AMERICAN PRECISION AMMUNITION, L.L.C, also known as PRECISION AMMUNITION; MATTHEW CAMPBELL; LAUREN CAMPBELL, Plaintiffs—Appellants, versus CITY OF MINERAL WELLS; THE MINERAL WELLS INDUSTRIAL FOUNDATION, INCORPORATED; THE MINERAL WELLS/PALO PINTO AREA GROWTH COUNCIL; STEPHEN L. BUTCHER; S.L.B., INCORPORATED, Defendants—Appellees.
No. 21-10558
United States Court of Appeals for the Fifth Circuit
January 12, 2024
Before STEWART, DENNIS, and WILSON, Circuit Judges. James L. Dennis, Circuit Judge:
This case serves as a strong reminder of the consequences of entering into a contract that obligates a party to perform an action forbidden by law. The City of Wells in Texas (“City“) and American Precision Ammunition, L.L.C. (“APA“) entered into a Tax Abatement Agreement (“Agreement“) in which the City promised to “gift” APA $150,000 and provide APA ten years of tax abatements. The City ultimately terminated the Agreement, claiming that the $150,000 gift was illegal under the Texas Constitution. APA sued the City and, relevant to this appeal, brought claims for breach of contract, a violation of the Texas
I. Factual and Procedural History
APA is in the business of designing and fabricating munitions, munitions components, and munitions equipment. On July 5, 2016, APA entered into the Agreement with the City. The Agreement provided APA with financial incentives as part of the City‘s efforts to entice APA to relocate to the City. For example, under the Agreement, APA agreed to spend at least $250,000 on improvements to its new site in the City, and the City agreed to “gift” APA $150,000 towards this total. The Agreement also contained provisions detailing the number of employees that APA would employ, tax abatements that APA would receive, and inspections that the City would perform.
APA alleges its relationship with the City began to sour in 2017, about a year after the parties entered into the Agreement. On July 17, 2018, the City, through its council, voted to revoke the Agreement without paying the $150,000 “gift” because of the City‘s claim that the gift was illegal under Texas‘s Constitution. This lawsuit followed.
In its original complaint, APA brought claims against the City for breach of contract, a violation of the TOMA, violation of federal due process protections, and violation of the due course of law provision of the Texas Constitution. The City filed its first motion to dismiss, which the district court granted, thereby dismissing the breach of contract,
Over a month later, APA filed a motion for reconsideration of the district court‘s decision to dismiss the breach of contract claim. In the alternative, APA moved for leave of court to file a second amended complaint. The district court denied APA‘s motion for reconsideration and motion for leave to file a second amended complaint. The district court also struck the portions of the first amended complaint that related to the three claims—breach of contract, federal due process, and state law due course of law claims—already dismissed with prejudice. The only claim remaining in APA‘s first amended complaint relevant to the instant appeal was APA‘s TOMA claim. The City filed a second motion to dismiss the TOMA claim—this time as moot. The district court granted the second motion pursuant to
II. Standards of Review
We review de novo whether a complaint pleads enough facts to state a claim to relief that is plausible on its face
We also review de novo the district court‘s dismissal of a moot claim for lack of subject matter jurisdiction. See Payne v. Progressive Fin. Servs., Inc., 748 F.3d 605, 607 (5th Cir. 2014).
Finally, we review the denial of both a motion for reconsideration and a motion to alter or amend a final judgment for abuse of discretion. See Ryan v. Phillips 66, 838 F. App‘x 832, 834 (5th Cir. 2020) (citation omitted); McClendon v. United States, 892 F.3d 775, 781 (5th Cir. 2018) (citation omitted). Under this standard, the court‘s decision need only be reasonable.
III. Discussion
The district court dismissed APA‘s breach of contract, TOMA, federal due process, and state due course of law claims. We review each claim in turn.
A.
APA first argues the district court erred when it found the Agreement illegal and, therefore, unenforceable under Texas law. As explained below, the district court did not err because the illegality of the Agreement is clear from the face of the complaint and the contract attached to it.2
“Under Texas law,3 a contract is illegal, and thus void, if the contract obligates
from authorizing any [city] . . . to grant public money[,]” which the Supreme Court of Texas has stated “means that the Legislature cannot require gratuitous payments to individuals, associations, or corporations” and cannot “authorize a county, city, town or political subdivision of the State to lend credit or grant public funds.” Tex. Mun. League Intergovernmental Risk Pool v. Tex. Workers’ Comp. Comm‘n, 74 S.W.3d 377, 380, 383-84 (Tex. 2002) (citations omitted) (emphasis in original); see also Edgewood Indep. Sch. Dist. v. Meno, 917 S.W.2d 717, 740 (Tex. 1995), as modified (Feb. 16, 1995). However, “[a] [city]‘s paying public money is not ‘gratuitous’ if the [city] receives return consideration.” Tex. Mun. League Intergovernmental Risk Pool, 74 S.W.3d at 383 (citing Key v. Comm‘rs Ct. of Marion Cnty., 727 S.W.2d 667, 668 (Tex. App.—Texarkana 1987, no writ)).
In its motion to dismiss, the City argued that it could not provide APA with the $150,000 because, under
Under our de novo review, we find that the City‘s contractual obligation to “gift” APA $150,000 constitutes a gratuitous payment of public money, meaning
First, consider the plain meaning of the terms of the Agreement. The Agreement states that APA “shall make a Capital Investment of no less than $200,000 in the aggregate for Required Improvements including $150,000.00 Gift from City to [APA] for infrastructure for Land to accommodate its manufacturing business” and slates completion of the improvements in part as “15 months from the date city gifts funds to [APA].” The complaint also repeatedly refers to the transfer as a “gift.” Black‘s Law Dictionary defines “gift” as “[t]he voluntary transfer of property to another without compensation.” Gift, BLACK‘S LAW DICTIONARY (11th ed. 2019) (emphasis added). “[W]e must presume parties intend what the words of their contract say and interpret contract language according to its plain, ordinary, and generally accepted meaning unless the instrument directs otherwise.” Pathfinder Oil & Gas, Inc. v. Great W. Drilling, Ltd., 574 S.W.3d 882, 888 (Tex. 2019) (internal quotations and citations omitted); see also Birdwell v. Birdwell, 819 S.W.2d 223, 228 (Tex. App.—Fort Worth 1991, writ denied) (“[T]he alimony provision . . . does NOT state that [the alimony provision] is wholly gratuitous.“) (emphasis added). The Agreement‘s later reference to the $150,000 as a “grant” does not negate the plain meaning of the word “gift.” Looking to Black‘s Law Dictionary again, “grant” is “[a]n agreement that creates a right or interest in favor of a person or that effects a transfer of a right or interest from one person to another” or “[t]he formal transfer of real property.” Grant, BLACK‘S LAW DICTIONARY (11th ed. 2019). This definition of “grant” aligns with the gratuitous nature of a “gift.”
Second, the Agreement does not indicate any consideration in exchange for the $150,000 gift and therefore, on the Agreement‘s face, there is no “return benefit.” The Agreement specifies that “[i]n return for [APA]‘s construction of the Required Improvements” and APA operating its business on the land, the City would provide ten years of tax abatements. Therefore, under the plain text of the Agreement, the tax abatements—not the $150,000 gift—are the return benefit that APA was set to receive for relocating to the City. That the Agreement as a whole is “consistent with encouraging development of the Zone and generating economic development and increased employment opportunities in the City”4 does not undermine the gratuitous nature of a “gift” nor does it undermine the text of the Agreement, which specifies that the tax abatements
For all of these reasons, the district court was correct to dismiss APA‘s breach of contract claim, and the district court did not abuse its discretion in denying APA‘s motion for reconsideration and motion to amend judgment, because the Agreement is unambiguous that the $150,000 transfer was intended to be gratuitous. The pleadings ““reveal beyond doubt that [APA] can prove no set of facts’ that would overcome the [affirmative] defense [of illegality] or otherwise entitle [it] to relief.” Bell, 27 F.4th at 320 (quoting Garrett, 938 F.2d at 594).6
B.
APA also alleges that the City violated the TOMA when it voted to terminate the Agreement. APA alleges the termination violated the TOMA because the agenda notice for the city council‘s meeting did not sufficiently apprise the public that the Agreement would be discussed or that any action might be taken with regard to it. Distilled to its essence, by way of the TOMA claim, APA wanted the district court to reinstate the Agreement. Because the district court determined that the Agreement was illegal, the court dismissed the TOMA claim as moot because there was no “agreement” to reinstate. APA agrees on appeal that its TOMA claim is predicated on a finding that the Agreement was valid and enforceable. Because we agree with the district court that the Agreement is unenforceable, we affirm the district court‘s
APA‘s final argument is that the district court erred by dismissing a claim under
“To state a Fourteenth Amendment due process claim under
With respect to APA‘s argument that the notice-and-cure provision of the Agreement created a property interest in the $150,000 gift, as explained above, the portion of the Agreement gifting APA $150,000 is illegal under the Texas Constitution as a gift of public funds. “A promise for breach of which the law neither gives a remedy nor otherwise recognizes a duty of performance by the promisor is often called a void contract,” and ”such a promise is not a contract at all.” RESTATEMENT (SECOND) OF CONTRACTS § 7 cmt. a (Am. L. Inst. 1981) (emphasis added); see also Watts v. Pilgrim‘s Pride Corp., No. 12-04-00082-CV, 2005 WL 2404111, at *3 (Tex. App.—Tyler Sept. 30, 2005, no pet.) (““A void contract is no contract at all; it binds no one and is a mere nullity.“). Therefore, to the extent APA‘s due process claims are based on a protected property interest in the $150,000 gift, the claims fail.
Turning to APA‘s argument that the notice-and-cure provision of the Agreement created a property interest in the tax abatements, even assuming arguendo that the “gift” provision can be severed from the Agreement and that APA has a property interest in the tax abatements,7 APA‘s due process and due course of law claims still fail. The purpose of due process is to “grant[] the aggrieved party the opportunity to present his case and have its merits fairly judged.” Lujan v. G & G Fire Sprinklers, Inc., 532 U.S. 189, 195 (2001) (quoting Logan v. Zimmerman Brush Co., 455 U.S. 422, 433 (1982) (internal quotation marks omitted)). The Supreme Court has explained that where “an ordinary breach-of-contract suit” can fully protect the interest, there is no due process claim. Id. at 196. Because “[Texas] law affords [APA] sufficient opportunity to pursue that claim in state court, we conclude that the [City‘s termination of the Agreement] does not deprive [APA] of its claim for [tax abatements] without due process of law.” See id. at 195.
IV. Conclusion
We AFFIRM the judgment of the district court.
CORY T. WILSON, Circuit Judge, dissenting:
The majority concludes that the City‘s “gift” to APA was improper for lack of consideration. With greatest respect for my esteemed colleagues, I read the underlying Agreement differently, and therefore dissent.
The majority correctly points out that the Texas Constitution prohibits a city‘s “gratuitous” payments to corporations. See
The majority does not analyze the first two requirements. See ante at 9 n.5. I briefly address each before turning to the third.
I.
It seems clear that the Agreement‘s “predominant purpose . . . accomplish[ed] a public purpose.” Id. The Agreement states that the City approved it as a means toward further “Commercial/Industrial Development[.]” The Agreement sets forth obligations and benefits for both parties. APA was required, inter alia, (1) to make a $200,000 combined capital investment to construct “Required Improvements“—that is, construction of a “laboratory and/or storage with infrastructure“; (2) to complete the Required Improvements within 15 months; and (3) to employ 50 people within five years of relocating and completing the Required Improvements (with intermediate employment level goals before that). The City was obligated (1) to “gift” APA “$150,000 . . . for infrastructure” as part of APA‘s “combined capital investment of at least $200,000.00” in the Required Improvements; and (2) to “grant to [APA] annual property tax abatements . . . for a period of ten . . . years[.]” These provisions—especially read in conjunction—show that the Agreement‘s “predominant purpose” would “accomplish a public purpose.” See id. at 385.
II.
The Agreement also satisfies the second requirement by allowing the City to retain public control over the funds to ensure that the public purpose is accomplished and to protect the public‘s investment. Specific to the “gift” at issue, the Agreement preserves the City‘s ultimate control over how the $150,000 was to be spent by cabining the money‘s uses to “infrastructure, access/egress, and utilities” related to APA‘s Required Improvements. The Agreement also allows the City to inspect APA‘s property “at any time . . . throughout the [Agreement‘s] Term and the year following the Completion Date,” and to “audit the financial and business records” of APA “that relate to [APA‘s] operations . . . at any time during the [Agreement‘s
III.
Irrespective of the foregoing, the majority concludes that the Agreement‘s lack of consideration is “fatal to APA‘s lawsuit.” Ante at 6. The majority holds “that the City‘s $150,000 payment was intended to be a gratuitous transfer” for two reasons: (A) the Agreement calls the $150,000 payment a “gift,” and (B) the Agreement indicates no “consideration in exchange for the $150,000 gift[.]” Though I understand the straightforward logic of the holding, I do not read the Agreement to confer an illegal $150,000 gratuitous transfer; instead, the payment was integral to the City‘s inducing APA to develop the site at issue, relocate there, and employ City residents. In other words, a classic economic development deal.1
A.
When interpreting a written contract, the plain language controls. In re Whataburger Restaurants LLC, 645 S.W.3d 188, 194 (Tex. 2022). But
“words must be construed in the context in which they are used[.]” Id. (citation and internal quotation marks omitted). Courts must “examine and consider the entire writing in order to give effect to all the provisions of the contract so that none will be rendered meaningless.” Id. (citation omitted). Doing so in this case makes clear that the payment at issue is not actually “gratuitous” and thus does not traverse
True enough, Section 2 of the Agreement states that “[APA] shall make a Capital Investment of no less than $200,000.00 in the aggregate for Required Improvements including $150,000.00 Gift from [the City] to [APA] for infrastructure for Land to accommodate its manufacturing business.” But Section 4 of the Agreement, to which the majority alludes in passing, if at all,2 provides additional detail. That section refers to the $150,000 payment as a “Grant” and specifies that the funds are “for infrastructure, access/egress, and utilities[.]” Whatever the import of the differing monikers of gift/grant, it is clear that the $150,000 payment was to come with significant strings attached, i.e., mutual promises from APA: Use of those funds was restricted to installing utilities and
no qualms—could be effectuated. Reading Sections 2 and 4 of the Agreement together, the City effectively outsourced to APA site preparation required for the facility‘s integration into, inter alia, City services like utilities. And the $150,000 gift/grant was paired with the requirement that APA add a minimum of $50,000 of its own funds for infrastructure installation. Thus, the payment was not a mere gratuity to APA; the “gift” came with an expectation of significant return benefit to the City, via performance of specified obligations by APA.3
B.
The majority also concludes that the $150,000 gift/grant lacks any return consideration from APA—demonstrating that it is an impermissible gratuity. See ante at 8–9. But that conclusion requires us to decouple the $150,000 payment from APA‘s construction of the Required Improvements, its required $50,000 minimum matching investment, the Agreement‘s employment benchmarks, and the tax abatements. The Agreement does not support such a reading; instead, it plainly links the $150,000 gift/grant and the tax abatements as parts of a package by which the City sought to entice APA‘s relocation to Mineral Wells.
Examining the Agreement in toto bears this out. APA only became eligible for the tax abatements if three things occurred: (1) timely completion of the Required Improvements, (2) “use of the [l]and” in accordance with the Agreement, and (3) APA‘s remaining “in compliance with” the Agreement. While the City‘s agreement to provide tax abatements was thus partly “[i]n return for [APA]‘s construction of the Required Improvements,” the Agreement makes clear that the $150,000 gift/grant was likewise an integral part of the deal, as it facilitated construction of the “Required Improvements.” Put differently, the gift/grant was as much part of the consideration the City offered APA to make this “Commercial/Industrial Development Project” happen as the tax abatements were. The court should not invalidate the Agreement by dissecting interrelated requirements that compose a single, larger deal.
Two basic principles of contract law support this view. First, courts generally do not weigh the sufficiency of consideration. Parker v. Dodge, 98 S.W.3d 297, 301 (Tex. App.—Houston [1st Dist.] 2003, no pet.) (“A court of law normally will not inquire into the adequacy of consideration supporting a contract.“) (citation omitted). The majority runs afoul of this principle by examining the Agreement‘s provisions in isolation, weighing its terms with promise-by-promise granularity to hold that only the tax abatements are supported by consideration. See ante at 9 (“[T]he tax abatements are what APA was to receive in exchange for relocating.“).
Second, it is well-settled that a single consideration is sufficient to support multiple promises bargained for in an agreement. Birdwell v. Birdwell, 819 S.W.2d 223, 228 (Tex. App.—Fort Worth 1991, writ denied); RESTATEMENT (SECOND) OF CONTRACTS § 80 cmt. a (1981) (“A single
If the $150,000 “gift” from the City to APA stood alone, then clearly it would be improper, and I would readily join my esteemed colleagues. But because it does not, I would hold the parties to their bargain—to include the City‘s gift/grant to APA to defray costs of site development. Cf. Texas Municipal League, 74 S.W.3d at 383–84. I therefore respectfully dissent.4