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City of Houston v. Hope for Families, Inc.

Court of Appeals of Texas, First District

January 9, 2020

CITY OF HOUSTON AND KEITH W. WADE, Appellants
v.
HOPE FOR FAMILIES, INC., Appellee

          On Appeal from the 151st District Court Harris County, Texas Trial Court Case No. 2017-37622

          Panel consists of Justices Keyes, Goodman, and Kelly.

          MEMORANDUM OPINION

          GORDON GOODMAN JUSTICE

         After Hope for Families, Inc. acquired property for a community development project financed by the City of Houston, its participation became stymied by preexisting tax liability attached to the property. The dispute between HFF and the City arose when Keith Wade negotiated a deed on behalf of the City that transfered the land to the City in exchange for forgiveness of the financing debt.

         HFF sued the City and Wade for declaratory relief, seeking to invalidate the deed because of Wade's alleged fraud in the inducement and HFF's failure to execute the deed according to statute. HFF brought separate tort claims for fraud and fraud in the inducement against Wade.

         The City and Wade filed a plea to the jurisdiction, seeking dismissal of HFF's claims based on governmental immunity. The trial court denied the plea, and the City and Wade appeal, contending that HFF did not demonstrate that a waiver of immunity applied to its claims. We affirm in part and reverse in part.

         Background

         In 2010, the City selected HFF to participate in a community development program and agreed to provide it with funding to purchase, demolish, and rehabilitate a foreclosed and dilapidated apartment complex known as the Bayou Bend Apartments into a multi-family development.[1] The City made approximately $4 million in financing available to HFF for the purchase, and HFF executed a promissory note in that amount.

         HFF learned after purchasing the property that it was encumbered with delinquent property taxes, which prevented HFF from proceeding with the project. For approximately two years, HFF worked toward a resolution of the tax delinquency. Before a resolution could be reached, however, Wade procured a general warranty deed signed by one of HFF's board members that purported to convey title to the property to the City in exchange for "ratification of the absence of HFF's liability under the $4 million promissory note and reserving to HFF rights of first refusal in any future sale and participation in future development of the property. Although Wade allegedly represented that the deed would not be used for any purpose, it was filed in the Harris County real property records.

         In its petition, HFF seeks to have the deed declared void, and either have it removed from the Harris County property records or have an order placed in the records declaring the deed void. HFF claims that the deed is void because its board did not pass a resolution authorizing the property's transfer and thus the conveyance did not comply with the requirement that HFF convey real property only "by appropriate resolution of the board of director's or members." Tex. Bus. Orgs. Code § 22.255. The petition also brings claims against Wade, whom it identifies as "an individual who resides in Harris County" for fraud and fraudulent inducement in procuring the allegedly unauthorized deed.

         In his answer, Wade asserted that official immunity barred HFF's suit against him and precluded liability for its claims. The plea to the jurisdiction contended that the City was immune from suit and that dismissal of HFF 's claims against Wade was required because its allegations against Wade all relate to his negotiation of a real estate deal, which was conduct within the course and scope of his employment.

         Plea to the Jurisdiction

         In challenging the trial court's denial of their plea, the City and Wade contend that HFF did not meet its pleading burden to show that its claims fall within a statutory waiver of immunity from suit.

         I. Standard of Review ...


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