Posted by: Patricia Salkin | July 27, 2013

TX Appeals Court Overturns Trial Court and Finds City Failed to Properly Notice Historic Property

The City of Dallas (“the City”) brought an action against developer, TCI West End (“TWE”), for demolishing a historic building in violation of an ordinance that prohibited demolition of a structure within a historic district without obtaining the proper approval. The City sought to recover civil penalties and an injunction under the Texas Local Government Code (“Texas Code”), and for fraud. The Texas Historical Commission (“THC”) intervened with a claim to recover damages under the Texas Code that allowed them to bring an action to recover damages only if the municipality had failed to bring an action within ninety days after the demolition occurred. The City did not assert a claim against TWE regarding this; therefore, the THC intervened to assert the claim.

In dispute was the remaining portion of the Missouri, Kansas & Texas Railway station that was located in the historic district in the City. The City had already demolished parts of the station by condemning sections of the property. In March 2006, TWE applied for and was granted a permit to demolish the remaining portion of the station. After the permit was issued, but before the demolition began, the City revoked the permit because it had determined that it was issued in error. The City failed to forward a written notice of the revocation to TWE, as required by the Dallas City Code (“Dallas code”). The City testified that they contacted the contractor for TWE, who then informed a representative for TWE that the permit was revoked. The City also testified that a “red tag” was placed on the property, notifying the TWE to stop all work. TWE argued that they did not receive the notification and continued to proceed with the demolition. Demolition was stopped just short of completion and the City filed a suit.

At trial, the jury found in favor of both the City and the THC on their claims under the Texas code. The jury also found in favor of the City on its claim for fraud. TWE then filed a motion for judgment notwithstanding the verdict (“JNOV”). The trial court granted TWE’s motion to disregard in part and denied it in part. The trial court awarded the City civil penalties for violations of city ordinances and awarded THC damages. The trial court granted judgment notwithstanding the verdict on all other relief awarded to the City and the THC.

On appeal, TWE argued that the trial court made an error in failing to grant it’s request for a JNOV because neither the THC nor the City were entitled to damages or penalties under the Texas Code. TWE appealed and THC cross-appealed contending that the trial court made an error in disregarding the jury’s finding of exemplary damages. The Court  concluded that the trial court had made an error in granting in favor of the THC and the City. Accordingly, they rendered judgment that the THC and the City take nothing by their claims. The court held that (1) the city’s failure to file a listing of historic properties barred the THC from recovering for the developer’s demolition of the building without proper permission; (2) the ordinance addressing enforcement of historic overlay district ordinances did not authorize the city to recover penalties; (3) the statute authorizing civil penalties for a violation of a health or safety ordinance did not authorize penalties; and (4) the developer did not “knowingly” violate city ordinances under penalty statute.

On the matter of the city failing to file a listing of historic properties barring the THC from recovering for the demolition, TWE argued that evidence was not given that the filing requirements set forth in the code were met, and meeting these requirements was a prerequisite to recovery. TWE contends that the THC cannot enforce it because the City did not file and index a verified listing of historic structures and properties before the station was demolished. The THC responded that the City’s failure to file does not affect the THC’s claim because the absence of a filing only prevents the City from bringing a claim and has no effect on the THC’s ability to bring a claim. The court stated that it was an undisputed fact that the filing requirements were not met and that whether the language of the statute granted the THC the ability to recover even in the absence of the required filing, needed to be resolved. The court stated that the Texas Code required the municipality to file in the real property records of the county clerk’s office a “verified written instrument listing each historic structure or property that is located in the municipality and county.” Accordingly, the court held that the language of the statute or its purpose did not support the THC’s interpretation of the code. The court interpreted the code to prohibit the THC from brining suit unless the required list has been filed. The code allows the THC to bring suit when the City fails to do so, not when the City is prohibited from doing so, because it did not meet the filing requirements.

An interpretation of the code that prohibits the THC from bringing suit unless the required list of historic structures and properties have been filed is supported by the identical requirement in the Texas Code. These sections mirror the provisions of the code and allow the THC to bring suit in municipalities that do not have demolition and building permit procedures. Under the Texas Code, the THC must file and index a verified listing of the historic structures and properties and, absent such filing, it may not bring suit under the section. Because the legislature included filing requirements in both, it is clear the legislature intended to predicate the ability to bring suit on the required filing in the property records regardless of whether suit is brought by a municipality or the THC. The THC contended that because the legislature required it to file a verified listing under the Dallas code but did not impose the same requirement on it in the Texas Code, such a requirement should not be implied. A filing requirement need not be implied in the Texas Code, because it is already explicit in the statute. Although the Texas Code requires the municipality to make the required filing rather than the THC, the THC becomes representative of the municipality when it enforces the statute. To allow the THC to bring suit when the City could not, would render the statute’s filing requirement superfluous.

Finally, the THC argued that even if the filing requirement applies, it was satisfied by the fact that TWE had actual notice that the station was a historic structure. The THC then cited to cases addressing statutory service requirements that were satisfied by actual notice. Even assuming TWE had notice that the station was a historic structure, the THC’s analogy of the Texas Code filing requirement to statutes addressing personal service is misplaced. The filing requirement in the Texas Code does more than provide property owners with notice that their properties have been designated as historic; it is the means by which the rights granted to the municipality and the THC under the section come into being. The verified list then operates much like an abstract of judgment that, when filed and indexed in the county property records, creates rights in favor of a non-owner that attach and run with the property. Also like the rights associated with filing an abstract of judgment, and unlike the statutory service provisions cited by the THC, the rights afforded under Texas Code are created by statute requiring substantial compliance with the statute before those rights may be enforced. If the statutory filing requirements are not substantially complied with, the statutory rights may not be enforced regardless of whether the property owner had actual knowledge of the information that should have been contained in the filing.

There is nothing in the record to show, nor is there any jury finding to the effect that the City substantially complied with the filing requirement set forth in the Texas Code. Therefore, the court concluded that the plain language of the statute prohibits the THC from recovering under the section and that the trial court made an error in failing to grant a JNOV on the THC’s claim under the Texas Code. Also, because they concluded that the THC was not entitled to relief under Texas Code it was unnecessary for them to address THC’s cross-appeal challenging the trial court’s refusal to award the THC exemplary damages.

On the matter of the City’s recovery of civil penalties based on the demolishment in violation of the city ordinances, the Texas Code grants municipalities general zoning authority. Among the purposes is to provide municipalities with zoning authority for “protecting and preserving places and areas of historical, cultural, or architectural importance and significance.” It includes enforcement provisions that states that a municipality “may also provide civil penalties” for a violation of an ordinance or regulation adopted under the municipality’s general zoning authority. It does not specifically provide civil penalties for ordinance violations, but allows the city to adopt such penalties. The City under the Dallas Code adopted the ordinances at issue. The ordinances provided criminal fines for violations, but leave the adoption of civil penalties open to further action by the City. The City cited no provision by which it adopted civil penalties for violations of ordinances. It merely referenced the recovery of damages, not penalties. The court held because the City did not adopt civil penalties for violations of the ordinances at issue, the Dallas code does not provide a basis of the award of penalties in the trial court’s judgment. On the matter of the statute the authorizing civil penalties for a violation of a health or safety ordinance did not authorize penalties, the City conceded that it only provides civil penalties only for a violation of an ordinance that regulates a health or safety matter. The court held that the City failed to show the zoning ordinances at issue were health or safety ordinances. The stated purposes of ordinances at issue were to protect buildings of historical, cultural, and architectural significance. There is no indication that these ordinances, or their attempted enforcement in this case, were attempts to regulate a health or safety issue. Therefore, it cannot form the basis for the civil penalties awarded to the City.

On the matter of TWE not “knowingly” violating the city ordinance, TWE contended that the evidence was insufficient to show that it was ever actually notified of the ordinances and was insufficient to support the jury’s findings in support of penalties. The jury was instructed that the City could recover penalties if it proved that: (1) TWE was actually notified of the ordinances; and (2) after receiving actual notice, TWE committed acts in violation of the ordinances or failed to take an action necessary for compliance with the ordinances. The City presented evidence that a TWE representative was informed of some of the requirements for obtaining a demolition permit. These requirements were mandated by the ordinances at issue. It presented no evidence that TWE was ever informed of the ordinance provisions themselves before the building was demolished. A property owner cannot knowingly violate a city ordinance if he is not notified that the ordinance exists. Therefore, the court held that the City failed to prove it was entitled to an award of civil penalties. Because the civil penalties awarded to the City were improper, the trial court made an error in denying TWE’s request for a JNOV on the City’s claim for civil penalties.

TCI West End, Inc. v. City of Dallas, 2013 WL 1561117 (Ct. App. TX  4/15/2013)

The opinion can be accessed at: http://scholar.google.com/scholar_case?case=992346241615334149&hl=en&as_sdt=2&as_vis=1&oi=scholarr

 


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Categories

%d bloggers like this: