City of Colony v. North Tex. Mun. Water

272 S.W.3d 699

CITY OF THE COLONY, Texas, Appellant, v. NORTH TEXAS MUNICIPAL WATER DISTRICT and City of Frisco, Texas, Appellees. and City of Frisco, Texas, Appellant, v. City of the Colony, Texas, Appellee and North Texas Municipal Water District, Appellant, v. City of the Colony, Texas, Appellee.

No. 2-07-128-CV.

Court of Appeals of Texas, Fort Worth.

November 26, 2008.

Rehearing Overruled December 18, 2008.

Robert E. Hager, Dallas, for Appellant.

Lewis L. Isaacks, Plano, Richard Abernathy, McKinney, for Appellees.

PANEL: LIVINGSTON, HOLMAN, and GARDNER, JJ.

OPINION

DIXON W. HOLMAN, Justice.

I. INTRODUCTION

City of The Colony, Texas, entered into a tri-party contract (the "Contract") in 1998 with City of Frisco, Texas, and North Texas Municipal Water District ("the District") for, among other things, the construction and operation of a regional wastewater system for the purpose of providing a facility to treat wastewater from both cities. The Colony made contractually required payments to the District for a number of years. But ultimately, it never delivered any of its wastewater to the District for treatment, it ceased making payments to the District, and it sued the District and Frisco for breach of contract, for a declaratory judgment that no contract was formed, and alternatively, for rescission of the Contract.

With the exception of one of The Colony's contract claims, the trial court granted the District's first amended motion for summary judgment on The Colony's causes of action. With the exception of the amount of damages and attorneys' fees to be awarded Frisco, the trial court granted Frisco's motion for summary judgment on The Colony's causes of action and on Frisco's breach of contract counterclaim. The remaining claims or outstanding issues went to trial. In addition to findings regarding attorneys' fees, a jury subsequently found that the District had materially breached the Contract for failing to have adequate capacity but that the breach was excused because The Colony had previously failed to comply with a material obligation of the Contract and that The Colony owed $0.00 to Frisco for The Colony's failure to comply with the Contract. The Colony, the District, and Frisco each filed a notice of appeal.

In three issues, The Colony argues that the trial court erred by granting Frisco's motion for summary judgment and the District's motion for summary judgment and that certain subsequent trial court rulings based upon the summary judgment rulings caused the rendition of an improper judgment. In two issues, Frisco argues that the evidence is legally and factually insufficient to support the jury's findings that The Colony owed Frisco $0.00 for The Colony's failure to comply with the Contract and that Frisco was entitled to $0.00 for Frisco's appellate attorneys' fees. And in three issues, the District argues that the trial court erred by overruling its motion to disregard the jury's finding that it materially breached the Contract and that the evidence is legally and factually insufficient to support the jury's findings that the District breached the Contract and that the District was entitled to $0.00 for attorneys' fees. As to The Colony's appeal, we will affirm. As to Frisco's appeal, we will affirm in part and reverse and render in part. As to the District's appeal, we will affirm.

II. FACTUAL AND PROCEDURAL BACKGROUND AND CONTRACT EXCERPTS

Lanny Lambert served as The Colony's city manager from the summer of 1997 to October 2000. According to Lambert, The Colony's mayor and city council wanted to participate with the District in the creation of a regional wastewater treatment system. At the time, The Colony treated its wastewater at its Stewart Creek treatment plant, but the mayor and city council wanted to join a regional system because they felt it was the most economically feasible solution to The Colony's increasing need for treatment capacity and because the existing plant was aging, deteriorating, and had odor problems. According to Lambert, "[O]ur goal at the time was to join the regional system. We hoped to cut our costs and really to get out of the sewer treatment business, pump all of our sewer to [the District] and get out of the business." A reason for The Colony's increasing need for wastewater treatment capacity was due to the growth that the city was experiencing from the Austin Ranch and Wynnewood Peninsula developments. Lambert was thus tasked with the assignment of negotiating an agreement with the District and Frisco.¹

Lambert met numerous times with Carl Riehn, the District's then executive director; George Purefoy, Frisco's city manager; and a District engineer, among others, including representatives from The Colony. Through his participation in the meetings, Lambert came to the understanding that The Colony was "requesting to be allowed to participate" in the regional system but that Frisco did not "particularly care or want [The Colony] to be involved" even though it was "something [The Colony] wanted to do."² Lambert was told about a border dispute that had occurred earlier in history between The Colony and Frisco.

The Colony, Frisco, and the District reached an agreement and executed the nineteen-page Contract, entitled, "Stewart Creek West Regional Wastewater System Contract," on May 28, 1998.³

Relevant initial portions of the contract are as follows:

WHEREAS, there have been prepared for and filed with the District the following: Report on a Proposed Regional Wastewater System for the Cities of Frisco and The Colony ... dated February, 1997, by Hunter Associates Texas, Ltd., Consulting Engineers, Dallas, Texas (the "Engineering Report"); and

WHEREAS, the parties hereto wish to further implement the Engineering Report and provide for the acquisition, construction, improvement, operation and maintenance of a Regional Wastewater System (the "System") for the purpose of providing facilities to adequately receive, transport, treat, and dispose of Wastewater; and

. . . .

WHEREAS, the Participants have deemed it necessary and desirable to contract with the District to provide for the expansion of the Plant and the acquisition, construction, improvement, operation and maintenance of the System to achieve efficiencies of cost and operation; and

. . . . WHEREAS, the parties hereto recognize these facts:

(a) That the District will use the payments to be received under this Contract and similar contracts, if any, for the payment of Operation and Maintenance Expense of the System and for the payment of the principal of, redemption premium, if any, and interest on its Bonds....

. . . .

(c) That the District will issue Bonds from time to time in the future to acquire, construct, extend, enlarge, improve, and/or repair the system.

Relevant definitions contained in the Contract are as follows:

"Annual Payment" means the amount of money estimated as provided in Section 5.03 of this Contract to be paid to the District by Participants as their proportionate share of the Annual Requirement.

"Annual Requirement" means the total amount of money required for the District to pay all Operation and Maintenance Expense of the System and to pay the principal of, and redemption premium, if any, and interest on its Bonds....

"District's System," "Regional System," "Regional Wastewater System," or "System" means all of the District's facilities acquired, constructed, used, or operated by the District for receiving, transporting, treating, and disposing of Wastewater of and for Participants, pursuant to this Contract (but excluding ... any facilities required to transport Wastewater to any Point of Entry of the District's System).... Said terms shall include only those facilities which are acquired, constructed, used, or operated by the District to provide service to Participants pursuant to this Contract. ...

"Participants" means Frisco, The Colony and all Additional Participants.

"Point of Entry" means any point at which Wastewater enters the property on which any Wastewater treatment plant operated by the District is located....

"Wastewater" means Sewage, Industrial Waste, Municipal Waste, Recreational Waste, and Agricultural Waste, as defined in the Code, together with properly shredded garbage, and such infiltration water that may be present. [Emphasis added.]

Section 2.01, under the heading "Providing of Facilities by the District," states in part as follows:

In order to provide services for receiving, transporting, treating, and disposing of Wastewater for Participants, the District will use its best efforts to design, acquire, construct, and complete the System, as generally described in the Engineering Report ..., and will operate and maintain the System, and from time to time enlarge, improve, repair, replace, and/or extend the System to provide service to the Participants. [Emphasis added.]

Relevant portions of the Contract under Article III, entitled "Discharge of Wastewater and Metering," provide as follows:

Section 3.01. DISCHARGE. In consideration of the payments to be made under its respective contract with the District, each of the Cities of The Colony and Frisco have and shall have the right to discharge all of its Wastewater from its respective sewer system into the District's system, provided that such Wastewater meets the requirements for quantity and quality as set forth in its respective contracts with the District....

Section 3.02. POINT OF ENTRY. Each Participant may discharge all such Wastewater generated from such Participant's sewer system into the designated Point or Points of Entry for such Participant, unless such Participant and the District mutually agree that like service can be provided elsewhere in the System.

Section 3.03. CONVEYANCE TO POINT OF ENTRY. It shall be the sole responsibility of each participant to transport, or cause to be transported, at no cost to the other Participants, its Wastewater to its Point or...