C. Borunda Holdings, Inc., Petitioner,
Lake Proctor Irrigation Authority of Comanche County, Texas, Respondent
Petition for Review from the Court of Appeals for the
Eleventh District of Texas
governmental-immunity case raises a first-impression issue
deriving from the Court's decisions in Reata Constr.
Corp. v. City of Dallas, 197 S.W.3d 371 (Tex. 2006), and
City of Dallas v. Albert, 354 S.W.3d 368 (Tex.
2011). The question is whether a defendant can prevail on the
merits of its germane, connected, and properly defensive
counterclaims against a governmental entity when the
governmental entity recovers monetary relief on its
affirmative claims by filing a lien and a lis pendens and
then nonsuits its affirmative claims. We hold that the
governmental entity's nonsuit does not negate the
defendant's right to pursue its counterclaims to the
extent it seeks an offset against the amount the governmental
entity recovered through the litigation process.
C. Borunda Holdings, Inc., operates pecan orchards. It
entered into a series of water-supply agreements with the
Lake Proctor Irrigation Authority, a political subdivision.
See Tex. Spec. Dist. Code § 7502.002 ("The
Lake Proctor Irrigation Authority of Comanche County is (1) a
conservation and reclamation district under Section 59,
Article XVI, Texas Constitution; and (2) a political
subdivision of this state."). Lake Proctor later sued
Borunda, alleging that Borunda had breached the 2012 and 2013
agreements by underpaying Lake Proctor in the amount of $111,
481.41. Borunda filed counterclaims alleging that Lake
Proctor breached the contracts and committed fraud by failing
to make reasonable efforts to provide Borunda water on a
comparable basis to other customers. According to Borunda,
Lake Proctor's breach during an historic drought caused
Borunda to lose more than 2, 000 pecan trees and face
imminent financial ruin.
after Lake Proctor filed suit, it recorded a crop lien and a
lis pendens against Borunda's orchards. Borunda later
decided to sell some of its land to generate cash and avoid
bankruptcy, but Lake Proctor's lien and lis pendens
prevented it from doing so. Allegedly in dire financial
straits, Borunda paid Lake Proctor $118, 045.52 (the amount
Lake Proctor sought, plus attorney's fees) to remove the
lien and lis pendens, but Borunda continued to pursue its
counterclaims seeking an offset against that payment.
Proctor then filed a plea to the jurisdiction, arguing that
immunity deprived the trial court of jurisdiction over
Borunda's counterclaims. The trial court ultimately
entered an agreed order on the plea, finding that it had
subject-matter jurisdiction "only . . . to the extent
that [Borunda] seeks monetary damages as an offset for
damages sought by [Lake Proctor] for breach of contract based
on [the 2012 and 2013 agreements, ] which shall not exceed
the monetary damages for the affirmative claims asserted by
[Lake Proctor]." A few months later, Lake Proctor
nonsuited its claims against Borunda and filed a second plea
to the jurisdiction and a motion for summary judgment. In
these new pleadings, Lake Proctor argued that because it was
no longer pursuing its claim for damages against Borunda,
immunity barred Borunda's counterclaims and Borunda could
not prevail on any claim for an offset.
in Reata that when a governmental entity asserts
claims for monetary relief, immunity does not protect the
entity against the defendant's counterclaims for monetary
relief that are "germane to, connected with, and
properly defensive to" the government's claims. 197
S.W.3d at 376-77. This is not because the governmental entity
"waives" its immunity by filing a claim for
affirmative relief. Id. Instead, the scope of
governmental immunity simply does not reach the defensive
counterclaims to the extent that any recovery on the
counterclaims serves as an "offset" against the
government's recovery on its affirmative claims.
Id. at 377.
led to the subsequent issue of whether governmental immunity
applies to germane, connected, and properly defensive
counterclaims if the governmental entity nonsuits its
affirmative claims without having recovered on them. We
resolved that issue in Albert, holding that a
governmental entity that voluntary nonsuits its affirmative
claims without having recovered on them does not
"reinstate" immunity against the defendant's
counterclaims. 354 S.W.3d at 374-75. Because the governmental
entity "did not have immunity from suit as to [the
defensive counterclaims], it could not either
'reinstate' such immunity, or, put differently, in
effect create it, by nonsuiting" its affirmative claims.
acknowledged in Albert, however, that the defendant
in that case could not prevail on the merits of its
counterclaims because the governmental entity was no longer
"pursuing a claim for damages to which an offset would
apply, " so the governmental entity "would not have
a recovery for the [counterclaims] to offset."
Id. at 376. The governmental entity could therefore
obtain summary judgment on the merits of the counterclaims
because they sought only an offset against the governmental
entity's recovery, yet the governmental entity had waived
any such recovery. Id. But the governmental entity
could not prevail on jurisdictional grounds because immunity
did not bar the counterclaims. Id.; see also
Sharyland Water Supply Corp. v. City of Alton, 354
S.W.3d 407, 414 (Tex. 2011) ("Even if [the governmental
entity's] rescission counterclaim meant that it was not
entitled to immunity from suit at least up to the amount of
an offset, the offset disappeared when [the governmental
entity's] counterclaim was defeated on summary
case, the trial court granted Lake Proctor's second plea
to the jurisdiction in part, finding as it had in its agreed
order on the first plea that it had subject matter
jurisdiction to the extent that Borunda sought an offset
against Lake Proctor's recovery. On the same day,
however, the trial court granted summary judgment for Lake
Proctor, ordering that Borunda take nothing on its
counterclaims seeking that offset. The court of appeals
affirmed. __S.W.3d ___, 2016 WL 7650559, at *2 (Tex.
App.-Eastland December 26, 2016). Borunda then petitioned for
review in this Court.
ultimate issue in this case is whether Lake Proctor was
entitled to summary judgment on the merits of Borunda's
counterclaims after Lake Proctor recovered the money it was
seeking and then nonsuited its affirmative claims. The result
turns on whether Borunda relinquished or waived its right to
pursue its counterclaim for an offset against Lake Proctor
when it paid Lake Proctor's claims in full.
initial matter, we are not concerned here with whether
governmental immunity bars Borunda's counterclaims. Under
Reata, it clearly does not because those
counterclaims were germane to, connected to, and properly
defensive to Lake Proctor's affirmative claim for breach
of contract, and sought only to offset any damages Lake
Proctor might recover. See Reata, 197 S.W.3d at 377.
This is not because Lake Proctor waived immunity by filing
its affirmative claims, but because "governmental
entities do not have immunity from offsetting claims germane
to, connected to, and properly defensive to monetary claims
by the entities." Albert, 354 S.W.3d at 376.
And under Albert, Lake Proctor's nonsuit of its
affirmative claims did not reinstate or create immunity from
Borunda's counterclaims because Lake Proctor "could
not reinstate or create something it did not have."
Id.; see City of Dall. v. Martin, 361
S.W.3d 560, 561 (Tex. 2011) ("[B]y non-suiting its
counterclaim the City did not reinstate immunity from suit. .
. ."). Just as Lake Proctor "generally cannot waive
immunity from suit by its actions, it cannot create immunity
by its actions." Albert, 354 S.W.3d at 376. The
trial court thus had jurisdiction over Borunda's properly
asserted counterclaims even though Lake Proctor nonsuited its
affirmative claims. See id. at 375.
concerned here instead with whether Lake Proctor was entitled
to summary judgment on the merits of Borunda's
counterclaims. Lake Proctor moved for summary judgment on the
ground that Borunda could not prevail on its counterclaims
because, having nonsuited its claims, Lake Proctor could
obtain no "recovery" against which any judgment on
the counterclaims could offset. The trial court granted the
motion, and the court of appeals affirmed, holding that,
"with [Lake Proctor's] claims to affirmative relief
gone, there was nothing against which Borunda could apply an
offset, and Borunda could not recover a judgment from [Lake
Proctor].___" S.W.3d at ___.
unlike the governmental entities in Albert and
Sharyland, Lake Proctor did recover on its
claims against Borunda through this litigation before it
nonsuited those claims. In fact, Lake Proctor recovered all
the monetary relief it was seeking in this case when Borunda
paid that amount to remove the lien and lis pendens. The
question, then, is whether Borunda may still seek and obtain
an offset against that amount based on Lake Proctor's
alleged breaches of the water-supply agreements. This is not
an immunity or jurisdictional issue; it is an issue that goes
to the merits of Borunda's counterclaims. ...