author: DAVIE L. WILSON, Justice.

text:
    Gerald J. McDERMOTT, Appellant, v. Kathleen D. CRONIN, Appellee.
    No. 01-99-00027-CV.
    Court of Appeals of Texas, Houston (1st Dist.).
    Jan. 13, 2000.
    Rehearing Overruled Nov. 10, 2000.

      Farrell Bolz, Houston, for Appellant.
    Glenn A. Ballard, Jr., Tracy C. Temple, Houston, for Appellee.
    Panel consists of Justices O’CONNOR, WILSON, and ANDELL.
   OPINION

DAVIE L. WILSON, Justice.

This is an interlocutory appeal from the denial of a special appearance. See Tex. Civ. PRAc. & Rem.Code Ann. § 51.014(a)(7) (Vernon Supp.2000); Tex.R. Civ. P. 120a. We must decide whether Texas has personal jurisdiction over a nonresident defendant in a real estate dispute over land in Belize when payments were made to a post office box in Houston. We affirm.

Facts

Appellant Gerald J. McDermott and his former wife Linda McDermott are the sole shareholders of Maya Ranch Limited, a Belize corporation that sells land in Belize. Gerald, a former Houston resident, moved to Belize in 1970. Linda still resides in Houston. On May 19, 1993, appellee Kathleen D. Cronin, a Hawaii resident, signed a contract for sale of land in Belize. Gerald signed the contract on behalf of Maya Ranch, and under his signature the contract listed Maya Ranch’s address as “P.O. Box 42809-400, Houston, Tx. 77242.” Cronin later moved to Vermont and continued making payments to Maya Ranch by sending checks to the Houston post office box. Linda collected the checks from the post office box.

Maya Ranch later sold the remainder of its property to Bridget Wallraf and Michael Wallraf. The Wallrafs made a claim to all of Maya Ranch, including Cronin’s land. Cronin notified Gerald about the Wallrafs’ claim, and she stopped making payments to Gerald under the contract for sale. Gerald then had his secretary send the following letter to Cronin:

GERALD J. MCDERMOTT

p.o. Boxmo9-m

HOUSTON, TX 77242

November 21,1996

Kathleen D. Cronin

P.O. Box 1562

Stowe, Vermont 05672

Dear Ms. Cronin:

Received your faxes this morning. I enclose herewith a copy of the letter from Mr. Barrow.

Our attorneys said that this action is outrageous. We have filed suit and are waiting on a Court date right now.

Please do not worry about the validity of your contract. I personally guarantee you will suffer no loss.

Respectfully Yours, •

/s/ Cherry Reyes for Gerald McDermott

Gerald J. McDermott GJM/rlr

Gerald claims he did not review the letter before it was mailed.

When the Wallrafs denied Cronin access to the land, she sued Gerald in Harris County, claiming fraudulent inducement and breach of the guaranty. Gerald filed both a special appearance contesting the trial court’s personal jurisdiction over him and a motion to dismiss based on forum non conveniens. The trial court denied both the special appearance and the motion to dismiss based on forum non conve-niens.

Discussion

In issue one, Gerald contends his special appearance should have been granted because Cronin’s petition does not allege that Gerald committed a specific act in Texas and because Gerald proved he is a nonresident of Texas. See Hotel Partners v. KPMG Peat Marwick, Chartered Accountants, 847 S.W.2d 680, 634 (Tex.App.—Dallas 1993, writ denied). We disagree.

Defective Pleading Allegations

In her petition, Cronin does allege that “[v]enue is proper in Harris County, Texas, because all or a substantial part of the events or omissions giving rise to plainiffs claims occurred in Harris County, Texas.” Even if we assume that Cronin’s pleading was inadequate to establish the requisite jurisdictional facts, a plaintiffs failure to make jurisdictional allegations in her pleadings is not subject to attack by the specially appearing defendant. Id.; see Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 202-03 (Tex.1985). Gerald, the nonresident defendant, had the burden to negate all bases of personal jurisdiction at the special appearance hearing. Hotel Partners, 847 S.W.2d at 634. Without jurisdictional allegations by a plaintiff that a defendant committed an act in Texas, the defendant can meet his burden of proof of negating all purported bases of jurisdiction by presenting evidence that he is not a Texas resident. Id.

We overrule issue one.

No Personal Jurisdiction

In issue two, Gerald contends his special appearance should have been granted because he does not have specific contacts with Texas to authorize in personam jurisdiction. In the alternative, Gerald contends that even if jurisdiction is proper, exercising jurisdiction in this case would offend traditional notions of fair play and substantial justice.

On appeal from a special appearance, we review all evidence in the record to determine if the nonresident defendant negated all possible grounds for personal jurisdiction. James v. Illinois Cent. R.R., 965 S.W.2d 594, 596 (Tex.App.—Houston [1st Dist.] 1998, no pet.); see Kawasaki, 699 S.W.2d at 203. To sustain a special appearance, the nonresident defendant must negate all bases of personal jurisdiction. CSR Ltd. v. Link, 925 S.W.2d 591, 596 (Tex.1996).

For Texas courts to exercise jurisdiction over a nonresident defendant, the Texas long-arm statute must authorize the exercise of jurisdiction, and the exercise of that jurisdiction must be consistent with federal and state guarantees of due process. Schlobohm v. Schapiro, 784 S.W.2d 355, 356 (Tex.1990). The Texas long-arm statute authorizes the exercise of jurisdiction over nonresidents who do business in Texas. Tex. Civ. PRAC. & Rem.Code Ann. § 17.042 (Vernon 1997). Finally, the Texas long-arm statute reaches as far as the federal and state constitutional guarantees of due process and due course of law allow. CSR Ltd., 925 S.W.2d at 594.

Personal jurisdiction can be either specific or general. CSR Ltd., 925 S.W.2d at 595. Specific jurisdiction occurs when a defendant’s alleged liability arises from or is related to an activity conducted within the forum state. Id. General jurisdiction occurs when a nonresident defendant’s contacts are continuous and systematic, allowing the forum state to exercise personal jurisdiction over the defendant even if the cause of action did not arise out of the contacts with the state. Id. General jurisdiction requires more substantial contact with the forum state. Id. In either case, a nonresident defendant must have minimum contacts with the forum state “such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Id. (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945)).

Interpreting opinions of the United States Supreme Court, the Texas Supreme Court has devised the following Texas formula for specific jurisdiction:

(1)The nonresident defendant or foreign corporation must purposefully do some act or consummate some transaction in the forum state;
(2) The cause of action must arise from, or be connected with, such act or transaction. Even if the cause of action does not arise from a specific contact, jurisdiction may be exercised if the defendant’s contacts with Texas are continuing and systematic.
(3) The assumption of jurisdiction by the forum state must not offend traditional notions of fair play and substantial justice, consideration being given to the quality, nature, and extent of the activity in the forum state, the relative convenience of the parties, the benefits and protection of the laws of the forum state afforded the respective parties, and the basic equities of the situation.

Schlobohm, 784 S.W.2d at 358.

Minimum Contacts

The first two prongs of the Schlobohm test apply to the minimum contacts analysis. See id. A nonresident defendant has sufficient minimum contacts if he has purposely availed himself of the benefits and protections of conducting business within the forum state. CSR Ltd., 925 S.W.2d at 594-95. This limitation prevents a nonresident defendant from being brought into a foreign court based on random, fortuitous, or attenuated contacts. Id. at 595. Based upon his contact with the forum state, a defendant must reasonably expect to be haled into a Texas court. Project Eng’g USA Corp. v. Gator Hawk, Inc., 833 S.W.2d 716, 721 (Tex.App.—Houston [1st Dist.] 1992, no writ). Minimum contacts are especially important when dealing with a nonresident defendant from a foreign country. CSR Ltd., 925 S.W.2d at 595.

In analyzing minimum contacts, it is not the number of the nonresident defendant’s contacts with the forum state that is important, but rather the quality and nature of those contacts. Memorial Hosp. Sys. v. Fisher Ins. Agency, Inc., 835 S.W.2d 645, 650 (Tex.App. — Houston [14th Dist.] 1992, no writ). A nexus is necessary for the assertion of jurisdiction in those instances in which a nonresident defendant maintained single or few contacts with the forum. Id. Although the extent of a nonresident defendant’s contacts with the forum state may be minimal, the quality and nature of those contacts may be substantial. Id.

The Texas long arm statute provides that a nonresident does business in Texas if the nonresident commits a tort in whole or in part in this state. Tex. Civ. Prac. & Rem.Code Ann. § 17.042 (Vernon 1997)-. Cronin’s petition alleges a cause of action for fraudulent inducement arising out of a letter bearing a Texas address.

The mere fact that a tort was committed in Texas does not automatically confer personal jurisdiction over a nonresident defendant. Memorial Hosp. Sys., 835 S.W.2d at 650. In determining whether a nonresident defendant purposefully established minimum contacts with the forum state, foreseeability should be considered. Guardian Royal Exch. v. English China Clays, P.L.C., 815 S.W.2d 223, 227 (Tex.1991). By using a Texas mailing address on both correspondence and contracts, Gerald certainly could have foreseen being sued in a Texas court. We hold that a strong nexus exists between the tort that allegedly occurred in Texas and the contact with Texas, i.e., the mailing address, and that this contact is a specifically affiliating minimum contact.

Fair Play and Substantial Justice

We now decide if fair play and substantial justice requires the trial court to grant Gerald’s special appearance notwithstanding the existence of a specifically affiliating minimum contact. We consider the following factors: (1) the burden on the defendant, (2) the interests of the forum state in adjudicating the dispute, (3) the plaintiffs interest in obtaining convenient and effective relief, (4) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several states in furthering fundamental substantive social policies. Guardian Royal Exch., 815 S.W.2d at 228.

1. The burden on the defendant Gerald claims there will be a substantial burden on him and any witnesses to travel from Belize to Houston for the trial. At the hearing on the special appearance, Gerald admitted that he still visits Texas for both business and personal reasons even though he has lived in Belize since 1970. Gerald does not argue specific facts to demonstrate the extent of any financial hardship that a Houston trial would impose on him.

2. The interests of the forum state in adjudicating the dispute Gerald next argues that Texas has no interest in this case because (1) neither Gerald nor Cronin are Texas residents and (2) the property at issue is in Belize. It is undisputed, however, that Cronin made her payments for the land to the Houston address and there is evidence that Gerald made the November 21,1996 personal guaranty in Texas.

3. The plaintiff’s interest in obtaining convenient and effective relief Gerald argues that Cronin has no interest in maintaining her suit in Texas because she will have to execute any Texas judgment she may receive in Belize. Cronin counters that she will conduct postjudgment discovery in order to locate any Texas assets that may be available.

4. The interstate judicial system’s interest in obtaining the most efficient resolution of controversies Gerald and Cronin agree this factor is inapplicable because this is an international dispute.

5. The shared interest of the several states in furthering fundamental substantive social policies Gerald and Cronin agree this factor is likewise inapplicable because this is an international dispute.

After considering the applicable factors, we hold that fair play and substantial justice does not require the trial court to grant Gerald’s special appearance, despite the existence of a specifically affiliating minimum contact. We overrule issue two.

Findings of Fact and Conclusions of Law

In issue three, Gerald challenges the trial court’s findings of fact and conclusions of law. When the trial court makes findings of fact, the findings are reviewed on appeal using the factual sufficiency standard. Nikolai v. Strate, 922 S.W.2d 229, 286 (Tex.App.—Fort Worth 1996, writ denied). The existence of personal jurisdiction is a question of law, and the trial court’s conclusions of law are reviewed de novo. James, 965 S.W.2d at 594.

Gerald first challenges Cronin’s evidence at the special appearance hearing, specifically, Cronin’s verified response to the special appearance. Gerald claims the verified response is deficient because it is not based on Cronin’s personal knowledge. Gerald has waived this complaint, however, because he did not obtain an adverse ruling from the trial court. See Tex.R.App. P. 33.1(a). But even if Gerald had not waived this complaint, Cronin’s affidavit recites that she has personal knowledge of the facts contained in the response.

Gerald next challenges specific findings of fact. The trial court’s findings of fact are reviewable for factual sufficiency of the evidence by the same standards as applied in reviewing the factual sufficiency of the evidence supporting a jury verdict. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex.1991). When reviewing a jury verdict to determine factual sufficiency, we must consider and weigh all the evidence and should set aside the judgment only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986); In re King’s Estate, 150 Tex. 662, 244 S.W.2d 660, 661 (1951); see also Pool v. Ford Motor Co., 715 S.W.2d 629, 633-35 (Tex.1986). See generally William Powers, Jr. & Jack Ratliff, Another Look at “No Evidence” and “Insufficient Evidence”, 69 Tex. L.Rev. 515 (1991).

Finding number 1
Pursuant to an Agreement of Sale dated May 19, 1993 (the “Agreement”), Cronin purchased a tract of land in the Maya Ranch Estates located in the Cayo District of Belize (“the Premises”), from Maya Ranch Limited (“MRL”). The Agreement is signed by McDermott and states that the seller’s address is a P.O. Box in Houston, Texas.

Gerald attacks this finding on the grounds that it goes beyond controlling legal issues and it makes a legal conclusion that Cronin actually purchased land in Belize.

Finding number 2
Pursuant to the Agreement, the parties agreed that Cronin was immediately entitled to possession and enjoyment of the Premises. In addition, MRL and McDermott promised that Cronin would be entitled to use the guest house located in the Maya Ranch Estates. Cronin agreed to pay MRL a total of $24,500.00, representing a down payment of $2,500.00 and 120 monthly payments of $284.27 commencing on June 1, 1993, including ten percent interest per an-num. The parties further agreed that, upon Cronin’s completion of these payment obligations, MRL would deliver to Cronin clear title to the Premises, free and clear of all encumbrances and liens. Payments under the Agreement were to be made by Cronin to an address in Texas.

Gerald attacks this finding on the ground that it goes beyond controlling legal issues and that the following statement is unsupported by any evidence: “In addition, MRL and McDermott promised that Cronin would be entitled to use the guest house located in the Maya Ranch Estates.”

Finding number 3
During the negotiation of the Agreement, MRL’s principal, McDermott, assured Cronin that her investment was safe and that he would personally guaranty MRL’s performance of all aspects of the Agreement. McDermott made this guarantee in writing from Texas. Based on McDermott’s guarantee, Cronin entered into the Agreement, paid the down payment amount of $2,500, and began making monthly payments under the Agreement to the P.O. Box in Texas. Cronin would not have entered into the Agreement absent McDermott’s guarantee.

Gerald contends there is insufficient evidence to support the finding that “McDer-mott made this guarantee [the November 21, 1996 letter] in writing from Texas ” because the contract for sale was negotiated on or before May 19, 1993. Assuming the reference to the contract for sale to be a mistake, Gerald then claims the evidence is factually insufficient to support a finding that his letter guaranty was made from Texas. Gerald relies on his testimony from the special appearance hearing in which he testified that the letter was drafted by his secretary and mailed from Belize.

Finding number ⅛
In September 1995, McDermott and his wife, Linda J. McDermott, sold numerous tracts of the Maya Ranch Estates to a single third party. The tracts sold by defendant included tracts adjacent to and surrounding the Premises. Upon learning of the sale, Cronin contacted McDermott to inquire about the details and the effect of the sale on her ownership of the Premises. Despite Cronin’s numerous inquiries, McDermott could not verify whether the Premises were included in the sale. The correspondence between Cronin and McDermott reveals that Cronin wrote to McDermott in Texas and that McDermott responded to Cronin’s inquiries from Texas. Cronin was placed in the position of not knowing who the title owner of the Premises was. Notwithstanding the confusion surrounding the ownership of the Premises, McDermott repeated that he would personally guarantee Cronin’s investment in the Premises and her access to the Premises and guest house. Based on these representations, Cronin continued making monthly payments to Texas under the Agreement.

Gerald attacks this finding on the grounds that (1) it is a combination of findings of fact and conclusions of law and (2) it goes beyond controlling legal issues. Gerald specifically claims the evidence is factually insufficient to support the portion of the finding “that McDermott responded to Cronin’s inquiries from Texas.” Gerald cites his testimony that he never personally sent a letter to Cronin in Texas, and differentiates any letters he may have signed and/or sent in his capacity as a corporate representative of Maya Ranch.

Finding number 5
Despite the fact that Cronin has forwarded over fourteen thousand dollars in payments to Texas under the Agreement, McDermott has failed to perform his personal guarantee of the Agreement, and Cronin has been denied use of the Premises, the guest house, and has lost over $14,000.00 in payments she has made under the Agreement. McDer-mott claims he is not subject to the Court’s jurisdiction based on an alleged lack of contacts with Texas. However, McDermott’s special Appearance is without merit, since McDermott made his personal guarantee to Cronin from Texas and further induced Cronin to continue making payments to Texas. In addition, McDermott has established systematic and continuous contacts with Texas sufficient to support the exercise of general jurisdiction over McDermott. Accordingly, McDermott’s special Appearance should be denied.

Gerald attacks this finding on the ground that it is a combination of findings of fact and conclusions of law.

We agree with Gerald that much of the findings of fact are either irrelevant to the controlling issues or are in reality conclusions of law. To the extent that the findings contain relevant findings of fact pertaining to Gerald’s personal contacts with Texas as discussed above in issues one and two, we hold that the findings are not so against the great weight and preponderance of the evidence as to be clearly wrong and unjust. In all other respects, we hold that the erroneous “findings” are not reversible error as they did not cause the rendition of an improper ruling on the special appearance. Tex.R.App. P. 44.1(a)(1). Regarding the trial court’s conclusions of law, we have already addressed these in our de novo review of the special appearance ruling.

We overrule issue three.

Conclusion

We affirm the order of the trial court denying the special appearance.


source: Caselaw Access Project

author: TOM B. RAMEY, Jr., Chief Justice.

license: Public Domain

text:
    Marie LACY, Appellant, v. RUSK STATE HOSPITAL and Texas Department of Mental Health and Mental Retardation, Appellees.
    No. 12-99-00436-CV.
    Court of Appeals of Texas, Tyler.
    May 31, 2000.
    Rehearing Overruled July 7, 2000.

      Lonnie B. Davis, Hemphill, for Appellant.
    Phillip E. Marrus, Asst. Atty. Gen., Austin, for Appellee.
    Panel consisted of RAMEY, Jr., C.J., HADDEN, J., and WORTHEN, J.
   TOM B. RAMEY, Jr., Chief Justice.

Appellant, Marie Lacy sued Appellees, Rusk State Hospital (“Rusk”) and the Texas Department of Mental Health and Mental Retardation (“TDMHMR”) under the Tort Claims Act for the wrongful death of her son, Michael. In her sole issue, Lacy alleges that the trial court erred in sustaining Appellees’ plea to the jurisdiction and motion to dismiss. We will affirm.

Background

Michael, a patient at the Rusk State Hospital, was on an outing with ten other patients and nine staff members to the hospital’s lake/lodge facility to watch movies and play board games. During the showing of a movie, Michael sneaked away, without staff permission, and went swimming, during which he drowned. Lacy filed suit against Rusk, TDMHMR, and several individual staff members under the Tort Claims Act under the provisions of the act concerning the use or condition of property, special or premises defects, re-spondeat superior, and negligent employment. Lacy’s claims can be summarized as follows: (1) failure to supervise Michael properly; (2) failure to take special elopement precautions, including failure to lock the doors of the lodge; (3) failure to prevent Michael from going swimming or, alternatively, failure to provide proper equipment, including resuscitation equipment; (4) failure to warn Michael of the hazard of swimming in the lake; (5) failure to fence the lake or have lifeguards present; and (8) negligent employment and/or hiring practices coupled with failure to have policies and procedures to address Michael’s elopement propensities. Appel-lees filed a plea to the jurisdiction and motion to dismiss which was sustained and Appellees were severed from the individual defendants.

The Standard of Review

A plea to the jurisdiction challenges the trial court’s authority to determine the subject matter of the action. City of San Augustine v. Parrish, 10 S.W.3d 734, 737 (Tex.App.—Tyler 1999, no writ). The plaintiff bears the burden of alleging facts affirmatively showing that the trial court has subject matter jurisdiction. Id. When deciding whether to grant a plea to the jurisdiction, the trial court must look solely to the allegations in the petition. Id. The court of appeals must take the allegations in the petition as true and construe them in favor of the pleader. Id. Whether a trial court has subject matter jurisdiction is a question of law and is reviewed de novo. Id., citing Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928 (Tex.1998), cert. denied, 526 U.S. 1144, 119 S.Ct. 2018, 143 L.Ed.2d 1030 (1999).

Discussion

Section 101.021 of the Civil Practice & Remedies Code provides that:

A governmental unit in the state is liable for:

(1) property damage, personal injury, and death proximately caused by the wrongful act or omission or the negligence of an employee acting within his scope of employment if:
(A) the property damage, personal injury, or death arises from the operation or use of a motor-driven vehicle or motor-driven equipment; and
(B) the employee would be personally liable to the claimant according to Texas law; and
(2) personal injury and death so caused by a condition or use of tangible personal or real property if the governmental unit would, were it a private person, be liable to the claimant according to Texas law.

Tex. Crv. Prac. & Rem. Code ANn. § 101.021 (Vernon 1999).

In Texas, a governmental unit is immune from tort liability unless the Legislature has waived immunity. Harris County v. Dillard, 883 S.W.2d 166, 168 (Tex.1994). The two components of sovereign immunity are immunity from suit and immunity from liability. Ntreh v. University of Texas—Dallas, 936 S.W.2d 649, 651 (Tex.App.—Dallas 1996), rev’d in part on other grounds, 947 S.W.2d 202 (Tex.1997); see Missouri Pac. R.R. v. Brownsville Navigation Dist., 453 S.W.2d 812, 813 (Tex.1970). Immunity from suit bars suits against units of state government absent express consent. Ntreh, 936 S.W.2d at 651; see also Green International, Inc. v. State, 877 S.W.2d 428, 432 (TexApp.—Austin 1994, writ dism’d). The party suing a governmental entity must allege consent to suit either by statute or express legislative permission. Missouri Pac. R.R., 453 S.W.2d at 814; Ntreh, 936 S.W.2d at 651. If a governmental entity is sued without such consent, the trial court should grant the governmental entity’s plea to the jurisdiction. Holder v. Mellon Mortgage Co., 954 S.W.2d 786, 804 (Tex.App.—Houston [14th Dist.] 1997, no writ); Vincent v. West Texas State University, 895 S.W.2d 469, 472 (Tex.App.—Amarillo 1995, no writ); see State v. Lain, 162 Tex. 549, 552, 349 S.W.2d 579, 582 (1961).

To invoke the trial court’s jurisdiction under the Tort Claims Act, it is necessary to show in what manner the Act waives the State’s immunity from suit. See Holder, 954 S.W.2d at 805-08. To state a claim regarding condition of property, a plaintiff must allege that defective or inadequate property caused the injury. See Salcedo v. El Paso Hospital Dist., 659 S.W.2d 30, 31-32 (Tex.1983). Conversely, to state a claim involving use of nondefec-tive property, a plaintiff must allege the property was used or misused by a government employee. Id. at 32.

In addition to the foregoing, the injury must be proximately caused by the condition or use of the property. See Dallas County Mental Health & Mental Retardation v. Bossley, 968 S.W.2d 339, 343 (Tex.1998). This requires more than mere involvement. Id. at 341-343. Property does not cause injury if it does no more than furnish the condition that makes injury possible. Id. at 343.

“Use” v. “Non-use”

Failure to lock a door through which the deceased escaped is not a “use” of tangible property waiving immunity. Bossley, 968 S.W.2d at 343. Allegations that the hospital was negligent in its care or supervision of Michael are not actionable under the Tort Claims Act. San Antonio State Hosp. v. Koehler, 981 S.W.2d 32, 37 (Tex.App.—San Antonio 1998, writ denied); Brown v. Montgomery Co. Hospital Dist., 905 S.W.2d 481, 484 (Tex.App.—Beaumont 1995, no writ). Furthermore, non-use of property does not waive sovereign immunity under the Tort Claims Act. Marroquin v. Life Management Center for MHHR Services, 927 S.W.2d 228, 231 (Tex.App.—El Paso 1996, writ dism’d w.o.j.); Seiler v. Guadalupe Valley Hospital, 709 S.W.2d 37, 38 (Tex.App.—Corpus Christi 1986, writ ref d n.r.e.).

Failure to provide life preservers and life guards for the lake area where Michael drowned are likewise not actionable under the Tort Claims Act. Swimming was not the sanctioned activity of the outing. Under these circumstances, a state agency is liable only when a state actor has provided property that lacks an integral safety component and that the lack of this integral component leads to the plaintiffs injuries. Kerrville State Hospital v. Clark, 923 S.W.2d 582, 585 (Tex.1996). This outing was not for purposes of swimming but for watching movies indoors. Appellees did not provide anything to Michael which was defective and immunity is not waived. Id.

With regard to the defective resuscitation equipment, for immunity to be waived, personal injury or death must be proximately caused by a condition or use of tangible personal or real property. Bossley at 343. Although Lacy alleged the equipment was defective, Michael drowned and nothing in the pleadings establishes the improper use of the equipment or that he would have been resuscitated if the equipment had not been defective. There is no allegation in Lacy’s pleadings that claim that her son’s death was proximately caused by the use of the resuscitation equipment, merely that the equipment was defective and resuscitation was delayed. Such non-use cannot confer authority to sue the State. Id.

The Condition of the Lake and Failure to Warn

Lacy alleges that the TDMHMR and Rusk had a duty to warn her son of the dangers of the lake. The duty owed by a premises owner or occupier is determined by the status of the complaining party at the time and place of injury, said status being that of invitee, licensee, or trespasser. Peerenboom v. HSP Foods, Inc., 910 S.W.2d 156, 161 (Tex.App.—Waco 1995, no writ); Graham v. Atlantic Richfield Co., 848 S.W.2d 747, 751 (Tex.App.—Corpus Christi 1993, writ denied). An invitee is a person who enters the premises of another at the express or implied invitation from the owner or occupier for their mutual benefit. Peerenboom, 910 S.W.2d at 161. The owner or occupier owes an invitee the duty to keep the property safe and must use reasonable care to protect the invitee from reasonably foreseeable injuries. Rosas v. Buddies Food Store, 518 S.W.2d 534, 537 (Tex.1975). A licensee, however, is a person who is privileged to enter and remain on the premises by the express or implied permission of the owner. Peerenboom, 910 S.W.2d at 163. A land owner or occupier is liable to a licensee only if the owner or occupier has actual knowledge of the condition that injured the plaintiff. City of El Paso v. Zarate, 917 S.W.2d 326, 331 (Tex.App.—El Paso 1996, no writ).

One may be an invitee as to certain parts of the premises, but not as to other parts, and when he leaves that part of the premises to which he has been invited and enters upon another part, his status is immediately changed to that of a trespasser or mere licensee. Where it appears that the plaintiff sustained the injury while using a part of the premises that was designed for his accommodation or use, only then may the owner or occupant be held liable to the victim as an invitee. Hopkins v. Texas Power & Light Co., 514 S.W.2d 143, 148 (Tex.Civ.App.—Dallas 1974, no writ). The test to determine whether a person is an invitee at the time and place of the injury is whether the owner of the premises should have anticipated the presence of someone such as the plaintiff at that particular place on the premises. Peerenboom, 910 S.W.2d at 162. Insofar as the allegations concern the condition of the lake, nothing in Lacy’s pleadings alleges that Michael was authorized to be in the lake or that his presence was anticipated. As to the lake, Michael was a trespasser and Appellees’ duty is governed by this status.

Failure to Implement Policies and Negligent Entrustment

The decision to implement policies and procedures is a discretionary function. See City of Brownsville v. Alvarado, 897 S.W.2d 750, 754 (Tex.1995). If the negligence causing an injury lies in the formulation of policy, the governmental entity remains immune from liability. See State v. Terrell, 588 S.W.2d 784, 788 (Tex.1979). A negligent entrustment cause of action based on Appellees’ decision to allow their employees to supervise Michael at the lodge is not a cause of action included in the Acts’ limited waiver of sovereign immunity. See Waldon v. City of Longview, 855 S.W.2d 875, 880 (Tex.App.—Tyler 1993, no writ) citing Young v. Dimmitt, 787 S.W.2d 50, 51 (Tex.1990).

We hold that the trial court did not err in granting Appellees’ motion to dismiss and plea to the jurisdiction. The judgment of the trial court is affirmed.

        . The Tort Claims Act does not apply to a claim arising from the action of an employee in responding to an emergency as long as the employee's actions are not taken with conscious indifference or reckless disregard for the safety of others. See Tex. Civ. Prac. & Rem.Code Ann. § 101.055(3) (Vernon 1997).


author: J. WOODFIN JONES, Justice.

text:
    SOUTHWESTERN BELL TELEPHONE COMPANY, Appellant, v. PUBLIC UTILITY COMMISSION OF TEXAS; Cities of Austin, Dallas, Fort Worth and Hereford; Office of Public Utility Counsel; and General Services Commission, Appellees.
    No. 03-99-00845-CV.
    Court of Appeals of Texas, Austin.
    Aug. 10, 2000.
    Rehearing Overruled Dec. 14, 2000.

      Robert J. Hearon, Jr., Graves, Dougherty, Hearon & Moody, P.C., Austin, for SW Bell.
    Jim Boyle, Law Offices of Jim Boyle, Austin, for Cities, et al.
    Kristen Pauling Doyle, Office of Public Utility Counsel, Austin, for Office of PUC.
    Amanda Atkinson Cagle, Asst. Atty. Gen., Natural Resources Division, Austin, for PUC.
    Before Justices JONES, YEAKEL and PATTERSON.
   J. WOODFIN JONES, Justice.

With revisions to the Public Utility Regulatory Act (PURA) in 1995, the legislature created a statutory alternative to traditional rate-of-return ratemaking. Appellant Southwestern Bell Telephone Company (SWBT) elected to be governed under this new scheme, which provides instead for “incentive regulation.” Pursuant to this scheme, SWBT applied to appellee, the Public Utility Commission (the Commission), for a rate-group reclassification. The Commission denied the request in most respects, and SWBT sought judicial review in the district court. The district court reversed and remanded in part, but affirmed the central portions of the Commission’s order and effectively denied most of the relief sought by SWBT. The Commission did not appeal the portions of its order that were reversed by the district court. On appeal, SWBT raises four issues challenging portions of the district court judgment affirming the Commission’s order. We will affirm in part and reverse and remand in part.

FACTUAL AND PROCEDURAL BACKGROUND

This case involves a skirmish in the shift toward deregulation of telecommunication utilities. Historically, companies like SWBT have been regulated according to traditional rate-of-return principles, which involve a complicated and speculative process of regulating costs and estimating a fair rate of return on investment. See PURA § 53.051 (West 1998).

In a 1977 rate-making proceeding under the traditional rate-of-return scheme, the Commission adopted a system of rate-group classifications for SWBT. Exchanges served by SWBT were divided into ten rate groups classified according to the number of working telephone lines in each exchange, and customers in each city were charged a tariff according to the rate group in which their exchange was classified. Rates progressively increased from the smaller groups to the larger, so customers in exchanges with fewer phone lines paid less than customers in exchanges with more phone lines. The higher tariffs represented a value-of-serviee principle: callers in an exchange with a larger number of phone lines could reach more telephones without paying long distance charges than could callers in a smaller exchange.

Over the years, the Commission has, in the course of rate-making proceedings, adjusted the number and boundaries of rate groups as needed to maintain exchanges’ relative classifications and to prevent exchanges with significantly different numbers of telephone lines from ending up in the same rate group. In so doing, the Commission used rate-group reclassification as a rate-design tool to help control how SWBT recovered its revenue requirement and to achieve equitable rates for all customers. Today, SWBT has eight rate groups instead of ten. The number and boundaries of the rate groups applicable to SWBT have not been reclassified since 1990.

There is now a national trend toward utility deregulation and away from rate-of-return regulation. Accordingly, the legislature adopted what is now codified as PURA chapter 58, effective in September 1995, which allows instead for incentive regulation. The purpose of this chapter is to “provide a framework for an orderly transition from the traditional regulation of return on invested capital to a fully competitive telecommunications marketplace in which all telecommunications providers compete on fair terms.” PURA § 58.001(1) (West 1998). A telephone company electing regulation under the incentive system agrees to cap its rates for four years and fulfill other infrastructure commitments. See id. §§ 58.021(b), .054 (West Supp.2000). In exchange, the company is able to garner more earnings if and when it increases its efficiency. A company regulated according to incentive regulation is not subject to a complaint, hearing, or determination regarding the reasonableness of its rates or revenues. See id. § 58.025 (West 1998). SWBT made this election in September 1995.

Chapter 58 includes three exceptions to the mandatory rate freeze: rate adjustments are allowed for (1) changes in FCC separations, (2) certain companies with fewer than five million access lines in the state, and (3) rate-group reclassification. It is this last exception that is at issue in this case. Specifically, PURA provides that when a company has elected incentive regulation, “the commission, on request of the electing company, shall allow a rate group reclassification that results from access line growth.” Id. § 58.058. The Commission and SWBT disagree over the meaning of that section and the role of rate groups under the new regulatory scheme.

In December 1997, SWBT requested reclassification of 52 exchanges into different rate bands to reflect access-line growth since the last reclassification in 1990. The reclassification of all 52 exchanges would have resulted in an annual revenue increase of approximately $40 million. Most of that increase is attributable to the requested reclassification of exchanges in Austin (from Rate Group 5 to 6), Fort Worth (from Rate Group 6 to 7), and Dallas (from Rate Group 7 to 8). When several parties intervened to oppose the application, the proceeding was docketed as a contested case and referred to the State Office of Administrative Hearings for hearings before an administrative law judge (ALJ).

After proceedings before the ALJ, the Commission ultimately adopted most provisions of the ALJ’s proposed decision, and while some rate-group reclassifications were allowed, the Commission’s order denied SWBT most of the revenue increase it had sought through reclassification. SWBT appealed to the district court. The district court reversed and remanded in part, but affirmed most of the Commission’s order. SWBT has appealed, raising four issues regarding the affirmed portions of the district court’s judgment.

First, the Commission adopted the portion of the ALJ’s proposed decision holding that “it would be appropriate to increase the upper level of Rate Group 5 and Rate Group 7 to retain Austin and Dallas, respectively, in their current rate groups.” By changing the boundaries, the Commission expanded the number of lines in those rate groups so that exchanges in Austin and Dallas no longer qualified for reclassification. SWBT complains that the Commission was bound to grant rate-group reclassifications based on increased line growth pursuant to PURA section 58.058 and that the Commission could not change the boundaries of the rate groups in doing so. SWBT asserts that, by changing the boundaries in a way that thwarted the requested reclassification of Austin and Dallas, the Commission improperly applied to the new incentive regulation scheme a rate-design tool appropriate only to rate-of-return regulation.

SWBT’s second issue on appeal concerns the Commission’s conclusion that SWBT could not benefit from pre-September 1995 access-line growth when it sought rate-group reclassification under the new incentive regulation scheme. In a stipulation reached in a prior rate-making case, SWBT agreed to refrain from seeking reclassification of any exchange to a higher rate group between 1991 and 1994. SWBT then voluntarily extended the duration of the stipulation until September 1995, when SWBT elected incentive regulation under chapter 58 of PURA. Now that the term of the stipulation has expired, SWBT seeks to include line growth that occurred during the voluntary rate freeze in its reclassification of exchanges into new rate groups. The Commission held that line growth that occurred during the term of the stipulation should not be considered, and that section 58.058 was meant to apply only to line growth occurring after the election of incentive regulation. The Commission’s decision on this issue eliminated 27 of the 52 exchanges for which SWBT sought reclassification, including the Fort Worth exchange.

During the course of these administrative proceedings, SWBT sought but was denied the opportunity to conduct discovery about proceedings surrounding another rate-group application filed by the United Telephone Company of Texas, d/b/a Sprint. In its third issue on appeal, SWBT asserts that Sprint is a similarly situated carrier subject to the same statutes, that a different result was reached in that case, and that SWBT should have been allowed to discover and introduce evidence of the disparate treatment received by the two companies.

Finally, in its fourth issue, SWBT complains that there is no statutory basis for the portion of the Commission’s order requiring SWBT to pay Cities’ attorney’s fees. Alternatively, if it is required to pay the attorney’s fees, then SWBT argues that it should also be able to recoup those fees in the rates it charges its customers.

DISCUSSION

Rate-Group Reclassification

PURA provides an exception to the rate cap SWBT agreed to when it elected incentive regulation, mandating that “Notwithstanding Subehapter B,[] the commission, on request of the electing company, shall allow a rate group reclassification that results from access line growth.” PURA § 58.058 (emphasis added). Based on line growth that had occurred since its exchanges were last reclassified in 1990, SWBT sought rate-group reclassifications pursuant to that section. Rather than simply reclassifying exchanges using existing rate-group boundaries, the Commission responded to SWBT’s request by changing the boundaries of two of the rate groups in order to keep the cities of Dallas and Austin in their existing respective rate groups. In its first issue on appeal, SWBT protests that the Commission is not authorized to change rate-group boundaries because the language of section 58.058 is mandatory (“shall allow rate group reclassification”) and so requires that the Commission reclassify exchanges once SWBT establishes that the exchanges have experienced access-line growth.

The Commission counters that rate groups have historically been used as a rate-design tool and are not intended as a means for giving SWBT an automatic rate increase. Therefore, the Commission claims that, consistent with past practice, it was free to reexamine and adjust the boundaries of SWBT’s rate groups to maintain cities in their current rate groups and to prevent undue revenue increases as a result of reclassification. SWBT concedes that past rate-group reclassifications have involved modifying rate groups’ upper and lower boundaries, but complains that carrying that practice over into incentive regulation violates the plain language of applicable sections within chapter 58. We agree with SWBT.

By adopting chapter 58, the legislature signaled a sea change in how telecommunications utilities that have elected incentive regulation are to be governed. Contrary to prior practice, section 58.025 states that a company electing incentive regulation “is not, under any circumstances, subject to a complaint, hearing, or determination regarding the reasonableness of the company’s: (1) rates; (2) overall revenues; (3) return on invested capital; or (4) net income.” PURA § 58.025 (West 1998). By changing rate-group boundaries to thwart SWBT’s requested reclassification, the Commission was conducting precisely this kind of “reasonableness” inquiry.

In the findings of fact in its order, the Commission candidly admitted that it “adjusted the size of rate groups in order to avoid placing two exchanges with significantly different numbers of [access lines] in the same group.” Specifically, the boundaries were changed to retain Austin and Dallas in their current rate groups because “[t]o put Austin in the same rate group as exchanges with considerably more [access lines] would be a departure from the rate-design strategies used by the Commission in the past.” This rationale necessarily involved an inquiry into the reasonableness of SWBT’s rates or revenues — i.e., the Commission refused to move Austin and Dallas into higher rate groups because it determined that it would be unreasonable to charge the same tariff to customers in cities with significantly different numbers of access lines. Section 58.025 expressly prohibits such a determination of the reasonableness of rates or revenues.

In this context, to give the term “rate group reclassification” the same meaning it had before incentive regulation was introduced would frustrate the intent of the legislature to free an electing utility from traditional ratemaking. Our goal in interpreting statutes is to ascertain and give effect to the legislature’s intent. See Sorokolit v. Rhodes, 889 S.W.2d 239, 241 (Tex.1994). We do so by looking first to the plain language the legislature used. See id. Under the plain meaning rule, if a statute is clear and unambiguous we interpret it according to its common everyday meaning. See Cail v. Service Motors, Inc., 660 S.W.2d 814, 815 (Tex.1983); El Paso Indep. Sch. Dist. v. Sharp, 923 S.W.2d 844, 846 (Tex.App.—Austin 1996, writ denied). By stating that the Commission “shall allow a rate group reclassification,” section 58.058 plainly requires the Commission to reclassify exchanges into new rate groups when a utility has proven access-line growth. We do not believe the mandatory language of the statute contemplates a contemporaneous adjustment to the rate-group boundaries designed to prevent the very reclassification called for by section 58.058. To allow the Commission to avoid the mandate in section 58.058 in this way would undermine the legislative intent expressed in the statute’s plain language.

The Commission argues that the mandatory language in section 58.058 is tempered by other sections within the same chapter. For example, while section 58.058 states that the Commission “shall allow a rate group reclassification,” section 58.059 states that “an electing company may request and the commission may authorize a rate adjustment under Section ... 58.058.” PURA § 58.059 (West 1998). The Commission argues that, by using the permissive term “may,” section 58.059 gives it the discretion to allow or disallow an adjustment requested by a utility under section 58.058. We disagree.

The Code Construction Act offers guidance on how to interpret the terms “may” and “shall”: “(1) ‘May’ creates discretionary authority or grants permission or a power. (2) ‘Shall’ imposes a duty.” Tex. Gov’t Code Ann. § 311.016 (West 1998) (emphasis added). The Commission wants us to read section 58.059 as giving it the discretionary authority to change rate-group boundaries when it considers a rate-group reclassification. But to interpret section 58.059 so broadly would, in effect, nullify the rate-group reclassification expressly mandated by section 58.058; by the Commission’s reading of section 58.059, it would have the discretion to never allow a rate adjustment, even though section 58.058 was enacted specifically as a way for utilities to increase their otherwise-frozen rates. Where possible, we are required to interpret statutory language in a manner that harmonizes and gives effect to all relevant laws. See Dallas Merchant’s & Concessionaire’s Ass’n v. City of Dallas, 852 S.W.2d 489, 495 (Tex.1993); see also Dial v. State, 658 S.W.2d 823, 826 (Tex.App.—Austin 1983, no pet.) (statutory sections that “are not positively repugnant will each be construed so as to give effect to both, if possible”). Only by relying on the Code Construction Act’s alternate definition and interpreting “may” as it is used in section 58.059 to grant permission or power to the Commission to authorize a rate-group reclassification requested pursuant to section 58.058 do we harmonize the two sections.

We are similarly unpersuaded by the Commission’s reliance on the language of section 58.055 that states, “(a) An electing company may increase a rate for a basic network service during [the rate freeze] only: (1) with commission approval that the proposed change is included in Section ... 58.058; and (2) as provided by Section!] ... 58.058.” PURA § 58.055 (West Supp.2000). The Commission urges that this section gives it the discretion — but does not require it — to allow a rate adjustment to occur as part of a rate-group reclassification. As explained above, however, such an interpretation would render the mandatory language of section 58.058 meaningless. Because the legislature specifically allowed rate-group reclassification as an exception to a utility’s agreed rate freeze and used mandatory language in directing the Commission to allow such reclassification, we believe that it intended rate-group reclassification requested pursuant to section 58.058 to be a largely mechanical process.

Under rate-of-return regulation, rate-group reclassification was used as a rate-design tool to keep access-line growth essentially revenue neutral. The mandatory language of section 58.058 — combined with section 58.025’s promise that SWBT “is not, under any circumstances, subject to a complaint, hearing, or determination regarding the reasonableness” of its rates or revenues — convinces us that rate-group reclassification cannot continue to be so used for utilities that opt for incentive regulation. See PURA § 58.025. Once the utility establishes that it has experienced sufficient line growth, “the commission shall allow a rate group reclassification that results from access line growth.” Id. § 58.058. However reasonable the Commission’s adjustments to the rate group boundaries might have been if conducted in a traditional rate-of-return ratemaking proceeding, they are not appropriate where, as here, SWBT is plainly not subject to an inquiry into the reasonableness of its rates. SWBT’s first issue is sustained.

Exclusion of Line Growth During Stipulation Period

SWBT next complains that when reclassifying exchanges into new rate groups, the Commission should not be able to exclude line growth that occurred prior to September 1, 1995. In its order on this issue the Commission explained:

Prior to its election, SWBT was subject to the terms of its last rate case, Docket No. 8585, a non-unanimous stipulation to which SWBT was a party. The bargain struck and approved by the Commission in Docket No. 8585 afforded SWBT pricing flexibility for services facing competition while also imposing a rate cap on basic local exchange services. The final order in Docket No. 8585 explicitly prohibited SWBT from reclassifying any exchange to a higher rate group during the term of the stipulation: 1991 through 1994. SWBT then voluntarily extended the term of the stipulation until September 1995, at which time it elected incentive regulation under PURA.

No one disputes that SWBT complied with the terms of the stipulation and did not seek rate-group reclassification during the term of the agreement. Once the stipulation expired, however, SWBT sought to include line growth that occurred during that period through a “rate group reclassification that results from access line growth.” PURA § 58.058. Although the ALJ sided with SWBT, the Commission refused to allow consideration of that line growth, holding instead that section 58.058 was meant to apply only to line growth occurring after an electing company chose to be regulated under incentive regulation. The district court affirmed the Commission’s holding.

Though they reached opposite conclusions, the ALJ and the Commission both agreed that section 58.058 is not clear on its face. The statute merely provides for rate-group reclassification that results from access-line growth; it does not specify the date from which the line growth should be measured. An agency’s construction of a statute that it is charged with enforcing is entitled to great weight, so long as the interpretation is reasonable and does not contradict the plain language of the statute. See Texas Citrus Exch. v. Sharp, 955 S.W.2d 164, 169 (Tex.App.—Austin 1997, no pet.); Texas Ass’n of Long Distance Tel. Cos. (TEXALTEL) v. Public Util. Comm’n, 798 S.W.2d 875, 884 (Tex.App.—Austin 1990, writ denied). SWBT asserts, and we agree, that the Commission’s interpretation of section 59.058 is not reasonable and so is not entitled to deference.

Section 58.058 states that “the commission ... shall allow a rate group reclassification that results from access line growth.” What the Commission essentially seeks to do here is add a caveat to the plain language of this statute, so the statute requires it to allow “reclassification that results from access line growth except when we choose not to count such growth.” A court may not judicially amend a statute to add words that are not implicitly contained in the language of the statute. See Jones v. Liberty Mut. Ins. Co., 745 S.W.2d 901, 902 (Tex.1988). “Only when it is necessary to give effect to the clear legislative intent can we insert additional words into a statutory provision.” Id. (quoting Hunter v. Fort Worth Capital Corp., 620 S.W.2d 547, 552 (Tex.1981)). There is no indication that the legislature intended for the Commission to create exceptions to section 58.058 that would ignore significant line growth, and the Commission’s assertion that every access line in some exchanges will be counted while some lines in other exchanges may be ignored stretches logic.

The Commission’s order concedes that “[tjhere is no question that for exchanges that experienced growth in access lines after September 1, 1995, § 58.058 allows rate group reclassification,” but goes on to say that allowing SWBT to count access-line growth prior to September 1, 1995 would “create[] a loophole for SWBT’s earlier bargain under Docket No. 8585.” The Commission held that “the earlier bargain creates a reasonable basis for distinguishing between pre-1995 access line growth and post-1995 access line growth for purposes of the relief sought in this case.”

The district court focused more on retroactivity concerns, apparently reasoning that because statutes are presumed to apply only prospectively, in enacting section 58.058 the legislature could only have contemplated including prospective fine growth. Utility rates, like any other legislation, can generally have only prospective application and cannot be used to recoup losses or gains incurred under rates set in prior proceedings. See TEXALTEL, 798 S.W.2d at 882. The district court judgment held that allowing SWBT to count line growth during the stipulation period and before it elected incentive regulation would effectively permit the utility to “reach back and take growth in access lines to increase the rates.” Retroactivity concerns are misplaced here, however. A statute is not retroactive merely because it draws upon antecedent facts for its operation. See Lewis v. Fidelity & Deposit Co., 292 U.S. 559, 571, 54 S.Ct. 848, 78 L.Ed. 1425 (1933); American Home Assurance v. Texas Dep’t of Ins., 907 S.W.2d 90, 94 (Tex.App.—Austin 1995, writ denied). Here, SWBT is seeking to apply the new statute only prospectively by counting its current number of access lines and classifying its exchanges into rate groups accordingly. This does not violate the general prohibition on giving a statute retroactive effect.

Perhaps the most compelling argument against the agency’s interpretation of section 58.058 emerges by examining the absurd results reached under that interpretation. In determining the meaning of a statute, a court must consider the entire act, its nature and object, and the consequences that would follow from each construction. See Sharp v. House of Lloyd, Inc., 815 S.W.2d 245, 249 (Tex.1991) (citing Sayre v. Mullins, 681 S.W.2d 25, 27 (Tex.1984)). Interpretations that would produce absurd results are to be avoided. See id. (citing McKinney v. Blankenship, 154 Tex. 632, 282 S.W.2d 691, 698 (1955)).

By the Commission’s own description, rate-group reclassification is allowed because “a customer in a larger exchange is able to call or receive calls from a greater number of fines at no cost than can a customer in a smaller exchange, [so] the larger exchange has more value and should be priced higher.” Yet under the Commission’s order, customers in an exchange that experienced fine growth from 1991-1995 would pay less than customers in an exchange that has experienced significant growth since 1995 even if the two exchanges now have precisely the same number of access fines and would otherwise be classified in the same rate band. This is true merely because the Commission has made the decision to forever exclude access fines that were added during the stipulation term, a decision that bears no relationship to the purpose of using rate bands to reflect customers’ cost of service. Like the ALJ, we “can find no reasonable basis, no ground of distinction, for treating comparably-sized exchanges differently.” We sustain SWBT’s second issue.

Denial of Discovery Request

In its third point of error, SWBT complains that the Commission erroneously deprived it of the opportunity to discover and introduce evidence regarding a rate-group reclassification proceeding involving Sprint. Sprint has also elected incentive regulation, and according to SWBT, Sprint filed its own application for rate-group reclassification just days before SWBT filed its application. In Sprint’s case, however, the Commission approved the reclassification without reexamining the boundaries of Sprint’s rate groups. Sprint had also previously agreed under a stipulation to cap local exchange rates, and the approved reclassification allowed Sprint to include fine growth that occurred during the period of the stipulation. Because both companies were subject to the same statutory scheme of incentive regulation and both requested a rate adjustment under section 58.058, and because both companies had previously been subject to rate-freeze stipulations, SWBT asserts that the Commission subjected the two phone companies to disparate treatment. SWBT demanded the opportunity to discover and introduce evidence of the purportedly inconsistent treatment and claims that the Commission acted arbitrarily and capriciously in denying the request. ’ It claims that the Equal Protection clauses of the United States and Texas constitutions are violated by the Commission’s denial of SWBT’s discovery request.

Even assuming that SWBT is correct in its assertions that it and Sprint are similarly situated in most ways material to this case, we do not believe that the Commission erred in denying SWBT’s request. In contested case hearings, the Commission generally follows the Texas Rules of Evidence as they apply in non-jury civil cases. See Tex. Gov’t Code Ann. § 2001.081 (West 2000); 16 Tex. Admin. Code § 22.141 (1999). It follows, then, that agency decisions on matters of discovery, like similar trial court rulings, will be disturbed only to remedy an abuse of discretion. See Markham v. Diversified Land & Exploration Co., 973 S.W.2d 437, 441 (Tex.App.—Austin 1998, pet. denied). An agency decision will be reversed only if substantial rights of the appellant are prejudiced by the agency’s abuse of discretion. See Tex. Gov’t Code Ann. § 2001.174(2)(F).

The record reflects that discovery was denied primarily because Sprint’s case was disposed of administratively. Commission regulations allow some tariff filings to be disposed of without going through the formal process of docketing them as contested case proceedings. See 16 Tex. Admin. Code § 22.33 (1999). Qualified proceedings may be approved by an ALJ without a hearing or action by the Commission. See id. § 22.32 (1999). Because the Sprint case was disposed of according to these provisions, the ALJ held that “it is not precedent for this case, that these questions were not addressed, that the Commission didn’t even issue that order. ... And so it seems to me that the Commission never reviewed this. So I don’t think the Commission is on record on this question.” The ALJ went on to explain that the Sprint case “was a settled case, and historically settled cases are ... not generally used as precedent for future cases.” We find adequate the ALJ’s explanation of why she denied SWBT’s discovery request and find no abuse of discretion in her decision. Nor do we find any fundamental violation of SWBT’s constitutional rights in the denial of this discovery request. SWBT’s third issue on appeal is overruled.

Attorney’s Fees

In its final issue on appeal, SWBT complains of the portion of the Commission’s order requiring it to pay Cities’ attorney’s fees. In allowing municipal participation in ratemaking proceedings, PURA provides that:

(a) The governing body of a municipality participating in a ratemaking proceeding may engage rate consultants, accountants, auditors, attorneys, and engineers to:
(1) conduct investigations, present evidence, and advise and represent the governing body; and
(2) assist the governing body with litigation before the commission or a court.
(b) The public utility in the ratemaking proceeding shall reimburse the governing body of the municipality for the reasonable cost of the services of a person engaged under Subsection (a) to the extent the commission determines is reasonable.

Id. § 51.006 (West 1998) (emphasis added). Thus, SWBT is required to reimburse Cities for their attorney’s fees incurred if these proceedings are deemed “ratemaking proceedings” and if the Commission finds that the costs are reasonable. In this case, the parties reached an agreement and SWBT has stipulated that the amount of fees requested by Cities was reasonable. However, SWBT argues that, because it has elected incentive regulation, by definition it is no longer subject to ratemaking proceedings and so the attorney’s fee provision in section 51.006 cannot apply to the present dispute.

In the “definitions” section of PURA, which is applicable to all utilities, “rate-making proceeding” is defined as “a proceeding in which a rate is changed.” PURA § 11.003(17) (West Supp.2000). The definition of “rate” includes “any compensation, tariff, charge, fare, toll, rental, or classification that is directly or indirectly demanded, observed, charged, or collected by a public utility for a service....” Id. § 11.003(16). The present case involves a requested change to a tariff that may be charged to certain customers on the basis of their classification into different rate groups. This is plainly a proceeding in which a rate — a tariff or classification — will be changed. SWBT’s claim that these proceedings are not ratemaking proceedings is contradicted by the plain language of PURA. Thus, the mandatory language of PURA section 51.006 applies, and SWBT must reimburse Cities for their attorney’s fees as ordered by the Commission.

SWBT next argues that, if it is required to pay Cities’ attorney’s fees, it should be allowed to raise its rates to recoup that expense. Under the previous regime of rate-of-return regulation, attorney’s fees paid to municipalities in ratemaking proceedings were added to the utility’s own expenses and became part of the utility’s revenue requirement to be recovered through rates. See West Tex. Utils. Co. v. Office of Pub. Util. Counsel, 896 S.W.2d 261, 270-71 (Tex.App.—Austin 1995, no writ). Had it not elected incentive regulation, SWBT would clearly be allowed to recoup this expense in rates. However, no similar allowance is made under incentive regulation, and when it elected to be governed under this scheme SWBT agreed to freeze its rates subject to three narrow statutory exceptions. An increase in expenses due to an order to pay attorney’s fees incurred by municipalities in ratemak-ing proceedings is not one of the exceptions to the rate freeze created by the legislature; we therefore find no error in the district court’s conclusion that PURA contains “no . provision that entitles [SWBT] to recover the attorneys’ fees awarded to Cities in this case.” While we are sympathetic to SWBT’s complaint that this creates something of a statutory “catch 22,” it is the province of the legislature and not this Court to address any ensuing inequity. See Southern Pac. Tramp. Co. v. Railroad Comm’n, 592 S.W.2d 74, 77 (Tex.Civ.App.—Austin 1979, writ ref d n.r.e.) (“Deficiencies in the laws regulating an industry ‘... will not justify a court’s excursion beyond its proper sphere in order to plug a hole or cure a supposed defect in the legislative scheme of things.’ ”) (quoting State v. Reyna, 160 Tex. 404, 333 S.W.2d 832, 838 (1960)). SWBT’s fourth issue on appeal is overruled.

CONCLUSION

We hold that the district court erred in affirming the portions of the Commission’s order that (1) allowed the Commission to change rate-group boundaries when it considered the rate-group reclassification requested by SWBT and (2) allowed the Commission to exclude from consideration access-line growth occurring during the period governed by a now-expired stipulation to a rate freeze. Those parts of the district court’s judgment are reversed, and those causes of action are remanded to the district court with instructions to remand to the agency for further proceedings. We also hold that the district court did not err in affirming the portions of the Commission’s order (3) denying SWBT’s discovery request regarding the Sprint proceedings and (4) ordering SWBT to reimburse Cities for their attorney’s fees without allowing a corresponding rate increase. Those portions of the district court’s judgment are affirmed.

        . See Act of May 16, 1995, 74th Leg., R.S., ch. 231, § 49, 1995 Tex. Gen. Laws 2017, 2045 (since recodified at Tex. Util.Code Ann. ch. 58).

        .See PURA, Tex. Util.Code Ann. § 58.058 (West 1998). For the sake of convenience, citations to PURA will be abbreviated as "PURA §_”

        .See id. § 15.001 (West 1998).

      .The proposed decision by the administrative law judge found that in the past, "the Commission raised the rate group upper limit when the failure to do so would put the exchange in question in a rate group with an exchange that had between 100,000 and 300,-000 more [access lines].” In a previous docket number, for example, the upper boundary of Rate Group 5 was raised to prevent the Austin exchange from being reclassified into Rate Group 6, which contains the Fort Worth and San Antonio exchanges.

      . See PURA § 58.056 (West 1998).

      . See id. § 58.057 (West 1998).

      . See id. § 58.058 (West 1998).

      .The district court reversed the Commission’s order to the extent that it excluded access-line growth that the Commission found resulted from marketing efforts by SWBT, and remanded for a new hearing to take into account all access-line growth that was erroneously excluded.

      . The Commission’s order suggests that the agreement not to reclassify exchanges “afford[ed] SWBT pricing flexibility for services facing competition while also imposing a rate cap on basic local exchange services."

      . This portion of the Commission’s order is contrary to the recommendation of the ALJ.

      . Subchapter B of chapter 58 governs the election of incentive regulation. See PURA §§ 58.021-028 (West 1998 & Supp.2000). Subchapter C, in which section 58.058 is found, governs the basic network services provided under the incentive regulation scheme. See id. §§ 58.051-.063 (West 1998 & Supp.2000).

      . The quoted language is from the ALJ's proposed decision and was adopted by the Commission in its final order.

      . If the Commission receives a request to intervene in the tariff filing, then administrative disposition is no longer permitted and the proceeding must be docketed. See Tex. Admin. Code § 22.33(b)(6) (1999). This is what happened in SWBT’s case.

      . As already noted, rate adjustments are allowed only for some changes in FCC separations, for certain companies with fewer than five million access lines in the state, and for rate-group reclassification. See PURA §§ 58.056, .057, .058.