Court Opinion

ID: 9762718
Source: CourtListenerOpinion
Date Created: 2023-08-29 02:29:51.457319+00
Date Added: 2024-06-11T07:29:36.893615
License: Public Domain

HECHT, Justice,
joined by PHILLIPS, Chief Justice, CORNYN and OWEN, Justices, concurring.
I concur in the Court’s opinion. I write separately for three reasons. First, I wish to make plain that the Court’s opinion is limited, despite some occasional broad language. Second, while today’s decision is supported by precedent, the Court does not explain why it refuses to depart from that precedent despite strong arguments that it should do so. The parties, and the public, are owed this explanation. Third, a word should be said in response to the dissent. The dissent would completely abolish immunity although the Legislature has not only repeatedly refused to do so but has within the past few days crafted mediation and administrative procedures to resolve certain contract disputes with the State.
I
The immunity issue in this case is a narrow one. It is this: should a court hold that the State, merely by entering into a contract for goods and services, waives immunity from suit for breach of the contract before the other party has tendered performance? That is all we can, and do, decide.
The Court’s succinct summary of the facts concerning the parties’ dispute omits the following important details that limit the legal issue to be decided. Texas Southern University solicited bids for the manufacture and installation of basketball arena scoreboards to be financed by a corporate sponsor in exchange for advertisement and concession rights. Federal Sign bid $182,506. After several weeks of negotiations, the Pepsi-Cola Company agreed to be the sponsor, and Federal Sign reduced its offer to $158,404. TSU formally accepted the proposal and instructed Federal Sign to begin work immediately so that the scoreboards would be finished as soon as possible. Seven months later, before Federal Sign had delivered anything to TSU, TSU terminated the agreement and contracted instead with Spectrum Scoreboards and Coca-Cola. Federal Sign sued for breach of contract to recover $67,481 lost profits and $22,840 expenses. At trial, a jury found that TSU breached its agreement and that Federal Sign suffered the damages it alleged.
These facts are important for two reasons. First, the subject contract is for goods and services. We do not address whether the State is immune from suit on debt obligations, such as bonds. Second, at the time of TSU’s breach (as found by the jury), Federal Sign had not performed. To be sure, Federal Sign purchased equipment for the contract that it could not otherwise use and lost profits it had bargained for. But Federal Sign never tendered performance, never performed services on TSU’s property, and never delivered TSU any materials. Would the result be different if Federal Sign had already installed the scoreboards and TSU refused to pay the agreed price? Or if TSU had accepted the scoreboards, acknowledged that Federal Sign had fully complied with the contract, but refused to pay the agreed price? Or if TSU refused to pay in order to force Federal Sign to make a concession on another contract? We do not attempt to decide such hypotheticals today, but they do *413suggest that the State may waive immunity by conduct other than simply executing a contract, so that it is not always immune from contract suits.
Categorical statements in the Court’s opinion must be read in this context. For example, the Court states that “when the state contracts with private citizens, the state waives only immunity from, liability.” Ante at 406. Later it states: “We hold that sovereign immunity from suit without legislative consent applies to contract claims against the state.” Ante at 412. These statements do not apply to all contracts — state bonds, for example — or to all circumstances. In short, today’s decision does not hold that the State is always immune from suit for breach of contract absent legislative consent; it holds only that the mere execution of a contract for goods and services, without more, does not waive immunity from suit.
II
I agree with the Court that its decision is supported by Herring v. Houston National Exchange Bank, 114 Tex. 394, 269 S.W. 1031 (1925), W.D. Haden Co. v. Dodgen, 158 Tex. 74, 308 S.W.2d 838 (1958), and Missouri Pacific Railroad v. Brownsville Navigation District, 453 S.W.2d 812 (Tex.1970). But we did not grant Federal Sign’s application for writ of error simply to reaffirm past decisions and affirm the court of appeals. Rather, we took the case, while applications for writ of error in two similar eases were pending (Green International, Inc. v. State, 877 S.W.2d 428 (Tex.App.—Austin 1994), writ granted, 38 Tex. Sup.Ct. J. 404 (March 30, 1995), writ dism’d, 39 Tex. Sup.Ct. J. 96 (Nov. 16, 1995) (settled); Firemen’s Insurance Co. v. Board of Regents of the University of Texas System, No. 95-0924 (filed Sept. 19, 1995, 38 Tex. Sup.Ct. J. 1209)), to consider whether the Court should abolish governmental immunity from suits on contract. The Court does not discuss this issue, except to say that we have repeatedly and recently held that the waiver of governmental immunity — in the sense of granting consent to sue, as opposed to conduct constituting waiver — is a matter addressed to the Legislature. Ante at 409; City of LaPorte v. Barfield, 898 S.W.2d 288, 291 (Tex.1995); Guillory v. Port of Houston Auth., 845 S.W.2d 812, 813 (Tex.1993), cert. denied, 510 U.S. 820, 114 S.Ct. 75, 126 L.Ed.2d 43 (1993); Lowe v. Texas Tech Univ., 540 S.W.2d 297, 298 (Tex.1976). Federal Sign argues that we should no longer adhere to such precedents. This argument deserves response; it is, after all, the main argument in the case.
There are compelling reasons for this Court to continue to defer to the Legislature. First, the handling of contract claims against the government involves policy choices more complex than simply waiver of immunity. Last year the Texas House of Representatives Committee on Civil Practices surveyed the law of all the other states and concluded that Texas had eight options: retain governmental immunity; waive immunity; waive immunity but exclude awards for attorney fees and consequential damages; waive immunity but prohibit liens on state property; waive immunity for claims under a certain amount; adopt an alternative dispute resolution system for all agencies; resolve all claims by administrative hearing; and create a new special claims court or administrative claims board. Texas House of Representatives, InteRim Report to the 75th Legislature 6-8 (1996). The committee’s survey of other states’ laws shows that most states waive immunity from suit on contracts, but that in only five states was that waiver by the judiciary. Id. at 18-29. The committee noted that until 1987 the Legislature freely granted consent to sue on contract claims, but that since then the Legislature has had “to reexamine the financial impact these suits could have on the limited resources of the state.” Id. at 9. In four legislative sessions from 1989 through 1995, 173 resolutions were introduced for consent to sue under chapter 107 of the Civil Practice and Remedies Code; only nine were passed. Id. Thus, the Legislature has taken a more active role in determining what claims have sufficient merit that they should be prosecuted.
The Legislature has repeatedly considered whether to waive all governmental immunity for contract suits and has refused to do so, although as MOPAC demonstrates, it may have done so in certain situations, such as by *414authorizing particular agencies to be sued. MOPAC, 453 S.W.2d at 813. In 1991 two bills were introduced to waive all governmental immunity for contract actions. Tex. S.B. 1072, 72nd Leg., R.S. (1991); Tex. H.B. 2154, 72nd Leg., R.S. (1991). They did not pass. In 1995 a bill was introduced to require state agencies to mediate construction contract disputes. Tex. H.B. 1369, 74th Leg., R.S. (1995). It also did not pass. In the legislative session just ended two bills were introduced to waive or modify governmental immunity for all contract actions. Tex. S.B. 846, 75th Leg., R.S. (1997); Tex. H.B. 2737, 75th Leg., R.S. (1997). Neither was reported from committee. Two bills requiring arbitration of prison construction contract disputes were not reported from committee. Tex. S.B. 1443, 75th Leg., R.S. (1997); Tex. H.B. 3352, 75th Leg., R.S. (1997). Another bill that, as originally introduced, would have waived governmental immunity for contract actions but, as amended, provided for administrative hearings and decisions on most contract disputes also did not pass. Tex. H.B. 172, 75th Leg., R.S. (1997).
One bill that did pass this session shows that the Legislature continues to assert governmental immunity from contract suits while crafting other procedures to resolve contract disputes with the State. Senate Bill 694, entitled the Governmental Dispute Resolution Act, to be codified as chapter 2008 of the Government Code, authorizes state agencies to provide for alternative dispute resolution of contract disputes. Tex. S.B. 694, 75th Leg., R.S. (1997). The bill expressly provides that it “does not waive immunity from suit”. Id. § 2008.005(a). The bill, which awaits the Governor’s signature, demonstrates the complex and competing policies involved in resolving the State’s contract disputes. Simply abolishing immunity cannot accommodate those policies.
Second, not all the factors that weigh in determining the State’s liability on its contracts can be assessed in a judicial proceeding. Must the State honor all long-term contracts when they no longer serve the public interest, continuing to spend tax revenues on matters that no longer benefit the people? If so, then the government’s ability to respond to changing conditions for the welfare of the people as a whole is impaired. Moreover, each succeeding administration may become increasingly bound by the contracts of prior administrations with no way of escape except payment of public resources. Harold J. Krent, Reconceptualizing Sovereign Immunity, 45 VANDERBILT L. Rev. 1529, 1530 (1992). Would state officials be unduly anxious to conform to judicial policy wishes if they knew that judges could determine the State’s liability for millions of dollars? See id. Would the prospect of liability smother policy initiatives based upon truly changed circumstances? See id. at 1530-1531. Governmental immunity rests on such concerns and not simply on the archaic idea that “the king can do no wrong”. Such political concerns pertain to the nature of democratic government and cannot be assessed by a jury in a contract suit. They are best determined by the people’s representatives in the Legislature.
Third, even if the Court were to abolish governmental immunity from contract suits, successful plaintiffs still could not be paid without legislative appropriation. Each appropriation bill passed by the Legislature typically contains a section on judgments. As an example, the 1995 bill provides in part:
None of the funds appropriated by this Act may be expended for payment of any judgment or settlement prosecuted by or defended by the Attorney General and obtained against the State of Texas or any state agency, except pursuant to this section or where it is specifically provided in an item or items of appropriation that the funds thereby appropriated or expenditures therein authorized may be used for the payment of such judgments.
Act of May 25, 1995, 74th Leg., R.S., ch. 1063, art. IX, § 56, 1995 Tex. Gen. Laws 5242, 6097. To abolish immunity for contract actions would not allow recovery against the government without its consent.
Finally, the Legislature has long provided a means of redress for contract claimants against the State by allowing petitions for consent to sue the State for breach of contract. Ten years ago the Legislature formalized the procedure for such petitions by *415adopting chapter 107 of the Civil Practice and Remedies Code. It “applies to resolutions granting permission to sue the state or any of the agencies of government that collectively constitute the government of this state, including ... institutions of higher learning”, like TSU. Tex. Civ. PRAC. & Rem. Code § 107.001. While the judiciary is better suited to resolve factual and legal issues in contract disputes, the Legislature is not incapable of considering such issues, and is better suited to deciding the kinds of political issues that also attend claims against the State. For this Court to invade matters so laden with political policy concerns and, by abolishing immunity from suit, to disrupt the procedures the Legislature has fashioned, would be not only contrary to our precedents but also unsound jurisprudence.
Ill
Finally, I must say a word in response to the dissenting opinion. The main premise of the dissent is that a state contract is not enforceable unless an individual party can sue the State in its courts. The premise is faulty for two reasons.
First, it simply assumes without explanation that the Legislature’s decision to waive immunity from suit on a case-by-case basis rather than across the board is not an adequate remedy for contract claimants. Petitions for waivers of immunity under chapter 107 of the Civil Practice and Remedies Code are, in the dissent’s view, no remedy at all. Why does legislative consent as a prerequisite to suit render the contract unenforceable? Certainly, the contracts of parties who received legislative consent to sue, sued, and collected were enforceable.
The presumption tacit in the dissent’s position is that a party can obtain justice only in the courts, not in the Legislature. This view of the Second Department of Government is unwarranted. Though the courts are better suited to resolving factual and legal disputes in contract actions, the Legislature is better suited to resolving matters of political policy. As shown above, contract claims against the State can involve both. The United States Supreme Court observed in Lynch v. United States, 292 U.S. 571, 580, 54 S.Ct. 840, 844, 78 L.Ed. 1434: “‘The contracts between a Nation and an individual are only binding on the conscience of the sovereign and have no pretensions to compulsive force. They confer no right of action independent of the sovereign will.’” Accord, Perry v. United States, 294 U.S. 330, 346-347, 55 S.Ct. 432, 433, 79 L.Ed. 912 (1935). The same is true of the State as respects her own courts. Whether to remedy the State’s contractual breaches is a matter addressed to the Legislature’s conscience. The Judicial Department does not possess a monopoly on conscience. The State may not take property without compensation, but it may determine how its Branches will participate in deciding its contractual disputes.
Second, a waiver of immunity would not provide the full redress the dissent contends is essential for a contract with the State to be enforceable. Even if the State is held liable in a suit for breach of contract, it cannot be forced to pay the judgment. The Legislature may simply refuse to appropriate the funds. There is no reason why requiring legislative consent to sue makes a contract unenforceable but requiring legislative consent to collect does not. The dissent’s terse response to this point is: “not relevant”. Post at 418.
The dissenting opinion faults the Court for not explaining why a waiver of immunity from liability does not entail a waiver of immunity from suit. Post at 416. Lynch and Perry both distinguish between the government’s obligation and its consent to suit. This Court in MOPAC stated that “[i]t is necessary to distinguish between two different governmental immunities: (1) immunity from suit without consent even though there is no dispute as to liability of the sovereign; and (2) immunity from liability even though consent to the suit has been granted.” 453 S.W.2d at 813. If the State did not waive immunity from liability by executing a contract, then it would have no obligation at all to the contracting party for its breach. The State can waive immunity from liability, thus recognizing its obligation, but retain immunity from suit, thereby requiring that the party present its claim of obligation to the Legislature, for its consent to sue. The dissenting opinion may feel that the State ought to *416waive immunity from suit by executing a contract, but there is nothing in the mere execution of a contract that expressly waives immunity from suit or is inconsistent with its assertion.
The “modem justification” for governmental immunity is not, as the dissent states, “that suits against the state would deplete resources of treasury and tax funds necessary to operate the government.” Post at 417. I have explained some of the considerations above, and they are not simply pecuniary. They involve the political structure of government and the allocation of responsibility among its Branches for resolving disputes involving the State.
The dissent states: “Today, Federal Sign has lost any recourse to enforce its contract with the State.” Post at 418. This is simply untrue. Federal Sign lost its recourse to enforce its contract when it refused, to petition the Legislature for consent to sue under chapter 107 of the Civil Practice and Remedies Code.
By waiving all immunity from suit for contract claims, the dissent would disregard the Legislature’s clear intent not to do so, expressed as recently as a few days ago. Tex. S.B. 694, 75th Leg., R.S. (1997). Apart from the reasons for immunity from suit explained above, the Court should be very reluctant to disregard the consistent, recent, unmistakable intent of the Legislature on the issue of waiver of immunity.
Finally, the dissent states: “Today, the Court holds that the State cannot be sued for its breach of contract unless the Legislature gives permission for the plaintiff to bring suit against the State.” Post at 418. The suggestion that the Court’s holding is a new idea is incorrect. One hundred fifty years ago the Court stated that “no state can be sued in her own courts without her consent, and then only in the manner indicated by that consent.” Hosner v. DeYoung, 1 Tex. 764, 769 (1847). What the Court does today is adhere to one and one-half centuries of consistent precedent.