Opinion
NUMBER 13-17-00047-CV
01-31-2019
KEMPNER WATER SUPPLY CORP., Appellant, v. CITY OF LAMPASAS, TEXAS, Appellee.
On appeal from the 27th District Court of Lampasas County, Texas.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Benavides and Hinojosa
Memorandum Opinion by Justice Benavides
The Honorable Rogelio Valdez, former Chief Justice of this Court, did not participate in this decision because his term of office expired on December 31, 2018.
Appellee City of Lampasas (City) sued appellant Kempner Water Supply Corporation (Kempner) for a breach of contract claim. Kempner and the City have differing interpretations of the relevant contract, and each moved for summary judgment. The trial court granted the City's motion for summary judgment and denied Kempner's. By four issues, which we construe as two, Kempner contends that summary judgment for the City was improper as to: (1) liability because no breach occurred under the correct interpretation of the contract, and (2) damages because evidence supporting the amount was inconclusive. We affirm in part and reverse and remand in part.
This case is before this Court on transfer from the Third Court of Appeals in Austin pursuant to a docket-equalization order issued by the Supreme Court of Texas. See TEX. GOV'T CODE ANN. § 73.001 (West, Westlaw through 2017 1st C.S.). Because this is a transfer case, we apply the precedent of the Third Court of Appeals to the extent it differs from our own. See TEX. R. APP. P. 41.3
I. BACKGROUND
Kempner owns and operates a potable water distribution system which provides water to its customers. The City is one of Kempner's customers. The parties entered into a 2006 contract titled "Whole Water Supply Contract" (the 2006 Contract). The 2006 Contract obligates Kempner to deliver treated water to the City for a period of eighty years. A. Relationship between Kempner, the City, and Central Texas
The City reserved the right to withdraw water from the Stillhouse Hollow Reservoir ("Stillhouse") pursuant to a contract between the City and the Brazos River Authority (BRA), which controls Stillhouse and Central Texas Water Supply Corporation (Central Texas). The City assigned its raw water reservation right to Central Texas in order for Central Texas to treat the water and deliver it to Kempner for final delivery to the City.
In 2004, Kempner sued Central Texas over a dispute regarding its contract with Central Texas. Because its interests were implicated, the City intervened. The three parties settled that litigation by agreements in late 2005 and early 2006, including a new wholesale water supply contract between Kempner and Central Texas dated October 27, 2005 (the 2005 Contract), and the corresponding 2006 Contract between Kempner and the City. These two new agreements were intended to maintain the basic structure of the parties' ongoing relationships, with the goal being the assured continued delivery of water from Stillhouse to the City.
When the 2006 Contract was executed, Kempner did not have its own water treatment facility. Consequently, Kempner relied on Central Texas's water treatment facilities. Kempner executed an agreement with Central Texas allowing Kempner to purchase treated water for a period of eighty years. Kempner delivers this treated water to the City. Central Texas treats water and sends it to Kempner for final delivery to the City. This multi-party relationship was necessary because Central Texas owned a water treatment plant but lacked a transmission line to the City, whereas Kempner owned a transmission line to the City but lacked a water treatment plant. Under this multi-party arrangement, Central Texas billed Kempner for the water it treated and delivered to Kempner, and the City paid whatever Kempner owed Central Texas.
B. Kempner's New Water Treatment Facility
In 2010, Kempner built its own water treatment plant. According to Kempner, in October and November of 2010, Central Texas reduced the water available to Kempner. Therefore, to provide the sufficient amount of water to the City, Kempner treated water at its plant. This marked the first time Kempner had the ability to produce treated water without having to rely on Central Texas in any way. Kempner billed the City directly for its treated water, but the City refused to pay, arguing that the 2006 Contract "does not authorize Kempner to charge any payment for treated water from Kempner's plant." The City then drafted an amendment to the 2006 Contract dealing with treated water delivered to the City from Kempner's plant. However, Kempner rejected the amendment claiming it impermissibly restricted Kempner's flexibility to provide treated water to the City.
Kempner alleges that in 2013, Central Texas's treatment plant failed to meet water quality standards, which prompted Kempner to use its treatment plant once again to deliver treated water to the City. The City disputes Kempner's assertion that Central Texas failed water quality standards, but it does not dispute that City residents enjoyed Kempner-treated water for a period of time. Again, Kempner billed the City directly for the water, but this time the City paid the bill under protest.
The City sued Kempner for breach of contract to recoup the water bill it paid under protest. Both parties moved for summary judgment. In its motion, the City argued that the 2006 Contract only obligated it to pay for water treated by Central Texas—not for water treated by Kempner. In response, Kempner argued that the contract obligated the City to pay for water used by its residents regardless of whether it was treated by Central Texas or Kempner. The trial court entered summary judgment for the City finding: (1) the 2006 Contract "does not permit Kempner to charge the City for water treated in Kempner's water treatment plant" and "only permits Kempner to charge the City a floor charge where the City's demand for water is less than the applicable floor"; and (2) Kempner breached the 2006 Contract "between the parties by charging the City for water treated in Kempner's water treatment plant." The trial court awarded the City $117,432.27 in damages and $333,563.00 in attorneys' fees. This appeal followed.
We note that Kempner does not contest its liability with respect to the City's breach of contract claim based on the "floor" charge.
II. STANDARD OF REVIEW AND APPLICABLE LAW
We review the trial court's summary judgment de novo. See Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). Summary judgment is proper when the movant conclusively establishes the elements of the claim. Id.; Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997). Here, the claim is breach of contract, which requires proof of four elements: "(1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as a result of the breach." Eaves v. Unifund CCR Partners, 301 S.W.3d 402, 407 (Tex. App.—El Paso 2009, no pet.).
When reviewing a summary judgment, we take as true all evidence favorable to the nonmovant, and we indulge every reasonable inference and resolve any doubts in the nonmovant's favor. Id. The party moving for traditional summary judgment has the burden to show that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985). When, as here, both parties move for summary judgment on the same issue and the trial court grants one motion and denies the other, we consider the summary judgment evidence presented by both sides, determine all questions presented, and if we determine that the trial court erred, render the judgment the trial court should have rendered. See FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000).
III. WHOLE WATER SUPPLY CONTRACT
The issues on appeal are whether Kempner breached the 2006 Contract by charging for Kempner-treated water and the amount of damages sustained as a result of the breach. Therefore, we will only address those issues in this breach of contract claim.
A. Contract Construction Principles
Our primary concern in construing a contract is to ascertain and give effect to the true intentions of the parties as expressed in the text of the agreement. El Paso Field Servs., L.P. v. MasTec North Am., Inc., 389 S.W.3d 802, 805 (Tex. 2012); Carbona v. CH Med., Inc., 266 S.W.3d 675, 680 (Tex. App.—Dallas 2008, no pet.). Objective manifestations of intent control, not what one side or the other alleges that they intended. URI, Inc. v. Kleberg Cty., 543 S.W.3d 755, 763-64 (Tex. 2018). Therefore, we presume the parties intend what the words of their contract say and interpret contract language according to its "plain, ordinary, and generally accepted meaning" unless the contract directs otherwise. Id. at 764.
We are cognizant that words are simply implements of communications, and oftentimes they cannot be assigned a rigid meaning, inherent in themselves. Id. A single word can carry significant differences in meaning when applied in different situations. Id. Accordingly, to hone in on the meaning the parties intended, we must construe words in the context in which they are used. Id. To achieve this objective, we examine and consider "the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless." Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005). "No single provision taken alone will be given controlling effect; rather, all the provisions must be considered with reference to the whole instrument." J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003). Courts must construe contracts "from a utilitarian standpoint bearing in mind the particular business activity sought to be served" and will avoid when possible a construction which is "unreasonable, inequitable, and oppressive." Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987).
If a contract can be given a certain or definite legal meaning, then the contract is not ambiguous, and we will construe it as a matter of law. El Paso Field Servs., 389 S.W.3d at 806. "In construing an unambiguous contract or in determining whether an ambiguity exists, courts may not seek the parties' intent beyond the meaning the contract language reasonably yields when construed in context." URI, 543 S.W.3d at 757.
B. Analysis
The parties rely on conflicting interpretations of the 2006 Contract, but both assert it is unambiguous. Because both parties agree the contract is unambiguous, we need not rely on extrinsic evidence unless we find ambiguity. Id. at 764-65. Kempner asserts that it was entitled to charge the City for all treated water delivered by Kempner, whether Kempner or Central Texas treated the water, and therefore, the trial court's declaration that Kempner breached the contract by charging the City for Kempner-treated water is erroneous as a matter of law. Kempner argues that because the 2006 Contract does not "distinguish between Kempner-treated water or Central Texas water," the City is required to pay Kemper for water Kemper treats "at the same rate per 1000 gallons that Kempner pays Central Texas for treated water." The City responds that the 2006 Contract prohibits Kempner from charging the City for water treated at Kempner's plant; therefore, according to the City, Kempner breached the 2006 Contract by improperly billing the City for Kempner-treated water.
The provision most relevant to Kempner's issue is the provision in section 3.5(A), entitled "Treated Water Cost." It provides the following:
For each 1000 gallons of water delivered to the City at the City's Points of Delivery, the City shall pay the amount per 1000 gallons that [Kempner] pays to [Central Texas] as [Central Texas] Treated Water Cost, billed at the initial rate of $.048 per 1000 gallons of treated water . . . being the same rate per 1000 gallons of treated water charged by [Central Texas] to [Kempner] . . .
By its express terms, section 3.5(A) authorizes charges for treated water in the amount per 1000 gallons that Kempner pays to Central Texas as its treated water costs, i.e., a reimbursement. Specifically, section 3.5(A) states that the City shall pay Kempner what Kempner pays to Central Texas for Central-Texas treated water. If the City were required to pay Kempner for water that Kempner treats (as Kempner suggests), then there would be no Central Texas treated water cost billed at the specific rate referenced in section 3.5(A) because Kempner would not incur any charges from Central Texas. Therefore, as written, the plain and ordinary reading of section 3.5(A) requires for the City to reimburse Kempner the amount Central Texas charges Kempner for the water Central Texas treats. See Kingsley Properties, LP v. San Jacinto Title Servs. of Corpus Christi, LLC, 501 S.W.3d 344, 349 (Tex. App.—Corpus Christi 2016, no pet.) (holding that "parties to a contract are 'masters of their own choices'") (quoting Healthcare Cable Sys., Inc. v. Good Shepherd Hosp., Inc., 180 S.W.3d 787, 791 (Tex. App.—Tyler 2005, no pet.)). Nonetheless, we will consider section 3.5(A) in the context of the entire contract, including the preamble, definitions, and relevant article provisions. See Dorsett, 164 S.W.3d at 662 ("We examine the entire agreement and seek to harmonize and give effect to all provisions so that none will be meaningless.")
1. Preamble
The 2006 Contract's preamble creates and circumscribes the parties' intent. The relevant excerpts follow.
WHEREAS, the Parties entered into a Water Sale and Purchase Contract . . . , whereby the City contracted with [Kempner] for [Kempner] to (i) have constructed by [Central Texas] a water treatment plant and (ii) construct and operate a water transmission system designed, in part, to transport water from Stillhouse and deliver it to the City; and
. . .
WHEREAS, [Kempner] entered into a Wholesale Water Supply Contract with [Central Texas] dated May 16, 2000 . . . pursuant to which [Central Texas] agreed to withdraw, treat and transmit treated water reserved by [Kempner] and the City in Stillhouse to [Kempner] in accordance with the terms of that Contract; and
WHEREAS, the provisions of this Contract are substantially similar in intent and concept to the provisions of the 2001 Contract . . .
Originally, Central Texas and Kempner entered into a contract in 2001, but the parties renegotiated the 2001 contract and entered into the 2005 Contract.
The preamble demonstrates that Central Texas plays a prominent role in the water treatment process. See All Metals Fabricating, Inc. v. Ramer Concrete, Inc., 338 S.W.3d 557, 561 (Tex. App.—El Paso 2009, no pet.) ("The recitals may be looked to in determining the proper construction of the contract and the parties intent."). The City contracted with Kempner for Kempner to have Central Texas construct a water treatment plant and a transmission system to transport water from Stillhouse to the City. Moreover, the preamble expressly references the 2005 Contract, along with other prior agreements, pursuant to which Central Texas agreed to "withdraw, treat and transmit treated water" to Kempner "in accordance with the terms of that [c]ontract." Furthermore, the provisions of the 2006 Contract are "substantially similar in intent and concept to the provisions of the 2001 Contract[,]" and when the parties signed the 2006 Contract, they could not have intended for the City to pay Kempner for Kempner-treated water because Kempner's water treatment facility did not exist.
Additionally, section 4.7 recognizes that Kempner's ability to perform its obligations under the 2006 Contract is subject to Central Texas's performance of its contract with Kempner: "The parties acknowledge that [Kempner's] ability to perform some obligations under this Contract are subject to [Central Texas's] performance of the CTWSC Wholesale Contract. [Kempner] shall use its best efforts to ensure that each covenant and representation made by [Central Texas] in the CTWSC Wholesale Contract is performed[.]"
2. Definitions
Focusing on the definition of "treated water" in section 1.1, Kempner argues that because the term "treated water" does not restrict the treated water to only Central Texas-treated water, it therefore includes Kempner-treated water. According to Kempner, this broad definition entitles Kempner to charge the City for Kempner-treated water in addition to Central Texas-treated water costs. Kempner references its 2005 contract with Central Texas to support its argument; however, the 2005 contract, like the 2006 Contract at issue, lacks a definition of "treated water." According to Kempner, "If the City intended to strictly limit its obligations to pay Kempner for [Central Texas-treated water], all the City had to do was include that restriction in the recital . . . ." However, the omission of a limiting definition is not determinative. See Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006) ("[W]e do not give controlling effect to any single provision; instead, we read all of the provisions in light of the entire agreement."). The absence of any sufficiently clear and unequivocal language demonstrating the necessary intent is what is determinative. Tawes v. Barnes, 340 S.W.3d. 419, 429 (Tex. 2011). In that regard, if Kempner intended for the City to pay Kempner for water Kempner treats in addition to Central Texas-treated water costs, Kempner should have articulated so in the 2006 Contract. See Tenneco Inc. v. Enterprise Products Co., 925 S.W.2d 640, 646 (Tex. 1996) ("[C]ourts will not rewrite agreements . . . to imply restraints for which they have not bargained.").
3. Kempner's Water Treatment Facility
In relevant part, section 3.1(B)(1)(a) states:
[T]he City's current reserved capacity in the [Central Texas] Water Treatment Plant is 4.84 MGD. At such time as the City desires to receive delivery in excess of 4.84 MGD of treated water . . . , the City shall provide notice to [Kempner] that it requests additional water treatment capacity, in an amount up to 2.06 MGD. . . . At [Kempner's] option, [Kempner] may provide the added water treatment plant capacity from its water treatment plant instead of from [Central Texas] with the City to pay the reasonable costs as set forth above . . . . In the event the City seeks more than 6.9 MGD of water treatment capacity, the City shall pay the cost . . . (emphasis added)
Here, the parties agreed that Kempner may provide additional water from Kempner's water treatment plant instead of from the Central Texas water treatment plant if the City desired to receive water in excess of 4.84 MGD. According to Kempner, because the 2006 Contract acknowledged and anticipated Kempner's water treatment plant, this means the City intended to pay Kempner for Kempner-treated water should Kempner choose to provide it. We disagree. After reviewing section 3.1(B)(1)(a), we conclude it merely gives Kempner the option to provide Kempner-treated water instead of Central Texas-treated water only if the City desires treated water in excess of its reserved capacity. This provision does not allow Kempner to circumvent its obligation to provide the City with Central Texas-treated water. To hold otherwise would mean section 3.1(B)(1)(a) is superfluous and unnecessary because the parties would have already agreed on such a process—that is, Kempner would always be able to provide the City with its own treated water in addition to the City paying Kempner for Central Texas reimbursement costs. See Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118 (Tex. 1996) ("We presume that the parties to a contract intend every clause to have some effect.").
In such event, the City would be responsible for additional compensation to Kempner, but it is undisputed that the City has never exercised this option.
4. Comingled Water and Title to Water; Risk of Loss
Because Kempner may have to provide the City with Kempner-treated water if the City desires water in excess of its reserved capacity, the City recognized that Central Texas-water may be comingled with Kempner-treated water as reflected in sections 3.7 and 4.2. Section 3.7 provides:
The Parties recognize that [Kempner] proposes to construct its own water treatment plant, . . . and further recognize that it is possible that water treated by [Kempner] may be comingled with the water delivered by [Central Texas]. [Kempner] further warrants and agrees that water entering the City's Points of Delivery from any water treatment plant constructed and operated in [the] future by [Kempner] will meet applicable state and federal standards . . . .Kempner suggests that this section addresses the City's payment obligations regardless of the source of treated water as the water would be "comingled." But the purpose of this section is to require Kempner to comply with all state and federal standards. It certainly does not address the City's payment obligations. Instead, it is section 3.5 that requires the City to reimburse Kempner for costs Kempner incurs related to Central Texas-treated water.
Kempner argues that section 4.2 authorizes Kempner "to bill the City for all treated water passing through the City's meters (less backflow) and the City agrees to pay Kempner's bills for that water" because "title to all water supplied to the City shall be [Kempner's]."
[T]itle to all water supplied to the City shall be [Kempner's] up to the Points of Delivery at which point title shall pass to the City; (ii) risk of loss of water on the [Kempner] side of the Points of Delivery lies with [Kempner], and risk of loss on the City side of the Points of Delivery lies with the City; and (iii) the City shall only be billed for that water that passes through the meters at the Point of Delivery, less any amounts that backflow into the [Kempner] System.While this section indeed addresses title to water and the risk of loss depending on the location of the water, it does not address the City's payment obligations. The City is required to reimburse Kempner, regardless of title to the water supplied by Kempner.
5. Unreasonable, Inequitable, or Oppressive Result
According to Kempner, the City's interpretation—which prevailed in the trial court—results in an unreasonable, inequitable and oppressive result because Kempner would be providing the City with Kempner-treated "free water." We disagree with this assertion. First, the City did not contract with Kempner for Kempner to treat water. Second, the 2006 Contract still obligates the City to provide numerous benefits to Kempner, regardless of who treats the water. For example, the City is required to pay a portion of Kempner's debt service on facilities the City will never own; fees required to store the City's water in the reservoir; a percentage of Central Texas's and Kempner's operation and maintenance expenses; Kempner's energy costs of delivering water from the Central Texas delivery point to the City; and a percentage of Kempner's tank maintenance costs including payment of debts Kempner owes. Accordingly, we conclude that the City and trial court's interpretations are not unreasonable, inequitable, or oppressive as the City agreed to reimburse Kempner for Central Texas-treated water and the 2006 Contract provides numerous other benefits to Kempner.
6. Force Majeure Clause
Kempner argues that the force majeure clause validates its position that the City is required to pay Kempner for both Central Texas-treated water and Kempner-treated water because any other interpretation would require Kempner to provide the City with Kempner-treated water without additional compensation. However, the force majeure clause does not delineate the payment obligations set forth in section 3.5. If Central Texas breaches its contractual obligations with Kempner by not providing Kempner with treated water in accordance with the 2005 Contract (which is then delivered to the City by Kempner), the costs and fees associated with that breach does not rest with the City, but with Kempner and Central Texas. Accordingly, Kempner's argument that it would provide "free water" to the City falls short.
C. Summary
The 2006 Contract's plain language when read in the context has only one reasonable interpretation: the City agreed to pay Kempner for costs Kempner incurred for water treated by Central Texas. See URI, 543 S.W.3d at 757 ("'Objective, not subjective, intent controls,' so the focus is on the words the parties chose to memorialize in their agreement."). If the parties intended to obligate the City to pay Kempner for water that Kempner treats in addition to reimbursing Kempner for Central Texas-treated water, then the parties could have articulated so. See id. at 770. Instead, the parties adopted a process that would be nugatory under Kempner's construction of the contract. Therefore, we conclude that the City conclusively established that Kempner breached its duty pursuant to the 2006 Contract by charging the City for Kempner-treated water. Because we determine that Kempner breached the 2006 Contract, we next determine whether the City's damages as a result of the breach are supported by legally sufficient evidence.
IV. DAMAGES
By its second issue, Kempner argues that the trial court's award of $117,432.27 of actual damages is not supported by legally sufficient evidence. In support of the City's motion for summary judgment, the City incorporated an affidavit from City Manager Finley DeGraffenried, which included itemized invoices from Kempner for the months of July, August, and September of 2013. Kempner asserts that DeGraffenried's affidavit is "remarkably cursory" and fraught with too many discrepancies to be considered conclusive. The City responds that the trial court's award was adequately supported by the City's summary judgment evidence, including Kempner's own invoices. Moreover, the City argues that Kempner did not challenge the amount of damages at the trial court and cannot do so for the first time on appeal.
A. Standard of Review
As the party moving for traditional summary judgment, the City had the burden to submit sufficient evidence that established on its face that "there is no genuine issue as to any material fact" and that it is "entitled to judgment as a matter of law." TEX. R. CIV. P. 166a(c); see Broussard v. Moon, 431 S.W.2d 534, 536-37 (Tex. 1968). When a movant meets the burden of establishing each element of the claim or defense on which it seeks summary judgment, the burden then shifts to the non-movant to disprove or raise an issue of fact as to at least one of those elements. See Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507, 511 (Tex. 2014); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678-79 (Tex. 1979) (discussing evolution and the purpose of shifting burdens in summary judgment practice). But if the movant does not satisfy its initial burden, then the burden does not shift, and the non-movant need not respond or present any evidence. See Amedisys, 437 S.W.3d at 511. "The nonmovant has no burden to respond to a summary judgment motion unless the movant conclusively establishes its cause of action or defense. The trial court may not grant summary judgment by default because the nonmovant did not respond to the summary judgment motion when the movant's summary judgment proof is legally insufficient." Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222-23 (Tex. 1999) (citations omitted).
In this case, the City had the burden to submit sufficient evidence to support its claim for $117,432.27 in damages. Kempner contends that DeGraffenried's affidavit on which the City relies does not establish that amount of damages. Kempner further argues that the affidavit raises burden-of-proof issues "replete with mathematical inconsistencies, ambiguities and unsubstantiated assumptions." We therefore review DeGraffenried's affidavit, and any other summary judgment evidence, to determine whether it constitutes legally sufficient evidence that the City is entitled to $117,432.27 in damages. If we find the City produced sufficient evidence of $117,432.27 in damages, it was uncontroverted evidence because Kempner did not present any evidence to disprove or create a fact issue on the City's calculations. But if we find insufficient evidence of $117,432.27 in damages, the City did not satisfy its burden of proof and was not entitled to summary judgment.
B. Measure of Damages
The measure of damages for a breach of contract is the benefit-of-the-bargain measure, the purpose of which is to restore the injured party to the economic position it would have been in had the contract been performed. Mays v. Pierce, 203 S.W.3d 564, 577 (Tex. App.—Houston [14th Dist.] 2006, pet. denied). A party should not receive less or more than the actual damages he incurred. Davis v. Chaparro, 431 S.W.3d 717, 726 (Tex. App.—El Paso 2014, pet. denied). "The ultimate goal in measuring damages for a breach-of-contract claim is to provide just compensation for any loss or damage actually sustained as a result of the breach." Id. (citing Walden v. Affiliated Computer Servs., Inc., 97 S.W.3d 303, 328 (Tex. App.—Houston [14th Dist.] 2003, pet. denied)). "Where damages evidence does not relate to the amount of damages sustained under the proper measure of damages, that evidence is both irrelevant and legally insufficient to support a judgment." Garza de Escabedo v. Haygood, 283 S.W.3d 3, 6 (Tex. App.—Tyler 2009), aff'd, 356 S.W.3d 390 (Tex. 2011).
C. Analysis
1. Summary Judgment Evidence
The trial court's summary-judgment order states that the City is entitled to $117,432.27 in damages; however, the summary judgment evidence is legally insufficient to support the City's damages in this amount as a result of Kempner's breach. The only evidence of damages supplied by the City was the affidavit of DeGraffenried, in which his own admissions are contradictory. Specifically, his affidavit avers as follows:
Damages
13. The City's damages include amounts improperly charged by Kempner which the City has paid under protest during this dispute:
• $74 ,884.22. On September 20, 2013, out of an abundance of caution . . . , the City paid "under protest" as billed improperly under the Contract $70,884.22, the amount represented on Kempner's September 11, 2013 bill for August usage as a $14,747.76 "outstanding balance," plus interest, and as $54,868.98 of "water audit billing," plus interest. Charges included in the "outstanding balance" include improper charges in the "revised" July 2013 bill forwarded by Mr. Lindner, including (i) $5,833.89 for Kempner-treated water, (ii) a floor penalty of $1,852.69, despite the City's demand having exceeded the floor, and (iii) $1,878.21 for a [Central Texas] Contribution Charge for Kempner[-]treated water. The $70,884.22 also includes a $54,868.98 charge for "Water Audit Billing," plus interest, despite applicable payments having been approved often years before during the annual "true-up" process . . . .
• $42 ,548.05. On October 15, 2013, the City paid under protest $42,548.05 which was improperly billed under the Contract on Kempner's October 5, 2013 bill. A certified copy of that bill is attached to this affidavit as Exhibit 14. The improper charges include: (i) $$2,487.59 [sic] for Kempner-treated water, and (ii) a "floor" penalty of $6,951.01, despite the City's demand having exceeded the floor.
The outstanding balance of $14,747.76 is reflected in Kempner's September 2013 invoice and attached to DeGraffenried's affidavit as exhibit A-13.
The sum of $3,644.09 and $2,189.80 for Kempner-treated water is $5,833.89 as reflected in Kempner's August 2013 invoice and attached to DeGraffenried's affidavit as exhibit A-11.
The outstanding balance of $42,548.05 is reflected in Kempner's October 2013 invoice and attached to DeGraffenried's affidavit as exhibit A-14.
The City asserts that DeGraffenried's affidavit and the attached invoices were sufficient evidence to prove $117,432.27 in damages, however, it concedes that $74,884.22 is not the correct amount that the City paid under protest. According to the City, there is a "math error in which [DeGraffenried] mistakenly described his $70,844.22 payment as a $74,844.22 payment" in addition to a "one cent math error." Instead, according to the City, the amount the City paid under protest for the month of September was $70,884.21. We construe the City's concession regarding the discrepancy in DeGraffenried's affidavit as a concession that it does not support the trial court's award of $117,432.27 in damages. Furthermore, the City claims the "outstanding balance" of $14,747.76 is the sum of $5,833.89 (Kempner-treated water), $1,852.69 (floor penalty), and $1,878.21 (Central Texas capital contribution charge for Kempner-treated water). However, the sum of these amounts is only $9,564.79. Accordingly, the City's own summary judgment evidence raises a material issue of fact regarding the amount of damages. See Baeza v. Hector's Tire & Wrecker Serv., Inc., 471 S.W.3d 585, 588 (Tex. App.—El Paso 2015, no pet.); Profitlive P'ship v. Surber, 248 S.W.3d 259, 262 (Tex. App.—Fort Worth 2007, no pet.).
Moreover, the City prevailed on only two theories that would support damages: Kempner breached the 2006 Contract by charging the City for Kempner-treated water and by charging the City for "floor" charges. Therefore, the amount of damages the trial court could have awarded was limited to these two liabilities. After reviewing the summary judgment evidence, it is unclear how $54,868.98 for "water audit billing" supports any damages the City incurred as a result of Kempner charging the City for Kempner-treated water. To illustrate, DeGraffenried testified by affidavit that September's $14,747.76 "outstanding balance" included: (1) $5,833.89 for Kempner-treated water; (2) a "floor' penalty of $1,852.69; and (3) a Central Texas capital contribution charge of $1,878.21 for Kempner—not Central Texas—treated water, all of which the City prevailed on in the trial court. Yet, according to DeGraffenried, Kempner improperly charged the City $54,868.98 for "water audit billing" "despite applicable payments having been approved often years before during the annual 'true-up' process." It is unclear how damages for "water audit billing" support the City's theories of liability for which the City prevailed. In fact, DeGraffenried's statement of improper "water audit billing" charges despite applicable payments having been approved years before, contradicts the City's original petition regarding "water audit billing." In its original petition, the City alleged the "entire amount" Kempner charged for "water audit billing" was the following: Kempner-treated water; Central Texas operations and maintenance expenses, Central Texas capital investment costs, and Kempner operations and maintenance expenses, "for all of which Kempner's billing is impermissible." None of these charges, however, relate to Kempner-treated water. Thus, the summary judgment evidence raises a genuine issue of material fact because according to the City, at least some of the "water audit billing" charges were for expenses that were not at issue at the trial court. As such, we conclude that there was no basis for the trial court to have considered "water audit billing" charges in making its determination of the proper award of damages for Kempner-treated water. Under these circumstances, we cannot conclude that the calculations in DeGraffenried's affidavit are legally sufficient to prove as a matter of law damages of $117,432.27.
We note that Kempner does not contest its liability with respect to the City's breach of contract claim based on the "floor" charge.
To support damages for "water audit billing," the City included deposition testimony from Kempner's General Manager, Delores Goode. She testified that "water audit billing" charges between 2010 and 2013 were subject to Kempner's interpretation of the 2006 Contract, but she did not provide any testimony as to how the amount was calculated or related to Kempner-treated water.
The record does not show that Kempner objected to the measure of damages or otherwise raised the issue in the trial court. However, an attack on the legal sufficiency of the grounds raised by a summary-judgment movant is an exception to the general rule that "[i]ssues not expressly presented to the trial court by written motion, answer, or other response shall not be considered on appeal as grounds for reversal." TEX. R. CIV. P. 166a(c); McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 343 (Tex. 1993). Because the City did not conclusively prove it incurred damages of $117,432.27 and it concedes as much, Kempner did not need to present summary judgment evidence to rebut this amount.
2. Burden of Proof
The shifting burden of proof in the summary judgment context is important to the discussion of this case. If the City's calculations in DeGraffenried's affidavit would have been legally sufficient evidence of $117,432.27 in damages, then the City would have been entitled to summary judgment as Kempner did not present any evidence to disprove or create a fact issue on the City's calculations. Here, however, the City's calculations, which it concedes, did not constitute legally sufficient evidence of $117,432.27 in damages. Because the City did not satisfy its initial summary judgment burden, the burden did not shift to Kempner to produce evidence raising an issue of fact. See McConnell, 858 S.W.2d at 343 ("[S]ummary judgments must stand or fall on their own merits, and the non-movant's failure to answer or respond cannot supply by default the summary judgment proof necessary to establish the movant's right.").
Nevertheless, while there is insufficient evidence to support the entire amount of the trial court's award, there is sufficient evidence to demonstrate that the City suffered some amount of damages as the result of Kempner's breach of contract. However, because we cannot discern the correct amount of those damages given the conflict in the evidence, we are unable to render judgment in favor of the City in a lesser dollar amount. See Formosa Plastics Corp. USA v. Presidio Engineers & Contractors, Inc., 960 S.W.2d 41, 51 (Tex.1998) (reversing and remanding the case to the trial court for a new trial where there was "no legally sufficient evidence to support the entire amount of damages, but there [was] some evidence of the correct measure of damages"). We therefore reverse the judgment of the trial court and remand the cause for a new trial on the issue of the amount of damages to be awarded to the City. TEX. R. APP. P. 43.2(d); Baeza, 471 S.W.3d at 588 (Tex. App.—El Paso 2015, no pet.) (reversing and remanding for a new trial on damages when the evidence was sufficient to prove a breach of contract and some damages sustained by the plaintiff but was insufficient to prove the amount the trial court awarded). We sustain Kempner's second issue. We further hold that the City is entitled to $333,563.00 in attorney's fees pursuant to the parties' stipulation because the City prevailed on appeal and will recover damages.
V. CONCLUSION
Having overruled Kempner's first issue, we affirm the portion of the judgment granting summary judgment on the City's claims. Having sustained the portion of Kempner's second issue challenging the amount of damages awarded to the City, we reverse the trial court's judgment awarding damages of $117,432.27 and remand the cause to the trial court for further proceedings consistent with this opinion.
GINA M. BENAVIDES,
Justice Delivered and filed the 31st day of January, 2019.