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City of New Braunfels v. Carowest Land, Ltd.

Court of Appeals of Texas, Third District, Austin

June 29, 2017

City of New Braunfels, Texas and Y.C. Partners, Ltd., d/b/a Yantis Company, Appellants
v.
Carowest Land, Ltd., Appellee

         FROM THE DISTRICT COURT OF COMAL COUNTY, 22ND JUDICIAL DISTRICT NO. C2015-0304A, HONORABLE PAUL R. DAVIS, JUDGE PRESIDING

          Before Justices Puryear, Pemberton, and Goodwin

          OPINION

          Melissa Goodwin, Justice

         The City of New Braunfels and Y.C. Partners, Ltd., d/b/a Yantis Company appeal from the trial court's declaratory judgment in favor of Carowest Land, Ltd., that included a declaration that a contract between the City and Yantis was void and an award of attorney's fees, costs, and expenses against the City and Yantis jointly and severally. For the following reasons, we vacate the trial court's judgment for lack of subject matter jurisdiction and remand the case to the trial court for further proceedings consistent with this opinion.

         BACKGROUND

         This case is among a series of cases between Carowest, the City, and Yantis. Because the relevant facts that form the basis of Carowest's claims were recited in a prior opinion issued by this Court, we do not recite them here except to the extent necessary to describe the relevant background. See Tex. R. App. P. 47.1; see generally City of New Braunfels v. Carowest Land, Ltd., 432 S.W.3d 501 (Tex. App.-Austin 2014, no pet.) (Carowest I).

         The heart of the parties' dispute in this case concerns a rule 11 agreement between the City and Yantis that was filed in the 2010 lawsuit brought by Carowest against the City and Yantis as to the South Tributary flood-control project (STP). See Carowest I, 432 S.W.3d at 535 n.131. Counsel for the City and Yantis discussed and signed the rule 11 agreement on behalf of their clients during the day of May 9, 2011, the same day that the city council held its meeting in the evening in which it approved Yantis as the contractor for the North Tributary flood-control project. In the rule 11 agreement, Yantis agreed "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 (with alternate three) by the City of New Braunfels at the New Braunfels' City Council meeting scheduled for this evening." Alternate three was for the optional work of delivering a specified quantity of excavated land (fill) from the project to Carowest. The rule 11 agreement further provided: "If the contract is not awarded to Yantis this evening, this offer is hereby withdrawn." Yantis, the contractor on the STP, had submitted a sealed bid on April 29, 2011, seeking to be the contractor on the North Tributary project.

         The agenda for the May 9, 2011, city council meeting included notice that the city council would discuss and consider the "approval of a contract with Yantis Company for construction services on the North Tributary Regional Flood Control Project." Immediately prior to consideration of the award of the North Tributary Contract during the city council meeting, the city council went into a closed meeting without announcing the basis for doing so. See Tex. Gov't Code § 551.101 (requiring announcement that closed meeting will be held and identification of "section or sections of this chapter under which the closed meeting is held").

         After the closed meeting concluded and the open session was reconvened, the mayor began by stating that the "Executive Session caption under which we went under" was to "Item C, deliberate pending/contemplated litigation, settlement offers, and matters concerning privileged and unprivileged client information." See id. § 551.071(1) (authorizing closed meeting to consult with attorney about "pending or contemplated litigation" or "settlement offer"). The city council then discussed the award of the North Tributary Contract to Yantis without reference to the rule 11 agreement. The city engineer presented the bids that the City received on April 29, 2011, the range of those bids, and the time line for the project, and advised the city council that Yantis submitted the lowest bid with the recommended alternates. The city council members then discussed the bids for the North Tributary Contract and Yantis's bid in relation to actual cost and quality of work on the completed STP. Following this discussion, the city council voted to award the North Tributary Contract to Yantis with one city council member voting against the award.

         The City provided a copy of the rule 11 agreement to Carowest the day after the city council's meeting. Carowest thereafter filed amended pleadings in the 2010 lawsuit, asserting claims under the Uniform Declaratory Judgments Act (UDJA), see Tex. Civ. Prac. & Rem. Code §§ 37.001-.011, including seeking declarations that the North Tributary Contract was void based on the City's alleged violations of the Texas Open Meetings Act (TOMA), see Tex. Gov't Code §§ 551.001-.146, and competitive bidding requirements in the Texas Local Government Code, see Tex. Loc. Gov't Code § 252.043(a) (requiring contract to be awarded to "lowest responsible bidder"). Carowest asserted its standing to complain about the North Tributary Contract based on its status as a "property tax paying resident, " see id. § 252.061(a), and a third party beneficiary of the North Tributary Contract. Carowest urged it was a third party beneficiary of the contract because the City had agreed to provide it with fill from the North Tributary project. The parties thereafter agreed to sever Carowest's UDJA claims related to the City's alleged TOMA violations and the validity and legality of the North Tributary Contract into a new cause number that is the subject of this appeal.

         The jury trial in the severed case occurred in October 2015. The trial court granted a directed verdict on Carowest's declaratory judgment claim "related to the City's improper TOMA procedure, " see Tex. Gov't Code § 551.101, and submitted other claims of Carowest to the jury. The jury found that:

• In awarding the North Tributary Contract to Yantis, the City "fail[ed] to award the contract to the lowest responsible bidder."
• In awarding the North Tributary Contract to Yantis, the City "fail[ed] to provide all bidders with the opportunity to bid on the same items on equal terms and have bids judged according to the same standards as set forth in the specifications."
• The City "allow[ed] Yantis to submit additional consideration for its bid for the North Tributary Contract after April 29, 2011 at 10:00 a.m."
• Yantis "provide[d] a release of the Delay Claims to the City in exchange for the City Council's vote to award it the North Tributary Contract on May 9, 2011."
• The City "consider[ed] the Rule 11 Agreement when judging Yantis'[s] bid for the North Tributary Project."

         Concerning the alleged TOMA violations as to the city council meeting on May 9, 2011, the jury found that the agenda for the meeting did not provide "full and adequate notice that the City Council would be considering the Carowest/Yantis suit"; that the Certified Agenda for the closed session did not include a statement of the subject matter of each deliberation, a record of any further action taken, or an announcement by the presiding officer of the date and time at the beginning and end of the meeting; that the city council discussed financial considerations of the North Tributary Contract and the rule 11 agreement during the closed session; and that the City agreed to award the North Tributary Contract to Yantis in exchange for Yantis's release of the Delay Claims on May 9, 2011. The jury, however, also found that the City did not make a final decision related to the award of the North Tributary Contract during the closed session.

         A bench trial on attorney's fees, costs, and expenses occurred in December 2015. The trial court thereafter entered declaratory judgment in favor of Carowest, making declarations in accordance with the jury's verdict and declaring that "the process by which the City of New Braunfels awarded the contract for the North Tributary Project was improper, illegal, and in violation of the Texas Open Meetings Act, the Texas competitive bidding laws, the Texas Penal Code, and public policy" and that the North Tributary Contract was void. The trial court's other declarations included that the City had violated sections 551.002, 551.041, 551.101, 551.103 of TOMA, see Tex. Gov't Code §§ 551.002, .041, .101., .103; the City and Yantis violated section 36.02 of the Texas Penal Code, see Tex. Penal Code § 36.02; the City violated section 271.0065 of the Texas Local Government Code, see Tex. Loc. Gov't Code § 271.0065; and the City violated section 252.043 of the Texas Local Government Code, see id. § 252.043. The trial court also awarded attorney's fees, costs, and expenses against the City and Yantis jointly and severally and entered findings of fact and conclusions of law in support of its award of attorney's fees, costs, and expenses. These appeals followed.

         ANALYSIS

         The City's Appeal

         Because it is dispositive, we limit our analysis to the City's first issue.[1]See Tex. R. App. P. 47.1. In its first issue, the City argues that Carowest's claims against the City are barred by governmental immunity and that the trial court, thus, lacked subject matter jurisdiction ...


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