Tara Partners v. City of South Houston

• Decision Date: 13 January 2009
• Docket Number: No. 14-07-00330-CV.,14-07-00330-CV.
• Citation: 282 S.W.3d 564
• Parties: TARA PARTNERS, LTD., Granada Terrace, Ltd., David R. Wise, 1606 Savannah LLC, Windsor Gardens, Ltd., and Freeport Villa Brazos Apartments, Ltd., Appellants, v. CITY OF SOUTH HOUSTON, Appellee.
• Court: Texas Court of Appeals

282 S.W.3d 564

TARA PARTNERS, LTD., Granada Terrace, Ltd., David R. Wise, 1606 Savannah LLC, Windsor Gardens, Ltd., and Freeport Villa Brazos Apartments, Ltd., Appellants, v. CITY OF SOUTH HOUSTON, Appellee.

No. 14-07-00330-CV.

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

January 13, 2009.

Rehearing and Rehearing En Banc Overruled May 21, 2009.

James H. Leeland, Houston, for appellants.

Scott Bounds, Houston, for appellee.

Panel consists of Justices FROST, SEYMORE, and GUZMAN.

MAJORITY OPINION

CHARLES SEYMORE, Justice.

In this suit for declaratory judgment and damages related to fees set by a water and sewer utility owned by the City of South Houston, appellants Tara Partners, Ltd., Granada Terrace, Ltd., David R Wise, 1606 Savannah LLC, Windsor Gardens, Ltd., and Freeport Villa Brazos Apartments, Ltd. challenge an order granting the City's plea to the jurisdiction and dismissing appellants' lawsuit without prejudice. Concluding the district court had jurisdiction over appellants' claims disputing the imposition of fees under the Texas Water Code, but not over appellants' claims for reimbursement for previously paid fees or over Tara Partners, Ltd.'s claims related to an alleged settlement agreement, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

I. FACTUAL AND PROCEDURAL BACKGROUND

The City of South Houston ("the City") is a general law municipality located within Harris County. The City operates its own water and sewer utility systems. Appellant Tara Partners, Ltd. ("Tara") owns apartments within and outside the City's boundaries. The remaining appellants own apartments solely within the City's boundaries. The City provides water to appellants' apartments. From 1992 until 2004, the minimum bill for all city customers was based on water meter size, with an additional charge based on water consumption.

In 2004, the City adopted an ordinance by which it charged residential, outside city residential, and commercial residential users a minimum monthly base rate of $10.00 for water and $12.00 for sewer "for each available unit connected to a meter, whether those units are occupied or vacant." As before, there was also a usage charge. Appellants fell within the "commercial residential user" category, defined as "all multi-family units containing two or more living units and including trailer parks, motels, apartment projects and hotels."¹ Appellants' estimated water and sewer charges for a two-hundred-unit apartment, with a three-inch meter, and using 750,000 gallons of water a month would increase from $39,294 to $91,622 under the 2004 ordinance.

Appellants sued the City in Harris County District Court, and Tara also separately sought review before the Texas Commission on Environmental Quality ("TCEQ") pursuant to Texas Water Code Section 13.043(b)(3).² While the district court case was proceeding, attorneys for Tara and the City signed a hand printed settlement "resolution," which provided in part that the parties agreed the rates set forth in the 2004 ordinance were not "just and reasonable" and "all increased amounts collected under [the 2004 ordinance] shall be returned to [Tara] within 30 days." According to appellants, the City did not comply with this agreement. In amended pleadings in district court, appellants then alleged the following "causes of action": unlawful and unconstitutional taxation in violation of Texas law, unreasonable and unjustified rate discrimination under Texas common law, arbitrary and unreasonable rates under Texas common law, breach of contract, and promissory estoppel (the latter two raised only by Tara and referring to the handwritten resolution). As additional "causes of action," appellants sought a declaratory judgment, including a declaration the handwritten resolution was enforceable, actual damages consisting of "all of the Surcharge collected by [the City]," and attorneys' fees under the Uniform Declaratory Judgment Act.³

The City filed a plea to the jurisdiction, and alternatively, special exceptions. The City argued (1) under the Texas Water Code provisions regarding exclusive original and exclusive appellate jurisdiction, the district court lacked subject matter jurisdiction over appellants' challenges to the water and sewer rates;⁴ (2) to the extent appellants were seeking common law tort damages, there was no waiver of governmental immunity or constitutional authorization as would give the district court jurisdiction over such claims; and (3) the settlement resolution was not a contract subject to the subchapter under which the legislature had waived governmental immunity for claims for breach of contract.⁵ Following an evidentiary hearing, the trial court granted the City's plea to the jurisdiction.

II. LEGAL STANDARDS AND STANDARD OF REVIEW

In four issues, appellants challenge the trial court's order granting the City's plea to the jurisdiction.⁶ In its plea, the City argued provisions of the Texas Water Code gave TCEQ exclusive appellate jurisdiction over the rate claims and governmental immunity precluded the remaining claims.

In a plea to the jurisdiction, a party challenges the trial court's authority to determine the subject matter of the cause of action. City of Mont Belvieu v. Enter. Prod. Operating, L.P., 222 S.W.3d 515, 518 (Tex.App.-Houston [14th Dist] 2007, no pet.). Because subject matter jurisdiction is a question of law, we review the trial court's decision de novo. Id. In deciding a plea to the jurisdiction, we may not weigh the merits of the claim, but must consider only the plaintiff's pleadings and the evidence pertinent to the jurisdictional inquiry. See Tex. Natural Res. Conservation Comm'n v. White, 46 S.W.3d 864, 868 (Tex.2001); Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554-55 (Tex.2000). 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. See Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 446 (Tex.1993). To prevail, the party asserting the plea must show that, even if all the allegations in the plaintiff's pleadings are taken as true, an incurable jurisdictional defect appears on the face of the pleadings, rendering it impossible for the plaintiff's petition to confer jurisdiction on the trial court. City of Mont Belvieu, 222 S.W.3d at 518.

If a plaintiff fails to plead sufficient facts affirmatively demonstrating the trial court's jurisdiction, but the pleadings do not affirmatively demonstrate incurable defects in jurisdiction, the issue is one of pleading sufficiency and the plaintiff should be afforded the opportunity to amend. Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226-27 (Tex. 2004); County of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex.2002). However, if the pleadings affirmatively negate the existence of jurisdiction, a plea to the jurisdiction may be granted without allowing the plaintiff an opportunity to amend. Miranda, 133 S.W.3d at 227; Brown, 80 S.W.3d at 555. Also, through inaction, a plaintiff may lose the opportunity to amend. See Haddix v. Am. Zurich Ins. Co., 253 S.W.3d 339, 347 (Tex.App.-Eastland 2008, no pet.).⁷

III. APPELLANTS' CLAIMS AND THE CITY'S PLEA

A. Appellants' Rate Claims and the Texas Water Code

In their first issue, appellants argue the trial court erred in dismissing their rate claims. Appellants' first three causes of action against the City were cast as (1) "Unlawful and Unconstitutional Taxation in Violation of Texas Law," (2) "Unreasonable and Unjustified Rate Discrimination" under Texas common law, and (3) "Arbitrary and Unreasonable Rates" under Texas common law. In each of these "causes of action," appellants attacked the increase in rates resulting from passage of the 2004 ordinance. Appellants alleged the increased rates were not related to the City's costs in providing service, were excessive in comparison to charges for other customers, and were not based on evidence or analysis. Appellants' sixth cause of action was a request for a declaration incorporating appellants' allegations in the first three causes of action, as well as seeking declarations (1) they were entitled to reimbursement for past payment and (2) the settlement agreement signed by counsel for Tara and the City was enforceable.

In its plea to the jurisdiction, the City argued, in part, that appellants' lawsuit was "essentially a challenge to the rates that the City charges for utility services." Citing Texas Water Code section 13.042(d), the City then contended the TCEQ had exclusive appellate jurisdiction over that dispute and therefore the district court lacked jurisdiction.

Texas district courts are courts of general jurisdiction and have jurisdiction over all actions, proceedings and remedies "except in cases where exclusive, appellate, or original jurisdiction may be conferred by [the Texas] Constitution or other law on some other court, tribunal, or administrative body." Tex. Const. Art. V, § 8. An agency has exclusive jurisdiction when a pervasive regulatory scheme indicates that the legislature intended for the regulatory process to be the exclusive means of remedying the problem to which the regulation is addressed. In re Entergy Corp., 142 S.W.3d 316, 322 (Tex.2004).

The question in the present case, therefore, is whether the legislature intended the regulatory process as the exclusive means of remedying a rate dispute between a municipally owned water and sewer utility and ratepayers living within the corporate limits of that municipality. We conclude it did not.

Water Code section 13.042 provides for a municipality's original jurisdiction and for TCEQ's original and appellate jurisdiction:

(a) Subject to the limitations imposed in this chapter and for the purpose of regulating rates and services so that those rates may be fair, just, and reasonable and the services adequate and efficient, the...