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Date: 02-20-2008

Case Style: Dona Ana Mutual Domestic Water Consumers Association v. The City of Las Cruces, New Mexico

Case Number: 06-2266

Judge: Briscoe

Court: United States Court of Appeals for the Tenth Circuit on appeal from the District of New Mexico, Bernalillo County

Plaintiff's Attorney:


Civil Litigation Lawyer Directory


Defendant's Attorney:


Civil Litigation Lawyer Directory


Description: Do�a Ana Mutual Domestic Water Consumers Association ("Do�a
Ana") - the appellant in Case No. 06-2347 - previously entered into a settlement
agreement (the "Settlement") with City of Las Cruces, New Mexico (the
"City") - the appellant in Case No. 06-2266 and an appellee in Case No. 06-2347.
In the Settlement, the City agreed to recognize Do�a Ana's exclusive rights,
under 7 U.S.C. � 1926(b), to provide water to customers in an area northeast of
Las Cruces, New Mexico (the "Disputed Area"). The United States District Court
for the District of New Mexico entered the Settlement as a stipulated judgment
and retained jurisdiction over it. Subsequently, another water service provider,
Moongate Water Company, Inc. ("Moongate"), which is an appellee in Case No.
06-2266 and in Case No. 06-2347, contested Do�a Ana's rights to provide water
in the Disputed Area. In Moongate Water Co. v. Do�a Ana Mutual Domestic
Water Consumers Association, 420 F.3d 1082 (10th Cir. 2005), we determined
that Do�a Ana did not have � 1926(b) exclusivity as against Moongate, and in
Do�a Ana Mutual Domestic Water Consumers Association v. New Mexico Public
Regulation Commission, 139 P.3d 166 (N.M. 2006), the New Mexico Supreme
Court affirmed a state regulatory determination that, as against Do�a Ana,
Moongate had the exclusive right to serve the Disputed Area. Do�a Ana and the
City then attempted to amend their previous Settlement via a "Second
Addendum," in which Do�a Ana consented to the City providing water in the
Disputed Area. Moongate intervened and moved for summary judgment, claiming
that it was a third-party beneficiary to the original Settlement and that the Second
Addendum prejudiced its rights to exclusivity in the Disputed Area. The district
court agreed with Moongate and refused to approve the Second Addendum. Do�a
Ana and the City appeal, arguing that the district court erred in holding that
Moongate was a third-party beneficiary. We exercise jurisdiction pursuant to 28
U.S.C. � 1291 and, in Case No. 06-2266, we reverse and remand. We dismiss the
related appeal, Case No. 06-2347, as moot.


I.

Moongate is a public utility organized under the New Mexico Public
Utilities Act, N.M. Stat. Ann. � 62-1-1 et seq. As a public utility, Moongate falls
under the jurisdiction of the New Mexico Public Regulatory Commission
("PRC"). See N.M. Stat. Ann. � 62-6-4. The PRC comprehensively regulates
many aspects of a public utility's business, including rate-setting, service
standards, accounting methods, and the building or expansion of facilities. See
N.M. Stat. Ann. �� 62-6-4, -16, -19, -23; id. � 62-9-1. In return for this
regulation, New Mexico law grants a public utility a limited monopoly within its
service area. See N.M. Stat. Ann. �� 62-9-1, -1.1; see also Morningstar Water
Users Ass'n v. N.M. Pub. Util. Comm'n, 904 P.2d 28, 39 (N.M. 1995).


Do�a Ana is a nonprofit water service provider formed under the New
Mexico Sanitary Projects Act, N.M. Stat. Ann. � 3-29-1 et seq. As a mutual
domestic water consumers association, Do�a Ana is not subject to regulation by
the PRC, except with regard to disputes between Do�a Ana and a public utility,
such as Moongate. See N.M. Stat. Ann. � 62-9-1; see also El Vadito de los
Cerrillos Water Ass'n v. N.M. Pub. Serv. Comm'n, 858 P.2d 1263, 1267 (N.M.
1993).


The City is a municipality providing water service pursuant to N.M. Stat.
Ann. � 3-27-1 et seq. As a municipality, the City is not subject to regulation by
the PRC. See N.M. Stat. Ann. � 62-6-4.1


In addition to the New Mexico regulatory scheme, federal law sometimes
limits a provider's ability to provide water to a particular area. Pursuant to 7
U.S.C. � 1926(a)(1), nonprofit water associations may borrow federal funds for
"the conservation, development, use, and control of water, and the installation or
improvement of drainage or waste disposal facilities, recreational developments,
and essential community facilities including necessary related equipment, all
primarily serving farmers, ranchers, farm tenants, farm laborers, rural businesses,
and other rural residents . . . ." Section 1926(b) prohibits other water utilities
from competing with the borrowing entity within the borrowing entity's service
area. 7 U.S.C. � 1926(b).2 Do�a Ana has borrowed money from the federal
government under this program.

In August 2002, Do�a Ana filed suit against the City in the United States
District Court for the District of New Mexico, alleging that the City had violated
Do�a Ana's rights under 7 U.S.C. � 1926(b) by commencing water service to
customers in Do�a Ana's service area. Moongate was not a party to this action.
In March 2003, Do�a Ana and the City entered into the Settlement, in which the
City agreed to recognize Do�a Ana's right to � 1926(b) protection in the Disputed
Area.


The controversy in the instant appeal centers around the language in several
paragraphs of the Settlement. First, in the preamble to the Settlement, the parties
(Do�a Ana and the City) stated:


WHEREAS, it is the intention of the parties hereto to settle and
dispose of, fully and completely, any and all claims, demands, and
causes of action heretofore or hereafter held by one party against the
other, arising out of, connected with or incidental to the dealings
between the parties prior to the date hereof regarding the
Association's service area.


Settlement, ROA, Vol. I, at 51.3 Next, the Settlement provided:


1. The parties recognize that this is a dispute concerning the service
areas to which Dona Ana is entitled to 7 U.S.C. � 1926(b) protection,
but as a compromise to settle litigation, and only binding on the City
and the Association, and specifically not binding on Moongate Water
Company, ("Moongate"), it is agreed the Association is entitled to 7
U.S.C. � 1926(b) protection within the geographical boundaries
designated in the document attached hereto as Exhibit "A"
(hereinafter the "Association's Service Area"). The City shall not
provide water service to any customer within the Association's
Service Area either directly or through the grant of a franchise or
similar means, without the express written consent of the
Association. Notwithstanding this provision, the City intends to
renegotiate a new franchise with Moongate, and the effect of such
renewal or extension shall be resolved pursuant to Paragraph Number
Settlement, 1, ROA, Vol. I, at 51-52. Paragraph 3, which the parties referenced
in Paragraph 1, then stated:


3. There is a disagreement between the parties as to whether
Moongate Water Company may have a right to sell water within
certain portions of the Association's Service Area. The City is
currently negotiating with Moongate for a non-exclusive franchise to
sell water in a certain area, a portion of which is located within the
Association's Service Area. Moongate's present franchise with the
City expired on December 31, 2002. The City has previously advised
Moongate that Moongate will have a month-to-month franchise upon
expiration of the existing franchise on December 31, 2002 pending
renegotiation of a new franchise. It is the Association's position that
the City's granting of and/or renewal of a franchise with Moongate
for it to provide water service within the Association's Service Area
may violate the Association's claimed rights pursuant to 7 U.S.C. �
1926(b). This dispute relating to whether the franchise or renewed
franchise granted by the City to Moongate is void as a violation of 7
U.S.C. � 1926(b), and/or whether Moongate has the right to sell
water within any portion of the Association's Service Area with or
without a franchise from the City, is to be resolved between the
Association and Moongate, and the determination of such issues by a
court of competent jurisdiction or by settlement between Moongate
and the Association shall be binding upon the City.


Settlement, 3, ROA, Vol. I, at 52-53. The Settlement also contained a broad
release of claims between the City and Do�a Ana, as well as several additional
provisions not directly relevant to the instant appeal.


The district court entered a stipulated judgment, incorporating the terms of
the settlement and providing:

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that this

Court retains jurisdiction to resolve any dispute between the parties
pertaining to the Agreement of Compromise, Settlement and Release
if such disputes cannot be resolved by mediation as provided for in
said Agreement.


Judgment, ROA, Vol. I, at 67.


In the meantime, in December 2002, Moongate initiated an action against
Do�a Ana in the United States District Court for the District of New Mexico,
seeking a declaratory judgment that Do�a Ana did not have � 1926(b) protection
in the Disputed Area. See Moongate, 420 F.3d at 1085. The district court agreed
with Moongate. See id. at 1086. In 2005, we affirmed the decision of the district
court and held that Do�a Ana did not have � 1926(b) protection in the Disputed
Area. See id. at 1087-90.


In addition, in June 2003, after the City and Do�a Ana had entered into the
Settlement, Moongate filed a complaint against Do�a Ana with the PRC.
Moongate sought a declaration that the Disputed Area was part of Moongate's
service area and that Do�a Ana could not extend service into the Disputed Area.


In May 2005, the PRC issued a final order in favor of Moongate, prohibiting
Do�a Ana from extending service into the Disputed Area. In June 2006, the New
Mexico Supreme Court affirmed the PRC's decision. See Do�a Ana Mut.
Domestic Water Consumers Ass'n v. N.M. Pub. Regulation Comm'n, 139 P.3d
166 (N.M. 2006).


Two other state proceedings relate tangentially to the instant case. The
first is an action that Moongate brought against the City in New Mexico state
court in 2004, alleging that the City had intruded on Moongate's service area. In
June 2006, the court held that "[a]s a consequence of electing not to be regulated
by the [PRC], the City must compensate Moongate for damage to or taking of
Moongate's property by intruding on its service area." Findings of Fact &
Conclusions of Law, 06-2266 Appellee Br. at A-18, 53. Second, in January
2005, Moongate brought an action against the City in New Mexico state court,
seeking a declaratory judgment that Moongate was a third-party beneficiary to the
Settlement between Do�a Ana and the City. In November 2005, the court granted
summary judgment in favor of Moongate, holding that Moongate was a thirdparty
beneficiary to the Settlement and that the City could not provide service in
the Disputed Area. The City has appealed the ruling to the New Mexico Court of
Appeals, but Moongate and the City have stipulated to a stay in that appeal,
pending resolution of the instant case.4


The instant appeal arose from a dispute between the City and Do�a Ana
regarding the City's compliance with the terms of the Settlement. In March 2005,
Do�a Ana filed a motion to enforce the Settlement. Following mediation, Do�a
5 Moongate also sought and, on January 17, 2006, obtained an order from
the PRC requiring Do�a Ana to withdraw its authorization to the City to provide
service in areas where the PRC had prohibited Do�a Ana from serving. The New
Mexico Supreme Court, however, recently reversed the PRC's order and held that
the PRC exceeded the scope of its authority. See Do�a Ana Mut. Domestic Water
Consumers Ass'n v. N.M. Pub. Regulation Comm'n, No. 29,654 (N.M. May 8,
2007).


Ana and the City agreed to amend the Settlement via a Second Addendum. Under
the Second Addendum, Do�a Ana consented to the City supplying water to
customers within certain parts of the Disputed Area. In return, the City agreed to
provide certain wastewater services to portions of Do�a Ana's territory.


On November 22, 2005, the City and Do�a Ana filed a motion in the
district court to amend the Settlement via the Second Addendum. That same day,
Moongate filed a motion to intervene, claiming that it was a third-party
beneficiary to the Settlement and that the Second Addendum violated its rights.5
After initially opposing Moongate's motion to intervene, the City and Do�a Ana
stipulated to Moongate's intervention but reserved the right to challenge
Moongate's substantive contentions. After filing its complaint in intervention,
Moongate moved for summary judgment, arguing that it was a third-party
beneficiary to the Settlement and that the Second Addendum adversely affected
its rights. Moongate based its argument on the language of the Settlement, as
well as extrinsic evidence, and Moongate contended that its third-party
beneficiary status precluded the City from supplying water to customers in the
Disputed Area.


The district court granted Moongate's motion for summary judgment,
holding that Moongate was a third-party beneficiary and denying approval of the
Second Addendum. The district court explained:


In the Settlement Agreement, City acknowledged that Do�a Ana
claimed � 1926(b) protection as to Do�a Ana's claimed service area,
that the dispute between Do�a Ana and Moongate would be resolved
between Do�a Ana and Moongate, and that City would be bound by
the resolution of the dispute. City promised that it would be bound
by the outcome of the dispute between Do�a Ana and Moongate,
regardless of which of the two entities prevailed in the dispute.


Clearly, Do�a Ana and City intended, as of the execution of the
Settlement Agreement, that Moongate would never have to litigate,
vis a vis the City, any issue regarding water service in the claimed
service area, if Moongate prevailed in its dispute with Do�a Ana.
While it may be obvious that both City and Do�a Ana believed that
Do�a Ana would prevail in its dispute with Moongate, the parties
may not now disavow their intention to benefit Moongate. While the
conferring of the benefit on Moongate may have been unexpected, it
cannot be said to have been unintended. Moongate is a third-party
beneficiary to the Settlement Agreement.


Dist. Ct. Op., ROA, Vol. II, at 649. Both Do�a Ana and the City have appealed
this ruling, arguing that Moongate is not a third-party beneficiary based on either
the language of the Settlement or extrinsic evidence.6


II.
As a preliminary matter, the district court properly exercised jurisdiction in
7 As of December 1, 2007, Rule 56(c) now reads: "The judgment sought
should be rendered if the pleadings, the discovery and disclosure materials on file,
and any affidavits show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law." This change is
entirely stylistic and does not affect the result in the instant case.
and draw all factual inferences in favor of the non-moving party." Zurich N. Am.
v. Matrix Serv., Inc., 426 F.3d 1281, 1287 (10th Cir. 2005) (citing Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). We review the district court's
determination of state law de novo. Roberts v. Printup, 422 F.3d 1211, 1215
(10th Cir. 2005).


The district court erred in holding that Moongate was a third-party
beneficiary to the Settlement. "�Ordinarily, the obligations arising out of a
contract are due only to those with whom it was made; a contract cannot be
enforced by a person who is not a party to it or in privity with it.'" Tarin's, Inc. v.
Tinley, 3 P.3d 680, 685 (N.M. Ct. App. 1999) (quoting Am. Jur. 2d Contracts �
425 (1991)) (alteration omitted). Sometimes, however, "[a] third party may be a
beneficiary of [a] contract, and as a beneficiary may have an enforceable right
against a party to [the] contract." Fleet Mortgage Corp. v. Schuster, 811 P.2d 81,
82 (N.M. 1991) (citing Permian Basin Inv. Corp. v. Lloyd, 312 P.2d 533, 537
(N.M. 1957)). "Although the thought has been expressed in differing ways, a
prime requisite to this status is that the parties to the contract must have intended
to benefit the third party, who must be something more than a mere incidental
beneficiary." McKinney v. Davis, 503 P.2d 332, 333 (N.M. 1972); see also
Schuster, 811 P.2d at 82-83 ("Whether a party is a third-party beneficiary depends
on if the parties to the contract intended to benefit the third party." (citing
McKinney, 503 P.2d at 333)); Tinley, 3 P.3d at 685-86 ("There are two classes of
third-party beneficiaries: intended beneficiaries and incidental beneficiaries.
Only intended beneficiaries can seek enforcement of a contract." (citations
omitted)). "The promisor must have �had reason to know the benefit was
contemplated by the promisee as one of the motivating causes for entering the
contract.'" Tinley, 3 P.3d at 686 (quoting Stotlar v. Hester, 582 P.2d 403, 407
(N.M. Ct. App. 1978)); see also Lloyd, 312 P.2d at 537.


Moreover, "[t]he burden is on the person claiming to be a third-party
beneficiary to show that the parties to the contract intended to benefit him. He
may do so using extrinsic evidence if the contract does not unambiguously
indicate an intent to benefit him." Tinley, 3 P.3d at 686 (citations omitted); see
also Schuster, 811 P.2d at 83 ("�Such intent must appear either from the contract
itself or from some evidence that the person claiming to be a third party
beneficiary is an intended beneficiary.'" (quoting Valdez v. Cillessen & Son, Inc.,
734 P.2d 1258, 1264 (N.M. 1987))); Casias v. Cont'l Cas. Co., 960 P.2d 839, 842
(N.M. Ct. App. 1998) ("The intent of the parties to a contract may be proven by
�relying on the unambiguous language of the agreement itself, or, in the absence
of such language, on extrinsic evidence such as the circumstances surrounding the
execution of the agreement.'" (quoting Hansen v. Ford Motor Co., 900 P.2d 952,
954 (N.M. 1995))). As always, "�[t]he primary objective in construing a contract
is to ascertain the intention of the parties.'" Cont'l Potash, Inc. v. Freeport-
McMoran, Inc., 858 P.2d 66, 80 (N.M. 1993) (quoting Mobile Investors v.
Spratte, 605 P.2d 1151, 1152 (N.M. 1980)). In addition, "a contract should be
interpreted as a harmonious whole to effectuate the intentions of the parties, and
every word, phrase or part of a contract should be given meaning and significance
according to its importance in context of the contract." Brown v. Am. Bank of
Commerce, 441 P.2d 751, 755 (N.M. 1968). "Further, in construing the contract,
reasonable rather than unreasonable interpretations are favored by the law." Id.
The language of the Settlement "does not unambiguously indicate an intent
to benefit [Moongate]." Tinley, 3 P.3d at 686. First, in the preamble to the
Settlement, Do�a Ana and the City explained that the overriding "intention of the
parties" was "to settle and dispose of, fully and completely, any and all claims,
demands, and causes of action heretofore or hereafter held by one party against
the other, arising out of, connected with or incidental to the dealings between the
parties . . . ." Settlement, ROA, Vol. I, at 51 (emphasis added). Contrary to
Moongate's contention, nothing in this provision indicates that the parties
intended the Settlement to resolve all claims between the City and Moongate.8
Paragraphs 1 and 3 similarly contain no indication that the parties intended
to make Moongate a third-party beneficiary to the Settlement. In Paragraph 1, the
parties agreed to the following: "The City shall not provide water service to any
customer within the Association's Service Area either directly or through the
grant of a franchise or similar means, without the express written consent of the
Association." Settlement, 1, ROA, Vol. I, at 51. Moongate argues that, under
this provision, the City "agreed that its right to provide water service in the
disputed area, if any, was derivative of Do�a Ana's right and dependent upon
Do�a Ana's permission." 06-2266 Appellee Br. at 12. The language does not
support such a broad interpretation. Rather, the provision simply states that the
City will not provide water service in the Disputed Area without Do�a Ana's
consent.


Do�a Ana and the City next agreed:


Notwithstanding this provision, the City intends to renegotiate a new
franchise with Moongate, and the effect of such renewal or extension
shall be resolved pursuant to Paragraph Number 3 herein. The
Association shall not submit this Agreement in litigation between the
Association and Moongate for the purpose of arguing that the City's
recognition of Dona Ana's � 1926(b) protected service area is
binding on Moongate.


Settlement, 1, ROA, Vol. I, at 52. By this language, both parties acknowledged
that, even though the City agreed not to provide water service in the Disputed
Area without Do�a Ana's consent, the City was nonetheless renegotiating a
franchise with Moongate, and Do�a Ana and Moongate were litigating whether
Do�a Ana had � 1926(b) protection against Moongate in the Disputed Area. The
last sentence, under which Do�a Ana agreed not to submit the Settlement as
evidence in its litigation against Moongate, reflected the City's desire to avoid
any forced participation in the litigation between Do�a Ana and Moongate over
Do�a Ana's alleged � 1926(b) protection. See Settlement Draft, ROA, Vol. II, at
440 (showing the addition of a draft of the provision); Letter with Suggested
Settlement Changes, ROA, Vol. II, at 445-46 (changing the language to its final
version, so that the Settlement would not provide Moongate with an advantage
over Do�a Ana, or vice versa, in the litigation between those two parties);
Affidavit of Jorge Garcia, 6, ROA, Vol. II, at 591 ("The City wished to end the
litigation between itself and the Association and did not wish to participate in
further litigation with the Association on the issue of the City's right to grant a
successor non-exclusive franchise to Moongate Water Company.").9


Likewise, Paragraph 3 does not show an intent to benefit Moongate. It
begins by acknowledging that "[t]here is a disagreement between the parties as to
whether Moongate Water Company may have a right to sell water within certain
portions of the Association's Service Area." Settlement, 3, ROA, Vol. I, at 52.


It next notes that "the City is currently negotiating with Moongate for a nonexclusive
franchise to sell water in [the Disputed Area]," and that, in the
meantime, "Moongate will have a month-to-month franchise." See id. Paragraph
Paragraph 3's last sentence is the heart and soul of Moongate's third-party
beneficiary claim, but it does not extend nearly as far as Moongate contends. Its
use of the words, "[t]his dispute," in particular, shows that it was addressing the
dispute described in the preceding sentence, regarding whether Do�a Ana's
alleged � 1926(b) rights precluded Moongate from serving water in the Disputed
Area. The determination that Do�a Ana and the City agreed "shall be binding
upon the City" was Do�a Ana's rights against Moongate under � 1926(b). By this
provision, the City agreed that, if Do�a Ana prevailed over Moongate, then the
City would be bound in recognizing Do�a Ana's � 1926(b) rights over Moongate
and could not grant Moongate a franchise. Conversely, if Moongate prevailed
over Do�a Ana, the City would be free to grant Moongate a franchise. Nothing in
this provision indicates that, if Moongate established rights over Do�a Ana to
serve the Disputed Area, then that determination would automatically preclude
the City from serving the Disputed Area too. Moongate has broadened the scope
of "[t]his dispute" to include all disputes between Moongate, Do�a Ana, and the
City, regarding which party or parties may serve the Disputed Area. The
language of Paragraph 3 does not support such an all-encompassing intent.


In its argument on appeal, Moongate implicitly ignores the words, "[t]his
dispute," in Paragraph 3, and instead focuses on the subsequent modifying clause,
"relating to . . . whether Moongate has the right to sell water within any portion
of the Association's Service Area with or without a franchise from the City."


Under a straightforward reading of the Settlement, however, "[t]his dispute"
refers to the preceding sentence, i.e. "the Association's position that the City's
granting of and/or renewal of a franchise with Moongate for it to provide water
service within the Association's Service Area may violate the Association's
claimed rights pursuant to 7 U.S.C. � 1926(b)." The clause that Moongate cites is
just an attempt - albeit a poorly drafted one - to provide additional specificity
regarding the issues that Do�a Ana and Moongate were litigating as part of Do�a
Ana's � 1926(b) claim to the Disputed Area.


As Do�a Ana observes, no state or federal proceeding could have
established Moongate's rights over the City to serve the Disputed Area. Neither
Moongate nor the City claimed � 1926(b) protection, so federal law could not
have provided either party with exclusive rights to the Disputed Area. The PRC
did not have jurisdiction over the City, see N.M. Stat. Ann. � 62-6-4, so
Moongate could not have asked the PRC to preclude the City from serving the
Disputed Area. Moongate, therefore, is arguing that its competitors - Do�a Ana
and the City - intended to grant it rights as a third-party beneficiary that it could
not have obtained through any process under state or federal law. This is not
convincing.


Additionally, the litigation time-line between the parties supports a narrow
reading of "[t]his dispute" in Paragraph 3. At the time of the Settlement in March
2003, the parties were not yet litigating any other disputes beyond Do�a Ana's
alleged � 1926(b) protection. Moongate did not file a complaint against Do�a
Ana with the PRC until June 2003, and Moongate did not bring any action against
the City in New Mexico state court until 2004. Moongate's argument that the
Settlement provision "covered all questions of Moongate's right to sell water in
the disputed area, including Moongate's state law claims against Do�a Ana before
the PRC," 06-2266 Appellee Br. at 15, ignores the simple fact that, at the time of
the Settlement, there were no "state law claims against Do�a Ana before the
PRC."


Moreover, the Settlement itself provided for a specific mechanism to
address the situation that ultimately developed. The Settlement stated that "[t]he
City shall not provide water service to any customer within the Association's
Service Area either directly or through the grant of a franchise or similar means,
without the express written consent of the Association." Settlement, 1, ROA,
Vol. I, at 51 (emphasis added). In this provision, the parties contemplated the
situation where Do�a Ana could give its "express written consent" for the City to
serve the Disputed Area, regardless of Do�a Ana's rights against Moongate (or
vice versa). Under Moongate's construction, Moongate's rights over Do�a Ana
automatically preclude the City from serving the Disputed Area, and Paragraph 3
of the Settlement swallows the "express written consent" provision in Paragraph
1. Such a reading does not comport with New Mexico's standard for determining
third-party beneficiary status. See Casias, 960 P.2d at 843 (explaining, in
response to the plaintiffs' arguments that they were third-party beneficiaries, that
"it appears that Plaintiffs are not construing the contract as a harmonious whole,
but rather are narrowly focusing on the language in subsection 4(b) out of
proportion with the rest of the contract").


The district court's reasoning is likewise unpersuasive. After broadening
the scope of the "determination" to which the City agreed to be bound, the district
court explained that, "[w]hile the conferring of the benefit on Moongate may have
been unexpected, it cannot be said to have been unintended." Dist. Ct. Op., ROA,
Vol. II, at 649. This is questionable reasoning, and it does not comport with the
plain language of the Settlement. Neither Do�a Ana nor the City intended to
benefit Moongate, and certainly not in such an all-encompassing manner.


Extrinsic evidence also does not support Moongate's claim to third-party
beneficiary status. Moongate relies upon several pieces of evidence. First,
Moongate cites to the "non-use clause" at the end of Paragraph 1 of the
Settlement as evidence that Do�a Ana and the City intended to benefit
Moongate.10 As discussed supra, however, this sentence reflects the City's desire
to avoid any forced participation in the litigation between Do�a Ana and
Moongate over Do�a Ana's alleged � 1926(b) protection. The City requested this
clause for the City's benefit - not with any intent to benefit Moongate.


Second, Moongate contends that the parties intended to benefit Moongate
when they added the reference to "settlement" in the last sentence of Paragraph 3.
See Settlement, 3, ROA, Vol. I, at 53 ("[T]he determination of such issues by a
court of competent jurisdiction or by settlement between Moongate and the
Association shall be binding upon the City."). Moongate claims that the City, as
the promisor, agreed to add this language for Do�a Ana, the promisee, to help
incentivize Moongate to settle, since Moongate would know that a settlement
would bind the City as conclusively as litigation would.11 Moongate provides no
evidence to support this interpretation, and we will not simply presume that such
evidence exists. See Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 889 (1990).


Third, Moongate cites to two statements by the City's attorneys. The first
is a statement by Harry Connelly, at the beginning of a deposition conducted
during the � 1926(b) litigation between Do�a Ana and Moongate:


Three, that there's a treatment between [Do�a Ana] and [the City]
and about Moongate's service area. The problem of that is to be
solved by [Do�a Ana] and Moongate, or a court, and such agreement
or settlement is binding on the city.


Deposition of John Reid, ROA, Vol. I, at 295. As the City points out, Mr.
Connelly was attempting to recount the terms of the Settlement, as concisely as
possible, on the record at the beginning of the deposition. An ambiguous, ad-lib
summary is not support for Moongate's all-encompassing view of the
Settlement's intent. As for the second statement, Moongate cites to a letter from
Marcia Driggers, in which Ms. Driggers stated:


The City understands that Judge Brack's decision in the Moongate
v. Dona Ana Mutual litigation held that the disputed service area
claimed by Dona Ana Mutual was not entitled to Section 1926(b)
protection and therefore, the PRC was entitled to settle service area
disputes in compliance with state statutes. Unless the City is
persuaded otherwise, the City believes that any forthcoming PRC
decision is as binding on the City as the decision of a court of
competent jurisdiction.


Letter from Marcia Driggers, ROA, Vol. I, at 297. Here, the qualifying phrase,
"[u]nless the City is persuaded otherwise," shows that the City was attempting to
interpret the Settlement in light of changed - and unforeseen - circumstances, and
that the City's interpretation was open to revision. It provides no evidence that
either the City or Do�a Ana intended the Settlement to benefit Moongate.
In addition to asking us to reverse the district court's grant of summary
judgment in favor of Moongate, Do�a Ana and the City request that we grant
summary judgment in their favor. We agree that this is the proper course of
action. We have previously explained:


The weight of authority is that summary judgment may be rendered
in favor of the opposing party even though he has made no formal
cross-motion under rule 56. And while an appellate court should not
grant summary judgment in favor of the nonmoving party where the
movant has not had the opportunity to present the applicable facts, if
the facts were fully developed at the summary judgment hearing so
that the court of appeals can determine that the nonmoving party
clearly was entitled to a judgment as a matter of law, an entry of
judgment for the nonmoving party may be proper if there is no
procedural prejudice to the moving party.


Dickeson v. Quarberg, 844 F.2d 1435, 1444 n.8 (10th Cir. 1988) (citations,
alteration, and internal quotation marks omitted). Here, Moongate had the burden
of showing that it was a third-party beneficiary to the Settlement. Tinley, 3 P.3d
at 686. The language of the Settlement does not indicate any intent to confer a
benefit upon Moongate. Likewise, none of Moongate's extrinsic evidence raises a
genuine issue of material fact as to Do�a Ana or the City intending the Settlement
to benefit Moongate. On the contrary, the only evidence directly addressing their
intent at the time of the Settlement indicates the exact opposite. See Affidavit of
Jorge Garcia, 9, ROA, Vol. II, at 591-92 ("It was not the intention of the City
that Moongate be a third-party beneficiary to the 2003 Settlement Agreement.");
Affidavit of Mariano Martinez, 8, ROA, Vol. II, at 613 ("At no time did the
Association intend that Moongate would be a third party beneficiary to the
Agreement."). Summary judgment in favor of Do�a Ana and the City is
appropriate.

Outcome: Therefore, in Case No. 06-2266, we REVERSE the district court�s grant of
summary judgment in favor of Moongate, and we REMAND to the district court
with an order to grant summary judgment in favor of Do�a Ana and the City, and
to enter the Second Addendum. In addition, and as explained supra note 6, we
DISMISS Case No. 06-2347 as moot.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: None



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