Court Opinion

ID: 4102390
Source: CourtListenerOpinion
Date Created: 2016-11-24 22:17:18.135191+00
Date Added: 2024-06-11T13:30:19.713932
License: Public Domain

NO. 12-16-00223-CV

                               IN THE COURT OF APPEALS

                 TWELFTH COURT OF APPEALS DISTRICT

                                            TYLER, TEXAS

IN RE: G-M WATER SUPPLY                                    §

CORPORATION,                                               §                ORIGINAL PROCEEDING

RELATOR                                                    §

                                         MEMORANDUM OPINION
         Relator G-M Water Supply Corporation filed a petition for writ of mandamus in which it
challenges the trial court’s order that it deposit $87,663.11 into the court’s registry.                          The
respondent is the Honorable Craig Mixon, Judge of the 1st Judicial District Court, Sabine
County, Texas. The City of Hemphill, Texas, is the real party in interest. We conditionally grant
the petition.

                                                  BACKGROUND
         G-M is a nonprofit water supply company. Pursuant to a longstanding relationship, G-M
purchases water from the City. In their most recent agreement, executed in 2011, G-M must
purchase a minimum amount of water based on an annually adjusted rate determined by the City.
Essentially, the City assesses the rate based on a projection of its annual costs to produce water
divided by the quantity of treated water estimated to be produced that year, expressed in a dollar
amount per 1,000 gallons.1
         G-M recently completed construction of its own water treatment facility and began taking
less water from the City under the contract. This action led to a much higher adjusted rate for
2015-16 because, according to the City, its costs are fixed, and since G-M takes less water, the

         1
           Other than charging for administrative costs, the City does not include profit in its calculation. Since the
rate is based on projections and estimates, the contract requires an independent audit at the end of each year, and any
overpayment or underpayments by G-M during that year are accounted for in the following year’s rate calculation.
City’s cost per gallon of water produced dramatically increased. In 2014-15, the City charged
G-M $2.8333 per 1,000 gallons of water, but raised the rate in 2015-16 to $5.2137 per 1,000
gallons of water. G-M disputed the City’s cost assumptions in computing the rate, calculated its
own rate of $3.6492 per 1,000 gallons of water, and paid the City based on that rate for each
monthly invoice.         After negotiations proved unsuccessful, the City filed suit against G-M,
alleging that it breached their contract by failing to pay the invoices at the contract rate set by the
City.
        The City filed an application for temporary injunction requesting that G-M pay the
accrued arrearages into the trial court’s registry, along with the full amount of future monthly
invoices calculated at the $5.2137 per 1,000 gallon rate pending a resolution on the merits. After
a hearing, the trial court granted the temporary injunction, concluding that the City will probably
prevail on the merits because G-M has breached and intends to continue to breach the terms of
the contract by failing to make the full payments invoiced by the City. Consequently, the trial
court ordered that G-M deposit $87,663.11 into the registry of the court, which represented the
amount of arrearages up until the time the injunction issued.2 Additionally, the trial court
ordered that G-M pay all future invoices at the full $5.2137 per 1,000 gallon rate directly to the
City until otherwise ordered. The trial court found that G-M’s failure to pay the full invoices had
adversely impacted the City’s fiscal status because it may be unable to recover the full amount of
a money judgment following a trial on the merits.
        G-M complied with the trial court’s order and deposited the disputed funds into the trial
court’s registry. G-M also filed an interlocutory appeal in this Court challenging the trial court’s
temporary injunction. Because some Texas courts, including this Court, have held that an order
to deposit funds into the trial court’s registry is not properly characterized as an appealable
temporary injunction, G-M filed this petition for writ of mandamus.3

        2
            At the hearing, G-M offered to deposit the disputed amount in a separate interest bearing account of its
choosing.
        3
          See, e.g., Zhao v. XO Energy LLC, 493 S.W.3d 725, 735 (Tex. App.—Houston [1st Dist.] 2016, no pet.);
Structured Capital Res. Corp. v. Arctic Cold Storage, LLC, 237 S.W.3d 890, 894 (Tex. App.—Tyler 2007, no pet.).

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                                            MANDAMUS
       In its petition, G-M alleges that the trial court abused its discretion by ordering that G-M
deposit the funds into its registry without showing a specific fund in which the City has a
disputed interest, and that the funds were at risk of depletion or loss.
Prerequisites to Mandamus
       Mandamus may be available to correct a clear abuse of discretion where there is no
adequate remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36 (Tex.
2004) (orig. proceeding); Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992) (orig.
proceeding).
       With respect to the resolution of factual matters or matters committed to the trial court’s
discretion, we may not substitute our own judgment for that of the trial court. Walker, 827
S.W.2d at 839. In such matters, the relator must establish that the trial court could reasonably
have reached only one decision. Id. at 840. Review of a trial court’s determination of the legal
principles controlling its ruling is much less deferential. Id. A trial court has no discretion in
determining what the law is or applying the law to the facts. Id. Consequently, a clear failure by
the trial court to analyze or apply the law correctly constitutes an abuse of discretion. Id.
       With regard to the adequate remedy by appeal element, the Texas Supreme Court stated
that review of significant rulings in exceptional cases may be essential to (1) preserve a relator’s
substantive or procedural rights from impairment or loss; (2) allow appellate courts to give
needed and helpful direction to the law that would otherwise prove elusive in an appeal from a
final judgment; and (3) prevent the waste of public and private resources invested into
proceedings that would eventually be reversed. See In re Prudential Ins. Co. of Am., 148
S.W.3d at 136. The court mandated that when the benefits outweigh the detriments, we must
consider whether the appellate remedy is adequate.          Id.   Whether an appellate remedy is
adequate so as to preclude mandamus review depends heavily on the circumstances presented.
Id. at 137. Because the balance of jurisprudential considerations depends on the circumstances,
it must be guided by analysis of principles rather than simple rules that treat cases as categories.
In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 464 (Tex. 2008) (orig. proceeding); In re
Prudential Ins. Co. of Am., 148 S.W.3d at 136. Mandamus review may be appropriate for trial
court errors where the very act of proceeding to trial, regardless of the outcome, would defeat the

                                                  3
substantive right involved. See In re XTO Energy Inc., 471 S.W.3d 126, 136 (Tex. App.—
Dallas 2015, no pet.) (orig. proceeding).
No Adequate Remedy by Appeal
       A trial court has inherent authority to order a party to pay disputed funds into the court’s
registry if there is evidence that the funds are in danger of being lost or depleted. See, e.g.,
Castilleja v. Camero, 414 S.W.2d 431, 433 (Tex. 1967); Zhao v. XO Energy LLC, 493 S.W.3d
725, 736 (Tex. App.—Houston [1st Dist.] 2016, no pet.).
       Texas courts are split as to whether an order to deposit funds into the trial court’s registry
is a mandatory temporary injunction. Compare Zhao, 493 S.W.3d at 735 (analyzing authorities
and holding that order to deposit funds into court’s registry is not temporary injunction subject to
interlocutory appeal), with In re Estate of Skinner, 417 S.W.3d 639, 644 (Tex. App.—Houston
[14th Dist.] 2013, no pet.) (analyzing authorities and holding order to deposit funds into court’s
registry under circumstances of that case was order granting temporary injunction authorizing
interlocutory appeal). We have held that such an order is not a temporary injunction. See
Structured Capital Res. Corp. v. Arctic Cold Storage, LLC, 237 S.W.3d 890, 894 (Tex. App.—
Tyler 2007, no pet.). Consequently, in courts reaching that conclusion, interlocutory appeal is
not available for such an order. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(4) (West
Supp. 2016) (statutory grant authorizing interlocutory appeal of order granting or denying
temporary injunction); Zhao, 493 S.W.3d at 735.
       Texas courts holding that an order to deposit funds into the registry is not an injunction
have likewise held that mandamus is appropriate relief when a trial court abuses its discretion in
issuing such an order. See, e.g., Zhao, 493 S.W.3d at 736; O’Brien v. Baker, No. 05-15-00489-
CV, 2015 WL 6859581, at *3 (Tex. App.—Dallas Nov. 9, 2015, no pet.) (mem. op.) (orig.
proceeding); N. Cypress Med. Ctr. Operating Co. v. St. Laurent, 296 S.W.3d 171, 179 (Tex.
App.–Houston [14th Dist.] 2009, no pet.) (orig. proceeding). And, one court concluded that an
order to deposit disputed funds into the court’s registry deprived the relator of the use of its
money without a showing either of liability or an intent to hide assets from a possible judgment,
and consequently, the benefits of mandamus outweighed its burdens. N. Cypress Med. Ctr.
Operating Co., 296 S.W.3d at 179–80. We agree with the holdings of these courts.
       Moreover, we believe the benefits of mandamus outweigh the detriments for other
reasons as well. The detriment to mandamus is that it delays resolution of the underlying

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dispute. However, a party ordered to deposit funds during the pendency of the lawsuit would not
only be deprived of the use of its funds, but would be precluded from challenging the trial court’s
order by appeal. This is because, with interlocutory appeal unavailable, the party would be
required to wait until the suit’s conclusion to appeal the order. At that time, the order to deposit
funds would no longer be in effect, which would render an appeal moot. Without mandamus
relief, a trial court could freely order that funds be deposited into its registry without appellate
review. Therefore, we conclude that the benefits of mandamus outweigh the burden of delay,
and hold that mandamus is available in this circumstance.
Abuse of Discretion
       Hemphill’s City Manager, Donald Iles, was the only witness who testified at the
temporary injunction hearing. He testified that he did not have access to G-M’s financial
records, and that he made an open records request concerning G-M’s financial status. His
request was granted, and he discovered that the balance of one of G-M’s checking accounts was
reduced by approximately $118,000.00 from January 2015 through July 2015.                     He also
discovered that a separate G-M construction account showed an overdraft of approximately
$15,000.00 at the end of one statement period. And he learned that G-M had a $5,000,000.00
capital investment in its new water treatment plant, although he could not testify as to G-M’s
current debt balance on the project or how it was financed. Iles testified that these facts raised
“some red flags that possibly they may not be able to pay.”
       When asked further about the accounts, he acknowledged that after the $118,000.00
reduction, G-M had a remaining balance of approximately $689,000.00. Portions of the account
statement were entered into evidence as Plaintiff’s Exhibit 11. Iles testified that he was unaware
of the current status of the construction account. The City’s counsel asked, “Based on that and
the other information you testified to, is there a legitimate concern about the solvency of [G-M],
in terms of its ability to repay these continually accruing arrearages?” Iles responded, “That
argument could be made, that conclusion could be drawn. I don’t have enough information
about their financial situation to say yes or no; but I would be worried, yes, sir.” G-M chose not
to offer any further evidence of its financial status. The trial court found in its order that the City
“may be unable to recover the full amount of a money judgment following a trial on the merits.”
       It is true that G-M spent significant funds to acquire its new water treatment plant, had a
construction account that had been overdrawn during one month, and had a reduction in one of

                                                  5
its checking accounts of approximately $118,000.00 at one point in time. However, the evidence
available to the trial court when it issued the order unequivocally shows that G-M had at least
$689,000.00 in cash. The portions of the account statement submitted in Plaintiff’s Exhibit 11
show that the account balance was as high as approximately $807,000.00 on January 1, 2015,
and as low as approximately $637,000.00 on June 20, 2015. Plaintiff’s Exhibit 11 also showed
that through several deposits, the account balance continued to increase to approximately
$689,000.00 by June 30, 2015. The disputed amount for purposes of this mandamus proceeding
is $87,663.11.4 Furthermore, Iles admitted that he did not have enough information concerning
G-M’s solvency and ability to pay a judgment. Iles’s statements that he was worried about
whether G-M could satisfy a judgment can only be viewed as speculative.                            Based on the
evidence before the trial court, it was unreasonable for it to conclude that G-M’s funds are in
actual danger of being lost or depleted given the amount of money in dispute. Therefore, we
hold that the trial court abused its discretion in ordering that G-M deposit $87,663.11 into the
court’s registry.
        Finally, since we have determined that the trial court abused its discretion because there
was no reasonable danger that the funds will be lost or depleted, we need not address G-M’s
contention that the City failed to prove it had an interest in a “specific fund.” See TEX. R. APP. P.
47.1; In re Hayward, 480 S.W.3d 48, 54-55 (Tex. App.—Fort Worth 2015, no pet.) (orig.
proceeding) (holding that Castilleja and its progeny do not apply to case because facts did not
present issue of which party owned a “specific account” that would justify deposit of “disputed
funds” in court’s registry); Behringer Harvard Royal Island, LLC v. Skokos, No. 05-09-00332-
CV, 2009 WL 4756579, at *4 (Tex. App.—Dallas Dec. 14, 2009, no pet.) (holding that parties
must have dispute of ownership as to specific fund for trial court to have authority to order
deposit of funds into registry; trial court does not have authority, beyond attachment statutes, to
order deposit of funds into registry to generally secure payment of possible future judgment).

                                                  DISPOSITION
        Because the trial court abused its discretion in ordering G-M to deposit $87,663.11 in the
court’s registry and G-M has no adequate remedy by appeal, mandamus is proper. Accordingly,

        4
            Iles testified that the arrearages continue to accrue at approximately $10,000.00 per month while this
dispute is pending. The trial court also ordered that G-M pay the full amount of all future invoices directly to the
City until ordered otherwise. This order is the subject of G-M’s separate interlocutory appeal.

                                                         6
we conditionally grant G-M’s petition for writ of mandamus and direct the trial court to vacate
its April 5, 2016 order requiring G-M to deposit $87,663.11 into the court’s registry, to issue an
order directing the district clerk to release the funds to G-M, and to set the underlying case for
trial. We trust that the trial court will promptly comply with this opinion and order. The writ
will issue only if the trial court fails to do so within ten days after the date of the opinion and
order. The trial court shall furnish this Court, within the time for compliance with this Court’s
opinion and order, a certified copy of its order evidencing compliance.

                                                                BRIAN HOYLE
                                                                   Justice

Opinion delivered November 22, 2016.
Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.

                                                   (PUBLISH)

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                                COURT OF APPEALS

      TWELFTH COURT OF APPEALS DISTRICT OF TEXAS

                                        JUDGMENT

                                     NOVEMBER 22, 2016

                                      NO. 12-16-00223-CV

                          G-M WATER SUPPLY CORPORATION,
                                       Relator
                                         V.
                               HON. CRAIG M. MIXON,
                                     Respondent

                                     ORIGINAL PROCEEDING
               ON THIS DAY came to be heard the petition for writ of mandamus filed by G-M
WATER SUPPLY CORPORATION, Relator. Said petition for writ of mandamus having
been filed herein on August 1, 2016, and the same having been duly considered, because it is the
opinion of this Court that the petition is meritorious, it is therefore CONSIDERED, ADJUDGED
AND ORDERED that the petition for writ of mandamus be, and the same is, conditionally
granted.
               And it is further the opinion of this Court that the trial judge will act promptly and
vacate its April 5, 2016 order requiring G-M to deposit $87,663.11 into the court’s registry, issue
an order directing the district clerk to release the funds to G-M, and set the underlying case for
trial. We trust that the trial court will promptly comply with this opinion and order. The writ
will issue only if the Honorable CRAIG M. MIXON, Judge of the 1st District Court of Sabine
County, Texas, fails to do so within ten days after the date of the opinion and order. The trial
court shall furnish this Court, within the time for compliance with this Court’s opinion and order,
a certified copy of its order evidencing compliance.
                   Brian Hoyle, Justice.
                   Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.