Crownhill Homes, Inc. v. City of San Antonio

Decision Date08 August 1968
Docket NumberNo. 234,234
PartiesCROWNHILL HOMES, INC., Appellant, v. CITY OF SAN ANTONIO et al., Appellees. . Corpus Christi
CourtTexas Court of Appeals

Lang, Cross, Ladon, Oppenheimer & Rosenberg, Paul M. Green, San Antonio, for appellant.

Niemann & Babb, Larry Neimann, Austin, amicus curiae.

Sawtelle, Goode, Troilo & Leighton, Robert Sawtelle, Sam Wolfe, City Atty., San Antonio, for appellees.


NYE, Justice.

Crownhill Homes, Inc., a subdivider and developer, filed suit against the City of San Antonio, the Water Works Board of Trustees, and the Board members individually (including the Mayor of the City of San Antonio), seeking a declaratory judgment as to the validity of certain regulations of the Water Works Board of Trustees and praying for a writ of mandamus requiring the Board to make certain requested on-site water main extensions in developer's subdivision without imposing the costs of the same on the developer. The trial was before the court sitting without a jury. The court entered judgment declaring the Board's regulations valid, denying the developer's application for mandamus, and denying all other additional relief requested. The developer has perfected its appeal.

For a number of years prior to 1960 the municipally owned Water Works of the City of San Antonio, through its Board of Trustees, required developers as a prerequisite to the approval of their plat for subdivisions, to pay the cost of water mains within the proposed development. Included in this cost to the developer were approach main extensions from the City's transmission water mains, and local benefit on-site mains that serve directly the lots within the subdivision. A policy of the Board provided for at least a partial refund to the developers of these expenditures, based on the amount of water used by the ultimate customers over a fixed period of time. Although the present Board's regulations continue to permit the developer to recoup his costs for the approach main extensions (which lead from the City's main transmission lines into the subdivision) the Board determined in the early part of 1960 that it could no longer reimburse the developer for the local benefit on-site water main costs. It is the refusal of the Board to make at least some of this reimbursement to the developers, that caused the initiation of this suit.

The basic issues of law presented by this appeal are: (1) Does the San Antonio Water Works Board of Trustees have the statutory authority to determine the Board's policy of governing the extensions of on-site water mains in the implementation of the City Council's approved master water plan, and if so, does the Board exercise a governmental discretion in setting forth this regulation? (2) Is the San Antonio Water Works Board's regulation valid which requires the developers to pay the entire cost of local benefit on-site water main extensions into a new area without reimbursement, when tested by the constitutional guarantees of due process of law and equal protection under the law?

The Water Works Board of Trustees of the City of San Antonio requires subdividers and developers without exception to install at their own expense, and in effect donate to the City, local on-site water mains and the necessary appurtenances designed to provide water service to the lots within their proposed subdivision. In the absence of contract performance bond, or other assurances deemed satisfactory by the Water Board, the Board will not certify to the Planning Commission of the City of San Antonio that water service is available to the subdivision. This certification is a prerequisite to plat approval by that body. So, unless the developer follows essentially this procedure by complying with the Board's regulations and policy, he is for all practical purposes denied the right to erect improvements within the subdivision. The questioned regulation reads as follows:

'Item 3. Extension of Developer-customer/on-site mains. The construction of water distribution and pertinent facilities for domestic, commercial and fire protection uses conforming to board-approved plans and specifications may be installed by a contractor of the developer's choice, provided a performance bond for 100% Of the total contract construction cost is furnished by the contractor in favor of the board and owner * * *.

'The board shall not be obligated to permit connection of any extension to existing system facilities prior to the full completion and acceptance of the entire construction by the board. * * *'

It is this regulation that forms the basis of appellant's complaint.

The San Antonio Water Supply Company, a private corporation, was purchased by the City of San Antonio in 1925 by authority of the Legislature of the State of Texas. The Legislature directed that the management and control of the system was to be placed in the hands of the City Council of the City, or if the Council and the citizens of the City deemed advisable, in the hands of a Board of Trustees consisting of not more than five members, one of whom shall always be the Mayor of such City. Art. 1109a, Vernon's Ann.Civ.St., Acts of 39th Legislature 1925. 1 The City of San Antonio decided that its water system would be governed under the alternate authority authorized by the Legislature. Therefore, the City entered into a trust agreement and placed into the hands of its Board of Trustees, the operation of the system. This was approved by the citizens of the City in an election held for that purpose.

In the early days of the Water Works Board, and especially during the years just prior to 1955, the water system was in poor financial condition. The Board was required to borrow cash from banks to meet operating expenses. During the later years the governing Board was forced to use and finally delated customer deposit refunds in order to carry on its operation. At that time the Water Board's regulations specified that land developers would install approach and on-site (local benefit water mains) to serve lots within their subdivision at their expense (subject to 100% Refund) from the transmission water mains made available to the subdivider by the Water Board. The regulations continued, that thereafter, if revenues from water sales within the subdivision reached a certain level, the developer could receive a refund from the board of 100% Of his approach and on-site local benefit main costs. 2 The Water Board's liability to developers for these 100% Main extension refunds soon amounted to $2,000,00.00. The Board determined that it was financially unable to continue this 100% Refund policy. As a result thereof, the Board in 1956 amended its regulations to restrict the potential refund to developers on on-site mains to 50%. At the same time the City Council passed a 19% Increase in water rates.

Two years later the City Council of San Antonio passed an ordinance authorizing the issuance of water revenue refunding bonds. This ordinance specified in detail the Board's powers, duties, functions, organization, and specifically how its revenues would be expended. The significance here is that the priority of fund requirements from water revenue under the bond ordinance called for 'the maintenance and operation fund' to have first call on all water system fund revenues; next, in priority of fund requirements was (2) 'interest and the sinking fund'; following this came (3) 'the bond reserve fund'; next, (4) 'the improvement and contingent fund' and finally, (5) 'the surplus fund.' It was undisputed that the definition of a water main extension is the 'addition of capacity, the addition of mains or other facilities which add to the system's size or to its amount of service units, such as customers, meters, mains, pumps, wells or other items.' It is appellees' contention that under the express terms of this ordinance, costs for extensions may be made only from the 'improvement and contingency fund' and the 'surplus fund'. The improvements and contingency fund consists, to the extent money is available from the higher priority requirements of other funds of a sum equal to 15% Of the gross revenue of the system. The record shows that since the passage of the ordinance, there has never been sufficient water revenue to satisfy the priority requirements of the first four funds. The 'surplus fund' has never been established.

The bond ordinance passed in conformity with Articles 1109a, 1111 to 1118w, V.A.C.S., requires the City of San Antonio to maintain sufficient rates to pay all 'maintenance, depreciation, replacement, betterment and interest (and principal) charges.' It was undisputed that the term 'betterment' is an improvement to the plant in service, and that this definition did not include extensions or additions to the system. The bond ordinance pledged all the revenues of the system to the bond holders' first lien, after deducting operating, maintenance, replacement and betterment charges. Appellee contends that neither the ordinance nor the statutes permit the deduction of extension charges from this pledge of revenue, and that neither the statutes nor the bond ordinance require the raising of rates sufficient to pay for on-site local benefit extensions, and that this Court should not require the appellee City to do so.

The financial condition of the Water Board continued to be poor. By 1960 the Board's obligations accumulated a deficit of $3,703,396.00. During the period from 1956 to 1960 and after the Board had liquidated its 100% Obligation to the developers, the Board's obligation to developers of 50% Refund for on-site improvements rose to $974,000.00. The system revenues were insufficient to meet this continued liability. The Board then determined that it was not in a position to meet the financial requirements of refunding 50% Of the cost of local on-site mains. The Board employed consulting engineers and made...

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