Andy Centeno, and Wife, Maria T. Centeno a/k/a Mattc, Ltd. v. City of Alamo Heights--Appeal from 57th Judicial District Court of Bexar County

MEMORANDUM OPINION
No. 04-02-00677-CV
Andy CENTENO and wife Maria T. Centeno,
Appellants
v.
CITY OF ALAMO HEIGHTS,
Appellee
From the 57th Judicial District Court, Bexar County, Texas
Trial Court No. 2001-CI-16587
Honorable Fred Shannon, Judge Presiding (1)

Opinion by: Sarah B. Duncan, Justice

Sitting: Sarah B. Duncan, Justice

Sandee Bryan Marion, Justice

Phylis J. Speedlin, Justice

Delivered and Filed: March 31, 2004

AFFIRMED

Andy and Maria Centeno appeal the trial court's take-nothing judgment in their suit seeking compensation from the City of Alamo Heights for the alleged unconstitutional regulatory taking of their property. Because no taking occurred as a matter of well-established law, we affirm the trial court's judgment in this memorandum opinion.

Factual and Procedural Background

The Centenos' dispute with the City began in 1995 when they purchased property that included a structure, once a military barracks, that had been used by The First Christian Science Church as an educational annex. At the time of the purchase, the structure did not comply with the City's zoning requirements. Although aware that there had been a previous need for the City to grant a variance to the prior owner of the property so that the structure would comply with those requirements, the Centenos nonetheless purchased the property with the intent to reside in the structure. Seeking to bring the structure into compliance, the Centenos applied for a number of variances and building permits. The City, through its Board of Adjustment, granted some the Centenos' applications and denied others. The Centenos appealed the Board's adverse actions to the district court, which granted summary judgment in favor of the City and issued a mandatory injunction requiring the Centenos to bring the structure into compliance with the City's residential zoning requirements by removing certain portions of the structure. On appeal, this court generally affirmed. See Centeno v. City of Alamo Heights, No. 04-00-00546-CV, 2001 WL 518911 (Tex. App.-San Antonio May 16, 2001, no pet.). However, because the Centenos' takings claim was not addressed in the City's motion for summary judgment, the court reversed the judgment against the Centenos on their takings claim and remanded for further proceedings. See id.

On remand, the Centenos claimed that, by enforcing its zoning regulations, the City "substantially and unreasonably interfered with [their] use and enjoyment of their residential property ... for any purpose." Although the Centenos conceded that they were aware when they purchased the property of the existing zoning requirements, they claimed the City's actions nevertheless constituted a taking because the City "routinely grant[ed] zoning variances to other similarly situated landowners ...." After a jury verdict in favor of the Centenos, the trial court rendered judgment notwithstanding the verdict. The Centenos again appealed.

Scope and Standard of Review

Whether a compensable regulatory taking has occurred is a question of law requiring consideration of all of the surrounding circumstances. See Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 932-33 (Tex. 1998), cert. denied, 526 U.S. 1144 (1999).

Regulatory Taking

Article I, section 17 of the Texas Constitution provides, in pertinent part, that "[]no person's property shall be taken, damaged or destroyed for or applied to public use without adequate compensation being made ...." Tex. Const. art. I, 17. A compensable regulatory taking occurs if a zoning regulation does not (1) "substantially advance[] a legitimate state interest," (2) "den[ies] landowners of all economically viable use of their property," or (3) "unreasonably interfere[s] with [the] landowners' rights to use and enjoy their property." Mayhew, 964 S.W.2d at 935 (citing Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015-19 & n.8 (1992)); see also Agins v. City of Tiburon, 447 U.S. 255, 260 (1980).

The Centenos have waived the first basis for a regulatory taking claim by failing to raise it until they filed their reply brief in this court. See Tex. R. App. P. 33.1. As to the second ground, the Centenos argue that the City's zoning regulations deny them all economically viable use of that part of the structure that they have been ordered to remove. But whether a regulation denies a landowner the economically viable use of a part of the property is not the test. The test is whether the zoning regulations deprive the Centenos of "all economically viable use of their property," see Mayhew, 964 S.W.2d at 935; and the undisputed evidence establishes this test is not met here. We therefore restrict our discussion to the third basis for a regulatory takings claim - whether enforcement of the regulations unreasonably interferes with the Centenos' right "to use and enjoy their property," which "requires a consideration of two factors: the economic impact of the regulation and the extent to which the regulation interferes with distinct investment-backed expectations." Id. (citing Lucas, 505 U.S. at 1019 n.8); accord Hallco Texas, Inc. v. McMullen Cty., 94 S.W.3d 735, 738 (Tex. App.-San Antonio 2002, pet. filed).

Economic Impact of the Regulations

First, we consider the economic impact of the City's zoning regulations, which "merely compares the value that has been taken from the property with the value that remains in the property. The loss of anticipated gains or potential future profits is not usually considered in analyzing this factor." Mayhew, 964 S.W.2d at 935-36 (citation omitted). We undertake this analysis to determine whether enforcement of the regulations "has a severe enough economic impact" on the property's value. Id. at 937. The jury found that the fair market value of the property before the taking was $128,000.00, and the fair market value after the taking was $90,085.56, resulting in a reduction of $37,914.44. This is not a severe economic impact. See Mayhew, 964 S.W.2d at 937.

The Centenos' Investment-Backed Expectations

"[T]he 'primary expectation' of the landowner that is affected by the regulation" is "[t]he existing and permitted uses of the property." Id. at 936 (citing Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 136 (1978)). "Knowledge of existing zoning is to be considered in determining whether the regulation interferes with investment-backed expectations." Mayhew, 964 S.W.2d at 936.

Although the Centenos purchased the property intending it for residential use, the primary expectation of a landowner in calculating investment-backed expectations is presumed to be the existing and historical use of the property. See, e.g., id.; Hallco Texas, Inc., 94 S.W.3d at 738 ("Historical uses of the property are critically important when determining the reasonable investment-backed expectations of the landowner."). The Centenos do not dispute that the property was historically used as an educational annex to a church. Moreover, at the time of purchase, the Centenos were aware not only of the City's zoning requirements but also that some of those requirements were not met by the property; and there had been a previous need for variances. The Centenos' awareness in this regard weighs against their claim to legitimate investment-backed expectations. See Mayhew, 964 S.W.2d at 936 (knowledge of existing zoning requirements considered); cf. Hallco Texas, Inc., 94 S.W.3d at 738-39 (where intended use of property necessitated governmental permit, property owner did not have distinct investment-backed expectation). Further, the Centenos have not cited, and we have not found, any authority suggesting that a landowner's hope to receive variances similar to those granted in favor of a previous owner of the property or neighboring property owners qualifies, in and of itself, as a distinct investment-backed expectation. See Deyeso v. City of Alamo Heights, 594 S.W.2d 123, 125 (Tex. Civ. App.-San Antonio 1979, no writ) (rejecting property owners "contention that [his] constitutional rights were violated merely because the City had neglected [to prohibit the same activity he requested] on four previous occasions"); Gartner v. Board of Adjustment of City of San Antonio, 324 S.W.2d 454, 456 (Tex. Civ. App.-San Antonio 1957, writ ref'd n.r.e.) (rejecting argument that denial of permit due to non-compliance with city zoning requirement was illegal because there were other similar non-conforming businesses); Hill v. Board of Adjustment of City of Castle Hills, 301 S.W.2d 490, 491 (Tex. Civ. App.-San Antonio 1957, writ ref'd) ("[T]he fact that a zoning regulation has not been enforced does not work its repeal."). Finally, we find no authority to support the Centenos' contention that the City was required to enforce its zoning requirements using a "less burdensome and less restrictive alternative[ ]." Under these circumstances, we cannot conclude the City's regulations interfered with the Centenos' right to use and enjoy their property. (2)

Substantive Due Process

The Centenos also argue that the unconstitutional taking of their property resulted in a denial of their rights to substantive due process in violation of the United States Constitution. However, because no unconstitutional taking occurred, the Centenos were not denied substantive due process.

Conclusion

The City's enforcement of its zoning regulations did not unreasonably interfere with the Centenos' right to use and enjoy their property; therefore, as a matter of law, there is no unconstitutional regulatory taking. Accordingly, the trial court did not err in rendering judgment notwithstanding the verdict. The trial court's judgment is affirmed.

Sarah B. Duncan, Justice

1. Sitting by assignment

2. To the extent the Centenos argue that the trial court's injunction in favor of the City also resulted in an unconstitutional taking of their property, we disagree. After the trial court concluded that no taking occurred, it was obliged to enforce the City's zoning regulations. See City of Fort Worth v. Johnson, 388 S.W.2d 400, 402 (Tex. 1964) (The "enforcement or non-enforcement of the ordinance is not a matter of judicial discretion" and absent a showing that the "zoning ordinance is arbitrary and unreasonable ... it is the duty of the courts" to enforce it.); San Miguel v. City of Windcrest, 40 S.W.3d 104, 107 (Tex. App.-San Antonio 2000, no pet.) ("In an appeal from the granting of a temporary or mandatory injunction, the merits of the underlying case are not at issue .... Where the facts ... definitively indicate that a party is in violation of the law, the trial court loses its discretion and must enjoin the violation.").