Clear Lake City Water Authority v. MCR Corporation

Opinion issued March 11, 2010

In The

Court of Appeals

For The

First District of Texas

____________

NO. 01-08-00955-CV

____________

CLEAR LAKE CITY WATER AUTHORITY, Appellant

V.

MCR CORPORATION, Appellee

On Appeal from the 333rd Judicial District Court of

Harris County, Texas

Trial Court Cause No. 2007-10488

MEMORANDUM OPINION

This case arises from a contract dispute between a water authority and a

developer. When the developer brought suit asserting breach of contract, the water

authority asserted governmental immunity from suit. By interlocutory appeal, the

water authority now challenges the trial court's order denying its plea to the

jurisdiction. Concluding that the Texas Legislature waived the water authority's

immunity from suit under section 271.152 of the Texas Local Government Code, we

affirm the trial court's order.

Factual and Procedural Background

Appellant Clear Lake City Water Authority (the "Authority") operates as a

conservation and reclamation district under article 16, section 59 of the Texas

Constitution and chapters 49 and 51 of the Texas Water Code. (1) Appellee MCR

Corporation ("MCR") is a developer that owned land within the boundaries of the

Authority.

In October 1991, the Authority and MCR executed a document entitled "Sales

Agreement and Lease of Facilities" ("the Agreement"), whereby MCR agreed to

construct water distribution lines, sewer lines, and drainage facilities to service a

nine-acre residential subdivision proposed to be built on land owned by MCR, and

to construct certain street improvements as well; and the Authority agreed to purchase

the completed "Facilities." (2) Pending its purchase of the Facilities, the Authority was

entitled to lease and operate the Facilities without charge by MCR. During this

period, the Authority levied user fees and ad valorem taxes on the residential lots

within the subdivision pursuant to the terms of the Agreement.

The Agreement gave the Authority the right to purchase the Facilities with

either bond proceeds or with annual user fees and property taxes. Although the

Authority had the right to use general revenues to purchase the Facilities, it was not

obligated to do so and could rely solely on bond proceeds. The Authority's

obligation to pay with bond proceeds was conditioned on voter approval of bonds at

a bond election. The Authority did not promise when it would hold a bond election,

or that any bond measure would be approved by the voters.

The Authority conducted bond elections in May and October 1998, and in

November 2006. In each of those elections, a measure was proposed that would have

authorized the issuance of bonds sufficient to permit the Authority to purchase the

Facilities. Each time, the measures failed.

In September 2004, the Authority held another bond election seeking voter

approval of bond funding for other Authority projects, but did not submit a

proposition to approve bonds to finance the purchase of the Facilities. This time, the

measure regarding funding for the other Authority projects passed.

MCR sued the Authority, alleging that the Authority's "refusal to include in the

September 11, 2004 bond election any provision for authorization of bonds to

purchase the Facilities constitute[d] repudiation of the Agreement" because the

Authority had an implied obligation to seek voter approval for the bonds to purchase

the Facilities. Moreover, MCR asserted that under the Agreement the Authority was

obligated to purchase the Facilities out of other sources of revenue available to the

Authority, even if the voters never approved bonds to fund the purchase of the

Facilities.

The Authority filed a plea to the jurisdiction and motion for summary judgment

contending governmental immunity from suit barred MCR's action and MCR

responded to the plea. On November 13, 2008, the district court denied the

Authority's plea and its motion for summary judgment and this appeal followed. The Authority's Plea to the Jurisdiction

In its sole issue, the Authority contends that the district court erred in denying

the Authority's plea to the jurisdiction and that, as a matter of law, governmental

immunity bars MCR's lawsuit.

Applicable Law and Standard of Review

A. Immunity

When a political subdivision of the State is immune from suit under the

doctrine of governmental immunity, a court lacks subject-matter jurisdiction over the

suit. (3) Tex. Dep't of Transp. v. Jones , 8 S.W.3d 636, 638 (Tex. 1999). Governmental

immunity has two components: immunity from liability and immunity from suit.

Tooke v. City of Mexia , 197 S.W.3d 325, 332 (Tex. 2006). Immunity from suit bars

suit against the entity altogether. Id . When a governmental entity enters into a

contract, that entity waives immunity from liability and voluntarily binds itself, just

as any other party would, to the terms of the contract, but that entity does not thereby

waive immunity from suit. Id . For there to be a waiver of immunity from suit in the

contract-claim context, the Legislature must have waived immunity from suit as to

the claim in question by clear and unambiguous language. See Tex. Gov't Code

Ann. § 311.034 (Vernon Supp. 2007) (providing that a statute shall not be construed

as a waiver of sovereign immunity unless the waiver is effected by clear and

unambiguous language); Tooke , 197 S.W.3d at 332-33 (requiring clear and

unambiguous language to waive governmental immunity).

Courts have little difficulty in recognizing the Legislature's intent to waive

immunity from suit when a statute contains language expressly waiving such

immunity. See Wichita Falls State Hosp. v. Taylor , 106 S.W.3d 692, 697 (Tex.

2003). Absent such express waiver language, Texas courts have rarely concluded that

the Legislature has waived immunity from suit. Id . In Wichita Falls Hospital , the

Texas Supreme Court noted that, in the absence of express waiver language, "we have

employed several aids to help guide our analysis in determining whether the

Legislature has clearly and unambiguously waived sovereign immunity." Id . The

court described these aids as follows:

First, a statute that waives the State's immunity must do so

beyond doubt, even though we do not insist that the statute

be a model of "perfect clarity." For example, we have

found waiver when the provision in question would be

meaningless unless immunity were waived.

Second, when construing a statute that purportedly waives

sovereign immunity, we generally resolve ambiguities by

retaining immunity. In this respect, our methodology

resembles that of the United States Supreme Court when it

considers a purported waiver of the federal government's

sovereign immunity. If the text and history of the statute

leave room to doubt whether the Legislature intended to

waive sovereign immunity, we are less likely to find a

waiver.

Third, if the Legislature requires that the State be joined in

a lawsuit for which immunity would otherwise attach, the

Legislature has intentionally waived the State's sovereign

immunity.

Finally, we are cognizant that, when waiving immunity by

explicit language, the Legislature often enacts

simultaneous measures to insulate public resources from

the reach of judgment creditors. Therefore, when deciding

whether the Legislature intended to waive sovereign

immunity and permit monetary damages against the State,

one factor to consider is whether the statute also provides

an objective limitation on the State's potential liability.

Id. at 697-98 (citations omitted).

Texas courts are not required to use these aids in determining whether the

Legislature clearly and unambiguously waived governmental immunity. See, e.g.,

Tooke , 197 S.W.3d at 330-45 (wherein Texas Supreme Court did not use these aids

in determining waiver of sovereign immunity.); see also Clear Lake City Water Auth.

v. Friendswood Dev. Co. , 256 S.W.3d 735, 741 (Tex. App.--Houston [14th Dist.

2008, pet. dism'd) (noting that Texas Supreme Court has not held that list of aids in

determining waiver of sovereign immunity is exclusive.)

B. Standard of Review

In filing a plea to the jurisdiction, a litigant challenges the trial court's subject

matter jurisdiction. Bland Indep. Sch. Dist. v. Blue , 34 S.W.3d 547, 554 (Tex. 2000).

Because subject matter jurisdiction is a question of law, we conduct a de novo review

of the trial court's ruling on the plea. See Mayhew v. Town of Sunnyvale , 964 S.W.2d

922, 928 (Tex. 1998). Upon review, we consider the pleadings and the evidence

pertinent to the jurisdictional inquiry; we do not consider the merits of the case.

County of Cameron v. Brown , 80 S.W.3d 549, 555 (Tex. 2002).

We review the trial court's interpretation of applicable statutes de novo. See

Johnson v. City of Forth Worth , 774 S.W.2d 653, 655-56 (Tex. 1989). In construing

a statute, our objective is to determine and give effect to the Legislature's intent. See

Nat'l Liab. & Fire Ins. Co. v. Allen , 15 S.W.3d 525, 527 (Tex. 2000). If possible, we

must ascertain that intent from language the Legislature used in the statute and not

look to extraneous matters for an intent the statute does not state. Id . If the meaning

of the statutory language is unambiguous, we adopt the interpretation supported by

the plain meaning of the provision's words. St. Luke's Episcopal Hosp. v. Agbor , 952

S.W.2d 503, 505 (Tex. 1997). We must not engage in forced or strained construction;

instead, we must yield to the plain sense of the words the Legislature chose. See id .

Analysis

In 1963, the Texas Legislature created the Authority as a conservation and

reclamation district under article 16, section 59 of the Texas Constitution. See Tex.

Const. Art. XVI, sec. 59; Act of Apr. 18, 1963, 58th Leg., R.S., ch. 101, 1963 Tex.

Gen. Laws 164 , 173. The Authority exercises the rights, powers, privileges,

authority, and functions conferred and imposed by Texas statutes regarding water

control and improvement districts. See id. Such water control and improvement

districts are political subdivisions of the State and generally are entitled to

governmental immunity. See Tarrant Reg'l Water Dist. v. Gragg , 151 S.W.3d 546,

549-50 (Tex. 2004) (concluding that water control and improvement district is

political subdivision of the State generally entitled to governmental immunity); Clear

Lake City Water Auth. v. Clear Lake Utils. Co. , 549 S.W.2d 385, 391 (Tex. 1977)

(concluding that Authority is political subdivision of State). Therefore, under the

doctrine of governmental immunity, the Authority is immune from suit in this case

unless the Legislature has waived the Authority's immunity from suit by clear and

unambiguous language . See Tooke , 197 S.W.3d at 332-33 ; see also Tex. Gov't

Code Ann. § 311.034 . In its pleadings and in its briefing, MCR asserts that the

Legislature waived the Authority's immunity from suit under section 49.066 of the

Texas Water Code, or in the alternative, under section 271.152 of the Texas Local

Government Code. See Tex. Water Code Ann. § 49.066 (Vernon 2000); Tex. Loc.

Gov't Code Ann. § 271.152 (Vernon 2005).

A. Tex. Water Code Ann. § 49.066

Chapter 49 of the Texas Water Code applies to the Authority. See Tex. Water

Code Ann. §§ 49.001 (a)(1), 49.002 (Vernon 2000 & Vernon Supp. 2009); Bexar

Metro. Water Dist. v. Educ. & Econ. Dev. Joint Venture , 220 S.W.3d 25, 29 (Tex.

App.--San Antonio 2006, pet. dism'd). Section 49.066, entitled "Suits," provides:

(a) A district may sue and be sued in the courts of this state in the

name of the district by and through its board. A suit for contract

damages may be brought against a district only on a written contract of

the district approved by the district's board. All courts shall take

judicial notice of the creation of the district and of its boundaries.

(b) Any court in the state rendering judgment for debt against a

district may order the board to levy, assess, and collect taxes or

assessments to pay the judgment.

(c) The president or the general manager of any district shall be

the agent of the district on whom process, notice, or demand required or

permitted by law to be served upon the district may be served.

(d) Except as provided in Subsection (e), no suit may be instituted

in any court of this state contesting:

(1) the validity of the creation and boundaries of a district

created under this code:

(2) any bonds or other obligation created under this code;

or

(3) the validity or the authorization of a contract with the

United States by the district.

(e) The matters listed in Subsection (d) may be judicially inquired

into at any time and determined in any suit brought by the State of Texas

through the attorney general. The action shall be brought on good cause

shown, except where otherwise provided by other provisions of this

code or by the Texas Constitution. It is specifically provided, however,

that no such proceeding shall affect the validity of or security for any

bonds or other obligations theretofore issued by a district if such bonds

or other obligations have been approved by the attorney general as

provided by Section 49.184. (4)

(f) A district or water supply corporation shall not be required to

give bond for appeal, injunction or costs in any suit to which it is a party

and shall not be required to deposit more than the amount of any award

in any eminent domain proceeding.

Tex. Water Code Ann. § 49.066 .

Following Tooke , all of the courts of appeals addressing the issue of waiver

under section 49.066 have concluded that the statute does not waive the government's

immunity from suit. See Valley Mun. Util. Dist. No. 2 v. Rancho Viejo, Inc ., No. 13-07-545-CV, 2008 WL 384320 , at *2-4 (Tex. App.--Corpus Christi Feb. 14, 2008,

no pet.) (mem. op.); Boyer, Inc. v. Trinity River Auth. of Tex ., 279 S.W.3d 354, 359

(Tex. App.--Fort Worth 2008, pet. denied); Bexar Metro. Water Dist . v. Education

and Economic Dev. Joint Venture , 220 S.W.3d 25, 29-32 (Tex. App.--San Antonio

2006, pet. dism'd). The Fourteenth Court of Appeals recently reached an identical

conclusion in a related case. Clear Lake City Water Auth. v. Friendswood Dev. Co. ,

256 S.W.3d 735, 741 (Tex. App.--Houston [14th Dist. 2008, pet. dism'd) (" Clear

Lake I "). In holding that that statute did not waive the Authority's immunity from

suit, the court examined the four aids from Wichita Falls State Hospital. See Clear

Lake I at 744-45 (citing Wichita Falls State Hosp ., 106 S.W.3d at 697-98 ).

As to the first aid, the court found that the Legislature had not waived the

Authority's immunity from suit beyond doubt, and section 49.066 would not be

meaningless unless immunity from suit is waived. In reaching its conclusion, the

court examined the legislative history of the statute and noted that the Legislature had

opportunity to amend the statute in order to expressly waive immunity as to claims

based on certain types of written contracts, but failed to do so. Id . at 744.

As to the second aid, the court found that the text and history of section 49.066

"leave room to doubt whether the Legislature intended to waive the Authority's

governmental immunity." Id. As to the third aid, the court concluded, based on a

plain reading of the statute, that the Legislature does not require in section 49.066 that

the State or the Authority be joined in any lawsuit. As to the fourth aid, also based

on a plain reading of the statute, the court concluded that section 49.066 does not

provide any objective limitation on the State's potential liability. Id .; Compare Tex.

Water Code Ann. § 49.066 (failing to impose any objective limitation on the State's

potential liability), with Tex. Loc. Gov't Code Ann. § 271.153 (Vernon 2005)

(imposing objective limits on recovery under section 271.152 by excluding recovery

for punitive damages, most consequential damages, and damages for unabsorbed

home office overhead).

Based on its analysis, the court concluded that none of the four Wichita Falls

State Hospital aids weighed in favor of the existence of a clear and unambiguous

waiver of immunity from suit in section 49.066 and that the Legislature did not waive

the Authority's immunity from suit by clear and unambiguous language. Id . at 745.

Based on this analysis, our reading of the statute, and the legislative history, we are

persuaded to adopt the reasoning of our sister courts. See id; see also Rancho Viejo ,

Inc ., 2008 WL 384320 , at *2-4; Boyer, Inc ., 279 S.W.3d at 359 , 2008 WL 163560,

at *3 ; Bexar Metro Water Dist ., 220 S.W.3d at 29-32 . Therefore, we hold that

section 49.066 of the Water Code does not waive the Authority's immunity from suit.

B. Tex. Loc. Govt. Code § 271.152

MCR also contends that the Legislature waived the Authority's immunity from

suit in section 271.152 of the Texas Local Government Code. See Tex. Loc. Gov't

Code § 271.152. In 2005, the Legislature enacted subchapter I of chapter 271 of the

Local Government Code, comprising sections 271.151-.160. (5)

Unlike Texas Water Code section 49.066, section 271.152 of the Local

Government Code contains an express waiver of immunity from suit as to certain

breach-of-contract claims:

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.

Tex. Loc. Gov't Code § 271.152.

For the entity to waive immunity from suit as to contract claims under section

271.152, the following statutory criteria must be satisfied:

(1) the entity must be "[a] local governmental entity that is

authorized by statute or the constitution to enter into a contract."

(2) The entity must enter into "a contract subject to this

subchapter."

(3) The claim must be for breach of the contract and be asserted

in a civil suit in "county or state court" or in an "authorized arbitration

proceeding" in accordance with any "mandatory procedures established

in the contract . . . for the arbitration proceedings."

See Tex. Loc. Gov't Code §§ 271.151, 271.152. In this case, the parties do

not dispute that the first and third elements are satisfied. As to the second element,

the Authority does not dispute that it entered into the Agreement; however, the

Authority argues that the Agreement is not "a contract subject to this subchapter,"

which is defined as "a written contract stating 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." Id . § 271.151(2). The Agreement is a

written contract, and the Authority has not asserted that the Agreement was not

properly executed on the Authority's behalf. However, the Authority asserts that

because 271.152's waiver applies only to contracts "stating" the agreement's essential

terms, implied agreements are excluded. Therefore, the issue at hand is whether the

Agreement "stat[es] the essential terms of the agreement for providing goods or

services to the [Authority] and whether MCR is suing on an implied contract rather

than a written contract, which therefore does not meet the requirements for waiver of

immunity." Our task is to determine if the Agreement contains the essential terms for

providing goods or services to the Authority as contemplated by section 271.151(2).

The Agreement contains the following provisions.

(1) The Authority is authorized to provide, among other things,

water supply, waste disposal, and drainage facilities to the

land within its boundaries;

(2) MCR is developing land within the Authority and desires

that water supply, waste disposal, and drainage facilities be

provided to such land prior to the time at which the

Authority can obtain voter approval and pay for the

construction or acquisition of such facilities with the

proceeds of its bonds;

(3) MCR and the Authority desire to provision for the design,

engineering, construction, acquisition, operation,

maintenance, lease, and sale of all water distribution lines,

sanitary sewers, and drainage facilities required to serve

[the subdivision], within the Authority;

(4) MCR shall cause the Facilities to be constructed pursuant

to contracts in accordance with the rules of the Texas

Water Commission. MCR shall provide for the inspection

by the Authority's engineers of work performed under the

contracts. Any and all contracts or change orders to the

contracts shall be subject to approval by the Board of

Directors of the Authority (the "Board"), which approval

shall not be unreasonably withheld. The Authority's

engineers shall have the right to halt construction work

until the contractor complies with the plans and

specifications;

(5) Subject to the other terms and provisions hereof, MCR

agrees to sell land the Authority agrees to purchase all

completed portions of the Facilities . . . in consideration of

the purchase price[.] It is expressly acknowledged and

agreed by the parties hereto, that the Authority has no

existing voter authorization to issue any bonds to pay for

the cost of the Facilities, and does not anticipate that funds

will be available for such costs without a voter approved

bond sale for such purchase. The Authority cannot predict

when, if ever, such an election and bond sale will occur, or

when, if ever, the Authority will have other funds available

and allocated for the purchase of the Facilities. The

Authority shall have the right to purchase the Facilities

with funds available from a source other than a bond sale

for such purpose, but shall have no obligation to do so;

(6) MCR shall award and diligently prosecute a contract or

contracts for, and shall otherwise cause to be completed by

the time described in this section, and shall pay for all

expenses in connection with, the grading and paving of all

streets, cul-de-sacs, alleys, boulevards, avenues, ways, and

roads and the construction of all bridges (collectively, the

"Street Improvements") within the Subdivision[.];

(7) MCR shall lease . . . all unacquired, completed, and

operable portions of the Facilities to the Authority . . .

without charge until such time as the Authority acquires

such portions; provided that such lease shall terminate

upon the acquisition by the Authority of all the Facilities.

In consideration therefor, the Authority shall alone operate

and maintain the leased Facilities or cause the same to be

operated and maintained. During the term of such lease, no

alterations, improvements, or additions to the Facilities

shall be made by either party hereto without the consent of

the other party[.]

Again, in Clear Lake I , the Fourteenth Court of Appeals examined the

applicability of Tex. Gov't Code § 271.151(2) to a nearly identical development

agreement. 256 S.W.3d at 741 . In determining whether the Authority was immune

from suit under the statue, the court analyzed Ben Bolt , the only case from the Texas

Supreme Court applying the language of section 271.152(2). See Ben Bolt-Palito

Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions Property/Casualty

Joint Self-Ins. Fund , 212 S.W.3d 320, 326-27 (Tex. 2006). There, the high court

took an expansive view of section 271.152 in determining that in it the Legislature

provided a clear and unambiguous waiver of the local governmental entity's

immunity from suit as to the contract in question. See Ben Bolt , 212 S.W.3d at

326-27 . In that case, a school district filed a declaratory-judgment action against a

self-insurance fund composed of ninety-two local governmental entities. See id. at

322 . The school district sought a declaration that a loss it had sustained was a

"covered occurrence" under its insurance policy with the fund. See id. at 323 . The

fund asserted governmental immunity. See id.

After determining that the fund enjoyed governmental immunity in its own

right, the Texas Supreme Court addressed whether, in section 271.152, the

Legislature had waived the fund's immunity from suit as to the declaratory-judgment

action in question. See id. at 327 . The fund asserted that the agreement at issue in

the case-the insurance policy-did not involve the provision of goods or services to

the fund because the school district was simply paying the fund for insurance

coverage. See id. at 324-26 . Nonetheless, the Ben Bolt court rejected this argument

based on the fund's admission that its members, including the school district in

question, elect a governing board, a subcommittee of which resolves claims disputes.

See id. The Ben Bolt court concluded that, by participating in the election of the

fund's governing board, the school district provided services to the fund, and the high

court found that this provision of services satisfied the statutory requirement of "a

written contract stating the essential terms of the agreement for providing goods or

services to the local governmental entity." See id. The Ben Bolt court reached this

conclusion without requiring that this provision of services by the members of the

fund be stated in the agreement (the insurance policy). Even though the essence of

the agreement (insurance policy) appeared to be an insurance transaction in which the

only thing provided to the fund was money, the Ben Bolt court concluded that the

agreement fell within the scope of the statutory language because the school district

was a member of the fund and the fund's members elected the fund's governing

board.

The Ben Bolt court acknowledged that, under section 271.152, the Legislature

has not waived immunity as to all contracts entered into by local governmental

entities; rather, it has waived immunity as to written contracts "stating the essential

terms of the agreement for providing goods or services to the local governmental

entity that [are] properly executed on behalf of the local governmental entity." Tex.

Loc. Gov't Code § 271.151(2); Ben Bolt , 212 S.W.3d at 326-27 . Nonetheless, the

Ben Bolt court broadly construed the meaning of this statutory language. See Ben

Bolt , 212 S.W.3d at 326-27 . Like our sister court, we apply the reasoning of Ben Bolt

to this appeal.

1. The sale of the Facilities is not a provision of goods.

The Authority submits that the Agreement does not involve a sale of "goods"

to the Authority since the facilities have been installed and affixed to the land, and

are therefore no longer moveable. See Tex. Bus. & Com. Code Ann. § 2.105 (a)

(Vernon 1994) (defining sale-of-goods contracts as involving the sale of "all things

. . . moveable . . . at the time of identification to the contract"). As a result, the

potential sale of the Facilities to the Authority does not involve the provision of

goods.

The terms of the Agreement, however, are not limited to the sale of the

Facilities. The Agreement also provides that MCR shall hire contractors to construct

the Facilities and to build the streets, roads, and bridges for the Subdivision. As the

Fourteenth Court of Appeals noted in Clear Lake I, "[t]his action appears to be

directed towards and to benefit the Subdivision and its residents, rather than the

Authority. Likewise, based on the language of the Agreement, these services appear

to be provided to the Subdivision and its residents rather than to the Authority."

Clear Lake I , 256 S.W.3d at 750-51 .

In Clear Lake I, the Fourteenth Court of Appeals found "if the school district's

participation in the election of the fund's governing board was sufficient to constitute

the provision of services in the insurance contract in Ben Bolt , then we conclude that

[the developer's] agreement to hire third parties to construct the Facilities and to build

the streets, roads, and bridges is likewise sufficient to constitute the provision of

services to the Authority. Applying the Ben Bolt court's liberal construction of the

applicable statute, we conclude that the Agreement is a written contract stating the

essential terms of the agreement for providing services to the Authority for the

construction of the Facilities as well as for the construction of streets, roads, and

bridges in the Subdivision." Id. at 750-51 .

We are persuaded by the Fourteenth Court of Appeals' reasoning and by its

application of Ben Bolt , and follow it here. Thus, the fact that the Agreement

authorized MCR to contract with third parties for the construction of the Facilities

along with streets, roads, and bridges, is sufficient to constitute the provision of

services to the Authority within the meaning of 271.152. (6)

2. The Agreement is not an "implied contract."

The Authority cites Somerset Indep. Sch. Dist. v. Casias , 2008 WL 1805533 ,

*3 (Tex. App.--San Antonio April 23, 2008, no pet.), in support of its argument that

because an implied contract is not a written contract, immunity is not waiver under

section 271.152 for such a claim. In Somerset , the court held that the written

agreement sued upon was a contract for sale of real estate and therefore not included

in the statute's waiver of immunity. Id . The court also held that the plaintiff could

not bring a separate claim for breach of an implied contract because an implied

contract is not a written contract as required under section 271.152. Id .

Here, by contrast, MCR is suing on a written contract, not a separate "implied

contract." As we have held, the agreement is a written contract for the construction

of the Facilities as well as for the construction of streets, roads, and bridges in the

subdivision. The existence of any implied term within the agreement has no bearing

on whether the agreement constitutes a written contract.

3. The Agreement does not violate the Separation of Powers or

Reserved Powers Doctrines

The Authority also argues that if the Agreement is read to include implied

terms requiring the Authority to include a provision to purchase the Facilities in any

bond election this Court would run afoul of the separation of powers doctrine by

abrogating the Authority's legislative function of issuing bonds. In support of its

argument, the Authority cites City of Corpus Christi v. Bayfront Assocs., Ltd ., 814

S.W.2d 98 (Tex. 1991).

Bayfront Associates is inapplicable to the instant case. The agreement at issue

there was invalid to the extent that it purported to preclude a governmental entity

from holding a bond election and issuing bonds. Id. at 107 . The Agreement here

does not preclude holding any bond election bond issuance. Nor does it require any

bond election or bond issuance.

Moreover, the Fourteenth Court of Appeals has rejected a similar argument that

the judiciary has no authority to interfere with a governmental entity's "legislative

discretion" to allocate public bond funds for the benefit of the public. "[O]nce the

Authority exercises its discretion to enter into a valid and enforceable contract, it no

longer has unfettered 'legislative direction' to decide what its obligations are and how

it will perform those obligations. Whether the contracts here are enforceable and

whether the Authority breached them is subject to review by the courts." Clear Lake

City Water Auth. v. Kirby Lake Dev. Ltd. , 123 S.W.3d 735, 749 (Tex. App.--Houston

[14th Dist.] 2003, pet dism'd).

4. There is an amount "due and owed" under the Agreement

The Local Government Code waives sovereign immunity for breach of contract

suits on contracts subject to its terms, but limits the total amount of money to be

awarded to "the balance due and owed by the local government entity under the

contract . . . ." Tex. Loc. Gov't Code § 271.153(a)(1). The Authority argues that

immunity has not been waived in this instance because there is no amount "due and

owed" under the Agreement. According to the Authority, nothing is due and owed

to MCR until voters have approved bonds to pay for the Facilities, and the Authority

has no obligation to ensure that this condition precedent is fulfilled.

In City of Houston v. Southern Electrical Services, Inc. , 273 S.W.3d 739 (Tex.

App.--Houston [1st Dist.] 2008, pet. denied), this Court held that a plaintiff satisfies

section 271.153(a)(1) by alleging facts to support its claim that there is a balance due

and owing under the contract. Id . at 744. The City of Houston argued that there was

no balance due under the contract at issue, but the Court rejected this argument as

going to the merits of the case, not whether the court had jurisdiction:

The City essentially asks that we find the claim for damages lacking in

merit because nothing in the contract imposes an obligation on the City

to adjust the contract price, and thus the City owes nothing in damages.

But an "adjudication" of such a claim is exactly what the Legislature

allows in Section 271.152. Section 271.153 does not retract the

privilege granted in Section 271.152 to adjudicate the claim for breach,

if a plaintiff alleges facts to support such a claim and seeks recovery

only of damages to the extent allowed. To observe that the claim will

fail does not deprive the trial court of jurisdiction to hear it - or in the

Legislature's own words, "adjudicate" it. SES's pleadings allege

sufficient facts to qualify this case as a waiver of sovereign immunity as

granted by statute, by alleging facts to support the claim that the City

has not paid "the balance due and owed under the contract"

Id . at 744. (citations omitted.)

Similarly, MCR's pleadings allege sufficient facts to qualify this case as a

waiver of sovereign immunity under section 271.152. In its original petition, MCR

alleges that the Authority breached its obligation under the Agreement to purchase

the Facilities by failing to use due diligence to obtain voter approval. The central

purpose of the Agreement was that MCR would construct the Facilities and the

Authority would ultimately purchase them. Section 2.01, in which the language about

inclusion in any bond election appears, is entitled "Purchase and Assignment," and

provides that "the Developer agrees to sell and the Authority agrees to purchase all

completed portions of the Facilities . . . ." Other provisions of the Agreement set the

purchase price, address issuance of bonds to purchase the Facilities, set out the

conditions of purchase and assignment, and allow for a lease of the Facilities "without

charge until such time as the Authority acquires such portions; provided that such

lease shall terminate upon the acquisition by the Authority of all the Facilities."

Therefore, MCR has alleged facts to support the claim that the Authority has not paid

"the balance due and owed under the Agreement." Id. at 744 .

CONCLUSION

In section 49.066 of the Texas Water Code, the Legislature did not waive the

Authority's immunity from suit by clear and unambiguous language. However,

applying the Texas Supreme Court's decision in Ben Bolt and the opinion of the

Fourteenth Court of Appeals in Clear Lake I , we conclude that the Agreement falls

within the scope of the type of contracts to which the Legislature waived immunity

in section 271.152 of the Texas Local Government Code. See Tex. Loc. Gov't

Code. §§ 271.151, 271.152; Ben Bolt , 212 S.W.3d at 326-27 . Accordingly, we

overrule the Authority's issue and affirm the trial court's order denying the

Authority's plea to the jurisdiction.

Sherry Radack

Chief Justice

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

1. See Tex. Const. art. XVI, § 59; Act of Apr. 18, 1963, 58th Leg., R.S., ch. 101,

1963 Tex. Gen. Laws 164 , 173; Tex. Water Code Ann. Chs. 49, 51 (Vernon

2000 & Supp. 2007).

2. We refer to the water distribution lines, sanitary sewer lines, and drainage

facilities collectively as the "Facilities."

3. Often, courts use the terms "sovereign immunity" and "governmental

immunity" interchangeably; nevertheless, they are two distinct concepts.

Wichita Falls State Hosp. v. Taylor , 106 S.W.3d 692 , 694 n. 3 (Tex. 2003).

"Sovereign immunity" refers to a State's immunity from suit and liability. Id .

Its protection extends not only to the State, but also to the varying divisions of

state government, including agencies, boards, hospitals, and universities.

"Governmental immunity" protects political subdivisions of the State,

including counties, cities, and school districts. Id .

4. Section 49.184 of the Water Code refers to approval of bonds by the Attorney

General and the registration of bonds. See Tex. Water Code Ann. § 49.184

(Vernon Supp. 2009).

5. This section applies to claims that arise before its effective date of September

1, 2005:

. . . only if sovereign immunity has not been waived with respect to the

claim before the effective date of this Act. A claim that arises under a

contract executed before the effective date of this Act and with respect

to which sovereign immunity has been waived is governed by the law

in effect on the date the contract was executed, and the former law is

continued in effect for that purpose.

Act of May 23, 2005, 79th Leg. R.S., ch. 604, sec. 2, 2005 Tex. Gen. Laws 1548 ,

1549.

6.

Moreover, the legislative history of section 271.152 supports its expansive reading

and this Court's holding. The Bill Analysis for section 271.152 states that the bill in

question "clarifies and re-expresses the legislature's intent that all local governmental entities

that are given the statutory authority to enter into contracts shall not be immune from suits

arising from those contracts, subject to the limitations set forth in C.S.H.B. 2039." House

Comm. On Civil Practices, Bill Analysis, Tex. H.B. 2039, 79 th Leg., R.S. 2005; Senate

Comm. On State Affairs, Bill Analysis, Tex. H.B. 2039, 79 th Leg. R.S. 2005. The limitations

referred to are not limitations making a distinction between "goods" and "real property."

Rather, they are (a) limitations on actual damages set forth in Section 271.153(a) (allowing

recovery of only the balance due under the contract, plus change orders, plus interest) and

(b) the concomitant exclusion of consequential and exemplary damages, and damages for

unabsorbed office overhead, in section 271.153(b). See Tex. Loc. Gov't Code §§ 271.153.

Additionally, the House's Bill Analysis expressly states that the legislation was

intended to overrule the effect of such recent cases as City of Mesquite v. PKG Contracting,

Inc ., 148 S.W.3d 209 (Tex. App.--Dallas 2004) (judgment reversed by PKG Contracting,

Inc. v. City of Mesquite , 197 S.W.3d 388 (Tex. 2006) (contract for construction of a storm

drainage system)); Carrollton v. McMahon Contracting, L.P ., 134 S.W.3d 925 (Tex.

App.--Dallas 2004) (judgment reversed by McMahon Contracting, L.P. v. City of

Carrollton , 197 S.W.3d 387 (Tex. 2006)((contract for street repairs)); Satterfield & Pontikes

Const., Inc. v. Irving ISD , 123 S.W.3d 63 (Tex. App.--Dallas 2003) (judgment reversed by

Satterfield & Pontikes Const., Inc. v. Irving ISD , 197 S.W.3d 390 (Tex. 2006)(contract for

new school building)). All of these cases involved real estate.