Opinion ID: 1194908
Heading Depth: 2
Heading Rank: 2

Heading: Contract Rate Case Analysis

Text: While Bodine is merely a water user and not a direct party to the water purchase contract, Bodine claims that the Shawnee Hills case does not apply because this is a contract rate case and not a user rate case as discussed in Shawnee Hills. Thus, according to Bodine, the rates charged by the City and passed through RWD to the ratepayers are improper because they are in violation of the clear and unambiguous terms of the contract, regardless of the reasonableness or unreasonableness of the rates. Bodine asks the court to make the City and RWD abide by the strict terms of the contract and correct the rates. Bodine claims that this is a contract rate case, and not a user rate case, because he alleges that he has the right and the power to make RWD enforce the contract with the City. According to Bodine, RWD is a public entity which has a legally enforceable duty, owing to him as a user ratepayer, to enforce the contract with the City and correct the overcharges. Bodine bases this contention on three different sources. First, Bodine cites to Att'y Gen. Op. No. 87-19, which states the rule that an entity created by statute (such as RWD) only has power as conferred upon it by statute. Att'y Gen. Op. No. 86-31 clarifies that the purpose of a rural water district is not commercial but is to generate revenue to pay for its facilities. Bodine points out that a contract made between a rural water district and a city is enforceable if it is an arms-length transaction and is made in a reasonable manner. See Att'y Gen. Op. No. 87-146. Finally, all monies generated by rural water districts are public money or funds in nature, pursuant to statute. Att'y Gen. Op. No. 87-157. Based on this authority, Bodine alleges that RWD owes him a duty to enforce the contract with the City as Bodine interprets the contract. It is true that a rural water district is a creature of statute and that the legislature has specifically conferred upon a rural water district the power to enter into an arms-length contract with a city in a reasonable manner, so as to provide water to the district, not to generate revenue out of public funds. K.S.A. 82a-619. However, just because a rural water district has the statutory power to enter into a reasonable contract with a city for the purchase of water does not mean the rural water district owes a duty to the water users, who are not parties to the contract, to interpret the contract exactly as the users interpret it and enforce the contract with the city as the users wants the contract interpreted. As a second source for Bodine's contention that he has the power and right to make RWD enforce the contract with the City, as he interprets the contract, Bodine points to the rules of contract law. Bodine is correct that RWD and the City have entered into a legally binding contract for the purchase of water. Bodine is also correct that this contract imposes a legally enforceable duty on RWD and the City to abide by the terms of the contract. However, Bodine is mistaken as to whom this duty is owed. As a statutorily authorized party to the contract, RWD owes a duty to the other party to the contract, the City, to abide by the terms of the contract. However, RWD does not owe a duty to Bodine, who is not a party to the contract, to interpret the contract in the same manner as Bodine interprets it and to force the City to abide by this interpretation. Just because the parties to the contract are public entities does not mean the duties arising out of the contract are owed to people who are not parties to the contract. The contract does not give Bodine the power to make RWD enforce the contract with the City as Bodine interprets the contract. Finally, as a third source for Bodine's contention that he has the power to make RWD enforce the contract with the City, as he interprets the contract, Bodine relies on letters from the Kansas Water Association (KWA) to RWD, encouraging it to pursue a suit against the City for breach of contract. In no way do the letters which Bodine relies upon from the KWA indicate that RWD has a legal enforceable duty owing to Bodine to enforce the contract with the City. Further, even if these letters did indicate such a position, KWA is not a legal authority and its opinion would have no control over the parties or this court. Thus, while RWD is a public entity, it does not owe a legally enforceable duty to Bodine, who is not a party to the contract, to enforce the contract with the City. As such, even assuming all the facts in Bodine's favor, Bodine does not have the right or the power to make RWD enforce the contract with the City. In other words, as a nonparty to the contract, Bodine does not have standing to enforce the terms of the contract as he interprets them. Bodine asserts that he does have standing to challenge the contract by pointing to K.S.A. 60-907, which provides in pertinent part: (a) Illegal tax, charge or assessment. Injunctive relief may be granted to enjoin the illegal levy of any tax, charge or assessment, the collection thereof, or any proceeding to enforce the same. (b) Unauthorized contracts. Injunctive relief may be granted to enjoin any public officer, board, or body from entering into any contract or doing any act not authorized by law that may result in the creation of an additional levy of a tax, charge or assessment. (Emphasis added.) The test for standing under K.S.A. 60-907 is whether a taxpayer's pocketbook is affected by government action. Blevins v. Board of Douglas County Comm'rs, 251 Kan. 374, 382, 834 P.2d 1344 (1992). Bodine alleges that by charging RWD more than the actual production costs of water, the City is raising more revenue than is needed to cover the water production costs. According to Bodine, the City is using the extra money as a substitute for property taxes in order to pay for city services such as police and fire protection. Thus, Bodine claims that City water rates amount to an illegal tax, which RWD passes on to its users, without challenging the rates or forcing the City to abide by the contractual rates. By statute, RWD has been specifically prohibited from levying taxes. K.S.A. 82a-619(d). Thus, Bodine claims that RWD, as a public body, has entered into a contract that has resulted in an illegal charge or tax in violation of K.S.A. 60-907. Bodine misapplies his K.S.A. 60-907 standing argument under this particular claim. Bodine is not seeking to enjoin the entering into of a contract or the collection of a tax. Rather, Bodine is trying to make RWD and the City abide by certain terms set out in the contract, as he interprets them. In other words, under this particular claim, Bodine is trying to make RWD enforce the contract with the City, not enjoin the contract. Thus, K.S.A. 60-907 does not apply to this claim or give Bodine standing to bring this claim. This is a direct breach of contract action for which Bodine does not have standing because he is not a party to the contract. Since Bodine is not a party to the contract, he must do more than show the rates are contrary to the contract terms in order to prove that the rates are improper. To prove that the rates are improper, Bodine, as a water user only, must show that the rates are unreasonable and confiscatory under the Shawnee Hills user rate case analysis. As previously discussed, Bodine did not and could not do so. The trial court properly granted summary judgment on this water contract rate claim.