WASSON INTERESTS, LTD., Pеtitioner, v. CITY OF JACKSONVILLE, Texas, Respondent
NO. 14-0645
Supreme Court of Texas.
April 1, 2016
Rehearing Denied June 3, 2016
489 S.W.3d 427
Joseph M. Nixon, Beirne, Maynard & Parsons, L.L.P., Houston, for Amicus Curiae pro se.
Heather Mahurin Lockhart, Texas Municipal League, Austin, for Amicus Curiae Texas Municipal League and Texas City Attorneys Association.
Arthur J. Anderson, Christopher Alan Brown, Winstead PC, Dallas, David Fowler Johnson, Winstead PC, Fort Worth, for Amicus Curiae Trinity East Energy, LLC.
Jeffrey R. Pruitt, Jeffrey R. Pruitt, Attorney at Law, Corpus Christi, for Petitioner.
D. Brett Brewer, Steven Rade Guy, The Norman Law Firm, Jacksonville, for Respondent.
Texas is inviolably sovereign.1 In re BP Oil Supply Co., 317 S.W.3d 915, 919 (Tex.App.-Houston [14th Dist.] 2010, no pet.) (orig.proceeding). Such sovereignty is inherent in its statehood, Alden v. Maine, 527 U.S. 706, 713 (1999), and genеrally protects the state from suits for money damages, Tex. Nat. Res. Conservation Comm‘n v. IT-Davy, 74 S.W.3d 849, 853 (Tex. 2002).2 Political subdivisions of the
Yet, although the rationale for governmental immunity remains firmly established in our jurisprudence, we have never decided whether the distinction between governmental and proprietary acts—sometimes referred to as the proprietary-governmental dichotomy—applies to breach-of-contract claims against municipalities. See id. This case, involving a municipality‘s lease of rеal property to a private party, requires us to address that question. Relying on a string of cases that emerged in the wake of Tooke, the court of appeals held that this dichotomy does not extend to the contract-claims context. And so the court of appeals held that in a breach-of-contract action, a city has immunity from suit for proprietary acts.4 We disagree and reverse. However, because the court of appeals did not address whether the lease contract was entered into in the city‘s proprietary or governmental capacity, we remand this case to the court of appeals for further proceedings consistent with this opinion.
I
In the 1990s, the Wassons assumed an existing 99-year lease of lakefront property owned by the City of Jacksonville. The lease specifies, among other things, that the property is to be used for residential purposes only. While they initially lived on the property, in 2009, the Wassons moved and conveyed their interest in the lease to Wasson Interests, Ltd. (“WIL“). WIL then began renting the property for terms of less than one week—apparently a
Nevertheless, in 2011, contending that WIL‘s use of the property violated the reinstatement agreement, the city sent WIL yet another eviction notice. WIL sued for breach of contract, seeking injunctive and declaratory relief. Following discovery, the city filed a combined motion for traditional and no-evidence summary judgment on several grounds, including governmental immunity. The trial court granted the motion without comment. WIL appealed, attacking both the traditional and no-evidence summary-judgment grounds.
The court of appeals affirmed based on governmental immunity. Wasson Interests, Ltd. v. City of Jacksonville, No. 12-13-00262-CV, 2014 WL 3368413, at *3-4 (Tex.App.-Tyler July 9, 2014) (mem.op.). Following the San Antonio court of appeals’ recent opinion in City of San Antonio v. Wheelabrator Air Pollution Control, Inc., 381 S.W.3d 597 (Tex.App.-San Antonio 2012, pet. denied), the court of appeals rejected WIL‘s argument that the proprietary-governmental dichotomy applied in the contract-claims context. Wasson, 2014 WL 3368413, at *2-4 (noting that the “supreme court has never held that the [proprietary-governmental dichotomy] determines whether immunity from suit is waived for breach[-]of[-]contract claims.“). The cоurt of appeals instead held that immunity is the “default position” in contract cases. Id. at *3. Therefore, as immunity was the default position and the court of appeals found no waiver, it affirmed the trial court‘s summary judgment. Id. at *3-4. WIL appealed, arguing that the proprietary-governmental dichotomy does extend to the contract-claims context. We granted review to resolve that question.
II
A
Two years after Texas joined the Union, this Court recognized the doctrine of sovereign immunity: “no state can be sued in her own courts without her consent, and then only in the manner indicated by that consent.” Hosner v. DeYoung, 1 Tex. 764, 769 (1847). This common-law doctrine—“inherent in the nature of sovеreignty,” THE FEDERALIST No. 81 (Alexander Hamilton)—“initially developed without any legislative or constitutional enactment,” Reata Constr. Corp., 197 S.W.3d at 374. See also Bd. of Land Comm‘rs v. Walling, Dallam 524, 525 (Tex.1843) (“That it is one of the essential attributes of sovereignty not to be amenable to the suit of a private person without its own consent has grown into a maxim, sanctioned as well by the laws of nations as the general sense and practice of mankind.“).
Yet despite being “an established principle of jurisprudence in all civilized nations,” Beers v. Arkansas, 61 U.S. 527, 20 How. 527, 15 L.Ed. 991 (1857), the stated reasons for immunity have changed over time. The theoretical justification has evolved from the English legal fiction that “[t]he King can do no wrong,” 1 WILLIAM BLACKSTONE, COMMENTARIES *246,5 to
Aside from the substance of the common-law roots of immunity, the very fact that it has developed through the common law—and has remained there—has important implications. Namely, as the arbiter of the common law, the judiciary has historically been, and is now, entrusted with “defin[ing] the boundaries of the common-law doctrine and ... determin[ing] under what circumstances sovereign immunity exists in the first instance.” See Reata, 197 S.W.3d at 375; see also Houston Belt & Terminal Ry. v. City of Houston, 487 S.W.3d 154 n.1 (Tex.2016); Tex. Dep‘t of Criminal Justice v. Miller, 51 S.W.3d 583, 592 (Tex.2001) (Hecht, J., concurring) (“The common-law rule of immunity in Texas was the judiciary‘s to recognize, and it is ours to disregard.“). In doing so, of course, we take as guides both the nature and purposes of immunity. We are also mindful that “the pragmatic rationale supporting this immunity ... helps to delineate its limits.” Houston Belt, 487 S.W.3d at 157.
But while the judiciary prunes and shapes the doctrine of immunity, its roots remain secure within the sovereign. Thus, because the doctrine dictates that a sovereign may not be sued “without her consent,” Hosner, 1 Tex. at 769, we generally defer to the sovereign will of the state—as expressed by “the people“—for any waiver of already existing immunity. See Tooke, 197 S.W.3d at 332; see also
B
Because sovereignty is vested in “the people” of the state, moreover, immunity does not equally attach to every act by every governmental entity or political subdivision. As a starting point, the state generally enjoys immunity for its lawful functions, which are on behalf of “the people.” But, for example, when a government officer acts ultra vires, immunity does not protect his acts. See Houston Belt, 487 S.W.3d at 158. That is because acts done “without legal authority” are not dоne as a branch of the state. Id. By definition, they fail to derive their authority from the root of our state‘s immunity—the sovereign will. See id. Likewise, in the context of governmental immunity, we have distinguished between various acts of a municipality. Gates v. City of Dallas, 704 S.W.2d 737, 738-39 (Tex.1986) (“Municipal corporations exercise their broad powers through two different roles[:] proprietary and governmental.“); see also Dilley, 222 S.W.2d at 993; Posnainsky, 62 Tex. at 127. Acts done as a branch of the state—such as when a city “exercise[s] powers conferred on [it] for purposes essentially public ... pertaining to the administration of general laws made to enforce the general policy of the state“—are рrotected by immunity. See Posnainsky, 62 Tex. at 127; City of Houston v. Williams, 353 S.W.3d 128, 134 (Tex.2011) (“When performing governmental functions, political subdivisions derive governmental immunity from the state‘s sovereign immunity.” (emphasis added)).
But a city is not a freestanding sovereign with its own inherent immunity.6 See City of Galveston v. State, 217 S.W.3d 466, 478 (Tex.2007) (Willett, J., dissenting) (“[W]e have repeatedly held that a city has no immunity of its own but is afforded the State‘s immunity when acting as the State‘s agent and performing governmental functions for public benefit.“); Reynolds v. Sims, 377 U.S. 533, 575 (1964) (“Political subdivisions of States—counties, cities, or whatever—never were and never have been considered as sovereign entities.“). Acts that are proprietary in nature, therefore, are not done as a branch of the state, but instead “for the private аdvantage and benefit of the locality and its inhabitants.” Posnainsky, 62 Tex. at 127; see also Gates, 704 S.W.2d at 739 (“Proprietary functions are those functions performed by a city, in its discretion, primarily for the
III
In this case, the parties disagree as to whether this proprietary-governmental dichotomy applies to contract claims. The city argues that our recent decision in Tooke established a “default rule” of immunity, and so this common-law distinction between proprietary and governmental acts has no application to a breach-of-contract action. Thus, the city essentially argues—and the court of appeals agreed—that a city is never subject to suit for contract claims unless there is a legislative waiver. The city also argues that the dichotomy is not workable and is otherwise not well-suited to the contract-claims context. On the other hand, WIL contends that there is little, if any, reason to limit this proprietary-governmental dichotomy to the torts-claims context: the rationale behind immunity and for the dichotomy should naturally guide this Court to apply the doctrine in both the contract- and tort-claims contexts, and no legislation or precedent should steer us to conclude otherwise. We agree with WIL and conclude that the dichotomy applies in the contract-claims context.
A
We start by noting our disagreement with the court of appeals’ interpretation of Tooke as establishing a new default rule of immunity. As a general matter, the court of appeals is correct to say that the judiciary defers to the legislature to waive immunity—indeed, Tooke says as much. See Tooke, 197 S.W.3d at 332-33. But Tooke says little else as it relates to the dichotomy and certainly does not eliminate the judiciary‘s common-law function of determining whether immunity exists in the first instance. As to the dichotomy, in Tooke we said that
[a] municipality is not immune from suit for torts committed in the performance of its proprietary functions, as it is for torts committed in the performance of its governmental functions. But we have nеver held that this same distinction determines whether immunity from suit is waived for breach of contract claims, and we need not determine that issue here.
Id. at 343 (emphasis added).7 In other words, in Tooke we simply declined to
Rather than attempting to divine some hidden holding from our opinion in Tooke, we find that the issue of whether the dichotomy applies in the contract-claims context is best resolved by a proper understanding of the closely related yet distinct roles of the judiciary and legislature concerning sovereign immunity, as well as the relation between sovereign immunity and municipalities. Our caselaw, discussed above, prescribes a relatively simple two-step process for addressing the applicability of immunity. The judiciary determines the applicability of immunity in the first instance and delineates its boundaries. See Reata, 197 S.W.3d at 375. If immunity is applicable, then the judiciary defers to the legislature to waive such immunity. See Tooke, 197 S.W.3d at 332-33.
Although the absence of immunity on the one hand and waiver of immunity on the other are analytically distinct, and each is left to a different branch of government, we have recognized that the “distinction is a fine one, as waiving immunity or finding it nonexistent have precisely the same effect.” City of Galveston, 217 S.W.3d at 471. We have therefore cautioned that “[d]ue to the risk that the latter could become a ruse for avoiding the Legislature, courts should be very hesitant to declare immunity nonexistent in any particular case.” Id. And so, while we dutifully safeguard our common-law function of determining immunity‘s applicability and boundaries, in so doing we keep in mind the policy preferences that the legislature has expressed. Cf. IT-Davy, 74 S.W.3d at 854.
B
The city argues that the proprietary-governmental dichotomy is ill-suited to the contract-claims setting for three primary reasons. First, the city argues that applying the dichotomy in the contract-claims context would run counter to the purposes of immunity. Second, the city contends that Chapter 271 of the Local Government Code, which waives immunity for municipalities in certain contract claims, expresses a legislative policy choice that cities should, as a default, have immunity unless Chapter 271 applies. And third, the city argues that the dichotomy is otherwise
1
The city argues that the dichotomy is an ill-suited tool in the contract-claims context due to the naturе of contracts and purposes of immunity. However, for more than 130 years, Texas courts have held that governmental immunity protects a city‘s governmental, but not its proprietary, functions. See Posnainsky, 62 Tex. at 127. In the tort-claims context, this distinction has been clearly established, both by this Court and by legislative recognition. See City of Tyler v. Likes, 962 S.W.2d 489, 501 (Tex.1997); Dilley, 222 S.W.2d at 993; Posnainsky, 62 Tex. at 127;
And not without reason—applying the dichotomy in the contract-claims context makes sense. The distinction between governmental and proprietary functions is premised on the derivative nature of governmental immunity. The state‘s immunity is inherent in its sovereignty, Alden, 527 U.S. at 713; cities, on the other hand, derive their immunity from the state, Williams, 353 S.W.3d at 134. As a result, a city‘s immunity can extend as far as the state‘s immunity but no further. We have therefore consistently said—at least in the tort-claims context—that a city is cloaked in the state‘s immunity when it acts as a branch of the state, but only when it acts as a branch of the state. See Tooke, 197 S.W.3d at 343; Gates, 704 S.W.2d at 739; Posnainsky, 62 Tex. at 127. When a city performs discretionary functions on its own behalf, it ceases to derive its authority—and thus its immunity—from the state‘s sovereignty. See FWISD, 22 S.W.3d at 840; Shilling, 240 S.W.2d at 1011-12; see also City of Galveston, 217 S.W.3d at 478 (Willett, J., dissenting). Such proprietary functions, therefore, do not stem from the root of immunity that is “the people,” and lacking that common root, they cannot be performed as a branch of the state. Nothing in this rationale inherently limits the dichotomy‘s application to tort claims.
Considering immunity‘s pragmatic purpose—“tо shield the public from the costs and consequences of improvident actions of their governments“—does not change this conclusion. See Tooke, 197 S.W.3d at 332. By definition, a city‘s “proprietary functions are those conducted ‘in its private capacity, for the benefit only of those within its corporate limits, and not as an arm of the government.‘” Id. at 343 (quoting Dilley, 222 S.W.2d at 993). Like ultra vires acts, for which government officers do not enjoy immunity, a city‘s proprietary functions are not performed un-
2
But whether it makes sense to apply the dichotomy as a common-law matter is not the end of our inquiry. In support of its argument that the dichotomy does not—or at least should not—apply in the contract-claims context, the city argues that the legislature has abrogated, or at least failed to incorporate, the dichotomy. Relying on Wheelabrator, the city argues that the waiver of immunity in Chapter 271 of the Local Government Code is the only way a city may be sued for breach of contract. See Wheelabrator, 381 S.W.3d at 605; see also Republic Power Partners, 424 S.W.3d at 194 (“there is but one route to the courthouse for breach-of-contract claims against a governmental entity, and that route is through section 271.152.“). WIL counters that while Chapter 271 waives immunity in contract claims without regard to whether the claim arose from a governmental or proprietary function, it does nothing to change or modify the common-law bounds of governmental immunity, including the application of the dichotomy, in the contract-claims context. Section 271.152 provides:
A local governmental entity that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this subchapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of the contract, subject to the terms and conditions of this subchapter.
From the outset, however, it is clear that Chapter 271 does not abrogate the common-law dichotomy. As abrogation of the common law is “disfavored,” we will construe Chapter 271 as abrogating the common-law dichotomy only “if there exists a clear repugnance” between the two. See Waffle House, Inc. v. Williams, 313 S.W.3d 796, 802 (Tex.2010) (internal quotation marks omitted). There is no clear repugnance here: the dichotomy is applied to determine whether there is immunity in the first instance, while Chapter 271 acts to waive already existing immunity in certain cirсumstances.
However, that there is no clear repugnance does not mean that Chapter 271 is irrelevant to our inquiry. Because we are “very hesitant to declare immunity nonexistent,” we carefully consider the statutory
3
Finally, in arguing that the dichotomy was created exclusively for the tort-claims context, the city suggests that the dichotomy itself is unworkable, citing several U.S. Supreme Court opinions. See, e.g., Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528, 545-46 (1985); City of Trenton v. New Jersey, 262 U.S. 182, 191-92 (1923). These opinions point out the difficulty in determining whether a function is proprietary or governmental, and thus they question whether such a dichotomy is a judicially manageable standard. See Garcia, 469 U.S. at 545 (“The goal of identifying ‘uniquely’ governmental functions ... has been rejected by the Court in the field of governmental tort liability in part because [it] is unmanageable.“); Indian Towing Co. v. United States, 350 U.S. 61, 64-68 (1955) (noting “the ‘non-governmental‘-‘governmental’ quagmire that has long plagued the law of municipal corporations“); see also City of San Antonio v. Winkenhower, 875 S.W.2d 388, 392 (Tex.App.-San Antonio 1994, writ denied) (noting the persuasiveness of the city‘s argument “that the classification of certain activities as proprietary under common law is anаchronistic in light of the expanded role [of] government in recent decades.“).
We, too, have recognized “[t]he distinction has not been a clear one,” as determining which functions are proprietary and which are governmental is not always a cut-and-dried task. See Tooke, 197 S.W.3d at 343. Yet, importantly, our state constitution authorizes the legislature to “define for all purposes those functions of a municipality that are to be considered governmental and those that are proprietary, including reclassifying a function‘s classification assigned under prior statute or common law.”
Such democratic enactments—representing the will of the people—fatally undercut the city‘s argument that workability concerns should discourage us from applying the dichotomy in the contract-claims context. While such a dichotomy may at times be difficult to apply, the Texas judiciary has been doing so for more than 130 years. Moreover, and perhaps most importantly, the legislature has provided definitional tools to aid our inquiry. See
* * *
In sum, sovereign immunity does not imbue a city with derivative immunity when it performs proprietary functions. This is true whether a city commits a tort or breaches a contract, so long as in each situation the city acts of its own volition for its own benefit and not as a branch of the state. We therefore hold that the common-law distinction between governmental and proprietary acts—known as the proprietary-governmental dichotomy—applies in the contract-claims context just as it does in the tort-claims context. Because the court of appeals below held otherwise, we reverse. However, as the court of appeals affirmed summary judgment by holding that the proprietary-governmental dichotomy did not apply, it did not address whether the contract at issue was proprietary or governmental, nor did it address the city‘s alternate grounds for summary judgment.11 Accordingly, we remand this case to the court of appeals to address those questions in the first instance.