City of Dallas and the Board of Adjustment of the City of Dallas v. PDT Holdings, Inc., and Phillip Thompson Homes, Inc. D/B/A Phillip Thompson Custom Homes

Court of Appeals of Texas·Decided June 16, 2023·No. 05-22-00730-CV·Published

Opinion

REVERSE and RENDER and Opinion Filed June 16, 2023

S In The

Court of Appeals

Fifth District of Texas at Dallas No. 05-22-00730-CV

CITY OF DALLAS AND THE BOARD OF ADJUSTMENT OF THE CITY OF DALLAS, Appellants

V.

PDT HOLDINGS, INC., AND PHILLIP THOMPSON HOMES, INC. D/B/A PHILLIP THOMPSON CUSTOM HOMES, Appellees

On Appeal from the 14th Judicial District Court Dallas County, Texas

Trial Court Cause No. DC-18-08484

MEMORANDUM OPINION

Before Justices Pedersen, III, Garcia, and Kennedy Opinion by Justice Garcia The City of Dallas appeals the trial court’s final judgment applying equitable

estoppel to bar enforcement of a zoning ordinance against PDT Holdings, Inc. (“PDT”). In two related issues, the City argues the trial court erred in determining that equitable estoppel bars enforcement of the ordinance because this is not an exceptional case requiring departure from the general rule against estoppel. The City further argues that PDT failed to show the Board of Adjustment abused its discretion in denying a variance. As discussed below, we conclude this is not an exceptional case where manifest justice demands departure from the general rule precluding

estoppel against a municipality. We reverse the trial court’s judgment and render judgment that PDT is not entitled to relief on its equitable estoppel claim.

I. Background

This case arises from PDT’s construction of a duplex townhome in Dallas (the “Project”). PDT’s plans called for a thirty-six-foot-high structure. The City approved the plans and issued a permit for the Project on Oct. 17, 2017.

In November, 2017, PDT executed a contract to sell the townhome to residential purchasers. Construction continued without incident until January 2018.

In January, the city inspector cited PDT for noncompliance with code requirements for the height of the parapet wall. A stop work order was issued until PDT fixed the parapet height. There was no mention of the overall thirty-six-foot height of the building; the notice of noncompliance cited only the height of the parapet wall. Later that month, the City approved PDT’s amended plans addressing the parapet wall. The amended plans still showed a thirty-six-foot overall height for the structure.

On April 23, 2018, the City issued a second stop work order stating that the Project did not comply with the City’s Residential Proximity Slope (RPS) ordinance limiting the maximum height of the structure to twenty-six feet. The Project was ninety percent complete at the time.

On May 21, 2018, PDT appeared before the Board of Adjustment (“BOA”)

seeking a variance from the RPS ordinance. The BOA denied the variance without prejudice.

PDT applied for a variance again, and a second BOA hearing was held on June 18, 2018. Although the City staff recommended that the variance be approved, the BOA denied the variance without prejudice. The Project was ninety-five percent complete at the time.

PDT appealed the BOA decision, and the City filed a plea to the jurisdiction.

An interlocutory appeal to our court followed. Our court’s opinion concluded, inter alia, that the trial court had jurisdiction under TEX. GOV’T CODE ANN. § 211.011 and could consider PDT’s equitable defensive theories.1 The case was remanded to the trial court.

On remand, the trial court abated the case to remand to the BOA. The BOA conducted a third variance hearing on May 18, 2020. Again, the City recommended approval of the variance, and again, it was denied. The case was then returned to the trial court.

The trial court conducted a bench trial on PDT’s third amended petition alleging the City was equitably estopped from enforcing the RPS ordinance. On

1 City of Dallas v. PDT, No. 05-21-00018-CV, 2021 WL 3733059 (Tex. App.—Dallas Aug. 24, 2021, no pet.) (mem. op.), Pedersen, J., concurring, 629 S.W.3d 794.

conclusion, the court entered a final judgment in favor of PDT estopping the City from enforcing the ordinance in connection with the Project.2 This appeal followed.

I. Analysis

A. Standard of Review and Applicable Law Whether the equitable estoppel doctrine applies to bar the City’s enforcement of the ordinance is a question of law. See City of White Settlement v. Super Wash, Inc., 198 S.W.3d 770, 774 (Tex. 2006). We review questions of law de novo. Walker v. Anderson, 232 S.W.3d 899, 908 (Tex. App.—Dallas 2007, no pet.).3 Generally, estoppel is based on the principle that “one who by his conduct has induced another to act in a particular manner may not be permitted to adopt an inconsistent position and thereby cause loss to another.” Fabrique v. Corman, 796 S.W.2d 790, 792 (Tex. App.—Dallas 1990, writ denied). Equitable estoppel is established when: (1) a false representation or concealment of material facts, (2) is made with knowledge, actual or constructive, of those facts, (3) with the intention that it should be acted upon, (4) to a party without knowledge or means of obtaining knowledge of those facts, (5) who detrimentally relies on the representations. See

2 The final judgment does not reverse the BOA’s denials of the variance or in any way address these actions.

3 PDT argues that because there are no findings of fact and conclusions of law, we imply all findings necessary to support the judgment. See Torrington Co. v. Stutzman, 46 S.W.3d 829, 842 (Tex. 2000). While this is true, implied findings must have support in the record on a theory of law applicable to the case. See Affordable Power, L.P. v. Buckeye Ventures, Inc., 347 S.W.3d 825, 830 (Tex. App.—Dallas 2011, no pet.). Contrary to what PDT seemed to suggest at oral argument, this does not mean we have carte blanche to craft a remedy based on a theory unsupported by the pleadings or imply findings that have no evidentiary support in the record.

Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 515–16 (Tex.1998).

The general rule is that when a governmental unit is exercising its governmental powers, it is not subject to estoppel. City of Hutchins v. Prasifka, 450 S.W.2d 829, 835 (Tex. 1970). “[T]he rule derives from our structure of government, in which the interest of the individual must at times yield to the public interest and in which the responsibility for public policy must rest on decisions officially authorized by the government’s representatives, rather than on mistakes committed by its agents.” Super Wash, 198 S.W.3d at 773 (citing City of San Angelo v. Deutsch, 91 S.W.2d 308, 310 (1936) (“The city’s public or governmental business must go forward, unimpeded by the fault, negligence, or frailty of those charged with its administration.”)). “[B]arring estoppel helps preserve separation of powers; legislative prerogative would be undermined if a government agent could—through mistake, neglect, or an intentional act—effectively repeal a law by ignoring, misrepresenting, or misinterpreting a duly enacted statute or regulation.” Id. at 774.

The Texas Supreme Court has recognized a very limited exception to the general rule. Specifically, the court has held that “[t]here is authority for the proposition that a municipality may be estopped in those cases where justice requires its application, and there is no interference with the exercise of its governmental functions.” Prasifka, 450 S.W.2d at 836. This exception “is applied with caution and

only in exceptional cases where circumstances demand its application to prevent manifest injustice.” Id.; see also Super Wash, Inc., 198 S.W.3d at 773.

B. Is This an Exceptional Case Where Justice Requires Application of Estoppel Against the City?

The City’s first and third issues argue the trial court erred in applying the equitable estoppel doctrine against the City to bar enforcement of the RPS ordinance.4 We therefore consider whether this is an exceptional case where justice requires departure from the general rule against estopping a municipality.

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City of Dallas and the Board of Adjustment of the City of Dallas v. PDT Holdings, Inc., and Phillip Thompson Homes, Inc. D/B/A Phillip Thompson Custom Homes, (Tex. Ct. App. 2023).

City of Dallas and the Board of Adjustment of the City of Dallas v. PDT Holdings, Inc., and Phillip Thompson Homes, Inc. D/B/A Phillip Thompson Custom Homes (City of Dallas and the Board of Adjustment of the City of Dallas v. PDT Holdings, Inc., and Phillip Thompson Homes, Inc. D/B/A Phillip Thompson Custom Homes) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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