City of League City v. Jimmy Changas Inc.

• Decision Date: 18 February 2021
• Docket Number: NO. 14-19-00776-CV,14-19-00776-CV
• Citation: 619 S.W.3d 819
• Parties: CITY OF LEAGUE CITY, Texas, Appellant v. JIMMY CHANGAS INC., Appellee
• Court: Texas Court of Appeals

619 S.W.3d 819

CITY OF LEAGUE CITY, Texas, Appellant

v.JIMMY CHANGAS INC., Appellee

NO. 14-19-00776-CV

Court of Appeals of Texas, Houston (14th Dist.).

Opinion filed February 18, 2021

William S. Helfand, Houston, for Appellant.

Steven Jon Knigh, Kellen R. Scott, Houston, for Appellee.

Panel consists of Chief Justice Christopher and Justices Jewell and Hassan.

Tracy Christopher, Chief Justice

In this breach-of-contract case, the City of League City contends the trial court erred in denying its plea to the jurisdiction because the City engaged in a governmental function when it entered into the contract at issue, and thus, it is immune from suit. Because we conclude that the City instead was engaged in a proprietary function in entering into the contract, we affirm the trial court's denial of the City's jurisdictional plea.

I. BACKGROUND

In 2012, the City entered into a "Chapter 380 Economic Development Incentives Grant Agreement" with Jimmy Changas, Inc., (Changas) in which the City offered incentives to Changas to develop a restaurant within city limits. Changas later sued the City for breach of contract, alleging that it had fully performed the contract, but the City had failed to pay as agreed. Changas alleged that the City was not immune from suit because the City performed a proprietary function in entering into the Grant Agreement, or alternatively, the legislature waived the City's immunity under Chapter 271 of the Local Government Code.

The City filed a plea to the jurisdiction, later amending the plea and combining it with a motion in the alternative for summary judgment on the merits. The trial court denied the City's plea and summary-judgment motion. The City now brings this interlocutory appeal of the portion of the trial court's order denying the plea to the jurisdiction.¹

II. STANDARD OF REVIEW

Whether a court has subject-matter jurisdiction is a question of law that is properly asserted in a plea to the jurisdiction. Tex. Dep't of Parks & Wildlife v. Miranda , 133 S.W.3d 217, 224 (Tex. 2004). We review the trial court's ruling on a plea to the jurisdiction de novo. Chambers-Liberty Ctys. Navigation Dist. v. State , 575 S.W.3d 339, 345 (Tex. 2019). Parties may submit evidence supporting or opposing the plea, which we review under the same standard applicable to a traditional motion for summary judgment. Id. (citing Sampson v. Univ. of Tex. at Austin , 500 S.W.3d 380, 384 (Tex. 2016) ). We take as true all evidence favorable to the plaintiff, indulging every reasonable inference and resolving any doubts in the plaintiff's favor. Sampson , 500 S.W.3d at 384. If the relevant evidence fails to raise a fact question on the jurisdictional issue, the court rules on the plea to the jurisdiction as a matter of law. Miranda , 133 S.W.3d at 228. But if the evidence creates a fact question regarding jurisdiction, then the trial court must deny the plea to the jurisdiction and allow the factfinder to resolve the issue. Id. at 227–28.

III. ANALYSIS

The state generally has sovereign immunity from suit and liability. See Wasson Interests, Ltd. v. City of Jacksonville , 489 S.W.3d 427, 429–30 (Tex. 2016) (" Wasson I "). When political subdivisions of the state act in a governmental capacity, they share in the state's immunity, which is then referred to as governmental immunity. See id. But political subdivisions, including municipalities, have no inherent immunity of their own; thus, when they act in a proprietary, non-governmental capacity, they lack immunity. See id. The proprietary-governmental dichotomy applies to both tort and contract claims. See id. at 430.

Since 1987, the Texas Constitution has authorized the legislature to define which municipal functions are proprietary and which are governmental,² and in the Texas Tort Claims Act ("the TTCA"),³ the legislature has set forth both general definitions and non-exclusive lists of examples. See TEX. CIV. PRAC. & REM. CODE ANN. § 101.0215. Generally, governmental functions "are those functions that are enjoined on a municipality by law and are given it by the state as part of the state's sovereignty, to be exercised by the municipality in the interest of the general public." Id. § 101.0215(a). Proprietary functions "are those functions that a municipality may, in its discretion, perform in the interest of the inhabitants of the municipality." Id. § 101.0215(b).

In contract claims, courts are guided by the TTCA's treatment of the proprietary-governmental distinction. Wasson I , 489 S.W.3d at 439. If a claim against a municipality arises from its performance of a function included in one of the TTCA's non-exclusive lists of examples of proprietary or governmental functions, then we are bound by the legislature's characterization of the function. See Ethio Exp. Shuttle Serv., Inc. v. City of Houston , 164 S.W.3d 751, 755–56 (Tex. App.—Houston [14th Dist.] 2005, no pet.). If the function at issue is not included in one of these lists, then we apply the legislature's general definitions. To determine if the function is best characterized as proprietary or governmental under the general definitions, we consider whether the municipality's act of entering into the contract (1) was mandatory or discretionary, (2) was intended primarily to benefit the general public or the municipality's residents, (3) was on its own behalf or on behalf of the State, and (4) "was sufficiently related to a governmental function to render the act governmental even if it would otherwise have been proprietary." Wasson Interests, Ltd. v. City of Jacksonville , 559 S.W.3d 142, 150 (Tex. 2018) (" Wasson II ") (op. on reh'g). When some of the Wasson II factors point to different results, "courts should consider immunity's nature and purpose and the derivative nature of a city's access to that protection." Id. at 154.

In its amended plea to the jurisdiction, the City challenged only Changas's pleadings, arguing that the City is presumed to be immune from suit and that Changas failed to demonstrate a valid waiver of governmental immunity. Changas alleged, both in its pleading and in response to the City's plea, that governmental immunity did not apply because the City entered into the Grant Agreement in its proprietary capacity. In the alternative, Changas argued that the City's immunity had been statutorily waived. The City addressed the proprietary-function argument in its reply; thus, we will consider the evidence the parties presented on this issue to determine whether the City entered into the Grant Agreement in its governmental capacity, either because it was engaging in a function specifically identified as governmental by the legislature or because the activity is governmental under the factors stated in Wasson II.

A. The City was not engaged in a function statutorily designated as governmental.

The City first contends that it entered into the Grant Agreement in a governmental capacity because the TTCA includes among its examples of governmental functions "community development or urban renewal activities undertaken by municipalities and authorized under Chapters 373 and 374, Local Government Code." TEX. CIV. PRAC. & REM. CODE ANN. § 101.0215(a)(34). The parties entered into the Grant Agreement pursuant to Chapter 380 of the Texas Local Government Code rather than Chapter 373 or 374, and they disagree about whether that distinction makes a difference on the facts presented here.

The City and Changas each rely on cases decided in 2018 by intermediate appellate courts who reached differing results on the question of whether a municipality has governmental immunity under section 101.0215(a)(34) from a claim that it breached an economic-development agreement pursuant to Chapter 380 of the Texas Local Government Code. Compare City of Westworth Vill. v. City of White Settlement , 558 S.W.3d 232, 243–44 (Tex. App.—Fort Worth 2018, pet. denied) (agreement that is not encompassed within Chapter 373 or 374 does not fall within section 101.0215(a)(34) of the TTCA) with CHW-Lattas Creek, L.P. ex rel. GP Alice Lattas Creek, L.L.C. v. City of Alice , 565 S.W.3d 779, 786–87 (Tex. App.—San Antonio 2018, pet. denied) (concluding that "all community development activities," including agreements under Chapter 380 of the Texas Local Government Code, are encompassed by section 101.0215(a)(34) of the TTCA).

Less than a year later, the Supreme Court of Texas decided Hays Street Bridge Restoration Group v. City of San Antonio , 570 S.W.3d 697 (Tex. 2019). In that case, a citizen's group entered into a memorandum of understanding ("MOU") with San Antonio for an historic bridge's restoration and incorporation into a public park. Id. at 700. San Antonio obtained a federal grant administered by the Texas Department of Transportation and agreed with the Department to fund 20% of the project's cost. Id. at 700–01. Pursuant to the MOU, the citizen's group arranged for funds, the bridge itself, and adjacent real property to be contributed to San Antonio for the project. See id. The bridge was restored, but contrary to the MOU's terms, San Antonio arranged to sell it to a brewery. Id. at 701. The citizen's group sued for specific performance, and San Antonio claimed governmental immunity under section 101.0215(a)(34) of the TTCA, as well as under subsection (a)(4) (defining "bridge construction and maintenance" as a governmental function). Id. at 705. The Supreme Court of Texas agreed that both provisions applied. Id.

The City relies on the following footnote from Hays Street Bridge :

Section 101.0215(a)(34) lists "community development or urban renewal activities undertaken by municipalities and authorized under Chapters 373 and 374, Local Government Code ". The [petitioner] argues that this limitation renders the provision inapplicable here. Because we consider the Legislature's classification of governmental and proprietary functions in the Tort Claims Act to be guidance in the contract-claims context—rather than binding

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