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Wimberley Springs Partners, Ltd. v. Wimberley Valley Watershed Association

Court of Appeals of Texas, Third District, Austin

May 19, 2017

Wimberley Springs Partners, Ltd. and Hays Trinity Groundwater Conservation District, Appellants
Wimberley Valley Watershed Association, Johanna L. Smith, H.K. Acord, Janet Acord, James R. McMeans and David H. Glenn, Appellees


          Before Chief Justice Rose and Justice Pemberton; Former Chief Justice Jones not participating


          Bob Pemberton, Justice

         Hays Trinity Groundwater Conservation District (Hays Trinity) and Wimberley Springs Partners, Ltd. (WSP) appeal a final judgment of the district court that reversed a Hays Trinity order granting a water-well operating permit to WSP. The same Hays Trinity order had denied as untimely requests for a contested-case hearing that appellees had made, [1] and that ruling has been the chief focus of the ensuing litigation. For the reasons explained below, we will reverse the district court's judgment and render judgment affirming Hays Trinity's order granting WSP's permit.


         Hays Trinity is a groundwater-conservation district created under the Texas Constitution and Chapter 36 of the Texas Water Code, [2] and which exercises jurisdiction (as its name suggests) within Hays County.[3] Consequently, when appellant WSP sought to refurbish an existing golf course located in western Hays County, it filed an application for a water-well permit with Hays Trinity pursuant to the district's administrative rules requiring that all non-exempt wells be permitted for operation.[4] Hays Trinity staff reviewed WSP's application and recommended that the permit be granted, whereupon Hays Trinity issued public notice that it would consider WSP's permit at a February 21, 2011 board meeting. To comply with the notice requirements in Chapter 36 and Hays Trinity's rules, WSP sent notices of the application and hearing to adjacent landowners and published the same notices in local newspapers.[5]

         At the February 21 meeting, WSP presented details of its application, and nineteen members of the public-including at least one of the appellees-provided testimony regarding WSP's permit application. Although Hays Trinity's rules provided for the filing of "protests" or requests for contested-case hearing in connection with permit applications, as we will elaborate below, no such filings or requests were made prior to or during the hearing. At the conclusion of the hearing, the board voted to approve WSP's application.[6]

         Beginning February 28, 2011 (roughly one week after the board vote to issue WSP's permit), for the first time, Hays Trinity began receiving requests for a contested-case hearing on WSP's permit from appellees and other individuals. After receiving the hearing requests, Hays Trinity issued public notice that it would conduct, at its next regularly scheduled board meeting, a pre-hearing conference to consider the requests for a contested-case hearing on WSP's application.[7]In response, WSP filed a motion asking Hays Trinity to deny the hearing requests as untimely filed, asserting that Hays Trinity's then-current rules authorized Hays Trinity's board to deem as untimely filed any hearing requests the board received after already voting to grant a permit. Hays Trinity's board voted to continue its pre-hearing conference and hold a separate hearing on the timeliness issue raised by WSP's motion.

         After considering appellees' response to WSP's motion and WSP's reply, as well as oral arguments by the parties' counsel at its April 7, 2011 meeting, Hays Trinity's board voted to deny the hearing requests as untimely filed and also voted to affirm its grant of WSP's permit application. In an April 12 order (Order No. 148) formally adopting its ruling on WSP's motion, Hays Trinity's board determined, as relevant here, that:

[T]he District Rules allow any interested person to file a formal protest at the public hearing, but only allow the applicant an additional 10-day period after board action to file a protest or a request for a contested hearing, and then only if the Board votes to issue the permit with conditions[.]

         With regard to the requests for contested-case hearing on WSP's permit application, the board found that:

[B]eginning one week after the public hearing, formal decision, and issuance of a permit for substantially less annual production than used historically and after the expiration of the deadline to file a request for a contested hearing, the District received 11 proposed protests and requests for contested case hearings from various individuals and from the Wimberley Valley Watershed Association, none of which included an explanation for the late filing or a request for an extension of the deadline.

         In turn, the board, in the same order, denied "all protests and requests for a contested case hearing as untimely filed" and affirmed the issuance of WSP's permit.

         After exhausting their remaining administrative remedies, the appellees filed suit for judicial review of Hays Trinity's order in district court, seeking to have Hays Trinity's order reversed and remanded for a contested-case hearing on WSP's permit application. WSP intervened in support of Hays Trinity's order, and both WSP and Hays Trinity filed summary-judgment motions. The district court denied the motions and ultimately signed the final judgment at issue here. That order reversed and remanded Order No. 148, holding that it "was arbitrary, capricious and an abuse of discretion" for Hays Trinity to deny appellees' contested-case hearing on WSP's application and grant WSP's permit without first conducting a contested-case hearing on the permit.


         In separate but overlapping issues, WSP and Hays Trinity assert generally that the district court erred in reversing Order No. 148 because Hays Trinity acted within its discretion and not arbitrarily or capriciously in denying appellees' hearing requests as untimely. More specifically, WSP and Hays Trinity principally contend that Hays Trinity's interpretation of the applicable deadline was reasonable and consistent with the text of its own rules, such that the district court should have deferred to Hays Trinity's interpretation and affirmed its order. In response, appellees maintain that the district court's judgment was correct because Hays Trinity essentially announced a new deadline after the deadline had passed. That lack of prior notice, appellees add, deprived them of their due-process and equal-protection rights.

         Standard of review

         We review Hays Trinity's order under the "substantial evidence" standard codified in the Administrative Procedure Act (APA).[8] This standard requires that we reverse or remand a case for further proceedings "if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions" are:

(A) in violation of a constitutional or statutory provision;
(B) in excess of the agency's statutory authority;
(C) made through unlawful procedure;
(D) affected by other error of law;
(E) not reasonably supported by substantial evidence considering the reliable and probative evidence in the record as a whole; or
(F) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.[9]

         Essentially, this is a rational-basis test to determine, as a matter of law, whether an agency's order finds reasonable support in the record.[10] "The test is not whether the agency made the correct conclusion in our view, but whether some reasonable basis exists in the record for the agency's action."[11]

         Both WSP and Hays Trinity emphasize Subsection (E) of Section 2001.174-the aspect of "substantial evidence" review that is concerned with the existence of a reasonable factual or evidentiary basis to support Hays Trinity's order-and seeks to invoke the principles of deference that would apply to our review of such issues. But there are no factual disputes underlying this appeal; instead, the parties' competing contentions turn ultimately on construction of Hays Trinity's administrative rules regarding the deadline, if any, by which appellees had to request a contested-case hearing. That issue, even when presented in the context of "substantial evidence" review under Section 2001.174, presents a question of law that we review de novo under traditional principles of statutory construction.[12] Our primary objective in construction of rules (or statutes) is to ascertain and give effect to the drafters' intent.[13] We determine that intent from the plain meaning of the words chosen when it is possible to do so, using any definitions provided.[14] We consider the rules as a whole rather than their isolated provisions.[15] We presume that the rules' language was chosen with care, with each word included (or omitted) purposefully.[16] Undefined terms are typically given their ordinary meaning, but if a different or more precise definition is apparent from the terms' use in context, we apply that meaning.[17] If the text of the rule is unambiguous, we adopt the interpretation supported by its plain language unless such an interpretation would lead to absurd results that the drafters could not possibly have intended.[18] However, if the text is ambiguous-i.e., there is more than one reasonable interpretation of it-we may be required to defer to an authoritative construction by the agency charged with the provision's enforcement that is reasonable and not inconsistent with the text of the provision.[19] Such deference is particularly appropriate where the statutes and rules at issue concern a matter within the core expertise of the agency.[20]

         Hays Trinity's interpretation of its own rules

         Neither the Water Code nor Hays Trinity's enabling statute establish deadlines regarding contested-case-hearing requests. The Water Code does, however, empower districts to adopt rules governing procedural matters like contested-case-hearing deadlines.[21] Whether Hays Trinity's rules provide a deadline for requesting such a hearing, and when one suffices as "timely filed, " turns on Rules 3.2 and 5.5 of Hays Trinity's rules. Rule 3.2 provides that for all operating-permit applications filed with the district:

The Board shall schedule a hearing, which may be held at a regular Board meeting, where the Board shall consider the application and any evidence presented at the hearing. Any interested person may provide oral or written testimony at the hearing, or may file a formal protest against the proposed action.
Following the hearing, the Board may:
1) issue the permit;
2) issue the permit with conditions;
3) deny the application; or
4) send the application to a contested case hearing.
If the Board votes to issue the permit with conditions, the applicant may reject the permit by filing a request for a contested case hearing within 10 days after receiving notice of the Board action.[22]

         Pointing to the above-emphasized language, WSP maintains that Rule 3.2 provides any interested person, Hays Trinity, and the applicant with the opportunity to protest or request a contested-case hearing before Hays Trinity makes a decision to issue a permit, and further gives applicants whose permit conditions were changed at the hearing, but not others, ten days to challenge those conditions. WSP further asserts that, consistent with Rule 3.2, Rule 5.5 allows Hays Trinity's board to grant or deny an application at the same public meeting at which it first considers the application:

F. The following individuals may request a contested case hearing:
(1) The applicant; or
(2) A person who
(a) has a personal justiciable interest related to a legal right, duty, privilege, power, or economic interest that is within the District's regulatory authority that is not merely an interest common to members of the public; and
(b) will be directly affected by the Board's action on the application.
G. The Board, on its own motion, may set the application for a contested case hearing. The Board shall set the application for contested case hearing if the applicant timely files a written request for contested case hearing. If a contested case hearing request is timely filed by an individual other than the applicant, as authorized by this Rule, the Board shall schedule a pre-hearing conference at its next regularly scheduled Board meeting. The Board shall determine at the pre·hearing conference if a contested case hearing will be held under Rule 5.6. If no request for contested case hearing is timely filed, and the Board determines there is no reason to conduct a contested case hearing on the application, the Board may, at the same meeting, grant ...

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