Hous. Belt & Terminal Ry. Co. v. City of Hous.

• Decision Date: 01 April 2016
• Docket Number: NO. 14–0459,14–0459
• Citation: 487 S.W.3d 154
• Parties: Houston Belt & Terminal Railway Co., BNSF Railway Co., and Union Pacific Railroad Co., Petitioners, v. City of Houston, Texas and Daniel Krueger, in his Official Capacity as Director of Public Works and Engineering, Respondents
• Court: Texas Supreme Court

487 S.W.3d 154

Houston Belt & Terminal Railway Co., BNSF Railway Co., and Union Pacific Railroad Co., Petitioners,

v.City of Houston, Texas and Daniel Krueger, in his Official Capacity as Director of Public Works and Engineering, Respondents

NO. 14–0459

Supreme Court of Texas.

Argued October 13, 2015

OPINION DELIVERED: April 1, 2016

Debora B. Alsup, Thompson & Knight LLP, Austin TX, James B. Harris, Richard B. Phillips Jr., Stephen F. Fink, Thompson & Knight LLP, Dallas TX, for Petitioners.

David M. Feldman, City of Houston Legal Department, Donna Lynn Edmundson, Houston City Attorney, Judith Lee Ramsey, Chief, General Litigation Section, City of Houston Legal, Lynette Fons, City of Houston Legal Department, Robert W. Higgason, Senior Assistant City Attorney, Houston TX, for Respondents.

Justice Brown

delivered the opinion of the Court.

Governmental immunity protects political subdivisions of the state, such as cities and their officers, from liability. Reata Const. Corp. v. City of Dallas, 197 S.W.3d 371, 374 (Tex.2006)

. An important justification for this immunity is pragmatic: it shields “the public from the costs and consequences of improvident actions of their governments.” Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex.2006). Yet the pragmatic rationale supporting this immunity also helps to delineate its limits—“extending immunity to officials using state resources in violation of the law would not be an efficient way of ensuring those resources are spent as intended.” City of El Paso v. Heinrich, 284 S.W.3d 366, 372 (Tex.2009). Thus, this Court has long recognized that governmental immunity does not bar claims alleging that a government officer acted ultra vires, or without legal authority, in carrying out his duties. Id. at 371–72

.

This case concerns the breadth of this ultra vires doctrine.¹ Specifically, it presents the question of whether a suit complaining “of a government officer's exercise of [limited] discretion” by alleging “that the officer acted without legal authority” is a viable ultra vires claim. See Heinrich, 284 S.W.3d at 372

. We conclude that it is. Although governmental immunity justifiably provides broad protection to the government and its agents, it does not protect every act by a government officer that requires some exercise of judgment—a government officer with some discretion to interpret and apply a law may nonetheless act “without legal authority,” and thus ultra vires, if he exceeds the bounds of his granted authority or if his acts conflict with the law itself. To the extent that the court of appeals held differently, we reverse that part of its judgment and remand this case to the trial court for further proceedings consistent with this opinion.

I

In 2011, the City of Houston enacted a drainage-fee ordinance, which was proposed as a “pay-as-you-go” system to improve the city's drainage. See Houston, Tex., Code of Ordinances ch. 47, art. XIV (2011).² Under the ordinance, drainage charges are imposed on properties within the city to “recover the city's cost in furnishing drainage for any benefitted property and the cost of funding future drainage system improvements,” and any monies collected are to be used exclusively for “expenses associated with the cost of service to provide drainage services within the service area.” Id. §§ 47–802, 47–821. Such charges are calculated based on a specified rate per “square [foot] of impervious surface on each benefitted property.” Id. § 47–822(c).

The ordinance gives the city's Director of Public Works and Engineering—in this case, Daniel Krueger—authority to administer its provisions, subject to the terms of the ordinance itself. Id. §§ 47–805, 47–824 (the director “shall be responsible for the administration of this article including, but not limited to, enacting any procedures or policies necessary for the administration of the drainage system and the drainage charges ... subject to the provisions of this article” and “shall establish and implement a system of verification and correction of drainage charges for each property subject to the drainage charges.”). However, the ordinance also provides guidance as to the scope and limits of Krueger's authority. As is especially relevant here, it provides definitions for both “benefitted property” and “impervious surface”:

Benefitted property means a lot or tract to which drainage service is made available under this article and which discharges into a street, creek, river, slough, bayou, culvert, conduit, inlet, or other channel that forms part of the city drainage utility system.

...

Impervious surface means any area that has been compacted or covered such that it does not readily absorb water or does not allow water to percolate through to undisturbed underlying soil strata. Surface materials considered impervious shall include, but not be limited to, bricks, pavers, concrete, asphalt, compacted oil-dirt, compacted or decomposed shale, oyster shell, gravel, or granite, and other similar materials. Surface features utilizing such materials and considered impervious shall include, but not be limited to, decks, foundations ..., building roofs, parking and driveway areas, sidewalks, compacted or rolled areas, paved recreation areas, swimming pools, and other features or surfaces that are built or laid on the surface of the land and have the effect of increasing, concentrating, or otherwise altering water runoff so that flows are not readily absorbed.

Id. § 47–802. As to “impervious surface,” the ordinance additionally provides that the “area of impervious surface on each benefitted property shall be determined on the basis of digital map data associated with tax plats and assessment rolls or other similar reliable data as shall be determined by the director.” Id. § 47–822(d).

Shortly after the ordinance was enacted, petitioners Houston Belt & Terminal Railway, BNSF Railway, and Union Pacific Railway (collectively, the “railroads”) received notices of proposed charges for their properties in Houston. The charges, proposed by Krueger, were about $3 million annually based on Krueger's determination that all of the railroads' properties within Houston were “benefitted” and that the surfaces of nearly all of those properties were also “impervious.” As to “impervious surface,” Krueger made his determination based upon aerial images—looking to see if the properties appeared green or brown—rather than digital map data. Generally, under this method, if the property appeared brown, Krueger determined it was impervious; if it appeared green, he determined it was pervious. Using this brown-or-green method, Krueger determined that about 93 million square feet of the railroads' properties were impervious. On the other hand, the railroads' have pointed out that Houston's digital map data shows that only 72,364 square feet of the railroads' properties were impervious. It follows that the use of digital map data would have yielded significantly lower charges on the railroads' properties.

Pursuant to the ordinance, after receiving the notice of proposed charges, the railroads submitted requests for verification and correction of Krueger's proposed charges, contending Krueger had improperly proposed charges on properties that were not benefitted and on surfaces that were not impervious. After a hearing panel upheld Krueger's decision, the railroads filed suit against the city and Krueger in his official capacity,³ alleging ultra vires claims against Krueger and seeking prospective injunctive relief.⁴ The city filed a plea to the jurisdiction as to the railroads' ultra vires claims based on governmental immunity. Without holding an evidentiary hearing, the trial court sustained the city's plea. The railroads moved for clarification of the court's order and sought an opportunity to amend. The trial court denied their motion.

The railroads filed an interlocutory appeal. The court of appeals examined the two ultra vires questions: whether Krueger acted outside his authority by (1) determining that certain properties were benefitted and thus subject to drainage charges and (2) determining that the railroads should pay roughly $3 million based on their benefitted properties' impervious surface area. Houston Belt & Terminal Ry. v. City of Houston, 424 S.W.3d 663, 667–68 (Tex.App.–Houston [14th Dist.] 2014)

. The court of appeals affirmed in part and reversed in part, concluding that the railroads pleaded a viable ultra vires claim challenging Krueger's determination that their properties were benefitted, but that they had not pleaded a viable ultra vires claim contesting Krueger's determination that the railroads' properties were impervious. Id. at 673. As to its second holding, the court reasoned that because “the enacting body intended to grant [Krueger] the ability to exercise his discretion,” the railroads' allegations regarding imperviousness did not fall within the ultra vires exception and were barred. Id. at 672. The parties cross-appealed, and we granted review to determine whether Krueger's actions were ultra vires under Heinrich and its progeny.⁵

II

Generally, “immunity from suit implicates courts' subject-matter jurisdiction.” Rusk State Hosp. v. Black, 392 S.W.3d 88, 91 (Tex.2012)

. Thus, it “is properly asserted in a plea to the jurisdiction.” Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex.2004). As subject-matter jurisdiction is a question of law, we review a trial court's ruling on a plea to the jurisdiction de novo. Klumb v. Houston Mun. Emps. Pension Sys., 458 S.W.3d 1, 8 (Tex.2015). “When a plea to the jurisdiction challenges the pleadings,” as here, “we determine if the pleader has alleged facts that affirmatively demonstrate the court's jurisdiction to hear the cause.” Heinrich, 284 S.W.3d at 378 (internal quotation marks omitted). In doing so, we construe the pleadings liberally in the pleaders' favor and look to their intent. Id. Only if the pleadings affirmatively negate jurisdiction...