Wasson Interests, Ltd. v. City of Jacksonville, Texas, 559 S.W.3d 142

City of Jacksonville built Lake Jacksonville as a municipal water supply and later leased lakefront lots to private parties under long-term leases that incorporated the City’s lake rules restricting use to residential purposes.
Wasson Interests (successor to original lessees) used the property for short-term rentals and events contrary to rules; the City terminated the leases, reinstated them with stricter terms, then terminated them again alleging violations.
Wasson sued for breach of the leases; the City moved for summary judgment asserting governmental immunity among other defenses; trial court granted summary judgment and court of appeals affirmed based on immunity.
Texas Supreme Court in Wasson I held the governmental/proprietary dichotomy applies to contract claims and remanded to determine whether the lease was entered in a governmental or proprietary capacity.
On remand the court of appeals found the lease termination was a governmental act; this Court granted review and decided the proper inquiry is the nature of the function when the municipality entered the contract.
The Supreme Court holds the City acted in a proprietary capacity when it leased the lakefront lots, so governmental immunity does not bar Wasson’s breach-of-contract claim; case remanded for further proceedings on other grounds.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether governmental/proprietary dichotomy applies to municipal breach-of-contract claims	Wasson: dichotomy applies; focus on nature of the contract when entered	City: focus should be on the actions complained of (the breach/enforcement)	Dichotomy applies; analyze the nature of the municipality’s conduct when it entered the contract
If dichotomy applies, which function controls—contracting act or breaching act?	Wasson: determine function at time of contracting	City: determine function of the act complained of (termination/enforcement)	Court: focus on the nature of the contract (function when contract was entered), not the nature of the breach
Whether the City was acting in a governmental or proprietary capacity when it leased lakefront lots	Wasson: leasing was discretionary and primarily for city residents—proprietary	City: leasing relates to operation of a governmental water reservoir—governmental	Court: leasing was discretionary, primarily benefitted residents, done on City’s own behalf, and not essential to governmental waterworks—proprietary
Consequence for immunity and remand	Wasson: immunity does not bar suit; remand for other defenses	City: immunity bars the claim	Held: governmental immunity does not bar Wasson’s breach claim; reversed and remanded for consideration of other summary-judgment grounds

Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006) (explains governmental/proprietary dichotomy and scope of municipal immunity)
Gates v. City of Dallas, 704 S.W.2d 737 (Tex. 1986) (defines proprietary functions and their typical beneficiary focus)
City of Corpus Christi v. Gregg, 289 S.W.2d 746 (Tex. 1956) (city acted in proprietary capacity when making leases)
City of Houston v. Shilling, 240 S.W.2d 1010 (Tex. 1951) (proprietary operations closely related to governmental functions are not automatically governmental)
Wheelabrator Air Pollution Control, Inc. v. City of San Antonio, 489 S.W.3d 448 (Tex. 2016) (applies Wasson I principle that contracting capacity controls immunity for contract claims)
City of Galveston v. Posnainsky, 62 Tex. 118 (Tex. 1884) (discusses municipalities acting as a branch of the state vs. for local benefit)
PKG Contracting, Inc. v. City of Mesquite, 197 S.W.3d 388 (Tex. 2006) (example where contracting was governmental and immunity applied)