Gatesco Q.M. Ltd. v. City of Hous.

• Decision Date: 20 October 2016
• Docket Number: NO. 14-14-01017-CV,14-14-01017-CV
• Citation: 503 S.W.3d 607
• Parties: GATESCO Q.M. LTD. d/b/a Quail Meadows Apartments, Appellant v. The CITY OF HOUSTON, Appellee
• Court: Texas Court of Appeals

503 S.W.3d 607

GATESCO Q.M. LTD. d/b/a Quail Meadows Apartments, Appellant

v.The CITY OF HOUSTON, Appellee

NO. 14-14-01017-CV

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

Opinion filed October 20, 2016

Darah L. Eckert, Mary Stevenson, Houston, TX, for Appellee

Robert Gaines Gibson, Rosenberg, TX, Steven Doyle Poock, Sugarland, TX, for Appellant

Panel consists of Chief Justice Frost and Justices Boyce and Jamison.

OPINION

Kem Thompson Frost, Chief Justice

This case arises out of a dispute between the City of Houston and a water-service customer. The customer sought declaratory relief based on various purported constitutional violations that allegedly occurred when the City charged the customer a late fee, shut off the customer's water supply, and required the customer to post a deposit before restoring water service. The trial court granted summary judgment for the City and dismissed the customer's claims. We reverse and remand as to the customer's substantive-due-course-of-law claims under the Texas Constitution, request for injunctive relief, and request for attorney's fees. We affirm the remainder of the trial court's judgment.

I. FACTUAL AND PROCEDURAL BACKGROUND

Appellant/plaintiff Gatesco Q.M., Ltd. d/b/a Quail Meadows Apartments (hereinafter "Gatesco") owns an apartment complex known as the Quail Meadows Apartments (hereinafter the "Apartments") in Houston, Texas. The only available supplier of water for the Apartments is appellee/defendant The City of Houston. On November 28, 2006, Gatesco, a longtime water customer, paid its water bill to the City one day late. The City assessed a ten-percent late fee of $1,020.03 (the "Late Fee"). Gatesco did not want to pay the Late Fee and challenged it in an administrative proceeding. Though unsuccessful in this proceeding, Gatesco still did not pay the Late Fee. The City's records showed Gatesco as being delinquent for not paying the Late Fee.

To avoid having its water shut off, Gatesco filed this lawsuit and obtained a temporary restraining order preventing the City from shutting off the water. On February 5, 2007, the trial court denied Gatesco's request for temporary injunction, signing the order at 11:06 a.m. Within two hours—at 12:47 p.m.—Gatesco paid the Late Fee, although the City says Gatesco paid the fee at the wrong location. The City shut off the water to the Apartments at 1:04 p.m., 17 minutes after Gatesco paid the fee. The City turned the water back on later that same afternoon. But, because the water had been turned off, the City required a cash security deposit of $35,200, an estimate of three months of water bills (the "Security Deposit"). The City later allowed the deposit requirement to be satisfied by posting a bond.

Gatesco challenged the security-deposit requirement in an administrative proceeding. After it was unsuccessful in this proceeding, Gatesco amended its lawsuit to add claims challenging the security-deposit requirement. The trial court dismissed Gatesco's claims based on governmental immunity, and this court affirmed in part and reversed and remanded in part. See Gatesco, Q.M., Ltd. v. City of Houston , 333 S.W.3d 338, 347 (Tex. App.–Houston [14th Dist.] 2010, no pet.). This court concluded that governmental immunity did not bar some of Gatesco's claims. See id. at 349–51.

On remand, the trial court granted the City's motion for a no-evidence and a traditional summary judgment. In this appeal, Gatesco challenges the trial court's summary judgment.

II. ISSUES AND ANALYSIS

Gatesco asserts that there is a genuine issue of material fact as to its requests for declaratory relief regarding the following claims:

(1) the ordinance that allows the City to charge a ten-percent late fee allegedly is an excessive fine and so violates the prohibition against excessive fines contained in article I, section 13 of the Texas Constitution ;

(2) the late-fee ordinance, on its face and as applied, is an unauthorized tax that violates article XI, section 5 of the Texas Constitution ;

(3) the City's levying of the ten-percent late fee against Gatesco violated the substantive-due-process protections of the Due Process Clause of the Fourteenth Amendment to the United States Constitution;

(4) the City's shutting off of the water, requiring a security deposit, and failing to conduct a required credit recheck violated the substantive-due-process protections of the Due Process Clause of the Fourteenth Amendment to the United States Constitution;

(5) the City's levying of the ten-percent late fee against Gatesco violated the substantive-due-course-of-law protections of article I, section 19 of the Texas Constitution ;¹

(6) the City's shutting off of the water, requiring a security deposit, and failing to conduct a required credit recheck violated the substantive-due-course-of-law protections of article I, section 19 of the Texas Constitution ;

(7) the City's levying of the ten-percent late fee against Gatesco violated the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution and the equal-protection provision contained in article I, section 3 of the Texas Constitution ;

(8) the City's shutting off of the water and requiring the Security Deposit violated the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution and the equal-protection provision contained in article I, section 3 of the Texas Constitution.

In a traditional motion for summary judgment, if the movant's motion and summary-judgment evidence facially establish its right to judgment as a matter of law, the burden shifts to the nonmovant to raise a genuine, material fact issue sufficient to defeat summary judgment. M.D. Anderson Hosp. & Tumor Inst. v. Willrich , 28 S.W.3d 22, 23 (Tex. 2000). In reviewing a no-evidence summary judgment, we ascertain whether the nonmovant pointed out summary-judgment evidence raising a genuine issue of fact as to the essential elements attacked in the no-evidence motion. Johnson v. Brewer & Pritchard, P.C. , 73 S.W.3d 193, 206–08 (Tex. 2002). In our de novo review of a trial court's summary judgment, we consider all the evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. Mack Trucks, Inc. v. Tamez , 206 S.W.3d 572, 582 (Tex. 2006). The evidence raises a genuine issue of fact if reasonable and fair-minded jurors could differ in their conclusions in light of all of the summary-judgment evidence. Goodyear Tire & Rubber Co. v. Mayes , 236 S.W.3d 754, 755 (Tex. 2007). When, as in this case, the order granting summary judgment does not specify the grounds upon which the trial court relied, we must affirm the summary judgment if any of the independent summary-judgment grounds is meritorious. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000).

A. Is there a genuine fact issue as to whether the Late Fee is an excessive fine that violates article I, section 13 of the Texas Constitution ?

In 2006, section 47-69 of the City of Houston Code of Ordinances required the City to charge Gatesco a ten-percent late fee because the City did not receive payment in full by the November 27, 2006 due date (the "Due Date") and Gatesco had not requested an administrative hearing to challenge the correctness of the bill:

All potable water bills shall be payable in full based upon the rates and schedules provided in this division, on or before the due date stated on the customer's bill, unless the customer notifies the department in writing that he or she desires to challenge the correctness of the bill in an administrative hearing as described in section 47-70. If payment in full is not received by the department or an authorized agent by the due date and the customer has not requested an administrative hearing, the department shall bill such customer ten percent of the past due amount as a charge for late payment.²

Houston, Texas, Code of Ordinances ch. 47, art. II, div. 1, § 47-69 (2006) (hereinafter "Section 47-69").

In the trial court, Gatesco sought a declaratory judgment that the Late Fee the City charged Gatesco is an excessive fine under article I, section 13 of the Texas Constitution. On appeal, Gatesco argues that there is a fact issue as to whether the Late Fee is an excessive fine.

Article I, section 13 provides that excessive fines shall not be imposed. Tex. Const. art. I, § 13 (West, Westlaw through 2015 R.S.). "Fines," as used in article I, section 13, includes civil penalties. Pennington v. Singleton , 606 S.W.2d 682, 690 (Tex. 1980). Whether this constitutional provision has been violated is a question for the court to decide under the facts of each particular case. Id. Generally, prescribing fines is a matter within the City's discretion. See id. A fine is not unconstitutionally excessive such that the courts will override the City's discretion, " ‘except in extraordinary cases, where it becomes so manifestly violative of the constitutional inhibition as to shock the sense of mankind.’ " Id. (quoting State v. Laredo Ice Co. , 96 Tex. 461, 73 S.W. 951, 953 (1903) ). The City has "a wide latitude of discretion" in the matter of imposing fines, and a fine is unconstitutionally excessive only where the penalty prescribed is so severe and so oppressive as to be wholly disproportionate to the offense and obviously unreasonable. See id. A primary consideration in determining whether a fine is excessive is whether it is fixed with reference to the object it is to accomplish. Id. Large penalties for anticompetitive business practices and usurious interest rates have been upheld by Texas courts when considered in light of the abuse the penalties were designed to cure. Id.

Gatesco argues that the trial court erred in concluding as a matter of law that the Late Fee was not an excessive fine under this legal standard. Gatesco asserts that it paid its water bill one day late at...