Texas=20
Southern University, appellant, and State Street Bank and Trust =
Company,=20
appellee, both filed motions for rehearing. Having considered the =
motions=20
and responses, the Court finds the motions to be without merit. =
The Court,=20
however, withdraws its Opinion and judgment issued June 8, 2006 =
and issues=20
the following in its stead. CMS Viron=20
Corporation and CMS Energy Resource Management Company =
(collectively=20
"Viron") and State Street Bank and Trust Company asserted numerous =
claims=20
against one another and Texas Southern University ("TSU") arising =
from an=20
alleged contract between TSU and Viron. In this interlocutory =
appeal, TSU,=20
a political subdivision of the State of Texas, appeals the trial =
court's=20
denial of its pleas to the jurisdiction based on sovereign =
immunity. In four=20
issues, TSU contends that (1) Viron has not obtained legislative=20
permission to sue TSU; (2) a party cannot circumvent the State's =
immunity=20
from suit by recasting a contract claim as one for inverse =
condemnation;=20
(3) the Uniform Declaratory Judgments Act does not expand the =
court's=20
jurisdiction; and (4) Viron did not possess a vested property =
right in the=20
equipment and TSU acquired the equipment pursuant to its contract =
with=20
Viron, not through the exercise of eminent-domain powers. We =
affirm in=20
part and reverse and remand in part.
Academic=20
Capital, L.L.C. offered to provide financing for the proposed=20
lease/purchase agreement. Academic Capital proposed that it would =
deposit=20
approximately $8.3 million in an escrow account to be established =
to fund=20
the purchase of the equipment necessary for the TSU project. From =
the=20
escrow account, Viron would be paid in four equal installments of=20
$2,083,570.25. Academic Capital designated its alter ego, Academic =
Services, as escrow agent under the escrow agreement. In=20
September 1998, Viron and TSU executed the Master State and =
Municipal=20
Lease/Purchase Agreement ("the Master Lease") wherein TSU =
requested that=20
Viron get the equipment. In the Master Lease, TSU certified that =
it had=20
"the legal capacity to enter into [the] Master Lease." TSU was to =
retain=20
title to the equipment; however, if TSU was in default, the title =
was to=20
"re-vest immediately in and shall revert to [Viron] free of any =
right,=20
title or interest of TSU." The rental=20
payment schedule found in the Master Lease provided for 20 =
semiannual=20
payments of $554,818.43 An opinion=20
letter from Cheryl Elliot Thornton, TSU's General Counsel, was =
attached as=20
an exhibit to the Master Lease. In that letter, Thornton=20
stated: The Master=20
Lease is a governmental purpose obligation and constitutes a =
legal, valid=20
and binding deferred payment obligation of [TSU], enforceable in=20
accordance with its terms and does not constitute a debt of [TSU] =
under=20
the laws of the State of Texas. In the event [Viron] obtains =
judgment=20
against [TSU] for money damages in connection with the Master =
Lease, [TSU]=20
will be obligated to pay such judgment. . . . . =
. .=20
. . =
. . The=20
signature of the official of [TSU] which appears on the Master =
Lease and=20
the attached documents is true and genuine; I know him/her to hold =
the=20
office set forth below his/her name. Such official is duly =
authorized to=20
execute the Master Lease and the attached documents. I have =
attached=20
hereto a copy of such authorization. . . . Viron, TSU,=20
and Academic Services agreed that the previously-executed escrow =
agreement=20
would become part of the Master Lease. Viron=20
assigned to Academic Capital its benefits under the Master Lease, =
and TSU=20
executed its acknowledgment of the assignment which included its=20
understanding that the payment schedule was unchanged. A few =
months later,=20
Academic Capital and Academic Services assigned the Master Lease, =
which=20
included the escrow agreement, to State Street Bank. Among the =
rights=20
assigned were (1) all rights as the owner and lessor of the =
equipment; (2)=20
all right, title and interest in and to the equipment; and (3) all =
right,=20
title and interest in and to all payments to be made by TSU in =
connection=20
with the equipment. In return, State Street advanced $8,547,545.51 =
into an=20
acquisition fund to be used by Viron to finance the purchase and =
the=20
delivery of the equipment. The acquisition fund was to be =
administered by=20
Academic as an escrow account. On April 2,=20
1999, TSU sent Viron a "Notice to Proceed" with the Thermal Plant =
Chiller=20
Upgrade project. As the=20
project progressed, the first three required payments were made by =
Academic Capital from State Street's escrow =
account to=20
Viron as scheduled on September 1, 1998; March 1, 1999; and =
September 1,=20
1999, each in the amount of $2,083,570.25. Viron contends, =
however, that=20
it never received the final payment it was due. The payment was =
sent to=20
State Street instead. The first=20
payment to be made by TSU under the Master Lease was due on =
February 1,=20
2000. At that time, TSU, via its new President and new General =
Counsel,=20
asserted that the Master Lease was not a valid obligation of TSU =
and=20
refused to make the payments. Viron=20
informed the Texas Attorney General's office of TSU's outstanding =
balance.=20
TSU and Viron could not agree to everything; however, they did =
address=20
Viron's work on the thermal chiller plant system. TSU paid Viron =
the=20
balance of $5,100,000 due on that part of the project. In the=20
summer of 2001, State Street learned that TSU was not making the =
required=20
installment payments and also that the purported Master Lease "had =
not=20
been authorized by TSU's Board of Regents, or the Coordinating =
Board, or=20
in accordance with the law, and was therefore void and =
unenforceable."=20
State Street notified TSU and Viron that these actions constituted =
defaults of the purported Master Lease and Viron was required to=20
repurchase the purported Lease from State Street for the =
$7,621,451.27=20
unpaid balance due to State Street. To date, it has not done=20
so. State=20
Street's third amended petition asserted an inverse condemnation =
claim=20
against TSU and also sought the trial court's determination and=20
declaration that (1) the purported lease and all related documents =
"were=20
executed without the requisite authority" and are "void and =
unenforceable=20
against TSU;" (2) TSU does not have any rights to the equipment; =
(3) State=20
Street holds all rights, title and interest to the equipment; (4) =
TSU has=20
"no right, title, or interest to the equipment and must return the =
equipment to State Street;" and (5) State Street is entitled to a=20
constructive trust and return of the equipment to State Street.=20
In its plea=20
to the jurisdiction, TSU argued that (1) State Street failed to =
allege any=20
waiver of TSU's immunity from suit; (2) characterizing a contract =
dispute=20
as a declaratory judgment claim does not confer jurisdiction on a =
trial=20
court; (3) declaratory judgment seeking to establish a contract's =
validity=20
may not be maintained without legislative permission; (4) State =
Street=20
lacks standing to assert a claim for inverse condemnation; (5) =
State=20
Street had no ownership interest prior to the assignment of the =
contract=20
from Academic Capital to State Street; and (6) all of State =
Street's=20
alleged right, title, and interest flow from the contract. There =
was no=20
sworn denial of State Street's ownership. Quintin=20
Wiggins, TSU's Senior Vice President for Business and Finance, =
testified=20
that the Master Lease was never valid, it was never authorized by =
the TSU=20
Board of Regents or the Higher Education Coordinating Board, TSU =
was not=20
the owner of the equipment, State Street had title to the =
equipment, and=20
TSU had never made any lease payments on the equipment. =
The trial=20
court denied the plea to the jurisdiction as to State Street's =
claims=20
without explanation. Viron's=20
second amended counterclaim and third-party petition asserted =
numerous=20
causes of action against TSU including breach of contract (breach =
of the=20
Energy Audit Agreement, the Energy Savings Agreement, and the =
Master=20
Lease), In its plea=20
to the jurisdiction, TSU argued that (1) Viron failed to allege =
waiver of=20
TSU's immunity from suit in its contract causes of action; (2) =
Viron's=20
declaratory judgment suit fails because it is seeking to enforce=20
performance under a contract and is, thus, a suit against the =
State that=20
cannot be maintained without legislative permission; and (3) =
"Viron lacks=20
standing to assert an inverse condemnation claim as it seeks to =
assert the=20
claim on behalf of State Street."
A.=20
The Sovereign Immunity Doctrine Texas has=20
long recognized that sovereign immunity, unless waived, protects =
the State=20
of Texas, its agencies, and its officials from lawsuits for =
damages,=20
absent legislative consent to sue the State. Dir. of Dep't of =
Agric.=20
& Env't v. Printing Indus. Ass'n of Tex., 600 S.W.2d 264, =
265=20
(Tex. 1980); Griffin v. Hawn, 341 S.W.2d 151, 152-53 =
(Tex. 1960);=20
Hosner v. DeYoung, 1 Tex. 764, 769 (1847). Sovereign =
immunity=20
embraces two principles: immunity from suit and immunity from =
liability.=20
Mo. Pac. R.R. Co. v. Brownsville Navigation Dist., 453 =
S.W.2d=20
812, 813 (Tex. 1970). Immunity from suit bars a suit against the =
State=20
unless the Legislature expressly consents to the suit. Tex. =
Natural=20
Res. Conservation Comm'n v. IT-Davy, 74 S.W.3d 849, 853 (Tex. =
2002).=20
If the Legislature has not expressly waived immunity from suit, =
the State=20
retains such immunity even if its liability is not disputed. =
The Texas=20
Supreme Court has long recognized that "it is the Legislature's =
sole=20
province to waive or abrogate sovereign immunity." Fed. =
Sign, 951=20
S.W.2d at 409. The Legislature may consent to suits against the =
State by=20
statute or by resolution. Legislative=20
control over waiving immunity from suit does not mean that the =
State can=20
freely breach contracts with private parties or that the State can =
use=20
sovereign immunity as a shield to avoid paying for benefits the =
State=20
accepts under a contract. Id. Rather, if a party who =
contracts=20
with the State feels aggrieved, it can seek redress by asking the=20
Legislature to waive immunity from suit. Id.; =
see Tex.=20
Civ. Prac. & Rem. Code Ann. =A7=A7107.001-.005 (Vernon 2005). =
When the=20
State contracts with a private party, it waives immunity from =
liability.=20
Little-Tex, 39 S.W.3d at 594. The State does not, =
however, waive=20
immunity from suit simply by contracting with a private party.=20
Id. Immunity from suit bars a suit against the State =
unless the=20
State expressly gives its consent to the suit. Id.; =
see also=20
Tex. Civ. Prac. & Rem. Code Ann. =A7=A7 101.025; =
107.001-.005.=20
Although the claim asserted may be one on which the State =
acknowledges=20
liability, this rule precludes a remedy until the Legislature =
consents to=20
suit. See Mo. Pac. R.R., 453 S.W.2d at 813. Legislative =
consent=20
for suit or any other sovereign immunity waiver must be "by clear =
and=20
unambiguous language." Univ. of Tex. Med. Branch at Galveston =
v.=20
York, 871 S.W.2d 175, 177 (Tex. 1994); Duhart v. =
State, 610=20
S.W.2d 740, 742 (Tex. 1980). Immunity=20
from liability protects the State from judgments even if =
the=20
Legislature has expressly given consent to the suit. Mo. Pac.=20
R.R., 453 S.W.2d at 813. Even if the Legislature authorizes =
suit=20
against the State, the question remains whether the claim is one =
for which=20
the State acknowledges liability. See State v. Isbell, 94 =
S.W.2d=20
423, 425 (Tex. 1936). The State neither creates nor admits =
liability by=20
granting permission to be sued. Tex. Civ. Prac. & Rem. Code =
Ann. =A7=20
107.002 ("A resolution granting permission to sue does not waive =
to any=20
extent immunity from liability."); Isbell, 94 S.W.2d at =
424-25.=20
However, when the State contracts, the State is liable on =
contracts made=20
for its benefit as if it were a private person. State v. =
Elliott,=20
212 S.W. 695, 697-98 (Tex. Civ. App.--Galveston 1919, writ ref'd). =
Consequently, when the State contracts with private citizens, it =
waives=20
immunity from liability. A =
plaintiff=20
who sues the State must establish the State's consent to sue. =
Tex.=20
Dep't of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999). =
Otherwise,=20
sovereign immunity from suit defeats a trial court's =
subject-matter=20
jurisdiction. Id. The State may assert sovereign immunity =
from=20
suit in a plea to the jurisdiction. Id. A plea to the=20
jurisdiction is a dilatory plea that seeks dismissal of a case for =
lack of=20
subject-matter jurisdiction, thus defeating "a cause of action =
without=20
regard to whether the claims asserted have merit." Bland =
Indep. Sch.=20
Dist. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000). Subject-matter =
jurisdiction is essential to the authority of a court to decide a =
case.=20
See Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928 =
(Tex. 1998).=20
In a suit=20
against a governmental unit, the plaintiff must affirmatively =
demonstrate=20
the court's subject-matter jurisdiction by alleging a valid waiver =
of=20
immunity. Dallas Area Rapid Transit v. Whitley, 104 =
S.W.3d 540,=20
542 (Tex. 2003). To determine whether the plaintiff has met that =
burden,=20
we consider the facts alleged by the plaintiff and, to the extent =
it is=20
relevant to the jurisdictional issue, the evidence submitted by =
the=20
parties. Id. (quoting White, 46 S.W.3d at 868). =
"[I]f=20
the pleadings affirmatively negate the existence of jurisdiction, =
then a=20
plea to the jurisdiction may be granted without allowing the =
plaintiff an=20
opportunity to amend." County of Cameron v. Brown, 80 =
S.W.3d 549,=20
555 (Tex. 2002). A plea to the jurisdiction must be denied where =
the State=20
contends that it is immune on the basis of a "contract dispute" =
but where=20
fact issues exist regarding the existence of a contract. State =
v.=20
Holland, 161 S.W.3d 227, 233 (Tex. App.--Corpus Christi 2005, =
pet.=20
filed). Because immunity from suit defeats a trial court's =
subject-matter=20
jurisdiction, immunity from suit may properly be asserted in a =
plea to the=20
jurisdiction. See Tex. Dep't of Parks & Wildlife v. =
Miranda,=20
133 S.W.3d 217, 225-26 (Tex. 2004). We review a=20
trial court's ruling on a jurisdictional plea de novo, construing =
the=20
pleadings in the plaintiff's favor and looking to the pleader's =
intent.=20
Id. at 226; IT-Davy, 74 S.W.3d at 855. Whether =
the=20
pleader has alleged facts that affirmatively demonstrate =
subject-matter=20
jurisdiction is a legal question that we review de novo. =
Miranda,=20
133 S.W.3d at 226. "If a plea to the jurisdiction challenges the =
existence=20
of jurisdictional facts, [a court is to] consider relevant =
evidence=20
submitted by the parties when necessary to resolve the =
jurisdictional=20
issues raised." Id. at 227. Yet, "[i]f the evidence =
creates a=20
fact question regarding the jurisdictional issue, then the trial =
court=20
cannot grant the plea to the jurisdiction, and the fact issues =
will be=20
resolved by the fact finder." Id. at 227-28. The Uniform=20
Declaratory Judgment Act ("DJA") is a remedial statute designed =
"to settle=20
and to afford relief from uncertainty and insecurity with respect =
to=20
rights, status, and other legal relations." Tex. Civ. Prac. & =
Rem.=20
Code Ann. =A7 37.002(b) (Vernon 1997); IT-Davy,74 S.W.3d =
at 855.=20
The Act provides: A =
person=20
interested under a deed, will, written contract, or other writings =
constituting a contract or whose rights, status, or other legal =
relations=20
are affected by a statute, municipal ordinance, contract, or =
franchise may=20
have determined any question of construction or validity arising =
under the=20
instrument, statute, ordinance, contract, or franchise and obtain =
a=20
declaration of rights, status, or other legal relations=20
thereunder. Tex. Civ.=20
Prac. & Rem. Code Ann. =A7 37.004(a) (Vernon 1997). The DJA =
does not=20
extend a trial court's jurisdiction, and a litigant's request for=20
declaratory relief does not confer jurisdiction on a court or =
change a=20
suit's underlying nature. IT-Davy, 74 S.W.3d at =
855. Private=20
parties may seek declaratory relief against state officials who =
allegedly=20
act without legal or statutory authority, but such suits are not =
"suits=20
against the State." Id. (quoting W. D. Hayden Co. v.=20
Dodgen, 308 S.W.2d 838, 840 (Tex. 1958)). This is because =
suits to=20
compel state officers to act within their official capacity do not =
attempt=20
to subject the State to liability. Id. In contrast,=20
declaratory-judgment suits against state officials seeking to =
establish a=20
contract's validity, to enforce performance under a contract, or =
to impose=20
contractual liabilities are suits against the State. Id. =
That is=20
because such suits attempt to control state action by imposing =
liability=20
on the State. Id. at 856. Consequently, such suits cannot =
be=20
maintained without legislative permission. Id.; see =
also Fed.=20
Sign, 951 S.W.2d at 404. Private parties cannot circumvent =
the=20
State's sovereign immunity from suit by characterizing a suit for =
money=20
damages, such as a contract dispute, as a declaratory-judgment =
claim.=20
IT-Davy, 74 S.W.3d at 856; Freedman v. Univ. of =
Houston,=20
110 S.W.3d 504, 508 (Tex. App.--Houston [1st Dist.] 2003, no=20
pet.). D.=20
Inverse Condemnation and Federal Takings =
Clause The Fifth=20
Amendment states: "[N]or shall private property be taken for =
public use,=20
without just compensation." U.S. Const. amend. V. To have=20
standing to sue for inverse condemnation, a party must have a =
property=20
interest at the time of the alleged taking. City of Keller v.=20
Wilson, 168 S.W.3d 802, 808 (Tex. 2005); City of Houston =
v.=20
Boyle, 148 S.W.3d 171, 178 (Tex. App.--Houston [1st Dist.] =
2004, no=20
pet.). Not any property interest will do; that interest must have =
risen to=20
the level of a vested right. State/Operating Contractors ABS=20
Emissions, Inc. v. Operating Contractors/State, 985 S.W.2d =
646, 651=20
(Tex. App.--Austin 1999, pet. denied). A vested property =
right is=20
one that has been fixed by a court's final judgment or that has =
some=20
definitive, rather than merely potential, existence. Reiss v.=20
Reiss, 40 S.W.3d 605, 608 (Tex. App.--Houston [1st Dist.] =
2001),=20
rev'd on other grounds, 118 S.W.3d 439 (Tex. 2003). =
Standing is a=20
constitutional prerequisite to maintaining suit. See Tex. =
Ass'n of=20
Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 444 (Tex. =
1993);=20
Hunt v. Bass, 664 S.W.2d 323, 324 (Tex. 1984). =
To recover=20
damages for inverse condemnation, State Street and Viron had to =
prove that=20
TSU intentionally took or damaged the equipment for public use, or =
were=20
substantially certain that would be the result. See Tex. =
Const.=20
art. I, =A7 17; City of Dallas v. Jennings, 142 S.W.3d =
310, 313-14=20
(Tex. 2004). To defeat TSU's plea to the jurisdiction, however, =
State=20
Street need only plead sufficient facts to show the elements of an =
inverse-condemnation cause of action. See Kerr v. Tex. Dep't =
of=20
Transp., 45 S.W.3d 248, 251 n.3 (Tex. App.--Houston [1st =
Dist.] 2001,=20
no pet.).
TSU argues=20
that, as a A.=20
Waiver by Conduct In issue=20
one, TSU argues that Viron has not obtained legislative permission =
to sue=20
TSU. It questions if sovereign immunity defeats subject-matter=20
jurisdiction over Viron's claims against TSU for breach of =
contract,=20
unjust enrichment, indemnity, and a declaratory judgment with =
respect to=20
the validity of the contract between Viron and TSU. In response, =
Viron=20
argues that TSU has waived its sovereign immunity by its=20
conduct. 1.=20
Standing TSU argues=20
that, "because Viron admittedly assigned all of its rights under =
the=20
Contract, . . . it lacks standing to sue TSU for breach of that=20
Contract." Viron does=20
not claim ownership of the equipment. Viron validly assigned all =
its=20
interest in the equipment in question to State Street Bank. Viron =
argues,=20
however, that, because TSU refuses to acknowledge that State =
Street ever=20
acquired any interest in the equipment by virtue of the =
assignment, Viron=20
retains the breach of contract claim. An=20
oversimplification of the facts helps illuminate Viron's =
explanation of=20
how it "retains a genuine and substantial stake in this=20
litigation."
This=20
three-way litigation is plainly a situation in which a real =
controversy=20
exists between Viron and TSU which can be determined by monetary =
relief.=20
Thus, it satisfies the constitutional minimum for standing. =
See Texas=20
Ass'n of Bus., 852 S.W.2d at 446 ("The general test for =
standing in=20
Texas requires that there (a) shall be a real controversy between =
the=20
parties, which (b) will be actually determined by the judicial =
declaration=20
sought."). We hold that Viron has standing to asserts its contract =
claims.=20
See Miranda, 133 S.W.3d at 227-28. 2.=20
Supreme Court cases from Federal Sign to=20
present In the=20
seminal case, Federal Sign v. Texas Southern University, =
the=20
Supreme Court held that sovereign immunity bars breach-of-contract =
claims=20
against the State unless the claimant has obtained legislative =
consent to=20
sue. Id. In Federal Sign, a contract had been =
executed=20
but it was terminated by TSU before performance. Id. at =
403.=20
Justice Baker's majority opinion cautioned that the holding was =
limited=20
and observed that "[t]here may be other circumstances where the =
State may=20
waive its immunity by conduct other than simply executing a =
contract so=20
that it is not always immune from suit when it contracts." =
Id. at=20
408 n.1 Writing for a plurality of four justices, Justice Hecht =
concurred=20
in Federal Sign and reinforced the significance of the =
narrow=20
holding of the Court by stating that "today's decision does not =
hold that=20
the State is always immune from suit for breach of contract absent =
legislative consent; it holds only that the mere execution of a =
contract=20
for goods and services, without more, does not waive immunity from =
suit."=20
Id. at 413 (Hecht, J., concurring). Justice Hecht posed a =
series=20
of hypotheticals that might support a waiver of sovereign=20
immunity:
In 2001,=20
the Texas Supreme Court revisited the issue in General =
Services=20
Commission v. Little-Tex Insulation Co., 39 S.W.3d 591 (Tex. =
2001).=20
Justice Baker wrote for the majority that held that the State does =
not=20
waive immunity merely by accepting benefits under a contract. =
Id.=20
at 595-98. The Little-Tex case involved two companion =
cases. One=20
case involved a construction dispute in which the construction had =
been=20
completed, and the State, after paying the full contract price, =
refused to=20
pay a claim for adjustments. Id. at 599. The second case =
involved=20
an asbestos abatement contract that was terminated by the State, =
in the=20
middle of performance, based on disputes regarding the =
contractor's=20
performance. Id. at 594. Neither case involved a =
situation in=20
which a contract had been fully performed and the State refused to =
pay=20
anything. In fact, neither of the cases addressed any of the =
hypotheticals=20
previously raised in Justice Hecht's concurrence to Federal =
Sign.=20
After determining that the cases fell within the newly-enacted=20
administrative procedure found in Chapter 2260 of the Government =
Code, The next=20
year, the Texas Supreme Court again addressed the =
waiver-by-conduct=20
exception to sovereign immunity in Texas Natural Resource =
Conservation=20
Commission v. IT-Davy, 74 S.W.3d 849 (Tex. 2002), and it was =
divided=20
4-4 on the issue with one dissenting justice (Justice Enoch). In=20
IT-Davy, the State had paid a contractor the full =
contract price=20
under the original terms, but it paid only a small percentage of a =
claim=20
for additional expenses and lost profits asserted under an =
"equitable=20
adjustment" clause. Id. at 851. Eight justices agreed =
that the=20
facts did not support a waiver-by-conduct exception, but were =
divided on=20
the reasoning. Justice Baker authored a plurality opinion urging a =
bright-line approach barring a waiver-by-conduct exception under =
any=20
circumstances. Id. at 857. Justice Hecht authored a =
concurrence=20
for a plurality of four justices explaining why the facts in=20
IT-Davy did not rise to the level anticipated in his =
Federal=20
Sign hypotheticals. Id. at 860-62. He wrote, "My=20
hypothetical supposed a government agency that chiseled a =
contractor just=20
because it could get away with doing so. Here, TNRCC and IT-Davy =
have a=20
legitimate disagreement over what price should be paid for the =
extra work.=20
. . . This is nothing more than an ordinary contract dispute."=20
Id. at 861. The plurality concurrence also stated that "I =
cannot=20
join, however, in the broad language of Justice Baker's opinion =
that=20
indicates that the State is always immune from suit for breach of =
contract=20
absent legislative consent." Id. at 860. Justice Hecht =
concluded=20
by stating that "I cannot absolutely foreclose the possibility =
that the=20
State may waive immunity in some circumstances other than by =
statute."=20
Id. at 862. In=20
Travis County v. Pelzel & Associates, 77 S.W.3d 246 =
(Tex.=20
2002), the Supreme Court rejected another waiver-by-conduct =
assertion in a=20
case involving a construction contract. After the building was =
completed,=20
Travis County paid virtually the entire contract price of =
$414,164.80, but=20
withheld $5,500 because the performance was not timely, relying on =
a=20
liquidated damages clause. Id. at 247. The court found no =
waiver=20
of immunity because the conduct at issue in that case did not =
amount to a=20
waiver. Id. at 252. The court held that "[w]hen a =
governmental=20
unit adjusts a contract price according to the contract's express =
terms,=20
it does not, by its conduct, waive immunity from suit, even if the =
propriety of that adjustment is disputed." Id. Viron =
contends=20
that this holding illustrates the Texas Supreme Court's desire to =
impute a=20
more "modest, case-by-case approach" when considering=20
waiver-by-conduct. In=20
Texas A&M University-Kingsville v. Lawson, Justice =
Hecht,=20
writing for a 5-4 Court, adopted a waiver exception for immunity =
in=20
breach-of-contract cases: When the State settles a claim from =
which it is=20
not immune, sovereign immunity does not protect it from a=20
breach-of-contract action to enforce the settlement agreement. 87 =
S.W.3d=20
at 518. Lawson settled his Whistleblower Act case against the =
University,=20
but later sued the University alleging that it violated the terms =
of the=20
settlement. Id. at 519. The court recognized that "a suit =
for=20
breach of a settlement agreement is separate and apart from the =
suit on=20
the settled claim" and held that "enforcement of a settlement of a =
liability for which immunity is waived should not be barred by =
immunity."=20
Id. at 521. In so holding, the court rejected both the =
court of=20
appeals' "adoption of a broad waiver-by-conduct exception to =
sovereign=20
immunity" and Justice Rodriguez's dissent's "rigid view of =
immunity from=20
suit for breach of contract." Id. at 522-23. The Court's=20
latest decision on the subject can be found in Catalina =
Development,=20
Inc. v. County of El Paso, 121 S.W.3d 704, 704 (Tex. 2003), =
where a=20
county solicited bids for purchasing a parcel of land, accepted =
the=20
highest bid, deposited the tendered earnest money, and sent the =
purported=20
buyer a warranty deed and affidavit to be used to close the =
transaction.=20
The county delayed authorization to sign the deed, and a =
newly-elected=20
commissioner's court refused to approve the sale. Id. =
While=20
repeatedly stating that the State may waive its immunity by =
conduct, the=20
court held "the equitable basis for such a waiver simply does not =
exist=20
under this set of facts." Id. at 705-06. The court =
distinguished=20
the facts in Catalina from those in Federal Sign =
by=20
stating that "the County did not profit unfairly at Collins's =
expense,"=20
and, despite the fact that he fully performed under the contract, =
Collins=20
"ignores an important distinction between [Justice Hecht's =
hypothetical in=20
his concurrence in] Federal Sign and this case. In =
Federal=20
Sign, the State was the buyer of commercial goods, while here =
the=20
County is the seller of government land. Collins does not seek to =
recover=20
for goods already conveyed." Id. at 706. The Catalina =
court, which consisted of eight justices and one dissenter =
(Justice=20
Enoch), clearly establishes that the court will evaluate the=20
waiver-by-conduct exception to sovereign immunity on the facts of =
each=20
case, not as a categorical matter or bright-line rule. 3.=20
Application to our facts The Texas=20
Supreme Court has never addressed a waiver-by-conduct exception =
argument=20
faced with the "extraordinary factual circumstances" as the trial =
court=20
described them here. In its order denying TSU's plea to the =
jurisdiction=20
against Viron, the trial court listed the following eight =
"relevant=20
factual allegations": 1. On=20
January 16, 1998, TSU notified [Viron] by letter that the TSU =
Board of=20
Regents had authorized the award of a contract to [Viron] for the=20
performance of an audit of TSU's energy system (the "energy audit=20
agreement"). The letter was signed by Dannette McElroy-Davis, =
project=20
manager, and Harold Johnson, associate vice president of =
Facilities=20
Planning and Operations for TSU. 2. On=20
January 28, 1998, two TSU officials instructed [Viron] in a =
written=20
"Notice to Proceed" to commence work on the audit. 3. On=20
February 25, 1998, TSU General Counsel Cheryl Elliot Thornton =
("Thornton")=20
notified a TSU official that the energy audit agreement was =
"acceptable=20
for final execution," subject to some technical =
revisions. 4. The=20
energy audit agreement was executed by TSU President James M. =
Douglas=20
("Douglas") on or about March 4, 1998. 5. [Viron]=20
completed the energy audit in June 1998. 6. As a=20
result of the audit's findings, [Viron] submitted a proposal to =
TSU in=20
which [Viron] offered to commence work on six projects aimed at =
improving=20
energy conservation and efficiency on the TSU campus. The =
proposal, titled=20
the Performance Based Energy Savings agreement (the "PBES =
agreement"),=20
called for [Viron] to provide both services and equipment to=20
TSU. 7. At a=20
meeting on July 10, 1998, the TSU Board of Regents authorized the =
TSU=20
administration to proceed with the PBES agreement. President =
Douglas=20
subsequently executed the PBES agreement on behalf of TSU on July =
27,=20
1998. 8. Pursuant=20
to the PBES agreement, [Viron] and TSU entered into a Master State =
and=20
Municipal Lease/Purchase Agreement (the "Master Lease") [footnote =
omitted]=20
in September 1998 to finance the purchase of equipment needed to =
complete=20
the energy projects. In a letter attached to the Master Lease, TSU =
General=20
Counsel Thornton represented to [Viron] that the Master Lease was =
"duly=20
authorized by all necessary action on the party of the Lessee =
(TSU)" and=20
that the Master Lease was "legal, valid, and binding" and =
"enforceable in=20
accordance with its terms." Viron=20
alleges that, after it provided approximately $13 million in =
equipment and=20
services, TSU declared that the agreements in question were not =
valid=20
obligations and refused to make payments due. Quintin Wiggins, =
TSU's=20
corporate representative, testified that TSU did not make any =
lease=20
payments on the equipment it received from the Master Lease. Viron =
contends that these facts alone are enough to create a =
waiver-by-conduct=20
exception. It argues, however, that the=20
injustice is even worse, because this case also includes an =
additional=20
fact that appears in none of the prior cases: The government =
officials=20
lured Viron into the Master Lease with false promises that the =
contract=20
would be valid and enforceable, then disclaimed any obligation on =
the=20
contract by taking the position that the contract was not valid =
after all.=20
We agree.=20
Based on the facts before us, we overrule point of error one and =
hold that=20
sovereign immunity does not defeat the trial court's =
subject-matter=20
jurisdiction over Viron's claims for breach of =
contract. B.=20
Waiver by the DJA In issue=20
three, TSU contends that the DJA does not expand courts' =
jurisdiction, and=20
the declaration that State Street seeks concerns the validity of a =
contract with the State. TSU questions whether the trial court =
lacks=20
jurisdiction to make this declaration. State=20
Street sought the trial court's determination and declaration that =
(1) the=20
purported Master Lease and all related documents "were executed =
without=20
the requisite authority" and are "void and unenforceable against =
TSU"; (2)=20
TSU does not have any rights to the equipment; (3) State Street =
holds all=20
rights, title and interest to the equipment; (4) TSU has "no =
right, title,=20
or interest to the equipment and must return the equipment to =
State=20
Street"; and (5) State Street is entitled to a constructive trust =
and=20
return of the equipment to State Street. State Street's =
declaratory=20
judgment action against TSU affirmatively pleads that its dispute =
with TSU=20
is not based on a contract. State Street argues that TSU cannot =
contest=20
its ownership because TSU failed to controvert ownership by =
verified=20
denial as required by Texas Rule of Civil Procedure 93, which =
states that=20
a pleading that a "plaintiff is not entitled to recover in the =
capacity in=20
which he sues" is required to "be verified by affidavit." Tex. R. =
Civ. P.=20
93(2). TSU argues=20
that IT-Davy conclusively bars Viron's =
declaratory-judgment=20
claim, which requests a declaration that the contract is valid and =
State=20
Street's declaratory judgment claim, which seeks a declaration =
that the=20
contract is "void and unenforceable." The Texas=20
Supreme Court has identified only two types of =
declaratory-judgment claims=20
that a plaintiff may assert against the State; a plaintiff may =
seek either=20
(1) to compel a state officer to act within his official capacity =
or (2)=20
to establish a contract's validity, enforce performance under a =
contract,=20
or impose contractual liabilities. IT-Davy, 74 S.W.3d at =
855. The=20
first category of claims are not "suits against the State." W. =
D.=20
Haden Co. v. Dodgen, 308 S.W.2d 838, 840 (Tex. 1958). In =
contrast,=20
the second category of claims are suits against the State "because =
such=20
suits attempt to control state action by imposing liability on the =
State."=20
IT-Davy, 74 S.W.3d at 856. Consequently, such suits =
cannot be=20
maintained without legislative permission. Id. Viron's and=20
State Street's requests for declarations concerning the Master =
Lease's=20
validity fall squarely within the second category of =
declaratory-judgment=20
claims identified in IT-Davy and thus fall outside the =
trial=20
court's subject-matter jurisdiction. See id. We sustain=20
issue three. C.=20
Waiver by Inverse Condemnation In issue=20
two, TSU asserts that, under established Texas law, a party cannot =
circumvent the State's immunity from suit by recasting a contract =
claim as=20
one for inverse condemnation. Assuming that TSU obtained the =
equipment=20
pursuant to a written contract, not through the exercise of =
eminent-domain=20
powers, TSU asks us to decide if Viron can overcome TSU's =
sovereign=20
immunity simply by pleading an inverse-condemnation claim. In =
issue four,=20
TSU contends that, on the day of the assignment, Viron did not =
possess a=20
vested property right in the equipment, and the evidence =
establishes that=20
TSU acquired the equipment pursuant to its contract with Viron, =
not=20
through the exercise of eminent-domain powers. TSU questions =
whether=20
either of these facts suffice to deprive the trial court of =
jurisdiction=20
over State Street's inverse-condemnation and federal takings =
clause=20
claims. Both State=20
Street and Viron alleged inverse condemnation and takings in their =
pleadings. State Street asserts no contract claim against TSU and =
seeks no=20
recovery under the allegedly void Master Lease. Rather, State =
Street=20
asserts that it is the owner of the equipment by virtue of two=20
assignments: the Viron/Academic Assignment and the Academic/State =
Street=20
Assignment. 1.=20
Standing TSU argues=20
that State Street lacks standing based on correspondence it sent =
to TSU.=20
On September 14, 2001, State Street sent a letter to the President =
of TSU,=20
Priscilla Slade, State=20
Street argues that, through the assignment, it paid $8.5 million =
"for the=20
equipment." TSU responds, however, that State Street's payment was =
not=20
"for the equipment," but rather for "an array of rights that =
notably=20
failed to include any vested property right in the equipment." =
With=20
respect to Viron, TSU contends that Viron lacks standing to assert =
an=20
inverse condemnation claim because it assigned away any right it =
may have=20
had in the equipment. Viron concedes that it "does not claim =
ownership of=20
the equipment. Viron validly assigned all its interest in the =
equipment in=20
question to State Street Bank so the inverse condemnation claim =
belongs to=20
State Street Bank." Viron argues, however, that, because TSU =
refuses to=20
acknowledge that State Street ever acquired any interest in the =
equipment=20
by virtue of the assignment, Viron retains the property interest =
and the=20
inverse condemnation claim. We hold=20
that the evidence creates a fact question regarding the standing=20
jurisdictional issue thus requiring us to resolve the issue in =
favor of=20
Viron and State Street. See IT-Davy, 74 S.W.3d at 855; =
see=20
also Miranda, 133 S.W.3d at 227-28. 2.=20
Color of Contract TSU=20
contends that, even if Viron and State Street had standing to =
pursue their=20
takings claims, the trial court still lacked jurisdiction because =
TSU=20
acquired the equipment under color of contractual right and thus =
without=20
any intent to exercise eminent-domain power. In its=20
third amended petition, State Street alleged, in relevant =
part: In=20
exercising dominion over and use of the equipment, TSU =
intentionally=20
denied State Street its property and applied it for public=20
use. The past=20
and continuing use of State Street's equipment is a physical act =
that=20
constitutes a taking of property and an unreasonable interference =
with=20
State Street's exclusive right to use and enjoy the property in =
violation=20
of the Texas and United States constitutions. This=20
intentional act was done without process or a proper condemnation=20
proceeding. TSU has=20
expressly denied it has any title to the equipment. Further, it =
has=20
acknowledged that it is not bound by any contract conferring right =
to the=20
equipment. State=20
Street seeks to recover just and adequate compensation from TSU =
for the=20
past and continuing taking of its property.
State=20
Street was not required to prove these allegations at this stage =
of the=20
lawsuit; all that was required to defeat TSU's plea to the =
jurisdiction=20
was a pleading of facts showing the elements of an =
inverse-condemnation=20
cause of action. See Kerr, 45 S.W.3d at 251 n.3. State =
Street=20
contends that it has satisfied its obligations because it has =
alleged that=20
(1) there is no contract, (2) it owns the equipment, (3) its =
assignment is=20
valid, and (4) TSU's taking of the equipment was intentional. =
In its=20
second amended counterclaim and third-party petition, Viron =
alleged the=20
following with respect to its inverse-condemnation =
claim: By virtue=20
of the assignment of the Master Lease, State Street Bank acquired =
certain=20
property rights in some of the equipment that was installed by =
Viron on=20
the TSU campus. Specifically, State Street Bank acquired rights in =
equipment other than the equipment relating to the Main Thermal =
Plant=20
upgrade, which was not financed under the Master Lease and for =
which TSU=20
paid cash. By exercising dominion and control over such other =
equipment,=20
for which it has not paid, TSU has intentionally denied State =
Street Bank=20
its rights in such property. Such action by TSU constitutes a =
taking of=20
property without due process of a proper condemnation proceeding.=20
It is clear=20
that the equipment was delivered to TSU, and its possession of the =
equipment was by virtue of the Master Lease and not by virtue of a =
taking=20
within the meaning of article I, section 17 of the Texas =
Constitution.=20
Tex. Const. art. I, =A7 17. Viron voluntarily and with its own =
consent=20
delivered the equipment to TSU after making the Master Lease. In =
so doing,=20
Viron cannot now say that the equipment was taken under the power =
of=20
eminent domain. See State v. Steck Co., 236 S.W.2d 866, =
869 (Tex.=20
Civ. App.--Austin 1951, writ ref'd) (holding that unenforcible =
contract=20
precludes legal liability and no constitutional =
violation). We hold=20
that State Street's and Viron's pleadings and evidence fail to =
allege=20
sufficient facts to establish TSU's requisite intent under=20
constitutional-takings jurisprudence. See Little-Tex, 39 =
S.W.3d=20
at 598-99. We sustain=20
issues two and four.
We affirm=20
the trial court's orders denying TSU's pleas to the jurisdiction =
with=20
respect to Viron's contract claims and reverse the trial court's =
denial of=20
TSU's pleas to the jurisdiction relating to Viron's and State =
Street's=20
inverse-condemnation and declaratory judgment =
claims. George C.=20
Hanks, Jr. Panel=20
consists of Justices Nuchia, Keyes, and Hanks. Justice=20
Keyes, concurring and dissenting.
2. 3. TSU also paid Viron $101,100 to =
compensate it for=20
its work in preparing the energy audit.=20
4. The final payment was for $581,509.76.=20
5. 6. State Street asserts that Viron concealed =
from=20
State Street TSU's position that the purported Master Lease and =
related=20
instruments were void for lack of authority and the existence of =
other=20
disputes between TSU and Viron, while at the same time Viron =
requested and=20
received more than $6 million out of the escrow account.=20
7. State Street contends that Viron's =
attempted=20
"release" had no effect on the status of the equipment or State =
Street's=20
rights in it because (1) Viron had already assigned all right, =
title, and=20
interest to the equipment to State Street and (2) TSU had no legal =
or=20
contractual right, title or interest in the equipment as it never =
had the=20
requisite legal authority to enter into a contract with State =
Street as=20
the owner of the equipment.=20
8. State Street also sought a declaratory =
judgment=20
against the other defendants and asserted claims for conversion, =
unjust=20
enrichment, breach of fiduciary duty, fraudulent transfer, alter =
ego and=20
single business enterprise, and breach of contract, warranty, and=20
covenants.=20
9. Viron sued Academic Capital, Academic =
Services, and=20
State Street for breach of fiduciary duty, breach of contract, =
conversion,=20
negligence, gross negligence, fraud, tortious interference, =
misapplication=20
of fiduciary property, civil conspiracy, and alter ego.=20
10. The Court is mindful that, under =
chapter 2260 of=20
the Texas Government Code, the sole remedy of a private party =
asserting a=20
breach-of-contract claim against the state is through an =
administrative=20
process. See Tex. Gov't Code Ann. =A7 2260 (Vernon 2004). =
The=20
Legislature, however, has amended chapter 2260 to specify that =
such=20
administrative process does not apply to contracts "executed or =
awarded on=20
or before August 30, 1999," such as those at issue here. =
See Tex.=20
Gov't Code Ann. =A7 2260.002(2) (Vernon Supp. 2005).=20
11. There is some question whether State =
Street and=20
Viron alleged federal claims as well as their state claims for =
inverse=20
condemnation. We read their pleadings to assert a claim for =
federal=20
"takings" and will accordingly address both the alleged federal =
and state=20
constitutional violations.=20
12. Tex. Gov't Code Ann. =A7=A7 2260.001 =
-2260.006=20
(Vernon 2000).=20
13. 14. We do not find State Street's rule 93 =
argument=20
persuasive. When capacity is contested, rule 93 requires that a =
verified=20
plea be filed unless the truth of the matter appears of record. =
Tex. R.=20
Civ. P. 93; Sixth RMA Partners, L.P. v. Sibley, 111 =
S.W.3d 46, 56=20
(Tex. 2003). "Capacity has been defined as a party's personal =
right to=20
come into court and should not be confused with the question of =
whether a=20
party has an enforceable right or interest." Austin Nursing =
Ctr., Inc.=20
v. Lovato, 171 S.W.3d 845, 849 (Tex. 2005) (quoting 6A =
Wright,=20
Miller, & Kane, Federal Practice and Procedure: Civil 2D =A7 =
1559, at=20
441 (2d ed. 1990). Furthermore, a trial court has no discretion to =
refuse=20
a trial amendment unless (1) the opposing party presents evidence =
of=20
surprise or prejudice or (2) the amendment is objected to and =
asserts a=20
new cause of action or defense and is thus prejudicial on its =
face. Tex.=20
R. Civ. P. 66; Chapin & Chapin, Inc. v. Tex. Sand & =
Gravel=20
Co., 844 S.W.2d 664, 665 (Tex. 1992); Francis v. Coastal =
Oil=20
& Gas Corp., 130 S.W.3d 76, 91 (Tex. App.--Houston [1st =
Dist.]=20
2003, no pet.).=20
15. Slade was terminated from her position =
as=20
president on July 17, 2006.=20
16. 17. These statements are derived from =
Wiggins's=20
deposition. TSU responds that Wiggins's testimony is not binding =
and=20
simply represents a "subsequently adopted litigation=20
=
position."