Aer-Aerotron v. Texas Dept. Transp.
| Decision Date | 17 June 1999 |
| Citation | 997 S.W.2d 687 |
| Parties | (Tex.App.-Austin 1999) Aer-Aerotron, Inc. Appellant v. Texas Department of Transportation, Appellee NO. 03-97-00649-CV |
| Court | Texas Court of Appeals |
Before Chief Justice Aboussie, Justices Jones, Kidd, B.A. Smith, Yeakel and Powers*;
BEFORE THE COURT EN BANC
On its own motion the Court has submitted this cause fo en banc consideration. Appellant Aer-Aerotron, Inc. sued appellee Texas Department of Transportation for breach of contract. Asserting that Aerotron had not obtained legislative consent to sue, the Department claimed immunity from suit and moved to dismiss for want of jurisdiction. The trial court dismissed the cause solely on jurisdictional grounds.1 We will reverse the order of dismissal and remand the cause to the trial court.
We determine the trial court's jurisdiction from the good-faith factual allegations made by the plaintiff. See Brannon v. Pacific Employers Inc. Co., 224 S.W.2d 466, 469(Tex. 1949); Flowers v. Lavaca County Appraisal Dist., 766 S.W.2d 825, 827(Tex. App.--Corpus Christi 1989, writ denied). Unless the defendant pleads and proves that such allegations were fraudulently made to confer jurisdiction, they are accepted as true, See Flowers, 766 S.W.2d at 827; see also Firemen's Inc. Co. v. Board of Regents of the Univ. of Tex. Sys., 909 S.W.2d 540, 542(Tex. App.--Austin 1995, writ denied). The Department has not asserted any fraudulent pleading here. We take our recitation of facts from Aerotron's pleadings.
In 1991, the Department sought to standardize the radios used in its districts throughout the state. Aerotron made a bid to supply standard base-station radios and one model of remote-control units for use in the field. On April 25, 1991, the Department accepted Aerotron's bid and entered into a one-year contract for Aerotron to supply 75 base-station radios at $5490 each and 50 remote-control radios at $1136 per unit, for a total of $468,550. The contract required Aerotron to ship a sample of each radio to the Department, which then had up to 30 days to test them for conformity to the contract specifications. On June 28, 1991, Aerotron shipped the two samples. The Department tested them and asked for certain modifications, which Aerotron made. On October 16, 1991, the Department "specifically and unequivocally" approved the modified samples and authorized Aerotron to ship 40 of the base stations and 48 remote-control units within 60 days.
On December 9, the Department extended the term of the contract for one year; the following day, it ordered 25 additional remote-control units. On January 3 and 6, 1992, Aerotron shipped 88 radios and the Department accepted them. On February 7, the Department ordered 75 additional base stations and 50 more remote-control units; on April 23 it ordered 25 more remote units. In the first year of the contract, the Department increased its purchase order from 125 to 300 radios, raising the total contract price to $993,990.
During the first part of 1992, the Department paid $396,804 for 127 radios it had received. In May 1992, after the Department had accepted more radios, it began to complain that some of the units failed to meet contract specifications. Aerotron addressed the problems and received the Department's acknowledgment that at least three of its four complaints had been corrected. On June 15, the Department ordered 50 additional base stations; on July 27, it ordered 25 more remote-control units. Aerotron asked the Department in August 1992 to pay invoices that had fallen due in March. In response to this request for payment, the Department raised additional complaints that the radios did not conform to specifications, despite its acceptance and request for additional radios.
On December 17, 1992, the Department demanded that Aerotron refund $396,804 for all radios that the Department had received and paid for, nothing that it would return the radios as soon as it could get them "back from the districts." Additionally, the Department canceled the balance of its purchase order.2 On December 24, Aeroton suggested that the Department had breached its obligations under the contract by its failure to pay $225,258 for radios received and accepted, and insisted that the Department fulfill its own contractual obligations by paying the balance due. Nevertheless, Aerotron again offered to modify the radios it had delivered to satisfy the Department. The Department subsequently authorized the modifications and in March 1993, Aerotron began fixing the problems. In April 1993, the Department ordered 13 more remote-control radios.3 The Department expressed its appreciation for Aerotron's willingness to make corrections. Aerotron's technicians gave hands-on training throughout the state to Department users of its radios. In June, Aerotron began to help install equipment in all districts and stationed a technician in Texas to monitor the operation of the equipment. In July 1993, the Department assured Aerotron that it would pay its outstanding bill by the end of its fiscal year, August 31. But in August, the Department said that it could not pay Aerotron out of its current budget and would pay in early September.
In a letter dated September 9, 1993, Aerotron's president Andrew Kostantinidis again requested payment, detailing the hardships that the Department's failure to pay had caused the company, forcing it to file Chapter 11 bankruptcy. Kostantinidis noted that, to satisfy the Department's complaints, the company had made nine separate modifications to the equipment, none of which he believed were required by the specifications. "I believe there is no end to what we are being asked to do to modify our radio equipment," wrote Kostantinidis. Kostantinidis closed by saying that Aerotron The Department's response came October 21, 1993; instead of sending payment, it announced it would return all radios accepted but not paid for,4 demanded that Aerotron fix all the radios it had paid for or refund the entire $396,804, and canceled all pending orders. In the same letter, the Department conceded that Aerotron had "incurred considerable cost in attempting to fix the radios" and that the president of Aerotron, the technician, and the engineering staff had spent "countless hours" working on the problem. The Department added that it shared Aerotron's "frustration" but believed that Aerotron had been given sufficient time to fix the radios. Aerotron's suit for breach of contract followed.
It has long been recognized that sovereign immunity protects the State from lawsuits for damages, absent legislative consent to sue the State. See, e.g., Federal Sign v. Texas S. Univ., 951 S.W.2d 401, 405(Tex. 1997). The term "sovereign immunity" actually includes two principles: immunity from suit and immunity from liability. See id. Immunity from suit bars legal action against the State, even if the State acknowledges liability for the asserted claim, unless the legislature has give consent to sue. See id. Immunity from liability protects the State from judgments even if the legislature has expressly given consent to sue. See id. When the State enters into a contract with a private entity, it gives up its immunity from liability but not its immunity from suit. See id.
In Federal Sign, the plaintiff company signed a contract with Texas Southern University ("TSU") to construct and deliver basketball scoreboards to TSU. Seven months later, before the scoreboards were delivered, TSU indicated it had decided to secure the scoreboards from another source. Federal Sign sued for breach of contract, asserting damages for lost profits and expenses. The trial court overruled TSU's plea to the jurisdiction, submitted the case to a jury, and rendered judgment on the jury verdict in favor of Federal Sign. On appeal, the supreme court considered a narrow issue: whether the State waives its immunity from suit by contracting with a private citizen. The majority held: "The act of contracting does not waive the State's immunity from suit." Federal Sign, 951 S.W.2d at 408. The court went on to explain, however, that its decision was limited to the particular facts presented:
We hasten to observe that neither this case nor the ones on which it relies should be read too broadly. We do not attempt...
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