Court Opinion

ID: 9776599
Source: CourtListenerOpinion
Date Created: 2023-08-29 19:39:52.847777+00
Date Added: 2024-06-11T07:32:40.137375
License: Public Domain

GONZALEZ, Justice,
dissenting.
I agree with the court that a litigant involved in an administrative hearing is entitled to only one adjudication. I disagree, however, that there has been a valid adjudication in this case.1 I also agree with the court that the Commission is not authorized to defer deciding or to sever part of the issue in question. However, no matter how erroneous this severance or deferral was, we should not penalize a litigant for an error made by the Commission through no fault of the litigant. Since the Commission made only a partial determination of what costs were reasonable and prudent and held in abeyance the balance of the issue, it is inappropriate to apply the principles of res judicata and collateral es-toppel to any portion of this case. I would affirm the court of appeals’ dissolution of the permanent injunction.2 However, I *566would not allow the litigants to present further evidence because they have had a full and fair opportunity to participate in the adjudicatory process. I would instruct the Commission to make a valid adjudication based on the record as it now exists.3 Under no circumstances would I apply res judicata and collateral estoppel to this case.
Res judicata makes final a matter which has been finally adjudged on its merits. See Abbott Laboratories v. Gravis, 470 S.W.2d 639, 642 (Tex.1971). Collateral es-toppel is a much narrower doctrine pertaining to the preclusion of issues. We have said that a party to a lawsuit may invoke the doctrine by establishing:
(1) the facts sought to be litigated in the second action were fully and fairly litigated in the prior action; (2) those facts were essential to the judgment in the first action; and (3) the parties were cast as adversaries in the first action.
Bonniwell v. Beech Aircraft Corp., 663 S.W.2d 816, 818 (Tex.1984). In short, res judicata prevents the relitigation of adjudicated claims (claim preclusion) and collateral estoppel bars the relitigation of adjudicated issues (issue preclusion). An essential element of both doctrines is that the rendering tribunal actually determined the issue or claim to be precluded on its own merits.
There are several indicators that support the court of appeals’ conclusion that the Commission postponed making a decision on a major portion of GSU’s claim:
1. The Commission argues that it made no decision on the prudence or imprudence of cost in excess of $2.273 billion.
2. The record shows as follows:
(a) The Commission adopted the examiner’s findings of fact and conclusions of law in large part but modified some of them in very significant ways. The Commission refused to adopt the examiner’s proposed conclusion of law 10 which would have provided that the doctrine of res judicata would preclude relitigation of any of the River Bend prudence issues.
*567(b) The Commission refused to adopt the examiner’s proposed finding 164 which recommended a disallowance of $274,015,089. Instead, the Commission made its own finding 164 and 164(a) and conclusion of law 10.
(c) Finding of fact 164 states that “[t]he preponderance of the evidence in this case establishes that 2.273 billion of River Bend capital costs were prudently and reasonable incurred. The evidence is inadequate to support a finding of either prudence or imprudence with regard to construction costs in excess of $2,273 billion ...”
(d) Finding of fact 164A states “... costs in excess of $2,273 billion should be excluded from plant in service AT THIS TIME for lack of sufficient evidence as to the prudence and reasonableness of those costs.”
(e) Conclusion of law 10 states that “[P]ursuant to PURA Sections 16(a), 38, 39(a) and 41, the Commission may reexamine on rehearing or in a subsequent proceeding the prudence and reasonableness of those River Bend costs regarding which the evidence is inadequate to support a finding of either prudence or imprudence.”
(f) Commissioner Thomas in his “concurring” order criticized “the decision of the majority (the two other Commissioners) to hold in abeyance $1.453 billion of the investment in the River Bend Nuclear Plant, to allow the company any opportunity to prove construction prudence on rehearing.”
The court examined the above and concluded that this was a mere effort or attempt by the Commission to defer or reserve adjudicating the question of the prudence or imprudence of cost in excess of $2.273 billion. The court reached this conclusion by selectively reading only portions of findings of fact 164 and 164 A and conclusion of law 10, and ignoring the rest. In my opinion, this is improper. It is our duty to decide the effects of the Commission’s order in light of the literal meaning of the language used by the Commission. We should not pick and choose only those portions of the record that are helpful in reaching a desired result. The court’s statement that “... the PUC found that GSU had failed to prove that any expenses in excess of $2.273 billion were prudently incurred,” Page 562 (emphasis added) is pure fiction. A reasonable reading of the record just does not support this conclusion. On the contrary, the Commission found that it would not allow a return on the $1.453 billion “AT THIS TIME” and made no express or implied finding of imprudence with respect to this major portion of GSU’s' claim.
Our court concludes that because the Commission was not authorized to defer its ruling, its decision to do so is void, not merely voidable.4 There are numerous decisions by agencies and courts which, though erroneous, are effective until set aside on appeal. In Schieffer v. Patterson, we said:
No matter how erroneous its conclusion and action may have been, it was within the judicial power of the court to determine that the cause was severable *568and to sever the same accordingly. The order of severance is subject to being set aside on appeal, but until this is done it effectively separates the controversy into two causes. A judgment which fully adjudicates one of the severed causes is appealable even though the entire controversy as it existed prior to the severance is not determined thereby.
433 S.W.2d 418, 419 (Tex.1968) (quoting Pierce v. Reynolds, 160 Tex. 198, 329 S.W.2d 76, 78-79 (1959)).5 Clearly a matter that has been expressly reserved from an order has not been decided, and “the res judicata effects of an action cannot preclude litigation of claims that a trial court explicitly separates or severs from that action.” Van Dyke v. Boswell, O’Toole, Davis & Pickering, 697 S.W.2d 381, 384 (Tex.1985).
Even though the Commission erred in deferring its decision, that is precisely what it did. Thus, the issue is not whether a public utility is entitled to a second opportunity to prove the same facts as justification for a rate increase, (they are not entitled to two bites at the same apple), but, instead, the central issue is what are the legal consequences or effects that flow from the Commission’s error. The court chooses to make an independent finding that the cost overruns in excess of $2,273 billion were imprudent since the Commission did not find that they were prudent. The effect of this decision is to assess a $1,453 billion penalty (permanent disallowance) on GSU all in the name of res judica-ta and collateral estoppel. I do not think that this is fair6 nor that we have the power to make this “negative finding” when the Commission expressly stated that it did not find that the costs were prudent or imprudent.7
The court today reaches its result by equating an administrative proceeding to a trial and stating that if a finder of fact determines that a party failed to carry its burden of proof on an issue, adjudication should be against that party. This is the case in a regular trial setting, but it may or may not be applicable in an administrative proceeding depending on some factors that are not present in a conventional trial.
Administrative agencies perform (sometimes simultaneously) governmental functions of legislating, executing and enforcing their rules and resolving disputes arising under those rules and laws passed by the legislature. “Agencies do not always resolve disputes in the same manner as courts. Courts base decisions on the application of existing law to particular facts. Agencies, however, may use adjudication as a policy-making technique and focus as much on prospective policy goals and considerations as on the particular dispute.” Note, Collateral Estoppel Effects of Administrative Agency Determinations: Where Should Federal Courts Draw the Line? 73 Cornell L.Rev. 817, 836 (1988). They also resolve disputes based on their own expertise in a certain area of the law, (e.g., the Railroad Commission and regulation of oil and gas), so they may resolve disputes based on their own predispositions rather than on purely neutral application of the law to the facts. Unlike judges and juries in conventional trials, administrative tribunals are charged with the responsibility of balancing and protecting public interests. See, e.g., Tex.Rev.Civ.Stat.Ann. art. 1446c, §§ 2, 54(c) (Vernon Supp.1990).
*569Thus, the analogy to conventional trials does not fit. The court’s facile analysis will lead to confusion, has the potential for unintended consequences and will spawn litigation.
All administrative agencies are not created equally. They have differing levels of authority, review powers, and afford varying levels of procedural safeguards. It is not always easy to determine if the administrative agency was acting in a “judicial capacity”. In State v. Thomas, 766 S.W.2d 217, 219 (Tex.1989), we said that rate-making was a quasi-judicial function. In State v. Southwestern Bell Telephone Co., 526 S.W.2d 526, 529-30 (Tex.1975), we said that the fixing or revision of rates is a legislative function. Only those issues that an agency determines while acting in a judicial capacity and when the parties are given a full and fair opportunity to participate in the adjuratory process should be given pre-clusive effect. Thus, at the very least, we should establish limits or guidelines to the application of collateral estoppel and res judicata to adjudications by administrative agencies.
The United States Supreme Court has set forth additional requirements before it will give preclusive effect to an administrative decision. In United States v. Utah Construction & Mining Co., 384 U.S. 394, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966), the Court set forth several requirements:
(1) the agency must have jurisdiction to resolve the issue; (2) the agency must act in a judicial capacity; (3) the agency must properly resolve the dispute before it; and (4) the parties must have an adequate opportunity to litigate.
Id. at 422, 86 S.Ct. at 1560. Application of collateral estoppel to administrative agency decisions in Texas should also pass the traditional test in addition to the standards articulated in Utah Construction and Mining Co.
Here it is apparent that the Commission did not properly resolve the dispute before it. Therefore, neither res judicata nor collateral estoppel may operate to preclude claims or issues in this case. If we take the court's decision to its logical conclusion, the effect of today’s opinion will be to impart collateral estoppel and res judicata effect on all actions and inactions by administrative agencies. As a matter of fundamental fairness, for the reasons expressed above, we should affirm the judgment of the court of appeals dissolving the permanent injunction.
COOK, J., joins in this opinion.

. GSU claimed that the $4.5 billion spent on the nuclear project was reasonably and prudently incurred. The Commission decided to defer making a decision of whether any cost in excess of $2,273 billion (adjusted cost estimate) were prudently incurred. It was the Commission’s expressed intent to review the prudence or imprudence of the additional cost in a subsequent proceeding.

. The determination of the prudence of the entire $4.5 billion expenditure has resulted in a multiplicity of suits because the Commission effectively severed its decision as to the portion *566of costs it determined were prudent from those it reserved for further proceedings. Those cases were docketed in the Commission as #6755 (request for determination regarding prudence of $4.5 billion River Bend expenditure), #7195 (GSU’s original application to change rates), and # 8702 (determination of prudence of $1,453 billion balance). The Commission consolidated #6755 and #7195 because a determination of the prudence of the expenditures was necessary to set the new rates. After the Commission determined the $2,273 billion expenditure was prudent but left open the balance, the judgment was appealed to the district court.
While that proceeding was pending, the Commission scheduled proceeding #8702 to determine the prudence of the $1,453 billion. The district court issued a temporary injunction enjoining any relitigation of the prudence of the Riverbend expenditures. While the granting of this temporary injunction was on appeal to the court of appeals, the district court granted a permanent injunction stating the relitigation of the prudence issue was barred by res judicata and collateral estoppel and the relitigation would interfere with the district court’s jurisdiction over the prudence issue in the administrative appeal of #6755 and #7195. This case comes to us on appeal from the court of appeals decision dissolving the permanent injunction because res judicata and collateral estoppel did not bar determination of prudence of the balance of the costs.
Let us end this madness! Since we have settled the issue that the severance was improper, the district court does not have a choice but to follow suit. I would dissolve the injunction but suggest to the parties that they file a plea in abatement in the commission pending remand by the district court of the case now on appeal. Our decision affirming this case would return the entire case to the Commission and allow it to make a single final adjudication regarding the entire $4.5 billion expenditure.
If the Commission should find that some additional costs were prudent, GSU should not be given a windfall. The Commission should adjust the rates keeping in mind the money already collected based on approved rates.

. I recognize that the end result may ultimately be the same as that which has already been achieved. The Commission may decide that none of the expenditures in excess of $2.273 billion were prudent. That is its prerogative. We are powerless to make an independent finding on this matter. We should respect the limits of our authority. Also, since this is a case of first impression in Texas, we should dissolve the permanent injunction and permit the Commission to decide the entire case as a whole in order to achieve f>'rness and to facilitate the orderly development of this important area of administrative law.

. The court finds Sexton v. Mount Olivet Ceme-tary Association, 720 S.W.2d 129 (Tex.App.— Austin 1986, writ ref'd n.r.e.) instructive and persuasive. In Sexton, the court of appeals held that the Banking Commission had no power to reopen proceedings and reconsider whether the association would have approval to sell prepaid funeral plans. Sexton is distinguishable from the instant case because in Sexton, the Banking Commission attempted to exercise jurisdiction after it had made a final decision. Under those circumstances it is clear that any attempt to act after its jurisdiction expired would have been void. See Plains Growers, Inc. v. Jordan, 519 S.W.2d 633 (Tex. 1974). Although the Banking Commission illegally attempted to reserve the power to reopen cases, this action did not detract from the Commission’s having made a final decision. In the instant case, the PUC expressly stated that no decision had been reached as to $1.453 billion in costs in excess of the amount it expressly approved as being prudent, and invited further proceedings by rehearing or new prodeeding for the issue expressly reserved. The Commission attempted to make its determination final as to the $2.273 billion it found to be prudent by severing its consideration of the balance. The court now transforms this severance into a deemed finding against GSU despite the Commission’s express statement that no finding had been made.

. In Schieffer, the issue of liability was improperly severed from damages. Our court held that the court of civil appeals had to take and determine the case as severed, unless and until the severance was set aside. 433 S.W.2d at 419.

. All parties (including GSU) are entitled to an unequivocal decision by the tribunal empowered to make a decision. In this case, it is the Commission and not this court who is empowered by the legislature to calculate utility rates and to protect the public interest by disallowing costs and expenses that are not prudently made. See Public Utility Comm 'n v. Houston Lighting & Power, 748 S.W.2d 439 CJex.1987).

.The court relies on Gerst v. Goldsbury, 434 S.W.2d 665 (Tex.1968) for its conclusion that the failure to rule in GSU's favor is converted into a negative finding. In Gerst the commission's finding that there was insufficient evidence on an issue was characterized as a negative finding. However, there was no attempt to reserve the issue for latter decision. The order did not purport to be anything other than a final adjudication on all issues before the commission.