Opinion
NO. 14-22-00616-CV
02-29-2024
The CITY OF HOUSTON, Appellant v. APTIM ENVIRONMENTAL & INFRASTRUCTURE, LLC, Appellee
Lori Yount, Darah L. Eckert, Donald Hightower, for Appellant. Tristan Manthey, for Appellee Hunt, Guillot & Associates, LLC. John Hatchett McFarland, Houston, Jason Beesinger, for Appellee Aptim Environmental & Infrastructure, LLC. Panel consists of Chief Justice Christopher and Justices Zimmerer and Poissant.
On Appeal from the 11th District Court, Harris County, Texas, Trial Court Cause No. 2021-46988
Lori Yount, Darah L. Eckert, Donald Hightower, for Appellant.
Tristan Manthey, for Appellee Hunt, Guillot & Associates, LLC.
John Hatchett McFarland, Houston, Jason Beesinger, for Appellee Aptim Environmental & Infrastructure, LLC.
Panel consists of Chief Justice Christopher and Justices Zimmerer and Poissant. OPINION
Margaret "Meg" Poissant, Justice
Appellant the City of Houston ("the City") contends that the trial court erred in denying its plea to the jurisdiction because its amended agreement with appellee Aptim Environmental & Infrastructure, LLC ("Aptim LLC") is not a valid contract capable of supporting statutory waiver of the City’s immunity from suit. The City asserts the parties’ second contract amendment was invalid because Aptim LLC signed the amendment as a corporation after converting to a limited liability company. We affirm.
I. B ackground
The City contracted with Aptim Environmental & Infrastructure, Inc. ("Aptim Inc.") to manage post-Hurricane Harvey flood projects. After eleven months of performance, seven task orders totaling $11.2 million, and a first amendment to the contract, Aptim Inc. converted to Aptim LLC.
A few months later, the City notified appellee that "the City would like to add funds to Aptim’s existing contract." The City informed appellee that it would be sending a "short, second amendment" to the contract and that appellee needed to sign the amendment with a "quick turnaround." On the morning of April 5, 2019, the City sent a final draft of the second amendment, asking appellee to approve "as soon as possible" so the City could route the amendment "in DocuSign for signatures, ideally before noon." When appellee’s vice-president electronically signed the second amendment, however, he signed on behalf of Aptim Inc. rather than Aptim LLC in the preprinted signature block:
693 S.W.3d 821.bmp
Houston City Council adopted Ordinance 2019-0266, which approved and authorized the second amendment and its increase to the maximum contract amount, on April 10, 2019. On April 10 and April 11, 2019, the City’s signators signed the second amendment in counterparts, thus increasing the overall project value by $3.0 million. On April 11, 2019, the City issued its eighth task order for the project, which detailed the $3.0 million in work to be completed within six weeks.
Houston, Tex., Ordinance 2019-0266 (Apr. 10, 2019).
In June 2019, appellee began submitting invoices for the work it had performed throughout the project. The City paid some but not all the invoices—and none related to the task order that arose from the second contract amendment. When a subcontractor sued appellee for unpaid services, appellee filed a third-party claim against the City for breach of contract. Appellee pleaded that the City waived immunity from suit under § 271.152 of the Local Government Code.
The City concedes that it waived immunity for breach of contract claims arising under the original contract and the first amendment. Thus, the City challenges only the second contract amendment in its plea to the jurisdiction and assertion of immuni- ty. In the trial court, the City argued that the second contract amendment was not a valid contract because Aptim Inc., on whose behalf the amendment was signed, had ceased its corporate existence and was thus not lawfully authorized to sign contracts. The City reasoned that because the signature on the second amendment was not authorized, the City retained governmental immunity from suit for breach of contract arising from the second amendment.
In response, appellee argued that under the law of its home state, Louisiana, Aptim LLC is a mere continuation of Aptim Inc. for all purposes: "The surviving entity is deemed to be all of the following: …. (b) The same corporation … without interruption as the converting entity." La. Rev. Stat. § 12:1-955 (2015); see also Retif Oil & Fuel, LLC v. Offshore Specialty Fabricators, LLC, No. 17-7831, 2018 WL 4680125, at * 4 (E.D. La. Sept. 28, 2018) (order) (finding that guarantor remained liable after OSF, Inc. converted to OSF LLC because under Louisiana law the converted entity is deemed the same entity without interruption as the converting entity, thus placing OSF LLC "in the shoes of OSF, Inc. for purposes of the Guaranty"). Because Aptim LLC is the mere continuation of Aptim Inc., appellee argues that the signature on the second contractual amendment was a misnomer.
The effect of such a conversion is similar under Texas law. The converting entity continues "to exist without interruption in the organizational form of the converted entity." Tex. Bus. Org. Code Ann. § 10.106(1); see In re Hawthorne Townhomes, L.P., 282 S.W.3d 131, 138–39 (Tex. App.—Dallas, orig. proceeding) (concluding arbitration agreement was a "valid" agreement although builder had signed the agreement as an LLC after it had already converted to a corporation).
Our sister court previously addressed misnomer of a party’s name in a contract. See Hous. Land & Loan Co. v. Danley, 131 S.W. 1143, 1144–45 (Tex. App.—Galveston 1910, no writ). Concluding the "misnomer of the company" had no effect on the enforceability of the contract, the court reasoned that "[m]odern law has departed from the strict rules of the common law as to use of the corporate name" and held the misnomer will not avoid a contract if a party’s identity substantially appears. Id. at 1145; accord Bradley J. Fish, Inc. v. Lesar Electric & Design LLC, No. 01-19-00064-CV, 2020 WL 4589758, at * 5 (Tex. App.—Houston [1st Dist.] Aug. 11, 2020, no pet.) (mem. op.) (concluding there was no fact issue that defendant remained obligated under contracts, despite confusion about corporate form where "LLC" was missing from the contractual counterparty’s name and signature in the contracts).
The trial court denied the City’s plea to the jurisdiction and motion for partial summary judgment based on immunity, and this interlocutory appeal ensued. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(5), (8) (permitting interlocutory appeals from a denial of a motion for summary judgment based on assertion of immunity by a political subdivision of the state, or from a ruling on a governmental unit’s plea to the jurisdiction).
II. G overnmental I mmunity
In its sole issue, the City avers that the trial court erred by finding that the second amendment was a valid contract capable of waiving the City’s immunity from suit and denying the City’s plea to the jurisdiction and motion for partial summary judgment.
A. S tandard of R eview
[1–4] Governmental units, including municipalities, are immune from suit unless the State consents to suit. See Alamo Heights Indep. Sch. Dist. v. Clark, 544 S.W.3d 755, 770 (Tex. 2018) (citing Mission Consol. Indep. Sch. Dist. v. Garcia, 372 S.W.3d 629, 636 (Tex. 2012); Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 224 (Tex. 2004)). Governmen- tal immunity from suit defeats a trial court’s subject matter jurisdiction and is properly asserted in a plea to the jurisdiction. See Miranda, 133 S.W.3d at 225-26. It is a dilatory plea, the purpose of which is to defeat a cause of action without regard to whether the claims asserted have merit. Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000). The plaintiff has the initial burden of alleging facts that affirmatively demonstrate that the trial court has subject matter jurisdiction. Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 446 (Tex. 1993).
[5–10] We review de novo a trial court’s ruling on a plea to the jurisdiction. Miranda, 133 S.W.3d at 228. As here, when the governmental entity challenges the existence of jurisdictional facts, and the parties submit evidence relevant to the jurisdictional challenge, we consider that evidence when necessary to resolve the jurisdictional issues raised. See id. at 227. When the jurisdictional issues implicate the merits of the plaintiff’s claims, 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)." Id. at 228. We take as true all evidence favoring the nonmovant and draw all reasonable inferences and resolve any doubts in the nonmovant’s favor. Id. If the evidence creates a fact question regarding the jurisdictional issue, then the trial court cannot grant the plea to the jurisdiction, and the fact issue will be resolved by the fact finder. Id. at 227–28. But if the relevant evidence is undisputed or fails to raise a fact question on the jurisdictional issue, then the trial court rules on the plea to the jurisdiction as a matter of law. Id. at 228.
B. L ocal G overnment C ontract C laims A ct
[11, 12] The Local Government Contract Claims Act outlines the conditions under which immunity is waived for contract suits against local governmental entities. See Tex. Loc. Gov’t Code. Ann. §§ 271.151–.160 ("Chapter 271, Subchapter I"); see Zachry Const. Corp. v. Port of Hous. Auth. of Harris Cty., 449 S.W.3d 98, 105-06 (Tex. 2014). Section 271.152 allows for waiver of the City’s immunity from suit as follows:
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. For § 271.152’s waiver of immunity to apply, three elements must be established: (1) the party against whom the waiver is asserted must be a "local governmental entity" as defined by § 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 § 271.151(2). City of Houston v. Williams, 353 S.W.3d 128, 134–35 (Tex. 2011). A "contract subject to this subchapter" is defined as "a written contract stating the essential terms of the agreement for providing goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity." Tex. Local Gov’t Code Ann. § 271.151(2).
Despite § 271.151(2)’s plain language "properly executed by the local government entity," the City argues jurisdiction is dependent on whether the second contractual amendment was properly executed by appellee. Id. (emphasis added). The City thus seeks to extend the statute’s requirement of proper execution to its contractual counterparty, citing El Paso Educ. Initiative, Inc. v. Amex Props., LLC, 602 S.W.3d 521 (Tex. 2020).
However, El Paso Educational Initiative addresses a government entity’s signator who failed to obtain authority from the government entity before she signed the contract at issue. Id. at 533–34. Because the signator lacked the authority to sign the contract, the contract had not been properly executed on behalf of the government entity as required by § 271.151(2). Id. at 534. The Texas Supreme Court concluded that waiver of immunity was conditioned on proper execution by the governmental entity, which made it a jurisdictional consideration. Id. The Texas Supreme Court did not extend § 271.151(2) to the counterparty’s execution of the contract, and it did not relegate the validity of a counterparty’s execution of a contract to a jurisdictional threshold. See id. It is the local government entity’s proper execution, not the contractor’s, that is required under Texas Local Government Code §§ 271.152 and 271.151(2).
The City’s argument is more akin to the assertion of immunity advanced in City of El Paso v. High Ridge Const., Inc., 442 S.W.3d 660, 670-71 (Tex. App.—El Paso 2014, pet denied). In High Ridge, the city properly executed a written contract for services with a contractual cap of $600,000. Id. at 671. The city employee overseeing the project issued work orders that exceeded the contractual cap, and he sometimes authorized additional services without work orders. Id. at 664. When the city refused to pay for certain services exceeding the contractual cap, the contractor sued for breach of contract. Id. The city filed a plea to the jurisdiction based on governmental immunity, arguing the parties had not entered into a properly executed contract amendment. Id. at 664, 672–73. The appellate court concluded the city’s argument reached the merits of the contractor’s complaint, not the jurisdictional issue:
The City’s argument that [contractor] 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 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.
The contractor in High Ridge pleaded specific reference to § 271.153, which permits a plaintiff to recover the balance due under a contract as it may have been amended and the amount owed for change orders or additional work the contractor has been directed to perform in connection with the contract. Tex. Local Gov’t Code Ann. § 271.153(a)(1)–(2). Appellee pleaded that immunity had been waived under § 271.152, the scope of which is found in the remaining sections of the subchapter, including § 271.153. See Zachry Constr. Corp., 449 S.W.3d at 106.
[13, 14] In deciding a plea to the jurisdiction, a court may not consider the merits of the case, only the plaintiff’s pleadings and the evidence relevant to the jurisdictional inquiry. County of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex. 2002). But "[o]nce the trial court determines whether 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." City of Mesquite v. PKG Contracting, Inc., 263 S.W.3d 444, 447 (Tex. App.—Dallas 2008, pet. denied); see Clear Creek Indep. Sch. Dist. v. Cotton Commercial USA, Inc., 529 S.W.3d 569, 579 (Tex. App.—Houston [14th Dist.] 2017, pet. denied) (concluding waiver of immunity was shown and declining to consider breach of the contract to be a jurisdictional element). The City’s contention that the second amendment does not "satisfy the traditional requirements of a contract" argues that because the City is not liable under the contract, immunity is not waived. See W. Tex. Mun. Power Agency v. Rep. Power Partners, L.P., 428 S.W.3d 299, 308 (Tex. App.—Amarillo 2014, no pet.) ("WTMPA contends immunity was not waived because it is not liable under the contract by reason of the assignment. This argument simply begs the question"). The City’s briefing and evidence concerning appellee’s signature is a defensive argument that "goes to the merits and does not implicate jurisdiction." See High Ridge, 442 S.W.3d at 672; see generally Zorrilla v. Aypco Constr. II, LLC, 469 S.W.3d 143, 155–56 (Tex. 2015) (explaining avoidance and affirmative defenses). We disagree that the trial court must consider the validity of appellee’s signature as a jurisdictional element. See Cotton Commercial USA, Inc., 529 S.W.3d at 585–86. We thus conclude that the trial court correctly denied the City’s plea to the jurisdiction and motion for partial summary judgment, and we overrule the City’s issue on appeal.
III. C onclusion
Because the pleadings and evidence show that the trial court has subject matter jurisdiction to consider appellee’s claims for breach of contract against the City, we affirm the trial court’s judgment.