Perry, Peary v. the City of Houston ( 2005 )

    Opinion issued April 28, 2005

    In The

Court of Appeals  

For The

First District of Texas

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NO. 01-01-00077-CV

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PEARY PERRY, Appellant

V.

THE CITY OF HOUSTON, Appellee

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On Appeal from the 125th District Court

Harris County, Texas

Trial Court Cause No. 95-48089-A

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MEMORANDUM OPINION

          This is an appeal of the trial court’s rendition of partial summary judgment for appellee, the City of Houston, against appellant, Peary Perry, on his claims of libel and slander, based on the City’s plea to the jurisdiction, and of the trial court’s rendition of five no-evidence summary judgments in favor of the City on Perry’s claims for (1) violation of First Amendment rights by retaliation; (2) tortious interference with prospective contractual relationships; (3) tortious interference with an employment relationship; (4) due process violations of a liberty interest in his good name; and (5) intentional infliction of emotional distress. In three issues, Perry contends that the City did not establish as a matter of law that it was protected by governmental immunity, and that he presented more than a scintilla of probative evidence to support each of the claims the trial court rejected. We affirm.

Factual & Procedural Background On May 5, 1993, the City entered into a contract with Municipal Collections, Inc. (MCI) to collect delinquent traffic tickets. During the contract’s term, Perry was MCI’s president and chief executive officer, as well as its majority shareholder. Pursuant to the contract, MCI was to be paid a contingency fee of 28% of the revenues it collected; the contingency fee was to be paid solely from monies collected by MCI. The contract stated that the director of the Municipal Courts Administration Department (MCAD) “shall have the exclusive right to approve the amount and payment of any monies due to [MCI] under this Contract” and that payment would be made to MCI when MCAD’s director receives and approves an MCI invoice. With regard to payment, the contract also stated,

The City [of Houston] shall review each invoice and, within (15) working days after its receipt, either approve it and deliver it to the Controller’s office for payment, or return it to [MCI] with a statement of the reasons for its rejection or non-approval. The City shall make payment within 30 days of approval of [MCI’s] invoice.

From June 1993 through October 1994, MCAD’s director, Larry Miller, approved, and the Controller’s Office paid, MCI’s invoices. Over a two-year period, MCI received $3,000,000 from the city for its services.

          To comply with the city’s affirmative action policy, MCI subcontracted with Bayou City Enterprises (BCE), a minority-owned business. The subcontract provided that BCE will “manage in close coordination with MCI the systemic noticing of all alleged Violators provided by the CITY and MCI.” In return for its services, BCE was to receive 19% of MCI’s 28% contingency fee; however, the subcontract also provided that BCE would pay MCI a monthly fee of $11,500 toward MCI’s “operating expenses.”

          George Greanias served as City of Houston Controller during the contract’s term. As controller, Greanias was required to audit payment requests . One type of audit performed by Greanias’s office was the “contract compliance audit” to determine whether the city was assuring compliance with the terms and conditions of contracts to which it was a party. In November 1994, the Controller’s Office began a compliance audit of the MCI contract.

          The audit covered the contract period of May 5, 1993, through March 31, 1995. Its stated purpose was to determine (1) whether MCI delivered the collection services it was contracted to provide, and (2) whether fees were paid to MCI according to the contract terms. Early in the auditing process, the Controller’s Office began an investigation into the services provided by BCE; however, BCE refused to cooperate with the investigation. With regard to this investigation, the audit stated, “The Controller’s Office published a report [in January 1995] concluding that BCE had not provided sufficient, competent and relevant evidence necessary to demonstrate that BCE was providing a commercially useful function to the City.” In December 1994, the Controller’s Office began withholding the portion of payment to BCE (i.e., the 19% of the 28% contingency payment) from payments made to MCI. The Controller’s Office continued its audit of the MCI contract in March 1995. The audit was published in July 1995; the auditors concluded as follows:

[MCAD] management cannot provide reasonable assurance that the terms of the [MCI] contract have been followed. Major contract terms and provisions have not been complied with. Most of the contract deviations benefitted the contractor and have resulted in higher cost or less service to the City. We estimate that the cost to the City resulting from not adhering to the contract terms has been $1,044,000.

          Some of the more significant audit findings were summarized as follows:

1.The Contract has not been properly administered. Major contract deviations have been permitted without approval from City Council. Most of the findings noted below are the result of deviations from contract terms and we estimate their cost to the City to be in excess of $1,044,000.

2.MCI did not process mail payments as required by the contract. The City incurred additional costs of approximately $300,000 in processing the mail payments for MCI.

3.MCI has withheld $207,000 from the 19% of gross revenue that the contract provides should have been paid to [BCE].

4.The City paid approximately $95,000 in fees to MCI for tickets on which bonds were posted by the alleged violators after tickets were assigned to MCI. Under the terms of the contract, MCI is not entitled to a fee on these tickets.

5.The date first notices are sent was not documented in MCI’s computer database. Incorrect first notice dates were used by MCAD to determine MCI’s entitlement to a fee, thus resulting in an overpayment to MCI of approximately $102,000.

6.The City paid MCI approximately $118,000 on tickets that the assignment term exceeded the 210-day limit imposed by the contract.

7.[MCI] did not provide the performance and payment bonds required by the contract. We estimate that MCI was able to avoid $112,000 of operating costs by not having to purchase these bonds.

8.Fees of approximately $110,000 were paid to MCI on tickets that, under the contract were not eligible for assignment because they were not at least 30 days delinquent.

          The published audit also incorporated MCAD’s and the Houston City Attorney’s responses to the audit’s findings. Generally, both MCAD and the city attorney disagreed with most of the audit’s findings.

          Perry’s name is not mentioned in either the published audit or in the transmittal letter from Greanias to then-City-of-Houston-Mayor Bob Lanier, which forwarded the audit and summarized some of the audit’s findings and conclusions. Issues relating to how or why the city selected MCI as the successful contractor were also not discussed in the audit.

          Following the publication of the audit, Greanias withheld payment of $315,000 of the amount billed by MCI. Mayor Lanier terminated the MCI contract in August 1995. In a press release, Mayor Lanier stated as follows:

MCI has been rendered incapable of performing under its contract as a consequence of payments actually withheld by the Controller, future payments that he says he will withhold, and other payments that he says he may withhold. . . . I want to limit the City’s potential liability as much as I can by an early termination of the contract. With the August withholding, the total amount withheld [from MCI] should approximate $375,000. I am led to believe that the issue of who owns what part of this money will be resolved by litigation.

          Following the termination of the MCI contract, Perry and MCI filed suit against the City and Greanias in his individual and official capacities. In a motion entitled “The City of Houston’s Motion for Partial Summary Judgment Regarding Plaintiff’s Libel/slander Claim and All Tort Claims and Plea to the Jurisdiction,” the City moved for partial summary judgment on all of Perry’s tort claims on the basis that it was shielded as a matter of law by governmental immunity. The trial court’s order, however, granted the partial summary judgment motion only as to the libel/slander claim and did not address Perry’s remaining tort claims.

          The City also filed a no-evidence motion for summary judgment on Perry’s claims for (1) violation of First Amendment rights by retaliation, (2) tortious interference with prospective contractual relationships, (3) tortious interference with an employment relationship, (4) due process violations of a liberty interest, and (5) intentional infliction of emotional distress. The trial court granted the City’s no- evidence motions for summary judgment on these five claims.

          After rendering judgment for the City on all causes of action, the trial court severed Perry’s claims against the City into a separate suit, and this appeal ensued. On December 27, 2002, this Court issued its opinion on rehearing in Perry’s suit against Greanias. That earlier opinion governs our disposition of this appeal.

Tort Claims

          In his first issue, Perry contends that the City did not prove it was entitled to governmental immunity as a matter of law. After Perry filed his brief, this Court issued its opinion in Perry v. Greanias, 95 S.W.3d 683 (Tex. App.—Houston [1st Dist.] 2002, pet. denied) (op. on reh’g). In Greanias, this Court concluded (1) Greanias’s conduct related to the audit of the MCI contract was a governmental function; (2) Greanias’s conduct relating to the audit, on which Perry based his complaints, was discretionary; (3) Greanias showed that he acted in good faith in conducting the audit and acting on its findings; and (4) Greanias acted within the scope of his authority when he conducted the MCI audit and acted on its findings. Id. at 693-99. Based on these conclusions, this Court held that Greanias was immune from liability in connection with Perry’s claims for violations of his due process and free speech rights under the Texas Constitution, and was immune from liability in connection with Perry’s claims for slander, defamation, and intentional infliction of emotional distress, as they were premised on Greanias’s actions and statements relating to the audit and its findings. Id. at 699.

          Immunity from liability prohibits adverse judgments against the State even if the State consents to suit. Tex. Dep’t of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999). This type of immunity is an affirmative defense, which must be pleaded to avoid waiver. Id. The trial court’s jurisdiction is unaffected by immunity from liability, and the appropriate procedural mechanism to assert immunity from liability is in a motion for summary judgment. Id. The record shows that the City raised this affirmative defense in its motion for partial summary judgment. A defendant is entitled to summary judgment when it conclusively establishes all elements of an affirmative defense. Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995).

          Except as its immunity has been clearly and unambiguously waived by the legislature, a political subdivision of the State of Texas has immunity from liability in the performance of its governmental functions. Dallas County Mental Health & Mental Retardation v. Bossley, 968 S.W.2d 339, 341 (Tex. 1998). Although immunity is waived to some degree in the Texas Tort Claims Act, the waiver of immunity under the Act does not apply to claims for intentional torts. See Tex. Civ. Prac. & Rem. Code Ann. § 101.057(2) (Vernon 1997). Both libel and slander are common-law intentional torts. See Tex. Dep’t of Health v. Rocha, 102 S.W.3d 348, 353 (Tex. App.—Corpus Christi 2003, no pet.). As a matter of law, therefore, the City is immune from liability for Perry’s claims for libel and slander.

          The City’s motion for partial summary judgment also properly raised the affirmative defense of immunity in regard to all of the tort claims made against it. The motion was entitled “The City of Houston’s Motion for Partial Summary Judgment Regarding Plaintiff’s Libel/slander Claim and All Tort Claims and Plea to the Jurisdiction.” In pertinent part, the City referred to all tort claims in the following paragraphs of the partial summary judgment motion:

4. Perry has alleged various tort causes of action against Houston in his latest petition.

81. Perry’s other tort claims are also based upon intentional torts.

157. Based upon the foregoing, Houston has conclusively shown that it is entitled to summary judgment on the issue of Perry’s libel/slander claim and all other tort claims alleged by Perry.

          The record reflects that the no-evidence motion for summary judgment filed with the trial court did not amend or supplant the City’s earlier motion for partial summary judgment, but merely augmented it—in other words, it was a supplemental motion for summary judgment, not an amended motion. Thus, the City’s motion for summary judgment on all tort claims remained a live pleading. Although the trial court disposed of Perry’s claims for tortious interference with prospective contractual relationships, tortious interference with an employment relationship, and intentional infliction of emotional distress by granting the City’s no-evidence motion for summary judgment, the City was entitled to immunity from liability from these intentional torts as well. Before issuing its opinion in Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623 (Tex. 1996), the Supreme Court of Texas had not considered whether a court of appeals could dispose of a case on summary judgment based on grounds on which the trial court did not rely. Id. at 626. The court held that, in the interest of judicial economy, courts of appeals may consider summary judgment grounds that the movant preserved for review, but on which the trial court did not rely. Id. The rule articulated in Cates does not depend on the number of motions for summary judgment filed, when they were presented to the trial court, or when the trial court ruled on the motions. See Baker Hughes Inc. v. KECO R & D., Inc., 12 S.W.3d 1, 5-6 (Tex. 2000).

          Accordingly, we hold that the City established its immunity as to all of Perry’s intentional tort claims and that the trial court could have properly rendered summary judgment for the City on all of the intentional torts alleged on the basis of immunity.

          We overrule the first issue.

No-Evidence Summary Judgments

          In his second issue, Perry contends the trial court erred in rendering no-evidence summary judgments in regard to his claims for (1) due process violation of his liberty interest in his good name, (2) violation of his First-Amendment rights by retaliation, (3) tortious interference with prospective contractual relationships, (4) tortious interference with an employment relationship, and (5) intentional infliction of emotional distress. Because we have held that the City is immune from liability for the intentional torts, only the claims for violation of due process and retaliation remain.

          Perry has not contended that City policy, hiring, or supervision resulted in the alleged violations of due process or his First-Amendment rights. Rather, both of these claims are based upon various actions that Greanias took during his term as City Controller, while acting in his official capacity as an agent of the City; thus, any liability on the City’s part is indirect under the doctrine of respondeat superior. See, e.g., Gill v. Tex. Dep’t of Crim. Justice, 3 S.W.3d 576, 581 (Tex. App.—Houston [1st Dist.] 1999, no pet.). Accordingly, because a governmental entity’s liability under the doctrine of respondeat superior is predicated on the liability of its employee or agent, the City is also immune from liability based on this Court’s holding in Greanias that Greanias was shielded from liability by official immunity. See Univ. of Houston v. Clark, 38 S.W.3d 578, 580 (Tex. 2000) (“[W]here official immunity shields a governmental employee from liability, sovereign immunity shields the government employer from vicarious liability.”).

          We overrule the second issue.

Motions for Reconsideration

          In his third issue, Perry contends that the trial court abused its discretion by denying his motions to reconsider its rulings on the City’s motion for partial summary judgment and motion for no-evidence summary judgment. Because we have concluded the trial court did not err in rendering judgment for the City, we likewise hold that the trial court did not err in overruling Perry’s motions for reconsideration of those judgments.

          We overrule the third issue.

          We affirm the trial court’s judgment.

                                                                        Elsa Alcala

                                                                        Justice

Panel consists of Chief Justice Radack and Justices Alcala and Bland.