Consol. Towne E. Holdings, LLC v. City of Jr.

675 S.W.3d 65

CONSOLIDATED TOWNE EAST HOLDINGS, LLC, Appellant

v.The CITY OF LAREDO, Joseph Neeb in His Official Capacity as City Manager, and Arturo Garcia, Jr. in His Official Capacity as Director of City of Laredo Utilities, Appellees

No. 04-22-00130-CV

Court of Appeals of Texas, San Antonio.

Delivered and Filed: July 12, 2023

APPELLANT ATTORNEY: Thad D. Spalding, Rick Thompson, Durham, Pittard & Spalding LLP, P.O. Box 224626, Dallas, TX 75222, Christopher C. Peterson, Lopez Peterson, PLLC, 101 W. Hillside Rd., Ste. 1, Laredo, TX 78041.

APPELLEE ATTORNEY: Ryan Scott Henry, Law Offices of Ryan Henry, PLLC, 1019 Central Parkway N., Ste.108, San Antonio, TX 78232, Alyssa J. Castillon, Laredo City Attorney's Office, 1110 Houston St., 3rd Fl., Laredo, TX 78040.

Sitting: Rebeca C. Martinez, Chief Justice, Irene Rios, Justice, Liza A. Rodriguez, Justice

OPINION

OPINION ON MOTION TO MODIFY THE JUDGMENT

Opinion by: Rebeca C. Martinez, Chief Justice

Consolidated Towne East Holdings, LLC ("Consolidated") sued the City of Laredo (the "City") in an effort to develop land in the City's extraterritorial jurisdiction. Consolidated sought water and sewer services from the City as part of its proposed development. However, before the City would provide these services, it required annexation. Consolidated contends that this precondition for water and sewer services amounts to an unconstitutional taking and that denial of services is an ultra vires act by the City Manager and the City's Director of Utilities.¹ The trial court dismissed Consolidated's claims with prejudice, and it appealed.

In an opinion issued on May 24, 2023, we affirmed. Thereafter Consolidated timely filed a motion to modify the judgment. We grant Consolidated's motion, withdraw our opinion and judgment issued on May 24, 2023, and substitute this opinion and judgment in its place. By this opinion and judgment, we modify the trial court's judgment to dismiss without prejudice Consolidated's regulatory takings claim and challenge to the validity of a city ordinance. We otherwise affirm the trial court's judgment.

BACKGROUND

Consolidated owns three tracts of land in an "economically distressed area," formally occupied by a colonia, outside of the City. See TEX. WATER CODE ANN. § 17.921(1) (defining "economically distressed area" for purposes of Texas Water Code, Subchapter K); Flores v. Millennium Interests, Ltd. , 185 S.W.3d 427, 434 (Tex. 2005) (Wainwright, J., concurring) ("The colonias are substandard, generally impoverished, rural subdivisions that typically lack basic utilities and other infrastructure.").

In 1995, Webb County and the City entered into an Interlocal Government Agreement. The general purpose of this agreement was to provide water and sewer connections to residents in fifteen colonias, located outside city limits, and to establish city-county cooperation to apply for grant money to achieve this end. One of these fifteen colonias was situated on Consolidated's tracts. In 2003, eight of the fifteen colonias landowners entered into a Participation Agreement with the City. Consolidated was not among these eight. The City and the participating landowners decided to "oversize" the water and sewer lines that were to be built to meet future development needs. The Participation Agreement provided for the landowners to contribute approximately $800,000 to oversize the lines. In return, the Participation Agreement created Living Unit Equivalences ("LUEs"), which were allocated to each participating landowner, to allow development up to the limit imposed by the number of LUEs allocated. In general, one LUE equates to the consumption of water and the discharge of wastewater attributable to one single-family residence. This measure is used for planning capital improvements to serve new development.²

The Participation Agreement also states: "Within five (5) years of the date of execution of this Agreement Landowners should apply to the City for annexation[.]" Further, the Agreement provides:

ANNEXATION. No Landowner can use any part of this allocation until such time as the parcel or portions thereof described in the relevant Exhibit A owned by him/her is annexed to the City of Laredo .... This shall not be interpreted to prohibit the use of these LUEs in unincorporated properties as provided in Section 31-3 of the City of Laredo Code of Ordinances.

In 2007, the City authorized the City Manager to sell excess water and sewer capacity from the oversizing effort to non-participating landowners in the form of LUEs. In 2011, the City passed an ordinance authorizing the Utilities Department to increase the cost per LUE at a rate of two percent per year.

Consolidated proposed redevelopment of its three tracts in 2016. Its proposal called for the replatting of the three tracts into approximately seventy-four individual lots. It is undisputed that to replat, Consolidated must obtain water and sewer services for each proposed lot. In 2017, Consolidated sought to obtain LUEs to meet this requirement; however, the City informed Consolidated that it would not issue an approval letter for the sale of LUEs because Consolidated's land had not been annexed into the City. The City informed Consolidated that to purchase LUEs, its land must be annexed into the City through a request for voluntary annexation, which requires payment of annexation fees. The City estimated these fees to be between $220,000 and $350,000. The City also informed Consolidated that, without annexation, water and sewer services could be provided, but only for three single-family residences.

In 2018, the City passed Ordinance 2018-O-056, pertaining to sewer service, and Ordinance 2018-O-069, pertaining to water service. Each ordinance amended Chapter 31 of the City's Code of Ordinances to require annexation before the City issues sewer and plumbing permits, except as permitted under Section 31-3. Section 31-3(a) provides:

The [C]ity shall not provide water service to and for future land developments outside the city limits, save and except for the residents of the fifteen (15) colonias listed in the [Interlocal Government Agreement].

In 2020, Consolidated sued the City for declarations to establish its right to purchase LUEs without initiating voluntary annexation and paying related annexation fees. It also sued for a writ of mandamus to compel the City Manager and the Director of Utilities to sell LUEs to Consolidated without also imposing an annexation requirement. Consolidated moved for partial summary judgment on its claims. The City filed a motion for summary judgment, asserting the trial court's lack of subject matter jurisdiction. The trial court held a hearing on the cross-motions and issued a final order, dismissing Consolidated's claims with prejudice. Consolidated timely appealed.

STANDARD OF REVIEW

We review a trial court's summary judgment de novo. Tarr v. Timberwood Park Owners Assoc., Inc. , 556 S.W.3d 274, 278 (Tex. 2018). We also review de novo a challenge to the trial court's subject matter jurisdiction. Tex. Dep't of Parks & Wildlife v. Miranda , 133 S.W.3d 217, 226 (Tex. 2004).

Summary judgment is proper when the movant has shown there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c) ; Cmty. Health Sys. Prof'l Servs. Corp. v. Hansen , 525 S.W.3d 671, 680 (Tex. 2017). In reviewing a trial court's summary judgment ruling, we take as true all evidence favorable to the nonmovant, indulging every reasonable inference and resolving any doubts in the nonmovant's favor. Provident Life & Acc. Ins. Co. v. Knott , 128 S.W.3d 211, 215 (Tex. 2003). When competing summary judgment motions are filed, each movant has the burden of establishing its entitlement to judgment as a matter of law. Tarr , 556 S.W.3d at 278. "When both parties move for summary judgment on the same issues and the trial court grants one motion and denies the other, we consider the summary judgment evidence presented by both sides, determine all questions presented, and if we determine that the trial court erred, render the judgment that the trial court should have rendered." Gonzalez v. Janssen , 553 S.W.3d 633, 637 (Tex. App.—San Antonio 2018, pet. denied) ; see also Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding , 289 S.W.3d 844, 848 (Tex. 2009).

DISCUSSION

The City argues in its motion for summary judgment that Consolidated failed to allege a valid waiver of governmental immunity, so as to establish the trial court's subject matter jurisdiction.

I. Governmental Immunity

Sovereign and governmental immunity are common-law concepts that generally protect the State and its political subdivisions from the burdens of litigation. Harris Cnty. v. Annab , 547 S.W.3d 609, 612 (Tex. 2018). "Sovereign immunity protects the state and its various divisions, such as agencies and boards, from suit and liability, whereas governmental immunity provides similar protection to the political subdivisions of the state, such as counties, cities, and school districts." Travis Cent. Appraisal Dist. v. Norman , 342 S.W.3d 54, 57–58 (Tex. 2011) (citing Wichita Falls State Hosp. v. Taylor , 106 S.W.3d 692, 694 n.3 (Tex. 2003) ).

Governmental immunity has two components: "immunity from liability, which bars enforcement of a judgment against a governmental entity, and immunity from suit, which bars suit against the entity altogether." Tooke v. City of Mexia , 197 S.W.3d 325, 332 (Tex. 2006). Immunity from suit implicates a court's subject matter jurisdiction to decide a claim against a governmental entity. Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc. , 571 S.W.3d 738, 746 (Tex. 2019). When a governmental defendant challenges jurisdiction on immunity grounds, the plaintiff has the burden to "affirmatively demonstrate the court's jurisdiction by alleging a valid waiver of immunity." Dall. Area Rapid Transit v. Whitley , 104 S.W.3d 540, 542 (Tex. 2003).

II. Consolidated's Claim...