City of San Antonio v. KGME, INC.
340 S.W.3d 870
Tex. App.2011Background
- KGME contracted with City in May 2004 to construct a drainage ditch with hydromulched vegetation.
- In February 2006 the parties determined KGME could not complete the project as contracted and the City halted work and withheld the retainage.
- KGME asserted two claims: breach of contract and a Texas Prompt Payment Act (PPA) claim for unpaid retainage and related interest and fees.
- On October 1, 2009 the City counterclaimed for breach of contract; the City later moved for a plea to the jurisdiction which the trial court denied.
- The City appealed and the court denied rehearing and issued this opinion affirming the denial of the plea to jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction over common law damages | KGME argues common law damages are germane despite §271.153 limits. | City argues sovereign immunity and §271.153 bar non‑permitted damages absent germane claims. | Jurisdiction exists; common law damages are germane to the counterclaim. |
| Germane damages limit and offset | KGME relies on Reata to allow germane common law damages up to the counterclaim amount. | City contends damages are limited by §271.153 unless germane and offset by counterclaim. | KGME's germane common law damages are recoverable up to the amount of the City's counterclaim. |
| PPA claim and sovereign immunity | KGME seeks PPA interest and fees; countersuit waives immunity for germane claims up to counterclaim. | City argues PPA does not waive immunity for suit beyond undisputed interest unless germane. | City waived immunity for KGME's PPA claim to the extent of the City's counterclaim, allowing fees and interest up to that amount. |
| Bona fide dispute precluding interest | Dispute exists regarding amount due and owing; therefore interest should apply. | Whether a bona fide dispute exists is unresolved and must be determined by factfinder. | Not decided; factfinder must determine if a bona fide dispute exists before interest under the PPA accrues. |
| Attorney's fees under 271.153 for pre‑2005 contract | KGME contends broader common law damages including fees should be allowed. | City argues §271.153 limits damages and precludes retroactive recovery of attorney's fees for pre‑2005 contracts. | KGME cannot recover attorney's fees under §271.153 for a contract executed in 2004; 2009 amendment not retroactive. |
Key Cases Cited
- Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006) (waiver timing for contracts pre‑2005)
- Reata Construction Corp. v. City of Dallas, 197 S.W.3d 371 (Tex. 2006) (government entity may waive immunity by countersuit for germane claims)
- Port Neches-Groves Indep. Sch. Dist. v. Pyramid Constructors, L.L.P., 281 S.W.3d 142 (Tex.App.-Beaumont 2009) ( bona fide dispute precludes PPA interest when disputed amount)
- McMahon Contracting, L.P. v. City of Carrollton, 277 S.W.3d 458 (Tex.App.-Dallas 2009) (sovereign immunity and waiver standards for PPA)
- Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692 (Tex. 2003) (clear and unambiguous waiver requirement for immunity,)
- Great American Insurance Co. v. City of Houston, 309 S.W.3d 614 (Tex.App.-Hou. [14th Dist.] 2010) (PPA immunity scope in related contexts)