City immune from suit for reverter given language of deed says 4th Court of Appeals

The City of Laredo v. Northtown Development, Inc. and Gateway Centennial Development, Co., 04-15-00736-CV (Tex. App—San Antonio, August 10,2016)

This is a takings case based on an alleged reverter in public property where the Fourth Court of Appeals reversed the denial of the City’s plea to the jurisdiction and dismissed the case.

Northtown Development, Inc. and Gateway Centennial Development Co. (“Northtown”) conveyed land to a utility district to build a wastewater treatment plan. It contained a reverter that if the property was ever stopped being used for a public purpose, the property would revert back to Northtown.  The utility district was eventually annexed by the City which assumed the waste water treatment plant and the property with the reverter. By 2011, the City had constructed a new wastewater treatment plant on the Property. The original plant was built on the western side of the Property, while the new plant was built on the eastern side.  Northtown took the position the City had abandoned the old plant on the western side which therefore reverted back to Northtown. The City asserted it had a force main, transmission lines, and other facilities still on the western side, it has plans to build a bigger plant by 2030 on the western side to accommodate growth as well as the fact the reverter language was only triggered if the entire parcel was abandoned.   Northtown sued for declaratory judgment and for a taking under the Texas Constitution. The City filed a plea to the jurisdiction which was denied. The City appealed.

The court first held Northtown’s declaratory judgment claim was nothing more than a recasting of its takings claim. A plaintiff cannot circumvent immunity by recasting a claim for monetary value as a declaratory judgment. Because Northtown’s sole purpose for obtaining a declaration that the possibility of reverter in the deed was triggered was to obtain a money judgment, the City’s immunity is not waived. Next, the court focused on only one of four arguments made by the City – the fact the reverter language is only triggered by complete abandonment of the property. The court analyzed the language within the deed carefully. Reading the plain language of the deed, the possibility of reverter addresses the use of the “tract” of land and upon the expiration of the use as to the “tract” of land, the determinable fee terminates and “title to the entirety” of the “tract” reverts to Northtown. The court held the deed only provides for a possibility of reverter of the “entirety” of the Property in the event none of the Property is used for purposes of operating a wastewater treatment plant or public purpose.  Since it is undisputed the eastern portion of the property operates the new plant, Northtown’s takings claim fails as a matter of law. The trial court should have granted the plea.  The order is reversed and the court rendered judgment for the City.

If you would like to read this opinion click here. The panel includes Chief Justice Marion, Justice Martinez, and Justice Pulliam. Justice Martinez delivered the opinion of the court. Attorneys for the City: Ryan  Henry and Artin DerOhanian. Attorneys for Northtown: Kelly Feicht, Albert M. Gutierrez and Carlos E. Flores.