Hallco Texas Inc. v. McMullen County

Texas Supreme Court 02-1176, 12-29-2006.

Texas Lawyer



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FACTS: In January 1991, Hallco bought 128 acres of land located about 1.75 miles from Choke Canyon Reservoir, sometimes referred to as Choke Canyon Lake, in McMullen County. The reservoir impounds water from the Frio River and supplies water to the city of Corpus Christi and a number of other communities in the region.

Hallco purchased the property with the intent to operate a Class I nonhazardous industrial waste landfill, a use requiring a permit from the Texas Commission on Environmental Quality (TCEQ).

In the course of Hallco's purchase, the company's president discussed Hallco's plans for the property with the McMullen County judge, who voiced opposition. Eleven days after Hallco purchased the property, the McMullen County commissioners court adopted a resolution expressing opposition to the proposed use as a potential hazard to local water supplies. Despite the county's disagreement, Hallco proceeded with plans to develop the property as an industrial-waste landfill, and on July 27, 1992, formally filed its application with TCEQ.

In June 1993, the county enacted the ordinance at issue here pursuant to Texas Health & Safety Code §364.012. That provision allows a county to prohibit municipal or industrial solid-waste disposal that presents a threat to the public health, safety and welfare, so long as the county designates an area in which disposal is permissible. McMullen County's ordinance prohibits the disposal of solid waste within three miles of Choke Canyon Lake, but allows disposal in any other area of the county so long as applicable state requirements are met.

By the time the county passed the ordinance, Hallco claims it had invested more than $800,000 in the site and the TCEQ permitting process. Hallco's application apparently remains pending at the Commission.

In June 1995, Hallco challenged the county's ordinance by filing suit in the federal district court; it also filed a parallel proceeding in state court. The federal court dismissed Hallco's substantive due-process and equal-protection claims with prejudice, holding that the ordinance was rationally related to a legitimate governmental purpose. The court dismissed without prejudice Hallco's claim alleging an unconstitutional taking in violation of the Fifth Amendment to the United States Constitution, holding that to ripen its federal takings claim Hallco first had to seek compensation through procedures the state had established.

A week after the federal court's dismissal, the county moved for summary judgment in the state court action. The trial court granted the county's motion as to all claims without specifying the grounds.

The court of appeals affirmed the trial court's judgment. The court of appeals' judgment issued April 16, 1997, and Hallco did not appeal that decision.

More than two years after the court of appeals' judgment and nearly six years after the ordinance was enacted, Hallco submitted a request for a variance to the McMullen County commissioners court. The county permitted Hallco to make a presentation on the request to the commissioners court, but took no action on Hallco's request.

Two months later, Hallco filed the lawsuit underlying this appeal. Hallco alleged that by denying its variance request the county had taken, damaged or destroyed Hallco's property for public use in violation of

Art. I, §17 of the Texas Constitution. Hallco also alleged that the county had taken its property without just compensation in violation of the Fifth Amendment to the United States Constitution. Hallco later amended its petition to assert a claim under the Texas Private Real Property Rights Preservation Act,

Texas Government Code §2007.021, which allows property owners to sue for certain governmental actions that result in an unconstitutional taking or restrict the use of property so as to reduce its value by at least 25 percent. Hallco alleged that, as a result of the county's action, it had sustained property-loss damages of $5,141,700, business-loss damages of $15,811,700, and permit-expense damages of $821,706.

In August 2001, the county moved for summary judgment on all of Hallco's claims. The county relied on its earlier defenses in the first suit and also asserted defenses of res judicata, statute of limitations and laches. The trial court again granted the county's motion without specifying the grounds, and the court of appeals affirmed.

HOLDING: Affirmed by a majority of the Texas Supreme Court.

The facts relevant to Hallco's present takings claim, including the county ordinance's wholesale prohibition, the manner in which it would be applied and the nature of the damage suffered, were all evident in the prior suit, a plurality of justices stated, and Hallco's requested variance proposed no new or different application. Although styled as a variance request, Hallco's request was nothing more than a demand for the county to reconsider what had been its position all along, the plurality found.

Under these circumstances, the plurality found that Hallco's facial and as-applied challenges were the same regardless of how Hallco chose to frame its pleadings, and held that res judicata barred another bite at the apple.

Similarly, a majority of the court stated that the Hallco I final judgment barred Hallco's claim under the Private Real Property Rights Preservation Act. Hallco failed to assert its variance request in the prior litigation and cannot resurrect the act's protections in Hallco II, the majority held.

As for Hallco's claim that it properly reserved its as-applied Fifth Amendment takings claim, the plurality disagreed.

OPINION: O'Neill, J., delivered the opinion of the court as to Parts I, II, III.B, and V, joined by Jefferson, C.J., and Wainwright, Brister and Johnson, J.J., and an opinion as to Part III.A and IV, joined by Jefferson, C.J., and Brister and Johnson, J.J. Green, J., did not participate in the decision.

DISSENT: Hecht, J., delivered a dissenting opinion, joined by Medina and Willett, J.J. "A facial challenge is ripe when the restriction is imposed, but an as-applied claim is not ripe until the regulatory authority has made a final decision regarding the application of the regulation to the property . . . . This case illustrates how the government can use this ripeness requirement to whipsaw a landowner. Hallco is entitled to a decision on the merits of its claims that the County's ordinance effected a compensable taking of its property. Because the Court disagrees, I respectfully dissent."

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