Dimmit County Memorial Hospital v. CPM Medical, LLC

MEMORANDUM OPINION
No. 04-11-00710-CV

DIMMIT COUNTY MEMORIAL HOSPITAL,
Appellant

v.

CPM MEDICAL, LLC,
Appellee

From the 293rd Judicial District Court, Dimmit County, Texas
Trial Court No. 10-08-11250-DCV
Honorable Cynthia L. Muniz, Judge Presiding

Opinion by: Rebecca Simmons, Justice

Sitting: Karen Angelini, Justice
Sandee Bryan Marion, Justice
Rebecca Simmons, Justice

Delivered and Filed: April 25, 2012

AFFIRMED IN PART, REVERSED IN PART AND RENDERED

Appellant Dimmit County Memorial Hospital appeals the trial court’s denial of the

Hospital’s plea to the jurisdiction. On appeal, the Hospital contends (1) it has not waived its

governmental immunity from suit on appellee CPM Medical’s breach of contract cause of action,

and (2) CPM’s unconstitutional takings cause of action is untenable as a matter of law. We

affirm the trial court’s order denying the Hospital’s plea to the jurisdiction as to CPM’s contract
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action and reverse the trial court’s order denying the Hospital’s plea to the jurisdiction as to

CPM’s takings claim and render judgment that the takings claim be dismissed with prejudice.

BACKGROUND

The facts underlying this suit are hotly disputed. CPM, a medical supplier, contends that

the Hospital, through Jerry Cervantes, an independent medical supplier, sought to obtain a

Stryker 5 Drill System (the system) from CPM. After the Hospital allegedly accepted CPM’s bid

for the system, CPM delivered the system to Cervantes, who then delivered it to the Hospital. In

their depositions, CPM’s manager, Paul Spinks, and Cervantes testified that a written, executed

contract—in the form of a signed invoice—existed for the sale of the system. However, CPM

was unable to locate and produce the original, alleged contract. Instead, CPM offered the court

an unsigned copy of the invoice.

The Hospital contends that there was no contract, and it did not accept delivery of the

system from Cervantes or CPM. Rather, it argues that Dr. Bill Alexander, a physician with

surgical privileges at the Hospital, brought the system to the Hospital. Dr. Alexander no longer

performs surgeries at the Hospital and is not a party to the suit. It is undisputed that the Hospital

is in possession of a Stryker 5 Drill System. 1

CPM contacted the Hospital to collect the amount owing. The Hospital refused to pay.

CPM filed suit for, inter alia, breach of contract and an unconstitutional taking. The Hospital

challenged the trial court’s subject matter jurisdiction by filing a plea to the jurisdiction. The

trial court denied the Hospital’s plea and entered findings of fact and conclusions of law. The

court concluded that fact issues existed regarding whether the Hospital waived its immunity by

its conduct and whether there was an unlawful taking. However, the court concluded that the

1
The Hospital contends Dr. Alexander was performing surgeries at the Hospital with the Stryker system in early
2008, and the only drill system in its possession is the one Dr. Alexander left at the hospital months prior to the
alleged delivery by CPM.

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Hospital conclusively established there was no written contract that included the terms of the

sale. 2 Specifically, the court concluded that CPM was entitled to pursue its theory of waiver of

governmental immunity by conduct. The Hospital appeals the trial court’s denial of its plea to

the jurisdiction.

PLEA TO THE JURISDICTION

On appeal, the Hospital does not challenge CPM’s pleadings; rather, the Hospital

challenges the jurisdictional facts in support of CPM’s claim of waiver of immunity from suit.

The Hospital contends it did not waive its governmental immunity to suit and the contractual

waiver of immunity argued by CPM applies only to local governmental entities, not the Hospital.

Alternatively, assuming it is a local governmental entity, the Hospital asserts there was no

contractual waiver because (1) CPM could not produce a properly executed, written contract, (2)

a waiver-by-conduct exception is not available to CPM, and (3) CPM’s unconstitutional taking

claim is untenable as a matter of law.

A. Standard of Review

The determination of subject matter jurisdiction is a question of law that we review de

novo. Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004) (citing Tex.

Natural Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 855 (Tex. 2002)). In this case

the plea to the jurisdiction challenged the existence of jurisdictional facts. See id. at 226–27.

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

must review the relevant evidence to determine whether a fact issue exists.” Univ. of Tex. at

Austin v. Hayes, 327 S.W.3d 113, 116 (Tex. 2010) (per curiam) (citing Miranda, 133 S.W.3d at

226). If a jurisdictional fact issue exists, the plea to the jurisdiction must be denied and the fact

2
The court further concluded CPM “is not entitled to a trial under the theory of whether [the Hospital] waived its
immunity from suit by contract.”

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issue will be determined by the fact-finder. Miranda, 133 S.W.3d at 227–28. Our standard of

review is similar to that of summary judgment review: “[W]e take as true all evidence favorable

to the nonmovant[, and w]e indulge every reasonable inference and resolve any doubts in the

nonmovant’s favor.” Id. at 228 (citing Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911

(Tex. 1997)).

B. Governmental Immunity

The issues in this case focus on governmental immunity. Absent the State’s consent to

suit, sovereign immunity deprives a trial court of subject matter jurisdiction to hear a suit against

the State. Miranda, 133 S.W.3d at 224 (Tex. 2004) (citing Tex. Dep’t of Transp. v. Jones, 8

S.W.3d 636, 638 (Tex. 1999) (per curiam)). Governmental and sovereign immunity include two

distinct concepts: immunity from suit and immunity from liability. See Harris Cnty. Hosp. Dist.

v. Tomball Reg’l Hosp., 283 S.W.3d 838, 842 (Tex. 2009); Miranda, 133 S.W.3d at 224.

Immunity from liability is merely an affirmative defense; immunity from suit, however, is

jurisdictional. Tomball Reg’l Hosp., 283 S.W.3d at 842. A governmental unit waives immunity

from liability by entering into a contract. Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex.

2006). However, waiver of immunity from suit for breach of contract requires a clear and

unambiguous waiver by the legislature. Id. at 332–33; Tomball Reg’l Hosp., 283 S.W.3d at 842.

C. Waiver of Immunity for Breach of Contract

The legislature has waived governmental immunity from suit for breach of contract

where “a written contract stating the essential terms of the agreement for providing goods or

services to the local governmental entity [has been] properly executed on behalf of the local

governmental entity.” See TEX. LOC. GOV’T CODE ANN. § 271.151(2) (West 2005); Tooke, 197

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S.W.3d at 344. 3 A “local governmental entity” is “a political subdivision of this state, other than

a county or a unit of state government, as that term is defined by Section 2260.001, Government

Code, including a . . . special-purpose district or authority, including any . . . public health

district, [or] emergency service organization.” TEX. LOC. GOV’T CODE ANN. § 271.151(3) (West

2005); Tooke, 197 S.W.3d at 345 n.101.

D. Analysis

1. “Local Governmental Entity”

In its pleadings, the Hospital asserted it was a political subdivision of the state. Further,

in a motion to dismiss, the Hospital asserted it was a “unit of local government.” For the first

time on appeal, the Hospital contends it is not a local governmental entity and, therefore, the

legislature has not waived its immunity from suit on the alleged breach of contract. Specifically,

the Hospital argues that the legislature has not included “county hospital” in the list of political

subdivisions under subsection (3) of 271.151 that have waived governmental immunity from

suit. See TEX. LOC. GOV’T CODE ANN. § 271.151(3). 4

“[W]e strictly construe what may be considered in an interlocutory appeal.” See Austin

Indep. Sch. Dist. v. Lowery, 212 S.W.3d 827, 834 (Tex. App.—Austin 2006, pet. denied) (citing

Bally Total Fitness Corp. v. Jackson, 53 S.W.3d 352, 355 (Tex. 2001)); see also TEX. CIV. PRAC.

& REM. CODE ANN. § 51.014 (West 1997). Section 51.014(a)(8) of the Texas Civil Practice and

3
Section 262.007, which is not applicable here, waives a county’s immunity from suit for breach of contract claims
involving electrical, architectural, and engineering services. See TEX. LOCAL GOV’T CODE ANN. § 262.007(d) (West
2005); Tooke, 197 S.W.3d at 342 (citation omitted).
4
Section 271.151’s definition of “local governmental entity” specifically excludes counties from the definition. See
TEX. LOC. GOV’T CODE ANN. § 271.151(3). However, the statutory definition includes public health districts and
emergency service organizations. Id. Chapter 121(F) of the Health and Safety Code sets forth the requirements for
establishing a public health district. See TEX. HEALTH & SAFETY CODE ANN. §§ 121.041–.047 (West 2010). An
“emergency service organization” is defined as “a volunteer fire department, rescue squad, or an emergency medical
services provider that is: . . . operated by its members; and . . . exempt from state taxes by being listed as an exempt
organization.” TEX. CIV. PRAC. & REM. CODE ANN. § 101.001(1)(A) (West Supp. 2010); see also Norrell v.
Gardendale Volunteer Fire Dep’t, 115 S.W.3d 114, 117 (Tex. App.—San Antonio 2003, no pet.).

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Remedies Code permits an interlocutory appeal from an order that grants or denies a plea to the

jurisdiction. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(8) (West Supp. 2011);

Lowery, 212 S.W.3d at 834. Our review of the plea to the jurisdiction should be limited to what

was considered by the trial court. See Lowery, 212 S.W.3d at 834 (“[W]e confine our review to

the ruling on the plea to the jurisdiction that was actually filed and do not address whether the

district court erred in denying the plea on a ground that was not argued below.”); Brenham Hous.

Auth. v. Davies, 158 S.W.3d 53, 61 (Tex. App.—Houston [14th Dist.] 2005, no pet.) (same); City

of Dallas v. First Trade Union Sav. Bank, 133 S.W.3d 680, 687 (Tex. App.—Dallas 2003, pet.

denied) (same). If we were to consider the Hospital’s point on appeal, it would deprive CPM of

the opportunity to respond with evidence controverting the claim that the Hospital is not a local

governmental entity. This issue is better addressed by the trial court. Accordingly, we will not

consider for the first time on appeal whether the Hospital meets the statutory definition of “local

governmental entity.”

2. Breach of Contract

The Hospital contends that even if it is a local governmental entity, there was no waiver

of immunity because there is no written contract stating the essential terms of the agreement, a

necessary requirement by statute. See TEX. LOC. GOV’T CODE ANN. § 271.151(2) (West 2005).

CPM responds that there was some evidence of a written contract sufficient to raise a fact issue

to defeat the plea to the jurisdiction. We turn then to whether there was evidence of a written

contract stating the essential terms of the agreement.

“In general, a contract is legally binding only if its terms are sufficiently definite to

enable a court to understand the parties’ obligations.” Fort Worth Indep. Sch. Dist. v. City of

Fort Worth, 22 S.W.3d 831, 846 (Tex. 2000) (citing T.O. Stanley Boot Co., Inc. v. Bank of El

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Paso, 847 S.W.2d 218, 221 (Tex. 1992)); see also Kirby Lake Dev., Ltd. v. Clear Lake City

Water Auth., 320 S.W.3d 829, 838 (Tex. 2010) (“The Agreements here are written contracts

stating their essential terms. The names of the parties, property at issue, and basic obligations

are clearly outlined.” (emphasis added) (citing Liberto v. D.F. Stauffer Biscuit Co., 441 F.3d 318,

324 (5th Cir. 2006))). The mere fact that a written, signed contract cannot be produced because

it has been lost does not preclude a party from establishing the existence of the alleged contract.

See Bank of Am. v. Haag, 37 S.W.3d 55, 58 (Tex. App.—San Antonio 2000, no pet.); accord EP

Operating Co. v. MJC Energy Co., 883 S.W.2d 263, 267 n.1 (Tex. App.—Corpus Christi 1994,

writ denied) (citations omitted). “[T]he existence and terms of a [lost contract] may be shown by

clear and convincing parol evidence.” Haag, 37 S.W.3d at 58.

a. Written agreement

CPM’s manager, Paul Spinks, testified that the Hospital signed an invoice, and the

invoice contained a purchase order number that was provided by the Hospital. While CPM

cannot produce the original, signed invoice, CPM submitted to the trial court a copy of the

unsigned, written invoice.

b. Essential terms

Next, we must determine whether the invoice contained all the essential terms of the

agreement such that it can be considered a written contract. Taking as true CPM’s evidence that

an invoice was signed identical to the unsigned copy of the invoice, the unsigned copy of the

invoice submitted to the trial court contained all essential terms of the agreement. See Kirby

Lake Dev., 320 S.W.3d at 838 (determining a contract contained all essential terms where the

contract listed the parties, the property at issue, and the basic obligations of the parties). The

invoice identifies both parties to the agreement and provides a purchase order number that was

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allegedly sent to Cervantes or CPM by the Hospital. The invoice also clearly identifies the

property at issue and specifically itemizes the components of the system. Finally, the invoice

sets forth the basic obligations required of both parties: the invoice shows a purchase order

number, indicating the Hospital’s intent to purchase the system, and it indicates that the Hospital

is to “remit” $19,800.00 for the system. Accordingly, CPM has submitted some evidence of a

contract that contained all essential terms of the alleged contract. See id.

c. Goods provided to a local governmental entity

Neither party disputes that the system is a “good”; therefore, the requirement of section

271.151(2) that the agreement provides for goods or services is met. See TEX. LOC. GOV’T CODE

ANN. § 271.151(2). The statute also requires the goods be provided to a local governmental

entity. In its petition and in its plea to the jurisdiction the Hospital asserted it was a

governmental entity. As stated above, we will not address for the first time on appeal the

Hospital’s assertion that it is not a local governmental entity.

d. Proper execution

Finally, the statute requires that the contract be properly executed. See id. Resolving any

doubts in CPM’s favor, we conclude a fact issue exists as to whether the contract was executed.

Two of CPM’s witnesses testified that a written contract—in the form of an invoice—was signed

by a hospital director. The mere fact that CPM cannot produce the executed document does not

preclude it from suing on its breach of contract claim. See Haag, 37 S.W.3d at 58; see also In re

Estate of Berger, 174 S.W.3d 845, 847 (Tex. App.—Waco 2005, no pet.); Chakur v. Zena, 233

S.W.2d 200, 202 (Tex. Civ. App.—San Antonio 1950, no writ).

Because CPM submitted some evidence that governmental immunity as to suit has been

waived, a fact issue exists regarding whether the Hospital waived its immunity to CPM’s breach

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of contract claim. Consequently, the trial court did not err in refusing to grant the Hospital’s plea

to the jurisdiction on CPM’s contract claim. See Miranda, 133 S.W.3d at 227–28.

3. Waiver-by-Conduct

CPM contends that if there is insufficient evidence to establish all of the statutory

requirements for governmental immunity including a written contract, the Hospital’s conduct in

accepting benefits under the alleged contract waived the Hospital’s immunity from suit. In its

second point of error, the Hospital argues that the legislature has not waived sovereign immunity

under a waiver-by-conduct theory. While we have affirmed the trial court’s order denying the

Hospital’s plea to the jurisdiction on the breach of contract claim, we will address CPM’s waiver

of governmental immunity-by-conduct argument in the interest of judicial economy and

efficiency. See Whittington v. City of Austin, 174 S.W.3d 889, 906 (Tex. App.—Austin 2005,

pet. denied); Wheelways Ins. Co. v. Hodges, 872 S.W.2d 776, 782 (Tex. App.—Texarkana 1994,

no writ).

The Texas Supreme Court has repeatedly rejected this type of broad waiver-by-conduct

exception for breach of contract claims against governmental entities. 5 A narrow waiver-by-

conduct exception exists only where the State initially waives immunity, enters into a settlement

agreement, and then fails to honor the settlement agreement. See Tex. A & M Univ.–Kingsville v.

Lawson, 87 S.W.3d 518, 522–23 (Tex. 2002) (plurality opinion). This narrow exception is not

applicable here.

Because the legislature has not clearly and unambiguously waived immunity for a

governmental unit’s conduct in a breach-of-contract claim, a waiver-by-conduct exception, under

5
See Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 414 (Tex. 2011); Tex. A & M Univ. Sys. v.
Koseoglu, 233 S.W.3d 835, 840 (Tex. 2007); Catalina Dev., Inc. v. Cnty. of El Paso, 121 S.W.3d 704, 706 (Tex.
2003); Tex. Natural Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 857 (Tex. 2002); Gen. Servs. Comm’n
v. Little-Tex Insulation Co., 39 S.W.3d 591, 593 (Tex. 2001).

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these facts, is not available to CPM. See Tex. A & M Univ. Sys. v. Koseoglu, 233 S.W.3d 835,

840 (Tex. 2007) (stating that a governmental unit “does not waive its immunity from a breach-

of-contract action by accepting the benefits of a contract”); e.g., Tex. Natural Res. Conservation

Comm’n v. IT-Davy, 74 S.W.3d 849, 857 (Tex. 2002); cf. City of Houston v. Swinerton Builders,

Inc., 233 S.W.3d 4, 12–13 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (concluding that the

legislature did not intend to waive governmental immunity for claims of quantum meruit brought

under section 271.152). Thus, the Hospital’s conduct in accepting the benefit of the Stryker drill

system did not waive its governmental immunity. The trial court erred in concluding that the

Hospital’s conduct waived its immunity from suit.

UNCONSTITUTIONAL TAKING

Finally, the Hospital claims that the trial court erred in concluding that a fact issue existed

under CPM’s unlawful takings claim. Relying heavily on Little-Tex, the Hospital contends

CPM’s claim is nothing more than a contract dispute and, therefore, does not rise to the level of a

constitutional taking. See Gen. Servs. Comm’n v. Little-Tex Insulation Co., 39 S.W.3d 591, 598–

99 (Tex. 2001). CPM argues that the Hospital is not immune from its properly pleaded

governmental takings claim.

A governmental entity is not shielded by sovereign or governmental immunity from

claims of unconstitutional takings. See id. at 598 (citing Steele v. City of Houston, 603 S.W.2d

786, 791 (Tex. 1980); State v. Biggar, 848 S.W.2d 291, 295 (Tex. App.—Austin 1993), aff’d,

873 S.W.2d 11 (Tex. 1994)). The Texas Constitution provides that “[n]o 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(a); accord Hallco

Tex., Inc. v. McMullen Cnty., 221 S.W.3d 50, 56 (Tex. 2006). To establish a takings claim, a

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party must prove “(1) the State intentionally performed certain acts, (2) that resulted in a ‘taking’

of property, (3) for public use.” Little-Tex, 39 S.W.3d at 598 (citing Steele, 603 S.W.2d at 788–

92). If a plaintiff fails to allege a valid takings claim, governmental immunity applies and a plea

to the jurisdiction should be granted. Bell v. City of Dallas, 146 S.W.3d 819, 825 (Tex. App.—

Dallas 2004, no pet.); accord City of Laredo v. Duarte, No. 04-06-00226-CV, 2006 WL

1895482, at *2 (Tex. App.—San Antonio July 12, 2006, no pet.) (mem. op.). However, when a

governmental unit withholds money or property under the “color of right” pursuant to a

contractual right, it “does not have the requisite intent under constitutional-takings

jurisprudence.” Little-Tex, 39 S.W.3d at 598–99; accord Kirby Lake Dev., Ltd. v. Clear Lake

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

Without pleading in the alternative, CPM alleges in its petition that “Defendant sought

out [CPM] for the procurement of the Stryker 5 Drill system subject of this lawsuit, received said

system from [CPM], and has refused [CPM] compensation for its property.” CPM presented

evidence that it received an offer from the Hospital, delivered the goods to the Hospital, the

Hospital accepted delivery, and then the Hospital refused to pay. Both the evidence and the

pleadings reviewed in the light most favorable to CPM reflect that the Hospital obtained

possession of the Stryker unit through the agreement of the parties, and thus under “color of

right.” CPM’s pleadings and evidence simply allege a breach of contract rather than a takings

claim. Cf. Bell, 146 S.W.3d at 825. Accordingly, CPM cannot establish the Hospital’s intent

under our takings jurisprudence. See Little-Tex, 39 S.W.3d at 598–99; accord Kirby Lake Dev.,

320 S.W.3d at 844; State v. Steck Co., 236 S.W.2d 866, 869 (Tex. Civ. App.—Austin 1951, writ

ref’d) (“[Plaintiff] by making the contract, manufacturing the [goods] and delivering them to the

State did so voluntarily and with its own consent, and can not now say the [goods] were taken

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under the power of eminent domain.”). The trial court erred in denying the plea to the

jurisdiction on CPM’s takings claim and such claim should be dismissed with prejudice. See

Harris Cnty. v. Sykes, 136 S.W.3d 635, 639–40 (Tex. 2004) (holding that disposition of a plea to

the jurisdiction based on sovereign immunity is with prejudice).

CONCLUSION

The trial court properly denied Dimmit County Memorial Hospital’s plea to the

jurisdiction based on CPM’s contract claim. 6 The trial court erred in denying the plea to the

jurisdiction on CPM’s takings claim. Accordingly, we affirm the trial court’s order with respect

to CPM’s breach of contract claim, and reverse its order on the takings claim and render

judgment that CPM’s takings claim should be dismissed with prejudice. Based on our

disposition to affirm in part and reverse in part and render, we conclude that there is good cause

to apportion costs of this appeal equally between Dimmit County Memorial Hospital and CPM

Medical. See TEX. R. APP. P. 43.4; Dardas v. Fleming, Hovenkamp & Grayson, P.C., 194

S.W.3d 603, 621 (Tex. App.—Houston [14th Dist.] 2006, pet. denied).

Rebecca Simmons, Justice

6
As we note in the opinion, the trial court erred in its conclusions of law that (1) there was no fact issue as to a
written contract, and that (2) the Hospital waived its immunity from suit by its conduct. However, we are not bound
by a trial court’s incorrect conclusions of law. See LaChance v. Hollenbeck, 695 S.W.2d 618, 622 (Tex. App.—
Austin 1985, writ ref’d n.r.e.); see also O’Farrill Avila v. Gonzalez, 974 S.W.2d 237, 243 (Tex. App.—San Antonio
1998, pet. denied). Despite the trial court’s incorrect conclusions, the trial court’s denial of the plea directed to
CPM’s contract claim was correct.

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