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Rosenberg Development Corporation v. Imperial Performing Arts, Inc.

Court of Appeals of Texas, Fourteenth District

July 6, 2017


         On Appeal from the 434th Judicial District Court Fort Bend County, Texas Trial Court Cause No. 14-DCV-218015

          Panel consists of Justices Christopher, Busby, and Jewell.


          Kevin Jewell Justice

         In this interlocutory appeal, an economic development corporation created by the City of Rosenberg contends that the trial court erred in partially denying its plea to the jurisdiction. Asserting entitlement to governmental immunity from suit, the corporation, Rosenberg Development Corporation, contends that the plaintiff, Imperial Performing Arts, Inc., failed to establish a valid waiver of governmental immunity and the trial court erred in denying its plea. We conclude, however, that the corporation does not enjoy governmental immunity from suit on these facts, and thus the plaintiff was not required to establish a waiver of immunity. Accordingly, we affirm the trial court's partial denial of the corporation's plea to the jurisdiction.


         The Development Corporation Act of 1979 (the "Act") authorizes certain municipalities to organize economic development corporations for, inter alia, "the promotion and development of new and expanded business enterprises to provide and encourage employment and the public welfare." Tex. Loc. Gov't Code § 501.004(a)(6). Appellant, Rosenberg Development Corporation ("RDC"), is an economic development corporation organized under the Act by the City of Rosenberg. According to RDC's articles of incorporation, it exists "exclusively for the purposes of. . . promoting, assisting[, ] and enhancing economic and industrial development activities . . . and . . . promot[ing] or develop[ing] new or expanded business enterprises, including public facilities."

         In March 2012, RDC entered into a Performance Agreement with Imperial Performing Arts, Inc. ("IPA"), a nonprofit organization that promotes and produces performance and visual arts. Under the Performance Agreement, RDC agreed to pay IPA $500, 000 in two installments. In exchange, IPA purportedly would lease, renovate, and operate both an "Arts Center" and the historic Cole Theater in downtown Rosenberg (though IPA contends that the contract obligated IPA only to arrange to renovate and open the Cole Theater).

         After IPA began renovating the building that would house the Arts Center, IPA realized the conversion would be more time-consuming and expensive than IPA allegedly had been led to believe. In September 2012, IPA requested a forty-five day extension from RDC; RDC's board of directors voted to give IPA a sixty day extension. IPA eventually finished the conversion and opened the Arts Center in November 2012. Since then, IPA has continuously occupied the Arts Center.

         Meanwhile, IPA also began prep work on the planned renovation of the Cole Theater, but realized that the theater project, like the Arts Center, would be more extensive and costly than initially envisioned. IPA alleges that an engineering and construction company declined to serve as the project's general contractor, telling IPA that the theater was so deteriorated that any "renovation" would effectively require complete rebuilding.

         According to IPA, by November 2013 it became obvious that the original plan to renovate and reopen the Cole Theater was not feasible. At a meeting between IPA's and RDC's respective boards of directors, one of RDC's directors allegedly projected that renovating the Cole Theater would cost between three and five million dollars and would take up to five years. This estimate was greater, as to both timing and cost, than any information previously available to IPA and, if accurate, IPA contends, impaired or prevented IPA's ability to accomplish the Performance Agreement's objectives.

         In February 2014, IPA told RDC's board of directors that IPA could not renovate and open the Cole Theater by December 2014 as planned. IPA asked for an extension and also asked to discuss amending the Performance Agreement to allow IPA to move to an alternate venue or build its own facility. In April 2014, IPA again asked for an extension and to amend the Performance Agreement.

         RDC allegedly refused to amend the Performance Agreement or to grant IPA an extension for the Cole Theater project. IPA stopped progress on the Cole Theater project in June 2014.

         IPA then sued RDC for, as relevant here, breach of contract by unreasonably failing to grant an extension of the Performance Agreement. IPA also sought a judgment declaring that the Performance Agreement constitutes an absolute grant to IPA of the funds provided by RDC.[1]

         RDC filed a counterclaim for breach of contract and declaratory judgment that IPA breached the Performance Agreement. RDC also filed a plea to the jurisdiction regarding IPA's claims for damages. In its plea, RDC argued that: (1) IPA's alleged damages are consequential damages, which IPA cannot recover in a suit against a local governmental entity under Local Government Code section 271.153; (2) RDC is immune from liability for IPA's damages claims under Local Government Code section 505.106 as to its performance of governmental functions; (3) RDC did not waive its immunity from suit by asserting claims against IPA because RDC's claims were more akin to recovering a civil penalty and were not in the nature of a damages claim; and (4) IPA failed to plead a valid legislative waiver of governmental immunity for its breach of contract claim.

         The trial court granted RDC's plea as to IPA's claim that RDC breached the Performance Agreement by refusing to discuss an extension under the contract and by refusing to give IPA a reason for the refusal to grant an extension. The trial court denied the plea as to IPA's claim that RDC breached the Performance Agreement by unreasonably refusing to grant an extension; denied the plea as to IPA's claim for declaratory judgment; and denied the plea by rejecting RDC's arguments that IPA's damages claims for breach of contract are barred by Local Government Code sections 271.153 and 505.106.

         RDC filed a notice of interlocutory appeal. On appeal, RDC challenges the portions of the trial court's order denying its plea to the jurisdiction.


         A. Appellate Jurisdiction

         We first address our jurisdiction over this interlocutory appeal. Though IPA has not challenged RDC's right to appeal the challenged order interlocutorily, we examine our appellate jurisdiction independently and sua sponte. See SJMed. Or., L.L.C. v. Estahbanati, 418 S.W.3d 867, 870 (Tex. App.-Houston [14th Dist] 2013, no pet.). Generally, our appellate jurisdiction is confined to appeals of final judgments. See Royal Indep. Sch. Dist. v. Ragsdale, 273 S.W.3d 759, 763 (Tex. App.-Houston [14th Dist.] 2008, no pet.). The legislature, however, has specified circumstances in which a litigant may appeal immediately from an otherwise unappealable order because a final judgment has not been rendered. See Tex. Civ. Prac. & Rem. Code § 51.014(a). RDC relies on one of these provisions, which allows a litigant to appeal from a trial court's interlocutory order that grants or denies a plea to the jurisdiction by a governmental unit as that term is defined in Texas Civil Practice and Remedies Code section 101.001. See id. § 51.014(a)(8).

         RDC filed a plea to the jurisdiction, which the trial court partially denied. A threshold issue for this court to resolve is whether RDC is a "governmental unit, " as that term is defined in the Texas Civil Practice and Remedies Code. If RDC is a "governmental unit, " we have jurisdiction over its interlocutory appeal. See id.

         Under the relevant portion of the Texas Civil Practice and Remedies Code, a "governmental unit" is:

(A) this state and all the several agencies of government that collectively constitute the government of this state, including other agencies bearing different designations, and all departments, bureaus, boards, commissions, offices, agencies, councils, and courts;
(B) a political subdivision of this state, including any city, county, school district, junior college district, levee improvement district, drainage district, irrigation district, water improvement district, water control and improvement district, water control and preservation district, freshwater supply district, navigation district, conservation and reclamation district, soil conservation district, communication district, public health district, and river authority;
(C) an emergency service organization; and
(D) any other institution, agency, or organ of government the status and authority of which are derived from the Constitution of Texas or from laws passed by the legislature under the constitution.

Id. § 101.001(3).

         The first three subsections are inapplicable. RDC is neither an agency nor a political subdivision of the state, and RDC is not an emergency service organization. Thus, the issue is whether RDC qualifies as a "governmental unit" under subsection (D). To meet subsection (D)'s requirements, the entity claiming governmental unit status must (1) be an "institution, agency, or organ of government" and (2) derive its "status and authority" as such from "laws passed by the Legislature." Id.; see Univ. of the Incarnate Word v. Redus, No. 15-0732, 2017 WL 1968030, at *4 (Tex. May 12, 2017); see also LTTS Charter Sch., Inc. v. C2 Constr., Inc., 342 S.W.3d 73, 75-78 (Tex. 2011).

         In determining the status and authority of RDC, an economic development corporation, we first note that such entities would not exist but for legislative enactment. Tex. Loc. Gov't Code §§ 501.011, 501.051. As a creature of statute, the legislature has defined RDC's status and authority. For example, RDC has all powers incidental to or necessary for the performance of its statutory authority to sue and be sued with respect to a project; to adopt and amend bylaws for the corporation's affairs; to lease or sell all or any part of a project; to donate or convey property to an institute of higher education; to make a secured or unsecured loan to finance all or part of the cost of a project; and to issue, sell, or ...

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