Roy Mcnair, Plaintiff-appellee/cross-appellant, v. City of Cedar Park, Texas, et al., Defendants,city of Cedar Park, Texas, Defendant-appellant/cross-appellee, 993 F.2d 1217 (5th Cir. 1993)

The City of Cedar Park, Texas, appeals an adverse verdict and judgment requiring it to refund approximately $650,000 to Roy McNair. McNair also appeals, seeking additional prejudgment interest and attorney's fees. For the reasons assigned, we reverse and render judgment in favor of the City and, concomitantly, reject McNair's appeal.

Background

Cedar Park is a small city about 30 miles northwest of Austin. During the mid-1980s it experienced rapid growth, requiring the purchase of the private system from which it previously had obtained its water. Because that system was operating at maximum capacity, Cedar Park determined that a major capital expansion was required to accommodate new development. In 1985, the City followed in the footsteps of other cities throughout Texas and enacted an ordinance imposing a community impact fee on all newcomers,¹  based on a calculation of the average cost of expansion per living unit. This fee, which computed to $2,400, was charged to all new development and was intended to offset the cost of systemic expansion. Upon receipt of the fees, the City obligated itself to provide water and sewer services.

In March 1984, McNair paid $1,650,000 for approximately 100 acres of land in Cedar Park's jurisdiction on which he intended to construct an upscale trailer park accommodating 1,600 new residents. His plats of the tract were approved by the City Zoning Commission. This approval was revoked because McNair had failed to pay the community impact fee within the time allowed. He then secured an agreement from the City to subsequently recalculate the fee based on actual water use of the trailers. In the meantime, he paid the sum of $1.3 million based on the $2400 per unit fee for 542 units.

On March 2, 1987, having abandoned his plan to develop the trailer park, McNair demanded a complete refund of his fee, plus accrued interest.²  By this time, Cedar Park was well into a five-year plan to construct a unified water system. About $2 million had been spent and the City had committed to spend an additional $8 million. The City was in the process of obtaining state regulatory permits to construct the planned waste-water treatment facilities.

McNair was never told that the fees would be refundable in whole or in part; the ordinance made no mention of refunds. He was the only developer who sought a refund, although others had abandoned their projects. Cedar Park remains obligated to provide water and sewer services to the McNair tract.

McNair sued the City in state court alleging unjust enrichment, assumpsit, and other theories. The case was removed to federal court when he added claims arising under federal law. The district court refused McNair's request to allow dismissal of the federal claims and thereafter a remand. With the exception of the assumpsit and unjust enrichment theories, all claims were disposed of under Fed. R. Civ. P. 56(c) and are not the subject of this appeal. The case proceeded to trial and a jury returned a verdict awarding McNair one-half of his fee; both Cedar Park and McNair timely appealed.

Analysis

The City preserved a sufficiency question by first moving for directed verdict at the close of all the evidence and thereafter by moving for judgment notwithstanding the verdict.³  The appellate standard of review of the insufficiency claim is the same as that applicable to the granting of a motion for directed verdict or judgment notwithstanding the verdict.⁴  When determining whether a party is entitled to judgment as a matter of law, whether the motion comes before, during, or after the trial, the court must consult "the applicable substantive law to ascertain what factual issues are material."⁵  The court must then review the evidence bearing on those issues, drawing all inferences in favor of the nonmovant/appellee, to determine whether a reasonable juror could arrive at a verdict in his favor.⁶ 

McNair's recovery is based on assumpsit, an implied-in-law or quasi-contract. While Texas has not adopted the English common-law forms of action, it did adopt the common law of England insofar as it comported with its constitution and statutory enactments.⁷  Texas recognizes a cause of action in contract based on implied-in-law obligations. While the old common-law writ of assumpsit--literally "he promised"--was a convenient means of enforcing implied obligations in the common-law, rather than the equity, courts of England, the form of the action is no longer of serious moment.⁸  We therefore pretermit the procedural niceties and focus on that which is necessary to sustain recovery as specifically alleged herein--money had and received⁹  and restitution.¹⁰ 

Both theories are equitable and have at their base an implied-in-law contractual obligation to restore unjust enrichment.¹¹  Thus, McNair had to establish that the City should be treated¹²  as having promised to return his payment, or some portion thereof, notwithstanding the absence of express contractual assent thereto. Before we may decide if there was a quasi-contractual basis for a refund, we must first consider whether a contractual obligation, implied or otherwise, existed.

Considering the regulatory aspects of this transaction, we are not wont to recognize contractual duties as a matter of course. A municipality obviously has the capacity to form binding contracts for a wide variety of purposes. At the same time, however, a municipality also has broader obligations towards its citizenry, arising from its routine taxation and expenditures schema, which cannot be regarded as anything but the ordinary course of government. Hence, a citizen cannot deem his payment of taxes to constitute consideration for clean streets and effective police services authorizing a suit in contract to enforce the providing of same.

Viewed closely, it is readily apparent that Cedar Park's dealings with McNair were qualitatively different. McNair proposed to bring 1,600 new residents into a city of 3,500. Assisted by able counsel, McNair negotiated with the City before paying the impact fee and in fact secured, in advance, an agreement to recalculate that fee based on actual usage subsequently experienced. The relationship between McNair and the City was not that of a citizen personally seeking routine public service. Rather, McNair and the City dealt at arm's length, in a business transaction, each cognizant of his or its own particular interests. It is appropriate, therefore, to treat the resulting obligations as an enforceable quasi-contract.¹³  That said, we must consider the parameters of that contract.

The ordinance clearly provides that any citizen seeking to build a new home in the City would have to pay, in advance, a pro-rata share of the costs of the providing of additional water and sewerage capacity. These costs reflect, of necessity, an economy of scale. The City could not bend and shape its plans according to the whim of each new resident. The reality of municipal management is that long-term systemic costs and growth projections¹⁴  must be taken into consideration, determined, and pursued. Individual plans allow for more flexibility. The ordinance made no mention of refunds in the event the developer simply changed his mind. The City made long-term plans with the understanding that it would be obligated to provide additional water and sewerage service to McNair, his successors in interest, and everyone else who paid the impact fee.¹⁵ 

While the potential scope of obligations created in equity is as broad as notions of fairness allow,¹⁶  the duty to refund the impact fee may only arise in circumstances recognized under controlling law. In Texas the notion of restitution does not permit the rescission of a contract and return of the value received in the absence of "fraud, duress, or the taking of undue advantage."¹⁷  Likewise, Texas does not require repayment of money had and received unless equity and good conscience demand it.¹⁸  We perceive no basis for finding the City's retention of McNair's payment unfair. The City has provided what it promised. The money paid did not, therefore, result in an unjust enrichment of Cedar Park.

The City's retention of the fee is fundamentally fair when one considers that McNair received exactly what he bargained for. He has paid his share of the systemic water and sewer expansion costs and cannot be asked to pay same again. His tract of land is entitled to those city services. At the same time, the City has incurred a substantial corresponding expense and obligation.¹⁹  Equity and the controlling law demand that the agreement between the City and McNair be honored. Nothing more; nothing less.

The judgment against Cedar Park is REVERSED and judgment in favor of Cedar Park rejecting McNair's demands is RENDERED. Consistent therewith, McNair's assignments of error in his appeal are rejected as moot.