Lori Temple v. the City of Houston

Opinion issued January 12, 2006

In The

Court of Appeals

For The

First District of Texas

NO. 01-03-01251-CV

LORI TEMPLE, Appellant

V.

CITY OF HOUSTON, Appellee

On Appeal from the 295th District Court

Harris County, Texas

Trial Court Cause No. 2003-34567

O P I N I O N

Appellant, Lori Temple, brings this interlocutory appeal from the trial court’s

grant of the appellee, City of Houston’s, plea to the jurisdiction. In one issue on

appeal, Temple argues that the trial court erred in granting the City’s plea. We

reverse and remand.

Background

Temple’s late husband was a police officer employed by the City. Her husband

participated in the City’s life insurance plan and named Temple as his beneficiary.

The plan provided minimum coverage in the amount of $15,000. The plan also

allowed Temple’s husband to elect coverage of two, three, or four times the

employee’s annual base salary, in exchange for higher premiums.

Before he died, Temple’s husband elected insurance coverage of three times

his salary. Temple believed that she and her husband had complied with the

requirements to obtain greater benefits and that the City was deducting higher

premiums from her husband’s paycheck.

After her husband’s death, the City refused to honor Temple’s husband’s

election of greater benefits. Temple filed a $148,000 breach-of-contract suit against

the City, and the City responded by filing a plea to the jurisdiction. Following a

hearing, the trial court granted the City’s plea and dismissed Temple’s suit for want

of jurisdiction. Temple appeals from this order.

Standard of Review

Subject-matter jurisdiction is essential for a court to have the authority to

resolve a case. Tex. Ass’n of Bus. v. Tex. Air Control Bd ., 852 S.W.2d 440, 443 (Tex.

1993). The plaintiff has the burden to plead facts affirmatively showing that the trial

court has subject-matter jurisdiction. Id . at 446. A party may challenge a court’s

subject-matter jurisdiction by filing a plea to the jurisdiction. See Tex. Dep’t of

Transp. v. Jones , 8 S.W.3d 636 , 638–39 (Tex. 1999). We review the trial court’s

ruling on such a plea de novo, as a question of law. Mayhew v. Town of Sunnyvale ,

964 S.W.2d 922, 928 (Tex. 1998). In conducting this de novo review, we do not

examine the merits of the plaintiff’s case, but consider only the plaintiff’s pleadings

and the evidence pertinent to the jurisdictional inquiry. County of Cameron v. Brown ,

80 S.W.3d 549, 555 (Tex. 2002). We construe the pleadings liberally in favor of

conferring jurisdiction. Tex. Dept. of Transp. v. Ramirez , 74 S.W.3d 864, 867 (Tex.

2002).

Sovereign Immunity

Sovereign immunity protects the State, its agencies and officials, and political

subdivisions of the State from suit arising from their performance of their

governmental functions, unless immunity from suit has been waived. Fed. Sign v.

Tex. Southern Univ ., 951 S.W.2d 401, 405 (Tex. 1997); San Antonio Indep. Sch. Dist.

v. McKinney , 936 S.W.2d 279, 283 (Tex. 1996). A city is a political subdivision of

the State. T ex. Civ. Prac. & Rem. Code Ann . § 101.001(3)(B) (Vernon 2005);

McKinney , 936 S.W.2d at 283 .

The sovereign immunity of the State inures to the benefit of a municipality

insofar as the municipality engages in the exercise of governmental functions, except

when that immunity has been waived. City of Tyler v. Likes , 962 S.W.2d 489, 501

(Tex. 1997). Governmental functions are “‘public acts which the municipality

performs as the agent of the State in furtherance of general law for the interest of the

public at large.’” Truong v. City of Houston , 99 S.W.3d 204, 209 (Tex.

App.—Houston [1st Dist.] 2002, no pet.) (quoting Bailey v. City of Austin , 972

S.W.2d 180, 192 (Tex. App.—Austin 1998, pet. denied)); T ex. Civ. Prac. & Rem.

Code Ann . § 101.0215(a) (Vernon 2005) (stating that governmental functions “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”). “[I]it is the Legislature’s sole province to waive or abrogate

sovereign immunity.” Tex. Nat. Resources Conservation Commn. v. IT-Davy , 74

S.W.3d 849, 853 (Tex. 2002) (quoting Fed. Sign , 951 S.W.2d at 409 ). A political

subdivision’s immunity from suit arising from the performance of a governmental

function can be waived only by legislative consent or constitutional amendment.

Wichita Falls State Hosp. v. Taylor , 106 S.W.3d 692, 695 (Tex. 2003); Fed. Sign , 951

S.W.2d at 405 . Such a waiver must be expressed “by clear and unambiguous

language.” T ex. Gov’t Code Ann . § 311.034 (Vernon 2005); Fed. Sign , 951 S.W.2d

at 405 (quoting Univ. of Tex. Med. Branch v. York , 871 S.W.2d 175, 177 (Tex.

1994)).

Conversely, a municipality has no “sovereign immunity” when it engages in

the exercise of proprietary functions. Id . “A proprietary function is one a city

performs, in its discretion, primarily for the benefit of those within the corporate

limits of the city, rather than for the use by the general public.” Truong , 99 S.W.3d

at 209 ; T ex. Civ. Prac. & Rem. Code Ann . § 101.0215(b) (Vernon 2005) (stating

that proprietary functions “are those functions that a municipality may, in its

discretion, perform in the interest of the inhabitants of the municipality”).

Proprietary or Governmental Function

In our order dated September 19, 2005, we asked the parties to provide

supplemental briefing regarding whether the City of Houston was performing a

governmental or proprietary function and the effect on the City’s governmental

immunity .

Both parties filed supplemental briefs. The City argues that the operation

of a police department is a governmental function and that an essential part of

operating the police department is paying the officers, including payroll deductions.

Therefore, by deducting appellant’s insurance premiums from his salary, the City was

performing a governmental function.

To support its argument that providing insurance benefits to City police

officers is a governmental function, the City cites generally to three cases. See City

of LaPorte v. Barfield , 898 S.W.2d 288 (Tex. 1995); City of Cockrell v. Johnson , 48

S.W.3d 887 (Tex. App.—Fort Worth 2001, pet. denied); City of Dallas v. Moreau ,

718 S.W.2d 776 (Tex. App.—Corpus Christi 1986, writ ref’d n.r.e.). In Barfield , the

Supreme Court of Texas noted that the parties conceded that the hiring and firing of

city employees was a governmental function. 898 S.W.2d at 291 . In City of

Cockerell , the court of appeals stated that the operation of a police department and

the hiring and firing of city employees were governmental functions. 48 S.W.3d at

898 . In City of Dallas , the court likewise held that the hiring and firing of city

employees was a governmental function, stating that “activities performed as part of

the police power of a municipal corporation in providing for the health, safety, and

general welfare of the citizens fall clearly within the governmental functions of a

city.” 718 S.W.2d 776, 779 (Tex. App.—Corpus Christi 1986, writ ref’d n.r.e.). We

fail to see how these cases resolve whether the City’s decision to provide insurance

benefits is a governmental or proprietary act.

In her supplemental brief, Temple relies on two cases for the proposition that

a municipality’s act of providing insurance benefits to its employees, pursuant to a

contract between the municipality and a private insurance company, is a proprietary

function. See Gates v. City of Dallas , 704 S.W.2d 737, 739 (Tex. 1986); Bailey v.

City of Austin , 972 S.W.2d 180, 193 (Tex. App.—Austin 1988, writ denied). We

agree with Temple that Gates and Bailey answer the issue before us.

In Gates , the Supreme Court of Texas discussed the differences between

governmental and proprietary functions. 704 S.W.2d at 738–739. The supreme court

stated, “Unlike governmental functions, for which municipal corporations have

traditionally been afforded some degree of governmental immunity, proprietary

functions have subjected municipal corporations to the same duties and liabilities as

those incurred by private persons and corporations.” Id . at 739. The court also held

that “Contracts made by municipal corporations in their proprietary capacity have

been held to be governed by the same rules as contracts between individuals.” Id .

The court concluded that, “When the City of Dallas entered into the insurance

contract with Gates, it acted in its proprietary role and was clothed with the same

authority and subject to the same liabilities as a private citizen.” Id . (internal

quotations omitted).

In Bailey v. City of Austin , the court of appeals analyzed whether the City of

Austin’s act of providing a health plan to its employees constituted a governmental

or proprietary function. 972 S.W.2d at 192–93. The court noted that the city had

three plans available: a self-insured plan and two HMO plans administered by private

insurers. The city managed and administered its own plan, oversaw the HMO plans,

and deducted premiums from its employees’ paychecks for all three plans. The court

held that “the City's function of offering, administering, and overseeing health care

plans for its own employees are proprietary functions. Such activities are not integral

to its function as an arm of the state.” Id . at 193. The City neither distinguishes

Gates or Bailey , nor contends that the City provided insurance benefits for the benefit

of the general public.

“The key difference between a proprietary and governmental function is that

the city functions in its governmental capacity when it performs functions mandated

by the state.” Truong , 99 S.W.3d at 209–10. The City does not refer us to any state

mandatory requirement that the City must provide insurance benefits to its police

officers—such as a statute that requires the city to provide the benefits at issue and

that specifies the types of benefits to be provided—and we are aware of none.

The

City attempts to satisfy this requirement by stating that its act of making payroll

deductions is a State requirement and thus a governmental act. The city cites no

authority for this proposition. We disagree with the City’s recharacterization of

Temple’s suit. Here, the basis of Temple’s suit is the State’s failure to pay insurance

benefits after her husband died. Accordingly, we construe the City’s act as one of

providing insurance benefits.

Providing insurance benefits to City police officers does not involve an act

provided by the municipality as the agent of the State in furtherance of general law

for the interest of the public at large. See Gates , 704 S.W.2d at 738 . We hold that

when a City provides to its employees insurance benefits that are not required by

statute, the City is performing a proprietary function—an act performed by a city, in

its discretion, primarily for the benefit of those within the corporate limits of the

municipality rather than for use by the general public. See City of Gladewater v. Pike ,

727 S.W.2d 514, 519 (Tex. 1987) (“A proprietary function is one intended primarily

for the advantage and benefit of persons within the corporate limits of the

municipality rather than for use by the general public.”). Because the City was

performing a proprietary function in providing insurance for its employees, the City

does not have sovereign immunity. Rather, it is “clothed with the same authority and

subject to the same liability as a private citizen.” Gates , 704 S.W.2d at 739 .

Accordingly, the trial court abused its discretion when it granted the City’s plea to the

jurisdiction.

We sustain Temple’s first issue.

Conclusion

We reverse the order of the trial court dismissing Temple’s claims against the

City and remand the cause to the trial court.

Evelyn V. Keyes

Justice

Panel consists of Justices Taft, Keyes, and Hanks.