Petition for Writ of Mandamus Conditionally Granted and Memorandum
Opinion filed January 4, 2013.




                                     In The

                      Fourteenth Court of Appeals

                               NO. 14-12-00861-CV



                     IN RE CITY OF HOUSTON, Relator


                        ORIGINAL PROCEEDING
                          WRIT OF MANDAMUS
                       County Civil Court at Law No. 3
                            Harris County, Texas
                        Trial Court Cause No. 921541

                       MEMORANDUM OPINION
      Relator, the City of Houston, filed a petition for writ of mandamus in this
court seeking relief from an order denying discovery of information concerning the
development and/or sale of the real property at issue in the underlying suit. The
real party in interest, Memorial Estate Builders, LLC (MEB), sued the City seeking
declaratory relief and alleging that it is entitled to damages for inverse
condemnation through a regulatory taking. See Tex. Const. art. I, § 17. The City
asks this court to direct the Honorable Linda Storey, the presiding judge of Harris
County County Civil Court at Law No. 3, to grant its motion to compel the
requested discovery. The City also filed a motion for temporary relief, asking that
we stay the trial that was scheduled to commence in October of 2012, asserting that
it had been improperly denied discovery of information vital to its defense. See
Tex. R. App. P. 52.8(b); 52.10. After providing MEB an opportunity to respond to
the motion for stay, this court granted the City’s motion and issued an order
staying the trial pending resolution of this proceeding. Because MEB failed to
object to the City’s discovery requests, and the information the City seeks goes to
the heart of MEB’s claim for lost profits, we conditionally grant the writ.

                                I. BACKGROUND

      MEB filed an application to replat two vacant residential lots in Monarch
Oaks Subdivision (the property) into six lots in May 2006. The application was
denied, purportedly because development of the replatted lots would conflict with
existing deed restrictions requiring that construction be set back twenty-five feet
and that residences face the street. After the first application was denied in August
2006, the homeowners in Monarch Oaks Subdivision amended the deed
restrictions to expressly prohibit subdividing lots. The City then denied MEB’s
second application to replat in October 2006.

      In 2008, MEB sued the City, seeking damages of over $1 million for an
inverse condemnation by regulatory takings claim based on the City’s 2006 denial
of MEB’s applications to subdivide the property. MEB alleges in its suit that
because of the City’s action, it could not develop the land as it desired, suffering a
loss of potential profits from the sale of subdivided lots and/or the development
and sale of multiple building sites. MEB alleged an inverse condemnation claim
under Article I, section 17 of the Texas Constitution, which prohibits a person’s


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property from being “taken, damaged or destroyed for or applied to public use
without adequate compensation being made, unless by the consent of such
person.”1 Tex. Const. art. I, § 17.

       The City propounded discovery on MEB in December of 2009 and again in
March of 2010. MEB answered and produced responsive documents. Among the
requests for production were requests for documents related to the sale or
development of the property. In early 2012, the City learned that MEB may have
sold or developed the property. By letter dated May 17, 2012, the City sought
supplementation of MEB’s discovery responses with any information concerning
sales of the subject property or homes built on the property.2 MEB did not
supplement its discovery.


1
   MEB makes no claim under the Takings Clause of the Fifth Amendment to the United States
Constitution, which is made applicable to the states through the Fourteenth Amendment. See
Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 933 (Tex. 1998). Texas case law on takings
under the Texas Constitution is consistent with federal jurisprudence, however, and we may look
to federal takings cases for guidance. See City of Austin v. Travis Cnty. Landfill Co., 73 S.W.3d
234, 238–39 (Tex. 2002).
2
  Relevant to this proceeding, MEB responded to and did not object to Houston’s First Request
for Production Nos. 13, 14, 15, 16, 18, 19 and 20; it objected to Requests No. 12 and 17. We find
no indication that a hearing was conducted on these objections, and therefore the City, as the
requesting party, waived its right to compel discovery on these two requests. See Roberts v.
Whitfill, 191 S.W.3d 348, 361 n. 3 (Tex. App.—Waco 2006, no pet.). MEB responded to the
City’s Second Request without making any objections. In its May 17, 2012, letter requesting
supplementation, the City referred to the following requests:
REQUEST FOR PRODUCTION NO. 13:
Produce all agreements that have been entered into by Plaintiff for the sale or lease of the
Property since the date Plaintiff's purchased the Property.
REQUEST FOR PRODUCTION NO. 14:
Produce all documents related to future contracts/agreements that Plaintiff claims have been lost
as a result of the City’s alleged taking.
REQUEST FOR PRODUCTION NO. 15:
Produce all documents related to maps, appraisals, surveys of the Property since Plaintiff’s [sic]
purchased the Property.
REQUEST FOR PRODUCTION NO. 16:
Produce all drawings maps or sketches of the Property from 2004 to present.


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       On August 22, 2012, more than thirty days before the scheduled trial date,
the City filed a motion to compel discovery. See Tex. R. Civ. P. 215.1(b). In its
motion to compel, the City sought production of documents relating to the sale or
development of the subject property. In response, MEB claimed that the motion to
compel was untimely and that information on current sales is not relevant to the
taking that occurred in 2006, when its applications to replat were denied.3

       The trial court conducted a hearing on the City’s motion to compel on
August 29, 2012. The hearing was brief and consisted only of argument of counsel.
The trial court orally denied the City’s motion to compel. See Tex. R. App. P.
52.3(k)(1)(A) (permitting the matter complained of in mandamus petition to be
shown by filing a reporter’s record from the hearing reflecting the oral ruling when
a written order has not been signed); see also In re Bledsoe, 41 S.W.3d 807, 811
(Tex. App.—Fort Worth 2001, orig. proceeding). The City then brought this


REQUEST FOR PRODUCTION NO. 18:
Produce all architectural drawings related to the Property.
REQUEST FOR PRODUCTION NO. 19:
Produce all architectural drawings related to the Plat.
REQUEST FOR PRODUCTION NO. 20:
Produce all architectural, technical drawings, electrical and other plans, including engineering
plans and designs or plats pertaining to the Property.
SECOND REQUEST FOR PRODUCTION NO. 3:
All contract(s) and communications between Plaintiff and any mortgage company, real estate
company (agent or broker) listing the Property for sale from the time Plaintiff purchased the
property to present.
SECOND REQUEST FOR PRODUCTION NO. 4:
All professional appraisals relating to the Property from the time Plaintiff purchased the Property
(including appraisals done during the process of the sales transaction when [MEB] purchased the
property) to present.
SECOND REQUEST FOR PRODUCTION NO. 5:
All contract(s) and communications between Plaintiff and David Weekly Homes, or any other
homebuilder for the purpose of submitting plans to build homes on this Property.
3
  Neither the City nor MEB made any specific arguments related to specific requests for
production. Accordingly, we do not address any specific requests, and our opinion is directed to
the general categories of documents related to the development and sale of the property.


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proceeding. In response to the City’s petition, MEB acknowledges that it sold one
lot in February of 2012, and that it was building a single family home on the other
lot for a third party. At the time it filed its response, MEB had not closed on the
sale of the single family home.

   II. MANDAMUS RELIEF WHEN DISCOVERY HAS BEEN DENIED

      Mandamus relief is available to correct a clear abuse of discretion for which
the relator has no adequate remedy by appeal. In re Prudential Ins. Co. of Am., 148
S.W.3d 124, 135–36 (Tex. 2004). Appeal is not an adequate remedy when a
party’s ability to present a viable defense at trial is vitiated or severely
compromised by the trial court’s discovery error. Able Supply Co. v. Moye, 898
S.W.2d 766, 772 (Tex. 1995). Mandamus is appropriate if a defendant has been
denied a reasonable opportunity to develop the merits of its defense. See Gen.
Motors Corp. v. Tanner, 892 S.W.2d 862, 863 (Tex. 1995) (per curiam). While
courts generally do not review orders refusing to compel discovery, mandamus
relief may be granted when the denial of discovery goes to the heart of a party’s
case. In re Allied Chem. Corp., 227 S.W.3d 652, 658 (Tex. 2007).

      Because MEB argues that the trial court did not abuse its discretion in
denying the City’s motion to compel on relevance grounds, we must examine
MEB’s claim for damages from a regulatory taking.

                         III. REGULATORY TAKING

      A landowner whose property has been taken, damaged, destroyed for, or
applied to public use without adequate compensation may bring an inverse
condemnation claim. City of Abilene v. Burk Royalty Co., 470 S.W.2d 643, 646
(Tex. 1971); Boyle, 148 S.W.3d at 177. The claim is denominated “inverse”
because the property owner asserts the claim. City of Houston v. Texan Land &


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Cattle Co., 138 S.W.3d 382, 387 (Tex. App.—Houston [14th Dist.] 2004, no pet.).
An inverse condemnation may occur when the government physically appropriates
or invades the property, or when it unreasonably interferes with the landowner’s
right to use and enjoy the property, such as by restricting access or denying a
permit for development. Taub, 882 S.W.2d at 826 (Tex. 1994); Westgate, Ltd. v.
State, 843 S.W.2d 448, 452 (Tex. 1992). This latter type of inverse condemnation
where no physical taking has occurred is referred to as a regulatory taking. See
Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 933 (Tex. 1998).

      All property is held subject to the valid exercise of the government’s police
power; therefore, not every regulation is a compensable taking. Sheffield Dev. Co.
v. City of Glenn Heights. 140 S.W.3d 660, 670 (Tex. 2004). A restriction in the
permissible uses of property or a diminution in its value resulting from regulatory
action within the government’s police power may or may not be a compensable
taking. Id. at 677–78.

      To determine whether a regulatory taking has resulted from the
government’s unreasonable interference with a property owner’s right to use and
enjoy his property, courts must consider the following three factors, referred to as
the Penn Central factors: (1) the economic impact of the regulation; (2) the extent
to which the regulation interferes with the owner’s distinct investment-backed
expectations; and (3) the character of the governmental action. Sheffield, 140
S.W.3d at 672 (citing Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104,
124, 98 S.Ct. 2646 (1978)). These factors are not exclusive; a regulatory taking
analysis requires consideration of all the relevant surrounding circumstances.
Sheffield, 140 S.W.3d at 672-73.




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                       IV. ANALYSIS OF THE CITY’S ISSUE

      In the City’s sole issue in this proceeding, it asserts that the trial court
abused its discretion in denying its request to compel production of documents
evidencing the development and sale of the subject property. The City asserts that
the information sought directly relates to MEB’s claim that government action
damaged its property and interfered with its investment-backed expectations. MEB
asserts that its “expectations were premised on the right to replat the Property into
six lots.” It claims that the City’s “new regulation” has diminished its economic
expectations through the inability to subdivide the property, and reasserts its
arguments that the City’s motion to compel was untimely and the discovery sought
was irrelevant.

A. Discovery Rules

      The general scope of discovery is defined as any unprivileged information
relevant to the subject of the action, even if it would be inadmissible at trial, as
long as the information sought is “reasonably calculated to lead to the discovery of
admissible evidence.” In re CSX Corp., 124 S.W.3d 149, 152 (Tex. 2003) (quoting
Tex. R. Civ. P. 192.3(a)). Information is relevant if it tends to make the existence
of a fact that is of consequence to the determination of the action more or less
probable than it would be without the information. Tex. R. Evid. 401. The phrases
“relevant to the subject matter” and “reasonably calculated to lead to admissible
evidence” are liberally construed to allow litigants to obtain the fullest knowledge
of the facts and issues prior to trial. Axelson v. McIlhany, 798 S.W.2d 550, 553
(Tex. 1990).

      Rule 193 of the Texas Rules of Civil Procedure “imposes a duty upon parties
to make a complete response to written discovery based upon all information
reasonably available, subject to objections and privileges.” Tex. R. Civ. P. 193


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cmt. 1. Rule 193.2 specifically requires objections to written discovery to be in
writing and to provide the specific legal or factual basis for the objection. Tex. R.
Civ. P. 193.2(a). A party seeking to exclude any matter from discovery must assert
any objection to a request for production in writing within its response. Tex. R.
Civ. P. 196.2(b); Bielamowicz v. Cedar Hill I.S.D., 136 S.W.3d 718, 723 (Tex.
App.—Dallas 2004, pet. denied).

      Although the scope of discovery is broad, requests must be reasonably
tailored to include only relevant matters. CSX Corp., 124 S.W.3d at 152 (citing In
re Am. Optical Corp., 988 S.W.2d 711, 713 (Tex. 1998) (per curiam)). Overbroad
requests for irrelevant information are improper. CSX Corp., 124 S.W.3d at 153.
Rule 193 permits a party to object to discovery as overbroad and to refuse to
comply with it entirely. Id. at cmt. 2 (citing Loftin v. Martin, 776 S.W.2d 145 (Tex.
1989)). Thus, the requirement for a written objection applies to a complaint that the
subject discovery is overbroad (encompassing a relevance objection), and a party
who fails to comply waives the objection. See In re HEB Grocery Co., L.P., 375
S.W.3d 497, 501 (Tex. App.—Houston [14th Dist.] 2012, orig. proceeding) (citing
Tex. R. Civ. P. 193.2(a)).

      The responding party also has the burden to supplement discovery. See Tex.
R. Civ. P. 193.5(a); Nealy v. Southlawn Palms Apartments, 196 S.W.3d 386, 394
(Tex. App.—Houston [1st Dist.] 2006, no pet.) (stating that a party has a duty to
amend or supplement discovery response when that response is no longer complete
and correct).

B. Timeliness of the City’s Motion

      MEB argued below that the City’s motion to compel was untimely.
Although MEB did not cite authority to support untimeliness of the motion to



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compel, because the trial court appears to have considered MEB’s argument below,
we will review the issue.

      Texas Rule of Civil Procedure 215.1 provides that a party may apply for an
order compelling discovery “upon reasonable notice to other parties.” The rule
contains no filing deadline. MEB had a duty to supplement its discovery and it
failed to do so. Our record does not contain a docket control order or other order
imposing a deadline on discovery. The motion to compel was filed more than thirty
days before trial was scheduled. The circumstances in this case may be
distinguished from cases in which a motion to compel was filed on the eve of trial.
See, e.g., Piazza v. Cinemark, USA, Inc., 179 S.W.3d 213, 216 (Tex. App.—
Eastland 2005, pet. denied) (noting that the trial court did not abuse its discretion
by denying motion to compel filed two days before summary judgment hearing
because plaintiff had more than ample time for discovery).

      In addition, the City learned of the sale and development of the property in
the spring of 2012, shortly before its May 2012 written request for MEB to
supplement its discovery. The City should not be penalized by MEB’s failure to
timely supplement its responses. Under these circumstances, the City’s motion to
compel discovery was timely.

C. Failure to Object to Relevance

      MEB asserted in response to the motion to compel in the court below that it
is not required to supplement its answers to the requested discovery because the
information sought is not relevant. MEB did not make that objection, or any other
specific objection, to the City’s request for information regarding the sale and
development of the property when it answered the City’s discovery. See Tex. R.
Civ. P. 193.2(a). By failing to include a written objection on relevance grounds
with its answers to the City’s requests for production, MEB has waived its


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objection on relevance grounds both in response to the City’s motion to compel
and in this proceeding. See Tex. R. Civ. P. 193.2(e); In re HEB Grocery Co., L.P.,
375 S.W.3d 497, 501 (Tex. App.—Houston [14th Dist.] 2012, orig. proceeding).

D. Relevance

       Having rejected both of MEB’s arguments against the City’s motion to
compel, we hold that the trial court clearly abused its discretion in denying that
motion. Mandamus is not available, however, unless the City also lacks an
adequate remedy by appeal. As explained above, an appellate remedy is inadequate
when the discovery sought goes to the heart of a party’s case. Thus, even though
MEB has waived its relevance objection, we must examine the relevance of the
discovery to determine whether this test has been met. We conclude that it has.

       MEB asserts that the discovery at issue is not relevant to the determination
of damages. First, MEB cites Texas Property Code Section 21.042, addressing
damages in condemnation proceedings.4 MEB argues that the measure of damages
is limited to the difference between the market value of the property immediately
before and immediately after the taking, citing Callejo v. Brazos Elec. Power Co
op, 755 S.W.2d 73, 76 (Tex. 1988). See also Brunson v. State, 444 S.W.2d 598,
602 (Tex. 1969) (holding that the measure of damages for the physical taking of
trailer house was the market value of the trailer house at the time of the taking).
MEB asserts that its damages are frozen in time as of the date of the condemnation
in 2006. MEB alleges that compensation for land taken by eminent domain must be
limited to circumstances that may have affected the market value of the land at the

4
  Section 21.042(a) provides that “[t]he special commissioners shall assess damages in a
condemnation proceeding according to the evidence presented at the hearing.” Tex. Prop. Code §
21.042(a). The statute further addresses how commissioners determine damages when an entire
parcel of land is condemned and when only a portion of a parcel of land is condemned. Id. §
21.042(b)-(d).


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time of the taking, citing Exxon Pipeline Co. v. Zwahr, 88 S.W.3d 623, 627 (Tex.
2002) (reviewing standard for valuing pipeline easement in condemnation
proceeding). Thus, MEB asserts, evidence of events occurring years after the date
of a taking—as the sales apparently did here—is generally irrelevant because those
events could not have affected an earlier market value. See Heddin v. Delhi Gas
Pipeline Co., 522 S.W.2d 886, 889 (Tex. 1975) (“A rupture occurring subsequent
to the date of taking could not have had an effect on market value as of the date of
taking.”); Sw. Pub. Serv. Co. v. Vanderburg, 526 S.W.2d 692, 694 (Tex. Civ.
App.—Amarillo 1975, no writ) (explaining that testimony should not have been
admitted because it concerned an incident that occurred “after the date of taking,
and thus, could not have influenced market value on the date of taking”).

       As the City points out, however, the cases MEB cites involve statutory
condemnation proceedings, in which the measure of damages is the lost market
value of the land at the time of condemnation. In contrast, MEB’s damage model
in this inverse condemnation case is based on the lost profits that MEB expected to
earn in the future if the City had approved the replat.5

       Lost profits are damages for the loss of net income to a business, and a
claimant must demonstrate one complete calculation of the net figure. Kellman v.
Workstation Integrations, Inc., 332 S.W.3d 679, 684 (Tex. App.—Houston [14th
Dist.] 2010, no pet.). MEB acknowledges that it recently sold one of the subject
lots and is currently building a home on the other lot for a third party. This actual
sale income and building expense is relevant—and indeed critical—to MEB’s

5
  The record before us contains a letter from MEB’s manager that explains its lost profits damage
calculation. It is unclear from MEB’s response to the mandamus petition whether it intends to (a)
use this lost profits evidence as a stand-alone damage model, or (b) consider the lost profits as a
factor in determining lost market value. See, e.g., Sheffield, 140 S.W.3d at 677 (noting lost
profits can be considered in assessing value of property and impact of inverse condemnation). In
either event, MEB must provide a complete calculation of lost profits as discussed below.


                                                11
damages: it must be taken into account in providing a complete calculation of the
net profits that MEB alleges it lost as a result of the City’s actions. See, e.g.,
Texaco, Inc. v. Phan, 137 S.W.3d 763, 771-72 (Tex. App.—Houston [1st Dist.]
2004, no pet.) (discussing calculation of lost profits by subtracting actual net
profits from expected net profits).

       Thus, we agree with the City that MEB cannot recover lost profits without
accounting for any profit gained from an actual sale. Although courts have
refrained from prescribing any particular method of calculating last profits, and we
do not do so here, MEB has not explained how it can provide a complete
calculation of lost profits without somehow taking into account the information
requested by the City. Accordingly, we hold that the requested information goes to
the heart of the claim for damages, and thus the City is entitled to mandamus relief
to compel its disclosure.6

                                       V. CONCLUSION

       MEB did not object in the trial court to the City’s requests for production of
documents related to any sale or development of the property. MEB has a duty to
supplement its answers to the City’s requests for production, and it failed to do so.
The requested documents are relevant, and the trial court clearly abused its
discretion in denying the City’s motion to compel MEB to supplement its
responses to the City’s discovery requests for documents relating to the sale and
development of the property. The information sought goes to the heart of the claim
for damages based on lost profits. Therefore, the City has no adequate remedy by
appeal. See Able Supply Co, 898 S.W.2d at 772-73 (granting mandamus relief
when the discovery denied by the trial court goes to the very heart of the case).

6
  Given our disposition, we need not address the parties’ arguments about whether a remote sale is also
relevant in deciding whether a regulatory taking occurred.


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      We conditionally grant the City’s petition for writ of mandamus and direct
the trial court to grant its motion to compel MEB to supplement its responses to the
City’s First Requests for Production Nos. 13, 14, 15, 16, 18, 19, and 20, and
Second Requests for Production Nos. 3, 4, and 5. We are confident that the
respondent will comply, and the writ will issue only if she does not.



                                  PER CURIAM



Panel consists of Chief Justice Hedges and Justices Brown and Busby.




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