City of Baytown v. Schrock
| Decision Date | 13 May 2022 |
| Docket Number | 20-0309 |
| Citation | 645 S.W.3d 174 |
| Parties | CITY OF BAYTOWN, Petitioner, v. Alan SCHROCK, Respondent |
| Court | Texas Supreme Court |
John J. Hightower, Allison S. Killian, Andrea Chan, Scott Bounds, Olson & Olson LLP, Houston, for Petitioner.
Robert W. Musemeche, Webster, for Respondent.
Alan Schrock, Pro Se.
Our Constitutions require the government to compensate property owners when it takes their property for public use.1 This 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.
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 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 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.
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.
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 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
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 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.
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 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 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 municipality's wrongful action unrelated to a taking of private property for public use.
While we do not foreclose the possibility that enforcement...
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