The City of Houston v. Maguire Oil Co.

• Decision Date: 03 May 2011
• Docket Number: No. 14–09–00701–CV.,14–09–00701–CV.
• Citation: 342 S.W.3d 726
• Parties: The CITY OF HOUSTON, Appellant,v.MAGUIRE OIL COMPANY, Maguire Energy Company, Cary M. Maguire, Cary M. Maguire as Manager for the Oil Fund U/I/D 9/1/76, Cary M. Maguire as Trustee UTD 1/1/83 FBO Cary M. Maguire, Jr., Cary M. Maguire as Trustee UTD 1/1/83 FBO Melinda Ambler Maguire, Cary M. Maguire as Trustee UTD 5/1/84 FBO Ann Blaine Maguire, Don R. Holloway as Custodian of the W. Matthew Holloway Tugtma, Don R. Holloway as Custodian of the Sarah L. Holloway Tugtma, Don R. Holloway as Custodian of the Barbara Ann Holloway Tugtma, Don R. Holloway as Custodian of the Tillman R. Holloway Tugtma, William N. Collins, Jr., as Custodian of the L. Paige Collins Tugtma, William N. Collins, Jr., as Custodian of the Hattie S. Collins Tugtma, and William N. Collins, Jr., as Custodian of the Chandler Collins Tugtma, Appellees.
• Court: Texas Court of Appeals

342 S.W.3d 726

The CITY OF HOUSTON, Appellant,

v.MAGUIRE OIL COMPANY, Maguire Energy Company, Cary M. Maguire, Cary M. Maguire as Manager for the Oil Fund U/I/D 9/1/76, Cary M. Maguire as Trustee UTD 1/1/83 FBO Cary M. Maguire, Jr., Cary M. Maguire as Trustee UTD 1/1/83 FBO Melinda Ambler Maguire, Cary M. Maguire as Trustee UTD 5/1/84 FBO Ann Blaine Maguire, Don R. Holloway as Custodian of the W. Matthew Holloway Tugtma, Don R. Holloway as Custodian of the Sarah L. Holloway Tugtma, Don R. Holloway as Custodian of the Barbara Ann Holloway Tugtma, Don R. Holloway as Custodian of the Tillman R. Holloway Tugtma, William N. Collins, Jr., as Custodian of the L. Paige Collins Tugtma, William N. Collins, Jr., as Custodian of the Hattie S. Collins Tugtma, and William N. Collins, Jr., as Custodian of the Chandler Collins Tugtma, Appellees.

No. 14–09–00701–CV.

Court of Appeals of Texas, Houston (14th Dist.).

May 3, 2011.

J. Mark Breeding, C. Charles Dippel, Frederick D. Junkin, Paul Stephen Radich, Mark Lynn Merrell, Houston, for appellant.Donald E. Herrmann, Todd William Spake, John Thomas Wilson IV, Fort Worth, David T. Hedges, Jr., James Claiborne Crawford, Houston, for appellees.Panel consists of Justices SEYMORE, BOYCE, and CHRISTOPHER.

OPINION

WILLIAM J. BOYCE, Justice.

The City of Houston appeals from a judgment in favor of Maguire Oil Company and others ¹ arising from an inverse condemnation claim predicated on the erroneous invocation of an inapplicable city ordinance to revoke Maguire's natural gas drilling permit. We affirm the trial court's judgment.

Background

The fight over Maguire's thwarted effort to drill for natural gas near Lake Houston is poised to mark its twentieth anniversary. This dispute encompasses one drilling site, two trials, three trial courts, four appeals,² and five Houston mayors.

I. Factual Background

The City acquired surface rights to land in the 1940s that eventually was inundated to create Lake Houston. The City adopted an ordinance in 1965 that generally proscribed pollution in the “control area” of Lake Houston. The City amended the ordinance in 1967 to restrict drilling in the Lake Houston “control area.” The term “control area” is significant to this litigation.

“Control area” was defined in the 1965 ordinance as “[t]hat land around the Lake within an area five (5) miles in width measured from the Normal Water's Edge of, and within the watershed of, Lake Houston.” The City Council amended the definition of “control area” in 1977 to equate that term with the City's “extraterritorial jurisdiction.” The shifting definition of “control area” later played a key role in the dispute. Although the definition was amended again in 1997 to expand the scope of the “control area,” the 1977 definition governs this dispute.

Between 1953 and 1991, Maguire acquired oil and gas leases covering five tracts near Lake Houston known collectively as the “Scanlan Deep Prospect.” The leases encompassing the Scanlan Deep Prospect are identified as the Scanlan, Wheless, Charpiot, Johnston, and Deussen leases.

Maguire began to investigate drilling a gas well in the Scanlan Deep Prospect in the late 1980s. Maguire initially drilled outside the city limits. After the failure of a vertical well, described as the Scanlan Deep No. 1, Maguire attempted to drill directionally. This attempt also failed. These efforts cost several million dollars.

Maguire then decided to drill a vertical well named the Wheless No. 1 inside the city limits approximately 300 feet west of Lake Houston. Maguire filed appropriate documents and asked the City to issue a drilling permit in 1991. The City approved a permit on May 7, 1991 to drill at the chosen location. The City later ratified and extended the permit. Maguire spent at least $250,000 in preparation for drilling; it cleared the location, built dikes, built roads, and signed a drilling contract.

A Lake Houston patrol noticed Maguire's drilling site in October 1991 and contacted Richard Alexander, an inspector with the City's Public Works and Engineering Water Quality Control Department. Alexander inspected the site and determined that it was approximately 300 feet from the water's edge of Lake Houston. Alexander informed his supervisor, Senior Inspector Henry Aghedo, about the location of Maguire's drilling site. Alexander also contacted Milton Belveal, senior inspector with the Planning and Development Department, who acknowledged that a permit had been issued to Maguire.

Aghedo consulted with his superior, Roger Hulbert, who was the deputy assistant director of the Public Works and Engineering Water Quality Control Department. Hulbert believed Maguire's permit had been issued in error and that drilling had to be stopped. Hulbert therefore instructed Alexander to issue a stop work order.

On October 31, 1991, Alexander issued a stop work order pursuant to City of Houston Code of Ordinances Chapter 23, Article IV, section 23–102, and delivered the order to Maguire's drilling site. Section 23–102 states as follows: “No well shall be drilled within the control area of Lake Houston which is nearer than 1,000 feet from the normal water's edge of Lake Houston or any of its drains, streams or tributaries.”

That same day, the City also wrote Maguire a letter stating that its drilling permit had been issued in error and was being revoked immediately because City of Houston Code of Ordinances sections 23–101 and 23–102 prohibit wells within 1,000 feet from Lake Houston. The letter was drafted by Donna Kristaponis, director of the Planning and Development Department, and stated as follows:

This [sic] to inform you that the above referenced permit appears to have been issued in error and is revoked effective immediately. All work in connection with the drilling of this well must cease immediately. Failure to cease operations will result in the issuance of a citation for each day of continued operations.

City of Houston Code of Ordinances Sections 23–101 and 23–102 prohibit wells from being drilled within 1000 feet from the normal water's edge of Lake Houston. It appears that the entire 40 acre Wheless No. 1 site is within the 1000' setback requirement and, therefore, no wells may be drilled on it.

I apologize for any inconvenience this may have caused you.

Maguire's original permit application was processed by Gloria Minor and approved by Hal Caton, Minor's supervisor in the Planning and Development Department. Maguire's renewal application was processed by Belveal and approved by Caton. Before October 31, 1991, Minor and Belveal were not aware of the provisions in chapter 23 of the City of Houston Code of Ordinances restricting the drilling of wells near Lake Houston. Kristaponis and Caton handled the revocation of Maguire's drilling permit, and Belveal was told that the permit had been revoked because the well would be drilled too close to Lake Houston.

Maguire met to discuss the permit revocation with the Legal, Health, and Planning and Development departments; Maguire also met with the deputy assistant director of the Public Works and Engineering Water Quality Control Department. No resolution was reached. All of the City's representatives maintained that the ordinance prohibited drilling within 1,000 feet of Lake Houston, and that no department would issue a permit that did not comport with the ordinance. Deputy Assistant Director Hulbert steadfastly maintained that his department would not issue a drilling permit. Maguire attempted to communicate with the mayor, but these efforts failed.

II. Procedural Background

On October 27, 1993, Maguire sued the City in the 55th District Court of Harris County for damages and a declaratory judgment. Maguire alleged that “certain actions taken by the City against mineral interests [Maguire] owned near Lake Houston amounted to, inter alia, (1) a taking without adequate compensation or due process of law; and (2) unreasonable discrimination against a mineral property owner.” Maguire Oil Co. v. City of Houston, 143 F.3d 205, 206 (5th Cir.1998).³ Maguire also asserted claims for negligent misrepresentation, estoppel, and promissory estoppel against the City. Id.

The City removed the case to the United States District Court for the Southern District of Texas on federal question grounds. Id. After a jury returned a verdict in favor of the City, the federal district court determined that it lacked subject matter jurisdiction; remanded the case; and imposed $98,578.10 in sanctions because the City “wrongfully caused the removal of this case from state court to federal court and, thereafter, deliberately concealed from the Court and counsel information pertinent to this Court's jurisdiction, all of which caused a multiplication of proceedings and the needless duplication of time and expense.” Id. at 207–08. The City appealed the federal district court's sanctions order. Id. at 206. The Fifth Circuit held that the district court abused its discretion by imposing sanctions, and reversed the district court's sanctions order. Id. at 212.

A. Maguire I

Following remand to the 55th District Court of Harris County, the City and Maguire filed summary judgment motions. Maguire Oil Co. v. City of Houston, 69 S.W.3d 350, 356 (Tex.App.-Texarkana 2002, pet. denied) (“ Maguire I ”). The trial court granted the City's motions for summary judgment. Id. at 356–57. Maguire appealed the trial court's judgment; its appeal was heard by the Texarkana Court of Appeals.

In Maguire I, the court of appeals held that summary judgment was proper on Maguire's negligent misrepresentation claim but improper as to Maguire's claims for inverse condemnation, reliance damages based on promissory estoppel, and selective enforcement. Id. at 372. Therefore, the court affirmed the trial court's judgment in part, reversed in part, and remanded the case for further proceedings in the trial court. Id.

In so doing, the Texarkana Court of Appeals rejected the City's argument...