River Creek Development Corporation and City of Hutto, Texas v. Preston Hollow Capital, LLC; 79 HCD Development, LLC; Public Finance Authority; and U.S. Bank National Association

Summary

The Supreme Court of Texas held that a local government corporation’s failure to submit a promissory note and supporting contracts to the Attorney General for examination did not render the financing transaction void, although the corporation could not claim statutory incontestability. The Court also held that the transaction did not violate the Public Improvement District Assessment Act because the relevant agreement was an installment sales contract rather than bonds issued under the statutory bond-financing provision. The Court affirmed the court of appeals’ judgment, finding any evidentiary error harmless and concluding that separate proof was not required to support the trial court’s equitable-and-just attorney-fee determination.

Holdings

1. Section 431.071 of the Texas Transportation Code imposes a mandatory duty on a local government corporation to submit a qualifying bond or note and a supporting contract to the Attorney General for examination.
2. Failure to submit the note and supporting contracts to the Attorney General does not render the entire transaction void or unenforceable; the consequence identified by the court is loss of the statutory defense of incontestability, leaving the instruments subject to challenge by a person with standing.
3. The transaction did not violate the PID Act because the City used an installment-sales-contract method authorized by Section 372.023(d)(1), rather than a bond-issuance method governed by Section 372.024. The restrictions concerning the entities that may issue bonds therefore did not apply to the Interlocal Agreement.
4. The trial court's consideration of two attorney opinion letters was harmless, and separate proof was not required to establish that the attorney's-fee award was equitable and just.

Questions Presented

1. Whether Chapter 431 of the Texas Transportation Code required River Creek to submit the promissory note and supporting contracts to the Attorney General for examination and approval.
2. Whether River Creek's failure to obtain Attorney General approval rendered the note, supporting contracts, or entire financing transaction void and unenforceable.
3. Whether the transaction violated the Public Improvement District Assessment Act by using special-assessment revenues in a financing structure involving costs associated with bonds issued by an out-of-state conduit issuer.
4. Whether the trial court improperly considered two attorney opinion letters as summary-judgment evidence.
5. Whether the trial court needed separate evidentiary proof that the attorney's-fee award was equitable and just.

Disposition

affirmed