City liable for contract damages for property it could not legally purchase

Wight Realty Interests v City of Friendswood, NO. 01-11-01075-CV (Tex. Civ. App. – Houston [1st Dist], April 4, 2013)

This is a breach of contract claim where the court of appeals determined the City waived its immunity.  The City and Wight entered into an earnest money contract to construct and develop a youth recreational sports facility. Upon completion, the City would purchase the property. The contract stated that the City could terminate the contract at any time but must pay Wight the costs of the improvement plus agreed upon liquidated damages. The City terminated the contract in 2009 but refused to pay.  Wight sued for breach of contract. The City filed a plea to the jurisdiction and summary judgment, which the trial court granted, and Wight appealed.  The court of appeals now reverses and remands.

In a prior appeal the court determined immunity was waved as the contract requires services be performed under Tex. Loc. Gov’t Code Ann. § 271.152 (West 2005) and was not merely a contract to purchase land.  Afterwards, the City argued the contract was void because the City did not have the authority to acquire the property for park use as it was situated outside of the counties in which the City is located citing Tex. Loc. Gov’t Code Ann.  §§ 273.001, 331.001 (West 2005).

The court of appeals held that while §273.001 and §331.001 place restrictions on the acquisition of park property, Wight can still make out a claim for breach of the services he provided. Further, Wight is not seeking specific performance requiring the City purchase the land for park use, but only to pay the costs of the improvements. As a result, the City can breach a contract to pay for improvements and construction on a piece of property which it cannot legally purchase or control.  The court does not address whether a “savings” clause existed within the contract. The court further held the City’s argument that the contract violated the “competitive bidding” requirements is not correct since the construction of a youth facility is for the “public health and safety” of the municipalities residents (even though the City cannot purchase or use it for such) and therefore not subject to competitive bidding requirements under §252.022(a)(2) or for professional services under §252.022(a)(4).  Finally, the court denied Wight’s summary judgment arguments as a fact issue exists as to damages and remanded the case.

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