Posted by: Patricia Salkin | June 21, 2018

TX Appeals Court Finds Property Owners Failed to Exhaust Their Administrative Remedies in an Inverse-Condemnation Suit

This post was authored by Matthew Loeser,  Esq.

This case arose from an inverse-condemnation suit brought by several property owners, against the City of Galveston, Texas. In an interlocutory appeal, the court reviewed the trial court’s denial of the City’s initial plea to the jurisdiction, and reversed in part the trial court’s order and dismissed the Property Owners’ takings claims with regard to the City’s denial of a Specific Use Permit (SUP) for the subject property. The court also affirmed in part with regard to the Property Owners’ takings claims based on the City’s revocation of the property’s grandfathered, non-conforming zoning status. On remand, the trial court heard the City’s second plea to the jurisdiction, which asserted that the trial court lacked subject-matter jurisdiction because the Property Owners failed to exhaust their administrative remedies regarding the City’s revocation of the property’s non-conforming status. The trial court granted the City’s second plea.

Here, the record reflected that the City presented evidence that the Property Owners could have filed an administrative appeal to the ZBA pursuant to the zoning standards and chapter 211 within a reasonable time after the City informed Ben-Amram, one of the Property Owners, that the property was in violation of section 29-111(a)(4) and had lost its non-conforming status. The City presented evidence that the Property Owners failed to appeal this decision to the ZBA. Specifically, since the Property Owners did not appeal the loss of the property’s “grandfather” status to the ZBA, the court found that they failed to exhaust their administrative remedies, and the trial court did not have subject-matter jurisdiction over their takings claims.

Next, the Property Owners contended that the trial court erred in granting the City’s plea to the jurisdiction based on exhaustion because they raised a fact issue that the doctrines of equitable estoppel and business compulsion applied to their claims. Specifically, Property Owners argued the City should be estopped from insisting on exhaustion because the City did not inform them of the option to appeal the revocation decision to the ZBA and instead only informed them of the option to apply for a SUP on the property. The court found, however, that this was not a case where City officials “affirmatively misled” the Property Owners. Here, Ben-Amram did not testify that any City official told him that he should not, or would not need to, appeal the loss of the property’s non-conforming status to the ZBA or that the requirement to exhaust that decision through such an administrative appeal was waived. Furthermore, the Property Owners failed to show any evidence that the City received any direct benefit in connection with its decision to revoke the property’s non-conforming status. As such, the court held that the Property Owners failed to present an exceptional case in which estoppel was required.

Lastly, Property Owners requested the court reconsider its prior holding “based upon errors in the prior opinion and subsequent events which confirm the futility of any further appeals or applications” by the Property Owners. However, since the court found the Property Owners were merely rearguing their prior arguments using the same prior evidence, it concluded there was no reason to revisit its prior holding that the City was entitled to dismissal on the Property Owners’ takings claims based on the City’s denial of the SUP application.

Murphy v City of Galveston, 2018 WL 2701983 (TX App. 6/5/2018)


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