Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-06-02266/USCOURTS-ca10-06-02266-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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FILED

United States Court of Appeals

Tenth Circuit

February 20, 2008

Elisabeth A. Shumaker

Clerk of Court

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

DOÑA ANA MUTUAL DOMESTIC

WATER CONSUMERS

ASSOCIATION,

Plaintiff,

v. No. 06-2266 

THE CITY OF LAS CRUCES, NEW

MEXICO,

Defendant-Appellant,

MOONGATE WATER COMPANY,

INC.,

 Intervenor-Appellee.

DOÑA ANA MUTUAL DOMESTIC

WATER CONSUMERS

ASSOCIATION,

Plaintiff-Appellant,

v. No. 06-2347 

THE CITY OF LAS CRUCES, NEW

MEXICO,

Defendant-Appellee,

MOONGATE WATER COMPANY,

INC.,

 Intervenor-Appellee.

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APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW MEXICO

(D.C. No. CIV-02-122-RB/KBM)

Lee E. Peters, Hubert & Hernandez, P.A., Las Cruces, New Mexico, for PlaintiffAppellant, Doña Ana Mutual Domestic Water Consumers Association, in Case

No. 06-2347.

Edward Ricco, Rodey, Dickason, Sloan, Akin & Robb, P.A., Albuquerque, New

Mexico, (Harry S. “Pete” Connelly, Office of the City Attorney, Las Cruces, New

Mexico, with him on the briefs), for Defendant, City of Las Cruces, New Mexico,

Appellant in Case No. 06-2266; Appellee in Case No. 06-2347.

William H. Lazar, Tesuque, New Mexico (Kyle W. Gesswein, Las Cruces, New

Mexico, and William A. Walker, Jr., Las Cruces, New Mexico, with him on the

brief) for Intervenor-Appellee, Moongate Water Company, Inc.

Before BRISCOE, GORSUCH, and HOLMES, Circuit Judges.

BRISCOE, Circuit Judge.

Doña Ana Mutual Domestic Water Consumers Association (“Doña

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 Doña 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

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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 Doña Ana’s rights to provide water

in the Disputed Area. In Moongate Water Co. v. Doña Ana Mutual Domestic

Water Consumers Association, 420 F.3d 1082 (10th Cir. 2005), we determined

that Doña Ana did not have § 1926(b) exclusivity as against Moongate, and in

Doña 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 Doña Ana,

Moongate had the exclusive right to serve the Disputed Area. Doña Ana and the

City then attempted to amend their previous Settlement via a “Second

Addendum,” in which Doña 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. Doña

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. 

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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).

Doña 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, Doña Ana is not subject to regulation by

the PRC, except with regard to disputes between Doña 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

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 Municipalities may elect to participate in the Public Utility Act’s general

regulatory scheme under the jurisdiction of the PRC, see N.M. Stat. Ann. § 62-6-

5, but the City has not elected to do so.

2

 This provision states:

The service provided or made available through any such association

shall not be curtailed or limited by inclusion of the area served by

such association within the boundaries of any municipal corporation

or other public body, or by the granting of any private franchise for

similar service within such area during the term of such loan; nor

shall the happening of any such event be the basis of requiring such

association to secure any franchise, license, or permit as a condition

to continuing to serve the area served by the association at the time

of the occurrence of such event.

7 U.S.C. § 1926(b).

5

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

 Doña Ana has borrowed money from the federal

government under this program. 

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 The Settlement refers to Doña Ana as the “Association” in certain places,

and as “Dona Ana” in others.

6

In August 2002, Doña Ana filed suit against the City in the United States

District Court for the District of New Mexico, alleging that the City had violated

Doña Ana’s rights under 7 U.S.C. § 1926(b) by commencing water service to

customers in Doña Ana’s service area. Moongate was not a party to this action. 

In March 2003, Doña Ana and the City entered into the Settlement, in which the

City agreed to recognize Doña 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

(Doña 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

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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

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 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 Doña Ana, as well as several additional

provisions not directly relevant to the instant appeal.

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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

Doña Ana in the United States District Court for the District of New Mexico,

seeking a declaratory judgment that Doña 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 Doña 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 Doña Ana had entered into the

Settlement, Moongate filed a complaint against Doña Ana with the PRC. 

Moongate sought a declaration that the Disputed Area was part of Moongate’s

service area and that Doña Ana could not extend service into the Disputed Area. 

In May 2005, the PRC issued a final order in favor of Moongate, prohibiting

Doña Ana from extending service into the Disputed Area. In June 2006, the New

Mexico Supreme Court affirmed the PRC’s decision. See Doña Ana Mut.

Domestic Water Consumers Ass’n v. N.M. Pub. Regulation Comm’n, 139 P.3d

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 All of the parties have agreed that the case in state court does not have

collateral estoppel effect in the instant case because Doña Ana was not a party to

the case in state court. 

9

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 Doña 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 Doña Ana

regarding the City’s compliance with the terms of the Settlement. In March 2005,

Doña Ana filed a motion to enforce the Settlement. Following mediation, Doña

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 Moongate also sought and, on January 17, 2006, obtained an order from

the PRC requiring Doña Ana to withdraw its authorization to the City to provide

service in areas where the PRC had prohibited Doña 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 Doña Ana Mut. Domestic Water

Consumers Ass’n v. N.M. Pub. Regulation Comm’n, No. 29,654 (N.M. May 8,

2007).

10

Ana and the City agreed to amend the Settlement via a Second Addendum. Under

the Second Addendum, Doña 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 Doña Ana’s territory.

On November 22, 2005, the City and Doña 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 Doña 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.

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 There is an additional dispute between the City and Doña Ana in Case No.

06-2347, regarding the district court’s refusal to approve the portions of the

Second Addendum not affecting Moongate, and the district court’s refusal to

allow Doña Ana to re-file its motion to enforce the Settlement. Because our

decision on the third-party beneficiary issue makes these other issues moot, we do

not address them.

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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 Doña Ana

claimed § 1926(b) protection as to Doña Ana’s claimed service area,

that the dispute between Doña Ana and Moongate would be resolved

between Doña 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 Doña Ana and Moongate,

regardless of which of the two entities prevailed in the dispute. 

Clearly, Doña 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 Doña Ana. 

While it may be obvious that both City and Doña Ana believed that

Doña 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 Doña 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

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 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

(continued...)

12

this case. Because the original action between Doña Ana and the City arose under

7 U.S.C. § 1926(b), the district court had jurisdiction over that action pursuant to

28 U.S.C. § 1331. The district court retained jurisdiction over the Settlement

because the stipulated judgment provided that the district 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. See Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 381 (1994);

Floyd v. Ortiz, 300 F.3d 1223, 1226 & n.3 (10th Cir. 2002). 

We have jurisdiction under 28 U.S.C. § 1291 to review the district court’s

grant of summary judgment to Moongate. “We review a grant of summary

judgment de novo, applying the same legal standard used by the district court.” 

Gillmor v. Thomas, 490 F.3d 791, 798 (10th Cir. 2007). Under Rule 56(c) of the

Federal Rules of Civil Procedure, summary judgment is appropriate “if the

pleadings, depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment as a matter of

law.”7

 “In ruling on summary judgment, the court must resolve all ambiguities

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(...continued)

entirely stylistic and does not affect the result in the instant case.

13

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

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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

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8

 In claiming that this paragraph supports its claims, Moongate actually

omits, through the use of ellipses, the language “held by one party against the

other.” As the City points out, such an omission is disingenuous.

15

is to ascertain the intention of the parties.’” Cont’l Potash, Inc. v. FreeportMcMoran, 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, Doña 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

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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 Doña Ana’s right and dependent upon

Doña 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 Doña Ana’s

consent. 

Doña 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 Doña Ana’s consent, the City was nonetheless renegotiating a

franchise with Moongate, and Doña Ana and Moongate were litigating whether

Doña Ana had § 1926(b) protection against Moongate in the Disputed Area. The

last sentence, under which Doña Ana agreed not to submit the Settlement as

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 As Doña Ana noted during the drafting of the Settlement, this provision

was almost certainly unnecessary, because the Settlement would not have been

admissible to show that the City’s § 1926(b) recognition was somehow binding on

Moongate. The City’s over-caution, though, does not indicate an intent to benefit

Moongate.

17

evidence in its litigation against Moongate, reflected the City’s desire to avoid

any forced participation in the litigation between Doña Ana and Moongate over

Doña 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 Doña 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

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3 then addresses the dispute between Doña Ana and Moongate:

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.

Id. at 52-53. 

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 Doña Ana’s

alleged § 1926(b) rights precluded Moongate from serving water in the Disputed

Area. The determination that Doña Ana and the City agreed “shall be binding

upon the City” was Doña Ana’s rights against Moongate under § 1926(b). By this

provision, the City agreed that, if Doña Ana prevailed over Moongate, then the

City would be bound in recognizing Doña Ana’s § 1926(b) rights over Moongate

and could not grant Moongate a franchise. Conversely, if Moongate prevailed

over Doña Ana, the City would be free to grant Moongate a franchise. Nothing in

this provision indicates that, if Moongate established rights over Doña Ana to

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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, Doña 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 Doña Ana and Moongate were litigating as part of Doña

Ana’s § 1926(b) claim to the Disputed Area.

 As Doña 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

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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—Doña 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 Doña Ana’s

alleged § 1926(b) protection. Moongate did not file a complaint against Doña

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 Doña 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 Doña 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,

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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 Doña Ana could give its “express written consent” for the City to

serve the Disputed Area, regardless of Doña Ana’s rights against Moongate (or

vice versa). Under Moongate’s construction, Moongate’s rights over Doña 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 Doña 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

Appellate Case: 06-2266 Document: 0101131683 Date Filed: 02/20/2008 Page: 21 
10 The sentence itself is not “extrinsic evidence,” but the other evidence is,

see supra (discussing the evidence of the sentence’s intent and formation). 

11 Notably, this is the only point at which Moongate invokes the promisorpromisee paradigm that typically characterizes a third-party beneficiary claim. 

See Tinley, 3 P.3d at 686. Usually, the promisee requests that the promisor

provide some benefit for the third-party beneficiary, with the promisee’s selfinterest as the motivation behind the request (e.g., if the third-party beneficiary is

the promisee’s creditor). See id. Here, if the City is the promisor, as Moongate

implies, then Doña Ana is the promisee, and presumably, Doña Ana should have

(continued...)

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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 Doña 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 Doña Ana and

Moongate over Doña 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 Doña 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

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11(...continued)

some motivation for asking the City to benefit Moongate. Moongate never states,

though, what Doña Ana’s motivation is here, or why Doña Ana would ever

intentionally request a benefit for Moongate—Doña Ana’s competitor and

adversary in litigation.

23

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 Doña Ana and Moongate:

Three, that there’s a treatment between [Doña Ana] and [the City]

and about Moongate’s service area. The problem of that is to be

solved by [Doña 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.

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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 Doña 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, Doña 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 Doña Ana or the City intending the Settlement

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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 Doña Ana and the City is

appropriate.

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 Doña 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.

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