Village of Tiki Island v. Jerry D. Ronquille and Wife Janelle L. Ronquille, Milton Chang and Wife, Marie, Angelia G. Hill and Richard Samaniego

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.”

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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.

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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.

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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

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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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