South Texas Water Authority v. Lomas

• Decision Date: 27 April 2007
• Docket Number: No. 05-0855.,05-0855.
• Citation: 223 S.W.3d 304
• Parties: SOUTH TEXAS WATER AUTHORITY a/k/a/ South Texas Water Authority Industrial Development Corporation, Petitioner, v. Romeo L. LOMAS and Citizens for Water Acquired Through Equal Rates, Respondents.
• Court: Texas Supreme Court

223 S.W.3d 304

SOUTH TEXAS WATER AUTHORITY a/k/a/ South Texas Water Authority Industrial Development Corporation, Petitioner, v. Romeo L. LOMAS and Citizens for Water Acquired Through Equal Rates, Respondents.

No. 05-0855.

Supreme Court of Texas.

April 27, 2007.

Mike Willatt, William P. Flickinger, Willatt & Flickinger, Austin, for Petitioner.

Jon R. Alworth, Attorney At Law, Brownsville, for Respondents.

PER CURIAM.

Romeo L. Lomas, individually, and other City of Kingsville residents organized as a private non-profit association under the name WATER,¹ brought this declaratory-judgment and damages action against South Texas Water Authority (STWA) challenging operating expenses charged under a water-supply contract with the City. Finding neither plaintiff had standing, the trial court granted summary judgment in STWA's favor. The court of appeals reversed in part, holding that Lomas had individual standing to pursue monetary and declaratory relief, WATER had associational standing to pursue declaratory relief, and both parties had standing as third-party beneficiaries of the water-supply contract. 223 S.W.3d 389, 2005 WL 1797003. We disagree, and reverse the court of appeals' judgment.

STWA constructed a water-transmission line from the City of Corpus Christi to furnish treated water to municipal and industrial customers in a portion of South Texas, and in 1981 entered into a contract with the City of Kingsville for that purpose. Lomas and WATER contend the rates charged under the contract are excessive and discriminatory, causing Kingsville ratepayers to bear a disproportionate percentage of the operating expense of service compared to users residing in other municipal districts that STWA services. Lomas and WATER assert standing as third-party beneficiaries of the water-supply contract, claiming the contract was intended to provide a direct benefit to the citizens of Kingsville.² WATER additionally asserts associational standing, and both Lomas and WATER contend they have standing to bring suit as consumers and taxpayers. We hold that the plaintiffs fail to meet the requirements necessary to establish standing under any of these theories.

First, there is a presumption against conferring third-party-beneficiary status on noncontracting parties. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 652 (Tex.1999). In deciding whether a third party may enforce or challenge a contract between others, it is the contracting parties' intent that controls. See Corpus Christi Bank & Trust v. Smith, 525 S.W.2d 501, 503-04 (Tex.1975). The intent to confer a direct benefit upon a third party "must be clearly and fully spelled out or enforcement by the third party must be denied." MCI Telecomms. Corp., 995 S.W.2d at 651. Incidental benefits that may flow from a contract to a third party do not confer the right to enforce the contract. Id. at 652. A third party may only enforce a contract when the contracting parties themselves intend to secure some benefit for the third party and entered into the contract directly for the third party's benefit. Id. at 651; Stine v. Stewart, 80 S.W.3d 586, 589 (Tex.2002). To qualify as one for whose benefit a contract was made, the third party must benefit more than incidentally; he must be either a donee or creditor beneficiary. MCI Telecomms. Corp., 995 S.W.2d at 651. A person is a donee beneficiary if the performance promised will come to him as a pure donation. Id. If performance will come to satisfy a duty or legally enforceable commitment owed by the promisee, then the third party is considered a creditor beneficiary. Id.

In this case, the water-supply contract provides that STWA agrees to sell, and the City of Kingsville agrees to purchase, water under the contract's terms and conditions. The contract does not mention Lomas, WATER, or residents of the City of Kingsville in general other than to specify the water's intended use for sale to municipal and industrial customers. The mere description of a product's intended use cannot confer third-party-beneficiary status on intended users, and there is nothing more in the contract itself upon which third-party-beneficiary status might be based. The court of appeals implicitly recognized as much by looking beyond the contract's terms to find the intended-benefit element in STWA's enabling legislation. 223 S.W.3d at 394-95, 2005 WL 1797003, at *5. That legislation describes STWA's purpose to be "for the benefit of the people of this state and for the improvement of their properties and industries, and [STWA], in carrying out the purposes of this Act, will be performing an essential public function under the constitution." Id. (quoting 66th Leg., R.S., ch. 436, § 22, 1979 Tex. Gen. Laws 995). In this language, and the water-supply contract's reference to STWA's statutory powers, the court of appeals found the requisite intent to confer a third-party benefit upon residents of the City of Kingsville.

It is true that the Legislature, in creating STWA as a conservation and reclamation district, intended generally to benefit the people of this state, as presumably it intends with all legislation. But general beneficence does not create third-party rights, else every Texan could challenge or seek to enforce any government contract and the presumption against third-party-beneficiary agreements would disappear. The enabling statute upon which the court of appeals relied created no more than an incidental benefit to the public at large, the very type of benefit we have said is insufficient to confer third-party-beneficiary status. Thus, even if the enabling statute's language could be imported into the water-supply contract to discern the parties' intent, which the court of appeals held and we do not address, there is nothing in either that would confer donee- or creditor-beneficiary standing upon the plaintiffs to challenge the contract's terms.

Neither are Lomas or WATER entitled to sue under general standing principles. Standing is a constitutional prerequisite to filing suit for both individuals and associations. See Williams v. Lara, 52 S.W.3d 171, 178 (Tex.2001); Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 447 (Tex.1993). The standing requirement's constitutional underpinnings are found in the separation-of-powers doctrine and, in Texas, the open-courts provision. Tex. Air Control Bd., 852 S.W.2d at 443. Our separation-of-powers article prohibits courts from issuing advisory opinions that decide abstract questions of law without binding the parties, as that is a function of the executive rather than the judicial branch. TEX. CONST. art. II, § 1; Brown v. Todd, 53 S.W.3d 297, 302 (Tex.2001). And our constitution's open-courts provision contemplates access to the courts for only those litigants who have suffered an actual injury, as opposed to one that is general or hypothetical. Tex. Air Control Bd., 852 S.W.2d at 444. Thus, as a general rule, to have standing an individual must demonstrate a particularized interest in a conflict distinct from that sustained by the public at large. See Williams, 52 S.W.3d at 178; Brown, 53 S.W.3d at 305.

Here, the court of appeals determined that...