Schrock v. City of Baytown

• Decision Date: 27 June 2019
• Docket Number: NO. 01-17-00442-CV,01-17-00442-CV
• Citation: 623 S.W.3d 394
• Parties: Alan SCHROCK, Appellant v. CITY OF BAYTOWN, Appellee
• Court: Texas Court of Appeals

623 S.W.3d 394

Alan SCHROCK, Appellant

v.CITY OF BAYTOWN, Appellee

NO. 01-17-00442-CV

Court of Appeals of Texas, Houston (1st Dist.).

Opinion issued June 27, 2019

David J. Sadegh, P.O. Box 5603, Kingwood, TX 77345, for Appellant.

Andrea Chan, Scott Bounds, 02706000, John J. Higtower, Olson & Olson, LLP, 2727 Allen Parkway, Houston, TX 77019, for Appellee.

Panel consists of Chief Justice Radack and Justices Goodman and Countiss.

Julie Countiss, Justice

Appellant, Alan Schrock, challenges the trial court's judgment, rendered after a jury trial, in favor of appellee, City of Baytown (the "City"), in Schrock's suit against the City for taking his property¹ and for a declaratory judgment.² In two issues, Schrock contends that the trial court erred in granting the City a directed verdict on his claims.

We affirm in part and reverse and remand in part.

Background

This is the second appeal we have heard involving these parties.³ In his previous appeal, Schrock challenged the trial court's rendition of summary judgment against him on his regulatory-taking and declaratory-judgment claims.⁴ We held that the trial court erred in granting the City summary judgment and dismissing Schrock's claims, and we reversed the trial court's judgment and remanded the case to the trial court for further proceedings consistent with our opinion.⁵

In his second amended petition, Schrock alleged that in 1993, he purchased a house at 606 Vista Avenue in the City to use as a rental property (the "property"), which he did until approximately January 2010. Each time that Schrock leased the property to a new tenant, the City required, before it would connect utility services, including water service, in the tenant's name, that the tenant pay a deposit and provide a copy of the lease agreement related to the property. Thus, whenever a new tenancy began, Schrock provided the City with a copy of the lease agreement, either by furnishing his new tenant with an extra copy to give to the City or by giving a copy of the lease agreement directly to the City himself.

In 2009, the City notified Schrock that he owed it $ 1,999.67 for unpaid utility services provided by the City to the property for ten of Schrock's prior tenants, dating back to 1993. The City gave Schrock copies of the relevant billing invoices, listing the names and account numbers of his prior delinquent tenants. The City demanded that Schrock pay the outstanding sum within fourteen days to avoid having a lien placed on the property. Schrock disputed the charges for utility services and requested an administrative hearing.

After a hearing, the City reduced the amount owed by Schrock to $ 1,157.39 for unpaid utility bills that had accrued over the preceding four years, rather than the preceding sixteen years. And it gave Schrock fourteen days to pay. Although after the administrative hearing, the City sent Schrock's attorney a notice detailing its decision, Schrock's attorney misfiled the notice. Because Schrock was not aware of the City's decision, he did not pay the sum assessed by the City, and on June 1, 2009, the City filed a lien against the property for unpaid utility services that it had provided directly to Schrock's tenants who had previously resided at the property. According to Schrock, the City failed to perfect its lien or provide him with notice of the lien or his right to appeal. And the City continued to provide utility services, including water service, to the property until January 2010, when, pursuant to an ordinance, the City refused to provide services to Schrock's new tenant.⁶

In 1991, the City had enacted an ordinance requiring landlords who wished to prevent the City from filing liens against their rental properties and discontinuing utility services to those properties to submit a "declaration" that their properties were rental properties, which they did not wish to be security for their tenants' utility bills.⁷

Even so, according to Schrock, he complied with the City's ordinance each time that he leased the property to a new tenant because he provided a copy of the lease agreement to the City, either directly or through his tenant. And the City charged new tenants a higher deposit to connect utility services to the property because of their status as tenants.⁸ Thus, Schrock alleged that the City, at all times, had notice that Schrock used the property as rental property. Also, Schrock asserted that he had complied with the Texas Local Government Code, which provides that a "municipality's lien shall not apply to bills for service connected in a tenant's name after notice by the property owner to the municipality that the property is rental property."⁹ The Local Government Code prohibits requiring, as a condition of connecting service, a third-party guarantee of a customer's utility bill or requiring, as a condition of connecting or continuing service, a customer to pay for service previously furnished to another customer at the same address.¹⁰

Later, in 2011, the City amended its ordinance, removing the requirement that a landlord file a "declaration." Rather, if the City "knows" that a property is occupied by a tenant, it may not file a lien against the property; however, it may report the tenant's delinquency to a credit bureau.¹¹ In 2012, the City further amended its ordinance, allowing utility services to continue to be provided to a property in accordance with the Local Government Code.¹²

Schrock brought regulatory-taking¹³ and declaratory-judgment¹⁴ claims against the City. Regarding his regulatory-taking claim, Schrock alleged that since January 2010, the City had refused to provide water service to the property, and without water service, Schrock was not able to use the property as a rental property. Accordingly, Schrock was denied all economically viable use of the property, and the property fell into disrepair and became uninhabitable. Schrock never received any compensation from the City for its regulatory taking of his property.

Schrock further alleged that the City's actions, in the enactment and enforcement of its ordinance,¹⁵ constituted an unreasonable interference with his right to use and enjoy the property and an "unlawful exercise of police power.... which primarily and adversely affected a small number of landlords of single[-]family residences." According to Schrock, from 1991 to 2012, the City filed eighteen liens against rental properties, but only eight remained, including the lien on his property.¹⁶ He argued that the City's enforcement of its ordinance was not "in response to a great public necessity," but constituted an "attempt to coerce a small number of landlords into paying their tenants' water bills" out of convenience because it was difficult for the City to collect from tenants who had moved. Schrock, on his regulatory-taking claim, sought "all actual damages resulting from the [City's] inverse condemnation of his [p]roperty."

Regarding his declaratory-judgment claim, Schrock sought a declaration that the City's enforcement of its ordinance¹⁷ against him in 2010 "resulted in the inverse condemnation of [his] property for which no just compensation [was] paid." Further, Schrock sought a declaration that certain sections of the City's ordinance,¹⁸ prior to their amendment, were "invalid, illegal, and/or unconstitutional" and conflicted with the Local Government Code.¹⁹ And he sought a "clarification as to the validity of [the City's] utility lien" as well as a "clarification as to his rights under the current version" of the City's ordinance²⁰ and as to whether the City "c[ould] lawfully prevent [his] tenants from obtaining utility service[s] at the [p]roperty."

In its fourth amended answer, the City generally denied Schrock's claims and asserted certain affirmative defenses.

At trial, Schrock testified that in 1993, he purchased the property, which was a ten-year-old mobile home, for $ 21,000. In 2006 or 2007, Schrock spent $ 5,000 to $ 5,500 renovating the property, which included rebuilding the outer walls, installing and painting new siding, and installing new insulation. The trial court admitted into evidence photographs of the property after the renovation, but before any utility services were suspended by the City. In Schrock's opinion, the property would "have held up another 10 or 15 years with the new siding on it."

According to Schrock, he always intended to use the property as a rental property. And since 1993, he consistently rented the property, with never more than a one or two week gap in between tenants. In other words, Schrock "always ha[d] another tenant to move in" to the property, and that tenant would pay Schrock a deposit prior to the previous tenant even vacating. Regarding rent, Schrock testified that his tenants paid less than $ 2,000 a month and were generally lower-income individuals. The last tenant with whom Schrock signed a lease agreement was required to pay a $ 400 deposit and $ 600 each month for rent. Schrock never foresaw a reason that would prevent him from using the property as a rental property.

Schrock explained that the lease agreement that he signed with each of his tenants required the tenant to provide and pay for his own utility services related to the property. And his tenants provided the City with a copy of their lease agreements when seeking the connection of utility services. According to Schrock, tenants were required to provide $ 125 deposits to the City for the connection of utility services, including water service, while owners of properties were only required to pay $ 50 deposits.

Schrock further testified that on March 31, 2009, the City sent him a letter, a copy of which the trial court admitted into evidence, stating that, as the owner of the property, he was responsible for "outstanding balances total[ing] ... $ 1,999.67" related to unpaid utility services provided by the City to Schrock's tenants from 1993 through 2009. The City, in its letter, essentially wanted him to claim...