No. 86SA129Supreme Court of Colorado.
Decided May 9, 1988. Opinion modified and, as modified, Rehearing Denied June 6, 1988.
Appeal from District Court, Water Division No. 2 Honorable John R. Tracey, Judge
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[EDITORS’ NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]Page 364
Davis, Graham, Stubbs, Clyde O. Martz, Gail L. Wurtzler, for Appellants/Cross-Appellees.
F. Henry Habicht II, Assistant Attorney General, Robert L. Klarquist, Department of Justice; Robert N. Miller, United States Attorney, John R. Hill, Department of Justice, Land Natural Resources Division, for Appellee United States of America.
Sherman Howard, Gary L. Greer, G. Sonny Cave, for Appellee Rock Creek Park Association.
Duane Woodard, Attorney General, Charles B. Howe, Deputy Attorney General, Richard H. Forman, Solicitor General, Wendy C. Weiss, First Assistant Attorney General, for Appellee State Division Engineer.
Fischer, Brown, Huddleson Gunn, P. C., Ward H. Fischer, Stephen J. Jouard; Evans and Briggs, Paul V. Evans, G. Scott Brigs, for Appellee/Cross-Appellant Rock Creek Mesa Water District.
EN BANC
JUSTICE ERICKSON delivered the Opinion of the Court.
[1] Appellants John and Frances May and Rock Creek Canyon Corporation applied in Water Division No. 2 for a conditional decree for storage of 462 acre-feet of water in a basin hydraulically separate from Rock Creek, the source of supply, and, in conjunction with a proposed change in use of water rights and plan of augmentation, a determination under section 37-92-305, 15 C.R.S. (1973 1984 Supp.), that proposed alterations in the use of water in the separate basin would not impair vested rights in Rock Creek. Appellants proposed to use the water as (1) a domestic supply for a new subdivision on the May property; (2) a domestic supply of 75 acre-feet under a continuing contract for water service to the Rock Creek Mesa Water District (Mesa); and (3) a reserve of 50 acre-feet in storage for domestic and campground uses on the May property. Statements of opposition were filed by the United States and Rock Creek Park Association claiming that the proposed storage and use of water in the separate basin would alter the rate, timing, and quantity of diversions from Rock Creek. Mesa filed an objection asserting that the continuing water service contract provided for more water than the annual 75 acre-feet obligation that appellants recognized in their application. [2] In a pretrial order dated October 11, 1985, the District Court for Water Division Number 2 determined that the contract between the Mays and Mesa unambiguously obligated the Mays to provide only 75 acre-feet of water annually. After trial, the court issued an order determining historic diversions and the amount of water available under the Mays’ water rights decrees and denying appellants’ application for a change in use and a plan of augmentation since the proposed change in use would injure vested rights of other appropriators. Following the order, appellants proposed terms and conditions under section 7-92-305 to avoid injury to other appropriators. The trial court rejected the proposals finding that they were insufficient to prevent injury to other users. We affirm.Page 365
I. [3] Factual Background
[4] The Mays own and operate a campground and recreational park in El Paso County, Colorado, west of the Fort Carson Military Reservation. The property consists of campgrounds, a museum and curio shop, a rally field, and five reservoirs used for fishing and swimming. They own the following water rights for commercial, recreational, piscatorial, municipal, irrigation, and domestic uses: (1) water rights decree to May well 1 for 1.9 cubic-feet-per-second (cfs); (2) water rights decree to May well 2 for 2.5 cfs; (3) water rights decree to May well 3 for 2.2 cfs; (4) water rights decree to the steer well for .103 cfs and for .033 cfs only for domestic uses; and (5) water storage rights decrees totalling 67.647 acre-feet for the five reservoirs (includes conditional decrees for storage of 33.513 acre-feet). The May wells tap an alluvial formation that is hydraulically and hydrologically connected to the flow of Rock Creek, a naturally occurring stream. To irrigate 20 acres of land, the Mays also own six percent of the waters decreed to the Gale ditch. The headgate of the ditch is located on Rock Creek downstream of the steer well and upstream of the other decreed rights.
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for the May well 1 decree; and (4) a determination by the water court that appellants are not required to provide augmentation water because no vested water right will be injured by the proposal.
[8] Statements of opposition to the application were filed by Rock Creek Mesa Water District, the United States, the City of Colorado Springs, and Rock Creek Park Association on its own behalf and for numerous other appropriators from Rock Creek. Prior to trial, Colorado Springs withdrew its statement of opposition. In their statements, the United States and Rock Creek Park Association claimed that the proposed storage and use of water in the unnamed basin would alter the rate, timing, and quantity of diversions from Rock Creek. Mesa’s objection asserted that its contract with the Mays entitled it to more water than the annual 75 acre-feet obligation that appellants recognized in their application.[9] Resolution by the District Court
[10] Prior to trial, appellants filed a motion in limine for interpretation of their contract with Mesa. In a pre-trial order, the parties stipulated that the sole agreements between the Mays and Mesa were a water sales contract dated August 19, 1964, an addendum to the water sales contract dated October 25, 1976, and a first revision to the addendum dated June 2, 1982. By order dated October 11, 1985, the court determined as a matter of law that the agreements obligated the Mays to provide 75 acre-feet of water annually to Mesa and 12 million gallons of storage capacity.
411.81 acre-feet. Subtracting from that amount the amounts necessary for the continued campground and domestic uses (40 acre-feet), the amount obligated to Rock Creek Mesa Water District (75 acre-feet), and the Applicant’s portion of
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the Gale Ditch to be used for irrigation of common area green belts in the proposed development (12.66 acre-feet), there remains less than 284.15 acre-feet available for the proposed project. . . .”
[14] (Emphasis added.) [15] The water court determined that total annual demand for the proposed project was 384 acre-feet based on annual project requirements of 260 acre-feet for municipal and commercial use; 49 acre-feet of evaporation and seepage loss from the proposed reservoirs; and 75 acre-feet to meet contractual commitments to Mesa. Replacement requirements for the reservoirs were estimated not to exceed 334 acre-feet in any year. Assuming full depletion of the reservoir, the court concluded that the maximum requirement in any year would be 846 acre-feet, the aggregate of 384 acre-feet of annual demand and 462 acre-feet of reservoir storage. [16] Because the amount of water historically used by the Mays was insufficient to avoid injury to other appropriators, the court denied the proposed change in use and plan of augmentation and the conditional storage right for 462 acre-feet of water.[2] Southeastern Colo. Water Conservancy Dist. v. City of Florence, 688 P.2d 715 (Colo. 1984) Hallenbeck v. Granby Ditch Reservoir Co., 160 Colo. 555, 420 P.2d 419(1966); § 37-92-305(3), 15 C.R.S. (1973 1984 Supp.). The water court increased the Mays’ existing storage rights by 8.463 acre-feet. The Mays’ application for well 1X was approved, provided that the combined production from wells 1A and 1X is not in excess of 178 acre-feet in any year and that each well is used to supply only the general ranch system. [17] On February 19, 1986, the water court issued amended findings of fact, conclusions of law and decree. In the amendments to the original order, the court rejected terms and conditions proposed by the Mays under section 37-92-305 to avoid injury to other appropriators. The court also amended the findings of fact in the original order to reject the Mays’ records of the flow in the May ditch since the records were not deemed credible.
II.
[18] Mesa’s cross-appeal challenges the trial court’s finding that the Mays are only required to furnish Mesa with 75 acre-feet of water per year and provide storage capacity for 12 million gallons of water. The water sales contract dated August 19, 1964, between the Mays and Mesa contains the following provisions:
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[23] . . . . [24] “7. . . . Seller shall construct facilities for the usable storage of nine million gallons of water within sixty (60) days after completion of the water distribution facility contract, provided, that in the computation of such usable storage capacity present storage facilities shall be considered a portion of such capacity. They shall further construct usable storage capacity for a total (including storage already constructed) of 12,000,000 gallons storage at the time there are a minimum of 150 separate residential users served by Purchaser, and usable storage capacity for a total of 50,000,000 gallons of water at the time there are a minimum of 350 residential users served by Purchaser; provided, however, that the Sellers have one hundred (100) days to complete said storage after the 350th user begins using water from the system of Purchasers.” [25] In the 1976 addendum, the parties abrogated the limitation under paragraph 6 and made, inter alia, the following amendments to the water sales contract: [26] “2. Except to the extent herein expressly modified, said original agreement will remain in full force and effect. [27] “3. The District [Mesa] agrees to buy, and May agrees to sell, 70 acre feet of water per annum, as measured from the meter measuring the District’s taking of water into the District system; provided, however, that in periods of low water availability, available supplies shall be divided one-fourth (1/4) to May and three-fourths (3/4) to the District, as measured from the lowest elevation point of District diversion. [28] . . . . [29] “5. . . . The division of priorities shall be changed to a ratio of 3:1 in favor of the District; provided that the personal residences of May and the museum shall continue to be exempt from this limitation and entitled to absolute priority. [30] . . . . [31] “9. It has been contemplated by the parties that the water needs of May, for his personal residences and businesses, may be reasonably projected to as much as 25 acre-feet of water per year, and that the water needs of the District, as presently developed, are 70 to 75 acre-feet per year, to which may be added a potential growth factor of about 10% per year. . . . [32] “In spite of any inference placed upon any other language of this Addendum, it is here clearly stated to be the intent of this Addendum to provide that the parties hereto will share the first 100-acre-feet of available water on a `1 to May, 3 to District’ ratio. . . .[3] [33] (Emphasis added.) [34] The water court determined “as a matter of law that the provisions of the contract are not ambiguous as to the obligation of [the Mays] to provide in excess of 75 acre-feet of water per year to [Mesa], nor as to storage capacity enlargement by [the Mays].” [35] Mesa claims that the amended provisions of the contract entitle it to receive the greater of 75 acre-feet or three-quarters of all water produced during periods of water shortage. In nonshortage periods, Mesa asserts that, subject to the absolute priority given to the Mays’ personal residence and museum, it gets three-quarters, or at the least one-half, o all the water produced by the Mays. According to Mesa, the contractual language limits neither the Mays’ delivery obligations to 70 or 75 acre-feet nor the required storage capacity to 12Page 369
million gallons. The Mays contend that Mesa is only entitled to receive 70 acre-feet of water. We agree with the water court.
[36] The interpretation of a written contract is generally a question of law. Pepcol Mfg. Co. v. Denver Union Corp., 687 P.2d 1310 (Colo. 1984) Union Rural Elec. Ass’n v. P.U.C., 661 P.2d 247 (Colo. 1983). It is axiomatic that a contract must be construed to ascertain and effectuate the mutual intent of the parties. Pepcol Mfg. Co., 687 P.2d at 1314. The parties’ intent is determined primarily from the language of the instrument itself and extraneous evidence of intent is only admissible where there is an ambiguity in the terms of the agreement. Radiology Prof. Corp. v. Trinidad Area Health Ass’n, 195 Colo. 253,577 P.2d 748 (1978); McNichols v. City and County of Denver, 120 Colo. 380, 209 P.2d 910 (1949). Written contracts that are complete and free from ambiguity express the intention of the parties and will be enforced according to their plain language Radiology Prof. Corp., 195 Colo. at 256, 577 P.2d at 750; American Mining Co. v. Himrod-Kimball Mines Co., 124 Colo. 186, 235 P.2d 804 (1951). [37] In determining whether the provisions of an agreement are ambiguous, “the instrument’s language must be examined and construed in harmony with the plain and generally accepted meaning of the words employed, and reference must be made to all the provisions of the agreement.” Radiology Prof. Corp., 195 Colo. at 256, 577 P.2d at 750; Christmas v. Cooley, 158 Colo. 297, 406 P.2d 333 (1965). The fact that the parties have different opinions about the interpretation of the contract does not of itself create an ambiguity. Radiology Prof. Corp., 195 Colo. at 256-57, 577 P.2d at 750; Brunton v. International Trust Co., 114 Colo. 298, 164 P.2d 472 (1945). [38] After closely examining the amended water sales contract we agree with the water court that the instrument unambiguously requires the Mays to annually deliver no more than 75 acre-feet of water and to provide for no greater than 12 million gallons of storage. The provisions of the original sales agreement and the addendum unambiguously provide that the Mays are only required to deliver a limited quantity of water to Mesa and that the 1-to-3 appropriation ratio applies only during periods of low water availability and not to all waters owned by the Mays. Under paragraph 9 of the addendum, the clear intent of the parties is that the first 100 acre-feet of available water must be divided on a “1 to May, 3 to Mesa” ratio. Since the delivery obligation of the Mays is therefore fixed at 75 acre-feet, or less than 350 users, the required storage capacity is 12 million gallons under the clear language of paragraph 7 of the original agreement.[4] [39] The provisions relied on by Mesa, paragraph 1 of the original sales agreement and paragraph 9 of the addendum, do not demand a contrary interpretation. Since paragraph 9 of the addendum is a specific commitment concerning the amount of water sold under the contract, it has preference over the general language in paragraph 1. 4 S. Williston Williston on Contracts § 619, at 743-45 (W. Jaeger ed. 1961 1987 Supp.). Paragraph 9 provides that additional water may be added to the fixed delivery requirement to reflect growth. In the context of the agreement, paragraph 9 uses the words “may be” permissively and does not require the fixed delivery obligation to be increased each year to reflect growth. [40] We also find that the Mays’ interpretation of the agreement entitling Mesa to receive 70 acre-feet of water is unpersuasive. Although certain provisions of the addendum suggest a fixed delivery requirement of 70 acre-feet, the clear intent of the parties appearing in the principal entitlement clause, paragraph 9, must be given effect. Las Animas Consol. Canal Co. v. Hinderlider, 100 Colo. 508, 68 P.2d 564Page 370
(1937); see 4 S. Williston, supra at § 624, at 822.
[41] Accordingly, we affirm the water court’s interpretation of the water sales agreement between the Mays and Mesa.III.
[42] The Mays claim that the water court arbitrarily quantified the amount of water beneficially used to flow through the May reservoirs. On cross-examination, John May testified that a flow of .25 cfs through the May ditch was sufficient to sustain the fish in the reservoirs. Based on the testimony, the water court found that .25 cfs, or 179 acre-feet, was the maximum amount of water beneficially used to flow through the reservoirs and reduced the Mays’ entitlement from 257.85 acre-feet, the estimated historic use, to 179 acre-feet.[5]
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Accordingly, an appropriator cannot change the use of a water right if the change increases the historical use to the detriment of other appropriators. Danielson v. Kerbs Agric., Inc., 646 P.2d 363 (Colo. 1982); Weibert, 200 Colo. at 317, 618 P.2d at 1371-72; City of Westminster v. Church, 167 Colo. 1, 445 P.2d 52 (1968); Farmers Highline Canal Reservoir Co., 129 Colo. at 580, 272 P.2d at 634; § 37-92-305(9), 15 C.R.S. (1984 Supp.).[10] Historic use is measured by the amount of water applied to a beneficial use and the amount of return flow Danielson, 646 P.2d at 373; Farmers Highline Canal Reservoir Co., 129 Colo. at 585-86, 272 P.2d at 635; see Colo. Const. art. XVI, § 6.[11]
The requirement of noninjury protects the vested rights of junior appropriators to the continuation of stream conditions existing at the time of their respective appropriations. Orr, slip op. at 12-13; City of Westminster, 167 Colo. at 11-12, 445 P.2d at 57. When an appropriator of a water right exercises his privilege to change a water right, he risks requantification based on the amount of water applied to a beneficial use. Pueblo West Metro. Dist. v. Southeastern Colo. Water Conservancy Dist., 717 P.2d 955 (Colo. 1986); Danielson, 646 P.2d at 373; §37-92-305(3); see § 37-92-502(2), 15 C.R.S. (1984 Supp.) (division engineer shall order discontinuance of any diversion to the extent water is not used beneficially); see also Weibert, 200 Colo. at 316, 618 P.2d at 1371 (owner of water right is not entitled to waste water).
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IV.
[47] Having determined that the water court properly quantified amounts of water historically used by the Mays, we now review the denial of the Mays’ application for a change of water right and plan of augmentation and for a conditional decree for a new 462 acre-foot reservoir.[12] Section 37-92-305 provides in relevant part:
(1952). The applicant has the burden to present a plan which will prevent or compensate injury to other appropriators. Hallenbeck v. Granby Ditch Reservoir Co., 144 Colo. 485, 357 P.2d 358 (1960); Terliamis v. Cerise, 133 Colo. 329, 295 P.2d 224 (1956); see Weibert, 200 Colo. at 316, 618 P.2d at 1371 (applicants and protestants must be given opportunity to propose terms and conditions to prevent injury to other appropriators). [55] In this case, the water court’s factual finding that the proposed changes in the application would cause injury to other appropriators is supported by the record and must be upheld on review. Ackerman v. City of Walsenburg, 171 Colo. 304, 467 P.2d 267 (1970); Means, 138 Colo. at 220, 331 P.2d at 808 (1958); Farmers Highline Canal Reservoir Co. v. City of Golden, 129 Colo. 575, 272 P.2d 629 (1954); see § 37-92-305(9) (claim of water right only recognized to extent waters have been applied to beneficial use); see also Southeastern Colo. Water Conservancy Dist. v. City of Florence, 688 P.2d 715 (Colo. 1984) (conditional water decree only granted upon proof that water is available in sufficient quantities and will be diverted and that the project will be completed with diligence). [56] After the court found injury to other appropriators and denied the application, the Mays proposed the following terms and conditions pursuant to section 37-92-305(3): [57] “1. The reservoir and municipal reserve requested by Applicants will be reduced to reflect the quantity of water
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the Court finds available for change of use without injury. That amount is believed to be the 802 acre-feet set forth in Amended Finding No. 42, which represents the amount of maximum annual historic diversions available to Rock Creek Canyon Corporation after other present demands are subtracted.
[58] “2. To the extent Rock Creek Canyon Corporation requires and diverts water in excess of the amount authorized for municipal use and storage in the new reservoir, it will protect the rights of the United States by releases to Rock Creek of treated effluent water meeting Department of Health standards in amounts equivalent to excess diversions at the times when such excess diversions are made, provided that Rock Creek is then administered on a non-futile call basis. [59] “3. Applicants will protect Rock Creek Park Association water users from any adverse effect on their rights from Applicants’ change by maintaining a reserve in the new reservoir of an amount of water required to meet those users’ existing domestic uses. That water will be provided to Rock Creek Park residents to the extent their existing domestic wells, drilled or dug in accordance with the State Engineers’ regulations and registered with the State Engineer, fail to provide water in quantities required for existing domestic uses.” [60] In an order dated February 19, 1986, the water court rejected the proposals as insufficient to prevent injury because they were based on “an availability of 802 acre-feet, which is far in excess of the amount determined by the Court to be available.” The court found that “[t]here are no conditions under which Applicants can be allowed to divert all the amounts proposed and still prevent injury to vested water rights.” [61] The Mays contend that the court erred in not granting the application based on the proposed terms and conditions. According to the Mays, approval of the application was mandatory since the proposed terms and conditions prevent injury to other users by limiting diversions to amounts found by the water court to be available. We disagree. [62] In our view, the water court’s finding that injury to other appropriators was unavoidable is supported by the record. Due to a lack of credible evidence, the water court was unable to quantify actual historic use and had to determine, based upon incomplete power consumption records for well number 1 and pump tests for wells 1A, 1B, 2, and 3, the maximumpossible historic use for the Mays’ wells. The inability to accurately quantify historic use prevented the court from granting the application subject to terms and conditions that would avoid injury to other appropriators. To grant the application based on the Mays’ proposed terms and conditions would be tantamount to an enlargement of their rights and would place a heavy and serious burden on other appropriators. [63] Accordingly, we affirm the judgment of the water court.