Naismith Engineering, Inc. v. the City of Aransas Pass, Texas ( 2019 )

NUMBER 13-18-00402-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
NAISMITH ENGINEERING, INC., Appellant,
v.
THE CITY OF ARANSAS PASS, TEXAS, Appellee.
On appeal from the 343rd District Court
of San Patricio County, Texas.
MEMORANDUM OPINION
Before Chief Justice Contreras and Justices Longoria and Perkes
Memorandum Opinion by Justice Longoria
Appellant Naismith Engineering, Inc. (NEI) appeals from a plea to the jurisdiction
granted in favor of appellee the City of Aransas Pass, Texas (the City). By one issue,
NEI argues that the trial court erred when it granted the City’s plea. We affirm.
I. BACKGROUND
The City’s manager, authorized by the City Council, entered into a contract with
NEI to design improvements to the boat-ramp area of the City’s Conn Brown Harbor (CBH
project). The scope of work by NEI for the CBH project included engineering, permitting,
and administration services for the boating access and facilities at Conn Brown Harbor.
NEI provided the design and the City then awarded the construction contract to J.M.
Davidson, Ltd.
The City sued NEI, J.M. Davidson, Ltd., and RLI Insurance Company, who
provided the surety on J.M. Davidson, Ltd.’s performance bond, alleging that there were
deficiencies related to the CBH project. The City sought over $1,000,000 in damages.
NEI subsequently counterclaimed against the City, seeking to recover outstanding fees
for work performed pursuant to NEI’s contract to work for the City as the engineer of
record. NEI alleged that “[NEI] performed work ranging from general project services to
general harbor engineering and planning and services for waterline extension. [The City]
has failed to pay [NEI] for rendered services in breach of the parties’ agreement.” In its
second amended counterclaim, NEI sought “approximately $611,575.36, plus interest, for
work performed under the contractual relationship.”
Arguing that it had governmental immunity, the City filed a plea to the jurisdiction
challenging NEI’s counterclaim. NEI countered that immunity had been waived by
chapter 271 of the Local Government Code. See TEX. LOC. GOV’T CODE ANN. § 271.152.
The trial court granted the plea to the jurisdiction, dismissing NEI’s counterclaim. This
appeal followed.
II. PLEA TO THE JURISDICTION
A. Standard of Review
2
Whether a court has subject-matter jurisdiction over a dispute that involves a
governmental agency is a question of law. Tex. Dep’t of Parks & Wildlife v. Miranda, 133
S.W.3d 217, 226 (Tex. 2004). On appeal, courts use a de novo standard in determining
whether the plaintiff’s pleadings allege sufficient facts to demonstrate that a trial court has
jurisdiction over the controversy. Id. In reviewing the pleadings, courts are not to weigh
whether the plaintiff’s claims have merit; instead, courts must decide whether the
pleadings and the evidence before the trial court demonstrate that the court may exercise
jurisdiction over the parties’ dispute. See County of Cameron v. Brown, 80 S.W.3d 549,
555 (Tex. 2002).
In reviewing whether the pleadings demonstrate that the trial court has jurisdiction
over the subject of the dispute, the plaintiff’s pleadings must “affirmatively demonstrate
the court’s jurisdiction by alleging a valid waiver of immunity.” Dall. Area Rapid Transit
v. Whitley, 104 S.W.3d 540, 542 (Tex. 2003). When the plea “challenges the existence
of jurisdictional facts,” the relevant evidence submitted by the parties is considered, when
necessary, in resolving the defendant’s challenge. Miranda, 133 S.W.3d at 227. In this
appeal, the dispute concerns whether NEI’s pleadings and the evidence demonstrate that
the Legislature waived the City’s immunity regarding NEI’s alleged breach of contract
claim.
B. Applicable Law
Political subdivisions in Texas have long enjoyed immunity from suit when
performing governmental functions like that involved here. While this
immunity can be waived, we have consistently deferred to the Legislature
to do so; indeed, we have said immunity from liability “depends entirely
upon statute.” For its part, the Legislature has mandated that no statute
should be construed to waive immunity absent “clear and unambiguous
3
language.”
City of Galveston v. State, 217 S.W.3d 466, 469 (Tex. 2007) (internal citations omitted).
The City is a home-rule city, meaning that it derives its powers from the Texas
Constitution, not the Legislature. See TEX. CONST. art. XI, § 5; Proctor v. Andrews, 972
S.W.2d 729, 733 (Tex. 1998) (citing Lower Colorado River Auth. v. City of San Marcos,
523 S.W.2d 641, 643 (Tex. 1975)). Home-rule cities have “all the powers of the state
not inconsistent with the Constitution, the general laws, or the city’s charter.” Proctor,
972 S.W.2d at 733. This includes immunity from suit for governmental functions. See
City of Galveston, 217 S.W.3d at 469. Therefore, we must determine not whether any
statute grants home-rule cities immunity from suit, but whether any statute limits their
immunity from suit. Proctor, 972 S.W.2d at 733. Such limits exist only when a statute
speaks with “unmistakable clarity.” Id.
The Legislature has waived governmental immunity as to certain contract claims.
Local Government Code section 271.152 provides:
A local governmental entity that is authorized by statute to enter into a
contract and that enters into a contract subject to this subchapter waives
immunity to suit for the purpose of adjudicating a claim for breach of
contract, subject to the terms and conditions of this subchapter.
TEX. LOC. GOV’T CODE ANN. § 271.152. Section 271.151(2)(A) provides that a “[c]ontract
subject to this subchapter” means “a written contract stating the essential terms of the
agreement for providing goods or services to the local governmental entity that is properly
executed on behalf of the local governmental entity.” Id. § 271.151(2)(A).
C. Analysis
1. Breach of Contract
4
The City argues that NEI was unable to produce a written contract related to the
“general services” for which NEI sought to recover damages. NEI counters that while
there is no physical written contract available, it argues that production of the actual
written contract is not necessary because it presented enough evidence of a written
contract.
Our opinion in Vantage Systems Design, Inc. v. Raymondville Indep. School
District, 290 S.W.3d 312 (Tex. App.—Corpus Christi–Edinburg 2009, writ ref’d n.r.e.), is
instructive here. In that case, RISD never signed a contract but approved the plaintiff’s
proposal and made at least one payment for work done by the plaintiff. Id. at 314. The
plaintiff argued that, even though there was no signed contract, multiple documents were
exchanged between the parties which, taken together, formed a “properly executed”
contract. Id. at 316. We held that the local government code’s waiver of immunity did
not apply because, while the plaintiff “pleaded the existence of a contract, it has not
marshaled one, which in this situation is a key jurisdictional fact.” Id. We declined to
“apply the common law of contracts to a governmental immunity question.” Id.
Because the plaintiff could not marshal a contract sufficient to meet the requirements of
section 271.152 in response to the arguments and evidence presented by the school
district that no such contract existed, we affirmed the trial court’s denial of the plea to the
jurisdiction. Id. Here, as in Vantage, the City disputes NEI’s contention that any
contract for “general services” existed between the City and NEI. Section 271.151
clearly states that for a contract to waive governmental immunity it must be written and
properly executed. See TEX. LOC. GOV’T CODE ANN. § 271.151 (emphasis added). Even
5
though NEI pleaded the existence of a contract, it has not marshaled one, which in this
situation is a key jurisdictional fact. Accordingly, the City did not waive its immunity under
§ 271.151. See Vantage, 290 S.W.3d at 316.
III. OFFSET WAIVER OF IMMUNITY
Alternatively, NEI argues that the City waived its immunity from suit on NEI’s
offsetting claims “that are germane to, connected with, and properly defensive to [the
City’s] claims.” See Reata Constr. Co. v. City of Dallas, 197 S.W.3d 371, 376–77 (Tex.
2006) (op. on reh’g). NEI alleges that its counterclaims are allowed because it has
counterclaimed for amounts owed “for services and for work done as the City’s engineer
of record, including work done on the [CBH project], which is the source of the City’s
claims for affirmative relief.” The City responds that NEI’s counterclaim was not based
on amounts owed for services rendered on the CBH project, and therefore, are not
germane to the City’s claims against NEI.
At the hearing on the City’s plea to the jurisdiction, David Underbrink, NEI’s vice
president, testified regarding NEI’s counterclaims against the City. He testified that the
City did not pay for all of the work NEI had done for it, and as such NEI was owed money.
On direct, Underbrink specifically testified that the City “did pay for the boat ramp project.”
This testimony was confirmed on cross-examination:
The City: But for everything you have invoiced the City of Aransas Pass
on the BAG grant project, Boating Access grant or boat ramp
project, you have been paid, correct?
Underbrink: Correct.
The City: The other payments you’re seeking, the other payments that
Naismith Engineering is seeking, all relate to other projects,
6
correct?
Underbrink: Work in and near the boat ramp and around town, yes.
The City: Other projects that were not under—
Underbrink: Other issues, yes.
The City: They were not under the boat ramp project contract?
Underbrink: They were not under that contract.
The City’s suit against NEI, to which NEI counterclaimed, is specifically related to the
services performed by NEI on the contract between NEI and the City on the CBH project,
or the boat ramp project as the parties agree it has been referred to, not any other alleged
services or contracts.
In Reata, the court explained that when:
the governmental entity interjects itself into or chooses to engage in
litigation to assert affirmative claims for monetary damages, the entity will
presumably have made a decision to expend resources to pay litigation
costs. If the opposing party’s claims can operate only as an offset to
reduce the governments recovery, no tax resources will be called upon to
pay a judgment, and the fiscal planning of the governmental entity should
not be disrupted. Therefore, a determination that a governmental entity’s
immunity from suit does not extend to a situation where the entity has filed
suit is consistent with the policy issues involved with immunity. In this
situation, we believe that it would be fundamentally unfair to allow a
governmental entity to assert affirmative claims against a party while
claiming it had immunity as to the party’s claims against it.
Reata, 197 S.W.3d at 375–76. A governmental entity retains immunity from suit as to
those claims for monetary damages that are not germane to, connected with, and
properly defensive to the entity’s claim. City of Irving v. Inform Constr., Inc., 201 S.W.3d
693, 694 (Tex. 2006); City of Angleton v. USFilter Operating Servs., Inc., 201 S.W.3d
677, 678 (Tex. 2006). By limiting the waiver to claims that are related to the sovereign’s
7
claim, policy decisions regarding government spending remain intact. Tex. Dep’t of
Transp. v. Crockett, 257 S.W.3d 412, 415 (Tex. App.—Corpus Christi–Edinburg 2008,
pet. denied).
While the City concedes that if NEI presented a counterclaim related to the CBH
project, such counterclaim would be a compulsory counterclaim, effectively waiving the
City’s immunity; however, the evidence does not support NEI’s contention that its
counterclaim is related to the CBH project. The counterclaim does not arise from the
same transaction or occurrence that is the subject matter of the City’s claim. See TEX.
R. CIV. P. 97(a). The only common thread is that both claims involve alleged services
performed by NEI for the City. See Crockett, 257 S.W.3d at 416. The counterclaim
here does not meet the elements required by Reata; it is not germane to, connected with,
and properly defensive to the City’s claim. See Reata, 197 S.W.3d at 375–76. The
City did not waive its immunity.
NEI’s sole issue is overruled.
IV. CONCLUSION
The judgment of the trial court is affirmed.
NORA L. LONGORIA
Justice
Delivered and filed the
19th day of September, 2019.
8