City of El Paso, Texas v. High Ridge Construction, Inc.

COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS

THE CITY OF EL PASO, TEXAS, §
No. 08-13-00187-CV
Appellant, §
Appeal from the
v. §
County Court at Law No. 3
HIGH RIDGE CONSTRUCTION, §
INC., of El Paso County, Texas
§
Appellee. (TC# 2011DCV00361)
§

OPINION

This is an accelerated appeal from an order denying a plea to the jurisdiction filed by the

City of El Paso. See TEX.CIV.PRAC.&REM.CODE ANN. §51.014(a)(8)(West Supp. 2013). We

reverse in part and affirm in part.

FACTUAL SUMMARY

In 2009, Congress enacted the American Recovery and Reinvestment Act (ARRA) in

response to the Great Recession. As a result of ARRA, the federal government provided

increased funding for weatherization services. Those funds were administered by the Texas

Department of Housing and Community Affairs (TDHCA) though local weatherization grants

distributed to large cities, councils of government, and community action programs on a one-

time basis. In order to receive these funds, the City entered into a contract with TDHCA to

administer $4,007,592 of ARRA funds through the El Paso Weatherization Assistance Program
(EP-WAP). Under the EP-WAP, the City reimbursed TDHCA-approved contractors who

provided weatherization services, including the installation of energy efficient appliances, in

qualified low income residential properties.1

On March 23 2010, the City Council passed a resolution authorizing the City Manager to

execute standard contracts between the City of El Paso and TDHCA-approved contractors to

perform eligible weatherization energy conservation services on approved residential units

pursuant to the EP-WAP. The following day, the City entered into a contract with High Ridge

Construction, Inc. to deliver energy assessment and weatherization emergency conservation

installment services related to the EP-WAP for eligible residential properties in El Paso. The

contract expressly provided that the City would not pay High Ridge more than $600,000 for

services performed under the contract.

The City hired employees to supervise and administer the EP-WAP. Ed Gonzalez served

as the EP-WAP Project Coordinator and Robert Veliz served as the Lead Project Inspector. In

October 2010, the City became aware that Veliz had issued work orders to High Ridge which

exceeded the contractual cap of $600,000 and had authorized High Ridge to perform

weatherization services at the Muñoz Apartments without work orders. The City paid High

Ridge a total of $1,429,725.72, but it refused to pay an additional $753,869.55 for materials and

services High Ridge provided to various residential dwellings, including the Muñoz

Apartments.2 High Ridge filed suit against the City asserting claims for breach of contract and

an unconstitutional taking of private property. It asserted that the City’s immunity from suit was

waived pursuant to Section 271.151 of the Texas Local Government Code. It also claimed that

1
The TDHCA required that priority be given to households with elderly persons, persons with disabilities,
households with young children under the age of five and households with a high energy burden.
2
High Ridge asserts it is owed $662,609 for the materials and services provided to the Muñoz Apartments without
work orders.

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the City is estopped from denying its contractual obligations because it had accepted the benefits

of High Ridge’s performance under the contract. The City answered and filed a plea to the

jurisdiction asserting governmental immunity.

After High Ridge amended its petition, the City filed another plea to the jurisdiction.

High Ridge subsequently filed its second amended petition which continued to assert its breach

of contract and unconstitutional takings claims and added a claim of equitable estoppel. In

response, the City filed a plea to the second amended petition. In this plea, the City challenged

High Ridge’s pleadings on their face and based on jurisdictional evidence attached to the plea.

The trial court denied the plea to the jurisdiction.

STANDARD OF REVIEW

A plea to the jurisdiction is a dilatory plea by which a party challenges the court's

authority to determine the subject matter of the action. Harris County v. Sykes, 136 S.W.3d 635,

638 (Tex. 2004); Bland Independent School District v. Blue, 34 S.W.3d 547, 554 (Tex. 2000).

The burden is on the plaintiff to allege facts affirmatively demonstrating that the trial court has

subject matter jurisdiction. Texas Department of Criminal Justice v. Miller, 51 S.W.3d 583, 587

(Tex. 2001); City of El Paso v. Mazie’s, L.P., 408 S.W.3d 13, 18 (Tex.App.--El Paso 2012, pet.

denied). Whether a party has alleged facts that affirmatively demonstrate a trial court’s subject

matter jurisdiction is a question of law which is subject to de novo review. Texas Department of

Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004); Mazie’s, 408 S.W.3d at 18.

Likewise, whether undisputed evidence of jurisdictional facts establishes a trial court’s

jurisdiction is also a question of law subject to de novo review. Miranda, 133 S.W.3d at 226. In

some cases, disputed evidence of jurisdictional facts that also implicate the merits of the case

may require resolution by the finder of fact. Id.

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 In a plea to the jurisdiction, a defendant may challenge the plaintiff’s pleadings, the

existence of jurisdictional facts, or both. Miranda, 133 S.W.3d at 226-27. Here, the City’s plea

to the jurisdiction is directed both at the pleadings and the existence of jurisdictional facts.

When examining the pleadings, we construe them liberally in favor of conferring jurisdiction.

See Texas Department of Transportation v. Ramirez, 74 S.W.3d 864, 867 (Tex. 2002). If the

pleadings do not contain sufficient facts to affirmatively demonstrate the trial court’s jurisdiction

but do not affirmatively demonstrate incurable defects in jurisdiction, the issue is one of pleading

sufficiency and the plaintiffs should be afforded the opportunity to amend. Miranda, 133

S.W.3d at 226-27. On the other hand, if the pleadings affirmatively negate the existence of

jurisdiction, then a plea to the jurisdiction may be granted without allowing the plaintiffs an

opportunity to amend. Id. at 227.

When a plea to the jurisdiction challenges the existence of jurisdictional facts, the

appellate court considers relevant evidence submitted by the parties when necessary to resolve

the jurisdictional issues presented. Miranda, 133 S.W.3d at 227. The standard of review for a

jurisdictional plea based on evidence “generally mirrors that of a summary judgment under

Texas Rule of Civil Procedure 166a(c).” Miranda, 133 S.W.3d at 228. Under this standard,

when reviewing a plea in which the pleading requirement has been met, we credit as true all

evidence favoring the nonmovant and draw all reasonable inferences and resolve any doubts in

the nonmovant's favor. Id. The movant must assert the absence of subject-matter jurisdiction

and present conclusive proof that the trial court lacks subject-matter jurisdiction. Id. If the

movant discharges this burden, the nonmovant must present evidence sufficient to raise a

material issue of fact regarding jurisdiction, or the plea will be sustained. Id. If the evidence

creates a fact question regarding the jurisdictional issue, then the trial court cannot grant the plea

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to the jurisdiction, and the fact question will be resolved by the fact finder. Id. at 227-28. The

trial court rules on the plea to the jurisdiction as a matter of law if the relevant jurisdictional

evidence is undisputed or it fails to raise a fact question on the jurisdictional issue. Id. at 228.

GOODS OR SERVICES

Issues One and Two are related. In Issue One, the City asserts that it retains its

governmental immunity from suit for breach of contract because High Ridge has failed to allege

that the weatherization contract provided goods or services to the City. In its second issue, the

City argues that it retains its governmental immunity from suit for breach of contract because the

undisputed jurisdictional evidence negates that High Ridge provided goods or services to the

City. We will consider Issue Two first because it will unnecessary to examine the sufficiency of

the pleadings if the jurisdictional evidence negates jurisdiction.

Governmental Immunity

Sovereign immunity protects the State from lawsuits for money damages. Reata

Construction Corporation v. City of Dallas, 197 S.W.3d 371, 374 (Tex. 2006); Texas Natural

Resource Conservation Commission v. IT–Davy, 74 S.W.3d 849, 853 (Tex. 2002). It also

deprives a trial court of subject-matter jurisdiction. Miranda, 133 S.W.3d at 224. Political

subdivisions of the state, including cities, are entitled to such immunity—referred to as

governmental immunity—unless it has been waived. Reata, 197 S.W.3d at 374.

Governmental immunity has two components: immunity from liability, which bars

enforcement of a judgment against a governmental entity, and immunity from suit, which bars

suit against the entity altogether. Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006). 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, but it does not waive

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immunity from suit. Tooke, 197 S.W.3d 332. The Supreme Court noted in Tooke that it has

“consistently deferred to the Legislature to waive sovereign immunity from suit, because this

allows the Legislature to protect its policymaking function.” Id. To ensure that this legislative

control is not lightly disturbed, a waiver of immunity must be clear and unambiguous. Id. at

332-33.

Governmental-Proprietary Dichotomy

The City’s arguments on appeal include an assertion that it is entitled to governmental

immunity from suit for breach of contract because it was exercising a governmental function

when it entered into the weatherization contract, namely, community development activities

authorized under Chapters 373 and 374 of the Local Government Code. See TEX.CIV.PRAC.&

REM.CODE ANN. §101.025(a)(34)(West 2011)(designating as a governmental activity

“community development or urban renewal activities undertaken by municipalities and

authorized under Chapters 373 and 374, Local Government Code”). Citing City of San Antonio

ex rel. City Public Service Board v. Wheelabrator Air Pollution Control, Inc., 381 S.W.3d 597,

603-04 (Tex.App.--San Antonio 2012, pet. denied), High Ridge responds that the governmental-

proprietary dichotomy does not apply to breach of contract claims, and even if it does, the City

failed to prove that the weatherization contract qualifies as a community development program

under Section 373.005 of the Local Government Code.

When performing governmental functions, political subdivisions derive governmental

immunity from the state’s sovereign immunity. City of Houston v. Williams, 353 S.W.3d 128,

134 (Tex. 2011); City of Galveston v. State, 217 S.W.3d 466, 469 (Tex. 2007). As a home rule

city, El Paso derives its powers from the Texas Constitution, not the Legislature. See

TEX.CONST. art. XI, § 5; see City of Galveston, 217 S.W.3d at 469. It has “all the powers of the

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state not inconsistent with the Constitution, the general laws, or the city’s charter.” See City of

Galveston, 217 S.W.3d at 469, quoting Proctor v. Andrews, 972 S.W.2d 729, 733 (Tex. 1998).

Among those powers is immunity from suit for governmental functions. City of Galveston, 217

S.W.3d at 469. Consequently, the question is not whether any statute grants a home-rule city

immunity from suit, but whether any statute limits its immunity from suit. Id. Such limits exist

only when a statute speaks with “unmistakable clarity.” Id., quoting Proctor, 972 S.W.2d at 733.

For many years, intermediate appellate courts have applied the governmental-proprietary

dichotomy to breach of contract claims asserted against municipalities. See City of Georgetown

v. Lower Colorado River Authority, 413 S.W.3d 803, 810-11 & n.4 (Tex.App.--Austin 2013, pet.

filed). The Eighth Court of Appeals is among those courts. See Williams v. City of Midland, 932

S.W.2d 679, 683-84 (Tex.App.--El Paso 1996, no writ). The Texas Supreme Court called this

approach into question in Tooke v. City of Mexia, when it observed that “we have never held that

this same distinction determines whether immunity from suit is waived for breach of contract

claims . . . .” 197 S.W.3d 325, 343 (Tex. 2006); see City of Georgetown, 413 S.W.3d at 810.

The Supreme Court did not finally decide the issue in Tooke because the case involved a

governmental function; consequently, even assuming the dichotomy applied, the municipality

had governmental immunity. City of Georgetown, 413 S.W.3d at 810. After Tooke, some

intermediate appellate courts have assumed without deciding that the dichotomy applies to

contract claims. See e.g., East Houston Estate Apartments, L.L.C. v. City of Houston, 294

S.W.3d 723, 731 (Tex.App.--Houston [1st Dist.] 2009, no pet.); City of Emory v. Lusk, 278

S.W.3d 77, 83 (Tex.App.--Tyler 2009, no pet.); City of Houston v. Petroleum Traders

Corporation, 261 S.W.3d 350, 355-56 (Tex.App.--Houston [14th Dist.] 2008, no pet.); City of

Weslaco v. Borne, 210 S.W.3d 782, 791-92 (Tex.App.--Corpus Christi 2006, pet. denied).

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 The San Antonio Court of Appeals reached a different conclusion in the context of a

common law quantum meruit claim. Wheelabrator, 381 S.W.3d at 603-04. The court rejected

Wheelabrator’s attempt to “import the proprietary/governmental distinction from the Texas Tort

Claims Act into this quasi-contractual context.” Id. The court found it significant that when the

Legislature enacted Chapter 271 in 2005 it “could have incorporated the

proprietary/governmental distinction into the statutory waiver scheme for contract claims” but it

did not do so. Id, at 603. Further, it interpreted Tooke as holding that sovereign immunity is the

“default” rule for municipalities with respect to all types of claims. Tooke, 197 S.W.3d at 331-

32. Thus, the court of appeals held that the City Public Service Board was immune from suit on

the quantum meruit claim. Wheelabrator, 381 S.W.3d at 605. The Austin Court of Appeals

disagreed with Wheelabrator in City of Georgetown, 413 S.W.3d at 811-13, but the Amarillo

Court of Appeals followed Wheelabrator in Republic Power Partners, L.P. v. City of Lubbock,

424 S.W.3d 184 (Tex.App.--Amarillo 2014, no pet. h.).

Like the Austin Court of Appeals in City of Georgetown, we are reluctant to overrule our

own precedent unless and until the Texas Supreme Court addresses whether the governmental-

proprietary dichotomy applies to a breach of contract claim asserted against a municipality. See

City of Georgetown, 413 S.W.3d at 811. At the same time, we recognize that we must begin our

analysis with the presumption that the City is immune from suit for breach of contract. See City

of Galveston, 217 S.W.3d at 469. High Ridge had the burden in the trial court to show that the

City’s immunity from suit has been limited. Significantly, High Ridge never asserted in its

pleadings that the City was not entitled to immunity because it was engaged in a proprietary

function. To the contrary, High Ridge has taken the position that the governmental-proprietary

dichotomy is completely inapplicable. Further, High Ridge did not allege any jurisdictional facts

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that demonstrate its claims arose from proprietary functions. See Weir Brothers, Inc. v.

Longview Economic Development Corporation, 373 S.W.3d 841, 846 (Tex.App.--Dallas 2012,

no pet.); City of Weslaco, 210 S.W.3d at 791 (“[T]he burden in this case was on appellees to

overcome immunity to suit by alleging jurisdictional facts to demonstrate that their claims

against appellants arose from proprietary functions.”). Consequently, we begin with the

presumption that the City is immune from suit. See City of Galveston, 217 S.W.3d at 469.3 The

only issue before us is whether that immunity is waived under Section 271.152 of the Local

Government Code.

Waiver of Immunity -- Section 271.152

Section 271.152 waives qualifying local governmental entities’ immunity from suit for

certain breach of contract claims. City of Houston v. Williams, 353 S.W.3d 128, 134 (Tex.

2011). It 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 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.LOCAL GOV’T CODE ANN. §271.152 (West 2005).

The Supreme Court has held that the statute, when applicable, waives a governmental

entity’s immunity from suit for breach of written contract by clear and unambiguous language.

Williams, 353 S.W.3d at 134. Three elements must be established in order for Section 271.152’s

waiver of immunity to apply: (1) the party against whom the waiver is asserted must be a “local

3
Even if the governmental-proprietary dichotomy applies in this case, the City established it was engaged in
community development activities under Section 373.005(b)(2) of the Local Government Code. See TEX.LOCAL
GOV’T CODE ANN. § 373.005(b)(2)(West 2005)(providing that a community development program may include
acquisition, construction, reconstruction, or installation of public works, facilities, sites, or other improvements,
including construction, reconstruction, or installation that implements design features or makes improvements that
promote energy or water use efficiency); East Houston Estate Apartments L.L.C. v. City of Houston, 294 S.W.3d
723, 733 (Tex.App.--Houston [1st Dist.] 2009, no pet.). The TDHCA contract requires the City to administer the
EP-WAP pursuant to the Texas Weatherization Program regulations codified in Title 10 of the Texas Administrative
Code. As noted by the City in its reply brief, Title 10 is named “Community Development.”

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governmental entity” as defined by Section 271.151(3); (2) the entity must be authorized by

statute or the Constitution to enter into contracts; and (3) the entity must in fact have entered into

a contract that is “subject to this subchapter” as defined by Section 271.151 and 271.152 of the

Local Government Code. Williams, 353 S.W.3d at 134-35; see El Paso Education Initiative, Inc.

v. Amex Properties, LLC, 385 S.W.3d 701, 706 (Tex.App.--El Paso 2012, pet. denied). Section

271.151(2)(A) defines the phrase “contract subject to this subchapter” 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.”

TEX.LOCAL GOV’T CODE ANN. §271.151(2)(A) (West Supp. 2013).

The Supreme Court held in City of Houston v. Williams that Section 271.151(2)(A)

effectively states five elements a contract must meet in order for it to be a contract subject to

Section 271.152’s waiver of immunity: (1) the contract must be in writing, (2) state the essential

terms of the agreement, (3) provide for goods or services, (4) to the local governmental entity,

and (5) be executed on behalf of the local governmental entity. Willliams, 353 S.W.3d at 135.

Chapter 271 does not define the term “services” as it is used in Section 271.152 even though the

Legislature has defined it in other contexts. Kirby Lake Development, Ltd. v. Clear Lake City

Water Authority, 320 S.W.3d 829, 839 (Tex. 2010). Absent a definition, the term is broad

enough to encompass a wide array of activities. Id., citing Van Zandt v. Fort Worth Press, 359

S.W.2d 893, 895 (Tex. 1962)(stating that the term “services” has a rather broad and general

meaning and it includes generally any act performed for the benefit of another under some

arrangement or agreement whereby such act was to have been performed). The services

provided need not be the primary purpose of the agreement, Kirby Lake, 320 S.W.3d at 839, but

the benefit that the local governmental entity would receive must be direct and unattenuated. See

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Berkman v. City of Keene, 311 S.W.3d 523, 527 (Tex.App.--Waco 2009, pet. denied)(“[T]he

statute does not apply to contracts ‘in which the benefit that the [local governmental entity]

would receive is an indirect, attenuated one.’”).

The Jurisdictional Evidence

The City asserts, as it did in the trial court, that the undisputed jurisdictional evidence

negates that High Ridge provided goods or services to the City as required by Section

271.151(2)(A) because the evidence shows that the City merely acted as a conduit of federal

funds and did not receive any direct benefit from High Ridge under the weatherization contract.

It relies primarily on East Houston Estate Apartments, LLC v. City of Houston, 294 S.W.3d 723

(Tex.App.--Houston [1st Dist.] 2009, no pet.) in support of its argument.

In East Houston, the city entered into a loan agreement “to provide funding to a private

entity, East Houston, for the purpose of rehabilitating an apartment complex to provide very low-

income and low-income housing . . . .” East Houston, 294 S.W.3d at 733. Under this

agreement, the city agreed to disburse federal funds to East Houston subject to certain terms and

conditions as part of an inter-creditor agreement for the financing of the federal government

community development program. Id. at 735. The city argued that the loan agreement did not

require East Houston to provide anything that could be construed as a service to the city, but East

Houston claimed that it was effectively providing low-income housing as a service to the city.

Id. at 733. The First Court of Appeals observed that the city would benefit in a general way from

having the apartment units refurbished and from the availability of additional housing for low-

income families, but nothing in the contract obligated East Houston to provide any municipal

service directly to the city. East Houston, 294 S.W.3d at 736. The central purpose of the

agreement was to facilitate a loan of money from the city’s portion of federal funds and from

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private funds to a private entity, East Houston, for the purpose of renovating East Houston’s

empty apartment building. Id. Given that the city was a conduit of federal funds and a facilitator

of the project but no services were directly provided to the city, the First Court of Appeals

concluded that this is not the type of “service” contemplated by Section 271.152. Id.

High Ridge maintains that East Houston is distinguishable because the City received a

direct benefit from the warranty and indemnity provisions contained in the weatherization

contract. The weatherization contract provides that the City engaged the services of High Ridge

“to deliver, on behalf of the City, energy assessment and weatherization emergency conservation

installment services related to the City’s Weatherization Program for eligible residential

properties in the City of El Paso.” [Emphasis added]. It is undisputed that the weatherization

services were provided exclusively to private residential properties. We recognize that the entire

community of El Paso generally benefitted from the increased energy efficiency in the residential

units which received services as a result of the EP-WAP, but this is an indirect result of the

contract. No courts have construed Section 271.152 as permitting a waiver of a local

governmental entity’s immunity from suit when it generally and indirectly benefits from the

contract. To the contrary, courts construing the statute have required that the benefit be direct

and not attenuated. We agree with the City that the weatherization services provided by High

Ridge to private residential properties did not provide a direct benefit to the City, and therefore,

they are not the type of service contemplated by Section 271.152. See East Houston, 294

S.W.3d at 736 (“It is clear that, while the City would benefit in a general way from having East

Houston's apartment units refurbished and from the availability of more housing for low-income

families, nothing in the contract obligated East Houston to provide any municipal service directly

to the City.”). That does not end our inquiry, however, because the weatherization contract also

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required High Ridge to provide a one year warranty to the client and to the City for all

weatherization work completed. Further, High Ridge is required by the weatherization contract

to indemnify and defend the City from any causes of action and claims arising out of High

Ridge’s activities under the contract. The warranty and indemnity provisions certainly operate as

a direct benefit to the City. We conclude that the weatherization contract contemplates the

provision of services directly to the City. See Kirby Lake, 320 S.W.3d at 839 (agreement

between residential developers and city water control and improvement district authority entailed

the provision of goods or services under Section 271.152 where developers agreed to construct,

develop, lease, and bear all risk of loss or damage to water and sewer facilities). Issue Two is

overruled.

High Ridge’s Pleadings

We turn now to the sufficiency of High Ridge’s pleadings. The only question presented

by Issue One is whether High Ridge alleged that the weatherization the contract provided for

goods or services to be provided to the City. High Ridge alleged generally in its second

amended petition that the City did in fact enter into a contract subject to Chapter 271” and the

pleadings specifically reference Section 271.152, but it did not allege that the contract

contemplated that goods or services would be provided to the City.

Citing El Paso Education Initiative, Inc. v. Amex Properties, LLC, 385 S.W.3d 701, 706

(Tex.App.--El Paso 2012, pet. denied), High Ridge asserts that it is only required to generally

allege that the City entered into a contract subject to Chapter 271 and it is not required to allege

any of the five elements set forth in Section 271.152. Our decision in El Paso Education

Initiative does not support High Ridge’s argument regarding the sufficiency of its pleadings

because the issue in the cited case was whether the jurisdictional evidence showed a waiver of

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immunity. El Paso Education Initiative, 385 S.W.3d at 705-06. We conclude that High Ridge’s

pleadings fail to state a waiver of immunity under Section 271.152 because they do not allege

that the weatherization contract provided for goods or services to be provided to the City. Issue

One is sustained.

CONTRACTUAL AMENDMENT

Issues Three and Four pertain to the City’s argument that High Ridge’s breach of contract

claim is based on purported amendments of the weatherization contract. In Issue Three, the City

contends that its immunity is not waived because High Ridge failed to allege that the purported

amendments to the weatherization contract were in writing and properly executed on behalf of

the City. Under Section 271.151(2)(A), the contract must be in writing and it must have been

property executed on behalf of the local governmental entity. See TEX.LOCAL GOV’T CODE ANN.

§ 271.151(2)(A).

High Ridge alleged in its second amended petition that it entered into the weatherization

contract with the City and agreed to perform the work requested by the City. It specifically

alleged in paragraphs 9 and 10 of the second amended petition that:

9. Pursuant to the agreement, Plaintiff began work on the Project. Payments
were issued by the City in the following manner. The City would request that
Plaintiff begin work on certain identified residential properties. Plaintiff would
begin, and often complete, the majority of the work/services that were requested
by the City. After much of the work/services were completed, the City would
issue a work order to Plaintiff that identified minor additional items of work to be
completed by Plaintiff on the residential properties. As Plaintiff completed these
additional items of work, the City would issue payment to Plaintiff for the
goods/work/services that were provided by Plaintiff.

10. The contract provides that its term is from April 26, 2010, until August 31,
2011. The contract also provides that the City would pay Plaintiff the total sum of
$600,000 for services performed by Plaintiff on the Project. However, it became
clear that the City intended and expected Plaintiff to perform additional
work/services on the Project, and pursuant to the contract. Accordingly, the total
payments paid to Plaintiff by the City in connection with the Project, and pursuant

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 to the contract, equal $1,275,856.72. Accordingly, the parties’ course of dealing
and course of conduct on the Project acknowledged that the City would pay
Plaintiff amounts in addition to the $600,000 price originally stated in the contract
for the Project. Alternatively, the City has waived any alleged limitation in the
contract concerning amounts that can be paid to Plaintiff under the contract.

Under these pleadings, High Ridge admits that it was issued work orders and received payment

for the $600,000 in weatherization services it provided under the weatherization contract.

Further, High Ridge admits it has been paid $1,275,856.72 in connection with the contract. The

pleadings reflect that High Ridge is suing the City for payment on additional weatherization

services performed under the weatherization contract.

The City does not assert that the written weatherization contract itself was not properly

executed. It instead takes issue with High Ridge’s failure to allege that the parties entered into a

properly executed contract amendment to “increase the contractual cap from $600,000 to nearly

$2,000,000.00.” High Ridge specifically alleges that it performed additional work or services on

the weatherization project under the contract through additional work orders issued by Robert

Veliz and Ed Gonzalez. The City characterizes the pleadings as alleging that these additional

work orders were de facto contract amendments that increased High Ridge’s contract. The City

argues that these allegations are legally insufficient to state a breach of contract claim under

Section 271.152 because High Ridge does not allege that it received a written contract

amendment that was properly executed by the City. Thus, the City maintains that its immunity

for this particular breach of contract claim has not been waived.

Section 271.153 permits a plaintiff who has brought a breach of contract action against a

local governmental entity to be awarded (1) the balance due and owed by the local governmental

entity under the contract as it may have been amended, including any amount owed as

compensation for the increased cost to perform the work as a direct result of owner-caused

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delays or acceleration; and (2) the amount owed for change orders or additional work the

contractor is directed to perform by a local governmental entity in connection with the contract.

See TEX.LOCAL GOV’T CODE ANN. § 271.153(a)(West Supp. 2013)(Emphasis added). We

understand High Ridge to allege that the City has failed to pay it for additional work it was

directed to perform by the City. The pertinent statutes do not require that this additional work be

supported by a written contract amendment and the City has not cited any controlling case

authority. Furthermore, we do not read High Ridge’s pleadings as necessarily alleging that the

additional work orders were de facto contract amendments.

High Ridge has alleged that the City is a “local government entity” under the statute and

we have determined that the jurisdictional evidence shows that the City properly executed a

written contract with High Ridge for providing goods or services to the City. It is undisputed

that the weatherization contract states the “essential terms of the agreement” between the City

and High Ridge. Further, High Ridge is seeking to adjudicate its claim for breach of the

contract. Therefore, the contract at issue is a “contract subject to this subchapter” under Section

271.151(2), and the City, by entering into the contract has waived its governmental immunity to

suit. See TEX.LOCAL GOV’T CODE ANN. § 271.152; City of Mesquite v. PKG Contracting, Inc.,

263 S.W.3d 444, 447 (Tex.App.--Dallas 2008, pet. denied)(rejecting the city’s argument that

governmental immunity is waived only for claims of breach of the essential, written terms of an

agreement, not for implied duties; once the trial court determines that the contract falls within the

provisions of Section 271.152, it need not parse further the pleadings or the contract to determine

whether the legislature has waived immunity for breach of contract claims). The City’s

argument that High Ridge cannot maintain its breach of contract claim for damages in excess of

the $600,000 contractual cap unless there is a properly executed written amendment is in reality

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an argument that the contract claim will fail on the merits. Such a claim does not deprive the

trial court of jurisdiction to hear the claim. See Roma Independent School District v. Ewing

Construction Company, No. 04-12-00035-CV, 2012 WL 3025927, at *3 (Tex.App.--San Antonio

July 25, 2012, pet. denied)(memo op.)(an argument that the breach of contract claim will fail

does not deprive the trial court of jurisdiction to hear the contract claim); see also City of North

Richland Hills v. Home Town Urban Partners, Ltd., 340 S.W.3d 900, 905 (Tex.App.--Fort

Worth 2011, no pet.)(court of appeals rejected city’s argument that the trial court lacked subject

matter jurisdiction over a breach of contract claim because the plaintiff’s alleged damages did

not fall within those available under Chapter 271; Chapter 271 is not a basis for a governmental

entity to claim that the trial court lacks jurisdiction). Issue Three is overruled.

Jurisdictional Evidence

In Issue Four, the City contends that it retains its immunity from suit for the breach of

contract claim because the undisputed jurisdictional evidence negates High Ridge’s allegations

that it performed services under the EP-WAP pursuant to a properly executed contract. As noted

in our discussion of Issue Three, High Ridge alleged that it performed additional work under the

weatherization contract pursuant to work orders issued by Robert Veliz and Ed Gonzalez. The

City is correct that the contract provides that it could be amended at any time by mutual

agreement of the parties, and it could only be amended by written instrument duly executed on

behalf of the City and High Ridge. The City offered evidence that the City Manager is the only

person who could enter into contracts with contractors under the EP-WAP. Further, there is

evidence that Mr. Veliz did not have authority to issue work orders. Thus, the City reasons that

the jurisdictional evidence “negates High Ridge’s jurisdictional allegation that its weatherization

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contract was amended through a written instrument that was properly executed on behalf of the

City.”

High Ridge did not allege that the weatherization contract had been amended. Its second

amended petition instead alleges that it performed additional work under the contract pursuant to

work orders issued by Mr. Veliz and Mr. Gonzalez. The City’s argument that High Ridge cannot

maintain its breach of contract claim unless there is a written contract amendment is in reality an

argument that the contract claim will fail on the merits. Such a claim does not deprive the trial

court of jurisdiction to hear the claim. See Roma Independent School District, 2012 WL

3025927, at *3; see also City of North Richland Hills, 340 S.W.3d at 905. Accordingly, we

overrule Issue Four.

UNCONSTITUTIONAL TAKINGS CLAIM

In its fifth issue, the City asserts that it retains its immunity from suit for High Ridge’s

claim that the City unconstitutionally took its property because High Ridge failed to allege that

the City intended to exercise its eminent domain powers to take High Ridge’s private property.

High Ridge responds that its second amended petition contains the necessary allegations required

to state a claim for an unconstitutional taking.

Article I, Section 17 of the Texas Constitution provides that: “No person’s property shall

be taken, damaged, or destroyed for or applied to public use without adequate compensation

being made, unless by the consent of such person . . . .” TEX.CONST. art. I, § 17. This provision,

like the Fifth Amendment to the United States Constitution, applies not only to traditional

takings claims, but also to inverse condemnation claims, in which a property owner alleges that

the government has usurped the use and value of his or her property, even if it has not

completely appropriated title. Kirby Lake Development, Ltd. v. Clear Lake City Water Authority,

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320 S.W.3d 829, 844 (Tex. 2010).

A takings claim consists of three elements: (1) an intentional act by the government

under its lawful authority, (2) resulting in a taking, damaging, or destruction of the plaintiff’s

property, (3) for public use. General Services Com’n v. Little-Tex Insulation Company, Inc., 39

S.W.3d 591, 598 (Tex. 2001); Mazie’s, 408 S.W.3d at 19; City of El Paso v. Ramirez, 349

S.W.3d 181, 186 (Tex.App.--El Paso 2011, no pet.). The City does not have immunity from a

valid takings claim. Mazie’s, 408 S.W.3d at 18, citing Little-Tex Insulation Company, 39 S.W.3d

at 598. If, however, the plaintiff fails to allege a valid takings claim, the City retains its

immunity from suit. Mazie’s, 408 S.W.3d at 19, citing Little–Tex Insulation, 39 S.W.3d at 598.

The Supreme Court stated in Kirby Lake that when a private party contracts with the

government, generally “the State does not have the requisite intent under constitutional-takings

jurisprudence when it withholds property or money from an entity in a contract dispute.” Kirby

Lake, 320 S.W.3d at 844, quoting Little-Tex Insulation Company, 39 S.W.3d at 598-99. In that

situation, “the State is acting within a color of right under the contract and not under its eminent

domain powers.” Id., quoting Little-Tex Insulation Company, 39 S.W.3d at 599.

High Ridge alleged in its second amended pleading that the City has intentionally taken

and obtained the benefit of the materials and work which High Ridge provided to the properties

described in the pleadings, the property has been taken for a public use, and the City has refused

to provide it with just compensation for the property. High Ridge expressly incorporated the

portion of its pleadings related to its claim for breach of contract. The pleadings demonstrate

that High Ridge voluntarily provided the property and services pursuant to the contract under the

EP-WAP and the City has withheld payment under a contractual dispute. Thus, the pleadings

affirmatively show that the City did not have the requisite intent to take High Ridge’s property

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under its eminent domain powers. See Kirby Lake, 320 S.W.3d at 844; Little-Tex Insulation

Company, 39 S.W.3d at 599 (state university’s withholding of additional payments to building

contractor, which submitted claim for expenses allegedly not contemplated by original contract,

did not give rise to an action by contractor for compensation under takings clause of the Texas

Constitution; since university was acting under colorable contractual rights, it did not have

requisite intent to take contractor’s labor and materials under any eminent domain powers); State

v. Steck Co., 236 S.W.2d 866, 869 (Tex.Civ.App.--Austin 1951, writ ref’d)(where plaintiff

entered into a contract with the state for the printing of cigarette tax stamps, and plaintiff

voluntarily manufactured the stamps and delivered them to the state, but the state refused to pay

the plaintiff for the stamps because the state had not followed competitive bid procedures when it

award the contract to the plaintiff; held that the plaintiff could not maintain a takings claim

against the state for its refusal to pay the plaintiff for the stamps due to because the state was not

exercising its power of eminent domain). Consequently, the City retains its immunity from suit

for this claim. Issue Five is sustained.

ESTOPPEL

Issues Six and Seven address High Ridge’s assertion of estoppel. In Issue Six, the City

maintains that its immunity from suit for High Ridge’s equitable estoppel claim has not been

waived because High Ridge’s pleadings do not support application of the limited “justice

requires” exception. The City argues in Issue Seven that the undisputed jurisdictional evidence

negates application of the “justice requires” exception to the City’s immunity from the equitable

estoppel claim.

It has long been the rule in Texas that a city cannot be estopped from exercising its

governmental functions. City of White Settlement v. Super Wash, Inc., 198 S.W.3d 770, 773

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(Tex. 2006), citing City of Hutchins v. Prasifka, 450 S.W.2d 829, 835 (Tex. 1970)(city not

estopped from enforcing zoning restrictions) and Rolison v. Puckett, 145 Tex. 366, 198 S.W.2d

74, 77 (1946)(city not estopped from collecting taxes); City of San Angelo v. Deutsch, 126 Tex.

532, 91 S.W.2d 308-09 (1936)(city not estopped from asserting a tax lien). The Supreme Court

explained in Super Wash that the bases for the rule are that the interest of the individual must at

times yield to the public interest, and the responsibility for public policy must rest on decisions

officially authorized by the government’s representatives, rather than on mistakes committed by

its agents. Super Wash, 198 S.W.3d at 773. A municipality may be estopped, however, in those

cases where justice requires its application and there is no interference with the exercise of its

governmental functions. Id., citing City of Hutchins, 450 S.W.2d at 836. This exception has

been found to apply where the municipal officials affirmatively misled the party seeking to estop

the municipality and the misleading statements resulted in the permanent loss of claims against

the municipality. See Roberts v. Haltom City, 543 S.W.2d 75, 80 (Tex. 1976)(holding that a city

could be estopped from enforcing a law against a party that required a party bring suit against the

city to file a notice of claim within thirty days of injury where there is evidence that city officials

may have affirmatively misled the party seeking to estop the city and that the misleading

statements resulted in the permanent loss of the party’s claims against the city). Evidence

showing city officials acted deliberately to induce a party to act in a way that benefitted the city

but prejudiced the party weighs in favor of applying the exception. Super Wash, 198 S.W.3d at

775, citing e.g., City of Austin v. Garza, 124 S.W.3d 867, 875 (Tex.App.--Austin 2003, no

pet.)(where city received a direct donation of land in exchange for land subject to an erroneous

plat note, the city could be estopped from later denying the validity of the plat note).

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 High Ridge responds that it is not required to plead or offer evidence pertaining to the

justice requires exception, and further, the City’s argument cannot be raised or considered in a

plea to the jurisdiction. High Ridge sued the City for breach of contract based on the City’s

refusal to pay High Ridge for work performed under work orders issued by Robert Veliz and Ed

Gonzalez. The City has taken the position that the work was extra-contractual because it is in

excess of the contractual cap of $600,000 and neither Veliz nor Gonzalez had the authority to

issue work orders beyond the contractual cap or to amend the contract. High Ridge alleges in its

second amended petition that the City should be estopped from denying the authority of Robert

Veliz and Ed Gonzalez in providing work orders to High Ridge pursuant to the weatherization

contract. Thus, High Ridge is not seeking to estop the City from exercising a governmental

function. Compare Super Wash, 198 S.W.3d 770 (where car wash owner brought action against

city to challenge the validity and enforceability of a zoning ordinance which placed conditions

on the use of the owner’s property, and alternatively, argued that city should be estopped from

enforcing the ordinance, the car wash owner was required to establish that justice required

estoppel and estoppel would not interfere with the city’s exercise of a governmental function).

High Ridge is instead seeking to foreclose a defensive issue raised by the City in response to

High Ridge’s breach of contract claim. The City does not cite and we have not found any cases

holding that a plaintiff must establish the justice requires exception in these circumstances.

Issues Six and Seven are overruled.

OPPORTUNITY TO REPLEAD

In Issue Eight, the City asserts that High Ridge should not be afforded an opportunity to

amend its pleadings because it is impossible for High Ridge to cure the pleading deficiencies

identified in the City’s plea to the jurisdiction and raised on appeal. The Supreme Court held in

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Miranda that if the pleadings do not contain sufficient facts to affirmatively demonstrate the trial

court’s jurisdiction but do not affirmatively demonstrate incurable defects in jurisdiction, the

issue is one of pleading sufficiency and the plaintiffs should be afforded the opportunity to

amend. Miranda, 133 S.W.3d at 226-27; see City of El Paso v. Collins, --- S.W.3d ----, 2013

WL 6665090, at *6 (Tex.App.--El Paso 2013, no pet.). We sustained Issue One, but have

concluded that the pleadings do not affirmatively establish that there are incurable defects in

jurisdiction. Thus, High Ridge must be given an opportunity to amend its pleadings with respect

to the breach of contract claim. We sustained Issue Five and concluded that the pleadings and

jurisdictional evidence affirmatively demonstrate that the City retains its immunity from suit for

the unconstitutional takings claim. In these circumstances, dismissal of the unconstitutional

takings claim is appropriate. Issue Eight is therefore sustained in part and overruled in part.

Having sustained Issue One, but having overruled Issue Eight in part, we reverse the trial

court’s order denying the plea to the jurisdiction as it applies to High Ridge’s breach of contract

claim and remand the cause to the trial court to allow High Ridge an opportunity to amend their

pleadings to cure the jurisdictional defects identified in the opinion. Having sustained Issue

Five, but having sustained Issue Eight in part, we reverse the trial court’s order denying the plea

to the jurisdiction as it applies to High Ridge’s unconstitutional takings claim and render

judgment dismissing that claim. Having overruled the remaining issues, we affirm the trial

court’s order denying the plea to the jurisdiction as it applies to High Ridge’s estoppel claim.

July 31, 2014
YVONNE T. RODRIGUEZ, Justice

Before Rodriguez, J., Barajas, C.J., and Chew, C.J. (Senior Judges)
Chew, C.J. (Senior Judge), sitting by assignment (concurring opinion), joined by Barajas, C.J.
(Senior Judge), sitting by assignment

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