City of New Braunfels, Texas And YC Partners Ltd., D/B/A Yantis Company v. Carowest Land, Ltd., 03-17-00696-CV

Background

Carowest (landowner) donated land and entered a 2009 Letter Agreement with the City of New Braunfels modifying a drainage channel; the Letter Agreement contained an indemnity provision for Yantis’ contractor claims tied to the modification.
Yantis (general contractor) executed a Change Order in October 2009 and a separate Waiver in May 2010 that released delay claims related to the Carowest portion of the South Tributary Project; nevertheless Yantis later asserted delay claims to the City.
The City repeatedly demanded Carowest handle/indemnify Yantis’s delay claim; Carowest denied liability and filed declaratory-judgment claims (the “South Tributary Claims”) seeking (1) that Yantis has no right to delay damages and (2) that the Change Order/Waiver released any such claims.
The City filed counterclaims alleging Carowest breached the Letter Agreement (including failure to indemnify) and sought damages; the City and Yantis later moved to dismiss Carowest’s declaratory claims on sovereign-immunity and justiciability grounds.
The trial court denied pleas to the jurisdiction by both the City and Yantis; this brief (Appellee) argues that denial should be affirmed because (a) the City’s counterclaims remove immunity for related defensive claims and (b) Chapter 271 of the Local Government Code waives immunity for contract disputes arising from covered contracts.

Issues

Issue	Plaintiff's Argument (Carowest)	Defendant's Argument (City / Yantis)	Held
1. Does the City’s assertion of affirmative counterclaims defeat sovereign immunity for Carowest’s South Tributary declaratory claims?	City brought affirmative breach-of-contract counterclaims; thus immunity is displaced and Carowest’s defensive declaratory claims are germane and justiciable (Reata/Albert).	City contends declaratory relief cannot operate as an offset and immunity remains.	Court denied plea: City’s counterclaims put City in litigation and defensive declaratory claims are germane; immunity does not bar them.
2. Does Local Gov’t Code §271.152 waive immunity for Carowest’s declaratory claims arising from the Letter Agreement?	§271.152 waives immunity to adjudicate contract breaches; UDJA is procedural so declaratory relief concerning a contract subject to §271.152 is within the waiver.	City argues §271.152 does not expressly waive immunity for declaratory relief and IT‑Davy/Zachry limit such relief.	Court (per Appellee brief) concludes alternatively that §271.152 covers declaratory adjudication of contract rights; prior precedent (Ben Bolt) supports waiver for contract-based declaratory claims.
3. Are Carowest’s declaratory claims moot or otherwise non-justiciable given releases and later events?	The declarations still matter to past compliance and to the City’s pending breach claim; even if declaratory relief were moot, attorneys’ fees claims keep controversy live.	City argues releases (Change Order / Rule 11) render the delay claim and indemnity issues moot.	Court previously rejected mootness as to the South Tributary Claims (Carowest I); Appellee urges denial of plea because declarations affect past obligations and attorneys’ fees remain justiciable.
4. Can Carowest obtain declaratory relief against Yantis absent the City as a party; is the City indispensable?	Declarations sought against Yantis only adjudicate whether Yantis has any delay claim and would not void municipal contracts or prejudice the City; City is not indispensable and controversy is ripe.	Yantis contends City is indispensable and that adjudication would circumvent municipal immunity and relate to North Tributary contract issues.	Court denied plea: South Tributary claims are distinct from North Tributary issues, City is not indispensable, and the dispute over indemnity/declarations is justiciable.

Key Cases Cited

Reata Construction Corp. v. City of Dallas, 197 S.W.3d 371 (Tex. 2006) (governmental entity’s affirmative monetary claims permit related offsetting claims to proceed)
City of Dallas v. Albert, 354 S.W.3d 368 (Tex. 2011) (government cannot reinstate immunity after asserting counterclaims; participation binds entity to litigation)
Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions Prop./Cas. Joint Self-Ins. Fund, 212 S.W.3d 320 (Tex. 2006) (Chapter 271 waiver covers contract disputes; declaratory action allowed where underlying subject matter is within statutory waiver)
Zachry Construction Corp. v. Port of Houston Authority, 449 S.W.3d 98 (Tex. 2014) (construing limits of Chapter 271 damages and waiver; did not address declaratory relief directly)
Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440 (Tex. 1993) (UDJA is procedural; declaratory relief does not expand subject-matter jurisdiction)
Allstate Ins. Co. v. Hallman, 159 S.W.3d 640 (Tex. 2005) (attorneys’ fees can preserve a live controversy even when the underlying claim is moot)
Camarena v. Texas Employment Comm’n, 754 S.W.2d 149 (Tex. 1988) (attorneys’ fees issue can prevent mootness of a declaratory action)