Analysis: San Antonio could flunk Texas Supreme Court test by aiding developer over community in Hays Street Bridge case

Submitted by AJPesquera on June 3, 2018 - 9:52pm

By Adolfo Pesquera

On the same day it agreed to hear arguments in the Hays Street Bridge Restoration Group’s lawsuit against the City of San Antonio, the Supreme Court of Texas ruled against another Texas city in a case with significant similarities.

The San Antonio dispute is over the fate of land in the 800 block of North Cherry Street that surrounds the East Side’s iconic Hays Street Bridge. The Restoration Group raised funds to restore the bridge, then reached an agreement with a private landowner to donate land to the City of San Antonio on the condition that it would be held in trust while the group raised funds to convert it into a public park with a visitor center, educational exhibits, restrooms and concessions.

By its own account in court documents, the city supported the public park concept so much that in 2006, San Antonio applied for state funding to develop the donated land at 803 North Cherry Street into a park. The application was denied. Then in 2012, the city entered a side deal to sell the property to a private developer, Alamo Beer Co. founder and CEO Eugene Simor.

The contested land

The Restoration Group sued and won a jury verdict in 2014. The jury found that the City of San Antonio violated its Memorandum of Understanding (Read the MOU) with the Restoration Group, and the District Court judge in the case ordered the city to return the land for the community park. (Read the jury’s verdict and judge’s order)

But the city appealed, and the Fourth Court of Appeals reversed the case - not on the merits - but on grounds that the city’s actions were protected by government immunity. (Read the opinion)

Apparently assuming the Court of Appeals decision would be the final word, city officials kept opening doors for private development of the site.

Mitch Meyer of Loopy Ltd., a real estate developer who has been collaborating with Simor, received permission from San Antonio City Manager Sheryl Sculley to proceed with a multifamily development on the contested land. In a March 23, 2018 letter to the developer (Read the letter) Sculley used her administrative authority to allow the project to proceed after the Historic and Design Review Commission rejected Meyer’s application for a Certificate of Appropriateness in the face of intense public opposition (Read more).

The Supreme Court of Texas Agrees to hear the case

However, on Friday, June 1, the Supreme Court of Texas agreed to hear arguments in the San Antonio case at an unspecified date in the fall. At the same time, the Court ruled in favor of Wasson Interests Ltd. and against the City of Jacksonville in a case from the Twelfth District Court of Appeals that has striking parallels to the Hays Street Bridge case.

Hays Street Restoration Group attorney Amy Kastely was not only aware of the Wasson v. Jacksonville case, she raised it in her March 15 reply brief to the high court. (Read the brief)

In their statement, Kastely and Gary Houston of the Restoration Group expressed optimism that the land will be returned to the public:

“The Hays Street Bridge Restoration Group and their many allies and supporters, including the 19,000 signors [sic] to a petition, look forward to the Texas Supreme Court reversing the (Fourth) Court of Appeals. At that time, the District Court will finally hold a hearing on whether the transfer of 803 N. Cherry to the Simor Texas Land Company violated the Court’s Judgment (a hearing that has been stayed since December 2014).
“The Restoration Group expects the District Court will find that the City did violate its Judgment and will invalidate the transfer, returning ownership of the land to the City, to hold in trust for the Hays Street Bridge community and visitor center.”

In a Friday afternoon news release, the city expressed confidence that nothing would change:

“The sale of the land is not an issue before the court and will not be affected by the outcome of its decision.”
The city included a statement from City Attorney Andy Segovia: “The Texas Supreme Court addressed four cases today involving governmental immunity, including this one. We welcome the court’s interest in these very important matters. The City will continue to work with the community on smart development for the area surrounding the Hays Street Bridge.”

Wasson v. Jacksonville

In Wasson v. Jacksonville, the Wassons leased land controlled by the city that was next to Lake Jacksonville, with the intent of opening a bed and breakfast. The city determined the business operation violated the lease and terminated the lease.

The issue in Wasson v. Jacksonville that is important to the Hays Street group is the “governmental/proprietary dichotomy.” Actions by a municipality taken for governmental functions are traditionally afforded some degree of immunity. But proprietary functions can subject the city to the same duties and liabilities incurred by private persons and corporations.

The Supreme Court said this dichotomy is “based on the reality that sovereign immunity is inherent in the State’s sovereignty, and municipalities share that protection when they act ‘as a branch’ of the State but not when they act ‘in a proprietary, non-governmental capacity.’ ”

How to pass the Supreme Court's test for governmental immunity

The court outlined four elements that should be considered when deciding whether an action is governmental or proprietary:

1. The City’s act of entering into the leases was mandatory or discretionary.

2. The leases were intended to benefit the general public or the City’s residents.

3. The City was acting on the State’s behalf or its own behalf when it entered the leases.

4. The City’s act of entering into the leases was sufficiently related to a governmental function to render the act governmental, even if it would otherwise have been proprietary.

With every element, the court found against the city of Jacksonville.

How does this apply in the Hays Street Bridge case?

Using the court’s test, the city must first show that it had no choice when it turned over land entrusted to it by a grassroots organization representing the community to a private developer.

Second, the city must show the deal was for the benefit of the general public and not just for certain residents.

Next, it will have to explain how its decision was a direct extension of its authority as an arm of the State of Texas.

Finally, it must show its decision was motivated primarily by a primary government function that just happened to have a proprietary outcome.

Given the result in Wasson, the city is not holding a strong hand. It appears that the Supreme Court of Texas wants to hear this case with the intent of refining its thinking in Wasson, not to undercut it.

The city ignored a community trust in favor of economic development that would enrich a few over the desires of the neighborhood and the broader community.

If the case proceeds as Kastely hopes, the city will be looking at a very costly settlement.