The plaintiffs in FLCT, Ltd. v. City of Frisco, No. 02-14-00335-CV (May 26, 2016), owned two adjoining parcels in the Dallas-Ft Worth area at the southeast corner what could be a very busy (and therefore profitable) intersection of two parkways. After checking with the city that the restriction in the Commercial zoning which prohibited the sale of beer and wine within 300 feet of a school wasn't going to prohibit such sales if they sold the southern portion of the parcels for a school, the owners did so. The owners and their new southern neighbor the school district executed a development agreement that acknowledged that the sale of alcohol on the remaining parcels was okay. Building permit issued.
A Racetrac gas/convenience store was what they had in mind. But the City amended the zoning code. And that was enough, apparently, to make the planning department change its mind about allowing the sale of alcohol near a school, which by then was under construction. Racetrac went elsewhere. (As it turns out, "elsewhere" meant on the other side of the intersection, the northwest corner, which is just outside the 300-foot zone, as the above photo reveals.) The owners had more success lining up a 7-Eleven, which also would sell beer and wine. But when they went to the City for final approvals for their new plans, the City demurred. The city told the owners that it always prohibited the sale of alcohol near schools, and that if it had earlier told the owners otherwise, that was a mistake.
The owners sued, claiming a vested right to sell alcohol, and that prohibiting it from doing so was a regulatory taking of its property. The trial court dismissed for lack of jurisdiction, concluding that the case somehow wasn't ripe, and that the owners didn't have a takings claim because the right to sell beer and wine on the parcels wasn't property." You bought the property subject to the limitation, and the city never validly said otherwise.
The court of appeals' opinion is long (71 pages) and detailed. We won't go into the parts that focus on local government law, but will focus on the takings portion that starts on page 59. There, the court concluded that the owners stated a valid ad hoc regulatory takings claim. The opinion analyzed each of the three Penn Central factors, and concluded that there was enough in dispute that the owners could go forward.
- Character of the government action: The court held that it didn't need to accept the owners' claim that the city intentionally targeted them, but that it was enough that the city's actions enforcing its zoning ordinance denied their allegedly vested use. "Thus, Owners alleged a refusal by the City that impacted their ability to use the Property in accordance with its applicable zoning classification. Whether the City actually had an enforceable first-in-time policy is a factual determination that goes to the merits of Owners’ claims and not the trial court’s jurisdiction." Slip op. at 62.
- Economic impact: The alleged diminution of 46% of value is enough to get by a motion to dismiss. Might or might not be enough to win, but it's enough to go forward. Slip op. at 63.
- Investment-backed expectations: The court concluded that the regulatory milieu and the owners' knowledge of the applicable restrictions was part of their expectations, but that "Owners presented evidence that both times a purchaser or tenant reached the alcoholic beverage permit application process in conjunction with the planned development set forth in the preliminary site plan application, the City’s stated position that the separation requirements applied caused the prospective purchaser and tenant to back out." Slip op. at 65. The owners weren't required to have already applied for and recieved a permit in order to possess reasonable expectations that they'd be allowed to proceed, only that the governing regulations would allow their use. Slip op. at 66. "Nevertheless, we do not hold that a prior permit held by a property owner is not significant for purposes of this analysis but rather that the fact that a permit had not yet been granted at the time of the alleged taking is not outcome determinative of whether the owner’s investment-backed expectations are reasonable." Id. at 66-67.
The court reversed the dismissal, and sent the case back for trial. "Although whether a valid takings claim has been alleged is a question of law, here, fact issues exist that must be resolved by a fact finder, including the extent of the economic impact on the Property and whether the City had a first-in-time policy regarding development." Slip op. at 69.
FLCT, Ltd. v. City of Frisco, No. 02-14-00335-CV (Tex. App. May 26, 2016)