REPUBLIC POWER PARTNERS, L.P., Appellant v. The CITY OF LUBBOCK, Appellee.
No. 07-12-00438-CV.
Court of Appeals of Texas, Amarillo.
Feb. 5, 2014.
Rick Thompson, Dallas, Harvey G. Joseph, Ryan D. Clinton, Deborah G. Hankinson, Dallas, John L. Hubble, Dallas, for Appellant. Thomas S. Leatherbury, Dallas, Adrian J. Rodriguez, Dallas, Matthew R. Stimmel, Dallas, for Appellee. Before CAMPBELL and HANCOCK and PIRTLE, JJ.
PATRICK A. PIRTLE, Justice.
This is an accelerated appeal wherein Appellant, Republic Power Partners, L.P., challenges the trial court‘s order granting the plea to the jurisdiction filed by Appellee, the City of Lubbock, in a suit filed by Republic Power claiming breach of contract and brеach of warranties by the City of Lubbock and West Texas Municipal Power Agency (WTMPA). Presenting three issues, Republic Power questions whether the trial court erroneously granted the plea to the jurisdiction given that (1) the City of Lubbock was engaged in a proprietary function for which it has no immunity from suit, (2) governmental immunity has been waived for written contract claims against local governmental entities under
Factual Background
In 1983 the cities of Brownfield, Floydada, Lubbock and Tulia fоrmed WTMPA for the purpose of obtaining a reliable and adequate source of electric energy for its citizens. WTMPA is a municipal power agency created pursuant to subchapter C of chapter 163 of the Texas Utilities Code. See
WTMPA currently obtains the electric energy it resells to its member cities from Southwestern Public Service (SPS). Under the Power Purchase Agreement with SPS, WTMPA is required to purchase all of its electric energy from SPS through May 2019. In 2007, WTMPA was notified by SPS that the existing Power Purchase Agreement would not be renewed. At that time, WTMPA began contemplating how it was going to supply electriс energy to its member cities after expiration of the existing Power Purchase Agreement. WTMPA ultimately negotiated and executed a Development Agreement with Republic Power, a private business entity, for the purpose of forming a partnership to develop, finance and operate future electric energy generation and transmission facilities.1
The Development Agreement required WTMPA to form a local government corporation to own and operate a power generation facility and issue bonds to finance its construction. The Development Agreement was executed on August 1, 2008, and on September 25, 2008, WTMPA‘s Board of Directors unanimously approved High Plains Diversified Energy Corporation as the local government corporation designated to own and operate the electric energy generation and transmission facilities contemplated by the agreement. Thereafter, one addendum dated July 23, 2009, and two amendments dated October 9, 2009, and May 18, 2011, were added to the Development Agreement. Initially, per the Development Agreement, the “Project Owner” was WTMPA, but those rights and obligations were assigned to High Plains.
Over the next three years, Republic Power raised millions in capital and expended considerable sums completing feasibility studies and arranging for financing of the project. The Development Agreement provided for issuance of first mortgage revenue bonds by the local government corporation, ultimately High Plains, for the purpose of obtaining the balance of the funds necessary to complete the project. In furtherance of that financing obligation, a bond validation hearing was ultimately scheduled in a Lubbock County district court to approve issuance of the revenue bonds.
Prior to that hearing, at a regularly scheduled meeting of the board of High Plains, a dispute arose as to the allocation of any surplus revenue generated by the project. Due to its greater usage of the electric energy to be generated, the City of Lubbock believed it should receive a greater percentage of any surplus revenue. The Board of Directors disagreed and ultimately, at the bond validation hearing, the City of Lubbock objected to issuance of the revenue bonds by arguing High Plains was not a valid local government corporation and WTMPA did not have the authority to create it. The district court agreed with the City of Lubbock and dismissed the bond validation proceeding with prejudice. As a result, no revenue bonds were ever issued.
After the bond validation suit failed, Republic Power filed the underlying suit against the City of Lubbock and WTMPA alleging breach of the Development Agreement. Initially, Republic Power alleged that WTMPA breached the agreement but sought to hold the City of Lubbock liable under a joint enterprise theory. Both defendants filed pleas to the jurisdiction asserting immunity from suit. Republic Pоwer then amended its petition to allege the City of Lubbock directly breached the Development Agreement. In response, the City of Lubbock filed an amended plea to the jurisdiction. Following a hearing, the trial court granted the City of Lubbock‘s
Standard of Review — Plea to the Jurisdiction
The party suing a governmental entity bears the burden of affirmatively demonstrating the trial court has jurisdiction to hear the dispute. Tex. Dep‘t. of Criminal Justice v. Miller, 51 S.W.3d 583, 587 (Tex.2001). A plea to the jurisdiction is a dilatory plea, the purpose of which is to defeat a cause of action without regard to whether the claims asserted have merit. Bland Independent School Dist. v. Blue, 34 S.W.3d 547, 554 (Tex.2000). In the context of a claim of sovereign or governmental immunity, the proponent of a plea to the jurisdiction contends the trial court lacks subject matter jurisdiction over the claim because it is protected by immunity from suit which has not been legislatively waived. Because immunity from suit defeats a trial court‘s subject matter jurisdiction, Tex. Dep‘t. of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex.1999), a plea to the jurisdiction is the proper way to assert a claim of sovereign or governmental immunity from suit. Bland, 34 S.W.3d at 555.
Whether a court has subject matter jurisdiction is a question of law. Tex. Natural Res. Conservation Comm‘n v. IT-Davy, 74 S.W.3d 849, 855 (Tex.2002). Therefore, if thе evidence creates a fact question regarding the existence of jurisdictional facts, the trial court cannot grant the plea to the jurisdiction and the fact issue must be resolved by the fact finder. Tex. Dep‘t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 227-28 (Tex.2004). A court deciding a plea to the jurisdiction is not required to look solely to the pleadings but may consider evidence submitted by the parties, and it must do so, when necessary to resolve the jurisdictional issues raised. Bland, 34 S.W.3d at 555. If the relevant evidence is undisputed or fails to raise a fact question on the jurisdictional issue, the triаl court rules on the plea to the jurisdiction as a matter of law. Miranda, 133 S.W.3d at 228. Accordingly, we review a trial court‘s ruling on a plea to the jurisdiction under a de novo standard of review. Tex. D.O.T. & City of Edinburg v. A.P.I. Pipe & Supply, LLC, 397 S.W.3d 162, 166 (Tex.2013); Miranda, 133 S.W.3d at 226. In doing so, we exercise our own discretion and redetermine each legal issue, without giving deference to the lower court‘s decision. See Quick v. City of Austin, 7 S.W.3d 109, 116 (Tex.1999) (op. on reh‘g).
Sovereign/Governmental Immunity
Sovereign immunity protects the State, as well as its agencies and officials, from lawsuits for damages and from liability. Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Texas Political Subdivs. Prop./Cas. Joint Self-Ins. Fund, 212 S.W.3d 320, 323-24 (Tex.2006); Reata Constr. Corp. v. City of Dallas, 197 S.W.3d 371, 374 (Tex.2006). Similarly, the common law doctrinе of governmental immunity protects political subdivisions of the State, including counties, cities and school districts. Ben Bolt, 212 S.W.3d at 324. Under the doctrines of sovereign and governmental immunity, it has long been rec
These components of immunity have come to be applied in a variety of circumstances to promote the pragmatic purpose of immunity, which is to “shield the public from the costs and consequences of improvident actions of their governments.” Tooke, 197 S.W.3d at 332. Therefore, in the context of a suit arising from a breach of contract, a governmental entity may necessarily waive immunity from liability by entering into the contract, thereby binding itself to the terms of the agreement, but not waive immunity from suit. Id. See also Federal Sign v. Texas S. Univ., 951 S.W.2d 401, 405-06 (Tex.1997).
Immunity may, however, be waived and the Legislature has the exclusive authority to do so by statute. To ensure that this legislative control is not lightly disturbed, statutes waiving immunity are strictly construed as not waiving immunity unless that waiver is effected by “clear and unambiguous” language. See
In determining whether immunity has been waived, the Texas Supreme Court has consistently deferred to the Legislature, because doing so allows the Legislature to protect the complex policymaking function surrounding suits against governmental entitiеs. IT-Davy, 74 S.W.3d at 853-54. As more fully discussed below, the Texas Legislature adopted section 271.152 of the Local Government Code to deal with the waiver of governmental immunity in the context of a breach of contract claim. See
ANALYSIS
Proprietary/Governmental Dichotomy
By its first issue, Republic Power contends the trial сourt erred in granting the City of Lubbock‘s plea to the jurisdiction because immunity does not apply to suits arising from the performance of a proprietary function. Specifically, Republic Power contends that because “the construction and operation of an electric utility” is a proprietary function, no governmental immunity exists. We disagree.
In presenting this argument, Republic Power seeks to incorporate the proprietary/governmental distinction from common law and the Texas Tort Claims Act,
The Texas Tort Claims Act clearly waives a municipality‘s governmental immunity from liability and suit for certain tort claims arising out of its governmental functions. A municipality‘s “governmental functions” are those functions conducted “in the performance of purely governmental matters solely for the public benefit.” Tooke, 197 S.W.3d at 343 (quoting Dilley v. City of Houston, 148 Tex. 191, 222 S.W.2d 992, 993 (1949)). Specifically, the Legislature provided that a municipality is not immune from liability for damages arising out of its “governmental functions,” which it went on tо define as “those functions that are enjoined on a municipality by law and are given it by the state as part of the state‘s sovereignty, to be exercised by the municipality in the interest of the general public ....”
In arguing for the application of this proprietary/governmental dichotomy in the context of a breach of contract claim, Republic Power argues that a municipality is not immune from claims arising out of its proprietary аcts because under common law, when a municipality engages in a proprietary function, it is subject to the same duties and liabilities as private citizens and corporations. See Gates v. City of Dallas, 704 S.W.2d 737, 739 (Tex.1986) (holding that “[c]ontracts made by municipal corporations in their proprietary capacity have been held to be governed by the same rules as contracts between individuals“).5 In pursuing this argument Republic Power fails to distinguish the two distinct components of immunity: (1) immunity from liability and (2) immunity from suit. Tooke, 197 S.W.3d at 332. Interpreting contracts by the “same rules” is a function оf liability, not a function of immunity from suit. Another serious flaw in Republic Power‘s argument is that the common law principle it relies upon pre-dates the adoption of both the Texas Tort Claims Act and the 2005 legislative enactment of subchapter I of chapter 271 of the Texas Local Government Code, entitled Adjudication of Claims Arising Under Written Contracts With Local Governmental Entities. See
By enacting subchapter I of chapter 271 of the Texas Local Government Code, the Legislature specifically sought to waive immunity to suit fоr certain claims arising under written contracts with governmental entities.
“As it had already done in the tort-claims context [through the Texas Tort Claims Act], the Legislature could have incorporated the proprietary/governmental distinction into the statutory waiver scheme for contract claims; however, it chose not to incorporate that distinction into a contract setting.” Wheelabrator, 381 S.W.3d at 603. We must presume the Legislature knew and understood exactly what it was doing when it enacted 271.152, and that it deliberately and purposefully omitted that distinction when it selected the words and phrases that it enacted. Id. at 603-04. Because it is the Legislature‘s function to weigh competing interests and establish public policy, specifically in the realm of governmental immunity, we conclude the Legislature did make a policy decision regarding the proprietary/governmental dichotomy—and that policy decision was that the doctrine of immunity applies to contract claims arising from proprietary functions, subject to specific provisions of waiver found in
As mentioned above, WTMPA relies on three Texas courts of appeals’ decisions to suрport its position that immunity from suit does not apply because the City of Lubbock was engaging in a proprietary function. In Temple, the First District Court of Appeals held the City of Houston had no governmental immunity from a breach of contract suit because it was performing a proprietary function when it provided life insurance benefits to its employees. 189 S.W.3d at 819-21. Similarly, in Bailey, the Third Court of Appeals, relying on Gates, 704 S.W.2d at 739, and “[s]trictly construing the doctrine of municipal immunity against the municipality,” held the City of Austin did not have governmental immunity because it was performing a proprietary function. 972 S.W.2d at 193 (emphasis added). Finally, in Casso, the Thirteenth Court оf Appeals held that paying employee health insurance premiums amounted to a proprietary function that prevented the City of McAllen from asserting governmental immunity. 2009 WL 781863, at *4, 2009 Tex.App. LEXIS 2049, at *14. Because Temple and Bailey were decided before Tooke was issued and prior to the enactment of subchapter I of chapter 271 of the Texas Local Government Code, we question their reasoning and find them to be inapposite to this case. Because Casso incorrectly relies on Tooke and Temple for the carte blanche proposition that “a municipality is not immune from suit when it engages in the exercise of proprietary functions,” we simply rejeсt its reasoning. Id.
Finding the reasoning of the San Antonio Court of Appeals in Wheelabrator to be convincing, we extend that ruling to find immunity does apply to claims arising from the breach of an express contract arising out of the performance of a proprietary function.6 Issue one is overruled.
By its second issue, Republic Power maintains the trial court erroneously granted the City of Lubbock‘s plea to the jurisdiction because immunity, if any, was waived under section 271.152. Again, we disagree.
Consistent with our disposition of issue one, there is but one route to the courthоuse for breach-of-contract claims against a governmental entity, and that route is through section 271.152. General Servs. Comm‘n v. Little-Tex Insulation Co., 39 S.W.3d 591, 597 (Tex.2001). By enacting section 271.152, the Legislature specifically provided that a local governmental entity “waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of contract, subject to the terms and conditions of [subchapter I].”
For the statute‘s waiver of immunity to apply, three requirements must be established: (1) the party against whom the waiver is asserted must be a local governmental entity; (2) the entity must be authorized by statute or the Constitution to enter into contracts; and (3) the entity must in fact have entered into a contract that is “subject to this subchapter.” City of Houston v. Williams, 353 S.W.3d 128, 134 (Tex.2011). Additionally, five elements must be met to determine if the contract is “subject to this subchapter.” It must be (1) in writing, (2) state the essential terms, (3) provide for goods or services, (4) to the local governmental entity, and (5) be executed on behalf of the local governmental entity. See
The opening paragraph of the Development Agreement provides it is “made and entered into ... by and between West Texas Municipal Power Agency, a Texas joint power agency and municipal corporation (‘WTMPA‘) comprised of the cities of Brownfield, Floydada, Lubbock and Tulia ....” (Emphasis added). Republic Power argues that WTMPA entered into the Development Agreement “on behalf of itself and the Cities” and it was executed on their behalf for purposes of section 271.152. The “RECITALS” portion of the Development Agreement does recognize a distinction between WTMPA and the cities themselves. Specifically, paragraphs C and D contain language that the “Project Owner” acts “on behalf of [WTMPA] and the Cities.” (Emphasis added). However, those recitals apply only to certain determinations and not to obligations under the Development Agreement.
The Development Agreement further provides in part:
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be executed by their proper officers respectively, being thereunto duly authorized, and their respective seals to be herеto affixed ....
In that regard, the signature page of the Development Agreement is signed by Gary Brown on behalf of WTMPA and John N. Crew on behalf of Republic Power. None of the cities involved in the formation of WTMPA are listed as signatories in the contract. The addendum and both amendments are also signed by Brown, Crew and Scott Collier, President of High Plains. WTMPA was named the “Project Owner” until it assigned the Development Agreement to High Plains who, in turn, became the “Project Owner.”
While Republic Power acknowledges the City of Lubbock was not a signatory to the Development Agreement, it argues it should be held liable under the circumstances of this particular case. According to Republic Power, the City of Lubbock‘s insistеnce on nearly 100% of surplus revenue generated by the project equated it with being WTMPA.7 We disagree. WTMPA is a municipal power agency created under chapter 163 of the Texas Utilities Code. It is a separate municipal corporation and is governed by its own board of directors. The City of Lubbock is not WTMPA.
Despite being named in the opening paragraph, the City of Lubbock and the other member cities were not parties to the Development Agreement, addendum or amendments. None of the documents are executed on behalf of any of the cities, and although Texas law recognizes that a contract need not be signed to be “executed” unless the parties explicitly require signatures, Mid-Continent Cas. Co. v. Global Enercom Mgmt., 323 S.W.3d 151, 157 (Tex.2010), there is no intent that the City of Lubbock was considered a party or even a third party beneficiary to the Development Agreement. To the contrary, section 10.11 of the Development Agreement specifies that the “provisions of the Agreement are for the exclusive benefit of the Project Owner and Republic Power” and provides only for Texas Tech University as a third party beneficiary per section 3.4(c) of the Development Agreement.
A contract generally binds no one except the parties to it. BML Stage Lighting, Inc. v. Mayflower Transit, Inc., 14 S.W.3d 395, 400 (Tex.App.-Houston [14th Dist.] 2000, pet. denied). The City of Lubbock, as a member city, was “no more than an incidental beneficiary” to the creation of WTMPA for the purpose of providing electric energy to the communities involved. See Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 420 (Tex.2011). Accordingly, we conclude the City of Lubbock did not enter into the Development Agreement and no one executed it on behalf of the City. Consequently, two critical elements that must be satisfied for waiver of immunity to apply are absent and section 271.152 does not apply to the facts of this case. Therefore, we hold the trial court did not err in finding that the Legislature did not waive the City of Lubbock‘s immunity from suit pursuant to section 271.152 and thereby granting its plea to the jurisdiction. Issue two is overruled.
Waiver by Conduct
By its third and final issue, Republic Power asserts the City of Lubbock‘s plea to the jurisdiction was erroneously granted because immunity from suit was waived by its conduct.8 We disagree. Republic Power further asserts the City of Lubbock waived its immunity, if any, by engaging in certain conduct, to-wit: knowingly entering into the Development Agreement, attempting to gain more than its 25% share
The Texas Supreme Court has rejected the invitation to recognize an exception for waiver of immunity by conduct. See IT-Davy, 74 S.W.3d at 857. See also Sharyland Water Supply Corp., 354 S.W.3d at 414. This Court has also refused to recognize waiver of immunity by conduct. See Leach v. Tex. Tech Univ., 335 S.W.3d 386, 400-01 (Tex.App.-Amarillo 2011, pet. denied). Issue three is overruled.
Conclusion
We affirm the trial court‘s order granting the City of Lubbock‘s plea to the jurisdiction on Republic Power‘s claims for breach of contract.
PATRICK A. PIRTLE
JUSTICE