Sharyland Water Supply Corporation v. City Of Alton

354 S.W.3d 407 (2011)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

D is a municipality located in Hidalgo County. P is a non-profit rural water supply corporation with offices in Mission, which is also in Hidalgo County. P and D entered into a Water Supply Agreement under which D conveyed its water system to P. IP provided potable water to D residents and maintained the system. The Water Supply Agreement gave P a ten-foot easement and required P to set rates and regulate the water distribution system's operation. P was responsible for repairing the system and maintaining the lines in conformity with current or future state rules and regulations. D received federal and local grants to install a sanitary sewer system. Part of that system was built in the public right-of-way, while another portion connected the sewer system from the public right-of-way to residences. D contracted with three contractors to build the sanitary sewer system. In some locations, D's sewer main was installed parallel to P's water main, so that connecting the sewer main to the residential service line required that the sewer line cross the water main. Construction was completed in 1999. P sued D for breaching the Water Supply Agreement, alleging significant injury because D's sanitary sewer residential service connections were negligently installed in violation of state regulations and industry standards. The location and proximity of the sewer lines to the water system threatened to contaminate the water supply. P also sued the contractors for negligence and breach of contract, contending it was a third party beneficiary of the contractors' agreement with D. A jury found that D breached the Water Supply Agreement, that each of the three contractors breached their contracts with D, and that P was a third party beneficiary of those contracts. The jury also found that the contractors' negligence injured P. The jury awarded identical damages for each of the three claims: $14,000 in past damages and $1,125,000 in future damages. The contractors appealed. As to the contractors, the court of appeals held that the economic loss rule barred P's negligence claim. The court concluded that P was not a third party beneficiary and therefore could not recover either damages or attorney's fees for the contractor's breach.