City of Terrell v. McFarland

BAKER, Justice.

The City of Terrell, Texas, appeals from an adverse judgment in a breach of contract suit brought by Lee McFarland. The city has raised nine points of error. We overrule points one through seven and sustain points eight and nine which concern McFarland’s award of attorney’s fees and postjudgment interest on those fees. We reform the trial court’s judgment by deleting the attorney’s fees awarded McFarland and the postjudgment interest on those fees; and, as reformed, we affirm the judgment.

The facts are disputed. The trial was hotly contested. McFarland alleged that he requested the city council to approve a reimbursement of a fifty percent pro rata refund of his costs for constructing water and sewer lines to his property. He contended that the city council, by official vote, agreed to such a refund if anyone later tied onto the lines built by McFarland. The city, on the other hand, argued that there was no council vote and there was no contract. McFarland contended that a letter signed by the city manager and the mayor, addressed to McFarland, is written evidence of the contract. In pertinent part, the letter states:

In consideration of the construction of these lines at your expense, and the ownership becoming vested in the City of Terrell, this letter evidences the agreement by the City to collect from any person who elects to connect to such lines a prorata share of your total cost of construction according to city ordinances. This amount will be refunded to you.

The minutes of city council meetings do not reflect a vote on an agreement. The agendas of council meetings do not indicate that a refund was to be discussed. A tape recording of the August 11,1981, city council meeting produced at trial by the city had obvious gaps in it and did not contain any evidence of a vote for a refund. Testimony by witnesses regarding any vote on a refund was conflicting.

The case was submitted to the jury in one question. The question asked:

Do you find from a preponderance of the evidence that in the summer of 1981 the Terrell City Council voted to collect for Lee McFarland a 50% pro rata refund for the cost of line installation in the event another tied onto said line?

The jury answered unanimously, “We do.”

In its first two points of error, the city asserts that there is no evidence of a contract and that there is no evidence that the city council voted to collect a fifty percent refund. In ruling upon “no evidence” points, we consider only the evidence and inferences tending to support the jury finding, disregarding all evidence and inferences to the contrary. Alm v. Aluminum Co. of America, 717 S.W.2d 588, 593 (Tex.1986). The record reflects that there is evidence supporting the jury’s finding. The letter referred to above is some evidence that there was an agreement or contract. Among those who testified that there was an agreement entered into by a vote of the city council were McFarland, Jim Gordon, a contractor who did work for McFarland, and Odise Mash-burn, a city councilman during the summer of 1981. The same three witnesses also testified that McFarland was to be refunded fifty percent of his costs or that a pro rata share meant fifty percent of his costs. We overrule points one and two.

In its third point of error, the city contends that the evidence is factually insufficient to support the jury’s finding that the city council voted to collect a fifty percent refund for McFarland. The city filed a Motion to Modify Judgment which the trial court considered, in substance, as a motion for new trial. In its motion, the city did not raise the factual insufficiency argument that it now asserts on appeal. The city has waived any error regarding factual sufficiency. See TEX.R.CIY.P. 324(b)(2); Garrett v. Standard Fire Insurance Co., 541 S.W.2d 635, 638 (Tex.Civ.App.—Beaumont 1976, writ ref’d n.r.e.). We overrule the city’s third point of error.

The city contends in its fourth point of error that the trial court erred in entering judgment for McFarland because the alleged contract was illegal. Illegality as a defense must be affirmatively pleaded unless the illegal nature of the document sought to be enforced is apparent from the plaintiff’s pleadings. Lewkowicz v. El Paso Apparel Corp., 625 S.W.2d 301, 303 (Tex.1981); see TEX.R.CIY.P. 94. An examination of the city’s pleadings reveals that the defense of illegality was not specifically pleaded. A careful reading of McFarland’s pleadings, including the letter relied on and attached thereto, furnishes no facial indication that the alleged contract is illegal. Moreover, in its motion for directed verdict, the city stated that “[i]t is not the City’s position that the contract was illegal but simply that a contract was not entered into.” We overrule the city’s fourth point.

In its fifth point of error, the city contends that the trial court erred in not submitting a question purportedly requested by the city. The question is filed as part of the record in this case, but there is no indication that the city requested its submission. Also, the record does not indicate that the city obtained a ruling on its alleged request. Rule 276 of the Texas Rules of Civil Procedure provides that when a question is requested and refused, the judge must endorse on the question “Refused” and sign it officially. When the record does not reflect that this was done, no error is shown even though the question may appear in the transcript. Cambridge Mutual Fire Insurance Co. v. Newton, 638 S.W.2d 75, 80 (Tex.App.—Dallas 1982, writ ref’d n.r.e.); see TEX.R.CIV.P. 276. We overrule the city’s fifth point.

The city argues in its sixth point of error that the trial court erred in submitting Special Issue Number 1 to the jury. The city objected that the reference in the question to the summer of 1981 was too broad in scope. The short answer to this objection is that the summer of 1981 is consistent with McFarland’s pleadings and the evidence at trial. The city also requested that the words “pro rata” be removed from the question. McFarland’s pleadings alleged that “pro rata” meant fifty percent in the context of this case. There was evidence at trial that “pro rata” meant fifty percent. The letter relied on by McFarland contained the term “prorata.” Therefore, no error is shown. See TEX.R.CIV.P. 278.

The city further objected to the jury question because of a distinction between service line connections and main line extensions. The city regards this distinction as crucial because it contended at trial that city ordinances authorized a refund only in cases of service line connections. The city engineer testified that the connections to McFarland’s lines were main line extensions. This testimony was uncontradicted. It will be assumed here that the city objected to the question’s failure to make this distinction even though the city’s objection is by no means clear in this regard.

In his Fourth Amended Petition, McFarland does not plead the distinction between service line connections and main line extensions that the city regards as so important. McFarland merely alleges that the lines connected to his lines are within the city ordinance definition of service lines. His petition does not preclude the possibility that the water and sewer lines connected to his lines could be defined as both service lines and main lines. In other words, McFarland’s pleadings do not say that the lines connected to his lines were not main lines; they only say that they are service lines as defined by the city ordinance. Neither McFarland’s pleadings nor his evidence assert that the definitions of main lines and service lines are mutually exclusive. His pleadings support the absence of such a distinction in the context of this case.

McFarland’s consistent theory at trial was that whether the connected lines were service lines or main lines was irrelevant. Jim Gordon testified that the contract between the city and McFarland included main line extensions and service line connections. McFarland testified that he did not remember the city council vote being based on any distinction between the two types of connections. Mashbum, the city councilman, testified that he voted with the understanding that the type of connection to McFarland’s lines made no difference. David Lewis, the city attorney, testified that he never fully understood the distinction between service lines and main lines and that such a distinction was illogical. In jury argument, counsel for the city acknowledged that McFarland was arguing that the type of connection to his lines did not matter.

When McFarland’s pleadings are correctly read, and when the evidence presented at trial is examined, it becomes clear that the question submitted to the jury was proper and supported by the pleadings and the evidence. See TEX.R.CIV.P. 278. The distinction between service line and main line connections was raised, argued, and relied upon by the city, not by McFarland. Therefore, it is a defensive theory, and it was the city’s burden, not McFarland’s, to see that it was properly submitted. See City of Houston v. Bush, 566 S.W.2d 33, 35-36 (Tex.Civ.App.—Beaumont 1978, writ ref'd n.r.e.); Davis Bumper to Bumper, Inc. v. American Petrofina Co., 420 S.W.2d 145, 150 (Tex.Civ.App.—Amarillo 1967, writ ref'd n.r.e.); TEX.R.CIV.P. 279. We overrule the city’s sixth point.

In its seventh point of error, the city argues that this case should not have been submitted to the jury because interpretation of the alleged contract was a matter of law for the court. However, there is no indication in the record that this particular complaint was ever presented to the trial court. Therefore, the city has waived any error in this regard. See TEX.R.CIV.P. 274; City of Austin v. Daniels, 160 Tex. 628, 335 S.W.2d 753, 758-59 (1960). In any case, the assertion that the question submitted somehow required the jury to interpret the contract is without merit. We overrule the city’s seventh point.

In its eight and ninth points of error, the city objects to the award of attorney’s fees and postjudgment interest on the award. The city argues that the actions by the city at issue in this case constituted governmental functions. It contends that attorney’s fees for breach of contract cannot be awarded against a city engaged in a governmental function.

The city’s eighth and ninth points of error should be sustained, although not for the reasons advanced by the city. The legislature has authorized recovery of attorney’s fees from a corporation if a claim is based on contract. See TEX.CIV.PRAC. & REM.CODE ANN. § 38.001 (Vernon 1986). The Texas Supreme Court has held that the statutory predecessor of section 38.001 applies to municipal corporations when they are engaged in proprietary, as opposed to governmental, functions. Gates v. City of Dallas, 704 S.W.2d 737, 740 (Tex.1986).

However, apparently in response to Gates, the legislature enacted article 1269j-13 of the Texas Civil Statutes, which states:

A city, town, or village incorporated under state law, including a home-rule city, may not be considered a corporation under a state statute governing corporations unless the statute extends its application to a city, town, or village by express use of the term “municipal corporation,” “municipality,” “city,” “town,” or “village.” It is the intent of the legislature that the limitation provided by this section apply regardless of whether the city, town, or village is acting in a governmental or proprietary function.

TEX.REV.CIV.STAT.ANN. art. 1269j-13 (Vernon Supp.1988). Article 1269j—13 effectively amends section 38.001 so that it no longer authorizes awards of attorney’s fees against a city. City of Dallas v. Arnett, 762 S.W.2d 942, 951 (Tex.App.—Dallas 1988).

Article 1269j-13 became effective on June 11, 1987, prior to the trial of this case. McFarland could not have been entitled to any attorney’s fees until he prevailed at trial. Therefore, article 1269j—13 governs resolution of these two points of error. Based on that article, and on this Court’s interpretation of it, we sustain the city’s eighth and ninth points of error.

We reform the trial court’s judgment by deleting the award of attorney’s fees and postjudgment interest on those fees. As reformed, we affirm the trial court’s judgment.

STEPHENS, J., files a dissenting opinion.