DalMac Construction Co. v. Texas a & M University

35 S.W.3d 654, 1999 WL 33236205

• Court: Court of Appeals of Texas
• Decided: February 15, 2000
• Docket: 03-98-00531-CV
• Status: Published

Opinion

PATTERSON, Justice.

Appellant DalMac Construction Company (“DalMac”) brought suit against appel-lees Texas A & M University and the Board of Regents of Texas A & M University (“A & M”) for claims arising out of a construction project. A & M filed a plea to the jurisdiction asserting that its sovereign immunity from suit deprived the trial court of jurisdiction. The trial court agreed and dismissed DalMac’s claims for want of jurisdiction. On appeal, DalMac challenges this dismissal on the grounds that (1) A & M waived immunity from suit on the contract by its conduct, (2) DalMac is entitled to discovery on the facts relating to A & M’s claim of immunity from suit, and (3) the trial court had jurisdiction to hear DalMac’s constitutional claims absent legislative consent to sue. In light of this Court’s decisions in Aer-Aerotron, Inc. v. Texas Department of Transportation, 997 S.W.2d 687 (Tex.App. — Austin 1999, no pet. h.), and Little-Tex Insulation Co. v. General Services Commission, 997 S.W.2d 358 (Tex.App. — Austin 1999, no pet. h.), we will reverse the order of dismissal and remand the cause to the district court for further proceedings.

FACTS AND PROCEDURAL BACKGROUND 1

In 1993, A & M contracted with DalMac for construction of a $30 million Recreational Sports Building and Natatori-um (“RSB”). DalMac had submitted a bid for the project based upon plans and specifications prepared by A & M’s architect. A & M awarded the contract to DalMac in the amount of $30 million on February 15, 1993. Work began on the project on March 5, 1993. DalMac completed the project in November 1995.

According to DalMac’s allegations, Dal-Mac discovered “almost immediately” that the plans and specifications on which it bid did not adequately describe and define the work to be performed. DalMac also discovered that the plans and specifications were frequently in conflict and unclear, and that some of the specifications and plans were impossible to meet.

Seeking additional information to clarify the specifications and scope of the work to be performed under the contract, DalMac submitted numerous Requests for Information (“RFIs”) to A & M. By February 14, 1994, DalMac had submitted 275 RFIs. DalMac alleges that A & M did not respond to the RFIs in a timely or adequate manner. DalMac complains that for the first three months of the project A & M’s average response time was 25 days, and that A & M took over a year to respond to some RFIs.

Because of changes in the plans and specifications, DalMac rescheduled work and incurred expenses beyond the original contract price. As a result of the corrections and clarifications, DalMac submitted change proposals, in accordance with the terms of the contract, to perform different or additional work beyond the scope of the original contract. A & M denied many of the change proposals and others went unanswered. When proposed change orders were denied, DalMac followed the dispute resolution process specified in the contract. One month before construction on the RSB was completed, DalMac sought additional time to complete the project and submitted a claim for an adjustment to the contract price in the amount of $2.4 million to cover increased costs of construction. A & M paid $255,171 of the claim. DalMac alleges that the project was completed in November 1995. After exhausting administrative remedies, including non-binding arbitration, DalMac filed suit seeking damages in excess of $3 million.

In its petition, DalMac alleged that A & M failed to perform according to the terms of the contract and violated various provisions of the United States and Texas Constitutions, including denial of procedural and substantive due process, taking property without compensation, violation of the open courts provision, and impairment of contracts. DalMac also argued that it was entitled to discovery of facts supporting its claim that A & M had waived sovereign immunity. Following a July 1, 1998 hearing, the district court dismissed DalMac’s claims for want of jurisdiction.

DISCUSSION

DalMac acknowledges that it did not seek legislative permission to sue A & M. Relying upon Federal Sign v. Texas Southern University, 951 S.W.2d 401 (Tex.1997), DalMac contends that legislative consent was not required and that it is entitled to bring suit because A & M waived sovereign immunity and consented to suit by accepting the benefits of full performance of the contract by DalMac.

In analyzing whether a state entity waives immunity in a contractual dispute, we do not write on a clean slate. In Federal Sign, the Texas Supreme Court held that the State does not automatically waive immunity from suit when it enters into a contract with a private person or entity. 951 S.W.2d at 408. Starting from the premise that “sovereign immunity, unless waived, protects the State of Texas, its agencies and its officials from lawsuits for damages,” id. at 404, the majority of the court stated: “[A] private citizen must have legislative consent to sue the State on a breach of contract claim. The act of contracting does not waive the State’s immunity from suit.” Id. at 407. Despite Federal Sign’s allegations of waiver by conduct of the State, the court declined to find waiver.

We acknowledge, however, a narrow opening left by the supreme court. In an oft-cited footnote, the court observed that its opinion should not “be read too broadly” and further noted: “There may be other circumstances where the State may waive its immunity by conduct other than simply executing a contract so that it is not always immune from suit when it contracts.” Id. at 407 n. 1 (emphasis added). Several members of the court, in a concurring opinion, attempted to define the size of the aperture by suggesting that a different result might pertain if (i) Federal Sign had installed the scoreboards and Texas Southern University (“TSU”) refused to pay the agreed price, (ii) TSU had accepted the scoreboards, acknowledged that Federal Sign had fully com plied with the contract but refused to pay as agreed upon, or (iii) TSU refused to pay to force Federal Sign to make a concession on another contract. As stated: “[TJoday’s decision does not hold that the State is always immune from suit for breach of contract absent legislative consent; it holds only that the mere execution of a contract for goods and services, without more, does not waive immunity from suit.” Id. at 413 (Hecht, J., concurring). Thus, the court left for another day the type of conduct by which a State may waive its immunity.

Drawing on both the majority’s footnote and the concurring opinion, DalMac asserts that while the act of contracting alone may not waive immunity from suit, A & M has waived immunity by its conduct. DalMac confines Federal Sign’s holding .to a single limited question: Does a governmental unit, merely by executing a contract, waive sovereign immunity from suit for breach of contract before the other party has tendered performance? See id. at 412. DalMac contends that Federal Sign stands only for the proposition that the mere execution of a contract for goods and services, without more, does not waive immunity from suit.

Most recently, this Court framed the issue left open by Federal Sign as follows: “[D]id the [State] engage in conduct, beyond the mere execution of the contract, that waived its immunity from suit?” See Aer-Aerotron, Inc., 997 S.W.2d at 691; see also Little-Tex, 997 S.W.2d at 363-64. We concluded in Aer-Aerotron that the State, by accepting goods and services, extending the term of the contract, increasing its orders, twice promising to pay the balance due, and requesting and receiving technical modifications and assistance, waived its immunity from suit for breach of contract when it engaged in actions that “fully implicated it in the performance of the contract” over a period of two and a half years. See Aer-Aerotron, Inc., 997 S.W.2d at 691. We held that an entity of the State may waive its immunity from suit with regard to a particular contract by its conduct. Id.; see also Little-Tex, 997 S.W.2d at 365.

Likewise, DalMac affirmatively alleged waiver of sovereign immunity by citing conduct by the State other than the mere execution of the construction contract. While DalMac alleges that A & M supplied incomplete, conflicting, and erroneous specifications that resulted in Dal-Mac incurring additional expenses, these allegations alone are insufficient to constitute waiver by conduct of the State. In a suit against the State, a plaintiff generally has the burden to plead that sovereign immunity to suit has been waived. See Missouri Pac. R.R. Co. v. Brownsville Navigation Dist., 453 S.W.2d 812, 813-14 (Tex.1970). Without sufficient allegations of waiver by conduct of the State itself, the trial court is without jurisdiction to hear the case.

DalMac asserts, however, that it should be permitted the opportunity to pursue limited discovery on A & M’s plea to the jurisdiction to uncover evidence of additional conduct by A & M to support DalMac’s waiver theory. We agree. Because Federal Sign, Aer-Aerotron, and Little-Tex tell us that there may be contract cases in which the State waives its immunity from suit by its conduct, appellant is entitled to demonstrate that legislative consent to sue is unnecessary under the facts and circumstances of this case. Accordingly, we remand to the district court for further proceedings.

CONCLUSION

In fight of Aer-Aerotron, Inc. v. Texas Department of Transportation and Little-Tex Insulation Co. v. General Services Commission, we reverse the district court’s judgment dismissing DalMac’s cause of action for want of jurisdiction and remand the cause to that court for farther proceedings.

1 . In a plea to the jurisdiction, unless the defendant pleads and proves that allegations were fraudulently made to confer jurisdiction, the trial court must take the factual allegations in the plaintiff’s petition as true. See Brannon v. Pac. Employers Ins. Co., 148 Tex. 289, 224 S.W.2d 466, 469 (1949); Firemen’s Ins. Co. v. Board of Regents, 909 S.W.2d 540, 542 (Tex.App. — Austin 1995, writ denied).

Thus, for the limited purpose of determining whether the trial court had jurisdiction over DalMac's causes of action, we will assume the truth of the allegations of its petition. The facts then are taken from DalMac's original petition. It should be noted, however, that the State filed a general denial, thereby placing in issue DalMac’s allegations, inter alia, that A & M breached the contract.