Water heater not operating & City water issues

Generally the guts of a ball valve can turn beyond the stops; the stops only keep the handle from turning further than intended. If the handle is loose on the shaft or has some other problem, it's possible that the guts could be out of alignment with respect to the handle, and in that case the valve could leak.

It probably is also possible for the packing (or whatever they call it) in a ball valve to wear out or be damaged and allow some leakage, but that's not very common to say the least.