Opinion issued October = 18,=20 2007
The Supreme=20
Court of Texas remanded this case to us for a determination of =
whether the=20
City of Houston's immunity from suit is waived pursuant to Local=20
Government Code sections 271.151-.160. City of Houston v. =
Allco,=20
Inc., 206 S.W.3d 113, 114 (Tex. 2006). We=20
affirm.
Unrelated=20
to the contract, residents of the Kennedy Heights region of =
Houston filed=20
a toxic tort suit in 1995 against Chevron U.S.A., Inc. in Texas =
state=20
court. The residents alleged that Chevron contaminated the soil in =
their=20
neighborhoods with petroleum by-products. On July 10, 1995, the =
state=20
court ordered the City to notify counsel for the tort plaintiffs =
of any=20
sewer work being performed in the Kennedy Heights subdivision. =
That order=20
was dissolved by further order on August 11, 1995. In June=20
1996, Allco was conducting sewer rehabilitation work for the City =
under=20
work order number 38 in the Crestmont subdivision--an area =
included within=20
the scope of the Kennedy Heights tort litigation. At that time, =
the City=20
had not informed Allco of the Kennedy Heights litigation filed in =
state=20
court. Also unknown to Allco, another lawsuit had been filed by =
Kennedy=20
Heights residents in Houston federal court. On June 18, 1996, at =
5:10=20
p.m., a federal marshal served Allco with a temporary restraining =
order=20
signed by the federal judge in the second Kennedy Heights suit. =
The order=20
required Allco to cease further excavation work on the Crestmont =
project.=20
At that time, Allco had 70 to 80 open trenches in the Crestmont=20
subdivision. Allco faxed a copy of the temporary restraining order =
to the=20
City's public works department. The=20
following day, Allco entered into an agreed order, which required =
Allco to=20
establish a plan to "rope off" the construction site and areas =
where the=20
excavated dirt was stored and to provide the tort plaintiffs =
access to=20
monitor the site. Allco hauled the dirt, which had been excavated =
prior to=20
Allco's receiving the restraining order, to an esplanade where the =
dirt=20
was covered and a fence was erected. Although=20
the contract permitted Allco to use the excavated dirt to refill =
the=20
trenches it had dug, Allco believed that the language of the =
agreed order,=20
requiring it to secure the dirt, prevented Allco from using that =
dirt to=20
refill the trenches. As a result, Allco purchased and trucked in =
new=20
dirt--an expense it would not have normally incurred under the =
contract.=20
During these activities, city inspectors were present at the work=20
site. On June 21,=20
1996, an assistant city attorney sent Allco a letter, demanding =
that Allco=20
dispose of the "excess excavated material and debris." If Allco =
did not do=20
as requested, the assistant city attorney warned that Allco would =
be in=20
breach of the contract. After receiving the letter, Allco paid for =
the=20
transport and disposal of the excavated dirt. As part of the =
disposal=20
process, Allco hired a company to test the excavated dirt to =
determine=20
whether it was contaminated. By the end of July 1996, the =
excavated dirt=20
had been trucked to a landfill for disposal at Allco's =
expense. On February=20
10, 1998, Allco submitted a claim to the City for the extra work=20
associated with the Kennedy Heights litigation. The city attorney =
denied=20
the claim six months later. In April 1999, Allco sought approval =
for the=20
extra work from the City's engineer. The City did not respond. =
Allco filed=20
suit against the City, alleging breach of contract and seeking =
$89,306.43=20
in damages for the extra work it had completed in the Crestmont=20
subdivision. Following a bench trial, the trial court signed a =
judgment in=20
favor of Allco. The court found that Allco was entitled only to =
part of=20
the damages it requested, awarding Allco $27,468.88 in damages, =
which=20
represented the cost of testing, of moving, and of ultimately =
disposing of=20
the excavated dirt, and included $1,375.00 in attorney's fees paid =
by=20
Allco to defend against the federal court restraining order. =
In support=20
of its judgment, the trial court signed findings of fact and =
conclusions=20
of law, including the following findings: (1) the contract =
provides for=20
extra work; (2) the contract "requires notice, relative to extra =
costs,=20
and Allco used this format in complying with the claim filing =
process";=20
(3) Allco reasonably believed that the assistant city attorney =
instructed=20
it to remove the soil; (4) Allco reasonably responded to the =
agreed order=20
and the assistant city attorney's directive in removing the =
excavated=20
soil; (5) Allco detrimentally relied on the directive of the =
assistant=20
city attorney and the agreed order in making its decision to =
remove the=20
excavated dirt; (6) Allco would have sought written authorization =
from the=20
City for the extra work had the City informed Allco of the Kennedy =
Heights=20
litigation; and (7) Allco acted reasonably and in the interest of =
public=20
safety in removing potentially contaminated soil. The City=20
appealed the trial court's judgment to this Court. Among its =
contentions=20
on appeal, the City asserted that Allco was not entitled to =
reimbursement=20
for the extra work associated with the Kennedy Heights litigation =
because=20
Allco had not complied with the contract by obtaining approval =
from the=20
City's engineer before commencing the extra work. We disagreed, =
concluding=20
that the City, by its conduct, had waived the contractual notice =
and=20
approval requirements with regard to extra work. City of =
Houston v.=20
Allco, Inc., No. 01-02-000812-CV, 2004 WL 1471818 at *4-5 =
(Tex.=20
App.--Houston [1st Dist.] 2004, July 1, 2004), rev'd on other=20
grounds, 206 S.W.3d at 114. In upholding the trial court's =
breach of=20
contract award to Allco, we wrote, Assuming=20
the contract provisions at issue in this case are conditions =
precedent to=20
the City's contractual obligation to pay Allco for extra work, the =
controlling findings of fact in this case support a conclusion =
that the=20
City waived performance of these conditions by its words and =
deeds.=20
Specifically, the findings of fact relating to the City's failure =
to=20
inform Allco of the Kennedy Heights litigation and the assistant =
city=20
attorney's directive to dispose of the excavated soil support such =
conclusion. Id.=20
at *5. We also concluded that Allco was entitled to the =
compensation=20
awarded by the trial court because equity would not permit the =
enforcement=20
of a forfeiture under a contract in an inequitable and oppressive =
manner.=20
Id. In other words, we concluded that Allco should not be =
required to forfeit its right to compensation under the contract =
for lack=20
of notice and approval from the City, given the City's conduct and =
the=20
public safety concerns at issue. See id. In its=20
appeal, the City also asserted that it was immune from suit. =
Following our=20
own precedent and that of the supreme court, we held that the City =
had=20
waived its immunity from suit because the City's charter provided =
that the=20
City could "sue and be sued." Id. at *3. Nearly two years =
after=20
our decision, the supreme court handed down =
Tooke the=20
Legislature [] enacted sections 271.151-.160 of the Local =
Government Code,=20
which waive immunity from suit for certain claims against local=20
governmental entities, including municipalities. Sections =
271.152-.154=20
'apply to a claim that arises under a contract executed before =
[September=20
1, 2005] . . . if sovereign immunity has not been waived with =
respect to=20
the claim' before that date.
A.=20
Statutory Provisions Local=20
Government code section 271.152 provides, A =
local=20
governmental entity that is authorized by statute or the =
constitution to=20
enter into a contract and that enters into a contract subject to =
this=20
subchapter waives sovereign immunity to suit for the purpose of=20
adjudicating a claim for breach of the contract, subject to the =
terms and=20
conditions of this Subchapter. Tex. Loc.=20
Gov't Code Ann. =A7 271.152 (Vernon 2005). Section 271.153, =
entitled=20
"Limitation on Adjudication Awards," limits and defines the =
damages that=20
may be recovered against a local government entity, as =
follows: (a) The=20
total amount of money awarded in an adjudication brought against a =
local=20
governmental entity for breach of a contract subject to this =
subchapter is=20
limited to the following: (1) the=20
balance due and owed by the local governmental entity under the =
contract=20
as it may have been amended, including any amount owed as =
compensation for=20
the increased cost to perform the work as a direct result of =
owner-caused=20
delays or acceleration; (2) the=20
amount owed for change orders or additional work the contractor is =
directed to perform by a local governmental entity in connection =
with the=20
contract; and (3)=20
interest as allowed by law. (b) Damages=20
awarded in an adjudication brought against a local governmental =
entity=20
arising under a contract subject to this subchapter may not=20
include: (1)=20
consequential damages, except as expressly allowed under =
Subsection=20
(a)(1); (2)=20
exemplary damages; or (3) damages=20
for unabsorbed home office overhead. In this=20
case, the parties do not dispute that the City is "a local =
governmental=20
entity" and that the contract at issue is a "contract subject to =
this=20
subchapter" because it is a "written contract stating the =
essential terms=20
of the agreement for providing goods or services to [a] local =
governmental=20
entity that [was] properly executed on behalf of the local =
governmental=20
entity." See id. =A7 271.151(2), (3)(A). Instead, the =
dispute in=20
this case centers on whether Allco's damages are statutorily =
permitted.=20
This is the issue that we determine. B.=20
Analysis The=20
contract between Allco and the City contemplated that, subject to =
the=20
approval of the City's engineer, Allco would be compensated for =
the costs=20
of extra work it performed. The City=20
contends that Allco is not entitled to compensation for the cost =
of=20
testing the excavated soil because the testing was neither a cost=20
authorized under the contract nor was it approved by the City as =
an extra=20
work cost. Allco points out that we recently held in City of =
Houston=20
v. Swinerton Builders, Inc. that Local Government Code =
section=20
271.152 waives the City's immunity from suit for certain breach of =
contract claims only and does not waive the City's immunity for =
quantum=20
meruit claims or other "claims in law or in equity." No. =
01-06-00870-CV,=20
2007 WL 1775989, at *6 (Tex. App.--Houston [1st Dist.] June 21, =
2007, no=20
pet.). The City argues that, "[u]nless the Contract addressed =
separate or=20
additional payment for this activity [soil testing], Allco would =
be=20
relegated to a claim in quantum meruit . . . ." We disagree=20
that Allco's claim to recover the cost of the soil testing was =
based on a=20
separate claim for quantum meruit. Allco has never wavered from =
its=20
position, neither in the trial court nor in this Court, that it =
was=20
entitled to recover the cost of the soil testing under the express =
provisions of the contract. On remand, Allco cites the contract =
provision=20
permitting it to recover extra costs incurred as a result of the =
City's=20
failure to provide information as a basis to recover the cost of =
soil=20
testing. That provision sets no limitation on the type of extra =
costs that=20
can be recovered. Moreover, there is no indication in the record =
that the=20
trial court awarded the cost of the soil testing as a measure of =
quantum=20
meruit damages; to the contrary, every indication is that the =
trial court=20
awarded the damages as measure of breach of contract damages. In =
sum,=20
Allco's request for compensation and its recovery regarding the =
cost of=20
the soil testing arose from Allco's breach of contract claim, not =
from a=20
quantum meruit claim. The City=20
also contends on remand that the cost of hauling and disposing of =
the=20
excavated soil was a cost included in the contract price and was =
not=20
recoverable as an extra cost under the contract. In this regard, =
the City=20
relies on the trial court's finding of fact that "[t]he Contract =
provided=20
that the cost of hauling and disposing excess excavated material =
and=20
debris is to be included in the price bid for the relevant item =
requiring=20
excavation." The City's=20
contention that the contract itself expressly prohibited the =
recovery of=20
these damages was an argument to have been raised by the City in =
the trial=20
court and in its initial appellate briefing to this Court when it =
first=20
appealed the trial court's judgment. Whether the contract =
prohibited the=20
costs of hauling and disposing of the excavated dirt is not the =
issue=20
before us on remand. The limited issue we are presented with is =
whether=20
these costs are the type of damages permitted by Local Government =
Code=20
section 271.153. As discussed, in support of its breach of =
contract claim,=20
Allco sought the costs of hauling and disposing of the excavated =
dirt as a=20
direct damage under the express provisions of the contract. That =
is, Allco=20
argued in the trial court that these costs were due and owed under =
the=20
contract. Such damages are the type permitted pursuant to section =
271.153.=20
See Tex. Loc. Gov't Code Ann. =A7 271.153(a)(1). =
Lastly, the=20
City contends that Local Government Code section 271.159 prohibits =
Allco's=20
recovery of Attorney's=20
fees incurred by a local governmental entity or any other party in =
the=20
adjudication of a claim by or against a local governmental entity =
shall=20
not be awarded to any party in the adjudication unless the local=20
governmental entity has entered into a written agreement that =
expressly=20
authorizes the prevailing party in the adjudication to recover its =
reasonable and necessary attorney's fees by specific reference to =
this=20
section. Tex. Loc.=20
Gov't Code Ann. =A7 271.159 (Vernon 2005). Noting that=20
the contract pre-dated section 271.159 by 10 years, the City =
asserts that=20
Allco cannot recover the attorney's fees because the contract does =
not=20
reference section 271.159, as required by that provision. We agree =
with=20
Allco that section 271.159 is not applicable to the The=20
attorney's fees were not "incurred by a local governmental entity =
or any=20
other party in the adjudication of a claim by or against a local=20
governmental entity," as specified in section 271.159. Rather, =
Allco=20
incurred the attorney's fees defending against the federal =
restraining=20
order. Allco requested the attorney's fees as direct damages owed =
under=20
the provisions of the contract, and not as attorney's fees owed =
for the=20
prosecution of the instant suit. As with the other costs claimed =
by Allco=20
in conjunction with the Kennedy Heights litigation and due under =
the=20
contract, Allco was entitled to these costs as provided in Local=20
Government Code section 271.153(a)(1).
We affirm=20
the judgment of the trial court. Panel=20
consists of Justices Taft, Hanks, and Higley.=20