Village of Tiki Island v. Jerry D. Ronquille and Wife Janelle L. Ronquille, Milton Chang and Wife, Marie, Angelia G. Hill and Richard Samaniego , 2015 Tex. App. LEXIS 2379 ( 2015 )

Opinion issued March 12, 2015
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-14-00823-CV
———————————
VILLAGE OF TIKI ISLAND, Appellant
V.
JERRY D. RONQUILLE AND WIFE JANELLE L. RONQUILLE, MILTON
CHANG AND WIFE, MARIE, ANGELIA G. HILL AND RICHARD
SAMANIEGO, Appellee
On Appeal from the 405th District Court
Galveston County, Texas
Trial Court Case No. 14-CV-0752
OPINION
This is an accelerated appeal from the trial court’s temporarily enjoining
enforcement of Tiki Island’s ordinance prohibiting short-term rentals of residences
against plaintiff homeowners. We lack jurisdiction to address the injunction
against four plaintiffs, and we affirm the injunction in favor of the remaining
plaintiff.
BACKGROUND
Plaintiffs/appellees Jerry Ronquille, Janelle Ronquille, Milton Chang, Marie
Chang, Angelia Hill, and Richard Samaniego own properties in the Village of Tiki
Island, Texas.1 Plaintiffs sued defendant/appellant Village of Tiki Island, alleging
that a new prohibition on short-term rentals of their Tiki Island houses amounts to
a regulatory taking.
A. Plaintiffs’ Petition
Plaintiffs’ petition alleges that “short term rentals have occurred on Tiki
Island for over 20 years,” and that, “prior to passage of Ordinance 05-14-02,
Plaintiffs were able to do short term lease/rentals.” Plaintiffs further allege that an
important consideration for each of them in buying their houses was the ability to
rent their houses short-term, that Plaintiffs “have operated their short-term
leasing/rental without interference by the Village of Tiki Island until the passage of
Ordinance No. 05-14-02,” and that their properties are already contractually
obligated for short-term rentals in the future. Plaintiffs seek a declaratory
1
Tiki Island is a waterfront community in Galveston County consisting of about
960 homes, with approximately 40% full-time occupants, and 60% part-time
occupants.
2
judgment, as well as a temporary injunction, a permanent injunction, damages,
attorneys’ fees, and costs.
In support of their request for temporary injunction, Plaintiffs allege they
have been “damaged by the unlawful taking of their properties” and that, unless a
temporary injunction is granted prohibiting enforcement of the ordinance,
Plaintiffs will suffer immediate and irreparable harm in loss of short-term rental
income and potential breach-of-contract liability to individuals with whom they
have contracted with for future rentals.
Finally, Plaintiffs assert that, by grandfathering fifteen other properties from
the prohibition on short-term rentals, the Village’s Board of Aldermen recognize
that short-term leasing and rental does not cause public harm to Tiki Island.
B. The Village’s Plea to the Jurisdiction and Answer
In response to Plaintiffs’ petition, the Village filed an Answer and Plea to
the Jurisdiction. The Village asserted that the trial court “lacks subject matter
jurisdiction over portions of the Plaintiffs’ Petition.” Specifically, it contends that
it is entitled to governmental immunity because (1) Plaintiffs have failed to allege
facts showing a waiver of the Village’s immunity, (2) Plaintiffs have not pleaded
facts showing a regulatory taking, and (3) the “meaning and validity of a penal
statute or ordinance should be determined by a court exercising criminal
jurisdiction.”
3
C. The Temporary Injunction Proceedings
On August 1, 2014, the trial court held a hearing on Plaintiffs’ motion for
temporary injunction, during which evidence was presented about the Ronquilles’,
the Changs’, and Richard Samaniego’s claims.
Plaintiff Jerry Ronquille
Ronquille testified that he purchased his Tiki Island house in July 2011 for
$370,000. His property is located in Tiki Yacht Club Colony, a section that does
not belong to the Tiki Island Civic Association. This matters because the Tiki
Island Civic Association did regulate short-term rentals in areas covered by the
association when he bought his property. His family planned to use the property,
and rent it out on a short-term basis when he and his family were not there. In
2011, the Ronquilles earned about $20,000 in short-term rentals and, in 2012 and
2013, they earned about $30,000 each year. In 2014, through the date of the
August 1, 2014 temporary-injunction hearing, they had earned about $20,000. He
testified that he already has contracts for short-term rentals into early 2015.
Ronquille listed his house for sale in late Spring of 2014 for $450,000,
before he found about abut the short-term rental problem. He has had some buyers
express interest, but no one will make a formal offer or negotiate for a price until
after the trial court’s decision. Ronquille testified to his belief that the inability to
rent his Tiki Island house reduces its value by approximately $20,000 to $40,000.
4
Ronquille further testified he has paid hotel occupancy taxes quarterly to
both the State and to the Village of Tiki Island on his rental income. His check to
the Village for the prior quarter had not been cashed by the Village as of the date
of the temporary-injunction hearing.
Roquille testified that, if the trial court did not enjoin the Village’s ordinance
prohibiting short-term rentals, he would (1) be burdened economically by the loss
of rental income to offset his mortgage, (2) be deprived of the investment that he
made when he bought the property, (3) be vulnerable to lawsuits by those he is
already obligated to rent to, and (4) suffer significant decrease in resale value.
Plaintiff Milton Chang
Chang testified that he bought his Tiki Island house in July 2012 for
$280,000 and spent $30,000 on improvements. Like Ronquille’s house, Chang’s
house is in Tiki Yacht Club Colony and is not covered by the Tiki Island Civic
Association. Before he purchased the house, Chang inquired and received
assurances that short-term rentals were permitted. In 2013, he received $18,221.00
in short-term rental revenue and, as of the August 1, 2014 hearing, had received
about $14,000 for 2014. As of that date, he also had future rental commitments
through November 2014. Chang opined that an inability to rent short-term would
make his house more difficult to sell and reduce its value.
5
Chang received a letter, dated June 27, 2014, from the Village’s building
inspector ordering Chang to cease all short-term rentals, and stated that charges
would be filed against him if he continued to violate the ordinance. Chang also
received a letter, dated July 18, 2014, returning his checks dated July 14, 2014 for
the prior year’s and current year’s hotel tax. Chang testified that he had been
trying to pay the 2013 taxes since January of 2014, but had problems getting
information from the Village about how to pay them.
Scott Maxwell
Maxwell2 testified that he owns a Tiki Island house he built 2011. That
house is in Tiki Yacht Club Basin and outside the coverage of the Tiki Island Civic
Club. He selected that area to build because short-term rentals were allowed there.
He lives there full-time, and is self-employed part-time running a fishing guide
business out of his house. He did one short-term rental in March 2014, when he
rented his house out for $2,750 for the week.
Maxwell does not currently engage in short-term rentals as part of his
business, but he allows out-of-town fishing customers to stay at his house short-
term without charge. He would like to be able to charge customers staying at his
house more than customers that do not. Maxwell opined that his property would
be more valuable if short-term rentals were allowed.
2
Maxwell is not a party to this case.
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Plaintiff Richard Samaniego
Samaniego testified that he bought his Tiki Island house in 2007 for
$390,000. It is in a section of Tiki Island that is regulated by the Tiki Island Civic
Association. Samaniego lives in League City and works outside of the United
States the majority of the time. When he purchased the house, he was not aware of
any restrictions on short-term rentals. He believes he could sell his house now for
$375,000. If short-term rentals were available, he opined that he could sell it for
$390,000 or $395,000.
Samaniego did not know about a lawsuit between homeowners and Tiki
Island Civic Association. He did not see a notice in the newspaper about that
lawsuit, nor did he know he would have been given the opportunity to grandfather
his property in for short-term rentals as a result of a settlement in that case.
In 2009, he listed his house for short-term rental and received a cease-and-
desist letter from Tiki Island Civic Association. Samaniego would very much like
to engage in short-term rentals to help pay the mortgage and expenses on his
house. He has done some long-term rentals, but opined that he has lost significant
potential income by not being able to do shorter terms.
Vicki Baggs
Baggs is a real-estate agent specializing in waterfront property with about
half of her business concentrated in Tiki Island. She has been a realtor for 22
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years, and has been involved in listing and managing properties for short-term
rentals in the past three or four years. The Ronquilles and Changs have been her
clients since 2011.
She requires short-term rental tenants pay a $300 cash deposit and leave a
credit card number on file. She inspects each house before and after each rental.
In four years, there have been three incidents that required her to keep part or all of
a short-term renters’ cash deposit. She estimated that 95% of short-term renters
are families on vacation that take good care of the houses. Baggs drives past each
rented house on Saturday nights because if a renter is going to throw a party, that is
the night it would most likely happen. Once she had to evict a short-term renter
from Ronquille’s house and once she had to evict a short-term renter from Chang’s
house. Both incidents involved neighbors’ complaints about parties.
Baggs testified that the rental market has been excellent recently and that she
has booked commitments for Ronquille’s house every remaining month in 2014
and one for 2015. She opined that Tiki Island houses that can be used for short-
term rentals are easier to sell and sell for more money. She testified that there have
been short-term rentals on Tiki Island since Tiki Island was founded.
Baggs further testified that Ordinance 05-14-02 has damaged many of her
clients, as many people cannot afford their vacation home without the ability
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engage in short-term rentals. The value of her client’s rental commitments for the
rest of 2014 is significant, and many future leases have already been signed.
Baggs is handling the sale of Ronquille’s house. She opined that they would
already have an offer on his house if Ordinance 05-14-02 had not passed.
Baggs agreed that only a small percentage of Tiki Island owners rent their
houses for short terms, but she testified that many more would if it were not
prohibited. She also testified that many people do short-term rentals “under the
radar” in the area of Tiki Island that is covered by the ban the Tiki Island Civic
Association put in place in 2006.
Mayor Vernon Teltschick
Teltschick testified that he was appointed Mayor by the Village’s Board of
Alderman in June 2014 when the incumbent mayor died. He testified that
Ordinance 05-14-02 was passed by the Village Board of Alderman on May 20,
2014 to prohibit short-term rentals. An exception under the ordinance was made
for houses that had been used for short-term rentals before March 1, 2011 and were
current in payment of taxes to the State and the Village. Houses meeting that
criteria were identified in an appendix to the ordinance and grandfathered for as
long as title to the houses stayed in the same direct family name. Teltschick
testified that he did not know why Ordinance 05-14-02 grandfathered only houses
used for short-term rentals before March 1, 2011 and why those houses beginning
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short-term rentals between March 1, 2011 and May 20, 2014 were not likewise
grandfathered. He did explain the reason that particular houses were grandfathered
though; the grandfathered properties were all covered by Tiki Island Civic
Association, and a court order resulting from earlier litigation between the Tiki
Island Civic Association and certain homeowners expressly permitted use of those
houses for short-term rentals.
Teltschick testified that the Village has ordinances regulating noise. He
knows of 15 or 20 calls complaining of noise in the previous five years, and he
testified that there are probably more calls about renters than residents. He is not
aware of any public health issues, safety issues, moral issues, or welfare issues
with short-term or long-term rentals. The only issue he is aware of with short-term
rentals is noise disturbances and people parking in other people’s lots. He also
testified that having short-term rentals can devalue neighboring residences.
The majority of the people in the community with whom Teltschick has
discussed this subject are opposed to short-term rentals. He testified that the
reason for distinguishing between short-term rentals and long-term rentals is that
the shorter-term renters caused a lot more disturbances in the neighborhoods.
While there are avenues for the community to deal with problems caused by short-
term rentals (such as the noise ordinance), those are not effective. Telschick
opined that Ordinance 05-14-02 is necessary to address this problem.
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Building Inspector Darrell Hunter
Hunter testified that he has worked for the Village for nine years. Since
passage of the 2014 ordinance, he has sent out six cease-and-desist letters,
prepared by the City Attorney, to plaintiffs Milton Chang and Angelia Hill and
others. His instructions to send the letters came from the Mayor through the City
Secretary. Hunter has personally heard complaints from neighbors of some of the
people he sent letters to about noise from tenants at these houses.
D. The trial court’s rulings
At the close of the August 1, 2014 hearing, the trial court announced that it
would issue a temporary injunction in favor of the Ronquilles and Changs. The
court stated that it would not issue a temporary injunction in favor of Samaniego,
however, because the evidence showed that he was not currently engaged in short-
term rentals so an injunction was not necessary to preserve his status quo. The
court also refused to issue a temporary injunction in favor of Hill because she was
not at the hearing, and the court had not heard any testimony or evidence about the
specifics of her situation.
1. The Ronquilles and Changs
On August 26, 2014, the trial court signed an order stating,
IT IS THEREFORE ORDERED that a Temporary Injunction
issue, operative until a Final Judgment is entered in this cause, as
follows:
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1. Defendant, Village of Tiki Island, Texas, its agents,
servants, successors, trustees and attorneys are commanded forthwith
to desist and refrain, and are hereby enjoined, from enforcement of its
Ordinance No. 05-14-02 as to Plaintiffs Jerry D. Ronquille, Janell L.
Ronquille, Milton Chang and Marie Chang.
2. Plaintiffs will post with the Clerk of this Court a cash
bond, in conformity with the law, in the amount of $500.00.
3. The Clerk shall forthwith, on the filing by Plaintiffs of
bond, issue a temporary injunction in conformity with the law and the
terms of this Order.
IT IS FURTHER ORDERED that the trial on the merits of this
cause is set for the 23th of March to the 25th of March, 2015.
2. Angelia Hill
On August 18, 2014, Hill filed a motion to reconsider the trial court’s oral
pronouncement that it would not issue a temporary injunction in her favor. On
September 30, 2014, the trial court held a hearing on Hill’s request for a temporary
injunction. Hill was the only testifying witness, and the trial court agreed to also
consider the evidence from the August 1, 2014 hearing in considering her petition.
Hill testified that she purchased her Tiki Island house in 2007 for $300,000.
The house is located in Tiki Yacht Basin, which is outside the area that the Tiki
Island Civic Association has authority to regulate short-term rentals. She
purchased it as an investment, with an intention of doing both long-term and short-
term rentals. Before purchasing, she researched whether the property was
restricted by deed restrictions or covenants. She and her realtor gathered from
their research that there were no deed restrictions or homeowners’ association
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regulations burdening the property. She began renting out her house short-term
shortly after her purchase.
As of the September 30, 2014 hearing, Hill had earned approximately
$25,000 in rental income for 2014. She tried for the first time to pay hotel taxes to
the Village in early May 2014, but was told that there would be a meeting in May
or June regarding short-term rentals and that, in the meantime, the Village was not
collecting taxes. She has not paid hotel taxes to the State.
After the Village passed the May 2014 ordinance prohibiting short-term
rentals, Hill hired a lawyer to file suit. She counts on that rental income to pay for
the home. She further testified that, if the ordinance is upheld, it will cause her
financial harm. She opined that her property would lose value if she could no
longer engage in short-term rentals of her house, and that the ability to do such
rentals would enable her to obtain a premium price for the property if she sold it.
Hill received a cease-and-desist letter from the Village’s Building Inspector
explaining that it has evidence that she is engaged in short-term rentals in violation
of applicable ordinances, noting the fine is $250 for a first conviction and $500 for
subsequent convictions, and threatening charges would be filed against her if she
continued to violate the ordinance. A citation dated 09/02/2014 was entered into
evidence citing her for violating Ordinance 05-14-02 on 08/29/14 through 09/01/14
and setting her appearance date at September 18, 2014. Finally, a letter to Hill
13
from the Tiki Island Municipal Court clerk was entered into evidence ordering her
to appear on September 18, 2014 and explaining that a warrant would otherwise
issue for her arrest. Hill testified that her lawyer made arrangements to continue
the municipal court case pending the outcome of the temporary-injunction hearing.
At the close of the hearing, the trial court stated that it would grant a
temporary injunction in favor of Hill pending the trial on the merits.
That same day, September 30, 2014, the trial court signed an order stating,
IT IS THEREFORE ORDERED that a Temporary Injunction
issue, operative until a Final Judgment is entered in this cause, as
follow:
1. Defendant, Village of Tiki Island, Texas, its agents,
servants, successors, trustees and attorneys are commanded forthwith
to desist and refrain, and are hereby enjoined, from the enforcement of
its Ordinance No 05-14-02 as to Plaintiff, ANGELA G. HILL.
2. Plaintiff will post with the Clerk of this Court a cash
bond, in conformity with the law, in the amount of $250.00.
3. The Clerk shall forthwith, on the filing by Plaintiffs of
the bond, issue a temporary injunction in conformity with the law and
terms of this ORDER.
IT IS FURTHER ORDERED that the trial on the merits of this
cause is set for the 23th of March to the 25th of March, 2015.
ISSUES ON APPEAL
The Village raises the following two issues on appeal:
1. “Whether the trial court erred in enjoining the enforcement of
Ordinance No. 05-14-02 because the Plaintiffs failed to allege
or demonstrate the existence of a viable takings claim against
the City.”
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2. “Whether the trial court erred in enjoining the enforcement of
Ordinance No. 05-14-02 because the Plaintiffs failed to allege
or demonstrate an irreparable injury to a vested property right.”
APPELLATE JURISDICTION
As a threshold matter, we address our own jurisdiction over the Village’s
appeal, and the scope of our review.
A. Who are the Parties to this Interlocutory Appeal?
The trial court’s order granting a temporary injunction in favor of the
Ronquilles and Changs was signed August 26, 2014. The trial court’s order
granting a temporary injunction in favor of Hill was signed September 30, 2014.
The August 26 order makes no mention of Hill, and the September 30, 2014 order
makes no mention of the Ronquilles or Changs.
On October 8, 2014, the Village filed a notice of appeal stating,
(1) The appeal is taken from the 405th District Court of Galveston
County, Texas. The cause number in the trial court is 14-CV-
0752, and the style of the case in the trial court is “Jerry D.
Ronquille and Wife Janelle L. Ronquille, Milton Chang and
wife, Marie, Angelia G. Hill and Richard Samaniego vs.
Village of Tiki Island.”
(2) The order appealed from is the September 30, 2014 Order
Granting Temporary Injunction.
(3) The Village of Tiki Island, defendant, desires to appeal.
(4) The appeal is taken to either the First or Fourteenth Court of
Appeals.
(5) The party filing this notice is the defendant, Village of Tiki
Island.
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(6) This appeal is an accelerated appeal under Tex. Civ. Prac. &
Rem. Code §§ 51.014 (a) (4) and (a) (8) and Tex. R. App. P.
28.1.
In both its October 15, 2014 docketing statement and November 10, 2014
amended docketing statement, the Village states this is an accelerated appeal of an
interlocutory order signed on September 30, 2014 and identifies the appellees as
Jerry Ronquille, Janelle Ronquille, Milton Chang, Marie Chang, Angelia Hill, and
Richard Samaniego. In its brief here, the Village challenges the trial court’s
granting temporary injunctive relief in favor of the Ronquilles, the Changs, and
Hill.
We conclude, however, that the temporary injunctive relief granted in Hill’s
favor on September 30, 2014 (and not the temporary injunctive relief granted in the
Roquilles’ and Changs’ favor on August 26, 2014) is the only order properly
before us. An accelerated appeal from an interlocutory order is perfected by filing
a notice of appeal within 20 days after the order is signed. TEX. R. APP. P. 26.1(b),
28.1(b). The Village’s notice of appeal was filed October 8, 2014, i.e., eight days
after Hill’s temporary injunction and 43 days after the Ronquilles’ and Changs’
temporary injunction.
The Village’s notice of appeal did not state it challenged the trial court’s
August 26, 2014 order granting a temporary injunction in favor of the Ronquilles
and Changs and, even if it had, it would have been untimely. Because the
16
September 30, 2014 temporary injunction order granting injunctive relief to Hill
did not purport to grant or deny relief as to the Ronquilles or Changs, the Village’s
properly perfected appeal of the September 30, 2014 temporary injunction in Hill’s
favor does not vest this Court with jurisdiction over the August 24, 2014 order
granting relief in favor of the Ronquilles and Changs.3 Accordingly, we dismiss
the appeal of the August 26, 2014 temporary injunction in favor of the Ronquilles
and Changs, TEX. R. APP. P. 42.3(a), and limit our review to the September 30,
2014 temporary injunction in favor of Hill.4
B. Scope of this Interlocutory Appeal
The Village cites Texas Civil Practice and Remedies Code § 51.014(a)(4)
(permitting appeal of interlocutory order that “grants or refuses a temporary
injunction”) and § 51.014(a)(8) (permitting appeal of interlocutory order that
“grants or denies a plea to the jurisdiction by a governmental unit”) as the statutory
bases for its interlocutory appeal. In its brief, the Village characterizes the trial
3
Had the Village timely appealed the August 26, 2014 temporary-injunction order,
then this Court could have additionally reviewed the September 30, 2014 order.
See TEX. R. APP. P. 29.6(a)(1) (“While an appeal from an interlocutory order is
pending . . . the appellate court may review . . . a further appealable interlocutory
order concerning the same subject matter.”).
4
In response to our letter indicating that we intended to dismiss the appeal as to the
Ronquilles and Changs under Rule 42.3(a) of the Texas Rules of Appellate
Procedure, the Village indicated that its challenge is limited to the September 30,
2014 temporary injunction order in favor of Hill.
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court’s temporary-injunction hearings as “plea to the jurisdiction proceedings” and
it cites the standards applicable to “reviewing a [ruling on] a plea to jurisdiction.”
At the August 1, 2010 temporary-injunction hearing (resulting in the August
26, 2014 temporary injunction in favor of the Ronquilles and Changs), the trial
court and parties referred only to the temporary-injunction standards, and the
Village never mentions jurisdiction. At the September 30, 2014 temporary-
injunction hearing (resulting in the September 30, 2014 temporary injunction in
favor of Hill), however, the Village’s counsel stated that he “move[d] that the
plaintiff’s case be dismissed for lack of subject matter jurisdiction.” After
permitting the Village’s counsel to ask some questions of Hill related to the
Court’s jurisdiction, the court asked the Village’s counsel to clarify what the
questions were getting at, and ultimately explained that it would not allow the plea
to the jurisdiction be heard with the motion for temporary injunction because the
plaintiffs were entitled to notice:
Court: [T]he plea to the jurisdiction, is that what this is?
Counsel: Yes, your Honor.
Court: The plea to the jurisdiction has not been set for a
hearing.
Counsel: But, your Honor, it is the obligation of this Court
to enter orders prior to the City — with regard to the Village of Tiki
Island — to ensure that it has subject matter jurisdiction of the — of
the case in order that the order that it issues with regard to the Village
are valid.
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Court: I understand that, [counsel]. All it takes is: You
setting it for a hearing or even submission, but it hasn’t been set. This
hearing is solely based upon the setting made with the motion filed by
[plaintiffs’ counsel] and — the plaintiffs.
Counsel: It’s an obligation of the plaintiffs in this case to
show that the request that they’ve made on this Court for relief is
within the subject matter jurisdiction of this Court. Otherwise, the
Court has no jurisdiction to enter an order with regard to the Village.
....
Court: [T]his is a hearing at — called for by [plaintiffs’
counsel]. He properly set it. He filed his motion. That’s what we’re
going to address. If you want to, set your plea to jurisdiction motion
for a hearing. If anything, it’s going to be a temporary injunction.
Counsel: Your Honor, just to make it clear for the record: It
is — it is the Village’s position that if the Court does not have
jurisdiction, that the effect of the temporary injunction is – and the
exercise of that injunction would be appealable as a denial of the
City’s plea to the jurisdiction.
COURT: It’s not a denial. I want to make it clear. I’m telling
you: All you have to do is set it for a hearing.
Counsel: But the effect — the effect of the Court’s action is
going to be a denial of the City’s plea to the jurisdiction because this
Court doesn’t have subject matter jurisdiction to grant the relief that’s
requested.
Court: Okay. I will say again: I’m not denying the
defendant’s plea to the jurisdiction because I haven’t heard it. It hasn’t
been set for a hearing. When you set it for a hearing, I’ll hear it and
make a decision.
At the close of the hearing, the Village again argued that the evidence
adduced at the temporary injunction hearing is insufficient to establish a taking,
thus depriving the trial court of subject-matter jurisdiction.
Court: Okay, and I appreciate that, [counsel]; and as soon
as you can set your plea to the jurisdiction for a hearing, I will
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consider that. . . . but as you well know, the other side is entitled to
notice. So if you’re going to have a plea to the jurisdiction heard, you
have to have notice, get it set for hearing, provide the notice of the
hearing. Then we can hear all about the jurisdiction; and if I decide to
grant the temporary injunction, it can be resolved at that point once
we have that hearing . . . .
...
All right. Here is what I’m going to do: I’m going to grant this
temporary injunction; but, Mrs. Hill, I really need to caution you that
defendants have filed a plea of the jurisdiction that is to be heard. If
they are entitled to a plea to the jurisdiction, that means that the
injunction will be dissolved; and at that point, the ordinance would be
in place. So just keep that in mind and — and just be prepared for any
situation.
....
Counsel: Your Honor, for — just for purposes of handling a
plea in an alternative matter, I believe that the Court already has
before it all the evidence that we would need for a formal hearing on
our plea for the jurisdiction.
Court: You want to set it on the submission docket, or
would you rather have a hearing? I’m happy to give you a hearing if
you want a hearing.
Counsel: I will — I will get back to your court coordinator.
Let me think about what the options are, and we’ll go from there.
Court: Absolutely. Whenever you get it set for a hearing,
we can get it on the docket and we can have a hearing for the plea to
the jurisdiction. Okay?
Plaintiffs point out in their brief that, while the Village filed a Supplemental
Plea to the Jurisdiction at the end of the September 30, 2014 temporary-injunction
hearing, the Village never requested a hearing or submission of its plea to the
jurisdiction in the trial court. The Village urges us to conclude that it is of no
matter because “[i] any event, the trial court’s first order of business was to
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determine whether it had subject-matter jurisdiction.” Accordingly, the Village
asks us to interpret the granting of the temporary injunction in favor of Hill as an
implicit denial of its plea to the jurisdiction and exercise interlocutory jurisdiction
over that denial under Texas Civil Practice and Remedies Code § 51.014(a)(8)
(permitting interlocutory appeal of order denying plea to the jurisdiction by
governmental unit). It further argues that our review of the trial court’s implicit
denial of its challenge to the trial court’s subject-matter jurisdiction is de novo and
that dismissal is the appropriate remedy if we determine that Plaintiffs failed to
establish the trial court’s subject-matter jurisdiction.
The Village cites no authority for our reviewing an unruled-upon plea to the
jurisdiction in this interlocutory appeal of a temporary injunction, and Plaintiffs
cite no authority in support of their argument that such review by this Court is
inappropriate. Our own research reveals that, until 2014, the courts of appeals
were split on the issue of whether grounds for dismissing a suit for lack of subject-
matter jurisdiction not ruled upon by the trial court could be raised for the first time
on interlocutory appeal. The majority of courts refused to exercise such
jurisdiction, reasoning that section 51.014’s interlocutory jurisdiction should be
strictly construed as a narrow exception to the general rule that only final
judgments and orders are appealable. See, e.g., Brantley v. Texas Youth Comm’n,
365 S.W.3d 89, 108 (Tex. App.—Austin 2011, no pet.). This Court was in the
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minority, having adopted the view that section 51.014(a)(8) grants the appellate
courts with interlocutory jurisdiction over newly-raised challenges to a trial court’s
subject-matter jurisdiction to issue a properly appealed interlocutory order because
subject-matter jurisdiction can be raised at any time. See Harris Cnty. Mun. Util.
Dist. No. 156 v. United Somerset Corp., 274 S.W.3d 133, 137 (Tex. App.—
Houston [1st Dist.] 2008, no pet.).
Several problems inherent in allowing subject-matter jurisdiction to be
raised for the first time on interlocutory appeal were identified by a concurring
opinion in Garcia v. Kubosh:
First, first-time consideration of jurisdictional challenges in an
interlocutory appeal may eliminate or undermine the other party’s
opportunity to re-plead and the court of appeals’s ability to rely on the
trial court’s discretion in determining the appropriateness of re-
pleading. Second, it may interfere with the other party’s opportunity
to fully develop the evidentiary record in response to new
jurisdictional contentions and the court of appeals’s reliance on the
trial court’s role as factfinder. Third, it may also interfere with the
other party’s right to full discovery on issues relevant to new
jurisdictional contentions and the court of appeals’s ability to rely on
the trial court’s first-hand evaluation of the sufficiency of existing
discovery. Fourth, it encourages parties to make strategic decisions
about whether to intentionally bypass consideration of jurisdictional
challenges at the trial stage and instead seek an initial adjudication
from the appellate court. Finally, it creates the potential for parallel
proceedings and contradictory results.
377 S.W.3d 89, 110–11 (Tex. App.—Houston [1st Dist.] 2012, no pet.) (Brown, J.,
concurring).
22
The supreme court resolved this split in Rusk State Hosp. v. Black, adopting
the minority view that subject-matter jurisdiction could be raised for the first time
on interlocutory appeal. 392 S.W.3d 88, 96 (Tex. 2012). In so doing, the supreme
court was mindful of the same concerns identified by the Garcia concurrence, i.e.,
that “a plaintiff may not have had fair opportunity to address jurisdictional issues
by amending its pleadings or developing the record when the jurisdictional issues
were not raised in the trial court.” Rusk State Hosp., 392 S.W.3d at 96. The
supreme court thus built safeguards into the standard for courts of appeals to apply
in reviewing challenges to subject-matter jurisdiction on interlocutory appeal that
were not previously raised or ruled on in the trial court:
Under such circumstances appellate courts must construe the
pleadings in favor of the party asserting jurisdiction, and, if necessary,
review the record for evidence supporting jurisdiction. In some
instances the pleadings or record may conclusively negate the
existence of jurisdiction, in which case the suit should be dismissed.
But if the pleadings and record neither demonstrate jurisdiction nor
conclusively negate it, then in order to obtain dismissal of the
plaintiff’s claim, the defendant entity has the burden to show either
that the plaintiff failed to show jurisdiction despite having had full and
fair opportunity in the trial court to develop the record and amend the
pleadings; or, if such opportunity was not given, that the plaintiff
would be unable to show the existence of jurisdiction if the cause
were remanded to the trial court and such opportunity afforded. If the
governmental entity meets this burden, then the appellate court should
dismiss the plaintiff’s case . . . If, however, the governmental entity
does not meet this burden, the appellate court should remand the case
to the trial court for further proceedings.
Rusk State Hosp., 392 S.W.3d at 96 (citations omitted).
23
In light of Rusk State Hospital, we first address the Village’s challenge to
the trial court’s subject-matter jurisdiction to enter the September 30, 2014
temporary injunction in Hill’s favor.5
WAIVER OF SOVEREIGN IMMUNITY
In its first issue, the Village argues that “Plaintiffs fail to plead or
demonstrate a regulatory taking” as necessary to waive the Village’s sovereign
immunity. See Cernosek Enters., Inc. v. City of Mont Belvieu, 338 S.W.3d 655,
662 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (citing Steele v. City of
Houston, 603 S.W.2d 786, 791 (Tex. 1980) (article I, section 17 constitutes waiver
of governmental immunity for the taking, damaging, or destruction of property for
public use)). It is Hill’s burden to establish the Village’s consent to be sued
through a waiver of immunity. Id. at 661.
A. Regulatory Taking
A regulatory taking occurs when regulation (1) compels “the property owner
to suffer a physical ‘invasion’ of his property,” (2) “denies all economically
beneficial or productive use of land,” or (3) “does not substantially advance
5
Rusk State Hospital supports the view that subject-matter jurisdiction can be raised
for the first time in an otherwise properly perfected and timely appeal of an
interlocutory order because, as a threshold matter, a trial court must have subject-
matter jurisdiction to enter the order that is the subject of the interlocutory appeal.
Because the Village did not perfect an interlocutory appeal of the temporary
injunction order entered in favor of the Ronquilles and Changs, we do not
address—in this interlocutory appeal of the injunction order entered in favor of
Hill—the trial court’s subject-matter jurisdiction over the Ronquilles or Changs
claims.
24
legitimate state interests.” Sheffield Dev. Co., Inc. v. City of Glenn Heights, 140
S.W.3d 660, 671 (Tex. 2004). “ Otherwise, however, whether regulation has gone
‘too far’ and become too much like a physical taking for which the constitution
requires compensation requires a careful analysis of how the regulation affects the
balance between the public’s interest and that of private landowners.” Id. at 671–
72. “While each case must therefore turn on its facts, guiding considerations can
be identified,” including: (1) “the economic impact of the regulation on the
claimant”; (2) “the extent to which the regulation has interfered with distinct
investment-backed expectations”; and (3) “the character of the governmental
action.” Id. at 672 (quoting Connolly v. Pension Benefits Guar. Corp., 475 U.S.
211, 225, 106 S. Ct. 1018 (1986)).
The supreme court has cautioned that these factors “do not comprise a
formulaic test.” Id. For example, “the economic impact of a regulation may
indicate a taking even if the landowner has not been deprived of all economically
beneficial use of his property.” Id. We must consider all of the surrounding
circumstances, Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 933 (Tex. 1998),
and apply “a fact-sensitive test of reasonableness.” City of College Station v.
Turtle Rock Corp., 680 S.W.2d 802, 804 (Tex. 1984).
25
1. Plaintiffs’ Pleadings
The Village first contends that Plaintiffs have not adequately pleaded a
regulatory taking. Specifically, it argues that “Plaintiffs fail to plead facts
evidencing a total taking” and that Plaintiffs have not alleged facts showing an
“unreasonable interference with right to use and enjoy their property.”
Plaintiffs’ petition states:
 “Short term rentals have occurred on Tiki Island for over 20 years. Prior
to passage of Ordinance 05-14-02, Plaintiffs were able to do short term
lease/rentals.”
 “ANGELIA G. HILL purchased her property in Tiki Island on May 5,
2007 in Tiki Island Section 17 as an investment with the intent to do
short-term leasing/rental. She purchased the property after performing a
due diligence search on property restrictions, and after receiving
assurance from officials with Tiki Island that short-term rental were not
prohibited in Tiki Island, Texas. Since the purchase of said property, this
Plaintiff has rented her property for week-ends or short term rentals; and,
this Plaintiff has obligated her property for week-end rental for several
months into the future. She will suffer imminent harm and irreparable
injury and has not adequate remedy at law unless Defendant is enjoined
from enforcing Ordinance No. 05-14-02.”
 “On May 20, 2014, the Board of Aldermen of the Village of Tiki Island
adopted Ordinance No. 05-14-02 . . . which inter alia, made short-term
leasing/rental “'unlawful and strictly prohibited.” However, the said
Ordinance provided that fifteen (15) certain, identified properties
(owners) in Tiki Island were “grand-fathered”' from the Ordinance and
approved for short-term rentals within the jurisdiction of the Village of
Tiki Island, Texas. Plaintiffs believe these “grand-fathered” properties
were exempted from the Ordinance because the owners of said fifteen
(15) properties filed a lawsuit against the Tiki Island Civic Association
and, an Agreed Judgment was entered that allowed short-term
leasing/rental by said properties’ owners. Plaintiffs . . . were not, and are
not, parties in the lawsuit filed against the Tiki Island Civic Association
nor the Agreed Judgment entered therein.”
26
 “Plaintiffs would show the Court that they have been damaged by the
unlawful taking of their properties by the Defendant's passage of
Ordinance No. 05-114-12. Unless a Temporary Injunction is granted
prohibiting Defendant from enforcing said Ordinance, Plaintiffs will
suffer immediate and irreparable harm in loss of short-term rental/lease
income. Further, Plaintiffs are subject to breach of contract suits by the
individuals with whom they contracted to provide short-term
leasing/rentals and are obligated by contract to perform. Unless
Defendant is enjoined from enforcing said Ordinance, Plaintiffs have no
adequate remedy at law. Also, this Ordinance provides for monetary
penalties against Plaintiffs who violate said Ordinance.”
 “Plaintiffs were lawfully doing short-term rental/leasing until the passage
of the said Ordinance. In “grand-fathering,” fifteen (15) properties within
Tiki Island, Texas, Plaintiffs believe that the Board of Aldermen
recognize that short-term leasing/rental does not cause public harm to
Tiki Island.”
 “These Plaintiffs have conducted short-term leasing/rental for a
substantial period of time. Their ability to do short-term leasing/ rental
was a major part of their decision to purchase property in Tiki Island,
Texas.”
 “Plaintiffs believe their ability to do short-term rental enhances the value
of their properties; and, the Ordinance prohibiting short-term
leasing/rental decreases the value of their properties. Unless Defendant is
enjoined, Plaintiffs will suffer irreparable injury that cannot be
adequately compensated or measured by a certain pecuniary standard.
Plaintiffs have a cause of action based on Texas Constitution Art. 1 Sec.
17, to prevent the inverse condemnation of their property through
wrongful taking of property by Defendant. Plaintiffs seek a Temporary
Injunction to prevent Defendant from enforcing Ordinance No. 05-14-12,
pending final trial of this suit at which time Plaintiffs pray that the
Temporary Injunction be made permanent to protect Plaintiffs’ property
rights. If the Temporary Injunction is denied, Plaintiffs will suffer
irreparable harm. Plaintiffs seek to maintain the status quo (pre-
Ordinance passage by Defendant) pending trial on the merits.”
Hill argues that the petition adequately alleges that a taking occurred through
regulatory action that inexcusably interfered with Plaintiffs’ right to use and enjoy
27
their property. Properly “constru[ing] the pleadings in favor of the party asserting
jurisdiction,” Rusk State Hosp., 392 S.W.3d at 96, we agree.
In support of its argument that Plaintiffs’ failed to adequately plead a takings
claim, the Village cites Mayhew, 964 S.W.2d at 927 and Cernosek Enterprises, 338
S.W.3d at 662.
Mayhew did not address the adequacy of pleadings. Rather, on appeal from
a trial on the merits, it considered whether the defendant municipality effectuated a
regulatory takings by refusing to approve plaintiffs’ proposed development plans
to build approximately 3,600 homes on plaintiffs’ land—at a density of over three
units per acre—in an area that had been zoned for more than a decade with a one-
acre minimum lot requirement. Mayhew, 964 S.W.2d at 925–26. The supreme
court held that the evidence demonstrated that the denial of the plaintiffs’
development application “substantially advance[d] the Town’s legitimate concern
for protecting the community from the ill effects of urbanization” and that the
evidence did not support the plaintiffs’ argument that the denial “unreasonably
interfere[d] with [plaintiffs’] rights to use and enjoy their property.” Id. at 935–38.
In so doing, the court emphasized that the plaintiffs “had no reasonable
investment-backed expectation to build 3,600 units on their property.” Id. at 937.
In contrast, Hill pleaded that (1) she researched the permissible uses of her
house before committing to buy it, ascertaining that short-term rentals were
28
permissible, (2) she relied upon Village officials assurances that short-term rentals
were permitted, (3) the ability to rent short term was a major part of her decision to
purchase her house, (4) she engaged in short-term rentals before Ordinance No. 05-
14-02 was passed, (5) she is contractually obligated for future short-term rentals,
(6) the ability to rent short-term enhances the value of her property, and (7) the
prohibition on short-term rental decreases the value of her property. In other
words, unlike in Mayhew, Hill challenges the Village’s interference with her prior
and current existing use of her property, not just proposed future uses.
Cernosek Enterprises, the other case relied upon by the Village, was an
interlocutory appeal from the grant of a plea to the jurisdiction in favor of the
defendant city on governmental immunity grounds. 338 S.W.3d at 660. The
plaintiff, a lumber company, claimed the city’s actions in granting a neighbor a
drilling permit amounted to a taking for which the city did not retain immunity. Id.
at 661. This Court affirmed, holding that the plaintiffs’ pleadings were insufficient
to allege a taking:
Hill Lumber’s appellate briefing does not cite to any specific
allegations in the record stating why it cannot use its property or
stating how the City has unreasonably interfered with its right to use
and enjoy the property by issuing a drilling permit. Instead, Hill
Lumber’s live pleading merely alleges its “property value has been
seriously diminished, [its] property and lives (as well as the lives of
employees and customers) are at serious risk, [it] has lost business,
and [its] general welfare and ability to enjoy a peaceable community
[has] been seriously harmed.” These allegations do not state specific
facts evincing a taking by the City.
29
Cernosek Enters., Inc., 338 S.W.3d at 662.
In contrast, Hill’s pleadings do allege specifically how the use of her
property is circumscribed by the City’s actions, i.e., she cannot rent short-term
rentals, as well as the harm, i.e., loss of current and future rental income and loss of
property value. Hill has sufficiency alleged that Ordinance 05-14-02 unreasonably
interfered with her right to use and enjoy her property.
2. The Evidence
The Village alternatively contends that the “undisputed evidence received by
the trial court” at the temporary-injunction hearings establishes that Hill has no
“viable taking claim arising out of the City’s prohibition of short-term rentals.”
Because the Village seeks dismissal on sovereign immunity grounds here without
the trial court ruling on the jurisdiction issue, Rusk State Hospital teaches that the
relief sought by the Village, i.e., dismissal by this Court, is only appropriate if (1)
the record conclusively negates jurisdiction, or (2) Hill did not establish
jurisdiction and either she “had full and fair opportunity in the trial court to
develop the record” or she “would be unable to show the existence of jurisdiction
if the cause were remanded to the trial court and such opportunity afforded.” 392
S.W.3d at 96.
The Village argues that two factors are relevant to the determination of
whether Hill has established a regulatory taking under the “unreasonable
30
interference” theory of recovery: economic impact and regulatory interference with
investment back expectations. See Mayhew, 964 S.W.2d at 935–36. Hill
acknowledges the relevance of these two factors, but notes that the courts have
rejected applying a formularized test, such that the analysis can vary from case to
case. See City of Houston v. Maguire Oil Co., 342 S.W.3d 726, 736 (Tex. App.—
Houston [14th Dist.] 2011, pet. denied).
Economic impact: The Village quotes Mayhew’s explanation that the
“economic impact of the regulation 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.” 964 S.W.2d at 935–36 (citing Andrus v. Allard, 444 U.S. 51, 66, 100
S. Ct. 318, 327 (1979) (because “[p]rediction of profitability is essentially a matter
of reasoned speculation that courts are not especially competent to perform, . . . the
interest in anticipated gains has traditionally been viewed as less compelling than
other property-related interests.”)). From this, the Village argues that evidence
about Plaintiffs’ anticipated future short-term rental income is not relevant to the
determination of the “economic impact of the City Ordinance No. 05-14-02 on the
fair market value of their properties.” Because Plaintiffs can only show that their
property is worth at most 10% more if short-term rentals are permitted and because
the Plaintiffs’ homes are worth more now than what Plaintiffs paid for them, the
31
Village contends that the evidence demonstrates no economic impact on their
property.
Baggs testified that demand for short-term waterfront rentals is strong. She
opined that a house that can be used for short-term rentals can be sold for more
money, and be sold faster, than one that cannot be used for short-term rentals. She
also explained that some of her clients depend on the income from short-term
rentals, and could not afford their vacation houses otherwise. She testified to her
belief that the ability to rent short-term is a valuable real property interest.
Hill testified that she bought her house in early 2007 for $300,000, and that
she has made substantial improvements to the house, although she was unable to
quantify the amount spent on all the improvements or the current value of her
house. On cross-examination, she testified that the value of her house was
decreased by Hurricane Ike. When asked about the Central Appraisal District’s
2014 valuation of her house at $300,000, she testified that she could not determine
whether that is a fair estimate because she does not know how that figure was
derived.
In 2014, Hill received approximately $25,000 in short-term rental revenue in
the first nine months of that year. She testified that if she were denied the privilege
of doing short-term rentals, it would cost her “quite a bit of money” and it would
cause her “grave financial damages” because she counts on that income to pay for
32
house, and that she could otherwise not afford it. She further testified that her
property would “lose value greatly” if she could no longer do short-term rentals
and that the ability to do short-term rentals would enable to her to obtain a
premium price for her property. When pressed about how much it would increase
the price, she testified that she would rely on an appraiser, real estate agent, and
accountant to come up with that number.
This unobjected-to temporary-injunction-hearing testimony is some
evidence of the “economic impact,” i.e., value taken from the property as
compared to the value remaining in the property, Mayhew, 964 S.W.2d at 935–36,
of Ordinance 05-14-02. Both Hill and Baggs testified that an inability to rent
short-term would reduce the value of Hill’s house. And although the Village
insists that we cannot factor into our analysis evidence about the Hill’s loss of
future rent income, the supreme court has rejected this absolute view. Sheffield
Dev. Co., 140 S.W.3d at 677 (“The City argues that evidence of lost profits should
be ignored, but we agree with the court of appeals that lost profits are clearly one
relevant factor to consider in assessing the value of property and the severity of the
economic impact of rezoning on a landowner.”). We are mindful that in both
Mayhew and Sheffield Development, the court cautioned that the government does
not guarantee profitability of land and that purchasing and developing real estate
carries with it financial risks that the government is not obligated to prevent.
33
Mayhew, 964 S.W.2d at 935–38, Sheffield Dev. Co., 140 S.W.3d at 677. But both
Mayhew and Sheffield involved zoning changes that scuttled future real-estate
development, which is more speculative (and the resulting lost value harder to
quantify) than the proven profitable short-term rentals that Hill was already
engaged in at the time Ordinance 05-14-02 was enacted. See Mayhew, 964 S.W.2d
at922; Sheffield Dev. Co., 140 S.W.3d at 660.
Investment Backed Expectations: The Village argues that the testimony at
the temporary injunction hearings also demonstrates that Ordinance 05-14-02 does
not interfere with Hill’s investment-backed expectations because (1) the Ordinance
permits Plaintiffs to use their property “for the purpose for which it was
constructed and used” prior to their acquisition, i.e., “a single family residence,”
(2) long-term rentals of the properties is a reasonable use of Plaintiffs’ houses, and
(3) the Mayor’s testimony established that any interference with investment backed
expectations was reasonable in light of concerns about parties, loud noise
complaints, and parking.
The Village cites Hearts Bluff Game Ranch, Inc. v. State, 381 S.W.3d 468,
491 (Tex. 2012) for the proposition that it is the use of the property prior to Hill’s
purchase that should be the focus of our analysis. It notes that there “is no
evidence that the City’s actions have affected any use of the property prior to Hill’s
purchase of the property.” And it reasons that Hill’s home was built for the
34
“purpose” of a single family residence, such that Hill cannot have an investment-
backed expectation in its use for short-term rental. The Village cites no authority
its assertion that use for short-term rentals renders a house something other than a
“single-family residence.” In any event, we disagree that Hearts Bluff Game
Ranch instructs us to look to the house’s use prior to Hill’s purchase instead of her
existing use at the time the zoning regulations changed to determine Hill’s
expectations. The supreme court in Hearts Bluff Game Ranch explained that
““[t]he existing and permitted uses of the property constitute the ‘primary
expectation’ of the landowner that is affected by regulation.” 381 S.W.3d at 491
(quoting Mayhew, 964 S.W.2d at 936.) In that case, the plaintiff landowners
purchased wetlands on a site that the Texas Water Development Board (TWDB)
had identified as a potential water reservoir location. Id. at 473. The plaintiff then
sought a permit from the Army Corps of Engineers for a mitigation banking
permit. Id. The Corps denied the permit because of the TWDB designation. Id.
The plaintiff then sued the State and the Corps of Engineers for “interfering with
its asserted right to commercially develop the land as a mitigation bank.” Id. In
evaluating whether the plaintiff had shown that the State or Corps interfered with
its reasonable investment expectations, the supreme court discussed the current and
known prior uses of the land:
Because Hearts Bluff’s property is bottomland, its uses are more
limited than other lands. There are other plausible uses of its land,
35
e.g., the existing uses for hunting and fishing, although Hearts Bluff
noted that the other possible uses would likely not justify the price
that it paid for the land. Hearts Bluff argues that the mitigation
banking program is a profitable venture and its loss of the expectation
of obtaining a valuable mitigation bank at the site is actionable. But
this seems to be a risk common to land developers. See Sheffield, 140
S.W.3d at 677. . . . .
....
Concerning its investment expectations, Hearts Bluff alleges that the
State has caused it substantial damage since it can no longer use its
property as a mitigation bank. . . . The record does not clearly indicate
all the uses of the parcel prior to Hearts Bluff’s purchase. However,
there is no evidence before us indicating that the State’s actions in this
case, whether it be communicating with the Corps or designating
Marvin Nichols as a unique site, have affected any previously existing
uses of the property. Hearts Bluff still has every use of the land
available to it other than participation at this time in a federal
mitigation banking program.
Heart’s Bluff Game Ranch, 381 S.W.3d at 490–91. Here, while the record does
not contain evidence about the specific use of Hill’s house prior to her purchase in
2007, the record does reflect that short-term rentals have long been done in Tiki
Island, and that Hill was doing short-term rentals for seven years before Ordinance
05-14-02 was passed. She made the decision to purchase this house based on
representations about her ability to rent it out short term, and she relies on the
income from some rentals to pay for the house. This is evidence of a reasonable
investment-backed expectation of an ability to do short-term rentals.
The Village contends that the ordinance is “reasonable” because houses can
be rented long-term under the ordinance, and because the evidence shows that
36
short-term rentals have a negative impact on the community. 6 The Village cites
several out-of-state cases for the proposition that its “classification and prohibition
of the short-term rental of residential properties is reasonable.” While each of
these cases do involve prohibitions on uses of real property, they are each
distinguishable on their facts from the evidence presented here. Moreover, none
support the Village’s assertion that Hill does not have reasonable investment-
backed expectation in her existing use of her house for short-term rentals; indeed,
not all even involve takings claims. See Jackson Court Condos., Inc. v. City of
New Orleans, 874 F.2d 1070, 1080–81 (5th Cir. 1989) (affirming summary
judgment that city’s adopting prohibition on time-share developments did not
amount to a takings; buyer of apartment complex testified that he was aware the
city was considering banning time-shares before he purchased the apartment
complex with plans for a later conversion to a time-share complex, and that he
believed—pre-purchase—that there were alternative viable uses of the property,
including continuing as an apartment complex); Aamodt v. City of Norfork, 682
F.3d 735, 736–37 (8th Cir. 2012) (affirming summary judgment rejecting
challenges to short-term rental ban; no taking claim was alleged—case only
involved plaintiff’s assertion that amendment to ordinance was improperly filed by
6
The Village does not acknowledge the evidence that short-term rentals have the
benefit to homeowners of their being able to use the home as a second, vacation
home while collecting short-term rental income to pay for the house.
37
the city with the City Clerk instead of the County Recorder and that City should
have filed a map with the amendment); Neumont v. Florida, 610 F.3d 1249, 1254
(11th Cir. 2010) (affirming dismissal of takings claim challenging vacation-rental
restrictions because plaintiffs had failed to first challenge the restrictions in state
court, which the court held was an exhaustion prerequisite to filing a federal
constitutional challenge); Siwinski v. Town of Ogden Dunes, 949 N.E.2d 825, 832–
33 (Ind. 2011) (affirming summary judgment that homeowner’s short-term rental
of home violated ordinance; no taking claim was alleged—case only involved
disagreement over language of ordinance); City of Venice v. Gwynn, 76 So. 3d 401,
404 (Fla. 2d Dist. App. 2011) (reversing circuit court decision holding that
restrictions limiting short-term rentals of house to three times per year were
unconstitutional as applied to homeowner; court held that lower court had failed to
apply correct standard by not comparing value of property before and after
restrictions were enacted and by not comparing difference in potential rental
income before restrictions and after restriction); Jackson & Co. (USA), Inc. v.
Town of Avon, 166 P.3d 297, 299–300 (Colo. App. 2007) (affirming injunction
prohibiting owner from using house as a lodge for short-term rentals; no taking
claim was alleged—court held that house’s use as a lodge was prohibited by
original subdivision plat filed 23 years before house was purchased by current
owner seeking to use it as a lodge); Ewing v. City of Carmel-By-The-Sea, 234 Cal.
38
App. 3d 1579, 1591–92 (1991) (affirming judgment that zoning ordinance
prohibiting short-term rentals did not violate homeowners constitutional rights with
no discussion about individual homeowner’s situations or evidence); Brown v.
Sandy City Bd. Of Adjustment, 957 P.2d 207, 211–12 (Utah Ct. App. 1998)
(reversing summary judgment in favor of City prohibiting homeowner’s from
renting homes short-term under ordinance; no taking claim was alleged—court
held that language of ordinance did not prohibit short-term rentals).
The one Texas case cited by the Village, Baird v. City of Melissa, 170
S.W.3d 921 (Tex. App.—Dallas 2005, pet. denied) is likewise inapposite. In
Baird, the City of Melissa concluded that Baird’s RV park was not in compliance
with applicable ordinances. 170 S.W.3d 923–24. Baird, who bought the RV park
in 1996, argued that operation of the park was not prohibited by any regulation or,
alternatively, that the city should be equitably estopped from terminating her use of
the property as an RV park. Id. at 925. The trial court granted summary judgment
in favor of the city, and the Dallas Court of Appeals affirmed. Id. The case did not
involve a takings claim, and the court held that the property’s use as an RV park
was prohibited by ordinances that had been in effect for at least five years before
Baird bought the property and that none of the equitable defenses advanced by
Baird applied. Id. at 925–28.
39
In sum, Hill presented evidence that enactment of Ordinance No. 05-14-02
had an economic impact on the value of her property, and that she had a
reasonable, investment-backed expectation that she could engage in short-term
rentals. Hill’s allegations and evidence, taken as true and construed liberally in her
favor, establish a viable taking claim for which the Village’s sovereign immunity is
waived. City of Anson v. Harper, 216 S.W.3d 384, 393 (Tex. App.—Eastland
2006, no pet.) (affirming denial of plea to the jurisdiction based on City’s prior acts
because “Plaintiffs’ allegations and extrinsic evidence, when taken as true and
construed liberally in their favor, are sufficient to establish a potential takings
claim”); see also State v. Brownlow, 319 S.W.3d 649, 652 (Tex. 2010) (“Sovereign
immunity from suit does not protect the State from a claim under the takings
clause.”).7
B. Declaratory Judgment
Although the Village’s first issue argues only that Plaintiffs have not
demonstrated a waiver of sovereign immunity as to their takings claim, the
argument section of its brief also asserts that the trial court does not have subject-
matter jurisdiction over Hill’s claim for declaratory judgment because the claim (1)
is not ripe, (2) merely recasts the relief sought by Plaintiffs under their takings
7
We do not opine on the reasonableness of the short-term rental ordinance or
whether Hill can ultimately establish a regulatory takings. Our holding here is
limited to the conclusion that Hill presented sufficient evidence to support the trial
court’s finding of a probable right of recovery.
40
claim, and (3) Plaintiffs have not shown they served the attorney general with
notice of action under Texas Civil Practice and Remedies Code section 37.006(b).
Hill responds only to the argument that Plaintiffs’ claims are not ripe.
Plaintiffs’ petition recites the following related to their declaratory judgment
action:
Plaintiffs bring this suit under provisions of Texas Civil
Practice & Remedies Code, Sec. 37.002 et seq., for Declaratory
Judgment finding that Ordinance No. 05-14-02 passed by the Board of
Aldermen of Tiki Island on May 20, 2014, be declared to be invalid
and unenforceable. Alternatively, Plaintiffs seek a finding that said
Ordinance is in violation of the Texas Constitution Art. 1 Sec. 17.
Plaintiffs seek relief under the Declaratory Judgment Act for an early
adjudication of their rights.
The act of the Board of Aldermen of Tiki Island, Texas, in
passage of Ordinance 05-14-02, amounts to the inverse condemnation
of Plaintiffs’ properties and should be found to be unenforceable and
to be stricken as it relates to the declaration that short-term/weekend-
end rentals are unlawful and strictly prohibited.
As relief, Plaintiff seek judgment that “Ordinance 05-14-02 be declared to
be unlawful, unenforceable, and be dissolved as to Plaintiffs, for declaration that
Plaintiffs’ properties have been wrongfully taken.”
“The Uniform Declaratory Judgments Act does not enlarge a court’s
jurisdiction; it is a procedural device for deciding cases already within a court’s
jurisdiction.” City of Paris v. Abbott, 360 S.W.3d 567, 577 (Tex. App.—
Texarkana 2011, pet. denied). The Village cites City of Anson v. Harper, 216
S.W.3d 384, 395 (Tex. App.—Eastland 2006, no pet.) in support of its argument
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that “because the declaratory relief merely recasts the relief sought by Plaintiffs
under their takings claim, . . . it is therefore not justiciable or ripe.”
We agree with Hill that City of Anson does not support the Village’s claim
that Hill’s request for declaratory relief is not ripe. In City of Anson, the court held
that both the plaintiffs’ takings claim and their claim for declaratory judgment
based on future, uncertain acts of the City were not ripe. 216 S.W.3d at 395 (“We
have previously held that plaintiffs’ takings claim was not ripe to the extent that it
relied upon the construction of a landfill because the City had not yet received a
TCEQ permit. For the same reason, plaintiffs’ declaratory judgment action is not
ripe to the extent it seeks an adjudication of the parties’ rights if a permit is granted
and if the City proceeds with its landfill plans.”) Here, Hill is not seeking a
declaration dependent on future actions; she seeks a declaration related to the
constitutionality of Ordinance 05-14-02 as applied to her. The Village has not
established that this claim is not ripe.
City of Anson does, however, support the Village’s argument that the trial
court lacks subject-matter jurisdiction over a declaratory-judgment action that
mirrors a takings claim, even when the takings claim is viable. Id. at 395. The
court in City of Anson held that the plaintiffs’ takings claim based upon actions
previously taken on the property were viable claims over which the trial court had
jurisdiction. Id. at 393. But the court held that the trial court lacked jurisdiction
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over plaintiffs’ declaratory judgment action based on the same previous acts by the
City because plaintiffs “merely restate[] their takings claim.” Id. at 395.
Here, there is no disagreement between the parties about the scope or
interpretation of Ordinance 05-14-02; the only dispute is over whether application
of the ordinance amounts to a takings. Because Hill’s Declaratory Judgment Act
claim merely restates her takings claim, we hold that the trial court lacks
jurisdiction over her request for declaratory judgment.
In sum, we overrule the Village’s first issue as to Hill’s takings claim and
sustain the Village’s first issue as to Hill’s declaratory judgment action.
TEMPORARY INJUNCTION
In its second issue, the Village contends that that “the trial court erred in
enjoining the enforcement of Ordinance No. 05-14-02 because the Plaintiffs failed
to allege or demonstrate an irreparable injury to a vested property right.”
The decision to grant or deny a temporary injunction lies in the sound
discretion of the trial court, and the court’s ruling is subject to reversal only for a
clear abuse of discretion. TMC Worldwide, L.P. v. Gray, 178 S.W.3d 29, 36
(Tex.App.—Houston [1st Dist.] 2005, no pet.). We do not substitute our judgment
for the trial court’s judgment unless the trial court’s action was so arbitrary that it
exceeded the bounds of reasonable discretion. Id. (citing Johnson v. Fourth Ct.
App., 700 S.W.2d 916, 918 (Tex.1985)). In reviewing an order granting or
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denying a temporary injunction, we draw all legitimate inferences from the
evidence in a manner most favorable to the trial court’s order. Id. (citing CRC–
Evans Pipeline Int’l v. Myers, 927 S.W.2d 259, 262 (Tex. App.—Houston [1st
Dist.] 1996, no writ)). Abuse of discretion does not exist if the trial court heard
conflicting evidence and evidence appears in the record that reasonably supports
the trial court’s decision. Id. (citing Davis v. Huey, 571 S.W.2d 859, 862 (Tex.
1978); Myers, 927 S.W.2d at 262).
A temporary injunction’s purpose is to preserve the status quo of the
litigation’s subject matter pending a trial on the merits. Id. at 36 (citing Walling v.
Metcalfe, 863 S.W.2d 56, 57 (Tex. 1993). To obtain a temporary injunction, the
applicant must plead and prove three specific elements: (1) a cause of action
against the defendant; (2) a probable right to the relief sought; and (3) a probable,
imminent, and irreparable injury in the interim. Id. (citing Butnaru v. Ford Motor
Co., 84 S.W.3d 198, 204 (Tex. 2002)).
The only specific challenge the Village lodges at the trial court’s temporary
injunction is that “to the extent that the Plaintiffs complain about Ordinance No.
05-14-02 making it a violation for a person to operate a short term rental residence
punishable up to $500, this court lacks jurisdiction to enjoin enforcement of the
Ordinance.” It does not dispute that the trial court has jurisdiction to determine if
application of the ordinance to Hill amounts to a takings, but argues that the trial
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court lacks jurisdiction to grant injunctive relief. Specifically, citing State v.
Morales, 869 S.W.2d 941 (Tex. 1994), it argues that a “court of equity does not
have jurisdiction to enjoin the enforcement of a penal ordinance or statute unless
(1) it is unconstitutional and (2) it threatens vested property rights with irreparable
injury.”
We agree with Hill that the facts of Morales, and the concerns expressed by
the majority of the supreme court in that case, were fundamentally different than
those presented here. Morales involved a challenge to a Penal Code provision
making sodomy a criminal offense in Texas. 869 S.W.2d at 942. The trial court
had declared the criminal statute to be unconstitutional and permanently enjoined
its enforcement. Id. The supreme court reversed and remanded to the trial court
with instructions to dismiss for lack of jurisdiction. Id.
The Morales court delineated the limits of the civil court’s jurisdiction over
penal statute as follows:
[A] civil court has jurisdiction to declare constitutionally invalid and
enjoin the enforcement of a criminal statute only when (1) there is
evidence that the statute at issue is unconstitutionally applied by a
rule, policy, or other noncriminal means subject to a civil court’s
equity powers and irreparable injury to property or personal rights is
threatened, or (2) the enforcement of an unconstitutional statute
threatens irreparable injury to property rights.
Id. Morales explained the two most critical failings in the trial court’s exercise of
jurisdiction over the plaintiffs’ challenge to the sodomy statute were that (1) the
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right allegedly impinged upon was a personal right, rather than a property right,
and (2) even the plaintiffs acknowledged that prosecution under the statute was
unlikely. Id. at 946–49. In contrast, this case involves a property right, and the
Village has already issued a citation to Hill.
The Village first argues that here there is “no pleading or demonstration of
unconstitutional conduct” because “the undisputed evidence shows that no plaintiff
can assert a viable taking claim because there is no total taking or unreasonable
interference with any Plaintiff’s reasonable investment backed expectations.” For
the same reasons that we rejected that argument in the sovereign-immunity
context, we hold that Hill’s pleadings and evidence sufficiency raise a
constitutional challenge to the application of Ordinance No. 05-14-02 to meet the
first requirement under Morales.
The Village next argues that “no Plaintiff has shown a vested property right
was threatened with irreparable harm.” In support, it cites City of University Park
v. Benners, 485 S.W.2d 773 (Tex. 1972), Hang On III, Inc. v. Gregg County, 893
S.W.2d 724 (Tex. App.—Texarkana 1995, writ dism’d by agr.), and City of La
Marque v. Braskey, 216 S.W.3d 861 (Tex. App.—Houston [1st Dist.] 2007, pet.
denied). Hill argues these cases are distinguishable. We examine each case in
turn.
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Benners did not address the question of whether a civil court of equity could
enjoin a criminal ordinance. It considered a commercial business owner’s takings
challenge to a zoning ordinance that reclassified its neighborhood from
commercial to residential. Benners, 485 S.W.2d at 775–76. The ordinance
contained a provision allowing existing businesses to continue their business for 25
years to allow recoupment of their investment. Id. at 775. The supreme court
rejected the plaintiff’s argument that she “held a vested right to use the lots for
commercial purposes which could not be constitutionally abridged by a
subsequently enacted zoning ordinance, regardless of the reasonableness of the
exercise of the police power and of the period allowed for recoupment of the
investment in the commercial improvement.” Id. at 776. The court reasoned that
there is “no difference in kind between terminating a land use which predates a
zoning change, with allowance for recoupment, and restricting future land uses not
presently utilized.” Id. at 779. It explained that the “former requires no more than
that the property owner be placed in the equivalent position of the later, i.e., that he
be afforded an opportunity to recover his investment in the structures theretofor
placed on the property.” Id.
In Hang On, the appellant—a restaurant featuring nude dancers—appealed
the denial of a temporary injunction to stay enforcement of a new ordinance
regulating sexually oriented businesses while it sought a declaration that it was not
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a sexually oriented business. 893 S.W.2d at 725–26. The ordinance required
permits for new and existing business, and allowed for continued operation while a
permit was sought and allowed existing businesses to apply for an extension to
operate if the owner demonstrated the need to recoup his investment. Id. at 726.
The court in Hang On cited Benners for the proposition that a property owner
“does not acquire a constitutionally protected right in a property use merely
because it began as a conforming use later rendered nonconforming.” Id. at 727
(citing Benners, 485 S.W.2d at 778)). But the court’s actual holding was that, by
arguing at the temporary injunction hearing only that it was not a sexually oriented
business, and not presenting evidence that the ordinance was unconstitutional or
that its enforcement would cause irreparable harm, the restaurant had not shown it
was entitled to a temporary injunction. Id. at 727.
In Braskey, this Court reversed a permanent injunction entered by a trial
court, following a jury verdict, in favor of a landowner operating a cat shelter,
Mamma Cat, who had been issued citations under a new Kennel Location
Ordinance for operating too close to other residences. 216 S.W.3d at 862. The
plaintiff sued for a declaration that the Kennel Location Ordinance did not apply to
her shelter and that, if it did, its enforcement amounted to an “ex post facto
application and constitutes unlawful taking of property in violation of the due
process cause [sic] of the U.S. Constitution.” Id. “The irreparable harm claimed
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by Braskey was that enforcement would cause her facility to close, the death of
cats housed at the Momma Cat, possible fines levied against her, her possible
confinement, and her expenditure of attorney’s fees.” Id.
In reversing the trial court’s permanent injunction for lack of jurisdiction, we
noted that these asserted harms “all concern the use of her property as a facility for
cats,” and we cited Benners for the proposition that “Braskey’s use of her property
as a facility for cats is not a constitutionally protected vested right because it
concerns only the way that her property is used, which is not an absolute right.”
Id. at 864. Finally, we explained that “the municipal court is the proper court to
hear Braskey’s challenges to the ordinance.” Id. (citing Morales, 869 S.W.2d at
945 (if the meaning and validity of a penal ordinance can be determined by a
criminal court and no vested property rights are in jeopardy, “[a] person may
continue his activities until he is arrested and then procure his release by showing
that the law is void”).
At first blush, this case appears most similar to Braskey. We conclude,
however, that Braskey is distinguishable on its facts.
Braskey and Hang On cite Benners for the proposition that “property owners
do not acquire a constitutionally protected vested right in property uses once
commenced or in zoning classifications once made.” Brenners, 485 S.W.2d at
779. Braskey further analyzes the meaning of “vested” in this context:
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The issue here is not whether Braskey had a property right in the
facility, but rather whether her use of the facility, as a cat shelter, was
a vested property right.
Property owners do not have a constitutionally protected vested right
to use real property in any certain way, without restriction. See City
of Univ. Park v. Benners, 485 S.W.2d 773, 778 (Tex. 1972) (holding
“that property owners do not acquire a constitutionally protected
vested right in property uses once commenced or in zoning
classifications once made”). . . . A right is “vested” when it “has some
definitive, rather than merely potential existence.” Tex. S. Univ. v.
State Street Bank and Trust Co., 212 S.W.3d 893, 903 (Tex. App.—
Houston [1st Dist.] 2007, no pet. h.); see also BLACK’S LAW
DICTIONARY 1595 (8th ed. 2004) (defining “vested” as “[h]aving
become a completed, consummated right for present or future
enjoyment; not contingent; unconditional; absolute”). Braskey’s use
of her property as a facility for cats is not a constitutionally protected
vested right because it concerns only the way that her property is
used, which is not an absolute right. See Benners, 485 S.W.2d at 778;
Weatherford, 157 S.W.3d at 483; Hang On, 893 S.W.2d at 726.
Braskey’s asserted harms—the closing of her facility, the death of cats
housed at the facility, possible fines levied against her for operating
the facility, her possible confinement for operating the facility, and
her expenditure of attorney’s fees to pursue continued operation of the
facility—all concern the use of her property as a facility for cats,
which is not a constitutionally protected vested right. See Benners,
485 S.W.2d at 778; Weatherford, 157 S.W.3d at 483; Hang On, 893
S.W.2d at 726.
Braskey, 216 S.W.3d at 863‒64.
Although Benners does hold that a property owner does not have a vested
right in a particular use of their property, implicit in its analysis is the recognition
of a narrow vested—i.e., complete, noncontingent—right when a new law restricts
an existing commercial use of a property. 485 S.W.2d at 778. Benners held that
zoning regulations prohibiting existing commercial uses “under reasonable
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conditions” are within the scope of municipal police power. Id. It deemed an
ordinance’s permitting existing businesses to recoup their investment to be a
reasonable, and legally equivalent, alternative to allowing unfettered continuation
of the existing business use. Id. at 777‒78. The court then concluded that, given
the property owner’s evidence and the 25 year recoupment period afforded by the
ordinance, “[i]t is evident that the owners of the property were given sufficient
time in which to terminate the commercial uses and to recoup any loss in property
value occasioned by the reclassification of the lots from commercial use to
residential use.” Id. at 779.
The ordinance at issue in Hang On remained faithful to these principals by
allowing continuation of preexisting sexually oriented businesses while the owner
seeks newly required permits, and it allowed extensions to be granted if the
property owner shows a need to recoup business investment. 893 S.W.2d at 725–
26. When Ordinance 05-14-02 was passed in 2014, it likewise avoided running
afoul of certain property owner’s vested rights by grandfathering their 2011
existing use of their homes for short-term rentals. In contrast, Braskey’s use of her
property as a cat shelter did not implicate these principles at all, as she complained
of regulation preventing use of her property to house cats, not investment losses or
loss in the value of her property. Braskey, 216 S.W.3d at 864–65.
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Hill has been renting her Tiki Island home short-term since 2007. She
bought it as an investment for the purpose of rentals, and made substantial
improvements to the property. Tiki Island’s 2014 ordinance banning short-term
rentals grandfathered certain identified properties that were already engaged in
short-term rentals as of 2011. It is not evident from the record why Hill’s use of
her home for short-term rentals was not grandfathered, as she was engaged in
short-term rentals before the 2011 grandfathering cut-off. The Village’s excluding
Hill from this grandfathered status, however, foreclosed Hill’s existing investment
use of her property without an avenue for recoupment. We thus hold that she has
identified a vested right for purposes of conferring the trial court with jurisdiction
to enter a temporary injunction in her favor.
Hill alleged, and introduced evidence of, unique concrete imminent harm to
her investment and business activities that cannot be redressed on direct appeal
from a criminal prosecution, such as potential breach-of-contract liability to short-
term renters she has contracts with for future dates. We thus hold that the trial
court had jurisdiction over Hill’s request for injunctive relief.
CONCLUSION
We hold that we lack jurisdiction over the Village’s challenge to the trial
court’s temporary injunction order in favor of the Ronquille and Changs. We also
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hold that the trial court lacked jurisdiction over Hill’s declaratory judgment action.
We otherwise affirm the trial court’s temporary injunction in Hill’s favor.
Sherry Radack
Chief Justice
Panel consists of Chief Justice Radack and Justices Brown and Lloyd.
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