City of McAllen v. Ramirez

Decision Date18 July 2013
Docket NumberNUMBER 13-09-00067-CV
CourtTexas Court of Appeals

On appeal from the 93rd District Court

of Hidalgo County, Texas.


Before Chief Justice Valdez and Justices Benavides and Longoria

Memorandum Opinion by Chief Justice Valdez

Arnoldo Ramirez Jr., Raul Romero, Promotions of America, Inc. ("Promotions"), and Nolana Entertainment, Inc. ("Nolana"), brought suit against the City of McAllen for "taking of property without due course of law or compensation" under article 1, section 17 of the Texas Constitution. See TEX. CONST. art. I, § 17 (establishing that "noperson's property shall be taken, damaged or destroyed for or applied to public use without adequate compensation being made . . . ."). After a bench trial, the trial court rendered judgment against the City of McAllen. The City appeals this judgment by eighteen issues. We affirm the trial court's judgment.


The underlying events concern the operation of the Collage nightclub in Nolana Shopping Center in McAllen, Texas. Jose Chanin owned the center and served as Collage's landlord. Collage was owned and operated by Nolana, which was owned by Ramirez and Romero as equal shareholders. The genesis for the underlying suit occurred when the City denied Nolana's application to renew its conditional use permit to operate as a bar.

The City's zoning ordinances provide that the Nolana Shopping Center is zoned "C-3," which is a general business zone. The City's ordinances allow the operation of restaurant-bars in this area, including those that offer live entertainment; however, any alcohol-selling business which does not derive at least 51% of its gross income from the sale of prepared food, such as a bar or nightclub, is required to obtain a conditional use permit. McAllen Ordinances §§ 138-1, 138-278. According to the ordinances, the purpose of the regulations regarding the conditional use permit "is to allow the compatible and orderly development, within the city, of uses which may be suitable only in certain locations in a zoning district if developed in a specific way or only for a limited period of time." Id. § 138.111.

When an applicant applies for a conditional use permit, the city's planning director processes the application, investigates the application, provides notice toowners of real property within 200 feet of the property for which application is being made, and presents the application with a recommendation to the planning and zoning commission. Id. § 138-112. The planning and zoning commission may deny an application after a public hearing if the proposed use fails to meet any of the criteria set forth in the ordinances for approval. Id. Whether the permit is granted or denied, any person aggrieved by the decision of the planning and zoning commission may appeal to the board of commissioners. Id. § 138-29. A conditional use permit, if granted, has a time limit of not more than one year unless otherwise approved by the board of commissioners. Id. § 138-117. At particular issue in this case is city ordinance section 138-118, which provides.

The property line of the lot of any of the abovementioned businesses, especially those businesses having late hours (after 10:00 p.m.), must be at least 300 feet from the nearest residence, church, school, or publicly owned property, or must provide sufficient buffering and sound insulation of the building such that the business is not visible and cannot be heard from the residential area, and must be designed to prevent disruption of the character of adjacent residential areas.

Id. § 138-118(a)(4)(a).1

A brief history of the events underlying the creation of Collage is necessary to understand the sequence of events that followed. Before Collage was created, Ramirez, a businessman and entertainment promoter, originally owned all of the stock in Nolana, and he and his family also owned all of the stock in Promotions. Ramirez also had an interest in several other nightclubs and businesses. Nolana leased a space in the Nolana Shopping Center to open a restaurant-bar named Hot Spots. Nolana also leased a separate space in the same shopping center for a different restaurant, FunTime Pizza. In order to finance these businesses, Nolana took out a loan of $1 million from First State Bank. First State Bank was later sold to Texas State Bank. Nolana collateralized the loan with a property owned by Promotions known as La Villa Real. Of the loan amount, Ramirez allocated $600,000 as investment in Hot Spots and spent the remainder on Fun Time Pizza.

During this same period of time, Romero owned a restaurant called La Tortuga in the same shopping center. Ramirez and Romero began discussing their businesses, and in approximately 1997, Ramirez sold Romero half of his stock in Nolana. Ramirez and Romero planned to transform Hot Spots into a nightclub named Collage. Ramirez also sold Fun Time Pizza to Romero for $500,000. To finance the purchase, the terms of sale required Romero to assume responsibility for the remainder of the $1 million loan. According to Romero's testimony, he assumed responsibility for paying the existing debt, which at that time was approximately half a million.2 Ramirez remained on the note as guarantor and remained involved in the business as a consultant and advisor.

Romero approached the City to obtain a building permit for remodeling Hot Spots. The City employees who responded to his request told him that he also needed to obtain a conditional use permit because its alcohol sales would exceed its food sales. The Mayor of the City of McAllen at that time, Leo Montalvo, informed Ramirez that there would be no problem in securing a conditional use permit.

On December 16, 1997, the City's planning and zoning Commission approved a request by Raul Romero for a conditional use permit for one year to operate a nightclubin the lease space formerly occupied by Hot Spots in the Nolana Tower Shopping Center. Romero originally executed the application in the name of a new and different corporation, Collage Enterprises, LLC, however, Romero never incorporated that entity. After Romero obtained the conditional use permit, Nolana immediately began to operate the lease space as Collage.

Thelma Gallegos, who resided on a street adjacent to the center, had complained vociferously about the shopping center from its inception. The shopping center had other tenants who offered live music. After Collage began operating, the number of her complaints and the complaints of other neighbors escalated. The complaints were not centered on music or noise in general, but were specifically directed against a bass thumping sound which they alleged emanated from Collage.

In a letter dated February 17, 1998, the City's planning and zoning commission notified Romero that the City had "received several citizen complaints concerning the establishment prompting an inspection of the property by a building official." The letter informed Romero:

An inspection conducted on Wednesday, February 11, 1998 revealed that your establishment was in violation of the following requirement of your [conditional use permit]:
Sections 138-118(4)(a) "The property line of those businesses (bars), especially those businesses having late night hours (after 10:00 p.m.), must be at least 300 feet from the nearest residence, church, school, or publicly owned property, or must provide sufficient buffering and sound insulation of the building such that the building is not visible and cannot be heard from the residential area, and must be designed to prevent disruption to the character of adjacent residential areas."
This letter is to advise you that the violation must be remedied within ten days from receipt of this letter. At that time, an inspection by a buildingofficial will be conducted to ensure compliance with the terms of the [conditional use permit]. If the violation has not been corrected, the Planning and Zoning Commission will consider revocation of the [conditional use permit] at the next available public hearing.

At approximately this same time, Gallegos brought a petition seeking revocation of Collage's conditional use permit. At its May 5, 1998 meeting, the planning and zoning commission heard complaints from the neighbors, but denied revocation. The residents did not appeal this decision.

During this period of time, the neighbors called the police on multiple occasions to complain about noise from Collage. None of the police investigations resulted in any findings regarding noise violations or citations to Collage for violations of any ordinances. Testimony at trial indicated that some of these complaints were made on many occasions when Collage was closed or on evenings when it offered live comedy performances or showed sporting events rather than music. The neighbors instituted a complaint against Collage with the Texas Acoholic Beverage Commission ("TABC"), which conducted a full investigation; but the complaint was ultimately dismissed as unfounded. The TABC's office was directly across the street from Collage, and its director admitted that he heard no noise even during late nights working at the office.

Ramirez and Romero met several times with residents at their homes and at Collage to attempt to remedy the complaints. Romero testified that in his opinion, "the problem didn't exist." Ramirez concurred. Even though they did not agree that there was a problem, Ramirez and Romero nevertheless performed extensive renovations to Collage to attempt to remedy the complaints.

According to Romero's testimony, Montalvo was personally involved in the investigation and visited Collage "many times." He told them that they were notviolating any ordinances. He instructed Romero and Ramirez to hire engineers from New York to...

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