The Texas Eighth Court of Appeals in El Paso issued a ruling in favor of Joel Navar, a manufactured home community owner, against the County of El Paso. There are several issues and court decision in this case, but we are only going to focus on the issue of the County engaging in an improper “taking” against Navar.

The court’s full opinion is available for anyone interested in all aspects of this case.

Facts of the Case

As it relates to the improper regulatory taking, the pertinent facts are that Navar applied for certificates of compliance with the County that his MH lots had the proper utility, roads, drainage and other minimum state standards necessary to bring in additional manufactured homes on vacant lots in his MHC.

The certificates of compliance from a county are required by a state law that only impacts land in a county situated with 50 miles of an international border.  The County refused to issue certificates of compliance based on a vague response that the, “parcels of land were not in compliance with statutory authority.”  But the County did not identify the statutory authority they were relying on.

Navar sued the County for failing to issue the certificates.

On a side note of MHC owner persistence, after he filed his suit, which was then pending for several years, the County came back and eventually issued the certificates he had been requesting. But Navar did not stop his lawsuit.

Navar alleged that employees for the County told him that he would not receive certificates of compliance until after he re-constructed the MHC’s water and sewage facilities and re-positioned existing homes.  Both the utility systems and existing homes had been in place for decades, and the County had previously issued certificates of compliance for the homes already in place.

Navar sued the County for a wrongful taking of personal property and plead damages for his inability to lease his lots as a result of the County’s improper inaction.

Improper Regulatory Takings

We have previous written at length on the history and case law on an improper taking in Texas.

In this case the court determined if the County had engaged in an improper taking based on the precedent of the Penn Central test (Penn Cent. Transp. Co. v. City of New York is the 1978 U.S. Supreme Court case that created the test for determining if a regulatory taking has occurred).

Under the Penn Central test, the court must evaluate three factors:

1. The character of the government action in question;
2. The economic impact of the regulation on the landowner; and
3. The extent to which the regulation has interfered with distinct investment-back expectations.

The court concluded that Navar had properly pled a regulatory taking, in part, by arguing that:

“it was unreasonable to require mobile home operators to comply with standards not previously pronounced or enforced to obtain the certificates required by Chapter 232, when those mobile home operators had previously obtained the certificates without issue. In other words, Navar is alleging, in part, that the County affected a regulatory taking by revoking the property’s grandfathered status.”

The County’s Failed Counter Arguments

The County argued Navar failed to state a cause of action for inverse condemnation, and that Navar failed to allege a regulatory taking. The court was not persuaded by the County’s arguments.

The court concluded that Navar was not required to plead inverse condemnation because he properly plead for a regulatory taking which is actionable.  Second, the County contended Navar did not satisfy the required elements of a taking, but based their analysis off other theories of a taking, not the Penn Central test that the court applied here.

Instead the court looked at the facts that Navar was previously permitted to use the property as a MHC when the County refused to issue subsequent permits for new homes.  The County’s failure to properly and timely issue the certificates made it, “economically impossible for Navar’s lots to generate income.” 

The court concluded the two preceding facts satisfied the second and third factors in the Penn Central test.  The first factor - the character of the government action in question - was satisfied because the County acted illegitimately by not issuing the certificates.

Conclusion

Winning an argument that a government improperly engaged in a regulatory taking, while typically difficult, does occur.

For all the MHC owners out there, take this case as an example of when facts and actions can create a legal victory for an owner over a government entity. And remember this case if you are ever confronted by a local government official who is obstructing your ability to utilize your previously authorized MHC based on vague statements of “violation of statutes.” Remember this case if confronted with a local government demanding unnecessary and expensive infrastructure costs for a utility system that is already in compliance with the law, or demands to re-positioning homes that had been previously authorized.