McNair v. City of Cedar Park, Tex.

United States Court of Appeals,
Fifth Circuit.
No. 92-8258.
Roy McNAIR, Plaintiff-Appellee/Cross-Appellant,
v.
CITY OF CEDAR PARK, TEXAS, et al., Defendants,
City of Cedar Park, Texas, Defendant-Appellant/Cross-Appellee.
June 29, 1993.
Appeals from the United States District Court for the Western District of Texas.
Before POLITZ, Chief Judge, REAVLEY and BARKSDALE, Circuit Judges.
POLITZ, Chief Judge:
The City of Cedar Park, Texas, appeals an adverse verdict and judgment requiring it to refund
approximately $650,000 to Roy McNair. McNair also appeals, seeking additional prejudgment
interest and attorney's fees. For the reasons assigned, we reverse and render judgment in favor of the
City and, concomitantly, reject McNair's appeal.
Background
Cedar Park is a small city about 30 miles northwest of Austin. During the mid-1980s it
experienced rapid growth, requiring the purchase of the private system from which it previously had
obtained its water. Because that system was operating at maximum capacity, Cedar Park determined
that a major capital expansion was required to accommodate new development. In 1985, the City
followed in the footsteps of other cities throughout Texas and enacted an ordinance imposing a
community impact fee on all newcomers,1 based on a calculation of the average cost of expansion per
living unit. This fee, which computed to $2,400, was charged to all new development and was
intended to offset the cost of systemic expansion. Upon receipt of the fees, the City obligated itself
to provide water and sewer services.
1
The City had a population of about 3,500 people and approximately 12,000 additional lots
had been platted.
In March 1984, McNair paid $1,650,000 for approximately 100 acres of land in Cedar Park's
jurisdiction on which he intended to construct an upscale trailer park accommodating 1,600 new
residents. His plats of the tract were approved by the City Zoning Commission. This approval was
revoked because McNair had failed to pay the community impact fee within the time allowed. He
then secured an agreement from the City to subsequently recalculate the fee based on actual water
use of the trailers. In the meantime, he paid the sum of $1.3 million based on the $2400 per unit fee
for 542 units.
On March 2, 1987, having abandoned his plan to develop the trailer park, McNair demanded
a complete refund of his fee, plus accrued interest.2 By this time, Cedar Park was well into a five-year
plan to construct a unified water system. About $2 million had been spent and the City had
committed to spend an additional $8 million. The City was in the process of obtaining state
regulatory permits to construct the planned waste-water treatment facilities.
McNair was never told that the fees would be refundable in whole or in part; the ordinance
made no mention of refunds. He was the only developer who sought a refund, although others had
abandoned their projects. Cedar Park remains obligated to provide water and sewer services to the
McNair tract.
McNair sued the City in state court alleging unjust enrichment, assumpsit, and other theories.
The case was removed to federal court when he added claims arising under federal law. The district
court refused McNair's request to allow dismissal of the federal claims and thereafter a remand. With
the exception of the assumpsit and unjust enrichment theories, all claims were disposed of under
Fed.R.Civ.P. 56(c) and are not the subject of this appeal. The case proceeded to trial and a jury
returned a verdict awarding McNair one-half o f his fee; both Cedar Park and McNair timely
appealed.
Analysis
The City preserved a sufficiency question by first moving for directed verdict at the close of
2
McNair canceled the project because of the economic downturn in the region and because of
serious disputes between himself and his business partner.
all the evidence and thereafter by moving for judgment notwithstanding the verdict.3 The appellate
standard of review of the insufficiency claim is the same as that applicable to the granting of a motion
for directed verdict or judgment notwithstanding the verdict.4 When determining whether a party is
entitled to judgment as a matter of law, whether the motion comes before, during, or after the trial,
the court must consult "the applicable substantive law to ascertain what factual issues are material."5
The court must then review the evidence bearing on those issues, drawing all inferences in favor of
the nonmovant/appellee, to determine whether a reasonable juror could arrive at a verdict in his
favor.6
McNair's recovery is based on assumpsit, an implied-in-law or quasi-contract. While Texas
has not adopted the English common-law forms of action, it did adopt the common law of England
insofar as it comported with its constitution and statutory enactments.7 Texas recognizes a cause of
action in contract based on implied-in-law obligations. While the old common-law writ of
assumpsit—literally "he promised"—was a convenient means of enforcing implied obligations in the
common-law, rather than the equity, courts of England, the form of the action is no longer of serious
moment.8 We therefore pretermit the procedural niceties and focus on that which is necessary to
sustain recovery as specifically alleged herein—money had and received9 and restitution.10
Both theories are equitable and have at their base an implied-in-law contractual obligation
3
See Fed.R.Civ.P. 50; McCann v. Texas City Refining, Inc., 984 F.2d 667 (5th Cir.1993).
4
Spuler v. Pickar, 958 F.2d 103 (5th Cir.1992).
5
King v. Chide, 974 F.2d 653, 656 (5th Cir.1992).
6
Spuler; King.
7
Knebel v. Capital Nat'l Bank of Austin, 505 S.W.2d 628 (Tex.Civ.App.—Austin), aff'd in
part and vacated and remanded in part, 518 S.W.2d 795 (Tex.1974).
8
1 Corbin on Contracts § 17, at 38-39 (1963).
9
For a description of this equitable cause of action see Staats v. Miller, 150 Tex. 581, 582, 243
S.W.2d 686, 687 (1951). See generally 42 C.J.S. Implied Contracts §§ 11-23 (1991).
10
See Restatement of Restitution § 5(b) ("The appropriate proceeding in action at law for the
payment of money by way of restitution is[,] ... in States distinguishing actions of contract from
actions of tort, an action of contract.").
to restore unjust enrichment.11 Thus, McNair had t o establish that the City should be treated12 as
having promised to return his payment, or some portion thereof, notwithstanding the absence of
express contractual assent thereto. Before we may decide if there was a quasi-contractual basis for
a refund, we must first consider whether a contractual obligation, implied or otherwise, existed.
Considering the regulatory aspects of this transaction, we are not wont to recognize
contractual duties as a matter of course. A municipality obviously has the capacity to form binding
contracts for a wide variety of purposes. At the same time, however, a municipality also has broader
obligations towards its citizenry, arising from its routine taxation and expenditures schema, which
cannot be regarded as anything but the ordinary course of government. Hence, a citizen cannot deem
his payment of taxes to constitute consideration for clean streets and effective police services
authorizing a suit in contract to enforce the providing of same.
Viewed closely, it is readily apparent that Cedar Park's dealings with McNair were
qualitatively different. McNair proposed to bring 1,600 new residents into a city of 3,500. Assisted
by able counsel, McNair negotiated with the City before paying the impact fee and in fact secured,
in advance, an agreement to recalculate that fee based on actual usage subsequently experienced. The
relationship between McNair and the City was not that of a citizen personally seeking routine public
service. Rather, McNair and the City dealt at arm's length, in a business transaction, each cognizant
of his or its own particular interests. It is appropriate, therefore, to treat the resulting obligations as
an enforceable quasi-contract.13 That said, we must consider the parameters of that contract.
11
"In order to warrant a recovery in an action of assumpsit for money paid out and expended, it
devolved upon appellants to plead and prove facts and circumstances from which a
quasi-contractual obligation to repay may be implied." Fun Time Centers, Inc. v. Continental
Nat'l Bank, 517 S.W.2d 877, 884 (Tex.Civ.App.—Tyler 1974, writ ref'd n.r.e.). See also La
Chance v. Hollenbeck, 695 S.W.2d 618 (Tex.App.—Austin 1985, writ ref'd n.r.e.) (describing
implied contractual basis for restitution).
12
Our analysis is limited. We do not here construe the terms of an express or implied-in-fact
agreement. Rather, we consider whether in fairness the City and McNair should be treated as
though they each agreed to assume some duty to the other and, assuming as much, the scope of
those duties.
13
Harker Heights v. Sun Meadows Land, Ltd., 830 S.W.2d 313 (Tex.App.—Austin 1992)
(discussing restitutionary remedy premised on an implied contract between city and developers).
The ordinance clearly provides that any citizen seeking to build a new home in the City would
have to pay, in advance, a pro-rata share of the costs of the providing of additional water and
sewerage capacity. These costs reflect, of necessity, an economy of scale. The City could not bend
and shape its plans according to the whim of each new resident. The reality of municipal management
is that long-term systemic costs and growth projections14 must be taken into consideration,
determined, and pursued. Individual plans allow for more flexibility. The ordinance made no mention
of refunds in the event the developer simply changed his mind. The City made long-term plans with
the understanding that it would be obligated to provide additional water and sewerage service to
McNair, his successors in interest, and everyone else who paid the impact fee.15
While the potential scope of obligations created in equity is as broad as notions of fairness
14
In fact, the City's projections were not merely based on the possibility that land like McNair's
could be developed, which would be substantial in itself. McNair's predecessor in title specifically
requested waste-water capacity for 750 living units. The city engineer confirmed the capacity and
after McNair acquired that tract, was told by McNair to reserve flow capacity for those units.
15
Tex.Loc.Gov't Code Ann. § 395.020 (Vernon Supp.1993) provides:
Any new development for which an impact fee has been paid is entitled to the
permanent use and benefit of the services for which the fee was exacted and is
entitled to receive immediate service from any existing facilities with actual
capacity to serve the new service units, subject to compliance with other valid
regulations.
McNair's argument that the City's failure to complete extension of improvements of his
tract, notwithstanding his suit essentially demanding rescission and seeking refund of
payment, is disingenuous. Bernal v. Garrison, 818 S.W.2d 79, 83 (Tex.App.—Corpus
Christi 1991, no writ ) ("A fundamental rule of contract law is that whenever a party to a
contract repudiates ... the other party ... is excused from further performance."). McNair
concedes the fact that the City could provide water within 30 to 60 days. Texas law has
long rejected the result McNair seeks with this argument:
After all, the underlying principle, running through the cases is this and nothing
more, that the action for money had and received upon a failure of consideration,
partial and complete, is to be ruled by broad considerations of equity and justice,
and that the plaintiff may not prevail if he fails to satisfy the court that what the
defendant has received should in conscience be returned.
Ennis v. Interstate Distr., Inc., 598 S.W.2d 903, 907 (Tex.Civ.App.—Dallas 1980) (citing
12 Williston on Contracts § 1457 (3d ed. 1970)).
McNair's request for a refund does not otherwise fit within the pertinent statutory
provision. Tex.Loc.Gov't Code Ann. § 395.025 (Vernon Supp.1993) (providing for
refund where municipality fails to provide service).
allow,16 the duty to refund the impact fee may only arise in circumstances recognized under
controlling law. In Texas the notion of restitution does not permit the rescission of a contract and
return of the value received in the absence of "fraud, duress, or the taking of undue advantage."17
Likewise, Texas does not require repayment of money had and received unless equity and good
conscience demand it.18 We perceive no basis for finding the City's retention of McNair's payment
unfair. The City has provided what it promised. The money paid did no therefo re, result in an
t,
unjust enrichment of Cedar Park.
The City's retention of the fee is fundamentally fair when one considers that McNair received
exactly what he bargained for. He has paid his share of the systemic water and sewer expansion costs
and cannot be asked to pay same again. His tract of land is entitled to those city services. At the
same time, the City has incurred a substantial corresponding expense and obligation.19 Equity and
the controlling law demand that the agreement between the City and McNair be honored. Nothing
more; nothing less.
The judgment against Cedar Park is REVERSED and judgment in favor of Cedar Park
rejecting McNair's demands is RENDERED. Consistent therewith, McNair's assignments of error
16
1 Williston on Contracts § 1:6, at 26 (4th ed. 1990).
17
Heldenfels Bros., Inc. v. Corpus Christi, 832 S.W.2d 39 (Tex.1992).
18
The parties devote much of their attention to the effect of the Heldenfels court's definition of
"unjust enrichment." The City contends that because unjust enrichment is a necessary component
for a quasi-contractual recovery, such as money had and received, the definition of unjust
enrichment in Heldenfels controls and, accordingly, requires the showing of a wrongful act by the
City. McNair points to earlier cases dealing with a factual setting more akin to that involved
herein and addressing specifically a "money had and received theory." In those cases the courts
stressed that the controlling question is somewhat broader: whether equity and good conscience
require repayment. E.g., Barrett v. Ferrell, 550 S.W.2d 138 (Tex.Civ.App.—Tyler 1977, writ
ref'd n.r.e.) ("An action for restitution based on ... money had and received will lie where one
person has obtained money ... [wrongfully] or when money is paid by one person in consideration
of an act to be done by another and the act is not performed.") Because there is no evidence of
wrongdoing or failure of consideration on the part of the City, or of any other circumstance
demanding repayment, we would reach the same result regardless of whether a wrongful act were
required. Accordingly, we need not resolve any conflict, real or imagined, between these cases.
19
Restitution is not available where the defendant materially changes his position in reliance.
Bryan v. Citizens Nat'l Bank, 628 S.W.2d 761 (Tex.1982). Likewise, the plaintiff may not claim
restitution where he has not incurred a loss. Id. Cf. Harker Heights (city failed to annex as it
impliedly agreed to do).
in his appeal are rejected as moot.