G-M Water Supply Corporation v. City of Hemphill, Texas

NO. 12-16-00129-CV
IN THE COURT OF APPEALS
TWELFTH COURT OF APPEALS DISTRICT
TYLER, TEXAS
G-M WATER SUPPLY § APPEAL FROM THE 1ST
CORPORATION,
APPELLANT
V. § JUDICIAL DISTRICT COURT
CITY OF HEMPHILL, TEXAS,
APPELLEE § SABINE COUNTY, TEXAS
MEMORANDUM OPINION
G-M Water Supply Corporation appeals the trial court’s temporary injunction requiring it
to pay the full amount of the City of Hemphill’s monthly invoices directly to the City until
otherwise ordered. G-M raises three issues in this interlocutory appeal. We dissolve the
temporary injunction and remand this case to the trial court for further proceedings.
BACKGROUND
G-M is a nonprofit water supply company. Pursuant to a longstanding relationship, G-M
purchases water from the City. In their most recent agreement, executed in 2011, G-M must
purchase a minimum amount of water based on an annually adjusted rate determined by the City.
Essentially, the City assesses the rate based on a projection of its annual costs to produce water
divided by the quantity of treated water estimated to be produced that year, expressed in a dollar
amount per 1,000 gallons.1
G-M recently completed construction of its own water treatment facility and began taking
less water from the City under the contract. This action led to a much higher adjusted rate for
1
Other than charging for administrative costs, the City does not include profit in its calculation. Since the
rate is based on projections and estimates, the contract requires an independent audit at the end of each year, and any
overpayment or underpayments by G-M during that year are accounted for in the following year’s rate calculation.
2015-16 because, according to the City, its costs are fixed, and since G-M takes less water, the
City’s cost per gallon of water produced dramatically increased. In 2014-15, the City charged
G-M $2.8333 per 1,000 gallons of water, but raised the rate in 2015-16 to $5.2137 per 1,000
gallons of water. G-M disputed the City’s cost assumptions in computing the rate, calculated its
own rate of $3.6492 per 1,000 gallons of water, and paid the City based on that rate for each
monthly invoice. After negotiations proved unsuccessful, the City filed suit against G-M,
alleging that it breached their contract by failing to pay the invoices at the contract rate set by the
City.
The City filed an application for temporary injunction requesting that G-M pay the
accrued arrearages into the trial court’s registry, along with the full amount of future monthly
invoices calculated at the $5.2137 per 1,000 gallon rate pending a resolution on the merits. After
a hearing, the trial court granted the temporary injunction, concluding that the City will probably
prevail on the merits because G-M has breached and intends to continue to breach the terms of
the contract by failing to make the full payments invoiced by the City. Consequently, the trial
court ordered that G-M deposit $87,663.11 into the registry of the court, which represented the
amount of arrearages up until the time the injunction issued. Additionally, the trial court ordered
that G-M pay all future invoices at the full $5.2137 per 1,000 gallon rate directly to the City until
otherwise ordered. In its order granting the temporary injunction, the trial court found that
unless this Court grants the requested injunctive relief, [the City] will be without an adequate
remedy at law in that [it] will have to file suit against [G-M] every month to recover the amounts
due under the terms of the parties’ contract, in that [G-M’s] failure to make full payments has
adversely impacted [the City’s] fiscal status, and in that [the City] may not be able to recover the
full amount of a money judgment following trial on the merits.
G-M filed this interlocutory appeal challenging the trial court’s temporary injunction.
Because some Texas courts, including this Court, have held that an order to deposit funds into
the trial court’s registry is not properly characterized as an appealable temporary injunction, G-M
filed a separate petition for writ of mandamus to resolve the issue pertaining to the registry
funds.2 This interlocutory appeal relates only to the trial court’s order that G-M pay all future
invoices directly to the City at the full $5.2137 per 1,000 gallon rate until otherwise ordered.
2
See, e.g., Zhao v. XO Energy LLC, 493 S.W.3d 725, 735 (Tex. App.—Houston [1st Dist.] 2016, no pet.);
Structured Capital Res. Corp. v. Arctic Cold Storage, LLC, 237 S.W.3d 890, 894 (Tex. App.—Tyler 2007, no pet.).
2
TEMPORARY INJUNCTION
In its second issue, G-M contends that the trial court abused its discretion by issuing the
temporary injunction because the evidence does not support a finding of a probable, imminent,
and irreparable injury.
Standard of Review
In an interlocutory appeal from a ruling on an application for a temporary injunction, we
do not review the merits of the underlying case. See Davis v. Huey, 571 S.W.2d 859, 861 (Tex.
1978). A temporary injunction is an extraordinary remedy, the purpose of which is to preserve
the status quo of the litigation’s subject matter pending trial on the merits. Butnaru v. Ford
Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). In this context, the status quo is the last, actual,
peaceable, noncontested status between the parties to the controversy that preceded the pending
suit. See In re Newton, 146 S.W.3d 648, 651 (Tex. 2004).
We review a trial court’s decision to grant a temporary injunction for an abuse of
discretion. Butnaru, 84 S.W.3d at 204. We must not substitute our judgment for the trial court’s
judgment unless the trial court’s judgment was so arbitrary that it exceeded the bounds of
reasonable discretion. Id. The trial court does not abuse its discretion if some evidence
reasonably supports the trial court’s decision. Id. More specifically, the trial court does not
abuse its discretion when it bases its decision on conflicting evidence, or when some evidence of
substantive and probative character exists to support its decision. Health Care Serv. Corp. v. E.
Texas Med. Ctr., 495 S.W.3d 333, 338 (Tex. App.—Tyler 2016, no pet.). An abuse of discretion
arises when the trial court misapplies the law to the established facts of the case or when it
concludes that the movant has demonstrated a probable injury or a probable right to recovery,
and the conclusion is not reasonably supported by the evidence. Id. (citing Tri–Star Petroleum
Co. v. Tipperary Corp., 101 S.W.3d 583, 587 (Tex. App.–El Paso 2003, pet. denied)). A trial
court also abuses its discretion in granting a temporary injunction unless it is clearly established
by the facts that the applicant is threatened with an actual irreparable injury if the injunction is
not granted. Marketshare Telecom, L.L.C. v. Ericsson, Inc., 198 S.W.3d 908, 925 (Tex. App.—
Dallas 2006, no pet.).
Applicable Law
To obtain a temporary injunction, the applicant must plead and prove (1) a cause of
action against the defendant; (2) a probable right to the relief sought; and (3) a probable,
3
imminent, and irreparable injury in the interim.3 Butnaru, 84 S.W.3d at 204. There are two
general types of temporary injunctions: prohibitive and mandatory. Health Care Serv. Corp.,
495 S.W.3d at 337. A prohibitive injunction forbids conduct, and a mandatory injunction
requires it. Id. A preliminary mandatory injunction is proper only if a mandatory order is
necessary to prevent irreparable injury or extreme hardship. Id. at 338. Said another way, while
granting a mandatory temporary injunction is within the sound discretion of the trial court, the
application should be denied absent a clear and compelling presentation of extreme necessity or
hardship. See Pharaoh Oil & Gas, Inc. v. Ranchero Esperanza, Ltd., 343 S.W.3d 875, 883
(Tex. App.—El Paso 2011, no pet.).
To establish an irreparable injury, the applicant must show that he or she has no adequate
remedy at law. Butnaru, 84 S.W.3d at 204. A legal remedy is adequate if it is as complete,
practical, and efficient to the ends of justice and its prompt administration as is equitable relief.
See Alert Synteks, Inc. v. Jerry Spencer, L.P., 151 S.W.3d 246, 254 (Tex. App.—Tyler 2004, no
pet.). An injury is irreparable if the injured party cannot be adequately compensated, or one for
which the damages cannot be measured by any certain pecuniary standard. Butnaru, 84 S.W.3d
at 204. Evidence of fear, apprehension, and possibilities is not sufficient to establish any injury,
let alone irreparable injury. See Marketshare Telecom, 198 S.W.3d at 925.
Lay opinion testimony is limited to those opinions or inferences that are rationally based
on the witness’s perceptions and are helpful to clearly understanding the witness’s testimony or
determining a fact in issue. See TEX. R. EVID. 701. “Rationally based” means that the opinion
must be one that a person could normally form from observed facts. Health Care Serv. Corp.,
495 S.W.3d at 339. When an opinion is not rationally based on a witness’s perception, the
purported evidence is only speculation. Id. Speculative testimony has no probative value. Id.
“Speculate” means “to take to be true on the basis of insufficient evidence.” Id.
Mandatory Temporary Injunction
G-M contends that the evidence before the trial court did not permit it to rationally
conclude that, without the temporary injunction, the City would suffer probable, imminent, and
irreparable harm. It argues that the City has an adequate remedy at law available, namely, a
money judgment against G-M. The City responds that (1) it will suffer irreparable injury without
the injunction because G-M’s financial status makes satisfaction of a judgment uncertain,
3
For purposes of this appeal, G-M challenges only the third element.
4
rendering its remedy at law inadequate; (2) it and its residents will suffer imminent and
irreparable injury because it has sustained a loss in its capital reserves resulting in a “freeze” for
necessary capital expenditures, which adversely affects its ability to provide city services; and
(3) the trial court was within its discretion to grant the injunction because G-M’s wrongful
conduct was recurrent or continuous.
The last, actual, peaceable, noncontested status between the parties that preceded the
controversy was when the parties operated under the contract rate for 2014-2015. The
calculation of the correct rate under the contract for 2015-2016 is the subject of the controversy.
The trial court’s injunction required that G-M pay all future invoices directly to the City at the
full $5.2137 per 1,000 gallon rate for 2015-2016 until otherwise ordered, which is a mandatory
temporary injunction altering the status quo. The issuance of such a temporary mandatory
injunction under these circumstances was proper only if the City made a clear and compelling
presentation that without the injunction, it would suffer an actual irreparable injury resulting in
extreme hardship, or that the injunction is extremely necessary to prevent an actual irreparable
injury. See Health Care Serv. Corp., 495 S.W.3d at 339; Pharaoh Oil & Gas, Inc., 343 S.W.3d
at 883; Marketshare Telecom, L.L.C., 198 S.W.3d at 925.
G-M’s Ability to Satisfy a Judgment
The trial court found in its order that the City may not be able to recover the full amount
of a money judgment following a trial on the merits. When a defendant is unable to pay
damages, the plaintiff has no adequate remedy at law. See Bankler v. Vale, 75 S.W.3d 29, 39
(Tex. App.—San Antonio 2001, no pet.); Tex. Indus. Gas v. Phoenix Metallurgical Corp., 828
S.W.2d 529, 533 (Tex. App.—Houston [1st Dist.] 1992, no writ).
Hemphill’s City Manager, Donald Iles, was the only witness who testified at the
temporary injunction hearing. He testified that he did not have access to G-M’s financial
records, and that he made an open records request concerning G-M’s financial status. His
request was granted, and he discovered that the balance of one of G-M’s checking accounts was
reduced by approximately $118,000.00 from January 2015 through July 2015. He also
discovered that a separate G-M construction account showed an overdraft of approximately
$15,000.00 at the end of one statement period. And he learned that G-M had a $5,000,000.00
capital investment in its new water treatment plant, although he could not testify as to G-M’s
5
current debt balance on the project or how it was financed. Iles testified that these facts raised
“some red flags that possibly they may not be able to pay.”
When asked further about the accounts, he acknowledged that after the $118,000.00
reduction, G-M had a remaining balance of approximately $689,000.00. Portions of the account
statement were entered into evidence as Plaintiff’s Exhibit 11. Iles testified that he was unaware
of the current status of the construction account. The City’s counsel asked, “Based on that and
the other information you testified to, is there a legitimate concern about the solvency of [G-M],
in terms of its ability to repay these continually accruing arrearages?” Iles responded, “That
argument could be made, that conclusion could be drawn. I don’t have enough information
about their financial situation to say yes or no; but I would be worried, yes, sir.” G-M chose not
to offer any further evidence of its financial status.
It is true that G-M spent significant funds to acquire its new water treatment plant, had a
construction account that had been overdrawn during one month, and had a reduction in one of
its checking accounts of approximately $118,000.00 at one point in time. However, the evidence
available to the trial court when it issued the temporary injunction unequivocally shows that G-M
had at least $689,000.00 in cash. The portions of the account statement submitted in Plaintiff’s
Exhibit 11 show that the account balance was as high as approximately $807,000.00 on January
1, 2015, and as low as approximately $637,000.00 on June 20, 2015. Plaintiff’s Exhibit 11 also
showed that through several deposits, the account balance continued to increase to approximately
$689,000.00 by June 30, 2015. Iles testified that the City maintains a capital reserve of
approximately $1.2 million on average, although he testified that the reserve had declined by
about $100,000.00. Iles also testified that the arrearages continue to accrue at approximately
$10,000.00 per month while this dispute is pending.
Iles admitted that he did not have enough information concerning G-M’s solvency and
ability to pay a judgment. Iles’s statements that he was worried about whether G-M could satisfy
a judgment can only be viewed as speculative, which is not probative evidence of G-M’s alleged
inability to satisfy a money judgment for this contractual dispute. See Health Care Serv. Corp.,
495 S.W.3d at 339; Marketshare Telecom, 198 S.W.3d at 925.
Here, the City has an adequate remedy at law, a money judgment for damages. It is
measured by a certain pecuniary standard—essentially the difference between the full contract
rate for 2015-2016 and what G-M actually paid during the disputed period at the time of
6
judgment. Moreover, based on the evidence before the trial court, it was unreasonable for it to
conclude that G-M may be unable to satisfy a money judgment.
G-M’s Impact on the City’s Fiscal Status
The trial court also found that G-M’s failure to pay the full amount of the invoices has
adversely impacted the City’s fiscal status. The City contends that G-M’s actions have impacted
its capital reserves and forced the City to freeze planned capital expenses, which adversely
affected its ability to provide services to its citizens. G-M responds that the evidence does not
reasonably lead to this conclusion, and that there is no evidence that its actions resulted in a
threat of imminent or irreparable injury.
Iles testified that the City maintains an average capital reserve of approximately $1.2
million that has been reduced by approximately $100,000.00 during this dispute. Consequently,
Iles decided to freeze budgeted capital expenditures while this lawsuit was pending, including
purchases of a bucket truck for the electric department, a “skid steer unit” and storage building
for the utility department, a photocopier, a line extension project for the water department, and a
construction project for general administration. The total budgeted cost of the items is
$222,300.00. Iles testified that the City has very little debt and it budgeted these expenses to be
paid through direct cash outlays out of the City’s pooled cash. Iles testified that he froze these
capital expenses because of G-M’s failure to pay the invoices at the full rate, and that G.M.’s
actions adversely affected the City’s ability to provide services. On cross-examination, when
asked what service is not being provided, Iles cited the electric department’s need for a new
bucket truck as an example. He stated that the current truck failed the dielectric test, and that the
truck is old, expensive to operate, and needed to be replaced. But he admitted that the truck is
still operational, and that if necessary, the City could have rented a newer truck. Iles also
admitted that the City continues to provide all City services, including all utilities, and that to his
knowledge, no one has suffered any property damage or personal injury as a result of G-M’s
failure to pay the full amount of the disputed invoices.
The City contends that the interruption of business relations can constitute irreparable
harm that entitles it to injunctive relief. See Miller v. Talley Dunn Gallery, LLC, No. 05-15-
00444-CV, 2016 WL 836775, at *6 (Tex. App.—Dallas Mar. 3, 2016, no pet.) (mem. op.). We
generally agree that the interruption of business relations can constitute irreparable harm in
certain circumstances, but the City has not met its burden to show that G-M’s actions will cause
7
imminent irreparable injury here. In Miller, after an acrimonious divorce, an ex-husband used
confidential information pertaining to his ex-wife’s art gallery in an effort to harm her business
by ruining her reputation in the community. See id. at *2. For example, the ex-husband
distributed sensitive financial information and sent scathing communications to the ex-wife’s
clients, artists she represented, and community leaders. See id. at *6. The ex-wife obtained a
temporary injunction prohibiting this conduct, because it caused actual irreparable harm to her
business, and the injunction was upheld on appeal. See id.
This case is distinguishable. While this dispute has no doubt affected the City’s short-
term ability to make all of the budgeted capital purchases at the preferred time, the evidence
shows that the City maintains capital reserves of over $1,000,000.00, it can negate the effects of
its postponed capital expenses, and that it is still able to provide all services until this matter can
be resolved at trial. Based on this evidence, the City did not make a clear and compelling
presentation that would allow the trial court to reasonably conclude that the City or its residents
will suffer an imminent or irreparable injury resulting in extreme hardship without the mandatory
temporary injunction.
Recurring or Continuous Injury
The trial court also found that the City will have to file suit against G-M every month to
recover the amounts due under the terms of the parties’ contract. The City argues that even if it
has an adequate remedy at law, the injury is recurring or continuous, and consequently, equity
authorized the trial court to grant a temporary injunction. See 183/620 Grp. Joint Venture v.
SPF Joint Venture, 765 S.W.2d 901, 905 (Tex. App.—Austin 1989, writ dism’d w.o.j.) (citing
Sinclair Ref. Co. v. McElree, 52 S.W.2d 679, 681 (Tex. Civ. App.—Dallas 1932, no writ)). The
basis for the doctrine is as follows:
As a general rule, where an injury committed by one against another is continuous or is being
constantly repeated, so that complainant’s remedy at law requires the bringing of successive
actions, that remedy is inadequate and the injury will be prevented by injunction. The fact that an
injured person has the right of successive actions for the continuance of the wrong does not make
it an adequate remedy at law which bars the jurisdiction of a court of equity to grant an injunction
to restrain the continuance of the injury.
Sinclair Ref. Co., 52 S.W.2d at 681. The City has not established the doctrine’s applicability
here. It does not argue that the remedy at law requires the bringing of successive actions with
each monthly breach of the contract. Moreover, the City will be made whole by a single money
8
judgment. See Horton v. Robinson, 776 S.W.2d 260, 268 (Tex. App.—El Paso 1989, no writ)
(distinguishing Sinclair, noting that only in absence of adequate remedy at law can equitable
injunctive relief be granted, and holding that once contract was breached, plaintiff was entitled to
recover all past, present, and future damages, and consequently, money judgment was adequate
remedy at law).
Conclusion
The City has an adequate remedy at law that will make it whole, namely, a money
judgment. Although there are circumstances in which a party may obtain a mandatory temporary
injunction requiring prejudgment preservation of disputed funds in a breach of contract action,
the City has not met that burden here. We hold that the City has failed to make a clear and
compelling presentation of evidence that would allow the trial court to reasonably conclude that
the City or its residents will suffer an imminent or irreparable injury resulting in extreme
hardship without the mandatory temporary injunction, or that the City demonstrated that an
injunction was extremely necessary to prevent actual irreparable injury. See Health Care Serv.
Corp., 495 S.W.3d at 341. The trial court abused its discretion in issuing the mandatory
temporary injunction requiring G-M to pay the monthly invoices at the full $5.2137 per 1,000
gallon rate until otherwise ordered.
G-M’s second issue is sustained. The City has not shown that it is entitled to mandatory
temporary injunctive relief, and consequently, G-M’s second issue is dispositive. Therefore, we
need not consider G-M’s remaining issues pertaining to whether the City was required to file a
bond and whether the trial court improperly ordered full and final relief, because those issues
presuppose that mandatory temporary injunctive relief was appropriate in these circumstances.
See TEX. R. APP. P. 47.1; In re S.N., 272 S.W.3d 45, 60 (Tex. App.—Waco 2008, no pet.)
(“[T]he cardinal principle of judicial restraint—if it is not necessary to decide more, it is
necessary not to decide more—counsels us to go no further.”).
DISPOSITION
Because the trial court abused its discretion in ordering G-M to pay the monthly invoices
at the full $5.2137 per 1,000 gallon rate until otherwise ordered, the April 5, 2016 temporary
injunction is immediately dissolved, and the case is remanded to the trial court for further
proceedings.
9
BRIAN HOYLE
Justice
Opinion delivered November 22, 2016.
Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.
(PUBLISH)
10
COURT OF APPEALS
TWELFTH COURT OF APPEALS DISTRICT OF TEXAS
JUDGMENT
NOVEMBER 22, 2016
NO. 12-16-00129-CV
G-M WATER SUPPLY CORPORATION,
Appellant
V.
CITY OF HEMPHILL, TEXAS,
Appellee
Appeal from the 1st District Court
of Sabine County, Texas (Tr.Ct.No. 13,200)
THIS CAUSE came to be heard on the appellate record and the briefs filed herein,
and the same being considered, because it is the opinion of this court that there was error in the
trial court’s temporary injunction dated April 5, 2016, it is ORDERED, ADJUDGED and
DECREED by this court that the trial court’s temporary injunction of April 5, 2016, ordering G-
M WATER SUPPLY CORPORATION, to pay the monthly invoices at the full $5.2137 per
1,000 gallon rate until otherwise ordered, be dissolved and the cause remanded to the trial court
for further proceedings in accordance with the opinion of this court; and that this decision be
certified to the court below for observance.
Brian Hoyle, Justice.
Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.
THE STATE OF TEXAS
MANDATE
*********************************************
TO THE 1ST DISTRICT COURT OF SABINE COUNTY, GREETING:
Before our Court of Appeals for the 12th Court of Appeals District of Texas, on the 22nd
day of November, 2016, the cause upon appeal to revise or reverse your judgment between
G-M WATER SUPPLY CORPORATION, Appellant
NO. 12-16-00129-CV; Trial Court No. 13,200
Opinion by Brian Hoyle, Justice.
CITY OF HEMPHILL, TEXAS, Appellee
was determined; and therein our said Court made its order in these words:
“THIS CAUSE came to be heard on the appellate record and the briefs filed herein, and
the same being considered, because it is the opinion of this court that there was error in the trial
court’s temporary injunction dated April 5, 2016, it is ORDERED, ADJUDGED and DECREED
by this court that the trial court’s temporary injunction of April 5, 2016, ordering G-M WATER
SUPPLY CORPORATION to pay the monthly invoices at the full $5.2137 per 1,000 gallon
rate until otherwise ordered, be dissolved and the cause remanded to the trial court for further
proceedings in accordance with the opinion of this court; and that this decision be certified to
the court below for observance.”
WHEREAS, WE COMMAND YOU to observe the order of our said Court of Appeals
for the Twelfth Court of Appeals District of Texas in this behalf, and in all things have it duly
recognized, obeyed, and executed.
WITNESS, THE HONORABLE JAMES T. WORTHEN, Chief Justice of our Court
of Appeals for the Twelfth Court of Appeals District, with the Seal thereof affixed, at the City of
Tyler, this the xx day of November, 2016.
PAM ESTES, CLERK
By: _______________________________
Chief Deputy Clerk