Integ Corp. v. Hidalgo Cnty. Drainage Dist. No. 1
| Decision Date | 21 November 2019 |
| Docket Number | NUMBER 13-18-00123-CV |
| Parties | INTEG CORPORATION AND GODFREY GARZA JR., Appellants, v. HIDALGO COUNTY DRAINAGE DISTRICT NO. 1, ET AL., Appellees. |
| Court | Texas Court of Appeals |
On appeal from the 275th District Court of Hidalgo County, Texas.
Before Chief Justice Contreras and Justices Rodriguez and Benavides1
Integ Corporation, which was wholly owned by Godfrey Garza, Jr., was hired byHidalgo County Drainage District No. 1 (HCDD), to serve as HCDD's manager in 2000 and it held the position until 2014. In 2017, HCDD sued Integ and Garza based on events arising out of that relationship and also sued Valley Data Collection Specialists, Inc. (Valley Data), Annie Q. Garza, Godfrey Garza, III, and Jonathon Garza (the individual defendants). Integ and Garza counterclaimed. The trial court granted a plea to the jurisdiction filed by HCDD and dismissed the counterclaim. The trial court also granted summary judgment dismissing HCDD's claims.
By a single issue, Integ/Garza, appellants and cross-appellees, appeal from the grant of HCDD's plea to the jurisdiction. Cross-appellant and appellee HCDD appeals from the dismissal of its claims against Integ/Garza, Valley Data and the individual defendants for breach of fiduciary duty, fraud, breach of contract, civil conspiracy, unjust enrichment, and constructive trust.2
Because resolution of Integ/Garza's plea to the jurisdiction depends in part on whether any of HCDD's claims against Integ/Garza remain viable, we address HCDD's issues first. By four issues and multiple sub-issues, HCDD challenges the trial court's grant of the motions for no-evidence and traditional summary judgment against it and argues that the trial court abused its discretion by denying its motions to continue the summary judgment hearings and trial date. Cross-appellees Valley Data, and the individual defendants responded to HCDD's challenge to the trial court's grant of summary judgment but seek no affirmative relief. We reverse and remand in part andaffirm in part.
HCDD is a division of local government that is operated by the Hidalgo County Commissioners' Court, which sits as its Board of Directors. See TEX. WATER CODE ANN. §§ 49.001, 49.051, 49.054. Beginning in approximately 1995, HCDD hired Garza as an employee manager of HCDD, a position he held for four or five years. After that time, Garza planned to leave because he wanted to make more money in the private sector. Alternatively, he proposed to the Commissioners' Court that they hire Integ to become the manager and allow the company to take on outside work. The Commissioners' Court agreed and simultaneously accepted Garza's resignation and approved a management consulting agreement (MCA) with Integ on October 3, 2000. See id. § 49.057(a). Integ was paid a flat fee on a monthly basis. That fee increased annually and came to include a car and telephone allowance. In 2007, Garza approached the Commissioners' Court with the idea of increasing his work and pay to include construction management for a project arising from a bond issue of approximately $100,000,000 approved by the voters, the Phase II drainage project. In exchange for the extra work, Garza proposed that he be paid a fee of one and a half percent based upon "actual construction costs," excluding land acquisition involved in the project. After a discussion that included safeguards for HCDD finances, the Commissioners' Court approved the new contract for a three-year period.
Garza continued to maintain his office at HCDD, his name remained on HCDD's letterhead as District Manager, and Garza continued to use HCDD's email address asbefore but Integ was not mentioned. Integ's responsibilities for HCDD, as enumerated in the MCA, included: to "perform the services herein contemplated faithfully, diligently, to the best of Integ's ability, consistent with all applicable laws, and all applicable local, state and federal regulations," to "perform management and compliance of the programs as specified by local, state and federal regulations," to "establish and maintain necessary standards of performance to assure activities and projects of the District comply with plans, applicable laws and regulations," to "exercise discretion and judgment in matters not covered by this Agreement and/or policies of the District," and to "communicate with the District's attorney on matters in litigation or potential litigation except as otherwise directed by the Board of Directors." Notably, the MCA was personal to Garza. HCDD was entitled to terminate the MCA on the death of Garza or injury or illness that would be reasonably likely to lead to the inability of Integ to perform services for a period in excess of thirty days. Three items were added to Integ's list of duties in 2007 to encompass the broadened MCA.
Integ employed only Garza and his wife Annie Garza who performed office work for Integ intermittently. According to the terms of the MCA, Integ was an independent contractor, not an employee of HCDD. The MCA obligated HCDD to purchase general liability and errors and omissions insurance to cover Integ. Although the MCA permitted Integ to handle outside work, it included a conflict of interest provision that required Integ to advise the Board of the nature of Integ's outside work and required Integ to turn down work if a majority of the Board deemed it to be a conflict of interest and also required that any outside work "not impair the fulfillment of Integ's obligations under the [MCA]."
Garza has two sons, Godfrey Garza, III (Trey) and Jonathon Garza, who formed Valley Data in 2004. Although Valley Data did not employ any licensed surveyors or licensed engineers, Valley Data provided surveying, geotechnical, and field engineering work for engineering companies that were doing work on drainage projects. Beginning in approximately 2006, Valley Data began doing large amounts of work for Tedsi Infrastructure Group (Tedsi), a local engineering firm, as a subcontractor for HCDD projects. Over time, Valley Data performed the same kind of work for other engineering firms, including Dannenbaum Engineering, who also held prime contracts with HCDD. In 2012, Annie Garza acquired Valley Data. Although Valley Data was not paid by HCDD, Valley Data was paid by companies who were paid by HCDD.
Lora Briones became the chief financial officer of HCDD in 2003. She reported to Garza. Briones testified that the 2007 contract concerned her, especially since she was required to compute the construction management fee.
Briones also learned informally from a Dannenbaum employee in 2008 that Valley Data was subcontracted to Dannenbaum on a HCDD contract but she did not know the extent of the work that Valley Data was performing. In 2014, Briones came across documentation of payments to Valley Data on HCDD contracts. At that time, she brought the information to the attention of county judge, Ramon Garcia. She also took the information to the FBI and to the Texas Attorney General because she was concerned about the undisclosed conflict of interest.
Between 2007 and 2014, Integ and Valley Data were paid millions of dollars from HCDD tax dollars. In October 2014, HCDD hired the Lee Firm in Corpus Christi toinvestigate whether it had claims against Integ/Garza. During the investigation, Michael Lee interviewed Briones, Ray Eufracio, and Steve Crain (HCDD's attorney). Lee gave a written report to the Commissioners in 2015. In his report, Lee discussed a project in which the federal Department of Homeland Security (DHS) planned to build a border wall on top of levees that were improved to protect Hidalgo County from flooding. Lee concluded that in February 2007 when the Commissioners' Court approved the MCA for construction management with Integ, it did not contemplate the federal wall/levee project which did not occur until later that year. As a result, according to Lee, there could have been no meeting of the minds that the federal project was part of the Phase II drainage project. The federal government put up $178 million for the DHS project. HCDD contributed an initial $28 million from the HCDD bond issue that was approved by the Commissioners' Court.3 Later on, according to the Lee report, HCDD contributed another $30 million. Lee also concluded that "actual construction costs" in the MCA meant something less than "total construction costs" as defined by the General Accounting Standards Boards Statement 34 which includes land acquisition and all preliminary engineering work. From the context of the discussion between the parties at the February 2007 Commissioners' Court meeting and other research, Lee determined that the term "actual construction costs" meant "direct construction costs for labor, material, equipment, services, contractors overhead and profit, not including compensation to the architect, and engineer and consultants, the cost of land, right-of-way, or other costs." Lee noted that Crain disagreed and took the broader view that"actual construction costs" included everything except land acquisition costs. Crain also took the view that the 2007 to 2013 MCAs included construction management on the DHS project.
In 2017, HCDD filed suit against Integ, Garza, Valley Data and the individual defendants. HCDD's original petition alleged: breach of fiduciary duty, fraud, negligent misrepresentation, breach of contract, civil conspiracy, unjust enrichment, and constructive trust. Integ/Garza filed a general denial, raised affirmative defenses of limitations, estoppel, ratification, unclean hands, waiver, laches, circuity of action doctrine, failure to exhaust administrative procedures, and brought a counterclaim for breach of contract for failure to carry insurance as required. Valley Data and the individual defendants filed a general denial to HCDD's claims and asserted the affirmative defenses of...
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