v. People

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ADVANCE SHEET HEADNOTE
June 8, 2020
2020 CO 50
No. 19SA106, Jacobs v. People—Summary Judgment Certification—Summary
Judgment Orders—Water Storage—Civil Penalties.
In this appeal from a number of orders of the water court, defendants
contend that the water court erred in (1) granting summary judgment for plaintiffs
and partial summary judgment for the third-party defendant; (2) imposing civil
penalties for defendants’ violations of an administrative order requiring them to
cease and desist unlawfully storing state waters in two ponds on their properties;
and (3) certifying its summary judgment rulings as final pursuant to
C.R.C.P. 54(b).
The supreme court concludes that the water court properly exercised its
discretion in certifying its summary judgment orders pursuant to C.R.C.P. 54(b)
and thus this appeal is properly before the court. The court next concludes that
the water court properly granted both plaintiffs’ summary judgment motion and
the third-party defendant’s motion for partial summary judgment because the
summary judgment record established, as a matter of law, that (1) defendants did
not comply with the administrative order requiring them to cease and desist the
unlawful storage of water in the ponds on their properties and (2) the third-party
defendant did not breach an agreement between it and defendants that defendants
claim satisfied their obligations under the administrative order. Last, the supreme
court concludes that the water court properly imposed civil penalties under
section 37-92-503(6)(a)(II), C.R.S. (2019).
Accordingly, the supreme court affirms the judgment of the water court,
concludes that both plaintiffs and the third-party defendant are entitled to an
award of the reasonable attorney fees that they incurred in this appeal, and
remands this case to the water court to allow that court to determine the amount
of fees to be awarded.
The Supreme Court of the State of Colorado
2 East 14th Avenue • Denver, Colorado 80203
2020 CO 50
Supreme Court Case No. 19SA106
Appeal from the District Court
Pueblo County District Court, Water Division 2, Case No. 17CW3038
Honorable Larry E. Schwartz, Water Judge
Plaintiffs-Appellees:
The People of the State of Colorado ex rel. Kevin G. Rein, State Engineer, and
Steve J. Witte, Division Engineer for Water Div. No. 2,
v.
Defendants and Third-Party Plaintiffs-Appellants:
Steven J. Jacobs, Jr., in his individual capacity; Casas Limited Partnership #4, a
Colorado Limited Partnership; and IQ Investors, LLC, a Colorado Limited
Liability Company,
v.
Third Party Defendant-Appellee:
Park Forest Water District
Judgment Affirmed
en banc
June 8, 2020
Attorneys for Plaintiffs-Appellees:
Philip J. Weiser, Attorney General
Christopher R. Stork, Assistant Attorney General
Paul L. Benington, First Assistant Attorney General
Denver, Colorado
Attorneys for Defendants and Third-Party Plaintiffs-Appellants:
Sherman and Howard L.L.C.
Stephen A. Hess
Colorado Springs, Colorado
Carlson, Hammond & Paddock, LLC
Karl D. Ohlsen
Denver, Colorado
Attorney for Third-Party Defendant-Appellee:
MacDougall & Woldridge, P.C.
Julianne M. Woldridge
Colorado Springs, Colorado
JUSTICE GABRIEL delivered the Opinion of the Court.
JUSTICE SAMOUR concurs in part and concurs in the judgment in part.
2
¶1 In this appeal from a number of orders of the water court, Dr. Steven Jacobs,
Casas Limited Partnership #4, LLP, and IQ Investors, LLC (collectively, “Jacobs”)
contend that the water court erred in (1) granting summary judgment for the State
Engineer and the Division Engineer for Water Division No. 2 (the “Engineers”)
and partial summary judgment for the Park Forest Water District (“PFWD”);
(2) imposing civil penalties for Jacobs’s violations of the Division Engineer’s order
requiring Jacobs to cease and desist unlawfully storing state waters in two ponds
on his properties; and (3) certifying its summary judgment rulings as final
pursuant to C.R.C.P. 54(b).
¶2 Because the issue pertains to our jurisdiction to hear this appeal, we
conclude first that the water court properly exercised its discretion in certifying its
summary judgment orders pursuant to C.R.C.P. 54(b). Accordingly, this appeal is
properly before us. Next, we conclude that the water court properly granted both
the Engineers’ summary judgment motion and PFWD’s motion for partial
summary judgment because the summary judgment record established, as a
matter of law, that (1) Jacobs did not comply with the Division Engineer’s order to
cease and desist the unlawful storage of water in the ponds on his properties and
(2) PFWD did not breach a so-called Inclusion Agreement between it and Jacobs.
Last, we conclude that the water court properly imposed civil penalties under
section 37-92-503(6)(a)(II), C.R.S. (2019).
3
¶3 Accordingly, we affirm the judgment of the water court, conclude that both
the Engineers and PFWD are entitled to an award of the reasonable attorney fees
that they incurred in this appeal, and remand this case to the water court to allow
that court to determine the amount of fees to be awarded.
I. Facts and Procedural History
¶4 In 2012, Casas and IQ Investors acquired certain real properties, together
with associated water rights and three ponds, in unincorporated El Paso County.
Dr. Jacobs is, through a corporation, the manager of IQ Investors, and he is a
general partner of Casas.
¶5 In order to satisfy the water needs of the properties, Jacobs negotiated with
PFWD to join the properties to PFWD, and these parties formalized their
arrangement in an Inclusion Agreement. Under paragraph 8 of this Agreement,
PFWD agreed to add the ponds to its plan for augmentation, provide
replacement/augmentation water sufficient to maintain the ponds “at a full
stage,” and augment depletions resulting from surface evaporation. The
Agreement further provided that, with the exception of the above-noted
requirement to provide augmentation water and the obtaining of a decree from
the water court allowing PFWD to do so, “nothing in this Agreement shall require
or otherwise obligate [PFWD], at any time or for any other purpose, to provide fill
or re-fill water to the Existing Ponds.”
4
¶6 Pursuant to the Inclusion Agreement, PFWD filed an application seeking to
amend its augmentation plan to add Jacobs’s ponds to it. In seeking this
amendment, PFWD made clear that it was not requesting new water storage rights
for the ponds but rather was simply proposing to replace evaporative losses from
them. The water court granted PFWD’s application and ruled that the ponds
would be augmented consistent with the requirements of PFWD’s augmentation
plan.
¶7 Shortly thereafter, the water commissioner wrote to Jacobs to determine the
status of an initial fill of two of the three ponds on Jacobs’s properties, which had
occurred sometime previously, after the two ponds were drained for
reconstruction work. Specifically, the commissioner stated his understanding that
the augmentation plan only provided for the replacement of evaporative losses
and did not provide for an initial fill after draining. The commissioner reminded
Jacobs of his obligation to provide for a legal initial fill and stated that although
Jacobs’s attorney had indicated that PFWD was going to provide the initial fill
from its excess return flow credits, the commissioner had not received
confirmation that the credits were purchased for that initial fill. Suspecting that
the initial fill after reconstruction was thus not legally obtained, the commissioner
requested that Jacobs provide him with the source of the initial fill and advised
5
that if he did not receive such confirmation, then he would seek an order requiring
the release of any illegally stored water.
¶8 Discussion of this issue apparently went on for more than a year. In the
course of such discussions, Jacobs took the position that the Inclusion Agreement
covered the initial fill. PFWD, however, contended that that Agreement did not
do so and that PFWD was not obligated to provide replacement water for the
ponds.
¶9 On December 23, 2016, having not received satisfactory proof that Jacobs’s
initial fill of the ponds was lawful, the Division Engineer issued an administrative
order (the “2016 Order”) to Jacobs pursuant to section 37-92-502(3), C.R.S. (2019),
which empowers a division engineer to order the release from storage of illegally
or improperly stored water. The 2016 Order required, within thirty days of
receipt, that Jacobs permanently cease and desist the storage of state waters within
the ponds and prepare a plan for draining the ponds by April 1, 2017.
Alternatively, the 2016 Order required that by April 1, 2017, Jacobs either provide
for legally obtained return flow credits from PFWD or apply to the State Engineer’s
Office for approval of a substitute water supply plan to use any other legally
obtained water source capable of delivering water to the Cottonwood Creek
drainage upstream of the subject ponds.
6
¶10 Jacobs did not comply with the 2016 Order by the deadline set forth therein.
The Engineers thus filed a complaint in the water court for injunctive relief,
penalties, and costs to enforce the 2016 Order. Several months of unsuccessful
settlement negotiations ensued, after which the Engineers filed a motion for a
preliminary injunction to compel Jacobs to comply with the 2016 Order.
¶11 As the case between the Engineers and Jacobs unfolded, Jacobs filed a
third-party complaint against PFWD in the water court, and Casas and IQ
Investors filed a separate complaint against PFWD in the El Paso County District
Court. Both of these complaints alleged that PFWD had breached the Inclusion
Agreement in a number of ways. In addition, in the water court proceeding, Jacobs
sought a declaratory judgment setting forth the rights and obligations of the
parties regarding, among other things, “[t]he extent to which PFWD is obligated
under the Inclusion Agreement to provide water to fill the ponds on [Jacobs’s]
property.” PFWD denied breaching the Inclusion Agreement, and, in the water
court case, it filed a counterclaim seeking rescission of the Inclusion Agreement on
grounds unrelated to the fill issue. The El Paso County District Court
subsequently stayed the complaint before it, pending the resolution of the claims
in the water court, in order to avoid the potential for conflicting jurisdiction
between the two courts.
7
¶12 In the briefing that followed in the water court, Jacobs asserted that the
Inclusion Agreement was unambiguous and that its plain language required
PFWD to provide augmentation for, or water to fill or re-fill, Jacobs’s ponds after
they were drained for reconstruction. The Engineers, in contrast, argued that the
Inclusion Agreement did not obligate PFWD to fill or re-fill the ponds beyond
filling to replace evaporative losses.
¶13 The water court subsequently held an evidentiary hearing on the Engineers’
motion for a preliminary injunction. At this hearing, the parties presented
conflicting testimony regarding the meaning of paragraph 8 of the Inclusion
Agreement. As pertinent here, the water commissioner testified that the 2016
Order was issued because the commissioner had determined that Jacobs had no
decreed right to fill the ponds after they had been drained for construction and
therefore the water was being unlawfully stored in those ponds. The
commissioner further testified, based on his experience and understanding, that
paragraph 8 of the Inclusion Agreement did not provide a legal basis for the re-fill
because when one maintains a storage vessel “at a full stage,” which is what the
Agreement required, “it’s already been full or legally filled and typically an
augmentation plan or other source that can be legally used to maintain it full
replaces the evaporative losses of a pond.” Accordingly, maintaining a vessel “at
a full stage” did not mean more than filling to make up for evaporative depletions.
8
¶14 Dr. Jacobs also testified, and he disagreed with the commissioner. In his
view, the language in paragraph 8 of the Inclusion Agreement stating that PFWD
“shall provide replacement/augmentation water sufficient to maintain the
Existing Ponds at a full stage” meant that PFWD would provide the water so that
the ponds would be full. Dr. Jacobs testified to his belief that PFWD was going to
provide the initial fill from its excess return flow credits.
¶15 In a detailed written order, the court granted the Engineers’ request for a
preliminary injunction. In support of this ruling, the court found that (1) at the
time of the filling of the ponds after they had been drained, Jacobs had no lawful
right to store water in the ponds beyond filling the ponds to replace evaporative
losses; (2) downstream senior water rights were in need of water at the time of
Jacobs’s re-filling of the ponds in excess of filling to replace evaporative losses;
(3) Jacobs lacked any decreed water right priorities for storage in the ponds or any
decreed augmentation plan or temporary substitute water supply plan approved
by the State Engineer to allow him to store water out of priority; (4) paragraph 8
of the Inclusion Agreement did not confer any obligation on PFWD to fill or re-fill
the ponds beyond filling to replace evaporative depletions; and (5) Jacobs
therefore had unlawfully stored water in the ponds. In light of these findings, the
court concluded that not only had the Engineers shown a reasonable probability
of success on the merits, but also they had succeeded on the merits. The court thus
9
ordered Jacobs to cease and desist all storage or retention of water in the ponds
and to submit a drainage plan to the Division Engineer for his approval. Jacobs
subsequently complied with this order.
¶16 In light of the court’s preliminary injunction ruling, the Engineers then filed
a motion for summary judgment, and PFWD filed a motion for partial summary
judgment.
¶17 In their motion, the Engineers asked the court to rule, as a matter of law,
that the 2016 Order was a valid order under section 37-92-502(3) and that Jacobs
had violated and continued to violate the 2016 Order. In addition, the Engineers
asked the court to impose civil penalties of up to $230,000 under section
37-92-503(6)(a)(II) and to award the Engineers their costs and reasonable attorney
fees under sections 37-92-503(1)(b) and (6)(e).
¶18 The court ultimately granted the Engineers’ motion. As pertinent here, the
court determined that Jacobs’s retention of the water in the ponds met the
statutory definition of a diversion in section 37-92-103(7), C.R.S. (2019), and was
also a diversion for purposes of section 37-92-503(6)(a)(II), which allows for the
imposition of civil penalties for diversions contrary to a valid order of the State or
a Division Engineer. The court thus concluded that the imposition of civil
penalties under section 37-92-503(6)(a)(II) was “proper and required by the
statutory language ‘shall forfeit and pay . . . for each day such violation
10
continues.’” (Quoting section 37-92-503(6)(a)(II); emphases in original.) In
addition, the court concluded that the plain language of sections 37-92-503(1)(b)
and 37-92-503(6)(e) authorized the imposition of costs and reasonable attorney fees
against Jacobs. The court thus ordered Jacobs to pay civil penalties in the amount
of $200 per day for the 460 days in which he did not comply with the 2016 Order
(for a total of $92,000) and awarded costs and fees to the Engineers.
¶19 In PFWD’s motion for partial summary judgment, PFWD asked the court to
conclude, as a matter of law, that the plain language of the Inclusion Agreement
did not obligate PFWD to provide water for or augment depletions from Jacobs’s
ponds beyond evaporative losses and that it specifically did not obligate PFWD to
provide water for or augment depletions caused by filling or re-filling Jacobs’s
ponds. PFWD further asked the court to rule, as a matter of law, that it did not
breach the Inclusion Agreement.
¶20 The court ultimately granted PFWD’s motion. In so ruling, the court noted
that the contents of the Inclusion Agreement were undisputed and that both sides
agreed that the language in paragraph 8 was unambiguous. The court then
construed paragraph 8, taking into consideration the words used (including the
fact that “to maintain . . . at a full stage” was a trade term or standard of the
community) and the terms of the amended augmentation decree. The court
concluded, as a matter of law, that PFWD was not obligated to augment depletions
11
from Jacobs’s ponds beyond evaporative losses and thus PFWD did not breach the
Inclusion Agreement.
¶21 The Engineers and PFWD then separately moved for entry of final judgment
on both of their summary judgment orders pursuant to C.R.C.P. 54(b). The court
granted both motions.
¶22 With respect to the Engineers’ motion, the court noted that (1) the summary
judgment order was final and constituted the ultimate disposition of the
Engineers’ claims for relief; (2) there was no just reason for delay of entry of a final
judgment as to such claims; and (3) judicial administration would not be hindered
by entry of a final judgment.
¶23 With regard to PFWD’s motion, the court found that between the order
granting the Engineers’ motion for summary judgment and the order granting
partial summary judgment in PFWD’s favor, there was now a complete
adjudication of all claims in the matter before it except for PFWD’s counterclaim
against Jacobs. As to that counterclaim, the court noted that it was independent
of the resolved claims, stood on its own, and could be prosecuted independent of
the other claims. The court also found that certifying the partial summary
judgment order as final would benefit judicial administration because it would
assist in promoting the resolution of the identical claims that Casas and IQ
12
Investors had filed against PFWD in the El Paso County District Court, which
claims had been stayed pending the outcome of the present proceeding.
¶24 Jacobs now appeals both the C.R.C.P. 54(b) certifications of the summary
judgment orders and the merits of those orders.
II. Analysis
¶25 Because the issue relates to our jurisdiction, we begin by considering
whether the water court properly certified the above-described summary
judgment orders as final pursuant to C.R.C.P. 54(b). Concluding that it did, we
proceed to the merits of those orders and determine that the court properly
granted summary judgment for the Engineers and partial summary judgment for
PFWD. We then consider whether the water court correctly imposed civil
penalties on Jacobs pursuant to section 37-92-503(6)(a)(II), and we conclude that it
did and in a proper amount. Last, we address the Engineers’ and PFWD’s requests
for an award of appellate attorney fees. We conclude that the Engineers are
entitled to such an award pursuant to section 37-92-503(6)(e) and that PFWD is
entitled to such an award under the Inclusion Agreement.
A. C.R.C.P. 54(b) Certifications
¶26 C.R.C.P. 54(b) provides, in pertinent part:
When more than one claim for relief is presented in an action, whether
as a claim, counterclaim, cross-claim, or third-party claim, or when
multiple parties are involved, the court may direct the entry of a final
judgment as to one or more but fewer than all of the claims or parties
13
only upon an express determination that there is no just reason for
delay and upon an express direction for the entry of judgment.
¶27 To determine whether to issue a C.R.C.P. 54(b) certification, a court must
engage in a three-step process and conclude that: (1) the decision certified
constitutes a ruling on an entire claim for relief; (2) the decision certified is final in
terms of the ultimate disposition of an individual claim; and (3) there is no just
reason for delay in the entry of final judgment on the claim. Lytle v. Kite, 728 P.2d
305, 308 (Colo. 1986). In deciding whether just reasons exist to delay an appeal of
an individual final judgment, a court must consider both the interests of judicial
administration and the equities involved. Id. at 309.
¶28 We review the first two prongs of the above-described test de novo, but the
third prong—whether there is no just reason for delay—“is committed to the trial
court’s sound discretion.” Id. at 308. “Once the concerns of sound judicial
administration have been met, the discretionary judgment of the district court
should be given substantial deference, ‘for that court is the one most likely to be
familiar with the case and with the justifiable reasons for delay.’” Id. at 309
(quoting Curtiss-Wright Corp. v. Gen. Elec. Co., 446 U.S. 1, 10 (1980); additional
internal quotation marks omitted). An appellate court will conclude that a trial
court abused its discretion in certifying a judgment as final under C.R.C.P. 54(b)
only when its ruling is manifestly arbitrary, unreasonable, unfair, or based on an
erroneous view of the law. Allison v. Engel, 2017 COA 43, ¶ 25, 395 P.3d 1217, 1223.
14
¶29 With respect to the certification of the order granting PFWD’s motion for
partial summary judgment, Jacobs contends that the certification was improper
because PFWD’s counterclaim for rescission of the Inclusion Agreement is still at
issue, as is the remainder of his declaratory judgment claim. Jacobs argues that
because the court’s partial summary judgment order resolved the interpretation
and application of only one section of the Inclusion Agreement, the court’s
certification of that order will result in separate appeals over different parts of the
agreement, contrary to C.R.C.P. 54(b)’s purpose of avoiding “piecemeal”
litigation. See Harding Glass Co. v. Jones, 640 P.2d 1123, 1127 (Colo. 1982) (“The
purpose of requiring that an entire claim for relief be finally adjudicated before
Rule 54(b) certification is proper is to avoid the dissipation of judicial resources
through piecemeal appeals.”).
¶30 The water court rejected this argument, finding that the partial summary
judgment ruling, when coupled with the summary judgment for the Engineers,
adjudicated Jacobs’s claims against PFWD in their entirety and ultimately
disposed of them. The court further found that PFWD’s counterclaim is
“independent of the other claims of the parties in this case, stands on its own, and
can be prosecuted independent of the other claims.” And the court found that
there was no just reason for delay because finalization would (1) assist in resolving
the potential for conflicting jurisdiction between this case and the stayed
15
proceeding in the El Paso County District Court, (2) allow for the resolution of the
identical claims in that court, and (3) prevent a collateral attack on jurisdiction over
the counterclaim in the water court.
¶31 In our view, each of these findings and conclusions was amply supported
by the record and reflected a proper exercise of the water court’s discretion. The
remaining allegations in Jacobs’s declaratory judgment motion and of PFWD’s
counterclaim concern Jacobs’s alleged failure to subdivide the property at the
appropriate time, and all of those allegations are wholly independent of the claims
regarding the meaning of paragraph 8 of the Inclusion Agreement. Moreover, the
partial summary judgment order completely disposed of Jacobs’s breach of
contract and declaratory judgment claims regarding the meaning of paragraph 8
of the Inclusion Agreement. And sound judicial administration and the equities
of this case favored certification because certification would permit resolution of
the stayed, identical proceeding in the El Paso County District Court on issue
preclusion grounds, while avoiding a collateral attack on the water court’s
jurisdiction. See Lytle, 728 P.2d at 309; see also Foster v. Plock, 2017 CO 39, ¶ 13,
394 P.3d 1119, 1123 (noting the elements of issue preclusion). Accordingly, we
conclude that the water court properly certified the order granting partial
summary judgment in PFWD’s favor under C.R.C.P. 54(b).
16
¶32 With respect to the certification of the order granting the Engineers’ motion
for summary judgment, it is undisputed that that order fully resolved all claims in
this case involving the Engineers. Jacobs contends, however, that the water court
abused its discretion in certifying this order because certification of the partial
summary judgment in PFWD’s favor was improper and the substantive issues
regarding the Engineers’ claims and the claims involving PFWD are so intertwined
that certification of the summary judgment order in the Engineers’ favor was
therefore also improper. We are not convinced.
¶33 As we understand Jacobs’s argument, it is premised on his view that the
certification of the partial summary judgment order in PFWD’s favor was
improper. We, however, have already rejected that premise. Accordingly,
Jacobs’s challenge to the C.R.C.P. 54(b) certification of the order granting summary
judgment for the Engineers likewise fails.
¶34 We are not persuaded otherwise by Jacobs’s apparent view that in certifying
the judgment here, the water court did not make sufficient findings to establish
that there was no just reason for delay. Although it might have been preferable
for the water court to set forth its reasoning more precisely in its certification order,
the record makes clear that the court discerned no just reason for delay because it
viewed the Engineers’ claims and the claims involving PFWD as separately
justiciable. For example, in its order granting the Engineers’ motion for a
17
preliminary injunction, the water court noted that private contracts do not relieve
the Engineers of their statutory duty to administer, distribute, and regulate waters
of the state. See, e.g., City of Thornton v. Bijou Irrigation Co., 926 P.2d 1, 97 (Colo.
1996) (noting that the provisions of a decree do not prevent the State Engineer’s
office from taking additional action to fulfill its statutory duty to protect
downstream users and that compliance with contractually imposed standards
does not necessarily relieve a contracting party of its duty to comply with statutory
requirements). The court thus concluded, “Because the Engineers do not
administer water rights based on agreements like the Inclusion Agreement the
Defendants have offered as their sole defense, the meaning of the Inclusion
Agreement is not relevant as to whether [Jacobs] violated the valid Order of the
Division Engineer.”
¶35 Although the water court did not reiterate this reasoning in its
C.R.C.P. 54(b) certification order, the record amply reflects the court’s position,
which it maintained throughout this case, and this reasoning supports the court’s
finding that there was no just reason for delay in the certification of the Engineers’
order.
¶36 For these reasons, we perceive no abuse of discretion in the court’s decision
to certify, pursuant to C.R.C.P. 54(b), the court’s order granting summary
judgment for the Engineers.
18
¶37 Accordingly, we conclude that this appeal is properly before us, and we turn
next to Jacobs’s arguments on the merits.
B. Summary Judgment Orders
¶38 Jacobs contends that the Inclusion Agreement between him and PFWD
established that he had provided for legally obtained return flow credits from
PFWD. Accordingly, he asserts that the water court erred in granting PFWD’s
motion for partial summary judgment, which was directed to the proper
interpretation of the Inclusion Agreement. And because Jacobs believes that the
water court improperly interpreted the Inclusion Agreement and that a proper
interpretation showed that he had provided for legally obtained return flow
credits, Jacobs further argues that he did not violate the 2016 Order and that
therefore the water court erred in granting the Engineers’ motion for summary
judgment. Again, we are unpersuaded.
¶39 Because Jacobs’s assertion that the water court erred in granting the
summary judgment motions at issue turns on his interpretation of paragraph 8 of
the Inclusion Agreement, we begin with that issue, addressing first the applicable
legal standards.
1. Standard of Review Regarding Summary Judgment Orders
¶40 We review an order granting summary judgment de novo. Dep’t of
Revenue v. Agilent Techs., Inc., 2019 CO 41, ¶ 15, 441 P.3d 1012, 1016. Summary
19
judgment is only proper when “the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.” C.R.C.P. 56(c); accord Agilent Techs., Inc.,
¶ 15, 441 P.3d at 1016.
¶41 In considering whether summary judgment is appropriate, a court grants
the nonmoving party the benefit of all favorable inferences that may reasonably
be drawn from the undisputed facts and resolves all doubts against the moving
party. Agilent Techs., Inc., ¶ 15, 441 P.3d at 1016. In responding to a properly
supported summary judgment motion, however, the nonmoving party may not
rest on mere allegations or demands in its pleadings but rather must provide
specific facts demonstrating a genuine issue for trial. Id.
¶42 Summary judgment is a drastic remedy, and it should only be granted when
it is clear that the applicable legal standards have been met. Westin Operator, LLC v.
Groh, 2015 CO 25, ¶ 21, 347 P.3d 606, 611.
2. Principles of Contract Interpretation
¶43 Contract interpretation also presents a question of law that we review de
novo. Klun v. Klun, 2019 CO 46, ¶ 18, 442 P.3d 88, 92. In construing a contract, we
interpret the contract in its entirety, seeking to harmonize and give effect to all of
its provisions so that none will be rendered meaningless. Copper Mountain, Inc. v.
20
Indus. Sys., Inc., 208 P.3d 692, 697 (Colo. 2009). Our primary goal in contract
interpretation is to determine and give effect to the intent of the parties. Klun, ¶ 18,
442 P.3d at 92. We determine the parties’ intent primarily from the language of
the instrument itself. Id. When a written contract is complete and free from
ambiguity, we will conclude that it expresses the intent of the parties, and we will
enforce it according to its plain language. Id. In ascertaining whether provisions
of an agreement are ambiguous, we review the instrument’s language and
construe it consistent with the plain and generally accepted meaning of the words
employed. Id. In addition, “[w]hen parties are engaged in a trade or technical
field, ‘[u]nless a different intention is manifested . . . technical terms and words of
art are given their technical meaning when used in a transaction within their
technical field.’” Bledsoe Land Co. v. Forest Oil Corp., 277 P.3d 838, 843 (Colo. App.
2011) (quoting Restatement (Second) of Contracts § 202(3)(b) (Am. Law. Inst.
1981)); see also Flying J Inc. v. Comdata Network, Inc., 405 F.3d 821, 833–34 (10th Cir.
2005) (considering the “specialized meaning of ‘cleared’ in the financial industry”
when interpreting a contract between providers of financial services).
¶44 Contract terms are ambiguous when they are reasonably susceptible of
more than one interpretation. Klun, ¶ 19, 442 P.3d at 92. The mere fact that the
parties interpret the agreement differently, however, does not alone establish an
ambiguity in the agreement. Id. Absent such ambiguity, we will not look beyond
21
the four corners of the agreement to determine the meaning that the parties
intended. Id.
3. The Inclusion Agreement
¶45 Jacobs and PFWD agree that paragraph 8 of the Inclusion Agreement is
unambiguous, but they disagree as to the meaning of its terms. That paragraph
provides, in pertinent part:
The Water District shall add the Existing Ponds to its plan for augmentation
as augmented structures, and shall provide replacement/augmentation water
sufficient to maintain the Existing Ponds at a full stage, and to augment
depletions resulting from surface evaporation . . . . The Existing
Ponds will be operated consistent with the terms and conditions of
the augmentation plan amendment, which shall be consistent with
this Paragraph 8, and no additional ponds may be constructed on the
Property without the Water District’s prior written consent. Excepting
provision of augmentation water as provided in this Paragraph 8 and the
obtaining of a decree from the Division 2 W[a]ter Court allowing the District
to do the same, nothing in this Agreement shall require or otherwise obligate
the Water District, at any time, or for any other purpose, to provide fill or
re-fill water to the Existing Ponds . . . .
(Emphases added.)
¶46 The evidence in the summary judgment record established that “at a full
stage” is a term of art. Specifically, the water commissioner explained that in the
field of water administration, when a document describes a duty to maintain a
storage vessel “at a full stage,” this means that the vessel has “already been full or
legally filled and typically an augmentation plan or other source that can legally
be used to maintain it full replaces the evaporative losses of a pond.” This view
22
was fully consistent with the terms of the amended augmentation plan, which, as
paragraph 8 of the Inclusion Agreement makes clear, governed the ponds’ use.
Indeed, as noted above, PFWD’s application for the amendment to its
augmentation plan noted that PFWD was not requesting new water storage rights
for the ponds but rather was simply proposing to replace evaporative losses from
them.
¶47 Jacobs offered no law or evidence to the contrary. Instead, relying on his
subjective view as to what the term “at a full stage” meant, he merely noted his
disagreement with the commissioner’s testimony. This disagreement alone,
however, is insufficient to establish either that the Inclusion Agreement is
ambiguous or that we should refuse to apply the generally accepted meaning of
the term “at a full stage.” See Klun, ¶ 19, 442 P.3d at 92 (noting that the mere fact
that the parties interpret an agreement differently does not alone establish an
ambiguity in the agreement); Agilent Techs., Inc., ¶ 15, 441 P.3d at 1016 (noting that
in responding to a properly supported summary judgment motion, the
nonmoving party may not rest on mere allegations in its pleadings but must
provide specific facts demonstrating a genuine issue for trial); Bledsoe Land Co.,
277 P.3d at 843–45 (applying the generally accepted meaning of the term
“completion of a well” in a dispute regarding an oil and gas lease when the parties
manifested no intent to redefine that term).
23
¶48 In light of the foregoing, we conclude that paragraph 8 of the Inclusion
Agreement is unambiguous, and applying that provision’s plain language here,
we further conclude that PFWD was obliged to replace only evaporative losses,
and not to provide fill or re-fill water for the ponds after they had been drained.
Indeed, paragraph 8 itself makes clear that nothing in the Inclusion Agreement
“shall require or otherwise obligate the Water District, at any time or for any other
purpose, to provide fill or re-fill water to the Existing Ponds.” Jacobs’s
interpretation, in contrast, would render this provision meaningless. We,
however, may not adopt such a construction. See Copper Mountain, Inc., 208 P.3d
at 697.
¶49 For these reasons, we conclude, as a matter of law, that the Inclusion
Agreement did not provide Jacobs with a legal fill and re-fill source for the ponds
as he contends. Nor did it obligate PFWD to augment depletions from Jacobs’s
ponds beyond evaporative losses. We thus further conclude that the water court
properly granted PFWD’s motion for partial summary judgment. And because
the court correctly determined that the Inclusion Agreement did not establish the
return flow credits or substitute water supply plan that the 2016 Order demanded,
we conclude that the water court correctly determined, as a matter of law, that
Jacobs had not complied with that Order, thereby warranting summary judgment
on the Engineers’ claims as well.
24
¶50 In reaching these conclusions, we decline Jacobs’s invitation to consider the
various redlined drafts of the Inclusion Agreement exchanged between the parties
before that Agreement was signed. As noted above, the parties all agreed—as do
we—that paragraph 8 of the Inclusion Agreement is unambiguous. Accordingly,
we will not look beyond the Agreement’s four corners to determine the meaning
intended by the parties. See Klun, ¶ 19, 442 P.3d at 92.
C. Civil Penalties
¶51 Jacobs next contends that the water court erred in imposing civil penalties
on him and in determining that he was in violation of the 2016 Order for 460 days.
Specifically, he asserts that under section 37-92-503(6)(a)(II), only improper
diversions are subject to civil penalties, but that the improper storage of water is
not. He further contends that if a penalty was authorized, then only his initial fill
of the ponds was a violation and the imposition of a $92,000 penalty for this
one-time misconduct constitutes an excessive penalty in violation of the Colorado
and United States Constitutions. We disagree with each of these contentions.
1. Standard of Review
¶52 Jacobs’s argument requires us to interpret several statutory provisions. We
review questions of statutory interpretation de novo. Agilent Techs., Inc., ¶ 16,
441 P.3d at 1016. In construing a statute, we aim to effectuate the legislature’s
intent. Id. “In doing so, we look to the entire statutory scheme in order to give
25
consistent, harmonious, and sensible effect to all of its parts, and we apply words
and phrases in accordance with their plain and ordinary meanings.” UMB Bank,
N.A. v. Landmark Towers Ass’n, 2017 CO 107, ¶ 22, 408 P.3d 836, 840. Additionally,
“[w]e must avoid constructions that would render any words or phrases
superfluous or that would lead to illogical or absurd results.” Agilent Techs., Inc.,
¶ 16, 441 P.3d at 1016. If the statutory language is clear, we will apply it as written,
and we need not resort to other rules of statutory construction. Id.
2. Storage as Diversion
¶53 Jacobs argues that section 37-92-503(6)(a)(II), which authorizes the
imposition of civil penalties in certain circumstances, only applies to illegal
diversions of surface water, as opposed to the illegal storage of such water, and
therefore the water court improperly assessed civil penalties against him.
Specifically, his argument is as follows: Section 37-92-503(6)(a)(II) only authorizes
civil penalties against persons who divert water contrary to a valid order of the
State Engineer. Subsections 37-92-502(2) and -502(3), however, distinguish
between orders related to diversions (-502(2)) and orders related to releases of
stored water (-502(3)). Accordingly, the penalties provision in section
37-92-503(6)(a)(II), which refers to one who diverts water, applies only to
violations of orders issued under subsection -502(2) and not to violations of orders
26
issued under subsection -502(3), as the 2016 Order here was. We are not persuaded
by this argument.
¶54 Section 37-92-503(6)(a)(II) provides, “Any person who diverts surface water
contrary to a valid order of the state engineer or a division engineer issued pursuant
to section 37-92-502 shall forfeit and pay a sum not to exceed five hundred dollars
for each day such violation continues.” (Emphasis added.) This provision, on its
face, applies to any diversion of surface water contrary to a valid order of the State
or Division Engineer issued pursuant to section 37-92-502.
¶55 “Diversion” or “divert” is defined, in pertinent part, as “removing water
from its natural course or location, or controlling water in its natural course or
location, by means of a control structure . . . or other structure or device.”
§ 37-92-103(7). “[T]o effect a diversion under the statute, water either must be
removed or it must be controlled.” City of Thornton ex rel. Utils. Bd. v. City of Fort
Collins, 830 P.2d 915, 930 (Colo. 1992). Moreover, “[a] dam certainly qualifies as a
structure or device.” Id.
¶56 Here, it is undisputed that the 2016 Order issued to Jacobs was issued
pursuant to section 37-92-502. Moreover, the evidence in the summary judgment
record shows that Jacobs retained and controlled surface water. Specifically, the
record shows that the ponds have continuously controlled water in its natural
course or location by means of a reservoir and dams, which are structures or
27
devices encompassed within the statutory definition of diversion. See City of
Thornton, 830 P.2d at 930. Accordingly, by definition, Jacobs diverted surface
water contrary to a valid order of the Division Engineer pursuant to section
37-92-502. Thus, under the plain language of section 37-92-503(6)(a)(II), the
imposition of civil penalties was proper.
¶57 To conclude otherwise and to adopt Jacobs’s construction of section
37-92-503(6)(a)(II) would have us draw a distinction between illegal diversions
and illegal storage of water that the statute does not make. To the contrary, as
noted above, the statute subsumes violations of all orders issued pursuant to
section 37-92-502, and that section includes both illegal diversions and illegal
storage of surface water. Moreover, distinguishing between the two for purposes
of the civil penalties provision would lead to absurd results because under such a
construction, no penalties could ever be imposed on a party who stores water
illegally, no matter how long the party does so. We, however, must avoid such
absurd results. Agilent Techs., Inc., ¶ 16, 441 P.3d at 1016.
¶58 We are likewise unpersuaded by Jacobs’s assertion that, if penalties may
properly be assessed here, then only his initial fill constituted a violation of the
2016 Order, and therefore he was only in violation of the Order for one day.
Jacobs’s argument simply ignores the fact that for 460 days, he did not prepare and
execute a plan for draining the ponds, nor did he provide for legally obtained
28
return flow credits from PFWD or apply to the State Engineer’s office for approval
of a substitute water supply plan. Jacobs further ignores the undisputed fact that,
continually since 1999, there has been a call for water administered by the
Engineers on the Arkansas River and that no “free river” conditions existed in 2014
or later that would have allowed the ponds to fill without depriving vested water
rights of water to which they were entitled under decreed priorities. Accordingly,
for every day that Jacobs did not release the water as he was ordered to do, he
injured such decreed water rights.
¶59 Lastly, we are unpersuaded by Jacobs’s argument that the $92,000 penalty
constitutes an excessive penalty in violation of the Colorado and United States
Constitutions.
¶60 A penalty is constitutionally excessive if it is grossly disproportionate to the
gravity of the underlying offense. Colo. Dep’t of Labor & Emp’t v. Dami Hosp., LLC,
2019 CO 47M, ¶ 29, 442 P.3d 94, 101. In assessing proportionality, a court should
consider “whether the gravity of the offense is proportional to the severity of the
penalty, considering whether the fine is harsher than fines for comparable offenses
in this jurisdiction or than fines for the same offense in other jurisdictions.” Id. at
¶ 38, 442 P.3d at 103. In addition, a court should consider the regulated
individual’s or entity’s ability to pay. Id. And “[w]hen a fine is imposed on a per
diem basis, with each day constituting an independent violation, the evaluation of
29
whether a fine is excessive must be done with reference to each individual daily
fine.” Id. at ¶ 36, 442 P.3d at 103.
¶61 Here, section 37-92-503(6)(a)(II) specifically authorizes the Engineers to levy
penalties of up to $500 “for each day such violation continues.”
§ 37-92-503(6)(a)(II). Thus, we evaluate whether the penalties imposed are
excessive on the basis of the individual daily imposition. Dami Hosp., ¶ 36,
442 P.3d at 103. For several reasons, we conclude that the $200 daily penalty that
the water court imposed here was not unconstitutionally excessive.
¶62 First, the statutory maximum penalty is $500 per day, and the daily penalty
that the water court levied was well below that authorized maximum.
§ 37-92-503(6)(a)(II). Moreover, the $200 daily penalty appears to be
commensurate with penalties levied for comparable conduct in Colorado. For
example, section 37-92-503(6)(a)–(c) lists the civil penalties for violations of a
variety of orders issued by the State Engineer, and each of those penalties is
similarly capped at a maximum of $500 per day.
¶63 Second, the record here shows that the $200 per day penalty was not grossly
disproportionate to the gravity of the underlying offense. Dami Hosp., ¶ 29,
442 P.3d at 101. As noted above, there has been a continual call for water on the
Arkansas River since 1999. Accordingly, for each day that Jacobs continued
storing water in violation of the 2016 Order, he injured decreed water rights. In
30
addition, during part of the time in which Jacobs was illegally storing the water at
issue, Colorado was in the midst of a severe drought. Particularly in this context,
and given the over-appropriated nature of the stream system, we, like the water
court, view Jacobs’s failure to comply with the 2016 Order for as long as he did to
constitute a serious violation warranting substantial penalties. For these reasons
as well, we believe that the penalties imposed were commensurate with the
gravity of Jacobs’s violation.
¶64 Third, Vaughn v. People ex rel. Simpson, 135 P.3d 721 (Colo. 2006), on which
Jacobs relies, does not assist him. In Vaughn, 135 P.3d at 722, a well on Vaughn’s
property had pumped approximately 6.2 million gallons of water after the division
engineer had issued an order requiring Vaughn to discontinue diverting from that
well. Division engineers calculated that if the well had been pumping twenty-four
hours per day, then it would have taken 7.25 days to divert that amount of water.
Id. Based on the foregoing, the water court imposed a penalty of $200 per day for
each of these seven days, resulting in total penalties of $1,400, and we upheld those
penalties. Id. at 721, 725.
¶65 Notwithstanding Jacobs’s assertions to the contrary, Vaughn did not involve
a $1,400 penalty for illegally pumping over a 153-day span. Rather, as noted
above, it involved $1,400 in penalties for an approximately seven-day violation.
Accordingly, Vaughn does not support Jacobs’s assertion that the penalties here
31
were grossly disproportionate. To the contrary, the $200 per day penalty imposed
in Vaughn matches the daily penalty imposed here. The only difference is that
Vaughn’s violation occurred over seven days, whereas Jacobs’s violation spanned
460 days. We therefore perceive no conflict between Vaughn and the water court’s
order in this case.
¶66 Finally, Jacobs does not dispute his ability to pay the $200 daily penalty.
Nor does he argue that the $200 penalty is excessive in comparison to penalties set
forth in similar statutes in this jurisdiction or in other jurisdictions.
¶67 Accordingly, we conclude that the water court properly assessed penalties
in the amount of $200 per day for the 460 days in which Jacobs was in violation of
the 2016 Order, and we further conclude that these penalties were not
constitutionally excessive.
D. Appellate Attorney Fees
¶68 Finally, both the Engineers and PFWD assert that they are entitled to an
award of the reasonable attorney fees that they incurred in this appeal. We agree.
¶69 With respect to the Engineers’ request for appellate fees, section
37-92-503(6)(e) provides, in pertinent part:
The state engineer and the particular division engineer . . . shall apply
to the water judge of the particular division to recover the civil
penalties specified in paragraphs (a), (b), and (c) of this subsection
(6) . . . . If the state engineer and the division engineer prevail, the
court shall also award the costs of the proceeding including the
allowance of reasonable attorney fees.
32
¶70 Here, for the reasons discussed above, the Engineers prevailed in recovering
the civil penalties that they sought. Accordingly, under the plain language of the
above-quoted statute, we conclude that the Engineers are entitled to recover their
costs, including reasonable appellate attorney fees.
¶71 With respect to PFWD’s request for appellate fees, the Inclusion Agreement
provides:
Attorney’s Fees. In the event of any dispute between the parties
concerning this Agreement or in the event of any action to enforce this
Agreement or to collect damages on account of any breach of the
obligations provided for herein, the prevailing party shall be entitled to
recover from the other party all costs and expenses, including reasonable
attorney’s fees, incurred in such litigation as well as all additional such
costs and expenses incurred in enforcing and collecting any judgment
rendered in such action.
(Emphasis added.)
¶72 Because this case involved a dispute concerning the Inclusion Agreement as
well as an effort to enforce that Agreement, and because PFWD was
unquestionably the prevailing party, we conclude that under the plain terms of
the above-quoted contractual fee-shifting provision, PFWD is also entitled to an
award of the reasonable attorney fees that it incurred in this appeal.
¶73 Pursuant to C.A.R. 39.1, we exercise our discretion to remand this case to
the water court for a determination of the amount of reasonable appellate fees to
be awarded.
33
III. Conclusion
¶74 For the foregoing reasons, we conclude that the water court properly
exercised its discretion in certifying its summary judgment orders pursuant to
C.R.C.P. 54(b), and, thus, this appeal is properly before us. We further conclude
that the water court properly granted both the Engineers’ summary judgment
motion and PFWD’s motion for partial summary judgment because the summary
judgment record established, as a matter of law, that Jacobs did not (1) comply
with the 2016 Order to cease and desist his storage of state waters in the ponds;
(2) establish that an Inclusion Agreement between him and PFWD provided for
legally obtained return flow credits; or (3) apply to the State Engineer for a
substitute water supply. Finally, we conclude that the water court properly
imposed civil penalties under section 37-92-503(6)(a)(II).
¶75 Accordingly, we affirm the judgment of the water court, conclude that both
the Engineers and PFWD are entitled to an award of the reasonable attorney fees
that they incurred in this appeal, and remand this case to allow the water court to
determine the amount of reasonable fees to be awarded.
JUSTICE SAMOUR concurs in part and concurs in the judgment in part.
34
JUSTICE SAMOUR, concurring in part and concurring in the judgment only in
part.
¶76 With one exception, I agree with the majority opinion in its entirety. The
exception is the majority’s reliance on Colo. Dep’t of Labor & Emp’t v. Dami Hosp.,
LLC, 2019 CO 47M, 442 P.3d 94. Under Dami, when, as here, “a fine is imposed on
a per diem basis, with each day constituting an independent violation, the
evaluation of whether a fine is excessive must be done with reference to each
individual daily fine.” Id. at ¶ 36, 442 P.3d at 103. I wrote separately there because
I disagreed “that the proportionality analysis must be conducted with regard to
each individual per diem fine, as opposed to the total” or aggregate fine. Id. at
¶ 40, 442 P.3d at 104 (Samour, J., concurring in part and dissenting in part). I’m
sticking with my conclusion in Dami. Thus, in determining whether the fine
imposed on Jacobs is excessive in violation of the United States and Colorado
Constitutions, I would focus on the $92,000 aggregate fine instead of the $200 per
diem fine.
¶77 Rather than dissent in part, however, I concur in the judgment only in part
because I would find that Jacobs’s aggregate fine is proportional. For the
persuasive reasons articulated by the majority in paragraphs 62 to 65 of its opinion,
I would find that the $92,000 fine, while significant, is nevertheless constitutional.
¶78 Accordingly, I concur in part and concur in the judgment only in part.
1