Attorney’s fees for breach of contract under Tex. Loc. Gov’t Code §271.153 valid only if equitable and just – denied for much smaller change order amount

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Dowtech Specialty Contractors, Inc. v. City of Weinert, 11-18-00246-CV (Tex. App. – Eastland, September 25, 2020)(mem. op.).

This is a breach of contract dispute where the Eastland Court of Appeals affirmed a trial court judgment awarding Dowtech a small amount of damages, but denied the contract remainder and attorney’s fees.

The City’s water supply is a combination of well water and water obtained from the North Central Texas Municipal Water Authority (the NCTMWA). The well water needed to be treated so the City, using several grants, decided to construct a pressurized system to keep the well water separate from NCTMWA water. During the bid process, the engineer advised the bidders to adjust a line item for instrumentation to allow NCTMWA to control certain valves/parts, but also a separate control system for the City. The revised bid specifically noted that not all necessary components for a full system were specified and the contractor must provide all items needed for a functional system. Dowtech was awarded the bid, but the main difference from the losing bidder was the cost of line item. Later, the City adjusted the pumphouse and issued a change order. When Dowtech asserted it was finished, the City noted it had not installed all parts of the instrumentation system, to which Dowtech asserted the bid did not require an operational system. After Dowtech submitted a final invoice, to which the City asserted it breached the agreement and refused to pay the final invoice. Dowtech sued the City for breach of contract and sought to recover both the contract balance and the charges for the additional work.  The City counterclaimed.  After a bench trial, the trial court awarded Dowtech $2,052.50 for the pumphouse work, but that Dowtech did not complete all work required by the contract so was not entitled to the contract price. It also denied the request for attorney’s fees and interest. Dowtech appealed.

The Court of Appeals held Dowtech did not plead the affirmative defense that its performance under the contract was excused and does not argue that the issue was tried by consent. But even if it had, the evidence was legally and factually sufficient to support the trial court’s determination Dowtech failed to complete all contracted work. Further, Dowtech did not file a motion for new trial or otherwise object to the trial court’s failure to award prejudgment interest on the change order amount. Therefore, Dowtech failed to preserve this issue for appeal.  Additionally, because the suit was brought under Tex. Loc. Gov’t Code §271.153, attorney’s fees can only be awarded if equitable and just. The trial court had discretion to award fees and the fact both parties failed in their primary claims (with Dowtech winning only as to the much smaller change order amount), the Court of Appeals felt the record did not reflect an arbitrary or unreasonable decision by the trial judge. The judgment was affirmed.

If you would like to read this opinion click here. The panel consists of Chief Justice Bailey, Justice Stretcher, and Senior Justice Wright.  Memorandum opinion by  Chief Justice Bailey.

 

Fort Worth Court of Appeals analyzes the law-of-the-case doctrine and determines private property owners did not establish claims against a city regarding fee simple land ownership

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City of Mansfield, et al., v Saverings, et al, 02-19-00174-CV (Tex. App. – Fort Worth, July 16, 2020)

In this lengthy opinion, the Fort Worth Court of Appeals holds certain private property owners did not establish a right to declaratory relief regarding fee-simple ownership of lots over which the City exercised some regulatory control, asserting they were public paths.

A developer filed a final plat in Tarrant County, creating a planned housing development—The Arbors of Creekwood – Gated Community (the Development) located in the City, but which had two HOAs. An amended plat divided the lots into R1 and R2 lots. All R2 lots were in the floodplain, which was governed by City ordinance. The developer created a lake and connected jogging paths ending at the lake. The developer testified the paths were for public use.  The boundary line for the R2 lots abutting the lake was to the north of the lake; thus, the lake was not included within the boundaries of these R2 lots. The developer executed a declaration of covenants, conditions, and restrictions (the Declaration) for the Development and filed them in Tarrant County. The Declaration stated the HOAs owned fee-simple title to private streets in the Development and “common properties” which had a complicated definition. In 1997, the Arbors HOA forfeited its right to do business and became a terminated entity. The surviving HOA asserted the Arbors HOA property lots (R2) automatically transferred to it. In January 2012, the City began planning for a “possible future trail connection” to the jogging path. Construction on the bridge began in 2013 and opened on January 25, 2014. Some owners of R1 lots noticed an increase in people using the jogging path and trespassing on the R1 lots. The R1 owners sued seeking a declaration they owned the R2 lots as common properties, and seeking to quiet title The Court of Appeals issued an interlocutory opinion in review of a temporary injunction noting the R2 lots were included in the definition of “common properties.” The R1 Owners also raised claims against the City Defendants for trespass and inverse condemnation.  The City Defendants filed a traditional and no-evidence motion for summary judgment, including arguments that the facts and law had substantially changed since the interlocutory order. They argued the R1 owners did not have a right to possess the R2 lots (which were originally owned by the defunct HOA) and that they did not have a private right to enforce a city ordinance on floodplain development. The trial court denied the City Defendants’ motions and granted the partial summary judgment of the R1 owners. The City Defendants appealed.

The court first went through a detailed analysis of the evidence submitted, objections to the evidence, and what constituted judicial admissions. The court held the law-of-the-case doctrine only applied to claims fully litigated and determined in a prior interlocutory appeal; it did not apply to claims that have not been fully litigated. The law-of-the-case doctrine is flexible and directs the exercise of court discretion in the interest of consistency but does not limit its power.  The interlocutory opinion (which was a complicating obstacle) did not address the R1 Owners’ UDJA claim regarding title to the R2 lots, only a probable right of relief for trespass claims based on an undeveloped record. The court noted they were substantially different arguments, issues, law, and review standards. [Comment: For a good analysis of the doctrine and its boundaries, read this section of the case.]  The City argued the R2 lots owned by the defunct HOA could be distributed only under the terms of the articles of incorporation and could not pass to the live HOA automatically. The court agreed with the City that the R1 owners did not establish a proper conveyance under the articles.

Next the court turned to the floodplain ordinance, where the R1 owners asserted the City failed to follow its own ordinance by obtaining studies before constructing structures in the floodplain connecting the jogging paths. The City Defendants’ argument no private cause of action to enforce the ordinance exists is one of standing. The R1 Owners did not challenge the validity of the ordinance but rather asserted that they wanted a construction of the ordinance and enforcement of it against the City Defendants. The R1 Owners did not have a right to enforce the ordinance through a UDJA claim, which only waives immunity for ordinance invalidation.  Alternatively, under the record, the R1 owners did not establish the City violated the ordinance. The City Defendants proffered summary-judgment evidence raising a fact issue on their substantial compliance.  Finally, since the court held the R1 owners could not bring a UDJA claim, the attorney’s fee award was reversed.

If you would like to read this opinion click here. Panel consists of Chief Justice Sudderth, Justices Gabriel and Kerr.  Opinion by Justice Gabriel.

Texas Supreme Court holds 1949 utility easements with “reconstruction” language means easements are general with no fixed width

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Southwestern Electric Power Company v. Kenneth Lynch, Tommy Batchelor, and Twant Wilson, Texas, 18-0768, (Tex. – Feb. 28, 2020)

This is a property/easement dispute where the Texas Supreme Court held a set of utility easements were general, with no fixed width, regardless of the historic use.

In 1949, Southwestern Gas & Electric Company (Southwestern) acquired a number of easements over a stretch of land in northeast Texas to construct a transmission line. Southwestern constructed wooden poles at the time. Southwestern Electric Power Company (SWEPCO) later acquired these easements. The easements authorize SWEPCO “to erect towers, poles and anchors along” a set course on a right-of-way that traverses several privately owned properties and SWEPCO historically used only 30 feet of easement area. In 2014 and 2015, SWEPCO undertook a modernization project to replace the transmission lines.  SWEPCO offer to set a width of 100 feet to individual property owners. Some owners accepted, but the Landowners in this case did not. After the project was completed, the Landowners filed suit seeking a declaratory judgment fixing SWEPCO’s easements to a thirty-foot width, fifteen feet on each side of the transmission line. They asserted the offer of 100 feet meant SWEPCO intended to exceed the 30 feet in the future.  SWEPCO filed two pleas to the jurisdiction, which were denied, and counterclaims for trespass and breach of contract. The trial court held a bench trial and held for the Landowners. The judgment was affirmed by the court of appeals.

The Court first determined SWEPCO’s pleas were properly denied as a ripe controversy existed regarding the scope of the easement, regardless of whether SWEPCO ever utilized more than 30 feet. While acknowledging many of the Landowner’s assertions were hypotheticals, it noted their claims are inextricably tethered to a disagreement of present scope. Regarding that scope, the easements do not state a specific maximum width of the right-of-way, nor do the easements specify how much of the land SWEPCO is entitled to access. Instead of construing the easements as general easements that intentionally omitted a defined width, the courts below incorrectly held the easements became “fixed and certain” once the transmission lines were constructed. The plain language of the easements stated they allowed for reconstruction and alteration, which contemplates future construction and installation of new poles and additional lines. The Court has recognized the existence of general easements that do not require a fixed width.  As a result, they are general easements with no fixed widths. However, the  Court noted a holder of a general easement must utilize the land in a reasonable manner and only to an extent that is reasonably necessary.  If at some point in the future SWEPCO utilizes the easements in a way that the Landowners believe is unreasonable and not reasonably necessary, or in a way that violates the express terms of the easements, the Landowners could at that point bring suit to enjoin SWEPCO’s use of the easements.

If you would like to read this opinion click here. Opinion by Justice Green. Justice Bland did not participate. Docket page with attorney information can be found here.

Taxpayer lacked standing to challenge Houston drainage fee ordinance despite charter election invalidity

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Elizabeth C. Perez v. Sylvester Turner, et al., 01-16-00985-CV (Tex. App. – Hous. [1st Dist], Oct. 15, 2019)

This is a long standing/multi-opinion dispute challenging the City of Houston’s drainage fee ordinance. Prior summaries found here and here. In this substituted opinion (for an opinion issued in August of 2018), the First District affirmed the granting of the City’s plea to the jurisdiction.

Voters in the City of Houston adopted a dedicated charter amendment for a “Pay-As-You-Go Fund for Drainage and Streets.” It then adopted a regulatory ordinance. One source of funding was a charge imposed on properties directly benefitting from the drainage system. The ballot language for the charter amendment was originally held misleading and invalid. After several disputes from the subsequent ordinance occurred, Perez  brought this ultra-vires claim and sought a judgment declaring the drainage fee ordinance invalid (yet again); an injunction against the assessment, collection, and expenditure of taxes and fees pursuant to the ordinance; and reimbursement, “on behalf of herself and all other similarly situated persons or entities,” of taxes and fees assessed and collected pursuant to the ordinance and paid “under duress.”  The City filed a plea to the jurisdiction asserting Perez lacked standing because she had suffered no particularized injury separate from the public, which was granted. Perez appealed.

The prior judicial declaration that the Charter Amendment is void does not address the Drainage Fee Ordinance. Thus, to the extent that Perez’s claims are based on her allegations the prior opinions invalided the ordinance, such are misplaced. The charter amendment was only needed to shift a portion of ad valorem tax revenue from debt services and was not required for authority to pass a drainage fee ordinance. Local Government Code Chapter 552 provided independent authority for such an ordinance. Perez has pleaded that she paid “illegal” drainage fees, she has cited to no authority declaring illegal the Drainage Fee Ordinance. Further, Perez has to demonstrate she “suffered a particularized injury distinct from that suffered by the general public” by the drainage fees collected.  The municipal fees were assessed to property owners across the City. The payment of municipal fees, like the drainage fees assessed against Perez’s properties here and numerous other properties in the City, does not constitute a particularized injury. Taxpayer standing is an exception to the “particularized injury” requirement.  However, it is not enough for the plaintiff to establish that she is a taxpayer— the plaintiff “may maintain an action solely to challenge proposed illegal expenditures.” A litigant must prove that the government is actually expending money on the activity that the taxpayer challenges; merely demonstrating that tax dollars are spent on something related to the allegedly illegal conduct is not enough.  Perez asserts the fees were collected illegally.  However, she was unable to establish the City is actually making any “measurable, added expenditure” of funds on illegal, unconstitutional, or statutorily unauthorized activities. As a result, she is not entitled to taxpayer standing. The plea was properly granted.

If you would like to read this opinion click here. Panel consists of Justice Keyes, Justice Lloyd and Justice Kelly. The attorneys listed for the City are Collyn A. Peddie and Patricia L. Casey.  The attorneys listed for Perez are Dylan Benjamen Russell, Andy Taylor  and Joseph O. Slovacek.

Texas Supreme Court holds specific performance is available remedy under waiver of immunity for certain contracts

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Hays Street Bridge Restoration Group v City of San Antonio, 17-0423 (Tex. March 15, 2019)

This is a breach of contract case where the Texas Supreme Court held the waiver of immunity found in TEX. LOC. GOV’T CODE §§ 271.151–.160 (as it existed at the time the contract was executed) also applied to specific performance.

The Hays Street Bridge is a historic cultural landmark in San Antonio. In the 1980s, when the City closed the bridge and Union Pacific Railroad sought to demolish it, a group of citizens formed the restoration group to save the bridge. The City obtained a $2.89 million federal grant administered by the Texas Department of Transportation to fund restoration and the Restoration Group promised, through an MOU, to match any funds for restoration. Over the next decade, the Restoration Group raised and transferred to the City more than $189,000 in cash and arranged for significant in-kind donations.  However, in 2012, it adopted an ordinance authorizing the sale of the property to Alamo Beer Company as part of an economic-incentive package. The Restoration Group sued, alleging the transfer would breach the City’s promise in the MOU to use the funds for repair of the bridge. For its breach of contract claim, the Restoration Group sought only specific performance.  The trial court ordered specific performance, but the court of appeals reversed, holding the City was immune. The Texas Supreme Court granted review.

The Court, citing to its recent holding in Wasson Interests v City of Jacksonville (Wasson II), held the MOU was of a governmental nature and not proprietary. The MOU was made to support the City–State funding agreement for restoration of the bridge and revitalization of the surrounding area. Under the Wasson II four-part test, only the first factor (mandatory v discretionary) leans toward proprietary. As a result, the City maintains immunity unless waived. Section 271.152 of the Local Government Code “waives” the City’s immunity, but that waiver is limited by the provisions found in other portions of the Act. Section 271.153 limits damages, not remedies. Damages equates to money, and specific performance equates to equitable remedies. Since the waiver is not limited by §271.153 on the subject of specific performance, such relief is a remedy encompassed within the waiver.

If you would like to read this opinion, click here.  Opinion by Chief Justice Hecht.

1st District Court of Appeals holds section of Texas Water Code regarding sewer CCNs unconstitutional

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City of Tyler v. Liberty Utilities (Tall Timbers Sewer) Corp., 01-17-00745-CV (Tex. App. – Houston [1st Dist.], December 20, 2018)

This is a declaratory judgment case where the First District Court of Appeals in Houston held a provision of the Texas Water Code unconstitutional.

Liberty Utilities (Tall Timbers Sewer) Corporation provides retail sewer utility service in Smith County under a certificate of convenience and public necessity. The City of Tyler desired to provide sewer service in Liberty’s service areas. State law prohibited the dual service in the area, so the City went to the Legislature, which passed §13.2475 of the Texas Water Code.  This created an exception from the generally applicable law allowing the City to provide sewer service within its boundaries, even in Liberty’s service areas. Liberty then sued the City, successfully obtaining a declaratory judgment that §13.2475 is unconstitutional. The City appealed.

In this 21-page opinion, the court analyzed the constitutional prohibition against local laws under  Article III, Section 56 of the Texas Constitution. The court analyzed the legislative debate and the author’s stated intended purpose. The court determined the section was bracketed and intended to address Tyler and regulated its affairs as a local law. The court further determined none of the constitutional exceptions from the prohibition applied. “The City of Tyler’s legislative strategy to uniquely exempt itself from the operation of Water Code Section 13.247(a) was a violation of the Texas Constitution’s default preference for laws of general applicability and general prohibition of local laws.”  As a result, it held §13.2475 unconstitutional.

If you would like to read this opinion click here. Panel consists of Justice Keyes, Justice Bland, Justice Massengale. Opinion by Justice Massengale.

Contract for sale of waste water to golf course is a governmental function and no waiver of immunity exists for breach claim

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City of Merkel v Copeland, 11-16-00323-CV (Tex. App. — Eastland, October 18, 2018). 

This is a governmental immunity/breach of contract claim where the Eastland Court of Appeals reversed the denial of the City’s plea to the jurisdiction. 

The City entered into a contract with Tin Cup Country Club where the City would sell the waste (i.e. effluent) from the City’s waste water treatment plant with a minimum each year and a set amount per gallon. Tin Cup used the waste to water and fertilize the golf course. Copeland and Cully purchased Tin Cup and the contract.  The City later stopped providing water as the quality did not meet state requirements.  Plaintiffs sued for breach of contract. The City filed a plea to the jurisdiction which was denied. The City appealed. 

The court first determined the City was performing a governmental function, not proprietary.  While sale of waste is not a listed function, it is a required sub-component of the governmental function of water and sewer services. The City must get rid of the waste somehow under TCEQ regulations, so selling it is a reasonable means of fulfilling its overall function. The only waiver of immunity would be found in Chapter 271 of the Texas Local Government Code relating to goods or services provided to the entity. Since the City was not purchasing anything (but selling) the issue becomes whether Tin Cup was providing a service. Under section 271.151(B), a contract for the sale of certain acre-feet of reclaimed water is subject to waiver, but that section did not exist when the contract was executed.  As a result, only subsection (A) applies. The contract was not a “service” and was not intended to be a service.  As a result no waiver of immunity exists. The plea should have been granted. 

If you would like to read this opinion click here. Panel consists of Justices Bailey, Chief Justice  Grey (by assignment from Waco) and Wright (retired). 

City could not use Family Code legitimation to challenge standing in wrongful death case

City of Austin d/b/a Austin Energy v. Maria Del Rosario, 03-18-00107-CV (Tex. App. – Austin, July 3, 2018)

Jaime Membreno died in 2009 when he came in contact with one of the City’s overhead power lines while working on a construction job in Austin.  Membreno was a citizen of El Salvador. Jaime was never married to Maria. She asserts that after his death she gave birth to Jaime’s son in El Salvador where she lived.  She sued the City on behalf of her minor son under a premise-defect theory of liability. She claimed that the City “failed to use reasonable care to safely operate and maintain the electric distribution system and its overhead distribution lines and poles in particular.” The City filed a plea to the jurisdiction which was denied. The City appealed.

The City asserts to have standing to sue under the Wrongful Death Act, an illegitimate child must comply with the requirements of Texas Family Code §160.201(b), thereby establishing a father-child relationship. However, the Texas Supreme Court has previously held it is inappropriate to incorporate the requirements of the Family Code for legitimation into the Wrongful Death Act. Additionally, in order to try and establish a father-son relationship, Maria had a DNA test performed of Jaime’s brother. The decedent’s brother had a 99.8% chance that they are nephew and uncle. The brother swore that he had never engaged in sexual relations with Maria. Maria showed the birth certificate demonstrating Jaime was listed as the father and provided her own affidavit. The court held Maria marshaled proof from which the fact finder could conclude that the clear and convincing evidence showed that her child was the son of the decedent. The City asserted Maria also lacked capacity to sue, however, a lack-of-capacity challenge is not jurisdictional. As a result, the City’s plea was properly denied.

 

If you would like to read this opinion, click here. Panel consists of Justice Goodwin, Justice Field and Justice Shannon. Memorandum Opinion by Justice Shannon. The attorney listed for the City is Ms. Chris Edwards.  The attorneys listed for the Plaintiffs are Sean B. Swords and David C. Wenholz.

Developer’s asserted causal link between use of bulldozers and inability to timely sell lots is insufficient to establish waiver of immunity says 13th Court of Appeals

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City of Weslaco v. Raquel Trejo and Roberto Trejo, 13-18-00024-CV (Tex. App. – Corpus Christi, June 21, 2018)

This is an interlocutory appeal from the denial of the City’s plea to the jurisdiction in a Texas Tort Claims Act case where the 13th Court of Appeals reversed but remanded the case.

The Trejos began to develop land into a residential subdivision. The Trejos hired Rio Delta Engineering to develop plans and designs for the subdivision’s infrastructure. Before lots could be sold, essential services such as water and sewer would have to be designed, built, and approved by the City. The City elected to combine the sewer and water plans of the Trejos as well as another client of Rio Delta, the Apostolic Church. The Trejos alleged the City delayed the sewer extension unreasonably, costing them the ability to timely sell lots. The Trejos filed suit alleging that the City was negligent in managing the sewer construction project, which “involved the use of motorized vehicles.” The City filed a plea to the jurisdiction, which was denied. The City appealed.

Because the Legislature has deemed sanitary and storm sewers to be a governmental function, immunity applies to the design allegations. The Trejos did not establish a waiver for such a claim.  No waiver exists for negligent training of personnel or supervisors. As to the claims for negligent operation of bulldozers, there must be a causal nexus between the operation or use of the motor-driven vehicle or equipment and a plaintiff’s property damage. This causal nexus is not satisfied by the mere involvement of vehicles or equipment, nor by a use that “does no more than furnish the condition that makes the injury possible.” The Trejos “have drawn a thin thread of causation across the span of many years and several intermediary steps—the use of equipment led to the design flaws, which led to problems with the sewer, which led to construction delays, which led to the Trejos’ inability to sell houses in 2008, which led to the project’s insolvency in 2009, which led to the bank’s foreclosure—in an effort to link the use of motorized equipment to the underlying harm of foreclosure.”  Such is too tenuous to be a causal link. However, the court held the Trejos should be given the opportunity to amend so remanded the case.

If you would like to read this opinion click here. Panel consists of Justice Rodriguez, Justice Contreras and Justice Hinojosa. Memorandum Opinion by Justice Rodriguez.  He attorneys listed for the City are Hector X Saenz and Charles S. Frigerio.  The attorney listed for the Trejos is Savannah Robinson.

Texas Supreme Court holds leasing of lakefront property is proprietary for purposes of beach-of-contract claim

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Wasson Interests, Ltd. vs. City of Jacksonville,17-0198, — S.W.3d. — (Tex. June 1, 2018)

In 2016 the Texas Supreme Court held the proprietary/governmental dichotomy applies in a breach of contact case. Summary found here. In this companion case, the Court held the contract was entered into as part of the City’s proprietary function and immunity is not implicated when the City leased lakefront property.

The City of Jacksonville constructed Lake Jacksonville in the late 1950s to serve as the City’s primary source of water. In the 1990s, the Wassons assumed an existing 99-year lease of lakefront property owned by the City of Jacksonville. The lease specifies, among other things, that the property is to be used for residential purposes only. After living on the property for several years, the Wassons moved and conveyed their interest in the lease to Wasson Interests, Ltd. (“WIL”). WIL then began renting the property for terms of less than one week, which the City asserted violated the terms of the lease.  This began a series of suits and opinions involving the parties.  In its 2016 opinion the Texas Supreme Court held the proprietary/governmental dichotomy applied to contracts and remanded the case to the trial court. In this appeal, the question is whether the City’s action of leasing the property was proprietary or governmental. The trial court held the actions were governmental and WIL appealed.

The City argued the function of developing and maintaining the lake was a governmental function. As a result, all aspects, including the leasing of land to tenants, is governmental. However, the Court went through several prior cases and indicated it is the action committed at the time (i.e. the lease contract) which counts in determining the proprietary/governmental purpose. “We hold that, to determine whether governmental immunity applies to a breach-of-contract claim against a municipality, the proper inquiry is whether the municipality was engaged in a governmental or proprietary function when it entered the contract, not when it allegedly breached …Stated differently, the focus belongs on the nature of the contract, not the nature of the breach. If a municipality contracts in its proprietary capacity but later breaches that contract for governmental reasons, immunity does not apply. Conversely, if a municipality contracts in its governmental capacity but breaches that contract for proprietary reasons, immunity does apply.” In making that determination, the court held “we consider whether (1) the City’s act of entering into the leases was mandatory or discretionary, (2) the leases were intended to benefit the general public or the City’s residents, (3) the City was acting on the State’s behalf or its own behalf when it entered the leases, and (4) the City’s act of entering into the leases was sufficiently related to a governmental function to render the act governmental even if it would otherwise have been proprietary.” After utilizing this test to the facts, the Court held the leasing of property is not essential or related to the waterworks operation. Merely because an activity “touches” upon a governmental function does not make it governmental in all things. As a result, it is proprietary in nature. The case is remanded for trial.

If you would like to read this opinion click here. Opinion by Justice Boyd. The docket page for this case is found here.

Evidence of a shorted-out lift pump on one day, is not evidence of faulty motor driven equipment on a different day says 13th Court of Appeals

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City of Edinburg v. GNJ Realty Investments LLC, 13-17-00290-CV (Tex. App.—Corpus Christi-Edinburg August 22, 2017).

This is an interlocutory appeal in a Texas Tort Claims Act (“TTCA”)/sewage backup case involving alleged negligent operation of a motor-driven lift pump. The 13th Court of Appeals reversed and rendered an opinion in favor of the City.

GNJ Realty Investments LLC (or “GNJ”) brought a negligence claim against the City of Edinburg (“the City”), for sewage backup and property damage allegedly caused by a City-owned faulty motor-driven lift pump. GNJ leased a building to RGV Footcare. On February 2, 2014, a RGV Footcare employee, saw standing water in almost every room of the building’s floors. She called a plumber soon after and called the City the next day. GNJ asserted negligence because it felt the City failed to use reasonable care in the service and maintenance of the motor-driven equipment used in the sanitation system.  It asserted the flooding was system backup and arose from this failure. The wastewater supervisor for the City testified that upon personal inspection, the manhole that gave sewer service to GNJ’s building showed no evidence that anything the City owned caused this incident. He further testified that if a lift pump can be faulty, certain alarms and logs would have been generated by the system. No such alarms or logs were created on that day, although a short was logged as occurring the following day.  The City filed a plea to the jurisdiction which the trial court denied. The City appealed.

The court held no evidence in the record indicated the pump was faulty and was directly linked to the flooding of GNJ’s building. As stated by the supreme court many times “arises from” must have a nexus between the operation and/or maintenance of the equipment and the damage sustained. The connection must be considerably more than just the involvement of property. The trial court was not presented with any evidence that any of the pumps at Lift Station 30 were clogged—fully or partially—on February 3, 2014. Moreover, that a pump “shorted out” the day after RGV Footcare experienced the water back up is alone not evidence that it was malfunctioning the day before. Given the record, the court reversed the trial court’s denial order and rendered judgment for the City. GNJ’s claim was dismissed.

If you would like to read this opinion click here. Panel consists of Justices Rodriguez, Contreras, and Hinojosa.  Memorandum Opinion by Justice Hinojosa.  The attorney listed for GNJ is John Andrew Millin IV.  The attorneys listed for the City are Roberto D. Guerra and Ysmael D. Fonseca.

Home-rule city’s franchise contract and right-of-way ordinance trumps pro-forma provision in a tariff, so utility must bear costs of relocation

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City of Richardson v Oncor Electric Delivery Company, LLC, 15-1008 (Tex. February 2, 2018)

This case involves a dispute between a city and a utility over who must pay relocation costs to accommodate changes to public rights-of-way.

The City of Richardson (“City”) negotiated a franchise agreement with Oncor Electric Delivery Company LLC, (“Oncor”)  requiring Oncor to bear the costs of relocating its equipment and facilities to accommodate changes to public rights-of-way. Richardson later approved the widening of thirty-two public alleys. Oncor refused to pay for the relocation. While the relocation dispute was pending, Oncor filed an unrelated case with the Public Utility Commission (PUC), seeking to alter its rates. That dispute was resolved by settlement, but the settlement included Richardson passing a tariff ordinance. The Court had to decide whether a pro-forma provision in a tariff, which sets the rates and terms for a utility’s relationship with its retail customers, trumps a prior franchise agreement, which reflects the common law rule requiring utilities to pay public right-of-way relocation costs.

By nature, a franchise agreement represents the unique conditions a city requires of a utility in exchange for the utility’s right to operate within the city. Here, the Franchise Contract incorporated a conventional right-of-way ordinance (the “ROW Ordinance”) requiring the utility, upon written notice from Richardson, to remove or relocate “at its own expense” any facilities placed in public rights-of-way. The ROW Ordinance is typical of others throughout Texas. “Tariff” is defined as “the schedule of a utility . . . containing all rates and charges stated separately by type of service, the rules and regulations of the utility, and any contracts that affect rates, charges, terms or conditions of service.” 16 Tex. Admin. Code §25.5(131). A tariff filed with the PUC governs a utility’s relationship with its customers, and it is given the force and effect of law until suspended or set aside. However, the PUC’s rules also contain a “pro-forma tariff,” the provisions of which must be incorporated exactly as written into each utility’s tariff.  The City and Oncor sued each other over payment of the relocation costs, each citing the differences between the ROW Ordinance/Franchise Contract and pro-forma tariff. The trial court granted the City’s motion for summary judgment, but the court of appeals reversed and rendered judgment for Oncor.

Under the common law, a utility’s right to use a city’s public rights-of-way is permissive and is subordinate to the public use of such rights-of-way. The Texas Supreme Court has traced this principal back at least as far as 1913.  The Utilities Code mirrors the common law, but specifically apply to “streets.”   Oncor argues that the Legislature’s use of “street” and not “alley” is significant and precludes these statutes from applying to alleys. Under statutory construction principles, every word included and excluded by the Legislature has significance. Looking to the statutory scheme, the Court found particularly relevant the Legislature’s recognition of the broad authority afforded to home-rule cities. As a home-rule city, Richardson has “exclusive original jurisdiction over the rates, operations, and services of an electric utility in areas in the municipality.” Furthermore, the Court held that in the context of home-rule cities, the recognition of a specific power does not imply that the other powers are forbidden. The  Legislature did not intended to strip municipalities of their common law right to require utilities to bear relocation costs. The language in the Tariff does not unmistakably address the relocation costs. The Tariff addresses Oncor’s relationship with end-users, which, in this case, dose not include the City.  As a result, the City retains the power to address costs through its ROW Ordinance and its Franchise Contract. The Court reversed the judgment of the court of appeals and reinstated the judgment of the trial court.

If you would like to read this opinion click here. Justice Green delivered the opinion of the Court. The docket page with attorney information can be found here.

City immune from suit for traffic light displaying “walk” signal at same time as green “turn arrow” says 13th Court of Appeals

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City of Edinburg v. Melinda Balli  13-17-00183-CV (Tex.App–, Corpus Christi, November 9, 2017)

This is a Texas Tort Claims Act case where the Corpus Christi Court of Appeals reversed the denial of the City’s plea to the jurisdiction and dismissed the Plaintiff’s claims.

Balli asserts she was struck by a vehicle as she used a crosswalk near the Hidalgo County Courthouse.  She asserts the pedestrian traffic light displayed a “walk” signal for pedestrians when she began to cross, however, the traffic light displayed a green arrow for turning vehicles, thereby causing the accident.  She asserts the City entered into a Municipal Maintenance Agreement with the State of Texas, in which the City undertook the duty “to make changes in the design and operation of the highway traffic signal(s) as it may deem necessary . . . .” and to provide and maintain traffic lights at various intersections. According to Balli’s petition, the City was aware of the problem with the traffic signals due to a similar collision on January 17, 2012. The City filed a plea to the jurisdiction arguing the lights were not malfunctioning, but were operating as designed by TxDOT to display a “walk” and a “turn arrow” at the same time. Vehicles are required to yield to pedestrians in the cross-walks. The trial court denied the plea and the City appealed.

Under the Texas Tort Claims Act (“TTCA”), the Texas Supreme Court has found a waiver of immunity “only in those situations in which the sign or signal was either (1) unable to convey the intended traffic control information, or (2) conveyed traffic control information other than what was intended.”  The term “condition” under the TTCA refers exclusively to “something ‘wrong’ with the traffic sign or signal such that it would require correction after notice.” Further, under the TTCA, a governmental entity remains immune from suits arising from its discretionary acts and omissions. The City asserts it assumed responsibility for the lights in 2012, and the City has not changed the lights’ programming originally inserted by TxDOT since that time. The City reasoned that because the lights “convey[ed] the intended traffic control information,” the traffic lights do not qualify as a wrongful condition of real property for which immunity would be waived. Based on testimony attached to the plea, the City utilized its discretion not to change the design or programming of the lights since they complied with TxDOT guidelines. Since the City established the lights were working as intended, Balli had the burden to negate that factual assertion. However, the only evidence Balli provides merely attacks the wisdom of that intent and the discretionary design choices, not the functioning of the lights. Balli has not produced any evidence that would create a fact issue concerning the existence of a “condition” in real property and waive immunity. The trial court should have granted the plea.

If you want to read this opinion, click here. The panel consists of Justices Rodriguez,  Benavides, and Longoria. Justice Rodriguez delivered the opinion of the court. To see the attorneys listed for the Appellant and Appellee click here.

 

Wrong-sized manhole cover was not a special defect holds Fort Worth Court of Appeals

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City of Arlington v. S.C.,et al. 02-17-00002-CV (Tex. App. – Fort Worth, September 7, 2017)

This is an interlocutory appeal involving a jurisdictional challenge in a special defect case. The Fort Worth Court of Appeals, acknowledging the case law is murky, held the misplaced manhole cover was not a special defect.

S.C. and her family were moving into a neighborhood in 2015 when she stepped on a manhole cover which was the wrong size for its opening. She fell into the hole, injuring her pubic bone and groin, and spent six days in the hospital. She sued the City under both a special defect and, alternatively, premise defect theory. Her minor children plead bystander injuries.  The City filed a partial summary judgment only as to the special defect claim, which the trial court denied. The City appealed.

The Fort Worth Court of Appeals panel admitted the case law was inconsistent. The Texas Supreme Court lists a special defect as the same “kind or class” as an “excavation or obstruction” to ordinary users on or near a roadway. The court listed a series of cases finding a defective cover over a hole satisfies the excavation “class or kind” test; however, the plaintiffs in those cases lost because the defect was too far from the roadway to count. The court held to qualify an “excavation- or obstruction-like condition [must] be, if not in the roadway itself, at least awfully close—near enough for the ordinary roadway user to encounter it.” Achieving ordinary-user status requires “that someone be on or in close proximity to a roadway, doing the normal things that one might expect to do on or near a roadway, whether in some sort of vehicle or on foot.”  The court noted its prior circuit opinions have listed a distinction between an open excavation as being the cause of an injury and a defectively covered excavation as being the cause, although such an analysis is not always required. It noted Supreme Court precedent requires it to interpret a waiver of immunity narrowly. While the panel listed that hypothetical aspects might qualify, the individual facts of this case,  the circuit’s prior opinions and direction from the Texas Supreme Court require it to hold the manhole issue is not a special defect. It reversed the denial but remanded for trial as a premise defect case.

 

Photo provided in opinion and annotated during Plaintiff’s deposition.

If you would like to read this opinion click here. Panel includes Chief Justice Livingston, Justice Gabriel and Justice Kerr.  Memorandum Opinion by Justice Kerr. The attorney listed for the City is Robert H. Fugate. The attorney listed for the Plaintiffs is Shelton Burgess Williams.

4th Court of Appeals holds developer properly pled breach of contract claim for wastewater development agreement

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NBL 300 Group Ltd v. Guadalupe-Blanco River Authority 04-17-00264-CV (Tex.App— San Antonio, August 16, 2017)

This is an immunity/breach of contract case where the San Antonio Court of Appeals reversed the granting of Guadalupe-Blanco River Authority’s (“GBRA”) plea to the jurisdiction.

NBL was developing certain properties known as Legend Pond. As part of the development NBL and GBRA entered into an agreement for the construction of a “wet well” and “lift station” (wastewater systems). NBL was to provide and oversee/arrange for the engineering, design, and construction of various improvements to the properties. GBRA was to apply certain connection fees and charges to reimburse NBL for its initial outlay. After completion of the development, NBL sued GBRA asserting breach and a failure to implement connection rate measures. GBRA filed a plea to the jurisdiction which the trial court granted. NBL appealed.

For a contract to be subject to Tex. Loc. Gov’t Code §271.152’s waiver of immunity, it (1) must be in writing, (2) state the essential terms of the agreement, (3) provide for goods or services, (4) to the local governmental entity, and (5) be executed on behalf of the local governmental entity. Under the contract NBL was required to propose a master plan, including design, permitting, acquisition, and construction of the facilities. NBL was responsible for engineering and permitting fees. In return, GBRA was required to approve all plans and specifications and to establish, to collect, and to forward fees to NBL as reimbursement for monies expended.  The court held constructing, developing, leasing, and bearing all risk of loss or damage to the facilities provides a “service.” NBL plead the contract was for services and all other essential terms. GBRA asserts NBL still does not plead damages via money’s due and owed.  However, the court held NBL alleges that GBRA: (1) refused to perform obligations under the contract; (2) failed and refused to pay amounts owed under the contract; (3) failed to comply with its obligations under the contract; and (4) that the breach was material because GBRA did not substantially perform a material obligation required under the contract. No other specifics were provided. As for damages, NBL seeks loss of the benefit of the bargain, loss of investment opportunity, loss of fees, and attorney’s fees. Again, no specifics.  However, the court held from a pleadings standpoint, such allegations were sufficient to qualify as a properly pled petition. The plea should not have been granted.

If you would like to read this opinion click here. The panel includes Justices Barnard, Alvarez, and Chapa. Justice Alvarez delivered the opinion of the court. Attorney listed for NBL 300 Group is Rafael Pizana III. Attorneys listed for the Guadalupe – Blanco River Authority are Lowell F. Denton and Scott Michael Tschirhart.