Tex App Dismisses Penn Central Claim – But What's It Doing Weighing The Facts?

By noemailnoemail-org-robert-thomas-inversecondemn on April 8, 2025

These days, when we have cases where there’s tinkering with the terms of rental agreements, we most often see local governments using their police power to force property owners to rent their properties on a long-term (more than 30 days) basis.

But in Bigelow Arizona TX-344, LP v. Town of Addison, No. 05-23-00642-CV (Apr. 4, 2025), the Texas Court of Appeals was dealing with a town ordinance that went the other way: it redefined the definition of “hotel,” which had the effect of prohibiting an extended-stay hotel from continuing to rent 95% of its rooms on a long-term basis under a nearly 30-year old special use permit, and forced what had been long term stays to become short-term stays.

Why? The town’s “desire for motels and hotels to operate so that rooms are available for the Town’s tourists[.]” Slip op. at 3. Really? Read a bit further and you see what was likely the real reason — taxes. “[T]he amendment provided for hotel/motel maximum exemptions from the payment of hotel occupancy tax, exempting not more than thirty percent of rooms subject to a room night exemption for pay the payment of hotel occupancy tax.” Id. (footnote omitted). After the definition change, the town notified the hotel that it was now a non-conforming use. And you know what that means.

Next up, the hotel operator sues for a taking under both the Texas and U.S. Constitutions. Next up after that, the Town filed a plea to the court’s jurisdiction, and the trial court agreed. As best we can tell, this thing called a plea in jurisdiction is kinda like a motion to dismiss, sort of like a motion to dismiss for lack of jurisdiction, but not quite because a plea can challenge jurisdictional facts. So to us — not a Texas lawyer by any stretch — this looks like a dismissal for failure to state a claim, with a little extra oomph because unlike federal court 12(b)(6) motions, the court here looks at the facts “mirror[ing] that of a traditional summary-judgment motion.” Slip op. at 4.

The court of appeals held that the complaint did not plead enough facts to show a regulatory taking. The complaint advanced a Penn Central argument, and the court weighed the factors and concluded that the plaintiff had not asserted sufficient facts to show there’s a claim:

Economic impact: “Here, Bigelow did not plead and provided no evidence that the value of its property has diminished since the Town passed the 2019 Ordinance.” Slip op. at 8. The court also rejected the owner’s assertion that it would have to turn away at least 65% of its customary long-term residents. The court held that this was another way of claiming lost profits, and the lost-profits claim is “entirely speculative” Who knows, maybe it could fill those vacancies with others? Rent em to short termers. The court concluded “we conclude this factor weights against a finding that the HOT Ordinance constitutes a taking.” Slip op. at 10.

Investment-backed expectations: Looking at the plaintiff’s expectations “at the time it purchased the property,” the court rejected the argument that the 25 years of long-term use under the special permit, because only the expectations at the time of purchase are relevant. Slip op. at 11. To make it worse, the court reviewed the facts and concluded that the hotel/motel use allowed by the special use permit “did not allow for the housing of permanent residents.” Slip op. at 14. Hotel use implies “temporary” and “transient,” and does not allow longer term uses; anyone staying longer than 30 days becomes a “permanent resident.” Slip op. at 15.

Character: The court began by noting “[t]he final factor requires us to consider the character of the government’s action.” Slip op. at 16. The court rejected the owner’s argument that the town had it out for the long-term hotel, holding that the town’s efforts to enforce its laws “cannot, as a matter of law, take ‘unfair advantage’ of the violating party.” Slip op. at 20.

We’re not really going to take a lot of time quibbling about whether the court’s weighing and consideration of the factors is right. Instead, we’re going to ask: what was it doing weighing anything at the pleadings stage. Yeah, we get that Texas has this “plea” procedure which seems to allow a court to take a more active hand in actually deciding disputed issues. Isn’t that a task for the trier of fact later in the case?

We get that the court doesn’t believe the complaint’s allegations. It may conclude the town has the better case. But we thought that was irrelevant at the pleadings stage. But wait, you say, your read of what the court did was look at the factual allegations and conclude that even if everything the complaint says is true, the law says “so what?” You can’t get profits as a matter of law, that special permit didn’t mean what the owner thought it meant as a matter of law. Any efforts to enforce the zoning ordinance as the town interprets it is a “character” safe harbor as a matter of law.