Hallco Texas, Inc. v. McMullen County

• Decision Date: 29 December 2006
• Docket Number: No. 02-1176.,02-1176.
• Citation: 221 S.W.3d 50
• Parties: HALLCO TEXAS, INC., Petitioner, v. McMULLEN COUNTY, Respondent.
• Court: Texas Supreme Court

221 S.W.3d 50

HALLCO TEXAS, INC., Petitioner, v. McMULLEN COUNTY, Respondent.

No. 02-1176.

Supreme Court of Texas.

Argued January 4, 2005.

Delivered December 29, 2006.

Rehearing Denied June 1, 2007.

Lynn E. Blais, University of Texas School of Law, R. James George Jr., George & Brothers, L.L.P. and Max Renea Hicks, Law Office of Max Renea Hicks, Austin, TX, for Petitioner.

Portia Bosse and James P. Allison, Allison Bass & Associates, L.L.P., Austin, for Respondent.

Justice O'NEILL delivered the opinion of the Court as to Parts I, II, III.B, and V, joined by Chief Justice JEFFERSON, Justice WAINWRIGHT, Justice BRISTER, and Justice JOHNSON, and an opinion as to Part III.A and IV, joined by Chief Justice JEFFERSON, Justice BRISTER, and Justice JOHNSON.

Hallco Texas, Inc. contends McMullen County's denial of a variance from an ordinance prohibiting the location of landfills within three miles of a water-supply reservoir effected an unconstitutional taking of property. We hold that Hallco's claim is barred and thus affirm the court of appeals' judgment.

I. Background

In January 1991, Hallco bought 128 acres of land located about 1.75 miles from Choke Canyon Reservoir, sometimes referred to as Choke Canyon Lake, in McMullen County. The reservoir impounds water from the Frio River and supplies water to the City of Corpus Christi and a number of other communities in the region. Hallco purchased the property with the intent to operate a Class I nonhazardous industrial waste landfill, a use requiring a permit from the Texas Commission on Environmental Quality¹. Class I industrial waste may include waste that, because of its concentration or physical or chemical characteristics, "is toxic, corrosive, flammable, a strong sensitizer or irritant, or a generator of sudden pressure by decomposition, heat, or other means," and which may pose a potential danger to human health or the environment. TEX. HEALTH & SAFETY CODE § 361.003(2)(A), (B); 30 TEX. ADMIN. CODE § 335.1(18)(18). Class I nonhazardous is distinct from Class I hazardous waste, but "is considered potentially threatening to human health and the environment if not properly managed, because of the constituents and properties this class can include," and thus requires special handling. TEXAS COMMISSION ON ENVIRONMENTAL QUALITY, GUIDELINES FOR THE CLASSIFICATION AND CODING OF INDUSTRIAL AND HAZARDOUS WASTES 2 (2005), available at http://www.tceq.state.tx.us/ comm_exec/forms_pubs/pubs/rg/rg-022_476238.pdf. In the course of Hallco's purchase, the company's president discussed Hallco's plans for the property with the McMullen County Judge, who voiced opposition. Eleven days after Hallco purchased the property, the McMullen County Commissioners Court adopted a resolution expressing opposition to the proposed use as a potential hazard to local water supplies. Despite the County's disagreement, Hallco proceeded with plans to develop the property as an industrial-waste landfill, and on July 27, 1992, formally filed its application with the Texas Commission on Environmental Quality.

In June 1993, the County enacted the ordinance at issue here pursuant to section 364.012 of the Health and Safety Code. While Texas counties generally enjoy fairly limited zoning authority, that provision allows a county to prohibit municipal or industrial solid-waste disposal that presents a threat to the public health, safety, and welfare, so long as the county designates an area in which disposal is permissible. TEX. HEALTH & SAFETY CODE § 364.012(a), (b).² McMullen County's ordinance prohibits the disposal of solid waste within three miles of Choke Canyon Lake, but allows disposal in any other area of the county so long as applicable state requirements are met. McMULLEN COUNTY ORD. No. 01-06-93. Although the County had conducted no technical studies at the time the ordinance was passed, the ordinance's predicatory provisions state that "a safe and abundant supply of drinking water is necessary to preserve and protect the health and welfare of the citizens of McMullen County;" that "soil in the area of the lake is porous and subsurface materials tend to be unstable and volatile;" that "the disposal of solid waste within three (3) miles of Choke Canyon Lake would constitute a threat to the public health, safety, and welfare;" and that "the present technology available with regard to the installation, operation and maintenance of solid waste disposal sites is insufficient to prevent contamination of adjacent areas." Id. Neither the Health and Safety Code nor the ordinance establish any procedure to obtain a variance from the landfill prohibition.

By the time the County passed the ordinance, Hallco claims it had invested more than $800,000 in the site and the Commission permitting process. The Commission issued a "final draft permit" in January 1995, and a "revised final draft permit" a little over a month later. A final draft permit reflects permit conditions recommended by the Commission's staff after completion of its technical review, but the permit's issuance may still depend on the outcome of a contested-case hearing. See 30 TEX. ADMIN. CODE § 80.118(a)(1). The County, the City of Corpus Christi, the Nueces River Authority, and several others appeared in the Commission proceedings and raised objections to Hallco's application. Hallco's application apparently remains pending at the Commission.³

In June 1995, Hallco challenged the County's ordinance by filing suit in the federal district court; it also filed a parallel proceeding in state court. The federal court dismissed Hallco's substantive due-process and equal-protection claims with prejudice, holding that the ordinance was rationally related to a legitimate governmental purpose. 934 F.Supp. 238, 241-42 (S.D.Tex.1996). In doing so, the court described an "Issues List," prepared by the Office of Public Interest Counsel and attached as an exhibit to the County's briefing, as "aptly illustrat[ing] that the safety of this proposed project is at least `fairly debatable.'" Id. at 241. The court dismissed without prejudice Hallco's claim alleging an unconstitutional taking in violation of the Fifth Amendment to the United States Constitution, holding that to ripen its federal takings claim Hallco first had to seek compensation through procedures the state had established. Id. at 240. The court rested that decision upon Williamson County Regional Planning Commission v. Hamilton Bank, 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985), which requires a party alleging a Fifth Amendment taking to obtain a final decision regarding application of the challenged regulation to its property, and to first use any available state procedure to obtain just compensation. The court noted that it was "arguable whether Hallco meets the first condition," bypassing Hallco's argument that the ordinance "constitutes a final decision because it ... does not expressly provide any means for obtaining variances from the provisions."⁴ Id. at 240. Instead, the court held that Hallco's Fifth Amendment claim was premature because Hallco had not sought compensation under article I, section 17 of the Texas Constitution. Id.

A week after the federal court's dismissal, the County moved for summary judgment in the state court action. With respect to Hallco's takings claims, the County argued that Hallco had no claim for compensation under either the state or federal constitution because Hallco had no cognizable property interest in disposing of waste on its property. The County argued, alternatively, that the ordinance was a reasonable exercise of police power that did not deprive Hallco of all economic use of its property. The County also moved for summary judgment on Hallco's equal-protection, due-process, contracts-clause, and state statutory causes of action. The trial court granted the County's motion as to all claims without specifying the grounds. Hallco Texas, Inc. v. McMullen County, 1997 WL 184719, *6 (April 16, 1997) (not designated for publication) ("Hallco I").

The court of appeals affirmed the trial court's judgment, holding that "Hallco's takings claim must fail because [Hallco] did not have a cognizable property interest of which the government could deprive [it]." Id. at *2, 3. The court reasoned that "the Legislature has defined when property owners may dispose of solid waste on their property via the permitting process" under sections 361.061-361.345 of the Texas Health and Safety Code, and stated that,

[e]ven if Hallco already had a permit, by definition, it would not have a property interest in disposal of solid waste. [Commission] regulations define permits as not being a property interest or a vested right.... The only way the McMullen County regulation affected Hallco was in denying it the right to operate a solid waste facility on the proposed site. A mere expectancy of future services which would render the land more valuable, in the absence of a contract, is not a vested property right for purposes of determining whether a taking has occurred.

Id. at *3 (citations omitted). The court of appeals' judgment issued April 16, 1997, and Hallco did not appeal that decision.

More than two years after the court of appeals' judgment and nearly six years after the ordinance was enacted, Hallco submitted a request for a variance to the McMullen County Commissioners Court. Hallco offered no changes to its proposed landfill. Instead, Hallco's request claimed the ordinance had no scientific basis and alleged the County had singled out Hallco and its property for disparate and unfair treatment. Attached to the request was an appraiser's assessment of the ordinance's economic impact on Hallco. Hallco asked the County to issue a variance permitting it to operate the proposed facility "notwithstanding the provisions of the County's Ordinance." The County permitted Hallco to make a presentation on the request to the Commissioners Court, but took no...