City of Montgomery v. TPProperty LLC

• Decision Date: 25 June 2015
• Docket Number: NO. 09–13–00509–CV,09–13–00509–CV
• Citation: 480 S.W.3d 545
• Parties: The City of Conroe, Texas and J.R. Moore Jr., in his Capacity as the Montgomery County Tax Assessor and Collector, Appellant v. TPProperty LLC, Appellee
• Court: Texas Court of Appeals

480 S.W.3d 545

The City of Conroe, Texas and J.R. Moore Jr., in his Capacity as the Montgomery County Tax Assessor and Collector, Appellant

v.TPProperty LLC, Appellee

NO. 09–13–00509–CV

Court of Appeals of Texas, Beaumont.

Submitted on February 27, 2014

Opinion Delivered June 25, 2015

John J. Hightower, Eric C. Farrar, Olson & Olson, LLP, Houston, TX, for Appellant.

John R. Hardin, T. Blake Edwards, K & L Gates LLP, Dallas, TX, for Appellee.

Before McKeithen, C.J., Kreger, and Horton, JJ.

OPINION

CHARLES KREGER, Justice

Appellant, the City of Conroe ("City") appeals the denial of its plea to the jurisdiction. See Tex. Civ. Prac. & Rem.Code Ann. §§ 51.014(a)(8), 101.001(3) (West Supp. 2014). The City contends the trial court erred when it denied the City's plea because (1) TPProperty LLC ("TPProperty") failed to exhaust its exclusive administrative remedies under the Texas Tax Code concerning the disputed Tax Abatement Agreement and (2) TPProperty failed to establish a waiver of the City's immunity to suit regarding the Tax Abatement Agreement and the Tourism Promotion Services Agreement.

I. Standard of Review

Subject-matter jurisdiction is essential for a court to have the authority to resolve a case, and trial courts lack such jurisdiction over a governmental unit that is immune from suit. Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 224 (Tex.2004) ; Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443 (Tex.1993). A party may challenge a court's subject matter jurisdiction by filing a plea to the jurisdiction. Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554 (Tex.2000). We review a trial court's ruling on a challenge to its subject matter jurisdiction de novo because jurisdiction is a question of law. Miranda, 133 S.W.3d at 228. In conducting this de novo review, we do not examine the underlying merit of the plaintiff's case, but consider only the plaintiff's pleadings and the evidence pertinent to the jurisdictional inquiry. County of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex.2002). The plaintiff has the burden to allege facts that affirmatively establish the trial court's subject matter jurisdiction. Tex. Ass'n of Bus., 852 S.W.2d at 446. In determining whether the plaintiff has met this burden, we construe the pleadings liberally in favor of conferring jurisdiction. Tex. Dep't of Transp. v. Ramirez, 74 S.W.3d 864, 867 (Tex.2002) ; Tex. Ass'n of Bus., 852 S.W.2d at 446.

II. Background

This dispute centers around the La Torretta Lake Resort & Spa (the "Hotel")¹ located in the Lake Conroe Area. In April 2007, the Hotel was not in operation. French Quarter VIII, LLC, ("French Quarter") desired to purchase the Hotel, renovate it, and restart operations. Before agreeing to purchase the Hotel, French Quarter entered into two agreements with the City: (1) a Tax Abatement Agreement, which provided for the temporary abatement of certain ad valorem property taxes on improvements to the Hotel that French Quarter promised to construct ("Abatement Agreement"); and (2) a Tourism Promotion Services Agreement, which provided for French Quarter to manage the expenditure of a portion of the City's hotel occupancy taxes collected from the guests of the Hotel, for marketing and promoting tourism in the Lake Conroe area ("HOT Agreement"). In April 2007, French Quarter entered into these two agreements with the City and purchased the Hotel.

By December 2011, French Quarter completed all of the required improvements to the Hotel contemplated in the Abatement Agreement but defaulted on the loan from its lender, which resulted in a foreclosure and TPProperty's acquisition of the Hotel at the foreclosure sale. Subsequent to the foreclosure sale, French Quarter executed a transfer to TPProperty of all of its rights associated with the Hotel, if any, including, but not limited to, the subject agreements. TPProperty asserts that it continued to fulfill the obligations under the agreements in the same manner as French Quarter had operated prior to the foreclosure and is entitled to the benefits of such agreements.

On February 14, 2012, the City sent notice of default letters to TPProperty, claiming that both the Abatement Agreement and the HOT Agreement were in default and contending, at least in part, that the Hotel failed to properly report certain information to the City and failed to provide sufficiently detailed budgets. In response to the notice, TPProperty amended its HOT Budget to expand significantly on the details, including items in the budget that it contends the City had never before requested or required of French Quarter. On April 12, 2012, Conroe's City Council adopted a resolution declaring the Abatement Agreement in default and refusing to approve the revised budget that TPProperty submitted to satisfy the terms of the HOT Agreement. On May 7, 2012, Conroe's City Council entered a resolution terminating the HOT Agreement.

Thereafter, TPProperty filed suit against the City and the Montgomery County Tax Assessor and Collector² seeking damages based on the City's alleged breach of the Abatement Agreement and the HOT Agreement, seeking a court order to compel specific performance of both agreements, and for declaratory relief regarding the parties' rights, status, and legal relationship under both agreements. TPProperty also sued the Montgomery Central Appraisal District ("MCAD") for its alleged refusal to process TPProperty's tax abatement application or otherwise grant TPProperty the tax abatements under the Abatement Agreement. TPProperty also sought declaratory relief against MCAD asking the court to declare that MCAD is not entitled to refuse to process TPProperty's tax abatement applications.³

The City filed its answer alleging various defenses and affirmative defenses. The City subsequently filed counterclaims against TPProperty for the collection of ad valorem property taxes and hotel occupancy taxes, together with statutory penalties, interest, and attorney's fees. The City further sought a temporary injunction to enjoin TPProperty from expending any hotel occupancy taxes that it had collected since October 1, 2011. MCAD filed a general denial.

Sometime later, the City filed a plea to the jurisdiction asserting: (1) the trial court lacked subject matter jurisdiction over TPProperty's claims related to the Abatement Agreement because TPProperty failed to exhaust its administrative remedies under the Tax Code; and (2) the trial court lacked subject matter jurisdiction over both the Abatement Agreement claims and the HOT Agreement claims because TPProperty's pleadings do not establish a waiver of the City's governmental immunity to suit. After a hearing, the trial court denied the City's plea to the jurisdiction, and the City timely appealed.

III. Governmental Immunity

Sovereign immunity protects the State, as well as its agencies and officials, from lawsuits for damages and from liability. Ben Bolt–Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivs. Prop./Cas. Joint Self–Ins. Fund, 212 S.W.3d 320, 323–24 (Tex.2006). Governmental immunity provides similar protection to political subdivisions of the State, including counties, cities, and school districts. See Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 694 n. 3 (Tex.2003). Like sovereign immunity, governmental immunity includes immunity from suit, which deprives a court of subject matter jurisdiction, and immunity from liability, which protects entities from judgments. City of Dallas v. Albert, 354 S.W.3d 368, 373 (Tex.2011). "Immunity from suit bars a suit against the State unless the Legislature expressly consents to the suit." Tex. Natural Res. Conservation Comm'n v. IT–Davy, 74 S.W.3d 849, 853 (Tex.2002). "If the Legislature has not expressly waived immunity from suit, the State retains such immunity even if its liability is not disputed." Id. "Immunity from liability protects the State from money judgments even if the Legislature has expressly given consent to sue." Id. Immunity from liability is an affirmative defense, not a jurisdictional bar. City of Houston v. Williams, 353 S.W.3d 128, 134 (Tex.2011). Therefore, we concern ourselves solely with the issue of governmental immunity from suit in this appeal.

A city is a political subdivision protected by governmental immunity. Taylor, 106 S.W.3d at 694 n. 3 ; City of LaPorte v. Barfield, 898 S.W.2d 288, 291 (Tex.1995), superseded by statute on other grounds, as recognized in Travis Cent. Appraisal Dist. v. Norman, 342 S.W.3d 54, 54–55 (Tex.2011) ). Governmental immunity protects political subdivisions when they are performing governmental functions like those involved here.⁴ See Williams, 353 S.W.3d at 134.

Accordingly, governmental immunity deprives the trial court of subject-matter jurisdiction for TPProperty's lawsuit against the City unless immunity has been waived or TPProperty's claims do not implicate immunity from suit in the first instance. Miranda, 133 S.W.3d at 224 ; Wichita Falls State Hosp., 106 S.W.3d at 694 n. 3.

IV. Waiver of Governmental Immunity

The City argues that the trial court erred in denying its plea to the jurisdiction regarding the Abatement Agreement and the HOT Agreement claims because TPProperty has failed to establish a waiver of the City's immunity from suit. TPProperty asserts that immunity has been waived in three ways. First, TPProperty argues that section 271.152 of the Local Government Code waived the City's immunity. Second, TPProperty argues that the City waived immunity by "asserting counterclaims against TPProperty that are ‘connected with’ and ‘germane to’ TPProperty's claims[.]" Third, TPProperty argues that the City waived immunity by its conduct.

A. Waiver of Immunity under Local Government Code Chapter 271

TPProperty argues that Local Government Code Chapter 271 waives the City's immunity under both the Abatement Agreement and the HOT Agreement. When a governmental unit enters into a contract, it makes itself potentially liable on...