Legacy Hous. Corp. v. City of Horseshoe Bay

Full title: LEGACY HOUSING CORPORATION, Plaintiff v. CITY OF HORSESHOE BAY, TEXAS…

Court: United States District Court, W.D. Texas, Austin Division

Date published: May 13, 2024

1:21-CV-01156-RP (W.D. Tex. May. 13, 2024)

Opinion

1:21-CV-01156-RP

05-13-2024

LEGACY HOUSING CORPORATION, Plaintiff v. CITY OF HORSESHOE BAY, TEXAS, HORSESHOE BAY PROPERTY OWNERS ASSOCIATION, JAFFE INTERESTS, LP, F/K/A HORSESHOE BAY RESORT LTD. F/K/A HORSESHOE BAY RESORT INC.; AND HORSESHOE BAY RESORT DEVELOPMENT, LLC, Defendants

DUSTIN M. HOWELL, UNITED STATES MAGISTRATE JUDGE.

TO: THE HONORABLE ROBERT PITMAN, UNITED STATES DISTRICT JUDGE.

ORDER AND REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

DUSTIN M. HOWELL, UNITED STATES MAGISTRATE JUDGE.

Before the Court are Legacy Housing Corporation's (“Legacy”) Motion for Partial Summary Judgment, Dkt. 103; Horseshoe Bay Resort Development (“HSBR Development”) and the Horseshoe Bay Property Owners Association's (the “POA”) Objections to and Motion to Strike Summary Judgment Evidence, Dkt. 113; HSBR Development and Jaffe Interests's (“Jaffe”) Motion for Summary Judgment, Dkt. 99; the POA's Motion for Summary Judgment, Dkt. 101; the City of Horseshoe Bay's (the “City”) Amended Motion for Summary Judgment, Dkt. 105; and all related briefing.

I. BACKGROUND

This suit arises from a dispute between Legacy (a manufactured home developer) and Defendants concerning Legacy's development of 297 lots (the “development lots”) located in Horseshoe Bay purchased in 2019, and a 94.77-acre property located outside of the City, but within its extraterritorial jurisdiction (the “ETJ property”). Dkt. 43, at 1. The ETJ property is located south of the development lots, and between the two properties is a strip of greenbelt land located within the City's limits (the “greenbelt strip”). Id. at 11.

There are two primary bases for Legacy's claims against Defendants. The first is a 2021 City ordinance (“Ordinance 2021-12”) which Legacy alleges encumbers its development lots by imposing new registration requirements for contractors, limiting the number of permits for speculative builds, and changing the requirements for driveways for manufactured homes. Id. at 5-8. Legacy claims Ordinance 2021-12 interferes with its investment-backed expectations and constitutes a regulatory taking. Id. at 6.

The second basis for Legacy's claims against Defendants is Legacy's construction of a roadway connecting a public street in Horseshoe Bay across one of Legacy's development lots, over the greenbelt strip, across the ETJ property, to Highway 71, which borders the ETJ property to the south. Id. at 11. Each section of the roadway is a source of dispute between the parties. As to the section constructed on Legacy's development lot, Legacy contends that Defendants have “notified Legacy of ... plans to deny any permit applications to construct a driveaway on Legacy's residential lots” as part of a conspiracy to stymie development of Legacy's properties. Id. at 11-12. As to the section of the roadway over the greenbelt strip, Legacy again contends that the parties have conspired to deny it access to the greenbelt strip and claims that the POA accepted money from the City in exchange for its cooperation. Id. at 11. While Legacy, at times, pleads that the POA owns the greenbelt strip, it alternatively contends that Legacy owns the strip of greenbelt and that Defendants have wrongfully denied access. Id.

Legacy brings several causes of action against Defendants related to the development of its lots and the denial of access to the greenbelt strip. Id. at 14-24. As to Ordinance 2021-12, Legacy brings a claim for an unconstitutional regulatory taking against the City and seeks declaratory judgment as to the constitutionality of the Ordinance. Id. at 14. For the alleged wrongful denial of access to the greenbelt strip, Legacy brings claims for: breach of fiduciary duty against the POA; a claim for negligence against the POA, Jaffe Interests, and HSBR Development; a claim under 42 U.S.C. § 1983 for a deprivation of property rights; and a civil-conspiracy claim against the City, Jaffe Interests, HSBR Development, and the POA. Id. at 17-22. Legacy also requests that the Court allow it to inspect POA records and declare that Legacy owns the part of the greenbelt at issue in this case under the strip-and-gore doctrine. Id. at 22-23.

The City moved to dismiss all but Legacy's takings claim. Dkt. 48, at 11. Because the motion was granted the takings claim is the only live claim remaining against the City. Dkts. 82; 89. The City also brought a counterclaim related to Legacy's construction of the roadway across the ETJ property, for “threatened and ongoing violations” of a recorded Development Agreement governing use of the ETJ property. Dkt. 11, at 10. Legacy moved to dismiss this counterclaim, but the motion was denied. Dkt. 61, 64.

Before the undersigned are the parties' cross-motions for summary judgment and objections to Legacy's summary judgment evidence. Legacy moves for partial summary judgment as to its strip-and-gore claim against HSBR Development and Jaffe. Dkt. 103. HSBR Development, and Jaffe move for summary judgment on Legacy's strip-and-gore claim, § 1983 conspiracy claim, civil-conspiracy claim, negligence and gross negligence claim, as well as their own counterclaims for breach of restrictive covenant and request for declaratory judgment. Dkt. 99. The POA moves for summary judgment on Legacy's strip-and-gore claim, § 1983 conspiracy claim, civil-conspiracy claim, breach of fiduciary duty claim, negligence claim, and request for inspection of records. Dkt. 101. The City moves for summary judgment on Legacy's takings claim and its own counterclaims for breach of the Development Agreement and for declaratory judgment. Dkt. 105. HSBR Development, and the POA also object to and move to strike Legacy's evidence in support of its motion for summary judgment on its strip-and-gore claim. Dkt. 113.

II. LEGAL STANDARD

Summary judgment is appropriate when the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Washburn v. Harvey, 504 F.3d 505, 508 (5th Cir. 2007). A dispute regarding a material fact is “genuine” if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When ruling on a motion for summary judgment, the court is required to view all inferences drawn from the factual record in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986); Washburn, 504 F.3d at 508. Further, a court “may not make credibility determinations or weigh the evidence” in ruling on a motion for summary judgment. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477 U.S. at 254-55.

Once the moving party has made an initial showing that there is no evidence to support the nonmoving party's case, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at 586. Mere conclusory allegations are not competent summary judgment evidence, and thus are insufficient to defeat a motion for summary judgment. Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007). Unsubstantiated assertions, improbable inferences, and unsupported speculation are not competent summary judgment evidence. Id. The party opposing summary judgment is required to identify specific evidence in the record and to articulate the precise manner in which that evidence supports his claim. Adams v. Travelers Indem. Co. of Conn., 465 F.3d 156, 164 (5th Cir. 2006). If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to its case and on which it will bear the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.

III. DISCUSSION

A. Legacy's Motion for Partial Summary Judgment, Dkt. 103

Legacy moves for summary judgment on its strip-and-gore claim against the POA and HSBR Development arguing that under Texas's strip-and-gore doctrine, Legacy owns title to the greenbelt strip separating three of Legacy's development lots from the ETJ property to the south of the greenbelt strip. Dkt. 103, at 2.¹

1 Legacy's Second Amended Complaint asserts a strip-and-gore claim against HSBR Development, Jaffe, and the POA. However, Legacy moves for summary judgment against only HSBR Development and the POA. Jaffe joins in HSBR's response to Legacy's motion for summary judgment and has also moved for summary judgment on the strip-and-gore claim in its own motion. Dkts. 99; 43, at 23; 103, at 1.

The strip-and-gore doctrine is a presumption that when a grantor conveys land he owns adjacent to a narrow strip that thereby ceases to be of benefit or importance to the grantor of the larger tract, he also conveys the narrow strip unless he plainly and specifically reserves the strip for himself in the deed by plain and specific language. Angelo v. Biscamp, 441 S.W.2d 524, 526-27 (Tex. 1969); Cantley v. Gulf Prod. Co., 135 Tex. 339, 143 S.W.2d 912, 915 (1940). The presumption is intended to apply to relatively narrow strips of land that are small in size and value in comparison to the adjoining tract conveyed by the grantor. Angelo, 441 S.W.2d at 526-27.

In its motion for summary judgment, Legacy contends that three of its development lots (Lots K7155, K7156, and K7157) were conveyed to Legacy's predecessors-in-interest by the same grantor, Kings Land Inc., and that at the time of the conveyances, Kings Land owned the greenbelt strips and did not expressly reserve for itself any rights in the strips. Dkt. 103, at 2. Therefore, Legacy now owns the strips of greenbelt. Id. HSBR Development, Jaffe, and the POA respond that Legacy is not entitled to a presumption that it owns the greenbelt strips because: (1) the strips of land are part of a large greenbelt tract and are not small in comparison to the lots; (2) HSBR, Jaffe, and the POA are not the grantors of the lots; (3) the greenbelt strips were clearly reserved in a recorded plat and Legacy's lots were expressly conveyed in accordance with the plat; and (4) Legacy cannot show that the strips of greenbelt were of “no benefit or importance” to Kings Land at the time of the conveyance. Dkts. 112, at 1-2; 114, at 1-2. HSBR Development and Jaffe additionally argue that there is no justiciable strip-and-gore claim against them since neither claims ownership of any part of the greenbelt. Dkt. 112, at 5.

1. The summary judgment evidence

The summary judgment evidence shows that Kings Land was once the common owner of each of Legacy's three lots and the greenbelt. See Dkt. 103-1, at 9 (1971 Warranty Deed from C.T Hedges to Kings Land of property covering the lots and greenbelt strips). Kings Land then conveyed each of the three lots to Legacy's predecessors-in-interest; these conveyances were made in accordance with “Plat No. K7.1, as recorded in Vol. 3, Page 38, Plat Records, Burnet County, Texas.” See Dkt. 112-1, at 19-21 (1995 Special Warranty Deed from Kings Land to Granite Hills, Inc. for lot K7155 “described on Exhibit A” with attached “Exhibit A” listing lot K7155 “located in Plat K7.1, HORSEHOE BAY SOUTH, as recorded in Vol. 3, Page 38, Plat Records, Burnet County, Texas”); id. at 23 (1981 Warranty Deed from Kings Land to Jared and Janie Carter conveying Lot K7156 “located in Burnet County, Texas, to-wit: Lot K7156, Section K7.1, in Horseshoe Bay South, according to the plat of said section of record in Volume 3, Page(s) 38 of the Map or Plat Records of Burnet County, Texas”); id. at 25 (1981 Warranty Deed from Kings Land to Russel D. Friedrich and Patricia Friedrich conveying Lot K7157 “located in Burnet County, Texas, to-wit: Lot K7157, Section K7.1, in Horseshoe Bay South, according to the plat of said section of record in Volume, Page(s) 38 of the Map or Plat Records of Burnet County, Texas.”). Plat K7.1 shows each of the subject lots bounded by the greenbelt to the south. Dkt. 112-1, at 3 (relevant section produced below with lot K7156 highlighted and greenbelt strip marked in green).

(Image Omitted)

In 2019, each of the three lots at issue were conveyed to Legacy by their respective grantors in accordance with “Plat No. K7.1, recorded volume 3 page 38, Plat Records of Burnet County Texas.” See Dkt. 112-1, at 8 (2019 Quitclaim Deed from Vico of South Florida to Legacy for Lot K7155 stating the lot is deeded “as shown on Plat K7.1.....”); id. at 10 (2019 Warranty Deed from Raleigh Van Trease to Legacy with a legal description of “Lot K156, Section K7.1, in Horseshoe Bay South, according to the plat of said section of record in Volume 1, Page 38 of the Map or Plat Records of Burnet County” and stating that the conveyance is subject to “[v]alid and enforceable matters of record including restrictions, reservations of interest, covenants, conditions, leases....); id. at 12 (2019 Special Warranty Deed from Jason Nassour Family Partnership to Legacy conveying “the real property described in the attached Exhibit A” with attached “Exhibit A,” a legal description of the property K5157 “HORSESHOE BAY SOUTH, K-7.1, according to map or plat thereof recorded in Volume 3, Page 38 . Plat Records of Burnet County, Texas.”).

2. Defendants' objections to Legacy's summary judgment evidence, Dkt. 113

Defendants object to Legacy's evidence in support of its motion for summary judgment as to its strip-and-gore claim. Specifically, Defendants object to the affidavit of Legacy's CEO, Curtis Hodgson, opining that Legacy owns title to the greenbelt strips adjacent to Lots K7155, K7156, K7157. Dkt. 113, at 1. Defendants argue Hodgson's opinion relies on a “title search conducted by a third party that disclaims its reliability,” therefore, the affidavit and title search exhibits on which he relies should be struck. Id.

Defendants state that Hodgson, who has been designated as a testifying expert, was not designated to opine on title, and Defendants did not have an opportunity to depose him on the title issue. Id. at 2. Defendants next contend that Hodgson is not qualified to give an opinion on title because he is not a title professional, his opinion that title to the greenbelt strips was not reserved by Kings Land or conveyed to the POA is not relevant to what Legacy must prove to support its strip-and-gore claim, and his opinion is unreliable because the title company that performed the title search on which Hodgson relies disclaims its own reliability. Id. at 3. Lastly, Defendants argue that the real-property records (Exhibits B and C) attached to Hodgson's report are not properly authenticated and are passed off by Hodgson as business records, yet, on their face show they are not records made by Legacy in their regular course of business. Id. at 4.²Defendants request that the Court strike these records. Id. The undersigned held a hearing on Defendants' Objections and Motion to Strike, Dkt, 113, on March 28, 2023, each side argued their positions, and the undersigned took the motion under advisement.

2 Exhibit B contains title records of the Warranty Deed of the property encompassing the lots and greenbelt property to Kings Land and Warranty Deeds of certain greenbelt properties and street rights of way properties to the POA. Dkt. 103-1, at 7-78. Exhibit C contains title records showing the chains of title for Legacy's lots, Lots K7155-K7157. Id. at 78-162.

A sworn affidavit is competent summary judgment evidence. Fed.R.Civ.P. 56(c)(1)(A); 56(c)(4). Therefore, Hodgson's affidavit will not be struck merely because he was not designated to opine as to title in his role as a testifying witness. As to Exhibits B and C containing real property records filed in county public records, the Court may take judicial notice of such records. Fed.R.Evid. 201; W. C. Chapman, L.P. v. Cavazos, No. 4:21-cv-00893-ALM, 2022 WL 1558502, at *6 (E.D. Tex. May 17, 2022). Defendants do not contest the authenticity of the records or raise issues regarding validity of the deeds in Exhibits B and C. Therefore, Exhibits B and C, to the extent they contain matters of public record, will not be struck. Sanders v. Univ. of Texas Pan Am., 776 Fed.Appx. 835, 837 (5th Cir. 2019) (“The district court did not err by taking such judicial notice. It is well settled that courts may take judicial notice of matters of public record”). Defendants' Motion to Strike, Dkt. 113, is denied.

3. Analysis as to Legacy's strip-and-gore claim

HSBR Development, Jaffe, and the POA argue that the strip-and-gore doctrine is inapplicable to the greenbelt strips because the greenbelt strips were “clearly reserved” in Plat K7.1, and the lots were conveyed strictly in accordance with Plat K7.1; therefore, the deeds are unambiguous “as to the boundaries of the lot conveyed and whether the grantor intended to convey the strips of the greenbelt.” Dkts. 112, at 4; 114, at 5. Legacy replies that the strip-and-gore doctrine applies even to unambiguous deeds and that, while a plat referenced by a deed may describe land as though the metes and bounds are written into the deed, the plat does not define the estate as conveyed. Dkt. 120, at 4 (citing Green v. Chesapeake Expl., L.L.C., 2018 WL 6565790, at *4 (Tex. App.-Fort Worth 2018, no pet.) (citing Strayhorn v. Jones, 300 S.W.2d 623, 638 (Tex. 1957); Reeves v. Towery, 621 S.W.2d 209, 210 (Tex. Civ. App.- Corpus Christi 1981, writ ref'd n.r.e.) (holding that reference to the plat does not constitute a reservation by the grantor)).³

3 Notably, in Reeves, the land in dispute was a subsection of the conveyed lot and within the boundaries of the conveyed lot. It was marked on the plat with a dashed line marked “reserved by owner.” 621 S.W.2d at 210. The Court of Civil Appeals found the reservation ineffective primarily because there was a unity of ownership between the disputed strip of the lot and the lot itself. Id. at 213. That case is distinguished from the case here because the subject greenbelt strips were not subsections of the conveyed lots.

The undersigned is unpersuaded by Legacy's argument as to the applicability of the strip-and-gore doctrine. Here, not only were the lots conveyed with reference to Plat K7.1, which indeed indicates the metes and bounds of the lots themselves, but Plat K7.1 also clearly marks the larger greenbelt of which the greenbelt strips are a part. Dkt. 112-1, at 3. The clear marking of the lots and the greenbelt on Plat K7.1 and the conveyance of the lots both from Kings Land to Legacy's predecessors in interest, and then from predecessors in interest to Legacy in accordance with Plat K7.1, indicates that the grantors did not intend to convey the greenbelt strips.

The strips' relationship to the conveyed property also suggests the strip-and-gore doctrine does not apply. It is clear from Plat K7.1 that at the time of the conveyances of lots K7155, K7156, and K157, the greenbelt strips were not small, and isolated in comparison to the lots. They were sections of a greenbelt spanning the southernmost boundary of the Horseshoe Bay South Development.

(Image Omitted) Dkt. 112-1, at 3 (Plat K7.1, with Legacy's lots marked in yellow and greenbelt strips marked in red).

Further, Legacy has not proved that the strips ceased to be of benefit or importance to Kings Land at the time of conveyance. Whether a strip of land has ceased to be of benefit or importance to the grantor and therefore was intended by the grantor to be part of the conveyance is a function of access to the strips of land. Escondido Servs., LLC v. VKM Holdings, LP, 321 S.W.3d 102, 109 (Tex. App.- Eastland 2010, no pet.) (“Having no access to the minerals under the strip after the conveyance to Crowley Farmland Partners, it is reasonable to presume that the Crouches intended to include the strip in the conveyance. The burden then shifted to appellant to present evidence that the Crouches did not intend to convey their mineral interest in the narrow strip to Crowley Farmland Partners.”).

Here, Legacy argues that “having no access to the strips of land after the conveyances of the lots to its grantees, it is reasonable to presume that Kings Land intended to include the strips in the conveyances.” Dkt. 103, at 8. However, Plat K7.1 demonstrates that the relevant strips of greenbelt were accessible via Kings Land's greenbelt property adjoining the greenbelt strips to the east and west. Dkt. 112-1, at 3; see Strait v. Savannah Ct. P'ship, 576 S.W.3d 802, 815 (Tex. App.-Fort Worth 2019, pet. denied) (finding that where original grantor retained property to the north and west of the conveyed property and could access the retained strip at issue, the strip-and-gore doctrine did not apply as a matter of law because the grantor did not leave an “isolated, small strip”); compare Escondido Servs., 321 S.W.3d at 105 (finding that where grantor had no access to mineral interest underneath a highway strip at the time of the conveyance and waived rights of ingress and egress, the appellee presented competent evidence that the strip ceased to be of benefit or importance to the grantor).

The undersigned finds as a matter of law that the strip-and-gore presumption is not applicable because Legacy has failed to demonstrate that the greenbelt strips were small in comparison to the lots conveyed and ceased to be of value and importance to the grantor and because the strips were plainly and specifically reserved. Therefore, Legacy cannot meet its evidentiary burden to conclusively establish the applicability of the strip-and-gore doctrine. Legacy's Motion for Partial Summary Judgment, Dkt. 103, should be denied and judgment should be granted in favor of HSBR Development, Jaffe, and the POA's on Legacy's strip-and-gore claim.

B. HSBR and Jaffe's Motion for Summary Judgment, Dkt. 99

HSBR Development, and Jaffe move for summary judgment on Legacy's strip-and-gore claim, § 1983 conspiracy claim, civil-conspiracy claim, negligence and gross negligence claim, as well as their own counterclaims for breach of restrictive covenant and request for declaratory judgment. Dkt. 99, at 1-2.

1. Strip-and-gore claim

The undersigned has addressed Legacy's strip-and-gore claim in detail above and has determined that the strip-and-gore doctrine is not applicable here. See discussion supra Part III.A.3. HSBR Development and Jaffe should be granted summary judgment in their favor on this claim.

‘2. Civil conspiracy

Legacy brings a civil-conspiracy claim as to HSBR Development and Jaffe alleging that they participated in “an actionable conspiracy to accomplish an unlawful purpose by unlawful means, that being to deprive Legacy of its constitutionally protected property rights, its investment backed expectations and to prohibit Legacy from developing its Lots.” Dkt. 43, at 20. Legacy also claims the parties conspired with respect to the allocation of POA dues which Legacy states are diverted to HSBR Development and Jaffe. Id.

Under Texas law, the elements of a civil-conspiracy claim are: “(1) two or more persons; (2) an object to be accomplished; (3) a meeting of minds on the object or course of action; (4) one or more unlawful, overt acts; and (5) damages as the proximate result.” Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex. 1983). Further, “a defendant's liability for conspiracy depends on participation in an underlying tort for which the plaintiff seeks to hold at least one of the named defendants liable.” Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex. 1996); see also Walsh v. America's Tele-Network Corp., 195 F.Supp.2d 840, 850 (E.D. Tex. 2002) (“Civil conspiracy is an entirely derivative claim.”).

HSBR Development and Jaffe move for summary judgment on Legacy's civil-conspiracy claim arguing that their alleged conduct is not tortious or unlawful. Dkt. 99, at 11-17. HSBR Development and Jaffe contend that Legacy's civil-conspiracy claim is based on HSBR Development and Jaffe's permissible enforcement of the Declaration of Reservations governing use of the development lots. Id. at 11. Specifically, the Declaration of Reservations allows HSBR Development and Jaffe to enforce requirements concerning yard lights, setbacks and easements, and Architectural Committee approval for any construction and design plans. Id.

HSBR and Jaffe put forth evidence that Legacy's CEO, Curtis Hodgson, testified that Legacy was aware the development lots were bound by the Declaration of Reservations and was aware of its terms when Legacy acquired the lots. Dkts. 99, at 10-15; Dkt. 99-1, at 11-12.⁴ HSBR and Jaffe also cite portions of the Declaration of Reservations that authorize their specific actions with respect to Legacy's use of the lots. Dkts. 99, at 10-15; 99-1, at 29, 34, 37, 38, 47, 48, 54, 57.⁵

4 (Deposition Testimony of Curtis Hodgson, “Q: .was Legacy aware at the time that Legacy purchased [the development lots] that a declaration of reservations existed that ran with the lots? A: Yeah, I think so. Q: .Was Legacy aware at that time that they purchased the lots that setbacks existed in the declaration of reservation? A: Yes. Q: And at that time that the lots were purchased, were you aware that 50%--only 50%...could be covered? A: Yeah. Q: Okay. And at the time that Legacy purchased the lots, was Legacy aware that there was an architectural committee that-where plans had to be submitted, reviewed, and approved? A: You know, I think you're saying is was I aware of the restrictions and the answer is yes.”).

5 (Declaration of Reservations § 2.1 describing the Architectural Committee, § A.8 describing the Yard Light requirement, §§ B.8 and B15 describing easement requirements, § 4.4 describing the collection and uses of fees, § 4.6 covering the rights of the Declarant, § 5.6 describing the Declarant's enforcement powers, § M-1 of the Supplement to the Declaration describing uses for the mobile home district, § 7 describing approval of plans by the Architectural Committee, § E describing the Declarant's reservations, § 95 describing the Amenities Maintenance Fund authorizing payment of fees to the Amenities owner). To the extent Legacy's conspiracy claim is based on its intent to “construct a driveway” on its lots that would connect over the greenbelt to Legacy's ETJ property to the south, HSBR Development and Jaffe characterize Legacy's “driveway” as a road and state that Legacy was not permitted to construct the roadway on its single-family lot, so the conspiracy claim based on the alleged right to construct or maintain the roadway should be dismissed. Id. at 16.

Legacy responds that HSBR's and Jaffe's argument that it was enforcing the Declaration of Reservations is a red herring because Legacy's civil-conspiracy claim is “based on a strip of greenbelt not governed by the Declaration.” Dkt. 107, at 2. Legacy reasserts its strip-and-gore claim and contends that the Declaration of Reservations does not stand in the way of its rights with respect to the strip of greenbelt. Id. at 3-4. Legacy further contends that it has rightfully built not “a roadway per se, but a pavement” on its own property, the strip of greenbelt. Id. at 4. In support of its proposition that it built “a pavement” on its own property, Legacy cites the deposition testimony of Hodgson, the deposition testimony of the City's corporate representative, Sally McFeron, stating there was no ordinance in place differentiating between a driveway (which Legacy is allowed to build on its property) and a road, and the deposition testimony of Legacy employee Taylor Major, who testified the driveway or pavement is on Legacy property, not POA property. Dkt. 107, at 4.⁶

6 (citing Exhibit A, Deposition of Curtis Hodgson, stating: “We never built a roadway over their property ... the pavement and gate is on our property.”; Exhibit B, Deposition of Sally McFeron, at 57:12-59:13; Exhibit H, Deposition of Taylor Major, at 167:14-22; 169:3-7).

Legacy also argues that the deposition testimony in this case creates a fact issue as to its civil-conspiracy claim because it proves HSBR and Jaffe officials and City employees could not determine who owned the strip of greenbelt but nevertheless blocked Legacy's access to it. Dkt. 107, at 11. Specifically, Horseshoe Bay City Manager Stan Farmer testified that he was uncertain about who owned the strip of greenbelt and discussed the property with HSBR Development President Ron Mitchell. Dkt. 107, at 12 (citing Dkt. 107-1, at 77-78, 81-82, Exhibit E, Deposition of Stan Farmer, 26:11-27:09; 74:21-75:03). Farmer also emailed Mitchell and POA Executive Director Sandra Moravitz about Legacy's roadway over its development lots, across the greenbelt property. Dkt. 107, at 13 (citing Dkt. 107-1, at 79-80, Exhibit E, Deposition of Farmer, 53:7-21, 57:3-58:12). Farmer also testified he was aware Mitchell “ha[d] reservations about [Legacy] crossing the greenbelt.” Dkt. 107, at 14 (citing Dkt. 107-1, at 88, Exhibit E, Deposition of Farmer, 94:3-7). Further, Legacy's chairman Hodgson testified that HSBR Development and Jaffe were “controlling a number of things, including the POA and including the five-foot strip” and were working together to “preclude” or “stymie[ ]” mobile homes being put into Horseshoe Bay South. Dkt. 107, at 14-15 (citing Exhibit A, Deposition of Hodgson, 243:21244:02; 246:1-7; 247:21-24). Legacy argues Farmer's and Hodgson's testimony highlights facts that raise a genuine dispute of material facts on its civil-conspiracy claim. Dkt. 107, at 16.

As a threshold issue, the testimony cited by Legacy solely concerns HSBR Development and Jaffe's actions with respect to the greenbelt strip of property. But HSBR Development and Jaffe's motion concerns its actions with respect to the Declaration of Reservations and the development lots. Notwithstanding the parties' apparent differences as to what gives rise to Legacy's civil-conspiracy claim, Legacy has not demonstrated that there is a fact issue as to any unlawful or tortious conduct on the part of HSBR Development or Jaffe. Underlying both of Legacy's arguments as to the civil-conspiracy claim is the notion that Defendants conspired to deprive Legacy of its rights with respect to the greenbelt strip, which it claims it owns under the strip-and-gore doctrine. The undersigned has found that the strip-and-gore claim is inapplicable and that Defendants should be awarded summary judgment on that claim. See discussion supra Part III.A.3. Therefore, Defendants' actions with respect to the greenbelt cannot form the basis of Legacy's civil-conspiracy claim, since Legacy has no ownership rights over to the greenbelt strip. Accordingly, there is no fact issue concerning tortious conduct underlying an alleged civil conspiracy to deprive Legacy access to the greenbelt strip. HSBR and Jaffe should be awarded summary judgment in their favor as to Legacy's civil-conspiracy claim.

3. Section 1983 conspiracy claim

HSBR and Jaffe next argue that Legacy's § 1983 conspiracy claim fails because there is no evidence of agreement to commit an illegal act; Legacy's constitutional rights were not violated with respect to its ability to “construct the Roadway across the residential lot, easement and greenbelt in violation of the Declaration”; and Legacy had no right to violate the covenants and restrictions in the Declaration of Reservations. Dkt. 99, at 17. HSBR and Jaffe argue that they should also be granted summary judgment on the § 1983 conspiracy claim because the underlying § 1983 claim against the City has already been dismissed. Id. at 18 (citing Dkt. 89).

Legacy responds that there is a fact issue as to its § 1983 conspiracy claim because Horseshoe Bay City Manager Stan Farmer “had no power or authority to interfere or take steps to prevent Legacy from accessing the greenbelt, and did so ‘as a courtesy,' even entering the land to post private ‘no trespassing signs' on behalf of the POA at the City's expense.” Dkt. 107, at 17 (citing Dkt. 107-1, at 84-85, Exhibit E Deposition of Stan Farmer, 88:24-89:20). Legacy also argues that the deposition testimony shows that the “City and the POA ‘coordinated' their response to Legacy's request to access Horseshoe Bay South and would only change their opposition if Legacy (a POA member) agreed to a ‘deal' and that the Resort's POA votes would be used to counter Legacy.” Dkts. 107, at 18; 107-1, at 86-87 (citing Exhibit E, Deposition of Farmer, 90:24-91:12). Legacy contends that this testimony is sufficient to create a fact issue of an agreement among defendants to wrongfully deny Legacy deprive Legacy of its constitutional right to “access to the strip of greenbelt land which Legacy owns under the strip-and-gores doctrine.” Dkt. 107, at 18.

The undersigned has found that the strip-and-gore doctrine does not apply to the greenbelt strip; therefore, Legacy's argument that it owns the strip under the doctrine and had a protected right to build a roadway over it fails. Legacy did not possess a protected right to build a roadway over the greenbelt, so its § 1983 conspiracy claim based on denial of access to the greenbelt strip necessarily fails. HSBR and Jaffe should be granted summary judgment on Legacy's § 1983 claim against them.

4. Negligence and gross negligence

Legacy brings a claim for negligence and gross negligence against HSBR Development and Jaffe based on a “a duty to exercise ordinary care in [their] dealings with Legacy as to the Declarations and use of the of the [greenbelt strip]” which HSBR and Jaffe breached when it deprived Legacy of protected property rights, including access to the greenbelt strip. Dkt. 43, at 21-22. Legacy claims Defendants were thus negligent in depriving Legacy of “the use of the POA common owned land within the City limits [i.e., the greenbelt strip] for access” to Legacy's ETJ property south of the greenbelt. Id. at 22.⁷

7 Legacy argues both that the greenbelt strips were POA property and that it was denied access as a POA member, and that it owns the greenbelt strips under the strip-and-gore doctrine.

HSBR Development and Jaffe move for summary judgment on Legacy's negligence and gross negligence claims arguing there is no duty of care that requires HSBR and Jaffe to allow Legacy to build a roadway across Legacy's development lots and across the greenbelt strips. Dkt. 99, at 17. Defendants also argue that Legacy's negligence and gross negligence claim is barred by the economic-loss rule since the negligence claim arises from the Declaration of Reservations and recovery of economic losses in negligence is barred when the loss is the subject matter of a contract. Id. at 19.

Legacy responds that there is a genuine issue of material fact as to its negligence claim because deposition testimony substantiates Legacy's contention that HSBR and Jaffe denied access to the greenbelt strips. Dkt. 107, at 18. Specifically, Legacy cites deposition testimony that it contends proves HSBR directed the efforts to block Legacy's access to the greenbelt strips and evidence that a citation was issued to Legacy for trespassing the greenbelt strips even though “ownership of the greenbelt [strips] was unknown.” Dkt. 107, at 19. Legacy claims HSBR and Jaffe “had no right or authority, stemming from the Declaration or otherwise, to unreasonably interject themselves in the process of preventing Legacy access to the [greenbelt strip].” Id. at 20. As to Defendants' economic-loss-rule argument, Legacy states it is “not asserting that Defendants breached the Declaration”; therefore, recovery is not precluded by the economic-loss rule. Id.

Negligence actions in Texas require “a legal duty owed by one person to another, a breach of that duty, and damages proximately caused by the breach.” D. Houston, Inc. v. Love, 92 S.W.3d 450, 454 (Tex. 2002). Here, Legacy has not identified the source of Defendants' alleged duty beyond asserting that Defendants owed Legacy a “common law duty of care.” Dkt. 107, at 19. Neither does Legacy explain how the duty of care might extend to HSBR and Jaffe aiding or approving the construction of Legacy's roadway across the greenbelt strips. Dkt. 119, at 11. The undersigned has found that the strip-and-gore doctrine does not apply. Therefore, as to its negligence and gross-negligence claim, Legacy has not established that there is an applicable legal duty to help Legacy gain access to the greenbelt strip for the purposes of building a driveway or pavement over it. Because there is no fact issue as to the existence of a legal duty, Legacy's negligence and gross-negligence claims fail. HSBR Development and Legacy should be granted summary judgment on these claims.

5. Declaratory-judgment action

Legacy seeks a declaration that HSBR Development and Jaffe “do not have the unfettered power or have wrongfully exceeded their power to prohibit and deny Legacy to lawfully develop the Lots . and [have] abused [their] power in that regard or acted ultra vires.” Dkt. 43, at 15. Legacy also seeks a declaration that HSBR Development and Jaffe “acted unlawfully and in a conspiracy” with the City and POA “to deprive Legacy of its constitutionally protected property rights without justification or legal basis.” Id. HSBR and Jaffe move for summary judgment on Legacy's request for declaratory judgment. Dkt. 99, at 20.

The federal Declaratory Judgment Act is merely a procedural device that creates no standalone cause of action. Rather, the viability of a party's request for declaratory relief is dependent on that party's ability to assert a viable substantive cause of action. E.g., Collin Cnty. v. Homeowners Ass'n for Values Essential to Neighborhoods, 915 F.2d 167, 171 (5th Cir. 1990) (“[I]t is the underlying cause of action ... that is actually litigated in a declaratory judgment action.”). This means that, when a party's underlying cause of action fails as a matter of law, its claim for declaratory relief necessarily fails as well. See, e.g., Stallings v. CitiMortgage, Inc., 611 Fed.Appx. 215, 217-18 (5th Cir. 2015) (“When the other claims have been dismissed, it is appropriate also to dismiss any declaratory judgment request.”).

Here, the undersigned has determined that Legacy's conspiracy claim should be dismissed, and that Legacy has not demonstrated that it had the right to develop the lots in violation of the restrictions and covenants in the Declaration, or to build a roadway over the greenbelt strip. Accordingly, because the claims underlying the request for declaratory judgment have failed, Legacy's claim for declaratory relief fails as well.⁸

8 Legacy did not respond to HSBR development and Jaffe's declaratory-judgment arguments.

6. Counterclaims for breach of restrictive covenant and for declaratory judgment

HSBR Development and Jaffe assert counterclaims against Legacy for breach of restrictive covenant and declaratory judgment on the grounds that the portion of Legacy's roadway that crosses Lot K7156 violates covenants and restrictions in the Declaration of Reservations governing Legacy's development lots. Dkt. 59, at 7-12. HSBR Development and Jaffe move for summary judgment on these claims. Dkt. 99, at 4-5.

In support of their motion for summary judgment on their counterclaim for breach of the restrictive covenant, HSBR and Jaffe present evidence that the Declaration of Reservations applies to the lots, restricts Legacy's lots to use for single family mobile homes, requires submission to and approval of plans by the Architectural Committee, and prohibits construction of improvements in the easement. Dkts. 99, at 4-5; 99-1, at 37, 38, 65 (Declaration of Reservations §§ 3.1(g) and 3.3(B)(8) (prohibiting construction of improvements in easement), § 5.7 (restricting property to single family use), § 5.7(7) (requiring approval of all plans by the Architectural Committee)). HSBR and Jaffe also cite evidence that Legacy built a roadway over Lot K51577 without first seeking permission in violation of the Declaration. Dkts. 99, at 4; 99-1, at 20, 164 (Exhibit A, Hodgson's deposition testimony admitting Legacy did not seek permission before building the roadway and Exhibit H, Legacy's Letter to Horseshoe Bay South Residents explaining that Legacy built a roadway from 26th street north of Lot K7156, across the lot, over the greenbelt strip, across the ETJ property, and connecting to Highway 71). HSBR Development and Jaffe contend that there is no genuine dispute as to the material facts that show Legacy's roadway violates the Declaration of Reservations. Dkt. 99, at 5.

Legacy disputes that the Declaration provides the basis for HSBR and Jaffe's claim for breach of restrictive covenant, arguing that “none of the statements contained in the Declaration stand in the way of Legacy's common law ownership of the [greenbelt strip] under the strips and gores doctrine.” Dkt. 107, at 4. However, HSBR Development and Jaffe's counterclaim for declaratory judgment concerns Legacy's construction of a roadway across Lot K7156, not Legacy's roadway over the greenbelt strips. Dkt. 59, at 7-12. Legacy next argues that it did not build a “roadway” across Lot K7156, but rather a pavement and gate on its own property. Dkt. 107, at 4 (citing Dkt. 107-1, at 13, Exhibit A, Deposition of Hodgson, 282:6-18, stating: “[t]he pavement and gate is on our property”). Legacy also argues there is a fact issue as to what it constructed on Lot K7156 because there is no codified distinction between a driveway, which Legacy is permitted to build on its lots, and a road. Dkt. 107, at 4 (citing Dkt. 107-1 at 25, Exhibit B, Deposition of McFeron, Corporate Representative of the City, 57:12-59:13, stating there is no rule that delineated between a driveway or a road, based on width, or type of construction, and she could not tell whether Legacy's pavement had a destination).

Notwithstanding Legacy's arguments concerning whether it built a roadway, driveway, or pavement, Legacy offers no evidence countering HSBR and Jaffe's evidence proving that the Declaration applies to the Lots, that the Declaration requires plans to be submitted to the Architectural Committee, and that Legacy did not seek approval before constructing the driveway/roadway on Lot K7156. The undersigned finds that HSBR and Jaffe have met their burden of showing that Legacy breached the Declaration of Reservations with respect to the roadway or driveway on Lot K7156, and Legacy has not come forward with evidence creating a genuine issue of material fact. Therefore, HSBR and Jaffe are entitled to summary judgment on their counterclaims for breach of the Declaration and for declaratory judgment as to breach of the Declaration. Payne v. Wells Fargo Bank Nat. Ass'n, 637 Fed.Appx. 833, 838 (5th Cir. 2016) (affirming grant of summary judgment on plaintiff's claim for declaratory judgment because district court had properly granted summary judgment on plaintiff's underlying causes of action).

C. The POA's Motion for Summary Judgment, Dkt. 101

Legacy's strip-and-gore claim, civil-conspiracy claim, § 1983 civil conspiracy claim, negligence claim, and declaratory judgment action are brought against the POA based on the same conduct as is alleged against HSBR Development and Jaffe. Dkt. 43, at 20, 21, 23. The conduct underlying these claims as to the POA concerns Legacy's access to the greenbelt strip and Legacy's alleged ownership of the greenbelt strip under the strip-and-gore doctrine. See Dkt. 43, at 14.⁹ Because the undersigned has found that the strip-and-gore doctrine does not apply, each of Legacy's claims as to the POA for civil conspiracy, § 1983 civil conspiracy, negligence, and declaratory judgment, based Legacy's ownership of the greenbelt strip under the strip-and-gore doctrine fail. Like HSBR and Jaffe, the POA is entitled to summary judgment on these claims.

9 (seeking declaration that the “POA does not have the authority to deny Legacy access to the [greenbelt strip]”); id. at 18 (stating the POA conspired with HSBR Development, Jaffe and the City, to “deny access to the [greenbelt strip]”); id. at 21-22 (stating the POA had a duty to exercise ordinary care in its dealings with Legacy “as to the use of POA property” and committed ultra vires acts in prohibiting Legacy the use of POA common owned land within the City limits for access to the ETJ property; id. at 23-24 (stating that the POA, Jaffe, and HSBR Development claim they own or control the greenbelt strip and requesting that the Court declare that Legacy owns the greenbelt strip)).

1. Breach of fiduciary duty

Legacy brings a claim against the POA for breach of fiduciary duty alleging that the POA owes a fiduciary duty to Legacy as a member of the association to use POA property and dues in a manner consistent with the Articles of Incorporation. Dkt. 43, at 21. Legacy claims the POA breached this duty when it conspired against Legacy “to prevent Legacy from using the strip of land [‘the greenbelt strip'] that is for the benefit of the members and threatened to press criminal charges against Legacy for doing so.” Id. at 21. To prevail in a breach-of-fiduciary-duty claim, a plaintiff must prove that (1) there is a fiduciary relationship between the plaintiff and defendant, (2) the defendant breached his fiduciary duty to the plaintiff, and (3) the breach resulted in an injury to the plaintiff or benefit to the defendant. Lundy v. Masson, 260 S.W.3d 482, 501 (Tex. App.-Houston [14th Dist.] 2008, pet. denied).

The POA moves for summary judgment on this claim arguing that there is no fiduciary duty between the parties, the claim is barred by the economic loss rule, and there is no evidence of breach of fiduciary duty. Dkt. 101, at 15-17. Legacy responds that the POA's argument fails because it “presupposes that the land in question is POA property and common land.” Dkt. 109, at 5. Legacy admits that it was not “artful” in initially pleading that the greenbelt strip is POA property; it now claims that it “asserts under its strips and gores claim that it owns the strip of land.” Id. Thus, the POA's argument that all members are entitled to the use and enjoyment of POA properties and common land does not explain the POA denying Legacy the right to access the greenbelt strip. Id.

Legacy's contention that the greenbelt strip is not POA property and that, in fact, it owns the greenbelt strip, severely undercuts its breach-of-fiduciary-duty claim. The breach-of-fiduciary-duty claim is based on Legacy's allegation that as a member of the POA, the POA had a duty to grant Legacy access to the “POA greenbelt strip.” Dkt. 43, at 21. If Legacy now claims that it owns the greenbelt strip, there is no good explanation for the source of the POA's alleged duty to grant Legacy access to the strip. In sum, to the extent the breach-of-fiduciary-duty claim is brought because the POA had a fiduciary duty to the POA to grant access to common-owned property like the greenbelt strip, there is no evidence that the duty extends to its being permitted to build a road over the greenbelt strip.¹⁰ To the extent Legacy argues that it owns the greenbelt strip under the strip-and-gore doctrine, Legacy has not explained how the POA's duty to grant access to common-owned property would extend to the POA's granting access to Legacy's own property. Because the undersigned has found that strip-and-gore doctrine does not apply, to the extent the breach-of-fiduciary-duty claim is based on a denial of access to Legacy's own property, the claim fails. The POA should be granted summary judgment as to the breach-of-fiduciary-duty claim.

10 The existence of a fiduciary duty presents a question of law for the court. Nat'l Plan Admrs, Inc. v. Nat'l Health Ins. Co., 235 S.W.3d 695, 704 (Tex. 2007); Meyer v. Cathey, 167 S.W.3d 327, 330 (Tex. 2005) (per curiam). Fiduciary duties do “not extend beyond the scope of the fiduciary relationship.” Home Loan Corp. v. Tex. Am. Title Co., 191 S.W.3d 728, 733 (Tex. App.-Houston [14th Dist.] 2006, pet. denied); see also Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 159 (Tex. 2004). Under the Amended POA Bylaws, as a member of the POA Legacy has a right to the “use and enjoyment of the Properties and Common Land” subject to the Declaration of Reservations restricting the use of the Development Lots and POA property. Dkt. 102, at 10, 24.

2. Request for inspection of POA records

Legacy has requested that it be permitted to inspect the POA's books and records for “the proper purpose of determining the discriminate and unequal allocation of the dues paid by it and other members as well as the funds received by the City in support of its claims.” Dkt. 43, at 22-23. The POA moves for summary judgment on this request arguing that “[t]o date, the POA has provided all relevant and/or requested books and records, and Legacy has yet to identify any additional records that have been requested but not produced or made available.” Dkt. 101, at 21. However, to the extent that Legacy claims it has not been provided records to which it is entitled, the “POA asserts the defense that Legacy's request is governed by Section 209.005 of the Texas Property Code and that Legacy can put forth no evidence that it followed the specific procedures set out in the statute for obtaining said records.” Id. Legacy does not respond to the POA's argument concerning the inspection of records except to say that the POA's contention that “Legacy can put forth no evidence that it followed the specific procedures set out in the statute for obtaining said records” is insufficient to support summary judgment on this claim. Dkt. 109, at 19-20.

However, Legacy did not so much as plead that it met the requirements for records inspection under the Property Code, which requires that records requests must be submitted in writing, by certified mail, with sufficient detail describing the property owners' association's books and records requested, to the mailing address of the association or authorized representative as reflected on the most current management certificate. Tex. Prop. Code § 209.005(e). This claim should be dismissed without prejudice for failure to state a claim.¹¹

11 As a general rule, “[e]ven if a party does not make a formal motion under Rule 12(b)(6), the district judge on his or her own initiative may note the inadequacy of the complaint and dismiss it for failure to state a claim as long as the procedure employed is fair to the parties.” Century Sur. Co. v. Blevins, 799 F.3d 366, 372 (5th Cir. 2015) (citing 5B Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure-Civil § 1357 (3d ed. 2004)).

D. City's Amended Motion for Summary Judgment, Dkt. 105

1. Fifth Amendment takings claim

Legacy brings a Fifth Amendment takings claim arguing that Ordinance 202112 unreasonably interferes with its right to use the development lots because it imposes an extreme economic impact such as lost profits, interferes with Legacy's investment-backed expectation that it would be able to develop the lots for manufactured homes, and constitutes discriminatory zoning directed at Legacy and manufactured homes. Dkt. 43, at 16. Legacy cites unnecessarily high registration and insurance requirements for manufactured home contractors that are not applicable to non-manufactured home contractors, an “arbitrary” cap on the number of construction permits for speculative builds, high utility fees, permanent foundation requirements, and other lot requirements that render it impossible to develop the lots for manufactured home purposes. Id. at 17. Together these zoning and building requirements have allegedly caused Legacy “lost opportunity profits.” Id.

The City moves for summary judgment on Legacy's regulatory takings claim arguing that many of the complained-of requirements preceded Legacy's purchase of the lots, the City has granted every permit Legacy has applied for, issued certificates for each house Legacy has constructed on the development lots, and Legacy has sold these houses and some vacant lots for up to three times what it paid. Dkt. 105, at 2. The City argues that Legacy's takings claim is based on the suspicion that it could have potentially profited more if not for the City's zoning requirements; however, the Fifth Amendment does not guarantee the most profitable use of the property. Id. In sum, the City contends “Legacy's complaints do not arise to the level of a takings of any property.” Id.

a. The Takings framework

The Takings Clause of the Fifth Amendment provides that private property shall not “be taken for public use, without just compensation.” U.S. Const. amend. V. The “paradigmatic taking” involves the “direct government appropriation or physical invasion of private property.” Lingle v. Chevron U.S.A., Inc., 544 U.S. 528, 537 (2005). However, a taking can occur even in the absence of such a direct appropriation. “[W]hile property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.” Pa. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922). Although a taking occurs when regulation goes “too far,” the Supreme Court “has generally eschewed any set formula for determining how far is too far, choosing instead to engage in essentially ad hoc, factual inquiries.” Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'l Pan. Agency, 535 U.S. 302, 336 (2002) (cleaned up). Significantly, however, this inquiry “aim[s] to identify regulatory actions that are functionally equivalent to ... classic takings.” Lingle, 544 U.S. at 539.

The Supreme Court has identified three categories of takings. First, and not relevant here, is a direct physical taking, which occurs when the government “requires an owner to suffer a permanent physical invasion of her property.” Id. at 538. It is “inappropriate to treat cases involving physical takings as controlling precedents for the evaluation of” a regulatory taking claim. Tahoe, 535 U.S. at 324. Second, “regulations that completely deprive an owner of all economically beneficial use of her property” likewise constitute a “categorical” taking, except where principles of nuisance and property law “independently restrict” the owner's use. Lingle, 544 U.S. at 538 (cleaned up). This category “[i]s limited to ‘the extraordinary circumstance when no productive or economically beneficial use of land is permitted.'” Tahoe, 535 U.S. at 330; Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1017 (1992). Third, government action may effect a taking even if there is neither a physical taking or the complete elimination of all economically beneficial use. This category “is characterized by essentially ad hoc, factual inquiries, designed to allow careful examination and weighing of all the relevant circumstances.” Tahoe, 535 U.S. at 322 (cleaned up).

Although there is no “set formula” for this third category of taking, courts apply the three factors outlined in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978). Those factors examine: (1) “[t]he economic impact of the regulation”; (2) “the extent to which the regulation has interfered with distinct investment-backed expectations”; and (3) “the character of the governmental action.” Id. at 124. Importantly, even under the Penn Central framework, “regulatory restriction on use that does not entirely deprive an owner of property rights may not be a taking.” Horne v. Dep't of Agric., 576 U.S. 350, 364 (2015). These three inquiries “share a common touchstone” in that they each “aim[ ] to identify regulatory actions that are functionally equivalent to the classic taking” and, thus, “each of these tests focuses directly upon the severity of the burden that government imposes upon private property rights.” Lingle, 544 U.S. at 539. If the burden is too severe, a taking has occurred.

At the same time, however, the Supreme Court has cautioned against defining takings too broadly: “Land-use regulations are ubiquitous and most of them impact property values in some tangential way-often in completely unanticipated ways. Treating them all as per se takings would transform government regulation into a luxury few governments could afford.” Tahoe, 535 U.S. at 324. Thus, “[a] central dynamic of” how the Supreme Court has approached regulatory takings is “flexibility.” Murr v. Wisconsin, 582 U.S. 383, 394 (2017). Flexibility is the “means to reconcile two competing objectives”: (1) “the individual's right to retain the interests and exercise the freedoms at the core of private property ownership”; and (2) “the government's well-established power to adjust rights for the public good.” Id. (cleaned up).

b. The challenged regulations under Ordinance 2021-12

There are four basic categories of requirements or restrictions Legacy cites as the basis of its takings claim. The first is the registration and background check requirements for contractors and subcontractors working on manufactured homes. Dkt. 43, at 6. The second is the cap placed on the number of construction permits the City will issue for speculative builds. Id. at 8. The third is the utility hookup fees. Id. The fourth is Ordinance 2021-12's requirements for driveways, porches, decks, and patios. Id. Only this last category merits a takings analysis.

i. Subcontractor requirements

Throughout its pleadings, briefing, and in its expert reports, Legacy contends that Ordinance 2021-12 imposed heightened and cumbersome registration and background check requirements for subcontractors of manufactured homes as compared to subcontractors of non-manufactured homes. In its Amended Complaint Legacy pleaded:

Specifically, the Ordinance imposes additional and unnecessary burdens on Legacy's investment backed expectations for the Lots by limiting, restricting, requiring registration and high insurance requirements that drive up costs for Legacy to retain necessary subcontractors and tradesmen to develop Lots for manufactured homes as intended when purchased that are not applicable to non-manufactured home developers who can hire any electrician or plumber with less burdensome requirements. Additionally, subcontractors, plumbers and electricians working on manufactured homes are subject to business profile and background checks conducted by the City, whereas plumbers and electricians working on non-manufactured housing are not.

Id. at 16.

In Hodgson's expert report, he opined:

The City also imposed a cumbersome registration scheme defining “manufactured housing contractor'” that must be registered with the City and subject to regulation by the City. The scheme includes any third party that installs, delivers, or sets up the house, including any third-party plumber, electrician, water and wastewater contractor (such as a septic contractor) and foundation and skirting contractors. Ordinance at 3.03.006. The Ordinance requires Legacy to only use plumbers and electricians who are registered with the city as “manufactured housing contractors.” The Ordinance imposes burdens on Legacy's investment-backed expectations for the Lot by limiting, restricting, and driving up costs for necesarry subcontractors and tradesmen required for Legacy to be able to develop the Lots as intended when purchased. These burdens did not exist in City Law when Legacy purchased the property. Moreover, these additional restrictions and burdens related to the use of third-party subcontractors and tradesmen are not imposed by the City for non-manufactured home development. The City treats non-manufactured home contractors and manufactured home contractors differently resulting in diminishment of Legacy's investment-backed expectations.

Subcontractors, plumbers, and electricians working on manufactured homes are subject to business profile and background checks conducted by the City, whereas plumbers and electricians working on nonmanufactured housing are not. See 3.03.010(a)(9)(H), (G). Similarly, plumbers and electricians working on manufactured homes must provide three examples of their work on manufactured homes and provide a list of references as well as unspecified “other information” requested by the City. Plumbers and electricians working on nonmanufactured homes are not subject to these requirements. 3.03.010(a)(9)(H),(G).

Additionally, plumbers and electricians working on manufactured homes have stricter insurance requirements compared to contractors working on non-manufactured home developments. Specifically, plumbers and electricians working on manufactured homes must have minimum aggregate insurance coverage of $600,000 and $300,000 per occurrence. No such minimum requirement for plumbers and electricians working on non-manufactured homes. Instead, plumbers and electrician[s] working on non-manufactured must simply be insured. 3.03.01(a)(9)(H), (G).

Dkt. 111-1, at 24.

Legacy's expert Chad Denton opined as to the effect of the registration requirements stating:

So to make everybody go through [registration] and then go find these references and get insurance, those -- you would be lucky to find people that would even do the job to drive out there to do 45 minutes of work, an hour's worth of work, when they can stay in town and do three or four of those jobs in a day and do no paperwork and get paid. And even if you can find the person, they are going to charge you an astronomical amount of money just because there's paperwork involved, intense paperwork that the City may approve or may not at their own discretion.

Dkt. 111-1, at 231.¹²

12 The undersigned notes that despite Hodgson and Denton's characterization of the registration requirements, Legacy's contractors have been able to get registered. Dkt. 111-1, at 13 (“We use a guy out there named Sean Corker who had a struggle to get licensed. II think he eventually got it done, but this is just one of many sequential things the City of Horseshoe Bay requires. I'm just talking about this one right now but you had Sean Corker, but he did get registered.”). Hodgson also testified that while “onerous” he himself was able to register as a mobile home contractor. Dkt. 111-1, at 15.

Legacy bases its claims about the allegedly heightened registration requirements for contractors and subcontractors of manufactured homes on its understanding of the Ordinance. Specifically, Legacy contends Ordinance 2021-12 defines a “manufactured home contractor” as “any of the following who participate in the placement of any manufactured home on property in the city: ... the improvements contractor for water, wastewater, and electric utility hook ups, foundation/tie-downs and skirting.” Dkt. 111, at 8 (citing Dkt. 83-5, at 16, Ordinance 2021-12's definition of a “manufactured home contractor”). Legacy argues that because of this newly inserted definition, subcontractors working on manufactured homes are essentially classed as manufactured home contractors and are subject to the heightened contractor (as opposed to subcontractor) requirements. Dkt. 111, at 8.

Legacy misinterprets the Ordinance as to the registration requirements.¹³Under sections F (registration for general commercial contractors and general residential contractors), G (registration for mechanical, electrical, plumbing, and irrigation subcontractors), H (registration for manufactured home contractors), and the definition of manufactured home contractors, the registration requirements for mechanical, electrical, plumbing, and irrigation subcontractors is the same whether that subcontractor is working on a manufactured home or a non-manufactured home. Dkt. 83-5, at 16, 20-22. Ordinance 2021-12 does not make a subcontractor hired by Legacy the equivalent of a manufactured home contractor subject to heightened requirements, as Legacy alleges.

13 Elsewhere, Hodgson states that “plumbers and electricians working on manufactured homes must have minimum aggregate insurance coverage of $600,000 and $300,000 per occurrence” while “[n]o such minimum requirement exists for plumbers and electricians working on non-manufactured homes. Instead, plumbers and electrician[s] working on nonmanufactured homes must simply be insured. 3.03.01(a)(9)(H), (G).” Dkt. 111-1, at 24. To the contrary, the Ordinance clearly requires contractors working on general commercial and residential projects to have at least $500,000 in insurance per occurrence, and at least $1,000,000 in aggregate insurance. Dkt. 83-5, at 21.

Legacy's experts have opined that the pre-taking value of each lot was $35,000, and the value after the taking is $5,000 per lot. Dkt. 111-1, at 33. Even if there were higher registration requirements for manufactured home contractors and subcontractors compared to non-manufactured home contractors and subcontractors, Legacy's experts have not connected the higher registration requirements with the post-taking lot value diminution. Even if they had, their methodology with respect to the registration requirements would be flawed, because the regulation does not impose heightened burdens on contractors and subcontractors of manufactured homes as compared to contractors of non-manufactured homes. The undersigned declines to adopt Legacy's pre- and post-taking valuation with respect to the registration requirements. DM Arbor Court, Ltd. v. City of Houston, Tex., No. 4:18-CV-01884, 2023 WL 4462076, at *15 (S.D. Tex. July 11, 2023) (“To be clear, the Court finds that the experts for both DMAC and the City rely on flawed assumptions to calculate the value of Arbor Court before permit denial. Marchitelli, DMAC's expert, calculates the value of Arbor Court as though Hurricane Harvey had never happened, and Arbor Court had not been damaged in any way. This methodology is not persuasive. But neither is the Court persuaded by the methodology of Torzewski, the City's expert, who calculated the ‘before' value of Arbor Court as though it would be kept in its state of disrepair forever. Thus, the Court declines to adopt the ‘before' valuations of either party's expert.”). Accordingly, there is no reliable evidence as to the pre- and post-taking valuation of the lots with respect to the registration requirements.

In the absence of evidence of the pre- and post-taking value of the lots, Legacy cannot show that the registration requirements have had an economic impact rising to the level of a taking. Keystone, 480 U.S. at 497 (stating the economic impact of a regulation, compares the value that has been taken from the property with the value that remains in the property). Therefore, Legacy cannot meet its burden with respect to its takings claim based on the registration requirements.

ii. Limitations on speculative builds

Similarly, Legacy's takings claim based on Ordinance 2021-12's cap on permits for speculative builds also fails. Legacy has pleaded that, because it takes seven months to develop a manufactured home in the Horseshoe Bay, “it would take Legacy 87 years to develop all of its lots, if it developed two lots at a time.” Dkt. 43, at 17.¹⁴However, the 2-permit cap for speculative builds existed under Ordinance 9,-08-25D, adopted August 25, 2009, ten years before Legacy bought its development lots. Dkt. 105, at 8 (citing 105-1, at 4, Exhibit F, McFeron Declaration; Ordinance 9,-08-25D Codified at City of Horseshoe Bay Code of Ordinances, § 3.03.010(c)).

14 Notably, the City does not impose a limit on how many construction permits it will issue for manufactured homes that have already been sold, the 2-permit cap applies only to speculative builds.

For the purposes of determining the economic impact of a regulation, investment-backed expectations are evaluated at the time that the owner purchased the property. Love Terminal Partners, L.P. v. United States, 889 F.3d 1331, 1345 (Fed. Cir. 2018). Thus, “‘what is relevant and important in judging reasonable expectations' is ‘the regulatory environment at the time of the acquisition of the property.'” See Bridge Aina Le'a, LLC v. Land Use Commn, 950 F.3d 610, 634 (9th Cir. 2020); see also Murr, 582 U.S. at 398 (“A reasonable restriction that predates a landowner's acquisition, however, can be one of the objective factors that most landowners would reasonably consider in forming fair expectations about their property.”). Here, where the City's speculative housing permit cap was in place for over a decade before Legacy purchased its lots, Legacy cannot show the requisite interference with respect to a reasonable investment-backed expectation. The 2-permit cap on speculative builds, therefore, is not an appropriate basis for Legacy's takings claim.

iii. Utility fees

Legacy contends that Ordinance 2021-12 requires Legacy to rent equipment costing $2,525 and pay a fee of $10,105 for utility hook ups, even though manufactured homes have a much smaller footprint than non-manufactured homes. Dkt. 43, at 8. Legacy claims that the fees are part of the City's plan to stymie Legacy “with the ... result being a taking due to the impossibility of compliance.” Dkt. 11, at 15.

As to these fees, it is well-settled that “that taxes and user fees ... are not ‘takings.'” Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595, 615 (2013) (alterations omitted). Because Legacy's challenge is directed at the user fees and connection costs that the City charges for its sewer services, it has not alleged a “taking” compensable under the Fifth Amendment and the fees are not an appropriate basis for Legacy's takings claim. Id.

iv. Zoning requirements under Ordinance 2021-12

As to zoning requirements under Ordinance 2021-12, Legacy disputes the requirements that each home must include a paved driveway of not less than 400 square feet and at least 12 feet wide, and decks, porches, and patios with a combined area of 150 square feet, which cannot encroach on the setback. Dkt. 43, at 10. Legacy states that after accounting for these requirements, only 1,725 square feet is left for a manufactured home. Id. Legacy also contends that Ordinance 2021-12 requires that manufactured homes have permanent foundations and that manufactured homes placed on the development lots be fewer than three years old. Dkt. 43, at 8-9. The undersigned will examine whether these requirements rise to the level of a taking and whether the City has met its burden with respect to its motion for summary judgment, or if Legacy has presented evidence that raises a fact issue as to Ordinance 2021-12's economic impact on the value of Legacy's property, and its investment-backed expectations.

c. Takings Analysis i. The economic impact of the regulation

To assess a regulation's economic impact, courts in the Fifth Circuit “compare the value that has been taken from the property with the value that remains in the property.” Hackbelt 27 Partners, L.P. v. City of Coppell, 661 Fed.Appx. 843, 850 (5th Cir. 2016). The Supreme Court has long held “mere diminution in the value of the property, however serious, is insufficient to demonstrate a taking.” Concrete Pipe, 508 U.S. at 645.

Legacy's experts, Hodgson and Denton, offer two methods of valuation. The first is the pre- and post-taking value of the development lots; the second is based on expected profits from selling the lots with a manufactured house factoring in the costs of building the house pre-and post-taking value. Dkt. 111-1, at 32-33. As to the value of the lots, Hodgson and Denton opine that the lots have a pre-taking value of $35,000/each and a post-taking value of $5,000/each, representing an 85% diminution in value. Id. As to the expected profits method of valuation, Denton and Hodgson opine that the pre-taking profits, after accounting for fixed costs and marketing, is $60,500 per lot with a home. Id. Post-taking, development costs rise from $30,000 to $45,000, resulting in post-taking profits of $45,500 ($60,500 pre-taking profit minus $15,000 in increased post-taking costs), representing a diminution in profits of 75%. Id. The undersigned will not consider hypothetical lost profits because “[w]hen analyzing the economic impact of a regulation, the loss of anticipated gains or potential future profits is typically not considered.” Hackbelt 27 Partners, 661 Fed.Appx. at 850 (citation and internal quotation marks omitted).

As to the 85% diminution in lot value, however, though a mere diminution cannot support a takings claim, 85% is in the realm of value diminutions that courts have found can support a takings claim. Concrete Pipe, 508 U.S. at 645 (mere diminution in value is not sufficient to state a takings); Penn Cent., 438 U.S. 131 (citing instances where no taking occurred though property value was diminished 75 percent and 87.5 percent by zoning laws); see also, e.g., Pulte Home Corp. v. Montgomery Cnty., 909 F.3d 685, 696 (4th Cir. 2018) (even assuming an 83% reduction in value of land is not enough to establish a taking); MHC Fin. Ltd. P'ship v. City of San Rafael, 714 F.3d 1118, 1127 (9th Cir. 2013) (81% reduction in value not sufficient to constitute a taking); Colony Cove Props., LLC v. City of Carson, 888 F.3d 445, 451 (9th Cir. 2018) (diminutions ranging from 75% to 92.5% not sufficient to constitute a taking); CCA Assocs. v. United States, 667 F.3d 1239, 1246 (Fed. Cir. 2011) (“[W]e are ‘aware of no case in which a court has found a taking where diminution in value was less than 50 percent.'”).

However, two issues preclude the undersigned from finding that the diminution in value and resulting economic impact weigh in favor of Legacy in the takings analysis. The first is that the $5,000/lot post-taking valuation assumes that under the regulations “it is no longer financially feasible to develop the property” and that “development is no longer viable.” Dkt. 111-1, at 33. Yet, Legacy's experts concede that the new requirements merely increase development costs. In other words, Legacy's experts have not shown that the lots are now undevelopable for manufactured housing and thus, only worth their lot value. The second issue is that since the adoption of Ordinance 2021-12, Legacy has sold some of the undeveloped lots for approximately $15,000 each, three times what it paid for them and three times the proposed post-taking value. Dkt. 105-2, at 65 (Hodgson's deposition testimony stating: “Q: You've sold some raw lots too. What was the price you got for the raw lots individually that you sold? A: I think on average about 15,000.”). Based on these issues, the undersigned finds that the economic impact factor favors the City. MDG-Rio V Ltd. v. City of Seguin, Texas, No. SA-18-CV-0882-JKP, 2021 WL 4267718, at *13 (W.D. Tex. Sept. 17, 2021) (finding that where appraisal scenarios demonstrated that a property could still be developed, and the property was worth more than what the Plaintiff paid for it, even with the zoning ordinances, the economic impact factor favored the City).

ii. The extent to which the regulation interfered with Legacy's investment-backed expectations

As to the extent to which Ordinance 2021-12 interferes with Legacy's investment backed expectations, “what is ‘relevant and important in judging reasonable expectations' is ‘the regulatory environment at the time of the acquisition of the property.'” Love Terminal Partners, L.P. v. United States, 889 F.3d 1331, 1345 (Fed. Cir. 2018) (quoting Commonwealth Edison Co. v. United States, 271 F.3d 1327, 1350 n.23 (Fed. Cir. 2001) (en banc)). “Not every investment-backed expectation can form the basis for a regulatory takings claim; instead, a claimant must establish interference with a reasonable investment-backed expectation.” Hackbelt 27 Partners, L.P., 661 Fed.Appx. at 850 (citation, emphasis, and internal quotation marks omitted). One factor that courts consider is whether the investor knows of the existing zoning. Id. Further, the Supreme Court has found it “quite simply untenable” that parties “could establish a ‘taking' simply by showing that they have been denied the ability to exploit a property interest that they heretofore had believed was available for development.” Penn Cent., 438 U.S. at 130.

Here, Legacy maintains that its investment-backed expectation prior to Ordinance 2021-12 was to “use its Lots for manufactured homes” or “develop the Lots for manufactured homes.” Dkt. 43, at 15-16. Legacy claims that Ordinance 2021-12 has “prevented Legacy from developing its lots so as to completely frustrate Legacy's investment backed expectations.” Dkt. 111, at 14. In support of this contention Legacy cites the expert report of Hodgson who states that after accounting for Ordinance 2021-12's lot requirements, “only 1,725 square feet of land is available ... which is too small.” Dkt. 111, at 12 (citing Dkt. 111-1, at 30, Hodgson's Expert Report). The City responds that a commercial home developer like Legacy could not “have a reasonable investment-backed expectation of developing 294 city lots unencumbered by local zoning and building requirements.” Dkt. 105, at 15.

Here, the evidence demonstrates that Legacy knew the development lots were within the City's limits and subject to its zoning authority. Dkt. 105-2, at 18.¹⁵As the Supreme Court has held, “those who do business in a regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end.” Concrete Pipe, 508 U.S. at 645. Likewise, when buying its lots in the M-1 zoning classification in the City of Horseshoe Bay, Legacy could not reasonably expect that the City would never adopt or update its zoning and building regulations as the City developed. Id.; see also Rancho de Calistoga v. City of Calistoga, 800 F.3d 1083, 1091 (9th Cir. 2015) (“Simply put, when buying a piece of property, one cannot reasonably expect that property to be free of government regulation such as zoning, tax assessments, or, as here, rent control.”). As stated, the reasonable expectation prong of the Penn Central test focuses on the existing use of the property as a basis for ascertaining the owner's “primary expectation concerning the use of the parcel.” 438 U.S. at 136. Here, Legacy knew the lots were subject to certain zoning rules and it was not reasonable to expect that those rules would never change. Also, Legacy can still develop the lots for manufactured housing. Therefore, its stated investment-backed expectation that it would be able to develop the lots for manufactured housing has not been interfered with. The undersigned finds that the interference with investment-backed expectations factor favors the City.

15 (Hodgson deposition testimony stating: “Q: What due diligence did you do to determine whether [the development lots] would be a good business opportunity for Legacy? A: Drove out there and looked at it and I guess confirmed that it was zoned for manufactured housing and that was about it. I may have looked at whatever ordinances there were or homeowner restrictions there were. I probably did. Q: You said you at least confirmed the zoning was for manufactured housing and may have looked at the ordinance. So you knew at that time that Horseshoe Bay South neighborhood was zoned M-1, manufactured, under the City of Horseshoe Bay's ordinances, correct? A: Correct. Q: Did you look at the setback requirements at that time? A: It wasn't too deep into where I became aware of the setbacks ... I had the advantage of being able to go out there and see 50-100 homes that were already installed.. Q: You learned that there were, in fact, setback requirements in the M-1 zone, correct? A: Somewhere along the way, yes. Q: All right. And you know specifically those are 10 feet front yard setback and 15 feet rear yard setback, and 5 feet on both side yards, correct? A: I think you recited them correctly.”).

iii. The character of the governmental action

The character of the governmental action is the last factor relevant to the takings analysis. Lingle, 544 U.S. at 539. In Lingle, the Supreme Court distinguished between regulations that “amount[ ] to a physical invasion,” and those that “merely affect[ ] property interests through ‘some public program adjusting the benefits and burdens of economic life to promote the common good.'” Id. (quoting Penn Central, 438 U.S. at 124). When the government “forc[es] some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole,” that denotes a taking. Id. at 537 (quoting Armstrong v. United States, 364 U.S. 40, 49 (1960)). To that end, “government action that singles out a landowner from similarly situated landowners raises the specter of a taking.” Bridge Aina Lea, 950 F.3d at 636.

With respect to the character of the City's actions, the City contends that each of Ordinance 2021-12's requirements “advance the City's legitimate and substantial interest in promoting consistent neighborhood aesthetics and functional housing characteristics in the development of Horseshoe Bay South.” Dkt. 105, at 16. The City characterizes the requirements as standard zoning tools that allow it to plan and direct orderly development throughout Horseshoe Bay South. Id. Legacy makes no arguments concerning whether Ordinance 2021-12 is inconsistent with surrounding and existing uses or and does not counter the City's characterization of the nature of its actions.

As noted above, when regulations “arise[ ] from some public program adjusting the benefits and burdens of economic life to promote the common good” they are less likely to be considered a taking. Penn Cent., 438 U.S. at 124. Regulations that control development based “on density and other traditional zoning concerns” are the paradigm of this type of public program. Henry v. Jefferson Cty. Commn, 637 F.3d 269, 277 (4th Cir. 2011). Thus, the Supreme Court held in Penn Central that “[z]oning laws are, of course, the classic example, ... which have been viewed as permissible governmental action even when prohibiting the most beneficial use of the property.” 438 U.S. at 125. Based on these principles, the undersigned finds that character of the government action factor weighs in favor of the City.

* * *

Viewing the facts in the light most favorable to Legacy, considering the totality of the circumstances with particular emphasis on the three Penn Central factors, and balancing those factors, the undersigned finds that the City carried its burden to show that it is entitled to judgment as a matter of law on Legacy's Fifth Amendment takings claim. Because all three of the factors identified in Penn Central appear to support the City, the undersigned recommends that the District Court grant the City's motion for summary judgment as to Legacy's takings claim.

2. Counterclaim for breach of contract/restrictive covenant and for declaratory judgment.

The City asserts permissive counterclaims against Legacy, invoking the Court's supplemental jurisdiction under 28 U.S.C. § 1367. Dkt. 11 at 9. The City's counterclaims concern “Legacy's threatened and ongoing violations of the City's zoning ordinances and a recorded development agreement governing the development of [the ETJ property].” Id. at 10.

The City contends that the ETJ property, which was acquired by Legacy from 71 Landholdings out of a larger 403.57-acre parcel, is subject to a 2016 Development Agreement between the City and 71 Landholdings. Id. at 11-12. The City argues that the 2016 Development Agreement is binding upon 71 Landholdings' “successors and assigns and runs with the entire 403.57 acres,” including Legacy's 94.77-acre ETJ property. Id. at 12. The 2016 Development Agreement provides:

The Owner covenants and agrees not to use the Property for any use other than for agriculture, wildlife management, and/or timber land consistent with Chapter 23 of the Texas Tax Code which will include for purposes of this Agreement, existing single-family residential use of the Property, without the prior written consent of the City. The Owner shall be permitted to construct a single-family residence, storage buildings and other related outbuildings such as barns, livestock pens, shelters and containments, all as may be used in conjunction with agricultural, wildlife management and/or timber land, but Owner will deliver prior written notice to the City of such construction activities to determine if a permit is required. Owner covenants and agrees to the stated use of the Property described above, which shall not include any subdivision and/or commercial development.

Id.

The City alleges that Legacy has recently violated this covenant by constructing a “wide, blacktop, road running the length of the ETJ Property.” Id. The road runs from Highway 71 at the southernmost end of the ETJ property to the northernmost boundary, where the ETJ meets the greenbelt. Id. at 12, 15. Just beyond the greenbelt, the road meets Legacy's development lots in the City and connects to 26th Street, a municipal road. Id. The City argues that Legacy's road is inconsistent with single-family or agricultural use and “was instead designed to connect Legacy's development in the City with Highway 71 to facilitate its commercial manufactured housing development.” Id. at 13.

Prior to Legacy's construction of the road, Horseshoe Bay's City Manager and City Attorney notified Legacy that its plan to connect Highway 71 through the ETJ property to Legacy's lots in the City was not allowed under the 2016 Development Agreement governing use of the ETJ property. Id. After Legacy began construction on the road, the City issued stop work orders and the POA placed barriers and “no trespassing” signs to prevent Legacy from connecting the road through the greenbelt to Legacy's development lots and 26th Street on the other side. Id. at 14. Legacy ignored these orders and signs and continued working on the road, eventually working under cover of night to connect the road over the greenbelt. Id.

The City alleges that in publicizing its planned development on the lots located in the City limits, Legacy has advertised exclusive use of the road to access Highway 71 and stated its intention to build an amenity package on the ETJ property that would be accessible to future residents of the planned development. Id. at 15-16. According to the City, Legacy has essentially announced that it will “continue to develop the ETJ Property in a manner that plainly violates the existing development restrictions applicable to its property” by advertising to future tenants of the City lots that it may one day build a pool, playgrounds, and a community center on the ETJ property. Id. at 16.

The City brings permissive counterclaims for breach of the 2016 Development Agreement and seeks a declaration that: (1) Legacy and the road across the ETJ property are subject to the 2016 Development Agreement; and (2) Legacy's plans to build a swimming pool, community center, and playground are subject to and prohibited by the Development Agreement. Id. at 17-19. The City moves for summary judgment on its claim for breach of the Development Agreement and request for declaratory judgment contending that it can conclusively establish: (1) Legacy acquired the ETJ property subject to an existing Development Agreement; (2) the Development Agreement's limits the use of the ETJ property to agricultural or singlefamily residential purposes and expressly prohibits subdivision or commercial development; and (3) Legacy has breached the Development Agreement by building a roadway over the ETJ property connecting its development lots to Highway 71. Dkt. 105, at 2. Accordingly, the City contends it is entitled to an affirmative summary judgment declaring Legacy's construction and use of the road over the ETJ Property, and any future non-conforming use of the ETJ property to be a breach of the Development Agreement. Id.

Legacy responds that there is a fact question concerning whether Legacy violated the Development Agreement by constructing a road across the ETJ Property because there is evidence that the “pavement installed by Legacy was a driveway [for which Legacy has a permit] and not a road.” Dkt. 111, at 15 (citing Dkt 111-1, at 44, Deposition of McFeron, 59:14-60:02). Legacy further responds that the existence of the disputed road/driveway is the only basis for the City's belief that Legacy planned to develop the ETJ the property and that there was nothing to support that contention besides the personal opinion of Horseshoe Bay's City Manager. Id. Lastly, Legacy argues that it has raised the affirmative defense of prior material breach by the City, precluding summary judgment on the City's claim for breach of the Development Agreement. Id.

A “restrictive covenant” is a negative covenant that limits permissible uses of land. Restatement (Third) of Prop.: Servitudes § 1.3(3) (2000). The original grantor of the property is entitled to enforce a restrictive covenant on that property. Eakens v. Garrison, 278 S.W.2d 510, 514 (Tex. Civ. App.-Amarillo 1955, writ ref'd n.r.e.); Pierson v. Canfield, 272 S.W. 231, 233 (Tex. Civ. App.-Dallas 1925, no writ). A restrictive covenant can bind a successor to the burdened land in two ways: as a covenant that runs with the land at law or as an equitable servitude. TXFar W., Ltd. v. Texas Invs. Mgmt., 127 S.W.3d 295, 302 (Tex. App.-Austin 2004, no pet.); Reagan Nat'l Adver. of Austin, Inc. v. Capital Outdoors, Inc., 96 S.W.3d 490, 495 (Tex. App.- Austin 2002, pet. granted, judgm't vacated w.r.m.). In Texas, a covenant runs with the land when (1) it touches and concerns the land; (2) it relates to a thing in existence or specifically binds the parties and their assigns; (3) the original parties to the covenant intend it to run with the land; and (4) the successor to the burden has notice. Inwood N. Homeowners' Assn v. Harris, 736 S.W.2d 632, 635 (Tex.1987); TX Far W., Ltd., 127 S.W.3d at 302; see also Westland Oil Dev. Corp. v. Gulf Oil Corp., 637 S.W.2d 903, 911 (Tex. 1982); Wayne Harwell Props. v. Pan Am. Logistics Ctr., 945 S.W.2d 216, 218 (Tex. App.-San Antonio 1997, writ denied); Panhandle & S.F. Ry. Co. v. Wiggins, 161 S.W.2d 501, 504-05 (Tex. Civ. App.-Amarillo 1942, writ ref'd w.o.m.). In addition to these fundamental requirements, restrictive covenants are construed liberally “to give effect to [their] purposes and intent.” Tex. Prop. Code § 202.003(a) Finally, purchasers are charged with notice of the terms of deeds that form an essential link in their chain of ownership. Cooksey v. Sinder, 682 S.W.2d 252, 253 (Tex. 1984); Westland Oil, 637 S.W.2d at 908.

The Development Agreement at issue in this case runs with the ETJ property and is binding on the City and the landowner and on their respective successors and assigns for the term of the agreement. Tex. Local Gov't Code § 212.172(f) (“The contract between the governing body of the municipality and the landowner is binding on the municipality and the landowner and on their respective successors and assigns for the term of the contract.”). The Development Agreement has renewed automatically under its own terms, has not been terminated by either party, and remains in effect. Dkts. 105-14, at 3 (Declaration of City Manager Jeff Koksa); 11-2, at 2-6. Legacy admits that it knew the ETJ property was encumbered by the Development Agreement at the time it purchased the lots. Dkts. 105-2, at 45 (Exhibit A, Hodgson Deposition, 171:1-5; 15, at 2). Therefore, each of the elements of a binding restrictive covenant has been established.

The next issue is whether Legacy's existing driveway/road over the ETJ property conforms to the uses outlined for the ETJ property in the Development Agreement or breaches the Development Agreement. A court's primary concern when construing a written contract is to ascertain the true intentions of the parties as expressed in the instrument. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983); Heil Co. v. Polar Corp., 191 S.W.3d 805, 810 (Tex. App.-Fort Worth 2006, pet. denied). This is achieved by examining and considering the entire writing in an effort to harmonize and give effect to all provisions of the contract so that none will be rendered meaningless. Coker, 650 S.W.2d at 393. Courts presume that the parties to the contract intend every clause to have some effect. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996); XCO Prod. Co. v. Jamison, 194 S.W.3d 622, 627 (Tex. App.-Houston [14th Dist.] 2006, pet. denied). It gives terms their plain, ordinary, and generally accepted meaning unless the contract shows the parties used them in a technical or different sense. Heritage Res., 939 S.W.2d at 121. A contract that can be given a definite or certain legal meaning is unambiguous as a matter of law. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003).

Here, the Development Agreement is clear and unambiguous in its limitations on the use of the ETJ property. It restricts use of the ETJ property to agriculture, wildlife management, and/or timber land consistent with Chapter 23 of the Texas Tax Code, which includes for purposes of the agreement the existing single-family use of the Property. Dkt. 11-2, at 3. Despite this restriction, Legacy has constructed a divided roadway across the ETJ Property creating a path from Highway 71 to Stag Street in the north of the development lots and constructed automatic gates on either end. Dkts. 105-2, at 45-7 (Exhibit A, Hodgson Deposition, 170:14-25; 175:1-15; 283); 105-3, at 23-5 (Exhibit B, Deposition of Taylor Major, 82:1-92:13). Legacy circulated a letter to residents in South Horseshoe Bay announcing that it had constructed the roadway through the ETJ property to Highway 71 and offered an “exclusive opportunity” to receive a gate opener to use the roadway. Dkt. 105-3, at 203. Legacy then distributed gate openers for others to use the roadway. Dkt. 105-3, at 203; 1052, at 46, 73 (Exhibit A, Hodson Deposition, 175:12-18; 283:25-285:16).

By constructing the roadway and allowing public use of the road by providing clickers for members of the public to use the road to travel between Horseshoe Bay South and Highway 71, Legacy breached the limitation that the ETJ property be used only for agricultural, wildlife, timber land, or single-family use. The undersigned finds that the City is therefore entitled to summary judgment on its claim for breach of the Development Agreement and is entitled to a declaration stating that the roadway violates the Development Agreement.

As to any planned future development of the ETJ property, while the City has pleaded that Legacy has stated its intent to build a “multi-acre amenity package” on the ETJ Property, “that could possibly include a brand-new swimming pool, state of the art playgrounds, and multi-purpose community center,” Legacy has not yet done so. Dkt. 11, at 15-16. However, such development of the ETJ property would also plainly violate the limitations in the Development Agreement. The City is therefore also entitled to a declaration that Legacy's use of the ETJ Property for the development of the foregoing amenities, or others like them, would be in violation of the Development Agreement.

As to Legacy's argument that it has raised an affirmative defense precluding summary judgment, in order to defeat summary judgment by raising an affirmative defense, the nonmovant must do more than just plead the affirmative defense. Lunsford Consulting Grp., Inc. v. Crescent Real Estate Funding VIII, L.P., 77 S.W.3d 473, 475-76 (Tex. App.-Houston [1st Dist.] 2002, no pet.) (citing Am. Petrofina, Inc. v. Allen, 887 S.W.2d 829, 830 (Tex.1994)). The nonmovant must come forward with evidence sufficient to raise a genuine issue of material fact on each element of the affirmative defense. Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984); Anglo-Dutch Petroleum Int'l, Inc. v. Haskell, 193 S.W.3d 87, 95 (Tex. App.-Houston [1st Dist.] 2006, pet. denied).

Here, Legacy has raised the affirmative defense of prior material breach against the City's counterclaim and puts forth evidence it argues shows that the City interfered with Legacy's relationship with the Texas Department of Transportation (“TxDOT”) regarding the construction of the driveway/roadway on the ETJ property. Dkt. 111, at 16. Specifically, Legacy contends “there is evidence in the record from which a reasonable jury could conclude that [Development Services Director for the City] Sally McFeron and [former City Manager] Stan Farmer went out of their way to try and get TxDOT to take action that would trigger annexation of the land in the ETJ, despite a lack of evidence that Legacy had violated the Development Agreement.” Id. However, the only evidence cited is McFeron's deposition testimony was that she wrote in an email “[t]he driveway permit and the construction will constitute a trigger for annexation of the property into the City of Horseshoe Bay. The permit is the key.” Id. (citing Dkt. 111-1, at 56).

Legacy has done little more than raise its affirmative defense of prior material breach, and it certainly has not come forward with evidence sufficient to raise a genuine issue of material fact on each element of its affirmative defense. It has not explained how the City's actions constitute a breach of the Development Agreement. See Dkt. 15, at 5 (Legacy's Answer to the City's Counterclaims stating: “Legacy asserts the affirmative defense of prior material breach. The City engaged in conduct of interfering with Legacy's relationship and permit with TxDot regarding the installation of the driveway on property outside the City limits which is not prohibited under the Development Agreement. The City is in breach of the Development Agreement by failing to honor the obligations and promises stated therein.”). Thus, Legacy has failed to defeat the City's entitlement to summary judgment by raising an affirmative defense. See Brownlee, 665 S.W.2d at 112 (holding that party opposing summary judgment by relying on affirmative defense “must come forward with summary judgment evidence sufficient to raise an issue of fact on each element of the defense to avoid summary judgment”); Haskell, 193 S.W.3d at 95 (same). Therefore, the City should be awarded summary judgment on its counterclaim for breach of the Development Agreement and is entitled to declaratory judgment as to Legacy's breach and proposed future development of the ETJ property.

IV. ORDER AND RECOMMENDATION

In accordance with the foregoing discussion, the undersigned RECOMMENDS that the District Court DENY Legacy's Motion for Partial Summary Judgment, Dkt 103; DENY HSBR Development and the POA's Objections to Legacy's Summary Judgment Evidence, Dkt. 113; GRANT HSBR Development and Interests's Motion for Summary Judgment, Dkt. 99, GRANT the POA's Motion for Summary Judgment, Dkt. 101; and GRANT the City's Motion for Summary Judgment, Dkt. 105.

V. WARNINGS

The parties may file objections to this Report and Recommendation. A party filing objections must specifically identify those findings or recommendations to which objections are being made. The District Court need not consider frivolous, conclusive, or general objections. See Battle v. United States Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987). A party's failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report and, except upon grounds of plain error, shall bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53 (1985); Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc).