Harris County Dist. 156 v. United Somerset

• Decision Date: 04 September 2008
• Docket Number: No. 01-07-00220-CV.,01-07-00220-CV.
• Citation: 274 S.W.3d 133
• Parties: HARRIS COUNTY MUNICIPAL UTILITY DISTRICT NUMBER 156, Appellant, v. UNITED SOMERSET CORPORATION, Appellee.
• Court: Texas Court of Appeals

274 S.W.3d 133

HARRIS COUNTY MUNICIPAL UTILITY DISTRICT NUMBER 156, Appellant, v. UNITED SOMERSET CORPORATION, Appellee.

No. 01-07-00220-CV.

Court of Appeals of Texas, Houston (1st Dist.).

September 4, 2008.

Rehearing Overruled November 20, 2008.

Brett J. Sileo, Harris, Hilburn & Sherer, L.L.P., Houston, TX, for Appellant.

Stephen G. Hunt, Bond, Hunt, French & Company, PLLC, Houston, TX, for Appellee.

Panel consists of Chief Justice RADACK and Justices ALCALA and BLAND.

OPINION

ELSA ALCALA, Justice.

In this interlocutory appeal, appellant, Harris County Municipal Utility District Number 156 ("the District"), appeals from the trial court's order denying its plea to the jurisdiction. See TEX. CIV. PRAC. & REM.CODE ANN. § 51.014(a)(8) (Vernon 2008).¹ Appellee, United Somerset Corporation ("United Somerset"), filed suit against the District for breach of contract, quantum meruit, and a declaration of the parties' rights under a purported contract with the District. In three issues on appeal, the District contends that the trial court erred by denying its plea to the jurisdiction because (1) "the District did not approve any contract with United Somerset and therefore did not waive immunity from suit," (2) United Somerset failed to exhaust its administrative remedies before the Texas Commission on Environmental Quality ("TCEQ"), and (3) there is no waiver of sovereign immunity for the quantum meruit claim. In addition, in its reply brief, the District asserts that this suit is not ripe for adjudication.

We conclude that this suit is not ripe. We therefore reverse and remand.

Background

The District was a municipal utility district created in 1980 pursuant to an order of the Texas Water Commission, which is now known as TCEQ. On February 3, 1986, the District and United Somerset entered into an agreement entitled "Water, Sewer and Drainage Improvement Financing and Construction Contract." The District's vice-president and secretary signed the agreement. However, the Board of Directors for the District was never called upon to ratify, approve or authorize the agreement with United Somerset.

Under the terms of the agreement, the developer financed the construction of utilities that the District agreed to later purchase by reimbursing approximately 70 percent of the developer's costs out of the proceeds of bond sales. The agreement called for the sale of bonds after houses, in numbers sufficient to provide an adequate tax base in the District, were built. The agreement defined United Somerset as a developer, stating that United Somerset planned to develop a subdivision with residential and commercial improvements. However, United Somerset did not own any property within the District. According to the District, "Section 3.03 of the purported agreement, if it was a valid agreement, required United Somerset to convey all rights, title and interest in the constructed utilities to the District."

United Somerset constructed various utility improvements. United Somerset claimed that it received engineering approval of the plans and specifications from the District's engineer. During construction, United Somerset provided documentation regarding the construction to, and received approval from, the engineer, the attorney for the district, and the TCEQ's predecessor agency. United Somerset incurred $2,220,431 in construction costs for the improvements.

By early 2006, a sufficient number of houses had been built in the District to provide a tax base. The District requested United Somerset to provide documentation to support the District's application to get approval from TCEQ to issue bonds. The District submitted a $2,750,000 bond application to TCEQ to cover the costs of the improvements. The application was supported by United Somerset's documents showing the cost of constructing the improvements, as well as by the agreement with United Somerset. The TCEQ approved the District's bond application on October 4, 2006.

In August 2005, over a year before TCEQ approved the bond application in October 2006, United Somerset filed these claims for breach of contract, quantum meruit, and a declaratory judgment to establish the validity of the agreement and its right to future payments from the bond proceeds. The District answered with a general denial, and several affirmative defenses, including that there was no waiver of the District's sovereign immunity, that United Somerset's claims were not ripe for adjudication, and that the TCEQ had exclusive original jurisdiction over United Somerset's claims.

Copper Lakes Development, L.P. filed a "Plea in Intervention and Application for Declaratory Relief," alleging that it was the "developer" and owner of the land on which United Somerset's facilities were constructed, and, therefore, it was entitled to the payment from the bond proceeds sought by United Somerset. However, Copper Lakes agreed with the District that proper jurisdiction was with the TCEQ.²

The District filed a plea to the jurisdiction, contending that the District is (1) generally immune from all suits, except where there is a specific waiver of immunity, and (2) immune from United Somerset's claims because the two people who signed the agreement for the District were an insufficient number of board members required to enter into a contract with United Somerset. The District also asserted that jurisdiction to decide any dispute about reimbursement of construction costs between a developer and a utility district lies with the TCEQ.

In response, United Somerset asserted that the trial court had jurisdiction because (1) municipal utility districts have waived immunity specifically for breach of contract actions and the agreement here is a valid contract, and (2) the TCEQ does not have exclusive jurisdiction of a contract dispute between a developer and a municipal utility district.

Ripeness

On appeal, the District asserts this case is not ripe for adjudication. However, that assertion was not made to the trial court. We must (A) determine whether we have jurisdiction to address the question of ripeness in this interlocutory appeal, and, if we determine we have jurisdiction, then (B) decide if the lawsuits for breach of contract and quantum meruit are ripe, and (C) decide if the lawsuit for declaratory judgment is ripe.

A. Our Jurisdiction Over Interlocutory Appeal

At the outset, we address whether we have jurisdiction in this interlocutory appeal to address the issue of ripeness, which is a matter asserted by the District on appeal but was not presented in the District's plea to the jurisdiction before the trial court.

We conclude we have jurisdiction in this interlocutory appeal to address ripeness, even though that matter was not part of the plea to the jurisdiction. See City of Houston v. Northwood Mun. Util. Dist. No. 1, 73 S.W.3d 304, 313 (Tex.App.-Houston [1st Dist.] 2001, pet. denied) (addressing merits of sovereign immunity challenge, although only standing was raised in plea to jurisdiction before trial court). In Northwood, we explained, "Although the City did not raise sovereign immunity in the trial court, a governmental entity's immunity from suit is a jurisdictional issue that may be raised for the first time on appeal." Id.³

We follow our precedent in Northwood. See id. We conclude that Northwood correctly states the duty of the court of appeals to address issues affecting subject matter jurisdiction, even when not raised in a plea to the jurisdiction. See Waco Indep. Sch. Dist. v. Gibson, 22 S.W.3d 849, 851 (Tex.2000). In Gibson, Waco Independent School District filed a motion to dismiss for want of jurisdiction, asserting that Gibson had failed to exhaust administrative remedies. Id. The trial court granted the motion, in part, dismissing all but one of Gibson's claims. Id. On interlocutory appeal, the school district asserted both ripeness and standing as additional grounds to affirm the trial court's dismissal, although neither issue was raised before the trial court. Id. The court of appeals declined to address either ripeness or standing, concluding that because the school district failed to raise these issues before the trial court they were not "properly preserved for our review." Gibson v. Waco Indep. Sch. Dist., 971 S.W.2d 199, 200 (Tex.App.-Waco 1998), vacated by Waco Indep. Sch. Dist. v. Gibson, 22 S.W.3d 849 (Tex.2000). The supreme court concluded that the court of appeals erred by failing to reach the ripeness and standing issues, noting that "because subject matter jurisdiction is essential to the authority of a court to decide a case, it cannot be waived and may be raised for the first time on appeal." Gibson, 22 S.W.3d at 851(emphasis added). We hold that we have jurisdiction in this interlocutory appeal to address ripeness, even though that matter was not part of the plea to the jurisdiction before the trial court. See id.

B. Ripeness of Breach of Contract and Quantum Meruit Claims

In its answer to the lawsuit, the District contends that United Somerset's claims are not ripe for adjudication. That position is also urged in its reply brief, where the District asserts that

United Somerset chose to sue the District before the District even had approval for the bond application, claiming "anticipatory breach of the contract." The District has not yet sold the bonds and received any bond proceeds, so it has not yet made any reimbursement decision. Therefore, it is not only premature for the TCEQ to make a ruling on whether the District made the proper reimbursement decision; it is premature for United Somerset to have even brought this lawsuit.

United Somerset responds that the contract dispute is ripe for adjudication. United Somerset states,

Twenty years after United Somerset's construction of the utility improvements the District submits its bond application, but still has not made a decision as to who, United Somerset, Copper Lakes or neither, is entitled to...