138 F.3d 1036 (5th Cir. 1998), 96-50837, Hidden Oaks Ltd. v. City of Austin

Docket Nº:96-50837.
Citation:138 F.3d 1036
Party Name:HIDDEN OAKS LIMITED, et al., Plaintiffs, Hidden Oaks Limited, Plaintiff-Appellee-Cross-Appellant, v. The CITY OF AUSTIN, Defendant-Appellant-Cross-Appellee.
Case Date:April 29, 1998
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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138 F.3d 1036 (5th Cir. 1998)

HIDDEN OAKS LIMITED, et al., Plaintiffs,

Hidden Oaks Limited, Plaintiff-Appellee-Cross-Appellant,


The CITY OF AUSTIN, Defendant-Appellant-Cross-Appellee.

No. 96-50837.

United States Court of Appeals, Fifth Circuit

April 29, 1998

Rehearing Denied May 27, 1998.

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Roger Joseph Marzulla, Marzulla & Marzulla, Washington, DC, Evangeline Claire Paschal, Akin, Gump, Strauss, Hauer & Feld, Washington, DC, A. Boone Almanza, Austin, TX, for Hidden Oaks Limited.

William T. Deane, Austin, TX, for Defendant-Appellant-Cross-Appellee.

Appeals from the United States District Court for the Western District of Texas.

Before JOHN R. GIBSON [*], JOLLY and EMILIO M. GARZA, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

Hidden Oaks Limited ("Hidden Oaks") and the City of Austin (the "City") cross-appeal the district court's entry of judgment for Hidden Oaks on claims of breach of contract and procedural due process, its dismissal of Hidden Oaks' substantive due process and takings claims, and its award of $115,000 in attorney's fees to Hidden Oaks. We affirm in part, reverse and vacate in part, and remand.


Hidden Oaks owns Stoneridge Apartments ("Stoneridge"), an eight-building, 137-unit complex located in Austin, Texas. In August 1994, the City served on Hidden Oaks eight written Notices of Violation (one for each of the complex's buildings) asserting that Stoneridge failed to comply with certain provisions of the City Uniform Housing Code ("housing code" or "code"). Specifically, the City alleged that some of the windows in Stoneridge were not large enough to serve as exit routes in case of a fire and also that certain exterior structures such as balconies and walkways were rotting and in need of repair. The notices advised that if Hidden Oaks "disagree[d] with these findings, [it] ha[d] appeal rights as set forth in the Housing Code," which stated that "[a]ny person affected by any notice of substandard violations may request and shall be granted an appeal and hearing before the Building and Standards Commission."

The notices also threatened that as long as Stoneridge remained in violation of the code, the City "reserve[d] the right to place a hold on all utilities," meaning that once the current tenant moved out of a unit, the new tenant could not reconnect utility service. The notices did not specify the circumstances under which the City would exercise its right to impose a utility hold on a property, but the City's deputy building official, Stuart Hersch, testified at trial that his inspectors generally

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made these determinations based on factors such as the owner's overall cooperativeness and willingness to make repairs.

The parties produced conflicting evidence at trial as to whether the City provided any way to appeal a building inspector's imposition of a hold, separate and apart from the appeal procedure provided to challenge an inspector's citation of a property as substandard. The City argued that even an owner who admitted the presence of code violations could appeal to the Building and Standards Commission (the "Commission"), seeking a reprieve or variance from the imposition of a hold--just as the building inspector in the first instance might find code violations and yet refrain from placing the hold at all. Hidden Oaks, on the other hand, claimed that the City entrusted its building inspectors with final, unreviewable authority over which substandard buildings would suffer holds and which would not.

In any event, the parties did not dispute that the Commission routinely heard appeals related to the correctness of the building inspector's citations, i.e., the Notices of Violation. Indeed, shortly after receiving the notices at issue here, Hidden Oaks filed an appeal with the Commission, asserting that "our 30-year-old apartment complex meets the requirements" for egress windows and "retrofitting of buildings would not achieve a significant life/safety improvement and would place an undue financial hardship on [the] owner." Hidden Oaks did not appeal the citations of the building inspector regarding the condition of the balconies and walkways, nor did Hidden Oaks petition the Commission for a reprieve from the threatened holds.

Prior to the hearing on Hidden Oaks' appeal, Hersch, along with another employee of the City, Terri Hasbrook, set up a meeting with Chip McLelland, an employee of Hidden Oaks, to discuss Hidden Oaks' pending appeal. During the meeting, McLelland expressed his desire to cooperate fully with the City and avoid the imposition of utility holds. The City, for its part, suggested that it might provide some fire-safety-related alternatives for Stoneridge, rather than insisting that Hidden Oaks essentially tear down the complex to expand the size of every window.

At the end of the meeting, McLelland asked Hersch to "put [their agreement] in writing." Hersch suggested instead that McLelland draft a letter, which Hersch then would approve. McLelland sent the letter several days later, stating that Hidden Oaks was "requesting a postponement of [their] appeals to the Board," and setting forth a proposal by which Hidden Oaks would install "hard wired smoke detector[s] with battery back-up[s] in each unit which has deficient egress" and "electronically interconnect smoke detectors in each sleeping room [of the] multi-bedroom units." In closing, McLelland noted: "I believe this [proposal] addresses the major safety concerns expressed by your Code Enforcement inspector and along with the now completed electrical repairs, removed sign wiring, and the progress being made on A/C platform repair, will avoid any further necessity of threatened utility holds." Hersch wrote "approved" in one corner, along with his signature, and placed the letter in Hidden Oaks' file.

Shortly after sending the letter ("September 1994 letter agreement"), Hidden Oaks learned that the City in fact had placed a utility hold on Stoneridge, contrary to Hidden Oaks' understanding of the meeting with Hersch and the subsequent September 1994 letter agreement. Following this discovery, Hidden Oaks continued to negotiate with the City for the removal of the hold, but the City did not release the last unit in Stoneridge until February 1996. 1

Hidden Oaks filed this suit in December 1995, alleging breach of contract, violation of the Fifth Amendment takings clause, and violation of various sections of the Texas Local Government Code. The district court dismissed the Fifth Amendment takings claim as unripe, and Hidden Oaks subsequently amended its complaint to include an inverse condemnation claim under Article I, § 17 of the Texas Constitution as well as several federal claims for violations of substantive and procedural due process. The case proceeded to trial in late September 1996. At the close of Hidden Oaks' presentation

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of evidence, the district court dismissed the substantive due process and inverse condemnation claims, finding that the City's actions were "rationally related to ... protect[ing] [the] health and safety of citizens" and that "under the law, [the City] can't be unreasonable when they are enforcing safety and health codes."

The jury responded to interrogatories on the breach of contract and procedural due process claims, finding for Hidden Oaks in both instances. The jury awarded damages of $231,089 and attorney's fees of $115,000 for the breach of contract claim, and nominal damages of $1 for the procedural due process violation. The district court entered judgment for a total sum of $346,090 plus interest and costs, and denied both parties' requests for attorney's fees pursuant to 42 U.S.C. § 1988. Both the City and Hidden Oaks filed timely appeals.


Before trial, the district court dismissed Hidden Oaks' federal takings claim for lack of jurisdiction, relying on the two-prong ripeness test of Williamson County Reg'l Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 186, 195, 105 S.Ct. 3108, 3116, 3121, 87 L.Ed.2d 126 (1985) (holding that claims for compensation under the Fifth Amendment takings clause are not ripe until (1) the relevant governmental unit has reached a final decision as to what will be done with the property and (2) the plaintiff has sought compensation for the alleged taking through whatever adequate procedures the state provides). We review jurisdictional determinations de novo and are free to consider all issues relevant to that inquiry, even those not addressed by the district court. See Samaad v. City of Dallas, 940 F.2d 925, 934 (5th Cir.1991) (noting that the ripeness analysis of Williamson County "is a jurisdictional requirement that cannot be waived").

Here, the district court held that Hidden Oaks failed to satisfy the first prong of Williamson--requiring that the City "arrive[ ] at a final, definitive position regarding how it will apply the regulations at issue to the particular land in question"--because Hidden Oaks failed to petition the Commission for a reprieve or "variance" from the building inspector's decision to impose a utility hold on Stoneridge. Williamson, 473 U.S. at 188, 105 S.Ct. at 3117 (holding federal takings claim unripe because respondent did not seek variances that would have allowed it to develop the property, notwithstanding the commission's finding that the plan as submitted did not comply with the relevant regulations). Hidden Oaks disputes that the Commission would even entertain such a variance petition, and urges that we reverse the district court's dismissal as based on the clearly erroneous factual conclusion that such variance procedures were in fact available.

We need not resolve...

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