IN THE SUPREME COURT OF TEXAS

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No. 17-0198 

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WASSON INTERESTS, LTD., PETITIONER, 

v. 

CITY OF JACKSONVILLE, TEXAS, RESPONDENT

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ON PETITION FOR REVIEW FROM THE

COURT OF APPEALS FOR THE TWELFTH DISTRICT OF TEXAS

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Argued February 27, 2018 

JUSTICE BOYD delivered the opinion of the Court: 

Having granted Petitioner’s motion for rehearing, we withdraw the judgment and opinion 

we issued on June 1, 2018. 

This case comes to us for the second time. As we explained the first time, “we have long 

held that ‘[a] municipality is not immune from suit for torts committed in the performance of 

its proprietary functions, as it is for torts committed in the performance of 

its governmental functions.’” Wasson Interests, Ltd. v. City of Jacksonville (Wasson I), 489 

S.W.3d 427, 430 (Tex. 2016) (quoting Tooke v. City of Mexia, 197 S.W.3d 325, 343 (Tex. 2006)).1

As a matter of first impression, we held that this governmental/proprietary dichotomy “applies in 

the contract-claims context just as it does in the tort-claims context.” Id. at 439. The issue now is 

                                                1

 This case concerns immunity from suit, not liability. See Wasson I, 489 S.W.3d at 430 n.4. (“When the 

government contracts with private citizens, it waives immunity from liability, but not its immunity from suit.”).
2 

whether the contract claim arises from the municipality’s performance of a governmental or 

proprietary function. We hold that it arises from the municipality’s performance of a proprietary 

function, so governmental immunity does not apply. We reverse the court of appeals’ judgment 

and remand the case to the court of appeals. 

I. 

Background 

The City of Jacksonville constructed Lake Jacksonville in the late 1950s to serve as the 

City’s primary source of water. Over the next several decades, the City developed the surrounding 

area and began leasing lakefront lots to private parties. In 1996, James and Stacy Wasson entered 

into long-term leases of City-owned lakefront lots and constructed a seven-bedroom house. The 

lease agreements incorporated the City’s Rules & Regulations Governing Lake Jacksonville by 

reference. Those rules provide that all lots outside the City’s corporate limits—which include the 

Wassons’ lots—“shall be restricted to residential purposes only,” and that no lot may be used to 

operate a “business or commercial enterprise.” The rules also provide that breach of “any of the 

regulations . . . shall be grounds for cancellation of the lessee’s lease.” 

The Wassons initially lived on the property but later moved and assigned the leases 

to Wasson Interests, Ltd. Planning to use the property as a bed-and-breakfast and event center, 

Wasson sought several variances from the Lake Jacksonville Advisory Board and the City Council, 

although it believed the variances were unnecessary. The Board denied the requests. Undeterred, 

Wasson began advertising and renting the property for short lease terms, weddings, and other 

events. The City determined these activities violated the leases’ requirement that the property be 

used only for residential purposes and threatened to terminate the leases unless Wasson ceased the 

business-related rentals. 
3 

In June 2010, the City terminated Wasson’s leases and issued an eviction notice. A few 

months later, the parties negotiated an agreement that reinstated the leases and permitted Wasson 

to rent the property to single families and small groups, but only for periods of a month or longer 

and only for private residential purposes. In early 2011, the City again terminated the leases, 

alleging that Wasson had been using a “sham monthly residential agreement” to “circumvent” the 

reinstatement agreement and use the property for “commercial” activities. Wasson filed this suit 

in response, alleging the City breached the lease agreements and seeking declaratory and injunctive 

relief. The City moved for summary-judgment on the grounds that (1) governmental immunity 

bars Wasson’s breach-of-contract claim, (2) immunity is not waived, (3) the City and Wasson did 

not enter into a valid, enforceable contract, (4) Wasson did not perform under the contract and its 

non-performance was not excused, and (5) the City did not breach the contract. The trial court 

granted the City’s motion without comment, and Wasson appealed. 

The court of appeals affirmed based on governmental immunity, rejecting Wasson’s 

argument that the governmental/proprietary dichotomy applies to breach-of-contract claims.2

 We 

reversed, holding that the dichotomy applies “whether a city commits a tort or breaches a contract.” 

Wasson I, 489 S.W.3d at 439. Because the court of appeals had not addressed “whether the contract 

at issue was proprietary or governmental,” we remanded for a determination of that issue. Id. On 

remand, the court of appeals held that Wasson’s contract claim arose from the City’s performance 

of a governmental function, and thus governmental immunity applied to bar the claim. 513 S.W.3d 

at 222–23. We again granted Wasson’s petition for review. 

                                                2 Wasson Interests, Ltd. v. City of Jacksonville, — S.W.3d —, No. 12–13–00262–CV, 2014 WL 3368413, at 

*3–4 (Tex. App.—Tyler July 9, 2014) (mem. op.), rev’d, 489 S.W.3d 427. 
4 

II. 

The Dichotomy 

“Municipal corporations exercise their broad powers through two different roles; 

proprietary and governmental.” Gates v. City of Dallas, 704 S.W. 2d 737, 738 (Tex. 1986). The 

governmental/proprietary dichotomy recognizes that immunity protects a governmental unit from 

suits based on its performance of a governmental function but not a proprietary function. Wasson 

I, 489 S.W.3d at 430. “Unlike governmental functions, for which municipal corporations have 

traditionally been afforded some degree of governmental immunity, proprietary functions have 

subjected municipal corporations to the same duties and liabilities as those incurred by private 

persons and corporations.” Gates, 704 S.W.2d at 739. 

The governmental/proprietary dichotomy is based on the reality that sovereign immunity 

is inherent in the State’s sovereignty, and municipalities share that protection when they act “as a 

branch” of the State but not when they act “in a proprietary, non-governmental capacity.” Wasson 

I, 489 S.W.3d at 430. Whether a municipality enjoys immunity from suit thus depends on “the 

relationship, or lack thereof, between the municipality and the state, not the relationship between 

the municipality and the party bringing suit.” City of Georgetown v. Lower Colo. River Auth., 413 

S.W.3d 803, 811 (Tex. App.—Austin 2013, pet. dism’d). 

The distinction between a municipality’s governmental and proprietary functions “seems 

plain enough, but the rub comes when it is sought to apply the test to a given state of facts.” City 

of Houston v. Wolverton, 277 S.W.2d 101, 103 (Tex. 1955). As we noted in Wasson I, “determining 

which functions are proprietary and which are governmental is not always a cut-and-dried task.” 

489 S.W.3d at 438. “It is in the application of this rule to a particular fact situation that the difficulty 

arises.” City of Houston v. Shilling, 240 S.W.2d 1010, 1012 (Tex. 1951). 
5 

We have explained that, “generally,” governmental functions consist of a municipality’s 

activities “in the performance of purely governmental matters solely for the public benefit.” Tooke, 

197 S.W.3d at 343 (quoting Dilley v. City of Houston, 222 S.W.2d 992, 993 (Tex. 1949)). 

Historically, governmental functions have consisted of activities “normally performed by 

governmental units” such as “police and fire protection.” Joe R. Greenhill and Thomas V. Murto 

III, Governmental Immunity, 49 TEX. L. REV. 462, 463 (1971) [hereinafter Greenhill]. “Acts done 

as a branch of the state—such as when a city ‘exercise[s] powers conferred on [it] for purposes 

essentially public . . . pertaining to the administration of general laws made to enforce the general 

policy of the state’—are protected by immunity.” Wasson I, 489 S.W.3d at 433 (quoting City of 

Galveston v. Posnainsky, 62 Tex. 118, 127 (1884)). 

Proprietary functions, by contrast, are those “performed by a city, in its discretion, 

primarily for the benefit of those within the corporate limits of the municipality,” and “not as an 

arm of the government.” Gates, 704 S.W.2d at 739; Dilley, 222 S.W.2d at 993. These are usually 

activities “that can be, and often are, provided by private persons.” Greenhill at 463. “Acts that are 

proprietary in nature, therefore, are not done as a branch of the state,” and thus “do not implicate 

the state’s immunity for the simple reason that they are not performed under the authority, or for 

the benefit, of the sovereign.” Wasson I, 489 S.W.3d 427. 

Although we have recognized the governmental/proprietary dichotomy as a matter of 

common law, the Texas Constitution authorizes the Legislature to “define for all purposes those 

functions of a municipality that are to be considered governmental and those that are proprietary, 

including reclassifying a function’s classification assigned under prior statute or common law.”

TEX. CONST. art. XI, § 13. Exercising that authority, the Legislature has defined and enumerated 
6 

governmental and proprietary functions for the purposes of determining whether immunity applies 

to tort claims against a municipality. See TEX. CIV. PRAC. & REM. CODE § 101.0215. 

The Tort Claims Act generally defines governmental functions as those “that are enjoined 

on a municipality by law and are given it by the state as part of the state’s sovereignty, to be 

exercised by the municipality in the interest of the general public.” Id. § 101.0215(a). The Act 

enumerates thirty-six governmental functions, ranging from “police and fire protection and 

control” to “animal control.” See id. § 101.0215(a)(1), (33). Conversely, the Act defines 

proprietary functions as those “that a municipality may, in its discretion, perform in the interest of 

the inhabitants of the municipality.” Id. § 101.0215(b). The Act provides a non-exclusive list of 

propriety functions, such as “the operation and maintenance of a public utility;” “amusements 

owned and operated by the municipality”; and “any activity that is abnormally dangerous or 

ultrahazardous.” Id. Proprietary functions, however, do not include any of the Act’s enumerated 

governmental functions. Id. § 101.0215(c). 

Although these statutory definitions and designations apply expressly to tort claims, we 

explained in Wasson I that they can also “aid our inquiry” when applying the dichotomy in the 

contract-claims context. Wasson I, 489 S.W.3d at 439. We thus consider both the statutory 

provisions and the common law in determining whether a city’s contractual conduct is 

governmental or proprietary. 

III. 

The City’s Relevant Activity 

The parties dispute which of the City’s various activities are relevant to the 

governmental/proprietary inquiry. The City asserts that immunity applies because all of its 

activities constituted governmental functions, including its creation of Lake Jacksonville as a water 
7 

supply, its decision to lease the property surrounding the lake, its adoption of ordinances and rules 

governing use of the leased property, and its attempt to enforce those rules against Wasson. And 

if one or more of these activities is not relevant, the City argues, its attempt to enforce the rules 

against Wasson is independently controlling because Wasson bases its breach-of-contract claim 

on that conduct. 

The court of appeals agreed with the City and considered all of the “specific acts” 

underlying Wasson’s claims.” 513 S.W.3d at 221–22. In particular, the court focused on “the 

City’s act of enforcing its ordinance to prevent commercial activity and terminate [Wasson’s] 

lease” because that “act form[s] the basis of” Wasson’s claim. Id. at 222. Concluding that the City 

performed that act as a “government function to maintain a safe and healthy water supply for its 

citizens and to preserve the property values of the lease lots,” the court held that governmental 

immunity applies. Id. at 222–23. 

Wasson, however, argues the only relevant activity is the City’s decision to lease the 

property. Instead of focusing on the City’s reasons for creating the lake or engaging in the conduct 

that allegedly breached the contract, Wasson contends the court of appeals should have focused 

on the nature of the City’s conduct when it entered into the lease agreements—the “City’s decision 

to lease the surrounding area for private use.” 

We agree with Wasson. When we decided in Wasson I that the dichotomy applies to 

breach-of-contract claims, we noted that the court of appeals had not “address[ed] whether the 

lease contract was entered into in the city’s proprietary or governmental capacity.” Wasson I, 489 

S.W.3d at 430 (emphasis added). We remanded the case for the court to consider “whether the 

contract at issue was proprietary or governmental,” not whether the City breached the contract in 
8 

either capacity. Id. at 439 (emphasis added). Contrary to the court of appeals’ understanding, we 

did not remand for the court to “determine whether the [City’s] actions in terminating” the lease 

“is a governmental or proprietary function.” 513 S.W.3d at 219 (emphasis added). 

Despite our directive in Wasson I, the City argues that the court of appeals properly focused 

on the nature of “the actions complained of,” quoting City of Houston v. Downstream 

Environmental, L.L.C., 444 S.W.3d 24, 32 (Tex. App.—Houston [1st Dist.] 2014, pet. denied) (“In 

determining whether a governmental entity is immune from suit, we consider whether the actions 

complained of were in furtherance of governmental or proprietary functions.”). Downstream cited 

Tooke as authority, but we said no such thing in Tooke. We explained in Tooke that a “municipality 

is not immune from suit for torts committed in the performance of its proprietary functions, as it 

is for torts committed in the performance of its governmental functions.” 197 S.W.3d at 343 

(emphases added). But we did not apply that rule to “breaches committed” in the breach-ofcontract context. To the contrary, we explained in Tooke that “even if the City were not immune 

from suit for breach of a contract whose subject lies within its proprietary functions, the Tookes’ 

contract [did] not qualify” because that contract involved governmental functions like “garbage 

and solid waste removal, collection, and disposal.” Id. at 343–44. Although we did not decide 

whether the dichotomy applies to breach-of-contract claims in Tooke, we suggested that if it did, 

the contract’s nature would determine the city’s immunity, not the nature of the breach. 

In addition to Tooke, we have suggested in other cases that courts should focus on the 

nature of the municipality’s contracting conduct, not the nature of its breaching conduct. In City 

of Corpus Christi v. Gregg, for example, we held that the city’s suit to cancel oil-and-gas-leases 

was subject to estoppel because the city acted in its proprietary capacity when “making the leases 
9 

upon which suit was brought.” 289 S.W.2d 746, 750 (Tex. 1956). In Gates, we held that a city that 

breached an insurance contract by failing to pay benefits was subject to statutory attorney’s fees 

because it acted in its proprietary capacity when it “entered into the insurance contract.” 704 

S.W.2d at 739. In PKG Contracting, Inc. v. City of Mesquite, we held that immunity barred a 

breach-of-contract claim against the city because the city “was acting in its governmental capacity 

when it contracted with PKG to construct a storm drainage system.” 197 S.W.3d 388, 389 (Tex. 

2006) (per curiam). And in Wheelabrator Air Pollution Control, Inc. v. City of San Antonio, in 

which we first applied our holding in Wasson I, we held that governmental immunity did not shield 

the city from a claim for attorney’s fees for breaching a contract to install pollution-control 

equipment in a city power plant because the city’s actions “in entering the contract” were 

proprietary. 489 S.W.3d 448, 450 (Tex. 2016). 

On the surface, focusing on the breaching conduct may seem reasonable to decide whether 

immunity applies to a breach-of-contract claim against a municipality. The dichotomy, however, 

is a tool with a particular purpose: it determines whether a municipality shares the State’s sovereign 

immunity because it was acting “as a branch” of the State, or whether it lacks immunity because 

it was acting “on its own behalf.” Wasson I, 489 S.W.3d at 436. We do not see how a city can act 

as a branch of the State when it breaches a contract it entered on its own behalf and in its proprietary 

capacity. Even if the City terminated Wasson’s leases to enforce the rules that protect the City’s 

water supply, the rules only applied to Wasson because the leases incorporated them by reference, 

and the City would have had no reason to terminate the leases had it not agreed to them in the first 

place. Enforcing rules that protect a city’s water supply is one matter, but it is another matter to 

terminate a contract that incorporates those rules. 
10 

We hold that, to determine whether governmental immunity applies to a breach-of-contract 

claim against a municipality, the proper inquiry is whether the municipality was engaged in a 

governmental or proprietary function when it entered the contract, not when it allegedly breached 

that contract. Stated differently, the focus belongs on the nature of the contract, not the nature of 

the breach. If a municipality contracts in its proprietary capacity but later breaches that contract 

for governmental reasons, immunity does not apply. Conversely, if a municipality contracts in its 

governmental capacity but breaches that contract for proprietary reasons, immunity does apply. 

This approach is most consistent with the purposes of both immunity and the 

governmental/proprietary dichotomy, and it provides clarity and certainty regarding the 

contracting parties’ rights and liabilities. 

IV. 

The Nature of the City’s Activity 

In light of our holding, we must determine whether the City acted in its governmental or 

proprietary capacity when it leased the lakefront lots to the Wassons. Because the Tort Claims Act 

does not enumerate leasing property as a governmental or a proprietary function, we must apply 

the general definitions. As explained, governmental functions “are enjoined on a municipality by 

law and are given it by the state as part of the state’s sovereignty, to be exercised by the 

municipality in the interest of the general public.” TEX. CIV. PRAC. & REM. CODE § 101.0215(a). 

And proprietary functions are those “that a municipality may, in its discretion, perform in the 

interest of the inhabitants of the municipality.” Id. § 101.0215(b). 

Applying these definitions in light of the parties’ arguments in this case, we consider 

whether (1) the City’s act of entering into the leases was mandatory or discretionary, (2) the leases 

were intended to benefit the general public or the City’s residents, (3) the City was acting on the 
11 

State’s behalf or its own behalf when it entered the leases, and (4) the City’s act of entering into 

the leases was sufficiently related to a governmental function to render the act governmental even 

if it would otherwise have been proprietary. We conclude that the City acted in its proprietary 

capacity when it leased the property to the Wassons. 

A. Mandatory or discretionary 

The City’s decision to lease its lakefront property to the Wassons was discretionary. “To 

carry out a municipal purpose, the municipality may . . . lease . . . property located in or outside 

the municipality,” but nothing requires it to do so. TEX. LOC. GOV’T CODE § 51.015(a) (emphasis 

added); see TEX. GOV’T CODE § 311.016(1) (“‘May’ creates discretionary authority or grants 

permission or a power.”). That is why we and the courts of appeals have routinely held that a city’s 

decision to lease city-owned property for private use may constitute a proprietary function.3

 After 

all, the discretionary management of property has served as a fundamental underpinning of the 

dichotomy for over one-hundred years. See Posnainsky, 62 Tex. at 131 (noting that municipalities 

are not exempt from liability “in managing or dealing with property or rights held by them for their 

own advantage or emolument”). 

As we observed in Wasson I, a city can control its contractual liabilities by “refusing to 

enter into the contract.” 489 S.W.3d at 437 n.10. Here, the City had no obligation to lease the 

                                                3 See Gregg, 289 S.W.2d at 750–51 (holding that in granting an oil and gas lease upon property belonging to 

it, city was acting in a proprietary capacity and thus subject to estoppel); City of Dallas v. Trinity E. Energy, LLC, No. 

05–16–00349–CV, 2017 WL 491259, at *4 (Tex. App.—Dallas Feb. 7, 2017, pet. filed) (mem. op.) (“Consequently, 

we conclude that the City was engaged in a proprietary function when it leased the minerals to Trinity.”); City of 

Lubbock v. Phillips Petroleum Co., 41 S.W.3d 149, 163 (Tex. App.—Amarillo 2000, no pet.) (holding city was subject 

to the doctrine of estoppel because it acted in its proprietary capacity in executing easement); City of Crystal City v. 

Crystal City Country Club, 486 S.W.2d 887, 889 (Tex. Civ. App.—Beaumont 1972, writ ref’d n.r.e.) (“City was acting 

in its proprietary capacity, as distinguished from governmental capacity, in its dealings with Country Club in executing 

the lease in question.”); Moore v. City of Beaumont, 195 S.W.2d 968, 991–92 (Tex. Civ. App.—Beaumont 1946), 

aff’d, 202 S.W.2d 448 (Tex. 1947). 
12 

lakefront lots to private parties. It could have left the land unused, used it strictly for the City’s 

purposes, or designated it as parks, a golf course, or some other form of recreational activity. 

Instead, it chose to generate revenue by granting long-term leases to private parties. We think that, 

under these circumstances, the City “should have no greater dignity as regards the controversy 

presented than would any other person who subdivides property and imposes restrictions thereon.” 

Blythe v. City of Graham, 287 S.W.2d 527, 530 (Tex. Civ. App.—Fort Worth 1956, writ ref’d 

n.r.e.). We thus agree with Wasson that the City exercised its discretion when it entered into the 

leases. 

B. Public or Resident Benefits 

Generally, a city’s governmental functions benefit the general public and its proprietary 

functions benefit its own residents. TEX. CIV. PRAC. & REM. CODE § 101.0215(a). The City argues 

that Lake Jacksonville benefits the general public and not just the City’s residents. More 

specifically, the City contends that a proprietary action must be “for the benefit only of those within 

its corporate limits.” The City submits that we cannot find the lease agreement to be proprietary 

because Wasson’s leased property is not located within the City’s corporate limits. The City claims 

this geographic distinction is “relevant, if not decisive,” and for support relies primarily on City of 

Weslaco v. Borne, 210 S.W.3d 782, 794 (Tex. App.—Corpus Christi 2006, pet. denied) (mobile 

home park located outside of city’s corporate limits did not “militiate[] in favor of classifying the 

functions as proprietary”). 

We have not been entirely clear with regard to the “benefits test.” We have said that 

proprietary functions only benefit the municipality’s residents, but we have also stated that 

proprietary acts are those performed “primarily for the benefit of those within the corporate limits 
13 

of the municipality.” Gates, 704 S.W.2d at 739 (emphasis added) (citing City of Crystal City, 486 

S.W.2d at 889).4

 We clarify today that Gates states the proper rule. A city’s proprietary contracts 

will often benefit some nonresidents, and its governmental contracts will often benefit some 

residents, but whether a contract primarily benefits one or the other will often indicate whether it 

is proprietary or governmental. 

Here, although non-residents certainly benefited from the City’s decision to lease its 

lakefront property, the record indicates the City’s primary objective was to develop the lake and 

that leasing the properties raised funds for the City’s budget.5

 And as Wasson notes, “the very 

nature of the private Lease Agreements necessarily excludes the general public from benefitting 

from the premises.” We agree with Wasson that the City entered into the leases primarily to benefit 

its own residents, not the general public. 

                                                4 See Wasson I, 489 S.W.3d at 433 (noting proprietary acts are performed “for the private advantage and 

benefit of the locality and its inhabitants”) (emphasis added) (quoting Posnainsky, 62 Tex. at 127); Tooke, 197 S.W.3d 

at 343 (“[P]roprietary functions are those conducted ‘in its private capacity, for the benefit only of those within 

its corporate limits, and not as an arm of the government.’”) (emphasis added) (quoting Dilley, 222 S.W.2d at 993); 

City of Gladewater v. Pike, 727 S.W.2d 514, 519 (Tex. 1987) (“A proprietary function is one intended primarily for 

the advantage and benefit of persons within the corporate limits of the municipality rather than for use by the general 

public.”) (emphasis added); City of Houston v. Quinones, 177 S.W.2d 259, 261 (Tex. 1944) (“The underlying test is 

whether the act performed by a city . . . is performed primarily for the benefit of those within the corporate limits of 

the municipality.”) (emphasis added). 

5 See Trinity E. Energy, LLC, 2017 WL 491259, at *4 (noting that city’s lease of city-owned land for the 

development of minerals “would benefit the residents within the City’s corporate limits, but they would not benefit 

the public at large, that is, the State”); City of Dallas v. City of Corsicana, No. 10–14–00090–CV, 2015 WL 4985935, 

at *4 (Tex. App.—Waco Aug. 20, 2015, pet. denied) (mem. op.) (noting that “business recruiting via tax abatement is 

in the category of functions that a municipality may, in its discretion, perform and that, in this situation, benefits the 

citizens of Dallas, rather than the general public at large”); City of Lubbock, 41 S.W.3d at 163 (“The land was 

purchased to increase groundwater available to the City’s residents. That was primarily for the benefit of the residents 

within the City’s limits rather than the public at large. There is nothing essentially governmental about the mere fact 

of owning real property outside the City or in granting an easement across that property.”). 
14 

C. State’s or City’s Behalf 

Consistent with the nature of sovereign immunity, which protects the State as a sovereign 

and political subdivisions when they act on the State’s behalf,6

 governmental functions are those 

in which a city acts as a “branch of the state,” Wasson I, 489 S.W.3d at 430, or an “arm of the 

government,” Tooke, 197 S.W.3d at 343, rather than on its own behalf. Here, we conclude the City 

acted on its own behalf by leasing its lakefront property, not on behalf of the State. The fact that 

the City’s decision to lease the property was entirely discretionary and primarily benefitted the 

City’s residents supports this conclusion, and we find no facts to counter it. See Wasson I, 489 

S.W.2d at 436 (“When a city performs discretionary functions on its own behalf, it ceases to derive 

its authority—and thus its immunity—from the state’s sovereignty. Such proprietary functions, 

therefore, do not stem from the root of immunity that is ‘the people,’ and lacking that common 

root, they cannot be performed as a branch of the state.”) (internal citations omitted). 

D. Relation to a governmental function 

Finally, we consider the extent to which the City’s decision to lease the lakefront lots was 

related to its governmental functions. The City contends it acted in its governmental capacity when 

it entered into the lease agreements because the “overarching purpose” of the leases, rules, and 

regulations “centers on the development of a water supply reservoir used as part of the City’s 

waterworks.” The court of appeals essentially agreed. It observed: “In and of itself, a lease of real 

                                                6

 Technically, “sovereign immunity” protects the State, while “governmental immunity” protects political 

subdivisions. See Wasson I, 489 S.W.3d at 430 (referring to “the realm of sovereign immunity as it applies to such 

political subdivisions” as “governmental immunity”). 
15 

property by a city could be a proprietary function in certain circumstances. But when it is on real 

property used for a government purpose, it becomes part of that governmental function.” 513 

S.W.3d at 222. According to the court, when a city’s activity involves “mixed functions, the rule 

is that if any one component of a function is governmental, the entire function will be considered 

governmental.” Id. at 221. 

We disagree. We have long held that not all activities “associated” with a governmental 

function are “governmental.” In Shilling, for example, we rejected the argument that a city’s 

discretionary operation of a garbage-truck repair shop was a governmental function because it was 

necessary to perform the city’s governmental function of garbage collection. 240 S.W.2d at 1011–

12. Noting that the city’s argument “would lead to the conclusion that in any operation necessary 

to the collection of garbage the city would be immune to liability for the acts of its employees,” 

we held that a “line must be drawn at which point the city ceases to be immune to liability.” Id. at 

1012. 

Consistent with our decision in Shilling, the courts of appeals “repeatedly have recognized 

that governmental functions encompass activities that are closely related to or necessary for 

performance of the governmental activities designated by statute.” City of Houston v. Petroleum 

Traders Corp., 261 S.W.3d 350, 356 (Tex. App.—Houston [14th Dist.] 2008, no pet.) (emphasis 

added).7

 We agree this statement more closely depicts the proper rule. The fact that a city’s 

                                                7 See also Davis v. City of Lubbock, No. 07–16–00080–CV, 2018 WL 736344, at *4 (Tex. App.—Amarillo 

Feb. 6, 2018, no pet. h.) (mem. op.) (“[T]he sale of the baled hay is sufficiently closely related to the performance of 

the City’s TCEQ-permitted activities as to come within the governmental functions the permit authorizes.”); Smith v. 

City of League City, 338 S.W.3d 114, 128 (Tex. App.—Houston [14th Dist.] 2011, no pet.) (holding city’s decisions 

concerning bridge “were closely related to the governmental function of ‘bridge construction and maintenance.’”); 

City of Elgin v. Reagan, No. 03–06–00504–CV, 2009 WL 483344, at *3 (Tex. App.—Austin Feb. 26, 2009, no pet.) 

(mem. op.) (allowing the public to adopt animals from a city-owned shelter was “so closely related to” the enumerated 
16 

proprietary action “touches upon” a governmental function is insufficient to render the proprietary 

action governmental. City of Corpus Christi v. Absolute Indus., 120 S.W.3d 1, 4 (Tex. App.—

Corpus Christi 2001, pet. denied) (holding that city’s threat to retaliate against refineries that did 

not use city’s landfill was proprietary, even though it “touche[d] upon waste and disposal to [a] 

remote degree”); see also Williams v. City of Midland, 932 S.W.2d 679, 683–84 (Tex. App.—El 

Paso 1996, no writ); City of Dallas v. Arnett, 762 S.W.2d 942, 953 (Tex. App.—Dallas 1988, writ 

denied). Instead, a city’s proprietary action may be treated as governmental only if it is essential 

to the city’s governmental actions. 

The Tort Claims Act identifies “waterworks,” “reservoirs,” and “water and sewer service” 

as governmental functions. TEX. CIV. PRAC. & REM CODE § 101.0215(a)(11), (19), (32). Relying 

on these designations, the court of appeals concluded that the City’s conduct in leasing the 

lakefront property was also governmental because it was merely a part of the City’s broader 

conduct in support of a governmental function.8 We disagree, because the City’s leasing of the 

lakefront property was not “essential” to the City’s operation or maintenance of the lake. 

Having considered the definitions and the parties’ arguments, we conclude that the City 

was performing a proprietary function—not a governmental function—when it leased its lakefront 

property to the Wassons. As we noted in Wasson I, drawing this distinction “is not always a cut-

                                               

governmental function of “animal control” as to be governmental); Ethio Exp. Shuttle Serv., Inc. v. City of Houston, 

164 S.W.3d 751, 756 (Tex. App.—Houston [14th Dist.] 2005, no pet.) (holding operation of shuttle service to airport 

was “well aligned” with enumerated governmental functions of “airports, regulation of traffic, and transportation 

systems”); Tex. River Barges v. City of San Antonio, 21 S.W.3d 347, 356 (Tex. App.—San Antonio 2000, pet. denied) 

(“Clearly, the City’s removal of TRB’s barge from the City-owned marina was a governmental function, since the Act 

expressly defines the operation of marinas as a governmental function.”). 

8 See 513 S.W.3d at 221 (holding that because the Tort Claims Act “specifically classifies ‘reservoirs,’ 

‘waterworks,’ and ‘water and sewer service’ as governmental functions,” “[t]he operation and maintenance thereof 

are likewise governmental functions”) (quoting TEX. CIV. PRAC. & REM. CODE § 101.0215(a)(11), (19), (32)). 
17 

and-dried task.” 489 S.W.3d at 438. Based on the common-law and statutory definitions, we have 

considered four factors relevant to these facts. In some cases, some factors may point to one result 

while others point to the opposite result. In such cases, courts should consider immunity’s nature 

and purpose and the derivative nature of a city’s access to that protection. Here, however, all four 

relevant factors establish that the City was performing a proprietary function when it leased its 

lakefront property. As a result, governmental immunity does not protect the City against Wasson’s 

suit for breach of the lease agreements. 

V. 

Conclusion 

We held in Wasson I that the governmental/proprietary dichotomy applies to the 

determination of whether governmental immunity bars a breach-of-contract claim against a 

municipality. We hold today that the nature of the function the municipality was performing when 

it entered into the contract governs that analysis. In this case, we hold that the City was engaged 

in a proprietary function when it leased its lakefront lots to the Wassons, and thus governmental 

immunity does not bar Wasson’s claim that the City breached those leases. 

Because the court of appeals affirmed the trial court’s summary judgment on the ground 

that governmental immunity bars Wasson’s claim, it did not address any of the City’s other 

summary-judgment grounds. Having concluded that governmental immunity does not bar 

Wasson’s claim, we reverse the court of appeals’ judgment and remand the case to that court so 

that it may consider the City’s additional grounds. 

_____________________ 

Jeffrey S. Boyd 

Justice 

Opinion delivered: October 5, 2018