Texas Supreme Court holds City’s moratorium invalid against existing subdivision owners

 

  CITY OF LORENA, TEXAS v. BMTP HOLDINGS, No. 11-0554 (Tex. August 30, 2013)

This is a development moratorium case on sewer lines where the City of Lorena passed a moratorium after having approved a subdivision plat for development. The Texas Supreme Court held the moratorium could not apply and remanded the case on the inverse condemnation and attorney fee claims.

The TCEQ initiated enforcement proceedings against the City regarding an overcapacity of its sewer system in 2004. In 2003 BMTP (a company which buys lots, gets subdivision plats, builds infrastructure, gets permits, then sells lots to builders) began working on a residential subdivision named South Meadows which was divided in to five phases. In January 2006 the City approved the phase five.  However, in the spring of 2006 the engineers retained to evaluate the City’s sewage system noted it was over capacity and recommended a temporary moratorium which the City enacted. The moratorium had an appeal process to protect vested rights as well as some of the written findings and summary of evidence required by Chapter 212, but did not contain such findings and evidence showing why the moratorium was not limited to property not already approved for development.  The moratorium was extended seven times, none of which noted why it should not be limited to property not already approved. Due to the long extended moratorium, the value of BMTP’s property fell 83% and it filed suit. The trial court granted summary judgment for the City, but the court of appeals reversed and the City appealed.

The Court first noted that the fact the BMTP did not follow the vested right recognition procedure in the moratorium is not dispositive since the enacted process is not mandatory as structured and would nonetheless be futile, so it’s claims are ripe. Interestingly, the Court held the “administrative remedy” requirements are mandatory for jurisdictional purposes only when the Legislature grants an administrative body sole authority over a dispute. This can become a thorn in the side of many cities who previously asserted several of its own procedures must be exhausted. It only provides a minimum of guidance as to how to make such procedures mandatory.

The rest of the case is pure statutory construction. Chapter 212 notes that a moratorium must not affect approved development. A subdivision plat is an approved development and the use of the term “or” (as in subdivision or construction found in statute) means both are prohibited individually, not that the city can pick one while excluding the other. The Court noted the concerns briefed by Amici Texas Municipal League are addressed in Chapter 245 (vested rights) and therefore need not be of concern for Chapter 212. As a result, the moratorium cannot apply to BMTP’s properties.

While the trial court granted the City’s summary judgment on inverse condemnation, such a grant was error given it’s holding on the moratorium application and the fact BMTP raised proper factual disputes. As a result, the inverse condemnation proceeding was remanded along with attorney’s fees.

The dissent asserted that regardless of an individual’s protected interests, public utilities must protect the whole and there will be sewage in the streets if the City is not permitted to place a hold on connections. The majority counter that the City was supposed to be proactive (so apparently they get what they deserve?) but more importantly, the City can still abate nuisances without violating Chapter 212 as long as it can show a health hazard currently exists.

If you would like to read this opinion click here.