Southern Electrical Services, Inc. v. City of Houston
355 S.W.3d 319
Tex. App.2011Background
- SES, as Morganti's assignee, sued the City of Houston for breach of contract and for interest under the Prompt Payment Act regarding a central concourse project at Hobby Airport.
- Morganti awarded a lump-sum contract; SES, a subcontractor, bid based on the City-provided prevailing wage rates and the subcontract incorporated the City–Morganti contract.
- Document 00812 set minimum prevailing wage rates; Document 00813 amended rates upward; both allowed higher wages but not required payments.
- City later amended wages to 00813 and offered to reimburse variances; Morganti and SES did not receive wage increases due to the switch, and SES was paid in full under the lump-sum contract.
- SES sought the difference between the initially certified rates and the correct rates, plus interest; trial court granted summary judgment for the City.
- On rehearing, the court reaffirmed that SES failed to show damages causally connected to the alleged breach and that the Prompt Payment Act claim failed as a matter of law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the City breach contract damages proven by SES? | SES argues the City provided incorrect wage scales, causing increased costs and damages. | City contends no damages were proven or consequential from the wage-scale misstatement. | No genuine damages issue; City not liable. |
| Are SES's alleged damages foreseeably resulting from the City's breach? | SES relied on the wrong wage scales in bidding and cost calculations. | Wage-rate minimums are not guarantees of payment of higher wages; risks allocated to the contractor. | Damages too speculative/not foreseeable; contract allocated cost risk to SES. |
| Does the contract bar SES's recovery or limit it under the Local Government Code? | SES asserts damages are recoverable despite statutory limits. | Code provisions together with contract language bar recovery of the claimed damages. | Held not to change outcome; damages barred by foreseeability and allocation of risk. |
| Is SES entitled to relief under the Prompt Payment Act for additional payment due to breach? | City's breach justifies interest under the Act on the extra payment. | Breach claim lacks merit, so the Prompt Payment Act claim is inapplicable. | Prompt Payment Act claim fail as the breach claim failed. |
Key Cases Cited
- Wright v. Christian & Smith, 950 S.W.2d 411 (Tex. App.-Houston [1st Dist.] 1997) (elements of breach of contract required for recovery)
- City of Dallas v. Villages of Forest Hills, L.P., Phase I, 931 S.W.2d 601 (Tex.App.-Dallas 1996) (damages must be foreseeable and not speculative)
- A.B.F. Freight Sys., Inc. v. Austrian Import Serv., Inc., 798 S.W.2d 606 (Tex.App.-Dallas 1990) (damages cannot be remote or conjectural)
- Houston Gulf Coast Bldg. & Constr. Trades Council, 710 S.W.2d 181 (Tex.App.-Houston [1st Dist.] 1986) (prevailing wage rate determinations; finality of rate decisions)
- United States v. Binghamton Constr. Co., 347 U.S. 171 (1954) (minimum wage requirements assume possibility of higher pay)