IN THE SUPREME COURT OF TEXAS
════════════
No. 02-1031
Reata Construction
Corporation, Petitioner,
v.
City of Dallas,
Respondent
════════════════════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Fifth District of
Texas
Argued December
12, 2004
Justice Johnson delivered the opinion
of the Court, in which Chief Justice
Jefferson, Justice Wainwright, Justice Medina, and Justice Green joined.
Justice Brister filed a concurrence in
which Justice Hecht and Justice O’Neill joined.
Justice Willett did not participate in
the decision.
We grant the
City of Dallas’s motion for rehearing. We withdraw our opinion of April 2, 2004,
and substitute the following in its place.
The issue in
this case is whether the City of Dallas has governmental immunity from suit for
claims by Reata Construction Corporation arising from the City’s alleged
negligence. The court of appeals held that the City had immunity. We conclude
that the City does not have immunity from suit as to Reata’s claims which are
germane to, connected with, and properly defensive to the City’s claims, to the
extent Reata’s claims offset those asserted by the City. We reverse the court of
appeals’ judgment and remand the case to the trial court for further
proceedings.
I. Background
The City of
Dallas issued Dynamic Cable Construction Corporation, Inc., a temporary license
to install fiber optic cable in Dallas. Dynamic subcontracted with Reata
Construction Corporation to do the drilling for the project. Reata inadvertently
drilled into a thirty‑inch water main, flooding a nearby building owned by
Southwest Properties Group, Inc. Southwest sued Dynamic and Reata for
negligence, and some tenants of the building intervened. Reata filed a
third‑party claim against the City alleging that the City negligently
misidentified the water main’s location. Before answering Reata’s third-party
claim, the City intervened in the case, asserting negligence claims against
Dynamic. A few weeks after intervening in the suit, the City answered Reata’s
petition and filed special exceptions asserting that Reata’s claims were not
within the Texas Tort Claims Act’s waiver of immunity. See Tex. Civ. Prac. & Rem. Code §
101.021. The City subsequently filed an amended plea in intervention
asserting claims of negligence against Reata and a plea to the jurisdiction
asserting governmental immunity from suit. Reata filed a response claiming that
(1) governmental immunity did not apply because the City subjected itself to the
trial court’s jurisdiction by intervening in the lawsuit and seeking affirmative
relief; (2) the Dallas City Charter and section 51.075 of the Texas Local
Government Code contain express waivers of governmental immunity because they
provide, respectively, that the City may “sue or be sued” and “plead and be
impleaded”; (3) under the common law, the City could not assert governmental
immunity for its actions in failing to properly identify the water main’s
location prior to 1970 because water services were considered a proprietary
function; and (4) even if the Texas Tort Claims Act applied, Reata’s claim fell
within the Act’s waiver of immunity. The trial court denied the City’s plea to
the jurisdiction, and the City took an interlocutory appeal. See Tex. Civ. Prac. & Rem. Code §
51.014(a)(8).
Rejecting
each of Reata’s asserted bases for a waiver of governmental immunity, the court
of appeals reversed and dismissed Reata’s claims against the City. 83 S.W.3d
400. The court of appeals held that even though the City intervened in the suit
against Reata, by such action the City asserted its right to sue but did not
waive its governmental immunity from suit. Id. at 398-400.
In
Anderson, Clayton & Co. v. State ex rel. Allred, 62 S.W.2d 107, 110
(Tex. 1933), we stated: “[W]here a state voluntarily files a suit and submits
its rights for judicial determination it will be bound thereby and the defense
will be entitled to plead and prove all matters properly defensive. This
includes the right to make any defense by answer or cross-complaint germane to
the matter in controversy.” But the court of appeals relied on other language in
that opinion providing that the State, having invoked the jurisdiction of the
district court, was “subject to the same rules as other litigants, except in so
far as such rules may be modified in favor of the State by statute or may be
inapplicable or unenforceable because of exemptions inherent in sovereignty.” 83
S.W.3d at 399 (quoting Anderson, 62 S.W.2d at 110). The court of appeals
concluded that when a governmental entity intervenes in a lawsuit, “sovereign
immunity still forecloses suit against that governmental entity.” Id.
In this
Court, Reata asserts (1) governmental immunity did not apply because the City
subjected itself to the trial court’s jurisdiction by intervening in the lawsuit
and seeking affirmative relief; (2) the Dallas City Charter and section 51.075
of the Texas Local Government Code contain express waivers of governmental
immunity because they provide, respectively, that the City may “sue or be sued”
and “plead and be impleaded”; and (3) even if the Texas Tort Claims Act applied,
Reata stated a claim within the Act’s waiver of immunity.
II. Sovereign Immunity
“Sovereign
immunity protects the State from lawsuits for money damages.” Tex. Natural
Res. Conservation Comm’n v. IT‑Davy, 74 S.W.3d 849, 853 (Tex. 2002).
Political subdivisions of the state, including cities, are entitled to such
immunity—referred to as governmental immunity—unless it has been waived. See Wichita Falls
State Hosp. v. Taylor, 106 S.W.3d 692, 694 n.3 (Tex. 2003). Sovereign
immunity encompasses immunity from suit, which bars a suit unless the state has
consented, and immunity from liability, which protects the state from judgments
even if it has consented to the suit. Tex. Dep’t of Transp. v. Jones, 8
S.W.3d 636, 638 (Tex. 1999). We have held that sovereign immunity from suit
deprives a trial court of subject-matter jurisdiction. Tex. Dep’t of Parks
& Wildlife v. Miranda, 133 S.W.3d 217, 224 (Tex. 2004); Jones, 8
S.W.3d at 638.
Sovereign
immunity is a common-law doctrine that initially developed without any
legislative or constitutional enactment. See Cohens v. Virginia, 19 U.S.
264, 293 (1821) (recognizing the doctrine without citing statutory or
constitutional authority); Hosner v. De Young, 1 Tex. 764, 769 (1846)
(same); see also Tex. A&M University-Kingsville v. Lawson, 87 S.W.3d
518, 520 (Tex. 2002). We have consistently deferred to the Legislature to
waive such immunity. See IT‑Davy, 74 S.W.3d at 854;
Guillory v. Port of Houston Auth., 845 S.W.2d 812, 813 (Tex. 1993);
Duhart v. State, 610 S.W.2d 740, 741 (Tex. 1980); Lowe v. Tex. Tech
Univ., 540 S.W.2d 297, 298 (Tex. 1976). We have previously discussed the
possibility that a governmental entity might waive its immunity by certain
actions, even absent a legislative waiver of immunity. See Catalina Dev.,
Inc. v. County of El Paso, 121 S.W.3d 704, 705-06 (Tex. 2003). However,
there is tension between the concept of a governmental entity waiving its
immunity from suit by some action independent from the Legislature’s waiving
immunity and the principle that only the Legislature can waive sovereign
immunity. See IT-Davy, 74 S.W.3d at 853. There is also tension
between the concept of a governmental entity waiving its immunity from suit and
the principle that a court’s lack of subject- matter jurisdiction generally
cannot be waived. See Fed. Underwriters Exch. v. Pugh, 174 S.W.2d 598,
600 (Tex. 1943). Recognizing that sovereign immunity is a common-law doctrine,
we have not foreclosed the possibility that the judiciary may modify or abrogate
such immunity by modifying the common law. See Taylor, 106 S.W.3d at
695-96; see also Tex. Dep’t of Criminal Justice v. Miller, 51 S.W.3d 583,
593 (Tex. 2001) (Hecht, J., concurring) (noting that judicial abolition of
immunity may be necessary to prompt the Legislature to enact a reasoned system
for determining the government’s responsibility for its torts). Therefore, it
remains the judiciary’s responsibility to define the boundaries of the
common-law doctrine and to determine under what circumstances sovereign immunity
exists in the first instance.
We have
generally deferred to the Legislature to waive immunity because the Legislature
is better suited to address the conflicting policy issues involved. See
IT-Davy, 74 S.W.3d at 854. A lack of immunity may hamper governmental
functions by requiring tax resources to be used for defending lawsuits and
paying judgments rather than using those resources for their intended purposes.
Id. The Legislature has expressed its desire to preserve its interest in
managing fiscal matters through the appropriations process by maintaining
sovereign immunity unless it has clearly and unambiguously stated otherwise.
Tex. Gov’t Code § 311.034. The
United States Supreme Court has also recognized that suits for money damages
against states “may threaten the financial integrity of the States” and that “at
the time of the founding, many of the States could have been forced into
insolvency but for their immunity from private suits for money damages.”
Alden v. Maine, 527 U.S. 706, 750 (1999). However, if the governmental
entity interjects itself into or chooses to engage in litigation to assert
affirmative claims for monetary damages, the entity will presumably have made a
decision to expend resources to pay litigation costs. If the opposing party’s
claims can operate only as an offset to reduce the government’s recovery, no tax
resources will be called upon to pay a judgment, and the fiscal planning of the
governmental entity should not be disrupted. Therefore, a determination that a
governmental entity’s immunity from suit does not extend to a situation where
the entity has filed suit is consistent with the policy issues involved with
immunity. In this situation, we believe it would be fundamentally unfair to
allow a governmental entity to assert affirmative claims against a party while
claiming it had immunity as to the party’s claims against it. See Guar. Trust
Co. v. United States, 304 U.S. 126, 134-35 (1938) (noting that the rule
allowing claims against a foreign sovereign that has asserted its own claims is
assumed to be founded on principles of justice); see also Cunningham v.
Parkdale Bank, 660 S.W.2d 810, 813 (Tex. 1983) (stating that fundamental
fairness requires parties to be heard on the merits of their cases).
III. Analysis
A. The City’s Claim for Relief
Although
there may have been some question after Anderson regarding whether
sovereign immunity continues to exist when an affirmative claim for relief is
filed by a governmental entity, subsequent cases indicate that under such
circumstances immunity from suit no longer completely exists for the
governmental entity. In State v. Humble Oil
& Refining Co., 169 S.W.2d 707, 708 (Tex. 1943), we considered whether a
defendant in a tax suit could assert an offset against the State for taxes it
had previously overpaid. The court of appeals concluded that the rule announced
in Anderson applied: the defendant was entitled to claim an offset for
any matter dependent upon or connected with the State’s suit. Id. at 709.
We stated that “[w]e have no fault to find with the rule of law announced in . .
. Anderson . . . when applied in a proper case.” Id. However, we
went on to hold that the Anderson rule did not apply in Humble Oil
because (1) its application would abolish the rule that taxes due the State
cannot be offset, and (2) the defendant’s claim was not connected with the
State’s claim as the two involved taxes for different months and years.
Id. at 710. While our opinion in Humble Oil did not specifically
address the issue of whether the trial court had jurisdiction over Humble’s
claims against the State, we acknowledged that in certain circumstances, a
defendant would be entitled to assert a claim against the State if the State
filed suit.
In Kinnear
v. Texas Commission on Human Rights, 14 S.W.3d 299, 300 (Tex. 2000), we
acknowledged that the trial court had jurisdiction over claims against the State
in a case where the State had filed suit. In Kinnear, the Texas
Commission on Human Rights filed suit against Kinnear, alleging that he had
violated the Texas Fair Housing Act. Id. at 299. Kinnear counterclaimed
for attorney’s fees as provided by the Act, and when he prevailed, the trial
court awarded them. Id. at 300. In response to the question of whether
the trial court had jurisdiction, we said that “[b]ecause the Commission
initiated [the] proceeding under the Texas Fair Housing Act, and Kinnear claimed
attorney fees as a consequence of that suit, the jurisdictional question in this
case was answered when the Commission filed suit.” Id. Later, four
concurring justices in a plurality opinion cited Kinnear and
Anderson for the proposition that “the State can waive immunity by filing
suit.” IT-Davy, 74 S.W.3d at 861 (Hecht, J., concurring).
In
circumstances such as those now before us, where the governmental entity has
joined into the litigation process by asserting its own affirmative claims for
monetary relief, we see no ill befalling the governmental entity or hampering of
its governmental functions by allowing adverse parties to assert, as an offset,
claims germane to, connected with, and properly defensive to those asserted by
the governmental entity. And, our decisions that immunity from suit does not bar
claims against the governmental entity if the claims are connected to, germane
to, and defensive to the claims asserted by the entity, in effect, modified the
common-law immunity doctrine and, to an extent, abrogated immunity of the entity
that filed suit. See Humble Oil, 169 S.W.2d at 710; Anderson , 62
S.W.2d at 110.
Therefore, we
hold that the decision by the City of Dallas to file suit for damages
encompassed a decision to leave its sphere of immunity from suit for claims
against it which are germane to, connected with and properly defensive to claims
the City asserts. Once it asserts affirmative claims for monetary recovery, the
City must participate in the litigation process as an ordinary litigant, save
for the limitation that the City continues to have immunity from affirmative
damage claims against it for monetary relief exceeding amounts necessary to
offset the City’s claims. Moreover, we see no substantive difference between a
decision by the City to file an original suit and the City’s decision to file
its claim as an intervenor in Southwest’s suit. Accordingly, when the City filed
its affirmative claims for relief as an intervenor, the trial court acquired
subject-matter jurisdiction over claims made against the City which were
connected to, germane to, and properly defensive to the matters on which the
City based its claim for damages. See Anderson, 62 S.W.2d at 110. Absent
the Legislature’s waiver of the City’s immunity from suit, however, the trial
court did not acquire jurisdiction over a claim for damages against the City in
excess of damages sufficient to offset the City’s recovery, if any. See
City of LaPorte v. Barfield, 898 S.W.2d 288, 297 (Tex. 1995);
Anderson, 62 S.W.2d at 110 (holding that when a governmental entity files
suit, “the defense will be entitled to plead and prove all matters properly
defensive”).
Because the
City’s assertion of claims for damages against Reata means that the City does
not have immunity from Reata’s claims to the limited extent we have explained
above, we must consider Reata’s remaining arguments to determine if the City’s
immunity from suit has been completely waived in some manner.
B. Texas Tort Claims Act
Reata claims
that the court of appeals erred in holding that its claims against the City do
not fit within any waiver of immunity under the Tort Claims Act. Specifically,
Reata claims that the court of appeals did not liberally construe its pleadings
as asserting damages for personal injuries. See Tex. Dep’t of Transp. v.
Ramirez, 74 S.W.3d 864, 867 (Tex. 2002) (noting that pleadings should be
liberally construed in favor of jurisdiction).
Through the
Tort Claims Act, the Legislature has waived the City’s immunity for “personal
injury and death so caused by a condition or use of tangible personal or real
property if the governmental unit would, were it a private person, be liable to
the claimant according to Texas law.” Tex. Civ. Prac. & Rem. Code §
101.021(2).
The court of
appeals concluded that none of the damages claimed against the City—property and
mental anguish damages—were recoverable under that subsection. 83 S.W.3d at 396.
Reata argues that a claim for personal injury damages was made as the
intervenors asserted that fumes from generators used in the flooded building
after the water shorted out the electricity made them sick. However, section
101.021(2) only waives immunity when the governmental unit is the user of the
property. San Antonio State Hosp. v. Cowan, 128 S.W.3d 244, 245-46 (Tex.
2004). There is no claim that the City was the user of the generators.
Reata also
argues that if its claim was not properly pleaded to demonstrate a waiver of
immunity, it should be given the opportunity to amend before its case is
dismissed. See Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d
217, 226-27 (Tex. 2004). But, in the trial court, the City twice filed special
exceptions claiming that Reata failed to state a cause of action for which the
City could be liable under the Tort Claims Act. Reata amended its petition
twice, but its pleadings still fail to demonstrate a waiver of immunity.
Accordingly, we hold that the court of appeals correctly determined that Reata’s
claims do not fit within any waiver of immunity under the Tort Claims Act and
that Reata was not entitled to replead.
C. Waiver of Immunity by the Local Government Code
and City Charter
Reata also
claims the City’s immunity from suit is waived by section 51.075 of the Local
Government Code, which provides that a home-rule municipality “may plead and be
impleaded in any court.” See Tex.
Loc. Gov’t Code § 51.075. However, waiver of immunity for tort claims is
governed by the Texas Tort Claims Act. See Tex. Civ. Prac. & Rem. Code ch.
101; Miranda, 133 S.W.3d at 224-25 (holding that the governmental entity
was immune from suit for a tort unless it was expressly waived by the Tort
Claims Act). Under rules of statutory construction, we give precedence to the
Tort Claims Act over section 51.075 because the Tort Claims Act is the
later-enacted, more specific statute regarding waiver of immunity in tort cases.
See Tex. Gov’t Code §
311.026. Moreover, in Tooke v. City of Mexia, ___ S.W.3d ___, ___ (Tex.
2006), we have held that the phrase “plead and be impleaded” in section 51.075
does not clearly and unambiguously reflect legislative intent to waive immunity
from suit. See Taylor, 106 S.W.3d at 697-98 (Tex. 2003).
Reata also
claims the City’s immunity is waived by the Dallas City Charter which states
that the City may “sue and be sued” and “implead and be impleaded.” Dallas, Tex., City Charter ch. II, §
1(2), (3). As we explain in Tooke, such phrases, separately or together,
do not comprise a clear and unambiguous waiver of immunity to suit.
Tooke, ___ S.W.3d at ___. The City Charter provision does not waive the
City’s immunity from suit. See id.
IV. Conclusion
Because the
City asserted affirmative claims for monetary relief against Reata, the City
does not have immunity from Reata’s claims germane to, connected to, and
properly defensive to claims asserted by the City, to the extent any recovery on
those claims will offset any recovery by the City from Reata. We reverse the
court of appeals’ judgment and remand the case to the trial court for further
proceedings consistent with this opinion.
________________________________________
Phil
Johnson
Justice
OPINION DELIVERED: June
30, 2006
For ease of reference, we will use the term “sovereign
immunity” to reference both sovereign immunity and governmental
immunity.
The City argues that Anderson is in conflict
with two prior cases from this Court in which we held immunity had not been
waived as to claims brought against the governmental entity plaintiffs by the
defendants. See Borden v. Houston, 2 Tex. 594, 611 (1847); Bates v.
Republic, 2 Tex. 616, 618 (1847). However, those cases are distinguishable
from Anderson because they involved claims by the defendants for set-offs
unrelated to the governmental entities’ claims. Borden, 2 Tex. at 595-96;
Bates, 2 Tex. at 616-17.
At the time Anderson was decided, a claim of an
offset was referred to as a defensive matter. See Sw. Contract Purchase Corp.
v. McGee, 36 S.W.2d 978, 979 (Tex. 1931) (stating “defendant in error
pleaded in defense . . . certain offsets and
defenses”).