C. Borunda Holdings, Inc. v. Lake Proctor Irrigation Auth. of Comanche Cnty.
540 S.W.3d 548
Tex.2018Background
- Borunda operated pecan orchards and contracted with Lake Proctor Irrigation Authority (a political subdivision) for water under 2012–2013 agreements; Lake Proctor sued for underpayments (~$111k).
- Borunda filed counterclaims alleging breach and fraud, asserting drought-induced tree losses and seeking damages and an offset against Lake Proctor’s claim.
- Lake Proctor recorded a crop lien and lis pendens; Borunda paid $118,045.52 to remove them but continued to press its counterclaims for an offset of that payment.
- Lake Proctor later nonsuited its affirmative claims after obtaining the payment and moved for summary judgment that Borunda could not recover an offset because the governmental plaintiff no longer pursued damages.
- Trial court granted summary judgment for Lake Proctor; the court of appeals affirmed. The Supreme Court granted review to decide whether Borunda may pursue an offset against the recovery Lake Proctor obtained via lien and lis pendens.
Issues
| Issue | Plaintiff's Argument (Lake Proctor) | Defendant's Argument (Borunda) | Held |
|---|---|---|---|
| Whether governmental immunity bars Borunda's defensive, germane counterclaims after nonsuit | Nonsuit reinstates immunity; no affirmative recovery remains, so no offset possible | Immunity was not reinstated by nonsuit; Borunda kept right to counterclaims | Rejected plaintiff: immunity did not bar the counterclaims (Reata/Albert controls) |
| Whether Borunda can obtain an offset when plaintiff recovered by lien/lis pendens and then nonsuited | Payment was voluntary; Borunda should have deposited funds or used Property Code procedure; thus no offset | Recovery via litigation process (lien/lis pendens) is a recoverable amount subject to offset | Favoring defendant: offset allowed against the amount recovered by Lake Proctor via lien/lis pendens |
| Whether the nonsuit defeats the merits of counterclaims seeking only an offset | Once nonsuited, no recovery remains to offset; summary judgment appropriate | Nonsuit after obtaining recovery does not extinguish defendant’s right to offset that recovery | Rejected plaintiff on the merits: Borunda can litigate counterclaims to offset the recovered amount |
| Whether permitting offset would implicate taxpayer protection or unfairly disrupt fiscal planning | Allowing refunds would disrupt fiscal planning / treasury | Any refund is the return of litigation recovery; no tax resources implicated; fundamental fairness supports offset | Favoring defendant: refund would not call on tax resources and fairness requires permitting counterclaims up to recovered amount |
Key Cases Cited
- Reata Constr. Corp. v. City of Dallas, 197 S.W.3d 371 (Tex. 2006) (governmental immunity does not extend to defensive counterclaims that offset the government’s monetary recovery)
- City of Dallas v. Albert, 354 S.W.3d 368 (Tex. 2011) (nonsuit of affirmative claims does not reinstate immunity from previously actionable defensive counterclaims)
- City of Galveston v. State, 217 S.W.3d 466 (Tex. 2007) (policy reasons supporting permitting offsets: protect public fisc and fairness)
- Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407 (Tex. 2011) (illustrates that offset disappears when governmental recovery is defeated on the merits)
- City of Dallas v. Martin, 361 S.W.3d 560 (Tex. 2011) (nonsuit does not reinstate immunity from suit)