Court Opinion

ID: 6340847
Source: CourtListenerOpinion
Date Created: 2022-05-16 07:12:12.995125+00
Date Added: 2024-06-11T09:19:24.676126
License: Public Domain

Supreme Court of Texas
                              ══════════
                               No. 20-0309
                              ══════════

                             City of Baytown,
                                 Petitioner,

                                      v.

                               Alan Schrock,
                                Respondent

   ═══════════════════════════════════════
              On Petition for Review from the
       Court of Appeals for the First District of Texas
   ═══════════════════════════════════════

                        Argued October 27, 2021

       JUSTICE BLAND delivered the opinion of the Court.

     JUSTICE YOUNG filed a concurring opinion, in which Justice
Lehrmann, Justice Blacklock, and Justice Busby joined.

       Our Constitutions require the government to compensate
property owners when it takes their property for public use.1 This

       1 The Fifth Amendment to the United States Constitution provides: “nor
shall private property be taken for public use, without just compensation.”
U.S. Const. amend. V. More broadly, the Texas Constitution provides that
“[n]o person’s property shall be taken, damaged, or destroyed for or applied to
public use without adequate compensation.” Tex. Const. art I, § 17(a).
constitutional right waives the government’s immunity from lawsuits—
immunity that otherwise often insulates the public treasury from claims
for damages.2 When government action falls short of a constitutional
taking, immunity bars many such claims.3
         In this dispute over unpaid utility bills, a landlord claims that the
city government’s wrongful withholding of utility service to collect
payment resulted in the loss of a tenant and the eventual disrepair of
his property. He claims the city’s action is a taking in violation of the
Texas or United States Constitution. The trial court found for the city,
ruling that the landlord did not establish an intentional taking of
private property for public use. The court of appeals reversed, holding
that fact issues exist as to whether the city’s utility-enforcement actions
resulted in a regulatory taking.
         Our Court recently rejected a similar proposition in City of
Houston v. Carlson.4 Following Carlson, we hold that the landlord’s
challenge to the city’s enforcement action fails to show the intentional
taking or damage for public use necessary to establish a constitutional
right to compensation. Accordingly, we reverse the court of appeals’
judgment and reinstate the trial court’s directed verdict.
                                          I
         In 1993, Alan Schrock purchased a lot in the City of Baytown for
$21,000. He planned to lease out a mobile home on the property to earn

         2   Harris Cnty. Flood Control Dist. v. Kerr, 499 S.W.3d 793, 799 (Tex.
2016).
         3   City of Houston v. Carlson, 451 S.W.3d 828, 830 (Tex. 2014).
         4   Id. at 833.

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rental income. At some point, utility bills for the City’s water service to
the property went unpaid. Until 2011, the City required landlords to
either guarantee payment for utility bills or to file a declaration with the
City stating that the landlord would not guarantee its tenant’s utility
payments.5 The City also had an ordinance prohibiting the connection
of new utility service at properties encumbered by outstanding utility
bills.6
          Although Schrock had rented out the property, he did not file a
rental declaration with the City until 2009, after the City had assessed
Schrock $1,999.67 in past unpaid utility bills. Schrock contested the
assessment, and after a hearing, the City reduced the amount he owed
to $1,157.39. The City placed a lien in that amount against the property.
          In 2010, the City refused to connect utilities to the property when
one of Schrock’s tenants requested it, which caused the tenant to cancel
the lease. The City’s refusal to connect service violated Texas Local
Government Code section 552.0025.7                    Section 552.0025 prohibits
municipalities from conditioning utility service connections on payment

         Baytown, Tex., Code of Ordinances ch. 98, art. III, § 98-65(i) (1967)
          5

(amended 1991). In 2011, the City amended Section 98-65 and repealed the
provision requiring a landlord to submit a rental declaration. The amended
version now provides that the City shall not impose liens for delinquent
charges for services provided to residential renters. Baytown, Tex., Code of
Ordinances ch. 98, art. III, § 98-65(d)(4) (2011).
          6   Id. § 98-65(g) (1967) (amended 1991).
         See Tex. Loc. Gov’t Code § 552.0025(a) (“A municipality may not
          7

require a customer to pay for utility service previously furnished to another
customer at the same service connection as a condition of connecting or
continuing service.”).

                                               3
of outstanding utility bills incurred by other customers residing at the
same address.8
       Later that year, Schrock attempted to tender payment, but the
City refused to accept his check. Schrock returned to the City offices to
make payment in cash but ultimately refused to pay. In the years that
followed, Schrock neither paid the assessment nor attempted to sell or
lease the property. It fell into disrepair and was vandalized.
       In 2012, Schrock sued the City for inverse condemnation and
other claims, primarily alleging that the City’s refusal to reconnect his
utility service violated section 552.0025 and caused damage to his
property. The City filed a plea to the jurisdiction, claiming that it is
immune from Schrock’s claims. After a lengthy procedural history in
state and federal court, only Schrock’s regulatory takings claim
remained for trial.9
       During trial, Schrock testified about his attempts to resolve the
lien and to the property’s deterioration, which he attributed to the City’s
wrongful refusal to connect utilities to the property. The assistant city
manager testified about the City’s efforts to collect payment for the
outstanding bills.

       8   Id.
       9 See Schrock v. City of Baytown, No. 4:12-cv-02455 (S.D. Tex. Mar. 11,
2013) (dismissing Schrock’s federal takings claim, substantive due process
claim, and declaratory judgment claim as unripe, finding limitations an
alternative ground for dismissal of the declaratory judgment and substantive
due process claims, and remanding Schrock’s state law inverse condemnation
claim and other state law claims); Schrock v. City of Baytown, No. 01-13-00618-
CV, 2015 WL 8486504 (Tex. App.—Houston [1st Dist.] Dec. 10, 2015, pet.
denied) (mem. op.) (remanding regulatory takings claim).

                                          4
       After Schrock rested his case, the trial court directed a verdict for
the City, concluding that Schrock had failed to adduce evidence of a
taking.
       The court of appeals reversed.10 Relying on the Supreme Court’s
decision in Penn Central Transportation Company v. City of New York,11
the court concluded that fact issues existed as to whether the City had
interfered in bad faith with Schrock’s investment-backed expectations,
which, in turn, presented some evidence of a regulatory taking.12 The
court of appeals did not address our Court’s recent decision in Carlson.
We granted review.
                                         II
       We review a trial court’s grant of directed verdict de novo,13 using
the legal sufficiency standard appellate courts apply to no-evidence
summary judgments.14 A trial court properly grants a directed verdict

       10   623 S.W.3d 394, 425 (Tex. App.—Houston [1st Dist.] 2019).
       11  438 U.S. 104, 124 (1978). We have described the Penn Central factors
as: “‘(1) the economic impact of the regulation on the claimant’; ‘(2) the extent
to which the regulation has interfered with distinct investment-backed
expectations’; and (3) ‘the character of the governmental action.’” Sheffield
Dev. Co. v. City of Glenn Heights, 140 S.W.3d 660, 672 (Tex. 2004) (quoting
Connolly v. Pension Benefits Guar. Corp., 475 U.S. 211, 225 (1986)).
       12   623 S.W.3d at 411, 420.
       13 See City of Keller v. Wilson, 168 S.W.3d 802, 823 (Tex. 2005)
(“Judgment without or against a jury verdict is proper at any course of the
proceedings only when the law does not allow reasonable jurors to decide
otherwise.”); see also JPMorgan Chase Bank, N.A. v. Orca Assets G.P., L.L.C.,
546 S.W.3d 648, 653 (Tex. 2018) (noting that de novo review applies to orders
deciding questions of law as to which “reasonable minds cannot differ on the
outcome,” including summary judgments and directed verdicts).
       14   City of Keller, 610 S.W.3d at 810.

                                              5
when no evidence supports a vital fact or the evidence fails to state a
claim as a matter of law.15 We consider the evidence in a light favorable
to the party suffering an adverse judgment, crediting all reasonable
inferences and disregarding evidence and inferences to the contrary.16
      A city is immune from suit unless its immunity is waived.17
Under our constitutions, waiver occurs when the government refuses to
acknowledge its intentional taking of private property for public use. A
suit based on this waiver is known as an “inverse condemnation” claim.18
To establish an inverse condemnation claim, a plaintiff must show that
the government intended to or was substantially certain that its actions
would take or damage the property for public use; otherwise, the
doctrine of governmental immunity bars the claim.19
                                         A
      The parties dispute whether a claim of economic harm to property
resulting from the improper enforcement of a municipal collection
ordinance alleges a regulatory taking.
      The City contends that Schrock’s evidence fails to show that the
City took or damaged his property for public use. Relying on Carlson,
the City argues that the enforcement of municipal ordinances that do

      15   Id. at 810–11, 814–16.
      16 Exxon Corp. v. Emerald Oil & Gas Co., L.C., 348 S.W.3d 194, 215, 217
(Tex. 2011).
      17   Carlson, 451 S.W.3d at 830.
      18Id. An inverse condemnation claim must allege an intentional
government act that caused the uncompensated taking of private property. Id.
at 831.
      19   Harris Cnty. Flood Control Dist., 499 S.W.3d at 799.

                                             6
not themselves regulate property use cannot constitute a regulatory
taking, even when such enforcement was improper as a matter of state
law. According to the City, the ordinance in this case was not a property-
use regulation; instead, the ordinance was a means to collect
outstanding bills for utility services provided to the property. Further,
the City argues, it did not deprive Schrock of the use of his property,
even though it indirectly caused the property to be without utility
service and temporarily placed a lien against it.
         Schrock responds that the City’s improper actions caused a loss
in his rental income and a diminution in the property’s value even if its
collection ordinance is not a land-use regulation. Thus, he argues, the
court of appeals correctly applied the Penn Central factors to conclude
that some evidence of a regulatory taking exists.            He alternatively
contends that the City’s actions constitute either a physical taking or an
exaction, entitling him to compensation.               Schrock attempts to
distinguish Carlson, which he suggests involved a flawed administrative
process, arguing that in this case, in contrast, the effect of the City’s
ordinance was so onerous that it constitutes a taking.
                                             B
         The right to own, use, and enjoy one’s private property is a
fundamental right.20 When the government takes, damages, or destroys
private property for public use, it must provide compensation.21 The
Texas Constitution requires compensation in more circumstances than

         20   Hearts Bluff Game Ranch, Inc. v. State, 381 S.W.3d 468, 476 (Tex.
2012).
         21   TEX. CONST. art. I, § 17(a).

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the United States Constitution—the federal requiring compensation for
“taken” property, and the state for “taken, damaged, or destroyed”
property—but         both   provide   a   means    of   redress   against   the
government.22
       A regulatory takings claim is one in which “the plaintiff complains
that the government through regulation so burdened his property as to
deny him its economic value or unreasonably interfere with its use and
enjoyment.”23 Our Court observed in Carlson that courts historically
have limited regulatory takings claims to those arising directly from
land-use restrictions.24 In that case, the City of Houston ordered several
condominium owners to vacate their property because they failed to
make mandated repairs.25          The owners sued, claiming a regulatory
taking based on Houston’s improper application of its regulations.26
       In holding that the owners failed to state a regulatory taking, we
contrasted between an ordinance that directly regulates land use and

       22 See Steele v. City of Houston, 603 S.W.2d 786, 789–90 (Tex. 1980)
(reviewing history of Texas Constitution’s takings clause). Despite the
Constitutions’ textual differences, the Court typically has evaluated federal
and state takings claims using the same analysis. See, e.g., Mayhew v. Town
of Sunnyvale, 964 S.W.2d 922, 935–36 (Tex. 1998) (analyzing plaintiff’s state
takings claim under federal takings caselaw); see also Jim Olive Photography
v. Univ. of Hous. Sys., 624 S.W.3d 764, 780 (Tex. 2021) (Busby, J., concurring)
(noting the distinctions). Schrock does not distinguish between the two.
Accordingly, we do not differentiate between the two Constitutions for
purposes of his appeal.
       23   Harris Cnty. Flood Control Dist., 499 S.W.3d at 800–01.
       24   451 S.W.3d at 832.
       25   Id. at 830.
       26   Id. at 832.

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one that does not—even though it could impair use of the property as a
result of its enforcement.27 The property owners in Carlson failed to
show a taking because the repair ordinance there did “not implicate any
property-use restriction.”28
       Like Houston’s ordinance in Carlson, the Baytown ordinance in
this case did not regulate land use. The ordinance permitted the City to
refuse to connect utility service to the property until outstanding utility
bills associated with the property were satisfied. The City’s provision of
utilities to the property was a service; its regulation of that service was
not a regulation of the property itself.
       As with the claims in Carlson, the true nature of Schrock’s claim
lies in the City’s wrongful enforcement of its ordinance, not in an
intentional taking or damage of his property for public use. In Carlson,
the plaintiffs similarly alleged that Houston wrongfully applied its
regulations.      We reiterated there that governments generally are
immune from such claims.29 Schrock’s challenge is no different from the
challenge in Carlson to the city’s alleged misapplication of its building
ordinance.30      In both cases, the alleged injury arises from a

       27   Id.
       28   Id.
       29 Id. at 833 (“Even assuming the city made a mistake, the respondents’
allegations would ‘amount to nothing more than a claim of negligence on the
part of [the city], for which [it] is immune under the Texas Tort Claims Act.’”
(quoting Dalon v. City of DeSoto, 852 S.W.2d 530, 538 (Tex. App.—Dallas 1992,
writ denied))).
       30Like Schrock, the plaintiffs in Carlson claimed a taking based on “the
penalty imposed and the manner in which the city enforced its standards.” Id.
at 832. We characterized the claim as a colorable due process claim, rejecting

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municipality’s wrongful action unrelated to a taking of private property
for public use.
       While we do not foreclose the possibility that enforcement of an
ordinance that does not directly regulate land use could amount to a
taking, this one does not. A regulation with “a condition of use ‘so
onerous that its effect is tantamount to a direct appropriation or
ouster’”31 may impair a property “so restrictively, or intrude on property
rights so extensively, that it effectively ‘takes’ the property.”32 However,
“nearly every civil-enforcement action results in a property loss of some
kind.”33     Property damage due to civil enforcement of an ordinance
unrelated to land use, standing on its own, is not enough to sustain a
regulatory takings claim.
       In Carlson, the order requiring owners to repair their property
was not an interference that was tantamount to ouster.34 Similarly, the
City’s lien, which Schrock could have paid or further challenged, was not
“so onerous that its effect [was] tantamount to ouster.”35 Instead, it was
a conditional restriction. Schrock reasonably could have avoided the

the notion that the takings claim arose from the improper enforcement of the
ordinance.    Id. at 832–33.      Schrock’s allegations are not materially
distinguishable from the owners’ allegations in Carlson.
       31   Id. at 831 (citing Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 537
(2005)).
       32Jim Olive Photography, 624 S.W.3d at 771–72 (citing Murr v.
Wisconsin, 137 S. Ct. 1933, 1942 (2017)).
       33   Carlson, 451 S.W.3d at 832–33.
       34   Id. at 832.
       35   See Lingle, 544 U.S. at 537.

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City’s interference with his property by seeking review of the ordinance’s
improper application and a refund.36 An enforcement action that causes
an economic loss to a property owner but allows for the reversal of that
loss is not a constitutional taking.37 Because the City’s enforcement
actions against the property were conditional and did not result in
permanent ouster, they were not a regulatory taking.38
       Such is the conclusion under Penn Central as well, which answers
whether a government’s interference with property rights constitutes a
regulatory taking by considering: (1) the regulation’s economic impact
on the property owner; (2) the extent to which the regulation interferes
with the property owner’s investment-backed expectations; and (3) the
character of the government’s action.39 In this case, Schrock could have
reversed the City’s lien and disruption of utility service through the
appeal process or payment. Thus, under Penn Central, Schrock did not
show that the economic impact of the City’s ordinance so interfered with

        Baytown, Tex., Code of Ordinances ch. 98, art. III, § 98-62(i)(5). The
       36

ordinance had an appeals process, in which Schrock participated.
       37 City of Dallas v. VSC, LLC, 347 S.W.3d 231, 235–36 (Tex. 2011)
(holding that police property seizure was not a taking because the procedure
permitted owner to regain possession). Thus, “[w]hen there exists provision
for compensation—or, as here, for the property’s return—a constitutional claim
is necessarily premature.” Id. at 236. The City removed the property lien after
Schrock challenged it.
       38 The redemptive right through compliance with the enforcement
process differentiates this case from a regulatory taking. See id. at 235–37.
When return of the property is available, it is a constraint on the government’s
permanent deprivation of property. See id. (observing that takings claims are
premature when the owner may apply for the return of his property).
       39   Sheffield, 140 S.W.3d at 672.

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his property rights that its actions appropriated the property from
him.40
                                       C
         Finally, Schrock did not present evidence in the trial court of the
alternative takings claims he raises in this Court. He did not claim a
physical taking. Instead, in the trial court, he claimed that the City’s
actions denied him all economically viable use of the property and
unreasonably interfered with his enjoyment of it. His testimony to the
property’s eventual state of disrepair was evidence of the degree of the
City’s alleged interference, not offered to prove that the City physically
acquired, occupied, or possessed his property. Schrock also did not raise
an exaction claim in the trial court. That is, he did not claim or offer
evidence that the City conditioned his right to develop or use his

         40See Lingle, 544 U.S. at 537 (defining a regulatory taking as a
condition of use “so onerous that its effect is tantamount to a direct
appropriation or ouster”). The Supreme Court has limited the examination of
the government’s purposes to “the severity of the burden that government
imposes upon private property rights,” rather than an examination of the
government’s allegedly improper motives. See id. at 539; id. at 542 (holding
that determination of whether government’s action properly advances a
legitimate interest “is tethered neither to the text of the Takings Clause nor to
the basic justification for allowing regulatory actions to be challenged under
the Clause”). This is because “the Takings Clause presupposes that the
government has acted in pursuit of a valid public purpose.” Id. at 543. The
court of appeals here heavily relied on the City’s improper motives to find that
Schrock raised a fact issue under Penn Central. But the Supreme Court in
Lingle held that courts must focus on the challenged regulation’s effect on
private property, not on the propriety of the government’s action. Our Court
acknowledged this limitation in VSC. 347 S.W.3d at 238 (holding that statute’s
failure to provide for proper notice is a due process challenge, not a takings
challenge, because “[t]he Takings Clause guarantees compensation ‘in the
event of otherwise proper interference amounting to a taking’” (quoting Lingle,
544 U.S. at 543)).

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property on granting the City a property interest or upon fulfilling a
property improvement condition.41 These alternative grounds are not
preserved for our review.
                              *       *        *
       We hold that the City’s utility enforcement actions do not
establish a regulatory taking of private property as a matter of law. The
trial court therefore properly directed a verdict for the City on Schrock’s
inverse condemnation claim. We reverse the judgment of the court of
appeals and reinstate the judgment of the trial court.

                                           Jane N. Bland
                                           Justice

OPINION DELIVERED: May 13, 2022

      41 See Town of Flower Mound v. Stafford Ests. Ltd. P’ship, 135 S.W.3d
620, 645 (Tex. 2004) (holding that a compensable taking occurred when the
town conditioned development approval on the developer’s rebuilding and
improving of a public street); see also Dolan v. City of Tigard, 512 U.S. 374
(1994); Nollan v. Cal. Coastal Comm’n, 483 U.S. 825 (1987).

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