City of Dallas v. Stewart

• Decision Date: 01 July 2011
• Docket Number: No. 09–0257.,09–0257.
• Citation: 361 S.W.3d 562,55 Tex. Sup. Ct. J. 271
• Parties: CITY OF DALLAS, Petitioner, v. Heather STEWART, Respondent.
• Court: Texas Supreme Court

361 S.W.3d 562

55 Tex. Sup. Ct. J. 271

CITY OF DALLAS, Petitioner,

v.Heather STEWART, Respondent.

No. 09–0257.

Supreme Court of Texas.

Argued Feb. 16, 2010.Decided Jan. 27, 2012.Dissenting Opinions Filed July 1, 2011.*

Thomas P. Perkins Jr., Dallas City Attorney, Patricia Medrano De La Garza, Christopher D. Bowers, Assistant City Attorney, Charles S. Black Jr., Duncanville, John K. Dunlap, Gwinn & Roby, Kelley Elise Cash, Thompson & Knight LLP, Johnanna Greiner, Dallas City Attorney's Office, Dallas, Barbara E. Rosenberg, James B. Pinson, Assistant City Attorney, for City of Dallas.

Julius Staev, Law Offices of Julius S. Staev, Dallas, for Heather Stewart.

Frederick Wayne ‘Fritz’ Quast, Taylor Olson Adkins Sralla & Elam LLP, Fort Worth, for Amicus Curiae The Cities of Aledo.Jose Ines Nino, Deputy City Attorney, for Amicus Curiae City of San Antonio, Texas.Donna Lynn Edmundson, Houston, for Amicus Curiae City of Houston, Texas.Rance L. Craft, Office of the Attorney General, Austin, for Amicus Curiae Office of the Solicitor General of Texas.Chief Justice JEFFERSON delivered the opinion of the Court, joined by Justice HECHT, Justice MEDINA, Justice WILLETT, and Justice LEHRMANN.

We deny the motion for rehearing. We withdraw our opinion of July 1, 2011 and substitute the following in its place.

Urban blight threatens neighborhoods. Either as a risk to public health or as a base for illicit activity, dilapidated structures harm property values far more than their numbers suggest. Cities must be able to abate ¹ these nuisances to avoid disease and deter crime. But when the government sets up a mechanism to deal with this very real problem, it must nonetheless comply with constitutional mandates that protect a citizen's right to her property.

Today we hold that a system that permits constitutional issues of this importance to be decided by an administrative board, whose decisions are essentially conclusive, does not correctly balance the need to abate nuisances against the rights accorded to property owners under our constitution. In the context of a property owner's appeal of an administrative nuisance determination, independent court review is a constitutional necessity. We affirm the court of appeals' judgment, but on different grounds.

I. Background

Heather Stewart bought a home in Dallas. Between 1991, when Stewart abandoned her house, and 2002, when the City demolished it, the Stewart home was a regular stop for Dallas Code Enforcement officials. Although utilities were disconnected and windows boarded up, the home suffered vandalism in 1997 and was occasionally occupied by vagrants. Stewart did little to improve the property, apart from building a fence to impede access, and she consistently ignored notices from the City. Inspectors returning to the home often found old notices left on the door.

In September 2001, the Dallas Urban Rehabilitation Standards Board (“URSB” or “Board”), a thirty-member administrative body that enforces municipal zoning ordinances, met to decide whether Stewart's property was an urban nuisance that should be abated. Stewart's neighbor, who had registered complaints on six prior occasions, testified that a fallen tree on Stewart's property had done $8,000 damage to her home and threatened to do $30,000 more. The Board reviewed prior complaints about the property and its general disrepair, found the Stewart house to be an urban nuisance, and ordered its demolition. In September 2002, the Board denied Stewart's request for rehearing and affirmed its order.

On October 17, 2002, a City inspector found that Stewart had not repaired the property, and on October 28, the City obtained a judicial demolition warrant. The City demolished the house four days later.

Before the demolition, Stewart appealed the Board's decision to district court, but the appeal did not stay the demolition order. See Tex. Loc. Gov't CodeE § 54.039(e). After the demolition, Stewart amended her complaint to include a due process claim and a claim for an unconstitutional taking. The trial court, on substantial evidence review, affirmed the Board's finding that Stewart's home was an urban nuisance and awarded the city $2,266.28 in attorneys fees. It then severed Stewart's constitutional claims and tried them to a jury. At the close of trial, the City moved unsuccessfully for a directed verdict on the grounds that the Board's nuisance determination was res judicata, precluding Stewart's takings claim. The jury rejected the City's contention that Stewart's home was a public nuisance and awarded her $75,707.67 for the destruction of her house.² The trial court denied the City's post-verdict motions and signed a judgment in conformance with the verdict.

The court of appeals affirmed but held that the Board's nuisance finding could not be preclusive because of the brief delay between the nuisance finding and the house's demolition. 360 S.W.3d at 518.³ The City petitioned this Court for review, arguing that the lower courts erred in failing to give the Board's nuisance determination preclusive effect in Stewart's taking claim. We granted the petition for review.⁴ 53 Tex.Sup.Ct.J. 115 (Nov. 20, 2009).

II. Analysis

Texas law permits municipalities to establish commissions to consider violations of ordinances related to public safety. See Tex. Loc. Gov't CodeE §§ 54.032–.041; see also id. §§ 214.001–.012.⁵ The City of Dallas created the now-defunct Urban Rehabilitation Standards Board for that purpose. See Dallas, Tex., Code §§ 27–6 to –9, repealed by Dallas, Tex., Ordinance 26455 (Sept. 27, 2006).⁶ The Board evaluated alleged violations of municipal ordinances. Dallas, Tex., Code §§ 27–6(a), 27–7, 27–8. Before issuing a demolition order, the Board was required to give property owners notice and a hearing. See id. §§ 27–9, 27–13. Property owners were also entitled to an appeal in district court, but judicial review was limited to deciding whether substantial evidence supported the Board's decision. Id. § 27– 9(e).

The Local Government Code authorizes substantial evidence review of standards commissions' decisions. Tex. Loc. Gov't CodeE §§ 54.039(f), 214.0012(f). The same standard governs review of State agency determinations under the Texas Administrative Procedure Act. See Tex. Gov't Code §§ 2001.174–.175 (“If the law authorizes review of a decision in a contested case under the substantial evidence rule or if the law does not define the scope of judicial review, a court may not substitute its judgment for the judgment of the state agency on the weight of the evidence....” (emphasis added)). Substantial evidence review is limited in that it requires “ ‘only more than a mere scintilla,’ to support an agency's determination.” Montgomery Indep. Sch. Dist. v. Davis, 34 S.W.3d 559, 566 (Tex.2000) (quoting R.R. Comm'n v. Torch Operating Co., 912 S.W.2d 790, 792–93 (Tex.1995)); see also W. Wendell Hall, Standards of Review in Texas, 38 St. Mary's L.J. 47, 290–92 (2006) (describing substantial evidence review as applied to Texas administrative agencies). Substantial evidence review “gives significant deference to the agency” and “does not allow a court to substitute its judgment for that of the agency.” Torch Operating, 912 S.W.2d at 792. As such, “the evidence in the record actually may preponderate against the decision of the agency and nonetheless amount to substantial evidence.” Tex. Health Facilities Comm'n v. Charter Med.-Dallas, Inc., 665 S.W.2d 446, 452 (Tex.1984).

As a general matter, we have held that some agency determinations are entitled to preclusive effect in subsequent litigation. See, e.g., Igal v. Brightstar Info. Tech. Grp., Inc., 250 S.W.3d 78 (Tex.2007) (applying res judicata to orders of the Texas Workforce Commission). Today, we must decide whether the Board's determination that Stewart's house was an urban nuisance, ⁷ and the affirmance of that decision on substantial evidence review, precludes a takings claim based on the demolition of that property. Because substantial evidence review of a nuisance determination resulting in a home's demolition does not sufficiently protect a person's rights under Article I, Section 17 of the Texas Constitution, we hold that the determination was not preclusive.

A. Eminent Domain and Inverse Condemnation

A city may not take a person's property without first paying just compensation. Tex. Const. art. I, § 17(d).⁸ Typically, when the government takes a person's property, it does so through condemnation proceedings. For more than 150 years, the Legislature has prescribed a thorough and consistent condemnation procedure. A district court appoints a board of commissioners to hear evidence about the public's need for the land and its value.⁹ The board's decision is then subject to de novo review by the district court. An early statute, passed before the ratification of the present constitution, provided that

if either party be dissatisfied with the decision of said Commissioners, he or they shall have the right to file a petition in the District Court, as in ordinary cases, reciting the cause of action and the failure to agree, and such suit shall proceed to judgment as in ordinary cases.Act approved Feb. 8, 1860, 8th Leg., R.S., ch. 51, § 2, 1860 Tex. Gen. Laws 60, 61, reprinted in 4 H.P.N. Gammel, The Laws of Texas 1822–1897, at 1422, 1423 (Austin, Gammel Book Co. 1898) (emphasis added).¹⁰ An almost identical judicial review provision appeared in the first Revised Civil Statutes. See Tex.Rev.Civ. Stat. art. 4202 (1879). Today, condemnation proceedings are governed by chapter 21 of the Property Code, which retains the right to de novo review of the lay board's valuation decision. See Tex. Prop.Code § 21.018 (If there is objection to the commissioners' decision, the district court shall “try the case in the same manner as other civil cases.”).

Frequently, however, the government takes property without first following eminent domain procedures. In these cases,...