Clear Lake City Water Authority v. Friendswood Development Company, Ltd.

Motion for Rehearing Granted; Affirmed; Opinion of February 12, 2008

Withdrawn and Opinion on Rehearing filed May 22, 2008

Motion

for Rehearing Granted; Affirmed; Opinion of February 12, 2008 Withdrawn and

Opinion on Rehearing filed May 22, 2008.

In The

Fourteenth Court of

Appeals

____________

NO. 14-07-00096-CV

____________

CLEAR LAKE CITY WATER AUTHORITY , Appellant

V.

FRIENDSWOOD DEVELOPMENT COMPANY,

LTD. ,

Appellee

On Appeal from the 281st

District Court

Harris County, Texas

Trial Court Cause No. 06-63998

O P I N I O N O N R E H E A R I N G

Appellee Friendswood Development Company, Ltd. = s motion for

rehearing is granted. The court = s opinion issued

on February 12, 2008, is withdrawn, and this Opinion on Rehearing is issued in

its place.

This

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

company. When the development company 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.

I. Factual and Procedural Background

Appellant

Clear Lake Water Authority (the A Authority @ ) is a conservation and reclamation

district

under article 16, section 59 of the Texas Constitution, and it operates as a

water control and improvement district under Texas statutes. [1]

Appellee Friendswood Development Company, Ltd. ( A Friendswood

Development @ ) is a developer owning land within the boundaries of

the Authority.

In March 1998, the Authority and Friendswood Development

executed a document entitled A Sales Agreement and Lease of Facilities @ ( A the Agreement @ ). Under the

Agreement, Friendswood Development was to arrange for the construction of water

distribution lines, sanitary sewer lines, and drainage facilities to provide

service to houses Friendswood Development proposed to build on its land; and

the Authority agreed to purchase or lease the completed A Facilities. @ [2]

The Agreement gave the Authority the right to purchase the

Facilities with either bond proceeds or 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, but it did promise A that it shall

include in any bond election it does hold subsequent to the effective date of

this Agreement bond authorization in an amount sufficient to pay the purchase

price of the Facilities. @ [3]

The Authority conducted bond elections in May 1998 and

October 1998. 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. Both times, the measures failed.

In July 2004, the Authority = s board of

directors voted to conduct another bond- authorization election, scheduled for

September 11, 2004. In the election, the Authority sought voter authorization

of $29.1 million in bonds, but that amount did not include funds required to

pay for the Facilities. In the September 2004 election, the voters approved by

a ten-to-one margin authorization of the $29.1 million in bonds. According to

Friendswood, the Authority currently uses the Facilities free of charge.

Friendswood Development sued the Authority, asserting that

under the Agreement the Authority was obligated to submit the same proposition

to the voters in every later bond election it held, unless and until the voters

approved bonds to fund the purchase of the Facilities. Friendswood Development

claimed the Authority breached the contract by refusing to submit such a

proposition to the voters in the September 2004 election. Friendswood

Development sought more than $1 million in damages purportedly resulting from

the Authority = s alleged breach of contract.

The Authority filed a plea to the jurisdiction or,

alternatively, motion for summary judgment, contending governmental immunity

from suit bars this action. Friendswood Development responded to the plea and

filed its own motion for summary judgment. On February 5, 2007, the trial

court denied the Authority = s plea to the jurisdiction, and the

Authority filed this appeal the same day. The following day, Friendswood

Development filed an emergency motion requesting the district court to vacate

its February 5 denial to the plea to the jurisdiction. On February 8, 2007, the

district court granted Friendswood Development = s emergency motion

and vacated the February 5 order. On February 12, the district court signed an

order in which it sustained certain evidentiary objections by Friendswood Development

and an order in which the court again denied the Authority = s plea to the

jurisdiction. The district court also signed an order in which it granted

final summary judgment awarding Friendswood Development $1,120,235.99 in

damages. The same day, Friendswood Development moved this court to dismiss the

Authority = s appeal, asserting that, by vacating the February 5

order, the district court had rendered the appeal moot. This court denied

Friendswood Development = s motion. See Tex. R. App. P. 27.3.

II. Issue Presented for Review

The Authority presents a single issue for review: Did the

district court err in denying the Authority = s plea to the

jurisdiction? The Authority contends, as a matter of law, that governmental

immunity bars Friendswood Development = s lawsuit.

III. 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. [4]

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 B 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, it has been rare for Texas courts to conclude that the

Legislature waived immunity from suit. Id . In Wichita Falls State

Hospital , the Texas Supreme Court noted that, in the absence of express

waiver language, A we have employed several aids to help

guide our analysis in determining whether the Legislature has clearly and

unambiguously waived sovereign immunity. @ Id . The

high 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 A 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 B 98 (citations omitted). Even in Wichita Falls

State Hospital , the

Texas Supreme Court did not state that courts are required to use these aids in

determining whether the Legislature clearly and unambiguously has waived

governmental immunity. See id . at 697 B 702. In addition, in Tooke ,

the Texas Supreme Court noted that the court of appeals had used these four

aids in its analysis; however, the Tooke court did not use these aids in

its determination as to whether the statute in question clearly and

unambiguously waived governmental immunity. See Tooke , 197 S.W.3d at

330 B 45. We have not

found any instances of the Texas Supreme Court using these aids after its

decision in Tooke . The Tooke court did not approve or disapprove

of these aids. It

appears that courts may use them but are not required to do so.

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 Fort Worth , 774 S.W.2d 653 , 655 B 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 the 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 .

IV. 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, ' 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 B 50 (Tex. 2004) (concluding that water

control and improvement district is a 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 the

Authority is a political subdivision of the 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 B 33; see also Tex. Gov = t Code Ann . ' 311.034. In its

pleadings and in its briefing, Friendswood Development 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. Did the Legislature waive

the Authority = s immunity from suit under Texas

Water Code section 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.

2006); Bexar Metro. Water Dist. v. Educ. & Econ. Dev. Joint Venture ,

220 S.W.3d 25, 29 (Tex. App. C San Antonio 2006, pet. filed). Section

49.066, entitled A 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. [5]

(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. In 1997,

this court concluded that the Legislature had waived the immunity from suit of

all districts covered by section 49.066 based on the A sue and be sued @ sentence in

section 49.066(a). See Loyd v. ECO Res., Inc. , 956 S.W.2d 110, 122

(Tex. App. C Houston [14th Dist.] 1997, no pet.) (relying on Missouri

Pacific R.R. Co. v. Brownsville Navigation Dist ., 453 S.W.2d 812 (Tex.

1970)). However, this part of Loyd is no longer good law following the

Texas Supreme Court = s overruling of Missouri Pacific in

Tooke . [6]

See Tooke , 197 S.W.3d at 342 B 43. We have found

only three post- Tooke cases addressing whether the Legislature waived

immunity from suit in section 49.066, and in all of these cases the courts

conclude there is no waiver. [7]

First, we note that neither immunity from suit nor

governmental immunity is expressly waived in section 49.066; these terms are

not even mentioned in this section. See Tex. Water Code Ann. ' 49.066.

Therefore, this court must determine if this is one of the rare instances in

which the Legislature waived immunity from suit by clear and unambiguous

language but without express reference to immunity. See Wichita Falls State

Hosp. , 106 S.W.3d at 697 .

The language in the first and third sentences of section

49.066(a) was contained in the statute at issue in Missouri Pacific .

See Tooke , 197 S.W.3d at 338 ; Missouri Pacific R.R. Co. , 453 S.W.2d

at 813 . We are bound by the Tooke court = s conclusion that

such language alone is not sufficient to waive immunity from suit. See

Tooke , 197 S.W.3d at 342 B 43.

In 1999, the Legislature amended section 49.066(a) to add

what is now the second sentence of section 49.066(a). See Act of May

30, 1999, 76th Leg., R.S., ch. 1354, ' 8, 1999 Tex. Gen.

Laws 4589 , 4591. In this sentence, the Legislature states that 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; however,

it does not state that all parties to such contracts may sue the district for

breach of these contracts or that immunity from suit as to all such claims is

waived. The Tooke court held that no waiver of immunity from suit is

contained in language stating that the governmental entity A may contract and

be contracted with, implead and be impleaded in all courts and places and in

all matters whatsoever . . . . @ Tooke ,

197 S.W.3d at 344 (emphasis added). The Tooke court concluded that such

language was not a clear and unambiguous waiver of immunity from suit; rather,

the Tooke court concluded all that was clearly stated was that the

governmental entity can be sued and impleaded in court when suit is permitted,

not that immunity is waived for all suits. Id . Likewise, we conclude

that all the second sentence of 49.066(a) clearly conveys is that, if another

statute (for example section 271.152 [8] )

waives immunity as to a contract suit against a district, then such a suit may

be brought only on the type of contract described in section 49.066(a). Id .;

Bexar Metro. Water Dist ., 220 S.W.3d at 31 . If, in 1999, the

Legislature intended to waive immunity from suit for all water districts as to

claims for breach of written contracts approved by the district = s board, then it

would seem strange that six years later the Legislature would expressly waive

immunity as to claims based on certain types of written contracts. [9]

See Tex. Loc. Gov = t Code Ann. ' 271.152 (Vernon

2005); Bexar Metro. Water Dist ., 220 S.W.3d at 32 .

Similarly, in section 49.066(b), the Legislature describes

relief that may be awarded by any court rendering judgment for debt against a

district. See Tex. Water Code

Ann. ' 49.066(b). In this statute, the Legislature did not

state that any suits against a district on a debt are permitted or that

immunity is waived as to such suits. We conclude that all section 49.066(b)

clearly says is that, if, in another statute, the Legislature waives immunity

from suit against a district on a debt, then any court rendering judgment on

that debt may award the relief stated in section 49.066(b). See Tooke ,

197 S.W.3d at 344 ; Bexar Metro. Water Dist ., 220 S.W.3d at 31 .

In section 49.066(c), the Legislature specifies the people

who are the agents on whom may be served any process, notice, or demand

required or permitted by law to be served on the Authority. See Tex. Water Code Ann. ' 49.066(c). The

Legislature does not state when the Authority = s agents may be

served with any process, notice, or demand, and it does not clearly and

unambiguously waive immunity from suit. See Tooke , 197 S.W.3d at 344 ; Bexar

Metro. Water Dist ., 220 S.W.3d at 31 .

In section 49.066(d) and (e), the Legislature prohibits

parties other than the Attorney General of Texas from instituting certain kinds

of suits and states that the Attorney General may bring suit on behalf of the

State, on good cause shown, to inquire into the matters listed in section

49.066(d). Because the present suit was not brought by the Attorney General

and because it does not prompt inquiry into the matters listed in section

49.066(d), the Legislature does not waive the Authority = s immunity from

suit in this case in this part of section 49.066. See Bexar Metro.

Water Dist ., 220 S.W.3d at 31 .

In section 49.066(f), the Legislature states that the

Authority cannot be required to give bond for appeal, injunction, or costs in

any suit to which it is a party and that the Authority is not required to

deposit more than the amount of any award in any eminent domain proceeding. See

Tex. Water Code Ann. ' 49.066(f). The

instant case is not an eminent domain proceeding. In section 49.066(f), the

Legislature does not state when the Authority may properly be made a party to a

suit, and it does not clearly and unambiguously waive immunity from suit. See

Tooke , 197 S.W.3d at 344 ; Bexar Metro. Water Dist ., 220 S.W.3d at

31 . This language may properly apply to suits in which there is no immunity

from suit, for example unconstitutional takings cases or claims under the Texas

Tort Claims Act, or to cases in which immunity has not been waived and the

Authority is seeking a judicial determination in this regard. See Bexar

Metro. Water Dist ., 220 S.W.3d at 31 .

Though we are not required to do so, we choose to examine

the four aids from Wichita Falls State Hospital. See 106 S.W.3d

at 697 B 98. As to the

first aid, for the reasons stated above, the Legislature has not waived the

Authority = s immunity from suit in this case beyond doubt, and

section 49.066 would not be meaningless unless immunity from suit is waived.

As to the second aid, the text and history of section 49.066 leave room to

doubt whether the Legislature intended to waive the Authority = s governmental

immunity. As to the third aid, 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, section 49.066 does not provide any objective limitation on the

State = s potential

liability. [10]

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). Therefore, none of the Wichita Falls State Hospital aids weighs in favor of the

existence of a clear and unambiguous waiver of immunity from suit in section

49.066.

In sum,

after carefully reviewing section 49.066 under existing precedents, we conclude

that in this statute the Legislature did not waive the Authority = s immunity from suit by clear and

unambiguous language. [11] See

Rancho Viejo, Inc. , 2008 WL 384320 , at *2 B 4; Boyer, Inc. , 2008 WL 163560,

at *3 ; Bexar Metro. Water Dist ., 220 S.W.3d at 29 B 32.

B. Did the Legislature waive

the Authority = s immunity from suit under Local

Government Code section 271.152?

Friendswood

Development 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 B .160. [12] See Act

of May 23, 2005, 79th Leg., R.S., ch. 604, ' 1, 2005 Tex. Gen. Laws 1548

(codified at Tex. Loc. Gov = t Code '' 271.151 B .160).

The Language of Section 271.152

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 the contract, subject to the terms and conditions of this subchapter.

Tex.

Loc. Gov = t Code ' 271.152. For an 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 [a]

local governmental entity that is authorized by statute or the constitution to

enter into a contract. @

(2) The entity must enter into A a contract subject to this subchapter. @

(3) The claim must be for breach of the contract [13]

and be asserted in a civil suit in A county

or state court @ or in an A authorized

arbitration proceeding @ in accordance with any A 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 a contract subject to this

subchapter, @ which is defined as A 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. Therefore, the issue at

hand is whether the Agreement A stat[es] the essential terms of the agreement for providing

goods or services to the [Authority]. @ [14] See id .

The Agreement

In the

underlying suit, Friendswood Development seeks damages resulting from the

Authority = s alleged breach of the Agreement by its failure to include in a bond

election subsequent to the effective date of the Agreement a proposal for bond

authorization in an amount sufficient to pay the purchase price for the

Facilities, which already are installed. If the voters had approved such a

bond-authorization proposal, Friendswood Development alleges, then the

Authority would have an obligation under the Agreement to buy the Facilities,

currently owned by Friendswood Development, with the bond proceeds. The

Agreement contains the following relevant provisions:

$ The Authority is authorized to provide,

among other things, water supply, waste disposal, and drainage facilities to

the land within its boundaries.

$

Friendswood

Development 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 and acquisition of such facilities.

$

Friendswood

Development and the Authority desire to provide 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 in question (hereinafter A Subdivision @ ), such water distribution lines, sanitary sewers, and drainage

facilities are collectively referred to in the Agreement as the A Facilities. @

$

Friendswood

Development will cause the Facilities to be constructed under contracts with

third-party contractors, in accordance with the rules of a state conservation

commission. Friendswood Development shall provide for inspection by the

Authority = s engineers of work performed under

the third-party contracts, and these engineers have the right to halt

construction work until the contractor in question complies with the plans and

specifications. These third-party contracts are subject to approval by the

Authority = s Board of Directors.

$

Subject to

Friendswood Development = s compliance with the Agreement and

reasonable development of the Subdivision, the Authority agrees to serve the

water and wastewater requirements of the Subdivision, subject to certain limitations.

$

Friendswood

Development agrees to sell to the Authority all completed portions of the

Facilities. The Authority also accepts assignment of any unperformed portion

of the Agreement no more than 30 days after the Authority receives bond proceeds

for the Authority to use as payment for the purchase price.

$

Friendswood

Development agrees to lease the Facilities to the Authority without charge

until the Authority purchases the Facilities.

$

Friendswood

Development agrees, at its own expense, to award and diligently prosecute a

contract or contracts for, and to otherwise cause to be constructed, all

streets, roads, and bridges described in the respective plats for the

Subdivision in accordance with the plans and specifications approved by the Authority = s engineers.

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). We find guidance in a

relatively recent Texas Supreme Court decision, Ben Bolt . See Ben

Bolt B Palito Blanco Consol. Indep. Sch. Dist. v. Texas Political

Subdivisions Property/Casualty Joint Self-Insurance Fund , 212 S.W.3d 320 , 326 B 27 (Tex. 2006).

The Texas Supreme Court applied

Section 271.151(2) in Ben Bolt.

In Ben

Bolt , the only case from the Texas Supreme Court applying the language of

section 271.151(2), [15] our 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. [16] See Ben Bolt , 212 S.W.3d at 326 B 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 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 C the insurance policy C 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 B 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 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). [17]

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. [18]

A To [this] extent, at least, the Fund = s members provide services to the

Fund. @ Id . at 327.

The Ben

Bolt court acknowledged that, under section 271.152, the Legislature has

not waived immunity as to all contracts entered into by local government

entities; rather, it has waived immunity only as to written contracts A 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. @ [19] Tex. Loc. Gov = t Code ' 271.151(2); Ben Bolt , 212 S.W.3d at 326 B 27. Nonetheless, the Ben Bolt

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

Bolt , 212 S.W.3d at 326 B 27. We apply the reasoning of Ben Bolt to this

appeal.

The

sale of the Facilities is not a provision of goods .

With Ben

Bolt as our guide, we first note that the Agreement contemplates several

actions by Friendswood. One action on which Friendswood relies is the

potential sale of the Facilities to the Authority. The Facilities have been

installed and affixed to the land so that they are not goods; therefore, the

potential sale to the Authority of fixtures that have become part of the real

property does not involve the provision of goods. See Tex. Bus. & Com. Code Ann . ' 2.105(a) (Vernon 1994) (defining

sale-of-goods contracts as involving the sale of A all things . . . moveable . . . at

the time of identification to the contract @ ); City of San Antonio v. Hartman ,

201 S.W.3d 667 , 672 n.19 (Tex. 2006) (holding that terms not defined in a

statute are given their ordinary meaning); San Antonio Area Found. v. Lang ,

35 S.W.3d 636, 640 (Tex. 2000) (defining real property as A land, and generally whatever is

erected or growing upon or affixed to land @ ); Logan v. Mullis , 686 S.W.2d

605, 607 (Tex. 1985) (concluding that a tank car converted to a drainage

culvert and affixed to land is real property, not personalty); G-W-L, Inc.

v. Robichaux , 643 S.W.2d 392, 394 (Tex. 1982) (concluding that sale of real

property and improvements thereon is not a sale of goods), overruled in part

on other grounds by Melody Home Mfg. Co. v. Barnes , 741 S.W.2d 349, 355

(Tex. 1987); Bexar Metro. Water Dist ., 220 S.W.3d at 32 ; Black = s Law Dictionary 714 (8th ed. 2004) (defining A goods @ as A tangible or movable personal property

other than money; esp., articles of trade or items of merchandise [as in] [ > ]goods and services[ = ] @ ). As a result, the potential sale

of the Facilities to the Authority does not involve the provision of goods.

Under the Ben Bolt

decision, Friendswood

Development provided services to the Authority .

The

Agreement, however, has another dimension beyond the sale of the Facilities C it contemplates hiring third parties

to construct the Facilities and to build the streets, roads, and bridges for

the Subdivision. We acknowledge this action appears to be directed towards and

to benefit the Subdivision and its residents, rather than the Authority. [20]

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. We

also note that Friendswood Development did not perform the construction

services with its employees; instead, it retained the services of independent

contractors to perform this work. [21]

Nonetheless,

the parties plainly state in the Agreement that the Authority is authorized to

provide, among other things, water supply, waste disposal, and drainage

facilities to the land within its boundaries. 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 Friendswood Development = 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. [22] See Tex. Loc. Gov = t Code '' 271.151, 271.152; Ben Bolt ,

212 S.W.3d at 326 B 27. Therefore, the Authority = s immunity from suit for all claims

for breach of the Agreement has been waived under section 271.152.

V. 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 , we

conclude that the Agreement falls within the scope of the type of contracts as

to which the Legislature waived immunity in section 271.152 of the Texas Local

Government Code. [23] See Tex. Loc. Gov = t Code '' 271.151, 271.152; Ben Bolt ,

212 S.W.3d at 326 B 27. Accordingly, we overrule the Authority = s issue and affirm

the trial court = s order denying the Authority = s plea to the

jurisdiction.

/s/ Kem Thompson Frost

Justice

Judgment rendered, Opinion of

February 12, 2008 Withdrawn, and Opinion on Rehearing filed May 22, 2008.

Panel

consists of Justices Anderson, Fowler, and Frost.

[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 A Facilities. @

[3] Original emphasis omitted.

[4] Often, courts use the terms A sovereign immunity @

and A 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). A 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. A Governmental immunity @ protects political subdivisions of the State, including counties,

cities, and school districts. Id .

[5] 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. 2007) .

[6] Likewise, the portion of a 2003 case from this court

indicating that the Legislature has waived the Authority = s immunity from suit is no longer good law after Tooke .

See Clear Lake City Water Auth. v. Kirby Lake Development, Ltd. , 123

S.W.3d 735 , 750 B 51 (Tex. App. C Houston

[14th Dist.] 2003, pet. denied).

[7] See Valley Mun. Utility Dist. No. 2 v. Rancho

Viejo, Inc. , No. 13-07-545-CV, 2008 WL 384320 , at *2 B 4 (Tex. App. C Corpus

Christi Feb. 14, 2008, no pet. h.) (mem. op.); Boyer, Inc. v. Trinity River

Auth. of Tex. , No. 2-07-052-CV, C S.W.3d C , C , 2008 WL

163560, at *3 (Tex. App. C Fort Worth Jan. 17, 2008, no pet. h.); Bexar Metro.

Water Dist ., 220 S.W.3d at 29 B 32.

[8] We use this example only as an illustration. We

recognize that the Legislature enacted section 271.152 six years after it

enacted the second sentence in section 49.066(a).

[9] Friendswood Development asserts that the Legislature

included water districts in the definition of a A local governmental entity @ in

section 271.152 to reemphasize its prior intent to waive immunity from suit

that the courts allegedly have ignored. However, this argument is inconsistent

with the language of section 271.152, in which the Legislature does not waive

immunity from suit as to all claims against water districts (as some allege was

the intent in the first sentence of section 49.066(a)) and the Legislature does

not waive immunity from all suits on board-approved, written contracts (as some

allege was the intent in the second sentence of section 49.066(a)).

[10] Friendswood Development asserts that, in section

49.066, the Legislature does impose objective limitations on the State = s potential liability because it requires

board-approved written contracts, prevents private parties from contesting the

matters stated in section 49.066(d), and relieves the Authority from having to

post bonds or deposit amounts beyond the amount of the award in eminent domain

proceedings. However, the fourth aid looks to objective limitations imposed on

the governmental entity = s liability on the claims for which immunity allegedly

has been waived. Precluding certain types of suits does not fit in this

category. Waiving any bond requirement does limit the governmental entity = s potential litigation expenses; however, governmental

entities are often exempted from such ancillary expenses, regardless of whether

immunity has been waived. In addition, such a waiver does not limit the

governmental entity = s exposure as to the claims for which the Legislature

allegedly waived immunity. Furthermore, limiting the amount the governmental

entity has to deposit when it is condemning land in an eminent-domain

proceeding is not a limitation on the amount of any claims against the

governmental entity.

[11] Friendswood Development asserts that this court

should give significance to the fact that the Legislature used A sue and be sued @

language at a time when the Texas Supreme Court had held that this language

waived immunity from suit. However, the Tooke court gave this fact no

significance; therefore, we give this fact no significance. See Tooke ,

197 S.W.3d at 333 B 42; Bexar Metro. Water Dist ., 220 S.W.3d at

30 .

[12] 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, ' 2, 2005 Tex. Gen. Laws 1548 , 1549.

[13] The Authority also asserts that, because Friendswood

Development alleges the Authority breached the Agreement only in regard to the

potential sale of the Facilities, the other parts of the Agreement are not

relevant to the issue of whether section 271.152 waives the Authority = s immunity in this case. However, under the

unambiguous language of section 271.152, if the Agreement is A 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, @ then the Authority A waives sovereign immunity to suit for the purpose of adjudicating a claim

for breach of the contract, subject to the terms and conditions of this

subchapter. @ Tex. Loc. Gov = t

Code ' 271.152. Under this statutory regime, once the

prerequisites for waiver of immunity are shown to be satisfied, all claims for

breach of the contract in question are subject to the Legislature = s waiver of immunity. See Tex. Loc. Gov = t

Code ' 271.151, et seq . In addition, in Ben Bolt ,

the Texas Supreme Court concluded that the Legislature had waived immunity

under this statute even though the court concluded that the part of the

contract on which the plaintiff based its claim did not involve the provisions

of good or services to the local governmental entity. See Ben Bolt B Palito Blanco Consol. Indep. Sch. Dist. v. Texas

Political Subdivisions Property/Casualty Joint Self-Insurance Fund , 212 S.W.3d 320, 327 (Tex. 2006) (stating that, for

there to be a waiver of immunity under section 271.152, the suit must be for

breach of A 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 @ ).

[14] In response to Friendswood = s motion for rehearing on appeal, the Authority

asserts, among other things, that immunity has not been waived under section

271.152 because no amount is A due and owed @ by the Authority under the Agreement within the

meaning of section 271.153(a)(1). See Tex.

Loc. Gov = t Code Ann. ' 271.153(a)(1). Presuming, without deciding, that

Friendswood had to plead damages satisfying the requirements of section

271.153(a) to fall within the waiver of immunity in section 271.152 and

liberally construing Friendswood = s

petition (as to which the Authority did not specially except), Friendswood

pleaded that its contract damages fall within the scope of section 271.153.

However, in its plea to the jurisdiction and supplement thereto the Authority

did not assert that governmental immunity applied based on Friendswood = s failure to satisfy section 271.153(a)(1). See

Austin Indep. Sch. Dist. v. Lowery , 212 S.W.3d 827, 834 (Tex. App. C Austin 2006, pet. denied) (holding that, in

interlocutory appeal of denial of plea to jurisdiction, appellate review is

limited to the grounds asserted in the plea that the trial court denied); accord

Brenham Housing Auth. v. Davies , 158 S.W.3d 53, 61 (Tex. App. C Houston [14th Dist.] 2005, no pet.). Furthermore, the

Authority did not challenge, either with argument or evidence in its plea,

Friendswood = s allegation that its claim satisfies section

271.153. See Tex. Dept. of Parks & Wildlife v. Miranda , 133 S.W.3d

217, 221 (Tex. 2004). In addition, the Authority did not argue section

271.153(a)(1) in its opening brief on appeal.

[15] Friendswood Development cites several cases

involving construction contracts for real property. See City of Mesquite v.

PKG Contracting, Inc. , 148 S.W.3d 209 (Tex. App. C Dallas 2004) (involving construction of a storm

drainage system), rev = d , 197 S.W.3d 388 , 388 B 89 (Tex. 2006) (reversing and remanding to the trial

court so that plaintiff could have opportunity to argue in the trial court that

the Legislature waived city = s immunity from

suit in the recently enacted section 271.152); City of Carrollton v.

McMahon Contracting, L.P. , 134 S.W.3d 925 (Tex. App. C Dallas 2004) (involving street repairs), rev = d, 197

S.W.3d 387 (Tex. 2006) (reversing and remanding to the trial court so that

plaintiff could have opportunity to argue in the trial court that the

Legislature waived city = s immunity from suit in the recently enacted section

271.152); Satterfield & Pontikes Constr., Inc. v. Irving Indep. Sch.

Dist ., 123 S.W.3d 63 (Tex. App. C Dallas

2003) (involving construction of new school building), rev = d , 197

S.W.3d 390, 391 (Tex. 2006) (reversing and remanding to the trial court so that

plaintiff could have opportunity to argue in the trial court that the

Legislature waived city = s immunity from suit in the recently enacted section

271.152). These cases are not on point because, in all of these cases, the

courts of appeals did not address section 271.152, and the Texas Supreme Court

only remanded to the trial court so that the plaintiff could have the

opportunity to make an argument under the recently enacted section 271.152.

[16] We have found no case from the Fourteenth Court of

Appeals construing this statutory language. Friendswood Development cites City

of Houston v. Clear Channel Outdoor, Inc. ; however, that case is not on

point. See 233 S.W.3d 441, 447 (Tex. App. C Houston [14th Dist.] 2007, no pet.). The only issue decided in that

case was that the trial court did not err in denying the City of Houston = s plea, in which the City asserted that there was no

waiver of immunity because the contract was not A properly executed on behalf of the [City of Houston] @ under Local Government Code section 271.151(2). See id. at 442 B 43, 445 B 47.

The City of Houston court did not address the meaning or application of

the language requiring that there be A a

written contract stating the essential terms of the agreement for providing

goods or services to the local governmental entity. @ See Tex.

Loc. Gov = t Code ' 271.151(2); City of Houston , 233 S.W.3d at 445 B 47.

[17] The Ben Bolt court stated that the fund

acknowledged that its members elected its governing board, without addressing

whether any references to these election services were contained in the

insurance policy. Indeed, the dissenting justices stated that the record in Ben

Bolt did not contain the insurance policy. See id . at 327, 328 B 29 (Willett, J., dissenting).

[18] The Bill Analysis for Section 271.152 states that

the bill in question clarifies and re-expresses the Legislature = s intent A 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 [the bill] . @ House Comm. on Civil Practices,

Bill Analysis , Tex. H.B. 2039, 79th Leg. R.S. (2005) (emphasis added).

Although the Ben Bolt court quoted this sentence from the Bill Analysis

without including the final clause (emphasized above), the court clearly stated

that this statutory waiver of immunity only applied to written contracts A stating the essential terms of the agreement for

providing goods or services to the local governmental entity. @ See Ben Bolt , 212 S.W.3d at 327 . Therefore,

the quotation of the Bill Analysis does not appear to provide an additional reason

as to why the Ben Bolt court concluded the contract fell within the

scope of the statute.

[19] See also Tex.

Loc. Gov = t Code '' 271.151(2), 271.152; Tooke , 197 S.W.3d at 342,

346 (stating that section 271.152 is a limited waiver of immunity from suit for

breach of contract under certain circumstances and that it is a more measured

approach that waives immunity as to certain contract claims).

[20] Relying on the Bexar Metropolitan case from

the Fourth Court of Appeals, the Authority asserts that section 271.152 does

not waive immunity for real-estate sales contracts and that the Agreement is a

real-estate sales contract. See Bexar Metro. Water Dist ., 220 S.W.3d at

32 (stating the waiver of immunity from suit in section 271.152 does not waive

a water district = s immunity for breaching a real-estate sales

contract). If the Agreement dealt only with the potential sale of the

Facilities by Friendswood Development to the Authority, we would agree with

this argument. However, we also must take into account the other parts of the

Agreement. Likewise, the Rancho Viejo court based its holding on the

utility district = s failure to properly execute the contact, which was

an easement agreement that was materially different from the Agreement at issue

in this case. See Rancho Viejo, Inc. , 2008 WL 384320 , at *4.

[21] The Authority also asserts that the Agreement cannot

be a construction contract because the parties do not describe the construction

project with specificity and the Agreement was not publicly bid, as required by

the Texas Water Code. See Tex.

Water Code Ann. '' 49.271 B 49.273

(Vernon 2000). Presuming, without deciding, that these statutes apply and

prevent the Agreement from being a construction contract, that would not

prevent the Agreement from being A 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. @ See

Tex. Loc. Gov = t

Code '' 271.151, 271.152.

[22] The Authority argues that, under the Agreement,

Friendswood Development is not obligated to construct anything for the

Authority; rather, the construction referred to in the Agreement is to be

performed by third-party contractors. Although the Agreement requires

Friendswood Development to hire third-party contractors, the relevant statute

does not require that the provision of goods or services to the local

governmental unit be performed by employees rather than independent

contractors. See Tex. Loc. Gov = t

Code '' 271.151, 271.152. Such a narrow construction of the

statute would be inconsistent with its plain meaning and the Texas Supreme

Court = s broad construction of the statute. See Tex. Loc. Gov = t

Code '' 271.151, 271.152; Ben Bolt , 212 S.W.3d at 326 B 27.

[23] The trial court struck the affidavit of William

Schweinle, the Authority = s general counsel. On appeal, the Authority asserts

the trial court abused its discretion in doing so. However, presuming without

deciding that the trial court erred in striking this affidavit, this error

would not affect our conclusion that the trial court properly denied the Authority = s plea to the jurisdiction. Schweinle = s affidavit is replete with parol evidence and

conclusory statements. Even if Friendswood Development had not objected to the

affidavit and even if the trial court had not stricken the affidavit, these

statements would be incompetent and amount to no evidence. See Coastal

Transport Co. v. Crown Cent. Petroleum Corp ., 136 S.W.3d 227, 232 (Tex.

2004); City of Mission v. Popplewell , 294 S.W.2d 712, 717 (Tex. 1956).

Even considering all of the testimony in this affidavit, we still would reach

the same conclusion based on section 271.152 and the Ben Bolt decision.

Because consideration of this affidavit would not materially affect our

analysis and disposition in this case, we need not and do not address the issue

of whether the trial court erred in striking the Schweinle affidavit.