City of Houston v. Southern Electrical Services, Inc., as Assignee of the Caddell Construction Company, Inc.

• Court: Court of Appeals of Texas
• Decided: April 26, 2007
• Docket: 01-06-00180-CV
• Status: Published

Opinion

Opinion issued April 26, 2007

In The

Court of Appeals

For The

First District of Texas

NO. 01-06-00180-CV

THE CITY OF HOUSTON, Appellant

V.

SOUTHERN ELECTRICAL SERVICES, INC. AND

CADDELL CONSTRUCTION CO. INC., Appellees

On Appeal from the 165th District Court

Harris County, Texas

Trial Court Cause No. 2005-41564

MEMORANDUM OPINION

Appellant, the City of Houston (the City), appeals the trial court's order denying the City's plea to the jurisdiction, which asserted that the trial court did not have subject-matter jurisdiction over the claim asserted by appellee Southern Electrical Services, Inc. (SES) because (1) SES had failed to plead and could not demonstrate a waiver of the City's "sovereign/governmental immunity" ⁽¹⁾ and (2) SES did not have standing to bring a cause of action for breach of contract and, therefore, the trial court should not have granted leave to amend SES's petition to add Caddell Construction Co. Inc. (Caddell) as a plaintiff. On appeal, appellant raises these same two issues and also asserts a third jurisdictional defect: the Department of Labor has exclusive jurisdiction over the alleged underpayment of the prevailing wage rate. ⁽²⁾ We reverse and remand.

BACKGROUND

Caddell, a general contractor, entered into an agreement for improvements to Terminal A North Concourse at George Bush Intercontinental Airport. Caddell then requested bids from subcontractors for the work. The City provided documents certifying the applicable prevailing wage rate, which subcontractors were required to pay their workers because federal funds were involved. SES prepared a bid using the City's wage documents and was awarded a contract by Caddell. SES later learned that the City's published wage rate was lower than the true prevailing wage rate and, as a result, incurred almost $1.5 million in damages for underpayment of the prevailing wage rate.

SES sued the City for breach of contract and, in the alternative, quantum meruit. The City specially excepted, asserting, among other things, that SES had not pleaded a basis for a waiver of the City's governmental immunity and that SES did not have standing to sue the City because the City did not have privity of contract with SES. The City also asserted a general denial and several affirmative defenses, including the doctrines of sovereign and governmental immunity and SES's lack of standing to bring the lawsuit. SES sought leave to file an amended petition. The City opposed SES's motion and filed a plea to the jurisdiction, asserting governmental immunity and SES's lack of standing. The trial court granted SES's motion for leave to file, and SES filed its first amended original petition. The amended petition added Caddell as a plaintiff and asserted that the legislature had waived the City's immunity from suit through the Local Government Code, which provides that a home rule municipality "may plead and be impleaded in any court" and that the City had waived its governmental immunity in the Houston City Charter, which provides that the City "may sue and be sued." Tex. Loc. Gov't Code Ann. § 51.075 (Vernon 1999); Houston, Tex., Charter art. II, § 1. A second amended petition added a claim for retainage after the contract was completed. The trial court denied the City's plea to the jurisdiction, and the City appealed.

DISCUSSION

A. Standard and Scope of Review

Subject-matter jurisdiction is essential 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). The plaintiff has the burden to plead facts affirmatively showing that the trial court has subject-matter jurisdiction. Id. at 446. A party may challenge a court's subject-matter jurisdiction by filing a plea to the jurisdiction. See Tex. Dep't of Transp. v. Jones, 8 S.W.3d 636, 638-39 (Tex. 1999). Because jurisdiction is a question of law, we review de novo the trial court's ruling on such a plea. Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928 (Tex. 1998). In conducting this de novo review, we do not look at the merits of the plaintiff's case, but consider only the plaintiff's pleadings and the evidence pertinent to the jurisdictional inquiry. County of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex. 2002). We construe the pleadings liberally in favor of conferring jurisdiction. Tex. Dep't of Transp. v. Ramirez, 74 S.W.3d 864, 867 (Tex. 2002). If the allegations in the plaintiff's petition do not establish jurisdiction, but do not affirmatively demonstrate incurable defects in jurisdiction, the issue is one of pleading sufficiency, and the plaintiff should be afforded the opportunity to amend. County of Cameron, 80 S.W.3d at 555.

B. Standing

In its second issue, the City contends that SES did not have standing to bring a breach of contract or quantum meruit action against the City because SES did not have a contract with the City, and SES did not establish that the trial court had subject-matter jurisdiction over SES's claims. The City argues that, because the original petition did not demonstrate that the trial court had jurisdiction, the defects could not be cured, and the trial court erred in granting SES's motion for leave to amend its original petition.

Standing is a component of subject-matter jurisdiction. Tex. Ass'n of Bus., 852 S.W.2d at 445-46. A plaintiff has standing to sue when it is personally aggrieved by the alleged wrong. Nootsie, Ltd. v. Williamson County Appraisal Dist., 925 S.W.2d 659, 661 (Tex. 1996). A plaintiff may also have standing by assignment of a cause of action. State Farm Fire & Cas. Co. v. Gandy, 925 S.W.2d 696, 706 (Tex. 1996). A claim may be assigned except when such an assignment is invalid as against public policy. Id. at 707. The supreme court has held assignments invalid as against public policy in four instances: (1) a cause of action for legal malpractice arising out of litigation, (2) Mary Carter agreements, (3) a plaintiff's claim against one joint tortfeasor to another joint tortfeasor as part of a settlement between the plaintiff and the assignee tortfeasor, and (4) interests in an estate. Id. at 707-11.

In this case, appellee sued "as assignee of Caddell Construction Co. Inc." and alleged in its original petition, "Caddell has assigned this claim to SES." The breach of contract and quantum meruit claims asserted by SES do not fall within the types of claims that, for public policy reasons, cannot be assigned. Accordingly, we hold that SES's allegation of assignment was sufficient to establish standing and that the trial court did not err in granting SES's motion for leave to file an amended petition.

We overrule the City's second issue. ⁽³⁾

C. Governmental Immunity

In its third issue, the City contends that its immunity from suit is not waived by the "plead and be impleaded" language in section 51.075 of the Local Government Code, or by the "sue and be sued" language in article II, section 1 of the Houston City Charter. See Tex. Loc. Gov't Code § 51.075; Houston,Tex., Charter art. II, § 1. In Tooke v. City of Mexia, the supreme court held that the phrases "sue and be sued" and "plead and be impleaded," by themselves, do not waive governmental immunity. 197 S.W.3d 325, 342-43 (Tex. 2006) (overruling Missouri Pac. R.R. v. Brownsville Navigation Dist., 453 S.W.2d 812 (Tex. 1970). Therefore, such language in section 51.075 of the Local Government Code and the Houston City Charter cannot be the basis for ruling that the City's governmental immunity has been waived.

However, in Tooke, the supreme court noted that the Legislature had recently enacted sections 271.151-.106 of the Local Government Code. Tooke, 197 S.W.3d at 344-45. These statutes waived immunity from suit for contract claims against most local governmental entities and apply to contracts executed before the effective date of the act, unless immunity had been waived before the act became effective. Id. We conclude that the issue of the application of this statute should be fully developed in the trial court. See City of Houston v. Clear Channel Outdoor, Inc., 197 S.W.3d 386 (Tex. 2006).

Accordingly, we sustain the City's third issue.

D. Exclusive Jurisdiction of Department of Labor

In its first issue, the City contends that the trial court did not have subject-matter jurisdiction over the alleged underpayment of the prevailing wage rate because exclusive jurisdiction lies with the Department of Labor. The City did not present this issue to the trial court in its plea to the jurisdiction. See Tex. Ass'n of Bus., 852 S.W.2d at 446 (stating that subject matter jurisdiction may be raised for first time on appeal). The City asserts that the Davis-Bacon Act, 40 U.S.C.A. § 3142 (LexisNexis 2003), "provides that disputes concerning labor standards are determined by the Department of Labor."

Section 3142 provides that, when the federal government is a party to a contract for construction, alteration, or repair of public buildings or public works, the minimum wages will be based on the wages determined by the Secretary of Labor to be prevailing in the area in which the work is to be performed. 40 U.S.C.A. § 3142 (a), (b). Section 3142 sets forth certain stipulations to be included in the contract, how the obligations of the contract may be discharged, and how overtime pay is to be calculated. 40 U.S.C.A. § 3142 (c), (d), (e). We find nothing within the Davis-Bacon Act granting exclusive jurisdiction of all disputes involving the Act to the Department of Labor. See 40 U.S.C.A. §§ 3141-3148 (LexisNexis 2003).

Although the Secretary of Labor's wage-rate determination may be appealed to the Wage Appeals Board of the Department of Labor, the Secretary's determination is not subject to judicial review. Univs. Res. Ass'n v. Coutu, 450 U.S. 754, 761 & n.10, 101 S. Ct. 1451, 1457 & n.10 (1981). However, we do not interpret appellees' petition as challenging the Secretary's wage rate determination.

The City refers to provisions in its contract with Caddell. Because the contract is not in the record on appeal, we are unable to include it in our review. Nevertheless, we are not persuaded by the cases cited by the City that the claims asserted by Caddell and SES fall within the purview of the Department of Labor. Moreover, the very existence of the case law cited by the City defeats the City's exclusive-jurisdiction claim because the cited cases rule on the merits rather than dismiss for lack of jurisdiction.

We overrule the City's first issue.

CONCLUSION

We reverse the trial court's interlocutory order denying the City's plea to the jurisdiction and remand the case for further proceedings.

Sam Nuchia

Justice

Panel consists of Justices Nuchia, Keyes, and Higley.

1.

Sovereign immunity refers to the State's immunity from suit and liability and protects the State and the various divisions of the State, including agencies, hospitals, and universities. Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 694 n.3 (Tex. 2003). Governmental immunity protects political subdivisions of the State, including counties, cities, and school districts. Id. Thus, the doctrine applicable to the City of Houston is governmental immunity.

2. Subject-matter jurisdiction cannot be waived and may be raised for the first time on appeal. Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 445-46 (Tex. 1993).

3. In its second issue, the City also complains that it is inconsistent to plead both breach of contract and quantum meruit. However, SES's claim for quantum meruit is clearly an alternative pleading.