City of Midlothian, Texas, Appellant v. ECOM Real Estate Management, Inc., Appellee
The City of Midlothian, in the course of expanding its wastewater operations, approached ECOM Real Estate Management, Inc. about obtaining an easement on ECOM's property. The parties entered an easement agreement for construction of a sewer system. The City agreed to construct five stubout connections, which allow ECOM to access the sewer system, and agreed that ECOM could provide its own water. After the City installed the sewer system and stubouts, the city council passed an ordinance requiring parties to purchase water from the City in order to use the sewer systems. The City denied ECOM's application for an exemption. ECOM sued the City, alleging breach of contract, fraud, and fraudulent inducement and seeking a declaratory judgment, attorney's fees, and exemplary damages.1 The trial court denied the City's partial plea to the jurisdiction. In five issues, the City challenges the denial of its plea. We reverse and render.
STANDARD OF REVIEW
A plea to the jurisdiction challenges the trial court's “power to determine the subject matter of the suit.” Vela v. Waco Indep. Sch. Dist., 69 S.W.3d 695, 698 (Tex.App.-Waco 2002, pet. withdrawn). We review a plea based on sovereign immunity de novo because the question of whether a court has subject matter jurisdiction is a matter of law.” Hoff v. Nueces County, 153 S.W.3d 45, 48 (Tex.2004); see Vela, 69 S.W.3d at 698. Where “the pleading requirement has been met and evidence has been submitted to support the plea that implicates the merits of the case, we take as true all evidence favorable to the nonmovant.” Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 228 (Tex.2004) (citing Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex.1997)). “We indulge every reasonable inference and resolve any doubts in the nonmovant's favor.” Id.
BREACH OF CONTRACT
In issue one, the City argues that the trial court lacks subject matter jurisdiction over ECOM's breach of contract claim.
ECOM does not contend that the Legislature has waived immunity from suit for the breach of contract action alleged in this case. See Tex. Local Gov.Code Ann. §§ 271.151-.152 (Vernon 2005); see also City of San Antonio v. Reed S. Lehman Grain, Ltd., No. 04-04-00930-CV, 2007 Tex.App. LEXIS 7515, at *6-7 n.2 (Tex.App.-San Antonio Mar. 14, 2007, pet. denied) (mem.op.). Rather, ECOM argues that it may pursue its breach of contract claim under Texas A & M University-Kingsville v. Lawson, 87 S.W.3d 518 (Tex.2002), (plurality op.) and City of Carrollton v. Singer, 232 S.W.3d 790 (Tex.App.-Fort Worth 2007, pet. denied).
In Lawson, the trial court granted the University's plea to the jurisdiction as to all but Lawson's whistleblower and constitutional claims, which the parties settled. See Lawson, 87 S.W.3d at 518-19. Lawson later sued the University for breach of the settlement agreement. Id. at 519. The trial court denied the University's plea to the jurisdiction. Id. Noting that the Legislature has waived immunity for whistleblower claims, the Texas Supreme Court held:
[W]hen a governmental entity is exposed to suit because of a waiver of immunity, it cannot nullify that waiver by settling the claim with an agreement on which it cannot be sued. The government cannot recover waived immunity by settling without defeating the purpose of the waiver in the first place. Such a rule would limit settlement agreements with the government to those fully performed before dismissal of the lawsuit because any executory provision could not thereafter be enforced.
Id. at 521.2
In Singer, the City notified the Singers that it needed to acquire a portion of their property to extend a road. See Singer, 232 S.W.3d at 792-93. The Singers agreed to convey a right of way to the City in exchange for the City's agreement to perform certain promises. Id. The Singers later sued the City for breach of the agreement. Id. at 794. The trial court denied the City's plea to the jurisdiction. Id. On appeal, the Singers argued that the “City is not immune from suit in this instance because the agreement between the parties was, in essence, a settlement of an eminent domain claim, for which the City has no immunity by virtue of the Texas Constitution.” Id. at 795.
The Fort Worth Court agreed with the Singers. According to the Court, “An agreement to convey property to a governmental authority for a public purpose has the same effect as a formal condemnation proceeding.” Id. at 798.
[E]ven though the City had not yet instituted condemnation proceedings against the Singers in court, it intentionally acquired the Singers' land for the public purpose of extending a road, for which a municipality is statutorily authorized to institute condemnation proceedings ․ and it had performed a condition precedent to instituting eminent domain proceedings in court-negotiating with the Singers for adequate compensation.
Id. at 799. “[I]f the Singers had not reached a settlement agreement with the City, the City would have had to institute eminent domain proceedings against them to acquire the land.” Id. The City “exposed itself to liability and suit by its threat of eminent domain proceedings.” Id. at 800 (emphasis added).
[T]he City could not create immunity from suit for the Singers' claim for adequate compensation by contracting to purchase their property at an agreed upon valuation in fulfillment of the condition precedent to filing an eminent domain proceeding in court as set forth in the property code.
Id. (internal citations omitted). The Fort Worth Court held that the City was not immune from suit because the agreement was a “settlement of an eminent domain proceeding in which the Singers would have a claim against the City for adequate compensation for the City's acquisition of their property, and for which the City would not be immune.” Id.
Here, the City admits that it cannot prevail under Singer. However, relying on Chief Justice Cayce's dissent, the City argues that Singer was wrongly decided.
In his dissent, Chief Justice Cayce noted that the majority's holding conflicted with the rule that a governmental entity “does not, merely by entering into a contract, waive immunity from suit.” Id. at 801 (Cayce, C.J., dissenting). He emphasized that, unlike Lawson, the “City was not exposed to suit because of a waiver of immunity when it entered into its agreement with the Singers.” Id. At the time of the agreement, the Singers had “no cognizable claim under Texas law that could be brought against the City based on their negotiations with the City, and they had not filed or threatened to file a suit alleging a claim against the City for which the City's immunity is waived.” Id.
He voiced several concerns with the majority's conclusion that the “City exposed itself to suit by ‘its threat of eminent domain proceedings,’ and that the parties' agreement settled an eminent domain claim in which ‘the Singers would have a claim against the City for adequate compensation.’ ” Id. at 802. First, the “alleged ‘threat’ of eminent domain proceedings did not expose the City to a suit for adequate compensation because the Singers could not have sued the City based on such a threat.” Id. The Singers would not have an “actionable claim against the City for adequate compensation” unless the City “actually commenced eminent domain proceedings to take the property-which the City did not do.” Id. Second, the agreement “evidences an intent that the Singers convey their property to the City in consideration for the City's promise[s],” not an intent to “ settle an alleged eminent domain or adequate compensation claim.” Id. Third, the Singers had “no adequate compensation claim to settle when they entered into the agreement because they had already reached an agreement with the City on the amount of compensation:”
Before initiating an eminent domain proceeding, a municipality must first attempt to purchase the property by agreement. When the municipality purchases the property by agreement, there is no condemnation or “taking” of the property by the power of eminent domain. In such a case, the person from whom the property was purchased has no justiciable claim for adequate compensation under the condemnation statutes or the takings clause.
Finally, Chief Justice Cayce warned that “characterizing the agreement as settling an eminent domain claim” ignores the “distinction between a municipality's power to purchase property by contract and to take property by eminent domain.” Id. at 803.
The evidence conclusively shows that the City was acting within a color of right under contract when it negotiated the agreement with the Singers to purchase their property and not under its eminent domain powers. The Singers were not forced to negotiate with the City. They could have refused to negotiate, insisted that the City take the property, if at all, by eminent domain, and asserted a claim for adequate compensation. Having agreed to convey their property to the City voluntarily, however, the Singers should not be allowed to now assert that the City has taken or attempted to take their property against their will by eminent domain.
To support the holding in Singer, ECOM cites San Antonio v. Grandjean, 91 Tex. 430, 41 S.W. 477 (1897), State v. Brewer, 141 Tex. 1, 169 S.W.2d 468 (1943), Howard v. County of Nolan, 319 S.W.2d 947 (Tex.Civ.App.-Eastland 1959, no writ), and Weingarten Realty Investors v. Albertson's, Inc., 66 F.Supp.2d 825 (S.D. Tex 1999). ECOM argues these cases clarify that a “conveyance in lieu of condemnation is the equivalent of a condemnation.”
In Grandjean, the city council declared that the Grandjeans' property should be condemned and the City condemned the property, naming only Ulysses Grandjean in the petition. See Grandjean, 41 S.W. at 477, 480. Marie Grandjean accepted one half of the proceeds, but later sued to recover the property. Id. at 477-78. The Texas Supreme Court held that Marie could not recover the property. Id. at 480. The Court noted that eminent domain is “essentially a right to take, and does not involve the necessity of any grant or conveyance on part of the owner, or of any judicial decree.” Id. at 478.
[S]ince the State has the inherent and paramount right to the property, when needed for public purposes, the determination by the proper authority that the necessity for the taking exists, the taking, and the adjustment with the owner of the question of compensation, however affected, completes the appropriation and devotes the property to the public use. The conditional paramount title of the government becomes absolute when the compensation is assessed or agreed upon and paid, or when its payment is waived. The doctrine of eminent domain implies that it is to be exercised against the will of the owner. It is his want of consent that renders its exercise necessary, and hence it is not consistent with the theory of the doctrine, that any conveyance from the owner or decree of court is essential to pass the title. The dissent of the owner to the taking is unavailing. His right under our Constitution, except as against the State itself, is to demand that before the property be taken, his compensation shall be paid. When he accepts as compensation a sum of money, whatever the amount and in whatever manner arrived at, his property, to the extent of the taking, is expropriated and appropriated to the use of the public. The question of compensation out of the way, he must yield to the inevitable. The State's right is to take or accept without a conveyance, and hence, when the compensation is adjusted, no conveyance is necessary.
Id. at 479; Dorsett v. State, 422 S.W.2d 828, 831 (Tex.Civ.App.-Waco 1967, writ ref'd n.r.e.).
In Brewer, the Brewers conveyed land to the State for construction of a highway and later sued for damage to their remaining property. See Brewer, 169 S.W.2d at 469, 471. The Texas Supreme Court explained that:
The conveyance of land for a public purpose will ordinarily vest in the grantee the same rights as though the land had been acquired by condemnation. The conveyance will be held to be a release of all damages which would be presumed to be included in the award of damages if the property had been condemned.
Id. at 471 (quoting 2 John Lewis, A Treatise on the Law of Eminent Domain in the United States § 474 (3d ed.1909)). The Brewers could not recover for damage to their property. See id. at 472-73.
In Howard, the Howards conveyed land to the State and Nolan County for “highway purposes” and later sued to set aside the deed. Howard, 319 S.W.2d at 948.
The power to acquire property for public use is inherent in the State without regard to consent of the owner, when adequate consideration is paid. However, when an owner consents to the taking and use of his property, such consent is a defense to an action to recover its possession. It is also held that whenever the owner accepts a sum of money as compensation for land for such a use, his property, to the extent of the taking, is expropriated to the use of the public.
Id. at 950 (internal citations omitted). The Howards could not set aside the deed, but were “limited to an action for damages for additional servitude on their land.” Id.
In Weingarten, Albertson's leased a space from Weingarten. See Weingarten, 66 F.Supp.2d at 834. The lease contained a provision regarding eminent domain. Id. at 835. TxDOT later sent correspondence entitled “Proposed Condemnation Proceedings.” Id. Weingarten conveyed the property to TxDOT. Id. The deed provided that the consideration “represents a settlement and compromise by all parties as to the value of the property ․ in order to avoid formal eminent domain proceedings ․” Id. at 843. Albertson's terminated the lease and later sued for breach of contract to recover a portion of the proceeds. See id. at 836-37. The Court noted that the “institution of formal condemnation proceedings was not required because Weingarten agreed to convey the property to TxDOT.” Id. at 843.
An agreement to convey property to a governmental authority has the same effect as a formal condemnation proceeding. “The conveyance of land for a public purpose will ordinarily vest in the grantee the same rights as though the land had been acquired by condemnation proceedings.” Indeed, “whenever the owner accepts a sum of money as compensation for land for such a use, his property, to the extent of the taking, is expropriated to the use of the public.”
Id. at 843 (internal citations omitted). The Court rejected Weingarten's argument that no taking occurred. See id. at 843-45.
These cases recognize that both a voluntary conveyance of property by a landowner to a governmental entity and a taking by eminent domain have the same result. See Grandjean, 41 S.W. at 479; see also Brewer, 169 S.W.2d at 471; Howard, 319 S.W.2d at 950; Weingarten, 66 F.Supp.2d at 843. As Chief Justice Cayce notes, there exists a distinction between a governmental entity's right to purchase property versus its right to take property. See Osborne v. Keith, 142 Tex. 262, 177 S.W.2d 198, 201 (1944); see also Weingarten, 66 F.Supp.2d at 842 (“Generally, in Texas, ‘the government compensates the owner before appropriating property, either by paying a mutually agreed price or by paying the value as determined in a statutory condemnation proceeding.’ ”); Tex. Prop.Code Ann. § 21.012 (Vernon Supp.2008); Tex. Local Gov.Code Ann. § 273.001 (Vernon 2005). Under either method, the entity has the same rights to the property. See Grandjean, 41 S.W. at 479; see also Brewer, 169 S.W.2d at 471; Weingarten, 66 F.Supp.2d at 843. Despite having the same result, the difference between the two methods of acquisition is that eminent domain is “exercised against the will of the owner,” while a purchase involves the owner's voluntary consent. Grandjean, 41 S.W. at 479. If the owner consents to a purchase, the process of eminent domain is unnecessary. See id. We agree with Chief Justice Cayce's conclusion that Singer ignores this important distinction.
Additionally, Singer ignores the fact that Lawson involved a pending lawsuit. The San Antonio Court recently declined to apply Lawson absent pending litigation:
Unlike Lawson, Gracia did not have a statutorily recognized claim pending in the trial court when he entered into an agreement with the District. The settlement agreement in this case was executed just as Gracia was instituting the administrative process that the State created for challenging the termination of teaching contracts. In short, Gracia settled a claim that, at that point in time, had no adjudicative value in our court system.
Donna Indep. Sch. Dist. v. Gracia, 286 S.W.3d 392, 395 (Tex.App.-Corpus Christi 2008, no pet.).3 In Porretto v. Patterson, 251 S.W.3d 701 (Tex.App.-Houston [1st Dist.] 2007, no pet.), the First Court cited Lawson as follows:
[A] governmental entity that agrees to settle a lawsuit from which it is not immune cannot claim immunity from suit for breach of the settlement agreement relating to that claim. The policy supporting this holding is that the government should not regain immunity it previously has waived by settling a case.
Porretto, 251 S.W.3d at 712 (“Because the GLO is not immune from the Porrettos' takings claim, under Lawson, the Porrettos' breach of contract claim can proceed, but only to the extent it arises out of the takings claim.”) (emphasis added) (internal citations omitted). We agree with this interpretation of Lawson.
In doing so, we note that this case does not involve a situation where the City was exposed to suit. See Singer, 232 S.W.3d at 802-03 (Cayce, C.J., dissenting). When the parties entered the easement agreement, no eminent domain proceeding was pending because no petition had been filed in the proper court. See Tex. Prop.Code Ann. § 21.012(a). ECOM, however, argues that the City threatened to file eminent domain proceedings and would have commenced proceedings had an agreement not been reached; thus, the agreement was made under a threat of eminent domain.4 This argument is inconsistent with our interpretation of Lawson. See Porretto, 251 S.W.3d at 712. ECOM could not assert a claim for adequate compensation until the City filed a petition to take the property by eminent domain. See Singer, 232 S.W.3d at 802 (Cayce, C.J., dissenting). Thus, ECOM had no claim to settle at the time the agreement was reached. Id. More importantly, the easement agreement itself contains no language suggesting an intent to settle an eminent domain claim. See Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex.2005) (“In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument.”); see also Weingarten, 66 F.Supp.2d at 843 (Deed contained language evidencing an intent to settle and avoid eminent domain proceedings).
ECOM suggests that to hold that the easement agreement did not settle an eminent domain claim renders the negotiation process a “mere charade to create immunity.” To say that the easement agreement settled an eminent domain claim, when it contains no language to this effect 5 and no eminent domain proceeding was pending, further blurs the distinction between an entity's power to purchase and its power to take. See Singer, 232 S.W.3d at 803 (Cayce, C.J., dissenting); see also Travis County v. Pelzel & Assocs., 77 S.W.3d 246, 248 (Tex.2002) (“[A] governmental entity does not waive immunity from suit simply by contracting with a private party.”).
Accordingly, we conclude that the City was “acting within a color of right under contract when it negotiated the agreement with [ECOM] to purchase [ ] property and not under its eminent domain powers.” Singer, 232 S.W.3d at 803 (Cayce, C.J., dissenting). Because the trial court erred by denying the City's plea to the jurisdiction as to ECOM's breach of contract claim, we sustain issue one.
The City argues, in issue two, that the trial court has no subject matter jurisdiction over ECOM's declaratory judgment claim because it is an improper attempt to enforce performance of the easement agreement and is so intertwined with ECOM's breach of contract claim as to be an attempt to recast its breach of contract claim as a declaratory judgment claim.
A person interested under a deed, will, written contract, or other writings constituting a contract or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract, or franchise may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status, or other legal relations thereunder. Tex. Civ. Prac. & Rem.Code Ann. § 37.004(a) (Vernon 2008). “[D]eclaratory-judgment suits against state officials seeking to establish a contract's validity, to enforce performance under a contract, or to impose contractual liabilities are suits against the State” for which immunity is not waived. Tex. Natural Res. Conservation Comm'n v. IT-Davy, 74 S.W.3d 849, 855-56 (Tex.2002). “[P]rivate parties cannot circumvent the State's sovereign immunity from suit by characterizing a suit for money damages, such as a contract dispute, as a declaratory-judgment claim.” Id. at 856.
ECOM's breach of contract claim is phrased, in pertinent part, as follows:
Through the Ordinance, Midlothian breached the settlement agreement/contract. Midlothian's refusal to allow ECOM and the future residents of the Master Tract access to Midlothian's sewer system without the purchase of water from Midlothian is a breach of the settlement/agreement contract, which has proximately caused damages to ECOM ․
ECOM's declaratory judgment claim states, in pertinent part:
As the dispute arises from the interpretation of a written instrument, ECOM requests the Court enter a declaratory judgment as to the meaning of the easement. Specifically, ECOM asks the Court to adjudicate the intent of the parties as reflected in the easement was to allow future residents of the Master Tract access to Midlothian's sewer system without necessity of purchasing water from Midlothian.
ECOM requested a similar finding if the trial court determined that the agreement was ambiguous and, alternatively, requested rescission in the event there was no meeting of the minds between the parties.
ECOM maintains that it simply seeks a declaration as to “whether the easement agreement in conjunction with the ordinance requires that ECOM purchase water from the City if it likewise wants to connect to the sewer system.” We disagree.
In Texas Parks & Wildlife Department v. Callaway, 971 S.W.2d 145 (Tex.App.-Austin 1998, no pet.), Callaway owned property on which the Texas Parks and Wildlife Department had an easement for a waterway. See Callaway, 971 S.W.2d at 147. Callaway sued the Department, alleging that the Department's opening of the waterway to the public resulted in a taking without compensation. Id. at 148. Callaway sought a declaration that the “Department has authority to keep the [waterway] closed to the public” and “must use this authority in complying with the easement's conditions and restrict public boating in the [waterway].” Id. at 151. The trial court denied the Department's plea to the jurisdiction. See id. at 147. The Austin Court held:
Although Callaway's request for declaratory judgment is not premised expressly on breach of contract, it is analogous to such a claim. In essence, Callaway seeks a declaration of his rights under the easement and an order enforcing those rights. There is no basis for the injunctive relief or the contractual damages that Callaway seeks unless he can establish that the easement constituted a contract, binding on the Department, which he can enforce. Whether the Department's decision that it was legally required to open the Pass was correct or incorrect, a suit to test it by seeking enforcement of contract rights is necessarily a suit against the state that cannot be maintained without legislative permission.
Id. at 152.
In Lehman Grain, Reed dedicated a sewer line easement to the City of San Antonio in exchange for the City's agreement that Reed could connect to the sewer line as long as “Reed ‘ma[de] a proper application’ and ‘enter[ed] into an agreement with the City for such sewer service.’ ” Lehman Grain, 2007 Tex.App. LEXIS 7515, at *1-2. Reed later sued the City when it denied sewer service. See id. at *2. Reed sought a declaration that “the City is obligated to comply with the terms of the Dedication Agreement by granting Lehman the privilege of connecting to the sewer line.” Id. at *10. The trial court denied the City's plea to the jurisdiction. See id. at *3-4. The San Antonio Court held that Reed's declaratory judgment claim sought to “enforce performance under the easement dedication contract.” Id. at *10.
In State v. Allodial Limited Partnership, 280 S.W.3d 922 (Tex.App.-Dallas 2009, no pet.), Allodial's successor sold a twelve acre tract to the State, but retained a two acre tract, which it later sold to Allodial. See Allodial, 280 S.W.3d at 924-25. Allodial later sued TxDOT. Id. at 925. Allodial sought a declaration that the “deed covenants required TxDOT to take no steps to deprive the 2.843 acre tract of on-grade access to the service road and that TxDOT's actions constituted a taking under article I, section 17 of the Texas Constitution.” Id. at 927. The trial court denied TxDOT's plea to the jurisdiction. See id. at 925. Citing Calloway, the Dallas Court held that Allodial's claim for breach of deed covenants was “analogous to breach of contract claims.” Id. at 928.
In light of these authorities, ECOM's declaratory judgment claim is analogous to a breach of contract claim. ECOM not only seeks a declaration of its rights under the easement agreement, but further attempts, in essence, to enforce performance of the agreement. See Callaway, 971 S.W.2d at 152; see also Allodial, 280 S.W.3d at 928; Lehman Grain, 2007 Tex.App. LEXIS 7515, at *10. Accordingly, the trial court erred by denying the City's plea to the jurisdiction as to ECOM's declaratory judgment claim.6 We sustain issue two.
In issue three, the City contends that the trial court lacks subject matter jurisdiction over ECOM's fraud and fraudulent inducement claims.
In the tort context, “[d]etermining a municipality's amenability to suit is a two-step inquiry:” (1) whether the function is governmental or proprietary; and (2) if governmental, whether immunity has been waived by statute. City of Houston v. Petroleum Traders Corp., 261 S.W.3d 350, 355 (Tex.App.-Houston [14th Dist.] 2008, no pet.) (quoting Ethio Express Shuttle Serv., Inc. v. City of Houston, 164 S.W.3d 751, 754 n.4 (Tex.App.Houston [14th Dist.] 2005, no pet.)).
ECOM argues that if the City was not exercising its eminent domain powers at the time of the easement agreement, then it was acting in a proprietary capacity for which it has no immunity. However, the Legislature has identified sanitary and storm sewers and water and sewer service as governmental functions. See Tex. Civ. Prac. & Rem.Code Ann. § 101.0215(a)(9), (32) (Vernon 2005). By entering a contract for the “purpose of installing, repairing, maintaining, removing, and operating a sanitary sewer line,” the City performed a governmental function. See id.; see also Lehman Grain, 2007 Tex.App. LEXIS 7515, at *8 (“City was acting in a governmental capacity when it contracted with Reed to acquire the easement for the installation of the sewer line.”).
Moreover, ECOM has not alleged (1) property damage, personal injury, or death proximately caused by the operation or use of a motor-driven vehicle or motor-driven equipment; (2) personal injury or death so caused by a condition or use of tangible personal or real property; or (3) a claim arising from a premises defect. Tex. Civ. Prac. & Rem.Code Ann. § 101.021 (Vernon 2005); Tex. Civ. Prac. & Rem.Code Ann. § 101.022 (Vernon Supp.2008). Additionally, the Tort Claims Act does not apply to claims “arising out of assault, battery, false imprisonment, or any other intentional tort.” Tex. Civ. Prac. & Rem.Code Ann. § 101.057(2) (Vernon 2005); see Sanders v. City of Grapevine, 218 S.W.3d 772, 779 (Tex.App.-Fort Worth 2007, pet. denied) (Trial court lacked jurisdiction over fraud claim because “fraud is an intentional tort.”).
In summary, the trial court erred by denying the City's plea to the jurisdiction as to ECOM's fraud and fraudulent inducement claims. We sustain issue three.
EXEMPLARY DAMAGES AND ATTORNEY'S FEES
In its fourth and fifth issues, the City argues that the trial court lacks subject matter jurisdiction over ECOM's claims for exemplary damages and attorney's fees.
Because the trial court has no subject matter jurisdiction to consider ECOM's breach of contract, declaratory judgment, fraud, or fraudulent inducement claims, ECOM cannot recover attorney's fees or exemplary damages associated with these claims. See Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 95 (Tex.1999) (“[A] prevailing party cannot recover attorneys fees from an opposing party unless permitted by statute or a contract between the parties.”); see also Twin City Fire Ins. Co. v. Davis, 904 S.W.2d 663, 665 (Tex.1995) (“[R]ecovery of punitive damages requires a finding of an independent tort with accompanying actual damages.”). We sustain issues four and five.
We reverse the trial court's judgment and render judgment dismissing ECOM's breach of contract, declaratory judgment, fraud, and fraudulent inducement claims.
Strip away another protection of landowners. Will they notice this time?
In a long string of events, the legislature and the courts have systematically carved away at one of the most fundamental of the rights given to the government-that private property may be taken only upon the payment of adequate/just compensation. To begin, the reader must understand that the Constitution, of both the United States and Texas, is a grant of certain powers inherently possessed by free people to the government. In those constitutions, the people granted to the government the authority to take private property for public use. But there was a fundamental protection or limitation embedded with that grant of authority. The protection is obviously designed to limit the use of this authority. The government could only exercise the authority to take property for a public use upon giving the owner adequate compensation for the property taken. The United States Constitution phrases it as follows:
No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness, against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
U.S. Const. amend. V (emphasis added).
The Texas Constitution states it thusly:
No person's property shall be taken, damaged or destroyed for or applied to public use without adequate compensation being made, unless by the consent of such person; and, when taken, except for the use of the State, such compensation shall be first made, or secured by a deposit of money; and no irrevocable or uncontrollable grant of special privileges or immunities, shall be made; but all privileges and franchises granted by the Legislature, or created under its authority shall be subject to the control thereof.
Tex. Const. art. I, § 17.
Over the years, the terms in these two provisions have been construed by the courts of the United States of America and Texas. Additionally the legislature has expanded the list of those entities that can take property and defined the procedures by which private property can be taken. The courts' construction and the legislative acts have almost always been in favor of expanding the authority of the government or other condemning authority's right to take the property or reduce the level of compensation that had to be paid to take the property. Notwithstanding this long and steady trend, citizens expressed both surprise and outrage when the United States Supreme Court held in Kelo v. City of New London that a “public use” could be to increase its tax revenue by taking underutilized property from a landowner for the purpose of selling or even donating it to a private entity for economic development purposes. See Kelo v. City of New London, 545 U.S. 469, 125 S.Ct. 2655, 162 L.Ed.2d 439 (2005). From a legal standpoint, this was not surprising.
For years there appears to have been a systematic erosion of the protection of landowners from their government. Hearing them first as a citizen, then as a lawyer, and now as a judge, stories abound that condemning authorities browbeat landowners into settlement agreements by threatening them with a condemnation suit. The stories generally continue as follows. The condemning authorities are quick to point out that the value of the property will be determined by citizens on the jury that understand that they will also be the persons having to pay for the property through their taxes or higher prices for commodities like gas or electricity. Fearing inadequate valuation through litigation, as well as to avoid the cost of litigation, a cost which is ignored in what the condemning authority or government must pay in compensation, the landowner settles. Sometimes the settlement agreement is not just for money. The agreement may involve any number of additional considerations such as right-of-way access by certain means or driveway entrances at certain locations, placement of specific improvements like curbs and gutters, sound barriers, and sidewalks or possibly the waiver of fees or taxes, or, as in this case, access to sewage facilities without a corresponding requirement to purchase water from the same entity.
Today the majority of this Court strips the landowner of the right to sue the governmental entity that made the settlement agreement, took title to the property under the threat of eminent domain proceedings, and then refused to fulfill its agreement to compensate the landowner. I would not. I respectfully dissent.
The Literary Map
We will start with understanding the difference between Kelo v. City of New London and this case. Then I will mention the holding in City of Carrollton v. Singer. City of Carrollton v. Singer, 232 S.W.3d 790 (Tex.App.-Fort Worth 2007, pet. denied). But the reader must examine that case, both majority and dissent, because in the case we are deciding, this Court discusses it at length and decides to go with the dissent rather than the majority. I will then comment upon some of the practical problems and implications of the Court's analysis and holding as it applies to the facts of this case. Finally, I will mention a simple solution that should be utilized.
Kelo v. City of New London Distinguished from This Case
The Kelo case involved defining a “public use.” Kelo was about taking property from one citizen so that it can be sold or given to another citizen who will improve the property and thus increase the taxable value of the property for the benefit of the government by providing increased taxes.
Whereas this case, at its most fundamental level, is about whether a landowner can sue the government for breach of the settlement agreement for refusing to pay for what is taken. And the reader must recognize that payment can be in many forms other than money. Likewise, what is taken, or damaged by the taking, can be more than just title to real property.
In this case, the City of Midlothian was installing a wastewater collection system otherwise known as a sewage line. They determined they needed to place the line on property owned by ECOM. Rather than suffer the uncertainties of a jury determination of value of the property rights taken and damage to the remainder of the tract if the City condemned an easement across it, the parties negotiated an agreement that involved benefits other than the payment of money.
The agreement provided that ECOM would convey an easement to the City on which the sewage line could be constructed. As compensation for the easement, ECOM, who is a developer of property, would be allowed to connect to the sewage line through connections placed in the line, and thereby discharge the sewage from a defined area of property ECOM was developing, which included the area where the easement was to be located. ECOM had its own source of potable water for the persons buying property in its development. The persons in the area developed by ECOM would thus be allowed to discharge the sewage into the system at no cost and without the corresponding obligation incurred by other users of the sewage system to purchase their water from the City.
The City built the sewage line on the easement conveyed to it by ECOM and, as agreed, the constructed sewage line had stub-outs or points at which the purchasers in ECOM's development were to connect. But then the City passed an ordinance that provided that no user could discharge sewage into the City system unless they also purchased water from the City. The effect of the ordinance was to destroy the benefit to ECOM of the agreement under which it had conveyed a property right, the easement, in which the sewage line was constructed. No one contends that the use of the property for the construction of a sewage line is not a public use. The issue in this case is whether the City can be sued for breach of the agreement.
So the issue in this case is substantially different than the issue in Kelo. The Court holds that the City cannot be sued for breach of the agreement. This holding is based on the determination that formal condemnation proceedings had not begun and is consistent with the dissenting opinion's analysis in City of Carrolton v. Singer, 232 S.W.3d 790 (Tex.App.-Fort Worth 2007, pet. denied).
City of Carrollton v . Singer
We now must move to the case relied upon by ECOM as authority for its ability to sue the City.
In City of Carrolton v. Singer, Singer asserted that the City of Carrolton had breached an agreement whereby Singer had agreed to convey property to the City and the City had agreed to make certain improvements to Singer's remaining property.
The issue in Singer was the same as the issue before this Court: Could Singer sue the City? The court in Singer held the City could be sued for breach of an agreement if the agreement was a settlement of an eminent domain proceeding. The facts in Singer are so similar to the facts in this case that the City of Midlothian concedes that if the holding in Singer is applied, the City cannot prevail. In what must be mental gymnastics for the City's counsel, which is the same firm that represented Singer and prevailed, the City argues that Singer was wrongly decided and that in this proceeding we should adopt the dissenting opinion from Singer. The Court does, I would not.
The legal positions and arguments are fully discussed in Singer. They apply equally to this proceeding. I cannot add anything of real value to that analysis so I will not attempt to do so.
In both cases, the City agreed with the landowner that the City would do certain things besides the simple payment of money to obtain the property they needed. The litigation in both suits arose upon the alleged breach of the agreement. I would hold, as the court in Singer did, that the City can be sued by the landowner for breach of the agreement made under the threat of taking the property by eminent domain.
Practical Problems and Implementation
The most fundamental problem of the Court's holding is that ECOM's suit for inverse condemnation remains, but the questions will be what did the City take, and how will it be valued? Did the City take the easement without payment so that now the City must pay for it? Did they take it by adverse entry and construction of the sewer line or by a municipal ordinance - also known as a regulatory taking? Or did the City take ECOM's contractual rights, and how will those rights be valued? These and other issues, which are not before us in this interlocutory appeal, will plague the parties throughout the remainder of the proceeding.
Additionally, the dissent in Singer and the Court in this case seem to be concerned about the need for clarity. The Court states: “To say that the easement agreement settled an eminent domain claim, when it contains no language to this effect and no eminent domain proceeding was pending, further blurs the distinction between an entity's power to purchase and its power to take.” Maj. Op., pg. 12 (citing Chief Justice Cayce's dissent in Singer ).
It is precisely because the line is blurry between the right to purchase and the right to take that we should affirm the trial court's judgment to not dismiss ECOM's suit. The result in this appeal will have the adverse consequences of:
1. encouraging the parties to not agree and force litigation; and
2. preventing workouts and non-monetary modifications of projects that would otherwise benefit both the condemning authority and the landowner.
And, finally, to the extent the agreement remains wholly executory, I have no problem with the analysis of the dissent in Singer. But once the City takes possession of the property, or accepts title to it, the City has then exercised the threat of taking the property by eminent domain.
A Simple Solution
In the winner-takes-all split between the holding in Singer and the holding in this proceeding, I believe the answer is in the middle. The issue is actually a question of fact: Was the agreement upon which the landowner sues made under the threat of having property taken by eminent domain? If the evidence on this question is not conclusive, there will be a fact question that must be resolved. And there is already a reasonably well developed body of law on the question of whether property is taken under the threat of eminent domain. This body of law has grown up out of the tax code because if property is taken under the threat of eminent domain, the gain from the sale/conveyance/transfer of the property may receive favorable tax treatment. See I.R.C. §§ 1231 and 1232 (2009).
Because I believe ECOM sufficiently pleaded allegations asserting that the agreement was made under the threat of eminent domain, and the City of Midlothian did not conclusively negate that fact at the hearing on the plea to the jurisdiction, I would hold that ECOM may sue the City of Midlothian for breach of the agreement. Alternatively, I would hold that whether the agreement was made under the threat of taking the easement by eminent domain is an unresolved fact issue which must be decided to determine the trial court's jurisdiction. Accordingly, I cannot join the judgment of the Court in this proceeding.1
FN1. ECOM also alleged a takings claim under article I, sections 17 and 19 of the Texas Constitution. See Tex. Const.. art. I, §§ 17, 19. These claims were not part of the City's partial plea to the jurisdiction and are not before us.. FN1. ECOM also alleged a takings claim under article I, sections 17 and 19 of the Texas Constitution. See Tex. Const.. art. I, §§ 17, 19. These claims were not part of the City's partial plea to the jurisdiction and are not before us.
FN2. We note that Lawson is a plurality opinion. A plurality opinion has little precedential value, if any. See Univ. of Tex. Med. Branch v. York, 871 S.W.2d 175, 176 (Tex.1994).. FN2. We note that Lawson is a plurality opinion. A plurality opinion has little precedential value, if any. See Univ. of Tex. Med. Branch v. York, 871 S.W.2d 175, 176 (Tex.1994).
FN3. ECOM distinguishes Gracia on grounds that Gracia had an administrative remedy. See Donna Indep. Sch. Dist. v. Gracia, 286 S.W.3d 392, 395 (Tex.App.-Corpus Christi 2008, no pet.) (“The Texas Supreme Court ․ has forestalled the waiver-by-conduct exception to sovereign immunity in situations where an administrative remedy is available.”). Despite this factual distinction, the San Antonio Court's reasoning that Lawson is inapplicable absent a pending lawsuit is still relevant to our analysis.. FN3. ECOM distinguishes Gracia on grounds that Gracia had an administrative remedy. See Donna Indep. Sch. Dist. v. Gracia, 286 S.W.3d 392, 395 (Tex.App.-Corpus Christi 2008, no pet.) (“The Texas Supreme Court ․ has forestalled the waiver-by-conduct exception to sovereign immunity in situations where an administrative remedy is available.”). Despite this factual distinction, the San Antonio Court's reasoning that Lawson is inapplicable absent a pending lawsuit is still relevant to our analysis.
FN4. Although the record lacks evidence suggesting that the City actually did threaten to commence eminent domain proceedings, ECOM's first amended original petition states: “representatives of Midlothian indicated to ECOM the city's need for a sewer line across a portion of the Master Tract and that it would acquire the land by eminent domain if an agreement between Midlothian and ECOM could not be reached.” We must take ECOM's pleadings as true. See Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 228 (Tex.2004).. FN4. Although the record lacks evidence suggesting that the City actually did threaten to commence eminent domain proceedings, ECOM's first amended original petition states: “representatives of Midlothian indicated to ECOM the city's need for a sewer line across a portion of the Master Tract and that it would acquire the land by eminent domain if an agreement between Midlothian and ECOM could not be reached.” We must take ECOM's pleadings as true. See Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 228 (Tex.2004).
FN5. ECOM maintains that its pleadings establish that the easement agreement is actually a settlement of an eminent domain claim. While we must take ECOM's pleadings as true, “we are not bound by legal conclusions nor by any illogical factual conclusions drawn from the facts pled.” Aledo Indep. Sch. Dist. v. Choctaw Props., 17 S.W.3d 260, 262 (Tex.App.-Waco 2000, no pet.), overruled on other grounds by Thomas v. Long, 207 S.W.3d 334 (Tex.2006).. FN5. ECOM maintains that its pleadings establish that the easement agreement is actually a settlement of an eminent domain claim. While we must take ECOM's pleadings as true, “we are not bound by legal conclusions nor by any illogical factual conclusions drawn from the facts pled.” Aledo Indep. Sch. Dist. v. Choctaw Props., 17 S.W.3d 260, 262 (Tex.App.-Waco 2000, no pet.), overruled on other grounds by Thomas v. Long, 207 S.W.3d 334 (Tex.2006).
FN6. ECOM cites cases in which a governmental entity was not immune from declaratory judgment actions on takings claims. See Koch v. Tex. Gen. Land Office, 273 S.W.3d 451, 457-60 (Tex.App.-Austin 2008, pet. filed); see also State v. BP Am. Prod. Co., 290 S.W.3d 345, 365-66 (Tex.App.-Austin 2009, pet. filed). The City's partial plea to the jurisdiction does not challenge ECOM's takings claim; thus, the issue is not before us.. FN6. ECOM cites cases in which a governmental entity was not immune from declaratory judgment actions on takings claims. See Koch v. Tex. Gen. Land Office, 273 S.W.3d 451, 457-60 (Tex.App.-Austin 2008, pet. filed); see also State v. BP Am. Prod. Co., 290 S.W.3d 345, 365-66 (Tex.App.-Austin 2009, pet. filed). The City's partial plea to the jurisdiction does not challenge ECOM's takings claim; thus, the issue is not before us.
FN1. By its declaratory judgment claim, ECOM seeks a determination of its rights under the agreement and prospective relief against the City. This also seems to bring it within the trial court's jurisdiction. See City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex.2009). Because the fraud and fraudulent inducement claims are, as I understand, alternative to the foregoing, I would not reach those, but do not find error in the Court's analysis. Either the breach of contract action or the declaratory judgment action may support attorney fees, but no claim presented would support exemplary damages.. FN1. By its declaratory judgment claim, ECOM seeks a determination of its rights under the agreement and prospective relief against the City. This also seems to bring it within the trial court's jurisdiction. See City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex.2009). Because the fraud and fraudulent inducement claims are, as I understand, alternative to the foregoing, I would not reach those, but do not find error in the Court's analysis. Either the breach of contract action or the declaratory judgment action may support attorney fees, but no claim presented would support exemplary damages.
(Chief Justice Gray dissenting)