City of New Braunfels, Texas And YC Partners Ltd., D/B/A Yantis Company v. Carowest Land, Ltd. ( 2018 )

ACCEPTED
03-17-00696-CV
21622582
THIRD COURT OF APPEALS
AUSTIN, TEXAS
1/4/2018 9:53 PM
JEFFREY D. KYLE
CLERK
No. 03-17-00696-CV
IN THE COURT OF APPEALS FILED IN
3rd COURT OF APPEALS
FOR THE THIRD DISTRICT OF TEXAS AUSTIN, TEXAS
AT AUSTIN 1/4/2018 9:53:15 PM
JEFFREY D. KYLE
Clerk
CITY OF NEW BRAUNFELS, TEXAS, and Y.C. PARTNERS, LTD.
d/b/a YANTIS COMPANY,
Appellants,
vs.
CAROWEST LAND, LTD.,
Appellee.
On Appeal from the 22nd Judicial District of Comal County, Texas
Cause No. C2017-0474A, Hon. Margaret G. Mirabal, Sitting by Appointment
BRIEF OF APPELLEE
CAROWEST LAND, LTD.
Jason Davis Thomas R. Phillips
State Bar No. 00793592 State Bar No. 00000022
Caroline Newman Small Maddy R. Dwertman
State Bar No. 24056037 State Bar No. 24092371
DAVIS & SANTOS, P.C. BAKER BOTTS L.L.P.
719 S. Flores St. 98 San Jacinto Blvd., Suite 1500
San Antonio, Texas 78204 Austin, Texas 78701
(210) 853-5882 (512) 322-2500
(210) 200-8395 (Facsimile) (512) 322-2501 (Facsimile)
jdavis@dslawpc.com tom.phillips@bakerbotts.com
csmall@dslawpc.com maddy.dwertman@bakerbotts.com
ATTORNEYS FOR APPELLEE
IDENTITIES OF PARTIES & COUNSEL
In addition to counsel listed in Appellants’ Identity of Parties and
Counsel, appellate counsel for Appellee Carowest Land, Ltd. include:
Thomas R. Phillips
State Bar No. 00000022
Maddy R. Dwertman
State Bar No. 24092371
BAKER BOTTS L.L.P.
98 San Jacinto Blvd., Suite 1500
Austin, Texas 78701
(512) 322-2500
(512) 322-2501 (Facsimile)
tom.phillips@bakerbotts.com
maddy.dwertman@bakerbotts.com
i
TABLE OF CONTENTS
Identities of Parties & Counsel .................................................................................. i
Index of Authorities ................................................................................................. iv
Statement of the Case............................................................................................. viii
Statement Regarding Oral Argument ...................................................................... ix
Issues Presented .........................................................................................................x
Statement of Facts ......................................................................................................1
Summary of the Argument.......................................................................................12
Argument..................................................................................................................16
I. The trial court properly denied the City’s plea to the jurisdiction
as to Carowest’s South Tributary Claims............................................16
A. Carowest’s South Tributary Claims against the City are
not barred by governmental immunity......................................16
1. Jurisdiction over Carowest’s South Tributary
Claims exists because the City asserted an
affirmative counterclaim alleging breaches of the
Letter Agreement. ...........................................................17
2. Jurisdiction over Carowest’s South Tributary
Claims exists pursuant to Texas Local Government
Code Section 271.152. ....................................................24
B. Carowest’s South Tributary Claims against the City
implicate a justiciable controversy............................................37
1. Carowest’s declaratory judgment claims are not
moot. ...............................................................................37
2. Carowest’s claim for attorneys’ fees is not moot. ..........39
II. The trial court properly denied Yantis’s plea to the jurisdiction
as to Carowest’s South Tributary Claims............................................42
A. Jurisdiction over Carowest’s South Tributary Claims
against Yantis is not dependent on jurisdiction over
Carowest’s same claims against the City..................................42
B. Carowest’s South Tributary Claims implicate a
justiciable controversy. .............................................................44
ii
Conclusion and Prayer .............................................................................................47
Certificate of Compliance ........................................................................................49
Certificate of Service ...............................................................................................50
iii
INDEX OF AUTHORITIES
Page(s)
CASES
Allstate Ins. Co. v. Hallman,
159 S.W.3d 640 (Tex. 2005) ........................................................................39, 40
Archer Grp., LLC v. City of Anahuac,
472 S.W.3d 370 (Tex. App.—Houston [1st Dist.] 2015, no pet.) ...................... 21
Bandera County v. Hollingsworth,
419 S.W.3d 639 (Tex. App.—San Antonio 2013, no pet.) ................................ 23
Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political
Subdivisions Prop./Cas. Joint Self-Ins. Fund,
212 S.W.3d 320 (Tex. 2006) ........................................................................26, 27
Bexar Metro. Water Dist. v. City of Bulverde,
156 S.W.3d 79 (Tex. App.—Austin 2004, pet. denied) ..................................... 45
Bexar Metro. Water Dist. v. City of Bulverde,
234 S.W.3d 126 (Tex. App.—Austin 2007, no pet.) ....................................37, 39
Brooks v. Northglen Ass’n,
141 S.W.3d 158 (Tex. 2004) .............................................................................. 44
Camarena v. Tex. Emp’t Comm’n,
754 S.W.2d 149 (Tex. 1988) ..................................................................39, 40, 41
Chenault v. Phillips,
914 S.W.2d 140 (Tex. 1996) .............................................................................. 31
City of Conroe v. TPProperty LLC,
480 S.W.3d 545 (Tex. App.—Beaumont 2015, no pet.) .................................... 21
City of Dallas v. Albert,
354 S.W.3d 368 (Tex. 2011) ..................................................................17, 18, 23
City of Houston v. Atser, L.P.,
403 S.W.3d 354 (Tex. App.—Houston [1st Dist.] 2013, pet.
denied)................................................................................................................. 11
iv
City of Houston v. Estate of Jones,
388 S.W.3d 663 (Tex. 2012) ........................................................................11, 45
City of Houston v. United Water Servs.,
201 S.W.3d 690 (Tex. 2006) .............................................................................. 17
City of McKinney v. Hank’s Restaurant Group,
412 S.W.3d 102 (Tex. App.—Dallas 2013, no pet.) .......................................... 21
City of Midland v. Goerlitz,
201 S.W.3d 689 (Tex. 2006) .............................................................................. 17
City of New Braunfels v. Carowest Land, Ltd.,
--- S.W.3d ---, No. 03-16-00249-cv, 2017 WL 2857142 (Tex.
App.—Austin, June 29, 2017 mtn. for reh’g pending) ................................passim
City of New Braunfels v. Carowest Land, Ltd.,
432 S.W.3d 501 (Tex. App.—Austin 2014, no pet.) ...................................passim
City of Pearsall v. Tobias,
No. 04-15-00302-CV, 2016 WL 1588400 (Tex. App.—San
Antonio Apr. 20, 2016, no pet.) (mem. op.) ....................................................... 35
City of San Antonio ex rel. City Pub. Serv. Bd. v. Wheelabrator Air
Pollution Control, Inc.,
381 S.W.3d 597 (Tex. App.—San Antonio 2012, pet. denied) .......................... 35
Creedmoor-Maha Water Supply Corp. v. Tex. Comm’n on Envtl.
Quality,
307 S.W.3d 505 (Tex. App.—Austin 2010, no pet.) .......................................... 29
Ghidoni v. Bexar Metro. Water Dist.,
No. 04-07-00377-CV, 2007 WL 2481034 (Tex. App.—San
Antonio Sept. 5, 2007, no pet.) (mem. op.) ........................................................ 35
Hendee v. Dewhurst,
228 S.W.3d 354 (Tex. App.—Austin 2007, pet. denied) ................................... 25
Klumb v. Houston Municipal Employees Pension System,
458 S.W.3d 1 (Tex. 2015).............................................................................31, 32
v
Lawson v. Keene,
No. 03-13-00498-CV, 2016 WL 767772 (Tex. App.—Austin Feb.
23, 2016, pet. denied) (mem. op.) ....................................................................... 31
Lower Colorado River Authority v. City of Boerne,
422 S.W.3d 60 (Tex. App.—San Antonio 2013, pet. dism’d) ........................... 35
National Public Finance Guarantee Corporation v. Harris County-
Houston Sports Authority,
448 S.W.3d 472 (Tex. App.—Houston [1st Dist.] 2014, no pet.) ...................... 34
Reata Construction Corp. v. City of Dallas,
197 S.W.3d 371 (Tex. 2006) .......................................................................passim
Redburn v. Garrett,
Case. No. 13-12-00215-CV, 2013 WL 2149699 (Tex. App.—
Corpus Christi May 16, 2013, pet. denied) (mem. op.) ...................................... 22
Saifi v. City of Texas City,
No. 14-13-00815-CV, 2015 WL 1843540 (Tex. App.—Houston
[14th Dist.] Apr. 23, 2015, no pet.) ..............................................................32, 33
San Antonio River Authority v. Austin Bridge & Road, L.P.,
No. 04-16-00535-CV, 2017 WL 3430897 (Tex. App.—San
Antonio Aug. 9, 2017, pet. filed) (mem. op.) ...............................................34, 35
Sharyland Water Supply Corp. v. City of Alton,
354 S.W.3d 407 (Tex. 2011) .............................................................................. 23
Sweeny Cmty. Hosp. v. Mendez,
226 S.W.3d 584 (Tex. App.—Houston [1st Dist.] 2007, no pet.) ...................... 18
Taylor v. State Farm Lloyds, Inc.,
124 S.W.3d 665 (Tex. App.—Austin 2003, pet. denied) ................................... 46
Tex. Ass’n of Bus. v. Tex. Air Control Bd.,
852 S.W.2d 440 (Tex. 1993) ..................................................................25, 30, 36
Tex. Dep’t of State Health Servs. v. Balquinta,
429 S.W.3d 726 (Tex. App.—Austin 2014, pet. dism’d) .............................25, 36
Tex. Dept. of Transp. v. Sefzik,
355 S.W.3d 618 (Tex. 2011) .............................................................................. 36
vi
Tex. Parks & Wildlife Dep’t v. Sawyer Trust,
354 S.W.3d 384 (2011) ....................................................................................... 36
Texas Association of School Boards Risk Management Fund v.
Benavides Independent School District,
221 S.W.3d 732 (Tex. App.—San Antonio 2007, no pet.) ..........................29, 30
Texas Dep’t of Pub. Safety v. Moore,
985 S.W.2d 149 (Tex. App.—Austin 1998, no pet.) .......................................... 46
Texas Dept. of Banking v. Mount Olivet Cemetery Ass’n,
27 S.W.3d 276 (Tex. App.—Austin 2000, pet. denied) ..................................... 45
Texas Natural Resources Conservation Commission v. IT-Davy,
74 S.W.3d 849 (Tex. 2002)...........................................................................28, 32
Unauthorized Practice of Law Cmte. v. Nationwide Mut. Ins. Co.,
155 S.W.3d 590 (Tex. App.—San Antonio 2004, pet. denied) .......................... 46
Wood v. Walker,
279 S.W.3d 705 (Tex. App.—Amarillo 2007, no pet.) ...................................... 44
Zachry Corporation v. Port of Houston Authority,
449 S.W.3d 98 (Tex. 2014).....................................................................30, 31, 32
Zurita v. SVH-1 Partners, Ltd.,
No. 03-10-00650-CV, 2011 WL 6118573 (Tex. App.—Austin
Dec. 8, 2011, pet. denied) (mem. op.) ................................................................ 39
STATUTES
TEX. CIV. PRAC. & REM. CODE ANN. § 37.003(a) .................................................... 25
TEX. LOCAL GOV’T CODE ANN. § 271.152 .......................................................passim
OTHER AUTHORITIES
BLACK’S LAW DICTIONARY (10 ed. 2014) ............................................................... 22
HOUSE COMM. ON CIVIL PRACTICES, Bill Analysis, Tex. H.B. 2039,
79th Leg., R.S. (2005)......................................................................................... 27
MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY (11 ed. 2003) ............................. 22
vii
STATEMENT OF THE CASE
Nature of This is an interlocutory appeal of the trial district court’s denial
the Case: of (1) a governmental unit’s plea to the jurisdiction and (2) a
privately owned entity’s plea to the jurisdiction.
The underlying case involves various claims asserted by Carowest
Land, Ltd. (“Carowest”) against the City of New Braunfels (the
“City”) and YC Partners, Ltd. d/b/a Yantis Company (“Yantis”),
as well as counterclaims by the City against Carowest. The
parties’ claims center around two municipal projects—the so-
called South Tributary Project and North Tributary Project—for
which Yantis was the general contractor.
This appeal involves two declaratory judgment claims asserted by
Carowest against the City and Yantis concerning the South
Tributary Project (“South Tributary Claims”). This Court
previously affirmed the district court’s denial of the City’s plea to
the jurisdiction as it concerns these claims. See City of New
Braunfels v. Carowest Land, Ltd., 432 S.W.3d 501 (Tex. App.—
Austin 2014, no pet.) (Carowest I). After Carowest I, Carowest
won summary judgment on liability on the two South Tributary
Claims, CR 55-56, and these claims were severed into a separate
action, CR 57-59. With only the issue of attorneys’ fees to be
decided in the severed cause, the City filed another plea to the
jurisdiction and was this time joined Yantis. CR 77-130, 131-98.
In the renewed pleas, the City and Yantis rely on this Court’s
2017 opinion regarding Carowest’s declaratory judgment claims
concerning the North Tributary Project. See City of New
Braunfels v. Carowest Land, Ltd., --- S.W.3d ---, No. 03-16-
00249-cv, 2017 WL 2857142 (Tex. App.—Austin, June 29, 2017
mtn. for reh’g pending) (Carowest II). This appeal is solely about
the South Tributary Claims. Carowest II did not address the
South Tributary Claims or their distinct jurisdictional bases.
Trial Court: Hon. Margaret G. Mirabal, sitting by appointment in the 22nd
Judicial District Court, Comal County, Texas
Trial Court The district court denied both the City’s and Yantis’s pleas to the
Disposition: jurisdiction. CR 1048, CR 1049.
viii
STATEMENT REGARDING ORAL ARGUMENT
Appellee Carowest Land, Ltd. believes that oral argument will likely
be unnecessary because this Court has already decided the issues presented in this
appeal in Carowest I and should therefore affirm in this case as well. However, if
the Court has any questions or concerns about the issues in this case, Carowest
conditionally requests oral argument. Carowest would welcome the opportunity to
address any questions the Court may have and, if necessary, the impact of
Carowest I and Carowest II on the issues presented.
ix
ISSUES PRESENTED
Issues as to the City
ISSUE ONE
The City asserted an affirmative counterclaim against
Carowest, alleging that Carowest breached its contractual
obligation to indemnify and hold the City harmless for
certain delay claims asserted by Yantis and seeking
monetary relief.
Did the district court properly conclude that because the
City asserted an affirmative breach of contract claim
against Carowest, the City is not immune from
Carowest’s South Tributary Claims concerning the same
contract, as those declaratory judgment claims are
germane to, connected with, and properly defensive to
the City’s breach of contract claim?
ISSUE TWO
Carowest entered into a written contract with the City
that both parties concede is subject to Chapter 271,
Subchapter I (“Chapter 271”) of the Texas Local
Government Code and the waiver of governmental
immunity contained therein.
Does Chapter 271 waive the City’s governmental
immunity from Carowest’s South Tributary Claims
arising from that same contract?
ISSUE THREE
The declarations Carowest seeks against the City are
intertwined with and defensive to the City’s pending
breach of contract claim against Carowest.
Do Carowest’s South Tributary claims implicate a
justiciable controversy?
x
Issues as to Yantis
ISSUE FOUR
Yantis, a privately owned entity, filed its own
interlocutory appeal from the trial court’s refusal to
dismiss Carowest’s South Tributary Claims against
Yantis for lack of jurisdiction.
Is the City an indispensable party to Carowest’s South
Tributary Claims against Yantis even though the
declarations Carowest seeks against Yantis would not
prejudice any rights of the City?
ISSUE FIVE
Upon Yantis’s assertion of a delay claim against the City,
the City sought indemnity from Carowest pursuant to a
written contract between the City and Carowest.
Carowest, in turn, filed a declaratory judgment action
against the City and Yantis under that contract regarding
the validity of Yantis’s delay claim and Carowest’s
indemnification obligation.
Do Carowest’s South Tributary Claims implicate a
justiciable controversy?
xi
STATEMENT OF FACTS
Carowest is a tax-paying citizen of the City of New Braunfels, which
owns the property where the Weston family resides (the “Property”). The
Westons, through Carowest, agreed to donate a tract of land on the Property worth
approximately $1 million to the City for the South Tributary Regional Flood
Control Project (“South Tributary Project”), a multi-million-dollar drainage project
designed to channel run-off waters down a large drainage channel to the
Guadalupe River. See CR 359-60. In 2008, a dispute arose between the City and
Carowest regarding various issues related to the South Tributary Project. See CR
360-62. This dispute was initially resolved, without litigation, by a July 27, 2009
Letter Agreement between Carowest and the City (the “Letter Agreement”). See
CR 85-89. The Letter Agreement included the following essential terms, among
others:
 The City allowed Carowest to modify the location and design of
the channel on the Property (the “Modification”).
 Carowest agreed to pay for additional engineering and construction
costs “directly related to analyzing and implementing the
Modification” (the “Modification Costs”). Modification Costs did
not include “any costs the City would have incurred without the
Modification.”
 Carowest further agreed to indemnify the City for claims brought
against the City by Yantis, the general contractor on the South
Tributary Project, if such claims were for a Modification Cost and
directly attributable to the Modification.
1
CR 85-86. Only the Letter Agreement’s indemnity provision is at issue in this
appeal.
The City demands that Carowest indemnify it against delay claims that Yantis
had previously released.
On October 21, 2009, the City and Yantis executed Change Order No.
3 (the “Change Order”). CR 94. The Change Order removed from Yantis’s
contract with the City all work on the Carowest Property and awarded Yantis
additional work of equal or greater value elsewhere on the South Tributary Project.
Id. In the Change Order, Yantis agreed that the “Change Order includes any and
all costs associated with or resulting from the change(s) ordered herein, including
all impact, delays, and acceleration costs” and that “there shall be no further time
or dollar compensation as a result of this Change Order,” thereby releasing all of
its claims against the City concerning the Carowest portion of the South Tributary
Project. Id. Neither the City nor Yantis disclosed to Carowest the existence of the
Change Order when it was executed. See CR 23.
Instead, on March 10, 2010, despite having released all of its claims
against the City concerning the Carowest portion of the South Tributary Project,
Yantis presented a $556,248 claim to the City for alleged work delays on the
Carowest Property. See CR 92-94. Over two months later, relying on the Letter
Agreement, the City referred this delay claim, including a copy of the previously
undisclosed Change Order, to Carowest and demanded that Carowest “negotiate
2
with Yantis and work out a payment.” CR 90-94. Carowest denied both that it
was liable for any delays and that any alleged delays arose from the channel
Modification. See CR 364.
On May 31, 2010, Yantis executed another release of all delay claims
in connection with its application to the City for a progress payment on the South
Tributary Project (the “Waiver”). See CR 979-80 (“For and in consideration of
$83,324.15, representing a progress payment on the above-referenced project . . .
Yantis hereby acknowledges complete satisfaction of, and waives and releases, any
and all claims of every kind against Owner, the Project and the property . . . .”).
Notwithstanding the fact that Yantis had now already twice released any claims
related to the Carowest portion of the South Tributary Project, the City made
repeated demands, by letters of May 13, 2010 and June 10, 2010, that Carowest
“negotiate with Yantis and work out a payment, if any, for delay damages.” CR
90-94, CR 95-97.
On July 18, 2010, almost nine months after executing the Change
Order, Yantis re-submitted its delay claim to the City, this time seeking
$276,270.80 in delay damages purportedly related to the Carowest portion of the
South Tributary Project (the “Delay Claim”). See CR 99. The City notified Yantis
(copying Carowest) that it was demanding that Carowest handle the claim, see CR
98, and then referred the Delay Claim to Carowest, demanding that Carowest
3
indemnify and defend the City, see CR 99-100. Carowest again denied there had
been any delays for which it was responsible. See CR 364. Following a series of
additional communications between Carowest and the City regarding the Delay
Claim, the City finally acknowledged in an October 8, 2010 letter to Yantis
(copying Carowest) that “based on the execution of change order number three,
Yantis has waived ‘any and all costs associated with or resulting from the
change(s) ordered herein, including all impact, delays, and acceleration costs.’”
CR 103 (emphasis in original). However, at no point did the City rescind its
demand that Carowest handle the bogus claim, and at no point did Yantis abandon
its Delay Claim.
Carowest seeks declarations regarding the validity of the Delay Claim and
Carowest’s alleged obligation to indemnify the City.
In response to the City’s continued pursuit of Carowest, Carowest
filed a declaratory judgment action against both the City and Yantis on November
3, 2010, seeking declarations that: (1) Yantis had no right to damages under the
Delay Claim; and (2) the City therefore had no right to indemnification from
Carowest. See CR 5-12. Carowest subsequently amended its petition to seek
additional declarations against the City and Yantis that (1) “the October 21, 2009
Change Order released any delay claim that existed before that date,” and (2) “the
May 31, 2010 progress payment fully and finally released any delay claim that
existed before that date” (collectively, with the declaratory judgment claims filed
4
on November 3, 2010, the “South Tributary Claims”). See CR 13.1 Carowest also
asserted other claims, including a breach of contract claims against the City. Id.1
On November 29, 2010, the City filed its first Plea to the Jurisdiction,
Supp. CR 4-8, which it subsequently amended on January 27, 2011, CR 459-65.
The district court denied the City’s plea to the jurisdiction on March 17, 2011. CR
467-68. The City then perfected an appeal of the order denying its plea, CR 470-
78, but subsequently filed a motion to dismiss its own appeal, CR 480-81, which
was granted by this Court, CR 483-85.
The City asserts affirmative counterclaims against Carowest.
After moving to dismiss its own appeal, the City returned to district
court and asserted various counterclaims, alleging that Carowest had materially
breached the Letter Agreement, including its indemnification provision, and related
contracts and seeking, among other relief, monetary damages in excess of
$843,000. See CR 833-38. The City’s breach of contract counterclaim, which
remains pending in Cause No. C2010-1519D (the “2010 Cause”), specifically
alleges, among other things, that:
Carowest breached the Letter Agreement by refusing to
indemnify and hold the City harmless for Yantis’s delay
claim. Carowest further breached Sections 2 and 3 of the
1
On January 2, 2018, Carowest and Yantis filed a joint request to supplement the Clerk’s
Record with items previously designated by the parties. Because the Clerk’s Record contains
only the first page of Carowest’s Second Amended Petition, Carowest has cited to that page. A
complete copy of Carowest’s Second Amended Petition is attached hereto as Exhibit 1.
5
Letter Agreement by filing suit against the City in
connection with the delay claim, causing the City to
suffer harm, including attorneys’ fees and costs. Such
breaches were material. The City has incurred, and is
entitled to recover, damages as a result of Carowest’s
breaches of the Letter Agreement.
CR 49 (emphasis added). Notably, the City’s statement of facts on appeal makes
no mention of its pending breach of contract claim against Carowest, even though
the City took the position in opposing Carowest’s motion to sever the South
Tributary Claims that its counterclaim is “interwoven with” and “implicate[s] the
exact same provision of the exact same contract” as the South Tributary Claims.2
Supp. CR 249-50.
In 2011, Carowest amended its pleading to assert the North Tributary Claims
based on the City’s violations of the Texas Open Meetings Act and competitive
bidding statutes.
In addition to the South Tributary Project, the City planned another
similar drainage project to channel run-off waters to the Guadalupe River (the
“North Tributary Project”). See CR 25. Yantis was one of several contractors to
submit bids when the City initiated a public bidding process for the North
Tributary Project in March 2011. See CR 206-07. Although Yantis’s total base
bid was not the lowest bid received for that project, the City used an alternate
2
Although the City shamelessly characterizes Carowest’s claims that remain pending in
the 2010 Cause as “frivolous,” City Br. at 9 n.3, its recitation of facts never mentions its own
pending counterclaims over the same contract.
6
method for tabulating the bids and recommended that Yantis be awarded the
contract. See CR 25, CR 207.
The New Braunfels City Council met on May 9, 2011 to decide
whether and whom to award the $5 million North Tributary construction contract.
See CR 206. Just hours before the meeting, Yantis offered to release its Delay
Claim related to the South Tributary Project, which it had already twice released,3
but only if the City Council awarded Yantis the North Tributary contract that very
evening. Id. The City accepted Yantis’s offer, and they executed a “Rule 11
Agreement” pursuant to which Yantis again purportedly released the Delay Claim
in a direct quid pro quo exchange for the award of the contract that night.4 Id. The
Rule 11 Agreement was not disclosed to the public or other bidders prior to or at
the City Council meeting. See CR 207. Instead, it was discussed in an improperly
noticed, closed, executive session, after which Yantis was awarded the North
Tributary contract. See CR 206-07. Only after it had awarded the North Tributary
contract to Yantis did the City notify Carowest and the public of the covert Rule 11
Agreement. See CR 207.
3
Despite these prior releases, Yantis continued to pursue its Delay Claim.
4
The Rule 11 Agreement provides that: Yantis will agree “to fully release the City of New
Braunfels from Yantis’ asserted delay claim on the South Tributary Project if, after all proper
and legal process is completed, Yantis is awarded the North Tributary Contract . . . at the New
Braunfels City Council meeting scheduled for this evening.” CR 206. It further provides: “If the
contract is not awarded to Yantis this evening, this offer is hereby withdrawn.” Id.
7
Based on the City’s conduct in connection with awarding the contract
for the North Tributary Project to Yantis, Carowest promptly amended its
pleadings in July 2011 to assert, among other claims, declaratory judgment claims
seeking declarations that (1) the City violated the Texas Open Meetings Act
(“TOMA”) and (2) the North Tributary contract between the City and Yantis was
void because it was awarded in violation of competitive bidding requirements in
the Texas Local Government Code and the Texas Penal Code (collectively, the
“North Tributary Claims”). See CR 13.1
In 2014, this Court held that the district court had jurisdiction over all of
Carowest’s declaratory judgment claims.
On September 1, 2011, the City filed another plea to the jurisdiction.
CR 487-502. The district court again denied the City’s plea, CR 504-05, and the
City again appealed, CR 507-09. On April 30, 2014, this Court issued its opinion
in that first interlocutory appeal. See City of New Braunfels v. Carowest Land,
Ltd., 432 S.W.3d 501 (Tex. App.—Austin 2014, no pet.) (Carowest I). Holding
that the City’s immunity was waived as to all of Carowest’s declaratory judgment
claims, including the South Tributary Claims at issue in this appeal, the Court
affirmed the district court’s denial of the City’s plea to the jurisdiction. Id. at 530-
35.
With respect to Carowest’s South Tributary Claims at issue here, this
Court held that jurisdiction existed “by virtue of the waiver of immunity in Local
8
Government Code chapter 271, [subsection] I and the limited jurisdiction that
arises by virtue of the City’s claim for monetary relief.” Id. at 534 (footnote
omitted). This Court also rejected the City’s argument that the claims in this case
were moot. Id. at 534-35.
In 2017, this Court wrongly held that the district court lacked jurisdiction over
Carowest’s North Tributary Claims.
In accordance with this Court’s decision and direct guidance in
Carowest I, which acknowledged jurisdiction over these claims, Carowest’s North
Tributary Claims were severed by agreement into a new cause so that the threshold
question regarding the legality of awarding the North Tributary Contract to Yantis
could be determined. See Supp. CR 292-94. Following a trial on the merits, the
jury returned a unanimous verdict for Carowest, and the district court rendered
judgment consistent with that verdict. See CR 137-59. The City and Yantis each
appealed. On June 29, 2017, this Court issued its opinion, reversing itself as to the
North Tributary Claims and holding that governmental immunity barred
Carowest’s North Tributary Claims because neither TOMA nor the competitive
bidding statutes at issue waived sovereign immunity for declaratory relief.5 See
City of New Braunfels v. Carowest Land, Ltd., --- S.W.3d ---, No. 03-16-00249-
5
Although not controlling here, the Carowest II opinion was, in Carowest’s view, wrongly
decided. Carowest explained its reasoning for that view in its Motion for Panel Rehearing and
Motion for Reconsideration En Banc, both filed on August 29, 2017, which remain pending
before the Court.
9
CV, 2017 WL 2857142 (Tex. App.—Austin June 29, 2017, mtn. for reh’g
pending) (Carowest II).
In Carowest II, the Court did not revisit or reconsider its prior
determination in Carowest I that the City had waived immunity for Carowest’s
South Tributary Claims at issue here.
Carowest’s South Tributary Claims have separate and distinct jurisdictional
bases from the North Tributary Claims.
Meanwhile, while Carowest II was still pending, the trial court
granted Carowest partial summary judgment on the South Tributary Claims. See
CR 55-56. The Court then granted Carowest’s motion to sever these claims into a
separate action so that they could become final while the remaining claims
between the parties in the 2010 cause proceeded, see CR 57-59, leaving only the
issue of Carowest’s attorneys’ fees to be decided.
Before that judgment became final, this Court issued its Carowest II
opinion. Relying on Carowest II, both the City and Yantis filed pleas to the
jurisdiction, see CR 77-130, CR 131-98, even though all of the City’s prior pleas as
they relate to Carowest’s South Tributary Claims have been denied and such denial
was already affirmed by this Court in Carowest I. See CR 436-37, Supp. CR 89,
Supp. CR 102. The City now asserts that the “exact same jurisdictional defect as
found in Carowest II applies to Carowest’s UDJA claims in this 2017 cause,” City
Br. at 11 (emphasis added). But in fact, Carowest has asserted two jurisdictional
10
bases for the South Tributary Claims in this case, both of which are distinct from
the jurisdictional bases over the North Tributary Claims addressed in Carowest II:
(1) the City’s assertion of affirmative counterclaims against Carowest, and (2) the
statutory waiver of immunity contained in Chapter 271 of the Texas Local
Government Code. See CR 435-86.
The district court properly denied both the City’s and Yantis’s pleas.
CR 1048, CR 1049.6 Pursuant to this Court’s analysis in Carowest I, the denial of
the City’s plea to the jurisdiction should be affirmed.7
6
In the underlying litigation, three experienced judges (Hon. Charles Ramsay, Hon. Paul
Davis, and Hon. Margaret Mirabal) denied each of the City’s multiple pleas to the jurisdiction.
Additionally, as it concerns Carowest’s South Tributary Claims, the grounds for
dismissal that the City asserts in its renewed plea to the jurisdiction are substantively the same as
those asserted in its earlier pleas. Because the City’s renewed plea is, in essence, a motion to
reconsider its earlier plea, Carowest respectfully suggests that this Court lacks jurisdiction to
consider the merits of the City’s interlocutory appeal. See City of Houston v. Estate of Jones,
388 S.W.3d 663, 667 (Tex. 2012) (holding that when a governmental entity, like the City, files a
plea to the jurisdiction or other procedural vehicle raising the same grounds as it did in a plea to
the jurisdiction previously denied by the trial court, the renewed plea is “substantively a motion
to reconsider the denial of [the original] plea” and that “[t]he court of appeals [does] not have
jurisdiction to consider any part of the merits of the interlocutory appeal” unless new facts or law
justify reconsideration); see also City of Houston v. Atser, L.P., 403 S.W.3d 354, 359 (Tex.
App.—Houston [1st Dist.] 2013, pet. denied) (holding that because the City failed to file a notice
of interlocutory appeal within twenty days of the trial court’s order denying the City’s original
plea to the jurisdiction, the court of appeals lacked jurisdiction to consider the merits of the
City’s interlocutory appeal of an order denying the City’s motion for summary judgment, which
raised the same immunity arguments).
If this Court were to conclude that the City has presented new law sufficient to justify
reconsideration of its Chapter 271 argument, then at the very least the City’s appeal should be
dismissed insofar as it alleges that Carowest’s South Tributary Claims are barred by
governmental immunity even though the City elected to assert affirmative claims for relief. The
City presents no new facts or law that justify this Court’s reconsideration of its prior holding that
jurisdiction over Carowest’s South Tributary Claims is proper under Reata Construction Corp. v.
City of Dallas, 197 S.W.3d 371, 377 (Tex. 2006) and its progeny.
11
SUMMARY OF THE ARGUMENT
In Carowest I, this Court affirmed the district court’s denial of the
City’s plea to the jurisdiction on the South Tributary Claims—the only two
declaratory judgment claims at issue in this case. Although this Court
subsequently held in Carowest II that different declaratory judgment claims—the
North Tributary Claims—asserted by Carowest against the City are barred by
governmental immunity, the Court did not reconsider its prior determination in
Carowest I that the South Tributary Claims are not barred by immunity. Indeed,
the Court had no reason to revisit its prior holding in Carowest I because the
jurisdictional bases for the South Tributary Claims and the North Tributary Claims
are distinct. As this Court held in Carowest I, the district court has jurisdiction
over the South Tributary Claims by virtue of the City having asserted affirmative
claims for relief against Carowest and by virtue of the statutory waiver of
immunity in Chapter 271 of the Texas Local Government Code. Carowest I, 432
S.W.3d at 534-35. The district court thus properly denied the City’s plea to the
jurisdiction.
Under settled law, a governmental entity does not enjoy immunity
from suit for offsetting claims against it that are “germane to, connected with, and
7
Carowest has filed a motion to dismiss Yantis’s appeal for lack of jurisdiction. If this
Court declines to dismiss Yantis’s appeal, it should affirm the district court’s denial of Yantis’s
plea to the jurisdiction.
12
properly defensive to” affirmative claims asserted by the entity. Reata
Construction Corp. v. City of Dallas, 197 S.W.3d 371, 377 (Tex. 2006). The City
has asserted affirmative counterclaims against Carowest, including a pending claim
that Carowest breached the same provision of the same contract on which
Carowest’s South Tributary Claims are based. Having elected to seek affirmative
relief against Carowest, the City cannot now claim immunity from the South
Tributary Claims.
Even if this Court were to conclude that the City’s assertion of
affirmative claims for relief did not abrogate its immunity, jurisdiction still exists
over the South Tributary Claims because Chapter 271 independently waives the
City’s immunity. Section 271.152 of the Texas Local Government Code provides
that “[a] local governmental entity 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.” TEX. LOCAL GOV’T CODE ANN. § 271.152
(emphasis added). It is fundamental that the Uniform Declaratory Judgments Act
(“UDJA”) provides a remedy where subject matter jurisdiction already exists.
Here, the underlying subject matter of Carowest’s declaratory judgment claims—a
contract that the City concedes is subject to Section 271.152—falls squarely within
Chapter 271’s waiver of immunity. Because the Legislature waived immunity as
to Carowest’s breach of contract claims, it also waived immunity as to Carowest’s
13
declaratory judgment claims based on the same contract. The City’s contrary
contention that Chapter 271 does not “expressly waive” immunity for declaratory
relief is both inconsistent with the principle that declaratory relief is “procedural”
in nature and conflicts with Texas Supreme Court authority. Consequently, this
Court must affirm the district court’s denial of the City’s plea to the jurisdiction.
This Court has also already rejected the City’s argument that the
district court lacks jurisdiction over Carowest’s South Tributary Claims based on
the doctrine of mootness. The City has asserted a breach of contract claim against
Carowest alleging that Carowest breached the Letter Agreement’s indemnification
provision. Even accepting as true the City’s and Yantis’s assertion that the Delay
Claim was released, at the latest, in 2011, such release does not moot the South
Tributary Claims. The declarations Carowest seeks regarding the validity of
Yantis’s Delay Claim and the timing of its release bear on Carowest’s past
compliance with the Letter Agreement. Because the City’s breach of contract
claim against Carowest remains pending in the 2010 Cause, Carowest’s South
Tributary Claims continue to implicate a live and justiciable controversy.
Additionally, even if this Court were to conclude that Carowest’s South Tributary
Claims are moot, Carowest’s claim for attorneys’ fees presents a live and
justiciable controversy over which the district court has jurisdiction.
14
As it concerns Yantis’s appeal, Carowest has filed a motion to dismiss
for lack of jurisdiction because no statute authorizes the interlocutory appeal of an
order denying a plea to the jurisdiction by a privately owned entity. If, however,
this Court declines to dismiss Yantis’s appeal, it should affirm the district court’s
denial of Yantis’s plea to the jurisdiction. First, the City is not an indispensable
party to Carowest’s declaratory judgment claims against Yantis because the South
Tributary Claims do not seek to void any contract to which the City is a party, as
Yantis erroneously asserts. Second, the South Tributary Claims implicate a
justiciable controversy. All that is required for a court to proceed on a declaratory
judgment action is a threat of imminent litigation or likely injury. When Carowest
filed the South Tributary Claims, the disagreement between the City and Carowest
regarding the scope and application of the Letter Agreement’s indemnification
provision had, at the very least, manifested the ripening seeds of a controversy, if
not matured into an actual controversy. Yantis’s claim that the controversy
remained hypothetical lacks any merit in light of the fact that the City has filed an
affirmative counterclaim against Carowest alleging that Carowest breached the
Letter Agreement’s indemnification provision.
For the foregoing reasons, this Court should affirm the district court’s
denial of both the City’s and Yantis’s jurisdictional pleas.
15
ARGUMENT
I. The trial court properly denied the City’s plea to the jurisdiction as to
Carowest’s South Tributary Claims.
A. Carowest’s South Tributary Claims against the City are not
barred by governmental immunity.
The City’s assertion that “the exact same jurisdictional defect as found
in Carowest II applies to Carowest’s UDJA claims” in this case is patently
incorrect. City Br. at 11. The Court in Carowest II did not address the
jurisdictional basis for either of the two declaratory judgment claims here. Instead,
this Court concluded that jurisdiction was lacking over the North Tributary Claims
because neither TOMA nor the competitive bidding statutes at issue expressly
waived governmental immunity for declaratory relief. See Carowest II, 2017 WL
2857142, at *4-6. Here, by contrast, jurisdiction over the South Tributary Claims
exists because: (1) the City asserted counterclaims for affirmative relief against
Carowest, and (2) Chapter 271 of the Texas Local Government Code waives
immunity for declaratory judgment claims arising from contracts subject to that
chapter. The distinct jurisdictional bases for the South Tributary Claims were not
even considered by the Court in Carowest II, which concerned only the North
Tributary Claims. This case, in fact, is governed by the Court’s opinion in
Carowest I, which affirmed the denial of the City’s plea to the jurisdiction as to the
very same South Tributary Claims at issue here because, as the Court held, (1) the
City left its “sphere of immunity from suit” by asserting claims for affirmative
16
relief against Carowest, and (2) the claims fall “within the district court’s
jurisdiction to adjudicate by virtue of the waiver of immunity in Local Government
Code chapter 271, [subchapter] I.” Carowest I, 432 S.W.3d at 523, 534-35.
1. Jurisdiction over Carowest’s South Tributary Claims exists
because the City asserted an affirmative counterclaim
alleging breaches of the Letter Agreement.
Under settled law, a governmental entity cannot seek affirmative relief
on one hand and claim immunity from related claims by that party against it on the
other. In City of Dallas v. Albert, the Supreme Court explained that the City could
not claim immunity because it had filed a counterclaim and could not “reinstate”
its immunity by a subsequent nonsuit. 354 S.W.3d 368, 375-77 (Tex. 2011).
Albert thus clarified and reaffirmed the Supreme Court’s prior holding in Reata,8
that a governmental entity does not enjoy immunity from suit for claims against it
that are “germane to, connected with, and properly defensive to” affirmative claims
8
Although the Reata rule has at times been described as creating a limited waiver of
sovereign immunity, the Supreme Court has characterized the Reata rule as a situation in which
immunity simply does not exist, rather than a situation in which immunity is waived. See, e.g.,
Albert, 354 S.W.3d at 374 (“Although litigation actions of governmental entities underlay our
decisions in Reata and similar cases, we did not hold that those actions effected waivers of
immunity; rather, they were factors considered in defining the contours of immunity.”); City of
Midland v. Goerlitz, 201 S.W.3d 689, 690 (Tex. 2006) (remanding to give plaintiff an
“opportunity to argue . . . that the City’s immunity from suit either does not exist pursuant to our
decision in Reata or that it has been waived by [Chapter 271]”); City of Houston v. United Water
Servs., 201 S.W.3d 690, 691 (Tex. 2006) (same).
17
asserted by the entity, to the extent the claims against the entity offset the entity’s
claims.9 Albert, 354 S.W.3d at 374-75.
As Justice Brister explained in his concurring opinion in Reata:
“[W]hen the government brings its own affirmative claims, it has obviously
concluded that the distraction and expense of litigation is worthwhile in that
particular case.” Reata Constr. Corp, 197 S.W.3d at 382-83 (Brister, J.,
concurring); see also Albert, 354 S.W.3d at 377 (“[A]fter governmental entities
decide to litigate, they are bound to participate in the litigation process as an
ordinary litigant.”). Such is the case here. The City, rather than standing on its
initial plea to the jurisdiction, chose to invoke the jurisdiction of the district court
and, therefore, is not immune from Carowest’s claims concerning the same
contract.
The following chronology of pleadings in this case demonstrates that
the trial court’s denial of the City’s plea to the jurisdiction as to Carowest’s South
Tributary Claims was proper under Reata and Albert:
 November 3, 2010 – Carowest files Original Petition for
Declaratory Relief, CR 5-12;
 November 29, 2010 – City files Original Answer and Plea to
Jurisdiction, Supp. CR 4-8;
9
Courts have acknowledged that the Reata rule extends to both contract and tort claims.
See, e.g., Sweeny Cmty. Hosp. v. Mendez, 226 S.W.3d 584, 592–93 (Tex. App.—Houston [1st
Dist.] 2007, no pet.) (by filing affirmative counterclaims, state hospital waived immunity for
counterclaims for tortious interference, defamation, and other torts).
18
 January 11, 2011 – Carowest files First Amended Petition against
City adding breach of contract claims, Supp. CR 15-24;
 March 17, 2011 – Court denies City’s Plea to the Jurisdiction,
Supp. CR 89;
 June 16, 2011 – After dismissing its own appeal, City files its
Original Counterclaim asserting claims for breach of contract,
declaratory relief, and specific performance and seeking to enforce
the same Letter Agreement that forms the basis of Carowest’s
declaratory judgment claims, CR 833-930;
 August 5, 2016 – Court grants partial summary judgment on
Carowest’s two declaratory judgment claims at issue in this case,
CR 55-56; and
 March 21, 2017 – Court severs these declaratory judgment claims
into the instant case, Supp. CR 292-94.
As reflected in the above timeline, in June 2011, relying on the Letter
Agreement, the City chose to go on the offensive and filed affirmative claims,
including a breach of contract claim, seeking monetary relief against Carowest.
See CR 833-930. Once the City did so, the district court also acquired jurisdiction
over Carowest’s claims that are “germane to, connected with, and properly
defensive to the City’s claims, to the extent [Carowest’s] claims offset those
asserted by the City.” Reata Constr. Corp., 197 S.W.3d at 373. Carowest’s South
Tributary Claims are clearly “germane to and connected with” the City’s breach of
contract counterclaim—they are based on the same provision of the Letter
Agreement. Carowest’s claims are also properly defensive to the City’s
counterclaim because judicial declarations that Yantis’s Delay Claim was released
19
in October 2009 or May 2010 and that Carowest therefore never had any obligation
to indemnify the City would rebut, at least in part, the City’s claim that “Carowest
breached the Letter Agreement by refusing to indemnify and hold the City
harmless for Yantis’s delay claim.” CR 49.
In its brief, the City does not deny that it has asserted affirmative
counterclaims against Carowest, see CR 55-64, or that its counterclaims remain
pending in the 2010 Cause from which the South Tributary Claims at issue here
were severed. Moreover, in opposing Carowest’s motion to sever, the City both
affirmed that it “has asserted counterclaims,” including a breach of contract claim
that “clearly implicates Yantis’s Delay Claim,” CR 933. The City further stated:
The claims Carowest seeks to have severed and the
City’s pending breach of contract counterclaim implicate
the exact same provision of the exact same contract. . . .
[quoting Letter Agreement § 3]. Because Carowest’s
claims relating to the Delay Claim and the City’s
counterclaim relating to the Delay claim are interwoven,
severance should not be granted.
CR. 934. In other word, the City essentially conceded that Carowest’s South
Tributary Claims are germane to, connected with, and properly defensive to the
City’s breach of contract counterclaim. The City nonetheless asserts that it is
immune from the South Tributary Claims because “[d]eclaratory relief, by its
nature, does not and cannot operate as an offset.” City Br. at 22. The terseness of
the City’s argument on this point is revealing. It cites only one unreviewed
20
decision, City of McKinney v. Hank’s Restaurant Group, 412 S.W.3d 102, 116
(Tex. App.—Dallas 2013, no pet.), to support its position. Other than Hank’s,
Carowest has found no case expressly limiting the Reata rule to monetary claims,
and the City offers no compelling or even plausible reason why a “properly
defensive” declaratory judgment claim, such as those asserted by Carowest, could
not be said to “offset” the City’s breach of contract claim.
Indeed, multiple cases have held that that a governmental entity that
asserts claims for affirmative relief is not immune from related declaratory
judgment claims under Reata. See, e.g., City of Conroe v. TPProperty LLC, 480
S.W.3d 545, 569 (Tex. App.—Beaumont 2015, no pet.) (“Most of the declarations
[plaintiff] seeks would have the effect of establishing the parties’ rights and
liabilities under the agreements. We have held the very issues these declarations
seek to affirm are within the trial court’s jurisdiction to adjudicate by virtue of the
City’s limited waiver of immunity arising from the City’s counterclaims seeking
monetary relief.”); Archer Grp., LLC v. City of Anahuac, 472 S.W.3d 370, 377-78
(Tex. App.—Houston [1st Dist.] 2015, no pet.) (holding that governmental entities
were not immune from counterclaims against the entities, including claim for
declaratory relief, because counterclaims “were germane to, connected with, and
properly defensive to” the entities’ affirmative claims for relief); Carowest I, 432
S.W.3d at 523, 534 (noting that “the City has left its ‘sphere of immunity from
21
suit’” by seeking affirmative relief, and thus rejecting the “City’s attempt to raise
governmental immunity as a jurisdictional bar to Carowest’s declaratory claim
founded on the same subject matter”); Redburn v. Garrett, No. 13-12-00215-CV,
2013 WL 2149699, at *10 (Tex. App.—Corpus Christi May 16, 2013, pet. denied)
(mem. op.) (“We conclude that appellant’s claim for a declaratory judgment that
the City ‘does not have an easement or other legal authority to enter [appellant’s]
property’ is sufficiently connected to the City’s claim that the City has an easement
encumbering appellant’s property. If it were established, appellant’s claim would
defeat the City’s claim and vice versa. Therefore, the trial court has jurisdiction to
hear appellant’s claim for declaratory judgment.”).
The holdings in these cases also comport with the plain meaning of
“offset,” which is “something that serves to counterbalance or to compensate for
something else.” MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY (11 ed. 2003);
see also BLACK’S LAW DICTIONARY (10 ed. 2014) (“Something (such as an amount
or claim) that balances or compensates for something else”). So too are these cases
consistent with the policy rationale underlying the judicial abrogation of immunity
announced in Reata.10 Here, the City invoked the district court’s jurisdiction to
10
In Reata, Justice Brister explained the Court’s rationale for limiting a governmental
entity’s abrogation of immunity to “offsetting” claims as follows: “By filing suit on a claim, a
government consents to have the courts decide its entitlement to a particular sum of money, but
no more.” Reata Constr. Corp., 197 S.W.3d at 383 (Brister, J., concurring). Albert reiterates
that the limitation is intended to preclude a litigant from asserting claims against a governmental
22
decide the City’s entitlement to damages for Carowest’s alleged breach of the
Letter Agreement’s indemnification provision. Because Carowest’s related
declaratory judgment claims do not seek any affirmative monetary relief from the
City, much less monetary relief in excess of the amount of damages claimed by the
City, the district court also acquired jurisdiction over Carowest’s South Tributary
Claims. As the court in Bandera County v. Hollingsworth cogently explained:
In Reata, the court noted that the considerations
underlying immunity from suit were not adversely
implicated by its holding. By choosing to engage in
litigation to assert its own affirmative claims for
monetary damages, the entity has presumably made a
decision to expend resources to pay litigation
costs. Because the opposing party’s claims can operate
only as an offset to reduce the government’s recovery,
the fiscal planning of the entity should not be disrupted. .
. . Similarly, in this case, “we see no ill befalling the
governmental entity or hampering of its governmental
functions” by allowing [plaintiffs] to assert a . . . bare
declaratory judgment claim [that] does not seek monetary
relief and does not seek to affect the County's
policymaking functions. . . . We hold the County is not
immune from that claim and the trial court did not err in
denying the plea to the jurisdiction with respect to that
claim.
419 S.W.3d 639, 644-45 (Tex. App.—San Antonio 2013, no pet.) (internal
citations omitted); cf. Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d
407, 413-14 (Tex. 2011) (assuming that declaratory judgment counterclaim
entity that are “for amounts over and above the amount that would offset the [entity’s] claim.”
Albert, 354 S.W.3d at 374.
23
asserted by governmental entity, absent an accompanying claim for monetary
damages, would fall within Reata’s offset holding and thereby abrogate
governmental immunity).
Because Carowest has established that jurisdiction exists over its
South Tributary Claims under Reata and its progeny, no separate statutory waiver
of immunity is required. This Court should therefore affirm the trial court’s denial
of the City’s plea to the jurisdiction.
2. Jurisdiction over Carowest’s South Tributary Claims exists
pursuant to Texas Local Government Code Section 271.152.
Even if this Court were to conclude that jurisdiction is lacking over
Carowest’s South Tributary Claims notwithstanding the City’s assertion of
affirmative claims for relief under the same contract, the trial court would still have
had jurisdiction because Chapter 271 independently waives the City’s immunity
from Carowest’s claims.
Section 271.152 of the Texas Local Government Code (“Section
217.152”) provides that “[a] local governmental entity 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.” TEX. LOCAL GOV’T
CODE ANN. § 271.152 (emphasis added). In its prior briefing, the City
acknowledged that it “agreed to be bound by the provisions of Chapter 271 of the
Local Government Code concerning the July 27, 2009 Letter Agreement between
24
the City and Carowest.” CR 809. Moreover, the City does not contend here that
the Letter Agreement falls outside the scope of Chapter 271. Instead, the City
argues that Chapter 271 waives immunity only for “a claim for breach of contract”
seeking monetary damages, not for a declaratory judgment claim, even if such
claim arises from a contract subject to Section 271.152. See City Br. at 16-22.
This argument misconstrues the fundamental nature of declaratory relief.
The UDJA neither confers new substantive rights upon parties nor
augments a court’s subject matter jurisdiction; it is rather “a procedural device for
deciding cases already within a court’s jurisdiction.” See, e.g., Tex. Ass’n of Bus.
v. Tex. Air Control Bd., 852 S.W.2d 440, 444 (Tex. 1993); Hendee v. Dewhurst,
228 S.W.3d 354, 379 n.31 (Tex. App.—Austin 2007, pet. denied) (UDJA
“provide[s] a remedy where subject matter jurisdiction otherwise exists”); TEX.
CIV. PRAC. & REM. CODE ANN. § 37.003(a) (“A court of record within its
jurisdiction has power to declare rights, status, and other legal relations whether or
not further relief is or could be claimed.”) (emphasis added). Thus, governmental
immunity does not bar a declaratory judgment action where the legislature has
waived immunity as to the underlying “subject matter of the claim.” Tex. Dep’t of
State Health Servs. v. Balquinta, 429 S.W.3d 726, 746 (Tex. App.—Austin 2014,
pet. dism’d).
25
The “procedural” as opposed to “substantive” nature of declaratory
relief is critically important. Here, the underlying subject matter of Carowest’s
declaratory judgment claims—the Letter Agreement that the City acknowledges is
subject to Section 271.152—falls squarely within the statute’s waiver of
governmental immunity. Because the Legislature waived immunity as to
Carowest’s breach of contract claims, it also waived immunity as to Carowest’s
declaratory judgment claims based on the same contract. As discussed below, this
result is consistent with both the language and purpose of Chapter 271, as well as
Texas Supreme Court jurisprudence.
Chapter 271 waives a local governmental entity’s immunity for cases
“adjudicating a claim for breach of the contract.” TEX. LOCAL GOV’T CODE §
271.152. The plain text of the statute does not exclude declaratory relief from the
scope of its waiver. Moreover, the Supreme Court has concluded that Chapter 271
waives immunity from suit for a declaratory judgment action that seeks to construe
a contract that would otherwise fit within the statute—i.e., a “contract subject to
this subchapter.” See Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex.
Political Subdivisions Prop./Cas. Joint Self-Ins. Fund, 212 S.W.3d 320, 326-28
(Tex. 2006).
In Ben Bolt, a school district sued a political subdivision’s joint self-
insurance fund after the fund denied the school district’s claim for water damage.
26
Id. at 322-23. The school district brought a declaratory judgment action against the
fund seeking only a declaration that the water damage was a covered loss; the
district did not plead for contract damages. Id. The Court rejected the fund’s
claim that it was immune from suit, concluding that any such immunity was
waived pursuant to Section 271.152. Id. at 328 (Section 271.152 “waives the
Fund’s immunity from Ben Bolt’s claim arising out of the insurance agreement
between the parties.”) (emphasis added). In reaching this conclusion, the Court
looked to the legislative history of Chapter 271 and explained that “the Legislature
intended to loosen the immunity bar so ‘that all local governmental entities that
have been given or are given the statutory authority to enter into contracts shall not
be immune from suits arising from those contracts.’” Id. at 327 (quoting HOUSE
COMM. ON CIVIL PRACTICES, Bill Analysis, Tex. H.B. 2039, 79th Leg., R.S.
(2005)).
As in Ben Bolt, Carowest’s South Tributary Claims against the City
arise out of a contract that is subject to Section 271.152. Indeed, the City admits
that much. Through its declaratory judgment claims, Carowest seeks to adjudicate
the City’s allegation that Carowest breached its obligation under the Letter
Agreement to indemnify and hold the City harmless. Those claims, just like a
breach of contract claim, come within the scope of Chapter 271’s waiver.
Furthermore, Carowest has asserted claims against the City alleging multiple
27
breaches of the City’s contractual obligations under the Letter Agreement, which
remain pending in the 2010 Cause. See CR 15-44. Hence, Carowest is seeking
declaratory relief as a defense against the City’s breach of contract counterclaim
and in connection with Carowest’s own breach of contract claim,11 not a mere
declaration of rights in order to extract attorneys’ fees from the City, as the City
repeatedly avers.12 See City Br. at 1-2, 20.
The City’s arguments that Chapter 271 does not waive immunity for
declaratory relief lack merit. First, the City cites Texas Natural Resources
Conservation Commission v. IT-Davy, 74 S.W.3d 849, 855-56 (Tex. 2002), for the
proposition that suits “against the government seeking to establish a contract’s
validity, or to enforce performance under a contract, or to impose contractual
liabilities, are barred by immunity because such suits attempt to control state
action.” City Br. at 15. Although the UDJA admittedly does not alter this rule, the
City ignores the effect of Chapter 271’s enactment in 2005 (after IT-Davy was
11
That Carowest’s South Tributary Claims in this suit were severed, for efficiency, into a
separate action following a grant of partial summary judgment in Carowest’s favor does nothing
to change this fact.
12
Omitting the critical fact that the City initiated this dispute by seeking indemnification for
Yantis’s purported delay claim from Carowest, the City maintains that the Legislature did not
design Chapter 271 to “allow a company that disputes the terms of its contract with a
municipality to file a lawsuit merely to get a declaration of its rights under the contract, when the
company has suffered no harm from the contract dispute, and then seek recovery from the
municipality in the form of attorneys’ fees.” City Br. at 2. Even assuming the City were correct,
which it is not, this argument implicates only the waiver of the City’s immunity under Chapter
271, not the separate and independent abrogation of the City’s immunity by virtue of the City’s
asserting an affirmative counterclaim against Carowest for breach of the Letter Agreement. See
supra at Section I.A.1.
28
decided). IT-Davy proscribed the use of declaratory judgments to bring a breach of
contract claim through the back door at a time when such claims were prohibited
because jurisdiction was lacking for the underlying claims. See, e.g., Creedmoor-
Maha Water Supply Corp. v. Tex. Comm’n on Envtl. Quality, 307 S.W.3d 505, 515
(Tex. App.—Austin 2010, no pet.) (asserting that a declaratory judgment claim is
“barred by sovereign immunity if the remedy would have the effect of establishing
a right to relief against the [s]tate that implicates sovereign immunity and for
which immunity has not been waived.”) (emphasis added). Chapter 271’s broad
waiver now permits breach of contract claims to come through the front door.
Thus, for claims arising from contracts subject to Chapter 271, there is no longer
any concern that litigants could plead declaratory judgment claims in an attempt to
obtain contract relief not otherwise available. As the court explained in Texas
Association of School Boards Risk Management Fund v. Benavides Independent
School District:
If we had held that immunity from suit had not been
waived with respect to the contractual claims, then the
Fund would have been correct—the School District could
not have circumvented immunity by characterizing their
dispute as a declaratory-judgment claim. However,
because we have held that immunity from suit has been
waived, the School District’s declaratory-judgment
action is not barred by the holding in IT-Davy.
29
221 S.W.3d 732, 740 (Tex. App.—San Antonio 2007, no pet.). The same is true
here. Because Chapter 271 waives immunity for Carowest’s contractual claims,
the holding in IT-Davy does not prohibit Carowest’s declaratory judgment claims.
Second, the City asserts that Ben Bolt is inapposite because the
Supreme Court simply assumed that declaratory relief was available under Chapter
271 without specifically addressing the question of whether Chapter 271 waives
immunity for declaratory judgment claims. See City Br. at 21. But, in reaching its
judgment, Ben Bolt just applied the well-settled principle that the UDJA is a
procedural device for deciding cases that already come within a court’s
jurisdiction. See, e.g., Tex. Ass’n of Bus., 852 S.W.2d at 444, and its progeny.
Third, contrary to the City’s contention, the Supreme Court has not
“answered the specific immunity question presented here,” thereby sub silentio
overruling this Court’s ruling in Carowest I. See City Br. at 16-17 (referencing
Zachry Corporation v. Port of Houston Authority, 449 S.W.3d 98, 105 (Tex.
2014)). In Zachry, the Court construed Chapter 271 and concluded that it “does
not waive immunity from suit on a claim for damages not recoverable under
Section 271.153,” which places limits on damages awards for breach of a contract
subject to Chapter 271. Zachry Constr. Corp., 449 S.W.3d at 110. As the City
admits, “claims for declaratory relief were not at issue in Zachry.” See City Br. at
16. The Court therefore did not opine on whether immunity is waived under
30
Section 271.152 as it concerns claims for declaratory relief. Nor did the Court
announce that it was departing from, much less overruling, its prior decision in Ben
Bolt13 or otherwise modifying the established principle that a trial court may award
relief under the UDJA when “deciding cases already within [its] jurisdiction.”
Chenault v. Phillips, 914 S.W.2d 140, 141 (Tex. 1996).14 In fact, the word
“declaratory” appears nowhere in Zachry.
Even after deciding Zachry, the Texas Supreme Court has signaled
that Chapter 271’s waiver encompasses claims for declaratory relief. In Klumb v.
Houston Municipal Employees Pension System, Petitioners and the City of
Houston sought declaratory and injunctive relief, alleging, among other things, that
the pension board acted ultra vires by delegating decision-making authority to a
committee in violation of a contractual meet-and-confer agreement between the
Pension System and the City of Houston. 458 S.W.3d 1, 12 (Tex. 2015). The
Court held that this declaratory judgment claim was barred by governmental
immunity, pointing to an analytically identical sovereign immunity holding that
“declaratory-judgment suits against state officials seeking to establish a contract’s
13
Zachry contains a lengthy footnote expressing the Court’s disapproval of certain cases “to
the extent they are contrary.” Zachry Constr. Corp., 449 S.W.3d at 110 n.54. Ben Bolt is not
among the cases listed.
14
Where an intervening Supreme Court opinion, like Zachry, is not clearly on point, this
Court remains bound by prior on-point Supreme Court precedent. See Lawson v. Keene, No. 03-
13-00498-CV, 2016 WL 767772, at *4 (Tex. App.—Austin Feb. 23, 2016, pet. denied) (mem.
op.). Hence, Carowest’s reliance on cases predating and not squarely overruled by Zachry is
proper.
31
validity, to enforce performance under a contract, or to impose contractual
liabilities are suits against the State. . . . Consequently, such suits cannot be
maintained without legislative permission.” Id. at 12 (quoting IT–Davy, 74 S.W.3d
at 855-56). Concluding that “[n]o waiver of immunity is alleged or supported on
the record” for petitioner’s declaratory judgment claim, the Court further noted:
Although the Legislature has waived a local
governmental entity’s sovereign immunity to suit for
contracts for goods or services, the waiver does not apply
here because the meet-and-confer agreement is not a
contract for goods or services.
Id. at 12 & n.7 (citing Zachry Constr. Corp., 449 S.W.3d at 106). Certainly the
Court would not have cited Zachry if Chapter 271’s waiver of immunity cannot
extend to claims for declaratory relief arising from a contract subject to that
chapter.
Unable to marshal any on-point authority from the Texas Supreme
Court or this Court expressly stating that Chapter 271 does not waive immunity for
declaratory relief, the City looks instead to decisions from other courts of appeals.
See City Br. at 18-19. But three of the five cases the City cites do not support its
blanket contention that “Chapter 271 does not waive immunity for UDJA claims.”
Id. at 18. In Saifi v. City of Texas City, the trial court granted the city’s plea to the
jurisdiction on all of plaintiff’s claims, including breach of contract and declaratory
judgment claims. No. 14-13-00815-CV, 2015 WL 1843540, at *2 (Tex. App.—
32
Houston [14th Dist.] Apr. 23, 2015, no pet.). On appeal, the Fourteenth Court of
Appeals concluded that plaintiff had failed to plead sufficient facts affirmatively
demonstrating the existence of a contract subject to Chapter 271 and remanded to
give plaintiff an opportunity to amend his pleadings in this regard. Id. at *6. With
respect to plaintiff’s claim for declaratory relief, the court did not hold that
declaratory relief is unavailable under Chapter 271. Instead, the Court reasoned as
follows:
Because [plaintiff’s] requested [declaratory] relief may
be sought in connection with his breach of contract claim
if he establishes on remand that the City’s immunity is
waived under Local Government Code section 271.152 . .
. we conclude it is unnecessary to reach this issue.
However, to the extent [plaintiff] contends that he may
separately seek declarations that he is not in breach of the
[contract] and is entitled to reinstatement, the UDJA does
not waive the City’s immunity for the requested relief.
Id. at *9 (emphasis added). Hence, the court announced it was declining to reach
the very issue the City claims Saifi supports. Additionally, the court acknowledged
that plaintiff could seek the declaratory relief requested so long as he could
establish a waiver of immunity under Chapter 271 for his breach of contract claim,
and then reiterated the settled principle, which Carowest recognizes, that the UDJA
does not itself give rise to jurisdiction absent a separate waiver of immunity for the
underlying cause of action. Because Carowest does not assert that the UDJA
confers jurisdiction over its declaratory judgment claims, Saifi is inapposite. If
33
anything, Saifi’s comment that plaintiff could seek the requested declaratory relief
if it were determined that Chapter 271 applied underscores the propriety of the
district court’s order denying the City’s plea to the jurisdiction here.
Similarly, in National Public Finance Guarantee Corporation v.
Harris County-Houston Sports Authority, plaintiff brought a breach of contract
action against the county sports authority and sought declaratory relief against both
the sports authority and the convention corporation, which served as stadium
landlord. 448 S.W.3d 472, 476 (Tex. App.—Houston [1st Dist.] 2014, no pet.).
The First Court of Appeals held that the sports authority had waived immunity
under Chapter 1371 of the Government Code, and thus never addressed whether
the authority had waived immunity under Chapter 271. Id. at 479-82. With
respect to the convention corporation, a separate defendant against whom plaintiff
did not allege any breach of contract, the court narrowly held that Chapter 271
does not “waive[] immunity of a governmental entity that is not alleged to have
breached a contract.” Id. at 484. Because both Carowest and the City allege that
the other has committed multiple breaches of the Letter Agreement, which they
admit is subject to Chapter 271, National Public Finance is also distinguishable.
Third, the court in San Antonio River Authority v. Austin Bridge &
Road, L.P., like the Supreme Court in Zachry, analyzed whether monetary
damages claimed by plaintiffs were recoverable under Section 271.153 such that
34
immunity had been waived under Section 271.152. No. 04-16-00535-CV, 2017
WL 3430897, at *8 (Tex. App.—San Antonio Aug. 9, 2017, pet. filed) (mem. op.).
The court did not specifically opine on the scope of Chapter 271’s waiver of
immunity insofar as it concerns declaratory judgment claims.
Although the remaining two cases cited by the City—Lower Colorado
River Authority v. City of Boerne, 422 S.W.3d 60, 66-67 (Tex. App.—San Antonio
2013, pet. dism’d), and City of Pearsall v. Tobias, No. 04-15-00302-CV, 2016 WL
1588400, at *2 (Tex. App.—San Antonio Apr. 20, 2016, no pet.) (mem. op.)—
hold that Chapter 271 simply does not waive immunity for declaratory relief, see
City Br. at 18-19, two decisions from one court authored by the same justice
cannot outweigh contrary Supreme Court authority or this Court’s own authority in
Carowest I. Hence, the City’s assertion that its Chapter 271 argument is
“consistent with Texas case law” is an overstatement. See City Br. at 18.15
15
In analyzing the scope of section 271.152’s waiver of immunity and concluding that it
does not extend to declaratory judgment claims, Lower Colorado River Authority relied on cases
holding that section 271.152 does not waive immunity “in the absence of a properly pleaded
breach of contract claim.” 422 S.W.3d at 67 (citing City of San Antonio ex rel. City Pub. Serv.
Bd. v. Wheelabrator Air Pollution Control, Inc., 381 S.W.3d 597 (Tex. App.—San Antonio
2012, pet. denied) (no waiver of immunity under Section 271.152 for quantum meruit claim) and
Ghidoni v. Bexar Metro. Water Dist., No. 04-07-00377-CV, 2007 WL 2481034, at *1-2 (Tex.
App.—San Antonio Sept. 5, 2007, no pet.) (mem. op.) (no waiver of immunity under Section
271.152 for fraud claims)). Because the plaintiff in Lower Colorado River Authority pled that
the city breached a contract subject to Chapter 271, the case is not only distinguishable from the
authorities on which it relies, but wrongly decided. So too was City of Pearsall, which relied on
Lower Colorado River Authority, wrongly decided.
35
Next, the City maintains that where a plaintiff asserts a declaratory
judgment claim against a municipality in reliance on a statute other than the UDJA,
such statute must expressly provide that it is waiving immunity for declaratory
relief. See City Br. at 19 (citing Tex. Dept. of Transp. v. Sefzik, 355 S.W.3d 618,
622 (Tex. 2011)). But the authority the City cites does not support its argument on
this point. In Sefzik, the Texas Supreme Court explained as follows:
As we have consistently stated, the UDJA does not
enlarge the trial court’s jurisdiction but is “merely a
procedural device for deciding cases already within a
court’s jurisdiction.” Tex. Parks & Wildlife Dep’t v.
Sawyer Trust, 354 S.W.3d 384, 388 (2011) (quoting Tex.
Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440,
444 (Tex. 1993)). Accordingly, the underlying action, if
against the state or its political subdivisions, must be one
for which immunity has expressly been waived.
Sefzik, 355 S.W.3d at 621-22 (emphasis added); see also Tex. Dep’t of State
Health Servs., 429 S.W.3d at 746 (“[A] UDJA declaratory claim asserted directly
against a state agency or official . . . will ordinarily be barred by sovereign
immunity, thereby divesting the trial court of jurisdiction, unless the Legislature
has waived immunity as to the subject matter of the claim.”) (emphasis added). In
other words, Texas law permits declaratory relief where there is an express waiver
of immunity for the underlying action or subject matter of the claim. Pursuant to a
straightforward application of this principle, when the Legislature waived
immunity for breach of contract actions under Chapter 271, it also waived
36
immunity for declaratory judgment actions arising from contracts subject to
Chapter 271. That is precisely Carowest’s argument here.
Because Carowest has established that Chapter 271 waives immunity
for its South Tributary Claims against the City, the district court’s denial of the
City’s plea to the jurisdiction should be affirmed on this independent and
alternative basis.
B. Carowest’s South Tributary Claims against the City implicate a
justiciable controversy.
The City contends that even if the City has waived immunity,
Carowest’s South Tributary Claims are now moot in light of the Rule 11
Agreement’s purported release of Yantis’s Delay Claim. See City Br. 23-29. This
argument is without merit, and was properly rejected in Carowest I. But even if
the declaratory relief sought by Carowest were moot, Carowest’s claim for
attorneys’ fees would remain a live controversy over which the Court has subject
matter jurisdiction.
1. Carowest’s declaratory judgment claims are not moot.
“A case becomes moot when: (1) it appears that one seeks to obtain a
judgment on some controversy, when in reality none exists; or (2) when one seeks
a judgment on some matter which, when rendered for any reason, cannot have any
practical legal effect on a then-existing controversy.” Bexar Metro. Water Dist. v.
City of Bulverde, 234 S.W.3d 126, 131 (Tex. App.—Austin 2007, no pet.). In
37
Carowest I, this Court rejected the City’s mootness argument, explaining that
“even if the release [in the Rule 11 Agreement] is assumed to resolve the delay
claim prospectively from the date of its execution, the validity of the delay claim
would still remain a live and justiciable issue to the extent it bears upon the parties’
past compliance with the Letter Agreement’s indemnification provisions.”
Carowest I, 432 S.W.3d at 535. Thus, Carowest’s South Tributary Claims
continue to implicate a justiciable controversy notwithstanding this Court’s
subsequent dismissal in Carowest II of separate declaratory judgment claims
seeking to void the Rule 11 Agreement.16
The City has asserted an affirmative claim against Carowest, alleging
that Carowest breached the Letter Agreement by “refusing to hold harmless and
indemnify the City against Yantis’s delay claim.” CR 49-50. This claim clearly
concerns Carowest’s “past compliance with the Letter Agreement’s
indemnification provisions.” Carowest I, 432 S.W.3d at 535. The City’s assertion
that “[t]here is no existing dispute that is dependent on the delay claim being valid
or invalid in the time period from October 21, 2009, to May 11, 2011,” City Br. at
27, is simply untrue. The City argues that it does “not make any difference” today
whether Yantis released its delay claim “in October 2009 or May 2010, as opposed
to May 2011.” See City Br. at 25-26. But the City’s contention that the triggering
16
As previously noted, Carowest’s Motion for Panel Rehearing and Motion for
Reconsideration En Banc, filed in Carowest II, remain pending before the Court.
38
of Carowest’s indemnification obligations is unrelated to the validity of Yantis’s
Delay Claim remains a disputed issue. It is Carowest’s position that the
declarations it seeks regarding the validity of Yantis’s Delay Claim and the timing
of its release would rebut the City’s pending counterclaim that Carowest breached
its obligations to indemnify and hold the City harmless. Because Carowest’s South
Tributary Claims will have a “practical legal effect on a then-existing
controversy,” Bexar Metro. Water Dist., 234 S.W.3d at 131, this Court should
decline to reverse the trial court’s order denying the City’s plea to the jurisdiction
based on the doctrine of mootness.
2. Carowest’s claim for attorneys’ fees is not moot.
Even if this Court were to conclude that Carowest’s South Tributary
claims are moot, Carowest’s claim for attorneys’ fees remains a live, justiciable
controversy over which the district court has subject matter jurisdiction. See, e.g.,
Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 643 (Tex. 2005); Camarena v. Tex.
Emp’t Comm’n, 754 S.W.2d 149, 150 (Tex. 1988); see also Zurita v. SVH-1
Partners, Ltd., No. 03-10-00650-CV, 2011 WL 6118573, at *8 (Tex. App.—
Austin Dec. 8, 2011, pet. denied) (mem. op.) (affirming trial court’s award of
attorneys’ fees where declaratory judgment claims were dismissed as moot and
noting that the UDJA “does not require a judgment on the merits of the dispute as a
prerequisite to a fee award”).
39
In Hallman, landowners sued Hallman for property damages resulting
from Hallman’s nearby mining activities. 159 S.W.3d at 641. Hallman requested
indemnity from his insurance carrier, Allstate, which provided a defense under a
reservation of rights and then filed a declaratory judgment suit to determine
coverage. Id. Hallman filed counterclaims, and both parties sought attorneys’
fees. Id. The parties filed cross-motions for summary judgment, and the trial court
entered judgment in favor of Allstate. Id. at 642. The court of appeals reversed,
rendered judgment for Hallman, and remanded for further proceedings on
attorneys’ fees. Id. While on appeal to the Texas Supreme Court, the underlying
case by the landowners against Hallman settled, and Allstate did not seek
reimbursement for its defense. Id. In light of these facts, the Court sua sponte
considered whether the declaratory judgment claim regarding coverage was moot.
Id. at 643. The Court concluded that even though the underlying lawsuit had been
settled, “Hallman’s remaining interest in obtaining attorney’s fees ‘breathes life’
into this appeal and prevents it from being moot.” Id. at 643 (emphasis added).
Similarly, in Camarena v. Texas Employment Commission, the Texas
Supreme Court held that a dispute over of attorneys’ fees remains a live
controversy even after a substantive claim for relief becomes moot. In Camarena,
farm workers sued the Texas Employment Commission seeking to have a statutory
agricultural exemption to unemployment benefits declared unconstitutional. 754
40
S.W.2d 149, 150 (Tex. 1988). While the suit was pending, the Texas legislature
amended the statute to provide the farm workers with unemployment benefits. Id.
Addressing whether the amendment rendered the suit moot, the Texas Supreme
Court explained:
Clearly, a controversy exists between the farm workers
and the [Texas Employment Commission]. The “live”
issue in controversy is whether or not the farm workers
have a legally cognizable interest in recovering their
attorney’s fees and costs. The fact that the Legislature
wisely undertook action to bring the farm workers within
the scope of [the Texas Unemployment Compensation
Act] does not moot or void the workers’ interest in
obtaining attorneys fees and costs for the successful
disposition of their claim. . . . Due to the existence of the
“live” issue of attorney’s fees and costs, we hold that the
suit was not moot.
Id. at 151 (emphasis added).
Although the City focuses on the propriety of remand on the issue of
its own claim for attorneys’ fees, it also apparently agrees that if jurisdiction is
lacking over Carowest’s declaratory judgment claims, “the only remaining
question [would be] whether any party should be awarded attorneys’ fees and
costs.” City Br. at 28-29 (emphasis added). Therefore, even if this Court
concludes that the district court lacks jurisdiction over Carowest’s South Tributary
Claims, it should remand the case so that the district court can resolve both parties’
claims for attorneys’ fees.
41
II. The trial court properly denied Yantis’s plea to the jurisdiction as to
Carowest’s South Tributary Claims.
If this Court declines to dismiss Yantis’s appeal for lack of
jurisdiction for the reasons set forth in Carowest’s Motion to Dismiss, filed on
January 4, 2018, the Court should affirm the trial court’s denial of Yantis’s plea to
the jurisdiction.
To the extent this Court concludes that the district court’s jurisdiction
over Carowest’s South Tributary Claims against Yantis depends on its jurisdiction
over Carowest’s claims against the City, the district court’s order denying Yantis’s
plea to the jurisdiction should be affirmed for the same reasons, set forth in Section
I, that the order denying the City’s plea should be affirmed.
A. Jurisdiction over Carowest’s South Tributary Claims against
Yantis is not dependent on jurisdiction over Carowest’s same
claims against the City.
Relying on this Court’s opinion in Carowest II, Yantis argues that, if
this Court concludes that the City is immune from Carowest’s declaratory
judgment claims, the district court also lacks jurisdiction over Carowest’s claims
against Yantis because “the City is an indispensable party to Carowest’s claims
regarding ‘the validity and legality of the North Tributary Contract.’” Yantis Br.
at 4-5 (quoting Carowest II) (emphasis added). Yantis’s invocation of the North
Tributary Contract, and its related argument that permitting Carowest to seek a
42
declaration that the contract is illegal would create an end-run around the City’s
governmental immunity, is both factually and legally wrong.
First, none of the South Tributary Claims asserted by Carowest in this
action allege that “the North Tributary Contract is void because it was awarded as
part of a secret deal where Yantis released its delay claims against the City,” as
Yantis asserts. See Yantis Br. at 4. The North Tributary Claims were at issue in
Carowest II. Carowest’s separate and distinct South Tributary Claims in this case
seek the following declarations concerning Yantis: (1) “Yantis has no right to
damages under the Delay Claim”; (2) “the October 21, 2009 Change Order
released any delay claim that existed before that date”; and (3) “the May 31, 2010
progress payment fully and finally released any delay claim that existed before that
date.” CR 32. These declarations are wholly unrelated to the North Tributary
Claims.
Second, this Court’s conclusion in Carowest II that the City was an
indispensable party to Carowest’s North Tributary Claims against Yantis because
the declarations concerned the “validity and legality” of a contract to which the
City was a party has no application here. In this case, Carowest only seeks
declarations that Yantis has no right to damages under the Delay Claim because it
had released the claim—not that the North Tributary Contract (or any other
contract) between the City and Yantis is void. These declarations would not have
43
the effect of “voiding a municipal contract” and thereby “destroy[ing] the effect of
the [City’s] immunity,” as Yantis asserts. See Yantis Br. at 5. Instead, the
declarations Carowest seeks against Yantis would result in a final and complete
adjudication of the dispute without prejudicing the rights of or imposing any
liability on the City. See, e.g., Wood v. Walker, 279 S.W.3d 705, 713 (Tex. App.—
Amarillo 2007, no pet.) (holding that dismissal of County in declaratory judgment
action did not preclude the trial court from rendering complete relief between the
remaining parties); see also Brooks v. Northglen Ass’n, 141 S.W.3d 158, 162 (Tex.
2004) (explaining that subject matter jurisdiction is rarely implicated by the failure
to join a party in a declaratory judgment action). Because the City is not an
indispensable party to Carowest’s South Tributary Claims against Yantis,
jurisdiction over these claims against Yantis exists independently of jurisdiction
over Carowest’s claims against the City.
B. Carowest’s South Tributary Claims implicate a justiciable
controversy.
Yantis further maintains that Carowest’s claim seeking a declaration
that Yantis “has no right to damages under the delay claim” fails to present a
justiciable controversy because the City’s indemnity claim against Carowest never
matured. See Yantis Br. 5-9. This contention should be summarily rejected.17
17
Yantis did not raise a justiciability argument in its plea to the jurisdiction. See CR 131-
98. When it raised the argument for the first time in its reply, Yantis properly noted that Judge
Davis had previously ruled against Yantis, on cross motions for summary judgment, regarding
44
Whether Yantis’s demand letters triggered Carowest’s indemnity obligations under
the Letter Agreement, such that Carowest had a duty to negotiate or adjudicate
Yantis’s Delay Claim, lies at the heart of an ongoing controversy between
Carowest and the City. In fact, Yantis admits that its position on this point
diverges from that of the City, which maintains that Carowest’s obligation to
indemnify and hold the City harmless arose when Yantis asserted its Delay Claim,
and did not turn on a third-party first determining the claim’s validity. See Yantis
Br. at 8. Thus, the declarations Carowest seeks relating to its indemnity
obligations do not concern a merely hypothetical controversy.
Furthermore, “[d]eclaratory-judgment actions are intended to
determine the rights of parties when a controversy has arisen, before any wrong
has actually been committed, and are preventative in nature.” Bexar Metro. Water
Dist. v. City of Bulverde, 156 S.W.3d 79, 88 (Tex. App.—Austin 2004, pet.
denied). All that is required for a court to proceed on a declaratory judgment
action is a threat of imminent litigation or likely injury. See, e.g., Texas Dept. of
Banking v. Mount Olivet Cemetery Ass’n, 27 S.W.3d 276, 282-83 (Tex. App.—
the justiciability of the indemnification claims. See CR 1031. However, Yantis does not
acknowledge the prior summary judgment ruling anywhere in its brief to this Court. Because the
justiciability issue was previously decided in Carowest’s favor, it is not a proper subject for
review here. Therefore, if this Court concludes that Yantis is entitled to bring an interlocutory
appeal of its jurisdictional plea, this Court should dismiss Yantis’s justiciability argument. See
Estate of Jones, 388 S.W.3d at 665-67 (holding that appellate court lacked jurisdiction to
consider interlocutory appeal of City’s plea to the jurisdiction because the trial court had
implicitly denied City’s the plea by granting partial summary judgment on the issue of liability
and City did not timely appeal that interlocutory order).
45
Austin 2000, pet. denied) (explaining that “ripeness does not require an actual
injury,” but only the “ripening seeds of a controversy”); Texas Dep’t of Pub. Safety
v. Moore, 985 S.W.2d 149, 153-54 (Tex. App.—Austin 1998, no pet.) (same);
Unauthorized Practice of Law Comm. v. Nationwide Mut. Ins. Co., 155 S.W.3d
590, 595 (Tex. App.—San Antonio 2004, pet. denied) (same). As this Court has
explained:
A justiciable controversy need not be a fully ripened
cause of action. However, the fact situation must
manifest the ripening seeds of a controversy . . . even
though the differences between the parties as to their
legal rights have not reached the state of an actual
controversy. In other words, there must either be a
pending cause of action between the parties or such a
clear indication of the extent of the parties’ differences
that a court may presume one is imminent.
Taylor v. State Farm Lloyds, Inc., 124 S.W.3d 665, 669 (Tex. App.—Austin 2003,
pet. denied) (internal citations and quotations omitted).
In this case, the City made repeated demands that Carowest negotiate
or adjudicate Yantis’s Delay Claim prior to its submission to a third-party
mediator to resolve any dispute regarding its validity. Carowest consistently
denied that it had any obligation to defend or indemnify the City against a bogus
Delay Claim that Yantis had already released. This disagreement between the City
and Carowest manifested an actual controversy between the parties or, at the very
least, the “ripening seeds of a controversy.” Taylor, 124 S.W.3d at 669. When
46
Carowest filed the South Tributary Claims against the City and Yantis, it did so in
response to a threat of imminent litigation. The threat of litigation, in fact,
subsequently developed into an actual claim by the City that Carowest breached
the Letter Agreement, including Carowest’s obligation to indemnify and hold the
City harmless from certain claims. Yantis’s argument that “Carowest’s UDJA
action relating to indemnity never matured into a justiciable controversy,” Yantis
Br. at 9, should therefore be rejected.
CONCLUSION AND PRAYER
For the foregoing reasons, the district court’s denial of the City’s plea
to the jurisdiction should be affirmed. If this Court does not dismiss Yantis’s
appeal for want of jurisdiction, the denial of Yantis’s plea to the jurisdiction should
also be affirmed. Carowest respectfully prays that this court affirm the district
court’s orders and remand the case to the district court for further proceedings.
47
Respectfully submitted,
BAKER BOTTS L.L.P.
By: /s/ Thomas R. Phillips
Thomas R. Phillips
State Bar No. 00000022
Maddy R. Dwertman
State Bar No. 24092371
98 San Jacinto Blvd., Suite 1500
Austin, Texas 78701
(512) 322-2500
(512) 322-2501 (Facsimile)
tom.phillips@bakerbotts.com
maddy.dwertman@bakerbotts.com
DAVIS & SANTOS, P.C.
Jason Davis
State Bar No. 00793592
Caroline Newman Small
State Bar No. 24056037
719 Flores St.
San Antonio, Texas 78204
(210) 853-5882
(210) 200-8395 (Facsimile)
jdavis@dslawpc.com
csmall@dslawpc.com
ATTORNEYS FOR APPELLEE
48
CERTIFICATE OF COMPLIANCE
In compliance with Texas Rule of Appellate Procedure 9.4(i)(3), I
hereby certify that this brief contains 11,903 words, excluding the parts of the brief
exempted by Rule 9.4(i)(1).
/s/ Maddy R. Dwertman
Maddy R. Dwertman
49
CERTIFICATE OF SERVICE
I certify that on January 4, 2018, a true and correct copy of the
foregoing was served via the Court’s Electronic Filing System on the following
counsel of record:
G. Alan Waldrop Lawrence Morales, II
Ryan D. V. Greene Chuck Shipman
TERRILL & WALDROP THE MORALES FIRM, P.C.
810 West 10th Street 6243 W. IH 10, Suite 132
Austin, Texas 78701 San Antonio, Texas 78201
awaldrop@terrillwaldrop.com lawrence@themoralesfirm.com
rgreene@terrillwaldrop.com cshipman@themoralesfirm.com
Valeria M. Acevedo Lamont A. Jefferson
J. Frank Onion, III Emma Cano
CITY OF NEW BRAUNFELS, TEXAS JEFFERSON CANO
CITY ATTORNEY’S OFFICE 112 East Pecan St., Suite 1650
424 S. Castell Ave. San Antonio, Texas 78205
New Braunfels, Texas 78130 ljefferson@jeffersoncano.com
vacavedo@nbtexas.org ecano@jeffersoncano.com
fonion@nbtexas.org
Attorneys for Appellant
Attorneys for Appellant YC Partners, Ltd., d/b/a Yantis Company
City of New Braunfels, Texas
/s/ Thomas R. Phillips
Thomas R. Phillips
50
INDEX TO APPENDIX
Exhibit 1 Plaintiff Carowest Land, Ltd.’s Second Amended Petition
1
EXHIBIT 1
1
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
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241