Tac Realty, Inc. v. City of Bryan

• Decision Date: 20 November 2003
• Docket Number: No. 14-02-01002-CV.,14-02-01002-CV.
• Citation: 126 S.W.3d 558
• Parties: TAC REALTY, INC., Appellant, v. The CITY OF BRYAN, Texas, and only in their Official Capacities, Jay Don Watson, Michael M. Beal, Paul Madison, Joe Marin, Mitchell P. Morehead, Boyd Sheffield, and Ernest A. Wentrcek, Appellees.
• Court: Texas Court of Appeals

126 S.W.3d 558

TAC REALTY, INC., Appellant, v. The CITY OF BRYAN, Texas, and only in their Official Capacities, Jay Don Watson, Michael M. Beal, Paul Madison, Joe Marin, Mitchell P. Morehead, Boyd Sheffield, and Ernest A. Wentrcek, Appellees.

No. 14-02-01002-CV.

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

November 20, 2003.

Rehearing Overruled En Banc February 26, 2004.

W. Jeff Paradowski, Bryan, Jonathan S. Day, Charles Hampton, Houston, for appellant.

Michael John Cosentino, Bryan, for appellees.

Panel consists of Justices YATES, HUDSON, and FROST.

OPINION

LESLIE BROCK YATES, Justice.

Appellant TAC Realty, Inc. ("TAC") complains of the trial court's dismissal of its case for lack of subject-matter jurisdiction. In response to TAC's lawsuit seeking temporary and permanent injunctive relief to prevent the City of Bryan ("the City")¹ from spending additional funds in furtherance of certain development agreements executed by the City, the City and the individual defendants filed a plea to the jurisdiction asserting TAC does not have standing to challenge the agreements. The trial court conducted a hearing and sustained the City's plea. In three issues, TAC asks this court to determine (1) whether the trial court committed reversible error by failing to find TAC made a prima facie showing that the development agreements violate article 11, section 5 of the Texas Constitution, the Bryan City Charter and Texas public policy; and (2) whether the trial court abused its discretion by refusing to grant TAC's request for a temporary injunction to prevent the City from spending additional monies in furtherance of the development agreements. We reverse and remand.

Factual and Procedural Background

TAC is a Texas corporation located in Bryan, Texas. It owns real property in the City and pays property taxes to the City. On November 2, 1999, the Bryan City Council approved three agreements with third-party developers as part of a project to develop a country club, golf course, hotel, conference center, and high-end residential area in the City ("Traditions Project"). In this lawsuit, TAC alleges the three agreements entered into by the City in connection with the Traditions Project obligated the City (1) to pay for the acquisition of land, public infrastructure improvements, and major utilities; (2) to donate land for a golf course and millions of gallons of water for use by the golf course developer; and (3) to contribute land and cash, in addition to a non-interest-bearing loan, toward the construction of certain improvements. TAC further alleges that the funds identified by the Bryan City Council on the same day the City Council approved the agreements were insufficient to satisfy the City's obligations under the development agreements. The City does not refute TAC's allegation that of the five funds identified, only two in fact existed and contained a total of $3.2 million. The City instead contends the City Council was told, prior to voting on the agreements, that it would be necessary to issue certificates of obligation in order to perform under the agreements. On October 26, 2000, the City issued approximately $17 million in Series 2000A certificates of obligation, an authorized use of which is paying "contractual obligations to be incurred" by the City in connection with, inter alia, the acquisition of streets and construction of improvements to real property. The City pledged ad valorem tax revenues during each year the certificates are outstanding and unpaid in an amount sufficient to fund the repayment of the bonds (both principal and interest). The City also created an interest and sinking fund of no less than 2% per annum.

In response to TAC's filing of this lawsuit, alleging the agreements violate article 11, section 5 of the Texas Constitution and the Charter of the City of Bryan and are contrary to Texas public policy, the City filed a plea to the jurisdiction and statement in opposition to temporary injunction. The City argued TAC lacked taxpayer standing and that the City did not have a binding obligation under the agreements when the City Council approved them, and the agreements, which were amended, are not void under article 11, section 5 of the Texas Constitution. The trial court held an evidentiary hearing on the City's plea and issued an order to sustain the City's plea and dismissed the case for lack of subject-matter jurisdiction on the basis that TAC does not have taxpayer standing to challenge the agreements. The trial court found that TAC failed to make a prima facie showing that "the City of Bryan is currently using or will use or will have to use ad valorem tax dollars to fund performance of the amended agreements" or "that the amended agreements ... are not in compliance with Art. 11, Section 5 of the Texas Constitution."

Discussion

A. Standard of Review

"Standing is a prerequisite to subject-matter jurisdiction, and subject-matter jurisdiction is essential to a court's power to decide a case." Bland Indep Sch. Dist. v. Blue, 34 S.W.3d 547, 553-54 (Tex.2000). Because subject-matter jurisdiction presents a question of law, we review a trial court's order granting a plea to the jurisdiction de novo. See Metro. Transit Auth. v. Burks, 79 S.W.3d 254, 256 (Tex.App.-Houston [14th Dist.] 2002, no pet.).

A party may challenge the absence of subject-matter jurisdiction by a plea to the jurisdiction and by other procedural vehicles, such as a motion for summary judgment. Bland Indep. Sch. Dist., 34 S.W.3d at 554. "A plea to the jurisdiction is a dilatory plea, the purpose of which is to defeat a cause of action without regard to whether the claims asserted have merit." Id. The purpose of a dilatory plea is not to force a plaintiff to preview its case on the merits, but to establish a reason why the merits of its case should never be reached. Id.

In deciding a plea to the jurisdiction, a court may not weigh the claims' merits but must consider only the plaintiffs' pleadings and the evidence pertinent to the jurisdictional inquiry. When we consider a trial court's order on a plea to the jurisdiction, we construe the pleadings in the plaintiff's favor and look to the pleader's intent.

Id. at 554-55. A trial court accepts the factual allegations in the petition as true, unless the defendant pleads and proves the allegations were fraudulently made to confer jurisdiction. Id. at 554. When reviewing a trial court's order on a plea to the jurisdiction, an appellate court may look to evidence outside of the pleadings. Id.

[T]he issues raised by a dilatory plea are often such that they cannot be resolved without hearing evidence. And because a court must not act without determining that it has subject-matter jurisdiction to do so, it should hear evidence as necessary to determine the issue before proceeding with the case. But the proper function of a dilatory plea does not authorize an inquiry so far into the substance of the claims presented that plaintiffs are required to put on their case simply to establish jurisdiction.

...

The court should, of course, confine itself to the evidence relevant to the jurisdictional issue.

Id. at 554-55.

B. Taxpayer Standing

In its first issue, TAC asserts the trial court improperly ruled on the merits of TAC's claim when the trial court found TAC does not have standing to challenge the City's development agreements. The Texas Supreme Court recently addressed the issue of taxpayer standing in Williams v. Lara, 52 S.W.3d 171 (Tex.2001). In Williams, the court stated that "[t]axpayers in Texas have standing to enjoin the illegal expenditure of public funds, and need not demonstrate a particularized injury. Implicit in this rule are two requirements: (1) that the plaintiff is a taxpayer; and (2) that public funds are expended on the allegedly illegal activity." Williams, 52 S.W.3d at 179. The City does not dispute TAC's status as a taxpayer in Brazos County. The only issue is whether TAC satisfies the second requirement— namely, can TAC show that "public funds are being expended on the allegedly illegal activity"? See id. at 179.²

To determine whether the trial court erred in its conclusion, we focus our attention on the supreme court's discussion of taxpayer standing in Williams. In Williams, former inmates and a Tarrant County resident sued Tarrant County and its sheriff, alleging that a religious-education program (the Chaplain's Education Unit ("CEU")) in a county jail facility violated the Texas and United States Constitutions and the plaintiffs' civil rights under section 1983 of title 42 of the United States Code. Id. at 175. The court recognized that it had not determined what constitutes "expending public funds," and turned to federal court authority for guidance. See id. at 181. After concluding the federal court jurisprudence of municipal taxpayer standing is most analogous to the requirements necessary to establish taxpayer standing in Texas, the court stated that a litigant must prove that the "government is actually expending money on the activity that the taxpayer challenges; merely demonstrating that tax dollars are spent on something related to the allegedly illegal conduct is not enough." Id. As an example, the court cited a Ninth Circuit Court of Appeals decision in which the court concluded there was no taxpayer standing to challenge a graduation prayer because spending tax dollars on renting a hall, printing programs, buying decorations, and hiring a security guard was necessary even if the ceremony did not include a prayer. See id. at 181-82 n. 6 (citing Doe v. Madison Sch. Dist. No. 321, 177 F.3d 789, 793-96 (9th Cir.1999)).

In Williams, the court concluded that Tarrant County used public funds to manage the CEU: "Based on their own testimony, we conclude that Sheriff Williams and Chaplain Atwell spent a significant amount of the County's time operating the CEU, including shaping and promoting its religious curriculum, and...