Badger v. Brooklyn Canal Co.

• Decision Date: 23 July 1996
• Docket Number: No. 940623,940623
• Parties: Wesley BADGER, Ray Greenwood, Clay C. Paxton, Utah Land Inc., Kip Nielsen, John M. Lefevre, Thomas M. Lefevre, Susie Barney, Lorene B. Leak, Albert Lefevre, Grant Lefevre, Max A. Hintze, Carol Breinholt, Cornell Henrie, Mary Ann Curtis, and Jerry B. Lewis, Plaintiffs and Appellants, v. BROOKLYN CANAL COMPANY and Robert L. Morgan, State Engineer, Defendants and Appellees.
• Court: Utah Supreme Court

Page 745

922 P.2d 745

Wesley BADGER, Ray Greenwood, Clay C. Paxton, Utah Land Inc., Kip Nielsen, John M. Lefevre, Thomas M. Lefevre, Susie Barney, Lorene B. Leak, Albert Lefevre, Grant Lefevre, Max A. Hintze, Carol Breinholt, Cornell Henrie, Mary Ann Curtis and Jerry B. Lewis, Plaintiffs and Appellants, v. BROOKLYN CANAL COMPANY and Robert L. Morgan, State Engineer Defendants and Appellees.

No. 940623.

Supreme Court of Utah.

July 23, 1996.

Paul M. Durham, G. Richard Hill, J. Mark Gibb, Salt Lake City, for plaintiffs.

Ken Chamberlain, Richfield, for Brooklyn Canal Co., Jan Graham, Att'y Gen., Michael M. Quealy, John H. Mabey, Jr., Asst. Att'ys Gen., Salt Lake City, for State Engineer.

STEWART, Associate Chief Justice:

This case is before us on appeal from the district court's review of a decision issued by the State Engineer. The State Engineer approved Brooklyn Canal Company's ("Brooklyn") application for a change in its diversion point on the Sevier River. Incident to an application for de novo review, the district court granted Brooklyn's motion for summary judgment against various plaintiffs who asserted claims either as shareholders in Brooklyn or as possessors of private well water rights and who collectively claimed that the change in diversion would be harmful to the public welfare.

I. PROCEDURAL BACKGROUND

The dispute at issue arises out of a decision by the Brooklyn Canal Company to change its method of agricultural irrigation from a "flood" method to a high-pressure sprinkler method. Brooklyn is a nonprofit mutual water corporation formed for the purpose of distributing water to its shareholders in Sevier County. Brooklyn has traditionally distributed its water by means of the Brooklyn Canal to individual shareholders who have employed ditches and furrows to water their crops. ¹ The canal draws most of Brooklyn's water right directly from the Sevier River, but a small portion has also been drawn from several artesian wells. In early 1992, it was proposed that the irrigation method be changed. ² At a shareholders' meeting held on February 18, 1992, the plan to switch to a pressurized sprinkler method was approved, with 72% of the shareholders present voting in favor of it. ³

Switching to a pressurized sprinkler system apparently necessitated transferring water to an underground pipe linked to a diversion point several miles upstream from the diversion point that supplies the Brooklyn Canal. The State Engineer must approve any adjustment in a point of diversion of a water right. Consequently, Brooklyn filed a change application for approval of the proposed upstream diversion point. In that change application, Brooklyn proposed to divert its entire water right of 31.27 cubic feet per second from the Sevier River at the new upstream diversion point. Brooklyn has conceded that this change would require abandonment of the artesian wells. ⁴

Several objections to the proposed change were filed. The State Engineer conducted a hearing on May 11, 1993, in Richfield, Utah. After receiving evidence submitted by Brooklyn and the various protestants, the State Engineer issued a memorandum decision approving the change in Brooklyn's diversion point. In that decision, the State Engineer referred to two concerns expressed by some of the protestants. First, they were concerned about the cost of constructing the new distribution system and purchasing the high pressure sprinkler equipment required under the new method, and second, they were concerned that they would be deprived of artesian sources of warm water for stock watering during the winter months. The State Engineer considered these arguments and ruled that "[Brooklyn] has a valid right with which to make this change and that if the change is approved with conditions, downstream rights will not be impaired." The State Engineer did not directly address the protestants' concerns with respect to winter stock watering except to opine "that the applicant has the responsibility to deliver water to its stockholders."

A number of the protestants then filed for de novo review before the district court in accordance with Utah Code Ann. §§ 73-3-14 (1989) and 63-46b-15 (1989). Pursuant to § 73-3-14(2), the State Engineer was joined as a defendant. Relying solely on the pleadings, Brooklyn moved for summary judgment, asserting that plaintiffs had no standing as shareholders to contest Brooklyn's corporate decisions. ⁵ This motion was denied because the trial court was unsure about the status of various claimed water rights. Subsequent interrogatories revealed that some plaintiffs claimed that they possessed private well water rights that were apart from the artesian well water rights held by Brooklyn and unrelated to any rights they held as shareholders in Brooklyn. ⁶ These plaintiffs ("private well plaintiffs" ⁷) asserted that Brooklyn's plan would lower the water table in the region of their wells, thus impairing their rights.

Brooklyn then submitted a second motion for summary judgment, asserting again that the shareholder plaintiffs had no standing to bring the suit and that the available facts demonstrated that the rights of the private well plaintiffs could not be adversely affected by simply changing the diversion point. In support of that proposition, Brooklyn submitted the affidavit of Myron Madsen, President of the Brooklyn Canal Company, which stated that the existing point of diversion was above all plaintiffs' lands and wells and that the new diversion point would be several miles further upstream and could not therefore affect downstream rights.

Responding to Brooklyn's second motion, the shareholder plaintiffs submitted several affidavits which they authored. In those affidavits, a number of shareholders complained that they could not afford to purchase the new equipment required, that the sprinkler system would preclude raising corn silage for dairy cows and cattle feed, and that they would be deprived of artesian sources of warm water for stock watering and domestic use during the winter months. They also argued that the proposed changes would harm the public interest by removing the Brooklyn Canal and its connecting ditches as potential flood control devices. In addition, some of the affidavits expressed concern about the law firm representing Brooklyn. The affiants claimed that various partners of Olsen, McIff & Chamberlain had represented some plaintiffs in previous matters and questioned the propriety of that firm's participation.

Brooklyn then submitted a reply brief accompanied by an affidavit executed by an expert witness, Gerald B. Robinson, Jr., on the issue of the impact of the proposed change on the water table supplying plaintiffs' private wells. Plaintiffs subsequently moved to disqualify Brooklyn's counsel and to strike the Robinson affidavit or, in the alternative, for leave to file additional affidavits and an additional responsive brief.

The trial court held a hearing on December 14, 1994, and ruled on all pending motions. Ruling from the bench, the court denied plaintiffs' motion to disqualify Brooklyn's counsel and, without explanation, the motion to strike the Robinson affidavit. The court also granted Brooklyn's summary judgment motion, subsequently issuing a written order on motions and entry of summary judgment stating the grounds upon which it had based its decision. See Utah R.Civ.P. 52. That order stated that the court had granted the motion because (1) the shareholder plaintiffs did not have "standing" to protest Brooklyn's change application; (2) switching methods of irrigation does not require a change application; and (3) no material facts were in dispute indicating any reason to believe the change in point of diversion would impair the private well plaintiffs' rights. Plaintiffs now appeal the grant of summary judgment and the rulings respecting the motions to strike and to disqualify counsel.

In reviewing a district court's entry of summary judgment, we view the facts and inferences in the light most favorable to the nonmoving party. Winegar v. Froerer Corp., 813 P.2d 104, 107 (Utah 1991). We review the trial court's grant of summary judgment for correctness, according no deference to its conclusions of law. Plateau Mining Co. v. Utah Div. of State Lands & Forestry, 802 P.2d 720, 725 (Utah 1990).

We will first separately discuss the shareholder and the private well plaintiffs' claims of impairment of their vested rights. We will then briefly address the collective claims regarding detriment to the public welfare and the motion to disqualify Brooklyn's counsel.

II. IMPAIRMENT OF THE SHAREHOLDER PLAINTIFFS' RIGHTS

With respect to their claims of vested rights, the shareholder plaintiffs assert that they possess "vested real property rights which are represented by their individual shares of water stock." They thus claim to hold an independent water right apart from their status as mere shareholders in a mutual water corporation. For support, the shareholder plaintiffs rely upon Salt Lake City Corp. v. Cahoon Irrigation Co., 879 P.2d 248, 252 (Utah 1994), in which we addressed the issue of whether stock in a mutual water corporation constituted a certificated security for purposes of Utah Code Ann. § 70A-8-102(1)(a), and we held that it did not. Id. at 252. In so holding, we noted that the formation of a mutual irrigation corporation "pooled [preexisting water] rights and created a vehicle for the distribution of the stockholder-owned water." Id. The shareholder plaintiffs argue that Cahoon supports their claim that they possess independent water rights entitling them to contest a change application before the State Engineer.

Our statement in Cahoon, however, must be read not only in the context of the question it resolved, but in light of other--and to the present dispute more pertinent--case law. Cahoon addressed the question of whether stock in a mutual water corporation more closely resembled a...