REVOCATION OF CERTIFICATE OF OCCUPANCY BARRED BY RES JUDICATA EVEN THOUGH FIRST JUDGMENT DENIED INJUNCTION AGAINST REVOCATION

Board of Adjustment of the City of Dallas v. Billingsley Family Limited Partnership
Dallas Court of Appeals, No. 05-12-00199-CV (August 27, 2013)
Justices Lang, Myers, and Evans (Opinion)
The Court of Appeals affirmed a trial court’s reversal of the Dallas Board of Adjustment’s revocation of the certificate of occupancy for an apartment complex that the City alleged was operating as a residential hotel. The parties had previously litigated over the permissibility of the apartment complex’s operations, resulting in a take-nothing judgment on all claims and counterclaims asserted by both sides. Although that judgment denied the complex owner’s request for an injunction prohibiting the City from revoking its certificate of occupancy, the Court of Appeals determined that res judicata barred the City from doing so.

The City of Dallas notified the Billingsley Family Limited Partnership in 2007 that it was operating an apartment complex as a residential hotel in violation of the city code. Billingsley filed suit against the City seeking a declaratory judgment that it was not operating a residential hotel and an injunction preventing the City from revoking its certificate of occupancy. The City counterclaimed for violations of the city code. The trial court granted partial summary judgment for the City, enjoining Billingsley from operating as a residential hotel and directing Billingsley to apply for a new certificate of occupancy. But the trial court later vacated that order and entered a final judgment that both parties take nothing. That judgment was affirmed on appeal.

Between the time of the partial summary judgment and the final judgment, the City revoked Billingsley’s certificate of occupancy. Billingsley appealed that action to the City Board of Adjustment, which upheld it. Billingsley then filed a petition for writ of certiorari (in a separate lawsuit), asking the trial court to reverse the Board’s decision. The trial court granted the writ and reversed the Board.

The Court of Appeals agreed with Billingsley and the trial court that res judicata precluded the Board from revoking the certificate of occupancy. The Board made three arguments on this point: first, Billingsley failed to present sufficient evidence at the Board hearing to support its assertion of res judicata; second, the trial court’s judgment was not yet final at the time of the Board hearing because there was a motion for new trial pending; and third, res judicata did not apply because the trial court in the first litigation expressly denied Billingsley’s request for injunctive relief to prevent the City from revoking its certificate of occupancy.

The appeals court rejected the City’s first two arguments because they focused on the time of the Board hearing and not on the time of the litigation over the Board’s decision. The pleadings and judgment in the first litigation were presented to the trial court in connection with Billingsley’s petition for writ of certiorari, and the judgment in the first litigation was final by that time; so the evidentiary and finality requirements for res judicata were met. The appeals court also rejected the City’s third contention, saying “[t]he mere denial of Billingsley’s request for injunctive relief . . . is not dispositive for purposes of res judicata.” The court observed that many of the facts were relevant to both proceedings, the issues involved in both proceedings formed a convenient trial unit, and separate proceedings would require significant duplication of effort. Because the revocation proceeding was based on Billingsley’s use of the property as a residential hotel, it arose out of the same subject matter as the earlier litigation, and was barred by res judicata.

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