City of Pasadena, Jeff Wagner and Robin Green v. APTVV, LLC and APTPCY, LLC

Houston, TX – Civil Litgation lawyer represented Appellee with seeking the return of money paid for utility and trash-collection billing.

APTVV, LLC owns the Victoria Village Apartments, a 612-unit apartment

complex in the City of Pasadena. APTPCY, LLC owns the Courtyard Apartments,

a 195-unit apartment complex also in the City of Pasadena. The two entities will be

referred to collectively as Apartment Owners.

The Apartment Owners have sued the City of Pasadena and two city

officials in a declaratory judgment action seeking the return of money paid to the

City through utility and trash-collection billing, plus attorney's fees. They allege

that the City implemented a waste-removal scheme granting an exclusive contract

to Waste Management to provide trash-removal services to all non-residential

customers in the City, and requiring all non-residential trash-removal customers to

use Waste Management and to pay whatever amount the City dictated.

Through a 2018 City ordinance, the City specified a base rate for Waste

Management's services. The base rate set the maximum that Waste Management

was allowed to charge non-residential customers for trash removal. The rate varied

depending on the quantity and frequency of trash-removal services.

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Through the same 2018 City ordinance, the City imposed a 25% City Fee on

trash-removal bills that were paid, meaning that 25% of the money Waste

Management received as payment for trash-removal services for non-residential

customers would be forwarded to the City in exchange for the exclusive right to

collect trash within the city limits.1 The City's fee schedule stated that the 25%

City Fee was included in the base rate amount set by the City.

One of the bills in dispute charged for the removal of trash from front-endload, 8-yards containers four times per week. The City's fee schedule listed a base

rate for that monthly service of $507.58, which included the 25% City Fee. The

record contains bills sent from before and after the 2018 ordinance and fee

schedule took effect. The pre-2018-ordinance bill includes a single line item for

trash service without specifically noting the 10% City Fee and then other line items

for city taxes. According to the record evidence, the then-applicable 10% City Fee

was included in the base rate figure. The post-2018-ordinance bills are structured

differently. There is a line item for the base rate, a second line item for the 25%

City Fee, and other line items for city taxes. The bills in the record generally

increased about 16% after the 2018 ordinance and its 25% City Fee were applied.

The Apartment Owners sued, alleging that the City Fee is an impermissible

tax by the City that is being imposed on commercial customers, who are forced to

1 Before 2018, the City Fee had been 10%.

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accept trash-removal services from Waste Management under the City-created

monopoly and forced to pay a 25% tax on the mandated services. The Apartment

Owners characterize the 25% City Fee as a "kickback.” According to the

Apartment Owners, if they were to refuse to accept trash-removal services under

the monopoly or to pay the 25% kickback to the City, the City could pursue both

civil remedies for uncollected solid waste constituting a nuisance and criminal

sanctions for non-compliance.

The Apartment Owners' declaratory judgment action against the City seeks

(1) a determination that the 25% City Fee is an illegal and unconstitutional tax

applied to local businesses through a trash-collection scheme, (2) return of past

payments of the City Fee, and (3) attorney's fees. They assert that they have paid

the illegal fee under duress because, otherwise, they would have faced civil and

criminal penalties.

In the same declaratory judgment action, APTVV challenges a "customer

service inspection certification charge” that appeared on its August 2016 utility bill

in the amount of $12,240. APTVV alleges it paid the fee to the City under the

same duress and has demanded its refund. The City allegedly responded that the

fee represented a $20-per-unit inspection charge for the 612-unit apartment

complex. APTVV disputes that any City official inspected all 612 units at its

complex and argues that, aside from the charge having no factual basis, it is

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unconstitutionally excessive. APTVV includes in its declaratory judgment action a

claim for the return of the $12,240 inspection certification charge it paid to the City

under duress.

Along with the declaratory judgment action against the City, the Apartment

Owners suit includes a breach-of-contract claim against Waste Management

seeking monetary damages.

The City and its officials moved to dismiss the claims against them on the

ground that the City enjoys governmental immunity from suit and all claims

against the officials are claims against the City. The Apartment Owners responded.

They emphasized that their burden in defeating a plea to the jurisdiction is only to

allege facts that, if taken as true, establish jurisdiction, not to prove their

allegations at this preliminary stage of the litigation. And they argued that the City

does not have immunity against suits seeking declaratory relief and the return of

money had and received, relying on Federal Sign v. Tex. S. Univ., 951 S.W.2d 401,

404 (Tex. 1997), and Nivens v. City of League City, 245 S.W.3d 470, 475 (Tex.

App.—Houston [1st Dist.] 2007, pet. denied).

The trial court denied the City's plea to the jurisdiction, and the City and its

officials appealed.2 They raise five issues, which we quote below:

2 Waste Management is not a party to this appeal.

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1. Appellees' claim for money had and received is barred by governmental

immunity because there is no statutory waiver of immunity for this or any

other quasi-contractual claims.

2. Appellees' claim against the City for declaratory relief, which merely

couches their claim for monetary damages as a request for declaratory relief,

is barred by the City's governmental immunity because the Declaratory

Judgment Act is merely a procedural device for claims over which a court

has subject matter jurisdiction.

3. Because Appellees are neither a party nor third-party beneficiary to the

City's contract with Waste Management, Appellees lack standing to

challenge the City's exclusive waste contract with Waste Management.

4. The City's exclusive franchise contract with Waste Management for

commercial solid waste disposal within the city is permissible under Texas

statute and constitutional.

5. Appellees fail to and cannot assert a valid ultra vires claim against Mayor

Jeff Wagner, and Robin Green, the City's Public Works Director, because

Mayor Wagner and Green did not enter into the Contract with Waste

Management and, as a result, neither Wagner nor Green could be a

responsible government actor for Appellees' ultra vires claim.

Plea to the Jurisdiction

The City contends that the Apartment Owners did not overcome the

presumption of governmental immunity and that there is no statutory waiver of

immunity for these contractual and "quasi-contractual” claims. As a result, the City

argues, the trial court erred in denying its plea to the jurisdiction.

A. Standard of review

A de novo standard of review applies to a trial court's ruling on a plea to the

jurisdiction based on governmental immunity. See Tex. Dep't of Parks & Wildlife

v. Miranda, 133 S.W.3d 217, 225–26 (Tex. 2004); Tex. S. Univ. v. Gilford, 277

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S.W.3d 65, 68 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). The plaintiffs

have the burden to allege facts that affirmatively demonstrate the trial court's

subject-matter jurisdiction. Gilford, 277 S.W.3d at 68 (citing Tex. Ass'n of Bus. v.

Tex. Air Control Bd., 852 S.W.2d 440, 446 (Tex. 1993)). We construe the

pleadings liberally and accept the plaintiff's factual allegations as true. See

Miranda, 133 S.W.3d at 226–27; Gilford, 277 S.W.3d at 68.

B. Governmental immunity

Governmental immunity defeats a trial court's subject matter jurisdiction

and is properly raised in a plea to the jurisdiction. Nivens, 245 S.W.3d at 474. It

protects political subdivision of the state, like municipalities, from suit when it

applies. Id. A party suing a municipality engaged in a government function must

establish consent to sue, either through express legislative permission or by statute.

See id.

But governmental immunity will not apply if a plaintiff alleges that illegal

tax payments were made because of duress, fraud, or mutual mistake of fact. Id. In

that context, the money collected from an illegal tax is not treated as the

municipality's property and subject to immunity; instead, "an illegally collected

fee should be refunded if paid as a result of fraud, mutual mistake of fact, or

duress, without respect to waiver of sovereign immunity. No legislative consent to

sue is needed under these circumstances.” Id. Thus, when plaintiffs seek

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declaratory or injunctive relief, including a refund of illegally collected tax

payments, consent to sue is not required. Id.

In Nivens, taxpayers asserted claims for money had and received but did not

seek declaratory or injunctive relief and did not allege that their payments resulted

from fraud, mutual mistake of fact, or duress. Id. Thus, this Court held that their

claims were barred by governmental immunity. Id.; see Tara Ptrs., Ltd. v. City of

S. Houston, 282 S.W.3d 564 (Tex. App.—Houston [14th Dist.] 2009, pet. denied)

(holding that claims were barred by governmental immunity because ratepayers

did not plead that they paid under duress).

Later, in Anheuser-Busch, L.L.C. v. Harris County Tax Assessor-Collector,

516 S.W.3d 1 (Tex. App.—Houston [1st Dist.] 2016, pet. denied), a taxpayer was

assessed over $600,000 in penalties and interest on its delinquent tax payment. Id.

at 4. The taxpayer paid the penalty to avoid additional penalties and interest and

then sued for its return. Id. at 5. The tax assessor-collector argued that it had

governmental immunity and that the trial court lacked subject-matter jurisdiction.

Id. Relying on Nevins, we held that no legislative consent to sue was required

because the taxpayer sought a declaratory judgment and alleged it paid the

improper penalties and interest under duress. Id. Immunity did not protect the tax

assessor-collector from suit; consent to sue was not required. Id.

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Like the Anheuser-Busch taxpayer, the Property Owners brought a

declaratory judgment action, asserting a claim for money had and received and

requesting return of allegedly illegal tax payments. This scenario fits within our

precedent and compels the conclusion that no legislative consent to sue is required

and no immunity from suit exists. Nivins, 245 S.W.3d at 474; Anheuser-Busch, 516

S.W.3d at 6.3

The City's reliance on Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006),

is misplaced in that it is a breach-of-contract case involving a claim for

consequential damages. Likewise, the City's merits arguments that its fee is

constitutional and that the Apartment Owners have simply misread their bill is

misplaced. At this stage of the litigation, our review is limited to whether the

plaintiffs have asserted facts that demonstrate the trial court's subject matter

jurisdiction, taking all factual assertions in the plaintiffs' pleadings as true. See

Miranda, 133 S.W.3d at 226–27; Gilford, 277 S.W.3d at 68. Whether the 25% City

Fee is a legitimate fee or an unconstitutional tax is not before us.

Because we conclude that the trial court did not err in denying the plea to the

jurisdiction and that the merits arguments are not before us, we overrule the City's

first, second, and fourth issues.

3 The City acknowledges the Nivens opinion but only through a single cf. citation

with no analysis.

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C. Standing to claim breach of contract

Next, the City argues that the Apartment Owners lack standing to bring a

breach-of-contract claim because the Apartment Owners are neither signatories nor

third-party beneficiaries of the contract between the City and Waste Management.

Thus, the City argues, they cannot "challenge or enforce” the contract.

The Apartment Owners do not assert a breach-of-contract claim against the

City. Their breach-of-contract claim is against Waste Management only. Waste

Management is not a party to this appeal and is not pursuing a standing challenge

on the sole breach-of-contract claim in this suit.

The City may not seek to limit the Apartment Owners' claims against or

recovery from nonappealing codefendants in its appeal of an adverse ruling. See

Jackson v. Fontaine's Clinics, Inc., 499 S.W.2d 87, 92 (Tex. 1973) (when

appealing defendant challenged plaintiffs' right to recover from nonappealing

codefendant, Court held that appealing defendant "may not complain of errors

which do not injuriously affect him or which merely affect the rights of others.”).

Moreover, the Apartment Owners' declaratory judgment action against the City

does not seek to "challenge or enforce” the contract between the City and Waste

Management, as the City contends, but, rather, to obtain the return of allegedly

unconstitutional taxes imposed under the terms of a city ordinance.

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We overrule the City's third issue.4

D. Ultra Vires argument does not support reversal of plea ruling

In the fifth and final issue, the City and its officials argue that no part of the

Apartment Owners' suit survives the assertion of governmental immunity because

the claims against the officials are not true ultra vires claims.

This appeal challenges a single ruling by the trial court—that the City lacks

governmental immunity from suit and that its plea to the jurisdiction is therefore

denied. We have already concluded that governmental immunity is unavailable to

force the dismissal of the Apartment Owners' claims against the City. Whether the

city officials were acting within their authority or ultra vires cannot provide

another means for reversing the ruling being challenged. Thus, this is not an issue

that is currently before us.

Had the City prevailed on appeal in establishing governmental immunity,

then the viability of the continued claims against the city officials as a suit for ultra

vires acts would possibly be before us. But with our holding that the trial court did

4 To the extent the City's standing complaint is that the Apartment Owners have no

particularized injury given that others similarly pay the fee, the Texas Supreme

Court's recent decision in Perez v. Turner, No. 20-0382, — S.W.3d —, 2022 WL

2080868 (Tex. June 10, 2022), forecloses it. A plaintiff has standing to seek

reimbursement of a fee because the plaintiff is out-of-pocket the money paid for

the fee. Id. at *7. The fee does not have to be declared invalid to grant the plaintiff

standing. Id. (noting that the Court's standing analysis focuses on the nature of the

injury, not the merits of the claim). A small fee paid is a particularized injury to

establish standing, regardless of whether the merits of the legal challenge to the

fee ultimately are resolved in the plaintiff's favor. See id. at *6–7.

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not err in rejecting the claim of governmental immunity or in denying the plea to

the jurisdiction on that ground, the viability of claims against city officials

individually is outside the issue being appealed, which is jurisdictional.

We overrule the fifth issue

We affirm.