Prudential Ripeness for Permit-Cap Takings and Plat-Designated Greenbelts Outside Texas Strips-and-Gores: Legacy Housing v. City of Horseshoe Bay

Introduction

In Legacy Housing Corporation v. City of Horseshoe Bay, the Fifth Circuit issued a comprehensive opinion resolving a multifaceted land-use dispute at the intersection of federal takings law and Texas real property doctrine. Legacy purchased hundreds of manufactured-housing lots on the city’s southern edge and 95 acres of adjacent extraterritorial jurisdiction (ETJ) land, then unilaterally built a road across the ETJ parcel, a five-foot “greenbelt” strip, and portions of the development lots to create a shortcut to a nearby highway and future amenities. The City and private defendants (the property owners’ association and resort developers) opposed Legacy’s buildout, leading to federal claims under the Takings Clause and Section 1983, state-law tort and fiduciary theories, and competing counterclaims over restrictive covenants.

The panel (Judges Higginbotham, Jones, and Southwick; opinion by Judge Southwick) affirmed summary judgment for all defendants, with one key modification: Legacy’s regulatory takings challenge to the City’s “two-at-a-time” cap on speculative housing permits is prudentially unripe and must be dismissed without prejudice. Along the way, the court clarified the proper reading of local contractor/subcontractor ordinances, held sewer hookup fees to be non-compensable user fees, rejected a Penn Central challenge to setback-related regulations, enforced an ETJ development agreement against a “driveway” relabeling gambit, and—importantly for Texas real property practitioners—held that a plat-designated greenbelt is an unambiguous reservation outside the Texas “strips and gores” presumption, adhering to Fifth Circuit precedent under the court’s rule of orderliness.

Summary of the Opinion

• Affirmed as modified: The court affirmed summary judgment for all defendants on all claims, except it modified the judgment to dismiss without prejudice Legacy’s Penn Central challenge to the “two-at-a-time” speculative permit cap due to prudential ripeness.
• Subcontractor requirements: The city’s ordinances do not impose heightened requirements on subcontractors working on manufactured homes; the more specific subcontractor provision controls, avoiding an absurd result.
• Permit caps: The takings challenge is prudentially unripe because Legacy never sought additional permits beyond the baseline two. Courts cannot assess the extent of any deprivation until the City has had an opportunity to consider and decide such requests.
• Utility hookup fees: Sewer connection charges are user fees imposed to recoup service costs and are not takings.
• Setbacks and related space requirements: Legacy failed to produce competent evidence of a serious economic impact from setbacks alone; its models could still fit on the lots; no Penn Central taking.
• ETJ development agreement: Legacy’s “driveway” was, in fact, a public shortcut and amenity access road that violated the ETJ agreement. The City did not commit a prior material breach.
• Texas strips-and-gores doctrine: No title passed to Legacy in the five-foot greenbelt; the plat unambiguously reserved the greenbelt outside lot boundaries, and Fifth Circuit precedent limits the doctrine’s reach.
• Negligence/gross negligence: No duty existed to assist a non-owner in building over land it does not own.
• Section 1983 and civil conspiracy: Without an underlying constitutional deprivation or tort, conspiracy claims fail as a matter of law.
• POA fiduciary duty: Any duty regarding the greenbelt was beyond the fiduciary relationship because the POA did not own the greenbelt.
• Developers’ restrictive covenant counterclaim: Legacy’s unapproved “driveway” construction over the lots was an “improvement” requiring prior architectural approval; summary judgment for developers affirmed.

Analysis

Precedents Cited and Their Role

• Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978): The governing ad hoc framework for regulatory takings (economic impact; interference with reasonable, investment-backed expectations; character of the government action). The court applied Penn Central to setbacks and explained why, on this record, all three factors favored the City.
• Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005): Reiterated that the takings inquiry seeks functional equivalents to physical appropriation. Informs the panel’s framing of regulatory takings analysis.
• Murr v. Wisconsin, 582 U.S. 383 (2017): Pre-existing restrictions inform, but do not determine, reasonable investment-backed expectations. The panel corrected the district court’s near-dispositive reliance on pre-existence when analyzing the permit cap, but then dismissed that challenge without prejudice for prudential ripeness.
• Williamson County Regional Planning Commission v. Hamilton Bank, 473 U.S. 172 (1985), overruled in part by Knick v. Township of Scott, 588 U.S. 180 (2019): Although Knick removed state-litigation exhaustion, the principle that courts must know “how far” a regulation goes before finding a taking persists. The panel cites related finality ideas in explaining why courts need the local authority’s decision on extra permits.
• Suitum v. Tahoe Regional Planning Agency, 520 U.S. 725 (1997); DM Arbor Court, Ltd. v. City of Houston, 988 F.3d 215 (5th Cir. 2021): Confirm prudential ripeness for Penn Central claims in the Fifth Circuit. The permit-cap claim is dismissed without prejudice because Legacy never tested the City’s willingness to grant additional permits.
• Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595 (2013), and United States v. Sperry Corp., 493 U.S. 52 (1989): Distinguish monetary exactions from user fees. Sewer hookup charges recoup service costs and are not takings.
• CCA Associates v. United States, 667 F.3d 1239 (Fed. Cir. 2011): Benchmarks for economic impact; reductions under ~50% have not yielded takings; used to gauge the insufficiency of Legacy’s setback evidence.
• Scott v. Harris, 550 U.S. 372 (2007): Courts disregard a party’s version of facts that is blatantly contradicted by the record. Applied repeatedly to reject Legacy’s “driveway” characterization and claims it built nothing on the lots.
• Texas strips-and-gores cases: Cantley v. Gulf Prod. Co., 143 S.W.2d 912 (Tex. 1940) (purpose and presumption), Strayhorn v. Jones, 300 S.W.2d 623 (Tex. 1957) (river/centerline context), and Simon v. Rudco Oil & Gas Co., 132 F.2d 211 (5th Cir. 1942) (Fifth Circuit’s reading that the doctrine does not apply to unambiguous conveyances except in limited centerline circumstances). The panel applies the Fifth Circuit’s rule of orderliness (FDIC v. Abraham, 137 F.3d 264 (5th Cir. 1998); Lee v. Frozen Food Express, Inc., 592 F.2d 271 (5th Cir. 1979)) to adhere to Simon.
• MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007); Aetna Life Ins. Co. v. Haworth, 300 U.S. 227 (1937): Adverse legal interests for justiciability; used to explain why the court could still reach the strips-and-gores dispute though POA/developers did not claim ownership.
• Texas tort and fiduciary duty authorities: D. Houston, Inc. v. Love, 92 S.W.3d 450 (Tex. 2002) (negligence elements); Walker v. Harris, 924 S.W.2d 375 (Tex. 1996) (duty is a question of law); Palmer v. Fuqua, 641 F.2d 1146 (5th Cir. 1981), relying on Rankin v. Naftalis, 557 S.W.2d 940 (Tex. 1977) (fiduciary duties are bounded by the relationship); Tilton v. Marshall, 925 S.W.2d 672 (Tex. 1996) and Hale v. Townley, 45 F.3d 914 (5th Cir. 1995) (civil conspiracy requires an underlying tort; §1983 conspiracy requires an underlying §1983 violation).
• Procedural preservation: United States v. Quintanilla, 114 F.4th 453 (5th Cir. 2024) and Brinkmann v. Dallas County Deputy Sheriff Abner, 813 F.2d 744 (5th Cir. 1987) (forfeiture for inadequate briefing).
• Ordinance interpretation: Sheline v. Dun & Bradstreet Corp., 948 F.2d 174 (5th Cir. 1991) (pure questions of law at summary judgment); City of New Orleans v. BellSouth Telecommunications, Inc., 690 F.3d 312 (5th Cir. 2012); Jones v. City of Palestine, 266 F. App’x 320 (5th Cir. 2008); City of Laredo v. Villarreal, 81 S.W.3d 865 (Tex. App.—San Antonio 2002) (avoid absurd results); Scalia & Garner, Reading Law (general/specific canon).

Legal Reasoning: How the Court Reached Its Decision

1) Many appellate challenges were forfeited

Legacy forfeited its equal protection and due process challenges against both the City and private defendants by failing to list them in its Statement of Issues and failing to apply legal principles to the facts. A civil conspiracy challenge against the City was likewise forfeited for lack of argument. Selected declaratory judgment issues were abandoned. The court emphasized that generalized legal recitations do not preserve issues without case-specific application.

2) Regulatory takings

• Subcontractor “heightened requirements”: Reading the City’s building code as a whole, the specific subcontractor provision governs all subcontractors (e.g., mechanical, electrical, plumbing), regardless of whether they work on manufactured housing. Legacy’s reading would produce irrational, disparate treatment and is unsupported by any enforcement history.
• Two-at-a-time speculative permit cap: Although pre-existing restrictions do not automatically defeat Penn Central claims (Murr), this challenge is prudentially unripe because Legacy never requested additional permits beyond the baseline cap. Courts need to know “how far” the regulation goes before judging whether it “goes too far.” Dismissal is without prejudice to allow Legacy to seek additional permits and, if denied, to quantify the alleged deprivation.
• Utility hookup fees: Sewer connection fees are classic user fees imposed to offset service costs (Sperry), not monetary exactions triggering Nollan/Dolan/Koontz scrutiny. No taking lies on these facts.
• Setback and space-related requirements: On this record, Legacy failed to show a serious economic impact from setbacks alone. Its experts’ “undevelopable” conclusion conflicted with their own concessions (only $15,000 in added cost; availability of models from 400 to 2,700 sq. ft.). Even assuming lost profits are cognizable, the record does not support a sufficiently serious diminution. The “character” factor favors the City because setbacks are paradigmatic zoning.

3) ETJ development agreement and restrictive covenant (City’s counterclaim)

Legacy labeled its road a “driveway,” but the record (advertising, configuration) shows a public shortcut to the highway and access to planned amenities on the ETJ parcel—uses beyond “agriculture, wildlife management, and/or timber land” and the allowed residential use. The City’s email to TxDOT did not constitute a prior material breach; the agreement permits annexation if the owner begins development in violation. Legacy’s breach occurred first when it undertook road construction for the stated purposes.

4) Texas strips-and-gores doctrine

The five-foot greenbelt between the lots and ETJ land remains outside Legacy’s title. All deeds referenced a plat that clearly delimited the lots and a continuous greenbelt; thus, the conveyances were unambiguous and did not include the greenbelt. Under Simon v. Rudco Oil & Gas Co. (5th Cir. 1942), the strips-and-gores presumption does not apply to unambiguous conveyances (except in road/ROW centerline scenarios). The Fifth Circuit’s rule of orderliness bound the panel to Simon, as no subsequent Texas authority made it “clearly wrong.” Moreover, strips-and-gores addresses misdescriptions; here, the omission was intentional—greenbelts were meant to remain outside lot boundaries for community benefit.

5) Negligence and gross negligence

No duty exists (and none was identified) requiring defendants to facilitate or permit a non-owner’s construction over land the non-owner does not own. Without a cognizable duty, the negligence claims fail as a matter of law.

6) Section 1983 and civil conspiracy

Both claims fail because there is no underlying constitutional deprivation or tort. Legacy had no right to build a road over the ETJ parcel, did not own the greenbelt, and violated restrictive covenants on its lots—foreclosing the premise of a protected property deprivation.

7) POA fiduciary duty

The POA did not own the greenbelt; any duty to grant roadway access would have fallen outside the fiduciary relationship recognized under the POA’s governing documents and Texas law. No fiduciary breach occurred.

8) Developers’ restrictive covenant counterclaim

Legacy’s grading and road construction on the lots constituted an “improvement” requiring prior architectural approval, which Legacy did not obtain. Its “driveway” label cannot overcome photographic evidence and its own marketing materials. Summary judgment for the developers was proper.

Impact and Forward-Looking Significance

• Prudential ripeness in takings: Within the Fifth Circuit, Penn Central challenges to discretionary permit regimes will be dismissed without prejudice if landowners have not requested available variances or additional permits that could alleviate or clarify the regulation’s effect. Knick’s jurisdictional fix does not displace prudential ripeness.
• Proof burdens in Penn Central cases: Plaintiffs must produce competent, regulation-specific economic evidence isolating the effect of each challenged requirement. Conclusory valuations and internal contradictions (e.g., admitting models can fit while claiming the lots are “undevelopable”) undermine the economic-impact showing.
• User fee safety zone: Cost-recovery utility fees remain outside takings liability absent unusual features tying them to land-use approvals as exactions. Koontz does not convert service charges into takings.
• Texas property law clarity: Plat-referenced greenbelts are unambiguously reserved and fall outside the strips-and-gores presumption. The Fifth Circuit will adhere to its own state-law interpretations under the rule of orderliness unless a subsequent Texas authority clearly abrogates them. Developers and POAs can rely on plats to define boundaries and common areas.
• ETJ development agreements: Cities can enforce use restrictions on ETJ parcels; relabeling an access road as a “driveway” will not forestall breach when the intended use is public shortcutting and amenity access. Annexation triggers tied to violations are enforceable.
• Section 1983 and conspiracy: Land-use disputes framed as conspiracies fail without a predicate constitutional deprivation. Ownership gaps and private covenant violations defeat property-rights premises.
• Appellate practice: The opinion underscores the cost of forfeiture. Parties must list issues in the statement of issues and apply legal standards to the case facts.

Complex Concepts Simplified

• Extraterritorial jurisdiction (ETJ): A band of land outside city limits where the city preserves some oversight over land use and development by agreement or statute.
• Greenbelt: A strip of land intended to remain undeveloped to buffer neighborhoods; often shown on plats and treated as common/open space, not part of adjoining lots.
• Penn Central balancing: A case-by-case test for regulatory takings that weighs (1) economic impact; (2) interference with reasonable, investment-backed expectations; and (3) the character of the government action (e.g., routine zoning versus physical invasion).
• Prudential ripeness: A judge-made readiness doctrine. Even if a federal court has jurisdiction, it will dismiss a claim that is factually not ready for adjudication—e.g., where a city has not yet decided whether to grant requested relief (like additional permits) that could mitigate or define the alleged harm.
• User fees vs. exactions: A user fee recoups the cost of providing a service (like a sewer connection) and is typically not a taking. An exaction is a condition on land-use approval (e.g., “dedicate land or pay money to get your permit”), which can trigger heightened scrutiny under Nollan/Dolan/Koontz.
• Texas “strips and gores”: A presumption that a grantor does not intend to retain useless, narrow strips when conveying all adjoining land—unless clearly reserved. The Fifth Circuit limits the doctrine when the conveyance is unambiguous (except for centerline presumptions such as roads/rights-of-way).
• Rule of orderliness: Within the Fifth Circuit, a panel is bound by prior published circuit decisions on state law unless a subsequent state supreme court decision or statute clearly makes the earlier decision wrong.
• Restrictive covenants and architectural control: Private land-use controls requiring pre-approval for “improvements.” Noncompliance can result in breach, independent of public zoning rules.

Conclusion

Legacy Housing v. City of Horseshoe Bay is a consequential land-use decision at the crossroads of federal takings doctrine and Texas property law. The panel:

• Reaffirmed prudential ripeness for permit-cap takings under Penn Central, requiring landowners to seek discretionary relief (e.g., additional permits) before courts can assess the magnitude of alleged economic deprivation.
• Clarified that plat-designated greenbelts are unambiguously outside conveyed lot boundaries and thus outside the Texas strips-and-gores presumption under binding Fifth Circuit precedent.
• Confirmed that cost-recovery utility hookup fees are non-compensable user fees, setbacks alone did not effect a taking on this record, and private covenants and ETJ agreements remain potent constraints on self-help development.
• Demonstrated that relabeling (road as “driveway”) and conclusory expert valuations cannot overcome documentary evidence and legal thresholds.

For developers, municipalities, POAs, and land-use litigators, the opinion offers practical guidance: ripen your takings claims through available administrative avenues; build robust, regulation-specific economic records; respect plat boundaries and private covenants; and avoid overreaching constructions on non-owned land. In the Fifth Circuit, these principles will shape the trajectory of manufactured housing development and broader land-use litigation for years to come.