Arch v. Mid-Dakota Rural Water System

#24864-a-JKM

2008 SD 122

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

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MYRIL ARCH, Plaintiff and Appellant,

v.

MID-DAKOTA RURAL WATER
SYSTEM, Defendant and Appellee.

* * * *

APPEAL FROM THE CIRCUIT COURT OF
THE SIXTH JUDICIAL CIRCUIT
HUGHES COUNTY, SOUTH DAKOTA

* * * *

HONORABLE JAMES W. ANDERSON
Judge

* * * *

AL ARENDT Attorney for plaintiff
Pierre, South Dakota and appellant.

PATRICK M. GRODE of
May, Adam, Gerdes & Thompson, LLP Attorneys for defendant
Pierre, South Dakota and appellee.

* * * *

CONSIDERED ON BRIEFS
ON NOVEMBER 3, 2008

OPINION FILED 12/17/08
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MEIERHENRY, Justice

[¶1.] The issue before the Court is whether Mid-Dakota Rural Water System

(Mid-Dakota) is obligated to provide water to all 12 lots in a housing development

owned by Myril J. Arch (Arch). The circuit court granted summary judgment in

favor of Mid-Dakota, determining that Mid-Dakota was not obligated to provide

water service. Arch appeals. We affirm.

[¶2.] Arch owns rural property in Hughes County, South Dakota. He has a

restaurant, “Cattleman’s Club,” on part of the property; however, most of the

property is agricultural land. Mid-Dakota, a non-profit corporation incorporated in

1987, provides potable water to rural areas in 13 counties in central South Dakota.

[¶3.] Around 2002, Arch learned that Mid-Dakota planned to make water

available to rural customers near Arch’s property. Mid-Dakota had approached

Arch about obtaining an easement to run its waterline across Arch’s land. When

Arch learned about Mid-Dakota’s plans to make rural water available to the area,

he decided to develop part of his land into rural home sites. Arch eventually agreed

to the easement if Mid-Dakota would extend the waterline to his planned home

sites. Mid-Dakota agreed. The agreement consisted of a one-sentence agreement,

hand written on a notepad by an employee of Mid-Dakota. The agreement, signed

and dated by the employee, provided: “Mid-Dakota will do a Mainline Extension to

‘Arch’s Acres’ (4” Line) to serve the proposed Development, provided there are at

least 3 hook-up[s] when we get things platted and underway.”

[¶4.] Because Mid-Dakota’s water treatment plant and distribution system

had limited capacity, Mid-Dakota required potential customers to sign a Water User

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Agreement and pay a hook-up fee in order to reserve water. The individual hook-

ups and water service agreements were governed by separate Water User

Agreements provided by Mid-Dakota to potential customers.

[¶5.] Once Arch agreed to grant Mid-Dakota the easement, Mid-Dakota

installed a four-inch waterline to Arch’s development. Arch signed two Water User

Agreements and purchased two hook-ups. About two years later in 2004, Arch

requested a third hook-up but was told by a Mid-Dakota employee without

explanation that “they couldn’t do it.” Arch did not inquire further nor did he

complete a Water User Agreement or pay a fee for the third hook-up. Thereafter,

Arch made no other requests for hook-ups in the development.

[¶6.] In July of 2006, Mid-Dakota’s treatment plant reached capacity

prompting Mid-Dakota’s board of directors to place a moratorium on new waterline

hook-ups. When Arch learned that the moratorium applied to new hook-ups in his

development, he initiated this lawsuit for breach of contract. Mid-Dakota filed a

motion for summary judgment in response to Arch’s lawsuit. The circuit court

granted the motion, dismissed the case, and entered judgment in favor of Mid-

Dakota based on the court’s determination that the July 14, 2003, agreement did

not obligate Mid-Dakota to provide water service to the lots in Arch’s development.

[¶7.] The only issue on appeal is whether the circuit court erred in granting

Mid-Dakota’s summary judgment motion. “We will affirm the trial court’s grant or

denial of a motion for summary judgment when no genuine issues of material fact

exist, and the legal questions have been correctly decided.” A-G-E Corp. v. State,

2006 SD 66, ¶13, 719 NW2d 780, 785 (citations omitted). “[T]he interpretation of a

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contract is a question of law, which is reviewed de novo.” Id. ¶15, 719 NW2d at 786

(citation omitted).

[¶8.] The only terms of the contract are as follows: “Mid-Dakota will do a

Mainline Extension to ‘Arch’s Acres’ (4” Line) to serve the proposed Development,

provided there are at least 3 hook-up[s] when we get things platted and underway.”

Arch argues that the language of the contract “to serve the development” is

ambiguous and susceptible to more than one meaning to be determined by the trier

of fact. Mid-Dakota claims that the agreement is not ambiguous and that it only

required Mid-Dakota to install a four-inch waterline to the development if Arch

obtained at least three hook-ups. Mid-Dakota claims that the agreement did not

obligate it to provide water service to all future sites in Arch’s development. The

circuit court agreed with Mid-Dakota and determined that the handwritten

provision did not obligate Mid-Dakota to provide water service to future sites and

that Mid-Dakota’s obligation to install a mainline to the development had been

fulfilled.

[¶9.] “‘A contract is not rendered ambiguous simply because the parties do

not agree on its proper construction or their intent upon executing the contract.’”

Pesicka v. Pesicka, 2000 SD 137, ¶10, 618 NW2d 725, 727 (quoting Singpiel v.

Morris, 1998 SD 86, ¶16, 582 NW2d 715, 719). We only determine a contract to be

ambiguous “‘when it is capable of more than one meaning when viewed objectively

by a reasonably intelligent person who has examined the context of the entire

integrated agreement.’” Id. (quoting Singpiel, 1998 SD 86, ¶16, 582 NW2d at 719).

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[¶10.] The agreement here consists of one sentence in which Mid-Dakota

agreed “to do a Mainline Extension to ‘Arch’s Acres’ (4” Line) to serve the proposed

Development.” The agreement clause, “to serve the Development,” cannot be

interpreted to mean that Mid-Dakota would furnish water to all the home sites in

Arch’s development. The contract to deliver water is provided for in the separate

Water User Agreement. Further, Arch only entered into two of the three promised

Water User Agreements for hookups. In the Water User Agreement, the user

agrees to purchase a hook-up and water, and Mid-Dakota agrees to furnish water

under certain terms of payment and other conditions. Consequently, the agreement

that Arch claims has been breached did not provide for the sale and purchase of

water. It only provided that Mid-Dakota would install a main waterline to the

development, which it did, even though Arch only entered into two of the three

promised Water Use Agreements for hook-ups. The trial court did not err in

granting summary judgment to Mid-Dakota.

[¶11.] We affirm.

[¶12.] GILBERTSON, Chief Justice, and SABERS, KONENKAMP, and

ZINTER, Justices, concur.

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