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Click here for the full text of this decision Gas purchased by consumers within the city from companies affiliated with RGVG and Southern Union is not subject to the 4 percent franchise tax under Ordinance No. 1129 based on a theory of “single business enterprise.” FACTS:The city of Edinburg entered into franchise agreements with Rio Grande Valley Gas Co. that were embodied in ordinances of the city. The ordinance at issue in this case, Ordinance No. 1129, permitted RGVG to install and operate pipeline facilities on or under public rights-of-way and other public lands within the city or areas annexed by the city and to distribute and sell natural gas. The ordinance required RGVG to pay a franchise tax of “four (4%) percent of its gross income derived from all gas sales within the City.” RGVG was subsequently acquired by and merged into Southern Union Co. HOLDING:Affirmed in part; reversed and rendered in part. The principal issue in this case is whether gas purchased by consumers within the city from companies affiliated with RGVG and Southern Union is subject to the four percent franchise tax under Ordinance No. 1129 based on a theory of “single business enterprise.” The city contends that RGVG and subsequently its successor Southern Union were obligated to pay a four percent franchise tax on all gas sold within the city that went through RGVG’s or Southern Union’s pipeline system, regardless of what entity, affiliated or not, actually sold gas to consumers within the city. The city argues that the phrase “four (4%) percent of its gross income derived from all gas sales within the city” includes income derived from transportation that was provided by RGVG or Southern Union in connection with gas sales within the city. The court is unpersuaded by this argument. It is unreasonable to construe the franchise agreement to mean that the grantee would have to pay franchise taxes on sales made by another company who had the lawful right to sell gas within the city. The city contends in the alternative that sales made by affiliates of RGVG or Southern Union to consumers within the city should be subject to the franchise tax set forth in Ordinance No. 1129 under a theory of single business enterprise. There was no basis in this record for concluding that the distinct corporate identities of the Valero entities should be disregarded or that sales of gas by RGVG’s affiliates to consumers within the city could be considered sales by RGVG under Ordinance No. 1129. The city contends that the court of appeals erred in holding that the city could not prevail on its tortious interference claim. The city approved tariffs and enacted ordinances that implemented some of the very sales that the city now contends constituted tortious interference. The city’s tortious interference claim has no merit. The court of appeals held that the city failed to plead fraudulent inducement and therefore that the trial court erred in awarding punitive damages. The city takes issue with that holding. On the merits, the city’s fraud claim fails. The city contends that the court of appeals erred in reversing the trial court’s determination that portions of certain of the laterals transferred by RGVG to Valero Energy Corp. (and that were owned by Valero Transmission, L.P. at the time of trial) were a purpresture and an encroachment on public property. The trial court’s judgment declaring a purpresture served no purpose. Even assuming that there was a purpresture, which the court does not decide, the city had abandoned any claim for damages, an injunction or other relief regarding its contention that a purpresture existed. OPINION:Owen, J., delivered the opinion of the court. O’Neill, J., did not participate.

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