Tara Partners, Ltd. v. City of South Houston (Tex.App.- Houston [14th Dist.] Jan. 13,
2009)(Seymore)(city governmental immunity), attorneys fees on UDJA claim immunity waiver, waiver
by conduct)
We conclude that the trial court had jurisdiction over appellants' claims disputing
imposition of fees under the Water Code. Accordingly, we reverse that part of
the trial court's order that dismissed appellants' claims disputing imposition of
fees under the Water Code and remand for further proceedings consistent with
our opinion.
We further conclude that the averments and allegations in appellants' Third
Amended Petition are insufficient to support the trial court's jurisdiction over
appellants' claims for reimbursement of previously paid fees and Tara's claims
pertaining to breach of a purported settlement agreement. Accordingly, we
affirm that part of the trial court's order dismissing appellants' claims for
reimbursement of previously paid fees and Tara's claim that the City breached a
purported settlement agreement.
AFFIRMED IN PART; REVERSED & REMANDED IN PART: Opinion by Justice Seymore
Before Justices Frost, Seymore and Guzman
14-07-00330-CV Tara Partners, Ltd., Granada Terrace, Ltd., David R. Wise, 1606 Savannah LLC,
Windsor Gardens Ltd., and Freeport Villa Brazos Apartments, Ltd. v. City of South Houston
Appeal from 157th District Court of Harris County
Trial Court Judge: Randy Wilson
Concurring Opinion by Justice Frost
M A J O R I T Y O P I N I O N
In this suit for declaratory judgment and damages related to fees set by a water and sewer utility
owned by the City of South Houston, appellants Tara Partners, Ltd., Granada Terrace, Ltd., David R.
Wise, 1606 Savannah LLC, Windsor Gardens, Ltd., and Freeport Villa Brazos Apartments, Ltd.
challenge an order granting the City's plea to the jurisdiction and dismissing appellants' lawsuit
without prejudice. Concluding the district court had jurisdiction over appellants' claims disputing the
imposition of fees under the Texas Water Code, but not over appellants' claims for reimbursement for
previously paid fees or over Tara Partners, Ltd.'s claims related to an alleged settlement agreement,
we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.
I. Factual and Procedural Background
The City of South Houston (“the City") is a general law municipality located within Harris County. The
City operates its own water and sewer utility systems. Appellant Tara Partners, Ltd. (“Tara") owns
apartments within and outside the City's boundaries. The remaining appellants own apartments solely
within the City's boundaries. The City provides water to appellants' apartments. From 1992 until
2004, the minimum bill for all city customers was based on water meter size, with an additional charge
based on water consumption.
In 2004, the City adopted an ordinance by which it charged residential, outside city residential, and
commercial residential users a minimum monthly base rate of $10.00 for water and $12.00 for sewer
“for each available unit connected to a meter, whether those units are occupied or vacant." As
before, there was also a usage charge. Appellants fell within the “commercial residential user"
category, defined as “all multi-family units containing two or more living units and including trailer
parks, motels, apartment projects and hotels."[1] Appellants' estimated water and sewer charges for
a two-hundred-unit apartment, with a three-inch meter, and using 750,000 gallons of water a month
would increase from $39,294 to $91,622 under the 2004 ordinance.
Appellants sued the City in Harris County District Court, and Tara also separately sought review
before the Texas Commission on Environmental Quality (“TCEQ") pursuant to Texas Water Code
Section 13.043(b)(3).[2] While the district court case was proceeding, attorneys for Tara and the City
signed a hand printed settlement “resolution," which provided in part that the parties agreed the rates
set forth in the 2004 ordinance were not “just and reasonable" and “all increased amounts collected
under [the 2004 ordinance] shall be returned to [Tara] within 30 days." According to appellants, the
City did not comply with this agreement. In amended pleadings in district court, appellants then
alleged the following “causes of action": unlawful and unconstitutional taxation in violation of Texas
law, unreasonable and unjustified rate discrimination under Texas common law, arbitrary and
unreasonable rates under Texas common law, breach of contract, and promissory estoppel (the latter
two raised only by Tara and referring to the handwritten resolution). As additional “causes of action,"
appellants sought a declaratory judgment, including a declaration the handwritten resolution was
enforceable, actual damages consisting of “all of the Surcharge collected by [the City]," and attorneys'
fees under the Uniform Declaratory Judgment Act.[3]
The City filed a plea to the jurisdiction, and alternatively, special exceptions. The City argued (1)
under the Texas Water Code provisions regarding exclusive original and exclusive appellate
jurisdiction, the district court lacked subject matter jurisdiction over appellants' challenges to the water
and sewer rates;[4] (2) to the extent appellants were seeking common law tort damages, there was no
waiver of governmental immunity or constitutional authorization as would give the district court
jurisdiction over such claims; and (3) the settlement resolution was not a contract subject to the
subchapter under which the legislature had waived governmental immunity for claims for breach of
contract.[5] Following an evidentiary hearing, the trial court granted the City's plea to the jurisdiction.
II. Legal Standards and Standard of Review
In four issues, appellants challenge the trial court's order granting the City's plea to the jurisdiction.
[6] In its plea, the City argued provisions of the Texas Water Code gave TCEQ exclusive appellate
jurisdiction over the rate claims and governmental immunity precluded the remaining claims.
In a plea to the jurisdiction, a party challenges the trial court's authority to determine the subject
matter of the cause of action. City of Mont Belvieu v. Enter. Prod. Operating, L.P., 222 S.W.3d 515,
518 (Tex. App.- Houston [14th Dist] 2007, no pet.). Because subject matter jurisdiction is a question
of law, we review the trial court's decision de novo. Id. In deciding a plea to the jurisdiction, we may
not weigh the merits of the claim, but must consider only the plaintiff's pleadings and the evidence
pertinent to the jurisdictional inquiry. See Tex. Natural Res. Conservation Comm'n v. White, 46 S.W.
3d 864, 868 (Tex. 2001); Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554-55 (Tex. 2000). When
we consider a trial court's order on a plea to the jurisdiction, we construe the pleadings in the
plaintiff's favor and look to the pleader's intent. See Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.
W.2d 440, 446 (Tex. 1993). To prevail, the party asserting the plea must show that, even if all the
allegations in the plaintiff's pleadings are taken as true, an incurable jurisdictional defect appears on
the face of the pleadings, rendering it impossible for the plaintiff's petition to confer jurisdiction on the
trial court. City of Mont Belvieu, 222 S.W.3d at 518. If a plaintiff fails to plead sufficient facts
affirmatively demonstrating the trial court's jurisdiction, but the pleadings do not affirmatively
demonstrate incurable defects in jurisdiction, the issue is one of pleading sufficiency and the plaintiff
should be afforded the opportunity to amend. Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d
217, 226-27 (Tex. 2004); County of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex. 2002). However, if
the pleadings affirmatively negate the existence of jurisdiction, a plea to the jurisdiction may be
granted without allowing the plaintiff an opportunity to amend. Miranda, 133 S.W.3d at 227; Brown, 80
S.W.3d at 555. Also, through inaction, a plaintiff may lose the opportunity to amend. See Haddix v.
Am. Zurich Ins. Co., 253 S.W.3d 339, 347 (Tex. App.- Eastland 2008, no pet.).[7]
III. Appellants' Claims and the City's Plea
A. Appellants' Rate Claims and the Texas Water Code
In their first issue, appellants argue the trial court erred in dismissing their rate claims. Appellants'
first three causes of action against the City were cast as (1) “Unlawful and Unconstitutional Taxation in
Violation of Texas Law," (2) “Unreasonable and Unjustified Rate Discrimination" under Texas common
law, and (3) “Arbitrary and Unreasonable Rates" under Texas common law. In each of these “causes
of action," appellants attacked the increase in rates resulting from passage of the 2004 ordinance.
Appellants alleged the increased rates were not related to the City's costs in providing service, were
excessive in comparison to charges for other customers, and were not based on evidence or
analysis. Appellants' sixth cause of action was a request for a declaration incorporating appellants'
allegations in the first three causes of action, as well as seeking declarations (1) they were entitled to
reimbursement for past payment and (2) the settlement agreement signed by counsel for Tara and
the City was enforceable.
In its plea to the jurisdiction, the City argued, in part, that appellants' lawsuit was “essentially a
challenge to the rates that the City charges for utility services." Citing Texas Water Code section
13.042(d), the City then contended the TCEQ had exclusive appellate jurisdiction over that dispute
and therefore the district court lacked jurisdiction.
Texas district courts are courts of general jurisdiction and have jurisdiction over all actions,
proceedings and remedies “except in cases where exclusive, appellate, or original jurisdiction may be
conferred by [the Texas] Constitution or other law on some other court, tribunal, or administrative
body." Tex. Const. Art. V, ' 8. An agency has exclusive jurisdiction when a pervasive regulatory
scheme indicates that the legislature intended for the regulatory process to be the exclusive means of
remedying the problem to which the regulation is addressed. In re Entergy Corp., 142 S.W.3d 316,
322 (Tex. 2004).
The question in the present case, therefore, is whether the legislature intended the regulatory
process as the exclusive means of remedying a rate dispute between a municipally owned water and
sewer utility and ratepayers living within the corporate limits of that municipality. We conclude it did
not.
Water Code section 13.042 provides for a municipality's original jurisdiction and for TCEQ's original
and appellate jurisdiction:
(a) Subject to the limitations imposed in this chapter and for the purpose of regulating rates and
services so that those rates may be fair, just, and reasonable and the services adequate and
efficient, the governing body of each municipality has exclusive original jurisdiction over all water and
sewer utility rates, operations, and services provided by a water and sewer utility within its corporate
limits.
(b) The governing body of a municipality by ordinance may elect to have the commission exercise
exclusive original jurisdiction over the utility rates, operation, and services of utilities, within the
incorporated limits of the municipality.
(c) The governing body of a municipality that surrenders its jurisdiction to the commission may
reinstate its jurisdiction by ordinance at any time after the second anniversary of the date on which
the municipality surrendered its jurisdiction to the commission, except that the municipality may not
reinstate its jurisdiction during the pendency of a rate proceeding before the commission. The
municipality may not surrender its jurisdiction again until the second anniversary of the date on which
the municipality reinstates jurisdiction.
(d) The commission shall have exclusive appellate jurisdiction to review orders or ordinances of those
municipalities as provided in this chapter.
(e) The commission shall have exclusive original jurisdiction over water and sewer utility rates,
operations, and services not within the incorporated limits of a municipality exercising exclusive
original jurisdiction over those rates, operations, and services as provided in this chapter.
(f) This subchapter does not give the commission power or jurisdiction to regulate or supervise the
rates or service of a utility owned and operated by a municipality, directly or through a municipally
owned corporation, within its corporate limits or to affect or limit the power, jurisdiction, or duties of a
municipality that regulates land and supervises water and sewer utilities within its corporate limits,
except as provided by this code.
Tex. Water Code Ann. ' 13.042. In addition, Water Code section 13.043(b)(3) provides that
ratepayers residing outside the corporate limits of a municipality Amay appeal the decision of the
governing body of the entity affecting their water, drainage, or sewer rates to the commission." Id. '
13.043(b).
Our ultimate goal in construing a statute is to give effect to the legislature's intent as expressed in the
language of the statute. F.F.P. Operating Partners, L.P. v. Duenez, 237 S.W.3d 680, 683 (Tex.
2007); Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 892 (Tex. 2000). In doing so, we must
always consider the statute as a whole rather than its isolated provisions. Helena Chem. Co. v.
Wilkins, 47 S.W.3d 486, 493 (Tex. 2001). “We should not give one provision a meaning out of
harmony or inconsistent with other provisions, although it might be susceptible to such a construction
standing alone." Id. Instead, we presume that both the statute and the legislative act are intended to
be effective in their entirety. Allegheny Mut. Cas. v. State, 710 S.W.2d 139, 141 (Tex. App.-Houston
[14th Dist.] 1986, pet. ref'd). Thus, in construing a statute - regardless of whether it is ambiguous on
its face - we may consider, among other matters, the following: the object sought to be attained; the
circumstances under which the statute was enacted; common law or former statutory provisions,
including laws on the same or similar subjects; and the consequences of a particular construction.
See Tex. Gov't Code Ann. ' 311.023 (Vernon 2005).[8]
In arguing TCEQ has exclusive jurisdiction over appellants' rate claims, the City relies primarily on
Water Code subsection 13.042(d). Unlike subsections (a), (b), and (e), however, subsection (d)
contains no reference to “rates." See Tex. Water Code Ann. ' 13.042(a), (b), (d), (e). Instead,
subsection (d) grants the commission exclusive appellate jurisdiction to “review orders or
ordinances." Id. (d). Additionally, to interpret subsection (d) as granting TCEQ exclusive appellate
jurisdiction over rate decisions by the governing bodies of municipally owned water and sewer utilities
would render superfluous the section which permits non-resident ratepayers to appeal to TCEQ a
“decision of the governing body of the entity affecting their water, drainage, or sewer rates." Id.
'13.043(b)(3); see F.F.P. Operating Partners, L.P., 237 S.W.3d at 711 (acknowledging fundamental
rule that court must give effect to every sentence, clause, and word of a statute so no part will be
rendered superfluous).
Finally, subsection 13.042(f) specifically cautions that the Water Code subchapter relating to
jurisdiction “does not give [TCEQ] power or jurisdiction to regulate or supervise the rates or service of
a utility owned and operated by a municipality . . . . except as provided by this code." Tex. Water
Code Ann. ' 13.043(f). This limitation is consistent with the legislative history of public utility regulation
in Texas, which “represents an attempt to retain local regulation of public utilities while empowering
the Commission to regulate regional service or service outside municipal limits." Pub. Util. Comm'n v.
City of Austin, 728 S.W.2d 907, 913 (Tex. App.-Austin 1987, writ ref'd n.r.e.); see also City of
Sherman v. Pub. Util. Comm'n, 643 S.W.2d 681, 683 (Tex. 1983) (describing municipalities' opposition
to state regulation of municipally owned utilities and explaining statutory compromise of retaining
municipal regulation within a municipality's territorial boundaries and exempting municipalities from
most of the statute's regulatory provisions).[9]
Based on the plain language of the Texas Water Code and the history of predecessor statutes, we
conclude the Texas Water Code does not confer exclusive appellate jurisdiction over the rates
charged by a municipally owned utility to ratepayers residing within its territorial boundaries. See City
of W. Tawakoni v. Williams, 742 S.W.2d 489, 490-91, 493 & 493 n.2 (Tex. App.-Dallas 1987, writ
denied) (indicating same in relation to predecessor of present Water Code).
The City, however, relies on the following cases, in which courts construed section 13.042(d) as
vesting TCEQ with exclusive appellate jurisdiction over the claims in question: City of Galveston v.
Flagship Hotel, Ltd., 73 S.W.3d 422 (Tex. App.- Houston [1st Dist.] 2002, no pet.) (“Flagship I");
Flagship Hotel, Ltd. v. City of Galveston, 117 S.W.3d 552 (Tex. App.- Texarkana 2003, pet. denied)
(“Flagship II"); and City of Donna v. Victoria Palms Resort, Inc., No. 13-03-375-CV, 2005 WL 1831593
(Tex. App.- Corpus Christi Aug. 4, 2005, pet. denied) (mem. op.).[10] In these cases, however, courts
were either not reviewing rates or provided only minimal reasoning in support of their conclusions.
In Flagship I, the issue was whether the district court had jurisdiction to issue a temporary injunction to
prevent cessation of water service to a hotel because of the hotel's alleged arrearage in payment of
its water bills. 73 S.W.3d at 423-24. The court quoted sections 13.042(a) and (d). Id. at 426. It
then quoted the definition of an “order": “An 'order' of a municipality is 'the whole or part of the final
disposition, whether affirmative, negative, injunctive, or declaratory in form, of the regulatory authority
in a matter other than rulemaking . . . .'" Id. (quoting Tex. Water Code Ann. ' 13.002(14)). Without
further analysis of section 13.042 or other provisions of the code, the court then concluded “exclusive
original jurisdiction over the City's decision to shut off Flagship's water is vested with the City.
Further, we conclude exclusive appellate jurisdiction over the City's final disposition of this dispute is
vested with the TNRCC." Id. at 427.[11]
The court next rejected the hotel's contention that, under section 13.042(f), TNRCC (now TCEQ) had
no power to reverse a decision by the city to shut off the hotel's water. Id.[12] In quoting the section,
the court emphasized the last phrase (“except as provided by this code") and then observed that
section 13.042(f) “merely limits the power of the TNRCC to enforce the legislative purpose of the
Water Code 'to assure rates, operations, and services that are just and reasonable to the consumers
and to the retail public utilities.'" Id. (quoting Tex. Water Code Ann. ' 13.042(f)). Although the hotel
had claimed breach of contract and sought declaratory relief, the appellate court specifically limited its
jurisdictional holding to the hotel's request for injunctive relief. Id. at 423-24, 428.
In Flagship II, on appeal after remand of Flagship I, one issue was whether the district court erred in
granting the city's plea to the jurisdiction over Flagship's claim for declaratory relief requesting a
judgment that its alleged water and sewer arrearage was barred by the statute of limitations and
agreements between the city manager and Flagship. Flagship II, 117 S.W.3d at 562-63. Without
discussion, the Flagship II court found the Flagship I court's reasoning “persuasive," and held
“Flagship must exhaust its administrative remedies through the Texas Commission on Environmental
Quality, formerly the TNRCC." Id. at 563.
Finally, in City of Donna, Victoria Palms sued the city over its refusal to credit an amount of alleged
water overcharges and its threat to disconnect water service. 2005 WL 1831593, at *3. The
appellate court reasoned:
The City's refusal to credit Victoria Palms with the amount of alleged overcharges constitutes a whole
or part of a final disposition of the City, other than rulemaking; that decision therefore constitutes an
order under the water code. [Tex. Water Code Ann. '] 13.002(14). The TCEQ has exclusive
appellate jurisdiction to review orders or ordinances of the City. See id. at ' 13.042(d).
Id. at *4. The court also relied on Flagship I, referring to its conclusion that the predecessor to TCEQ
had exclusive appellate jurisdiction over the city's final disposition of a dispute with a hotel over
discontinuing water service for nonpayment of fees. Id. (citing Flagship I, 73 S.W.3d at 427).
We do not find Flagship I and II and City of Donna persuasive authority for the present case because
they either do not involve review of rates or contain only minimal reasoning in support of their results.
Instead, for the reasons discussed above, we conclude the legislature has not conferred exclusive
appellate jurisdiction on TCEQ over water and sewer rates a municipally owned water and sewer utility
charges ratepayers residing within its corporate limits. Accordingly, we hold the district court has
jurisdiction over appellants' Water Code claims. See Tex. Const. Art. V, ' 8 (granting district courts
general jurisdiction unless exclusive, appellate, or original jurisdiction conferred on other entity).
We therefore sustain appellants' first issue in part. We reverse the district court's dismissal of
appellants' first three claims in their third amended petition and dismissal of appellants' claim for
declaratory judgment (sixth claim) insofar as appellants requested a declaration regarding rates, but
not insofar as they requested a declaration regarding reimbursement for past amounts paid or
enforceability of the settlement agreement.
B. Appellants' Common Law, Breach of Contract, and Declaratory Judgment Claims
In issue two, appellants argue the trial court erred in dismissing their “common law and breach of
contract claims" because they fall outside the purview of TCEQ's exclusive jurisdiction. Appellants
first refer to their “several common law claims for unlawful and unconstitutional taxation, unreasonable
and unjustified rate discrimination, and arbitrary and unreasonable water and sewer rates, as well as
numerous requests for declaratory judgment." As discussed in Section III. A., above, these causes of
action are, in essence, attacks on the increase in rates resulting from passage of the 2004 ordinance;
and we have concluded the district court has jurisdiction over these claims.
In issue two, appellants also refer to Tara's claims for breach of contract and promissory estoppel.
We discuss those claims in Section III. D., below, in response to appellants' fourth issue. Because of
our resolution of appellants' first and fourth issues, we do not discuss their second issue.
C. Appellants' Claims for Equitable Relief and Attorneys' Fees
In issue three, appellants argue, if the ordinance is declared void ab initio, they have a right to
recover unlawful water and sewer fees and attorneys' fees. Under this issue, appellants contend (1)
the City is not immune from suits for equitable relief, (2) appellants should be allowed to seek
reimbursement of the surcharges already paid pursuant to the Water Code's requirement that the City
have just and reasonable rates, (3) the trial court has jurisdiction to order reimbursement under the
Uniform Declaratory Judgment Act (“UDJA"), (4) it would be against public policy for the City to receive
a windfall, and (5) the UDJA waives governmental immunity for attorneys' fees. In short, in issue
three, appellants focus on the monetary awards they seek (1) for previously paid water and sewer
fees and (2) for attorneys' fees.
The City responds by invoking governmental immunity. The City observes that, despite having filed
their third amended petition after the City filed its plea to the jurisdiction, appellants did not allege
waiver of governmental immunity. More specifically, the City argues that appellants “have yet to plead
a legislative waiver of the City's immunity to a common law claim for monetary or equitable relief."[13]
In Texas, sovereign immunity protects the state against lawsuits for damages unless the state has
consented to suit. See Miranda, 133 S.W.3d at 224. Cities, as political subdivisions of the state, are
entitled to immunity unless it has been waived. See San Antonio Indep. Sch. Dist. v. McKinney, 936 S.
W.2d 279, 283 (Tex. 1996). Sovereign immunity encompasses two distinct principles: immunity from
suit and immunity from liability. Miranda, 133 S.W.3d at 224.[14] Although immunity from liability is an
affirmative defense, immunity from suit deprives a court of subject matter jurisdiction. Id. Because
immunity from suit, unlike immunity from liability, affects the court's jurisdiction, immunity from suit is
properly raised in a plea to the jurisdiction. See Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692,
696 (Tex. 2003).
Money had and received.
Appellants rest their claim for monetary damages primarily on the equitable doctrine of money had
and received.[15] As the First Court of Appeals recently explained:
[W]here a claim for declaratory or injunctive relief is brought seeking the refund of illegally collected
tax payments, governmental immunity will not apply if the taxpayer alleges that the payments were
made as a result of fraud, mutual mistake of fact, or duress, whether express or implied. See Dallas
County Cmty. College Dist. v. Bolton, 185 S.W.3d 868, 876-79 (Tex. 2005) (holding that a taxpayer
cannot bring a suit for the return of illegally collected taxes if the payments were made voluntarily);
see also Camacho v. Samaniego, 954 S.W.2d 811, 822 (Tex. App.-El Paso 1997, pet. denied). The
revenue generated from a tax determined to be illegal should not be treated as property of the State
or municipality to which the principles of sovereign immunity apply, and an illegally collected fee
should be refunded if paid as a result of fraud, mutual mistake of fact, or duress, without respect to
waiver of sovereign immunity. See Camacho, 954 S.W.2d at 822; Austin Nat'l Bank of Austin v.
Sheppard, 123 Tex. 272, 71 S.W.2d 242, 246 (1934). No legislative consent to sue is needed under
these circumstances.
Nivens v. City of League City, 245 S.W.3d 470, 474 (Tex. App.-Houston [1st Dist.] 2007, pet. denied).
In Nivens, taxpayers asserted claims for money had and received, breach of contract, and mistake,
but had not sought declaratory or injunctive relief regarding levy and refund of allegedly illegal
municipal utility district taxes. Id. at 475. The taxpayers also did not allege they made any payments
as a result of fraud, mutual mistake of fact, or duress. Id. The appellate court held appellants' claims
were barred by governmental immunity. Id.
Appellants in the present case argue they alleged duress as follows: “Since December 1, 2004,
under the [2004] Ordinance, Plaintiffs have been forced to pay arbitrary, unreasonable, excessive,
confiscatory, and discriminatory charges for water and sewer service." They further request this court
to take judicial notice of provisions in the City's Code of Ordinances, under which the City is
authorized to impose late payment charges and discontinue water service for delinquent accounts.
Appellants now contend they would be subject to “punishment" under these provisions. See Dallas
County Comm. College Dist. v. Bolton, 185 S.W.3d 868, 877 (Tex. 2005) (stating reimbursement of
illegal fees and taxes allowed when public entity compels compliance with void law and subjects
person to punishment if he refuses or fails to comply).
Despite having included multiple paragraphs setting forth specific facts related to the enactment and
effects of the 2004 Ordinance, appellants never pleaded the potential for penalties of late payment
charges and cessation of water service. They never characterized late charges and cessation of
water as “punishment" or duress. Their reference to being “forced" to pay the 2004 water and sewer
charges appears in a paragraph completely separate from their jurisdictional paragraphs.
Even construing appellants' pleadings liberally, we conclude that, like the taxpayers in Nivens,
appellants did not allege facts indicating they made water and sewer payments as a result of fraud,
mutual mistake of fact, or duress. Nivens, 245 S.W.3d at 475. Just as were the taxpayers' claims in
Nivens, appellants' claims in the present case are barred by governmental immunity. See id.
Appellants, however, contend that, if they have not pleaded sufficient facts to allege a claim for money
had and received, they should be allowed to amend their petition. See Hull v. Davis, 211 S.W.3d 461,
463 (Tex. App.- Houston [14th Dist.] 2006, no pet.) (stating when plaintiff fails to plead facts
establishing jurisdiction, but petition does not affirmatively demonstrate incurable defects in
jurisdiction, issue is one of pleading sufficiency, and plaintiff should be afforded the opportunity to
amend).
We note that appellants amended their petition after the City filed its plea to the jurisdiction but did not
include facts or allegations that pertain to late fees and cessation of service. However, we
acknowledge that appellants' pleadings do not affirmatively negate the trial court's jurisdiction over
their money had and received claim. After the trial court granted the City's plea to the jurisdiction,
appellants did not seek or request an opportunity for another amendment to their petition. See Tex. A
& M Univ. Sys. v. Koseoglu, 233 S.W.3d 835, 839-40 (Tex. 2007) (indicating plaintiff should be given
opportunity to amend after a trial court finds merit in a plea to the jurisdiction).
Although the general rule reflects a preference for allowing amendment, a plaintiff may forfeit this
opportunity through inaction. Haddix, 253 S.W.3d at 347. By failing to seek permission to amend
after the trial court found the City's plea meritorious, appellants forfeited the opportunity to amend
while this case was pending in the trial court. See id.; see also Dahl ex rel. Dahl v. State, 92 S.W.3d
856, 862 n.6 (Tex. App.-Houston [14th Dist.] 2002, no pet.) (noting plaintiffs arguably waived
complaint that trial court failed to provide them opportunity to amend pleadings when they did not
seek leave to amend).[16]
Monetary damages under the UDJA.
As part of issue four, appellants contend the district court had jurisdiction to order reimbursement
under UDJA section 37.011. Section 37.011 provides in relevant part: “Further relief based on a
declaratory judgment or decree may be granted whenever necessary or proper. The application must
be by petition to a court having jurisdiction to grant the relief." Tex. Civ. Prac. & Rem. Code Ann. '
37.011 (Vernon 2008). As appellants admit, “further relief" under section 37.011 is typically
injunctive relief. See State v. Anderson Courier Serv., 222 S.W.3d 62, 66 (Tex. App.- Austin 2005,
pet. denied) (“Typically, further relief under section 37.011 is granted in the form of an injunction for
the purpose of enforcing a declaratory judgment where the evidence shows that a party will not
comply with the judgment."). Private parties cannot circumvent governmental immunity by
characterizing a suit for money damages as a declaratory‑judgment claim. City of Houston v.
Williams, 216 S.W.3d 827, 828-29 (Tex. 2007).
Attorneys' fees under the UDJA.
Finally, appellants argue the UDJA waives governmental immunity for an award of attorneys' fees. We
agree. See Tex. Educ. Agency v. Leeper, 893 S.W.2d 432, 446 (Tex. 1994) (concluding that, by
authorizing declaratory judgment actions to construe legislative enactments of governmental entities
and authorizing awards of attorney fees, UDJA necessarily waives governmental immunity for such
awards). That the UDJA waives immunity for attorneys' fees awards, however, does not mean it
waives immunity for damages awards.
We overrule appellants' third issue to the extent it relates to the district court's jurisdiction over claims
for monetary damages. We sustain appellants' third issue only to extent it relates to the district
court's jurisdiction over an award of attorneys' fees if such an award is warranted.
D. Breach of Contract and Promissory Estoppel Based on the Settlement Agreement
In issue four, Tara argues that the district court had jurisdiction to enforce the “settlement agreement"
(an undated handwritten “resolution" signed by appellants' counsel and the City's counsel) which
purportedly arose from the proceedings before TCEQ. Tara initially contends the trial court has
jurisdiction because the agreement arose from a forum where liability had been waived.
In support, appellants cite Texas A & M University-Kingsville v. Lawson, 87 S.W.3d 518, 521 (Tex.
2002) (plurality op.). Writing for the plurality in Lawson, Justice Hecht observed, A[W]hen a
governmental entity is exposed to suit because of a waiver of immunity, it cannot nullify that waiver by
settling the claim with an agreement on which it cannot be sued." Id.
The City responds that no settlement agreement exists because the city council never authorized the
resolution, and therefore statutory provisions allowing for adjudication of claims arising under written
contract with local governmental units do not apply.[17] Under Texas Local Government Code section
271.152, a local governmental entity authorized by statute or constitution to enter into contract, and
which enters into a contract subject to the subchapter, waives sovereign immunity to suit for purpose
of adjudicating a claim for breach of the contract. Tex. Loc. Gov't Code Ann. ' 271.152 (Vernon
2005). A contract subject to the subchapter is “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") (emphasis added). Id. ' .151(2).
Tara relies solely on the handwritten “resolution" executed by its counsel and counsel for the City. As
an initial matter, we note the following language in that document: “Now therefore be it resolved by
The City Council . . . ." At the hearing on the plea to the jurisdiction, City Secretary Maria Vega
testified she had searched the City's records back to 2004 and had not found the handwritten
resolution. Neither had she found any record of the City's having adopted or authorized the
resolution. She had attended all the city council meetings for “the last couple of years" and was not
aware of the city council's having authorized such a resolution. The resolution was not in a form that
she would present or execute for the City.
A city's governing body may not delegate the right to make decisions affecting the transaction of city
business. City of San Benito v. Rio Grande Valley Gas Co., 109 S.W.3d 750, 757 (Tex. 2003).
Although cities may delegate to others the right to perform acts and duties necessary to the
transaction of the city's business, they can do so only by resolution or ordinance, by a majority vote.
Id.
Thus, even if we assume the proceeding before the TCEQ was one in which the City's immunity had
been waived, we cannot conclude the handwritten resolution constituted an agreement between Tara
and the City. The plurality opinion in Lawson does not support a waiver of the City's immunity in the
present case.
Tara also contends the district court has jurisdiction over its breach of contract and equitable
estoppel claims under “Federal Sign's 'Equitable Waiver by Conduct' Exception" to governmental
immunity. See Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 408 n.1 (Tex. 1997) (stating there may be
circumstances when “the State may waive its immunity by conduct other than simply executing a
contract so that it is not always immune from suit when it contracts"). Tara specifically directs this
court's attention to Texas Southern University v. State Street Bank & Trust, 212 S.W.3d 893 (Tex. App.
-Houston [1st Dist.] 2007, pets. denied).[18]
In State Street Bank the First Court of Appeals held, because of the extraordinary factual
circumstances of the case, the State was not immune from suit. Id. at 907-08. In that case, Texas
Southern University had entered into a contract for equipment and services. Id. at 908. After
receiving approximately $13 million in equipment and services, the university refused to pay, claiming
the contracts were invalid. Id. Additionally, one of the plaintiffs argued that the injustice was even
worse than the facts found by the trial court because the case also included an additional fact not
appearing in any of the prior cases: “'The government officials lured [plaintiff] into the Master Lease
with false promises that the contract would be valid and enforceable, then disclaimed any obligation
on the contract by taking the position that the contract was not valid after all.'" Id.
In neither its pleadings nor its responses to the City's plea to the jurisdiction, did Tara allege it was
“lured" or misled in relation to the handwritten resolution.[19] By law, such a “resolution" would not be
binding on the City until passed by a majority vote at a duly assembled meeting. See City of San
Benito, 109 S.W.3d at 757. Tara was charged with notice of the limits of the authority of the City's
counsel. See State v. Ragland Clinic‑Hospital, 138 Tex. 393, 159 S.W.2d 105, 107 (1942) (stating, in
context of suit against state, that because powers of all state officers are fixed by law, all persons
dealing with them are charged with notice of the limits of their authority and are bound at their peril to
ascertain whether contemplated contract is within power conferred). The circumstances of the
present case do not rise to the level of the “extraordinary factual circumstances" in State Street Bank.
We overrule Tara's fourth issue.
IV. Conclusion
We conclude that the trial court had jurisdiction over appellants' claims disputing imposition of fees
under the Water Code. Accordingly, we reverse that part of the trial court's order that dismissed
appellants' claims disputing imposition of fees under the Water Code and remand for further
proceedings consistent with our opinion.
We further conclude that the averments and allegations in appellants' Third Amended Petition are
insufficient to support the trial court's jurisdiction over appellants' claims for reimbursement of
previously paid fees and Tara's claims pertaining to breach of a purported settlement agreement.
Accordingly, we affirm that part of the trial court's order dismissing appellants' claims for
reimbursement of previously paid fees and Tara's claim that the City breached a purported settlement
agreement.
/s/ Charles Seymore
Justice
Panel consists of Justices Frost, Seymore, and Guzman (Frost, J., concurring).
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[1] We refer to the ordinance at issue as the A2004 Ordinance." The definition of “commercial residential user" was
amended in 2005 to exclude hotels and motels.
[2] Section 13.043(b) provides in relevant part: “Ratepayers of the following entities may appeal the decision of the
governing body of the entity affecting their water, drainage, or sewer rates to the commission: . . . a municipally owned
utility, if the ratepayers reside outside the corporate limits of the municipality." Tex. Water Code Ann. ' 13.043(b)
(Vernon 2008).
[3] See Tex. Civ. Prac. & Rem. Code Ann. '' 37.002, .009 (Vernon 2008). In addition to Tara's requesting a declaration
the handwritten resolution was enforceable, appellants sought a declaration that:
(a) . . . the [2004] Ordinance is an unlawful ad valorem tax in violation of the Texas Constitution;
(b) . . . the [2004] Ordinance is a discriminatory utility rate under Texas law;
(c) . . . any presumption that the [2004] Ordinance is valid disappeared because the City acted arbitrarily rather than on
the basis of changed conditions when passing the [2004] Ordinance;
(d) . . . no conclusive or issuable fact or condition existed which would have authorized the City's passage of the [2004]
Ordinance;
(e) . . . the City must have introduced substantive evidence and exercised legislative judgment on the basis of that
substantive evidence before it in order to validly pass the [2004] Ordinance;
(f) . . . the City did not introduce substantive evidence or exercise legislative judgment on any basis of substantive
evidence before it when passing the [2004] Ordinance;
(g) the action of the City Council in passing the [2004] Ordinance was arbitrary because it was based on absolutely no
investigation of the facts and certainly no investigation of the facts with regard to the City's expenses in providing water
and sewer services or as to what rates would enable the City to realize a reasonable return on its investment;
(h) the City's final water and sewer rates under the [2004] Ordinance must, but do not, relate to the actual cost
(including only direct and indirect costs) of providing the charged‑for service, water and sewer service;
(i) the City's “actual costs" of providing the charged‑for service - water and sewer service - under the [2004] Ordinance
do not include expenses related to other City departments, such as the police and fire departments, or expenses
related to City‑wide employee raises to the extent such employees are not a part of the water and sewer service
department;
. . . .
(k) . . . the [2004] Ordinance is arbitrary, capricious, and/or unreasonable, and therefore, void ab initio;
(l) . . . [appellants] are entitled to, and the City shall pay, a reimbursement of water and sewer service fees from the
City to [appellants], such amount being the difference between the amount charged to [appellants] under the [2004]
Ordinance from December 1, 2004 until the date of the final judgment;
(m) . . . this Court declare that [appellants] only have to pay water and sewer rates under the Prior Ordinance until
further order from the Court or until such time that the [2004] Ordinance is lawfully amended in accordance with Texas
law and other applicable law; and
(n) . . . [appellants] are entitled to an award of attorneys' fees pursuant to Texas Civil Practice & Remedies Code '
37.009.
In their prayer for damages, appellants limited damages to reimbursement for surcharges. In another section of their
petition, however, they referred to having “additionally suffered revenue losses, reductions in property values, and the
loss of current and potential tenants, among other damages."
[4] See Tex. Water Code Ann. '' 13.042, .043 (Vernon 2008).
[5] See Tex. Loc. Gov't Code Ann. '' 271.151(2), .152 (Vernon 2005).
[6] Specifically, appellants argue that (1) under the Texas Water Code, TCEQ does not have jurisdiction to review
inside-city ratepayers' claims; (2) TCEQ does not have exclusive jurisdiction to review appellants' common law,
breach of contract, and declaratory judgment claims; (3) appellants have the right to recover unlawful water and sewer
fees and attorney's fees if the ordinance is declared void ab initio; and (4) the trial court has jurisdiction to enforce the
settlement agreement signed by Tara's counsel and counsel for the City.
[7] If a plea to the jurisdiction challenges the existence of jurisdictional facts, we consider relevant evidence submitted
by the parties when necessary to resolve the jurisdictional issues raised. Tex. Dep't of Parks & Wildlife v. Miranda,
133 S.W.3d 217, 227 (Tex. 2004). If the evidence creates a fact question regarding the jurisdictional issue, then the
plea to the jurisdiction must be denied. Id. at 227B28. If the evidence is undisputed or fails to raise a fact question on
the jurisdictional issue, then the trial court rules on the plea to the jurisdiction as a matter of law. Id. at 228. As our
concurring colleague observes, however, the City, in its plea to the jurisdiction, challenged appellants' pleadings.
[8] The Code Construction Act applies to construction of the Water Code. See Tex. Water Code Ann. ' 1.002(a)
(Vernon 2008).
[9] The City of Sherman and City of Austin courts were construing the Public Utilities Regulatory Act of 1975. See City
of Sherman v. Pub. Util. Comm'n, 643 S.W.2d 681, 683 (Tex. 1983); Pub. Util. Comm'n v. City of Austin, 728 S.W.2d
907, 912B13 (Tex. App.-Austin 1987, writ ref'd n.r.e.). The Water Code provisions at issue in the present case retain
much of the language of that act. See Act of June 2, 1975, 64th Leg. R.S., ch. 721, '' 17, 20, 26, 1975 Tex. Gen. Laws
2327, 2334-37. Compare Tex. Water Code '' 13.042(a)B(e), .042(f), .043, respectively.
[10] The City also cites City of Willow Park v. Squaw Creek Downs, L.P., 166 S.W.3d 336, 340 (Tex. App.- Fort Worth
2005, no pet.). The Squaw Creek Downs court held the trial court had jurisdiction over a presuit discovery petition and
affirmed the trial court's order denying the city's plea to the jurisdiction. Id. at 338. In passing, the court observed, A[T]
he water code confers exclusive original jurisdiction over water service disputes to the municipality and exclusive
appellate jurisdiction over such disputes to the Commission." Id. at 340 (citing Galveston v. Flagship Hotel, Ltd., 73 S.
W.3d 422, 427 (Tex. App.- Houston [1st Dist] 2002, no pet.)).
[11] The City had apparently conceded the commission's appellate jurisdiction. See City of Galveston v. Flagship
Hotel, Ltd., 73 S.W.3d 422, 427 (Tex. App.- Houston [1st Dist.] 2002, no pet.).
[12] In 2001, the Texas Natural Resources Commission (TNRCC) was renamed the Texas Commission on
Environmental Quality. Act of May 28, 2001, 77th Leg., R.S., ch. 965, ' 18.01, 2001 Tex. Gen. Laws 1933, 1985.
[13] In its plea to the jurisdiction, the City invoked governmental immunity only insofar as appellants were seeking
monetary damages and Tara was seeking breach of contract damages related to the purported settlement
agreement. To defeat appellants' other claims, the City relied on its assertion that the Water Code vested exclusive
jurisdiction in the TCEQ.
[14] Often, courts use the terms “sovereign immunity" and “governmental immunity" interchangeably. Wichita Falls
State Hosp. v. Taylor, 106 S.W.3d 692, 694 n.3 (Tex. 2003). They are, however, two distinct concepts. Id. “Sovereign
immunity" refers to a State's immunity from suit and liability. Id. Its protection extends not only to the State, but also to
the varying divisions of state government, including agencies, boards, hospitals, and universities. Id. “Governmental
immunity" protects political subdivisions of the State, including counties, cities, and school districts. Id.
[15] They also contend they should be allowed to recover under the Water Code requirement that rates be just and
reasonable and it would be against public policy to allow the City a windfall. In support of the first contention, they rely
solely on Texas Natural Resources Conservation Commission v. Lakeshore Utility Co., 164 S.W.3d 368, 377-79 (Tex.
2005). Lakeshore Utility was an enforcement action brought by TCEQ's predecessor against a non-municipally
owned utility, and the court did not address the issue of governmental immunity. See id. at 369B70 & 370 n.2. In
support of the second contention, appellants rely solely on City of Port Isabel v. Pinnell, 207 S.W.3d 394, 398, 406-07
(Tex. App.- Corpus Christi 2006, no pet.). Pinnell involved a declaratory judgment and injunctive relief. See id. at 398.
The appellate court affirmed the trial court's judgment that certain city ordinances were void. Id. at 398, 406-08.
Although the trial court awarded attorneys' fees, Pinnell did not involve an award of monetary damages resulting from
enactment of the void ordinances, and governmental immunity was not an issue. See id. at 401. Lakeshore and
Pinnell do not support the trial court's jurisdiction over an action for monetary damages against the City.
[16] We note that the City does not dispute the form or substance of the trial court's order granting its jurisdictional
plea without prejudice. Accordingly, we confine our disposition to the judgment rendered. See Tex. R. App. P. 25.1(c)
(stating, except for just cause, appellate court may not grant party who does not file notice of appeal more favorable
relief than the trial court).
[17] The City further responds that the doctrine of promissory estoppel generally does not apply to a governmental
unit exercising its public or governmental functions. See City of Hutchins v. Prasifka, 450 S.W.2d 829, 835 (Tex. 1970).
[18] Tara also directs our attention to Catalina Development, Inc. v. County of El Paso, 121 S.W.3d 704 (Tex. 2003). In
Catalina Development, the supreme court held the county, by its conduct, had not waived immunity from suit. Id. at
704.
[19] Tara contends, for the first time on appeal, that it was “lured into entering into this agreement by the false
promises of the City attorney and its litigation counsel." In the trial court, Tara argued only that counsel for both sides
had signed the document and a fact question existed regarding whether there was any order or resolution granting
the City's attorneys general or specific authority to bind the City. Tara then conceded it still had time to conduct
discovery on that issue and informed the court “if we discover through the discovery process pursuant to a
continuance that there really is no evidence on the issues that we needed some discovery on, then we'll rest on the
arguments that we have made today as well as the evidence."