Mountain Peak Special Utility District v. Public Utility Commission of Texas and the City of Midlothian ( 2017 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-16-00796-CV
Mountain Peak Special Utility District, Appellant
v.
Public Utility Commission of Texas and The City of Midlothian, Appellees
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 200TH JUDICIAL DISTRICT
NO. D-1-GN-15-002843, HONORABLE ORLINDA NARANJO, JUDGE PRESIDING
MEMORANDUM OPINION
The Public Utility Commission of Texas (the Commission) granted the petition of
the City of Midlothian (the City) for expedited release of a portion of property it owned from the
certificated service area of Mountain Peak Special Utility District (Mountain Peak). See Tex. Water
Code § 13.254(a-5) (providing for expedited release of property not receiving water or sewer service
from certificate holder). In its suit for judicial review of the Commission’s order, Mountain Peak
contended that the Commission erred in granting the City’s petition for decertification because
the statutory requirements for expedited release pursuant to section 13.254(a-5) were not met.
Specifically, Mountain Peak argued that the property the City sought to have decertified was in fact
“receiving water service” from Mountain Peak and thus was not eligible for expedited release under
section 13.254(a-5). Mountain Peak also asserted that the decertification petition should not have
been approved because the City excluded from its request for expedited release a 6.7-acre piece of
property that it owned within Mountain Peak’s certificated service area. In addition, Mountain Peak
asserted that the Commission’s approval of the petition for decertification should be set aside
because federal law preempted the decertification of any of Mountain Peak’s certificated service
area. After a hearing, the district court affirmed the Commission’s order granting the City’s petition
for decertification. We will affirm the district court’s judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Mountain Peak is a conservation and reclamation district operating as a special
utility district created under Article XVI, Section 59, of the Texas Constitution and regulated by the
Commission. See Tex. Const. art. XVI, § 59; Act of May 13, 2013, 83d Leg., R.S., ch. 170, § 2.96,
2013 Tex. Gen. Laws 725, 769 (transferring to Public Utility Commission powers, duties, functions,
programs, and activities of Texas Commission on Environmental Quality relating to economic
regulation of water and sewer service); see also Tex. Water Code §§ 13.002-.515 (establishing
comprehensive regulatory system to regulate retail public utilities), .002(19) (“retail public utility”
includes political subdivision operating, maintaining, or controlling facilities for providing potable
water service for compensation). Mountain Peak holds a certificate of convenience and necessity
(CCN) that authorizes it to be the exclusive water-service provider within a specifically defined
territory, which is referred to as its “certificated area.” See Tex. Water Code § 13.244 (setting forth
requirements for application for CCN).
The City owns approximately 104 acres of land in Ellis County that was located
within Mountain Peak’s certificated area. The City filed a petition with the Commission seeking to
remove the 104 acres from Mountain Peak’s certificated area pursuant to Texas Water Code section
2
13.254(a-5). Section 13.254(a-5) provides that the owner of a tract of land that is 25 acres or larger
and located in certain counties, including Ellis County, may petition for, and is entitled to, expedited
release of that tract from a certificated area if the tract is “not receiving water service.” Id.
§ 13.254(a-5).1 In its petition, the City stated that the 104-acre property was not receiving water or
sewer service from Mountain Peak. The petition was supported by the affidavit of Michael G. Adams,
the City’s Executive Director of Engineering and Utilities, in which he averred that the 104-acre
property “currently is not receiving potable water service, or water of any type from [Mountain
Peak],” that the City “has not requested water service from Mountain Peak,” and “[i]f Mountain Peak
has any water facilities near or adjacent to the [104-acre property], those facilities were installed
and are used to provide water service to property other than the [104-acre property].”
Mountain Peak filed a motion to intervene and opposed the petition. Mountain Peak
asserted that the petition seeking decertification of a part of Mountain Peak’s certificated area
was in conflict with a contractual commitment between the City and Mountain Peak that had been
approved by the Commission’s predecessor agency, the Texas Natural Resources Conservation
Commission (TNRCC), in 1997. Mountain Peak also asserted that the 104-acre property was
“receiving water service” from Mountain Peak because there was a sewer lift station owned and
operated by Mountain Peak located on the north part of the property. According to Mountain Peak,
there was a two-inch water line running 200 to 300 yards from a connection to a 12-inch water main
1
A landowner may not seek expedited release of such a tract if it is located (1) within the
boundaries of any municipality or the extraterritorial jurisdiction of a municipality with a population
of more than 500,000 and the municipality or retail public utility owned by the municipality is the
holder of the CCN or (2) in a platted subdivision “actually receiving water or sewer service.” See
Tex. Water Code § 13.254(a-2).
3
owned and operated by Mountain Peak and terminating inside a meter box with an angle-stop valve
on the 104-acre property next to the lift station. Mountain Peak stated that the two-inch water line
supplied water from Mountain Peak’s public water system to the City for use at the lift station such
that the 104-acre property was “receiving water service” from Mountain Peak. Finally, Mountain
Peak asserted that the City’s petition was not administratively complete because it did not include
“evidence that the owner of the tract of land in question—the City of Midlothian—authorized and
approved” the petition.2
The Commission’s Staff reviewed the petition and Mountain Peak’s response and
recommended that Mountain Peak’s petition be deemed deficient until the City provided proof that
(1) the request did not seek to violate currently applicable contract terms, and (2) the City did not
seek approval of an application that would violate Texas Water Code section 13.254(a-5). The
Commission then issued an order directing the City to amend its application to cure the deficiencies
identified by the Commission’s Staff. The City filed its response arguing that Mountain Peak’s bare
allegations of a contractual impediment to the decertification request did not render its petition
administratively incomplete. Additionally, while maintaining its position that the existence of an
unmetered water line to the lift station did not cause the 104-acre property to be “receiving water
service” such that it was disqualified from expedited decertification pursuant to section 13.254(a-5),
in order to eliminate any question in that regard, the City amended its petition to seek decertification
2
The petition was filed by the President of Harkins Engineering, Inc.
4
of only 97.3 acres (the Park Property) of the 104 acres described in its original application. The
amendment excluded 6.7 acres of property on which the lift station was located.3
Mountain Peak continued to object to the decertification petition and added a
complaint that the City was not authorized to amend its petition to seek decertification of property
different from that described in its original petition, and that it could not “arbitrarily” exclude part
of its property from the area it sought to remove from Mountain Peak’s certificated area. Mountain
Peak also argued that, even if it was proper for the City to seek expedited release of only the Park
Property, sufficient water lines, facilities, and water supplies existed on or near the Park Property
such that it, too, was “receiving water service” and therefore could not qualify for expedited release
under section 13.254(a-5). The administrative record includes additional briefing and evidence in the
form of affidavits and exhibits filed by both the City and Mountain Peak relevant to the disputed issues.
The Commission concluded that the City had satisfied the criteria for expedited
decertification as set forth in Texas Water Code section 13.254(a-5) and approved the request for
expedited release of the Park Property from Mountain Peak’s certificated area. Mountain Peak’s
motion for rehearing was overruled by operation of law. Mountain Peak then filed a suit for judicial
review in Travis County district court.
3
Attached to the City’s filing is a second affidavit of Michael Adams in which he avers:
City records confirm that the northernmost approximately 6.7 acres of the [104-acre
property] that includes this lift station was included as part of a 2006 final plat of
Phase 2A of the Lawson Farms subdivision (the “Phase 2A Park Property”). [] The
sewer lift station, required under an earlier final plat (Plat One), was constructed at
developer expense and was accepted by [the City] in 2006 as part of the Phase One
improvements for the Lawson Farms subdivision. [] Under [the City’s] then existing
subdivision regulations, the developer was required to install a water line to the lift
station, which might be installed later, or “phased-in.”
5
In the district court, Mountain Peak again asserted that the City could not carve out
the 6.7-acre portion of its property from the property for which it sought decertification and, in any
event, that the Park Property was “receiving water service” from Mountain Peak. Mountain Peak
also continued to maintain that removal of the Park Property from its certificated area was in conflict
with the 1997 TNRCC order that, according to Mountain Peak, approved and incorporated an
agreement between Mountain Peak and the City to refrain from seeking to alter or amend
one another’s CCNs or interfere with the boundaries of their respective CCNs. Mountain Peak
also argued that federal law preempted the removal of any property from its certificated area.
Specifically, Mountain Peak asserted that federal law protects the service area of entities like
Mountain Peak that have outstanding debt to the federal government for loans obtained through
a federal program designed to assist the development of water distribution and sewer service
facilities in rural areas. See 7 U.S.C. § 1926 (establishing loan program through United States
Department of Agriculture to aid designated associations in developing and operating water
distribution and sewer service facilities in rural areas). The Commission filed a general denial of
Mountain Peak’s claims, and the City intervened in support of the Commission.
Following a hearing, the trial court rendered judgment affirming the Commission’s
order approving the City’s request for expedited release of the Park Property from Mountain Peak’s
certificated area. Mountain Peak then perfected this appeal.
Standard of Review
Section 13.381 of the Texas Water Code provides that any party to a proceeding
before the Commission is entitled to judicial review under the substantial-evidence rule. See Tex.
6
Water Code § 13.381. Section 13.002 defines “proceeding” to mean “any hearing, investigation,
inquiry, or other fact-finding or decision-making procedure” under Texas Water Code chapter 13.
Id. § 13.002(16). Thus, we must review the Commission’s decision in this case “through the prism
of substantial evidence review.” Texas Gen. Land Office v. Crystal Clear Water Supply Corp.,
449 S.W.3d 130, 135 (Tex. App.—Austin 2014, pet. denied) (quoting Texas Water Comm’n v.
Lakeshore Util. Co., 877 S.W.2d 814, 818 (Tex. App.—Austin 1994, writ denied)). Under this
standard, we may not, with respect to questions committed to the Commission’s discretion, substitute
our judgment for that of the Commission on the weight of the evidence. See Tex. Gov’t Code
§ 2001.174. We must, however, reverse the Commission’s decision if it prejudices substantial rights
because its findings, inferences, conclusions, or decisions (1) violate a constitutional or statutory
provision; (2) exceed the Commission’s statutory authority; (3) were made through unlawful
procedure; (4) are affected by other error of law; (5) are not reasonably supported by substantial
evidence considering the reliable and probative evidence in the record as a whole; or (6) are arbitrary
or capricious or characterized by an abuse of discretion or a clearly unwarranted exercise of
discretion. Id. § 2001.174(2).
An agency’s decision is presumed to be valid, and it is supported by substantial
evidence if the evidence in its entirety is sufficient to allow reasonable minds to have reached
the conclusion the agency must have reached to justify the disputed action. Texas State Bd. of
Dental Exam’rs v. Sizemore, 759 S.W.2d 114, 116 (Tex. 1988). The evidence in the record may
preponderate against the agency’s decision yet still provide a reasonable basis for the decision
and thereby meet the substantial-evidence standard. Texas Health Facilities Comm’n v. Charter
7
Med.-Dallas, Inc., 665 S.W.2d 446, 452 (Tex. 1984). The question of whether an agency’s decision
is supported by substantial evidence is a question of law, and we owe no deference to the district
court’s decision. See Firemen’s & Policemen’s Civ. Serv. Comm’n v. Brinkmeyer, 662 S.W.2d 953,
956 (Tex. 1984). We review questions of statutory construction de novo. See Railroad Comm’n v.
Texas Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 624 (Tex. 2011).
Did the Commission err by permitting the City to amend its petition to seek expedited release of
the Park Property and not of the 6.7 acres?
Mountain Peak asserts that the Commission erred by permitting the City to file an
amended decertification petition that removed 6.7 acres from the area for which it sought expedited
release. According to Mountain Peak, because the 6.7 acres was not a “separately deeded and acquired
tract,” it could not be omitted from the acreage for which decertification was requested, and the
Commission’s decertification order was therefore erroneous.4 Mountain Peak has not identified
any statutory support for its position that the City could not exclude the 6.7 acres from the property
for which it sought expedited release from Mountain Peak’s certificated service area. Section
13.254(a-5) requires only that the property sought to be decertified be a tract of land of at least
25 acres located in certain counties and that it not be “receiving water service.” See Tex. Water
Code § 13.254(a-5). The Park Property was of the required size and located in an eligible county,
and the Commission found that it was not receiving water service. As this Court has previously
concluded, section 13.254(a-5) does not have an “all or nothing” requirement that prevents a
4
Mountain Peak does not specifically identify how such error could be the basis for reversal
of the Commission’s order in this suit for judicial review, but we note that it could conceivably fall
under the heading of “exceeding the Commission’s statutory authority” or “affected by other error
of law.” See Tex. Gov’t Code § 2001.174(2)(B), (D).
8
landowner from choosing to seek expedited release of some, but not all, of its property located in a
certificated service area. See Crystal Clear Water Supply Corp., 449 S.W.3d at 136.
Mountain Peak argues that permitting a landowner to seek decertification of some,
but not all, of its property in a certificated service area could cause landowners to “simply draw
circles around [multiple service] connections, carve them out, and decertify the rest of the property.”
This argument ignores the fact that one consideration when determining whether a piece of property
is “receiving water service” is whether there are water facilities or lines committed to serving the
property. See id. at 137. If those lines or facilities exist, it does not matter whether they are located
on or simply near the property for which the landowner seeks expedited release. Carving out the
land they are located on from the property they serve does not mean that those lines or facilities are
not taken into account when determining whether the property for which decertification is requested
is “receiving water service” for purposes of section 13.254(a-5). Id. The Commission’s having
permitted the City to amend its petition to remove 6.7 acres from the property for which it sought
expedited release from Mountain Peak’s certificated service area does not provide a basis for
reversing the Commission’s order.
Was the Park Property “receiving water service?”
The Commission determined that the Park Property was not receiving water service
from Mountain Peak. It expressly found that the Park Property was “not receiving actual water
from Mountain Peak” nor had Mountain Peak committed facilities or lines providing water to the
Park Property or performed acts or supplied anything to the Park Property. See id. (property is not
“receiving water service” if there are no water facilities or lines committed to serving property and
9
CCN holder has not performed any act or supplied anything to that property related to providing
water to that property).
In support of its petition for decertification, the City submitted three affidavits from
Michael Adams. The contents of Adams’s affidavits regarding water service to the Park Property
can be summarized as follows:
C Mountain Peak provides no service to the Park Property.
C There is a sewer lift station located on the 6.7 acres removed from the City’s
decertification petition. The 6.7 acres was platted for a subdivision adjacent
to the Park Property and the lift station was constructed at the expense of the
developer of the subdivision.
C Under the City’s then-existing subdivision regulation, the developer was
required to install a water line to the lift station. Pursuant to the subdivision
regulation, a one-inch water line was installed that runs from a water line in
the subdivision to the lift station. The City is unaware of any use of the water
line other than whatever testing was done upon installation.
C There is no written service or extension agreement between the City and
Mountain Peak related to the lift station. The City has never paid for or been
billed for the construction of the water line or for the delivery of any water
to the lift station. There is no meter or city account for the water line.
Mountain Peak submitted three affidavits from Randel Kirk, Mountain Peak’s General Manager.
The contents of Kirk’s affidavits can be summarized as follows:
C Mountain Peak provides water service to a sewer lift station through a two-
inch water line that runs from one of Mountain Peak’s nearby 12-inch water
lines to the lift station where it terminates at an angle-stop valve in a meter
box.
C Mountain Peak owns a six-inch water line that runs along the southern
boundary of, and is located on, the Park Property. This water line “has the
capacity to serve” the Park Property.
10
C Mountain Peak has distribution lines and other facilities near the Park
Property that “have the capacity” to provide water service to the Park
Property. In a nearby subdivision there are multiple distribution lines
including: three 12-inch water lines, two eight-inch water lines, and numerous
smaller water lines.
C Mountain Peak has two water plants within a mile of the Park Property, each
of which “has the capacity to serve” the Park Property and “capacity
committed to” the Park Property. Mountain Peak also owns a one-million
gallon storage tank at one of its water plants that was sized to accommodate
“potential development on or near” the Park Property.
C Mountain Peak has five groundwater wells within two miles of the Park
Property that “could be used to serve” that property. Two other ground water
wells are within approximately one mile of the Park Property.
C Mountain Peak “has water supplies sufficient to serve its customers in the
area, including the Park Property.”
The determination of whether a tract of land is “receiving water service” is a “fact-based inquiry
requiring the Commission to consider whether the [utility] has facilities or lines committed to
providing water to the particular tract in furtherance of its obligation to provide water to that tract
pursuant to its CCN.” Id. at 140 (emphasis in original). In this suit for judicial review, we consider
whether the evidence presented in the decertification proceeding “provided reasonable support” for
the Commission’s determination that the Park Property was not “receiving water service” from
Mountain Peak. See id. at 141. We conclude that the evidence presented to the Commission regarding
Mountain Peak’s facilities and water lines provided a reasonable basis for the Commission’s finding
that the Park Property was not “receiving water service.”
The existence of water lines on or near the Park Property does not necessarily mean
that the Park Property was “receiving water service.” There was no evidence that the water lines
11
were committed to or installed for the purpose of providing water to the Park Property. It was
reasonable for the Commission to determine that those water lines were in fact installed for the
purpose of providing water to different property—the subdivision. Similarly, although Kirk averred
that Mountain Peak’s water plants have the capacity to provide water to the Park Property, there is
nothing in Kirk’s affidavit to indicate that the water plants were constructed for that purpose or that
they were otherwise “committed” to providing water to the Park Property. The same is true of
Mountain Peak’s water wells. The evidence regarding the lift station, which is located on the 6.7
acres that are not part of the Park Property, indicates that it was constructed in connection with
development of the subdivision and that the water line was likewise installed to provide water to the
lift station rather than in furtherance of providing water to the Park Property. Kirk’s affidavit states
that the storage tank was sized to accommodate future development generally and does not indicate
how that storage capacity was intended to or would be used to provide water service to the Park
Property. There is substantial evidence supporting the Commission’s finding that Mountain Peak
had not performed any act; furnished any thing; or used any facilities or lines for, or committed
them to, providing water service to the Park Property. Because there was substantial evidence to
support the Commission’s finding that the Park Property was not receiving water service, the three
criteria for expedited decertification pursuant to section 13.254(a-5) were met.
Does the Commission’s order conflict with a previous agency order?
It is undisputed, and the Commission found, that in 1996 the City and Mountain Peak
entered into an agreement (the 1996 Agreement) providing, among other things, that (1) in an area
identified as the “Dual Certificated Area,” the City “will provide water distribution service only to
12
industrial customers and Mountain Peak will provide water distribution service only to other-than-
industrial customers” and (2) neither the City nor Mountain Peak “will apply to any regulatory,
judicial, or governing body to change, alter, or amend the boundaries between their CCNs . . . and
will jointly utilize all reasonable actions to resist any changes thereto.” In 1997, the Commission’s
predecessor agency, the TNRCC, approved “the portions of the agreement or contract between
[the City] and [Mountain Peak] designating areas to be served by them pursuant to their Certificates
of Convenience and Necessity.” See Tex. Water Code § 13.248 (contracts between retail public
utilities, when approved by Commission, are valid and enforceable and are incorporated into
appropriate areas of public convenience and necessity). Mountain Peak argued to the Commission
that the agency’s 1997 approval served to prevent the Commission from subsequently issuing an
order, such as the one at issue in this suit for judicial review, that granted the City’s request to
change the boundaries of Mountain Peak’s CCN.5
The 1996 Agreement arose in the context of a proceeding before the TNRCC to
consider Mountain Peak’s application to amend its CCN to establish the boundaries of its certificated
service area in Ellis County. The 1996 Agreement reflects the City’s agreement to support Mountain
Peak’s application and Mountain Peak’s agreement to support the City’s application for TNRCC
approval of a “Dual Certificated Area,” which we understand to be a geographical area that would
be within the certificated service areas of both the City and Mountain Peak.6 The 1996 Agreement
5
Mountain Peak also suggests that the City’s request for release of the Park Property from
Mountain Peak’s certificated service area is a breach of their agreement. We express no opinion as
to the merits of this assertion.
6
No portion of the Park Property is within the Dual Certificated Area.
13
also includes the following three “qualifications” to Mountain Peak’s agreement to support the
City’s application for TNRCC approval of the Dual Certificated Area:7
a. In the Dual Certificated Area, [the City] will provide water distribution service
only to industrial customers, and Mountain Peak will provide water distribution
service only to other-than-industrial customers, provided that either may consent on
a case-by-case basis to the other providing water distribution service to a customer
who would otherwise be ineligible for service from that party, without waiving the
limitation herein provided;
b. Neither [the City] nor Mountain Peak will apply to any regulatory, judicial or
governing body to change, alter or amend the boundaries between their CCNs or the
arrangements herein described for the Dual Certificated Area, and will jointly utilize
all reasonable actions to resist any change thereto; and
c. [The City] will not allow, encourage or cause any change in regulation, law or
ordinance which will result in limiting or prohibiting other-than-industrial customers
in the Dual Certificated Area (other than ordinances generally applicable to all
geographic areas in the City’s jurisdiction).
The TNRCC ultimately approved Mountain Peak’s application to amend its CCN and ordered
the following:
The City of Midlothian and Mountain Peak Water Supply Corporation also requested
Commission approval of an agreement or contract . . . between the City of Midlothian
and Mountain Peak Water Supply Corporation designating the areas to be served
by them pursuant to their CCNs. Among other things, the agreement or contract
between the City of Midlothian and Mountain Peak Water Supply Corporation
provides that in dual certification areas, the City of Midlothian will provide water
service only to industrial customers and Mountain Peak Water Supply Corporation
will provide water service only to other-than-industrial customers, unless either
agrees on a case by case basis to the other providing water service to a customer who
would otherwise be ineligible for service from that entity.
7
The boundaries of the Dual Certificated Area were also established by the 1996 Agreement
and a map showing the location of the Dual Certificated Area within Mountain Peak’s proposed
CCN was attached as an exhibit to that agreement.
14
@@@@
The portions of the agreement or contract between the City of Midlothian and
Mountain Peak Water Supply Corporation designating the areas to be served by them
pursuant to their Certificates of Convenience and Necessity, is hereby approved.
Mountain Peak argues that the TNRCC order approved not just its agreement with the City to serve
different classes of customers in the Dual Certificated Area established by the 1996 Agreement, but
also approved the qualification in subparagraph b of the 1996 Agreement, which Mountain Peak
characterizes as an agreement between them to not seek to change, alter, or amend the boundaries
of their respective CCNs.8 We disagree.
The TNRCC order approves only the portions of the 1996 Agreement “designating
the areas to be served” by the City and Mountain Peak respectively. Those portions are (1) the
delineation of Mountain Peak’s CCN, (2) the delineation of the Dual Certificated Area, and (3) the
designation of which customers within the Dual Certificated Area would be serviced by the City and
which by Mountain Peak. The City’s and Mountain Peak’s separate agreement not to seek to alter
or amend the boundaries between their CCNs does not itself constitute a designation of a service
area but, rather, an agreement not to seek to alter one. The TNRCC order did not approve that
agreement. Consequently, the TNRCC order does not stand as an impediment to the Commission’s
8
Although not relevant to our analysis of this issue, we observe that the agreement does not
state that the parties agree to refrain from seeking to change, alter, or amend the boundaries of their
CCNs, but the boundaries between their CCNs.
15
approval of the City’s request for expedited release of the Park Property from Mountain Peak’s
certificated service area.9
Does federal law preempt the Commission’s decertification order?
Mountain Peak argues that the Commission’s order is preempted by federal law,
specifically 7 U.S.C. section 1926(b). See 7 U.S.C. § 1926(b) (imposing federal restrictions on
competition and customer choice in areas served by federally indebted associations). Section 1926
establishes a loan program through the United States Department of Agriculture to aid designated
associations, including conservation and reclamation districts, in developing and operating water
and sewer-service facilities in rural areas. Id. § 1926(a). Section 1926(b) provides:
The service provided or made available through any [federally indebted] association
shall not be curtailed or limited by inclusion of the area served by such association
within the boundaries of any municipal corporation or other public body, or by the
granting of any private franchise for similar service within such area during the term
of such loan; nor shall the happening of any such event be the basis of requiring such
association to secure any franchise, license, or permit as a condition to continuing to
serve the area served by the association at the time of the occurrence of such event.
Id. § 1926(b). This section constitutes “a congressional mandate that local governments not
encroach upon the services provided by [federally indebted] associations, be that encroachment in
the form of competing franchises, new or additional permit requirements, or similar means.” North
Alamo Water Supply Corp. v. City of San Juan, Tex., 90 F.3d 910, 915 (5th Cir. 1996) (per curiam).
9
The City also asserts that the agreement not to seek to alter or amend boundaries applies
only to the boundaries of the Dual Certificated Area and not to other portions of Mountain Peak’s
or the City’s certificated service areas. We need not address this issue and express no opinion in
that regard.
16
The prohibition advances two policy purposes: “(1) to encourage rural water development by
expanding the number of potential users of such systems, thereby decreasing the per-user cost, and
(2) to safeguard the viability and financial security of such associations (and [the] loans) by protecting
them from the expansion of nearby cities and towns.” Id. A water utility must establish three elements
to invoke the protections of section 1926(b): (1) the utility is an “association” within the meaning
of section 1926, (2) the utility has a qualifying federal loan outstanding, and (3) the utility “provided
or made [service] available” to the disputed area. See Creedmoor-Maha Water Supply Corp. v.
Texas Comm’n on Envtl. Quality, 307 S.W.3d 505, 519 (Tex. App.—Austin 2010, no pet.).
The only dispute in the present case is whether Mountain Peak established that it
“provided or made [service] available” to the Park Property. The Commission did not take section
1926(b) into account when considering Mountain Peak’s decertification petition because Texas Water
Code section 13.254(a-6) expressly forbids the Commission from denying “a petition received
under Subsection 13.254(a-5) based on the fact that a certificate holder is a borrower under a federal
loan program.” See Tex. Water Code § 13.254(a-6). Thus, instead of reviewing a Commission
determination as part of Mountain Peak’s suit for judicial review applying the substantial evidence
standard, we are reviewing the trial court’s determination that Mountain Peak did not qualify for
the protection of section 1926(b).
When, as here, there are no findings of fact or conclusions of law, a trial court’s
judgment will be upheld on any theory supported by the record, Davis v. Huey, 571 S.W.2d 859,
862 (1978), and any necessary findings of fact will be implied, Holt Atherton Indus., Inc. v. Heine,
835 S.W.2d 80, 83 (Tex. 1992). “Conclusions of law that are necessary, but not made, are deemed
in support of the judgment.” State v. Heal, 917 S.W.2d 6, 9 (Tex. 1996). Implicit in the trial court’s
17
determination here is the finding that Mountain Peak did not meet its burden of proving that it
“provided or made [service] available” to the Park Property. See BMC Software Belgium, N.V. v.
Marchand, 83 S.W.3d 789, 795 (Tex. 2002) (when neither party requests findings of fact and
conclusions of law, it is implied that trial court made all findings necessary to support judgment or
order). Thus, we must consider whether the evidence presented to the trial court supports its findings
and ultimate conclusion that Mountain Peak had not “provided or made [service] available” to the
Park Property.
This Court has previously analyzed the meaning of “provided or made [service]
available” under section 1926. See Creedmoor-Maha Water Supply Corp., 307 S.W.3d at 520-23.
The Court held:
We are persuaded by the majority view of the federal circuit courts—to establish
that it “provided or made [service] available” to the disputed area [the utility] was
required to plead (and ultimately prove) that it either presently was serving the area
or at least presently had the physical means to do so.
Id. at 522.10 The Court noted that the ordinary meaning of the terms “provide” and “make available”
“denote actual provision of service or physical capacity and readiness to provide service,” and that
10
In Creedmoor, this Court reviewed the trial court’s ruling on a plea to the jurisdiction.
Consequently, the Court reviewed whether Creedmoor’s pleadings contained allegations that, if
true, would demonstrate that it had “provided or made [service] available” to the disputed area. See
Creedmoor-Maha Water Supply Corp. v. Texas Comm’n on Envtl. Quality, 307 S.W.3d 505, 513
(Tex. App.—Austin 2010, no pet.). In this case, we are called upon to determine whether the evidence
presented to the trial court supports its conclusion that Mountain Peak had “provided or made [service]
available.” The Creedmoor court’s analysis of the legal implications of Creedmoor’s allegations are
instructive to our review of whether the evidence presented to the trial court supports its conclusion
that Mountain Peak had not “provided or made [service] available” to the Park Property.
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the protection of section 1926(b) is “‘defensive’ in nature, intended “to protect territory already served
by a rural water association.” Id. (quoting Le-Ax Water Dist. v. City of Athens, Ohio, 346 F.3d 701,
708 (6th Cir. 2003)).
Mountain Peak points to the evidence previously detailed in this opinion about its
facilities and water lines “on and near” the Park Property and emphasizes evidence it presented
by affidavit that it had the “capacity” to serve the Park Property. For their part, the City and the
Commission point to evidence in the record that the existing water lines did not have the present
physical capacity to provide sufficient water to serve the needs of the Park Property when developed
and that new facilities would have to be constructed to supplement the existing lines.11 Specifically,
attached to one of Kirk’s affidavits is the report of a professional engineering firm stating that the
six-inch water line along the southern boundary of the Park Property “did not have sufficient
capacity to meet the City’s projected needs” and “would need to be upsized to a 12" line and then
looped through an area of the Park Property, resulting in the installation of approximately 5,300
linear feet of 12" line” at a cost of approximately $450,000 plus associated boring and casing costs.
Also attached to the affidavit is a letter from Mountain Peak to the City in which Mountain Peak’s
representative states that the parties should address two matters, one of which was “providing water
11
This evidence was part of the administrative record that was admitted as an exhibit in the
trial court proceedings. Although Mountain Peak complains that the evidence was not timely filed
in the agency proceeding, it provides no supporting authority, and the evidence was not stricken from
the agency record. Moreover, Mountain Peak did not object to the admission of that evidence when
the administrative record was offered into evidence before the trial court, nor did Mountain Peak
seek to prevent the trial court’s consideration of that evidence or obtain any ruling with regard to
any objections to its admissibility. Thus, this evidence was before the trial court when it made its
determination of whether Mountain Peak met the requirements for protection under section 1926(b).
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for the proposed new athletic park” to be built on the Park Property. The letter includes a proposal
for constructing a water line at the City’s expense that would deliver water to the Park Property.
The City and the Commission assert that this evidence supports the trial court’s conclusion that,
although Mountain Peak had facilities and water lines that were providing service to nearby
properties, they had not yet “provided or [made] service available” to the Park Property, and that
considerable additional infrastructure would be needed to accomplish that end.
In Creedmoor, this Court held that, in the context of a plea to the jurisdiction,
uncontroverted record evidence that the utility “lacked both the infrastructure and water to serve”
the development negated any allegations in Creedmoor’s petition that it had “provided or made
[service] available.” Id. at 523. Here, there is at least disputed evidence on that issue. We must
presume that the trial court resolved any disputed facts in favor of its judgment and that the judgment
implies all necessary findings of fact to support it. See Holt Atherton, 835 S.W.2d at 83; Worford
v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990). That is, we must imply a finding by the trial court
that Mountain Peak did not in fact have the infrastructure needed to demonstrate a “physical capacity
and readiness to provide service” to the Park Property. There is evidence in the record to support
the trial court’s implied finding that, as a matter of fact, Mountain Peak did not have the physical
capacity and readiness to provide service to the Park Property. See Creedmoor-Maha Water Supply
Corp., 307 S.W.2d at 522. Mountain Peak has not demonstrated that this finding is not supported
by legally or factually sufficient evidence. See Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex.
2001) (per curiam) (party attacking legal sufficiency of evidence supporting adverse finding on issue
on which he had burden of proof must demonstrate that evidence establishes as matter of law vital
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fact in support of issue); id. at 242 (party attacking factual sufficiency of evidence supporting adverse
finding on which he had burden of proof must demonstrate that finding is against great weight and
preponderance of evidence).
The trial court found, based on legally and factually sufficient evidence, that Mountain
Peak had not “provided or made [service] available” to the Park Property. We therefore affirm the
trial court’s conclusion that 7 U.S.C. section 1926 did not preempt the Commission’s order.
CONCLUSION
We conclude that it was not error for the Commission to permit the City to amend
its decertification petition to seek expedited release of the Park Property, exclusive of the 6.7-acre
tract, and that substantial evidence supports the Commission’s finding that the Park Property
met the criteria for expedited release pursuant to section 13.254(a-5). We have also affirmed the
district court’s conclusion that Mountain Peak was not entitled to invoke the protection of 7 U.S.C.
section 1926(b) because it had not “provided or made [service] available” to the Park Property.
Consequently, we affirm the district court’s judgment affirming the Commission’s order approving
the City’s petition for expedited release.
_____________________________________________
Scott K. Field, Justice
Before Justices Puryear, Field, and Bourland
Affirmed
Filed: November 2, 2017
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