Texas Supreme Court deals City of San Antonio an upset in Hays Street Bridge case

Submitted by AJPesquera on March 17, 2019 - 3:27pm

The Texas Supreme Court reversed a lower court decision that favored the City of San Antonio in a long-running dispute with a community group that has been trying to transform a tract of land surrounding the Hays Street Bridge into a visitors park.

In the March 15, 2019 decision written by Texas Supreme Court Chief Justice Nathan Hecht, the court ruled that governmental immunity does not shield the city from a 2014 trial court judgment that favored the Hays Street Bridge Restoration Group. The Court also rejected the city’s last-minute argument that the case is moot.

Hecht pointedly sliced apart the city’s claims in oral arguments before the court -- claims repeated in a Friday news release -- that proceeds from the sale of the disputed land were applied to the budget for the restoration of the bridge, and therefore the city fulfilled the judgment of the trial court.

"Those assertions are neither verified nor supported by any evidence,” Hecht wrote. The city provided no proof that the funds went to support the bridge restoration, Hecht wrote, so “The unverified conclusory statement cannot be taken at face value."

The ruling, which was hailed by the Restoration Group, returns the case to the Fourth Court of Appeals, and then to the trial court in Bexar County where a jury found against the city.

History of the case

Since the late 1990s, the Restoration Group raised money and in-kind donations to save and restore the landmark bridge, including an agreement with Budco Ltd. to donate the adjacent land to the city to be held in trust for a visitors center. (Special Section on Hays Street Bridge.)

But in 2012, two years after the restored bridge reopened, the city made a deal to transfer the property to a private developer. In 2014, the Restoration Group sued the city for breaching its 2002 Memorandum of Understanding, and won a jury verdict and judgement in Bexar County District Court.

Even as the Restoration Group sought to enforce the trial court judgment, the city transferred the land to the developer. The Restoration Group returned to the trial court to ask the judge to find the city in contempt of the judgment.

San Antonio avoided a contempt ruling by appealing the case to the Fourth Court. This put the land transaction in limbo while the dispute continued in the courts.

After the Fourth Court dismissed the suit in an opinion on March 1, 2017, the city proceeded with the sale to the parent company of Alamo Beer Company. That resulted in a side deal with residential developer Loopy Limited, who had an architect/engineer team draw up documents for a multi-story luxury apartment building.

Meanwhile, the Restoration Group appealed to the Texas Supreme Court and the court agreed to hear the case. In September, 2018, the justices of the Texas Supreme Court heard oral arguments from attorneys for the city and for the Restoration Group.

When is a city immune?

The legal issue before the court was whether the Fourth Court was right or wrong when it found the city was immune from suit. The Supreme Court used the San Antonio case to refine its position on what constituted a waiver to immunity.

Counsel for the Restoration Group was encouraged by events in another Supreme Court case that appeared to help their case. In June 2018, the high court revisited Wasson Interests Ltd. v. City of Jacksonville.

That case focused on whether Jacksonville had acted in its governmental capacity or in a proprietary capacity. Contracting for the purpose of carrying out an activity recognized by the state as a government function can provide a municipality immunity, but contracts that are more business-like in nature, that are more focused on profiting from the transaction than on the general public good, may result in more exposure to liability.

The Supreme Court issued its second opinion in Wasson v. Jacksonville, referred to as Wasson II, after the Fourth Court had ruled in San Antonio’s favor. There was speculation that the high court might use Wasson II to the benefit of the Restoration Group, but that was not the result.

“We issued Wasson II after the court of appeals rendered its judgment in this case, but the analysis we set out there squarely supports the court of appeals’ conclusion that the City’s functions under the MOU (Memorandum of Understanding) were governmental,” wrote Chief Justice Hecht in an 18-page ruling.

Despite that finding, Hecht did not let the city off the hook. The Supreme Court’s decision hinged on its reading of another appellate case it decided: Zachry Construction Corp. v. Port of Houston Authority of Harris County and interpretation of the state’s Local Government Contract Claims Act.

The Fourth Court reasoned that since the only remedy claimed by the Restoration Group and awarded by the trial court was specific performance -- they wanted a park, not money damages -- the city was immune. But the section of the Act that the Fourth Court cited only referred to “damages,” which strictly translates to money in a court of law.

Hecht concluded the Fourth Court’s reliance on the Zachry interpretation of remedies was too limited.

“Zachry does not answer whether Section 271.153 foreclosed the Restoration Groups suit for specific performance. We hold that it did not,” Hecht wrote.

He noted that another subsection of the law clarifies that damages awarded against a local government may not include certain additional categories.

“Neither mentions any equitable remedy,” Hecht stated.

The courts cannot read the law as implying there is a prohibition to every suit seeking an equitable remedy against a local government. That would too greatly restrict the general waiver of immunity, the opinion concluded.

The court concluded that the city is not immune, reversed the Fourth Court of Appeals decision and sent the case back there for the city’s other arguments.

What’s next for the land?

On the same day as the Texas Supreme Court decision, the city issued a statement claiming the Court’s “narrow and technical ruling” would not affect the land deal.

Almost exactly a year ago, on March 23, 2018, then-City Manager Sheryl Sculley overruled the San Antonio Historic Design and Review Commission's decision and administratively approved a towering luxury apartment development on the land next to the bridge, despite overwhelming public opposition that the project would obstruct views of the iconic bridge. (Read Sculley’s letter to developer Mitch Meyer here.)

The city’s news release also repeated assertions its lawyers made in oral arguments before the Texas Supreme Court: that proceeds from the sale of the property were applied to the budget for the restoration of the bridge, and therefore the city fulfilled the 2012 judgment of the trial court.

Not so fast, said the Court

But in the ruling, Hecht wrote that those claims by the city "are neither verified nor supported by any evidence.”  The city provided no proof that the funds went to support the bridge restoration, Hecht wrote, therefore “The unverified conclusory statement cannot be taken at face value."

Hecht also dissected the city’s unusual argument, raised just 17 days before oral argument, that the whole case was moot because the city already fulfilled the trial court judgment.

"Either the City lacks confidence in its mootness argument, or it has invoked appellate jurisdiction it believes does not exist to obtain a judgment to which it is not entitled," Hecht wrote.

“The parties vigorously dispute whether the City has satisfied the judgment,” Hecht wrote.  “At this point, the case is not moot. The City’s motion is denied.”

Now what?

Next, the case will go back to the Fourth Court of Appeals - perhaps before the end of the year - to hear the city’s argument that the jury verdict was not supported by evidence.

If the city loses that bid, the case will go back to Bexar County District Court, said Amy Kastely, pro bono counsel for the Restoration Group.

“Finally, we’ll have an opportunity to have a factual hearing on whether or not the city has violated the judgment of the district court,” Kastely said during a video news conference after the ruling.

“I understand the city has issued a statement saying this decision will have no impact on future use of the land,”  she said. “And they are just wrong.”

Kastely said she has met with new City Manager Erik Walsh, who did not deny that his predecessor, Sculley, overreached when she overruled the HDRC to allow the five-story apartment development to proceed.

Can construction begin on the apartment building? Kastely said court cases like this in other cities suggest “there is a very real possibility that (the developers) will be ordered to remove anything they put on that land eventually. So if they want to put up a building that they will have to later take down, that is up to them,” she said.

“Now is a good time for the city, the mayor, for the City Council, the new city manager,to do the right thing - to commit this land to public use, to support public access and understanding of this amazing and historic bridge,” Kastely said.