Opinion
No. 01-05-00335-CV
Opinion issued August 31, 2005.
On Appeal from the 405th District Court, Galveston County, Texas, Trial Court Cause No. 04CV1057.
Panel consists of Chief Justice, RADACK and Justices, JENNINGS and HANKS.
MEMORANDUM OPINION
Appellants, Joseph Knute Nivens, Wilbur Dunten, and Marvin Fontenot, (collectively "the taxpayers"), challenge the trial court's order granting a plea to the jurisdiction in favor of appellee, the City of League City ("the City"). We affirm the order of the trial court.
Factual and Procedural Background
In 1981, the City consented to create Municipal Utility Districts ("MUDs") One through Six, which are located within the boundaries of the City. The City executed contracts ("utility agreements") with each MUD. The utility agreements were for the acquisition and construction of water, sewer, and drainage systems. Each utility agreement also noted that both the City and the MUD would levy and collect ad valorem taxes on the taxable property in each MUD and the City would allocate 40% of the taxes it collected from the residents to the respective MUD. Seven years later, the City amended its utility agreements with MUD Numbers Two and Three and stated that the allocation percentage payable by the City to each MUD was to be determined in accordance with a "complex formula." The next year, the City also amended its original utility agreement with MUD Number Six to reflect the same change.
In accordance with chapter 54 of the Texas Water Code, the MUDs were created by an order of the Texas Water Rights Commission, now known as the Texas Commission on Environmental Quality.
A few years later, the taxpayers, who resided in the MUDs, sued the City, MUD Numbers Two, Three, and Six, and their respective directors to recover damages equal to the taxes that they had paid on their property. In their first amended original petitions, the taxpayers pleaded breach of contract, negligence, money had and received, and the defense of mistake. In response, the City filed its first amended answer and plea to the jurisdiction. In its plea, the City alleged that the trial court lacked jurisdiction over the taxpayers' case for two reasons. First, the taxpayers failed to plead sufficient facts to overcome the City's immunity from suit. This allegation addressed the taxpayers' negligence claim and the defense of mistake. Second, under section 54.016(f) of the Texas Water Code, the taxpayers lacked standing to assert claims. The standing issue encompassed the taxpayers' breach of contract and money had and received claims.
A claim for money had and received arises when the defendant obtains money which in equity and good conscience belongs to the plaintiff. It is an equitable doctrine applied to prevent unjust enrichment. See Hunt v. Baldwin, 68 S.W.3d 117, 132 (Tex.App.-Houston [14th Dist.] 2001, no pet.).
The trial court granted the City's plea to the jurisdiction on all grounds and dismissed the taxpayers' case for want of jurisdiction. On appeal, the taxpayers only pursue the negligence and breach of contract claims; therefore we need not determine whether the trial court erred when it found that it did not have jurisdiction over the taxpayers' claim for money had and received.
Plea to Jurisdiction
In their sole issue, the taxpayers contend that the trial court erred in granting the City's plea to jurisdiction.
A plea to the jurisdiction is a dilatory plea challenging a trial court's authority to determine the subject matter of the cause of action without defeating the merits of the case. City of Houston v. Northwood Mun. Util. Dist. No. 1, 73 S.W.3d 304, 308 (Tex.App.-Houston [1st Dist.] 2001, pet. denied) (citing Bland I.S.D. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000)). While the underlying claims may form the context in which a plea to the jurisdiction is raised, the purpose of the plea is not to preview or delve into the merits of the case, but to establish the reason why the merits of the underlying claims should never be reached. Id. In a plea to the jurisdiction, "the pleader must allege facts that affirmatively demonstrate the court's jurisdiction to hear the cause." City of Houston v. Rushing, 7 S.W.3d 909, 913 (Tex.App.-Houston [1st Dist.] 1999, pet. denied). A trial court's ruling on a plea to the jurisdiction presents a legal question which is reviewed de novo. See Northwood, 73 S.W.3d at 308.
Negligence Claim
The taxpayers' negligence claim arose out of the assessment and collection of taxes by the City and the MUDs. The taxpayers assert that they should recover damages equal to the amount of taxes that they paid the City, because the City negligently breached an "implied" duty under section 54.016(f) of the Texas Water Code. Section 54.016(f)(2) states in pertinent part that "the total annual ad valorem taxes collected by the city and the district from taxable property within the district does not exceed an amount greater than the city's ad valorem tax upon such property." Tex. Water Code Ann. § 54.016(f)(2) (Vernon 2002). The taxpayers further state that "the failure of the MUDs to ensure that the total taxes collected from the taxable property within each MUD did not exceed an amount greater than the City's ad valorem taxes upon such property, constituted negligence per se, and was the proximate cause of [the taxpayers'] damages."
Governmental immunity protects the State, its agencies and officials, and political subdivisions of the State from suit, unless immunity from suit has been waived. See Gen. Servs. Comm'n v. Little-Tex Insulation Co. Inc., 39 S.W.3d 591, 594 (Tex. 2001). The governmental immunity of the State inures to the benefit of a municipality insofar as the municipality engages in the exercise of governmental functions, except when that immunity has been waived. Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 840 (Tex. 2000).
Governmental immunity from suit defeats a trial court's subject-matter jurisdiction and is properly asserted in a plea to the jurisdiction. Tex. Dep't of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999). A party suing a governmental entity must establish consent to sue, which may be alleged either by reference to a statute or to express legislative permission. See Mis. Pac. R.R. Co. v. Brownsville Navigation Dist., 453 S.W.2d 812, 814 (Tex. 1970). It is well settled that, absent consent to suit, a trial court lacks subject-matter jurisdiction. Fed. Sign v. Texas S. Univ., 951 S.W.2d 401, 405 (Tex. 1997).
In support of their argument that the City has waived its immunity from liability, the taxpayers rely on Austin Nat'l Bank of Austin v. Sheppard, 71 S.W.2d 242 (Tex. 1934) and they characterize their claim as a "suit to recover illegal taxes." However, in Austin Nat'l Bank, the Texas Supreme Court held that a person who has paid an illegal tax only has a claim for repayment if the tax is paid under duress. Id. at 246. Assuming, without deciding, that the taxes paid to the City were illegal, the taxpayers cannot prevail on a suit to recover "illegally collected" taxes because they did not plead duress. See id. Here, the taxpayers only pleaded the defense of mistake, not duress. Furthermore, we hold that, because the taxpayers failed to plead an express waiver of immunity from suit arising out of the assessment and collection of taxes, the trial court did not err in holding that it lacked jurisdiction to hear the taxpayers' negligence claim. See Mis. Pac., 453 S.W.2d at 814; Fed. Sign, 951 S.W.2d at 405.
Breach of Contract Claim
The taxpayers also sued the City for breach of contract. The taxpayers asserted that, "by entering the contracts with the MUDs, [the City] has waived immunity from liability on those contracts." The taxpayers also pleaded that they were entitled to recover damages because they were third party beneficiaries of the utility agreements between the City and the MUDs.
Waiver of Immunity Based on Contract
Although a governmental entity waives immunity from liability when it enters a contract, immunity from suit is not waived merely by entering a contract. Catalina Dev., Inc. v. County of El Paso, 121 S.W.3d 704, 705 (Tex. 2003). Instead, express consent by the governmental entity is required to show that immunity from a breach of contract suit has been waived. Id. This consent must be expressed in clear and unambiguous language. Tex. Gov't Code Ann. § 311.034 (Vernon 2005). In this case, there is no contract or agreement between the taxpayers and the City. The utility agreements were executed by the City and the MUDs. Assuming, without deciding, that the City waived its immunity from liability by entering a contract with the taxpayers, the taxpayers have not proven consent to suit. See id.
Third-Party Standing
In determining whether a third party has a right to enforce a contract, courts look to the express intent of the contracting parties. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 651 (Tex. 1999). A court should not imply or create third-party beneficiary rights unless they are expressly intended by the contracting parties, and plainly and fully spelled out in the four corners of the contract. Id. Thus, courts should presume that an agreement confers no third-party enforcement rights unless it "clearly appears" that the contract intends a third party to benefit, to the point of suing upon the contract. Id. Accordingly, a court will not interpret a contract to confer third-party beneficiary rights unless (1) the contract plainly expresses the third-party obligation of the bargain-giver, (2) it is unmistakable that a benefit to the third party is within the contemplation of the primary contracting parties, and (3) the primary parties contemplate that the third party would be vested with the right to sue for enforcement of the contract. Id. at 652. The fact that a third party receives incidental benefits from a contract does not establish a right of action to enforce the contract. Id. at 651.
The facts of the present case are analogous to those found in MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., where the court found that a third party does not have a right to enforce a contract. In MCI Telecomms., Texas Utilities (TU) sought to recover attorney's fees for a breach of a contract between MCI and the Missouri Pacific Railroad (MoPac). Id. at 649. TU sued MCI for damages under breach of contract and negligence theories. Id. TU claimed that, as a licensee, it was a third-party beneficiary of the MCI/MoPac contract. Id. The MCI/MoPac contract explicitly provided, however, that "neither this Agreement, nor any term or provision hereof, nor any inclusion by reference, shall be construed as being for the benefit of any party not in signatory hereto." Id. at 649-50. The Texas Supreme Court held that the contract's disclaimer provision reflected that the parties had no intent to confer third-party benefits under the contract. Id. at 651-52. The court further observed that nothing in the contract indicated that MCI and MoPac ever intended to confer a direct benefit to TU. Id. at 652.
Like TU, the taxpayers in the case before us have also asserted that they were third-party beneficiaries of the utility agreements. Specifically, the taxpayers alleged that "the duties imposed by section 54.016(f) were for the benefit of residents who own taxable property and are implicit in the [utility agreements]." The utility agreements, however, do not contain language which shows that the parties expressly contracted directly for the taxpayers' benefit. See id. at 651-52. Instead, the utility agreements expressly state that "the intent of this agreement is for said joint venture [between the City and the MUDs] to assign all rights and responsibilities to said [MUD] upon its creation." Moreover, the taxpayers concede that
Although the contract between [the City] and the MUDs did not assure that the total ad valorem taxes would be so limited, this statutory limitation is implicit in the contract.
(Emphasis added.) The right of a party to enforce a contract as a third party cannot rest on implication. Id. at 651; see also Knight Constr. Co., Inc. v. Barnett Mortgage Trust, 572 S.W.2d 381, 382-83 (Tex.Civ.App.-Houston [14th Dist.] 1978, writ ref'd n.r.e.). Because the taxpayers' alleged third-party beneficiary relationship is based on an implied contract claim, we hold that the utility agreements do not evidence an intent to directly benefit them. Thus, we further hold that the taxpayers are not third-party beneficiaries of the utility agreements as a matter of law. See MCI Telecomms., 995 S.W.2d at 652; see also Union Pac. R.R. Co. v. Novus Int'l, Inc., 113 S.W.3d 418, 423 (Tex.App.-Houston [1st Dist.] 2003, pet. denied) (denying third-party beneficiary status because "nowhere in the rail contract [was] it stated that the parties [were] contracting for the benefit of Carbide's customers"). Accordingly, because the taxpayers did not establish a clear and unambiguous waiver of the City's immunity from suit and because the taxpayers are not third-party beneficiaries of the utility agreements, we hold that the trial court did not err in holding that it lacked jurisdiction to hear the taxpayers' breach of contract claim.
Conclusion
We affirm the order of the trial court.