Court Opinion

ID: 3119008
Source: CourtListenerOpinion
Date Created: 2015-10-16 08:12:57.672553+00
Date Added: 2024-06-11T11:53:00.434094
License: Public Domain

Opinion issued March 19, 2013.

                                    In The

                             Court of Appeals
                                    For The

                         First District of Texas
                         ————————————
                             NO. 01-11-01108-CV
                           ———————————
                      CITY OF FREEPORT, Appellant
                                       V.
                BRIARWOOD HOLDINGS, L.L.C., Appellee

                   On Appeal from the 239th District Court
                          Brazoria County, Texas
                        Trial Court Case No. 55780

                         MEMORANDUM OPINION

      The City of Freeport brings this interlocutory appeal challenging the trial

court’s denial of its plea to the jurisdiction. See TEX. CIV. PRAC. & REM. CODE

ANN. §51.014(a)(8) (West Supp. 2012). Briarwood sued the City and the Freeport
Economic Development Corporation (FEDC) to set aside a deed to real property

from FEDC to the City and to have the real property conveyed to Briarwood,

asserting claims for common-law and statutory fraud, and trespass. Briarwood also

sued FEDC for breach of lease.        Briarwood sought specific performance and

attorney’s fees for breach of contract or, alternatively, money damages for the

value of the property and lost rent, lost profits, and diminution in value of adjacent

properties.

      The City and FEDC filed a plea to the jurisdiction, although FEDC later

abandoned its plea. The trial court denied the City’s plea. The City appeals,

contending the trial court erred in denying the plea because Briarwood failed to

allege facts demonstrating a waiver of the City’s immunity from suit. We reverse

and render a judgment of dismissal of Briarwood’s claims other than its breach of

contract claim, which we remand to give Briarwood the opportunity to replead.

                                    Background

      In 1995, the City created the Freeport Economic Development Corporation

under the Development Corporation Act.1 In 2003, FEDC and the City entered

into a Development Agreement with Freeport Waterfront Properties, L.P. (FWP).

The purpose of the 2003 Development Agreement was to develop a marina in the

City. Under the 2003 Development Agreement, FWP would acquire real property

1
      See TEX. LOC. GOV’T CODE §§ 501.001–.453 (West Supp. 2012).
                                          2
to be used for the marina. One such parcel of real property designated in the

Agreement came to be known as the “Henderson land” or “Henderson tract.” The

Henderson tract was a critical piece of land because, without it, the other tracts

could not be utilized as a marina. Thus, the City agreed to use “its best efforts” to

obtain and convey the Henderson land to FWP, including using its power of

eminent domain to obtain the land, if necessary.           The 2003 Development

Agreement also provided that the City and FEDC would “execute, acknowledge

and deliver, after the date hereof, without additional consideration, such further

assurances, instruments and documents, and shall take further actions, as [FWP] or

the City shall reasonably request of the other in order to fulfill the intent of this

Agreement and the transactions contemplated thereby.”

      Later, with the City’s approval, FWP assigned its interest under the 2003

Development Agreement to Freeport Marina, L.P. Although the record does not

show their specific relationship, it is undisputed that Freeport Marina and

Briarwood are “affiliates” of FWP, as that term is defined in the 2003

Development Agreement.2

2
      The 2003 Development Agreement defines “affiliate” as follows:

                                         3
      FEDC acquired several tracts of land and sold them to Freeport Marina

pursuant to the 2003 Development Agreement. FEDC also instituted eminent

domain proceedings to acquire the Henderson tract, but, in May 2006, FEDC

settled with the owners of the Henderson tract.             Their settlement agreement

included an agreement to move an existing business on the land to another location

and to hold the deed to the Henderson tract in escrow until the move was

completed. FEDC spent $900,000 moving the business, acquired the deed to the

Henderson tract from escrow, and filed the deed on January 12, 2009.

      In the meantime, however, other plans and agreements relating to the marina

were going forward. On February 8, 2007, FEDC and Freeport Marina entered

into another Development Agreement related to the marina.                Under the 2007

Development Agreement, FEDC assumed the duties and obligations of the “Project

Developer” under the 2003 Development Agreement.                 FWP was the original

Project Developer under the 2003 Development Agreement, but had assigned its

interest to Freeport Marina. Also on February 8, 2007, FEDC and Freeport Marina

entered into a Lease Agreement for the marina facility.

            “Affiliate” of a specified person means a person who (a) is directly
            or indirectly controlled by, or under common control with, the
            specified person; (b) owns directly or indirectly thirty-five percent
            (35%) or more of the equity interests of the specified person; or (c)
            is a general partner, officer, director, non-financial institution trustee
            or fiduciary of the specified person or of any person described in (a)
            or (b).
                                            4
       At about this same time, Briarwood and FEDC entered into a Ground Lease

Agreement, in which FEDC leased the real property for the marina from

Briarwood. The 2007 Development Agreement also required the owners of the

Henderson land to lease it to FEDC. The City was not a party to the 2007

Development Agreement, the Lease Agreement, or the Ground Lease Agreement.

       On May 15, 2007, FEDC director Lee Cameron sent an email to Walker

Royall, who controlled FWP, Freeport Marina, and Briarwood and was designated

as the representative for Briarwood in the 2007 Development Agreement.

Cameron explained to Royall that FEDC’s agreement to move the owners of the

Henderson tract was “predicated on you buying the Henderson land for $200,000.”

He further informed Royall that the deed would be in escrow until the move was

complete, that the FEDC Board and the City Council were aware of and concurred

in the decision to sell the Henderson land to Briarwood for $200,000, and that the

FEDC Board “is unanimous in their support of the sale to Briarwood and that is not

about to change.”    Cameron concluded by stating, “I think this E-mail will

establish the intent of [F]EDC and I think it is legally binding. You have nothing

to worry about.”    On May 24, 2007, the FEDC board met and unanimously

approved the sale of the Henderson land to Briarwood for $200,000. However,

FEDC did not sell the land to Briarwood. Instead, on October 9, 2009, FEDC sold

it to the City.

                                        5
      Briarwood sued FEDC and later added the City as a defendant. Shortly

thereafter, FEDC sued Royall, FWP, Freeport Marina, Briarwood, and others, and

the trial court consolidated the two suits. Both the City and FEDC filed a plea to

the jurisdiction, which FEDC later abandoned.        Briarwood also moved for

summary judgment for specific performance, seeking to have the Henderson land

transferred to Briarwood.    The trial court denied both the City’s plea to the

jurisdiction and Briarwood’s motion for summary judgment. The City appealed

the denial of its plea to the jurisdiction. See TEX. CIV. PRAC. & REM. CODE ANN.

51.014(a)(8) (authorizing interlocutory appeal of denial of governmental entity’s

plea to the jurisdiction).

                                   Discussion

A.    Sovereign and Governmental Immunity

      Sovereign immunity generally protects the state against lawsuits for money

damages; governmental immunity provides protection to subdivisions of the state,

including cities, and is derived from the state’s sovereign immunity.     City of

Houston v. Williams, 353 S.W.3d 128, 134 (Tex. 2011); Smith v. Galveston Cnty.,

326 S.W.3d 695, 697–98 (Tex. App.—Houston [1st Dist.] 2010, no pet.) (citing

Mission Consol. Indep. Sch. Dist. v. Garcia, 253 S.W.3d 653, 655 (Tex. 2008) and

Harris Cnty. v. Sykes, 136 S.W.3d 635, 638 (Tex. 2004)). “Sovereign immunity

has two components: immunity from suit and immunity from liability.” Williams,

                                        6
353 S.W.3d at 134. Immunity from suit exists, and the state may not be sued,

absent an express waiver of immunity by the Legislature. Id. Governmental

immunity from suit may also be waived, “but we defer to the Legislature to do so

by statute.” Id. Immunity from liability protects the state from money judgments,

but is a defense and not a jurisdictional bar as is immunity to suit. Id.

      Both forms of immunity must be waived in order to recover a money

judgment against the state. See id. A governmental entity may waive immunity

from liability by entering into a contract with a private party, but unless the

Legislature has waived immunity from suit, no suit can be maintained. See id.

Conversely, “immunity from liability shields the state from money judgments,

even when the Legislature has given consent to sue.” Id.

B.    Plea to the Jurisdiction

      A plea to the jurisdiction based on governmental immunity from suit is a

challenge to the trial court’s subject matter jurisdiction. See City of Waco v.

Kirwan, 298 S.W.3d 618, 621 (Tex. 2009); Tex. Dep’t of Parks & Wildlife v.

Miranda, 133 S.W.3d 217, 225–26 (Tex. 2004). “A plea questioning the trial

court’s jurisdiction raises a question of law that we review de novo.” State v.

Holland, 221 S.W.3d 639, 642 (Tex. 2007).

      When, as in this case, a plea to the jurisdiction challenges the sufficiency of

the plaintiff’s jurisdictional pleadings, we must determine whether the plaintiff has

                                           7
alleged facts that affirmatively demonstrate the court’s jurisdiction. See Miranda,
133 S.W.3d at 226. We construe the pleadings liberally in favor of the plaintiff

and look to the pleader’s intent. Id.; Smith, 326 S.W.3d at 697–98. The party

asserting the plea must show that, “even if all the allegations in the plaintiff’s

pleadings are taken as true, there is an incurable jurisdictional defect apparent from

the face of the pleadings, rendering it impossible for the plaintiff’s petition to

confer jurisdiction on the trial court.” Anderson v. Am. Fed’n of Gov’t Emps.,

AFL-CIO, 338 S.W.3d 709, 712–13 (Tex. App.—Houston [1st Dist.] 2011, pet.

denied). If the pleading contains facts that do not affirmatively demonstrate, but

also do not affirmatively negate, jurisdiction, “it is an issue of pleading sufficiency

and the plaintiff should be given an opportunity to amend the pleadings.” Kirwan,
298 S.W.3d at 622 (quoting Miranda, 133 S.W.3d. at 2226–27). If the pleadings

affirmatively negate the existence of jurisdiction, then a plea to the jurisdiction

may be granted without allowing the plaintiff an opportunity to amend its petition.

Smith, 326 S.W.3d at 698 (citing Miranda, 133 S.W.3d at 227).

C.    Analysis

      The City contends that Briarwood cannot allege facts showing a waiver of

the City’s immunity from suit and, because the jurisdictional defects cannot be

cured, all of Briarwood’s claims should be dismissed with prejudice. In response,

                                          8
Briarwood asserts multiple bases for affirming the trial court’s order.3 We will

address Briarwood’s arguments for wholesale affirmance and then analyze whether

the City affirmatively negated jurisdiction with respect to each of Briarwood’s

claims.

      1.     Waiver of Immunity by Conduct

      Relying on Texas Southern University v. State Street Bank & Trust Co., 212
S.W.3d 893, 908 (Tex. App.—Houston [1st Dist.] 2007, pet. denied), Briarwood

asserts that the City waived its immunity by conduct. The City responds that

waiver by conduct is no longer viable in light of Sharyland Water Supply Corp. v.

City of Alton, 354 S.W.3d 407, 414 (Tex. 2011) and, that, even if it were, it would

not apply here because the facts in this case are not like the “extraordinary factual

circumstances” involved in Texas Southern University.

      We do not address the City’s contention that Sharyland categorically

sounded the death knell on waiver of immunity by conduct, because we agree with

the City’s assertion that, even if it were possible to establish such a waiver in any

case, it is not possible here. In Texas Southern University, the governmental unit

3
      Although Briarwood argued in the trial court that Texas Rule of Civil Procedure
      39 operates to waive the City’s immunity, it has abandoned that argument on
      appeal. Accordingly, we do not address it. See Wojcik v. Wesolick, 97 S.W.3d
335, 336–37 (Tex. App.—Houston [14th Dist.] 2003, no pet.) (citing Hall v.
      Tomball Nursing Ctr., Inc., 926 S.W.2d 617, 619 (Tex. App.—Houston [14th
      Dist.] 1996, no writ) (holding that court of appeals need not address ground in
      motion for summary judgment that appellee abandons on appeal).
                                         9
induced a private party into a contract with assurances, including a letter from its

general counsel, that a contract would be valid and enforceable, and then, after

receiving equipment and services worth $13 million, claimed the contract was not

valid and refused to pay. 212 S.W.3d at 908. This court distinguished prior Texas

Supreme Court cases that refused to find waiver of immunity by conduct because

“[n]either case involved a situation in which a contract had been fully performed

and the State refused to pay anything.” Id. at 905.

      This case differs from Texas Southern University in two important respects.

First, the record contains no evidence that Briarwood has fully performed and

conferred millions of dollars worth of benefits upon the City, only to be denied any

return consideration. Second, in Texas Southern University, the governmental

entity claiming immunity was the very entity that had assured the plaintiff that the

contract would be valid and enforceable. See id. Here, the assurances did not

come from the City, the entity Briarwood seeks to charge with a waiver by

conduct; instead, the email suggesting the proposed transaction was “legally

bindng” and that Royall had “nothing to worry about” came from FEDC, which,

according to Briarwood, has “already conceded subject-matter jurisdiction.”

      We conclude that waiver by conduct, if it can ever be established, does not

exist here. Sharyland, 354 S.W.3d at 414; Tex. S. Univ., 212 S.W.3d at 908.

                                         10
      2.     The City “stepped into the shoes” of FEDC

      Briarwood argues that, under Texas law, the City, having bought the

Henderson tract with knowledge of Briarwood’s interest in it, steps into FEDC’s

shoes and can be compelled to convey title to Briarwood. Therefore, Briarwood

reasons, the City should also step into the shoes of FEDC in jurisdictional terms,

and FEDC’s submission to the trial court’s subject matter jurisdiction should

operate to waive immunity and create jurisdiction with respect to the City.

      Briarwood cites several cases supporting its claim that when a seller

breaches a contract for the sale of land by selling it to a third-party purchaser with

knowledge of the previous contract, then the subsequent purchaser stands in the

shoes of the original seller and may be compelled to convey title to the first

purchaser. See Antwine v. Reed, 199 S.W.2d 482 (Tex. 1947); Langley v. Norris,

173 S.W.2d 454 (Tex. 1943); Abraham Inv. Co. v. Payne Ranch, Inc., 968 S.W.2d
518 (Tex. App.—Amarillo 1998, pet. denied); Gohlke v. Davis, 279 S.W.2d 369

(Tex. Civ. App.—San Antonio 1955, writ ref’d n.r.e.). But none of these cases

supports the proposition that a governmental entity that purchases real property

with knowledge of a previous contract to sell the land to a third party waives

immunity with respect to a claim for specific performance made by the third party.

Nor has Briarwood cited statutory authority indicating the Legislature has waived

immunity in this circumstance.            See Williams, 353 S.W.3d at 134

                                         11
(“[G]overnmental immunity can be waived, but we defer to the Legislature to do

so by statute.”); see also Tex. Natural Res. Conservation Comm’n v. IT–Davy, 74
S.W.3d 849, 857 (Tex. 2002) (“[I]t is the Legislature’s sole province to waive or

abrogate sovereign immunity.”). Because we must defer to the Legislature to do

so, we reject Briarwood’s assertion that the City’s mere purchase of the Henderson

tract from FEDC waived the City’s immunity with respect to claims relating to that

property.

      3.    Did the City Negate Jurisdiction with respect to each of
            Briarwood’s Claims?

            a.     Breach of contract

      The City contends that Briarwood’s contract claim should be dismissed with

prejudice on the basis that “Briarwood does not allege—nor could it—that

Briarwood and the City were parties to any contract or agreement.” Chapter 271,

Subchapter I, of the Local Government Code provides a waiver of immunity for

breach of certain contracts. See TEX. LOC. GOV’T CODE ANN. §§ 271.151–.160

(West 2005 & Supp. 2012). The Supreme Court has held that three elements are

required to waive immunity under section 271.152:

      (1) the party against whom the waiver is asserted must be a “local
      governmental entity” as defined by section 271.151(3),

      (2) the entity must be authorized by statute or the Constitution to enter
      into contracts, and

                                         12
      (3) the entity must in fact have entered into a contract that is “subject
      to this subchapter,” as defined by section 271.151(2).

Williams, 353 S.W.3d at 134–35. The statute defines a “[c]ontract subject to this

subchapter” 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.”4 TEX. LOC. GOV’T CODE

ANN. § 271.151(2).

      The City argues that section 271.151(2) cannot waive immunity here

because Briarwood is not a party to a written contract with the City. Briarwood’s

live pleading alleges, generally, that the City breached the 2003 Development

Agreement by failing to use its best efforts to convey the Henderson tract to

Briarwood.    However, it is undisputed that Briarwood is not a party to that

agreement—the parties to the 2003 Development Agreement are the City and

FWP. Briarwood did not claim, in its pleading, to be a third-party beneficiary

under the 2003 Development Agreement. Nor did Briarwood plead any other

theory that would allow it, a non-party to the agreement, to sue the City for the

contract’s alleged breach.

      Recognizing this pleading deficiency, Briarwood argued that the trial court’s

denial of Briarwood’s summary judgment motion indicates the trial court

4
      “Services” includes development contracts like the one at issue in this case. See
      Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 839 (Tex.
      2010).
                                         13
determined there is a fact issue about whether a contract between Briarwood and

the City exists. Briarwood reads too much into the trial court’s denial of the

motion for summary judgment. Given the absence of findings related to the

summary judgment ruling, the most that can be inferred from it is that the trial

court determined that Briarwood failed to carry its burden to conclusively establish

its entitlement to specific performance.

      For the first time at oral argument, Briarwood asserted that it should be

allowed to assert a breach of contract claim against the City under a third-party

beneficiary theory. Some authority supports Briarwood’s contention that a third-

party beneficiary’s claim for breach of contract may fall within the waiver of

immunity authorized by section 271.152. See Galveston Indep. Sch. Dist. v. Clear

Lake Rehab. Hosp., L.L.C., 324 S.W.3d 802, 810 (Tex. App.—Houston [14th

Dist.] 2010, no pet.) (“[W]hen a governmental entity and a contracting party enter

into a contract subject to subchapter I and denominate a third-party beneficiary of

that contract, the third-party beneficiary’s claim for breach of contract falls within

the waiver of immunity authorized under section 271.152.”) (quoting Ben Bolt-

Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions Prop./Cas.

Joint Self-Ins. Fund, 212 S.W.3d 320, 327 (Tex. 2006)). And we are mindful that

we must interpret Briarwood’s pleadings liberally in favor of jurisdiction.

Miranda, 133 S.W.3d. at 226. Thus, although the City correctly points out that

                                           14
Briarwood’s live pleading does not plead a waiver of immunity with respect to the

breach of contract claim, and thus does not affirmatively demonstrate the trial

court’s jurisdiction over that claim, either by pleading Briarwood’s third-party

beneficiary status or otherwise, we are obligated to construe the pleadings liberally

in Briarwood’s favor. The City did not negate the possibility that Briarwood

could, if allowed to replead, affirmatively demonstrate jurisdiction under a third-

party beneficiary theory. Because the pleadings neither affirmatively demonstrate

nor affirmatively negate jurisdiction over Briarwood’s claim for breach of contract

against the City, we conclude we must remand for the trial court to allow

Briarwood a reasonable opportunity to amend its pleadings to allege a breach of

contract claim against the City. See Galveston Indep. Sch. Dist., 324 S.W.3d at

810–11 (noting that governmental entity may waive immunity by entering into

contract subject to Chapter 271 and denominating third-party beneficiary of that

contract); Kirwan, 298 S.W.3d at 621 (quoting Miranda, 133 S.W.3d. at 227); cf.

Solis v. City of Laredo, 353 S.W.3d 528, 533 (Tex. App.—San Antonio 2011, no

pet.) (affirming trial court’s order granting plea to jurisdiction where record

conclusively established nonexistence of only contract upon which           plaintiff

purported to sue City).

                                         15
               b.      Intentional Torts (Common-Law Fraud, Statutory Fraud, and
                       Trespass)

       The City also contends that Briarwood has failed to allege a waiver of

immunity for intentional torts. The City correctly points out that neither section

271.157 of the Local Government Code nor section 101.057 of the Civil Practice

and Remedies Code, which waive immunity for certain breach of contract claims

and tort claims, respectively, waives immunity for intentional torts. See TEX. LOC.

GOV’T CODE ANN. § 271.157 (West 2005) (“This subchapter does not waive

immunity to suit for a cause of action for a negligent or intentional tort.”); TEX.

CIV. PRAC. & REM. CODE ANN. § 101.057(2) (West 2011) (“This chapter does not

apply to a claim . . . arising out of assault, battery, false imprisonment, or any other

intentional tort . . . .”).

       Briarwood does not respond to the City’s plea to the jurisdiction or appellate

brief concerning the intentional torts. Because Briarwood failed to demonstrate a

waiver of immunity with respect to its claims for common-law fraud, statutory

fraud, and trespass claims, we conclude the trial court erred in denying the City’s

plea to the jurisdiction with respect to these claims. See Seureau v. ExxonMobil

Corp., 274 S.W.3d 206, 219 (Tex. App.—Houston [14th Dist.] 2008, no pet.)

(stating “the Legislature has not waived immunity with respect to the intentional

tort of fraud”); Harris Cnt.y v. Cypress Forest Pub. Util. Dist. of Harris Cnty., 50

                                          16
S.W.3d 551, 554 (Tex. App.—Houston. [14th Dist.] 2001, no pet.) (holding

immunity not waived for intentional tort of trespass).

                                      Conclusion

      We reverse the trial court’s denial of the City’s plea to the jurisdiction and

render judgment dismissing with prejudice Briarwood’s claims for common-law

fraud, statutory fraud, and trespass. We remand the case to give Briarwood an

opportunity to replead a breach of contract claim against the City.5

                                                 Rebeca Huddle
                                                 Justice

Panel consists of Justices Jennings, Massengale, and Huddle.

5
      Although the City urges us to dismiss Briarwood’s “attorney’s fee claim” with
      prejudice, Briarwood shall have the opportunity, on remand, to amend its
      pleadings concerning the remedies, including attorney’s fees, it seeks for the
      City’s alleged breach of contract. See Cessna Aircraft Co. v. Aircraft Network,
      LLC, 345 S.W.3d 139, 146 (Tex. App.—Dallas 2011, no pet.) (citing Huff v.
      Fidelity Union Life Ins. Co., 312 S.W.2d 493, 501 (Tex. 1958)) (claim for
      attorney’s fees is not independent cause of action; rather, it is remedy available, in
      some circumstances, to prevailing party).
                                            17