City of North Richland Hills v. Home Town Urban Partners, Ltd. and Arcadia Land Partners 25, Ltd.

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH

NO. 02-10-00224-CV

CITY OF NORTH RICHLAND HILLS APPELLANT

V.

HOME TOWN URBAN PARTNERS, LTD. APPELLEES
AND ARCADIA LAND PARTNERS 25, LTD.

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FROM THE 96TH DISTRICT COURT OF TARRANT COUNTY

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AND

NO. 02-10-00236-CV

CITY OF NORTH RICHLAND HILLS APPELLANT

V.

ARCADIA LAND PARTNERS 25, APPELLEES
LTD. AND ARCADIA HOLDINGS

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FROM THE 67TH DISTRICT COURT OF TARRANT COUNTY

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OPINION ON REHEARING
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We have considered Appellees‘ motion for rehearing of our February 17,

2011 opinion and Appellant‘s response. We grant the motion for rehearing, and
we withdraw our February 17, 2011 opinion and judgments and substitute the

following.

I. Introduction

In these consolidated interlocutory appeals, the City of North Richland Hills

(the City) challenges the trial courts‘ respective denials of the City‘s partial pleas

to the jurisdiction in the lawsuits filed against it by Appellees Hometown Urban

Partners, Ltd. (Urban Partners), Arcadia Land Partners 25, Ltd., and Arcadia

Holdings (collectively, Arcadia).1 The City contends that governmental immunity

protects it from the breach of contract claims, two of the declaratory judgment

claims, and one of the inverse condemnation claims asserted against it by

Appellees. The City also contends that Urban Partners does not have standing

to challenge a zoning amendment based on lack of statutorily required notice.

We affirm in part and reverse in part.

II. Background

A. Factual Background2

This case concerns the Home Town Development (the Development) in

the City of North Richland Hills, Texas. Arcadia was the original developer, and

Urban Partners owns real estate within the Development.

1
See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(8) (Vernon 2008)
(permitting interlocutory appeal from an order granting or denying a plea to the
jurisdiction filed by a governmental unit).
2
The facts set forth below are taken from the parties‘ contract and the
Appellees‘ pleadings in the proceedings below, which we accept as true and
construe in Appellees‘ favor pursuant to the appropriate standard of review. See
Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226–27 (Tex. 2004).
 In 1999, the City adopted a regulating plan to zone the area within the

Development, approved a preliminary plat for the Development, and created a

Tax Increment Financing (TIF) District to capture increased property tax

valuations generated by the Development. The regulating plan and preliminary

plat included a general street layout, development plan, and sites for a library

and a recreation center.

In 2001, the City and Arcadia entered into the Home Town North Richland

Hills Comprehensive Development Agreement (the Development Agreement).

Among other things, the Development Agreement set forth the City‘s and

Arcadia‘s responsibilities for the design, construction, and eventual acceptance

by the City of public improvements in the Development. The public

improvements included water and sewer improvements, drainage improvements,

irrigation, streets, street signs and lights, parks, and landscaping. The

Development Agreement also provided that if certain conditions were met,

Arcadia would convey a tract of land to the City for construction of a recreation

center and would grant the City an easement for 400 parking spaces (to be

constructed by the City) adjacent to the proposed site.

In 2004, the City adopted an amended preliminary plat for the

Development. The amended plat included a new elementary school site but

retained the original sites for the library and recreation center. The library was

built and opened in accordance with the preliminary plat, regulating plan, and

Development Agreement, but the recreation center has not been constructed
within the Development because the City purchased a ten-acre tract outside the

Development to construct the recreation center. Appellees allege that the City

breached the Development Agreement by changing the location of the recreation

center without Appellees‘ consent.

When the City created the initial zoning district for the Development, multi-

family uses were allowed within the zoning district as a matter of right without

further approval from the City. In 2007, however, the City amended the zoning

district to allow multi-family use only with a specific use permit (SUP) from the

City. Appellees allege that this zoning amendment occurred despite the City‘s

knowledge that Urban Partners had built a multi-story apartment building in the

Development and was buying another thirty acres from Arcadia to develop

additional multi-family uses. Appellees also allege that they were not previously

notified of the proposed zoning amendment or the City‘s approval of the zoning

amendment and that Urban Partners purchased the thirty acres for several

million dollars without knowledge of the zoning amendment. Appellees further

allege that Urban Partners applied for a SUP for multi-family use on the thirty-

acre tract after the zoning amendment and that the City imposed numerous

impossible conditions and eventually denied the SUP applications.

Private developers have spent more than $20 million and have invested

more than $140 million for land development and park improvements in the

Development. Approximately seventy percent of the Development has been

2
constructed, and approximately thirty acres has been or will be dedicated to the

City for public improvements.

B. Procedural Background

Urban Partners filed suit in the 96th District Court of Tarrant County in

March 2009 (the Urban Partners suit), seeking declaratory, mandamus, and

injunctive relief and monetary damages relating to the City‘s multi-family use

zoning amendment, and Arcadia subsequently intervened in the Urban Partners

suit. The live pleading in the Urban Partners suit alleges claims against the City

for declaratory relief, violations of due process, inverse condemnation, estoppel,

and breach of the Development Agreement.

In addition, Arcadia filed suit against the City in the 67th District Court of

Tarrant County (the Arcadia suit). In the Arcadia suit, Arcadia alleges causes of

action for declaratory relief, inverse condemnation, estoppel, and breach of the

Development Agreement.

The City filed partial pleas to the jurisdiction in both cases, and after

hearings, each trial court denied the City‘s pleas to the jurisdiction. These

interlocutory appeals followed.

III. Applicable Law

Whether the trial court had subject matter jurisdiction is a question of law

that we review de novo. Tex. Natural Res. Conservation Comm’n v. IT-Davy, 74

S.W.3d 849, 855 (Tex. 2002). A plea to the jurisdiction is a dilatory plea that

challenges the trial court‘s subject matter jurisdiction. Bland Indep. Sch. Dist. v.

3
Blue, 34 S.W.3d 547, 554 (Tex. 2000). It is used to defeat a cause of action

without regard to whether the claims asserted have merit. Id.

―[S]overeign immunity deprives a trial court of subject matter jurisdiction for

lawsuits in which the state or certain governmental units have been sued[,]

unless the state consents to suit.‖ Miranda, 133 S.W.3d at 224. In Texas,

sovereign immunity has two components: immunity from liability and immunity

from suit. Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006); Miranda,

133 S.W.3d at 224. Immunity from liability ―bars enforcement of a judgment

against a governmental entity‖ and is an affirmative defense. Tooke, 197 S.W.3d

at 332; Miranda, 133 S.W.3d at 224. Immunity from suit, on the other hand,

―bars suit against the [governmental] entity altogether‖ because it ―deprives a

court of subject matter jurisdiction.‖ Tooke, 197 S.W.3d at 332; Miranda, 133

S.W.3d at 224. This appeal involves immunity from suit.

When a governmental entity such as the City enters into a contract, it

waives immunity from liability but does not waive immunity from suit unless the

legislature has clearly and unambiguously waived the governmental entity‘s

immunity from suit. Tooke, 197 S.W.3d at 332–33. To invoke the trial court‘s

subject matter jurisdiction over a claim arising out of a governmental entity‘s

contractual obligations, the plaintiff must allege a valid waiver of immunity from

suit and plead sufficient facts demonstrating the trial court‘s jurisdiction. Miranda,

133 S.W.3d at 226; Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440,

446 (Tex. 1993). We construe the pleadings liberally in favor of the plaintiff, look

4
to the pleader‘s intent, and accept the pleadings‘ factual allegations as true.

Miranda, 133 S.W.3d at 226. If, as in this case, a plea to the jurisdiction

challenges the existence of jurisdictional facts, we consider relevant evidence

submitted by the parties that is necessary to resolve the jurisdictional issues. Id.

at 227; Bland, 34 S.W.3d at 555. We take as true all evidence favorable to the

nonmovant, and we indulge every reasonable inference and resolve any doubts

in the nonmovant‘s favor. Wise Reg’l Health Sys. v. Brittain, 268 S.W.3d 799,

805 (Tex. App.—Fort Worth 2008, no pet.) (citing Miranda, 133 S.W.3d at 228).

If the evidence creates a fact question regarding jurisdiction, the trial court must

deny the plea to the jurisdiction and leave its resolution to the factfinder.

Miranda, 133 S.W.3d at 227–28. But if the evidence is undisputed or fails to

raise a fact question on the jurisdictional issue, the trial court rules on the plea to

the jurisdiction as a matter of law. Id. at 228.

V. Parties’ Contract Involved Services

The City contends in its first issue that the trial courts do not have subject

matter jurisdiction over Appellees‘ breach of contract claims. The City argues

that the Development Agreement is not a qualifying agreement under local

government code section 271.152 because it does not involve the provision of

goods or services to the City. Appellees respond that they provided several

services to the City that fall within the waiver of the City‘s immunity from suit and

that the trial courts therefore have subject matter jurisdiction over their breach of

contract claims.

5
 Section 271.152 of the local government code states:

A local governmental entity that is authorized by statute or the
constitution to enter into a contract and 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, subject to
the terms and conditions of this subchapter.

Tex. Loc. Gov‘t. Code Ann. § 271.152 (Vernon 2005). A ―contract subject to this

subchapter‖ is defined, in relevant part, as ―a written contract stating the essential

terms of the agreement for providing goods or services to the local governmental

entity.‖ Id. § 271.151(2) (Vernon 2005).

The City argues that the Development Agreement is not a contract for

―goods or services‖ because the Development Agreement is ultimately a contract

for the conveyance of real property.3 The City also argues that even though

Appellees used or provided goods or services to construct the improvements on

the property, the ―provision of goods and services as a precursor or condition to

the conveyance of real property is not the provision of ‗goods or services.‘‖ 4 But

3
See, e.g., Brown Water Marine Serv., Inc. v. Aransas Cnty. Navigation
Dist. No. 1, No 13-07-00055-CV, 2008 WL 1822727, at *2 n.1 (Tex. App.—
Corpus Christi Apr. 24, 2008, pet. denied) (mem. op.) (lease of property not
goods or services); Valley Mun. Util. Dist. No. 2 v. Rancho Viejo, Inc., No. 13-07-
00545-CV, 2008 WL 384320, at *4 (Tex. App.—Corpus Christi Feb. 14, 2008, no
pet.) (mem. op.) (easement to district not goods or services); Bexar Metro. Water
Dist. v. Educ. & Econ. Dev. Joint Venture, 220 S.W.3d 25, 32 (Tex. App.—San
Antonio 2006, pet. dism‘d w.o.j.) (immunity retained for claim of breach of
contract for sale of real estate).
4
See Somerset Indep. Sch. Dist. v. Casias, No. 04-07-00829-CV, 2008 WL
1805533, at *3 (Tex. App.—Corpus Christi Apr. 23, 2008, pet. denied) (mem. op.)
(holding that a contract was one for the conveyance of land even though the
seller was required to perform environmental cleanup as a condition of closing).

6
we cannot agree with the City‘s contention that the Development Agreement is

merely a conveyance of real property. Instead, we believe the City‘s first issue is

resolved by two of the supreme court‘s recent decisions. See Kirby Lake Dev.,

Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829 (Tex. 2010); Ben Bolt-Palito

Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdiv. Prop./Cas. Joint Self-

Ins. Fund, 212 S.W.3d 320 (Tex. 2006).

In Ben Bolt, ninety-two governmental entities formed an insurance fund to

provide casualty insurance to fund participants. See 212 S.W.3d at 322. Fund

members elected a governing board, and a board subcommittee resolved self-

insurance claim disputes. See id. at 327. The Fund argued that its immunity

from suit was not waived by local government code section 271.152 because no

goods or services were provided to the Fund under the insurance contract with a

member entity. See id. Disagreeing, the supreme court held that the Fund‘s

immunity from suit was waived because the members provided services to the

Fund in that the members elected the governing board whose subcommittee

resolved claim disputes. See id. Thus, in Ben Bolt, even though the service

provided to the Fund was not the primary purpose of the contract, the members‘

provision of claim dispute services was sufficient to fall within the waiver of

immunity under local government code section 271.152. See id. at 327–28.

In Kirby Lake, several developers entered into agreements with the Clear

Lake Water Authority. 320 S.W.3d at 832. Similar to the Development

Agreement in this case, the agreements in Kirby Lake required the developers to

7
build water and sewer facilities and lease the facilities to the Water Authority free

of charge. Id. In addition, the agreements provided that the Developers would

―cause the Facilities to be constructed under contracts with third-party

contractors.‖5 The court of appeals held that the developers‘ ―agreement to hire

third parties to construct the Facilities and to build the streets, roads, and

bridges‖ was ―sufficient to constitute the provision of services to the [Water]

Authority.‖ Friendswood, 256 S.W.3d at 751. Affirming and holding that the

Water Authority‘s immunity from suit was waived by section 271.152, the

supreme court stated:

We agree with the court of appeals that the Agreements entail
services provided directly to the [Water] Authority. The Developers
contracted to construct, develop, lease, and bear all risk of loss or
damage to the facilities, obligations far more concrete than those at
issue in Ben Bolt. We therefore hold that the Agreements
contemplate the provision of services under the statute.

Kirby Lake, 320 S.W.3d at 839 (internal citation omitted).

In this case, the Development Agreement provides:

From time to time, [Appellees] shall commence the
development of various Tracts within the Development, and
[Appellees] may contract, at [their] sole cost and expense, with such
contractors as may be selected for the installation of all
Infrastructure Improvements for such Tracts, which may include both

5
Clear Lake City Water Auth. v. Friendswood Dev. Co., Ltd., 256 S.W.3d
735, 748 (Tex. App.—Houston [14th Dist.] 2008, pet. dism‘d) (op. on reh‘g). The
contract language is not set forth in the Kirby Lake opinion, but it is quoted in the
opinion resolving the Water Authority‘s interlocutory appeal of the trial court‘s
denial of its plea to the jurisdiction and motion for summary judgment. See id. at
739–40.

8
 Public Use Improvements and Private Use Improvements for such
Tracts.

In addition, the Development Agreement required Appellees to prepare all

plans and designs for the public and private use improvements to be constructed

by Appellees within the Development. It also obligated Appellees to provide

public bidding for any third-party contracts; to ―supervise and oversee all such

contracts‖; to ―exercise due diligence and good faith efforts to insure compliance

by such contractors with all requirements of the City for the installation and

completion of Public Use Improvements‖; to ―use reasonable efforts to guard

against any defects or deficiencies in the work of the contractor(s) or

subcontractors‖; to ―reject any work or materials that do not, in [Appellees‘]

professional judgment, materially conform to the appropriate contract

documents‖; to obtain lien waivers or ―bills paid affidavits‖ from all contractors

under Public Improvement Contracts; to ―establish and maintain a central file for

all design, construction, and related contractual documents‖; and to ―coordinate

with the appropriate contractors the performance and completion of any

unfinished items in respect of the Public Use Improvements.‖ Moreover, the

Development Agreement required Appellees to ―follow the good faith

recommendations of the engineer retained by [Appellees]‖ to prepare the plans

for sewer system improvements within the Development.

The City points to the language in the Kirby Lake agreements requiring the

developers to retain third-party contractors to construct the facilities and argues

9
that the Development Agreement is different because Appellees were authorized

but not required to retain third-party contractors to complete the construction and

installation. Even if this were a legitimate basis to distinguish Kirby Lake, there is

no such distinction in this case. The Development Agreement, at a minimum,

required Appellees to retain an engineer to prepare plans for water, sewer, and

drainage improvements within the Development because it obligated Appellees

to follow the ―good faith recommendations‖ of ―the engineer retained by

[Appellees]‖ with regard to each of those improvements. Thus, we need not

decide whether a contract that merely authorizes rather than requires a

developer to retain third-party contractors removes the contract from the waiver

of immunity in local government code section 271.152.

Here, just as in Kirby Lake, Appellees provided various services to the City

pursuant to the Development Agreement, including but not limited to the retention

of third-party contractors. See Kirby Lake, 320 S.W.3d at 839–40; Ben Bolt, 212

S.W.3d at 327–28. Thus, the holdings of Kirby Lake and Ben Bolt are dispositive

of the City‘s first issue. We hold that local government code section 271.152

waives the City‘s immunity from suit with regard to the Development Agreement

because the Development Agreement is a contract for the provision of services

to the City within the meaning of that statute. See Tex. Loc. Gov‘t Code Ann. §§

271.151(2), .152; Kirby Lake, 320 S.W.3d at 839–40; Ben Bolt, 212 S.W.3d 327–

28; Friendswood Dev. Co., 256 S.W.3d at 751. We overrule the City‘s first issue.

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 V. Limitation of Damages

In its second issue, the City contends that even if the Development

Agreement falls within the waiver of immunity in local government code Chapter

271, the trial courts lack subject matter jurisdiction over Appellees‘ breach of

contract claims because Appellees‘ alleged damages do not fall within those

available under local government code section 271.153.

Relevant to this case, section 271.153 provides that breach of contract

damages against the City are limited to ―the balance due and owed by the [City]

under the contract‖ and cannot include any consequential damages not expressly

included within any balance due and owing to Appellees. Tex. Loc. Gov‘t Code

Ann. § 271.153(a)(1), (b)(1) (Vernon Supp. 2010). The City argues both that

there is no balance due and owing to Appellees and that Appellees‘ potential

damages are consequential damages for which sovereign immunity is not waived

by Chapter 271. Appellees respond that the City‘s damages argument is not

jurisdictional and is premature.

In Kirby Lake, the supreme court stated that ―[t]he purpose of section

271.153 is to limit the amount due by a governmental agency on a contract once

liability has been established, not to foreclose the determination of whether

liability exists.‖ 320 S.W.3d at 840. And in City of Mesquite v. PKG Contracting,

Inc., our sister court stated that ―statutory limitations on PKG‘s recoverable

damages do not deprive the trial court of subject matter jurisdiction to adjudicate

11
PKG‘s breach of contract claims.‖ 263 S.W.3d 444, 448 (Tex. App.—Dallas

2008, pet. denied).

Appellees pleaded that there are amounts due and owing under the

Development Agreement and that they seek specific performance of the

Development Agreement,6 and they argue on appeal that they seek recovery of

at least the cost of constructing 400 parking spaces due to the City‘s relocation of

the recreation center. Appellees‘ pleadings are sufficient to invoke the trial

courts‘ subject matter jurisdiction. See Dallas Area Rapid Transit v. Monroe

Shop Partners, Ltd., 293 S.W.3d 839, 842 (Tex. App.—Dallas 2009, pet. denied);

PKG Contracting, Inc., 263 S.W.3d at 448. The City‘s argument concerning

Appellees‘ damages ―takes us far into the merits of the lawsuit and beyond

jurisdictional facts,‖ Dallas Area Rapid Transit, 293 S.W.3d at 842, and we

decline to adjudicate Appellees‘ damage claims by applying section 271.153

within the procedural context of the City‘s pleas to the jurisdiction. 7 We agree

with the PKG court that the ―trial court is in the best position following further

proceedings to determine whether [Appellees may] recover some, all, or none of

6
The Development Agreement provides that the non-breaching party ―shall
have the right to enforce the terms of this [Development] Agreement by specific
performance.‖
7
We express no opinion as to whether Appellees may or may not be
entitled to specific performance or any other damages following a full
adjudication of their claims.

12
the damages and remedies [they] claim[].‖8 PKG Contracting, Inc., 263 S.W.3d

at 448; see Dallas Area Rapid Transit, 293 S.W.3d at 842; see also City of

Houston v. S. Elec. Servs., Inc., 273 S.W.3d 739, 744 (Tex. App.—Houston [1st

Dist.] 2008, pet. denied) (holding pleadings alleged sufficient facts to establish

waiver of immunity from suit and to defeat plea to jurisdiction and declining to

―adjudicate‖ the plaintiff‘s damage claim through plea to jurisdiction). We

overrule the City‘s second issue.

VI. Requests for Declaratory Relief and Attorney’s Fees

The City argues in its third issue that the trial courts lack subject matter

jurisdiction over two of Appellees‘ requests for declaratory relief because one

request does not ask the trial court to construe or decide the validity of a

municipal ordinance or franchise and because the City is not a proper party in a

suit relating to the second request. The City‘s fourth issue asserts that Appellees

cannot recover attorney‘s fees under the Declaratory Judgment Act for the

8
We are aware of the supreme court‘s holding in Tooke that the Tookes‘
only damages were consequential damages excluded from recovery by section
271.153, but Tooke was an appeal following a trial on the merits. See 197
S.W.3d at 329, 346. Similarly, we held in Boyer, Inc. v. Trinity River Authority of
Texas that a fact issue required reversal of a summary judgment for the
governmental entity because the plaintiff presented evidence that its lost profits
were direct, rather than consequential, damages not precluded by section
271.153. See 279 S.W.3d 354, 359 (Tex. App.—Fort Worth 2008, pet. denied).
This case, however, is an interlocutory appeal following the denial of the City‘s
pleas to the jurisdiction. As our sister court stated, ―We cannot say on this record
that [Appellees‘] claim for damages is solely for damages excluded by the
statute.‖ PKG Contracting, Inc., 263 S.W.3d at 448.

13
requests for declaratory relief over which the trial courts do not have subject

matter jurisdiction.

A. Relocation of Recreation Center

1. Applicable Law

The Texas Declaratory Judgments Act contains a waiver of immunity from

suit. See Tex. Civ. Prac. & Rem. Code Ann. § 37.006(b) (Vernon 2008); City of

El Paso v. Heinrich, 284 S.W.3d 366, 373 n.6 (Tex. 2009). But this waiver is a

limited one, and determining whether a particular request for declaratory relief

falls within this waiver of immunity is often complicated.

Immunity from suit is waived if a party joins a governmental entity and

seeks a declaration that an ordinance or statute is invalid, based on either

constitutional or nonconstitutional grounds. See Heinrich, 284 S.W.3d at 373

n.6; City of Elsa v. M.A.L., 226 S.W.3d 390, 391–92 (Tex. 2007); Lakey v. Taylor,

278 S.W.3d 6, 15 (Tex. App.—Austin 2008, no pet.); see also City of Beaumont

v. Bouillion, 896 S.W.2d 143, 148–49 (Tex. 1995). Likewise, immunity from suit

is waived if a party joins a governmental entity and seeks a declaration

construing an ordinance or statute. See Tex. Lottery Comm’n v. First State Bank

of DeQueen, 325 S.W.3d 628, 633–34 (Tex. 2010) (noting that governmental

entities are to be joined in suits to construe their legislative pronouncements and

that immunity from suit is waived in such suits (citing Heinrich, 284 S.W.3d at 373

n.6)); Tex. Educ. Agency v. Leeper, 893 S.W.2d 432, 445–46 (Tex. 1994)

(stating that governmental entities are not immune from suits seeking a

14
construction of their legislative pronouncements). However, governmental

immunity generally bars suits for retrospective monetary relief, and private

parties cannot circumvent a governmental entity‘s immunity from suit by

characterizing a suit for money damages as a declaratory judgment claim. See

Heinrich, 284 S.W.3d at 368–69, 371. Therefore, if a litigant joins a

governmental entity and seeks an otherwise proper declaratory judgment

construing or invalidating a statute, this claim is nonetheless barred by

governmental immunity if the declaration sought would have the effect of

establishing a right to relief against the governmental entity for which

governmental immunity has not been waived. See id. at 372; City of Houston v.

Williams, 216 S.W.3d 827, 828–29 (Tex. 2007); State v. BP Am. Prod. Co., 290

S.W.3d 345, 360 (Tex. App.—Austin 2009, pet. filed).

2. Analysis

The City challenges Appellees‘ request for a declaration ―that the City

violated the regulating plan, Development Agreement, TIF Plan and plats in

relocating the recreation center site without obtaining [Appellees‘] consent.‖ In

this regard, we note that one of Appellees‘ breach of contract allegations is that

without Appellees‘ consent, ―the City purchased a 10 acre site outside of [the

Development] to construct the recreation center. . . . The City has violated the

Development Agreement, approved [Development] zoning regulation plan and

plats which clearly show the civic location of the recreation center.‖ A party may

not seek a declaratory judgment ―only in an attempt to have the trial court decide

15
its breach-of-contract claim.‖ IT-Davy, 74 S.W.3d at 860 (holding that the limited

waiver under the Declaratory Judgment Act recognized in Leeper ―does not allow

private parties to sue the State for money damages‖); see also City of Corinth v.

NuRock Dev. Inc., 293 S.W.3d 360, 368–69 (Tex. App.—Fort Worth 2009, no

pet.) (holding that immunity is not waived for a requested declaration that the

plaintiff ―did not materially breach the [contract] or otherwise fail to meet its

obligations to the City‖). Appellees‘ requested declaration is merely a recasting

of their claim for breach of the Development Agreement. See IT-Davy, 74

S.W.3d at 860; NuRock, 293 S.W.3d at 368–69. Therefore, we hold that the trial

courts in both the Urban Partners suit and the Arcadia suit erred by denying the

City‘s partial plea to the jurisdiction as to this request for a judicial declaration,

and we sustain this portion of the City‘s third issue.

B. Denial of SUP Applications

The City also challenges Appellees‘ request in the Urban Partners suit for

a declaration ―that the City did not comply with its ordinances and state statute in

denying the SUP applications.‖ The City argues that this is a request for the trial

court to declare that various city officials did not comply with state law and city

ordinances in denying the SUPs, that the City is not a proper party in a suit

seeking this type of declaration, and that the allegedly offending, non-party city

officials are the proper parties.

In City of El Paso v. Heinrich, Heinrich sued various governmental entities

for declaratory relief after the entities reduced her monthly pension benefits. See

16
284 S.W.3d at 369. Specifically, Heinrich alleged that ―the Pension Board and its

individual members acted outside their authority and in violation of the Texas

Constitution when they reduced [her] benefits.‖ Id. at 377. The court interpreted

her claim as one challenging the Board‘s action under the applicable statute, not

as one challenging the validity of the statute, and held that her claim could only

be brought in an ultra vires suit against the appropriate officials in their official

capacity. Id.

In Texas Department of Insurance v. Reconveyance Services, Inc.,

Reconveyance sought declaratory relief against the Department concerning the

Department‘s interpretation of certain insurance code provisions. See 306

S.W.3d 256, 257–58 (Tex. 2010). Reconveyance sought a declaration that the

Department had, through its interpretation of the insurance code provisions,

acted beyond its authority by attempting to limit the services Reconveyance

could offer through title agencies. Id. at 258. Relying on Heinrich, the supreme

court held that Reconveyance‘s suit was an ultra vires suit because it sought to

establish that Department employees had acted without statutory authority. Id. at

258–59. The supreme court dismissed Reconveyance‘s suit for lack of subject

matter jurisdiction because Reconveyance had not sued any of the Department‘s

officials. Id. at 259.

In their pleadings, Appellees allege that ―City staff continually changed

[the] requirements‖ for the SUPs, ―raising the bar so high it could never be met by

[Appellees]‖ and that ―City staff manufactured three ‗reasons‘ for denying the

17
SUP Application, ‗[but] the actual reasons . . . for the denial was that the City did

not want additional multi-family development.‖ Appellees‘ request for a

declaration ―that the City did not comply with its ordinances and state statute in

denying the SUP applications‖ is, like in Heinrich and Reconveyance, an ultra

vires claim alleging that City officials acted without legal authority in denying the

SUP applications, and it may only be brought against the City officials in their

official capacities. See Reconveyance, 306 S.W.3d at 259; Heinrich, 284 S.W.3d

at 377. Thus, the City‘s immunity from suit has not been waived, and the trial

court in the Urban Partners suit erred by denying the City‘s plea to the jurisdiction

as to this requested declaration. See Reconveyance, 306 S.W.3d at 258–59;

Heinrich, 284 S.W.3d at 377.

Appellees, citing Sanders v. City of Grapevine, argue that because the City

has conceded that the trial court has jurisdiction over some of their requested

judicial declarations, the trial court has jurisdiction over all of Appellees‘ other

requests for judicial declarations. See 218 S.W.3d 772, 779–80 (Tex. App.—Fort

Worth 2007, pet. denied). However, we do not read Sanders to support

Appellees‘ contention. There, we held that Sanders‘s pleading for declaratory

relief did not on its face ―seek to impose damages or other liability on the City‖

and that the trial court erred by granting the City‘s plea to the jurisdiction as to the

request for declaratory relief. Id. Contrary to Appellees‘ assertion, nothing in

Sanders suggests that if the City‘s immunity from suit has been waived as to one

request for declaratory relief, the City‘s immunity has been waived as to all other

18
requests for declaratory relief. See id. We sustain the remainder of the City‘s

third issue.

C. Attorney’s Fees

In part of its fourth issue, the City argues that Appellees may not recover

attorney‘s fees under the Declaratory Judgments Act for any declarations over

which the City‘s immunity from suit has not been waived. We agree and hold

that Appellees may not recover attorney‘s fees for prosecuting their requests for

judicial declarations (1) ―that the City violated the regulating plan, Development

Agreement, TIF Plan and plats in relocating the recreation center site without

obtaining [Appellees‘] consent‖ and (2) ―that the City did not comply with its

ordinances and state statute in denying the SUP applications.‖ See NuRock, 293

S.W.3d at 370 (holding that no basis for recovery of attorney‘s fees existed

because declaratory judgment claim was dismissed). We sustain this portion of

the City‘s fourth issue.9

VII. Standing to Challenge Zoning Amendment

In the Urban Partners suit, Appellees seek a judicial declaration ―that the

multi-family/townhome SUP requirement is void and/or cannot be applied to

[Appellees‘] property because notice was not made in accordance with Chapter

211, Tex. Loc. Gov‘t Code.‖ In its fifth issue, the City contends that Urban

9
The parties represented at oral argument that they had reached an
agreement concerning the remainder of the City‘s fourth issue. Thus, we
express no opinion concerning the remainder of the City‘s fourth issue.

19
Partners lacks standing to challenge the zoning ordinance amendment based on

lack of statutorily required notice because the alleged lack of notice is a mere

procedural irregularity that can only be brought by the State in a quo warranto

proceeding.10

In relevant part, local government code section 211.007(c) states:

Before the 10th day before the hearing date, written notice of each
public hearing before the zoning commission on a proposed change
in a zoning classification shall be sent to each owner, as indicated
by the most recently approved municipal tax roll, of real property
within 200 feet of the property on which the change in classification
is proposed.

Tex. Loc. Gov‘t Code Ann. § 211.007(c) (Vernon 2008). It is undisputed that the

City did not provide the notice required by section 211.007(c), but the City

contends that the lack of notice is merely a procedural irregularity that may only

be challenged by the State in a quo warranto proceeding.

In Bolton v. Sparks, the supreme court held that a zoning ordinance was

invalid because the Dallas City Council did not comply with statutory notice and

public hearing requirements. 362 S.W.2d 946, 950 (Tex. 1962). In so holding,

the court stated,

The steps directed to be taken for notice and hearing, when
provided for in the law, are intended for the protection of the property
owner, and are his safeguards against the exercise of arbitrary
power. Each act required is essential to the exercise of jurisdiction
by the City Council, and each must be rigidly performed.

10
Appellees assert other grounds in their pleadings below to invalidate or
limit the zoning amendment, and the City does not challenge those other grounds
on appeal. We express no opinion as to Appellees‘ other challenges.

20
Id.; see also Truman v. Irwin, 488 S.W.2d 907, 908–09 (Tex. Civ. App.—Fort

Worth 1972, no writ) (holding that zoning change was ―void and ineffective

because of noncompliance‖ with notice procedures); City of San Antonio v. Pope,

351 S.W.2d 269, 272 (Tex. Civ. App.—Eastland 1961, no writ) (same); City of

Amarillo v. Wagner, 326 S.W.2d 863, 866 (Tex. Civ. App.—Amarillo 1959, writ

ref‘d n.r.e.) (same); Tonroy v. City of Lubbock, 242 S.W.2d 816, 818–19 (Tex.

Civ. App.—Amarillo 1951, writ ref‘d n.r.e.) (same).

In the context of municipal annexation ordinances, the supreme court has

held that private parties do not have standing to challenge municipal annexations

for procedural irregularities. See Laidlaw Waste Sys. (Dallas), Inc. v. City of

Wilmer, 904 S.W.2d 656, 658 (Tex. 1995) (―Laidlaw has no standing to challenge

the annexation on procedural grounds, such as alleged failures to meet the

notice and signature requirements.‖); Alexander Oil Co. v. City of Seguin, 825

S.W.2d 434, 436, 438 (Tex. 1991) (stating that ―[t]he only proper method for

attacking the validity of a city‘s annexation of territory is by quo warranto

proceeding, unless the annexation is wholly void‖ and holding that landowner‘s

complaints concerning adequacy of service plan presented to city council and

whether quorum was required to conduct hearing were matters for attack via quo

warranto); see also Walton v. City of Midland, 287 S.W.3d 97, 99, 102–05 (Tex.

App.—Eastland 2009, pet. denied) (applying Alexander Oil and holding quo

warranto required to challenge city council‘s approval of settlement agreement

21
when alleged impropriety by city council would only render the act voidable, not

void).

The City argues that even though Alexander Oil was an annexation case, it

implicitly overruled each of the zoning cases cited above because it distinguished

void acts—such as an act exceeding statutory authority—from voidable acts—

such as procedural irregularities—and held that procedural irregularities must be

challenged via quo warranto because they render annexation ordinances

voidable rather than void.11 According to the City, the failure to provide notice as

required by local government code section 211.007(c) is a procedural irregularity

that would merely render the zoning ordinance voidable, and thus, Urban

Partners has no standing to challenge the zoning ordinance because a quo

warranto proceeding is required.

However, the supreme court has not held that procedural irregularities in

zoning cases—such as the lack of notice alleged against the City in this case—

can only be brought by the State in quo warranto proceedings. See Laidlaw

Waste Sys. (Dallas), Inc., 904 S.W.2d at 658; Alexander Oil, 825 S.W.2d at 437–

11
The City argues on rehearing that Bolton was implicitly overruled by
Alexander Oil. Specifically, the City contends that Alexander Oil overruled City of
Duncanville v. City of Woodland Hills, 489 S.W.2d 557, 558 (Tex. 1972) (per
curiam), and that City of Duncanville relied on Bolton. See Alexander Oil, 825
S.W.2d at 438–39; City of Duncanville, 489 S.W.2d at 558. We disagree.
Alexander Oil overruled City of Duncanville because it ―conflicted with the long
line of authority that only the state can challenge annexation for such procedural
irregularities because such irregularities merely result in voidable ordinances.‖
Alexander Oil, 825 S.W.2d at 439 (emphasis added). Alexander Oil made no
mention of Bolton or any intent to overrule it. Id. at 438–39.

22
39. Rather, it is well-settled that the failure to give notice of a proposed zoning

change renders the zoning ordinance void, not voidable. See Bolton, 362

S.W.2d at 950; Truman, 488 S.W.2d at 908–09; Pope, 351 S.W.2d at 272;

Wagner, 326 S.W.2d at 866; Tonroy, 242 S.W.2d at 818–19. Thus, even if quo

warranto might be required in zoning cases involving voidable acts (an issue we

need not decide), quo warranto is not required in the present zoning case

because the failure to give notice renders the zoning ordinance void. See, e.g.,

Bolton, 362 S.W.2d at 950. And private parties have standing to challenge void

ordinances. See Alexander Oil, 825 S.W.2d at 436 (―The only proper method for

attacking the validity of a city‘s annexation of territory is by quo warranto

proceeding, unless the annexation is wholly void.‖) (emphasis added).

Therefore, we hold that Urban Partners has standing to challenge the zoning

amendment based on lack of statutorily required notice, and we overrule the

City‘s fifth issue.

VIII. Inverse Condemnation

In its seventh issue,12 the City asserts that the trial courts do not have

subject matter jurisdiction over one of Appellees‘ inverse condemnation claims

because it is merely a restatement of Appellees‘ breach of contract claims.13

Appellees respond that the City‘s breach of the Development Agreement is only

12
The City has withdrawn its sixth issue.
13
The City concedes that the trial courts have subject matter jurisdiction
over Appellees‘ two other inverse condemnation claims.

23
one of the factors to consider in determining the merits of their inverse

condemnation claim. In this regard, Appellees‘ second amended petition alleges

that the City‘s actions constitute a taking in violation of article 1, section 17 of the

Texas constitution because ―the City has deprived [Appellees] of their reasonable

investment backed expectations (depriving [Appellees] of reasonable use and

enjoyment of the Property)‖ and that Appellees ―had a reasonable expectation

that the recreation center and parking spaces would be developed in accordance

with the Development Agreement, regulating plan, preliminary plat and TIF

documents.‖14

―To establish a takings claim under Article I, section 17, the claimant must

show that a governmental actor acted intentionally to take or damage property for

a public use.‖ State v. Holland, 221 S.W.3d 639, 643 (Tex. 2007). ―When the

government acts pursuant to colorable contract rights, it lacks the necessary

intent to take under its eminent-domain powers and thus retains its immunity

from suit.‖ Id. Thus, a plaintiff may not recast a breach of contract claim against

a governmental entity as one for inverse condemnation. See id. at 643–44. In

this case, however, Appellees have not merely recast their breach of contract

claim as one for inverse condemnation.

―[A] restriction in the permissible uses of property or a diminution in its

value, resulting from regulatory action within the government‘s police power, may

14
We quote from the pleadings in the Arcadia suit but note that the
pleadings in the Urban Partners suit contain a substantially similar allegation.

24
or may not be a compensable taking.‖ Sheffield Dev. Co., Inc. v. City of Glenn

Heights, 140 S.W.3d 660, 670 (Tex. 2004) (citing Taub v. City of Deer Park, 882

S.W.2d 824, 826 (Tex. 1994)). Although some are, ―not every regulation is a

compensable taking.‖ Id. ―[W]hether [a] regulation has gone ‗too far‘ and

become too much like a physical taking for which the constitution requires

compensation requires a careful analysis of how the regulation affects the

balance between the public‘s interest and that of private landowners.‖ Id. at 671–

72. To make this determination, courts consider ―(1) ‗the economic impact of the

regulation on the claimant‘; (2) ‗the extent to which the regulation has interfered

with distinct investment-backed expectations‘; and (3) ‗the character of the

governmental action.‘‖ Id. at 672 (quoting Connolly v. Pension Benefits Guar.

Corp., 475 U.S. 211, 225, 106 S. Ct. 1018, 1026 (1986)).

Appellees cite City of San Antonio v. El Dorado Amusement Co. to support

their contention that the City‘s breach of the Development Agreement is only one

factor in evaluating the merits of their inverse condemnation claim. See 195

S.W.3d 238, 246–47 (Tex. App.—San Antonio 2006, pet. denied). There, El

Dorado offered evidence that it had profitably operated a business for several

years before the city amended the zoning regulation to prohibit the sale of

alcohol on the premises and that the rezoning significantly impaired its ability to

operate its business. Id. The court held that a compensable regulatory taking

resulted from the city‘s rezoning because the evidence supported ―a finding that

the enactment of the rezoning ordinance had a severe economic impact on El

25
Dorado‘s business and unreasonably interfered with El Dorado‘s investment-

backed expectations.‖ Id. at 247; see also City of Carrolton v. McPhee, 05-08-

01018-CV, 2009 WL 2596145, at *2 (Tex. App.—Dallas Aug. 25, 2009, no pet.)

(mem. op.) (affirming denial of plea to jurisdiction and holding pleadings

sufficiently alleged regulatory taking).

Here, Appellees allege that the City deprived them of their reasonable

investment-backed expectations, and they contend that they had a reasonable

expectation—based on seventy-percent of the development being constructed in

accordance with the zoning, plats, building permits, Development Agreement,

and TIF financing documents and all of which having been in place for several

years—that the recreation center and parking spaces would be developed in

accordance with those documents. These allegations are sufficient to allege a

regulatory taking that unreasonably interfered with Appellees‘ investment-backed

expectations. See El Dorado, 195 S.W.3d at 246–47; McPhee, 2009 WL

2596145, at *2. While the City‘s alleged breach of the Development Agreement,

standing alone, cannot form the basis of an inverse condemnation claim because

it would be nothing more than a recasting of Appellees‘ breach of contract claim,

see Holland, 221 S.W.3d at 643–44, Appellees reference the Development

Agreement as only one evidentiary factor to consider in determining whether the

City‘s actions as a whole constitute a regulatory taking. See El Dorado, 195

S.W.3d at 246–47; McPhee, 2009 WL 2596145, at *2. We therefore overrule the

City‘s seventh issue.

26
 IX. Conclusion

Having overruled the City‘s first, second, fifth, and seventh issues, we

affirm in part the trial courts‘ denials of the City‘s partial pleas to the jurisdiction.

Having sustained the City‘s third issue and part of the City‘s fourth issue, we

reverse in part the trial courts‘ orders denying the City‘s pleas to the jurisdiction.

We dismiss for lack of subject matter jurisdiction (1) Appellees‘ request for a

declaration in both the Urban Partners suit and the Arcadia suit ―that the City

violated the regulating plan, Development Agreement, TIF Plan and plats in

relocating the recreation center site without obtaining [Appellees‘] consent‖; (2)

Appellees‘ request for a declaration in the Urban Partners suit ―that the City did

not comply with its ordinances and state statute in denying the SUP

applications‖; and (3) Appellees‘ requests for attorney‘s fees for prosecuting

these requests for judicial declarations.

ANNE GARDNER
JUSTICE

PANEL: GARDNER, WALKER, and GABRIEL, JJ.

DELIVERED: April 28, 2011

27