### NUM BER 13-06- 0056 9-CV 

## COURT OF A PP EA LS T H I R T E E N T H D I S T R I C T O F T E X AS CORPUS CHRI ST I - 

## E D I N B U R G
CA NYO N REG IONA L WA TE R A UT HOR ITY, A pp ellan t,

v. GU A D A L U PE -B L A N C O R IV ER A U T H OR ITY, T H E T E XAS C O M M I S S I O N O N E N V I R O N M E N T AL QUA LITY, A ND M A RGA RET HOFFM A N IN HER OFF ICIA L CA PA CITY AS EX ECU TIVE D IREC TOR O F T H E T E XAS C O M M I S S I O N O N E N V I R O N M E N T AL QUA LITY, A pp ellees .

On a p p ea l f ro m th e 35 3r d D is tr ic t C o u rt of T rav is C ou nty , T exas . 

## O P I N I O N Be fo re C hie f J us tice Vald ez an d Ju stice s R od rigu ez an d Be na v ide s

Op inio n by

C hie f J us tice Vald ez This ca se or ig ina ll y

i nv olv ed a w ater- ra te ap peal thatC any on R eg ion al W ater Author it y ( “C any on R eg ion al” ), appel lan t, and ot hers b ro u g h t b e fo re t h e T e x a s C o mm i s si onT hi s appeal i nv ol v es t hr ee p ar t i es: ( 1) t he Com m i ssi on, a st at e ag ency t hat i s r esponsi bl e f or 1 i m pl em ent i ng t he co nst i t ut i on a nd l aws ofT exas r el at i ng t o t he c on s erva t i on o fnat ur al r esour ces an d t he p ro te c ti o n o f th e e n v i ro n m e n t, see T EX
. W A T E R C OD E A NN . § 5 .0 1 2 (V e rn o n 2 0 0 8 ); (2 ) G u a d a l u p e -B l a n c o , a c o n s e rv a ti o n a n d re c l a m a ti o n d i s tri c t, see T EX
. C ON ST
. ar t

. X VI , § 59; and , ( 3) C any on Regi onal , a speci al l aw w a te r d i s tri c t. S e e id

. B e x a r M e tr o p o lita n W a te r D is tr ic t a n d W a te r S e r v ic e s In c . a ls o f ile d w a te r - r a te a p p e a ls a n d w e r e p a r tie s in th e u n d e r lyin g s u it. T h e y, h o w e v e r , a r e n o t p a r tie s to th e in s ta n t a p p e a l. 2 on En viro n m e ntal Qual it y ( “t he C ommis si on” ), co -a ppel lee

. I n i ts ra te ap peal , C any on 1 Reg ion al soug ht rev iew of the ra tes thatGuad alu pe- Bl anco Ri v er Aut hor it y

( “G uadal upeBl anco” ), co -ap p e lle e, c harg ed for w ater

. Dur ing the admini strati v e rev iew of the rate appeal , t he par

ti es re ached an i mpass e reg ardin g the in ter pr etati on of an un der ly ing cont ra ct and t he v ali dity of the Commi ss ion ’s admi nis trati v e r ule s. C any on R eg ion al and Guadal upe- Bl anco soug ht de cl ar ator y reli ef i n dis tr ic t cour

t, and the C ommis si on mov ed to di smi ss C any on R eg ion al’ s c lai ms for lac k o f jur is dic ti on. T h e t ria l court re ndered jud g ment i n fav or

of Guadal upe- Bl anco and t he C ommis si on and tax ed Cany on R eg ion al
w it h a p orti on of Guada lup e- Bl anco’ s att o rn e y’s fees. By fiv e i ss ues, C any on R eg ion al ap pe al s v ar i ou s a s pe c ts o f t he j ud g me nt

. W e affi r m. I. B A CKGRO UND On O cto ber

13, 1998, Can y on R eg ion al and G uadal upe- Bl a n co entered i nto a w ater pur chas e c ontracti n w hic h Gua dal upe- Bla n co p ro m is ed to prov ide a c ertai n amountof
u n t r e a t e d w a t e r t o C a n y o n R e g i o n a l

. Th e c o n t r a c t c o n t a i n e d t h e fo l l o w i ng r ele v ant provisi ons: 15. Charges. (a ) [C any on R eg ion al] sh all pay GBRA [G uadalupe- Bl anco] for each mon th be ginning the f irst mo nth of this W ate r Purchase Con tract throug h the ter m of this W ater Purchas e C ontractan am ou n t o f

m one y equal to 1/1 2th the pro ductof thatparty’s Long -Ter m Annual Quan ti ty i n effectdur ing that month t imes the F ir m W ater

Rate ( her ein after defined) i n effectdur ing that month. The “F ir m W ater Rat e” shal l be the ra te cha rge d byI n 2002, t he T exas Nat ur al R esour ce Conver sat i on Com m i ssi on’ s nam e was ch anged t o t he T exas 2 C o m m i s s i o n o n E n v i ro n m e n ta l Q u a l i ty

. See 30 T EX
. A D M IN
. C OD E § 3. 2( 8) ( 2002) ( T ex. C om m ’ n on E n v i ro n m e n ta l Q u a l i ty , D e fin i ti o n s ). 3

GBRA pe r acre-fo ot of

w ate r per y e ar for a f irm w ate r supply reserved and supp lied pu rsuan t to this W ate r Purchase Con tract , buti n any

ev ent n ot l ess than the ra te c h a rg ed for stored w ate r on a f irm-y ield ba s e s f rom Can y on Rese rv oir. T he p resen t Firm W ate r Rate is $61 .00 per acre-footper y ear.

. . . . 16. Annual Adj ust ment. C RW A [C any on Reg ion al] shall payGBRA at i ts off ic e i n Gua dal upe C ounty , Texa s o r suc h oth er pl ace as GBRA may designat e in w riting, not later tha n the thirty -f irst ( 31st ) da y of Janu ary of each y ear , a dol lar

amount eq ual to the p ro ductof the fol low ing : a factor of 2.0, ti mes t he Fi rm W ater Rat e in eff ecton D ecember 31 o f the p re v iou s y ear , ti mes the number of ac re -feet of w ater used in the pr ev iou s c ale ndar

y ear i n e xc ess of the Tota l Annual C ommitment appl ic abl e for that y ear . . . . 17. Adj ust ment of R ates

. (a) T he Firm W ate r Rate spe c if ied in this W ate r Purchase C on trac t ma y

b e ad j us te d by

G BRA atany

ti me and from t i me to tim e. If

GBRA desires to adjust eithe r rate , it shall, at least si xty ( 60) day s p ri or

to the first day

on w hic h suc h adj ust ment is propose d to become eff ect iv e, giv e written not ic e of the prop osed adjust me nt to the pa rties to this W ate r Purchase Con tract

. (b ) The monthl y

ch arg e to be pai d for water del iv er y may be s et and adj ust ed by

GBRA atany

tim e and from ti me to ti me, provided tha t the basis for the rate estab lished b y GBRA shall be th e c ostof ser

v ic e[,] incl udi ng the debt ser v ic e req uirements of GBRA w hic h w er e i ncur re d i n conne cti on w it h the financ ing of the w ater

del iv er y sy ste m. . . . (c ) In t he ev ent of a di sag re ement be tw een G BRA and any par ty ov er any adj ust ment propose d by GBRA to t h e F ir m W ater Rat e . . . appl ic abl e to that par ty , or ove r th e s etti ng or adj ust ment by

GBRA of anydeli v er

y charg e appli cabl e to that par ty , G BRA and that par

ty may app ly by

appropr iat e means to t he TNR CC , or

any ag ency su cc eed in g to the rate- maki ng jurisdiction of

the T NRCC, to establish a just and rea sona ble

[2] adj ust ment or

ch arg e.C any on Regi onal and G uadal upe- Bl anco f i l ed p et i t i ons u nder di ff er ent cause num ber s i n di st r i ct 3 c o u rt. O n F e b ru a ry 2 6 , 2 0 0 4 , t h e tri a l c o u rt, b y a g re e d o rd e r, c o n s o l i d a te d th e tw o s u i ts

. 4 After ex ecut ing the cont ra ct, Guad alu pe- Bl anco inc re ased the fir m w ater ra te i n annual inc re ments for w ater

from $61 an a cre foot i n 1998 to $9 2 an acre foot i n 2006. I n 2002 and 200 3, C any on R eg ion al chal len g ed th e rate i ncreases by fil ing rate- appeal petiti ons
w it h the C ommis si on. T h e Co m m iss io n ref e rre d th e pe ti ti ons to th e St a te Of f ice of Ad m in ist ra ti ve He a rin gs for an ev ide nti ar

y hear ing on w hether it w as in the publ ic int er est to m o d ify G uadal upeBl anco’ s water ra te. See 30 T EX . A D M IN . C OD E § 291. 131( b) ( 1994) ( Tex . C omm’n o n Env ironmental Qual it y , Ex ecut iv e Di re cto r' s Rev iew of P eti ti on or Appeal ) (“ For a pe ti ti on o r a p p e a l t o re vie w a ra t e t h a tis ch a rg e d p u rs u a n tt o a w r i t t e n c o n t ra c t , t h e e xe c u t ive direct or w il l forw ard the peti ti on or appeal to the S tate Off ic e of A dmini strati v e Hea ri ng s t o condu ct an ev ide nti ar

y hear ing on p ubl ici nterest .” ). C any on R eg ion al obj e ct e d to the pub lic i nte rest hea ring on th e ground th at th e w ate r rate was n ot pursu antt o the contract and th a t it w as enti tl ed to proceed di re ctl y to an ev ide nti ar

y hear ing on t he rate. See id. § 291. 131( c)

. The admin is trati v e l aw j udg e abat ed th e pet it ion s a n d r eferred th e matt er to di str ic t c our

t. Id . § 291 .13 1(d). Both Guadal upe- Bl anco and C any on R eg ion al soug ht de cl ar ator y reli ef under

the Uniform Decla ratory Judgm entAct (“U DJA”) and th e Ad mi ni s trat i v e Pr oc ed ures A ct (“APA”) i n d i s t r i c t c o urt. See T EX . C IV . P R AC
. & R EM . C OD E A NN . § 37.004 (V er non 200 8) ; T EX . 3 G OV ’ T C O D E A NN . § 2001. 038 ( Ver non 200 8)

. Al ong w it h s eeki ng dec larator y reli ef, Can y on Regional sue d Gua dalu pe-Bla nco for breach of contract , ar gu in g tha t paragraph 17(c) prov ide d tha t t he par

ti es ag re ed to proceed di re ctl y to a rate- maki ng hear ing before the5

Com mission and thatGuad alup e-Blan co brea ched thatprovi sion by insisting on a pub lic int er esthear ing ; i t al so soug ht an i nju nct ion to prohi bitthe Commi ss ion from co nduct ing a publ ici nteresthear ing

. Both par ti es soug ht attor ney ’s f ees under the UD JA, and Cany on Reg ion al re q uest ed at tor ney ’s fees und er ch apter 38 o f the c iv il pract ic e and re medies code. T EX . C IV . P R AC
. & R EM . C OD E A NN . § 38.001( 8) ( Ve rn o n 2008) ( prov idi ng for t he recovery of reason able atto rney’s fees o n a claim for an oral or w ritten con tract). The Co mmiss ion fil ed a ple a to the jur is dic ti on, i n w hic h i t arg ued t hat C any on Regional’s “conte ntion ” that “direct acce ss to a justne ss and reason able ness h earing mu st
a lw ay s b e g iv en and a publ ici nteresthear ing ca n nev er be req uired as a precond it ion ” shoul d be dis mis sed for l ack of jur is dic ti on bec ause that q uest ion w as before t he admini strati v e l aw

j udg e. In J une 200 4, C any on R eg ion al and G u adal upe- Bl anco filed cross -mot ion s for par ti al summar

y j udg ment. The cent ra l is sue in Guadal upe- Bl anco’ s mot ion w as w hether Guadal upe- Bl anco’ s rate i ncreases w er e made u nder the contra ct and w hether C any on Reg ion al’ s b re ach of contractclai m w as v iab le. Can y on Reg ion al’ s motion rai sed si mil ar cont ra ctu al is sues , buti t als o made s tatut or y and cons ti tuti onal arg uments

. Can y on Reg ion al arg ued t hat t he C ommis si on w as obl ig ated to fix a j ust a n d r e asona ble rate becau se numerous w ater co de prov is ion s c all ed for itto do s o. Add it io n a lly , C any on Re gi o n a l raised a constitu tiona l arg um entbyclaiming thatrequir ing a public interest hea ring imp aired the p arties’ ability to ent er in to con tracts tha t “w aived” the pu blic interest
re q uirement. Itci ted a se cti on of the Tex as Con sti tuti on th at prov ide s t hat, “[ n]o

. . . law imp airing the obligation of contract s[] sha ll be ma de. ” T EX . C ON ST . ar t. I, § 16.T he t r i al cour t awar ded G uadal upe- Bl anco $120, 000 i n at t or ney ’ s f ees i n t ot al

. I n ad di t i on t o t axi ng 4 C a n y o n R e g i o n a l , t h e tri a l c o u rt ta x e d B e x a r M e tro p o l i ta n W a te r D i s tri c t a n d W a te r S e rv i c e s , In c ., e a c h w i th $ 4 0 ,0 0 0 i n a tto rn e y ’ s fe e s .

T hi s case was t r ansf er r ed f r om t he T hi r d C our t ofA ppeal s t o t he T hi r t eent h Cour t of Appeal s und er 5 a d o c k e t e q u a l i za ti o n o rd e r i s s u e d b y th e S u p re m e C o u rt o f T e x a s . See T EX
. G OV ' T C OD E A NN
. § 73. 001 (V ern on 20 05 ). “ I n c as es t ran s ferred by t he S up rem e C ou rt from on e co urt of ap pe al s t o an othe r, t he co urt of app eal s t o wh i c h t h e c a s e i s t r a n s f e r r e d m u s t d e c i d e t h e c a s e i n a c c o r d a n c e wi t h t h e p r e c e d e n t o f t he t r ansf er or cour t under pr i nci pl es of st ar e deci si s i f t he t r ansf er ee cour t ' s deci si on o t her wi se woul d ha v e be en i nc on s i s t en t w i t h t he prec ed en t of t he t ran s feror c ou rt

. ” T EX
. R. A PP
. P. 41. 3. 6 On D ecember

17, 2004, the t ri al cou rt g ra nted Guadal upe- Bl anco’ s mot ion and decl ar ed th at t he fir m w ater rate i ncreases w er e under th e c o ntractfor p ur poses of section s 291 .12 8 throu gh 291. 138 o f t itle 30 of

t he adm inistrative cod e. T he trial court also found that Can y on R eg ion al’ s b reach of contractcl aim w as w it hout meri t as a mat ter of law

. Reg ardin g the Commi ss ion ’s plea to the jur is dic ti on, t he tr ial co urt di smi ss ed C any on Reg ion al’ s c lai m that a publ ici nteresthear ing ca n nev er be a precond it ion to a rate- set ti ng hear ing w h e n s ta te-ow ned s ur face w ater

i s i nv olv ed. The la st por ti on of the par

ti al
sum ma ry

judgmen t order pron oun ced th at Gu ada lupe -Blanco wa s entitle d to at torne y ’s fees, w hic h w oul d be deter mined in the t ri al cour t’ s fin al jud g ment. On J uly 1 1 , 2006, the t ri al cour t rendered a final j udg ment t hat i ncor porated and
re a f f irmed the pa rtial summ aryjudgmen t of Decem ber 17 , 200 4. T he jud gmen t also decla red tha t section s 291 .12 8 throu gh 291 .13 8 of title 30 of the adm inistrative code, which deal w it h w ater-rate a ppeal s t hat t he C ommis si on had promulg ated, w e re a prope r ex er ci se of th e Commis si on’ s s tatut or y auth or it y . Al thoug h Gua dal upe- Bl anco soug ht $302,87 0.17 in attor ney ’s fees, the tr ial co urt aw arded i t $40 ,000 in fees ag ain st Can y on Reg ion al. Thi s a ppeal foll ow ed.

4 5 II. D I S CUS S I ON This i s a n appea l from a jud g ment that w as par ti all y rendered on cross -mot ion s for7

summar y j udg ment. W hen par

ti es file cross -mot ion s for summary

judg ment and the tr ial
cour t g ra nts one moti on and deni es the o ther , an appel lat e c our t s hould r ev iew

the
summar y j udg ment ev iden ce suppo rt ing eac h moti on and deter mine all q uest ion s pr esent ed. FM Props. Operat ing Co. v. City of Aust

in , 22 S.W .3d 8 68, 8 72 (T ex. 2000 ). The appel lat e c our

t “s houl d render

the jud g ment that the tri al cour t s houl d hav e rendered.” Id . If the trial court’s orde r does no t specif y the ground s upo n w hich it grant ed su mm ary judgme nt, th e ap pellat e co u rt “ mu st af f irm sum ma ry

judgmen t if

any of th e sum ma ry judgme nt ground s are me ritorious.” Id

. A . “Pursua nt t o a Cont rac t” W e b e gi n o u r a n a lys is o f t h e f ir s tis s u e wit h a b ri e f o ve rvi e w o f

t h e a d m in is t ra t ive
ru les thatg ov er n w hol esal e w ater rate a ppeal s. To protes t a w hol esal e w a ter rate, the compl ain ant fil es a pet it ion w it h the ex ecut ive d irec tor of the C ommis si on, w ho forw ards
a c omplet e pet it ion to the Stat e Off ic e of A dmini strati v e H ear ing s for an e v ide nti ar

y hear ing before a n admi nis trati v e l aw j udg e. 30 T EX . A D M IN . C OD E § 29 1.131(a)

. A pet it ion that seeks review

of a rate tha t is charged pursuan t to a wr itten contractmustund ergo a pub lic int er esthear ing

. Id . § 291 .13 1(b). If the cha llenged rate is fou nd to not ad v ersely af fect the p ubl ici nterest , t hen t he Commi ss ion w il l dis mis s t he pet it ion

. Id . § 291.134 (a ). O n the oth er han d, if

the Co m m is s io n f inds th at th e prote sted rate ad v ersely af fects th e pu blic intere st, the n it w ill send the ma tter to an adm inistrative law judge for a n e vid e ntiary hear ing on t he rate. Id . § 291. 134( b)

. A pet it ion thatse eks rev iew of a rate t hat i s n ot charg ed pursuant to a w ri tten cont ra ct is g ra nted an ev ide nti ar y hear ing on t he rate. Id . § 291 .13 1(c). W hen there is a disagreem entregarding w het her the chall e n ge d r ate is8

pursu antto a cont ract, the adm inistrative law judge is to ab ate the pro ceed ing and forw ard the c ontrov ersy

to the a ppropr iat e c our t. Id . § 291 .13 1(d). In t his ca se, the tr ial co urt found that the rate w as charg ed pursuantto a c ontract

. By its f irst issue, Canyon Regional argues tha t the t rial cou rt e rred in f inding tha t the f irm
w ater rate t hat i s i ncl uded in th e c o ntract ’s pr ic e c alc ula ti on i s a co ntract ual rate. Acc ordin g to Can y on R eg ion al, the phrase “p ursuantto the c o n tr a ct ” thati s u sed in the adm inistrative code’s rules dea ling w ith w ate r rate a ppe als me ans tha t the contractmust
ex pli ci tl y se t forth a f ixed pr ic e. If itdoes not, then the ra te i s n ot made “p ursuantto the cont ract.” See id

. § 291. 131. Bec ause the cont ra ct does not p ro v ide a pe rmane nt, fix ed number , C any on R eg ion al cont ends that the d is puted ra te is n o t made “p ursuantto the cont ract,” and theref ore, a p ublic inte re s t h e a rin g is inapp ropriate . Canyon Regi ona l’s int er pr etati on of the ter m “ pursuant ,” w hil e c lev er , t ortures it s p lai n meani ng . W e c onst ru e the C ommis si on’ s admini strati v e rul es, w hic h hav e the sa me forc e as sta tutes , i n the sa me manner as st atute s. See R odr igu ez v. Ser v. Lloyds Ins . C o. , 997 S.W .2d 248, 254 (Tex . 1999). Acco rd ing ly , w ords and phrases w il l be read i n c ontext and
cons tr ued accordin g to the r ule s o f grammar and c ommon usa g e. See T EX . G OV ’ T C ODE A NN . § 31 1. 01 1 ( Ve r no n 19 98 )

. W hi l e ma ny w r i tt en c on trac ts c on ta i n a fi x ed p r i c e, s om e cont ra cts co ntai n a p ri ci ng sc hem e tha t i s c ommonly kn ow n as an “ open- ter m pr ic e.” Ind eed , the b usine ss a nd com me rce co de allows parties to ent er into a “con tract for sale even tho ugh the price is not settle d” if th e seller or buyer fixes the price in “g ood faith. ” See T EX . B US
. & C OM
. C OD E A NN . § 2.305 (V er non 199 4)

. For ex ample, Tex as cour

ts hav e l ong uph eld th e v alidity of ope n-term price cont racts in w hich g asoline ref iners set a sale price9

to a post ed pr ic e tha t i s fai rl y appl ied to si mil ar ly -s it uated pur chas ers. See Shel l Oi l Co. v. HRN, Inc. , 144 S.W .3d 4 29, 4 36 ( Tex . 200 4)

. The cont ra ct at the c enter of thi s d is pute cont ain s a n open- ter m pr ic e prov is ion that cal cul ates the sal e pr ic e of w hol esal e w ater bas ed upon Guad alu pe-Bl a n co’s firm w ater
ra t e . T h e f ir m wa t e r r a t e is p u b li c ly a va il a b le , a n d Ca n yo n Re gi o n a l i s p ro vid e d wit h si xt yday s n oti ce of anych ang e i n i t. M or eov er , t h e f irm wa ter rate i s c harg ed to al l of Guadal upe- Bl anco’ s “ cus tomers.” W e c annot say how thi s c ontracti s any

di ff er ent t han g asol ine co ntract s t hat h av e been uphel d by othe r cour

ts. See i d. Canyon Regional’s f irst is sue is ov er ru led

. B. Breach o f Co nt ract By i ts sec ond i ss ue, C any on R eg ion al arg ues that Guadal upe- Bl anco br eache d the cont ract by not“w aivi ng” the pub lic i nte rest hea ring requireme nts un der the Comm ission’s admini strati v e r ule s, but i nst ead, ins is ted on a hear ing as the a dmini strati v e r ule s req uire. Can y on R eg ion al cont ends tha t se ct io n 17(c) , w hic h prov ide s t hat i n the ev ent o f a ra te dispu te “GBRA an d [Can y on Regiona l] may a pply by app ropriate mea ns to th e T NRCC, or any ag ency succeed ing to the rate-m aking jurisdiction of the T NRCC, to est ablish a just and reason abl e adj ust ment or ch arg e,” obl ig ates Guadalup e- Bl anco to direct ly submit to a rate-m aking hea ring. T he a rg um entis flawed in tw o respe cts. W e be gin by not ing that Canyon Regiona l’s arg um entis not supp orted bya single
c i t a t i o n t o a n y l e g al author it y . See T EX . R. A PP . P. 38.1( i)

. An app ro pr iat e l eg al ci tati on
w oul d be to t he Dan iel ca se, w hic h hol ds that a c our t s houl d e xam in e and cons ide r the ent ire w riting in an ef

fort to ha rmon iz e an d giv e ef fect to all t he p rov isions of the con tract10

so that none w il l be rendered meani ng les s. See Uni ver sal C. I.T

. Cr edit Corp. v. Da n iel , 243 S. W .2d 1 54, 1 58 (Tex . 1951). I t has al so been recog niz ed th at t he l aw , ex is ti ng at the ti me a c ontracti s for med, bec omes a par t of the cont ra ct. See K inn ar d v . Hom ann , 750 S. W .2 d 3 0 , 3 1 (T e x. Ap p .–Au st in 19 8 8 , writde n ie d ) (ci ti n g Langev er v. M il ler , 76 S.W .2d 1025, 1026- 27 (Tex . 1934))

. Val id ag ency rul es and reg ula ti ons, promulg ated w it hin the ag ency ’s auth or it y , hav e the forc e and eff ectof law

. Id . at32 ( ci ti ng Lew is v. Jacksonville Bldg . & Loan Ass'n , 540 S.W .2d 3 07, 3 10 ( Tex . 197 6) ). In Hom ann , a sel ler

of re al est ate e ntered i nto a real es tate li sti ng ag re ement w it h
a real tor and then left t ow n. Id . at 31. T he realto r be cam e aware of a pen ding foreclosu re sal e, bu t di d noti nform the abs ent o w ner . Id

. Afte r th e f o re closu re sa le took pl ace, the
ow ner sued the re alt or for, among othe r thi ng s, br each of f idu ci ar y duty

. Id. The r eal tor
arg ued t hat i t ow ed onl y the duty to li st the pro per

ty as gov er ned bythe li sti ng ag re ement. Id

. The ow ner

arg ued t hat t he ag re ement i ncor porated an admi nis trati v e rul e promulg ated by the Tex as Real Estate Co mmiss ion , w hic h prov ide d that “[a] real es tate broker ow es the
v ery highest f iduciary ob lig ation t o his principa l a nd is o bliged to convey to his principa l all informa tion o f

wh ic h t h e agenthas kno w ledge an d w hich m ay af fect th e principa l’s decision .” Id

. T h e A u s t in C o u rto f A p p e a ls h e ld t h a tt h e a d m in is t ra t ive r u le wa s , b y la w, a par t of t he li sti ng ag re ement an d i mposed on th e real tor the g eneral duty

to infor m the
ow ner of all in formati on that mig ht af fect her deci si on about the lis ted p ro per ty

. Id . at32. In t his ca se, the publ ici nteresthe ar ing req uirement t hat C any on R eg ion al challen ges w as, by law , a part of the agreem ent . A plausible interpret ation of the ph rase “m a y a p p ly b y a p p ro p ri a t e m e a n s ” i s t h a tb o t h p a rt ie s m u s tsu b m itt o t h e a d m in is t ra t ive11

ru les that the Commi ss ion has in force. Addi ti onal ly , the publ ic int ere st heari ng re q uirement of

secti on 291.131 of

titl e 30 of the admi nis trati v e c ode w as propose d i n 1994, and t he c ontractat is sue w as ex ecut ed on Oct ober 13, 1998. See 19 T EX . R EG
. 6227( 1994) (to be co difie d at 30 T EX . A D M IN . C OD E § § 29 1 .1 2 8 -2 9 1 .1 3 8 ) (p ro p o se d Au g. 9, 19 94) (Te x . Nat’l Res. Conser’n Com m. ). Thu s, w hen the contract was fo rmed , a pub lic int er esthear ing w as the “ appropr iat e means ” to ob tai nin g a rate- set ti ng hearing on a pet ition f rom a rate tha t w as set “pu rsuan t to a w ritten con tract.” Id. ; c f

. Hom ann , 750 S.W .2d a t 31. C any on R eg ion al’ s s econd i ss ue i s o v er ru led

. C. Th e Val id ity

o f th e C om miss io n’ s R at e A pp eal R ul es B y it s t h ir d a n d fo u rt h is s u e s , Ca n yo n Re gi o n a l a rg u e s t h a tt h e a d m in i s t r a t ive app ellate rules the Com mission prom ulgated “ex ceed ed” the Comm ission’s statu tory author it y by re q uir ing a publ ic int er est hear ing before p ro ceedi ng to a rate- maki ng hear ing in ra te di sput es re g ardin g st ate- owne d wa ter

. Can y on R eg ion al cont ends that the Commi ss ion has shir ked it s res ponsi bil it y of “fix [i ng ] reason abl e rates for t he furni shi ng of
ra w or treated w ater” by hid ing behi nd the publ ic int er esthear ing req uirement. See T EX . W A TE R C OD E A NN . § 12. 013 ( Ver non 200 8)

. The thr ustof Can y on R eg ion al’ s c hal len g e to the r ule s is th a t no w ater-rate c hal len g er has ev er

prev ail ed i n a p ubl ici nteresthear ing and, therefore, the p ubl ici nteresthear ing req uirement i s i nherentl y unfair and pr ev ents chal len g ers from proceed ing to a “ sta tutor il y auth or iz ed” rate- set ti ng hear ing

. The Co mmiss ion arg ues that Can y on R eg ion al’ s b ro a d readi ng of v ar iou s w ater code prov is ion s i g nor es the w ater ap p ro p riation proces s t hat c ur re ntl y ex is ts betw een g ov er nmental enti ti es. I t c ontends thatGuad alu pe- Bl anco, a s ubsi dia ry g ov er nmental12

enti ty , has a v est ed us ufruct uar y r ig ht i n i ts w a te r a n d thatthe admini strati v e appel lat e ru les i n pl ace proper ly balan ce Guadal upe- Bl anco’ s r ig hts w hil e mai ntai nin g the Commi ss ion ’s st atuto ry obligati on to ens ur e tha t s tate w ater rates are reason abl e. The Com mission ’s arg um entp ro p e rly f rame s our stan dard of rev iew for Canyon Regional’s third an d fourth issues. Constru ction o f

a statu te—o r in this case a statu tory schem e—by an agency charg ed w it h i ts enforc ement i s e nti tl ed to se ri ous cons ide ra ti on, a s l ong as the
c o n s t r u c t i o n i s r e a s o n a b l e an d do e s n o tc o n t r a d i c tt h e p l a i n l a n g u a g e o f t h e s t a t u t e i t s e l f. Tarrant Ap praisal Dist. v. Moore , 845 S.W .2d 820, 823 (Tex . 199 3) ; Steer ing C om m s. for the Cities Served

by TXU Elec. v. PUC , 42 S.W .3d 296, 300 (Tex . App.–Aus ti n 2001, no pet.)

. This i s par

ti cul ar ly tr ue w hen t he s tatut e i nv olv es compl ex su bje ct matter

. Steer

ing Com m s. for

Cit ies , 4 2 S

. W

. 3 d a t3 0 0

. Co u rt s , h o we ve r, “d o n o td e fe r t o a d m in is t r a t ive int er pr etati on i n reg ard to q uest ion s w hic h do not li e w it hin admini strati v e ex per ti se, or deal
w ith a no nte chnica l q uest ion of law .” Rylande r v. Fi

sher Controls Int’

l, Inc. , 45 S.W .3d 2 91, 302 ( Tex . Ap p.–Aus ti n 2001, no p et.)

. The publ ici nteresthear ing req uirement for di sput es of a w ater ra te t hat i s b ased on a con tract is a perm issible adm inistrative r ule giv en t hatthe water code’s regulato ry sc heme fav ors c ontract s b etw een g ov er nm e n ta l enti ti es for th e s uppl y of w ater

. The leg is lat ur e g ra nted w ater dis tr ic ts cont ra ctu al author it y for the s uppl y of w ater and v est ed
ov ersi g ht of s uch cont ra cts w it h the C ommis si on unde r sec ti on 11. 036 of the w ater co de,
w hic h prov ide s t hat “ [t] he pr ic e and ter ms of the cont ra ct shal l be j ustand re asona ble and
w ithou t discrimina tion. . . .” T EX . W A TE R C OD E A NN . § 11. 036 (b) (Ve rnon 2 008 ). Con trary13

to C any on R eg ion al’ s a ss erti on, t he s tatut e does not emphasi z e the phrase “j ustand
re asona ble ” to t he det ri ment of co ntract ual r ig hts

. In promulg ati ng se cti on 291 of tit le 30 of the admi nis trati v e c ode, the C ommis si on respon ded t o publ icco mments by noti ng that it“ bel iev es a rev iew

proces s w it h an inh er ent deferenc e to cont ra cts w il l encou ra g e c ar eful pla nni ng bysell ers and purc hasers, foster reg ion ali z ati on and g enerate a n eff ic ien cy factor
a bsentfrom t he c ur re nt proces s.” 19 T EX . R EG
. 6 2 2 7 ( 1 9 9 4 )

. T h u s , t h e C ommis si on promulg ated an admini strati v e rul e that, at leas t i n i ts opi nio n, protec ts leg is lat iv ely created cont ra ctu al ri g hts betw een g ov er nmental enti ti es. And, there is no c ompell ing reason to dis tur b the rate- re v iew ing s ch e m e tha t t he C ommis si on has crafted. See Moore , 845 S.W .2d at 823 (provi ding tha t an appe llate court shou ld uph old an adm inistrative agency ’s int er pr etati on of a s tatut e “ so long a s th e c onst ru cti on i s reason abl e and does not cont ra dic t t he pl ain l ang uag e of the sta tute” ). C any on R eg ion al’ s t hird and fourth is sues ar e ov er ru led

. D. A tt or ney ’s F ees By i ts fift h i ss ue, C any on R eg ion al cont ends that iti s e nti tl ed to att or ney ’s fees based on G uadal upe- Bl anco’s b re a ch of parag ra ph 17( c)

. It als o c ontends thatthe tr ial
c ou rt er r ed i n aw ardi ng a tt or ne y ’ s fee s t o Gu ad al up e- Bl an c o be c au s e i t di d no t pr ope rly segregate its fees b etween recoverable and unreco v erab le claims. Gua dalu pe-Bla nco arg ues that it w as not re q uired to seg re g ate attor ney ’s fees becau se the nature o f the under ly ing cl aims w er e v er y i nter tw ine d and becau se the d ecl ar ator y j udg ment cla ims w ent beyond the AP A and enco mp assed UDJA cl aim s. 1. St and ard o f Rev iew14

T he n eed to seg regate fees is a question of law , w hile the exten t to w hich certa in cl aims ca n or

ca nnot be s eg re g ated is a mix ed q uest ion of law and fact. Tony Gu llo Mo tor s I , L. P. v . Chapa , 212 S.W .3d 2 99, 3 13 ( Tex . 200 6)

. Generally, a par ty se eki ng atto rney’s fees m ust segregate fees incu rred i n c o n n e c tion wi th a claim thatallow s their recovery f rom f ees incu rred in conn ection w ith claims for w hich no su ch recovery is all ow ed . See 79 79 Airpo rt Garag e, L.L.C. v. Dollar Rent A Car Sys., In c. , 245 S.W .3d 4 88, 5 0 6 ( T e x. Ap p .– Ho u st o n [ 1 4 th D ist .] 20 0 7 , p e t. f ile d ) (ci ti n g Chapa , 212 S.W .3d at 313 -14). This i s b ecaus e tr ial co urts do not hav e i nherent a uthor it y to re q uire a l osi ng par

ty to pay the p re v ail ing par

ty ’s a ttor ney ’s fees. Chapa , 212 S.W .3d at 311 . Th ey ma y only do so under auth or it y

of a c ontractor

st atute

. See id

. Tex as cour

ts re cog niz e an ex cept ion to thi s g eneral ru le. See id

. W hen di sc re te legal serv ices advance both recoverable claims and un recoverable claim s, atto rneys are not req uired to se g re g ate fees to recov er the total amount cov er ing al l cl aims

. See id . at 313. In t his si tuati on, t he c lai ms are s aid to be “ int ertw ine d,” and the m e re f actthat attor ney ’s fees ar e inc ur re d in adv anci ng both re cov er abl e and unr ecov erabl e cl aims does not render

thos e fees un re cov er abl e. See id . at313- 14. 2. A pp licab le L aw The UD JA, w hic h al low s for the re cov er

y of attor ney ’s fees, prov ide s t hat a cl aimant wh o s e ri gh t s , st a t u s , o r o t h e r l e ga l r e la t io n s a re a f fe c t e d b y a st a t u t e o r c o n t ra c tm a y h a ve deter mined any q uest ion of cons tr uct ion or v ali dity ar is ing under

the sta tute or

co ntractand obtai n a decl ar ati on of

r ig hts , s tatus , or

othe r leg al re lat ion s t her eunder

. T EX . C IV . P R AC
. & R EM . C OD E A NN . §§ 37. 004( a) , 37. 009 ( Ver non 200 8)

. Sect io n 2 001.038 of the15

gov ernm ent code , w hich does not allow for the recovery of atto rney’s fees, create s a cause of action for declara tory judgme nt regarding “[t]he v alidity or app licability of a rule . . . if it is al leg ed th at t he r ule or i ts threatened appl ic ati on i nter feres w it h or

i mpairs, or

threatens to inte rfere w ith or impa ir, a legal rig ht or priv ilege of the pla intif

f .” T EX . G OV ' T C OD E A NN . § 2001. 038( a)

. 3. A nal ysis In t his thoroug hly

l it ig ated cas e, muc h energ y w as ex pended on the deter minat ion of attor ney ’s fees. At the a ttor ney ’s fees hea ri ng , C any on R eg ion al arg ued that the fees could be segregated between two phase s of the litigation. It con ten ded thatthe f irst phase
w as a cha llenge to the app licability of the Com mission ’s app ellate rules, and the f irst phase onl y tang enti all y

rela ted t o a c ontract ual cl aim. N ext, Can y on R eg ion al cont ended t hat t he
sec ond pha se of the c ase w as pur ely an A PA s u it t o d eter mine the v ali dity of the Com m iss ion’s appel lat e r ule s. C any on R eg ion al arg ued t hat G uadal upe- Bl anco w as obligated to seg regate fee s during the f irst pha se of the case in orde r to obta in atto rney’s fees for w or k o n only the re cov er abl e c lai m and t hat G uadal upe- Bl anco w as not e nti tl ed to at tor ney ’s fees for the s econd phas e of the cas e. Guadalup e -B lan co arg ued t hat i t w as not o bli g ated to s eg re g ate fees. I t neverthe less, ten dere d nu me rous fee bills, tab les, af f idavits, and dep osition testim ony in supp ort of

its request for fees. One t a b le d ivides legal fe es by mont hs an d y ears. Acc ordin g to that tabl e, G uadal upe- Bl anco ex pended $141,19 8.27 in attor ney ’s fees and
ex pense s i n 2004. The t ri al cour t conc lud ed the first phase of the c ase on D ecember 17, 2004, w hen i t rendered a par ti al summar

y j udg ment th a t f o und t he rate d is pute w as16

p u rs u a n tt o a c o n t ra c ta n d d is p o s e d o f C a n yo n R e gi o n a l’ s va ri o u s co n t ra c t u a l, st a t u t o ry, and constitu tiona l claims. W e find Can y on R eg ion al’ s a ttor ney ’s fees arg ument dis ing enuous . In on e breath itarg ues that iti s e nti tl ed to att or ney ’s fees as a res ultof it s c ontract ual cl aim but t hat Gua dalu pe-Bla nco is notentitle d to f ees b ecau se its claims are pu rely APA claim s. It is tr ue th at w hen a p a rt y “ files a proceed ing that only ch all eng es the v ali dity of an admini strati v e r ule , t he par ti es ar e bound by

the APA and may

not seek

reli ef under

the UDJA beca use such relief w ould b e re d u n d ant .” Tex. Sta te Bd . of Plumbing Exam'r s v. Associa ted

Plum bing -Heating -Cooling Con tracto rs of Tex., Inc. , 3 1 S

. W

. 3 d 7 5 0 , 7 5 3 (T e x. App.–A ust in 2000, pet. dis m'd b y ag r. ) (e mphasi s a dded)

. In t his ca se, C any on Reg ion al’ s f irst- phase declarator y cl aims so ug ht more tha n a decl ar ati on c oncer nin g the v ali dity of a r ule

. In t he first p h a se of thi s c ase, C any on Reg ion al ask ed th e tr ial co urt t o decla re that: (1) the firm w ater rate w as not a cont ra ctu al
ra te; (2 ) Guadal upe- Bl anco br eache d parag ra ph 17( c) of the a g re ement; (3 ) g ov er nmental enti ti es do notenj oy

a c onst it uti onal r ig ht t o c ontractunder the Tex as Con sti tuti on; a nd ( 4) the C ommis si on i s s tatut or il y obl ig ated to fix

reason abl e w ater

rates throug hout the s tate. In esse nce, Canyon Regional choo se to litigate claims f or w hich on ly the UDJA could prov ide the re li ef that i t s oug ht. See Howe ll v. T ex. W orkers' Com

p. Comm 'n , 143 S.W .3d 416, 442- 43 ( Tex

. App.–A ust in 2004, pet. deni ed)

. Con seq uentl y , G uadal upe- Bl anco w as forced to def end not only an AP A dispu te, b ut Can y on Regiona l’s nume rous con tractu al,
c o n s t i t u t i o n a l , a n d s t a t u t o r y c l a i ms fo r

d e c l a r a t o r

y re l i e f. It is clear fro m th e judgme nt and record tha t the trial court con sidered the f ee b ills,C any on Regi onal ’ s m ot i on t o exce ed t he p age l i m i t s i n i t s br i ef i ng i s her ei n de ni ed. 6
17 ta ble s, and t est imony

i n c alc ula ti ng the attor ney ’s fees and ar ri v ed ati ts deci si on by bal anci ng mix ed q uest ion s o f law and fact. In 2 0 0 4 , d u ri ng the firs t pha se of the c ase, Gua dalu pe-Bla nco alleged tha t it e x pen ded $ 141 ,19 8.2 7 in atto rney’s fees a nd e x pen ses. How ever, the tria l c o u rt , in its discretion, on ly aw arde d Gua dalu pe-Bla nco $ 120 ,00 0 in attor ney ’s fees and tax ed C any on R eg ion al w it h one- thi rd of the aw ard. See Chapa , 212 S.W .3d at 313 -14. Bes id es ma king blanketassertion s regarding Gua dalu pe-Bla nco’s “d uty ” to seg re g ate, Can y on Reg ion al does not factual ly chal len g e the tr ial cour t’ s ruli ng nor does i t di re ct us to an y tes ti mony

or ex hib it s that ar e cont ain ed in the n ine v olu mes of the repor ter ’s record tha t dea l w it h attor ney ’s fees. See T EX . R. A PP . P. 38.1( i) ( “The br ief must cont ain

. . . appropr iat e c it ati ons . . . to t he re cord.” ). C any on R eg ion al’ s fifth i ss ue is ov er ru led

. 6 III . C ONCL US I ON The tr ial co urt’ s j udg ment i s a ff ir med.
RO GELI O VA LDE Z Chief Justice Opinio n de liv ered and f iled this the 3 0 day

of Oct ober , 200 8. th