4(a) (2004)). Nor can we can we conclude that the Corps, under the facts alleged, was acting as an “agent” of the State. See B & G Enters., 220 F.3d at 1323. The Corps, a federal political subdivision implementing federal law and federal policy, is directed to make its decision on Hearts Bluff’s application based on federal guidelines. See 33 C.F.R. § 320.4(a) (requiring a “public interest review” prior to permit issuance). Hearts Bluff acknowledged that the Corps “is the governmental agency responsible for permitting and administering mitigation banks pursuant to § 404 of the Clean Water Act.” In sum, Hearts Bluff pled that the State influenced the Corps to deny Hearts Bluff’s permit application. Because the State had no authority to approve or refuse the necessary permit for Heart Bluff’s development, it will generally not be subject to an inverse condemnation claim for the denial of a federal permit to commercially develop the property. Even if Hearts Bluff could clear the hurdle of the State’s lack of authority to act on its permit application, courts are not required to accept as true parts of its pleadings that are actually legal, rather than factual, allegations. See Fain v. Great Spring Waters of Am., Inc., 973 S.W.2d 327, 329 aff’d, Sipriano v. Great Spring Waters of Am., Inc., 1 S.W.3d 75 (Tex. 1999). The statement that creation of a mitigation bank would preempt the development of the reservoir is not admitted by the State, which argues that position may be wrong as a matter of law, as the TWDB advised the Corps in its response letter. In addition, Hearts Bluff claims that the main purpose of the unique designation is to invoke the State’s protection of the site from private development. In its 2007 water plans, the TWDB recommended that the Legislature designate Marvin Nichols Reservoir as - 26 - unique pursuant to section 16.051(g) of the Texas Water Code. And in May 2007, the Legislature’s approval of the TWDB’s state water plan automatically resulted in that designation being conferred on the Marvin Nichols Reservoir site. However, the unique designation’s purpose, expressed in the statute, is to preclude other governmental units in Texas from acquiring an interest in it. See TEX . WATER CODE § 16.051(g).29 Hearts Bluff cites no authority for its assertion that a unique designation legally inhibits or prevents private development of the site, and the statutory provision itself limits only state governmental entities from pursuing an interest in the reservoir site. The Corps denied Hearts Bluff’s application in July 2006, with no mention of the possible unique designation.30