Date: 11-05-2007

Case Style: City of San Antonio v. Polanco & Company, LLC

Case Number: 04-07-00258-CV

Judge: Catherine Stone

Court: Texas Court of Appeals for the Fourth Distrcit on appeal from the 225th Judicial District Court, Bexar County

Plaintiff's Attorney:

Andrew E. Toscano, Gene Toscano, Inc., San Antonio, Texas

Defendant's Attorney:

Jacqueline M. Stroh, Cathy J. Sheehan and Deborah L. Klein, Crofts & Callaway, A Professional Corporation, San Antonio, Texas

Description:

This appeal arises out of a contract between the City of San Antonio and Polanco & Company, L.L.C., by which Polanco agreed to provide food concession services at several City-owned golf courses. After a dispute arose regarding the City's termination of the contract, Polanco sued the City. The City claimed immunity from suit and filed a plea to the jurisdiction seeking dismissal of Polanco's suit. Because the trial court erroneously denied the plea, we reverse the trial court's order and render judgment dismissing Polanco's claims.

Background

Pursuant to a city ordinance, the City of San Antonio and Polanco & Company, L.L.C. entered into a contractual agreement through which Polanco would operate food and beverage concessions at several City-owned and operated golf courses in exchange for payment of a commission to the City. When Polanco failed to meet its obligations, the City terminated the contract and instructed Polanco to vacate the premises.

Following its termination, Polanco filed the underlying lawsuit and raised claims of breach of contract and fraud. Polanco also sought a temporary restraining order prohibiting the City from evicting it. The judge ruled that Polanco was not entitled to a temporary injunction, but ordered the City to allow Polanco to enter the premises and remove its property. Polanco later amended its petition and alleged breach of good faith and fair dealing, breach of fiduciary duty, negligent misrepresentation, common law fraud, fraud in the inducement, and claims under the Declaratory Judgment Act. In its second amended petition, Polanco added allegations of conversion and inverse condemnation. In response, the City filed a plea to the jurisdiction, contending it was immune from suit. The trial court denied the plea. On appeal, the City argues that the trial court erred in denying its plea to the jurisdiction on all of Polanco's claims.

Standard of Review

A plea to the jurisdiction is a dilatory plea by which a party challenges a court's authority to determine the subject matter of the action. Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000). The party suing the governmental entity bears the burden of affirmatively showing that the trial court has jurisdiction to hear the cause. Tex. Dep't of Criminal Justice v. Miller, 51 S.W.3d 583, 587 (Tex. 2001). Whether a trial court has subject matter jurisdiction is a question of law subject to de novo review. Tex. Natural Res. Conservation Comm'n v. IT-Davy, 74 S.W.3d 849, 855 (Tex. 2002); Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928 (Tex. 1998). In reviewing a trial court's ruling on a plea to the jurisdiction, we construe the pleadings in favor of the pleader and look to the pleader's intent. Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 446 (Tex. 1993). We are not required to look solely to the pleadings when deciding a plea to the jurisdiction; we may consider evidence relevant to the jurisdiction when it is necessary to resolve the jurisdictional issue raised. Blue, 34 S.W.3d at 555.

Texas Tort Claims Act

In its first issue, the City argues the trial court erred in denying the City's plea to the jurisdiction on Polanco's tort claims. It claims that because the Texas Tort Claims Act ("TTCA") defines governmental functions to encompass the operation of golf courses, the Act neither waives immunity for the intentional tort claims asserted by Polanco, nor provides recovery for exemplary damages and attorney's fees. Polanco alleges, however, that ownership and operation a golf course is a proprietary function for which the City is not immune from liability.

Governmental or proprietary function

Sovereign immunity from suit defeats a trial court's subject matter jurisdiction unless the State expressly consents to a suit. Tex. Dep't of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999). Governmental immunity operates like sovereign immunity and affords a similar protection to subdivisions of the State, including counties and cities. Harris County v. Sykes, 136 S.W.3d 635, 638 (Tex. 2004). The TTCA provides a limited waiver of immunity, allowing suits to be brought against governmental units in certain, narrowly defined circumstances. Miller, 51 S.W.3d at 587. The TTCA expressly waives sovereign immunity in three areas: "'use of publicly owned automobiles, premises defects, and injuries arising out of conditions or use of property.'" Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 225 (Tex. 2004) (quoting City of Cameron v. Brown, 80 S.W.3d 549, 554 (Tex. 2002)); see Tex. Civ. Prac. & Rem Code Ann. § 101.021 (Vernon 2005). When a municipality commits a tort while engaged in a governmental function, its liability is determined by the provisions of this Act. Tex. Civ. Prac. & Rem Code Ann. § 101.0215(a) (Vernon 2005); Martinez v. City of San Antonio, 220 S.W.3d 10, 14 (Tex. App.-San Antonio 2006, no pet.).

When a municipality commits a tort while engaged in a proprietary function, it is liable to the same extent as a private entity or individual. Martinez, 220 S.W.3d at 14; see also Tooke v. City of Mexia, 197 S.W.3d 325, 343 (Tex. 2006) ("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."). Under common law, "generally speaking, a municipality's proprietary functions are those conducted in its private capacity, for the benefit of those within its corporate limits, and not as an arm of the government." Tooke, 197 S.W.3d at 343 (quotation omitted). In contrast, "governmental functions are those in the performance of purely governmental matters solely for the public benefit." Id. (quotation omitted). The Legislature has included a nonexclusive list of activities categorized as governmental functions in section 101.0215(a) of the Texas Civil Practice and Remedies Code; proprietary functions of a municipality do not include those governmental activities listed under subsection (a). Ethio Express Shuttle Serv., Inc. v. City of Houston, 164 S.W.3d 751, 755-56 (Tex. App.-Houston [14th Dist.] 2005, no pet.). The following are listed among a municipality's governmental functions: "parks and zoos" and "recreational facilities, including but not limited to swimming pools, beaches, and marinas." Tex. Civ. Prac. & Rem. Code Ann. § 101.0215(a)(13), (23).

Chapter 75 of the Civil Practices and Remedies Code, commonly known as the Recreational Use Statute, provides that in circumstances where a governmental unit would be liable under the TTCA, the Recreational Use Statute controls in limiting the liability of the governmental unit. Id. § 75.003(g) (Vernon 2005). Additionally, the Legislature further clarified the applicability of the Recreational Use Statute within the TTCA: "To the extent that Chapter 75 limits the liability of a governmental unit under circumstances in which the governmental unit would be liable under this chapter, Chapter 75 controls." Id. § 101.058 (Vernon 2005). Chapter 75, which applies to all governmental units whether or not they charge a fee to enter the premises, provides that a recreational use includes activities such as hiking, picnicking, disk golf, and "any other activity associated with enjoying nature or the outdoors." Id. §§ 75.001, 75.003.

The City argues that the TTCA's list of governmental functions should be interpreted to include the operation of a golf course. Specifically, it contends that the TTCA's plain language provides that the list of governmental functions is non-exclusive, both in relation to those items that are considered as governmental functions, and in relation to those items that are considered recreational facilities. The City also cites the Recreational Use Statute's broad definition of "recreation" and argues that a golf course is within the type of venues listed by the Legislature under the non-exhaustive category of governmental functions generally and of recreational facilities specifically.

Polanco, on the other hand, argues that the operation of a golf course is a proprietary function and an amusement for which the City has no immunity. Polanco contends that a golf course is a proprietary function because the City has admitted that the golf courses are intended for the benefit of San Antonio residents. Polanco then argues that the principle of ejusdem generis is necessary to give effect to the governmental-proprietary dichotomy and the uncommon usage of the recreational-amusement dichotomy. Polanco asserts that according to this canon of construction, courts should construe the words according to the same kind or class as the ones expressly mentioned. Polanco thus argues that because recreational facilities under Section 101.0215(a)(23) specifically include swimming pools, beaches, and marinas, application of the ejusdem generis principle limits recreational facilities to those facilities containing bodies of water for either swimming or boating.

While neither the TTCA nor the Recreational Use Statute specifically list golf courses as an example of a recreational facility, we conclude that golf courses encompass the type of activity "associated with enjoying...the outdoors" as described in the Recreational Use Statute. Additionally, while golf courses are not among the governmental functions listed in Section 101.0215(a), the statute provides that this list is nonexclusive. Golf courses are similar to several enumerated governmental functions, such as "parks and zoos," and they surely fit within the broad recreational facility definition: "recreational facilities, including but not limited to swimming pools, beaches, and marinas." Tex. Civ. Prac. & Rem. Code §§ 75.001, 101.0215(a). Therefore, without holding that any one of the governmental functions listed perfectly describes golf courses, we hold that the ownership and management of golf courses falls under the classifications of "parks and zoos" and "recreational facilities." (1)

This court has held that "all activities associated with the operation of one of the government functions listed in section 101.0215(a) are governmental and cannot be considered proprietary, regardless of the city's motive for engaging in the activity." City of San Antonio v. Butler, 131 S.W.3d 170, 177-78 (Tex. App.-San Antonio 2004, no pet.) (holding that city's contracting with vendors to provide food and beverages for events in the Alamodome falls within the governmental function of maintaining a civic or convention center). We therefore conclude that the City's activities as alleged in this lawsuit fall within the City's governmental function of owning, operating, and maintaining a golf course. Having concluded that the functions at issue fall within at least two of the classifications of governmental functions listed in subsection (a), we are precluded from holding that any of the activities related to the management of the golf course are proprietary. See Tex. Civ. Prac. & Rem. Code Ann. § 101.0215(c); City of Weslaco v. Borne, 210 S.W.3d 782, 792-93 (Tex. App.-Corpus Christi 2006, pet. denied).

Waiver under the TTCA

Having determined that operation of golf courses is a governmental function, we must now consider whether Polanco pleaded a valid waiver of the City's sovereign immunity under the TTCA, which is required for the trial court to have jurisdiction over the City. Ethio, 164 S.W.3d at 757. Sovereign immunity is waived under the TTCA for only two types of claims: (1) those involving property damage, personal injury, or death arising from the operation or use of a motor-driven vehicle or motor-driven equipment; and (2) those involving personal injury or death caused by a condition or use of tangible personal property or real property. Tex. Civ. Prac. & Rem. Code Ann. § 101.021. Polanco's tort allegations against the City do not allege conduct falling within any of these areas because it has not alleged personal injury or death, nor has it alleged a claim that involves property damage proximately caused by the negligent operation or use of a motor-driven vehicle or motor-driven equipment. Moreover, the TTCA does not waive sovereign immunity for intentional torts. Id. § 101.057 (Vernon 2005) ("This chapter does not apply to a claim...arising out of assault, battery, false imprisonment, or any other intentional tort...."); Tex. River Barges, Inc. v. City of San Antonio, 21 S.W.3d 347, 356 (Tex. App.-San Antonio 2000, pet. denied) (under the Texas Tort Claims Act, a municipality is immune from liability for intentional torts, including that of conversion). Accordingly, we sustain the City's first issue.Contract Claims

In its second issue, the City argues it has immunity from liability as to Polanco's contract claims based on its interpretation of chapter 271 of the Local Government Code. Section 271.152 of the Local Government Code 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.

Tex. Loc. Gov't Code Ann. § 271.152 (Vernon 2005).

A local government entity is defined to include a municipality. Id. § 271.151(3) (Vernon 2005). A "contract subject to this subchapter" is defined as "a written contract stating the essential terms of the agreement for providing goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity." Id. at (2). Damages are limited as follows:

(a) The total amount of money awarded in an adjudication brought against a local governmental entity for breach of a contract subject to this subchapter is limited to the following:

(1) the balance due and owed by the local governmental entity under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration;

(2) the amount owed for change orders or additional work the contractor is directed to perform by a local governmental entity in connection with the contract; and

(3) the interest as allowed by law.

(b) Damages awarded in an adjudication brought against a local governmental entity arising under a contract subject to this subchapter may not include:

(1) consequential damages, except as expressly allowed under Subsection (a)(1);

(2) exemplary damages; or

(3) damages for unabsorbed home office overhead.

Id. § 271.153 (Vernon 2005).

Polanco argues that it contracted to provide goods and services and that there is uncontroverted evidence the City kept the equipment and inventory used as part of the goods and services. Polanco further asserts there is a balance due and owing by the City to Polanco under the terms of the contract for increased costs of performance or based upon additional work directed by the City. Polanco contends the balance due is at least $125,000 for the goods the City has kept.

However, the City argues that the contract with Polanco does not waive its immunity from suit because the agreement in question is not a contract whose essential elements provide goods or services to the City. The City also argues that even if the contract were one for goods and services, the City continues to be immune from suit because Polanco failed to claim any damages allowed by the statute and therefore failed to state a claim within the statute's waiver of immunity.

We agree with the City and hold that regardless of whether the contract was for goods or services, Polanco failed to claim allowable damages under section 271.153. Under the contract, the City was not required to pay Polanco anything; rather, Polanco was obligated to pay the City a commission. Therefore, contrary to Polanco's assertions, section 271.153(a) does not provide an avenue for recovery as there is no balance due from the City to Polanco, nor is there any amount due from change orders, additional work, or interest. Because Polanco has not claimed any damages within the limitations of Chapter 271 of the Local Government Code, we sustain the City's second issue.

Inverse Condemnation

In its third issue, the City argues that it has immunity from liability as to Polanco's inverse condemnation claim. In response, Polanco argues that sovereign immunity does not shield the City from an action for compensation under the takings clause of Article I, Section 17 of the Texas Constitution. That provision provides "[n]o person's property shall be taken, damaged or destroyed or applied to public use without adequate compensation being made, unless by the consent of such person." Tex. Const. art. I, § 17. Specifically, Polanco claims that "the City affirmatively took and kept its property and then retagged it for use at Ordinance No. 2006-08-31-0964."

Although sovereign immunity bars Polanco's breach of contract and tort claims, Polanco correctly asserts that sovereign immunity does not bar an action for compensation under the takings clause. See Gen. Servs. Comm'n v. Little-Tex, 39 S.W.3d 591, 598 (Tex. 2001). Whether particular facts constitute a taking is a question of law. Id. The Texas Supreme Court has outlined a three-part test to identify a constitutional taking: (1) the State intentionally performed certain acts, (2) that resulted in a "taking" of property, (3) for public use. Id. "To meet the first prong, the State must have the requisite intent to be acting under its eminent domain powers, rather than merely withholding property or money in a contract dispute." Smith v. Lutz, 149 S.W.3d 752, 760 (Tex. App.-Austin 2004, no pet.). In a contractual situation, when acting within a color of right to take or withhold property, the State is acting similar to a private citizen and not under any sovereign powers. Little-Tex, 39 S.W.3d at 599; Lutz, 149 S.W.3d at 760. Courts have held that in such a circumstance, the State only has an intent to act within the scope of the contract and does not have the requisite intent to take under its eminent domain powers. Little-Tex, 39 S.W.3d at 599; Lutz, 149 S.W.3d at 760-61.

In Lutz, the University of Texas obtained possession of certain software through a contract with Smith and when a dispute arose over Smith's performance and the University's payments, the University denied Smith access to or possession of the software. Lutz, 149 S.W.3d at 761. The Lutz court held that when the University refused Smith possession of the software, it was acting under color of its contractual rights and therefore it did not have the requisite intent to take Smith's property by eminent domain. Id.

Similarly, the City obtained possession of Polanco's property by virtue of the contract with Polanco. When a dispute arose over Polanco's performance and failure to make payments to the City, the City denied Polanco access to or possession of the property. By doing so, the City was acting under color of its contractual rights; it did not have the requisite intent to take Polanco's property by eminent domain. See id. Additionally, Polanco voluntarily entered into the contract with the City. When a party consents to the government's possession of its property, there can be no constitutional taking. Id. The contract between the City and Polanco specifically stated:

Upon any such expiration or termination of this Contract, Concessionaire shall quit and peacefully relinquish control of the Food and Beverage Concession to City, and City, upon or at any time after such expiration or termination, may, without further notice, enter upon and re-enter the Clubhouses and possess itself thereof, and by force, summary proceedings, ejectment or otherwise, and may remove Concessionaire and all other persons and property....

Because Polanco voluntarily entered into the contract with the City and because the City was acting under color of its contractual rights when taking possession of Polanco's property, we sustain the City's third issue.

Declaratory Judgment

In its final issue, the City argues that Polanco cannot avoid immunity "by crafting its claim as one for a declaratory judgment." Polanco amended its Original Petition and asserted the following claims under the Declaratory Judgment Act:

a) POLANCO requests that the Court declare rights, status or other legal relations regarding provisions within the aforementioned contract, to wit:

i) POLANCO requests that the Court declare that the aforementioned contract resulted in a partnership and/or joint venture/adventure by and between POLANCO and the CITY;

ii) POLANCO requests that the Court declare that the aforementioned contract pertains to a proprietary function;

iii) POLANCO requests that the Court declare that the aforementioned contract created a duty of good faith and fair dealing; and/or,

iv) POLANCO requests that the Court declare that the CITY breached its duties, as pled in this petition herein.

In its appellate brief, Polanco now claims that because it did not sue the City under the Declaratory Judgment Act for actual money damages, the City has no immunity from suit.

The Texas Supreme Court has outlined two distinct types of declaratory judgment suits against the State. The first type, brought against government officials who allegedly act without legal or statutory authority, seeks to compel the officers to act within their official capacity; these are not considered suits against the State and therefore do not implicate sovereign immunity. City of San Antonio v. Reed S. Lehman Grain, Ltd., No. 04-04-00930-CV, 2007 WL 752197 *3 (Tex. App.-San Antonio 2007, pet. denied) (mem. op.). The second type is a suit brought against government officials seeking to establish a contract's validity, to enforce performance under a contract, or to impose contractual liabilities. Id. This second category of declaratory actions is considered a suit against the State because it seeks to control state action or impose liability on the State and therefore may not be maintained without legislative permission. Id.

We conclude that Polanco's declaratory judgment claim fits into the second category of declaratory actions because it seeks to establish a contract's validity or enforce performance under a contract. As outlined above, the contract, which Polanco voluntarily signed, contained specific details regarding access to the property in the event of a contract termination. When the State acts within a color of right to withhold property under a contract, "a suit seeking declaratory relief concerning the ownership, possession, or access to that property is a suit based in contract, for which legislative consent must be obtained." Lutz, 149 S.W.3d at 760. We therefore conclude that Polanco's claim under the Declaratory Judgment Act is an improper attempt to circumvent the State's sovereign immunity from suit. Because Polanco lacked legislative consent, the City is immune from suit for Polanco's declaratory judgment claim. The City's fourth issue is sustained.

* * *

For the full text of this opinion, see: http://www.4thcoa.courts.state.tx.us/opinions/htmlopinion.asp?OpinionId=20625

Outcome: Based on the forgoing, we hold the trial court erred by denying the City's plea to the jurisdiction regarding the tort, contract, takings, and declaratory judgment claims. We therefore reverse the trial court's order in all respects and render judgment that the claims against the City are dismissed.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: None