Elizabeth C. Perez v. Sylvester Turner, Mayor, Karun Sreerama, Director of Public Works and Engineering and the City of Houston ( 2018 )

Opinion issued August 30, 2018
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-16-00985-CV
———————————
ELIZABETH C. PEREZ, Appellant
V.
SYLVESTER TURNER, MAYOR, KARUN SREERAMA, DIRECTOR OF
PUBLIC WORKS AND ENGINEERING, AND THE CITY OF HOUSTON,
Appellees
On Appeal from the 11th District Court
Harris County, Texas
Trial Court Case No. 2015-34786
OPINION
This is a suit contesting a City of Houston drainage fee ordinance.
Appellant, Elizabeth C. Perez, appeals the trial court’s December 9, 2016
order granting the plea to the jurisdiction filed by Appellees—Mayor Sylvester
Turner, the Director of Public Works and Engineering Karun Sreerama, and the City
of Houston (collectively, “the City”)—and dismissing all of Perez’s claims.1 Perez
seeks a judgment declaring the drainage fee ordinance invalid; an injunction against
the assessment, collection, and expenditure of taxes and fees pursuant to the
ordinance; and reimbursement, “on behalf of herself and all other similarly situated
persons or entities,” of taxes and fees assessed and collected pursuant to the
ordinance and paid “under duress.”
In four points of error, Perez argues that (1) she has standing to assert a legal
claim for reimbursement for wrongfully-collected drainage charges that she paid
under duress under the purportedly invalid city ordinance; (2) the named individual
defendants—the Mayor and the Director of Public Works and Engineering—do not
have governmental immunity from her claims based on their enforcement of the
invalid city ordinance, and, therefore, the trial court has subject-matter jurisdiction
over her claims for declaratory and injunctive relief against these defendants; (3) the
City’s governmental immunity to her declaratory and injunctive relief claims was
waived by the statutory requirement that the City be joined as a necessary party to
her claims asserting the unconstitutionality and/or the illegality of specific city
ordinances conferring the authority to assess, collect and expend drainage charges
1
Perez originally named Annise Parker and Dale A. Rudick in their official capacities
as defendants. However, both Parker and Rudick have since been replaced in office.
2
for street improvements; and (4) the trial court wrongly dismissed her constitutional
claims on the ground that they were not ripe. We affirm in part and reverse and
remand in part.
Background
A. The Charter Amendment
Houston is a home rule city governed by a city charter. In 2010, a citizen-
initiated petition sought to amend the charter to address the need for drainage and
street improvements through Proposition One, which would change the method of
financing such projects from bond debt to “Pay-As-You-Go.” The amendment
proposed a Dedicated Drainage and Street Renewal (DDSR) Fund that would be
funded from various sources including a fixed percentage of ad valorem tax revenue
shifted from debt service to the DDSR Fund, federal grants, and drainage fee and
developer impact fee revenue. Because the percentage of ad valorem tax revenue
shifted to the DDSR Fund and the drainage and developer fees added by the charter
amendment could affect Houston’s revenue caps,2 the amendment provided that
“funding for the [DDSR Fund] that is not derived from ad valorem taxes levied by
2
A revenue cap was added to the city charter in 2004 that requires voter approval for
increases in ad valorem taxes above a certain level, as determined year-by-year
based on a formula set out in the charter.
3
the City (i.e., that portion derived from fees, charges and third party payments) shall
not be included in those ad valorem tax revenues limited by this Charter.”
Specifically, on November 2, 2010, the City of Houston voters voted on and
approved “PROPOSITION I—CHARTER AMENDMENT PROPOSITION
Relating to the Creation of a Dedicated Funding Source to Enhance, Improve and
Renew Drainage Systems and Streets.” The body of Proposition I stated, in its
entirety, “Shall the City Charter of the City of Houston be amended to provide for
the enhancement, improvement and ongoing renewal of Houston’s drainage and
streets by creating a Dedicated Pay-As-You-Go Fund for Drainage and Streets?”
Perez and two other registered voters filed an election contest in December
2010 to challenge the legality of Proposition I, asserting that the Proposition’s
language was defective and illegally deceptive. This case proceeded through the trial
court, which granted summary judgment in favor of the City and the Mayor, and the
appellate court, which affirmed the trial court’s judgment (Dacus I), to the Texas
Supreme Court, which reversed the judgment of the appellate court and ruled in
favor of Perez and her co-parties. Dacus v. Parker, 466 S.W.3d 820 (Tex. 2015)
(Dacus II). The supreme court held that because Proposition I failed to mention that
drainage charges would be imposed on most real property owners, and therefore
omitted a chief feature of the measure, the measure was not submitted “with such
definiteness and certainty that voters would not be misled.” Id. at 829. The court
4
remanded the case to the trial court “for further proceedings consistent with [its]
opinion.” Id.
On remand from Dacus II, the trial court granted summary judgment in favor
of Perez and her co-plaintiffs. It held that the November 2, 2010 election on
Proposition I, amending the City’s charter, was void. The Fourteenth Court of
Appeals affirmed, and the Texas Supreme Court denied the City’s subsequent
petition for review. City of Houston v. Dacus, No. 14-16-00123-CV, 2017 WL
536647, at *2, 5 (Tex. App.—Houston [14th Dist.] Feb. 9, 2017, pet. denied) (mem.
op.) (Dacus III).
B. The Drainage Fee Ordinance
In April 2011, after the Dacus case was filed, and while it was still pending,
the City passed an ordinance under Local Government Code Chapter 552, the
“Municipal Drainage Utility Systems Act,” creating a drainage utility and allowing
that utility to assess, collect, and spend drainage fees (the Drainage Fee Ordinance).
The Drainage Fee Ordinance defines “drainage” as including streets, curbs, and
other manmade or natural “conduits . . . that are used to draw off surface water from
land, carry the water away, collect, store, or treat the water, or divert the water into
natural or artificial watercourses or into which the surface water flows.” The
Ordinance identifies the authority to collect drainage fees as arising from both
Chapter 552 and the City’s home rule authority.
5
The City subsequently collected drainage fees from Perez and others. For
example, Perez presented evidence that she paid a monthly drainage fee of $11.38
on her current residence.
Following the Texas Supreme Court ruling in Dacus II and while remand was
pending in that suit, on June 17, 2015, Perez initiated the instant class-action lawsuit3
against the City and City officers charged with implementing the Drainage Fee
Ordinance, challenging the legality of the Ordinance and seeking declaratory and
injunctive relief and reimbursement of taxes paid pursuant to it. Perez alleged that
the City and the individual defendants “unconstitutionally and illegally assessed,
collected and expended hundreds of millions of dollars from 2011 to 2105
purportedly for drainage and street improvements and repairs . . . from . . . Houston
taxpayers and landowners pursuant to a void Charter Amendment,” Proposition I,
and “a void City Ordinance,” the Drainage Fee Ordinance.
In her petition, she sought a judicial declaration that the drainage tax imposed
by the Drainage Fee Ordinance is “illegal and/or unconstitutional” and that “all
assessed amounts must be reimbursed to those persons and entities that paid them.”
3
Perez pled her suit as a class-action lawsuit but no class certification ever occurred.
Perez argues in her brief on appeal that the drainage fees have been used illegally
because they have been used not only for drainage projects but for “projects clearly
unrelated to drainage systems such as traffic signal reconstruction, bridge
replacement, street intersection improvements, concrete panel replacement, and
asphalt overlays, among others.” The issue before us, however, is whether the trial
court had jurisdiction over Perez’s claims, not the merits of her claims.
6
In this Court, Perez now states that she no longer seeks reimbursement for past
payments for taxes, only the monthly drainage fee charged to her residence. She also
sought an injunction against the expenditure of all amounts assessed but not yet spent
and against further assessments, with any money collected to be paid into the registry
of the Court.
Perez claimed, “Simply put, the [Drainage Fee Ordinance] is void, and has
always been void.” Perez claimed that she has standing to bring claims against the
City and the “ultra vires defendants” because she “is a municipal taxpayer who paid,
and continues to pay, the [i]llegal [drainage] [t]ax under duress.” She alleged that
the drainage fee tax has been illegally assessed and collected “pursuant to a void
Charter Amendment and/or to a void City Ordinance” and that the current mayor,
Sylvester Turner, has announced his intention to continue to assess and collect the
drainage tax. She also sought declaratory and injunctive relief to stop the City and
individual defendants from passing future budgets or future spending of public
monies which “exceed the caps of the Revenue Cap and/or the Spending Cap
contained in the Houston City Charter,” as, she alleged, the City had been doing
under “the now Void Charter Amendment.” She claimed standing as a resident,
municipal taxpayer, and registered voter who has paid the drainage tax “under
duress.”
7
Finally, Perez contended, citing City of El Paso v. Heinrich, 284 S.W.3d 366
(Tex. 2009), that no governmental immunity exists for a claim brought under the
ultra vires exception to sovereign or governmental immunity for claims like those
she is alleging against the individual defendants for “prospective injunctive and/or
declaratory relief to restrain the official from violating statutory or constitutional
provisions.” Perez also contended that “the Texas Declaratory Judgments Act
contains a waiver of immunity from suit for prospective equitable remedies in
official-capacity suits against government actors who have violated statutory and
constitutional provisions by acting without legal authority,” even if the judgment
contains a declaration that state officials must comply with the law and enforcement
of the law “compels the payment of money.”
On December 9, 2016, the trial court dismissed Perez’s lawsuit for want of
subject-matter jurisdiction. The trial court found that Perez’s “purported
constitutional claims” were not ripe for adjudication, that Perez had “no standing to
challenge the validity, legality, and/or constitutionality of the assessment and/or
collection of City of Houston drainage fees, the November 2010 Pay-As-You-Go
charter amendment [Proposition I], and/or the April 2011 [D]rainage [Fee]
[O]rdinance because she has suffered no particularized injury as a matter of law,”
that she had “no standing to seek money damages and/or a refund as a taxpayer as a
matter of law,” and that governmental immunity also barred her refund claim.
8
The trial court further found that:
• Perez “has not pleaded and cannot plead any ultra vires act with regard
to the mere enforcement or implementation” by any city official of any
charter amendment, ordinance, or other law “currently in effect”;
• her purported ultra vires claim against the City was barred by
governmental immunity “because no municipality, including the City
of Houston, is a proper party to any ultra vires claim as a matter of
law”;
• her ultra vires claims against the individual defendants were likewise
barred by governmental immunity because she had raised no fact issue
that any of them “had the legal authority to or did commit any ultra
vires act alleged”;
• she lacked standing to assert any claim that the City’s drainage fee or
its implementation “violates any effective City of Houston revenue
‘caps’”; and
• she lacked standing “to seek an audit or certification pursuant to Art.VI,
§ 7 because said provision has never gone into effect.”
Accordingly, the trial court found that Perez was not entitled to any award of
attorney’s fees. The court granted the City’s pleas to the jurisdiction and dismissed
all of Perez’s claims for lack of jurisdiction, observing that she had “failed to replead
any viable claim after this court’s having given her sufficient opportunity and time
in which to do so.”
Perez appealed.
9
Subject-Matter Jurisdiction
A. Standard of Review of Subject-Matter Jurisdiction
Both ripeness and standing are components of subject-matter jurisdiction.
McAllen Med. Ctr., Inc. v. Cortez, 66 S.W.3d 227, 231 (Tex. 2001).
The ripeness doctrine prohibits suits involving “uncertain or contingent future
events that may not occur as anticipated, or indeed may not occur at all.” Perry v.
Del Rio, 66 S.W.3d 239, 250 (Tex. 2001). An issue is ripe for decision when at the
time a lawsuit is filed the facts are sufficiently developed “so that an injury has
occurred or is likely to occur, rather than being contingent or remote.” Waco Indep.
Sch. Dist. v. Gibson, 22 S.W.3d 849, 851–52 (Tex. 2000).
The standing doctrine prohibits suits by those who are not personally
aggrieved. DaimlerChrysler Corp. v. Inman, 252 S.W.3d 299, 304 (Tex. 2008). A
party’s standing is never presumed, cannot be waived, and can be raised for the first
time on appeal. Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443–45
(Tex. 1993). “For a plaintiff to have standing, a controversy must exist between the
parties at every stage of the legal proceedings, including the appeal.” Williams v.
Lara, 52 S.W.3d 171, 184 (Tex. 2001). If the issues are no longer live or the parties
lack a legally cognizable interest in the outcome, the case becomes moot. Id.; see
O’Shea v. Littleton, 414 U.S. 488, 495–96, 94 S. Ct. 669, 676 (1974) (“Past exposure
to illegal conduct does not in itself show a present case or controversy regarding
10
injunctive relief . . . if unaccompanied by any continuing present adverse effects.”).
Like ripeness, “[s]tanding is a prerequisite to subject-matter jurisdiction, and
subject-matter jurisdiction is essential to a court’s power to decide a case.” Bland
Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 553–54 (Tex. 2000). We review standing
under the same standard by which we review subject-matter jurisdiction generally.
Tex. Ass’n of Bus., 852 S.W.2d at 446.
Like ripeness and standing, mootness is also relevant to a trial court’s subject-
matter jurisdiction to consider a case. See Travelers Ins. Co. v. Joachim, 315 S.W.3d
860, 865 (Tex. 2010). A controversy must exist between the parties at every stage of
the legal proceedings, including the appeal. Bd. of Adjustment of San Antonio v.
Wende, 92 S.W.3d 424, 427 (Tex. 2002). “If a controversy ceases to exist—‘the
issues presented are no longer “live” or the parties lack a legally cognizable interest
in the outcome’—the case becomes moot.” Williams, 52 S.W.3d at 184 (quoting
Murphy v. Hunt, 455 U.S. 478, 481, 102 S. Ct. 1181, 1183 (1982)). A case is moot
when a judgment cannot have a practical effect on an existing controversy. Reule v.
RLZ Invs., 411 S.W.3d 31, 32 (Tex. App.—Houston [14th Dist.] 2013, no pet.); see
Meeker v. Tarrant Cty. Coll. Dist., 317 S.W.3d 754, 759 (Tex. App.—Fort Worth
2010, pet. denied). When a case becomes moot on appeal, we set aside the judgment
and dismiss the case. See Marshall v. Hous. Auth. of San Antonio, 198 S.W.3d 782,
785 (Tex. 2006); Reule, 411 S.W.3d at 32; Meeker, 317 S.W.3d at 759, 763.
11
The absence of subject-matter jurisdiction may be raised by a plea to the
jurisdiction, among other procedural vehicles. Bland Indep. Sch. Dist., 34 S.W.3d
at 554. Whether the trial court has subject-matter jurisdiction is a question of law
that we review de novo. Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217,
226 (Tex. 2004).
B. Impact of Dacus on Perez’s Claims in this Suit
As a preliminary matter, we address the portions of Perez’s pleadings and
complaints on appeal in which she asserts complaints related to the Charter
Amendment, including her claim that the Drainage Fee Ordinance has already been
determined to be invalid because of the litigation surrounding the Charter
Amendment.
In Dacus II, the Texas Supreme Court declared that Proposition I, providing
for the creation of the Pay-As-You-Go Fund (the DDSR Fund) was not submitted to
the voters in November 2010 “with such definiteness and certainty that voters would
not be misled.” 466 S.W.3d at 829. On remand for further proceedings, the
Fourteenth Court of Appeals, in Dacus III, affirmed the judgment of the trial court
holding that the election on Proposition I, amending the City charter to provide for
the DDSR Fund, was void, and it ordered the City to hold a new election on the
measure. 2017 WL 536647, at *2, 5. The supreme court denied the City’s petition
12
for review of the Fourteenth Court of Appeals’ decision in Dacus III, finally
resolving the controversy regarding the validity of the Charter Amendment.
In this suit, Perez challenges the legality of the DDSR Fund established in
December 2011 pursuant to Proposition I. Perez filed this suit after the supreme court
held, in Dacus II, that the language of Proposition I was too uncertain to enable
voters to make an informed choice on the Proposition, but before the Fourteenth
Court of Appeals held, in Dacus III, that the election was void and ordered a new
one. Because of the Fourteenth Court of Appeals’ decision in Dacus III, which
became final after Perez filed this suit and while this appeal was pending, issues
relating to the Charter Amendment have been resolved by the judgment declaring
the Charter Amendment void and ordering a new election on the measure. Any
further complaints regarding the Charter Amendment are moot. See Reule, 411
S.W.3d at 32; Meeker, 317 S.W.3d at 759.
Perez also alleged that the City and other individual defendants exceeded their
authority granted pursuant to a void Charter Amendment. However, the controversy
regarding the validity of the Charter Amendment was not yet resolved at the time
Perez filed her petition. Any claims that the City or City officials acted improperly
in failing to recognize the invalidity of the Charter Amendment before its invalidity
was judicially determined were premature at the time Perez filed this suit. See Perry,
66 S.W.3d at 250; Gibson, 22 S.W.3d at 851–52 (holding that issue is ripe for
13
decision when “at the time a lawsuit is filed, the facts are sufficiently developed ‘so
that an injury has occurred or is likely to occur, rather than being contingent or
remote’”) (emphasis in original) (quoting Patterson v. Planned Parenthood of
Houston & Se. Tex., Inc., 971 S.W.2d 439, 442 (Tex. 1998)).
Although the Dacus line of cases addressed the Charter Amendment, it did
not address the Drainage Fee Ordinance. Nothing in the Dacus cases invalidated or
called into question the City’s authority to pass the Drainage Fee Ordinance pursuant
to its constitutional home-rule authority or Local Government Code Chapter 552.
Thus, to the extent that Perez’s claims are based on her allegations that the Dacus
cases have already invalidated the Drainage Fee Ordinance and that, as a result, the
City or individual defendants have acted improperly in enforcing the Ordinance, her
claims are misplaced and premature. See Perry, 66 S.W.3d at 250; Gibson, 22
S.W.3d at 851–52. The merits of the Drainage Fee Ordinance must be addressed and
determined before any plaintiff may be heard to complain that the City is enforcing
an illegal and invalid ordinance, and that had not yet happened when Perez filed the
underlying suit and has not been determined by the supreme court’s decision in
Dacus.
We conclude that the trial court lacked subject-matter jurisdiction over any
claims dependent on the Charter Amendment’s having been declared void, and, thus,
it properly dismissed those claims based on the City’s plea to the jurisdiction.
14
Perez also argues, however, that the Drainage Fee Ordinance itself is illegal
and invalid in its own right. Perez challenges the validity of the Drainage Fee
Ordinance based in part on her assertion that the judgment voiding the Charter
Amendment likewise invalidated the Drainage Fee Ordinance. The City contests this
assertion. The City asserted in the trial court below and asserts on appeal from the
order dismissing Perez’s claims that the Drainage Fee Ordinance was passed
pursuant to the City’s authority as a home-rule city governed by a city charter and
pursuant to authority granted by Local Government Code Chapter 552. The City
argues in its brief on appeal that the Charter Amendment was unnecessary to impose
a drainage fee but was proposed because it “shifts a portion of ad valorem tax
revenue from debt service to the DDSR Fund and possibly affects Houston’s revenue
caps, [and thus] Houston’s charter was best served by an amendment and election.”
Nevertheless, the City asserted both in the trial court and on appeal that it had
authority—independent of the Charter Amendment—to pass and enforce the
Drainage Fee Ordinance.
The Texas Constitution provides for home-rule authority. See TEX. CONST.
art. XI, § 5; see also TEX. LOC. GOV’T CODE ANN. §§ 9.001–.008 (West 2008)
(addressing adoption of charters for home-rule municipalities). A home-rule city
derives its power from the Texas Constitution, operates by its city’s charter, and
“possess[es] the full power of self government and look[s] to the Legislature not for
15
grants of power, but only for limitations on their power.” See Town of Lakewood
Vill. v. Bizios, 493 S.W.3d 527, 531 (Tex. 2016).
Furthermore, Local Government Code Chapter 552, also known as the
Municipal Drainage Utility Systems Act, sets out procedures for municipalities to
address concerns regarding drainage. See TEX. LOC. GOV’T CODE ANN. §§ 552.041–
.054 (West 2015 & Supp. 2017) (setting out procedures for municipalities to create
drainage utility that can address drainage concerns). The Drainage Fee Ordinance
itself states:
[T]his Ordinance has been prepared for consideration by City Council
in conformance with Subchapter C of Chapter 552 of the Texas Local
Government Code and the City’s Home-Rule powers under Article XI,
Section 5 of the Texas Constitution to create a City of Houston
Municipal Drainage Utility System to accomplish the objective and
directives of Section 22, Article IX of the City Charter with regard to
streets and drainage[.]
We conclude that Perez’s claims based on the validity of the Drainage Fee
Ordinance in its own right are ripe for determination. We therefore turn to Perez’s
standing to bring these claims.
C. Perez’s Standing
In her first issue on appeal, Perez argues that she has standing to assert a legal
claim for reimbursement of all drainage charges made under the Drainage Fee
Ordinance because, as a municipal taxpayer who paid, and continues to pay under
16
duress, an illegal drainage tax assessed by the City, she can demonstrate both that
she has suffered a particularized injury and that she has standing to sue as a taxpayer.
1. Perez failed to demonstrate a particularized injury
Perez argues that she “owned two separate real properties which were
assessed on a monthly basis for drainage charges.” As evidence, Perez provided her
water bills with a line item for drainage charges and also including assessment of
additional late payment fees. Perez argues that these payments demonstrate a
particularized injury, thereby giving her standing to seek reimbursement of the paid
drainage fees. She argues in her appellate brief, “Indeed, no one but Perez was
charged with this illegal drainage fee for these two specific pieces of real estate, and
no one was forced to pay an illegal fee under duress for these two specific parcels of
land except for [Perez].” The trial court found, however, that she suffered no
particularized injury and thus had “no standing to challenge the validity, legality,
and/or constitutionality of the assessment and/or collection of City of Houston
drainage fees.”
“In general, taxpayers do not have a right to bring suit to contest government
decision-making because . . . governments cannot operate if every citizen who
concludes that a public official has abused his discretion is granted the right to come
into court and bring such official’s public acts under judicial review.” Bland Ind.
Sch. Dist., 34 S.W.3d at 555. Thus, unless standing to sue the government is
17
conferred by statute, “taxpayers must show as a rule that they have suffered a
particularized injury distinct from that suffered by the general public in order to have
standing to challenge a government action or assert a general right.” Id. at 555–56.
We begin our analysis by recognizing that although Perez has pled that she
paid “illegal” drainage fees, she has cited to no authority declaring illegal the
Drainage Fee Ordinance pursuant to which the fees were assessed and collected.
Perez herself seeks such a declaration in the underlying suit, but she does not cite to,
nor could we find, any authority declaring the Drainage Fee Ordinance invalid or
void. Perez makes multiple references to the Dacus case; however, as discussed
above, that case addressed only the validity of the ballot language for the Proposition
I Charter Amendment and did not address the validity of the Drainage Fee
Ordinance. See, e.g., Dacus III, 2017 WL 536647, at *2. Thus, Perez misconstrues
the facts of this case when she asserts that she was forced to pay “illegal” fees.
Accordingly, Perez cannot rely on the line of cases she cites in her brief on
appeal, which provide for, as she characterizes it, “reimbursement of illegal fees and
taxes . . . when the public entity compels compliance with a void law and subjects a
person to punishment if he refuses or fails to comply.” See, e.g., State v. Akin Prods.
Co., 286 S.W.2d 110, 110-12 (Tex. 1956) (holding, where supreme court had
previously held tax on citrus industry unconstitutional in its entirety and
plaintiffs/taxpayers had obtained permission to sue State for recovery of funds
18
collected under that unconstitutional act, that taxes paid under duress were
recoverable). These cases do not apply to a situation, like the one here, where the
underlying law—here, the Drainage Fee Ordinance—has not yet been declared
invalid.
To establish that she suffered a particularized injury that conferred standing
upon her, Perez had to demonstrate she “suffered a particularized injury distinct from
that suffered by the general public” by the drainage fees collected pursuant to the
Drainage Fee Ordinance. See Bland Indep. Sch. Dist., 34 S.W.3d at 555–56. Perez
argues that she suffered a unique injury distinct from that suffered by the general
public because she is the only person who was required to pay the drainage fees
associated with her unique pieces of property. However, this is insufficient to
demonstrate a unique injury. The municipal fees were assessed to property owners
across the City. The payment of municipal fees, like the drainage fees assessed
against Perez’s properties here and numerous other properties in the City, does not
constitute a particularized injury sufficient to confer standing to sue for recovery of
the fees. See id.
We overrule this part of Perez’s first issue.
2. Perez’s standing as a taxpayer
Perez also argues that she has demonstrated her standing as a taxpayer.
19
There is a long-established exception to the general rule that a particularized
injury is required for taxpayer standing: “a taxpayer has standing to sue in equity to
enjoin the illegal expenditure of public funds, even without showing a distinct
injury.” See id. However, under this exception, “[a] taxpayer may maintain an
action solely to challenge proposed illegal expenditures; a taxpayer may not sue to
recover funds previously expended.” Williams, 52 S.W.3d at 179 (emphasis added).
The courts have long maintained this broader grant of taxpayer standing to enjoin
future public spending without permitting the taxpayer to recover funds previously
expended, stating,
When a taxpayer brings an action to restrain the illegal expenditure . . .
of tax money he sues for himself and it is held that his interest in the
subject matter is sufficient to support the action; but when the money
has already been spent, an action for its recovery is for the [taxing
entity]. The cause of action belongs to it alone.
Bland Indep. Sch. Dist., 34 S.W.3d at 556 (quoting Hoffman v. Davis, 100 S.W.2d
94, 96 (1937)). The courts reason that the exception to the particularized injury
requirement for taxpayer lawsuits to enjoin future public expenditures, while
restricting the recovery of monies already spent to the taxing entity alone,
“unquestionably impinges on the policies of restricting taxpayer lawsuits, but,
strictly limited, it provides important protection to the public from the illegal
expenditure of public funds without hampering too severely the workings of the
government.” Id.
20
Implicit in the rule that Texas taxpayers have standing to enjoin the future
illegal expenditure of public funds without showing a particularized injury are two
requirements: “(1) that the plaintiff is a taxpayer; and (2) that public funds are
expended on the allegedly illegal activity.” Williams, 52 S.W.3d at 179. Thus, “[t]o
be entitled to municipal taxpayer standing a litigant must prove that the government
is actually expending money on the activity that the taxpayer challenges; merely
demonstrating that tax dollars are spent on something related to the allegedly illegal
conduct is not enough.” Id. at 181.
Perez argues that she has standing to bring claims against the City as a
municipal taxpayer, arguing that she pays both the allegedly illegal drainage fees
and ad valorem taxes. She argues that the City “is going to spend tax dollars illegally
because each year the Houston City Council passes an annual fiscal budget which
spends hundreds of millions of dollars of assessed and collected drainage charges on
projects not permitted under law” and in violation of the revenue cap on ad valorem
taxes. Thus, Perez sought, in part, an injunction against future assessments and
expenditures of drainage fees.
The City argues that Perez’s payment of her water bill, which includes the
drainage fees, does not qualify her as a taxpayer and that, although Perez alleged
that she paid ad valorem taxes, she did not present any evidence that she has paid
21
such taxes. The City relies on Williams v. Lara to support its argument on this
ground.
In Williams, the Texas Supreme Court held that payment of sales tax does not
confer taxpayer standing. 52 S.W.3d at 179–80. It reasoned:
Taxpayer standing is a judicially created exception to the general
standing rule. We have already limited the applicability of this
exception by narrowly defining the type of action a taxpayer can
maintain. . . . Extending taxpayer standing to those who pay only sales
tax would mean that even a person who makes incidental purchases
while temporarily in the state could maintain an action. This would
eviscerate any limitation on taxpayer suits. It would allow a person with
virtually no personal stake in how public funds are expended to come
into court and bring the government’s actions under judicial review.
This is not what this Court envisioned in crafting the taxpayer-standing
exception. Accordingly, we hold, for prudential reasons, that paying
sales tax does not confer taxpayer standing upon a party.
Id. at 180 (internal citations omitted).
Perez’s situation is clearly distinguishable from the plaintiff in Williams.
Perez alleged, and presented some evidence in support of her allegations, that she
owns property in the City and pays drainage fees assessed on that property. 4 Thus,
4
The parties do not address in any substantive way the question of whether the
drainage fees here may properly be treated as taxes rather than fees—Perez
repeatedly refers to it as a “tax” while the City calls it a “fee.” However, we note
that the City’s decision whether to label a charge a “fee” rather than a “tax” is not
binding on this Court’s analysis. See TracFone Wireless, Inc. v. Comm’n on State
Emergency Commc’n, 397 S.W.3d 173, 175 n.3 (Tex. 2013). “A charge is a fee
rather than a tax when the primary purpose of the fee is to support a regulatory
regime governing those who pay the fee.” Id. It does not appear that the drainage
fees here supported a regulatory regime. Rather, the purpose of the drainage fee was
to generate revenue to fund drainage improvements throughout the City, and, thus,
we conclude that Perez’s payment of the drainage fees was sufficient to confer upon
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she did more than “make[]incidental purchases while temporarily in the state.” See
id. Rather, her payment of the drainage fees associated with her property
demonstrates that she maintains a personal stake in how the City’s drainage funds
are collected and expended. We conclude that Perez has established the first
requirement for taxpayer standing, i.e., that she is a taxpayer. See id. at 179 (implicit
in taxpayer standing exception from general rule requiring particularized injury are
two requirements: (1) that the plaintiff is a taxpayer, and (2) that public funds are
expended on allegedly illegal activity).
The City also argues that Perez has failed to prove that the City is actually
expending money illegally. Again, the City cites Williams, which stated, “To be
entitled to municipal taxpayer standing, a litigant must prove that the government is
actually expending money on the activity that the taxpayer challenges; merely
demonstrating that tax dollars are spent on something related to the allegedly illegal
conduct is not enough.” Id. at 181. Perez’s live petition alleged, in part, that the City
was illegally assessing, collecting, and expending funds for drainage and street
improvements pursuant to the allegedly void Ordinance. The jurisdictional evidence
indicates that the City passed the complained-of Ordinance and that it has
implemented it. This is sufficient to demonstrate for jurisdictional purposes that the
her standing to challenge the assessment and expenditure of those funds, as set out
above.
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City is actually assessing and expending money based on the complained-of
Ordinance. See id.; see also Bland Indep. Sch. Dist., 34 S.W.3d at 554 (although
court can and should consider evidence to extent necessary to resolve jurisdictional
claim, plea to jurisdiction “does not authorize an inquiry so far into the substance of
the claims presented that plaintiffs are required to put on their case simply to
establish jurisdiction”).
Accordingly, we conclude that Perez has established taxpayer standing here.
See Williams, 52 S.W.3d at 179. However, Perez’s standing as a taxpayer is limited
to maintaining “an action solely to challenge proposed illegal expenditures; a
taxpayer may not sue to recover funds previously expended.” See id. (emphasis
added). Perez has standing to seek a declaration that the Drainage Fee Ordinance is
illegal and to seek to enjoin the prospective assessment, collection, and expenditure
of drainage fees based on a declaration that the Ordinance is in fact illegal, assuming
that all other criteria for subject-matter jurisdiction are met—including the City’s
and the individually named defendants’ lack of governmental immunity to her suit.
However, Perez lacks standing to assert her claims for reimbursement for any taxes
already assessed, collected, or paid pursuant to the Drainage Fee Ordinance. See id.;
Bland Indep. Sch. Dist., 34 S.W.3d at 556; Hoffman, 100 S.W.2d at 96.
We sustain Perez’s first issue in part.
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D. The City’s and the ‘Ultra Vires’ Defendants’ Immunity to Perez’s Suit
In her second issue, Perez argues that she properly asserted ultra-vires claims
for declaratory and injunctive relief. And, in her third issue, Perez asserts that the
City’s immunity was waived by the statutory requirement that the City be joined as
a necessary party to her claims asserting the unconstitutionality and/or illegality of
specific city ordinances. We address these issues together.
The Legislature has mandated that municipalities be made parties to
declaratory judgment actions that challenge the validity of municipal ordinances.
TEX. CIV. PRAC. & REM. CODE ANN. § 37.006(b) (West 2015). “For claims
challenging the validity of ordinances or statutes . . . the Declaratory Judgment Act
requires that the relevant governmental entities be made parties, and thereby waives
immunity.” Texas Lottery Com’n v. First State Bank of DeQueen, 325 S.W.3d 628,
633–34 (Tex. 2010) (quoting Heinrich, 284 S.W.3d at 373 n.6) (citing section
37.002(b)). Generally, however, suits against state officers in the exercise of their
discretion are barred by governmental immunity. Houston Belt & Terminal Railway
Co. v. City of Houston, 487 S.W.3d 154, 163 (Tex. 2016). Nevertheless, when a
state officer acts beyond his legally granted discretion, i.e., without legal authority,
his acts are not protected. Id. Thus, “suits to require state officials to comply with
statutory or constitutional provisions are not prohibited by sovereign immunity.”
Heinrich, 284 S.W.3d at 372.
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“[T]he rule that ultra vires suits are not ‘suits against the State within the rule
of immunity of the State from suit’ derives from the premise that the ‘acts of officials
which are not lawfully authorized are not acts of the State.’” Id. at 373 (quoting
Cobb v. Harrington, 190 S.W.2d 709, 712 (1945)). Because these acts are not acts
of the State, “it follows that these suits cannot be brought against the state, which
retains immunity, but must be brought against the state actors in their official
capacity[,] . . . even though the suit is, for all practical purposes, against the state.”
Id. (citing Brandon v. Holt, 469 U.S. 464, 471—72, 105 S. Ct. 873, 878 (1985)).
To fall within the ultra vires exception to state actors’ governmental
immunity, “a suit must . . . allege, and ultimately prove, that [a state] officer acted
without legal authority or failed to perform a purely ministerial act.” Id. at 372;
Turner v. Robinson, 534 S.W.3d 115, 126 (Tex. App.—Houston [14th Dist.] 2017,
pet. denied). A state officer acts without legal authority if he “exceeds the bounds
of his granted authority or if his acts conflict with the law itself.” Turner, 534 S.W.3d
at 126. But the ultra vires rule is subject to important qualifications. Heinrich, 284
S.W.3d at 373. Under the ultra vires exception, suits against public officials to
enjoin prospective illegal activity, as measured from the date of the injunction, are
not barred by governmental immunity. Id. at 376; see Edelman v. Jordan, 415 U.S.
651, 669, 94 S. Ct. 1347, 1358 (1974) (using entry of injunction to distinguish
retrospective from prospective relief). But retrospective monetary claims against
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state officers are barred by governmental immunity. Heinrich, 284 S.W.3d at 374.
“As Heinrich made clear, immunity for an ultra vires act is only a waiver with regard
to bringing future acts into compliance with the law,” not with regard to permitting
suits to recover monies already assessed, collected, or spent. Turner, 534 S.W.3d at
126 (quoting City of Galveston v. CDM Smith, Inc., 470 S.W.3d 558, 569 (Tex.
App.—Houston [14th Dist.] 2015, pet denied) (emphasis added)). The declaratory
judgments act may not be used to circumvent immunity. Heinrich, 284 S.W.3d at
374.
Here, Perez contends that the Drainage Fee Ordinance, creating a drainage
utility and allowing that utility to assess and collect drainage fees pursuant the City’s
home-rule authority and the provisions of Local Government Code Chapter 552, is
illegal because it was created pursuant to a void charter amendment. And she seeks
to enjoin the collection of fees pursuant to that Ordinance and to recover damages
for herself “and all other persons and entities similarly situated” in the form of
reimbursement of all fees collected by the City pursuant to the Drainage Fee
Ordinance.
We hold, first, that Perez has standing to sue the City and the ultra vires
defendants to determine the legality of the Drainage Fee Ordinance and so to
determine whether the City officers charged with assessing and collecting taxes and
spending public monies as authorized by the Ordinance are acting without legal
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authority, and thus ultra vires, in assessing and collecting fees and spending public
money under the Ordinance and whether those activities may therefore be enjoined.
See TEX. CIV. PRAC. & REM. CODE ANN. § 37.006(b); Tex. Lottery Comm’n, 325
S.W.3d at 633; Heinrich, 284 S.W.3d at 373 n.6; see also Houston Belt & Terminal
Ry. Co., 487 S.W.3d at 164 (stating that primary objective in construing ordinance
is to ascertain and give effect to enacting body’s intent). Just as she has standing to
seek to enjoin future expenditures, Perez has standing to sue the individual
defendants charged with carrying out the provisions of the allegedly illegal
Ordinance. Bland Indep. Sch. Dist., 34 S.W.3d at 556 (“[A] taxpayer has standing to
sue in equity to enjoin the illegal expenditure of public funds, even without showing
a distinct injury.”). This is so because the individual defendants do not have
governmental immunity for their future acts to enforce the Ordinance—to the extent
it is determined to be invalid—in their official capacities. Heinrich, 284 S.W.3d at
373. However Perez may maintain this taxpayer action solely to seek to enjoin
proposed future illegal expenditures as measured from the date of any injunction she
might obtain, not to recover funds previously expended. See Williams, 52 S.W.3d
at 179; Heinrich, 284 S.W.3d at 376; Bland, 34 S.W.3d at 556; Hoffman, 100 S.W.2d
at 96.
Accordingly, we sustain Perez’s second and third issues insofar as they assert
her standing to seek a declaration that the Drainage Fee Ordinance is illegal, and,
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therefore, that the continued assessment, collection, and expenditure of fees under
the Drainage Fee Ordinance is illegal. And we sustain those issues insofar as she
alleges that the individual ultra vires defendants do not have governmental immunity
to her suit for an injunction against the prospective assessment, collection, and
expenditure of taxes in the event the Ordinance is declared invalid and only from the
date an injunction issues. We otherwise overrule Perez’s second and third issues.
E. Ripeness of Constitutional Claims
In her fourth issue, Perez challenges the trial court’s determination that her
constitutional claims are not ripe.
As stated above, the ripeness doctrine prohibits suits involving “uncertain or
contingent future events.” Perry, 66 S.W.3d at 250. An issue is ripe for adjudication
and decision when at the time a lawsuit is filed the facts are sufficiently developed
“so that an injury has occurred or is likely to occur, rather than being contingent or
remote.” Waco Indep. Sch. Dist., 22 S.W.3d at 851–522. However, for Perez to have
standing, the live controversy must continue to exist between herself and the
defendants “at every stage of the legal proceedings, including the appeal.” Williams,
52 S.W.3d at 184.
We conclude, on the basis of the foregoing facts and authorities, that the issues
whether the Drainage Fee Ordinance is illegal and, hence, whether the assessment
and collection of fees under the Ordinance is illegal and should be enjoined are ripe.
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The City has relied on its authority pursuant to the Texas Constitution’s home-rule
authority provision and Local Government Code Chapter 552 to collect the fees
pursuant to the Drainage Fee Ordinance and has collected and expended fees on the
basis, and Perez has claimed that she has been injured by the City’s collection of
fees pursuant to that Ordinance. Thus, the issues are sufficiently developed so that
Perez’s claim seeking a declaration that the Ordinance is invalid and an injunction
against the City’s future collection or expenditure of funds pursuant to that
Ordinance is ripe for adjudication.
Accordingly, we sustain Perez’s fourth issue contending that the controversy
between herself and the City is ripe for decision.
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Conclusion
We affirm the trial court’s dismissal of Perez’s claim for reimbursement of
drainage and street improvement fees for lack of subject-matter jurisdiction. We
further affirm the dismissal her claims against the City on grounds of governmental
immunity insofar as the claims seek an injunction against the assessment, collection,
and expenditure of taxes pursuant to the Drainage Fee Ordinance prior to any
determination that the Ordinance is in fact invalid. We reverse the dismissal as it
relates to Perez’s claim that the Drainage Fee Ordinance is invalid and her claim
seeking to enjoin any future collection or expenditure of fees pursuant to that
Ordinance, and we remand for further proceedings consistent with this opinion.
Evelyn V. Keyes
Justice
Panel consists of Justices Keyes, Brown, and Lloyd.
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