                                                                          F I L E D
                                                                   United States Court of Appeals
                                                                           Tenth Circuit
                     UNITED STATES COURT OF APPEALS
                                                                           JUN 14 2000
                            FOR THE TENTH CIRCUIT
                                                                      PATRICK FISHER
                                                                               Clerk

    CANADIAN COUNTY WATER
    AUTHORITY; CANADIAN COUNTY
    RURAL WATER, SEWER, and
    SOLID WASTE MANAGEMENT,
    District #3,

                Plaintiffs-Appellants,

    v.                                                   No. 99-6217
                                                   (D.C. No. 98-CV-1591-M)
    CITY OF UNION; THE UNION                             (W.D. Okla.)
    CITY MUNICIPAL AUTHORITY,
    a public trust,

                Defendants-Appellees.


                            ORDER AND JUDGMENT            *




Before BRORBY , ANDERSON , and MURPHY , Circuit Judges.




         After examining the briefs and appellate record, this panel has determined

unanimously to grant the parties’ request for a decision on the briefs without oral




*
      This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore

ordered submitted without oral argument.

        Plaintiffs Canadian County Water Authority and Canadian County Rural

Water, Sewer and Solid Waste Management District #3 (collectively, “CCWA”)

are a rural water association that provides water services to customers in

Canadian County, Oklahoma. CCWA brought suit for declaratory and injunctive

relief against defendants City of Union City and Union City Municipal Authority

(collectively, “Union City”). CCWA claimed that Union City was infringing on

CCWA’s exclusive rights under 7 U.S.C. § 1926(b) by providing water to a

juvenile detention facility located in CCWA’s service district. On cross-motions

for summary judgment, the district court granted summary judgment to Union

City.

        At issue on appeal is whether CCWA qualified for the protection from

encroachment on water service provided by 7 U.S.C. § 1926(b) at the time Union

City began providing water service to the juvenile detention facility. The district

court concluded that CCWA did not qualify for protection under § 1926(b). We

review the grant of summary judgment de novo, applying the same standard as the

district court under Fed. R. Civ. P. 56(c).     See Sequoyah County Rural Water Dist.

No. 7 v. Town of Muldrow,      191 F.3d 1192, 1196 (10th Cir. 1999),   cert. denied ,

120 S. Ct. 1532, and cert. denied , 120 S. Ct. 1548 (2000).


                                              -2-
       The material facts are not in dispute. As part of the Consolidated Farm and

Rural Development Act, 7 U.S.C. §§ 1921-2009n, Congress authorized the

Secretary of Agriculture to make and insure loans to nonprofit water service

associations for “the conservation, development, use, and control of water.”

7 U.S.C. § 1926(a)(1). Congress also authorized the Secretary to make grants to

such associations “to finance specific projects for works for the development,

storage, treatment, purification, or distribution of water.”   Id. § 1926(a)(2).

       In June 1980, CCWA obtained two loans from the Farmers Home

Administration (FmHA)      1
                               pursuant to § 1926(a)(1) to fund the costs of developing

its water system. CCWA executed two promissory notes to the FmHA and

secured the notes with mortgages in favor of the FmHA. CCWA also obtained

two grants from the FmHA in June 1980 “for the purpose only of defraying a part

. . . of the development costs.” Appellant’s App. at 125, 130. The first grant was

obtained pursuant to § 1926(a)(2), while the second grant was obtained pursuant

to an entirely different statute. In 1987, CCWA took advantage of a federal

buy-out option and repurchased its two loans from the FmHA at a discounted rate.

The loans were considered paid in full, and the FmHA executed and recorded




1
      Although the FmHA is now known as the Rural Utilities Service,  see
7 C.F.R. § 1780.3(a), we will refer to the agency as the FmHA throughout this
order and judgment to avoid any confusion.

                                              -3-
satisfactions of both its liens securing those notes. CCWA did not thereafter

borrow any funds from the FmHA or any other federal agency.

      As a result, when Union City began providing water service to the juvenile

detention facility in 1998, CCWA had no outstanding loans with the FmHA. This

fact is significant because 7 U.S.C. § 1926(b) provides protection to rural water

associations from encroachment by other competitors within their service districts

as follows:

      The service provided or made available through any such [rural
      water] 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 . . . .

“The legislative history of section 1926(b) demonstrates that Congress intended to

protect rural water districts from competition in order to encourage rural water

development.”      Sequoyah County Rural Water Dist.,   191 F.3d at 1196 (quotation

omitted). “In addition, § 1926(b) was intended to provide greater security for the

federal loans made under the program.”      Id. (quotation omitted). As the Fourth

Circuit recently explained, “[t]he protection afforded by § 1926(b) is meant to

secure outstanding notes against default by protecting the income of the notes’

issuer.” Bell Arthur Water Corp. v. Greenville Utils. Comm’n     , 173 F.3d 517, 523

(4th Cir. 1999).



                                           -4-
       CCWA does not dispute that it lost the protection of § 1926(b) afforded by

its two loans when it repurchased those loans from the FmHA in 1987.         See

Sequoyah County Rural Water Dist.        , 191 F.3d at 1200. Rather, CCWA contends

that it continues to qualify for protection from competition under § 1926(b)

because it received grants from the FmHA in 1980, which it could be called upon

to repay if it were to violate the terms and conditions of the grants. CCWA cites

no authority for its contention and we know of none; the issue appears to be one

of first impression. The district court concluded that CCWA’s grants did not

qualify it for protection under § 1926(b) and, therefore, entered judgment for

Union City.

       To determine whether CCWA qualifies for protection under § 1926(b) by

reason of its grants, we begin with the language of the statute itself.   See

Glenpool Util. Servs. Auth. v. Creek County Rural Water Dist. No. 2       , 861 F.2d

1211, 1214 (10th Cir. 1988). “When, as in this case, the statute is unambiguous

and free of irrational result, that language controls.”     Id. The language of

§ 1926(a)(1)-(19) establishes that Congress intended the term “loan” and the term

“grant” to be distinct. For instance, the Secretary’s authority to make loans and

grants to rural water associations derives from two separate subsections, and the

subsection authorizing the Secretary to make grants places various restrictions on

that authority that are not present in the subsection authorizing the Secretary to


                                              -5-
make loans. Compare § 1926(a)(1) with § 1926(a)(2). In truth, virtually every

subsection of § 1926(a) makes an explicit distinction between a loan and a grant.

       With this distinction in mind, we examine the language of § 1926(b), which

provides that “[t]he service provided or made available through any such [rural

water] association shall not be curtailed or limited . . .      during the term of such

loan .” 7 U.S.C. § 1926(b) (emphasis added). This language is clear and

unambiguous: the protection of § 1926(b) extends only during the term of a           loan

from the FmHA. Therefore, under the plain language of the statute, once CCWA

retired its loans with the FmHA in 1987, it lost the protection of § 1926(b).

Accordingly, Union City did not violate § 1926(b) when it began supplying water

to the juvenile detention facility in 1998.

       The judgment of the United States District Court for the Western District of

Oklahoma is AFFIRMED.



                                                             Entered for the Court



                                                             Wade Brorby
                                                             Circuit Judge




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