Alternatives Unlimited, Inc. v. Raymondville Independent School District

• Court: Court of Appeals of Texas
• Decided: March 20, 2014
• Docket: 13-13-00363-CV
• Status: Published

Opinion

NUMBER 13-13-00363-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI – EDINBURG

ALTERNATIVES UNLIMITED, Appellant, INC., v.

RAYMONDVILLE INDEPENDENT SCHOOL DISTRICT, Appellee.

On appeal from the 197th District Court of Willacy County, Texas.

MEMORANDUM OPINION Before Justices Garza, Benavides and Perkes Memorandum Opinion by Justice Garza Appellant, Alternatives Unlimited, Inc. (“AU”), challenges the trial court’s judgment

granting a plea to the jurisdiction filed by appellee, Raymondville Independent School

District (“RISD”). By two issues, AU contends the trial court erred in (1) finding that a

contract between the parties had not been properly executed and (2) failing to apply the waiver by conduct theory. We affirm.

I. BACKGROUND

AU sued RISD on March 25, 2013, alleging breach of contract and breach of the

duty of good faith and fair dealing. AU’s original petition alleged that RISD approached

AU in 2012 to discuss the possibility of AU providing Supplemental Educational Services

(“SES”)1 to one of RISD’s constituent institutions, Raymondville High School (“RHS”).

According to AU, on or about May 16, 2012, RHS principal Benjamin Clinton sent AU an

SES contract via facsimile and stated that “all it needed was for AU to sign the contract

and return it to [RISD] in order to begin services.” AU contends that its vice-president

signed the contract and returned it to RISD that same day. A copy of the contract was

attached to AU’s petition.

AU alleges that, pursuant to the contract, it entered “the agreed upon billing rate

for AU’s SES tutoring services” into EZSES, an online system for managing SES services.

AU contends that, on or about June 18, 2012, RISD Superintendent Johnny Pineda

approved the billing rate that was entered into the EZSES system, and that RISD began

assigning eligible students to AU shortly thereafter. AU’s petition states that it submitted

student learning plans into the EZSES system and that RISD approved the plans through

that system.

AU claims that it then began tutoring services on June 22, 2012 and completed

those services on or about July 31, 2012. It claims that it submitted invoices to RISD on

1 SES refers to a provision of the No Child Left Behind Act of 2001 under which public schools

designated as in need of improvement are required to offer tutoring and other extra academic help, through state-approved providers, to children of low-income families. See 20 U.S.C. § 6316(e); see also Description of Supplemental Educational Services, U.S. DEP’T OF EDUC., http://www.ed.gov/nclb/choice/help/ses/ description.html (last visited Mar. 2013).

2 July 16, 2012 and August 15, 2012.2 According to AU, RISD paid the first invoice in the

amount of $8,933.33 but did not pay amounts due under the second invoice. RISD later

refused to pay amounts allegedly due under the second invoice and disputed the

existence of a contract. AU claimed that this constituted breach of contract and breach

of the duty of good faith and fair dealing. It sought $25,790 in damages plus attorney’s

fees.

RISD filed an answer denying AU’s allegations and a plea to the jurisdiction

contending that it is immune from suit as a local government entity and that its immunity

has not been waived. Although governmental immunity from suit may be waived with

respect to certain contract claims, see TEX. LOC. GOV’T CODE ANN. § 271.152 (West 2005),

RISD argued that it never formally executed a contract with AU. RISD noted that the

purported contract attached to AU’s petition did not contain the signature of any

representative of RISD. RISD further argued that, even if the purported contract had been

executed, it is not enforceable because it was not ratified by the superintendent or the

school board. RISD did not attach evidence to its plea.

AU filed a response to RISD’s plea asserting that governmental immunity does not

bar its suit because: (1) RISD waived immunity by entering into a contract with AU; (2)

RISD assented to the contract, thereby making the contract enforceable and triggering

the waiver of immunity under local government code section 271.152, by “taking

deliberate actions indicating it had indeed consented to [its] terms”; and (3) RISD waived

immunity by its conduct.

After a hearing, the trial court granted the plea and dismissed AU’s suit. This

2AU states in its petition that the invoices are attached as exhibits thereto. However, the record does not contain copies of the invoices.

3 appeal followed.

II. DISCUSSION

A. Standard of Review

In reviewing whether a plea to the jurisdiction was properly granted, we first look

to the pleadings to determine if jurisdiction is proper, construing them liberally in favor of

the plaintiff and looking to the pleader’s intent. City of Waco v. Kirwan, 298 S.W.3d 618,

622 (Tex. 2009) (citing Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226–

27 (Tex. 2004)). If the pleadings neither affirmatively demonstrate nor negate jurisdiction,

the plaintiff should be given an opportunity to amend the pleadings. Id. If a plea to the

jurisdiction challenges the existence of jurisdictional facts, we consider relevant evidence

submitted by the parties when necessary to resolve the jurisdictional issues raised, even

where those facts may implicate the merits of the cause of action. Id. In considering this

evidence, we take as true all evidence favorable to the nonmovant and indulge every

reasonable inference and resolve any doubts in the nonmovant’s favor. Id. If the

evidence creates a fact issue as to jurisdiction, then it is for the fact-finder to decide. Id.

However, if the relevant evidence is undisputed or fails to raise a fact question on

jurisdiction, the plea to the jurisdiction is ruled on as a matter of law. Id. (citing Miranda,

133 S.W.3d at 228).

B. Applicable Law

The doctrine of sovereign immunity provides that “no state can be sued in her own

courts without her consent, and then only in the manner indicated by that consent.” Tooke

v. City of Mexia, 197 S.W.3d 325, 331 (Tex. 2006) (citing Hosner v. DeYoung, 1 Tex. 764,

769 (1847)). Governmental immunity operates like sovereign immunity to afford similar

4 protection to subdivisions of the State, including counties, cities, and school districts.

Harris Cnty. v. Sykes, 136 S.W.3d 635, 638 (Tex. 2004).

In Texas, governmental immunity has two components: (1) immunity from liability,

which bars enforcement of a judgment against a governmental entity, and (2) immunity

from suit, which bars suit against the entity altogether. Tooke, 197 S.W.3d at 332.

Immunity from liability is an affirmative defense that must be pleaded or else is waived.

Kinnear v. Tex. Comm’n on Human Rights, 14 S.W.3d 299, 300 (Tex. 2000). Immunity

from suit, on the other hand, deprives a court of subject matter jurisdiction. Miranda, 133

S.W.3d at 224. By entering into a contract, a governmental entity necessarily waives

immunity from liability, voluntarily binding itself like any other party to the terms of

agreement. Tooke, 197 S.W.3d at 332. However, the act of entering into a contract does

not waive immunity from suit; instead, we defer to the legislature to waive immunity from

suit because this allows the legislature to protect its policymaking function. Id. This is

particularly true in the context of contract claims, where “legislative control over sovereign

immunity allows the legislature to respond to changing conditions and revise existing

agreements if doing so would benefit the public.” Id. Accordingly, governmental immunity

may be waived only by “clear and unambiguous” statutory language. Id. at 332–33; see

TEX. GOV’T CODE ANN. § 311.034 (West 2005) (“In order to preserve the legislature’s

interest in managing state fiscal matters through the appropriations process, a statute

shall not be construed as a waiver of sovereign immunity unless the waiver is effected by

clear and unambiguous language.”).

Section 271.152 of the Texas Local Government Code provides:

A local governmental entity that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this

5 subchapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of the contract, subject to the terms and conditions of this subchapter.

TEX. LOC. GOV’T CODE ANN. § 271.152. A “contract subject to this subchapter” is defined

as “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) (West 2005). A school district such as RISD is a

“local government entity” for purposes of the statute. See id. § 271.151(3)(B).

C. Analysis

AU concedes that the contract at issue was not signed by an authorized agent of

RISD; instead, it contends that RISD “properly executed” the contract by “manifesting

unconditional assent” to its terms by its conduct. AU argues by its first issue that, because

the contract was “properly executed,” the waiver of immunity provided by the local

government code applies. See id. § 271.152. By its second issue, AU contends that,

even if the statutory waiver of immunity does not apply, the trial court should have

concluded that RISD waived its immunity by virtue of its conduct. In response, RISD

contends that the purported contract was not “properly executed” because it was not

signed by an RISD representative.3 Because AU’s issues both turn on whether a

governmental unit may waive immunity by conduct other than signing a contract, we

address them together.

“Contracts require mutual assent to be enforceable,” and “[e]vidence of mutual

assent in written contracts generally consists of signatures of the parties and delivery with

3 RISD also contends that the contract was not “properly executed” because (1) the RHS principal

lacked authority to bind RISD, and (2) the RISD school board did not approve of the contract in compliance with the Texas Open Meetings Act. Because of our conclusion herein, we need not address whether the contract was not “properly executed” for these alternate reasons.

6 the intent to bind.” Baylor Univ. v. Sonnichsen, 221 S.W.3d 632, 635 (Tex. 2007).

However, as AU notes, the Texas Supreme Court has recognized “that a contract need

not be signed to be ‘executed’ unless the parties explicitly require signatures as a

condition of mutual assent.” Mid-Continent Cas. Co. v. Global Enercom Mgmt., Inc., 323

S.W.3d 151, 157 (Tex. 2010).

If a written draft of an agreement is prepared, submitted to both parties, and each of them expresses his unconditional assent thereto, there is a written contract. If there is a writing, there need be no signatures unless the parties have made them necessary at the time they express their assent and as a condition modifying that assent. An unsigned agreement all the terms of which are embodied in a writing, unconditionally assented to by both parties, is a written contract.

Id. (ellipses and citations omitted). In Mid-Continent, the appellant insurance company

sought to invalidate an indemnity agreement between its insured, All States, and

appellee, Global. Id. at 156. Mid-Continent argued that the contract was invalid because

appellee, after receiving the contract from the insured, did not sign the agreement. Id. at

157. The Court disagreed, noting:

Global offered the contract to All States, and All States accepted not only by signing and faxing the agreement back to Global, but also by beginning performance on the contract work. . . . Further, there was mutual assent to All States’s work by Global. All States and Global agree that the insured contract was effective, and the companies were operating under that agreement when the accident occurred.

Id. Because there was no evidence indicating that the parties intended for signatures to

be required, the insurance policy was enforceable. Id. at 157–58.

AU contends that this case is analogous to Mid-Continent. It argues that RISD

manifested its assent to the agreement by approving the billing rate and student learning

plans that were entered into the EZSES system and by paying amounts due under AU’s

July 2012 invoice.

7 We agree with AU that there appears to be a fact issue regarding whether RISD,

by its conduct, manifested its assent to the terms of the purported agreement. However,

Texas courts have consistently rejected the argument that immunity may be waived by

virtue of the conduct of the governmental unit. See Tex. A&M Univ. Sys. v. Koseoglu,

233 S.W.3d 835, 840 (Tex. 2007) (“[The plaintiff] advances a waiver-by-conduct

argument . . . but we have consistently rejected that position and held that ‘the State does

not waive its immunity from a breach-of-contract action by accepting the benefits of a

contract.’”) (quoting Gen. Servs. Comm’n v. Little-Tex Insulation Co., 39 S.W.3d 591, 598

(Tex. 2001)); Tex. Natural Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 857

(Tex. 2002) (“Creating a waiver-by-conduct exception would force the State to expend its

resources to litigate the waiver-by-conduct issue before enjoying sovereign immunity’s

protections—and this would defeat many of the doctrine’s underlying policies.”); see also

La Joya Indep. Sch. Dist. v. Bio-Tech Solutions, Inc., No. 13-07-00484-CV, 2009 WL

1089459, at *4 (Tex. App.—Corpus Christi Apr. 23, 2009, no pet.) (mem. op.); Patterson

v. Gulf Marine Inst. of Tech., No. 13-06-067-CV, 2008 WL 525424, at *8 (Tex. App.—

Corpus Christi Feb. 28, 2008, pet. denied) (mem. op.). Mid-Continent is distinguishable

because it did not involve a governmental entity. See 323 S.W.3d at 153.

Our opinion in Vantage Systems Design, Inc. v. Raymondville Independent School

District, 290 S.W.3d 312 (Tex. App.—Corpus Christi 2009, writ ref’d n.r.e.), is also

instructive. 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”

8 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.

AU nevertheless argues that a governmental unit may waive immunity by its

conduct in “extraordinary factual circumstances,” relying on Texas Southern University v.

State Street Bank & Trust Co., 212 S.W.3d 893 (Tex. App.—Houston [1st Dist.] 2007,

pet. denied). In State Street, the First Court of Appeals held that sovereign immunity did

not bar a breach-of-contract suit against a public university because of the “extraordinary

factual circumstances” involved in that case. Id. at 908 (citing IT-Davy, 74 S.W.3d at 862

(Hecht, J., concurring) (“I cannot absolutely foreclose the possibility that the State may

waive immunity in some circumstances other than by statute.”)). The facts in State Street

included the following: (1) the university notified the contractor that its board of regents

had approved an agreement for the contractor to audit the university’s energy system; (2)

university officials instructed the contractor to commence the audit; (3) the university’s

general counsel stated that the audit agreement was “acceptable for final execution”; (4)

the contractor completed the audit; (5) the contractor then submitted a proposal to the

university to perform six energy conservation projects; (6) the university’s board of

regents authorized approval of the projects and the university president executed the

agreement; and (7) the university’s general counsel informed the auditor that an

equipment lease agreement needed for the projects was “duly authorized by all necessary

action on the part[] of [the university]” and was “legal, valid and binding.” Id. at 907–08.

Similar “extraordinary” factual allegations are absent from this case. In particular,

9 AU does not contend, as the contractor in State Street did, that “government officials lured

[it] into the [contract] with false promises that the contract would be valid and enforceable,

then disclaimed any obligation on the contract by taking the position that the contract was

not valid after all.” Id. at 908; see Employees Ret. Sys. of Tex. v. Putnam, LLC, 294

S.W.3d 309, 327 n.17 (Tex. App.—Austin 2009, no pet.) (distinguishing State Street on

the basis that the governmental unit’s conduct did not rise to the level of “extraordinary

factual circumstances”); Seureau v. ExxonMobil Corp., 274 S.W.3d 206, 225 (Tex. App.—

Houston [14th Dist.] 2008, no pet.) (“Waiver by conduct is not warranted in ordinary

contract disputes.”); see also City of Deer Park v. Ibarra, No. 01-10-00490-CV, 2011 WL

3820798, at *7 (Tex. App.—Houston [1st Dist.] Aug. 25, 2011, no pet.) (mem. op.)

(distinguishing State Street on the basis that there were no “extraordinary factual

circumstances” and noting that “[t]here is no allegation that the City lured the workers into

performing their jobs with false promises”).

Even if AU was able to show “extraordinary factual circumstances,” we note that

State Street has been disavowed by at least one other court of appeals. See Leach v.

Tex. Tech Univ., 335 S.W.3d 386, 401 (Tex. App.—Amarillo 2011, pet. denied)4; Ahmed

v. Tex. Tech Univ. Health Sci. Ctr. Sch. of Med. at Amarillo, No. 07-11-00176-CV, 2013

4 In Leach, the Amarillo Court of Appeals stated:

[State Street] contradicts the Supreme Court’s statements in Little-Tex [39 S.W.3d 591, 598 (Tex. 2001)], IT-Davy [74 S.W.3d 849, 857 (Tex. 2002)], and [Texas Parks & Wildlife Department v. E.E. Lowrey Realty, Ltd., 235 S.W.3d 692, 695 n.2 (Tex. 2007)] about the only avenue for redress being through the Texas Legislature. If the highest civil court in Texas truly means what it said, then the holding in State Street simply is wrong. If, on the other hand, there may still be instances akin to those in State Street warranting the application of waiver by conduct, then the Supreme Court’s utterances about the legislature having the exclusive authority to waive sovereign immunity are inaccurate. In either case, it is a matter for the Supreme Court (or Texas Legislature) to resolve, and we have no choice but to abide by their decision.

Leach v. Tex. Tech Univ., 335 S.W.3d 386, 401 (Tex. App.—Amarillo 2011, pet. denied).

10 WL 265076, at *6 (Tex. App.—Amarillo Jan. 23, 2013, no pet.) (mem. op.). Moreover,

since State Street, the Texas Supreme Court has reaffirmed its stance against waiver-by-

conduct in governmental immunity cases. See Sharyland Water Supply Corp. v. City of

Alton, 354 S.W.3d 407, 414 (Tex. 2011). In Sharyland, the Court stated that “[c]reating a

waiver-by-conduct exception would force the State to expend its resources to litigate the

waiver-by-conduct issue before enjoying sovereign immunity’s protections—and this

would defeat many of the doctrine's underlying policies.” Id. (citing IT-Davy, 74 S.W.3d

at 857). The Court further noted that “the Legislature had enacted comprehensive

schemes that allow contracting parties to resolve breach-of-contract claims against the

government” and that “[b]y providing these avenues for redress, the Legislature has

balanced competing private and public interests—a balance that would be thwarted if we

allowed waiver-by-conduct exceptions in breach-of-contract actions against the

government.” Id.

In light of the Supreme Court’s opinion in Sharyland and the specific facts of this

case, we conclude that RISD did not waive governmental immunity by its conduct. The

trial court therefore did not err in granting RISD’s plea to the jurisdiction. AU’s issues are

overruled.

III. CONCLUSION

We affirm the trial court’s judgment.

DORI CONTRERAS GARZA, Justice

Delivered and filed the 20th day of March, 2014.