APTBP, LLC D/B/A Bay Pointe Apartments and Gatesco, Inc. v. the City of Baytown

Affirmed and Memorandum Opinion filed September 18, 2018.

In The

Fourteenth Court of Appeals

NO. 14-17-00183-CV

APTBP, LLC D/B/A BAY POINTE APARTMENTS AND GATESCO, INC.,
Appellants
V.

THE CITY OF BAYTOWN, Appellee

On Appeal from the County Civil Court at Law No. 3
Harris County, Texas
Trial Court Cause No. 1079024

MEMORANDUM OPINION

APTBP, LLC d/b/a Bay Pointe Apartments and Gatesco, Inc. (collectively,
“APTBP”) appeal an order granting the City of Baytown’s plea to the jurisdiction
and dismissing their claim with prejudice. APTBP contends the trial court
erroneously granted the City’s plea to the jurisdiction because it pleaded sufficient
facts to establish an inverse condemnation claim. We affirm.
 BACKGROUND

APTBP, LLC has owned Bay Pointe Apartments in Baytown since 2014;
GATESCO is a property management company. APTBP, LLC purchased Bay
Pointe Apartments located in Baytown in 2014. The apartment complex was still
damaged by Hurricane Ike when APTBP, LLC purchased it. APTBP, LLC started
repairing the buildings in the complex after the purchase. A dispute arose when the
City allegedly refused to release electricity to repaired, vacant units in the apartment
complex.

APTBP filed a suit alleging a claim for inverse condemnation/regulatory
taking under Article 1, section 17 of the Texas Constitution against the City on June
16, 2016. APTBP alleged that it lost rental income on vacant, move-in ready
apartment units when the City “abruptly ceased releasing ‘holds’ on units of the
[c]omplex that have been rehabbed and which could be leased out.” APTBP alleged
that the City “arbitrarily decided” that Bay Pointe could not receive electricity until
the “entire apartment complex obtains a new final Certificate of Occupancy (which
is impossible without electric power)” while no “other complex has this requirement,
and [Bay Pointe] did not have this requirement until recently.”

The City filed an “Answer, Plea to the Jurisdiction, and Counterclaim” on July
8, 2016. The City pleaded the affirmative defense of governmental immunity;
asserted the court lacked subject matter jurisdiction because the facts APTBP
pleaded are insufficient to establish a viable takings claim under the Texas
Constitution; and pleaded a “counterclaim for civil penalties and injunctive relief
under Subchapter B of Chapter 54 of the Texas Local Government Code” for
violation of the City’s Code of Ordinances.

The City filed a brief in support of its plea to the jurisdiction on February 9,
2017. The City alleged that APTBP, LLC purchased Bay Pointe in May 2014, and
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started renovating the complex because multiple buildings were vacant and there
was significant damage to the common areas. The City alleged it conducted several
inspections of Bay Pointe, but the complex did not meet the minimum requirements
to obtain a certificate of occupancy as required by the City of Baytown Code of
Ordinances. At some point, the City’s chief building official placed electric meter
holds on vacant units at Bay Pointe and informed APTBP that the holds would be
released once a certificate of occupancy was obtained. The City released the holds
in August 2016 after APTBP agreed to repair the common areas. According to the
City, it issued a certificate of occupancy after the repairs were made; APTBP then
leased the vacant units. In its brief, the City argued that APTBP failed to plead a
takings claim to overcome its immunity. The City also argued that GATESCO
lacked standing to sue the City because a cause of action for an injury to property
belongs to the owner of the property, and GATESCO never owned Bay Pointe;
instead, APTBP, LLC is the sole owner of Bay Pointe since May 2014 and has
standing.

APTBP filed a response to the City’s plea to the jurisdiction brief on March
1, 2017, arguing that the City misapplied its ordinances and the International
Building Code and arbitrarily denied electric power to repaired, vacant apartment
units at Bay Pointe, “which resulted in economic waste and the deterioration and
decay of those apartment units affected, and the loss of rental income.” APTBP also
argued that the City misapplied the Code of Ordinances’ standards and regulations
to APTBP, LLC and Bay Pointe, “which are not applied to other owners” or other
apartment “complexes in the City.”

APTBP filed a “supplement” to its original petition on March 1, 2017, which
contained additional allegations to conform to the particular arguments APTBP
made in its response to the City’s brief. APTBP alleged it was “unable to obtain

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electric power for [its] units (which are eligible for power pursuant to Code) due to
the City’s arbitrary and capricious conduct . . . which resulted in economic waste
and the deterioration and decay of those apartment units affected, and the loss of
rental income.” APTBP prayed for “[e]conomic damages due to inverse
condemnation/regulatory taking in the form of lost rents” and “destruction/cost to
repair/loss of value of individual units.”

The City filed a reply to APTBP’s response to the plea to the jurisdiction on
March 3, 2017, arguing that the City retained its immunity from suit because APTBP
failed to allege facts to prove a compensable taking occurred in this case. Among
others, the City contended that APTBP’s allegation that it “misapplied requirements
of its safety ordinances by setting the bar to obtain the operating permit impossibly
high” cannot support a compensable taking claim because an objection to the
infirmity of the City’s process of ordering units to remain vacant is not enough to
prove a compensable taking.

The trial court held a hearing on the City’s plea to the jurisdiction on March
6, 2017. After the hearing, the trial court signed an order on March 6, 2017, granting
the City’s plea to the jurisdiction and dismissing APTBP’s claim against the City
with prejudice. The trial court did not rule on the City’s counterclaim. APTBP filed
a timely interlocutory appeal. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014 (a)(8)
(Vernon 2017) (A person may appeal from an interlocutory order that grants or
denies a plea to the jurisdiction by a governmental unit.).

ANALYSIS

APTBP argues that the trial court erred by granting the City’s plea to the
jurisdiction because it has “pleaded facts which affirmatively demonstrate a facially
valid takings claim.” APTBP argues that the City’s misapplication of its standards
and regulations with regard to APTBP’s property unreasonably interfered with the
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use and enjoyment of property and has violated APTBP’s rights under Article 1,
section 17 of the Texas Constitution. According to APTBP, it has a viable takings
claim because the City’s misapplication of ordinances and wrongful denial of access
to electricity (1) prevented APTBP from renting repaired apartment units, causing
loss of rental income; and (2) created economic waste because APTBP’s apartment
units deteriorated without air-conditioning.

I. Standard of Review

A plea to the jurisdiction is a dilatory plea that seeks dismissal of a case for
lack of subject matter jurisdiction. Harris Cty. v. Sykes, 136 S.W.3d 635, 638 (Tex.
2004). Whether a trial court has subject matter jurisdiction is a question of law.
Harris Cty. v. Annab, 547 S.W.3d 609, 612 (Tex. 2018). We therefore review the
trial court’s ruling on a plea to the jurisdiction de novo. See id.

When a plea to the jurisdiction challenges the pleadings, we determine if the
pleader has alleged facts that affirmatively demonstrate the court’s jurisdiction to
hear the case. See id. We construe the pleadings liberally in favor of the plaintiff
and look to the pleader’s intent. Id. at 612-13. If the pleadings do not contain
sufficient facts to affirmatively demonstrate the trial court’s jurisdiction but do not
affirmatively demonstrate incurable defects in jurisdiction, the issue is one of
pleading sufficiency, and the plaintiff should be afforded the opportunity to amend.
Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226-27 (Tex. 2004). If
the pleadings affirmatively negate the existence of jurisdiction, then a plea to the
jurisdiction may be granted without allowing the plaintiff an opportunity to amend.
Id. at 227.

II. Takings Claim

A municipal government enjoys immunity from suit unless its immunity has

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been waived. City of Houston v. Carlson, 451 S.W.3d 828, 830 (Tex. 2014).
Without this waiver, courts have no jurisdiction to adjudicate a claim against the
municipality. Id. The Texas Constitution waives governmental immunity with
regard to inverse condemnation claims. Id. at 830; see also Harris Cty. Flood
Control Dist. v. Kerr, 499 S.W.3d 793, 799 (Tex. 2016) (“Sovereign immunity does
not shield the government from liability for compensation under the takings
clause.”). Such claims must be predicated on a viable allegation of taking. Carlson,
451 S.W.3d at 830. In the absence of a properly pleaded takings claim, the
government retains immunity, and a court must sustain a properly raised plea to the
jurisdiction. Id.

The preservation of private property rights is “‘one of the most important
purposes of government.’” See id. at 831 (quoting Eggemeyer v. Eggemeyer, 554
S.W.2d 137, 140 (Tex. 1977)). But the government also has other obligations,
including ensuring the safety and security of its citizens. Id. “To satisfy its
responsibilities, government often imposes restrictions on the use of private
property.” Id. Even though these restrictions can result in inconvenience to owners,
the government generally is not required to compensate an owner for associated loss.
Id. When a property owner believes compensation is due for his loss, he may seek
redress via an inverse condemnation claim. Id. To plead an inverse condemnation
claim, a plaintiff must allege an intentional government act that resulted in the
uncompensated taking of private property. Id. “A taking is the acquisition, damage,
or destruction of property via physical or regulatory means.” Id. “A regulatory
taking is a condition of use ‘so onerous that its effect is tantamount to a direct
appropriation or ouster.’” Id. (quoting Lingle v. Chevron U.S.A. Inc., 544 U.S. 528,
537 (2005)).

Here, APTBP contends that it has suffered a regulatory taking but its

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allegations do not support that claim because governmental interference arising from
the improper application or misapplication of regulations and standards does not
constitute a taking. See id. 831-33.

APTBP raised two types of allegations in the trial court: (1) the City’s
misapplication of its regulations and standards vis-à-vis APTBP, LLC’s apartment
complex constitutes a taking; and (2) the City’s misapplication of its regulations and
standards only as to APTBP, LLC’s apartment complex, and to no other apartment
complexes in Baytown, constitutes a taking. Specifically, APTBP alleged in its
pleadings and at the hearing the following acts by the City in support of its takings
claim:

 “[T]he City intentionally enforced the City of Baytown Code of Ordinances .
. . in an arbitrary, capricious, and discriminatory manner by misapplying
requirements to [Appellants] which are not applied to other owners.”

 “[T]he Code was misapplied in a manner that made the operating permit (C.O.
[Certificate of Occupancy]) impossible to obtain by [APTBP], for example,
by refusing electric power to [APTBP] until an operating permit is issued,
even though a requirement to obtain the operating permit is first having
electric power,” so that APTBP is “essentially in a class of one.”

 “[T]he City intentionally misapplied the Code to [APTBP], and to no other
owner, by setting the bar to obtain the operating permit impossibly high” so
that the “standard for [APTBP] was perfection in all aspects of construction.”

 “[APTBP] has been saddled with extra-legal requirements that no other owner
has . . . .”

 “Withholding electric to an apartment owner is not a means of enforcement
under the Code.”

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  “The City . . . intentionally misapplied Sec. 112.1 and Sec. 112.2 of the
International Building Code (IBC) to prevent [APTBP] from accessing
electrical power, even though [APTBP] had approval under Sec. 18-260 of
the City Code to obtain electric power.”

 “The City was intentionally applying its code in a wrongful and
discriminatory manner, in bad faith, and in retaliation.”

 The City “intentionally misapplied a City ordinance.”

 The City treated APTBP’s apartment complex “differently from every other
apartment complex in the City of Baytown. [APTBP] was in a class of one.”

 The City “won’t release the electric. Only one in the City of Baytown in this
situation.”

In analyzing whether these contentions rise to the level of a taking, we find
instructive the supreme court’s analysis in City of Houston v. Carlson, 451 S.W.3d
at 831-33.

In Carlson, an investigation by the City of Houston revealed various alleged
structural, electrical, and plumbing problems in a condominium complex. Id. at 829.
The city declared the condominiums uninhabitable and posted a notice throughout
the complex stating (1) the condominium owners had ten days to apply for a
certificate of occupancy; and (2) failure to comply with the notice “may subject you
to a municipal court citation.” Id. at 829-30. The owners did not apply for an
occupancy certificate or make the requisite repairs. Id. at 830. After a month passed
without compliance, the city did not issue a citation; instead, it ordered all residents
to vacate the complex within 31 days pursuant to a city ordinance that authorized
officials to “order the use discontinued immediately” when a structure “creates a
serious and immediate hazard.” Id.

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 The city upheld the order to vacate after an administrative hearing. Id. The
order to vacate later was reversed by a district court based on due process violations,
and the owners sold the complex for redevelopment. Id. The owners then filed an
inverse condemnation suit, alleging that a taking had occurred when the city forced
them to vacate the complex. Id. The owners sought compensation for the years of
lost use of the complex. Id. The trial court granted the city’s plea to the jurisdiction,
finding the owners did not allege a taking. Id. The supreme court agreed. Id. at
831-33.

The supreme court concluded that a complaint about the misapplication of the
city’s safety regulations with regard to the owners’ property, or a complaint about
the manner in which the city enforced its standards, is not a takings claim. See id.
at 831-32. The court noted that the owners did not contest any of the city’s property-
use restrictions; did not argue that it is “unreasonable to require multi-family
residential facilities to obtain occupancy certificates;” and did not “challenge the
city’s electrical, plumbing, or structural standards.” Id. at 831. Instead, the owners
objected only to the “penalty imposed and the manner in which the city enforced its
standards,” and that the “safety regulations were misapplied vis-à-vis their
property.” Id. at 832. The court concluded that the owners “simply have not alleged
a taking,” and “the city therefore retains its immunity from suit.” Id. at 833.

Similar circumstances are present here. APTBP does not challenge any
regulations and standards in the City’s Code of Ordinances or in the International
Building Code. APTBP does not allege that any particular regulations or standards
are unreasonable restrictions on the use of the property at issue. Rather, APTBP
complains about the City’s misapplication or “wrongful” application of certain
regulations and standards and the manner in which the City enforced certain
standards and regulations in relation to APTBP, LLC’s property. Based on Carlson,

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we conclude that APTBP has not alleged a viable regulatory taking. Id. at 831-33;
see also Nat’l Media Corp. v. City of Austin, No. 03-16-00839-CV, 2018 WL
1440454, at *4-6 (Tex. App.—Austin Mar. 23, 2018, no pet.) (mem. op.) (“National
Media’s pleadings—in complaining of the City’s ‘illegal’ actions in wrongly
applying the zoning code to deny sign registration and foreclose a relocation
permit—simply do not plead a viable regulatory taking”); House of Praise
Ministries, Inc. v. City of Red Oak, No. 10-15-00148-CV, 2017 WL 1750066, at *7
(Tex. App.—Waco May 3, 2017, no pet.) (mem. op.) (House of Praise Ministries
did not plead a regulatory taking when it did not complain about particular code
provisions and challenged only the city’s enforcement of code provisions); CPM
Trust v. City of Plano, 461 S.W.3d 661, 673 (Tex. App.—Dallas 2015, no pet.)
(appellants did not plead a taking when they did “not contest the sign regulations in
the City’s zoning ordinance, but rather complain about the City’s misapplication of
certain regulations as to their property”).

We also conclude that no viable takings claim is presented based on APTBP’s
allegations that the City misapplied its regulations and standards because it required
only APTBP to comply with them, and treated other apartment complex owners in
Baytown differently or more leniently. See Carlson, 451 S.W.3d at 831-32.
Accordingly, we conclude that APTBP has not alleged a taking and the trial court
properly granted the City’s plea to the jurisdiction with regard to its takings claim. 1

APTBP further argues that, if its “pleadings lack sufficient facts to
affirmatively demonstrate the trial court’s jurisdiction, but do not reveal incurable
jurisdictional defects, this Court should afford Plaintiff an opportunity to re-plead.”

1
In its plea to the jurisdiction, the City argued that Gatesco lacks standing to bring a takings
claim. The trial court granted the City’s plea and ordered that “all of Plaintiffs’ claims against the
City are dismissed, with prejudice, for lack of jurisdiction.” Gatesco does not challenge on appeal
the trial court’s determination that it lacks standing to bring a takings claim.

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 “Appellate courts generally must remand a case to afford parties an
opportunity to cure jurisdictional defects in their pleadings when the parties did not
have that opportunity in the first instance because the jurisdictional issue arose the
first time on appeal.” Clint Indep. Sch. Dist. v. Marquez, 487 S.W.3d 538, 558-59
(Tex. 2016). “If a plaintiff has been provided a reasonable opportunity to amend
after a governmental entity files its plea to the jurisdiction, and the plaintiff’s
amended pleading still does not allege facts that would constitute a waiver of
immunity, then the trial court should dismiss the plaintiff’s action.” Sykes, 136
S.W.3d at 639.

Here, APTBP had and used the opportunity to amend its pleadings in the trial
court after the City filed a plea to the jurisdiction. The City also pointed out at the
hearing on the plea to the jurisdiction that APTBP had not alleged a takings claim,
and APTBP did not amend its pleadings thereafter. APTBP is not entitled to an
additional opportunity to replead. See Marquez, 487 S.W.3d at 559 (plaintiffs were
not entitled to a remand to replead because they already had an opportunity to amend
their pleadings after the school district filed a plea to the jurisdiction); Sykes, 136
S.W.3d at 639 (plaintiff was not allowed to replead because “the trial court allowed
[plaintiff] to file an amended petition, after which the court made a final
adjudication”); Miranda, 133 S.W.3d at 231 (plaintiffs were not entitled to replead
because they had an opportunity to amend their pleadings and did so in the trial
court); Trant v. Brazos Valley Solid Waste Mgmt. Agency, Inc., 478 S.W.3d 53, 63
(Tex. App.—Houston [14th Dist.] 2015, pet. denied) (plaintiffs were not entitled to
an additional opportunity to replead because they amended their petition twice after
defendant filed a plea to the jurisdiction and did not amend their petition after a
hearing on the plea to the jurisdiction).

Additionally, the right to amend typically arises when the pleadings fail to

11
allege sufficient facts to demonstrate the trial court’s jurisdiction. See Marquez, 487
S.W.3d at 559. But the jurisdictional bar here does not arise from a lack of factual
allegations; instead, it arises from the nature of APTBP’s claims. See id. APTBP
did not challenge a particular regulation or standard as required for a regulatory
taking claim, even though it labeled its claim as a regulatory taking. See House of
Praise Ministries, 2017 WL 1750066, at *8; see also Carlson, 451 S.W.3d at 831-
33. Rather, APTBP challenged the City’s misapplication of certain regulations and
standards, and the manner in which the City enforced certain standards and
regulations with regard to APTBP, LLC’s property. Allowing APTBP to replead in
order to allege additional facts would not help APTBP with regard to a claim for a
regulatory taking. APTBP would have to allege an entirely different complaint to
properly plead a regulatory taking. See House of Praise Ministries, 2017 WL
1750066, at *8 (pleading defect cannot be cured and plaintiff was not entitled to
replead because plaintiff did not attack a regulation and only attacked the manner of
enforcement of specific regulations; alleging additional facts cannot help plaintiff
because plaintiff would have to plead a different complaint to properly allege a
regulatory taking); see also Tex. A & M Univ. Sys. v. Koseoglu, 233 S.W.3d 835,
840 (Tex. 2007) (plaintiff was not entitled to a remand to amend his pleadings
because he pleaded the wrong cause of action, and any additional facts in support of
that cause of action would not overcome the university’s immunity from suit).

We overrule APTBP’s issue.

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 CONCLUSION

Having overruled APTBP’s issue, we affirm the trial court’s order granting
the plea to the jurisdiction.

/s/ William Boyce
Justices

Panel consist of Justices Boyce, Jamison and Brown.

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