In the Courts

Water Cases

Herrera v. Mata, No. 23-0457, 68 Tex. Sup. Ct. J. 121, 2024 Tex. LEXIS 1079 (Dec. 6, 2024).

The Texas Supreme Court (“Court”) remanded several homeowners’ claims against Hidalgo County Irrigation District No. 1 (“District”) officials for the District’s effort to collect charges over twenty years old. The District is a special purpose irrigation district created under the authority of the Texas Constitution to deliver untreated water for irrigation and to provide for the drainage of lands.

In 2019, the District, as part of an initiative to find and collect delinquent amounts owed to it, sent ten homeowners a statement reflecting “delinquent taxes” owed for the years 1983-1998. While the amount owed by the homeowners varied between $237 and $255, the statements imposed additional charges for interest and attorney’s fees, bringing the total per homeowner between $1,139 and $1,211. Upon receiving these statements, the homeowners requested the charges be removed based on Texas Tax Code (“Tax Code”) 33.05(c), which states that if no pending litigation concerning a delinquent tax exists, the collector “shall cancel and remove from the delinquent tax roll…a tax on real property that has been delinquent for more than 20 years.” The District refused and cited to its authority as an irrigation district under Texas Water Code (“Water Code”)
§ 58.509 to levy charges and assessments which “shall constitute a lien against the land” and to which “[n]o law providing limitation against actions for debt shall apply.”

On August 18, 2020, the homeowners sued the District and several District officials in their official capacity, asserting that the District acted ultra vires in seeking to collect taxes in violation of the Tax Code and seeking a refund of payments homeowners had made pursuant to the “delinquent tax” statements, as well as declaratory and injunctive relief. Though irrigation districts, as political subdivisions of the state, are normally immune from lawsuits for money damages, such immunity does not apply if a complaint successfully alleges that district officials acted “ultra vires,” that is, without legal authority. Despite the homeowners’ argument that they successfully pled an ultra vires claim by showing the District failed to remove the charges in compliance with Tax Code § 33.05(c), the trial court found in favor of District officials, who responded that the charges were “assessments” under the Water Code rather than taxes subject to § 33.05(c) and as such, the trial court did not have jurisdiction to hear the homeowners’ claim. The trial court’s finding was appealed to the 13th Court of Appeals, which also found that the trial court lacked jurisdiction over the Tax Code claim, and the homeowners then petitioned the Court for review.

The Court found that when a challenge to jurisdiction rests solely on what is alleged in the pleadings, such pleadings are construed in favor of the plaintiff and must “affirmatively negate” jurisdiction for a plea challenging jurisdiction to be successful. Thus, when viewed in favor of the homeowners, the homeowners alleged sufficient facts to allow a court to hear the ultra vires claim by showing that (1) they received “delinquent tax statements” from the District; (2) the statements were sent more than twenty years after the amounts were due; (3) there is no pending tax litigation against any of them; and (4) the District failed to cancel and remove the charges. The District claimed these facts were negated elsewhere in the pleadings, pointing to concessions by the homeowners that the District does have authority to levy assessments under the Water Code, the failure of the homeowners to formally request a refund if the charges were taxes, the fact that the District never listed the disputed charges as delinquent on the property appraisal rolls or on the public lists of delinquent taxes, and a post-hoc clarification letter sent by the District stating that the charges were not taxes. However, the Court found that none of these factors determined the character of the disputed charges as definitively “tax” or “assessment” given the unusual circumstances of the charges; and therefore, the homeowners alleged facts showing that the charges were taxes subject to the Tax Code’s limitations period and that a court has jurisdiction to hear the Tax Code ultra vires claim. The Court remanded the case to the trial court for proceedings consistent with this opinion.

Harris Cty. Water Control v. 308 Furman, Ltd., No. 01-23-00177-CV, 2024 Tex. App. LEXIS 9062 (Tex. App.—Houston [1st Dist.] Dec. 31, 2024, no pet. h.).

A Texas Commission on Environmental Quality (“TCEQ”) Order had a preclusive effect on Harris County Water Control and Improvement District No. 89’s (“District”) ability to relitigate its obligation to reimburse a developer in district court. The District is a municipal utility district operating pursuant to Chapters 49 and 54 of the Texas Water Code, and it provides water, wastewater treatment, drainage, and related services to residents within its boundaries.

In December 2002, the District entered into a reimbursement agreement with 308 Furman, Ltd. (“Furman”), under which the District agreed to reimburse Furman, the developer of certain property, for the eligible portion of construction costs assumed in constructing water supply lines, storm sewers, drainage facilities, and other infrastructure required to serve the property. The District agreed to pay up to the maximum of all sums advanced to or on behalf of the District to the extent permitted by TCEQ rules, including interest. Furman agreed to maintain and provide an accounting of such costs, and in return, the District agreed to make all reasonable efforts to file and obtain approval from the TCEQ to issue bonds to fund reimbursements to Furman. However, in 2017, a dispute arose as to whether certain costs were reimbursable based on the District’s exclusion from a bond application the costs to reimburse Furman for a pump station, money advanced to the District, payment of interest, and detention pond maintenance expenses. Furman appealed the District’s decision refusing to reimburse these costs to the TCEQ, who eventually issued an Order finding in favor of Furman on all issues except the interest.

When the District failed to provide any reimbursement to Furman despite the TCEQ Order, Furman brought a breach-of-contract claim in district court based on the reimbursement agreement. Furman asserted that the TCEQ Order required a finding in Furman’s favor, because TCEQ, a court of competent jurisdiction, had rendered a prior final judgement on the merits involving the same claims and the same parties, satisfying a legal doctrine known as res judicata. The District argued that res judicata did not bar it from contesting the breach-of-contract claim because the TCEQ does not have authority to decide a contract dispute. Further, the TCEQ statutes and regulations consider certain public interest factors that are not at issue in a contract claim, making the two claims distinguishable. The trial court granted summary judgment in Furman’s favor and entered a judgment awarding Furman the reimbursement costs in damages plus pre- and post- judgment interest.

On appeal, the 1st Court of Appeals (“Court”) found that though the TCEQ cannot award breach-of-contract damages, the TCEQ Order may still have a preclusive effect as to the issues the TCEQ did have authority to adjudicate. The elements of a breach-of-contract claim are: (1) the existence of a valid contract, (2) the party suing to enforce the contract performed or tendered performance, (3) the other party failed to comply, and (4) the suing party was damaged because of the breach. Because the District did not challenge the validity of the reimbursement agreement, the Court only looked to whether the TCEQ Order addressed the last three issues. As to these issues, the Court found that the TCEQ had to find that Furman performed to find the costs reimbursable, and the TCEQ found that the District erred in deciding to exclude the costs from its bond application, thus effectively finding that the District failed to comply with the reimbursement agreement. Finally, the Court found that the TCEQ Order is ultimately a finding that Furman was “aggrieved” by the actions of the District. For these reasons, the Court held that the trial court did not err in granting summary judgment in favor of Furman on the breach-of-contract claim based on res judicata.

Litigation Cases

City of Buffalo et al. v. Moliere, No. 23-0933.

A recent Supreme Court decision determined that the City Council of a Type A general law city had the authority to fire a police officer. Gregory Moliere (“Moliere”) was fired from his position as a police officer for the City of Buffalo, Texas (“Buffalo”). A Buffalo Police Department policy prohibits high speed chases while a civilian is riding in the patrol vehicle. Moliere did just that—and it resulted in damage to his patrol vehicle. Two weeks later, the Buffalo City Council met in a closed session to discuss Moliere’s incident, and then voted to terminate Moliere’s employment in open session. Moliere sued the City, the Mayor, and members of the City Council in their official and individual capacities, seeking a declaration that the City acted without authority and a judgment compelling his reinstatement as a police officer. Moliere argued that only the police chief was authorized to terminate his employment. Moliere also alleged that the Council’s action “deprived his limited due process” under the City’s policies and procedures.

After the trial court granted the City and Mayor’s combined plea to the jurisdiction and motion for summary judgment and dismissed the claims against the City Council members, Moliere appealed. The Court of Appeals held that because there was no City ordinance permitting the Council to fire police officers, there was a fact issue as to whether the City had the power to fire Moliere. The City appealed to the Supreme Court.

On appeal, the Supreme Court found that the City Council did have authority to fire Moliere. Buffalo, as a general-law municipality, is a “political subdivision[] created by the State and, as such, possesses [only] those powers and privileges that the State expressly conference upon [it]” and those powers are typically granted through the Local Government Code.

The Supreme Court found that Local Government Code Section 341.001 applied, which states that “[t]he governing body of a Type A general-law municipality may establish and regulate a municipal police force. . . .” Therefore, Section 341.001(a) undeniably establishes the City Council’s authority, as Buffalo’s governing authority, to regulate the City’s police force, which includes terminating a police officer for violating official policy or demonstrating a performance-related deficiency. The Supreme Court wholly disagreed with Moliere’s argument that only the police chief has authority to terminate his employment because it would “vitiate the City Council’s express authority to ‘regulate’ the police force. . . .” Instead, the “express legislative grant of authority confers implied powers reasonably necessary to carry out the conduct expressly authorized” which could reasonably imply the right to terminate a police officer

As such, the Supreme Court reversed the Court of Appeal’s judgment and reinstated the trial court’s judgment dismissing Moliere’s claims against all defendants. The Court of Appeals did not reach Moliere’s separate complaint of a due process claim, and therefore the Supreme Court remanded the case to the Court of Appeals with respect to the pending due-process claim.

425 Soledad, Ltd. et al, v. CRVI Riverwalk Hospitality, LLC, No. 23-0344.

Even if an easement is not recorded, subsequent purchasers may be on inquiry notice, or possess actual notice, if a reasonable inquiry of the documents would reveal the easement. In this case, the Supreme Court determined what constitutes actual notice of an unrecorded easement to subsequent property purchasers.

The properties at issue are an office building, a parking garage, and a hotel in San Antonio. The office building and hotel are connected to the parking garage via tunnels. In 2005, 425 Soledad Ltd. (“425 Soledad”) purchased the office building. At that time, 425 Soledad and the owner of the parking garage entered into a parking agreement which permitted 425 Soledad to use up to 150 parking spots in the parking garage. The parking agreement stated that it would “run with the land and inure to the benefit of, and be binding on, [the parties] and their respective successors and assigns in title.” The parking agreement was not recorded in the county property records.

In 2006, HEI San Antonio Hotel, LP (“HEI”) purchased the parking garage and hotel. HEI financed the purchase with Merrill Lynch with a loan including two notes, A and B. Merrill Lynch knew of the parking agreement, as it had 425 Soledad attest that the agreement was “in full force and effect.”

In 2008, Cypress Real Estate Advisors (“Cypress”) purchased the B-Note from Merrill Lynch through its special-purpose entity, CRVI Crowne Plaza (“CRVI Crowne”). CRVI Crowne confirmed its duty to inquire into the loan documents, which included the closing documents for the Merrill Lynch loan with HEI with appendices that listed the parking agreement. However, the Cypress employee conducting the due diligence did not ask for a copy of the parking agreement from Merrill Lynch or HEI.

In 2010, Cypress anticipated that HEI would default on its loan and considered acquiring the parking garage and hotel. An appraisal of the parking garage and hotel referred to the parking agreement, however the Cypress employee—the same employee who conducted the previous due diligence—later testified he did not read beyond the appraisal’s first page and was thus unaware of the information.

Cypress then placed the parking garage and hotel into a receivership in a state court action. Cypress also created another entity, CRVI Riverwalk Hospitality (“CRVI Riverwalk”), to purchase the properties from the receiver. Similar to when CRVI Crowne purchased the note, CRVI Riverwalk assumed a duty of inquiry for the property purchase. Another Cypress employee conducted the due diligence and noticed monthly parking revenue that he understood to be from monthly parking arrangements. Yet, he did not ask to see any parking agreements. Although Cypress had several appraisals for the properties, the Cypress employee “cherry picked” which documents to review and did not review the appraisals. When due-diligence period ended, CRVI Riverwalk purchased the parking garage and hotel.

Later, an office building unit holder requested parking spaces and CRVI Riverwalk refused. 425 Soledad sued and sought a declaratory judgment that the parking agreement is an enforceable instrument that runs with ownership of the garage. CRVI Riverwalk argued that the agreement was not an enforceable easement and that it was a bona-fide purchaser who took without notice of the agreement.

The trial court found that the parking agreement created an enforceable easement appurtenant, and that CRVI Riverwalk was not a bona-fide purchaser. The Court of Appeals agreed there was an easement, but found CRVI Riverwalk was a bona-fide purchaser.
The Supreme Court agreed there was an enforceable easement and, along with the trial court, found that CRVI Riverwalk could not use the affirmative defense of being a bona-fide purchaser.

CRVI Riverwalk argued first that CRVI Crowne should be treated as a bona-fide purchaser and that protection should also shelter CRVI Riverwalk. The Supreme Court disagreed because CRVI Crowne had actual knowledge of the parking agreement, meaning it could have discovered the parking agreement through a “reasonably diligent inquiry and exercise of the means of information at hand.” While a recorded easement provides constructive notice, there was ample opportunity for CRVI Crowne to discover the parking agreement. For example, the closing documents from Merrill Lynch referred to the parking agreement, HEI possessed a copy of the parking agreement, and the tunnel easement referred to the parking garage as being owned by Merrill Lynch. Pursuant to CRVI Crowne’s duty to inquire, the parking agreement would have been revealed through a reasonable inquiry.

Therefore, CRVI Riverwalk’s argument that it also should be a bona-fide purchaser in its own right failed. The Supreme Court found that CRVI Riverwalk had access to the same information as CRVI Crowne and was on inquiry notice. Further, CRVI Riverwalk had several appraisals describing the parking agreement, which it ignored. The Supreme Court stated that “[w]hen a duty to inquire exists, negligent ignorance has the same effect in law as actual knowledge.”

Having established that the unrecorded parking agreement was an enforceable easement, and that CRVI Riverwalk was not a bona-fide purchaser, the Supreme Court ruled in favor of 425 Soledad.

Purchasers of properties should take their duty to inquire seriously and request copies of every agreement listed or referred to in the documents provided by existing owners or loan servicers. Furthermore, if agreements are discovered after purchase, and to avoid long and protracted litigation, they should reasonably consider whether the existence of the agreement was overlooked during due diligence before refusing to honor the agreement as a bona-fide purchaser. Simply stating that the agreement at issue was not provided by the prior owner will not satisfy the requirements for being a bona-fide purchaser.

Nelson v. Eubanks, No. 15-24-00037-CV, 2024 Tex. App. LEXIS 8227 (Tex. App.—Houston [1st Dist.] Nov. 26, 2024, no pet. h.).

A defect in an election contest citation does not create a jurisdictional defect. In November 2023, Texas voters approved 13 amendments to the Texas Constitution. Shortly thereafter, three pro-se voters filed an election contest challenging the use of allegedly illegal electronic voting machines.

The Secretary of State filed a plea to the jurisdiction, arguing in part that the voters’ contest failed because the citation served on the Secretary’s office was defective, and therefore the case was jurisdictionally defective. The Secretary argued that she never received proper citation because the citation included an incorrect answer deadline. The citation erroneously stated the general civil answer deadline rather than the election contest deadline. Texas Rule of Civil Procedure 99 provides the general civil action answer deadline, which is the Monday next after the expiration of 20 days after the date of service. See Tex. R. Civ. P. 99(b). However, Election Code Section 233.007(a)(2) provides a shortened deadline for state-wide elections—20 days after the date of service. Tex. Elec. Code § 233.007(a)(2), (b).

The Court of Appeals found this to be a harmless error and not an error that created a jurisdictional defect. In fact, the voters filed and served their election contest timely, or before the election was canvassed, and therefore it was jurisdictionally sound. See Tex. Elec. Code § 233.014(b). The Court of Appeals also noted that that the Secretary was actually served with the citation, knew of the citation defect, and responded before the statutory deadline.

The Secretary argued that the defect was jurisdictional because “strict compliance with the rules is required” otherwise “service is invalid.” The Court of Appeals disagreed as that rule applies to default judgments, not service of citation generally. Instead, defects in citations must be challenged by motions to quash and the “only relief is additional time to answer rather than dismissal of the cause.”

The Court of Appeals further acknowledged that while
“[s]tatutory prerequisites to a suit, including the provision of notice, are jurisdictional requirements in all suits against a governmental entity,” citation is not a prerequisite to suit but a part of the statute addressing when the Secretary must answer. Tex. Gov’t Code § 311.034; Tex. Elec. Code § 233.007. It is the district clerk’s duty to prepare, sign, and issue citation, not the filing parties. Therefore it was the district clerk who issued the defective citation based on a form that required the voters to specify the type of service requested, but not the date for its return. The filing parties in this case, the voters, met their only prerequisite of suit by filing and serving the Secretary before the final election canvass was completed.

The Court of Appeals ultimately found that while providing an answer deadline is mandatory, it is not jurisdictional. Therefore, the voters’ defective citation is not an incurable error.

Following the most recent elections, government officials should be aware that citations for election contests may provide the incorrect answer deadline and they should follow the 20-day deadline provided by Election Code Section 233.007 for statewide elections. Further, any deadline inaccuracies do not provide jurisdictional errors and should only be challenged by motions to quash rather than pleas to the jurisdiction.

Air and Waste Cases

Texas Attorney General (“AG”) Sues PFAS Manufacturers 3M and DuPont for Falsely Advertising Safety of Products.

On December 11, 2024, the AG filed a petition at the Johnson County District Court, arguing that 3M and DuPont (“Defendants”) mispresented and omitted facts surrounding the safety of many of their brand names such as Teflon, Stainmaster, and Scotchgard, which contain the “forever chemicals” PFAS. This claim was brought under the Texas Deceptive Trade Practices-Consumer Protection Act and asserts that the Defendants knew of the danger of PFAS yet marketed them as safe for consumer use, ultimately misrepresenting their environmental and biological risks. This lawsuit has not been set for hearing.

Supreme Court Allows Emission Rules to Stand While Litigation Continues.

On April 25, 2024, EPA promulgated a rule reducing allowable emissions of carbon dioxide by power plants and other industrial facilities that impact downwind states, which provided the first legal limits on carbon dioxide. After promulgation, several states, energy companies, and other industry groups challenged the rule and requested it be put on hold while the federal appeal moves forward for a final determination on the rule’s legality. The petitioners argue that the rule is not achievable with current technology, which could force closures and other negative impacts, and that the rule violates the major questions doctrine – the idea that an agency must be given explicit authority to make decisions that have significant economic and political impact. In October 2024, the Supreme Court ordered that the rule stay in place while litigation continues, finding that the rule provides significant environmental benefits. Edison Elec. Inst. et al. v. EPA et al, 604 U.S. No. 24A116 (2024).

“In the Courts” is prepared by Samantha Tweet in the Firm’s Districts Practice Group; Sydney Sadler in the Firm’s Litigation Practice Group; and Mattie Neira in the Firm’s Air and Waste Practice Group. If you would like additional information or have questions related to these cases or other matters, please contact Samantha at 512.322.5894 or stweet@lglawfirm.com, or Sydney at 512.322.5856 or ssadler@lglawfirm.com, or Mattie at 512.322.5804 or mneira@lglawfirm.com.