Maguire Oil Company v. City of Houston

In The

Court of Appeals

Sixth Appellate District of Texas at Texarkana

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No. 06-01-00061-CV

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MAGUIRE OIL COMPANY, ET AL., Appellants

V.

CITY OF HOUSTON, Appellee

On Appeal from the 55th Judicial District Court

Harris County, Texas

Trial Court No. 93-55813

Before Cornelius, C.J., Grant and Ross, JJ.

Opinion by Justice Ross

O P I N I O N

Maguire Oil Company (1) (Maguire) appeals the summary judgment granted in favor

of the City of Houston. Maguire sued the City alleging damages when the City revoked a

permit authorizing Maguire to drill a gas well near Lake Houston, a freshwater reservoir and

the City's main source of drinking water.

In its petition, Maguire claimed it applied for and received a permit from the City on

May 7, 1991. The City ratified and modified the permit on May 22, 1991, and extended the

permit on August 5,1991. The location of the well was on the shore of Lake Houston,

approximately 300 feet from the lake.

Maguire claimed it began preparing the land for drilling, signed a drilling contract,

purchased nearby leases for the purpose of offset drilling, and began moving equipment

onto the drilling site. On October 31, 1991, the City issued a stop work order. In a

separate letter sent to Maguire's attorney, the City acknowledged the permit "appear[ed]

to have been issued in error" and revoked it, effective immediately. The letter referenced

Houston Code of Ordinances Sections 23-101 and 23-102, which at the time prohibited

drilling a well within the City's extraterritorial jurisdiction (ETJ) (2) and 1,000 feet of the normal

water's edge of Lake Houston.

Maguire sought a judgment declaring the permit valid. It also sought a declaration

that Section 23-102 is unreasonable in that it makes no provision for special circumstances

and it discriminates against oil and gas wells by allowing other types of wells to be drilled

within the 1,000-foot limit. (3) Maguire sought a further declaration that the City engaged in

selective enforcement of Section 23-102 by allowing other oil and gas wells to be drilled

within the 1,000-foot limit.

Further, Maguire alleged the City's actions amounted to inverse condemnation of

its mineral interests in violation of the Due Process Clauses of the Fifth and Fourteenth

Amendments to the United States Constitution and the Due Course of Law provision of the

Texas Constitution. Maguire contended it was entitled to recover the value of the minerals

in place.

As an alternative to its inverse condemnation claim, Maguire alleged it was entitled

to reliance damages it incurred under either a negligent misrepresentation theory, if the

permit was invalid, or under a promissory estoppel theory, if the permit was valid. Maguire

further alleged the City was estopped from denying the validity of the permit.

The parties each filed motions for summary judgment. In its motion, the City

contended Maguire's inverse condemnation claim was barred by the statute of limitations.

It also contended Maguire's reliance on the permit was unreasonable, and thus Maguire

could not prevail on its estoppel theory. In its motion for partial summary judgment,

Maguire contended it should prevail on its inverse condemnation claim as a matter of law.

The trial court overruled both motions.

The City later filed a motion to exclude the testimony of one of Maguire's expert

witnesses. The trial court granted the City's motion. The City then filed another motion for

summary judgment and a motion to have the trial court reconsider its previous motion for

summary judgment.

In its second motion for summary judgment, the City contended there was no

evidence Maguire suffered economic loss as a result of the City's action and no evidence

the City engaged in selective enforcement of Section 23-102. Further, the City

contended Section 23-102 was rationally related to a legitimate public purpose and

therefore did not discriminate against Maguire. The City also alleged Maguire's negligent

misrepresentation, promissory estoppel, and estoppel claims were barred by sovereign

immunity. After a hearing, the trial court granted the City's motions.

Maguire contends the trial court erred in granting summary judgment because (1)

Maguire presented evidence of damages to support its inverse condemnation claim; (2)

Maguire's inverse condemnation claim was not barred by a statute of limitations; (3)

sovereign immunity did not bar Maguire's promissory estoppel and negligent

misrepresentation claims because fact issues existed under a well-settled exception to

sovereign immunity; and (4) Maguire presented evidence to support its selective

enforcement claim.

The City moved for summary judgment under Tex. R. Civ. P. 166a(b). To prevail

on such a motion, the movant must establish that there is no genuine issue of material fact

and that the movant is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c).

Summary judgment for a defendant is proper when the defendant negates at least one

element of each of the plaintiff's theories of recovery, or pleads and conclusively

establishes each element of an affirmative defense. Sci. Spectrum, Inc. v. Martinez , 941

S.W.2d 910, 911 (Tex. 1997). When reviewing a summary judgment, we take as true all

evidence favorable to the nonmovant. Rhone-Poulenc, Inc. v. Steel , 997 S.W.2d 217, 223

(Tex. 1999). We indulge every reasonable inference and resolve any doubt in the

nonmovant's favor. Id. On appeal, the movant still bears the burden of showing that there

is no genuine issue of material fact and that the movant is entitled to judgment as a matter

of law. Id.

Because the City moved for summary judgment in part on the ground the statute of

limitations had run, it must have (1) conclusively proved when the cause of action accrued,

and (2) negated the discovery rule, if it applies and was pleaded or otherwise raised, by

proving as a matter of law there is no genuine issue of material fact about when Maguire

discovered, or in the exercise of reasonable diligence should have discovered, its cause

of action. See KPMG Peat Marwick v. Harrison County Hous. Fin. Corp. , 988 S.W.2d 746,

748 (Tex. 1999). If the City established the action was barred by the statute of limitations,

Maguire must then have adduced summary judgment proof raising a fact issue in

avoidance of the statute of limitations. See id.

The City also moved for a no-evidence summary judgment under Tex. R. Civ. P.

166a(i). When a party moves for a no-evidence summary judgment, that party does not

bear the burden of establishing each element of its own claim or defense, as under Rule

166(a) or (b). Garrett v. L.P. McCuistion Cmty. Hosp. , 30 S.W.3d 653, 655 (Tex.

App.-Texarkana 2000, no pet.). Rather, although the nonmoving party is not required to

marshal its proof, that party must present evidence that raises a genuine fact issue on the

challenged elements of the claims on which the nonmovant would have the burden of proof

at trial. Id.

Because a no-evidence summary judgment is essentially a pretrial directed verdict,

we apply the same legal sufficiency standard as we apply in reviewing a directed verdict.

Id. We consider all the evidence in the light most favorable to the nonmovant, disregarding

all contrary evidence and inferences. Id. A no-evidence summary judgment is improperly

granted if the nonmovant presents more than a scintilla of probative evidence to raise a

genuine issue of material fact. Id. More than a scintilla of evidence exists when the

evidence rises to a level that would enable reasonable and fair-minded people to differ in

their conclusions. Id.

Inverse Condemnation Claim

The Fifth Amendment to the United States Constitution provides private property

shall not be taken for public use without just compensation. U.S. Const. amend. V. The

provision is applicable to the states under the Due Process Clause of the Fourteenth

Amendment. U.S. Const. amend. XIV. The Texas Constitution also contains a "takings

clause," which provides in part "[n]o person's property shall be taken, damaged or

destroyed for or applied to public use without adequate compensation being made, unless

by the consent of such person, . . . ." Tex. Const. art. 1, § 17.

If the government appropriates property without paying adequate compensation, the

owner may recover the resulting damages in an inverse condemnation suit. Westgate, Ltd.

v. State , 843 S.W.2d 448, 452 (Tex. 1992). An inverse condemnation may occur when the

government physically appropriates or invades the property, or when it unreasonably

interferes with the landowner's right to use and enjoy the property, such as by restricting

access or denying a permit for development. Id. To maintain a cause of action for inverse

condemnation, the plaintiff must prove (1) an intentional governmental act, (2) resulting in

the taking, damaging, or destruction of the plaintiff's property, (3) for public use. Gen.

Servs. Comm'n v. Little-Tex Insulation Co. , 39 S.W.3d 591, 598 (Tex. 2001).

Statute of Limitations

In its first motion for summary judgment, the City contended the statute of limitations

barred Maguire's inverse condemnation claim. The City's theory is that Section 23-102

was enacted in 1967; therefore, Maguire had to file any inverse condemnation cause of

action within ten years of that date. (4) It cites Trail Enters., Inc. v. City of Houston , 957

S.W.2d 625, 628 (Tex. App.-Houston [14th Dist.] 1997, pet. denied), in which the appellant

asserted an inverse condemnation cause of action after it sought to drill on land within

1,000 feet of Lake Houston. The court of appeals held the cause of action accrued in

1967, the date the ordinance was enacted and, therefore, the date the City first interfered

with the appellant's right to use the property. Id. at 631 . The court further held suit had to

be filed within ten years of the date the ordinance was passed. Id. at 631, 633 .

Maguire contends the statute of limitations does not bar its action because Sections

23-101 and 23-102 do not apply. Maguire contends that, at the time the City revoked the

permit, Sections 23-101 and 23-102 prohibited drilling on land in the City's ETJ and 1,000

feet from Lake Houston. The parties do not dispute Maguire's lease is within the Houston

city limits and not in the City's ETJ.

The summary judgment proof shows the 1967 ordinance prohibited any oil, gas,

liquid hydrocarbon, or any other mineral well from being drilled within "the control area of

Lake Houston which is nearer than 1000 feet from the normal water level of Lake Houston

. . . ." "Control area" was defined in a 1965 ordinance as, "The land around the Lake within

an area five (5) miles in width measured from the Normal Water's Edge of, and within the

watershed of, Lake Houston." A 1977 ordinance redefined the control area as, "That land

contained in the extraterritorial jurisdiction of the City of Houston, Texas, which contains

waters that flow into or adjacent to the watershed of Lake Houston."

When construing statutes, our ultimate purpose is to discover the Legislature's

intent. Meritor Auto., Inc. v. Ruan Leasing Co. , 44 S.W.3d 86, 89 (Tex. 2001). In

determining that intent, the Legislature has instructed we may consider, among other

things, the object sought to be obtained, the circumstances under which the statute was

enacted, the legislative history, and the consequences of a particular construction. Id. ; see

also Tex. Gov't Code Ann. § 311.023 (Vernon 1998). We begin, however, with the words

the Legislature used. Meritor Auto., Inc. , 44 S.W.3d at 89 . "If the meaning of the statutory

language is unambiguous, we adopt, with few exceptions, the interpretation supported by

the plain meaning of the provision's words and terms." Id. , quoting Fitzgerald v. Advanced

Spine Fixation Sys., Inc. , 996 S.W.2d 864, 865 (Tex. 1999). These rules apply to the

construction of city ordinances. Mills v. Brown , 159 Tex. 110 , 316 S.W.2d 720, 723 (1958);

Rosenblatt v. City of Houston , 31 S.W.3d 399, 403 (Tex. App.-Corpus Christi 2000, pet.

denied), cert. denied , ___ U.S. ___, 121 S.Ct. 2218 , 150 L.Ed.2d 211 (2001).

Standing alone, the language of the ordinance does not support the City's position.

The 1977 amendment redefined the control area to include only "[t]hat land contained in

the extraterritorial jurisdiction of the City of Houston, Texas, which contains waters that flow

into or adjacent to the watershed of Lake Houston." Maguire's lease is within the city limits

and not in the City's ETJ. Consequently, the ordinance's literal language would not apply

to Maguire's lease.

The City contends, "If an ordinance is susceptible to two constructions, one being

valid and the other being invalid, the courts will adopt the construction rendering [the]

ordinance valid," quoting Moore v. Cox , 215 S.W.2d 666, 668 (Tex. Civ. App.-Fort Worth

1948, no writ), and citing In re Bay Area Citizens Against Lawsuit Abuse , 982 S.W.2d 371,

380 (Tex. 1998), and Proctor v. Andrews , 972 S.W.2d 729, 735 (Tex. 1998). The City

contends that, if we follow Maguire's interpretation, then landowners in the City's ETJ would

be prohibited from drilling, but adjoining landowners within the city limits would be permitted

to drill. Therefore, similarly situated landowners would be treated differently, making the

ordinance void.

The City's argument presumes the City had no rational basis to draw that distinction.

If the City had a rational basis to treat similarly situated landowners differently, a question

we do not address here, then the ordinance would not be void. As Maguire observes, the

City does not have standing to contend one of its own ordinances creates a violation of the

due process or equal protection clauses. Proctor , 972 S.W.2d at 734 .

The City also contends that the ordinance's obvious purpose was to protect Lake

Houston and that any other interpretation would frustrate that purpose. However, it is

conceivable the city council determined it could protect Lake Houston and still allow drilling

within the city limits, but not in the City's ETJ. Our conclusion is bolstered by the fact that,

under the 1977 amendment, not all drilling is prohibited in the City's ETJ, only drilling on

land "which contains waters that flow into or adjacent to the watershed of Lake Houston."

Presumably, then, drilling could occur on land that is within 1,000 feet of Lake Houston if

the land did not contain "waters that flow into or adjacent to the watershed of Lake

Houston."

Further, the City's position is at variance with its position in Trail Enterprises . There

the appellant raised an equal protection challenge on the ground that "the Ordinance

requires a small group of mineral interest owners with interests in the control area, which

is in the City's ETJ, to pay the cost of protecting the City's water supply," and that "mineral

owners within the city limits are free to drill within 1000 feet of the lake and its drains

(including man-made), streams, or tributaries regardless of the proximity of the wells to

Lake Houston." Trail Enters., Inc. , 957 S.W.2d at 634 . The City responded that "the

Ordinance applies equally to all mineral interest owners whose interests are within the

City's ETJ in the Lake Houston control area." Id.

In addition, the City's position is at variance with subsequent actions of the Houston

city council. Maguire presented summary judgment proof showing that, in 1997, the City

again amended the definition of "control area" to include "[t]hat land either in the city, or

in the extraterritorial jurisdiction of the city, . . . ." The resolution by which the ordinance

was passed recites in part:

WHEREAS , as a result of recent annexations, a significant portion of

the protected area around Lake Houston formerly in the City's extraterritorial

jurisdiction is now within the City, and it is therefore necessary to amend the

Code of Ordinances to include land within the City in the control area, . . . .

Finally, the City contends we should give great weight to its construction, as it is

charged with administering and enforcing the ordinance. The City presented the affidavit

of Richard Alexander, a senior inspector for water production for the City and the city

official responsible for enforcing city ordinances in and around Lake Houston. He states

he has always interpreted the prohibition against drilling within 1,000 feet of Lake Houston

as being applicable to land inside the city limits as well as land in its ETJ. In addition, the

City presented the affidavit of Milton Belveal, the City's senior inspector for planning and

development. He states that, other than the permit issued to Maguire, the City has not

issued a drilling permit for an oil, gas, or mineral well located within 1,000 feet of Lake

Houston since 1967.

Construction of a statute by an administrative agency charged with its enforcement

is entitled to serious consideration, so long as the construction is reasonable and does not

contradict the plain language of the statute. Tarrant Appraisal Dist. v. Moore , 845 S.W.2d

820, 823 (Tex. 1993). Here, however, the plain language of the ordinance prohibits drilling

only in the City's ETJ. Therefore, we will give no weight to the City's construction of the

ordinance.

We conclude summary judgment was inappropriate on Maguire's inverse

condemnation cause of action under the theory the statute of limitations had run. We need

not consider Maguire's additional argument the statute of limitations could not have run

because its inverse condemnation cause of action did not accrue until (1) it exhausted all

reasonable alternative means of production of the minerals, or (2) it discovered the only

means available to access the minerals was to drill a well 300 feet from the edge of Lake

Houston.

Economic Loss

In its second motion for summary judgment, the City contended there was no

evidence Maguire suffered economic loss or damage as a result of the inverse

condemnation. At the heart of the City's contention was its motion to exclude the testimony

of Wayman Gore, one of Maguire's expert witnesses, which the trial court granted, and its

objection to the affidavit of Cary Maguire, which the trial court implicitly sustained when it

granted the City's motion for summary judgment.

Utilizing geological reports and sample data, Gore estimated there is 47,304,000

mcf of gas present and recoverable under the Maguire lease and the potential value of this

gas is at least $33,586,000.00. He calculated the value of the gas using transactional

values, i.e., what companies pay to purchase proven reserves that are still "in the ground."

Gore used a transactional value of $0.71 mcf, which an independent service reported was

the median value for the fourth quarter of 1991, the period when the City revoked

Maguire's permit.

Gore also calculated the value of the gas using a discounted cash flow analysis.

This analysis assumed production over time beginning in late 1991. The quantity of gas

assumed produced in each period was multiplied by the price reported in that period and

reduced by the costs associated with drilling. The cash flow in each period was then

discounted to account for the time value of money. Gore concluded the value of these

cash flows discounted to the fourth quarter of 1991 was $42,377,000.00.

Gore admitted he had no opinion concerning the price a willing buyer would pay a

willing seller for the gas. In fact, he expressed doubt that a willing buyer would pay

$33,586,000.00 for the mineral prospect. Rather, he characterized his calculation as the

fair market value to Maguire of drilling the well, producing the gas, and selling it.

In his affidavit, Cary Maguire stated that, in his opinion, the fair market value of

Maguire's mineral interest was at least $36,000,000.00. He based his opinion on his over

forty-seven years' experience as an independent oil and gas producer and on his position

as a working interest owner. He also based his opinion on Gore's calculations and

methodologies.

When a government condemns real property, the normal measure of damages is

the land's market value. City of Harlingen v. Estate of Sharboneau , 48 S.W.3d 177, 182

(Tex. 2001). Market value is the price the property will bring when offered for sale by one

who desires to sell, but is not obliged to sell, and bought by one who desires to buy, but

is under no necessity of buying. Id.

The City sought to exclude Gore's testimony on the ground he used a faulty

methodology to calculate economic loss resulting from the taking. The City contends

Gore's opinion was irrelevant because it was not based on an estimate of the market value

of what was taken, i.e., the right to drill for gas, and speculative because it presumes

minerals are present under the Maguire lease and can be recovered. Because Cary

Maguire based his opinion, in part, on Gore's methodologies and calculations, the City

contended his opinion evidence suffered from the same deficiencies as Gore's.

Maguire contends that the appropriate measure of damages is the value of the

minerals in place and that it could properly introduce expert testimony to establish the

value. Maguire relies on several cases to support its theory. In State v. Angerman , 664

S.W.2d 794, 796 (Tex. App.-Waco 1984, writ ref'd n.r.e.), the court of appeals held it was

not error to allow an expert to testify about the amount of gravel on the land and the value

of that gravel as a basis for his opinion of the market value of the land. In Coastal Indus.

Water Auth. v. Trinity Portland Cement Div. , 523 S.W.2d 462, 468 (Tex. Civ. App.-Houston

[1st Dist.] 1975, writ ref'd n.r.e.), the court of appeals held that, as a means of determining

the value of condemned land, an expert could testify as to the amount of clay in place and

the market value per unit, and calculate the total value of the clay in place by multiplying

the quantity by the price. In Brazos River Auth. v. Gilliam , 429 S.W.2d 949, 952-53 (Tex.

Civ. App.-Fort Worth 1968, writ ref'd n.r.e.), the expert determined the value of the sand

and gravel using data from three sales of gravel in place on other nearby tracts and used

"a mathematical formula" to determine the value of the sand and gravel in place. In Brazos

River Conservation & Reclamation Dist. v. Costello , 169 S.W.2d 977, 988 (Tex. Civ.

App.-Eastland 1943, writ ref'd w.o.m.), the court of appeals held an expert could testify

about the value of oil reserves under condemned property.

These cases are arguably distinguishable, either because the court was only

concerned with the value of the minerals as an aid to determining the value of the land

( Angerman , Coastal Industries , and Gilliam ), because the minerals at issue involved less

uncertainty in their extraction than oil and gas ( Angerman , Coastal Industries , and Gilliam ),

and/or because the oil and gas condemned was from producing fields ( Costello ). (5)

However, in Lomax v. Henderson , 559 S.W.2d 466, 466 (Tex. Civ. App.-Waco

1977, writ ref'd n.r.e.), the Brazos River Authority condemned 200 acres, of which the

appellees owned the surface and an undivided mineral interest and the appellants owned

an undivided one-fourth mineral interest in sixty-four acres. The Authority's statement of

condemnation expressly reserved the mineral interests to the defendants, but stipulated

"no operations for the recovery of any such oil, gas, and other minerals shall be conducted

on the surface of said premises." Id. Yet there was no indication production of oil, gas,

or other minerals was ongoing at the time the land was condemned. See id. at 467-68 .

After the trial court rendered judgment, the appellees sought to withdraw the

damage award from the court registry, asserting they were entitled to the full amount of

damages because they owned the surface and the mineral interests were not condemned.

Id. at 467 . The appellants intervened, contending their mineral interests were rendered

valueless by the restrictions on surface use. Id.

The court of appeals wrote, "Without question, appellants' right of use of the surface

of the land in question was taken from them. The proper measure of this loss, and the one

sought to be shown by appellants on the trial, was the diminution of value of their mineral

estate by the taking." Id. (emphasis added). Though there is language in the court's

opinion suggesting the testimony centered around the value of the minerals in the ground,

the overall thrust of the majority opinion and the dissenting opinion makes clear that the

issue was the value of the mineral estate as a whole. See id. at 470 (James, J.,

dissenting) ("Appellants' second . . . point of error asserts the trial court erred in finding that

Appellants' mineral rights had no market value, and that such finding is so against the great

weight and preponderance of the evidence as to be manifestly unjust. I would sustain this

contention.").

The Texas Supreme Court has acknowledged the primacy of comparable sales

evidence to determine the market value of property taken. Estate of Sharboneau , 48

S.W.3d at 182 . However, the court also acknowledged that, when comparable sales

figures are lacking or the method is otherwise inadequate as a measure of fair market

value, other methods of determining market value can be applied. Id. at 183 . Whatever

method an expert uses, however, "the goal of the inquiry is always to find the fair market

value of the condemned property. An appraisal method is only valid if it produces an

amount that a willing buyer would actually pay to a willing seller." Id.

Federal courts have accepted evidence of comparable sales of mineral interests to

establish the value of a mineral interest taken. See Cal-Bay Corp. v. United States , 169

F.2d 15, 24 (9th Cir. 1948); see also St. Genevieve Gas Co. v. Tennessee Valley Auth. ,

747 F.2d 1411 , 1414 (11th Cir. 1984) (trial court's finding other mineral leases were not

comparable to mineral leases at issue was not clearly erroneous); United States v. 179.26

Acres of Land , 644 F.2d 367, 371 (10th Cir. 1981) ("The best evidence of market value of

real property in condemnation is, of course, found in sales of comparable land within a

reasonable time before the taking."). Where evidence of comparable sales of mineral

interests does not exist, however, federal courts have approved other valuation methods

to determine the economic loss resulting from a taking. See 179.26 Acres of Land , 644

F.2d at 372 . One federal court approved the use of a method very similar to the one Gore

applied in the present case. United States v. 2,847.58 Acres of Land , 529 F.2d 682, 685

(6th Cir. 1976) ("The witness Nosow emphasized the fact that he was not giving the value

of the oil if it were produced and brought to the surface, but was testifying to what a willing

buyer would pay and a willing seller would take for these mineral reserves in place.").

Other federal courts have used an income capitalization approach, which measures the

present value of the income the estimated recoverable minerals could generate in a proven

market, reduced by the cost to recover the minerals and an appropriate risk factor. See

United States v. 2,560.00 Acres of Land , 836 F.2d 498 , 503-04 (10th Cir. 1988); United

States v. 103.38 Acres of Land , 660 F.2d 208, 212 (6th Cir. 1981); United States v.

Whitehurst , 337 F.2d 765, 776 (4th Cir. 1964).

From this standpoint, Gore's affidavit provided some evidence of market value. The

City makes much of excerpts from Gore's deposition and his affidavits where he states he

calculated the fair market value of the gas "to Maguire." However, Gore calculated the

value of the gas by using transactional values reported for the fourth quarter of 1991. He

explained that these transactional values are what companies pay to purchase reserves

still "in the ground." In short, his method measures comparable sales of "proven" reserves.

The City contends the reserves beneath Maguire's lease are not "proven" and

therefore Gore's affidavit was speculative because it was based on the assumption there

was gas present and recoverable. The City maintains sales of comparable mineral

interests would provide better evidence of market value.

However, Maguire presented sufficient summary judgment proof to raise a fact

question regarding the existence and recoverability of gas on its lease. We agree evidence

of comparable sales of mineral interests would provide a superior measure of market

value, given that the existence of recoverable gas under Maguire's lease is as yet

unproven. Nevertheless, Maguire's summary judgment proof is not deficient merely

because it failed to provide such evidence. If competent comparable sales evidence

exists, the parties will have the opportunity to present it at trial and the court must admit it

to the exclusion of any other valuation evidence. In the absence of such evidence, Gore's

affidavit provides summary judgment proof of market value. In addition, even if Gore's

method of measuring the value of the minerals in place did not provide an adequate

measure of market value, his use of a discounted cash flow analysis provided some proof

of market value in the absence of comparable sales evidence. See Estate of Sharboneau ,

48 S.W.3d at 183 (approving use of income capitalization method).

Therefore, summary judgment was inappropriate on Maguire's inverse

condemnation claim. We need not address Maguire's contention that Cary Maguire's

affidavit also presents competent evidence of economic loss.

Negligent Misrepresentation and Promissory Estoppel Claims

As an alternative to its inverse condemnation claim, Maguire alleged it was entitled

to reliance damages it incurred under either a negligent misrepresentation theory, if the

permit was invalid, or under a promissory estoppel theory, if the permit was valid. While

denying Maguire's negligent misrepresentation and promissory estoppel claims, the City

moved for summary judgment under the doctrine of sovereign immunity.

A city is immune from liability for its governmental actions unless that immunity is

waived. City of LaPorte v. Barfield , 898 S.W.2d 288, 291 (Tex. 1995). Operation of a

reservoir has been classified a governmental function for which a municipality is immune

from suit except where immunity has been waived under the Texas Tort Claims Act. Tex.

Civ. Prac. & Rem. Code Ann. § 101.0215 (a)(19) (Vernon Supp. 2002); see also Tex. Civ.

Prac. & Rem. Code Ann. § 101.021 (Vernon 1997). Also, the issuance and denial of

permits has been held to be a governmental function. See Trevino & Gonzalez Co. v. R. F.

Muller Co. , 949 S.W.2d 39, 42 (Tex. App.-San Antonio 1997, no writ); Kirschke v. City of

Houston , 330 S.W.2d 629, 633 (Tex. Civ. App.-Houston 1959, writ ref'd n.r.e.)

(development permit), overruled on other grounds , City of Austin v. Teague , 570 S.W.2d

389, 393 (Tex. 1978).

Maguire contends the City is estopped from invoking sovereign immunity. The

general rule is that, when a municipality or other unit of government is exercising its

governmental powers, it is not subject to estoppel. City of Hutchins v. Prasifka , 450

S.W.2d 829, 835 (Tex. 1970). However, a municipality may be estopped in those cases

where justice requires the application of estoppel and there is no interference with the

exercise of its governmental functions. Id. at 836 , citing City of Dallas v. Rosenthal , 239

S.W.2d 636 (Tex. Civ. App.-Dallas 1951, writ ref'd n.r.e.). This exception is to be applied

with caution and only in exceptional cases where the circumstances clearly demand its

application. Id.

In Rosenthal , the city ordered the appellee to stop using his property as a meat

storage facility in violation of city zoning ordinances, even though the city had issued two

permits in a year and a half, visited the appellee's property multiple times, and the appellee

had expended substantial funds. See Rosenthal v. City of Dallas , 211 S.W.2d 279, 282,

291-92 (Tex. Civ. App.-Dallas 1948, writ ref'd n.r.e.) (hereinafter, Rosenthal I ). Initially, the

court of appeals affirmed the trial court's judgment in favor of the city, but on rehearing

reversed the judgment and sent the case back for a new trial. (6) Id. at 288, 294-95 . At the

end of the second trial, the trial court enjoined the city from enforcing the zoning ordinance.

City of Dallas v. Rosenthal , 239 S.W.2d at 637 (hereinafter, Rosenthal II ). In affirming the

trial court's judgment, the court of appeals held, "In exceptional cases (and surely this is

one), a municipality, even in exercise of a governmental function, may be subjected to the

same rules of equitable estoppel as are individuals where right and justice require it." Id.

at 645 .

The Rosenthal cases are part of a line of cases applying or, in most cases, refusing

to apply estoppel in the context of permitting and zoning actions. See John M. Black &

Josiah M. Daniel, III, The Texas Rule of Estoppel in Zoning Cases , 33 Baylor L. Rev. 241 ,

247 (1981); David Hartman, Comment, Risky Business: Vested Real Property

Development Rights - The Texas Experience and Proposals for the Texas Legislature to

Improve Certainty in the Law , 30 Tex. Tech. L. Rev. 297, 309 (1999). For instance, in City

of Amarillo v. Stapf , 129 Tex. 81 , 101 S.W.2d 229, 232 (1937), and Davis v. City of

Abilene , 250 S.W.2d 685, 688 (Tex. Civ. App.-Eastland 1952, writ ref'd), the courts held

the unauthorized acts of city officials in wrongfully issuing permits to landowners could not

estop the cities from enforcing their zoning ordinances. See also Black & Daniel, supra ,

at 244 n.12 (and cases cited therein).

In Rosenthal , by contrast, the court held the building inspector was lawfully charged

with determining whether the meat storage facility qualified as a permissible nonconforming

use. Rosenthal II , 239 S.W.2d at 643 ; Rosenthal I , 211 S.W.2d at 291 . The city did not

appeal the building inspector's determination in favor of the landowner; therefore, city

officials acted on appropriate authority in issuing the permit and the city was estopped from

repudiating it. Rosenthal II , 239 S.W.2d at 645 ; Rosenthal I , 211 S.W.2d at 291 .

The City contends Rosenthal is not a common-law exception to sovereign immunity

because Rosenthal did not involve sovereign immunity. Rather, the landowner used

estoppel as a defense to the city's action in enforcement of its zoning ordinance. Further,

the City contends Rosenthal 's holding would apply only if the City was seeking equitable

relief, citing Marriott v. City of Dallas , 635 S.W.2d 561, 564 (Tex. App.-Dallas 1982), aff'd ,

644 S.W.2d 469 (Tex. 1983). In Marriott , the court viewed Rosenthal as being "squarely

bottom[ed] . . . upon the premise that the city, seeking equity, must show it had done

equity." Id.

The City's contention ignores the fact that, when faced with the City's stop work

order, Maguire stopped working, thereby obviating the City's need to seek equitable relief.

Though the Rosenthal court was clearly concerned with balancing the equities between the

parties, in part because the city sought injunctive relief, the court's broader holding was that

a city may be equitably estopped in exceptional cases where justice requires it.

Rosenthal I , 239 S.W.2d at 645 . We see no reason for applying this rule only when the

city is seeking equitable relief.

Further, while Rosenthal did not technically involve an assertion of sovereign

immunity, it did involve the principle that, when a city is exercising its governmental powers,

it is not subject to estoppel. See Prasifka , 450 S.W.2d at 835 . This principle is similar, if

not identical, to the principle underlying sovereign immunity. See City of San Angelo v.

Deutsch , 126 Tex. 532 , 91 S.W.2d 308, 310 (1936) ("The cases in which questions of

[immunity from] liability are presented are the same in their general nature and in the

reasons underlying their decision as are those in which estoppel is invoked."); Dillard v.

Austin Indep. Sch. Dist. , 806 S.W.2d 589, 594 (Tex. App.-Austin 1991, writ denied) (calling

bar against invoking estoppel on city acting in its governmental capacity a corollary to

sovereign immunity); see also Black & Daniel, supra , at 243 (stating because sovereign

immunity tends to insulate city from negligent acts associated with zoning, Texas courts

are reluctant to uphold estoppel against city's enforcement of zoning ordinances).

The caselaw suggests that in order to apply estoppel the trial court must determine

the following:

(1) whether the landowner is relying on an authorized act of a city official or

employee, see Stapf , 101 S.W.2d at 232 ; Deutsch , 91 S.W.2d at 310 ; Krause v.

City of El Paso , 101 Tex. 211 , 106 S.W. 121, 123 (1907) (holding landowner entitled

to rely on permit from mayor and survey of city engineer, both of which city

ordinance required her to obtain before building); Rosenthal II , 239 S.W.2d at 643

(holding building inspector's decision was one he was empowered to make);

Rosenthal I , 211 S.W.2d at 291 (same); see also Black & Daniel, supra , at 241;

(2) whether this is the kind of case in which justice requires the application of

estoppel, see Prasifka , 450 S.W.2d at 836 ; Arrington v. County of Dallas , 792

S.W.2d 468, 472 (Tex. App.-Dallas 1990, writ denied) (upholding summary

judgment because circumstances not "so grave as to constitute manifest injustice");

and

(3) whether the application of estoppel would interfere with the exercise of the

city's governmental functions, see Prasifka , 450 S.W.2d at 836 .

Further, relevant authorities suggest a party seeking to invoke estoppel against a

city must demonstrate he or she qualifies under each element of equitable estoppel. See

City of Lufkin v. McVicker , 510 S.W.2d 141, 145 (Tex. Civ. App.-Beaumont 1973, writ ref'd

n.r.e.); see also Black & Daniel, supra , at 242. In McVicker , the court of appeals stated the

landowner failed to meet any of the elements of equitable estoppel, i.e.,

a false representation or concealment of material facts; it must have been

made with knowledge, actual or constructive of the facts; the party to whom

it was made must have been without knowledge or the means of knowledge

of the real facts; it must have been made with the intention that it should be

acted on; and the party to whom it was made must have relied on or acted

on it to his prejudice.

McVicker , 510 S.W.2d at 145 , quoting Gulbenkian v. Penn , 151 Tex. 412 , 252 S.W.2d 929,

932 (1952). These are normally questions for the jury, but may be established (or refuted)

as a matter of law by undisputed evidence. Jones v. Ray Ins. Agency , 59 S.W.3d 739, 752

(Tex. App.-Corpus Christi 2001, no pet. h.); Page Airways, Inc. v. Associated Radio Serv.

Co. , 545 S.W.2d 184, 192 (Tex. Civ. App.-San Antonio 1976, writ ref'd n.r.e.); see also

Upchurch v. Albear , 5 S.W.3d 274, 277 (Tex. App.-Amarillo 1999, pet. denied); 4M Linen

& Uniform Supply Co. v. W. P. Ballard & Co. , 793 S.W.2d 320, 322 (Tex. App.-Houston

[1st Dist.] 1990, writ denied).

Though we agree the elements of equitable estoppel must be present, we note the

equitable estoppel recognized in Rosenthal was based on the city's conduct. (7) The building

inspector classified the meat storage facility as a permissible nonconforming use, the city

did not appeal his decision, and the court estopped the city from later enforcing the

ordinance. Rosenthal II , 239 S.W.2d at 643 ; Rosenthal I , 211 S.W.2d at 291 . One who

by his conduct has induced another to act in a particular manner should not be permitted

to adopt an inconsistent position and thereby cause loss or injury to the other. Fabrique,

Inc. v. Corman , 796 S.W.2d 790, 792 (Tex. App.-Dallas 1990), writ denied , 806 S.W.2d

801 (Tex. 1991) (per curiam); Mobil Oil Corp. v. Frederick , 615 S.W.2d 323, 325 (Tex. Civ.

App.-Fort Worth), aff'd in part & rev'd in part on other grounds , 621 S.W.2d 595 (Tex.

1981); see also 31 C.J.S. Estoppel and Waiver § 59 (1996). In equitable estoppel by

conduct, the fraud is the inconsistent position subsequently taken, rather than the original

conduct. 28 Am. Jur. 2d Estoppel and Waiver § 71 (2000).

In the present case, we conclude the City failed to establish grounds for avoidance

of estoppel as a matter of law. Maguire presented sufficient summary judgment proof to

show the actions of city officials were authorized. We have already stated that the

language of Section 23-102 does not prohibit Maguire from drilling. (8) City officials issued

Maguire three drilling permits, and the City does not contend Maguire failed to fulfill the

formal requirements for obtaining these permits. Further, Alexander's affidavit asserts that

he is "a City official responsible for enforcing City ordinances in and around Lake Houston,"

that he issued the stop work order, and that he revoked the permit. Therefore, the City

failed to demonstrate, as a matter of law, its officials were not acting under the City's

authority.

In addition, Maguire demonstrated this is the kind of case in which justice requires

application of estoppel. Maguire presented summary judgment proof that, after obtaining

the permits, it expended $190,000.00 preparing the drill site, including clearing a wooded

area, building a road, driving pipe, and reinforcing a bridge.

Also, estoppel would not interfere with the City's exercise of its governmental

functions. Though we have found no case applying the Texas Supreme Court's language

from Prasifka , dicta from Dallas County Flood Control Dist. No. 1 v. Cross , 815 S.W.2d

271, 284 (Tex. App.-Dallas 1991, writ denied), suggests estoppel would interfere with the

exercise of a city's governmental functions if it would erect a legal barrier to the city

carrying out its governmental functions in the future. On the other hand, estoppel would

not interfere with the exercise of a city's governmental functions if the landowner had been

using the land for some time without objection from the city. See Krause , 106 S.W. at 123

(landowner's house stood on property for over twenty years before city enforced boundary);

Rosenthal I , 211 S.W.2d 279 (landowner used property as meat storage facility for year

and a half before city sought to enforce zoning law). We do not suggest these are the only

factors a trial court could properly consider in making this determination.

In the present case, Maguire sought damages associated with its expenditures to

prepare the drill site. Monetary damages would not prevent the City from operating Lake

Houston in the future or place the City's drinking water at risk. In fact, assuming Maguire's

well would threaten the City's drinking water, money damages are a superior remedy to

enforcement of the permit. However, even if Maguire had sought the removal of the City's

stop work order, summary judgment would still have been inappropriate, because Maguire

presented summary judgment proof of other wells that have been drilled within 1,000 feet

of Lake Houston.

Finally, Maguire's summary judgment proof raises a fact issue concerning each

element of equitable estoppel. Maguire's summary judgment proof establishes that the

City issued Maguire three permits, that Maguire relied on the City's conduct in issuing the

permits by expending substantial funds, and that, later, city officials revoked the permit and

issued Maguire a stop work order. Therefore, the City failed to refute Maguire's estoppel

defense. Summary judgment was inappropriate on Maguire's claims for negligent

misrepresentation and promissory estoppel based on sovereign immunity.

The City also contends that, notwithstanding the availability of sovereign immunity,

Maguire's negligent misrepresentation and promissory estoppel claims fail as a matter of

law. The elements of negligent misrepresentation are: (1) a defendant makes a

representation in the course of business or a transaction in which the defendant has a

pecuniary interest; (2) the defendant supplies "false information" for the guidance of others

in their business; (3) the defendant did not exercise reasonable care or competence in

obtaining or communicating the information; and (4) the plaintiff suffers pecuniary loss by

justifiably relying on the representation. Fed. Land Bank Ass'n of Tyler v. Sloane , 825

S.W.2d 439, 442 (Tex. 1991); Facciolla v. Linbeck Constr. Corp. , 968 S.W.2d 435, 442

(Tex. App.-Texarkana 1998, no pet.). The City contends any alleged misrepresentation

had to occur in the course of a business or pecuniary transaction and the issuance of a

drilling permit is not a business transaction.

However, we have already concluded that the language of Section 23-102 does not

prohibit Maguire from drilling and that the City has not alleged Maguire failed to comply with

the formalities for obtaining a permit; therefore, the permit was valid. Summary judgment

was appropriate on Maguire's negligent misrepresentation claim.

The elements of promissory estoppel include: (1) a promise; (2) foreseeability of

reliance by the promisor; and (3) substantial reliance by the promisee to his detriment.

English v. Fischer , 660 S.W.2d 521, 524 (Tex. 1983). Maguire's promissory estoppel claim

is based on the permit, which it contended induced it to expend substantial funds to

prepare the site for drilling. The City contends a permit is not a promise.

In Shelby Operating Co. v. City of Waskom , 964 S.W.2d 75, 80 (Tex.

App.-Texarkana 1997, pet. denied), this Court held,

If the ordinance requires that a drilling permit be obtained before a well is

commenced and also prescribes the conditions which must be met, the

granting of a permit is a ministerial act and is not discretionary. Accordingly,

if the provisions of the ordinance are met, the permit must be issued and

cannot be revoked,

citing 5 Eugene Kuntz, Oil and Gas § 68.3 (1991). See also Ex parte Mata , 925 S.W.2d

292, 295 (Tex. App.-Corpus Christi 1996, no writ) ("The granting of licenses and permits

are generally held to be privileges and not rights, although if one meets the criteria set in

order to obtain a permit or license, it may not be lawfully refused. It becomes a right.").

Our language in Shelby regarding revocation of a permit must be limited when there is

language in the ordinance itself governing the terms of revocation or when city officials,

acting under the city's inherent police powers, determine drilling is endangering the public

health, morals, safety, or welfare. See Trevino & Gonzalez Co. , 949 S.W.2d at 42 , citing

Leach v. Coleman , 188 S.W.2d 220, 224-25 (Tex. Civ. App.-Austin 1945, writ ref'd w.o.m.),

and Tex. Transp. Code Ann. § 316.004 (Vernon 1999) (empowering cities to include "a

provision that authorizes the governing body, at its discretion, to terminate the permit

without notice to the permit holder" in an ordinance establishing permit program).

The City cites the court's statement in Trevino that, "A building permit is simply a

revocable and alterable license authorizing construction." Trevino & Gonzalez Co. , 949

S.W.2d at 42 . That statement was made in the context of the court's holding that a permit

is not a contract. Id. However, promissory estoppel applies when a promise is not

enforceable in contract. 31 C.J.S. Estoppel and Waiver § 92 (1996).

In the present case, the City issued Maguire three permits, which vested it with the

right to drill. That right was not revocable except under the terms of the ordinance or if city

officials determined Maguire's drilling was affecting the public health and safety. As such,

it was a promise to allow Maguire to drill under the terms of the governing ordinances so

long as its activities did not endanger the public welfare. There is no summary judgment

proof showing under what conditions a drilling permit may be revoked under the Houston

Code of Ordinances. There is also no summary judgment proof showing Maguire's

activities were a threat to the public welfare. In fact, Maguire's summary judgment proof

shows the existence of other wells located the same distance from Lake Houston as

Maguire's lease. Therefore, summary judgment was inappropriate on Maguire's

promissory estoppel claim.

Selective Enforcement Claim

Maguire next contends the trial court erred by rendering a no-evidence summary

judgment against its selective enforcement claim. As a general rule, an ordinance is not

rendered either invalid or inoperative by the failure of officials to enforce it on other

occasions. (9) McVicker , 510 S.W.2d at 145 ; see also T & R Assocs. v. City of Amarillo , 688

S.W.2d 622, 630 (Tex. App.-Amarillo 1985, writ ref'd n.r.e.) ("The fact that a city official or

employee fails in certain particulars to enforce a zoning regulation cannot render it

invalid."). Maguire contends, however, Section 23-102 has been discriminatorily applied. (10)

The City contends that, because Maguire did not make a showing it was part of a

protected class, it cannot recover. The City's position is based on a series of decisions

culminating in State v. Malone Serv. Co. , 829 S.W.2d 763 (Tex. 1992). In that case, the

Texas Supreme Court held that, to establish a claim of discriminatory enforcement, a party

must first show he or she has been singled out for prosecution or enforcement of the

regulation or ordinance while others similarly situated and committing the same acts have

not. Id. at 766 ; see also United States v. Rice , 659 F.2d 524, 526 (5th Cir. 1981); Wolf v.

State , 661 S.W.2d 765, 766 (Tex. App.-Fort Worth 1983, writ ref'd n.r.e.). Further, the

party must also show the government has purposefully discriminated on the basis of an

impermissible consideration such as race, religion, or the desire to prevent the exercise of

constitutional rights. Malone Serv. Co. , 829 S.W.2d at 766 ; see Rice , 659 F.2d at 526 ;

Wolf , 661 S.W.2d at 766 .

Both Malone Service Company and Rice involved claims not raised by specially

protected groups. Malone Service Company involved a claim by a hazardous waste

disposal plant operator about enforcement of an environmental regulation, Malone Serv.

Co. , 829 S.W.2d at 765 ; Rice involved a claim the Internal Revenue Service was

selectively enforcing the tax code against a group of tax protesters because of their

exercise of their right to protest. Rice , 659 F.2d at 526 . Both the Texas Supreme Court

in Malone Service Company and the Fifth Circuit in Rice concluded the defendants failed

to show the government had an invidious motivation for enforcing the law (e.g., one based

on race, ethnicity, religion, gender, or the desire to prevent the exercise of constitutional

rights). Rice , 659 F.2d at 527 ; Malone Serv. Co. , 829 S.W.2d at 767 .

The City contends Maguire has not shown it is in a protected group and, therefore,

it is not entitled to raise an equal protection argument. The United States Supreme Court

recently addressed a situation where a municipality refused to connect a water line to the

plaintiff's property unless the plaintiff granted it a thirty-three-foot easement, rather than the

fifteen-foot easement required of her neighbors. Vill. of Willowbrook v. Olech , 528 U.S.

562, 563 , 120 S.Ct. 1073 , 145 L.Ed.2d 1060, 1062 (2000). The Court, reiterating earlier

cases, recognized a cognizable equal protection claim brought by a "class of one," where

the plaintiff alleges that he or she has been intentionally treated differently from others

similarly situated and that there is no rational basis for the difference in treatment. Id. , 528

U.S. at 564 , citing Sunday Lake Iron Co. v. Township of Wakefield , 247 U.S. 350, 352 , 38

S.Ct. 495 , 62 L.Ed. 1154, 1155-56 (1918). In Sunday Lake Iron , the Court wrote:

The purpose of the equal protection clause of the Fourteenth

Amendment is to secure every person within the State's jurisdiction against

intentional and arbitrary discrimination, whether occasioned by express terms

of a statute or by its improper execution through duly constituted agents . . . .

It is also clear that mere errors of judgment by officials will not support a

claim of discrimination. There must be something more - something which

in effect amounts to an intentional violation of the essential principle of

practical uniformity. The good faith of such officers and the validity of their

actions are presumed; when assailed, the burden of proof is upon the

complaining party.

Sunday Lake Iron Co. , 247 U.S. at 352-53 (citation omitted).

Olech teaches that a party may be able to maintain an equal protection claim, even

though he or she does not belong to a protected class. At a summary judgment hearing,

a party must present some evidence that he or she was intentionally treated differently than

others who are similarly situated and that there is no rational basis for the differential

treatment. See Harlen Assocs. v. Inc. Vill. of Mineola , 273 F.3d 494, 500 (2d Cir. 2001);

Am. Fabricare v. Township of Falls , 101 F.Supp.2d 301 , 309 n.14 (E.D. Pa. 2000).

After Olech , the federal courts have grappled with the role of the defendant's motive

in "class of one" equal protection cases. In Hilton v. City of Wheeling , 209 F.3d 1005, 1008

(7th Cir. 2000), the Seventh Circuit stated "the role of motive is left unclear" in Olech and

held the United States Supreme Court's requirement the plaintiff prove there is no rational

basis for the differential treatment means the plaintiff must demonstrate "the defendant

deliberately sought to deprive [the plaintiff] of the equal protection of the laws for reasons

of a personal nature unrelated to the duties of the defendant's position." See also Bartell

v. Aurora Pub. Sch. , 263 F.3d 1143, 1149 (10th Cir. 2001) (taking a similar position); Shipp

v. McMahon , 234 F.3d 907, 915 (5th Cir. 2000) (same). However, in Olech , the United

States Supreme Court held the plaintiff's complaint, which alleged the defendant

intentionally demanded an "irrational and wholly arbitrary" thirty-three-foot easement, but

later settled for a "clearly adequate" fifteen-foot easement, was sufficient to state a claim

for relief "quite apart from the Village's subjective motivation." Olech , 528 U.S. at 565 .

Regardless of whether a plaintiff must prove the differential treatment was motivated

by animus, we conclude Maguire presented sufficient summary judgment proof to raise a

fact issue on its equal protection claim. Maguire offered the affidavit of James D. Wilson,

who stated he reviewed topographical maps of the area and Texas Railroad Commission

documents and discovered twenty-one wells "drilled after 1967, inside the city limits of

Houston, and within 1000 feet of Lake Houston's drains, streams or tributaries." He also

stated he was able to visually confirm the location of six of these wells. Of the twenty-one

wells, all but four are operated by a single company.

This proof, though admittedly circumstantial, is sufficient to raise a fact question

concerning whether the City intentionally enforced Section 23-102 against Maguire

differently than against other companies. Further, because the other wells are similarly

situated to the one Maguire sought to drill, the summary judgment proof is sufficient to

raise a fact issue concerning whether the City had a rational basis for enforcing Section

23-102 differently. Finally, assuming Maguire is required to prove the City acted with

animus, the summary judgment proof is sufficient to raise a fact issue because the proof

shows the differential enforcement disproportionately favors a single company. Therefore,

summary judgment was inappropriate on Maguire's selective enforcement cause of action.

Conclusion

Summary judgment was appropriate on Maguire's negligent misrepresentation

claim. However, summary judgment was inappropriate on Maguire's inverse condemnation

claim, its claim for reliance damages based on promissory estoppel, and its selective

enforcement claim. Therefore, we affirm the trial court's judgment in part, reverse in part,

and remand for further proceedings.

Donald R. Ross

Justice

Date Submitted: August 28, 2002

Date Decided: February 15, 2002

Publish

1. A full list of plaintiffs is as follows: (1) Maguire Oil Company; (2) Maguire Energy

Company; (3) Cary M. Maguire, individually; (4) Cary M. Maguire as manager for the Oil

Fund, a Texas joint venture; (5) Cary M. Maguire as trustee of the Cary M. Maguire, Jr.,

Melinda Ambler Maguire, and Ann Blaine Maguire trusts; (6) Don R. Holloway as custodian

of property for W. Matthew Holloway, Barbara Ann Holloway, and Tillman R. Holloway

under the Texas Uniform Transfers to Minors Act (TUTTMA), see Tex. Prop. Code Ann.

§§ 141.001 -.025 (Vernon Supp. 2002); and (7) William N. Collins as custodian of property

for L. Paige Collins, Hattie S. Collins, and Chandler Collins under the TUTTMA. Each of

the plaintiffs (except Cary M. Maguire as trustee) is either a working interest holder in, or

a royalty owner and lessor of, one or more of the oil, gas, and mineral leases the subject

of this suit.

2. The Texas Local Government Code defines extraterritorial jurisdiction as the

unincorporated area that is contiguous to the corporate boundaries of the city and that is

located within five miles of those boundaries if the city has 100,000 or more inhabitants.

Tex. Loc. Gov't Code Ann. § 42.021 (5) (Vernon 1999).

3. Maguire abandoned its discrimination claim at the hearing on the City's second

motion for summary judgment.

4. There is no specific statute of limitations for an inverse condemnation claim.

However, courts have held the ten-year statute of limitations to acquire land by adverse

possession applies. Trail Enters., Inc. v. City of Houston , 957 S.W.2d 625, 631 (Tex.

App.-Houston [14th Dist.] 1997, pet. denied); see also Tex. Civ. Prac. & Rem. Code Ann.

§ 16.026 (a) (Vernon Supp. 2002); Brazos River Auth. v. City of Graham , 163 Tex. 167 , 354

S.W.2d 99, 110 (1961); Waddy v. City of Houston , 834 S.W.2d 97, 102 (Tex.

App.-Houston [1st Dist.] 1992, writ denied); Hudson v. Arkansas Louisiana Gas Co. , 626

S.W.2d 561, 563 (Tex. App.-Texarkana 1981, writ ref'd n.r.e.); Hubler v. City of Corpus

Christi , 564 S.W.2d 816, 823 (Tex. Civ. App.-Corpus Christi 1978, writ ref'd n.r.e.).

5. Maguire also relies on dicta from Haupt, Inc. v. Tarrant County Water Control &

Improvement Dist. Number One , 833 S.W.2d 697, 699-700 (Tex. App.-Waco 1992), rev'd

on other grounds , 854 S.W.2d 909 (Tex. 1993), in which expert testimony was introduced

to establish the value of minerals in place on condemned land. However, Haupt does not

provide sufficient insight into the methods the expert witness used to value the minerals.

For example, did the expert use sales of comparable mineral interests, a discounted cash

flow analysis of the revenues that could be earned from the minerals, or as Maguire

attempted to do in this case, sales of the reserves in the ground? In addition, Haupt dealt

with "proven" reserves from producing fields. Other cases we have reviewed suffer from

these same deficiencies. See Tarrant County Water Control & Improvement Dist. Number

One v. Fullwood , 963 S.W.2d 60, 61 (Tex. 1998) (Hecht, J., dissenting from denial of

application for writ of error) ("[T]he [trial] court awarded Fullwood $60,000 for what the jury

found to be the value of his royalty interest at the time the District plugged the wells, based

on the anticipated future economic productive life of the oil reserves."); Trinity River Auth.

v. Chain , 437 S.W.2d 887, 889 (Tex. Civ. App.-Beaumont 1969, writ ref'd n.r.e.) (where

jury was asked to determine "reasonable market value of the minerals under the 280.64

acres of land being condemned"); City of Teague v. Stiles , 263 S.W.2d 623, 628, 630 (Tex.

Civ. App.-Waco 1953, writ ref'd n.r.e.) (holding witness competent to testify "as to the

market value of the royalty under the land; that the value of the royalty under the lake

would be depreciated; and that the spacing rule of the Railroad Commission is one well per

40 acres").

6. In fact, Justice Looney dissented on rehearing and Chief Justice Bond concurred,

making the opinion on original submission the dissenting opinion and the dissenting

opinion on rehearing the majority opinion. See Rosenthal v. City of Dallas , 211 S.W.2d

279, 294-95 (Tex. Civ. App.-Dallas 1948, writ ref'd n.r.e.) (Bond, C.J., concurring on reh'g).

7. The estoppel doctrine applied in Rosenthal is also closely akin to quasi-estoppel,

which is a species of equitable estoppel and is itself an equitable doctrine. See Cook

Composites, Inc. v. Westlake Styrene Corp. , 15 S.W.3d 124, 136 (Tex. App.-Houston

[14th Dist.] 2000, pet. dism'd); 31 C.J.S. Estoppel and Waiver § 120 (1996); see also 31

id. § 59 (1996) ("Insofar as conduct amounts to, and is considered as, a representation,

it is dealt with in this chapter together with other matters constituting representations; but

insofar as conduct inconsistent with a right subsequently asserted is viewed as a form of

quasi estoppel, it is dealt with in the chapter on quasi estoppel . . . ."). Compare 31 id.

§§ 58-119, with 31 id. §§ 120-152. Quasi-estoppel precludes a party from asserting, to

another's disadvantage, a right inconsistent with a position previously taken. Lopez v.

Munoz, Hockema & Reed, L.L.P. , 22 S.W.3d 857, 864 (Tex. 2000). It applies when it

would be unconscionable to allow a person to maintain a position inconsistent with one to

which he acquiesced, or from which he accepted a benefit. Id. Unlike equitable estoppel

by conduct, however, quasi-estoppel requires no showing of a false representation or of

detrimental reliance. Stable Energy, L.P. v. Newberry , 999 S.W.2d 538, 548 (Tex.

App.-Austin 1999, pet. denied).

8. Arguably, Maguire could invoke estoppel even if Section 23-102 prohibited it from

drilling. Houston Code of Ordinances Section 31-30, which Maguire offered as summary

judgment proof, requires a building official to issue a permit if (1) the permit application is

found to comply with Houston Code of Ordinances Chapter 31, and (2) the well is not

prohibited by Chapter 31. Houston, Tex., Code of Ordinances § 31-30 (1990). Arguably,

Section 31-30 creates a fact issue concerning the authority of city officials to issue a permit

for drilling in a location prohibited by Section 23-102. However, we believe Section 31-30

must be read in conjunction with the restrictions on drilling in Section 23-102. From this

we conclude the City did not authorize city officials to issue a drilling permit for a site where

drilling would be prohibited under Section 23-102.

9. Eunice A. Eichelberger, Annotation: Enforcement of Zoning Regulation as Affected

by Other Violations , 4 A.L.R. 4th 462 (1981).

10. The concept of discriminatory enforcement is based on the constitutional

guarantee of equal protection under the law. State v. Malone Serv. Co. , 829 S.W.2d 763,

766 (Tex. 1992). The defense originated in the context of criminal prosecutions, but courts

in this state have held the governing principles also apply to civil proceedings involving

state agencies. Id.