M.E.N. Water Supply Corporation, Angus Water Supply Corporation, Chatfield Water Supply Corporation, Corbet Water Supply Corporation, City of Frost, City of Kerens, and Community Water Company v. City of Corsicana, Texas

IN THE
TENTH COURT OF APPEALS
No. 10-16-00364-CV
M.E.N. WATER SUPPLY CORPORATION,
ANGUS WATER SUPPLY CORPORATION,
CHATFIELD WATER SUPPLY CORPORATION,
CORBET WATER SUPPLY CORPORATION,
CITY OF FROST, CITY OF KERENS,
AND COMMUNITY WATER COMPANY,
Appellants
v.
CITY OF CORSICANA, TEXAS,
Appellee
From the 13th District Court
Navarro County, Texas
Trial Court No. D13-22473-CV
OPINION
In six issues, appellants, M.E.N. Water Supply Corporation, Angus Water Supply
Corporation, Chatfield Water Supply Corporation, Corbet Water Supply Corporation,
the City of Frost, the City of Kerens, and the Community Water Company, complain
about rulings on various motions that comprise the final judgment that was granted in
favor of appellee, the City of Corsicana. We affirm, in part, and reverse and remand, in
part.
I. BACKGROUND
In July 2013, appellants filed their original petition against Corsicana, asserting
that Corsicana breached contracts “by charging rates higher than those authorized by the
contracts, and the Ratepayers have incurred damages as a result.”1 Specifically,
appellants complained about Corsicana’s decision, in 2009, to shift from a flat, volumetric
water rate to inclining, block rates for all retail and wholesale customers. Appellants
alleged that this shift resulted in ratepayers “not being charged the rates being charged
general consumers of Seller [Corsicana], within the City of Corsicana.” In their live
pleading, their fourth amended petition, appellants expanded their claims to include
allegations that Corsicana is not immune from breach-of-contract claims with regard to
proprietary functions and a request for specific performance.
Corsicana responded by filing a plea to the jurisdiction, arguing that sovereign
immunity applies to appellants’ breach-of-contract and specific-performance claims.
Corsicana also moved to dismiss the claims filed by Kerens and Frost because the
damages sought by Kerens were not allowed under Chapter 271 of the Local Government
Code, and because Frost cannot recover damages due to a failure to satisfy a condition
The City of Blooming Grove was a named plaintiff in appellants’ original petition; however,
1
Blooming Grove ultimately non-suited its claims against Corsicana and, thus, is not a party to this appeal.
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 2
precedent in the contract between Corsicana and Frost. Additionally, Corsicana filed no-
evidence and traditional motions for summary judgment, asserting numerous grounds.
After a hearing, the trial court granted Corsicana’s no-evidence and traditional
motions for summary judgment and ordered that Kerens take nothing on its claims. The
trial court also granted Corsicana’s plea to the jurisdiction as to the Water Supply
Corporations and motion to dismiss as to Frost. In its final judgment, the trial court
summarized all of its prior rulings, denied all relief requested by appellants, and ordered
that appellants take nothing on their claims. This appeal followed.
II. CORSICANA’S MOTION TO DISMISS
In its first issue, Frost contends that the trial court erred in dismissing its claims
for failure to satisfy a non-existent condition precedent. In particular, Frost argues that
its contract did not limit its right to file suit for breach of contract. We agree.
A. Standard of Review
We review the trial court’s ruling on a motion to dismiss under an abuse-of-
discretion standard. Am. Transitional Care Ctrs. of Tex., Inc. v. Palacios, 46 S.W.3d 873, 875
(Tex. 2001). To determine whether the trial court abused its discretion, we must decide
whether the trial court acted without reference to any guiding rules or principles. Downer
v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985). Even if a reviewing court
would have decided the issue differently, it cannot disturb the trial court’s decision,
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 3
unless it is shown to be arbitrary and unreasonable. Walker v. Packer, 827 S.W.2d 833, 840
(Tex. 1992).
B. Discussion
In this issue, the parties focus on the contents of Frost’s contract with Corsicana
for water. Specifically, the vital portion of the contract is section 4.06, which provides the
following:
Section 4.06. Disputed Bills. If Purchaser disputes the amount of a bill
rendered by Seller pursuant to this Contract, Purchaser shall nevertheless
pay such bill in accordance with Section 4.04. If it is subsequently
determined by agreement or a final, unappealable court order that the
amount of the disputed bill should have been less (or more), the amount of
the bill shall be promptly and appropriately adjusted, and the amount of
any reimbursement (or additional payment) that is due after the adjustment
shall be paid by the owing Party within ten (10) days of such agreement or
court order. If not paid when due, such amounts bear interest at the rate of
ten percent (10%) per annum from the due date until paid. Provided,
however, interest may be waived by the Party to whom the amount is owed.
(Emphasis in original.) In the trial court and on appeal, Corsicana construes this clause
as requiring Frost to satisfy a condition precedent—either obtain an agreement with
Corsicana or a final, unappealable court order finding overpayment—before seeking an
adjustment on their bills. Frost disagrees.
When reviewing a contract, our goal is to determine the parties’ true intentions as
expressed in the instrument. Plains Exploration & Prod. Co. v. Torch Energy Advisors, Inc.,
473 S.W.3d 296, 305 (Tex. 2015); see Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). “We
‘construe contracts from a utilitarian standpoint bearing in mind the particular business
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 4
activity sought to be served,’ and avoiding unreasonable constructions when possible
and proper.” Plains Exploration & Prod. Co., 473 S.W.3d at 305 (quoting Reilly v. Rangers
Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987)). We must “consider the entire writing,
harmonizing and giving effect to all the contract provisions so that none will be rendered
meaningless.” Id. (citing Moayedi v. Interstate 35/Chisam Rd., L.P., 438 S.W.3d 1, 7 (Tex.
2014)). “No single provision taken alone is given controlling effect; rather, each must be
considered in the context of the instrument as a whole,” and we must “give words their
plain, common, or generally accepted meaning unless the contract shows that the parties
used words in a technical or different sense.” Id. If the contract’s language can be given
a definite legal meaning or interpretation, then it is not ambiguous and we will construe
the contract as a matter of law. See El Paso Field Servs., L.P. v. MasTec N. Am., Inc., 389
S.W.3d 802, 806 (Tex. 2012) (citing Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am.,
341 S.W.3d 323, 333 (Tex. 2011)).
With regard to conditions precedent, Texas courts have stated:
“A condition precedent may be either a condition to the formation of a
contract or to an obligation to perform an existing agreement.” Hohenberg
Bros. Co. v. George Gibbons & Co., 537 S.W.2d 1, 3 (Tex. 1976); see II Deerfield
Ltd. P’ship v. Henry Bldg., Inc., 41 S.W.3d 259, 264 (Tex. App.—San Antonio
2001, pet. denied). As such, a condition precedent may “relate either to the
formation of contracts or to liability under them.” Hohenberg Bros., 537
S.W.2d at 3. “Conditions precedent to an obligation to perform are those
acts or events, which occur subsequently to the making of a contract, that
must occur before there is a right to immediate performance and before
there is a breach of contractual duty.” Id.; Deerfield, 41 S.W.3d at 264.
Although no words in particular are necessary for the existence of a
condition, “such terms as ‘if’, ‘provided that’, ‘on condition that,’ or some
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 5
other phrase that conditions performance, usually connote an intent for a
condition rather than a promise.” Hohenberg Bros., 537 S.W.3d at 3; Deerfield,
41 S.W.3d at 264-65. “In the absence of such a limiting clause, whether a
certain contractual provision is a condition, rather than a promise, must be
gathered from the contract as a whole and from the intent of the parties.”
Hohenberg Bros., 537 S.W.3d at 3; Deerfield, 41 S.W.3d at 265. “However,
where the intent of the parties is doubtful or where a condition would
impose an absurd or impossible result then the agreement will be
interpreted as creating a covenant rather than a condition.” Hohenberg Bros.,
537 S.W.3d at 3. Because of their harshness and operation, conditions
precedent are disfavored. Criswell v. European Crossroads Shopping Ctr., Ltd.,
792 S.W.2d 945, 948 (Tex. 1990); Sirtex Oil Indus., Inc. v. Erigan, 403 S.W.2d
784, 787 (Tex. 1966).
Gulf Liquids New River Project, LLC v. Gulsby Eng’g, Inc., 356 S.W.3d 54, 64 (Tex. App.—
Houston [1st Dist.] 2011, no pet.).
After review, we do not agree with Corsicana’s interpretation of section 4.06 of the
contract. Though section 4.06 includes several sentences that begin with “if,” which can
connote a condition precedent, nothing in the section requires an agreement or final,
unappealable court order as a condition precedent to filing suit for breach of contract. In
fact, the operative language does not contemplate the filing of any lawsuit. Rather, the
language relied upon by Corsicana states only that an agreement or final, unappealable
court order adjusting amounts owed creates a contractual obligation for the debtor to pay
the amount due within ten days. And contrary to Corsicana’s assertions, section 4.06
does not mention, much less require, an order from an administrative case as a condition
precedent to the filing of a breach-of-contract suit. Therefore, because conditions
precedent are disfavored, and because the trial court’s dismissal order is premised on an
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 6
erroneous finding that Frost did not satisfy the purported condition precedent outlined
in section 4.06, we conclude that the trial court abused its discretion in granting
Corsicana’s motion to dismiss Frost’s lawsuit on this basis. See Palacios, 46 S.W.3d at 875;
see also Criswell, 792 S.W.2d at 948; Erigan, 403 S.W.2d at 787; Gulf Liquids New River Project,
LLC, 356 S.W.3d at 64. Accordingly, we sustain appellants’ first issue.
III. SUMMARY JUDGMENT
In their second and third issues, Kerens argues that the trial court erred in granting
summary judgment in favor of Corsicana. Specifically, Kerens asserts that it produced
evidence that a valid contract exists; that the contract and pleadings provide a basis for
specific performance; that Corsicana breached that contract; and that the contract was
damaging.
A. Applicable Law
A no-evidence summary judgment is equivalent to a pre-trial directed verdict, and
we apply the same legal sufficiency standard on review. Mack Trucks, Inc. v. Tamez, 206
S.W.3d 572, 582 (Tex. 2006). Once an appropriate no-evidence motion for summary
judgment is filed, the non-movant must produce summary judgment evidence raising a
genuine issue of material fact to defeat the summary judgment. See TEX. R. CIV. P. 166a(i).
“A genuine issue of material fact exists if more than a scintilla of evidence establishing
the existence of the challenged element is produced.” Ford Motor Co. v. Ridgway, 135
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 7
S.W.3d 598, 600 (Tex. 2004). We do not consider any evidence presented by the movant
unless it creates a fact question. Binur v. Jacobo, 135 S.W.3d 646, 651 (Tex. 2004).
More than a scintilla of evidence exists if the evidence would enable reasonable
and fair-minded jurors to differ in their conclusions. Hamilton v. Wilson, 249 S.W.3d 425,
426 (Tex. 2008) (per curiam); see Transp. Ins. Co. v. Moriel, 879 S.W.2d 10 25 (Tex. 1994).
Evidence that is “so weak as to do no more than create a mere surmise or suspicion of
fact” is no evidence and, thus, does not create a fact issue. Kindred v. Con/Chem, Inc., 650
S.W.2d 61, 63 (Tex. 1983); see Ortega v. City Nat'l Bank, 97 S.W.3d 765, 772 (Tex. App.—
Corpus Christi 2003, no pet.) (op. on reh'g). In determining whether the non-movant has
met his burden, we review the evidence in the light most favorable to the non-movant,
crediting such evidence if reasonable jurors could and disregarding contrary evidence
unless reasonable jurors could not. Tamez, 206 S.W.3d at 582; City of Keller v. Wilson, 168
S.W.3d 802, 827 (Tex. 2005).
We review the trial court's grant of a traditional motion for summary judgment de
novo. See Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). When
reviewing a traditional motion for summary judgment, we must determine whether the
movant met its burden to establish that no genuine issue of material fact exists and that
the movant is entitled to judgment as a matter of law. See TEX. R. CIV. P. 166a(c); Sw. Elec.
Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002). The movant bears the burden of proof
in a traditional motion for summary judgment, and all doubts about the existence of a
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 8
genuine issue of material fact are resolved against the movant. See Grant, 73 S.W.3d at
215. We take as true all evidence favorable to the non-movant, and we indulge every
reasonable inference and resolve any doubts in the non-movant's favor. Valence Operating
Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). We will affirm a traditional summary
judgment only if the record establishes that the movant has conclusively proved its
defense as a matter of law or if the movant has negated at least one essential element of
the plaintiff's cause of action. IHS Cedars Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143
S.W.3d 794, 798 (Tex. 2004); Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997).
When the trial court's judgment does not specify which of several grounds
proposed was dispositive, we affirm on any ground offered that has merit and was
preserved for review. See Joe v. Two Thirty Nine J.V., 145 S.W.3d 150, 157 (Tex. 2004).
Moreover, when a party moves for summary judgment under both rules 166a(c) and
166a(i), “[we] first review the trial court's summary judgment under the standards of rule
166a(i).” Ridgway, 135 S.W.3d at 600.
B. Discussion
As noted above, Kerens, along with others, filed suit against Corsicana for breach
of contract. In their live pleading, appellants complained about Corsicana’s decision in
2009 to implement an inclining block rate structure for water sales and alleged that:
Thus, the Ratepayers with standard contracts seek as damages the
difference between the amounts actually charged by Corsicana and the
amounts that should have been charged based on the “minimum inside city
retail water rate.” Kerens seeks as damages the difference between the
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 9
amounts actually charged by Corsicana and the amounts that should have
been charged based on the contract requirement that Corsicana charge “a
base rate and a volume rate” that are “the rates being charged general
consumers of Seller, within the City of Corsicana.”
In its traditional summary-judgment motion, Corsicana asserted that: (1) Kerens
may not seek specific performance under the contract because the contract has expired
and there is no other basis for specific performance; (2) the increase in wholesale water
rates was authorized under the contract; and (3) there is no evidence of breach, damages,
or entitlement to a reduction in rates. Moreover, in its no-evidence summary-judgment
motion, Corsicana challenged three elements of Kerens’s breach-of-contract claim—the
existence of a valid contract, breach, and damages. See Runge v. Raytheon E-Systems, Inc.,
57 S.W.3d 562, 565 (Tex. App.—Waco 2001, no pet.) (noting that the elements of a breach-
of-contract claim are: (1) the existence of a valid contract between plaintiff and defendant;
(2) the plaintiff’s performance or tender of performance; (3) the defendant’s breach of the
contract; and (4) the plaintiff’s damage as a result of the breach); see also Esty v. Beal Bank
S.S.B., 298 S.W.3d 280, 299 (Tex. App.—Dallas 2009, no pet.) (stating that a breach-of-
contract claim occurs when a party fails to perform an act that it has explicitly or
impliedly promised to perform).
Attached to Corsicana’s summary-judgment motion is the water-purchase
contract between Corsicana and Kerens, as well as the affidavit of Corsicana’s City
Manager Connie Standridge and the oral deposition of Kerens’s City Administrator
Cindy Scott. With regard to the rates charged for water, the contract provides as follows:
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 10
1. Rates and Payment Date. To pay Seller, not later than the 20th day
following each monthly billing cycle for water delivered in accordance with
the “schedule of rates” as hereinafter defined, said rates not be be [sic]
altered or amended more than yearly as provided hereinafter. The said
“schedule of rates,” as hereinafter defined, shall be the then prevailing rate
in effect at the time of initial delivery of water to Purchaser’s meter, said
rate yearly established by the City Commission of the City of Corsicana.
The rates shall include a base rate and a volume rate (per 1,000 gallons rate).
...
5. Modification of Contract. That the provisions of this contract pertaining
to the “schedule of rates” to be paid by Purchaser to Seller for water are
subject to modification at the end of every one year period, by Seller, with
said one year period construed to be the anniversary date from date of
inception of the delivery of water to point of delivery at Purchaser’s clear-
well. Any increase or decrease shall be based on system-wide rates for the
consumers of Seller within the corporate limits of the City of Corsicana,
subject to the definition of “schedule of rates” as hereinafter set forth. Other
provisions of this contract may be modified or altered by mutual
agreement.
...
8. Schedule of Rates. Rates shall be interpreted, for all purposes under this
contract, as meaning the rates being charged general consumers of Seller,
within the City of Corsicana, Texas.
(Emphasis in original.).
Corsicana posits that the only limitation on its right to set rates is that Kerens must
be charged the same rates as other “general consumers” of Corsicana’s water who are
located within Corsicana. On the other hand, Kerens contends that the contract limited
Corsicana’s right to set rates to a base rate and a single volume rate. Kerens complains
that, in 2009, Corsicana breached the contract by establishing an inclining block of three
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 11
volume rates that increased with the amount of water purchased. In support of its
argument, Kerens included the following chart, which is derived from information
received from the Corsicana City Council:
Rate per 1,000 gallons purchased
Year Rate 1-10,000 10,001 gallons- More than
Set gallons 25,000 gallons 25,000 gallons
2009 $3.00 $3.15 $3.25
2012 $2.80 $3.15 $3.25
2013 $3.00 $3.15 $3.25
2014 $3.45 $3.60 $3.70
Corsicana’s volumetric rates are especially concerning to Kerens because the summary-
judgment evidence demonstrates that Kerens purchases over 99% of its water at the
highest Third-Tier Rates.
In any event, based on our review, we do not agree with Kerens’s interpretation
of the contract. Specifically, the contract allows Corsicana to establish “a base rate and a
volume rate (per 1,000 gallons rate),” so long as the rates charged to Kerens are the same
rates charged to Corsicana’s “general consumers” within Corsicana. The parties do not
dispute the base rate, but rather focus their arguments on the volume rate. The language
of the contract authorizes Corsicana to establish a “volume rate (per 1,000 gallons rate)”
or, in other words, a rate based upon the volume of water purchased. This is precisely
what Corsicana has done. As shown above, the so-called “inclining block rates” provide
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 12
a singular rate that varies based on volume—something that we believe was
contemplated by the language “volume rate (per 1,000 gallons rate).”2
We also cannot say that the summary-judgment evidence establishes that the rates
charged to Kerens and “general consumers” within Corsicana differed. In particular,
Scott testified, in her oral deposition, that: (1) Kerens has always been a major user of
water; (2) it has always been charged the same base rate as many of the people who live
in Corsicana; and (3) the volumetric rate charged to Kerens is the same rate Corsicana
charges its large water users. Scott later admitted that the rates charged to Kerens versus
what has been billed to Corsicana in-city customers has been the same the entirety of the
contract.
Therefore, based on the foregoing and applying the applicable standards, we
cannot say that Kerens has proffered more than a scintilla of evidence that creates a
material fact issue as to the breach element of Kerens’s breach-of-contract action.
Accordingly, we cannot say that the trial court erred in granting summary judgment in
favor of Corsicana as to Kerens’s breach-of-contract claims. And because Corsicana
established entitlement to summary judgment on one element of Kerens’s breach-of-
contract claims, we need not address the remaining elements of Kerens’s cause of action.
2 Interestingly, in her testimony, Scott admitted that the 2009 changes did not affect rates, but rather
volume.
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 13
See Mason, 143 S.W.3d at 798; Grinnell, 951 S.W.2d at 425. We overrule appellants’ second
and third issues.
IV. CORSICANA’S PLEA TO THE JURISDICTION
In their fourth, fifth, and sixth issues, the Water Supply Corporations challenge
the trial court’s granting of Corsicana’s plea to the jurisdiction. They argue that the trial
court erred in granting Corsicana’s plea to the jurisdiction because: (1) cities are not
immune from breach-of-contract claims arising from the performance of proprietary
functions, such as wholesale water sales; (2) immunity is waived for breach-of-contract
claims pertaining to written contracts for providing goods or services to a local
governmental entity; and (3) specific performance is not an independent claim, but rather
available relief for breach-of-contract claims.
A. Standard of Review
A plea to the jurisdiction based on sovereign immunity challenges a trial court’s
subject-matter jurisdiction. State v. Holland, 221 S.W.3d 639, 642 (Tex. 2007). “A plea
questioning the trial court's jurisdiction raises a question of law that we review de novo.”
Id. The plaintiff must allege facts that affirmatively establish the trial court’s subject-
matter jurisdiction. Id. In determining whether the plaintiff has satisfied this burden, we
construe the pleadings liberally in the plaintiff’s favor and deny the plea if facts
affirmatively demonstrating jurisdiction have been alleged. Tex. Dep’t of Parks & Wildlife
v. Miranda, 133 S.W.3d 217, 227 (Tex. 2004).
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 14
A plea to the jurisdiction may challenge the existence of jurisdictional facts.
Miranda, 133 S.W.3d at 227. In some cases, the challenged jurisdictional facts are distinct
from the merits of the case, but in other cases, the challenged jurisdictional facts are
inextricably intertwined with the merits of the case. Id. “[I]n a case in which the
jurisdictional challenge implicates the merits of the plaintiffs’ cause of action and the plea
to the jurisdiction includes evidence, the trial court reviews the relevant evidence to
determine if a fact issue exists.” Id. Our standard of review on appeal “generally mirrors
that of a summary judgment,” meaning we will take as true all evidence favorable to the
non-movant and indulge reasonable inferences and resolve doubts in the non-movant’s
favor. Id. at 228.
If “the pleadings do not contain sufficient facts to affirmatively demonstrate the
trial court’s jurisdiction but do not affirmatively demonstrate incurable defects in
jurisdiction, the issue is one of pleading sufficiency and the plaintiffs should be afforded
the opportunity to amend.” Id. at 226-27. A court may grant a plea to the jurisdiction
without affording the plaintiff an opportunity to amend only if “the pleadings
affirmatively negate the existence of jurisdiction.” Id. at 227. “A trial court is not required
to deny an otherwise meritorious plea to the jurisdiction or a motion for summary
judgment based on a jurisdictional challenge concerning some claims because the trial
court has jurisdiction over other claims.” Thomas v. Long, 207 S.W.3d 334, 339 (Tex. 2006).
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 15
B. Applicable Law
“Sovereign immunity and its counterpart, governmental immunity, exist to
protect the State and its political subdivisions from lawsuits and liability from money
damages.” Mission Consol. Indep. Sch. Dist. v. Garcia, 253 S.W.3d 653, 655 (Tex. 2008).
Under the common-law doctrine of sovereign immunity, the State cannot be sued
without its consent. City of Houston v. Williams, 353 S.W.3d 128, 134 (Tex. 2011) (citing
Tooke v. City of Mexia, 197 S.W.3d 325, 331 (Tex. 2006)). And like sovereign immunity,
governmental immunity affords similar protection to subdivisions of the State, including
counties, cities, and school districts. LTTS Charter Sch., Inc. v. Palasota, 362 S.W.3d 202,
208 (Tex. App.—Dallas 2012, no pet.).
Governmental immunity has two components: (1) immunity from liability, which
bars enforcement of a judgment against a governmental entity; and (2) immunity from
suit, which bars suit against the entity altogether. Id. Immunity from suit deprives the
court of subject-matter jurisdiction and is properly raised in a plea to the jurisdiction,
whereas immunity from liability is asserted as an affirmative defense. See Miranda, 133
S.W.3d at 224; see also Palasota, 362 S.W.3d at 208. “Immunity from suit bars a suit against
the State unless the Legislature expressly consents to the suit.” Tex. Natural Res.
Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 853 (Tex. 2002). “If the Legislature has
not expressly waived immunity from suit, the State retains such immunity even if its
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 16
liability is not disputed.” Id. “Immunity from liability protects the State from money
judgments even if the Legislature has expressly given consent to sue.” Id.
Section 271.152 of the Local Government Code waives immunity to suit for
qualifying local governmental entities for the purpose of adjudicating a claim for breach
of contract entered into by the local governmental entity. TEX. LOC. GOV’T CODE ANN. §
271.152 (West 2016); see City of Houston, 353 S.W.3d at 134. For section 271.152’s waiver
of immunity to apply, the following elements must be established: (1) the party against
whom the waiver is asserted must be a “local governmental entity” as defined by the
Local Government Code; (2) the entity must be authorized by statute or the Constitution
to enter into contracts; and (3) the entity must in fact have entered into a contract that is
defined by section 271.151(2) of the Local Government Code. See TEX. LOC. GOV’T CODE
ANN. §§ 271.151(2) (West 2016), 271.152; see also City of Houston, 353 S.W.3d at 134-35. For
the purpose of waiving immunity under Chapter 271 of the Local Government Code, a
contract must be written and must state “the essential terms of the agreement for
providing goods or services to the local governmental entity that is properly executed on
behalf of the local governmental entity.” City of Houston, 353 S.W.3d at 135 (citing TEX.
LOC. GOV’T CODE ANN. § 271.151(2)(B)).
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 17
C. Discussion
1. Governmental or Proprietary Function?
Here, the Water Supply Corporations characterize the act of selling water
wholesale to non-resident entities as a proprietary act for which there is no immunity
from suit. We disagree.
Municipalities may exercise broad powers through two different roles—
proprietary or governmental.3 See Wasson Interests, Ltd. v. City of Jacksonville, No. 17-0198,
2018 Tex. LEXIS 999, at * 4 (Tex. Oct. 5, 2018) (citing Gates v. City of Dallas, 704 S.W.2d 737,
738 (Tex. 1986)); see also City of Merkel v. Copeland, No. 11-16-00323-CV, ___ S.W.3d ___,
2018 Tex. App. LEXIS 8501, at *4 (Tex. App.—Eastland Oct. 18, 2018, no pet. h.). The
governmental/proprietary dichotomy, which stems from the common law, “recognizes
that immunity protects a governmental unit from suits based on its performance of a
3 The functions of a municipality fall into one of two categories. Governmental
functions are those functions that are enjoined on a municipality by law and are given to
it by the state as part of the state’s sovereignty, to be exercised by the municipality in the
interest of the general public. A municipality performing a governmental function is
afforded sovereign immunity unless immunity has been waived under the Texas Tort
Claims Act.
Proprietary functions are those functions that a municipality may, in its discretion,
perform in the interest of the inhabitants of the municipality. Proprietary functions are not
integral to a municipality’s functions as an arm of the state. The sovereign immunity of
the state does not protect a municipality from liability for actions taken in a proprietary
capacity because such are undertaken for the benefit of private enterprise or the residents
of the municipality rather than for the benefit of the general public.
City of San Antonio v. BSR Water Co., 190 S.W.3d 747, 752 (Tex. App.—San Antonio 2005, no pet.) (internal
citations & quotations omitted).
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 18
governmental function but not a proprietary function.” Wasson Interests, Ltd., 2018 Tex.
LEXIS 999, at *4. And this dichotomy “is based on the reality that sovereign immunity is
inherent in the State’s sovereignty, and municipalities share that protection when they
act as a branch of the State but not when they act in a proprietary, non-governmental
capacity.” Id. at *5 (internal citations & quotations omitted). Therefore, we must
determine whether Corsicana acted in its governmental or proprietary capacity when it
entered into contracts with the Water Supply Corporations for the sale of wholesale water
to non-residents. And in doing so, the focus of our inquiry is on “whether the
municipality was engaged in a governmental or proprietary function when it entered the
contract, not when it allegedly breached that contract.” Id. at *13.
In the context of contract claims, we must consider the relevant statutory
provisions, as well as the common law, to determine the boundaries of governmental
immunity. Id. at *7. To “aid our inquiry,” we look to the definitions for governmental
and proprietary functions set forth by the Legislature in the Texas Tort Claims Act
(“TTCA”). Id.; see TEX. CIV. PRAC. & REM. CODE ANN. § 101.0215 (West Supp. 2018). Under
the TTCA, governmental functions are defined as “those functions that are enjoined on a
municipality by law and are given to it by the state as part of the state’s sovereignty, to
be exercised by the municipality in the interest of the general public.” TEX. CIV. PRAC. &
REM. CODE ANN. § 101.0215(a). The TTCA provides a non-exhaustive list of thirty-six
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 19
governmental functions, ranging from “police and fire protection and control” to “animal
control.” Id. § 101.0215(a)(1), (33); see Wasson Interests, Ltd., 2018 Tex. LEXIS 999, at *7.
On the other hand, the TTCA defines proprietary functions as “those functions
that a municipality may, in its discretion, perform in the interest of the inhabitants of the
municipality.” Id. § 101.0215(b). Such functions include “the operation and maintenance
of a public utility,” “amusements owned and operated by the municipality,” and “any
activity that is abnormally dangerous or ultrahazardous.” Id. § 101.0215(b)(1)-(3).
“Proprietary functions, however, do not include any of the Act’s enumerated
governmental functions.” Wasson Interests, Ltd., 2018 Tex. LEXIS 999, at *8 (citing TEX.
CIV. PRAC. & REM. CODE ANN. § 101.0215(c)). The Texas Supreme Court has also stated
that a proprietary function may be treated as a governmental action if the proprietary
action is “essential” to a governmental action. Wasson Interests, Ltd., 2018 Tex. LEXIS 999,
at *21.
If the governmental action is not expressly listed in section 101.0215, courts must
apply the general definitions of governmental and proprietary functions. Id. at **14-15.
In doing so, we consider: (1) whether the City’s act of entering into the contract was
mandatory or discretionary; (2) whether the contract was intended to benefit the general
public or the City’s residents; (3) whether the City was acting on the State’s behalf or its
own behalf; and (4) whether the City’s act of entering into the contract “was sufficiently
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 20
related to a governmental function to render the act governmental even if it would
otherwise have been proprietary.” Id. at **14-15.
As noted above, we must determine whether Corsicana acted in its governmental
or proprietary capacity when it entered into contracts with the Water Supply
Corporations for the sale of wholesale water to non-residents. If the City’s actions are
listed as a governmental function under the TTCA, we have no discretion, regardless of
the City’s motives, to declare the actions as proprietary. City of Plano v. Homoky, 294
S.W.3d 809, 814 (Tex. App.—Dallas 2009, no pet.). When reviewing the TTCA’s list of
governmental functions, Corsicana’s sale of wholesale water to both residents and non-
residents falls under the “waterworks” or “water and sewer service” provisions of the
TTCA. See TEX. CIV. PRAC. & REM. CODE ANN. § 101.0215(a)(11), (32). Accordingly, we
conclude that Corsicana was acting in its governmental capacity when it entered into the
contracts with the Water Supply Corporations for the sale of wholesale water to non-
residents.4 See TEX. CIV. PRAC. & REM. CODE ANN. § 101.0215(a)(11), (32); see also City of
4 On appeal, the Water Supply Corporations also try to distinguish between providing water to the
citizens of Corsicana and to non-residents, arguing that the latter constitutes a proprietary function.
However, Texas Courts have noted that a plaintiff may not “‘split various aspects of [the City’s] operation
into discrete functions and recharacterize certain of those functions as proprietary.’” City of Plano v.
Homoky, 294 S.W.3d 809, 815 (Tex. App.—Dallas 2009, no pet.) (quoting City of San Antonio v. Butler, 131
S.W.3d 170, 178 (Tex. App.—San Antonio 2004, pet. denied)). As such, we disagree with the argument that
providing water to non-residents somehow transforms Corsicana’s act of providing water into a
proprietary function that does not fall within the “waterworks” or “water and sewer service” governmental
functions listed in the TTCA. See id.; TEX. CIV. PRAC. & REM. CODE ANN. § 101.0215(a)(11), (32) (West Supp.
2018); see also City of Texarkana v. City of New Boston, 141 S.W.3d 778, 784 n.3 (Tex. App.—Texarkana 2004,
pet. denied) (“The introduction of a proprietary element into an activity designated by the Legislature as
governmental does not serve to alter its classification.”); Christopher D. Jones, Comment, Texas Municipal
Liability: An Examination of the State and Federal Causes of Action, 40 BAYLOR L. REV. 595, 615 (1988) (“If a
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 21
Merkel, ___ S.W.3d ___, 2018 Tex. App. LEXIS 8501, at *8 (concluding that “the City
exercised a governmental function when it contracted to dispose of its treated
wastewater/effluent by sale”); Multi-County Water Supply Corp. v. City of Hamilton, 321
S.W.3d 905, 909 (Tex. App.—Houston [14th Dist.] 2010, pet. denied) (concluding that
governmental immunity applied to a breach-of–contract action brought by Multi-County
Water Supply Corporation regarding the City of Hamilton’s decision to increase the rates
it charged Multi-County for treated water); City of San Antonio v. BSR Water Co., 190
S.W.3d 747, 753-54 (Tex. App.—San Antonio 2005, no pet.) (concluding that the San
Antonio Water System’s decisions to drill wells, purchase water, and file an application
for a CCN over the Expansion Area cannot be distinguished from the City’s
governmental function to provide “water and sewer service”); City of Texarkana v. City of
New Boston, 141 S.W.3d 778, 783-84 (Tex. App.—Texarkana 2004, pet. denied) (rejecting
plaintiffs’ argument that Texarkana’s sale of water to the citizens of the Seven Cities was
proprietary and noting that “[a]lthough waterworks and a number of other municipal
functions have traditionally been considered proprietary under the common law,”
section 101.0215 of the TTCA reclassified these functions as governmental).
proprietary function does not include governmental functions, a function containing a governmental
component cannot be considered proprietary, and therefore must be governmental. Thus, in regard to
mixed functions, the rule now seems to be that if any one component of a function is governmental, the
entire function will be considered governmental, and an action involving that function will have to be
brought under the Tort Claims Act.”).
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 22
Despite the foregoing, the Water Supply Corporations rely heavily on a decision
issued by the Eastland Court of Appeals in 2002. See generally City of Ranger v. Morton
Valley Water Supply Co., 79 S.W.3d 776 (Tex. App.—Eastland 2002, pet. denied). We find
this reliance to be misplaced.
In City of Ranger, the Eastland Court of Appeals addressed governmental authority
to regulate water rates and not governmental immunity and noted the following: “To
provide the wholesale supply of water to a nonresident retail supplier is to provide a
proprietary function.” See id. at 779. However, in support of this statement, the Eastland
Court of Appeals relied on City of Big Spring v. Board of Control, 404 S.W.2d 810, 812 (Tex.
1966)—a case that was decided before the 1970 amendment of the Texas Tort Claims Act
and the 1987 amendment reclassifying as governmental a number of activities that were
considered proprietary under the common law. See City of Texarkana, 141 S.W.3d at 784
n.3 (citing Act of June 3, 1987, 70th Leg., 1st C.S., ch. 2, § 3.02, 1987 Tex. Gen. Laws 37, 47-
48). As such, we are not persuaded by the Water Supply Corporations’ reliance on City
of Ranger.
2. Section 271 of the Local Government Code
The Water Supply Corporations also argue that even if their claims involve
governmental functions, immunity is waived for breach-of-contract claims pertaining to
written contracts for providing goods or services to a local governmental entity. See TEX.
LOC. GOV’T CODE ANN. §§ 271.151(2), 271.152. Once again, we disagree.
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 23
Corsicana is a local governmental entity, and therefore, a contract for goods or
services is required under law to waive immunity.5 See TEX. LOC. GOV’T CODE ANN. §§
271.151(3)(A), 271.152. Section 271.152 reads:
A local governmental entity that is authorized by statute or the constitution
to enter into a contract and that enters into a contract subject to this
subchapter waives sovereign immunity to suit for the purpose of
adjudicating a claim for breach of contract, subject to the terms and
conditions of this subchapter.
Id. § 271.152. Chapter 271 defines a “contract subject to this subchapter” as a “written
contract stating the essential terms of the agreement for providing goods and services to the
local government entity that is properly executed on behalf of the local governmental
entity.” Id. § 271.151(2) (emphasis added). Thus, there is a waiver of immunity only
when the contract involves the provision of goods or services to a local governmental
entity. See id. §§ 271.151(2), 271.152.
The term “services” is not defined in Chapter 271. However, the Texas Supreme
Court has held that the term “is broad enough to encompass a wide array of activities,”
and “includes generally any act performed for the benefit of another.” Kirby Lake Dev.,
Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 839 (Tex. 2010) (internal citation &
quotations omitted). Furthermore, the services provided “need not be the primary
5It is undisputed that Corsicana is a home-rule municipality within the context of section 5.004 of
the Local Government Code. See TEX. LOC. GOV’T CODE ANN. § 5.004 (West 2008) (“A municipality is a
home-rule municipality if it operates under a municipal charter that has been adopted or amended as
authorized by Article XI, Section 5, of the Texas Constitution.”).
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 24
purpose of the agreement.” Id. However, section 271 does not extend to “‘contracts in
which the benefit that the local governmental entity would receive is an indirect,
attenuated one.’” Id. (quoting Berkman v. City of Keene, 311 S.W.3d 523, 527 (Tex. App.—
Waco 2009, pet. denied) (op. on reh’g)); cf. Lubbock County Water Control & Improvement
Dist. v. Church & Akin, L.L.C., 442 S.W.3d 297, 303 (Tex. 2014) (“When a party has no right
under the contract to receive services, the mere fact that it may receive services as a result
of the contract is insufficient to invoke chapter 271’s waiver of immunity.”). The First
Court of Appeals in East Houston Estate Apartments, L.L.C. v. City of Houston further
explained the limitations on the term “services” in the statute:
If every contract that confers some attenuated benefits on a governmental
entity constitutes a contract for a “service,” the limitation of contracts
covered by section 271.152 to “contract for goods or services provided to
the entity” loses all meaning. Nothing in the statute [or] in its legislative
history supports such an interpretation. Had the legislature intended to
waive immunity from liability for every contract participated in by the
State, it could have done so. We must interpret the limitation as having
some meaning.
294 S.W.3d 723, 736 (Tex. App.—Houston [1st Dist.] 2009, no pet.).
In this issue, the Water Supply Corporations allege that they provide numerous
services to Corsicana under the contract, including the construction of storage, pumping,
and pressure maintenance or other facilities; agreeing to take appropriate actions to
curtail or limit water usage during times of emergency or shortage; developing a water-
conservation plan; agreeing to adopt and enforce adequate plumbing regulations;
purchasing an air gap and backflow preventer; and agreeing to indemnify Corsicana for
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 25
any losses, damage, or liability caused by the negligence of the Water Supply
Corporations.
Despite the foregoing, the “central purpose” of the contracts between Corsicana
and the Water Supply Corporations is indisputably Corsicana’s sale of wholesale water
to the Water Supply Corporations, not vice versa. See id.; see also Brazos River Auth. v.
Brazos Elec. Power Coop., Inc., No. 10-09-00403-CV, 2010 Tex. App. LEXIS 4742, at **9-10
(Tex. App.—Waco June 23, 2010, pet. denied) (mem. op.). Like Berkman and Brazos River
Authority, the “services” purportedly provided by the Water Supply Corporations to
Corsicana are, at best, indirect and attenuated benefits that do not result in a section
271.152 waiver of governmental immunity. See Church & Akin, L.L.C., 442 S.W.3d at 303;
Berkman, 311 S.W.3d at 5266; see also Brazos River Auth., 2010 Tex. App. LEXIS 4742, at **9-
10 (“Brazos Electric pleads that because, under the FUA, it will operate, maintain, and
repair the Facility and supply the Facility with electricity, the FUA provides the essential
terms of an agreement for providing goods and services to the Authority. The FUA is in
essence a lease of the Facility—the FUA describes the Facility as the ‘Leased Facility.’
Brazos Electric’s lease of the Facility is not the provision of goods and services to the
6 In Berkman v. City of Keene, 311 S.W.3d 523 (Tex. App.—Waco 2009, pet. denied), the city entered
into a contract to provide, among other things, sewer services to a landowner for thirty-five years. Id. at
524-25. The landowner contended that when he used the property as a home for children who were wards
of the state and allowed his property to be annexed, he was providing services to the city that caused the
contract to fall within the waiver of immunity set forth in section 271.152. See id. at 527. This Court
determined that both of these benefits to the city were indirect in nature, and therefore, the contract
between the city and the landowner did not fall under section 271.152. See id.
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 26
Authority, and Brazos Electric does not attempt to argue otherwise in this appeal.”). In
fact, these “services” mentioned by the Water Supply Corporations are merely actions
that are necessary to facilitate the procurement of water by the Water Supply
Corporations for their customers. Accordingly, we hold that the Water Supply
Corporations’ claims for breach of contract against Corsicana do not come within section
271.152’s waiver. See TEX. LOC. GOV’T CODE ANN. § 271.152; Berkman, 311 S.W.3d at 526;
E. Houston Estate Apts., L.L.C., 294 S.W.3d at 736; see also Brazos River Auth., 2010 Tex. App.
LEXIS 4742, at **9-10. And given this, we cannot say that the trial court erred in granting
Corsicana’s plea to the jurisdiction as to the Water Supply Corporations. See Holland, 221
S.W.3d at 642; see also Miranda, 133 S.W.3d at 227. We overrule the fourth, fifth, and sixth
issues brought by the Water Supply Corporations.7
V. CONCLUSION
Having sustained Frost’s first issue, we reverse the trial court’s order granting
Corsicana’s motion to dismiss and remand for proceedings consistent with this opinion.
We affirm the final judgment of the trial court in all other respects.
AL SCOGGINS
Justice
7And given our conclusions regarding governmental immunity and the lack of a waiver of
Corsicana’s immunity, we need not address the Water Supply Corporations’ contention regarding specific
performance. See TEX. R. APP. P. 47.1, 47.4.
M.E.N. Water Supply Corp., et al. v. City of Corsicana Page 27
Before Chief Justice Gray,
Justice Davis, and
Justice Scoggins
Affirmed, in part, and reversed and remanded, in part
Opinion delivered and filed November 14, 2018
[CV06]
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