Wednesday, 30th July 2014

Pawnshop Can’t Sue for Interpretation of Ordinance

Posted on 17. Apr, 2014 by in Spring 2014

Pawnshop Can’t Sue for Interpretation of Ordinance

By RICHARD WEATHERINGTON

There is an old saying that ignorance of the law is no excuse. Yet laws, regulations, and ordinances can be written in such a way that more than one interpretation can be reached.

When such a difference cannot be resolved informally, it would seem logical that the courts should be the place to go to for a decision on what the ordinance really means.

Recently, a pawnbroker sued a city seeking a judicial declaration for its position in a disagreement with the city over the interpretation of one of its ordinances.

A company operated a pawnshop in Dallas County, Texas, for many years. In 2003, it began to offer short-term and long-term loans under a similar business name.

In 2012, the City of Dallas told the pawnshop that its loan services business constituted an “Alternative Financial Establishment” under Dallas City Code section 51A 4.207 and that it must comply with the provisions of that section.

That section defined an alternative financial establishment as a car title loan business, check cashing business, or money transfer business. An alternative financial establishment, however, did not include an establishment that provided financial services that were accessory to another main use.

The pawnshop disagreed with the city’s interpretation of the section and informally attempted, but failed, to persuade the city that its loan business was not an alternative financial establishment.

The pawnshop then filed a lawsuit seeking a judicial declaration that its loan services business was not an alternative financial establishment, or, alternatively, that the business was accessory to its “main pawnshop use.”

The city filed a “plea to the jurisdiction” partly based on governmental immunity. A plea to the jurisdiction basically challenges the authority of a court to hear a matter or case.

The pawnshop amended its petition and alleged that the Uniform Declaratory Judgments Act waived the city’s immunity because the “suit seeks the determination of the question of whether the ‘accessory use’ provisions of the Dallas City Code should be construed to encompass the offering of short-term and long-term loans to the customers of a pawnshop, incidental to the operation of the pawnshop.”

The city amended its plea to the jurisdiction to assert that the UDJA did not waive its governmental immunity for a suit against the city for the construction or interpretation of an ordinance and that the pawnshop had not challenged the validity of the ordinance.

In response, the pawnshop alleged that the waiver of immunity applies to suits involving statutory interpretation as well as invalidation.

After a hearing, the trial court denied the city’s amended plea, and an interlocutory or interim appeal was made to the Texas Court of Appeals.

Standard of Review

The Appeals Court first noted that governmental immunity from lawsuits defeats a trial court’s subject matter jurisdiction or the right of the court to hear the matter and is properly asserted in a plea to the jurisdiction.

Whether a trial court has the right to hear the case, said the Appeals Court, was a question of law, which the court would review from a fresh point of view.

When a plea to the jurisdiction challenges the formal written claims, the Appeals Court must determine if the party making the claims has alleged facts that positively demonstrate the court’s authority to hear the case.

A plaintiff bears the burden to allege facts that positively demonstrate the trial court’s authority to hear the matter. The Appeals Court said it construes the allegations in the claims liberally in favor of the plaintiff and looks to the party’s intent.

On one hand, if the claims don’t contain sufficient facts to positively demonstrate jurisdiction or the authority to hear and decide a case, but might be cured by amendment, the issue is one of claims sufficiency and the court should allow the plaintiff an opportunity to amend.

On the other hand, if the claims positively rule out the existence of the court jurisdiction, then a plea to the jurisdiction may be granted without allowing the plaintiff an opportunity to amend its claims.

Applicable Law

Sovereign immunity deprives a trial court of the right to hear the matter for lawsuits in which the state or certain governmental units have been sued unless the state consents to the suit. Municipalities are political subdivisions of the state and entitled to governmental immunity unless it has been waived. The waiver of governmental immunity must be in clear and unambiguous language.

The issue in this appeal, said the court, was whether the UDJA waived the city’s governmental immunity. The city argued there was no waiver for declaratory judgment actions seeking only to construe the meaning of a statute. It argued that because the pawnshop sought only a construction or interpretation of the city ordinance and did not seek to invalidate the section, governmental immunity barred the lawsuit.

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