TCAA NEWS
(Volume 5, Issue 8—September 2010)
"Your Source for Information About the Texas City Attorneys Association"
News and Updates

TCAA to Fill Board Position on October 28, 2010: Those interested in applying for a place on the Board should fill out an application and return it via e-mail to Scott Houston at legalgovt@tml.org. Application forms are available on the front page of TCAA’s Web site at www.texascityattorneys.org and must be received by 5:00 p.m. on October 8, 2010. Pursuant to the TCAA Constitution, the TCAA president has appointed a three-member nominating committee to make a recommendation to the membership on the applications. The members of that committee are: (1) Karen Kennard, Interim City Attorney, Austin; (2) Frank Garza, City Attorney, Balcones Heights; and (3) Charles Anderson, City Attorney, Irving.

TCAA Fall Seminar! The TCAA Fall Seminar in conjunction with the TML Annual Conference is scheduled for October 28, 2010, in Corpus Christi. A link to registration and hotel information is available on the front page of www.texascityattorneys.org. This year’s topics include:

  • Breach of Contract Claims—Chapter 271 Update
  • Recent State Cases of Interest to Cities
  • How Much Will that Substandard Building Demolition Really Cost You?
  • Future Municipal Water Supplies—From Planning to Implementation
  • Legislative Forecast, Including Federal Collective Bargaining Update
  • Recent Federal Cases of Interest to Cities
  • TABC Update
  • Recreational Use Statute Update
  • Employee Privacy and Free Speech Rights Update
  • Ethics—City Attorneys and the Attorney-Client Privilege

FREE CLE! The 2010 TCAA Summer Conference Available Online: TCAA Online Seminars is a FREE SERVICE that allows TCAA members who are city attorneys, assistant city attorneys, or attorneys who regularly practice municipal law to purchase and view a video of past seminars in a single-session format. The viewing of the session, along with the completion of an evaluation and participation in the LisTCAA listserv, allows attorneys to receive participatory CLE credit with the State Bar. To view available seminars, please go to www.tcaaseminars.org. Use the password “FreeCLE” to gain access to the sessions.

Municipal Attorney Job Openings: For the most recent Texas Municipal League classifieds postings, please click here.

Articles

The Red Flag Rule: An Identity Theft Risk Audit for Municipal Lawyers. Diane Pedicord, General Counsel, Oklahoma Municipal League.
Lawyers have an occupational hazard of seeing a tort waiting to happen where others only see something ugly or unpleasant or defective. When looking at the FACTA Red Flag Rule, it is appropriate, therefore, to ask whether this federal rule creates new risks of liability for our municipal clients. Read more.

Recent Texas Cases of Interest to Cities
Note: Included cases are from the period beginning on the 10th of the previous month through the 10th of the current month.

Governmental Immunity-Contract: Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., No. 08-1003 (Tex. Aug. 27, 2010). Kirby Lake Development (the developers) entered into an agreement with Clear Lake City Water Authority (the Authority) to build water infrastructure that the developers would pay for, but that the Authority would partially reimburse if a favorable bond election provided the Authority with additional financing. The agreement stated that the Authority would have the use of the infrastructure rent free until a successful bond election was held. The agreement stated that:

The Authority does agree, however, that it shall include in any bond election it does hold subsequent to the effective date of this Agreement bond authorization in an amount sufficient to pay the purchase price of the Facilities.

The Authority held two bond elections that included the bond authorization for the infrastructure, but each failed. The Authority then held a bond election that did not include the bond authorization. The developers sued the Authority, arguing that the agreement required it to place the bond authorization on every election ballot the Authority called until the proposition passed. The developers also argued that the Authority’s failure to provide for payment of the infrastructure constituted a taking. The Authority argued that: (1) it had governmental immunity from suit; (2) the agreement required only that the Authority include the bond authorization on one ballot; and (3) the agreement was invalid under the reserved powers doctrine if it required that the bond authorization be included on every election ballot.

Governmental Immunity

Water authorities have some governmental immunity under state statute. Willacy Cnty. Water Control & Improv. Dist. No. 1 v. Androth, 177 S.W.2d 936, 937 (Tex. 1944). Section 271.152 of the Local Government Code waives immunity for all governmental entities for breach of contract suits related to valid contracts for “goods and services.” TEX. LOC. GOV’T CODE §§ 271.151-.152. The term “services” is not defined for the purposes of Chapter 271, but generally covers a wide array of activities. See Van Zandt v. Fort Worth Press, 359 S.W.2d 893, 895 (Tex. 1962); Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions Property/Casualty Joint Self-Ins. Fund, 212 S.W.3d 320, 327 (Tex. 2006). The Court held that the contract was subject to Chapter 271, which waived the Authority’s governmental immunity, and that the “service” was “to construct, develop, lease, and bear all risk of loss or damage to the facilities . . . .”

Interpretation of Agreement

The Authority argued that “any” in the agreement meant that the Authority had to place the bond authorization on at least one bond election. But the developers argued that the intent of the agreement was that the Authority would continue to have the bond authorization on all elections until the proposition passed. The Court held that “any” can be interpreted in either way but that the intent in this case suggested that “any” should be interpreted as “every” and thus the Authority breached its agreement when it left the proposition off one of its election ballots.

Reserved Powers Doctrine

The Authority, and the Amici, argued in their briefs that requiring the Authority to place the bond authorization on all future bond elections violates the reserved powers doctrine because it takes the authority to order an election – a substantive governmental function – away from the Authority. See State ex rel. City of Jasper v. Gulf States Utils. Co., 189 S.W.2d 693, 698 (Tex. 1945); Todd v. Helton, 495 S.W.2d 213, 220 (Tex. 1973); State ex rel. Edwards v. Reyna, 333 S.W.2d 832, 833 (Tex. 1960). Governmental entities may not contract away legislative or governmental powers that would limit their ability to perform their public duties. Jasper, 189 S.W.2d at 698; Brenham v. Brenham Water Co., 4 S.W. 143, 149 (Tex. 1887). The Court held that the agreement did not contract away any future power or cause an impediment to the Authority’s governmental obligations. The Court noted that the agreement did not limit the Authority’s ability to provide water service, and did not limit the Authority’s ability to choose the time, place, order, number of propositions, or whether to hold an election at all. It was simply an agreement to pay a debt.

Takings

The developers argued that the Authority’s continued use of the facilities, rent free, was a taking. The Court held that the developers consented to this use in the contract and could not now argue that there was a taking. City of Round Rock v. Smith, 687 S.W.2d 300, 303 (Tex. 1985).

Conclusion

The agreement is valid and requires that the Authority place the bond proposition to reimburse the developers on all future election ballots.

Eminent Domain: City of Edinburg v. A.P.I. Pipe & Supply, LLC, et al., No. 13-09-00159-CV (Tex. App.—Corpus Christi-Edinburg August 26, 2010). In February 2003, the City of Edinburg filed a petition for condemnation in county court to acquire title to 9.869 acres of land for the public purpose of constructing a right-of-way for drainage ditches along U.S. Highway 281. After a hearing, a panel of special commissioners awarded $224,249 to the landowner as compensation for the condemned property, and a judgment (the “2003 Judgment”) was entered in county court adopting the award that vested fee title in the city. In May 2004, however, the county court entered a “Judgment Nunc Pro Tunc” (the “2004 Judgment”) regarding the same property. That judgment granted the city a right-of-way easement over the property instead of fee title. The 2004 Judgment contained a provision stating that it superseded the prior judgment.

Later in 2004, A.P.I. Pipe and Supply, Inc. (A.P.I.) purchased roughly thirty-four acres of land – which included the 9.869 acres at issue – subject to an easement granted to the city as provided in the 2004 Judgment. When the city granted an easement over the property to the Texas Department of Transportation (TxDOT), A.P.I. filed an inverse condemnation suit against the city and TxDOT for the taking of soil located within the drainage channel. The city filed a plea to the jurisdiction, which was denied by the trial court. The city appealed and argued that it was immune from a suit for inverse condemnation because A.P.I. had no interest in the property, and that the 2004 judgment was void. The court of appeals agreed that the 2004 Judgment was void and that the city had fee title to the property under the 2003 Judgment, but remanded to the trial court because fact issues precluded a decision on whether A.P.I. had an interest in the property as a good faith purchaser for value.

Once remanded back to the trial court, the city filed a second plea to the jurisdiction arguing that, because the 2003 Judgment was recorded in county records, A.P.I. was not a good faith purchaser for value without notice. The city also argued that A.P.I.’s suit was actually for trespass to try title, not inverse condemnation, and the city has immunity from such a suit. The trial court denied the plea to the jurisdiction, and the city appealed.

On appeal, the city first argued that A.P.I. may not rely on equitable doctrines, like the “good faith purchaser for value” doctrine, to take title away from a governmental entity. The court dismissed this argument, stating that the “good faith purchaser for value” doctrine is not only an equitable doctrine, but a statutory requirement pursuant to Texas Property Code Section 13.01(a). Beyond that, the court opined that A.P.I. had no constructive notice of the city’s claim to the property in fee simple because nothing in the county property records revealed that the 2004 Judgment was void due to issuance outside of the trial court’s plenary power. The court stated that A.P.I. was not required to inquire as to the effect or validity of the 2004 Judgment, and therefore could rely on it as a good faith purchaser for value.

Next, the city argued that A.P.I.’s claim is actually one for trespass to try title, a claim for which the city has immunity. The court of appeals rejected that argument, providing that the two claims are not the functional equivalent of one another. See Poretto v. Patterson, 251 S.W.3d 701, 708 (Tex.App.—Houston [1st Dist.] 2007, no pet.). Because it is imperative that a claimant demonstrate an ownership interest to recover on a takings claim, the court rejected a logical extension of the city’s argument that would legally preclude A.P.I. from proving ownership because of governmental immunity.

Finally, the court of appeals addressed the scope of the easement granted in the 2004 Judgment. Both parties disputed the ownership of the soil removed from the property by the city. The city contended that the 2004 Judgment allowed the city to remove soil for the easement and keep the soil for its own use. A.P.I. argued that beyond excavation, the city had no rights with respect to the soil, and the soil therefore should not have been removed from its property. Following the decision in Brownlow v. State, 251 S.W.3d 756 (Tex.App.—Houston [14th Dist.] 2008, pet. granted), the court of appeals held that because the city only bargained for an easement under the 2004 Judgment, it was not entitled to ownership of the extracted soil. A.P.I. had a sufficient property interest in the soil to maintain an action for inverse condemnation. The court of appeals affirmed the order of the trial court denying the city’s plea to the jurisdiction.

Water: City of Galveston v. Flagship Hotel, LTD., No. 03-10-00094-CV (Tex. App.— Austin August 27, 2010). A customer of the city’s municipally-owned water utility sought a ruling on the jurisdiction of the Texas Commission on Environmental Quality (TCEQ) over the disconnection of water service to the customer’s property and the subsequent refusal of the city to refund the disconnection fees. The TCEQ concluded that, because the utility was owned by the city, TCEQ had no jurisdiction. The customer appealed, seeking reversal of the TCEQ’s final order that it lacked jurisdiction. However, because the customer had previously sought a ruling from the court that TCEQ was without jurisdiction over this situation, the court held that it lacked jurisdiction under the Texas Administrative Procedure Act (Texas Government Code Chapter 2001). The Act holds that a party is not aggrieved for purposes of the APA by a final order that provides the result that the party sought. TEX. GOV’T CODE § 2001.171. The court dismissed the suit for lack of jurisdiction.

Governmental Immunity-Contract: Multi-County Water Supply Corp. v. City of Hamilton, et al., No. 14-09-00333-CV (Tex. App.—Houston [14th Dist.] August 31, 2010). The court held that this was a contract claim disguised as a declaratory judgment claim, and that the city retained its governmental immunity. Took v. City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006).

Building: City of San Antonio v. D’Hanis State Bank, No. 04-10-00181-CV (Tex. App.—San Antonio August 18, 2010) (mem. op.). The court held that the Declaratory Judgment Act allowed a suit by a bank that was arguing that it was an “innocent lender for value similar to a bona fide purchaser” against a city demolition order under Chapter 214 of the Local Government Code.

Governmental Immunity-Tort: Shawn Hudson v. City of Houston, No. 01-07-00939-CV (Tex. App.—Houston [1st Dist.] August 12, 2010). The court held that it is a proprietary function of a city to provide a defense and indemnity to its employees, thus limiting a city’s immunity. However, the employee had to provide notice of the suit and a need for defense and indemnity to invoke the city’s duty, even if the city had actual knowledge of the suit.

You can view attorney general opinions at www.oag.state.tx.us. On the same site, you can also sign up to receive e-mail updates of opinion requests and newly released opinions.

As a supplement to TCAA News, please check the TML Legislative Update Newsletter and TML's Connect News Service .
Please contact Scott Houston, TCAA General Counsel, with your news, questions, and/or comments by e-mail at legalgovt@tml.org or by phone at 512-231-7400.
TCAA members may use the information herein for any purpose. No other person may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas City Attorneys Association.
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