Putnam v. City of Irving

• Decision Date: 27 January 2011
• Docket Number: No. 05–10–01269–CV.,05–10–01269–CV.
• Citation: 331 S.W.3d 869
• Parties: Joe PUTNAM and Irving Taxpayers Opposed to Illegal and Wasteful Use of Tax Money, Appellants,v.CITY OF IRVING, Texas, Appellee.
• Court: Texas Court of Appeals

331 S.W.3d 869

Joe PUTNAM and Irving Taxpayers Opposed to Illegal and Wasteful Use of Tax Money, Appellants,

v.CITY OF IRVING, Texas, Appellee.

No. 05–10–01269–CV.

Court of Appeals of Texas, Dallas.

Jan. 27, 2011.

James B. Harris, Scott P. Stolley, Richard B. Phillips, Thompson & Knight, L.L.P., Christopher L. Chauvin, Dallas, TX, for Appellants.Mikel J. Bowers, Bell, Nunnally & Martin LLP, Michael L. Raiff, E. Ray Hutchison, Thomas S. Leatherbury, Vinson & Elkins, L.L.P., Dallas, TX, Charles R. Anderson, Office of City of Irving, Lisa Bowlin Hobbs, Vinson & Elkins, L.L.P., Irving, TX, Marc A. Fuller, Dallas, TX, John F. Boyle, Boyle & Lowery, L.L.P., Irving, TX, Robert D. Martinez, Cotton Schmidt & Abbott, LLP, Fort Worth, TX, Frank L. Branson, Eric T. Stahl, Law Offices of Frank L. Branson, P.C., Dallas, TX, Karen Bailey Pettigrew, Assistant Attorney General Financial Litigation Division, Austin, TX, for Appellee.Before Justices O'NEILL, FITZGERALD, and LANG–MIERS.

OPINION

Opinion By Justice LANG–MIERS.

We deny appellants' motion for rehearing and motion for rehearing en banc. On the Court's own motion, we withdraw our opinion of December 13, 2010 and vacate the judgment of that date. This is now the opinion of the Court.

This is an expedited appeal under a statute that applies to the issuance of public securities. See Tex. Gov't Code Ann. §§ 1205.001–.152 (West 2000). The City of Irving, Texas, sought a declaratory judgment to validate the issuance of municipal bonds for the construction of an entertainment center and hotel complex and the pledge of certain revenues to repay the bond debt. Joe Putnam, a former mayor of Irving, and Irving Taxpayers Opposed to Illegal and Wasteful Use of Tax Money, a group of taxpayers opposed to the issuance of the bonds and the pledge of the revenues, (together the Taxpayers) intervened in the action. The trial court ordered the Taxpayers to post security to continue their participation in the proceeding. When they did not post security by the statutory deadline, the trial court dismissed their intervention. Because we conclude that the trial court did not abuse its discretion by requiring the Taxpayers to post security or by dismissing their intervention, we affirm the trial court's orders.

Background

The City designed a new convention center and entertainment complex to attract visitors to the City. In 2007, the City held an election asking voters to vote for or against the construction of the entertainment center and the imposition of new taxes. Voters passed the measure and approved the imposition of three new taxes: an event admissions tax, a 2% hotel occupancy tax, and a vehicle parking tax. See Tex. Loc. Gov't Code Ann.. §§ 334.151, .252 (West 2005) (admissions tax and hotel occupancy tax), § 334.201 (West Supp.2010) (event parking tax). The City passed ordinances imposing the event admissions tax and parking tax at a special meeting of the city council.

The new convention center has been built and is set to open in early 2011. The City filed this declaratory judgment action under chapter 1205 of the Texas Government Code to validate three series of municipal bonds in a total amount not to exceed $200 million to fund the construction of an “entertainment center and boutique hotel project.” See Gov't § 1205.021. It proposed to pledge the following revenue sources to repay the bond debt: (1) state sales and use taxes, mixed beverage taxes, and hotel occupancy taxes collected within the project; (2) city sales and use taxes and mixed beverage taxes collected within the project; (3) a 7% citywide hotel occupancy tax; (4) rent payments from its tenant at the project; (5) the parking tax on motor vehicles parked at the project; (6) the admissions tax on events held at the project, and (7) the citywide 2% hotel occupancy tax.

The Taxpayers opposed the issuance of the bonds for several reasons. First, they contended that the City cannot legally pledge the State's portion of the revenue sources because the project does not qualify as a “hotel project.” Next, they contended that the City cannot legally pledge the State's portion of the mixed beverage taxes because there is no statutory authority for this. Next, they contended that the City cannot legally pledge the admissions and parking taxes because those taxes were imposed by ordinances that were passed at a special meeting instead of a regular meeting as required by the city charter. Finally, they contended that the City cannot legally pledge any revenue sources other than those approved by the voters.

The City moved to require the Taxpayers to post security for any damage or cost the City may incur because of the delay caused by the Taxpayers' participation in the lawsuit if the City finally prevailed and obtained “substantially the judgment requested in its petition.” Id. § 1205.101. The trial court held a hearing on the motion and agreed with the City. It ordered the Taxpayers to post security in the amount of $10 million within 11 days from the date of the order. When the Taxpayers did not do so, the trial court dismissed their intervention. See id. §§ 1205.103, .104(a). The Taxpayers appeal both the requirement of security and the dismissal. We consolidated the two appeals.

Discussion

Standard in the Trial Court

A trial court “shall” grant a municipality's motion to require security unless the opposing party establishes that it is entitled to a temporary injunction against the issuance of the bonds. See id. § 1205.102. A temporary injunction is an extraordinary remedy and generally requires the party seeking a temporary injunction to show (1) a cause of action; (2) a probable right to the relief sought; and (3) a probable, imminent, and irreparable injury in the interim. See Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex.2002); Alliance Royalties, LLC v. Boothe, 313 S.W.3d 493, 496 (Tex.App.-Dallas 2010, no pet.). In this type of case, “the mere existence of the suit acts as a temporary injunction” because the bonds cannot issue while this action is pending. Buckholts Indep. Sch. Dist. v. Glaser, 632 S.W.2d 146, 149 (Tex.1982). The legislature's purpose in enacting this statute “was to stop ‘the age old practice allowing one disgruntled taxpayer to stop the entire bond issue by simply filing suit.’ ” Id.

If the trial court grants the issuer's motion for security, the court must set the bond in an amount sufficient to cover any damages or costs the issuer may incur because of the delay caused by the continued participation of the opposing party or intervenor “if the issuer finally prevails and obtains substantially the judgment requested in the petition.” Gov't § 1205.103(b). When a trial court orders a party to post security to continue its participation in a bond validation proceeding, the party must post the security before the 11th day after the entry of the order setting the bond amount. Id. § 1205.104(a). If that party does not post the required security by the deadline, the trial court “shall dismiss [that] opposing party or intervenor....” Id.

Standard of Review

The statute required the trial court to grant the City's motion for security unless the Taxpayers established that they were entitled to a temporary injunction against the issuance of the bonds. Consequently, the issue here is whether the trial court abused its discretion when it determined that the Taxpayers did not meet their burden to show they were entitled to a temporary injunction against the issuance of the bonds. See Boothe, 313 S.W.3d at 496; Tom James of Dallas, Inc. v. Cobb, 109 S.W.3d 877, 883 (Tex.App.-Dallas 2003, no pet.); In re Talco–Bogata Consol. Indep. Sch. Dist. Bond Election, 994 S.W.2d 343, 345 (Tex.App.-Texarkana 1999, no pet.). In our review, we do not substitute our judgment for that of the trial court. Cobb, 109 S.W.3d at 883. We determine only whether the court's action was so arbitrary as to exceed the bounds of reasonable disagreement. Boothe, 313 S.W.3d at 496; Cobb, 109 S.W.3d at 883; Talco–Bogata, 994 S.W.2d at 345. In so doing, we draw all legitimate inferences from the evidence in the light most favorable to the trial court's decision. Cobb, 109 S.W.3d at 883. When the trial court bases its decision on conflicting evidence, there is no abuse of discretion. Id.; Talco–Bogata, 994 S.W.2d at 345. The trial court abuses its discretion, however, when it misapplies the law to established facts or when the evidence does not reasonably support the trial court's decision. Cobb, 109 S.W.3d at 883. We review de novo the trial court's legal conclusions. See Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992). Additionally, this proceeding is governed by statute, and we review de novo matters of statutory construction. F.F.P. Operating Partners, L.P. v. Duenez, 237 S.W.3d 680, 683 (Tex.2007).

Elements of a Temporary Injunction

Did the Taxpayers establish they have a cause of action?

The party seeking a temporary injunction must first establish it has a cause of action. The government code states that all residents, property owners, and taxpayers of the governmental entity seeking to issue the securities are parties to the proceeding. See Gov't §§ 1205.041, .044. The City contends that the Taxpayers did not establish a cause of action because they presented no evidence that any of the Taxpayers reside in the City. We agree that Irving Taxpayers Opposed to Illegal Use and Waste of Tax Money did not establish that any of its members are residents, property owners, or taxpayers. However, the crux of the testimony showed that Putnam is a citizen of Irving. Although “citizen” is not expressly included within the statute, it is used interchangeably with “resident” in the local-government context. See Nunez v. Autry, 884 S.W.2d 199, 202 (Tex.App.-Austin 1994, no writ). As a result, we conclude that the trial court could have reasonably determined that the Taxpayers established that Putnam is a resident and is...