SE Ranch Holdings, Ltd. v. City of Del Rio, Texas--Appeal from 83rd Judicial District Court of Val Verde County

MEMORANDUM OPINION
No. 04-06-00640-CV
SE RANCH HOLDINGS, LTD.,
Appellant
v.
CITY OF DEL RIO, TEXAS,
Appellee
From the 83rd Judicial District Court, Val Verde County, Texas
Trial Court No. 26182
Honorable David Peeples, Judge Presiding (1)

Opinion by: Phylis J. Speedlin, Justice

 

Sitting: Catherine Stone, Justice

Karen Angelini, Justice

Phylis J. Speedlin, Justice

 

Delivered and Filed: August 29, 2007

AFFIRMED

 

SE Ranch Holdings, Ltd. ("SE Ranch") appeals the trial court's order granting the City of Del Rio's plea to the jurisdiction and dismissing SE Ranch's breach of contract claim against the City. We affirm the judgment of the trial court.

 

Factual and Procedural Background

In 2005, SE Ranch, a private developer, began negotiations with the City of Del Rio, Texas, ("the City"), a home-rule city, (2) to develop a master plan community on 3,200 acres of undeveloped land located outside the City limits. SE Ranch sought to create a Tax Increment Reinvestment Zone ("Zone") in accordance with section 311.003 of the Texas Tax Code. See Tex. Tax Code Ann. 311.003(a) (Vernon Supp. 2006). In December 2005, the City passed an ordinance creating a Zone in the area of the proposed development. In April 2006, the Zone's board of directors approved a project plan, reinvestment zone financing plan, and a proposed development agreement. On April 11, 2006, the City passed Ordinance No. O:2006-014, approving the Zone's project plan and financing plan. The same day, a resolution was passed authorizing the execution of a development agreement between the City and SE Ranch; the parties signed the development agreement on April 11, 2006. SE Ranch then purchased the 3,200 acres in separate transactions at a cost of more than $3 million.

Shortly after the development agreement was executed, the City was presented with a petition for public referendum seeking to repeal Ordinance No. O:2006-014. The City then held a public hearing regarding the proposed development, and SE Ranch sued the City to enjoin any action on the referendum. In May 2006, a newly reconfigured City Council voted to repeal Ordinance No. O:2006-014. SE Ranch subsequently amended its pleadings, adding causes of action for breach of contract and unconstitutional takings. The City responded to the lawsuit by filing a plea to the jurisdiction based on governmental immunity. The trial court granted the City's plea to the jurisdiction and dismissed SE Ranch's contract claim for lack of subject matter jurisdiction. This interlocutory appeal followed. See Tex. Civ. Prac. & Rem. Code Ann. 51.014(a)(8) (Vernon Supp. 2006).

Applicable Law and Standard of Review

Sovereign immunity deprives a trial court of subject matter jurisdiction for lawsuits in which the State or certain governmental units have been sued unless the State consents to suit. Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 224 (Tex. 2004). Governmental immunity operates like sovereign immunity and affords a similar protection to political subdivisions of the State, including counties and cities. Harris County v. Sykes, 136 S.W.3d 635, 638 (Tex. 2004); Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 694 n.3 (Tex. 2003). Governmental immunity, like sovereign immunity, includes two distinct principles: immunity from suit and immunity from liability. Miranda, 133 S.W.3d at 224. Immunity from liability is an affirmative defense, while immunity from suit deprives a court of subject matter jurisdiction. See id.; see also Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivs. Prop./Cas. Joint Self-Ins. Fund, 212 S.W.3d 320, 323 (Tex. 2006).

Whether a trial court has subject matter jurisdiction is a question of law. Miranda, 133 S.W.3d at 226. We review the trial court's ruling on a plea to the jurisdiction based on governmental immunity from suit de novo. Tex. Natural Res. Conservation Comm'n v. IT-Davy, 74 S.W.3d 849, 855 (Tex. 2002). In performing this review, we do not look to the merits of the case, but consider only the pleadings and the evidence relevant to the jurisdictional inquiry. Miranda, 133 S.W.3d at 227-28.

 

Discussion

On appeal, SE Ranch concedes that because immunity from liability is not the appropriate subject of a plea to the jurisdiction, the sole issue in this appeal is the City's claim of governmental immunity from suit. See Norrell v. Gardendale Volunteer Fire Dep't, 115 S.W.3d 114, 116-17 (Tex. App.--San Antonio 2003, no pet.); see also Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006) ("By entering into a contract, a governmental entity necessarily waives immunity from liability, voluntarily binding itself like any other party to the terms of agreement, but it does not waive immunity from suit."). SE Ranch asserts the City waived its governmental immunity from suit in three ways: 1) in the notice provision of the City Charter; 2) in the venue provision of the development agreement; and 3) by statute under section 271.152 of the Local Government Code, which permits certain suits for breach of contract. See Tex. Loc. Gov't Code Ann. 271.152 (Vernon 2005).

City Charter

We begin by addressing SE Ranch's claim that the City waived immunity from suit for damages to persons or property by language found in its City Charter. SE Ranch directs us to the language found in Article 1, Section 4 of the City Charter which provides:

Before the City of Del Rio shall be liable for damages for the death or personal injuries of any person or for damage to or destruction of property of any kind, which does not constitute a taking or damaging of property under Texas Const. art. I, 17, the person injured, if living, or his representatives, if dead, or the owner of the property damaged or destroyed, shall file with the city secretary notice, addressed to the city council, in writing of such death, injury, damage, or destruction, duly verified by affidavit, within one hundred eighty (180) days . . . ; and the failure to so notify the city secretary within the time and manner specified herein shall exonerate, excuse, and exempt the city from any liability whatsoever. . . .

 

See Del Rio, Tex., City Charter art. I, 4 (emphasis added). SE Ranch argues that (1) the City, as a home-rule municipality possessing the full power of self government, has the authority to waive immunity from suit in its City Charter and (2) the above quoted language is an express waiver of immunity because it "details the specific notice of claim process a claimant must follow to subject the City to liability."

First, we note that the Supreme Court has expressly left open the question of whether a municipality could waive immunity from suit through its charter or ordinance. See Tooke, 197 S.W.3d at 344 (". . . [I]t could be argued that a city lacks authority to waive its own immunity from suit by ordinance or charter. But we need not address that argument here because the quoted provision is not a clear and unambiguous waiver of immunity."); see also City of Houston v. Allco, Inc., 206 S.W.3d 113, 114 (Tex. 2006) ("We do not reach the question whether a municipality may waive immunity from suit; we hold only that the charter text is not such a waiver."); City of Houston v. Jones, 197 S.W.3d 391, 392 (Tex. 2006) (per curiam) (same); Sisk Utils., Inc. v. City of Greenville, 197 S.W.3d 389, 389-90 (Tex. 2006) (per curiam) (same); PKG Contracting Inc. v. City of Mesquite, 197 S.W.3d 388, 389 (Tex. 2006) (per curiam) (same). Likewise, we need not address whether the City has the authority to waive its own immunity from suit because we can resolve the issue before us based on the City Charter text alone. See City of LaPorte v. Barfield, 898 S.W.2d 288, 291 (Tex. 1995) (waiver of sovereign immunity must be clear and unambiguous); see also Tex. Gov't Code Ann. 311.034 (Vernon Supp. 2006).

Second, turning to the language at issue in the City Charter, SE Ranch argues the charter provides a detailed notice of claim process which would be "meaningless if it is not interpreted as waiving immunity from liability." We disagree. The above quoted provision does not waive immunity from suit in clear and unambiguous terms. Barfield, 898 S.W.2d at 291. Instead, Article I, section 4 merely provides a notice or "presentment provision" detailing how and when claims must be presented to the City. See Travis County v. Pelzel & Assocs., Inc., 77 S.W.3d 246, 249 (Tex. 2002) (superseded by statute on other grounds) (holding that statutory presentment language providing that "[a] person may not sue on a claim against a county unless the person has presented the claim to the commissioners court and the commissioners court has neglected or refused to pay all or part of the claim" did not "go as far as waiving immunity from suit, but merely establishe[d] a condition precedent to suit"). Accordingly, we overrule SE Ranch's first issue.

Development Agreement

SE Ranch next argues that the venue and alternative dispute resolution (ADR) provision of the development agreement waives the City's immunity from both liability and suit. Section 18.2 of the development agreement contains the following provision:

Any legal action or proceeding brought or maintained, directly or indirectly, as a result of this Contract shall be heard and determined in Val Verde County, Texas. The parties agree that any dispute that may arise under this Agreement shall first be submitted to mediation between the parties, or to alternative dispute resolution proceedings, before litigation is filed.

 

SE Ranch contends that "because the drafters of the agreement envisioned that SE Ranch would be able to sue the City for breach of contract and provided express prerequisites to such a lawsuit," we should hold that the City has waived its governmental immunity from suit. We disagree. As previously noted, a waiver of immunity must be clear and unambiguous. Tooke, 197 S.W.3d at 332-33 (to ensure that legislative control over sovereign immunity is "not lightly disturbed, a waiver of immunity must be clear and unambiguous"). The provision quoted above is not such a clear and unambiguous waiver. See Columbus Indep. Sch. Dist. v. Five Oaks Achievement Ctr., 197 S.W.3d 384, 385 (Tex. 2006) (finding no waiver of immunity from suit in a provision that stated "any recourse to judicial action under this contract shall be in the courts"); Tex. Political Subdivs. Prop./Cas. Joint Self-Ins. Fund v. Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist., 163 S.W.3d 172, 176 (Tex. App.--San Antonio 2005) rev'd on other grounds 212 S.W.3d 320 (Tex. 2006) (noting that statutory language "envisioning suit" did not constitute a clear and unambiguous waiver of immunity from suit). Accordingly, SE Ranch's second issue is overruled.

Breach of Contract under Section 271.152 of the Local Government Code

Finally, SE Ranch claims immunity was waived under the Local Government Code. Tex. Loc. Gov't Code Ann. 271.152 (Vernon 2005). The City responds that even if immunity from suit was waived under section 271.152, which they deny, the statute at issue precludes SE Ranch from recovering damages in this case because SE Ranch never actually provided any goods or services to the City in light of the "suspended" contract; therefore, there can be no "balance due and owed" by the City. (3)

In 2005, the Legislature enacted section 271.152 of the Texas Local Government Code, which waives immunity from suit for certain claims against local governmental entities, including municipalities, as follows:

A local governmental entity that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this subchapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of contract, subject to the terms and conditions of this subchapter.

 

Tex. Loc. Gov't Code Ann. 271.152; see also Tex. Loc. Gov't Code Ann. 271.151(3)(A) (Vernon 2005) (defining a "municipality" as a "local governmental entity"). The statute defines a "contract subject to this subchapter" as "a written contract stating the essential terms of the agreement for providing goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity." Id. 271.151(2). Damages are limited to "the balance due and owed by the local governmental entity under the contract," "the amount owed for change orders or additional work the contractor is directed to perform by a local governmental entity in connection with the contract," and "interest as allowed by law." Tex. Loc. Gov't Code Ann. 271.153(a) (Vernon 2005). Damages, however, may not include "consequential damages," "exemplary damages," or "damages for unabsorbed home office overhead." Id. 271.153(b). In reviewing whether a party has alleged facts that affirmatively demonstrate a trial court's subject matter jurisdiction, we do not look to the merits of the case but consider only the plaintiff's pleadings and evidence pertinent to the jurisdictional inquiry. County of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex. 2002). Here, SE Ranch's third amended petition, filed 21 days after the hearing on the plea to the jurisdiction, (4) does not specify the nature or amount of damages it is seeking under sections 271.152-.153 but merely states, "[a]lternatively, the City waived sovereign immunity to suit pursuant to Section 271.152 of the Texas Local Government Code by entering into the Development Agreement." Although SE Ranch did plead for "actual, consequential and incidental damages in . . . excess of the . . . jurisdictional limits" under a separate breach of contract action, such a broad pleading is not sufficient to allege allowable damages under section 271.153, and therefore did not affirmatively demonstrate the trial court's jurisdiction. Further, at the hearing, counsel for SE Ranch acknowledged to the trial court that "there is a very specific limitation on consequential damages and other [types] of damages . . . under 271." Again, however, counsel never specified the amount or nature of actual damages it was seeking; in fact, although the City put damages at issue, SE Ranch did not argue any damages that would be recoverable under section 271 at the hearing before the trial court. Because we hold SE Ranch failed to plead and/or raise a fact issue as to allowable damages under section 271.153, we overrule SE Ranch's final issue.

Conclusion

Because SE Ranch has failed to affirmatively show a clear and unambiguous waiver of the City's immunity from suit, they have also failed to establish the trial court's subject matter jurisdiction to hear the case. Accordingly, we conclude the trial court did not err in sustaining the City's plea to the jurisdiction and dismissing SE Ranch's breach of contract claim for want of subject matter jurisdiction; therefore, we affirm the judgment of the trial court.

 

Phylis J. Speedlin, Justice

1. Sitting by assignment.

2. See Tex. Loc. Gov't Code Ann. 5.004 (Vernon 1999) ("A municipality is a home-rule municipality if it operates under a municipal charter that has been adopted or amended as authorized by Article XI, Section 5, of the Texas Constitution.").

3. The City also argues that the development agreement does not meet the requirements of section 271.151(2) because (1) essential terms are missing from the contract and (2) the contract does not specify that SE Ranch will provide goods or services to the City, thus preserving immunity from suit. See Tex. Loc. Gov't Code Ann. 271.151(2) (Vernon 2005). Because we hold SE Ranch failed to plead allowable damages under section 271.153, we need not address whether the contract was for goods or services or contained essential terms. Tex. Loc. Gov't Code Ann. 271.153 (Vernon 2005).

4. SE Ranch was permitted by the trial court to amend its pleadings before filing notice of appeal.