City of San Antonio v. Wheelabrator Air Pollution Control, Inc.

• Decision Date: 01 August 2012
• Docket Number: No. 04–11–00821–CV.,04–11–00821–CV.
• Citation: 381 S.W.3d 597
• Parties: CITY OF SAN ANTONIO, Acting By and Through CITY PUBLIC SERVICE BOARD a/k/a CPS Energy, Appellant, v. WHEELABRATOR AIR POLLUTION CONTROL, INC., Appellee.
• Court: Texas Court of Appeals

381 S.W.3d 597

CITY OF SAN ANTONIO, Acting By and Through CITY PUBLIC SERVICE BOARD a/k/a CPS Energy, Appellant,

v.WHEELABRATOR AIR POLLUTION CONTROL, INC., Appellee.

No. 04–11–00821–CV.

Court of Appeals of Texas, San Antonio.

Aug. 1, 2012.

Annalyn G. Smith, Schmoyer Reinhard LLP, Judith R. Blakeway, Strasburger & Price, L.L.P., Kristen H. Elizondo, Bracewell & Giuliani, LLP, San Antonio, TX, Kimberly S. Keller, The Keller Law Firm, Boerne, TX, for Appellant.

Charles Thomas Kruse, Matthew W. Caligur, Baker & Hostetler, LLP, Houston, TX, for Appellee.

Sitting: PHYLIS J. SPEEDLIN, Justice, STEVEN C. HILBIG, Justice, MARIALYN BARNARD, Justice.

OPINION

Opinion by: PHYLIS J. SPEEDLIN, Justice.

The City of San Antonio, acting by and through CPS Energy ¹ (hereinafter “CPS”), appeals the trial court's denial of its plea to the jurisdiction in this lawsuit by Wheelabrator Air Pollution Control, Inc. in which it asserts a breach of contract claim and, alternatively, a quasi-contractual quantum meruit claim to recover a 10% contract retainage withheld by CPS. This interlocutory appeal raises a question of first impression—whether the governmental/proprietary distinction employed in the Texas Tort Claims Act applies in a contractual or quasi-contractual setting to determine whether a municipality is immune from suit. We hold that the governmental/proprietary distinction does not apply, and conclude CPS is immune from suit on the quantum meruit claim. Accordingly, we reverse the trial court's order denying CPS's plea to the jurisdiction, render judgment dismissing Wheelabrator's quantum meruit claim for want of jurisdiction, and remand the cause to the trial court for further proceedings.²

Factual and Procedural Background

Contract for Project. On or about August 5, 2004, Wheelabrator Air Pollution Control, Inc. (“Wheelabrator”) and Casey Industrial, Inc. (“Casey”) entered into a written contract with CPS for the design and construction of two baghouses at the J.T. Deely Station, a coal-fired power station owned and operated by CPS. A baghouse traps fly ash, a coal byproduct, before it enters the air, providing a reduction in emissions from a power station. CPS agreed to pay $41,818,460 to Wheelabrator and $43,541,737 to Casey for their roles in the project. Wheelabrator was involved in the engineering design and procurement, while Casey was involved in the actual construction of the baghouse units. The contract provided that CPS would withhold from Wheelabrator 10% of the total contract price ($4,173,099) as retainage. CPS fully paid Wheelabrator its contract price, except for the agreed upon 10% retainage. When Wheelabrator sought payment of the retainage in 2007, contending it had fully and timely performed, CPS informed Wheelabrator that it was going to withhold payment of the retainage pending resolution of the claims asserted by Casey against CPS. Casey sought to recover an additional $12,000,000 from CPS for costs of delay it alleged were caused by Wheelabrator. Eventually, both Casey and Wheelabrator filed suit against CPS.

Casey Lawsuit. In 2008, Casey filed suit against CPS asserting claims of breach of contract, implied contract/quasi-contract, and quantum meruit. The litigation proceeded for three years before Wheelabrator separately filed suit against CPS. Casey filed a summary judgment motion, asserting that the three-party contract entered into by CPS, Wheelabrator, and Casey is void due to violations of Texas' procurement law requiring competitive bidding, and that Casey should therefore be allowed to recover in quantum meruit for additional work it performed. The City, acting on behalf of CPS, filed its own summary judgment motion asserting the contract is valid and that Casey is barred from any equitable recovery outside the contract. After a hearing, the trial court denied the City's motion and granted Casey's summary judgment motion, finding that the contract is void and that Casey “is entitled to prove liability, if any, and damages, if any, under the doctrine of quantum meruit.” The City also filed a plea to the jurisdiction asserting it is immune from suit for additional work or quantum meruit; the trial court denied the plea. The City is appealing both rulings in the Casey appeal—the summary judgment order finding the contract is void, and the denial of its plea to the jurisdiction asserting immunity from the quantum meruit claim.

Wheelabrator Lawsuit. Wheelabrator filed suit against CPS on August 23, 2011, seeking to recover the $4,173,099 in retainage funds under a breach of contract claim and, alternatively, a quantum meruit claim.³ CPS filed a plea to the jurisdiction asserting immunity from suit because there is no waiver of sovereign immunity for contractual claims outside the scope of Chapter 271 of the Local Government Code or for quantum meruit claims in equity. Wheelabrator responded that CPS does not have any immunity from suit for functions taken in its proprietary capacity, such as operation of a public utility, and even if it had immunity, it has waived it through its conduct; therefore, Wheelabrator's quantum meruit claim should survive. Wheelabrator's pleadings allege that CPS “is not immune from suit by virtue of the express terms of the Agreement, and by virtue of Chapter 271 of the Texas Local Government Code.”

At the end of a hearing on the plea to the jurisdiction, the trial court denied CPS's plea. The court's written order finding CPS is “not immune from suit for claims for additional work or quantum meruit,” and denying the plea to the jurisdiction, was signed on November 15, 2011. CPS now appeals that finding. SeeTex. Civ. Prac. & Rem.Code Ann. § 51.014(a)(8) (West Supp.2011).

Standard of Review

Subject matter jurisdiction is necessary for a court to have the authority to resolve a case. Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443 (Tex.1993). Sovereign and governmental immunity from suit deprive a trial court of subject matter jurisdiction. Reata Const. Corp. v. City of Dallas, 197 S.W.3d 371, 374 (Tex.2006). To invoke a trial court's subject matter jurisdiction over a claim against a governmental entity, the plaintiff must allege a valid waiver of immunity from suit and plead sufficient facts demonstrating the trial court's jurisdiction. Tex. Dept. of Parks and Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex.2004); Tex. Ass'n of Bus., 852 S.W.2d at 446. A governmental entity properly raises immunity through a plea to the jurisdiction. Reata, 197 S.W.3d at 374. In reviewing a trial court's ruling on a plea to the jurisdiction, we do not examine the merits of the cause of action, but consider only the plaintiff's pleadings and any evidence relevant to the jurisdictional inquiry. Miranda, 133 S.W.3d at 227;County of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex.2002). We construe the pleadings liberally in favor of jurisdiction, and accept the pleadings' factual allegations as true. Miranda, 133 S.W.3d at 226. The existence of subject matter jurisdiction is a question of law that we review de novo. Tex. Nat'l Res. Conservation Comm'n v. IT–Davy, 74 S.W.3d 849, 855 (Tex.2002); Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928 (Tex.1998).

Immunity From Suit

On appeal, CPS contends the trial court does not have jurisdiction over Wheelabrator's quantum meruit claim because (i) the legislature has not waived CPS's immunity from suit for quantum meruit claims, (ii) the proprietary-governmental dichotomy has not been extended beyond the tort claim context, and (iii) CPS did not waive its immunity from suit by its conduct.

Presumption of Governmental Immunity

Sovereign immunity protects the State, as well as its agencies and officials, from lawsuits for damages and from liability. Ben Bolt–Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivs. Prop./Cas. Joint Self–Ins. Fund, 212 S.W.3d 320, 323–24 (Tex.2006) (sovereign is immune from both liability and suit). “The appurtenant common-law doctrine of governmental immunity similarly protects political subdivisions of the State, including counties, cities, and school districts.” Id. at 324;City of Houston v. Williams, 353 S.W.3d 128, 134 n. 5 (Tex.2011) (noting distinction between sovereign and governmental immunity). Political subdivisions of the State, such as the City of San Antonio, have governmental immunity from suit unless the Legislature has expressly waived such immunity by statute. Williams, 353 S.W.3d at 134;Ben Bolt, 212 S.W.3d at 324. A statute shall not be construed as waiving immunity unless the waiver is effected by “clear and unambiguous” language. Tex. Gov't Code Ann. § 311.034 (West Supp.2011); Williams, 353 S.W.3d at 134. It has long been recognized that it is the Legislature's sole province to waive immunity from suit. IT–Davy, 74 S.W.3d at 853–54. On the other hand, a political subdivision may waive its immunity from liability by entering into a contract with a private party. Id. at 854. Only immunity from suit operates as a jurisdictional bar; immunity from liability constitutes an affirmative defense. Williams, 353 S.W.3d at 134;Miranda, 133 S.W.3d at 224.

Limited Legislative Waiver of Immunity for Certain Contract Claims

The Legislature has clearly and unambiguously waived a governmental entity's immunity from suit for certain contractual claims. Ben–Bolt, 212 S.W.3d at 327. Chapter 271 of the Local Government Code expressly waives qualifying local governmental entities' immunity from suit for certain breach of contract claims. Tex. Loc. Gov't Code Ann.. §§ 271.151–.160 (West 2005 & Supp.2011). For section 271.152's limited waiver to apply, three elements must be established: (1) the party against whom waiver is asserted must be a “local governmental entity,” (2) authorized to enter into contracts, and (3) the entity must have in fact entered into a “contract subject to this subchapter.” Williams, 353 S.W.3d at 134;Tex. Loc. Gov't Code Ann.. § 271.152 (West 2005). A ...