Rocky Ford v. Kents Lake ( 2019 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2019 UT 31
IN THE
SUPREME COURT OF THE STATE OF UTAH
ROCKY FORD IRRIGATION COMPANY,
Appellant,
v.
KENTS LAKE RESERVOIR COMPANY and DOES 1 THROUGH 200,
Appellees,
and
BEAVER CITY,
Intervenor and Appellee.
No. 20170290
Filed July 11, 2019
On Direct Appeal
Fifth District, Beaver County
The Honorable Paul D. Lyman
No. 100500156
Attorneys:
Stephen E.W. Hale, Matthew E. Jensen, J. Mason Kjar, Salt Lake City,
for appellant
John H. Mabey Jr., David C. Wright, Salt Lake City, for appellees
Kents Lake Reservoir Company and Does 1 through 200
Justin W. Wayment, Christian Jones, Cedar City, for intervenor-
appellee
ASSOCIATE CHIEF JUSTICE LEE authored the opinion of the Court, in
which CHIEF JUSTICE DURRANT, JUSTICE HIMONAS, JUSTICE PEARCE, and
JUSTICE PETERSEN joined.
ROCKY FORD v. KENTS LAKE
Opinion of the Court
ASSOCIATE CHIEF JUSTICE LEE, opinion of the Court:
¶1 This case comes to us on direct appeal from the Fifth District
Court. Rocky Ford Irrigation Company and Kents Lake Reservoir
Company1 both have water rights in the Beaver River. As changes
occurred—both in water rights and in irrigation techniques—the
administration of the Beaver River grew increasingly complex.
Rocky Ford sued Kents Lake seeking clarification regarding priority
of rights and Kents Lake’s obligations as to river administration and
measurement. Rocky Ford lost on each of its claims below and
accordingly appealed. We affirm in part, reverse in part, and
remand.
I
¶2 Around 1870, settlers began diverting water from the Beaver
River and directly conveying it through canals and ditches to their
crops. These initial rights were direct flow rights—the right to take
water from the source and apply it directly to the end use without
reservoir storage. After most of the base flow of the Beaver River
was allocated to direct flow rights, water users constructed
reservoirs to store spring runoff and winter flows to allow for later
use on their crops.
¶3 Rocky Ford and Kents Lake are water users in the Beaver
River System. Both have direct flow and storage rights dating back
to the first determination of rights in the Beaver River in 1916.
¶4 Rocky Ford acquired various direct flow rights with priority
dates of 1870, 1890, 1903, 1907, and 1909. Kents Lake and its
shareholders also acquired direct flow rights. Kents Lake’s direct
flow rights had priority dates of 1870, 1890, and 1903.
¶5 These parties also hold storage rights in reservoirs they built.
Rocky Ford constructed Minersville Reservoir at the bottom of the
Beaver River System. It holds a 1907 storage right to divert water
into the Minersville Reservoir. Kents Lake constructed Upper Kents
Lake and Middle Kents Lake Reservoirs, collectively called the
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1 There is some inconsistency in the spelling of this party’s name
in the briefing and record of this case. The briefs on appeal use the
“Kents Lake” formulation. In the lower court, the party is often
referred to as “Kent’s Lake.” We stick with the former formulation in
this opinion except when quoting from the district court record.
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Opinion of the Court
“South Fork Reservoirs,” in the headwaters of the Beaver River
System. Kents Lake holds an 1890 storage right to divert water into
the South Fork Reservoirs.
¶6 In the early 1900s, the Fifth District Court conducted a
general adjudication of the Beaver River culminating in the issuance
of the Beaver River Decree (Decree) in 1931. The Decree established
and confirmed priority dates and use limitations on Beaver River
water rights. It confirmed direct flow rights acquired by Rocky Ford
in 1870, storage rights acquired by Rocky Ford in 1907, and other
direct flow rights acquired by Rocky Ford on later dates. It also
confirmed storage rights for Kents Lake in South Fork Reservoirs
(acquired in 1890) as well as direct flow rights for certain Kents Lake
shareholders.2 The Decree also divided the Beaver River into two—
an upper and lower portion of the river with the Patterson Dam
serving as the dividing line. Water users located above the dam were
denominated “upper users” and were allowed to divert water prior
to “lower users” despite a later priority date.3
¶7 The Decree also required users to “promptly install and
perpetually maintain suitable . . . measuring devices at or [as] near as
possible to their respective points of diversion or at such other points
as may be designated in their decree, for the measurement of all
water diverted hereunder for consumptive uses.” Under the Decree,
water users were “permanently enjoined from diverting . . . any
water for such consumptive purposes through any ditch, canal,
conduit or other device not provided with proper headgates, control
works, and measuring devices.”
¶8 A few years after the Decree, Kents Lake sought to build an
additional reservoir—Three Creeks Reservoir. And in 1938 Kents
Lake filed an application with the State Engineer under Utah Code
section 100-3-3, seeking to change the place of storage of 830 acre-feet
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2 Kents Lake and Kents Lake’s shareholders are collectively
referred to throughout this opinion as “Kents Lake.”
3 This divide was approved because lower users were usually
benefitted by return flows. Return flows refer to water that is not
consumed by plants or through evaporation that ultimately flows
back, either above or below ground, into the source. Flood irrigation,
the primary method of water use employed at the time of the Decree,
consumed only 40% of the diverted water, leaving 60% to reenter the
Beaver River as return flow.
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ROCKY FORD v. KENTS LAKE
Opinion of the Court
of water from South Fork Reservoir to Three Creeks Reservoir. Then,
in 1940, Kents Lake submitted an application with the State
Engineer, seeking the right to store an additional 1,193 acre-feet of
water in Three Creeks Reservoir. The State Engineer reviewed the
applications and put the other water users in the Beaver River
System on notice of Kents Lake’s proposed changes. Rocky Ford
protested both the change and the new application for appropriation
before the State Engineer. The State Engineer found that despite
Rocky Ford’s protests, both Kents Lake’s changed use and new
appropriation request would put the water towards a beneficial use
and not impair existing rights. Accordingly, the State Engineer
granted both Kents Lake’s requests.4
¶9 In 1953, Rocky Ford and Kents Lake entered into an
agreement (Agreement) to “provide for the practical administration
of storage . . . and to prevent future controversy concerning the
diversion for storage.” The Agreement provided that (1) Rocky Ford
would not protest Kents Lake’s planned change application seeking
an option storage right in Three Creeks Reservoir, (2) Kents Lake
would not oppose Rocky Ford’s enlargement of its reservoir, and
(3) Rocky Ford has an exclusive right to store all water available to it
from November 1 to the following April 1 each year.
¶10 As agreed, Kents Lake submitted a change application to the
State Engineer seeking to create an option storage right in Three
Creeks Reservoir. Rocky Ford, as promised, did not protest the
application. The State Engineer approved the application and
granted Kents Lake’s request for these “direct-storage changes.”
Kents Lake now had a direct-storage right, allowing it to either use
the water directly or store it in Three Creeks Reservoir.
¶11 Once Kents Lake’s change application was approved, Kents
Lake sought to “perfect” its changed use. This entailed entering into
a “period of proof” where Kents Lake applied the water to the
changed use under the supervision of the State Engineer. Once the
State Engineer was satisfied that the water was being used in
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4 Rocky Ford challenged the State Engineer’s approval,
eventually appealing the case to this court. This court upheld the
approved changes and concluded that Kents Lake could divert water
into Three Creeks Reservoir if it would have been available for
storage in South Forks Reservoirs. Rocky Ford Irrigation Co. v. Kents
Lake Reservoir Co., 135 P.2d 108, 114 (Utah 1943).
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Opinion of the Court
accordance with the change application and was put to a beneficial
use, Kents Lake received a certificate from the State Engineer that
served as “prima facie evidence of the owner’s right to the use of the
water in the quantity, for the purpose, at the place, and during the
time specified therein, subject to prior rights.” UTAH CODE § 73-3-17
(1953). Kents Lake received a certificate from the State Engineer
perfecting its direct-storage right.
¶12 Beginning in the 1970s, users of the Beaver River began to
gradually convert from flood irrigation to sprinkler systems.
Sprinklers are a more efficient watering mechanism. They require
diversion of less water and produce less return flow. 5 Some upper
river users store these efficiency gains, reducing the amount of water
flowing in the Beaver River. This reduction in flow can adversely
affect downstream users like Rocky Ford if there is insufficient water
in the river to fulfill lower users’ rights.
¶13 The above changes, decrees, advancements, and agreements
have made the administration of the Beaver River increasingly
complex. In 2003, Rocky Ford asked the State Engineer to enhance
oversight of the Beaver River storage. Over the next year and a half,
Rocky Ford, Kents Lake, and the State Engineer corresponded about
improved storage regulation. And the State Engineer found that
Kents Lake’s measurement devices were deficient.
¶14 Still unsatisfied, Rocky Ford filed a lawsuit in district court
in November 2010 alleging water right interference, conversion of
water rights, and negligence, and seeking declaratory relief,
injunctive relief, and rescission of the 1953 Agreement. Rocky Ford
contends that its water rights have been impaired by direct-storage
changes and other actions taken by Kents Lake, including Kents
Lake’s failure to measure its water in accordance with the Beaver
River Decree. Kents Lake filed a counterclaim seeking clarifications
of the parties’ water rights under the Agreement. Three years later
Beaver City was allowed to intervene.
¶15 Following discovery, Rocky Ford moved for partial
summary judgment. It asserted that (1) the direct-storage changes
maintain an 1890 priority date only to the extent they don’t impair
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5 In contrast to flood irrigation, which consumes only 40% of the
diverted water and leaves the remainder for return flow, sprinkler
irrigation consumes about 75% of the diverted water and leaves only
25% for return flow.
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Opinion of the Court
Rocky Ford’s direct flow rights, and (2) Rocky Ford’s direct flow
rights are not subordinated or waived under a plain language
reading of the Agreement. The district court denied the motion. In so
doing, the court concluded that Rocky Ford had “intentionally
waived its direct flow rights against [Kents Lake] through its
entrance into the 1953 agreement” and that Kents Lake could
continue to store its water as it has “even to the detriment of [Rocky
Ford]’s direct flow rights.”
¶16 The parties stipulated to dismissal of all claims for damages,
leaving only claims for injunctive relief, declaratory relief, and
rescission of contract. At trial, the court’s denial of Rocky Ford’s
motion for summary judgment precluded any evidence concerning
the priority of the direct-storage changes or the meaning of the
Agreement. The court focused on Kents Lake’s measurement
obligations and Rocky Ford’s claims related to the continued efficacy
of the Agreement. During the three-day bench trial, the court refused
to admit evidence from Rocky Ford’s expert about the impact of
sprinklers on the historic return flow to the Beaver River.
¶17 On June 28, 2016, the trial court issued its written
Memorandum Decision. The court first denied Rocky Ford’s request
for injunctive and declarative relief regarding Kents Lake’s
measurement obligations. Because Kents Lake had followed the
instructions of the State Engineer with regard to measurement, the
district court concluded that Rocky Ford was not entitled to
declarative or injunctive relief. The district court also declined to
rescind the 1953 Agreement. It concluded that Rocky Ford had not
proved material breach, impracticability, frustration of purpose, or
mutual mistake. Lastly, the district court awarded attorney fees to
Kents Lake and Beaver City sua sponte under Utah Code section
78B-5-825.
¶18 The district court later denied Rocky Ford’s rule 59 motion
seeking reversal of the fee award. Rocky Ford then filed this appeal.
II
¶19 Rocky Ford seeks reversal of the district court’s decision
denying the motion for partial summary judgment, its entry of final
judgment, and its award of attorney fees. Five principal questions
are presented for review. First, did the trial court commit legal error
when it denied Rocky Ford’s motion for summary judgment?
Second, did the trial court err in refusing to declare that Kents Lake
could not store the water it saved through improved efficiency?
Third, did the trial court err in refusing to declare that Kents Lake
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Opinion of the Court
must measure its usage consistent with the requirements of the
Beaver River Decree? Fourth, did the trial court err in refusing to
rescind the 1953 Agreement? And fifth, did the trial court err in
awarding attorney fees to Kents Lake and Beaver City?
¶20 We affirm the denial of Rocky Ford’s motion for partial
summary judgment on alternative grounds. And we affirm the trial
court’s holdings that Rocky Ford had no claim on Kents Lake’s
efficiency gains and that the 1953 Agreement should not be
rescinded. But we reverse and remand on the district court’s refusal
to enter a declaratory judgment regarding Kents Lake’s
measurement obligations. We also reverse the denial of the rule 59
motion and hold that Kents Lake and Beaver City are not entitled to
attorney fees.
A
¶21 The first question presented for review is whether the
district court committed legal error in denying Rocky Ford’s motion
for summary judgment. The court concluded that Rocky Ford had
intentionally subordinated its direct flow rights to Kents Lake’s
rights and that Kents Lake could take and use water to Rocky Ford’s
detriment. The court treated this issue as a matter of contract
interpretation. In denying the motion, the district court concluded
that the 1953 Agreement was clear and unambiguous and
established that Rocky Ford intentionally subordinated its direct
flow rights, allowing Kents Lake to use the water to Rocky Ford’s
detriment. We disagree with the district court’s determination that
the Agreement clearly and unambiguously established that Rocky
Ford intentionally subordinated its direct flow rights. Yet we affirm
the denial of the motion for summary judgment on alternative
grounds advanced by Kents Lake.
1
¶22 In its order denying Rocky Ford’s motion for summary
judgment, the district court relied entirely on the language of the
Agreement. The first two recital paragraphs of the Agreement state
that both Rocky Ford and Kents Lake have “various rights in the
Beaver River.”6 The fourth recital paragraph identifies the priority
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6 The text of relevant “whereas” clauses are as follows:
WHEREAS, Rocky Ford has various rights to the use of
water of the Beaver River and its tributaries,
(continued . . .)
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Opinion of the Court
dates of some of these rights.7 And the fifth recital paragraph
describes the purpose of the Agreement—“to provide for the
practical administration of storage under the water rights mentioned
above and to prevent future controversy concerning the diversion of
storage under said water rights . . . .” (emphasis added). The
Agreement then sets forth its terms in greater detail.
¶23 The district court believed that the conflict between Rocky
Ford and Kents Lake hinged on which of Rocky Ford’s water rights
were implicated in the fifth recital clause’s reference to the “above”
rights. The court held that the “above” rights referred to in the fifth
recital clearly implicated not only the rights detailed in paragraph
four but the various rights owned by Rocky Ford referred to in
paragraph one. It was “baffle[d] . . . to learn that [Rocky Ford]
want[ed it] to read ‘various rights’ to mean ‘various rights except
Rocky Ford’s direct flow rights.’” To interpret the contract to waive
only part of Rocky Ford’s rights, the court reasoned, “would nullify
the 1953 agreement.” The court thus concluded that Rocky Ford had
unambiguously waived its direct flow rights and given Kents Lake’s
changed use senior priority. So Kents Lake was permitted to use its
changed water right to Rocky Ford’s detriment.
¶24 We are unable to affirm the district court’s interpretation of
the Agreement. We think the reference to “above rights” in the fifth
recital may well refer only to those rights specifically detailed in
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including Application No. 1215, Certificate No. 2388,
issued by the State Engineer of the State of Utah; and
WHEREAS Kent’s Lake has various rights to the use
of waters of the Beaver River and its tributaries . . . .
(emphasis added).
7 The full text of the relevant whereas clause is as follows:
WHEREAS, the priority date of the water right of
Kent’s Lake for its said 1660 acre feet is 1890, and the
priority date of Rocky Ford under its Certificate No.
2388 for 25,477.5 acre feet is February 25, 1907, and
the priority date of Kent’s Lake Application No. 13420
for 1193 acre feet is March 8, 1940, and the priority
date of the direct flow rights of the various
stockholders of Kent’s Lake referred to herein have
priority dates of 1890 and earlier . . . .
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paragraph four, and not to Rocky Ford’s “various rights” referenced
in paragraph one. For that reason we disagree with the district
court’s decision to deny summary judgment on the basis of its
interpretation of the Agreement. Yet we do not disagree with the
district court’s ultimate holding—that Kents Lake’s direct-storage
rights are senior in priority to certain Rocky Ford direct flow rights.
We just reach this conclusion on alternative grounds advanced by
Kents Lake.
2
¶25 Kents Lake did not advance the theory of contract
interpretation endorsed by the district court below. Instead, it
argued that Rocky Ford had “agreed it was not impaired” under
doctrines of “waiver, release, ratification, or . . . estoppel.” Rocky
Ford, Kents Lake argues, waived its protest of Kents Lake’s change
application with the State Engineer. So Rocky Ford is precluded
from claiming impairment now. We agree.
¶26 A water user can apply to change its rights in a water source.
To do so, the water user must file a change application with the State
Engineer. UTAH CODE § 73-3-3 (1953). A changed use involves a
change in the “place of diversion or use” of the water for a purpose
other than that “originally appropriated.” Id. A changed use is not
permitted “if it impairs any vested right.” Id. Other water users are
entitled to file a protest with the State Engineer, claiming that the
change would impair vested rights in the water source. Id. § 73-3-7
(1953). As contracted for in the Agreement, Kents Lake applied for a
changed use to convert part of its direct flow rights into a hybrid
direct-storage right. And true to the Agreement, Rocky Ford did not
protest the change. The change application was then approved by
the State Engineer.
¶27 Rocky Ford now wants to establish that Kents Lake’s
changed use is junior to Rocky Ford’s direct flow rights. The
question we must therefore resolve is how a change application
affects priority. If a change application retains the original priority
date, Rocky Ford’s rights are junior to Kents Lake’s, and Kents Lake
can use its water to the detriment of Rocky Ford. But if a change
application receives the priority date of the approved change, Rocky
Ford’s rights would be senior to Kents Lake’s direct-storage right.
¶28 We resolve this question under the text of section 73-3-3.
This provision says that “[a]ny person holding an approved
application for the appropriation of water may in like manner, either
permanently or temporarily, change the point of diversion, place or
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Opinion of the Court
purpose of use, but no such change of approved application shall
affect the priority of the original application.” Id. § 73-3-3. A plain
reading of this section indicates that a change application does not
alter the priority date of the original right.
¶29 This reading is supported by our case law. In Hague v. Nephi
Irrigation Co., we explained that “[w]hen water has been lawfully
appropriated, the priority thereby acquired is not lost by changing
the use for which it was first appropriated and applied, or the place
at which it was first employed, provided that the alterations made
. . . shall not be injurious to the rights acquired by others prior to the
change.” 52 P. 765, 769 (Utah 1898) (citation omitted) (internal
quotation marks omitted). So a changed use that is approved by the
State Engineer receives the priority of the original right.
¶30 Rocky Ford holds a vested water right acquired prior to the
direct-storage changes. And now Rocky Ford claims to be impaired
by the direct-storage changes. Both section 73-3-3 and Hague
acknowledge that a change cannot impair the vested rights acquired
by other users. UTAH CODE § 73-3-3 (1953); Hague, 52 P. at 769. Rocky
Ford believes this creates a hybrid priority date system. It asks this
court to hold that changed uses should be administered: “(1) to the
extent [there is] impairment, based on the priority date of the
change[;] and (2) to the extent there is no impairment[,] based on the
Original Priority.” Because Kents Lake’s changed use cannot impair
a vested right, Rocky Ford asserts that its right is senior to the
changed use insofar as the changed use impairs Rocky Ford’s vested
rights. As long as the change does not impair another right, in other
words, Rocky Ford asserts that it is entitled to the original priority
date.
¶31 We disagree. We do not see evidence in the code, or in our
case law, for interpreting the statute in this way. A plain reading of
section 73-3-3 and Hague indicates that changed use should be
administered in accordance with the original priority date.
¶32 Rocky Ford is right that a changed use should not impair a
vested right. But that does not give parties the ability to claim
impairment in perpetuity. Kents Lake asserts that an impairment
claim must be raised during the protest period before the State
Engineer. And because Rocky Ford did not challenge the change
application through the appropriate administrative mechanisms it is
unable to claim impairment now. We agree.
¶33 Rocky Ford asserts that the administrative proceedings
before the State Engineer cannot be the parties’ only opportunity to
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argue impairment. It points to our Searle opinion and asserts that
Kents Lake’s proposed reading—that a party must raise claims with
the State Engineer during the protest period in order to raise them
before the courts—is incompatible with the holding of the Searle
court. Searle v. Milburn Irrigation Co., 2006 UT 16, 133 P.3d 382. In
Searle, we said that “it is well established that the state engineer has
no authority to finally adjudicate water rights.” Id. ¶ 34. We clarified
that the State Engineer approves applications if there is “reason to
believe” that no impairment will occur. Id. ¶ 37. But we explained
that “[d]etermining whether an applicant has, in fact, proven that the
new manner of use does not impair vested rights is a matter
ultimately left to a final judicial determination of rights.” Id.
¶34 We reaffirm what we said in Searle. The courts, and not the
State Engineer, are the final adjudicators of water priority. But this
does not altogether relieve a party from an obligation to raise its
claims first through the administrative mechanism created by our
law.
¶35 Requiring parties to first raise protests with the State
Engineer before review by the courts does not make the State
Engineer the final adjudicator of water rights. Courts have the
authority to review and reverse the determinations of the State
Engineer. Yet the law has established a protest period as an
administrative mechanism for parties to raise claims of impairment.
And our case law has required participation at the administrative
level as a prerequisite to challenging the State Engineer’s
determination on appeal. Badger v. Brooklyn Canal Co., 966 P.2d 844,
849 (Utah 1998) (“Requiring the State Engineer to scour his/her
records to determine what, if any, water rights a given protester has
that may be affected by a change application would eviscerate the
requirement that it is the protesters’ responsibility to make known
the nature of their protest before the State Engineer.”); S & G, Inc. v.
Morgan, 797 P.2d 1085, 1087–88 (Utah 1990) (holding that the plaintiff
lacked standing to challenge a change application because it waived
its right to participate at the appellate level by its intentional inaction
at the administrative level).
¶36 The State Engineer will review and adjudicate claims of
impairment and approve a change application if there is “reason to
believe” that the approval will not impair vested water rights. Searle,
2006 UT 16, ¶ 31; see also UTAH CODE § 73-3-3 (1953). After a change
application has been approved, parties enter into a period of “proof”
to perfect the change. UTAH CODE § 73-3-12 (1953). In this stage, the
applicant can “proceed and perfect the appropriation by applying
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the water to beneficial use.” Loosle v. First Fed. Sav. & Loan Ass’n of
Logan, 858 P.2d 999, 1002 (Utah 1993). If the State Engineer is
satisfied that “a permanent change of point of diversion [or] place or
nature of use has been perfected in accordance with the application
. . . and that the water . . . has been put to a beneficial use,” the State
Engineer issues a certificate. UTAH CODE § 73-3-17 (1953). That
certificate is “prima facie evidence of the owner’s right to the use of
the water in the quantity, for the purpose, at the place, and during
the specified time therein, subject to prior rights.” Id.
¶37 Utah Code section 73-3-14 expressly authorizes judicial
review of the State Engineer’s decision. It allows parties who are
aggrieved by a decision by the State Engineer to bring an action for
plenary review in the district court within sixty days. Id. § 73-3-14
(1953). Rocky Ford did not do so. Whether it could not (based on its
Agreement not to protest) or simply did not is irrelevant. Kents Lake
went through the administrative processes in both filing its
application and in perfecting its right. And Rocky Ford did not seek
any relief through the prescribed administrative channels at either
stage. Kents Lake now has a perfected right in the direct-storage
changes with an 1890 priority date. And Rocky Ford can no longer
claim it is impaired.
¶38 We affirm the denial of Rocky Ford’s motion for summary
judgment on this basis. Rocky Ford’s motion asked the court to
conclude that Kents Lake’s direct-storage changes maintained an
1890 priority only to the extent they did not impair Rocky Ford’s
direct flow rights. As explained above, our case law and relevant
statutes indicate that Kents Lake’s changed use receives original 1890
priority. And Rocky Ford, having failed to participate in any
administrative proceedings, cannot now claim impairment.
B
¶39 The second question presented concerns Rocky Ford’s claim
that the trial court erred when it refused to enter a declaratory
judgment that Kents Lake cannot store the water it saves through
increased efficiency. We find no error in the district court’s
conclusion. Kents Lake is entitled to use its water in the most
efficient manner within the bounds of its right. Lower users have a
claim on return flow once it reenters the stream, but not on an upper
user’s efficiency gains.
¶40 Kents Lake switched to sprinklers as its irrigation method in
the 1970s. Sprinklers are a more efficient watering mechanism than
flood irrigation—they use less water and create less return flow. And
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because of the direct-storage changes, Kents Lake is able to store the
excess water produced by more efficient irrigation. If Kents Lake had
only a direct flow right, as it did initially, the saved water would
remain undiverted in the Beaver River. But the direct-storage
changes allow Kents Lake to store its excess water. Kents Lake’s
ability to save the excess water without creating large return flows
puts less water in the river for downstream users like Rocky Ford.
With this in mind, Rocky Ford seeks a declaratory judgment that
requires Kents Lake to divert less water instead of storing its
efficiency gains.
¶41 To the extent Kents Lake’s direct-storage rights (now
established to have 1890 priority) are senior to Rocky Ford’s direct
flow rights, it is clear that Kents Lake is under no obligation to
produce any return flow. Typically, a senior user is entitled to use its
water to the detriment of a junior user.8
¶42 So, any right junior to Kents Lake’s direct-storage right has
no claim on Kents Lake’s efficiency gains.
¶43 This is not the end of the inquiry, however. Some of Rocky
Ford’s direct flow rights have an 1870 priority that is senior to the
priority of the Kents Lake’s direct-storage right. And the Beaver
River Decree creates unique problems with this administration. It
allows certain upper users (as defined by the line of demarcation) to
divert water from the Beaver River prior to the lower, senior users
taking their water. This is contrary to how water rights are usually
administered. In most water administration, junior users of water are
not entitled to take any of their water until the senior user’s right has
been entirely fulfilled. Salt Lake City v. Silver Fork Pipeline Corp., 2000
__________________________________________________________
8 See, e.g., UTAH CODE § 73-3-1 (establishing a first-in–time,
first-in-right appropriation scheme); Salt Lake City v. Silver Fork
Pipeline Corp., 2000 UT 3, ¶ 34, 5 P.3d 1206 overruled on other grounds
by Jensen v. Jones, 2011 UT 67, ¶ 15, 270 P.3d 425 (“A senior
appropriator is guaranteed the full measure of his or her
appropriation before any claim by a junior appropriator may be
satisfied.”); Hanson v. Salt Lake City, 205 P.2d 255, 271 (Utah 1949)
superseded by statute as recognized in Fairfield Irrigation Co. v. Carson,
247 P.2d 1004 (Utah 1952) (Wolfe, J. concurring) (“[I]f the first
appropriator’s rights are superior under the law, they should be
made so in fact . . . .” (citation omitted) (internal quotation marks
omitted)).
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UT 3, ¶ 34, 5 P.3d 1206 (“A senior appropriator is guaranteed the full
measure of his or her appropriation before any claim by a junior
appropriator may be satisfied.”) overruled on other grounds by Jensen v.
Jones, 2011 UT 67, ¶ 15, 270 P.3d 425.
¶44 The Beaver River Decree was written in 1931, at a time when
the primary method of irrigation was flood irrigation, creating large
return flows. It allowed upper junior users to take water prior to
lower senior users—likely because it presumed that upper users
would create return flow and thus not infringe the rights of the
lower senior users. With the advent of more efficient sprinkler
irrigation, return flows have decreased and certain lower users, like
Rocky Ford, have been affected. The question implicated by these
changes—whether an upper user with a junior water right can use
water more efficiently to the detriment of a lower user with a senior
right—is one this court has never addressed.
¶45 Our case law has long established that parties are free to put
water to any beneficial use within their defined right. Water users
are entitled to capture and reuse runoff, for example.9 This practice
of reducing return flows to make better use of water is one that
existed before sprinklers and before the Beaver River Decree. And
our case law has never recognized a water user’s right to a call on
efficiency gains.10
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9 Estate of Steed v. New Escalante Irrigation Co., 846 P.2d 1223, 1228
(Utah 1992) (“It has been a universal custom in this state for
irrigation and canal companies to make necessary improvements in
their systems to prevent loss of water by seepage . . . .” (citation
omitted) (internal quotation marks omitted)); Big Cottonwood Tanner
Ditch Co. v. Moyle, 174 P.2d 148, 150 (Utah 1946) (allowing an
irrigation company, in the interest of water conservation, to capture
its seepage by lining a ditch).
10 Our law has also sought to encourage parties to find more
efficient uses of their water. “[O]ur statutory and decisional law” is
based on “the desirability and . . . necessity of . . . continuous
beneficial use of all available water with as little waste as possible.”
Delta Canal Co. v. Frank Vincent Family Ranch, LC, 2013 UT 69, ¶ 24,
420 P.3d 1052 (citation omitted) (internal quotation marks omitted).
“[I]t is essential,” therefore, that “the highest and best beneficial use
should . . . be encouraged [and] carefully safeguarded.” HEAL Utah
v. Kane Cty. Water Conservancy Dist., 2016 UT App 153, ¶ 5, 378 P.3d
(continued . . .)
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Opinion of the Court
¶46 Implicit in Rocky Ford’s argument is the notion that lower
users have a say in how upper users use water runoff. But this is
incorrect. Downstream users have a right to runoff only when it
reenters the stream and becomes return flow. Salt Lake City v.
Telluride Power Co., 17 P.2d 281, 284 (Utah 1932) (explaining that
return flow water loses its separate identity when it reenters the
stream). Upper users, such as Kents Lake, are free to recapture
runoff on their land and put it to use. But upper users cannot
recapture the excess water once it reenters the stream. Rocky Ford
and other lower users have a right to this return flow.
¶47 Perhaps the demarcation of the Beaver River through the
Decree did not foresee sprinkler use. But it was not novel for parties
to capture the runoff from flood irrigation or innovate in other ways
to reduce seepage. The Beaver River Decree divided the river into
upper and lower users despite this innovation. Sprinklers are only a
modern example. Nothing in the Decree itself creates an obligation
for upper users to create a return flow, and we do not establish such
an obligation here.
¶48 Lower river users have no claim on runoff before it reenters
the stream. And lower users have no claim against upper users
requiring them to create a return flow. Upper users may use their
water right in the most efficient and beneficial way, despite its effect
on lower users. We thus affirm the lower court’s decision not to enter
the declaratory judgment sought by Rocky Ford. Rocky Ford has no
claim to Kents Lake’s efficiency gains.
C
¶49 The third question presented for our review pertains to
Kents Lake’s obligations to measure its water use in accordance with
the Beaver River Decree. In the proceedings below, Rocky Ford
sought both declaratory and injunctive relief, asking the court to
clarify Kents Lake’s measurement obligations. Rocky Ford
contended that Kents Lake does not have measurement devices
necessary to satisfy its measurement obligation under the Beaver
River Decree. The trial court denied Rocky Ford’s requests for both
declaratory and injunctive relief. Rocky Ford seeks reversal of those
decisions. We affirm the district court’s denial of Rocky Ford’s
request for injunctive relief. But we reverse and remand to the
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1246 (first alteration in original) (citation omitted) (internal quotation
marks omitted).
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Opinion of the Court
district court for further determinations on the declaratory
judgment.
¶50 Rocky Ford asks us to reverse the trial court’s decision
denying its request for injunctive relief. But Rocky Ford’s brief does
not adequately address the decision before us on appeal. The district
court held that Rocky Ford had failed to carry its heavy burden of
proof.11 Specifically, the district court said that Rocky Ford was
unable to show that it had suffered irreparable harm resulting from
Kents Lake’s failure to fulfill its measurement obligations under the
Decree. On appeal, Rocky Ford has not adequately addressed the
standard for entry of injunctive relief or sufficiently explained how
the district court erred under that standard. We thus affirm the
lower court’s denial of injunctive relief under our case law requiring
an appellant to speak specifically to the terms of an order challenged
on appeal. See Utah Physicians for a Healthy Env’t v. Exec. Dir. of the
Utah Dep’t of Envtl. Quality, 2016 UT 49, ¶ 16, 391 P.3d 148 (holding
that an appellant’s failure to address and brief arguments directed at
the order under review on appeal was fatal to the appeal).
¶51 The defect in Rocky Ford’s argument does not extend to its
request for declaratory relief, however. Under Utah Code
section 78B-6-402, a party seeking declaratory relief must show by a
preponderance of the evidence that the requested relief will
terminate an alleged controversy or remove an uncertainty. UTAH
CODE § 78B-6-402. Rocky Ford alleges confusion amongst the parties
as to the measurement obligations under Utah Law and the Beaver
River Decree. And Rocky Ford sought a declaratory judgment
clarifying these responsibilities.
¶52 In denying Rocky Ford’s request for relief, the trial court
stated that “Kent’s Lake asserts that it has consistently done
whatever the State Engineer or his agent has asked it to do.” And it
stated that “the State appears satisfied with Kent’s Lake.” But the
district court did not explain how this compliance with the State
__________________________________________________________
11 “A court may grant a permanent injunction if it determines that
(1) the petitioner establishes standing by demonstrating special
damages, (2) the petitioner has a property right or protectable
interest, (3) legal remedies are inadequate, (4) irreparable harm
would result, (5) court enforcement is feasible, and (6) petitioner
merits the injunction after balancing the equities.” Johnson v. Hermes
Assocs., Ltd., 2005 UT 82, ¶ 13, 128 P.3d 1151 (footnote omitted).
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Opinion of the Court
Engineer excuses a lack of compliance with the Beaver River Decree.
And we see no reason to so conclude.
¶53 The State Engineer is tasked with the “general
administrative supervision of the waters of the state and the
measurement, appropriation, apportionment, and distribution of
those waters.” Id. § 73-2-1(3)(a). But our law mandates that “a person
using water in this state . . . shall construct or install and maintain
controlling works and a measuring device at: (a) each location where
water is diverted from a source.” Id. § 73-5-4(1). This obligation is
independent from and in addition to the duty to install and use
measuring devices at “any other location required by the state
engineer.” Id. In this case, the party’s measurement obligations are
further clarified in the 1931 Beaver River Decree. The Decree says,
“the parties hereto and their successors in interest shall promptly
install and perpetually maintain suitable and efficient headgates,
control works and measuring devices at or near as possible to their
respective points of diversion.”
¶54 Kents Lake does not dispute that the Beaver River Decree
and Utah Code section 73-5-4 require installation of “measuring
devices at or near as possible to their respective points of diversion.”
Nor does Kents Lake dispute that there is no such measuring device
at multiple points of diversion into Kents Lake’s reservoirs. It instead
argues that all measurement required under statute and the Beaver
River Decree is to benefit the State Engineer in administering the
river. So Kents Lake claims that by complying with the State
Engineer it has discharged any duties required of it by statute or the
Decree.
¶55 We disagree. Our law creates an independent obligation to
measure. See id. § 73-5-4(1) (requiring parties to install and maintain
measurement devices at each location where water is diverted);
Gunnison Irrigation Co. v. Peterson, 280 P. 715, 717 (Utah 1929) (“If the
defendant violated the terms of the decree, he cannot purge himself
of the contempt by showing that no commissioner was appointed.”).
That obligation exists regardless of whether a party complies with
the requests of the State Engineer. This is Rocky Ford’s rebuttal.
Rocky Ford acknowledges that Kents Lake may have complied with
instructions from the State Engineer. But it disagrees that this
releases Kents Lake from any independent obligation to measure
water in accordance with statute or the Decree.
¶56 We agree with Rocky Ford. Parties have an independent
duty to fulfill measurement obligations. Rocky Ford does not seek
damages for past mismeasurement or wrongful storage, which
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Opinion of the Court
would require us to decide whether following the direction of a State
Engineer insulates a water user from claims of damages. Rocky Ford
instead asks for clarification moving forward. We find that the
clarification it seeks is warranted, and remand to the district court to
interpret the parties’ measurement obligations under Utah Code
section 73-5-4 and the Beaver River Decree, and enter a declaratory
judgment clarifying these obligations.
D
¶57 Rocky Ford also appeals the trial court’s decision not to
rescind the 1953 Agreement. This question implicates two sub-issues.
First, did the district court err in refusing to rescind the 1953
agreement on the basis of a material breach? And second, did the
district court abuse its discretion when it refused to admit certain
evidence Rocky Ford claims was relevant to the rescission claim?
1
¶58 Rocky Ford alleges two material breaches of the 1953
Agreement. The Agreement provides that “Rocky Ford has exclusive
right to store all water during the non-irrigation season.” But Kents
Lake closed the gates of its South Fork Reservoirs in the winter,
capturing any inflows and preventing them from reaching Rocky
Ford. Kents Lake also failed to comply with the measurement
obligations outlined in the 1953 Agreement. Rocky Ford argues that
these are “uncured material failure[s] sufficient to render the
contract unenforceable.” Aquagen Int’l, Inc. v. Calrae Tr., 972 P.2d 411,
414 (Utah 1998) (internal quotation marks omitted).
¶59 We disagree. We affirm on the ground that the alleged
breaches were not material.
¶60 The materiality of a contract term is a “fact-like mixed
question[]” that is reviewed “deferentially.” Sawyer v. Dep’t of
Workforce Servs., 2015 UT 33, ¶ 11, 345 P.3d 1253. And “rescission is
not warranted” where a breach does not “defeat the object of the
parties in making the agreement.” Cross v. Olsen, 2013 UT App 135,
¶ 27, 303 P.3d 1030 (citation omitted) (internal quotation marks
omitted). The district court permissibly concluded that Rocky Ford’s
claimed material breaches did not go to the object of the Agreement.
A principal object of the Agreement was to protect new interests.
Specifically, it was to ensure that Rocky Ford would not protest
Kents Lake’s proposed change application and to ensure that Kents
Lake would not oppose Rocky Ford’s enlargement of its reservoir.
While the Agreement restated Kents Lake’s measurement
obligations and Rocky Ford’s exclusive winter storage rights, the
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Opinion of the Court
district court could permissibly conclude that the object was not to
reaffirm prior obligations both parties already had. Both parties
acknowledge that these obligations pre-date the Agreement.
¶61 The object of the Agreement was for Rocky Ford to enlarge
its reservoir and for Kents Lake to apply for the change application
free from Rocky Ford’s protest. Because Kents Lake’s alleged
breaches do not go to material terms of the Agreement, the trial court
acted within the bounds of its discretion in determining that the
breaches were not material and in declining to rescind the
Agreement on this ground.
2
¶62 Rocky Ford also claims that the trial court abused its
discretion when it excluded evidence that allegedly supported Rocky
Ford’s rescission claim. It asks us to reverse this determination. But
we “afford district courts a great deal of discretion in determining
whether to admit or exclude evidence and will not overturn an
evidentiary ruling absent an abuse of discretion.” State v. Cuttler,
2015 UT 95, ¶ 12, 367 P.3d 981 (citation omitted) (internal quotation
marks omitted). And we will not determine that the district court
abused its discretion unless its “decision exceeds the limits of
reasonability.” State v. Larsen, 865 P.2d 1355, 1361 (Utah 1993). We do
not believe that the trials court’s exclusion of evidence here “exceeds
the limits of reasonability.” See id. We accordingly affirm the
exclusion of the evidence in question.
¶63 The district court found that testimony about the historic
return flow to the Beaver River was irrelevant. Rocky Ford
challenges that decision. It asserts that evidence of historic return
flow would have enabled it to prove impracticability, frustration of
purpose, or mutual mistake as a basis for rescission. And it contends
that the district court committed reversible error in excluding
evidence of historic return flows.
¶64 We disagree and affirm. The trial court’s ruling on the
rescission claim was not based on Rocky Ford’s lack of evidence
regarding return flows. To the contrary, the court found that the
1953 Agreement had “nothing to do with return flows.” The court
supported this conclusion by correctly noting that the Agreement is
silent as to runoff, return flows, and Rocky Ford’s position as a
downstream water user. Each of Rocky Ford’s alleged rescission
theories required a finding that return flows were so fundamental to
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Opinion of the Court
the Agreement that the reduction of them would have made the
Agreement unenforceable.12 And the district court concluded that
this was not the case, regardless of what the evidence of return flow
showed.
¶65 The district court did identify a number of issues that Rocky
Ford lacked sufficient evidence to prove. But it ultimately rejected
Rocky Ford’s rescission claim on the ground that Rocky Ford could
not prove that return flows were relevant to the Agreement. The trial
court acted within its discretion in so doing. We thus affirm the
exclusion of Rocky Ford’s evidence and the court’s determination
not to rescind the 1953 Agreement.
E
¶66 The final issue on appeal concerns the trial court’s award of
attorney fees. After trial, the court sua sponte awarded attorney fees
to Kents Lake and Beaver City under Utah Code section 78B-5-825
based on a determination that Rocky Ford’s claims were “without
merit and not brought or asserted in good faith.” Rocky Ford
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12 Rescission of a contract is an exceptional remedy that must be
supported by exceptional facts. Rocky Ford asserted three theories in
support of its claim for rescission: impracticability, frustration of
purpose, and mutual mistake. Impracticability requires “an
unforeseen event [that] occurs after formation of the contract . . .
which event makes performance of the obligation impossible or
highly impracticable.” Cent. Utah Water Conservancy Dist. v. Upper E.
Union Irrigation Co., 2013 UT 67, ¶ 28, 321 P.3d 1113 (citation omitted)
(internal quotation marks omitted). “Frustration of purpose differs
from the defense of [impracticability] only in that performance of the
promise, rather than being impossible or impracticable, is instead
pointless.” W. Props. v. S. Utah Aviation, Inc, 776 P.2d 656, 659 (Utah
Ct. App. 1989). And mutual mistake requires that “at the time the
contract is made, the parties make a mutual mistake about a material
fact, the existence of which is a basic assumption of the contract.”
Workers Comp. Fund v. Utah Bus. Ins. Co., 2013 UT 4, ¶ 27, 296 P.3d
734 (citation omitted). Each of these theories is thus premised on the
notion that the fact giving rise to a claim for rescission goes to a
material contract term. Yet return flows and runoff were not material
to the Agreement. And the trial court accordingly concluded that
none of Rocky Ford’s theories were legitimate grounds for
rescinding the contract.
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Opinion of the Court
challenged the award of attorney fees in a rule 59 motion. That
motion was denied. Rocky Ford now asks us to reverse the award of
attorney fees. It contends that the trial court erred when it
determined that Rocky Ford’s claims lack merit and were brought in
bad faith.
¶67 Utah Code section 78B-5-825(1) calls for an award of
attorney fees in civil actions when “the court determines that the
action or defense to the action was without merit and not brought or
asserted in good faith.” This provision requires proof on “two
distinct elements.” In re Discipline of Sonnenreich, 2004 UT 3, ¶ 46, 86
P.3d 712. An award of fees under this provision requires a
determination that the losing party’s claim was “(1) without merit,
and (2) not brought or asserted in good faith.” Id.
¶68 A determination under the first element, as to the merits of a
claim, typically will turn on a conclusion of law—as to whether the
losing party’s claim lacks a “basis in law or fact.” Id. ¶ 47 (citation
omitted) (internal quotation marks omitted). Such a determination is
reviewed for correctness. Id. ¶ 45. The second element, by contrast,
implicates fact-intensive questions about the losing party’s
“subjective intent.” Id. ¶ 49. A party’s good faith may be established
by proof of “[a]n honest belief in the propriety of the activities in
question;” a lack of “intent to take unconscionable advantage of
others;” and a lack of “intent to, or knowledge of the fact that the
activities in question will hinder, delay, or defraud others.” Id. ¶ 48
(alteration in original) (citation omitted) (internal quotation marks
omitted). A lower court’s findings on this element typically will be
afforded a substantial measure of discretion. Id. ¶ 45.
¶69 The district court made sua sponte findings on the two
elements of the statute. Ordinarily we would yield substantial
deference to the court’s findings on the latter element. But we
decline to do so here for two reasons. First is the fact that the district
court’s findings are infected by legal error. The error is in conflating
the two elements of the statute—in suggesting that Rocky Ford’s
claims were not asserted in “good faith” because they were “without
merit.” Most of the district court’s “findings” on the lack of “good
faith” are premised on the court’s observations about the lack of
merit in Rocky Ford’s claims. But the two elements are distinct. It is
error to “conflate” them. Id. ¶ 49 (explaining that “the mere fact that
an action is meritless does not necessarily mean that the action is also
brought in bad faith”). And a threshold legal error is an abuse of
discretion that undercuts the deference we would otherwise afford
to the district court. Goggin v. Goggin, 2011 UT 76, ¶ 26, 267 P.3d 885
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Opinion of the Court
(“An error of law by the district court . . . would be an abuse of
discretion.”).
¶70 The district court did make two “findings” that seem to treat
the “good faith” inquiry as distinct. It faulted Rocky Ford for
dismissing a claim against the Division of Water Rights—concluding
Rocky Ford allowed this claim to be dismissed for “no apparent
reason.” And it criticized Rocky Ford for not “suing all well owners
and upstream users, who might be switching from flood irrigation to
sprinkler irrigation.” These “findings,” however, are too lacking in
detail and too disconnected from the legal standard of “good faith”
to sustain our deference on this appeal.
¶71 This is the second basis for our decision not to defer to the
district court’s findings. We acknowledge the difficult job of our
district court judges. We recognize that the many demands of their
busy jobs make it difficult for them to always enter detailed findings
on every fact-intensive decision they may make. Detailed findings,
moreover, may not be strictly required. But a lack of detail in a lower
court’s findings will make it more difficult for us to afford deference.
When the detail is lacking, we may not be able to understand the
discretion that was exercised by the court below. And for that reason
we may not be in a position to afford the same level of deference that
would otherwise be provided. Gardner v. Gardner, 2019 UT 28, ¶ 63
n.58, --- P.3d --- (explaining that without detailed findings of fact “it
will be difficult for an appellate court to determine whether the
district court’s ultimate . . . determination was within its discretion”).
¶72 This is the position we find ourselves in here. We see no
apparent basis in the record for attributing bad faith to Rocky Ford
for dismissing a claim against the Division of Water Rights or for
declining to pursue claims against “well owners” or “upstream
users” who “might be switching from flood irrigation to sprinkler
irrigation.” Maybe Rocky Ford lacked a good reason for those
decisions. But the district court never explained how those decisions
could indicate a lack of good faith on Rocky Ford’s part in bringing
or asserting its claims against Kents Lake. And without some
explanation on the face of the district court’s order, we find no basis
for deferring to the ultimate determination of bad faith.
¶73 Absent a basis for deference, moreover, we find no basis for
an award of attorney fees. Most of Rocky Ford’s claims have
admittedly failed on their merits. But we find no basis for a
determination that Rocky Ford filed or pursued its claims in bad
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Opinion of the Court
faith. For that reason, we reverse the award of attorney fees to Kents
Lake and Beaver City.
III
¶74 We affirm the trial court’s denial of summary judgment, its
decision not to issue a declaratory judgment prohibiting Kents Lake
from storing its efficiency gains, and its decision not to rescind the
1953 Agreement. We reverse, however, the award of attorney fees to
Kents Lake and Beaver City.
¶75 We also reverse and remand the trial court’s decision not to
clarify Kents Lake’s measurement obligations. We remand with
instructions to interpret the Beaver River Decree and enter a
declaratory judgment clarifying the specific measurement
obligations of both parties under the Decree.
23