State v. the City of Galveston

Opinion issued September 10, 2004

In The

Court of Appeals

For The

First District of Texas

____________

NO. 01-03-00557-CV

____________

THE STATE OF TEXAS, Appellant

V.

THE CITY OF GALVESTON, Appellee

On Appeal from the 212th District Court

Galveston, County, Texas

Trial Court Cause No. 03CV0018

DISSENTING OPINION

The majority holds that a municipality enjoys no immunity from a claim by a

statewide governmental agency for damages for negligence in the performance of a

governmental function, here the installation, maintenance, and upkeep of a water line

that erupted, causing damage to a state highway. I respectfully dissent.

Sovereign and Governmental Immunity

Since 1884, municipalities have enjoyed immunity from suit for tort claims

when performing governmental functions unless that immunity is expressly waived

by statute. See City of Galveston v. Posnainsky , 62 Tex. 118, 133 (1884) (first

recognizing municipality’s immunity to suit arising from performance of

governmental functions). Governmental functions, as defined by the Texas Tort

Claims Act (TTCA), are “those functions that are enjoined on a municipality by law

and are given it by the state as part of the state’s sovereignty, to be exercised by the

municipality in the interest of the general public.” Tex. Civ. Prac. & Rem. Code

Ann. § 101.0215(a) (Vernon 2004). The immunity enjoyed by a municipality in the

exercise of its governmental functions is called “governmental immunity,” as is the

immunity of all “political subdivisions of the State, including counties, cities, and

school districts,” as opposed to “sovereign immunity,” which is enjoyed by the State

itself and “various divisions of state government, including agencies, boards,

hospitals, and universities.” Wichita Falls State Hosp. v. Taylor , 106 S.W.3d 692 ,

694 n.3 (Tex. 2003).

Both sovereign and governmental immunity provide immunity

to both suit and liability. See Catalina Dev., Inc. v. County of El Paso, 121 S.W.3d

704, 705 (Tex. 2003).

It is undisputed that, in this case, the City was performing a governmental

function in committing the acts of negligence giving rise to the State’s claims and that

normally the TTCA recognizes the immunity of municipalities from such claims.

It is further undisputed that no other applicable statute waives the municipality’s

immunity from suit. Thus any grounds for the City’s amenability to suit and liability

in this case must be sought outside the purview of the TTCA and all other statutes,

which is where the majority finds it.

The majority opines that the City enjoys no immunity to a negligence action

brought by TxDOT, a statewide agency, for damages for the City’s performance of

an admittedly governmental function—the installation, maintenance, and upkeep of

a waterline—because TxDOT, as a state agency, is the State, whereas the City is a

political subdivision of the State, and therefore enjoys only immunity derived from

the State, which, being derivative, cannot be asserted against the State. The majority

concludes that no waiver of immunity is necessary, or even possible, when a

municipality is sued by the State, since a municipality has no immunity to waive

against the sovereign from which its immunity derives. The majority bases its claim

on the following passage from Posnainsky :

in so far as municipal corporations . . . exercise powers conferred on

them for purposes essentially public—purposes pertaining to the

administration of general laws made to enforce the general policy of the

state—they should be deemed agencies of the state, and not subject to

be sued for any act or omission occurring while in the exercise of such

power, unless, by statute, the action be given; that, in reference to such

matters, they should stand as does sovereignty, whose agents they are,

subject to be sued only when the state, by statute, declares they may be.

Posnainsky , 62 Tex. at 127 .

In my view, the majority misconstrues the critical language in the passage from

Posnainsky on which it relies, which states that insofar as municipalities exercise

governmental powers, “they should be deemed agencies of the state, and not subject

to be sued for any act or omission occurring while in the exercise of such power,

unless, by statute, the action be given. ” Id. (emphasis added). The majority leaps

from Posnainsky ’s statement that a municipality is an agent of the state to the

conclusion that a municipality’s immunity is therefore derivative and, merely because

it is derivative, may not be asserted against the sovereign from which it derives. It

distinguishes the immunity of a State agency, such as TxDOT, from that of a deemed

State agency, such as the City, declaring the former’s immunity to be “sovereign,”

hence not derivative, while the latter’s is derivative, thus not sovereign, so that a true

State agency is not subject to suit by the State, but a deemed State agency is. I can

find no basis for this construction of Posnainsky .

I interpret the plain language of Posnainsky as stating that a municipality has

immunity to liability and suit in its performance of governmental functions by virtue

of the fact that those functions are conferred on the municipality by the sovereign, so

that the municipality is deemed an agent of the State in performing those functions

and, as such, does indeed share derivatively in that sovereign’s immunity, unless the

Legislature, by statute, declares that the municipality may be sued. I see no logical

way to infer from this language that immunity derived from the State does not exist

to be asserted against the State from which it derives and therefore need not be

waived by statute. Thus, contrary to the majority, I read Posnainsky as holding that

a municipality has sovereign immunity with respect to its exercise of governmental

functions precisely because those functions are conferred on it by the State; thus it

shares derivatively in the State’s sovereign immunity when exercising governmental

functions; and, having sovereign immunity,

like the State itself, it cannot be sued by

anyone, including another governmental entity of any type, without legislative

permission.

A long line of well-established authority supports this interpretation of

Posnainsky by holding that any governmental entity, including a municipality, enjoys

immunity to suit for its governmental actions unless that immunity is expressly

waived by the Legislature. See Harris County v. Sykes , 136 S.W.3d 635, 638 (Tex.

2004) (“Sovereign immunity from suit defeats a trial court’s subject matter

jurisdiction unless the state expressly consents to suit. . . . Governmental immunity

operates like sovereign immunity to afford similar protection to subdivisions of the

State, including counties, cities, and school districts.”) (citation omitted); Texas

Natural Res. Conservation Comm’n v. IT-Davy , 74 S.W.3d 849, 853 (Tex. 2002) (“If

the legislature has not expressly waived immunity from suit, the State retains such

immunity even if its liability is not disputed.”); Texas Dep’t of Transp. v. Jones , 8

S.W.3d 636, 638 (Tex. 1999)(“The party suing [a] governmental entity must establish

the state’s consent, which may be alleged either by reference to a statute or to express

legislative permission.” ). It follows from this general principle that “the State is not

liable for the negligence of its employees absent constitutional or statutory provisions

for liability.” University of Tex. Med. Branch at Galveston v. York , 871 S.W.2d 175,

177 (Tex. 1994). Thus, a municipality, enjoying immunity to suit derived from the

State, is not liable for its employees’ performance of governmental functions absent

constitutional or statutory provisions permitting the municipality to be sued—whether

by the State or by anyone else. See Sykes , 136 S.W.3d at 640 (county immune from

negligence action brought by former jail inmate’s wife); Catalina Dev. , 121 S.W.3d

at 705 (“[A] governmental unit waives immunity from suit only through its express

consent.”). The majority opinion preempts this entire line of authority.

The Home-Rule Amendment

The same reasoning dictates the majority’s response to the City’s argument that

its immunity is not derivative of the State’s immunity, but derives from the home-rule

amendment to the Texas Constitution and can, therefore, be asserted against the State.

The majority opines that the amendment does not make municipalities their own

sovereigns for purposes of immunity, stating, “The opposite is true. Like all

municipalities, home-rule municipalities still ‘represent no sovereignty distinct from

the State and possess only such powers and privileges as have been expressly or

impliedly conferred upon them.’” Lake Charles Harbor & Terminal Dist. v. Bd. of

Trustees of Galveston Wharves , 62 S.W.3d 237, 246 (Tex. App.—Houston [14th

Dist.] 2001, pet. denied). Since the home-rule amendment does not confer immunity,

the majority concludes, a home-rule municipality has no immunity to damage suits

by the State by virtue of that amendment. I agree with the majority in part and

disagree in part.

The home-rule amendment gives cities with more than 5,000 inhabitants, like

Galveston, the right to adopt or amend their charters by majority vote at elections held

for that purpose. Tex. Const. art. XI, § 5. As the majority states, the amendment

eliminated the practice of having the legislature grant and amend special charters and,

instead, allowed qualifying municipalities to adopt and to amend their charters

without legislative approval, so long as a charter did not infringe upon the state

Constitution or laws passed by the Legislature. See id. ; Tex. Loc. Gov’t Code Ann.

§ 51.072 (Vernon 1999); City of San Antonio v. Boerne , 111 S.W.3d 22 , 26 & 26 n.5

(Tex. 2003); Anderson v. Brandon , 47 S.W.2d 261, 262 (Tex. 1932). Because of this

amendment, municipalities adopting a home-rule charter, like Galveston, have “the

full power of self government and look to the Legislature only for limitations on their

power.” Perry v. Grenias , 95 S.W.3d 683, 694 (Tex. App.—Houston [1st Dist.]

2002, pet. denied); accord City of Galveston v. Giles , 902 S.W.2d 167, 170 (Tex.

App.—Houston [1st Dist.] 1995, no writ) (“Under Article 11, §5. . ., the City’s

powers are plenary, subject only to the limitations of the City’s own charter,

ordinances, and superior statutes.”).

I agree with the majority that the home-rule amendment “‘effectively created

home rule cities as ‘mini-legislatures’” and authorized them “to do anything [that] the

legislature could theretofore have authorized them to do.” See City of San Antonio ,

111 S.W.3d at 26 n.5; Forwood v. City of Taylor , 214 S.W.2d 282, 286 (Tex. 1948)

(describing home-rule municipality as “a delegate of legislative power”). I also agree

with the majority’s conclusion that, “In this sense home-rule cities derive their powers

from the Texas Constitution.” The home-rule amendment thus confers governmental

power—the power to legislate—on certain municipalities through constitutional

enactment.

Because the home-rule amendment confers the power to legislate on home-rule

municipalities, those municipalities enjoy derivative governmental immunity from

suit in the exercise of that power. But it does not follow that, because a home-rule

municipality enjoys conferred legislative power to amend its charter, hence enjoys

derivative immunity, it has no immunity to a suit for damages by the State for its

negligence in exercising in exercising that legislative power. Under the home-rule

amendment, as before, a municipality’s governmental immunity derives from the

State’s conferring upon it governmental powers and, with them, sovereign immunity;

and, as before, the principle that the sovereign cannot be sued without its own

consent, i.e. , without legislative waiver, still applies.

Eagle Pass and Policy Consequences

The majority relies principally for support for its reasoning and conclusion on

Texas Workers’ Compensation Commission v. City of Eagle Pass/Texas Municipal

League Workers’ Compensation Joint Insurance Fund , 14 S.W.3d 801 (Tex.

App.—Austin 2000, pet. denied). I believe this reliance is misplaced. In Eagle Pass ,

the plaintiff, TWCC, a statewide agency like TxDOT, assessed administrative

penalties against the City of Eagle Pass and its transportation authority (“Capital

Metro”) for their having made late benefits payments in violation of the Labor Code.

See id. at 803 (citing Tex. Lab. Code Ann. § 409.023(Vernon 1996)). The City and

Capital Metro admitted the violations, but claimed they were immune from

administrative penalties under the sovereign immunity doctrine. See id. The court

recognized the statutory authority of the TWCC to review and audit the records of

insurance carriers to determine whether they were in compliance with the Workers’

Compensation Act. Id. at 802 (citing Tex. Lab. Code Ann. § 414.001-.007(Vernon

1996) and 28 Tex. Admin. Code §§ 180.1 -.8 (Vernon 1999)). It also pointed out that

the definition of “insurance carrier” in the statute included self-insuring political

subdivisions and that the City and Capital Metro were undisputedly self-insuring

“political subdivisions.” Id. at 803 (citing Tex. Lab. Code Ann. § 401.011(27)(c)

(Vernon Supp. 2004)). Thus they were in the class of entities subject to the statute.

The court of appeals could have decided Eagle Pass on purely statutory

grounds, and it could have reached the same conclusion it did, namely that the City

and Capital Metro enjoyed no immunity to administrative penalties assessed by

legislative permission under the Labor Code. Had the court done so, its ruling would

have been consistent with the long line of Supreme Court cases holding that any party

which sues a governmental entity must establish legislative consent to suit. Instead,

like the majority in this case, the Eagle Pass court reasoned that immunity from suit

was “inapplicable” to the State’s assessment of administrative penalties against the

municipal entities. Id. In its view, “[m]unicipalities are created as political

subdivisions of the State” and “represent no sovereignty distinct from the state and

possess only such powers and privileges as have been expressly or impliedly

conferred upon them”; thus, “[b]ecause political subdivisions of the State do not

possess such independent sovereignty, they have no immunity as against the State.”

Id. at 803-04 .

In my view, the court of appeals’ rationale in Eagle Pass is unnecessary to its

disposition of the case, conflicts with well-established law, and is erroneous; but the

majority’s opinion in this case, which adopts that reasoning, goes well beyond Eagle

Pass . First, there is no statutory authority to support the majority’s decision that

Galveston lacks immunity to TxDOT’s tort claims, unlike the statutory authority

provided by the Labor Code in Eagle Pass . Second, the majority’s holding

contravenes the plain language of the applicable statute, the TTCA, whereas, in Eagle

Pass, the Legislature had expressly conferred on the TWCC, by statute, the authority

to levy administrative penalties on self-insured municipalities like Eagle Pass. Thus,

the majority here confers on a state agency by judicial fiat the power to sue another

governmental entity for damages for acts for which that governmental unit would

otherwise be immune from suit, and it does so without any reliance on legislative

authority, with potentially far-reaching consequences.

As the majority acknowledges, sovereign immunity protects the public treasury

by preventing the shifting of tax resources away from their intended purposes and

towards defending lawsuits and paying judgments. See Wichita Falls State Hosp. v.

Taylor , 106 S.W.3d 692, 695 (Tex. 2003); IT-Davy , 74 S.W.3d at 854 . The majority

also acknowledges that allowing the State (or a state agency) to recover damages

from a municipality shifts funds from the local to the state level, depleting local

coffers of funds that have likely already been budgeted for local matters. However,

it rationalizes its decision to permit such shifting of funds from one taxing authority

to another on the ground that the loss to one governmental entity and taxing authority,

the municipality, replenishes other public funds—those allocated in the state budget

for projects of the State and its agencies—that were lost due to the municipality’s

fault.

The majority fails to recognize that the inevitable consequence of its decision

to permit a state agency to sue a municipality for damages for negligence in the

performance of governmental functions is the shifting of public funds from one

sovereign taxing authority to another by judicial decree , without any authorization

for such shifting of sovereign powers by the Texas Legislature or by the people of the

municipal taxing unit. There is no authority for such a judicial assertion of taxing

authority in the Texas Constitution or laws, and the majority cites to none. It merely

falls back upon its assertion that since a municipality’s immunity to suit for damages

derives from the State it cannot be asserted against the State.

As this Court itself has observed, “Like the power of taxation, the power to

manage fiscal affairs ‘is an essential and inherent attribute of sovereignty belonging

as a matter of right to every independent government.’” Perry, 95 S.W.3d at 694

(quoting City of San Angelo v. Deutsch , 126 Tex. 532 , 91 S.W.2d 308, 309 (Tex.

1936)).

Nor does it matter whether a political subdivision of the State enjoys the

power to manage its fiscal affairs by legislative act or by constitutional directive; a

municipality that has such power is exercising “an essential and inherent attribute of

sovereignty” enjoined upon it as a governmental function by constitutional or

legislative decree; and it is, therefore, immune to private or State suits for damages

that interfere with that power, in the absence of an express legislative directive

otherwise.

A governmental entity’s power to manage its fiscal affairs may not be

readjusted by judicial action. Rather, as the Texas Supreme Court has recently

stated, “We have consistently deferred to the Legislature to waive sovereign

immunity from suit, because this allows the Legislature to protect its policymaking

function. . . . Indeed, in the Code Construction Act, the Legislature expressed its

desire to maintain control over sovereign immunity ‘[i]n order to preserve [its]

interest in managing state fiscal matters through the appropriations process.’” IT-Davy , 74 S.W.3d at 854 (citing Tex. Gov’t Code § 311.034). The Court explained,

Subjecting the government to liability may hamper governmental functions by

shifting tax resources away from their intended purposes toward defending

lawsuits and paying judgments. Accordingly, the Legislature is better suited

than the courts to weigh the conflicting public policies associated with waiving

immunity and exposing the government to increased liability, the burden of

which the general public must ultimately bear.

Id. A court’s subjection of any of the entities that form the government of the State

to liability in the exercise of their governmental functions usurps a vital function of

the Legislature.

The majority reasons, however, that the people acting through the branches,

agencies, and departments of state government (but not municipalities) are sovereign;

the Attorney General in representing TxDOT, a state agency, in this case represents

the people; therefore, TxDOT, as represented by the Attorney General, is not usurping

legislative power by bringing this suit, but is acting in the name of the people to

replenish public coffers depleted through the fault of the City; nor, by extension, is

this Court usurping power by entertaining this suit. This reasoning and this

conclusion, however, misapprehend the guiding principle of representative

government, namely that government may be said to be government “of the people,

by the people, and for the people” only because, at all levels of government,

representatives of the people exercise the powers conferred upon them by the people.

It is a misstatement of this principle to assert that state agencies and the executive

officials who represent them represent the people, but municipalities and their

representatives do not.

This line of reasoning also violates not only the reasoning and the rule in IT-Davy , but also the constitutional separation of powers doctrine. That doctrine

mandates that “no person, or collection of persons, being one of these departments,

shall exercise any power properly attached to either of the others, except in the

instances herein expressly permitted.” Tex. Const. art. II, § 1; see also Empire Gas

& Fuel Co. v. State , 121 Tex. 138 , 47 S.W.2d 265, 274 (Tex. 1932) (“The sovereign

power of our government rests with the people. The Constitution . . . represents the

expression of the will of the people and in the light of the history of governments, its

adoption is for the purpose of preserving certain rights and prescribing certain powers

under which the Legislature, the executive and the judiciary perform their functions”).

It is a contravention of the doctrine of separation of powers for a state agency or

official of the executive branch—rather than the Legislature—to assert the authority

to determine which entities may be sued by the State and which cannot; and it is a

further contravention of that doctrine for a court to assert the authority to determine

the sovereign immunity of branches of government without reference to any

constitutional provision or statutory authority and for it to permit one governmental

entity endowed with immunity to sue another entity so endowed without express

legislative consent.

The effects of the majority’s opinion are not limited to judicial and executive

infringement on the Legislature’s power to make fiscal policy. As amicus the Texas

Association of School Boards Legal Assistance Fund points out, the Texas Supreme

Court has rejected a number of arguments seeking to prove a waiver of sovereign

immunity through actions other than legislative acts. See IT-Davy , 74 S.W.3d at 858

(refusing to find contractual waiver of Texas Natural Resource Conservation

Commission’s immunity from suit); General Servs. Comm’n v. Little-Tex Insulation

Co. , 39 S.W.3d 591, 594 (Tex. 2001) (refusing to find State’s waiver of immunity

from suit simply by contracting with private party). In IT-Davy , the Supreme Court

not only refused to find that a waiver of the TNRCC’s immunity by contract; it also

refused to find a legislative waiver of immunity in provisions of the Texas Water

Code permitting a person affected by an act or omission of the TNRCC to seek

judicial review. It stated,

The Code Construction Act provides that “a statute shall not be construed as

a waiver of sovereign immunity unless the waiver is effected by clear and

unambiguous language.” Tex. Gov’t Code § 311.034. And, the Legislature

knows how to clearly and unambiguously waive sovereign immunity from suit.

For instance, the Texas Tort Claims Act provides that “[s]overeign immunity

to suit is waived and abolished to the extent of liability created by this

chapter.” Tex. Civ. Prac. & Rem. Code § 101.025(a).

IT-Davy , 74 S.W.3d at 859 . (Significantly, the TTCA does not provide for a wavier

of sovereign immunity for the acts upon which TxDOT has sued the City.) As Amici

assert, if sovereign immunity is not waived by any of the cited actions, but is waived

by the Attorney General acting without any statutory authority in this case (or if

waiver need not even be considered because the City enjoys no immunity against

TxDOT, its sovereign), an entire body of law governing sovereign immunity and its

waiver is rendered meaningless. The majority avoids this conclusion by reiterating

that a statute cannot waive immunity a municipality never had, i.e. , immunity to the

State’s suits against it.

Nor does the majority come to grips with the City’s very serious argument that

no principled distinction can be made among political subdivisions of the State

deemed to share in the sovereign immunity of the State and those deemed to have

only “derivative” immunity, hence to have no immunity at all to suits for damages

brought against them by the more privileged “sovereign” entities. The majority’s

attempt to define its terms, distinguish relevant cases and apposite rules of law, and

limit its holding signals just how troubled its opinion is.

The majority claims to have solved the problem of distinguishing those

governmental entities considered to be the State, hence to have sovereign immunity

to suits for damages by the State, from those governmental entities considered to have

only derivative governmental immunity, hence to be subject to suits for damages by

the State, by borrowing the general distinction between State entities and political

subdivisions set out in Monsanto Company v. Cornerstones Municipal Utility

District , 865 S.W.2d 937, 940 (Tex. 1993) and Guaranty Petroleum Corporation v.

Armstrong , 609 S.W.2d 529, 531 (Tex. 1980). According to this definition, as

recapped by the majority, ‘State’ entities “have statewide jurisdiction, have a

governing person or body that is elected in statewide elections or is appointed by a

state official, and lack the power to assess or collect taxes.” By necessary

implication, governmental entities that fail to satisfy these criteria lack immunity to

damage suits against them by the State. But piggybacking the majority’s distinction

between governmental entities subject to suits for damages by the State and

governmental entities immune from such suits on the general distinction drawn in

Monsanto and Guaranty Petroleum between political subdivisions and the State

entails absurdities.

By expressly excluding all entities that have the power to assess or collect taxes

from the definition of state entities entitled to sovereign immunity against the State,

the majority excludes the Legislature from the definition of the State and subjects it

to suits for damages by executive agencies. Moreover, as it acknowledges, the

majority opens the coffers of all other ‘non-State’ governmental taxing authorities to

the State’s raids on their treasuries. And its criteria for determining which

governmental entities may be sued by other governmental entities have political

consequences, decreeing, for example, that political subdivisions, like school

districts, may be sued for damages by State agencies, but State entities, such as

universities, may not be. See Taylor , 106 S.W.3d at 694 n.3 (characterizing

“counties, cities, and school districts” as political subdivisions and “agencies, boards,

hospitals, and universities” as “divisions of state government”). Finally, the

majority’s definition of the State, combined with its holding that the State is exempt

from abiding by the Texas Tort Claims Act, rewrites the Act. Henceforth, the TTCA

governs a political subdivision’s immunity from claims for damages in the exercise

of its governmental functions except when the subdivision is being sued by the State.

An exemption the Legislature did not write thus governs the outcome of this case and

many more to come.

I fear the majority is opening a Pandora’s box of future litigation over which

governmental entities enjoy the sovereign immunity of the State, and are thus entitled

to sue other governmental entities, and which governmental entities have merely

derivative immunity and are subject to such suits, with immense potential damage to

the foundational principles of representative government and the separation of

powers. More immediately, I fear the majority is opening municipal coffers to

potential plunder by state agencies, with no permission from the Legislature for this

rearrangement of the State’s own carefully crafted laws.

I do not intend to imply, nor do I believe, that the State, acting through the

Legislature by statute or resolution, lacks the power to authorize suits for damages

by governmental entities against other governmental entities that negligently perform

governmental functions for which they would otherwise enjoy immunity to suit.

However, action authorizing such litigation should be taken deliberately, by the

Legislature, not by an executive agency or official utilizing the court system to obtain

judicially that which the Legislature has not expressly authorized; nor should a court

endorse such litigation.

For the foregoing reasons, I cannot agree with the majority opinion, and I

respectfully dissent. I would affirm the judgment of the trial court.

Evelyn V. Keyes

Justice

Panel consists of Justices Taft, Keyes, and Bland.

Justice Keyes, dissenting.

En banc consideration was requested. See Tex. R. App. P. 41.2 (c).

A majority of Justices voted against en banc consideration. See id.

Justice Jennings, dissenting from the denial of en banc consideration.