TAC Realty Inc. v. City of Bryan

The trial court's finding that TAC lacked standing because it failed to make a prima facie showing that the Traditions Project development agreements violate article 11, section 5 of the Texas Constitution was an improper ruling on the merits of TAC's claim.

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Click here for the full text of this decision FACTS:The appellant, TAC Realty Inc., complains of the trial court’s dismissal of its case for lack of subject-matter jurisdiction. In response to TAC’s lawsuit seeking temporary and permanent injunctive relief to prevent the city of Bryan from spending additional funds in furtherance of certain development agreements executed by the city, the city and the individual defendants filed a plea to the jurisdiction asserting TAC does not have standing to challenge the agreements. The trial court conducted a hearing and sustained the city’s plea. HOLDING:Reversed and remanded. The court’s clarification of taxpayer standing in Williams v. Lara, 52 S.W.3d 171 (Tex. 2001), does not require that a plaintiff prove the challenged activity is illegal. But, more than an allegation of unlawful expenditure is required. Plaintiffs first must allege and prove they pay ad valorem taxes. Second, plaintiffs must allege and prove public funds are being spent on the alleged illegal activity. In deciding a plea to the jurisdiction, a reviewing court accepts the factual allegations in a plaintiff’s petition as true, unless the defendant pleads and proves the allegations were fraudulently made to confer jurisdiction. Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547 (Tex. 2000). The city has not pleaded or proved TAC fraudulently made allegations in its petition in an effort to confer standing. The court doesn’t fear that the holding will open a floodgate of taxpayer lawsuits challenging municipal contracts because affording a plaintiff standing to challenge municipal expenditures does not necessarily mean that the resulting suit or claim will succeed on the merits. As Bland made clear, a hearing and evidence on the question of whether TAC is a property taxpayer is proper. However, a hearing on the merits of TAC’s claim in response to the city’s plea to the jurisdiction was not proper. The evidence considered by the trial court went to the merits of TAC’s claim namely, whether the development agreements at issue violate the Texas Constitution. Although the court in Bland did note that the evidence properly considered by the trial court in that case related to the “basic nature of the finance arrangement” at issue, that does not mean that a trial court should decide the merits of a taxpayer’s claim in order to determine if a plaintiff has standing. The plaintiffs in Bland challenged a lease-purchase agreement between the school district and Citicorp Inc. to allow for the construction of a new school, contending that it violated the Public Property Finance Act. The court concluded that the plaintiffs lacked standing because all obligations under the contract had been completed except for the school district’s obligation to repay the loan. Construction of the school was complete and the building was occupied. Citicorp had performed its obligations under the contract; only the school district had any remaining obligation � to repay the loan. The court’s holding in Bland was narrow: “When all that remains is a school district’s repayment of a loan for work completed, allowance of a taxpayer action to prohibit such repayment threatens a substantial interference with governmental actions.” The issues in this case are quite different than those presented in Bland. It is undisputed that the city has spent or is spending public funds on the agreements TAC challenges. Whether those dollars are from funds already segregated by the city for any particular purpose or are from ad valorem tax dollars earmarked for this purpose is not relevant to the question of whether TAC has standing. The city does not contend TAC fraudulently pleaded its allegations in an effort to devise standing. Yet, in reaching its conclusion that TAC did not have standing, the trial court inappropriately ruled on the merits of TAC’s claims. OPINION:Yates, J.

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