# Harris County Water Control and Improvement District No. 89 v. 308 Furman, Ltd.

> Texas Court of Appeals, 1st District (Houston) · December 31, 2024

URL: https://www.frixlaw.com/law-library/cases/10776738

## Case

- **Court:** Texas Court of Appeals, 1st District (Houston)
- **Decided:** December 31, 2024
- **Precedential status:** Published
- **Opinion:** Opinion
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

Opinion issued December 31, 2024

In The

Court of Appeals
For The

First District of Texas
————————————
NO. 01-23-00177-CV
———————————
HARRIS COUNTY WATER CONTROL AND
IMPROVEMENT DISTRICT NO. 89, Appellant
V.
308 FURMAN, LTD., Appellee

On Appeal from the 151st District Court
Harris County, Texas
Trial Court Case No. 2020-43780

MEMORANDUM OPINION

Appellant, Harris County Water Control and Improvement District No. 89

(the “District”), challenges the trial court’s rendition of summary judgment in favor

of appellee, 308 Furman, Ltd. (“Furman”), in Furman’s suit against the District for

breach of contract. In nine issues, the District contends that the trial court erred in
granting summary judgment in favor of Furman based on the affirmative defense of

res judicata.

We affirm.

Background

The District is a municipal utility district in Harris County, Texas, that sells

fresh water, sewage treatment, drainage, and related services to residents within its

area. Furman is a residential developer that purchased approximately 308 acres

within the District (the “property”). In December 2002, the District and Furman

entered into a “Water, Sewer, and Drainage Facilities Reimbursement Agreement”

(the “reimbursement agreement”), under which the District agreed to reimburse

Furman for the eligible portion (the “reimbursable share”)1 of the construction costs

that Furman, as developer of the property, assumed in constructing the fresh water

supply lines, sanitary sewers, storm sewers, and drainage facilities (collectively, the

“facilities”) “intended for use or required to be constructed to serve the [p]roperty.”

As to the amount of payment, the District agreed, under certain conditions, to “pay

[Furman] up to the maximum for all sums advanced to, or on behalf of, the District

up to the maximum extent permitted under the [Texas Commission on

1
The reimbursement agreement defined “[r]eimbursable [s]hare” as “the amount of
reimbursement specified in the reimbursement audit.” (Internal quotations
omitted.)

2
Environmental Quality (“TCEQ”) Rules], including payment of interest on the funds

so advanced or to or paid on behalf of the District by [Furman].”

Additionally, Furman agreed to “maintain and provide the District with a

complete accounting of all [c]onstruction [c]osts” that it incurred “in order to

determine the [r]eimbursable [s]hare.” In return, the District “agree[d] to make all

reasonable efforts to file bond applications, obtain approval” from the TCEQ “for

the sale of [b]onds, and to sell the [b]onds” to fund the reimbursements to Furman.

And on payment of the reimbursable share by District, Furman agreed to convey its

property interest in the facilities to the District.

Furman and the District also agreed that Texas law applied to the

reimbursement agreement and that any obligations created by the reimbursement

agreement “[we]re further subject to all rules, regulations[,] and laws of any

regulatory agency having jurisdiction, including the Rules of the [TCEQ].”

A dispute then arose between Furman and the District as to whether certain

costs were reimbursable, and Furman appealed the District’s decision refusing to

reimburse it for those costs to the TCEQ. The TCEQ granted Furman’s appeal in

part and denied it in part. In its Order, the TCEQ made findings of fact and

conclusions of law to support its ruling. Its findings of fact, in pertinent part, were

as follows:

1. In 2002, . . . Furman . . . and [the District] entered into [the
reimbursement agreement].
3
2. The [reimbursement agreement] provide[d] that the facilities
would be purchased by the District through the issuance of bonds
approved by the [TCEQ].

3. On May 2, 2017, the District’s board of directors[2] . . . decided
not to include in Bond Application No. 7: reimbursement for the
Brunswick Meadows pump station . . . in the amount of
$813,346,25; reimbursement for money advanced to the District
in the amount of $138,434.77; payment of five years of interest
in the amount of $791,289.01; and reimbursement of Brunswick
Meadows[’] detention pond . . . maintenance expenses in the
amount of $265,124.46.

4. Furman filed its first appeal with TCEQ on June 1, 2017, and an
amended appeal on January 30, 2018. The appeals were based
on the District’s omission of the above-listed items in Bond
Application No. 7 for which Furman claim[ed] it [wa]s entitled
to reimbursement under the [reimbursement agreement].

5. The [reimbursement agreement] provide[d] that Furman would
construct water, sewer, and drainage facilities to serve land
owned by Furman and located in the District.

6. The [reimbursement agreement] provide[d] that the facilities
would be purchased by the District through issuance of bonds
approved by TCEQ.

7. Under the [reimbursement agreement], the District’s obligation
to purchase the [d]etention [p]ond and [p]ump [s]tation
(collectively, the [“facilities”]) and reimburse Furman [wa]s
subject to the District engineer’s certification that the
construction ha[d] been completed in accordance with plans and
specifications as approved by the District.

8. The [facilities’] plans and specifications, which indicated
Furman’s intent to have [the] Harris County Flood Control
2
See TEX. WATER CODE ANN. § 49.051 (providing “[a] district shall be governed by
its board, the number of which is otherwise provided by law”).

4
District (HCFCD) accept the [f]acilities for maintenance, were
approved by the District.

9. The District’s reimbursement to Furman was not conditioned on
HCFCD’s acceptance of the [f]acilities for maintenance.

10. Construction of the [f]acilities was completed in 2010.

....

13. In 2009, Furman and the District entered into a [l]etter
[a]greement . . . , which provided that Furman was solely
responsible for maintenance until HCFCD accepted the
[f]acilities for maintenance.

14. In 2015, Furman paid the local Homeowners’ Association
(HOA) $160,977.60 for ten years of maintenance as part of the
HOA’s agreement to assume from Furman responsibility for
maintenance of the [f]acilities.

15. The District did not incur any damages as a result of HCFCD’s
non-acceptance of the [f]acilities.

16. The [facilities] were suitable and necessary because increased
detention capacity was required.

17. The cost of the [f]acilities was reasonable.

18. Furman paid the District’s attorneys, engineers, and bookkeepers
for work performed for the District, not for Furman. Furman’s
payment of those invoices on behalf of the District were
developer advances.

19. Two years of interest is the industry standard.

20. The District has the discretion whether to reimburse the
developer for two years or five years of interest.

21. Maintenance of the [f]acilities refers to mowing, seeding, and
fertilizing around the [facilities].
5
22. Furman handled maintenance, including mowing, of the
[d]etention [p]ond from 2010 to 2013.

23. From 2013 through 2017, the District hired a third party to mow
the [f]acilities more frequently, approximately monthly, because
it had received complaints about snakes, rodents, and tall grass.

24. In 2015, Furman entered into an agreement with the HOA to
transfer maintenance responsibility to the HOA. Furman paid
the HOA approximately ten years of maintenance expenses in
relation to that agreement.

25. The District deducted its [f]acilities maintenance expenses from
2013 through 2017 from the amount to be reimbursed to Furman
in Bond Application No. 7.

26. Mowing expenses are not typically presented as a bond item for
reimbursement in TCEQ bond applications, but most
maintenance and operating budgets have a line item for mowing.

27. If the District had included the requested $2 million in Bond
Application No. 7, it would still have complied with TCEQ’s
economic feasibility rules.

....

30. On April 30, 2018, a Notice, of Hearing was issued to the parties
to this appeal. The notice contained a statement of the time,
place, and nature of the hearing; a statement of the legal authority
and jurisdiction under which the hearing was to be held; a
reference to the particular sections of the statutes and rules
involved; and either a short, plain statement of the factual matters
asserted or an attachment that incorporated by reference the
factual matters asserted.

....

The TCEQ also made the following conclusions of law:

6
1. TCEQ has jurisdiction over this matter.[3]

2. [The State Office of Administrative Hearings (the “SOAH”)] has
jurisdiction to conduct the administrative hearing in this matter,
including the authority to issue a Proposal for Decision with
Findings of Fact and Conclusions of Law.[4]

....

4. The hearing was conducted pursuant to the Administrative
Procedure Act.[5]

5. Furman ha[d] the burden of proving by a preponderance of the
evidence that the District erred in its decisions.[6]

6. If submitted by the District in Bond Application No. 7, the costs
of the [p]ump [s]tation, developer advances, five years of
interest, and maintenance expenses would be eligible for
reimbursement with utility bond funds.[7]

7. The District erred in its decision to exclude from Bond
Application No. 7 reimbursement of $813,346.25 to Furman for
the [p]ump [s]tation.

8. The District erred in its decision to exclude from Bond
Application No. 7 reimbursement of $138,434.77 to Furman for
developer advances.

9. The District erred in its decision to deduct $265,124.46 in
[f]acilities maintenance expenses from Furman’s reimbursement
proceeds.
3
See id. §§ 54.239, 54.241.
4
See 30 TEX. ADMIN. CODE § 80.6 (Tex. Comm’n on Envtl. Quality, Referral to
SOAH).
5
See TEX. GOV’T CODE ANN. ch. 2001.
6
See 30 TEX. ADMIN. CODE § 80.17(a) (Tex. Comm’n on Envtl. Quality, Burden of
Proof).
7
See id. ch. 293 (Tex. Comm’n on Envtl. Quality, Water Districts).

7
10. Furman did not meet its burden of proof in establishing that the
District erred regarding the amount of interest paid to Furman in
Bond Application No. 7.

....

The District did not seek judicial review of the TCEQ’s ruling or provide any

payment to Furman for the reimbursement amounts that, according to the TCEQ

Order, the District had erroneously excluded from Bond Application No. 7.

In its first amended petition, filed in the trial court, Furman alleged that it

“purchased [the property] . . . to develop a residential neighborhood.” In 2002,

Furman and the District entered a “reimbursement agreement,” a copy of which

Furman attached to its petition. Under the reimbursement agreement, Furman

“agreed to construct . . . water, sewage, and drainage improvements and then convey

those improvements to the District once they were completed.” In return for the

conveyance, the District “agreed to reimburse Furman for its costs in making those

improvements through the issuance of bonds.”

Furman completed its work on the property in 2010. In May 2017, the District

issued its bond but “intentionally excluded” certain costs which, according to

Furman, were “eligible for reimbursement.” Those costs included the

“[c]onstruction of a water pump station,” “[d]eveloper advances,” “[i]nterest

reimbursement,” and “[m]owing maintenance expenses,” which, in total, amounted

to “over $2 million.”
8
Furman “appealed the District’s decision to exclude those costs to the

[TCEQ].”8 In September 2019, “a full evidentiary hearing was held” before an

administrative law judge. The TCEQ then issued its Order, in which it “concluded

that all four categories of costs for which Furman sought reimbursement would have

been eligible for reimbursement if submitted by the District in its bond application.”

Thus, Furman asserted that the District had “erred in failing to reimburse Furman”

for three categories of the costs for which it had sought reimbursement, namely, the

costs that Furman had incurred in the construction of the water pump station, the

developer advances, and the mowing maintenance expenses.

Furman maintained that the District’s conduct constituted a breach of the

reimbursement agreement, which was “a valid and enforceable contract.” According

to Furman, it had “performed, tendered performance of, or [wa]s excused from

performing its contractual obligations,” the District “materially breached its

contractual obligations to Furman,” and such breach was “a proximate cause of the

damages sustained by Furman.”

Furman also argued that “res judicata require[d] a finding” in its favor on its

breach-of-contract claim because a “court of competent jurisdiction” had rendered

“a prior final judgment on the merits” involving the same parties as those in the

8
See TEX. WATER CODE ANN. §§ 54.239, 54.241; TEX. GOV’T CODE ANN.
§ 2001.144; 30 TEX. ADMIN. CODE § 80.273 (Tex. Comm’n on Envtl. Quality,
Decision Final and Appealable).

9
instant suit, which was “based on the same claims as were raised in the first action.”

According to Furman, then, it was “entitled to actual damages for unpaid

reimbursable funds due under the [reimbursement agreement] in the amount of

$1,216,905.48,” as well as its attorney’s fees and costs.

The District answered, generally denying the allegations in Furman’s petition

and asserting various affirmative defenses and certain other defenses.

Furman then moved for summary judgment, arguing that it was entitled to

summary judgment as a matter of law on its breach-of-contract claim because res

judicata barred the District from relitigating its obligation to pay the three

reimbursement claims that had been adjudicated by the TCEQ in Furman’s favor.

Furman explained that its “lawsuit involve[d] the same claims that were at issue in

the [TCEQ] proceeding,” specifically, “whether the District [had] breached the

reimbursement [agreement] with Furman by refusing to reimburse it $813,346.25 in

costs for construction of the water pump station, $138,434.77 for developer

advances, and $265,124.46 in mowing maintenance expenses.”

In its response to Furman’s summary-judgment motion, the District

maintained that the TCEQ Order “d[id] not make any finding on the elements of

[Furman’s] breach[-]of[-]contract claim[] under Texas law.” Further, the District

pointed out that “the TCEQ Order d[id] not award any damages to Furman,” and

“specifically decline[d] to award damages by denying ‘any other requests for general

10
or specific relief.’” Thus, according to the District, “the TCEQ Order [wa]s not a

final judgment on the merits of Furman’s breach[-]of[-]contract claim.”

The District also argued that res judicata did not bar it from contesting

Furman’s breach-of-contract claim because “the TCEQ d[id] not have jurisdiction

to decide a contract dispute.” The District observed that no statute or regulation

“direct[ed] the TCEQ to determine a breach[-]of[-]contract claim.” Instead, in

determining whether reimbursement was proper, the TCEQ was to “consider

suitability, necessity, reasonableness of the cost, and economic viability,”9 which

were “public interest factors” that were “not at issue in a breach[-]of[-]contract

claim.”10

In its reply to the District’s response, Furman noted that “[t]he TCEQ[] Order

ma[de] numerous findings about the terms of the parties’ agreement” and found that

the District had “erred in excluding three categories of costs from the bond

application,” which was equivalent to a finding that the District had breached the

reimbursement agreement. The TCEQ Order also “identifie[d] the amount of

damages Furman suffered for each category” of cost. Thus, according to Furman,

the TCEQ Order “addresse[d] all necessary elements to establish” that the District

9
See 30 TEX. ADMIN. CODE § 293.180(c)(2) (Tex. Comm’n on Envtl. Quality,
Appeal of Decision of the Board of Municipal Utility District Regarding Facilities
Constructed for District).
10
The District did not raise any of its affirmative defenses in its summary-judgment
response.

11
failed to comply with the reimbursement agreement and that Furman was “entitled

to damages in the amounts” that the TCEQ found the District had “wrongfully

excluded.” Whether “[t]he TCEQ actually awarded damages,” Furman maintained,

“ha[d] no bearing on whether it decided all necessary elements of a contract dispute.”

And even “though the TCEQ did not award damages, its findings as to the amount

of damages” that the District owed Furman under the reimbursement agreement

“[we]re res judicata.”11

The trial court granted Furman summary judgment on its breach-of-contract

claim and entered a judgment awarding Furman $1,216,905.48 in damages plus

pre- and post-judgment interest. The District then moved for reconsideration and a

new trial, reiterating its arguments that the TCEQ Order was not a final judgment on

the merits of Furman’s breach-of-contract claim and that the TCEQ lacked “the

authority to determine a breach[-]of[-]contract claim.” The trial court denied the

District’s motion.

Standard of Review

We review a trial court’s decision to grant summary judgment de novo.

Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005); Provident Life

& Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). In conducting our

review, we take as true all evidence favorable to the non-movant, and we indulge

11
The District also filed a surreply.

12
every reasonable inference and resolve any doubts in the non-movant’s favor.

Valence Operating, 164 S.W.3d at 661; Knott, 128 S.W.3d at 215. When, as here,

the trial court does not specify the grounds on which it granted summary judgment,

we must affirm if any of the summary-judgment grounds are meritorious. See

Beverick v. Koch Power, Inc., 186 S.W.3d 145, 148 (Tex. App.—Houston [1st Dist.]

2005, pet. denied).

To prevail on a matter-of-law summary-judgment motion, a movant has the

burden of establishing that there is no genuine issue of material fact and it is entitled

to judgment as a matter of law. TEX. R. CIV. P. 166a(c); Cathey v. Booth, 900 S.W.2d

339, 341 (Tex. 1995). When a plaintiff moves for a matter-of-law summary

judgment on its own claim, it must conclusively prove all essential elements of its

cause of action. Rhône–Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999).

Once the movant meets its burden, the burden shifts to the non-movant to raise a

genuine issue of material fact precluding summary judgment. See Centeq Realty,

Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995); Transcont’l Ins. Co. v. Briggs

Equip. Tr., 321 S.W.3d 685, 691 (Tex. App.—Houston [14th Dist.] 2010, no pet.).

Res Judicata

In its first, second, third, fourth, fifth, sixth, seventh, and ninth issues, the

District argues that the trial court erred in granting summary judgment in favor of

Furman on its breach-of-contract claim because Furman did not establish as a matter

13
of law that the TCEQ Order was a final judgment on the merits of Furman’s

breach-of-contract claim as required for res judicata to apply.

Res judicata is a generic term for the related concepts of claim preclusion (res

judicata) and issue preclusion (collateral estoppel), and it must be pleaded as an

affirmative defense.12 TEX. R. CIV. P. 94; Whallon v. City of Houston, 462 S.W.3d

146, 155 (Tex. App.—Houston [1st Dist.] 2015, pet. denied); Barnes v. United

Parcel Serv., Inc., 395 S.W.3d 165, 173 (Tex. App.—Houston [1st Dist.] 2012, pet.

denied); see also Barr v. Resol. Tr. Corp., 837 S.W.2d 627, 628 (Tex. 1992); Wilson

v. Fleming, 669 S.W.3d 450, 456 (Tex. App.—Houston [14th Dist.] 2021)

(observing although federal courts refer to doctrines of claim preclusion and issue

preclusion collectively as “res judicata,” Texas courts generally refer to “collateral

estoppel” when referencing and applying issue preclusion), aff’d, 694 S.W.3d 186

(Tex. 2024). Both res judicata and collateral estoppel may be used offensively to

stop a defendant from relitigating claims or issues previously litigated. Koval v.

Henry Kirkland Contractors, Inc., No. 01-06-00067-CV, 2008 WL 458295, at *5

(Tex. App.—Houston [1st Dist.] Feb. 15, 2008, no pet.) (mem. op.); see also Case

12
The parties dispute whether Furman sought to apply res judicata or collateral
estoppel to its breach-of-contract claim. This Court will not linger on whether one
label is more proper than the other and will instead focus on whether Furman
established as a matter of law that the TCEQ’s adjudication of the administrative
appeal in Furman’s favor functions in a way that precludes the need for further
litigation of Furman’s breach-of-contract claim.

14
Funding Network, LP. v. Anglo–Dutch Petroleum Int’l, Inc., 264 S.W.3d 38, 57

(Tex. App.—Houston [1st Dist.] 2007, pet. denied) (“Collateral estoppel can be

applied offensively or defensively.”).

Res judicata prevents the re-litigation of a claim or cause of action that has

been finally adjudicated in a prior lawsuit. Barr, 837 S.W.2d at 628; Barnes, 395

S.W.3d at 173. For res judicata to apply, a party must show that: (1) there was a

prior final judgment on the merits by a court of competent jurisdiction, (2) the parties

in the second action are the same or in privity with those in the first action, and

(3) the second action is based on claims that were or could have been raised in the

first action. Igal v. Brightstar Info. Tech. Grp., Inc., 250 S.W.3d 78, 86 (Tex. 2008);

Barnes, 395 S.W.3d at 173. Res judicata does not operate as a bar to litigation when

the second claim could not have been raised in the previous litigation. See Abbott

Lab’ys v. Gravis, 470 S.W.2d 639, 642 (Tex. 1971); Barnes, 395 S.W.3d at 173.

Collateral estoppel, or issue preclusion, bars the relitigation of identical issues

of fact or law decided in a prior suit. Tex. Dep’t of Pub. Safety v. Petta, 44 S.W.3d

575, 579 (Tex. 2001); Hassell Constr. Co. v. Springwoods Realty Co., No.

01-17-00822-CV, 2023 WL 2377488, at *12 (Tex. App.—Houston [1st Dist.] Mar.

7, 2023, pet. denied) (mem. op.). A party seeking to assert collateral estoppel must

show that: (1) the issue of fact or law sought to be litigated in the second action was

fully and fairly litigated in the first action, (2) those issues were essential to the

15
judgment in the first action, and (3) the party against whom the doctrine is asserted

was a party or was in privity with a party in the first action. Sysco Food Servs., Inc.

v. Trapnell, 890 S.W.2d 796, 801 (Tex. 1994); Hassell Constr. Co., 2023 WL

2377488, at *12.

Here, the District challenges the first and third elements of res judicata,

asserting that the TCEQ was not a “court of competent jurisdiction” to adjudicate

Furman’s breach-of-contract claim, and thus, the breach-of-contract claim could not

have been raised in the TCEQ proceeding. The District also asserts that the offensive

use of res judicata is improper. We address each of these assertions in turn.

A. TCEQ Jurisdiction

Issue preclusion “applies to administrative agency orders when the agency is

acting in a judicial capacity and resolves disputed issues of fact properly before it

which the parties have had an adequate opportunity to litigate.” Turnage v. JPI

Multifamily, Inc., 64 S.W.3d 614, 620 (Tex. App.—Houston [1st Dist.] 2001, no

pet.); see also Estate of Howard, 543 S.W.3d 397, 401 (Tex. App.—Houston [14th

Dist.] 2018, pet. denied); New Talk, Inc. v. Sw. Bell Tel. Co., 520 S.W.3d 637 (Tex.

App.—Fort Worth 2017, no pet.).

As to the administrative proceeding at issue here, the administrative law judge

determined that “Texas Water Code [section] 54.239 and 30 Texas Administrative

Code [section] 293.180 afford[ed] Furman the right to appeal decisions made by the

16
[District’s board of directors] involving the cost and purchase of facilities if it is

aggrieved by such decisions.” The administrative law judge noted that “[i]t [wa]s

clear that the [District’s board of directors] made decisions regarding what costs of

facilities it purchased from Furman would be included in Bond Application No. 7,

and that th[o]se decisions adversely affected Furman.”

The District argues that the TCEQ Order “does not reflect a resolution of the

parties’ contractual dispute” because the TCEQ cannot award breach-of-contract

damages.13 But the TCEQ Order may have preclusive effect over the issues that the

TCEQ did have the authority to adjudicate. The question, then is whether, after

considering the TCEQ’s findings on the issues that it could adjudicate, a genuine

issue of material fact remains which would preclude summary judgment on

Furman’s breach-of-contract claim. See Siegler, 899 S.W.2d at 197; Transcont’l

Ins. Co., 321 S.W.3d at 691.

13
See 30 TEX. ADMIN. CODE § 293.180(c)(4) (“[I]f the Commission finds that the
district erred in its decision, it may direct the district to reimburse the petitioner(s)
all or part of the deposit which the petitioner paid.”). The District also asserts that
the TCEQ and Furman both admitted that the TCEQ “ha[d] no authority to decide
breach[-]of[-]contract claims.” This assertion does not affect our inquiry because
whether an administrative agency has the authority to make a particular decision is
a question of law, whereas a judicial admission is an assertion of fact. See In re
Spooner, 333 S.W.3d 759, 764 (Tex. App.—Houston [1st Dist.] 2010, orig.
proceeding [mand. denied]).

17
B. Breach of Contract

The District argues that the TCEQ Order has no preclusive effect because it

does not address any of the elements of a breach-of-contract claim. The elements of

a breach-of-contract claim are: (1) a valid contract, (2) the party suing to enforce the

contract performed or tendered performance, (3) the other party failed to comply

with the contract, and (4) the suing party was damaged as a result of the breach.

USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479, 501 n.21 (Tex. 2018);

Thornton v. Dobbs, 355 S.W.3d 312, 316 (Tex. App.—Dallas 2011, no pet.). “A

breach occurs when a party fails or refuses to do something [it] has promised to do.”

Mays v. Pierce, 203 S.W.3d 564, 575 (Tex. App.—Houston [14th Dist.] 2006, pet.

denied).

The District has not challenged the validity of the reimbursement agreement

as a whole or the validity or meaning of the reimbursement agreement’s provision

under which it agreed to reimburse Furman for the “reimbursable share” of Furman’s

construction costs. This leaves the second, third and fourth elements of Furman’s

breach-of-contract claim to consider. See Menchaca, 545 S.W.3d at 501 n.21;

Thornton, 355 S.W.3d at 316.

As to the second element—that Furman performed its obligations under the

reimbursement agreement—the District complains that the TCEQ’s findings that the

facilities Furman built were “suitable, reasonable, and necessary” are not the same

18
as a finding of performance. We note that those findings were necessary to comply

with applicable law. See 30 TEX. ADMIN. CODE § 293.180(c)(2) (Tex. Comm’n on

Envtl. Quality, Appeal of a Decision of the Board of Municipal Utility District

Regarding Facilities Constructed for the District) (providing TCEQ should consider

suitability, necessity, reasonableness of cost, and economic viability in rendering

decisions). The TCEQ also concluded that if the District had submitted the costs of

the facilities and maintenance expenses in Bond Application No. 7, they would have

been “eligible for reimbursement with utility bond funds.” The TCEQ would not

have concluded that the costs were eligible for reimbursement had Furman not

performed its obligations under the reimbursement agreement.

As to whether the TCEQ determined in its Order that the District failed to

comply with the reimbursement agreement, the TCEQ concluded that the District

“erred” in deciding “to exclude from Bond Application No. 7 reimbursement of

$813,346.25 to Furman for the Pump Station,” to “exclude from Bond Application

No. 7 reimbursement of $138,434.77 to Furman for developer advances,” and “to

deduct $265,124.46 in Facilities maintenance expenses from Furman’s

reimbursement proceeds.” The District complains that the TCEQ’s conclusion that

it erred in excluding these reimbursements is not a basis for damages because it is

premised on the hypothetical approval by the TCEQ of “bonds in the amount Furman

s[ought] if the District had agreed to apply for such amounts.” The conclusion in

19
the TCEQ Order that the District erred in excluding the reimbursable funds, though,

necessarily implies that the TCEQ would have approved such funds if the District

had included them in Bond Application No. 7. See id. § 293.41(c) (Tex. Comm’n

on Envtl. Quality, Approval of Projects and Issuance of Bonds) (TCEQ “has the

statutory responsibility to approve projects relating to the issuance and sale of bonds

for districts as defined in [Texas Water Code section] 49.001(1)”); see also id.

§ 293.44 (Tex. Comm’n on Envtl. Quality, Special Considerations) (detailing water

district’s authority to obtain financing through bond issuance and limits on such

authority). The reimbursement agreement reflects the parties’ understanding that

the TCEQ has the last word about the District’s authority to have a bond issued in

order to reimburse a developer, requiring the District to “obtain approval” from the

TCEQ “for the sale of [b]onds” for reimbursement and limiting reimbursement “to

the maximum extent permitted” under TCEQ Rules.

Thus, the TCEQ’s conclusion that the District erred in excluding the

reimbursements sought by Furman effectively amounts to a conclusion that the

District failed to comply with the reimbursement agreement.

As to whether Furman was damaged as a result of the District’s breach of the

reimbursement agreement, we note that the TCEQ Order in favor of Furman in its

appeal is, at its core, a conclusion that Furman was “aggrieved” by the decisions of

the District’s board of directors “involving the cost and purchase of facilities.” See

20
TEX. WATER CODE ANN. § 54.239; 30 TEX. ADMIN. CODE § 293.180. Further, the

TCEQ determined the specific amounts that were owed to Furman under the

reimbursement agreement.

C. Offensive Use of Res Judicata

The Texas Supreme Court has observed that applying res judicata to the

administrative orders of certain administrative agencies “further[s] the public policy

discouraging prolonged and piecemeal litigation.” Igal, 250 S.W.3d at 86. The

District warns of the possibility of a double recovery, but answers its own concern

in stressing that the TCEQ lacks the authority to award damages.

The District also urges that we consider the fairness factors set forth in

Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979). In contrast to Parklane

Hosiery, though, the District and Furman were both parties to the administrative

appeal and in the trial court. The concerns raised in Parklane Hosiery thus do not

apply here. See id. at 328.

In the reimbursement agreement, the parties acknowledged repeatedly that the

TCEQ Rules governed their performance under it. The agreement’s choice of law

provision reinforced the importance of TCEQ oversight, requiring that the

obligations set forth in the agreement be governed by Texas law and also expressly

making them “subject to all rules, regulations and laws of any regulatory agency

having jurisdiction, including the Rules of the [TCEQ].” The District has not

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identified any public policy or other reason for refusing to apply res judicata in this

case, and given the overarching importance of TCEQ regulation in the subject matter

and the reimbursement agreement, we find none.

For these reasons, we hold that the trial court did not err in granting summary

judgment in favor of Furman on its breach-of-contract claim based on res judicata.

We overrule the District’s first, second, third, fourth, fifth, sixth, seventh, and

ninth issues.14

Conclusion

We affirm the judgment of the trial court.

Julie Countiss
Justice

Panel consists of Chief Justice Adams and Justices Hightower and Countiss.

14
Our disposition makes it unnecessary to reach the District’s remaining issue. See
TEX. R. APP. P. 47.1.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10776738. Public record. Not legal advice.