Rio Grande Valley Gas Co. v. City of Pharr

• Decision Date: 30 December 1997
• Docket Number: No. 13-96-352-CV,13-96-352-CV
• Citation: 962 S.W.2d 631
• Parties: RIO GRANDE VALLEY GAS CO., Southern Union Company, Southern Union Gas Company, Mercado Gas Services, Appellants, v. The CITY OF PHARR, on Behalf of Itself and Other Similarly Situated Entities, Appellees.
• Court: Texas Court of Appeals

Page 631

962 S.W.2d 631

RIO GRANDE VALLEY GAS CO., Southern Union Company, Southern

Union Gas Company, Mercado Gas Services, Appellants, v. The CITY OF PHARR, on Behalf of Itself and Other Similarly

Situated Entities, Appellees.

No. 13-96-352-CV.

Court of Appeals of Texas,

Corpus Christi.

Dec. 30, 1997.

Roberto J. Yzaguirre, Jose E. Chapa, Jr., Yzaguirre & Chapa, McAllen, Eduardo R. Rodriguez, Rodriguez, Colvin & Chaney, Brownsville, Jerry K. Clements, Locke, Purnell, Rain & Harrell, Dallas, Christina Carlson Dodds, Daniel W. Bishop, II, Locke, Purnell, Rain & Harrell, Austin, Thomas F. Loose, Karin B. Torgerson, Kirsten M. Castaneda, Locke, Purnell, Rain & Harrell, Dallas, Lisa D. Powell, Morris Atlas, Atlas & Hall, McAllen, Osborne J. Dykes, III, Fulbright & Jaworski, Houston, Luther H. Soules, III, Soules & Wallace, San Antonio, for appellants.

Vincent L. Marable, III, Wharton, Benjamin L. Hall, III, Elizabeth Bazan-Hawkins, O'Quinn, Kerensky, McAninch & Laminack, Houston, Phil Harris, Weslaco, John M. O'Quinn, Robert R. Johnson, Sherry Scott, O'Quinn, Kerensky & McAninch, Houston, Jennifer Bruch Hogan, Holmon, Hogan, Dubose & Townsend, Houston, for appellees.

Before DORSEY, YANEZ and RODRIGUEZ, JJ.

OPINION

YANEZ, Justice.

Rio Grande Valley Gas Co., Southern Union Gas Co., et. al. ¹ bring this interlocutory appeal from an order entered in the 92nd District Court certifying as a class all Texas municipalities (excluding Edinburg and McAllen) that have entered into franchise agreements with RGV or SUG providing for payment of franchise fees based on a percentage of the franchisee's gross receipts. By three points of error, appellants contend the trial court abused its discretion in certifying the class. We affirm.

Procedural History

The Cities of Edinburg and Pharr, like many other municipalities, executed municipal ordinances which granted to RGV and its successors, lessees, and assigns, the right to use public property to lay its system of pipes and lines for the purposes of distributing, supplying, conveying, and selling natural gas to customers within city limits. In exchange for these rights, RGV was to pay a percentage of its "gross receipts" from all gas sales within the municipalities to each respective municipality. Over thirty municipalities in the Rio Grande Valley executed franchise agreements with RGV containing identical or nearly identical terms.

A disagreement arose with respect to the calculation of the gross receipts because Edinburg discovered that RGV was transporting natural gas for other companies for sale within the city limits, and not including its revenue from such endeavors in its gross receipt calculations used for franchise payments. Edinburg contended this arrangement to transport gas on behalf of transport customers was not authorized under the ordinance granting RGV a franchise.

On August 31, 1995, Edinburg sued appellants and Valero corporate entities ² for exceeding their franchise rights by "engaging in revenue-generating schemes in their gas operations on public property," and thereby paying a deceptively small franchise fee payment to Edinburg. SUG was named as a party because it has assumed RGV's rights and obligations under the franchise agreements, and allegedly continues to interpret the franchise agreements in the same manner as RGV. Edinburg sued appellants on multiple causes of action, including breach of contract, ³ and sought both damages and declaratory relief. According to Edinburg's pleadings, franchise payments were based on appellants' gross receipts, which were undervalued. By subsequent amended petition filed April 24, 1996, Edinburg sought certification of a class action, with itself as representative of all Texas municipalities which have or have had similar franchise agreements with RGV.

On June 17, 1996, Pharr, which is represented by the same counsel as Edinburg, sought to intervene in Edinburg's class action, incorporating by reference all the allegations and causes of action pleaded by Edinburg. On June 20, 1996, four days before the scheduled hearing for certification of a class in which Edinburg would be class representative, Pharr filed an "Amended Petition in Intervention, Motion to Sever, Request for Class Action, and Request for Jury Trial," by which it sought to sever its claim from the Edinburg suit and have itself certified as class representative. ⁴

One of Edinburg and Pharr's key contentions is that their agreements, like those of other class members, allow only the franchisee to sell gas within city limits, and even if the franchisees are allowed to have "transport customers," whatever profits which derive from these "transportation customers" should be, and should have been, included among RGV and SUG's gross receipts. Appellants disagree, and do not believe the franchise agreement warrants the inclusion of transportation customers within the calculation of gross receipts subject to the franchise fee. Pharr seeks to adjudicate the "rights, status, and legal relationship" between municipalities and the defendants "with respect to the withholding of proper municipal fees due and owing" as well as "the scope of authority granted to the defendants in the franchise fee ordinances" on behalf of approximately ninety municipalities with similar agreements.

On June 24, 1996, the trial court held a hearing on Pharr's motion to certify. Prior to the hearing, however, appellants filed a motion to disqualify and/or recuse Judge Homer Salinas, then the presiding judge at the 92nd District Court. The motion was denied as untimely, the court conducted a hearing on the certification issue, and the class now at issue was certified. Appellants brought this interlocutory appeal of Judge Salinas's certification order, arguing that the trial court abused its discretion in certifying a class action in the manner it did.

While this appeal was pending, subsequent motions to "disqualify and/or recuse" Judge Salinas were filed. They were referred to the administrative judge, who appointed Judge Robert Pate to hear the matter. After conducting a hearing, Judge Pate granted the motions. Because an issue arose regarding the validity of Salinas's certification order in light of his removal, appellants then filed a motion to vacate Judge Salinas's order. For reasons set out below, and by agreement of the parties, we issued an order staying this appeal until Judge Westergren, who was appointed to replace Judge Salinas, determined what effect Salinas' removal had, if any, on the certification order. Upon filing of Judge Westergren's determination of the issues presented by appellants regarding Judge Salinas's removal, we reinstated this appeal. Appellants have since amended their brief and added a supplemental point of error alleging that the certification order is void because Judge Salinas was without jurisdiction to enter any order. We now address the arguments raised by appellants.

POINTS ON APPEAL

In their first point of error, appellants argue the certification order is void because the trial court was disqualified at the time it entered the order. By their second point of error, appellants maintain the certification order should be overruled because the trial court abused its discretion and entered the order without (a) first affording appellants due process opportunities to receive proper notice of the certification sought, (b) allowing appellants to be heard in a meaningful manner, and (c) allowing appellants to cross-examine Pharr's city attorney. Finally, appellants contend in their third point that the order should be overruled because appellee did not satisfy the requirements for certification under Texas Rule of Civil Procedure 42.

Scope and Standard of Review

Our jurisdiction over an appeal from an interlocutory order exists only insofar as it is specifically authorized by statute. Laurie v. Stabel, 482 S.W.2d 652, 654 (Tex.Civ.App.--Amarillo 1972, no writ); Byer v. Dallas Power & Light Co., 290 S.W.2d 948, 950 (Tex.Civ.App.--Dallas 1956, no writ); see Browne v. Bear, Stearns & Co., 766 S.W.2d 823, 824 (Tex.App.--Dallas 1989, writ denied). Section 51.014 of the Texas Civil Practice & Remedies Code permits a party to appeal from an interlocutory order that certifies or refuses to certify a class in a suit brought under rule 42 of the Texas Rules of Civil Procedure. TEX. CIV. PRAC. & REM.CODE ANN. § 51.014(3) (Vernon 1997); De Los Santos v. Occidental Chem. Corp., 933 S.W.2d 493, 494 (Tex.1996); Koch Gathering Systems, Inc. v. Harms, 946 S.W.2d 453, 455 (Tex.App.--Corpus Christi 1997, writ denied). A party may complain of all matters which pertain to the certification decided by an interlocutory order. American Express Travel Related Servs. Co. v. Walton, 883 S.W.2d 703, 707 (Tex.App.--Dallas 1994, no writ) (holding that a defendant could complain about notice to class members and class size).

We will reverse the certification order only if the record shows a clear abuse of discretion. St. Louis Southwestern Ry. Co. v. Voluntary Purchasing Groups, Inc., 929 S.W.2d 25, 29-30 (Tex.App.--Texarkana 1996, no writ); Walton, 883 S.W.2d at 711. An abuse of discretion is shown if the trial court acts without reference to any guiding principles or acts arbitrarily or unreasonably. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 242 (Tex.1985). A clear failure by a trial court to analyze or apply the law correctly is an abuse of discretion. Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992); St. Louis Southwestern Ry. Co., 929 S.W.2d at 30. Further, the reviewing court must view the evidence in the light most favorable to the trial court's ruling and indulge every presumption in favor of that ruling. Health & Tennis Corp. of Am. v. Jackson, 928 S.W.2d 583, 587 (Tex.App.--San Antonio 1996, writ dism. w.o.j.); Vinson v. Texas Commerce Bank--Houston, 880 S.W.2d 820, 823 (Tex.App.--Dallas 1994, no writ); Dresser Indus., Inc. v. Snell, 847...