Engelman Irrigation v. Environmental Qual.
| Decision Date | 10 April 2008 |
| Docket Number | No. 03-07-00252-CV.,03-07-00252-CV. |
| Citation | 251 S.W.3d 184 |
| Parties | ENGELMAN IRRIGATION DISTRICT, Appellant, v. TEXAS COMMISSION ON ENVIRONMENTAL QUALITY and Shields Brothers, Inc., Appellees. |
| Court | Texas Court of Appeals |
J.W. Dyer, Dyer & Associates, McAllen, for Appellant.
Linda B. Secord, George Thomas Bohl, Asst. Attys. Gen., Natural Resources Division, Austin, David Wood, Gonzalez, Gayton, Garza & Castillo, McAllen, for Appellee.
Before Chief Justice LAW, Justices WALDROP and HENSON.
This appeal concerns the denial of Engelman Irrigation District's application for authorization to proceed in federal bankruptcy. Declaring itself unable to meet its debts and other obligations as they mature, Engelman sought bankruptcy authorization from the Texas Commission on Environmental Quality ("Commission"). See Tex. Water Code Ann. § 49.456(a)-(d) (West 2000) (). After a three-day hearing before an Administrative Law Judge ("ALJ") at the State Office of Administrative Hearings, the Commission issued a final order denying Engelman's bankruptcy application. Engelman sought review in district court, and the district court affirmed the order of the Commission. Engelman now appeals. For the reasons that follow, we affirm the judgment of the district court.
The course of this nearly twenty-year dispute over the provision of irrigation waters from the Lower Rio Grande, roiled by a decade-long delay in paying a final judgment, was channeled into this Court's jurisdiction when the debtor irrigation district sought the Commission's authorization to declare bankruptcy.
Engelman, an irrigation district in Hidalgo County, Texas, created pursuant to article XVI of the Texas Constitution, is a governmental agency of the State that is under the supervisory authority of the Commission. On January 30, 1995, Shields Brothers, Inc., obtained a jury verdict against Engelman for breach of contract as a result of Engelman's failure to deliver irrigation water that Shields Brothers had purchased in the early 1990s.1 The trial court awarded Shields Brothers $397,606.07 in actual damages, pre-judgment interest, and attorney's fees and ordered that the judgment bear interest at 10% per annum from March 22, 1995, until paid. The judgment was affirmed on appeal and became final in December 1998. See Engelman Irrigation Dist. v. Shields Brothers, Inc., 960 S.W.2d 343 (Tex.App.-Corpus Christi 1997), pet. denied, 989 S.W.2d 360 (Tex.1998) (per curiam).
Beginning in February 1999, Shields Brothers filed motions in the trial court to order Engelman to levy, assess, or collect taxes or assessments in order to pay the judgment. At that time, Engelman made its first "settlement and satisfaction of debt agreement" offer, proposing to pay Shields Brothers $50,000 upon full execution of settlement documentation, proceeds from the sale of all of its oil and gas mineral interests, and annual payments of $25,000 for seven years. Shields Brothers refused the offer.2 In response, Engelman declared itself unable to pay the Shields Brothers judgment and, in March of 1999, activated the bankruptcy-authorization process provided under the water code. See Tex. Water Code Ann. § 49.456(a)-(d); see also 30 Tex. Admin. Code § 293.88 (2005) ("bankruptcy-authorization rule").
Under the water code, a district that is subject to the continuing supervision of the Commission, such as Engelman, may not proceed in bankruptcy unless it is authorized to do so by written order of the Commission. See Tex. Water Code Ann. § 49.456(a). When a district submits a bankruptcy application to the Commission for approval, the Commission "shall investigate the district's financial condition," including its assets, liabilities, and sources of revenues. Id. § 49.456(c). The Commission shall deny a district's application unless it determines that the district cannot, through the full exercise of its rights and powers, reasonably expect to meet its debts and other obligations as they mature. Id. § 49.456(d). But even if the Commission does determine that a district cannot reasonably expect to meet its debts through the full exercise of its rights and powers, the decision to authorize a district to proceed in bankruptcy is made at the Commission's discretion. See 30 Tex. Admin. Code § 293.88(c) () (emphasis added).
Shields Brothers opposed Engelman's application and submitted evidence to the Commission that Engelman did in fact have the ability to pay the judgment owed to Shields Brothers. As of May 31, 2002, the amount of the outstanding judgment with all of the accrued post-judgment interest was $789,893.52.
Following its investigation of Engelman's financial condition, the Commission issued an interim order in 2002 denying the bankruptcy request and referring the matter to the State Office of Administrative Hearings "to develop facts and any limitations in law with regard to specific measures to generate revenues to meet the District's obligations." Engelman, Shields Brothers, and the Commission were all parties in the SOAH proceeding.
After conducting a hearing on the merits, the ALJ issued a proposal for decision, recommending that the Commission find that Engelman, in order to meet its debt obligations, could: (1) sell some of its water rights; (2) sell all of its mineral rights; (3) sell some of its water allocations; (4) increase its assessments to irrigators; and, with Commission approval, (5) obtain a long-term revenue note.
On September 7, 2004, the Commission issued its final order denying Engelman's application to proceed in bankruptcy ("Order"), concluding that Engelman can, through the full exercise of its rights and powers, reasonably expect to meet its debt obligations. The Order largely adopted the findings of the ALJ, identifying the same five measures that the ALJ had determined Engelman could use to generate revenue. The Order further directed Engelman to "adopt specific measures to generate sufficient revenue to settle the judgment against it," which "may include but are not limited to a combination of those specified" in the Order. In determining that Engelman could sell some of its water rights, one of the most contentious issues in this case, the Commission made several fact findings, including: (1) Engelman has a current balance of 20,031 acre-feet of water rights, but only 7,498 irrigable acres within its boundaries; (2) Engelman has 1,286 acre-feet of "excess water rights"; (3) Class A water rights, the type owned by Engelman, are in high demand and are worth at least $1,200 to $1,500 per acre-foot; (4) Engelman possesses 427.78 "excluded" acres with irrigation water rights that it can sell to municipalities; and (5) Engelman has sold 3,064 acre-feet of its original certificated water rights.
Engelman sought judicial review and reversal of the Order in district court, asserting that the Order was not supported by substantial evidence, that the Order violated Engelman's substantial rights by forcing it to raise money by means that violated the constitution and laws of Texas and that the Order was arbitrary and capricious because the Commission exceeded its authority and failed to order Engelman to adopt specific measures to raise the money to pay the Shields Brothers debt. The district court affirmed the Order of the Commission in all respects, and Engelman appeals.3
In five issues, Engelman asserts that the district court erred in affirming the Order because Engelman has no ability to reasonably expect to meets its debts and other obligations as they mature, requiring the Commission to authorize Engelman's bankruptcy application as a matter of law. Specifically, Engelman asserts that (1) the Commission had no authority to order Engelman to sell water rights or other property in violation of the constitution and laws of Texas; (2) the Commission wrongly concluded that Engelman could borrow money to satisfy the Shields Brothers judgment and therefore the Commission's finding on this issue was unsupported by the evidence; (3) there is no evidence to support the Commission's finding that Engelman can increase its water assessments in an amount sufficient to satisfy the judgment; (4) the Commission failed to order Engelman to adopt specific measures to raise revenue in order to satisfy the judgment, as required by the Commission's bankruptcy-authorization rule; and (5) there is no evidence that Engelman can reasonably meet its debt obligations as they mature.
Standards of review
Engelman's first issue requires us to construe the forced-sale provision of the Texas Constitution, see Tex. Const. art. XI, § 9, to determine whether the Commission has ordered a forced sale of Engelman's assets. This is a question of law, which we review de novo. See Texas Dep't of Transp. v. Needham, 82 S.W.3d 314, 318 (Tex.2002). We are also asked to interpret various sections of the water code governing the Commission's authority to review Engelman's bankruptcy application and to require Engelman to exercise its statutory powers by adopting specific measures to meet its debt obligations. When interpreting a statutory provision, a court must ascertain and effectuate the legislative intent. See Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 383 (Tex.2000). The construction of a statute by the administrative agency charged with its enforcement is entitled to great weight by reviewing courts. State v. Public Util. Comm'n, 883 S.W.2d 190, 196 (Tex.1994); Bexar Metro. Water Dist. v. Texas Comm'n on Envtl. Quality, 185 S.W.3d 546, 550 (Tex.App.-Austin 2006, pet. denied).
Engelman's remaining...
To continue reading
Request your trial
- Mbm Financial Corp. v. Woodlands Operating
-
Engelman Irrigation Dist. v. Shields Bros., Inc.
...98th District Court of Travis County. In 2008, TCEQ's administrative decision was affirmed by the court of appeals in what we will call Engelman II .10 The Engelman I judgment remained unpaid.In 2006, while Engelman II was on appeal, we decided Tooke v. City of Mexia ,11 which overruled Mis......
-
Engelman Irrigation Dist. v. Shields Bros., Inc., NUMBER 13–14–00070–CV
...authorization; authorization was ultimately denied; and EID lost an appeal on the issue in 2008. See Engelman Irrigation Dist. v. Tex. Comm'n on Envtl. Quality, 251 S.W.3d 184, 191–202 (Tex.App.—Austin 2008, no pet.). In its opinion, the Austin Court of Appeals discussed the following backg......