Dallas Creek Water Co. v. Huey, 4

Citation933 P.2d 27
Case DateMarch 10, 1997
CourtSupreme Court of Colorado

Page 27

933 P.2d 27
21 Colorado Journal 354
Frank M. HUEY and Carol L. Huey; Samuel L. Ewing and Martha
L. Ewing; Robert N. Neff and Hella H. Neff; Esther C.
Lewis; Thomas P. Whelan and Marilyn P. Whelan; Louis V.
Schlosser and Sue A. Schlosser; South Ridgeway Partnership;
and Ken Knox, Division Engineer for Water Division No. 4, Appellees.
No. 96SA186.
Supreme Court of Colorado,
En Banc.
March 10, 1997.

Page 31

Patrick & Stowell, P.C., a Professional Corporation, Kevin L. Patrick, Brian L. Stowell, Scott C. Miller, Aspen, for Appellant.

Caloia, Houpt & Light, P.C., Jefferson V. Houpt, Sherry A. Caloia, Glenwood Springs, for Appellees.

Gale A. Norton, Attorney General, Martha Phillips Allbright, Chief Deputy Attorney General, Richard A. Westfall, Solicitor General, Jennifer L. Gimbel, Deputy Attorney General, Lee E. Miller, First Assistant Attorney General, Natural Resources Section, Denver, for State Engineer and Division Engineer, Water Division No. 4.

Justice HOBBS delivered the Opinion of the Court.

This appeal is from an order of the Water Court for Water Division No. 4 cancelling a conditional water right for purported failure of the owner or user thereof to file timely an application for a finding of reasonable diligence. Although the application was filed by the water user's agent prior to expiration of the applicable diligence period, the application named only a predecessor in interest, a defunct Colorado corporation, as the applicant. The user of the water right sought to proceed with the application, but the water

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court refused to allow a formal party substitution for this purpose. The water court ordered dismissal of the application on the basis that it lacked subject matter jurisdiction because the application failed to include the present owner or user of the water right as an applicant prior to the filing deadline.

We conclude, however, that subject matter jurisdiction was vested in the water court by the combination of the timely filing of the application and publication of the resume notice. Both the contents of the application and the resume notice disclosed that Dallas Creek Water Company (Dallas Creek Company) was the user of the water right. Since Dallas Creek Company appeared promptly in the proceedings, through counsel, for the purpose of pursuing an application which was timely filed by its agent, and counsel was permitted to participate in motion and discovery practice, we conclude that the water court erred when it ruled that it was without jurisdiction and refused to allow Dallas Creek Company to be substituted formally as the real party in interest to the application. Accordingly, we reverse the order of dismissal and remand for further proceedings regarding the diligence application.


On April 25, 1974, a conditional decree for 10 cubic feet per second (c.f.s.) of water was entered for the Log Hill Pumping Plant at a specified point of diversion on Dallas Creek, a tributary to the Uncompahgre River in Ouray County, Colorado. The water was to be used "on Log Hill Mesa and immediately adjacent areas for municipal purposes, which include industrial, residential, commercial, recreational and fish culture purposes." In re Water Rights of Wright, No. W-1365 (Water Division No. 4, filed Apr. 25, 1974). The original appropriator envisioned development of 7,000 acres of land for residential, commercial, industrial, and recreational use involving 40,000 new residents.

The conditional water right application was filed and the decree obtained by William R. Wright. The subsequent ownership of the water right is disputed by those who have maintained statements of opposition (Objectors). Nevertheless, it is undisputed that Wright, Raymund F. Kolowich, and Robert F. Draper incorporated WRIKO, INC., as a Colorado corporation on February 22, 1972, and that WRIKO successfully pursued subsequent reasonable diligence applications which kept the conditional water right in effect. On April 27, 1987, WRIKO obtained a water court decree which determined that a portion of the Log Hill Pumping Plant conditional right had been made absolute and that 9.38 c.f.s. should remain in effect as a conditional water right. 1

On March 15, 1993, the water clerk for Water Division No. 4 notified Raymund Kolowich that the conditional decree "filed by Wriko, Inc. as applicant, WILL BE DUE FOR DILIGENCE FILING IN MAY, 1993." 2 On March 30, 1993, "JAMES A. WILLEY, AGENT" filed an application for a finding of reasonable diligence in the name of WRIKO, INC., seeking to keep in effect the conditional water right. Willey was, in fact,

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the agent for Dallas Creek Company, the user in possession of the water facility to which the conditional right was originally decreed.

The application refers to the user of the water right: "The applicant supplies water to the D.C.W.C. (Dallas Creek Water Company, Inc.) formerly Loghill Village Water Company and other properties." The application also describes Dallas Creek Company as the operator of existing water facilities which include the Loghill Village Pumping Plant. This is the structure to which the water court originally decreed the conditional water right in 1974 and, in 1987, decreed it to be partially absolute and partially conditional.

Notice of the reasonable diligence application was published in the July 1993 resume for Water Division No. 4. The resume notice clearly stated that a finding of reasonable diligence was being sought for the Loghill Village Pumping Plant, its source of water being Dallas Creek. The geographical location of the point of diversion was set forth, identifying the water right sought to be continued in effect as conditional. The resume, as did the application, recited that: "The Applicant supplies water to the D.C.W.C. (Dallas Creek Water Company, Inc.) formerly Loghill Village Water Company and other properties." Statements of opposition were due to be filed by the last day of August 1993.

In response to the resume, numerous statements of opposition were filed. Objectors are owners of land and water rights in the Dallas Creek basin. Throughout the proceeding here and in the water court, Objectors have asserted that: (1) neither WRIKO nor Dallas Creek Company is the owner of the water right; (2) Dallas Creek Company did not appear as a party in interest by means of a timely filed diligence application; (3) the owner of the water right has not appeared at any time in the diligence proceeding; and (4) Dallas Creek Company is not an appropriator for purposes of pursuing the conditional water right or these diligence proceedings.

Objectors also assert, as to the merits of the application, that Dallas Creek Company does not possess a plan, sufficient holdings of land or contractual arrangements, or the means to place the remaining portion of the conditional water right to beneficial use. Objectors seek cancellation of the remaining conditional portion of the Log Hill Pumping Plant water right, emphasizing that only .62 c.f.s. of the originally decreed 10 c.f.s. conditional right has been made absolute over the course of twenty-three years and that no additional amount had been put to beneficial use during the diligence period.

On September 3, 1993, Kevin L. Patrick, P.C. entered an appearance on behalf of Dallas Creek Company by means of a pleading captioned "CONCERNING THE APPLICATION FOR WATER RIGHTS OF: DALLAS CREEK WATER COMPANY and WRIKO, INC., in Ouray County." (Emphasis added.) Thereafter, Patrick and his successor law firm, Patrick & Stowell, P.C., (the Patrick firm) pursued the application before the referee and the water court on behalf of the Dallas Creek Company as user of the water right, though a formal substitution of parties had not occurred. The Patrick firm answered discovery requests, responded to motions, and prepared for trial. It filed a formal motion for substitution of Dallas Creek Company as a real party in interest on January 16, 1996, shortly before the scheduled trial. The water court denied the motion as untimely and incapable of being granted because of a perceived jurisdictional defect in the application.

The case had been prepared actively for trial. Between September 3, 1993, and January 16, 1996, the Objectors propounded interrogatories which were answered by written responses and the production of documents. Through the responses and document production, the Patrick firm sought to show that Dallas Creek Company: (1) has a perpetual lease of the absolute and conditional portions of the Log Hill Pumping Plant from persons, corporations, and ventures who are the successors in interest to WRIKO; (2) together with co-venturers has invested approximately three million dollars during the diligence period in activities related to perfection of the water right; (3) together with co-venturers has land, contractual arrangements, and Ouray County land use approvals for development

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plans and plats which depend on use of the water right; and (4) is in possession of operating facilities which depend on the absolute and conditional water right.

The merits of these contentions and the application have not been reached. Objectors moved to dismiss the diligence application because WRIKO, the named applicant, had been dissolved as a Colorado corporation on January 22, 1988, and no other party appeared as an applicant within the diligence period. Shortly before trial, the water court agreed that it lacked subject matter jurisdiction because the application "was not timely filed by a real party in interest."

In its order denying the company's motion for reconsideration, the court expressed doubt that a deficiency in listing a real party in interest on a timely filed application can be cured by subsequent amendment to the application. The water court also entered a minute order denying, as untimely, the substitution of Dallas Creek Company as a...

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