EMPIRE LODGE HOMEOWNERS'ASS'N v. Moyer

• Decision Date: 17 December 2001
• Docket Number: No. 00SA211.,00SA211.
• Citation: 39 P.3d 1139
• Parties: EMPIRE LODGE HOMEOWNERS' ASSOCIATION, a Colorado non-profit corporation, Plaintiff-Appellant, v. Anne MOYER and Russell Moyer, individually and as Co Personal Representatives of the Estate of Maxine Reddy, deceased, and as Co-Trustees of the Maxine Reddy Trust, Defendant-Appellee, and Steven J. Witte, Division Engineer, Water Division 2, Appellee pursuant to C.A.R. 1(e).
• Court: Colorado Supreme Court

39 P.3d 1139

EMPIRE LODGE HOMEOWNERS' ASSOCIATION, a Colorado non-profit corporation, Plaintiff-Appellant, v. Anne MOYER and Russell Moyer, individually and as Co Personal Representatives of the Estate of Maxine Reddy, deceased, and as Co-Trustees of the Maxine Reddy Trust, Defendant-Appellee, and Steven J. Witte, Division Engineer, Water Division 2, Appellee pursuant to C.A.R. 1(e).

No. 00SA211.

Supreme Court of Colorado, En Banc.

December 17, 2001.

As Modified on Denial of Rehearing February 11, 2002.

Felt, Monson & Culichia, L.L.C., James G. Felt, Steven T. Monson, James W. Culichia, Bradford R. Benning, Colorado Springs, CO, Attorneys for Plaintiff-Appellant.

The Law Office of Thomas R. Raynes, LLC, Thomas R. Raynes, Gunnison, CO, Attorney for Defendants-Appellees.

Ken Salazar, Attorney General, Steven O. Sims, First Assistant Attorney General, Shana Smilovits, Assistant Attorney General, Denver, CO, Attorneys for State and Division Engineers.

Moses, Wittemyer, Harrison & Woodruff, P.C., Veronica A. Sperling, Richard J. Mehren, Boulder, CO, Attorneys for Amicus Curiae City of Boulder.

Timothy R. Buchanan, P.C., Timothy R. Buchanan, Peter D. Mohr, Arvada, CO, Attorneys for Amicus Curiae Fort Morgan Reservoir and Irrigation Company and the Jackson Lake Reservoir and Irrigation Company.

Hill & Robbins, P.C., David W. Robbins, Dennis M. Montgomery, Denver, CO, Attorneys for Amicus Curiae Groundwater Appropriators of the South Platte, Inc.

Justice HOBBS delivered the Opinion of the Court.

This appeal is from a judgment of the District Court for Water Division No. 2 (Water Court) in favor of the operators of a decreed irrigation water right, Anne and Russell Moyer (Moyers), against an out-of-priority diverter, Empire Lodge Homeowners' Association (Empire Lodge), which has been filling two ponds for fishing and recreation at a subdivision.¹ The Moyers placed frequent calls to curtail Empire Lodge's pond-filling diversions. Citing the State Engineer's approval of its out-of-priority diversions, Empire Lodge filed suit in water court, alleging enlargement of the Moyers' use and invoking the futile call doctrine. The Moyers counterclaimed to enjoin Empire Lodge's out-of-priority diversions to its ponds, alleging that Empire Lodge's failure to obtain an augmentation plan decree authorizing the out-of-priority diversions rendered the diversions illegal.

The Water Court dismissed Empire Lodge's complaint against the Moyers and issued an injunction in favor of the Moyers, ordering cessation of Empire Lodge's out-of-priority diversions absent adjudication authorizing them. Empire Lodge appealed. We affirm the Water Court's judgment. We hold that: (1) Empire Lodge lacked standing in water court to invoke the futile call or enlargement doctrines against the Moyers' water use; (2) Empire Lodge's out-of-priority diversions required an augmentation plan decree authorizing them; and (3) the Water Court did not abuse its discretion in enjoining Empire Lodge's out-of-priority diversions pending adjudication authorizing them. We therefore affirm the Water Court's judgment.

I.

Empire Lodge is a Colorado nonprofit homeowners' association formed in connection with the Beaver Lakes Estates Subdivision, the development of which commenced in the early 1970s in Lake County, Colorado. Comprised of 261 lots, the subdivision is located approximately seven miles south of Leadville along Empire Creek, a tributary to the Arkansas River. The Moyers, co-trustees of the Maxine Reddy Trust, operate a large ranch located along Empire Creek downstream from Empire Lodge.

Empire Lodge has been diverting water out of priority to fill two ponds known as the Beaver Lakes, which the residents of the Beaver Lakes Subdivision utilize for fishing and recreation. It does not have an augmentation plan decree, or a conditional or absolute decree confirming a water appropriation and adjudicating a priority for filling the ponds.

Empire Lodge's out-of-priority diversions travel via the Nelson Woods No. 2 Ditch to the upper Beaver Lake, filling it, then travel to the lower Beaver Lake, filling it, with the water then spilling back to Empire Creek. The upper and lower ponds have surface areas of 3.87 acres and 10.59 acres, respectively. While the ponds are filling, no water returns to Empire Creek.

Empire Lodge is also the owner of a water right diverted by means of the Nelson Woods No. 2 Ditch right, adjudicated July 9, 1907 for 1.25 c.f.s. for irrigation and domestic use with a priority date of April 29, 1891.² This water right is rarely in priority due to the call of senior water rights diverting from the Arkansas River and its tributaries. Empire Lodge relies on the State Engineer's approval for its out-of-priority diversions to fill the two ponds because its Nelson Woods No. 2 right is too junior to fill the ponds reliably due to the overappropriation of the Arkansas River Basin.³ Empire Lodge has not obtained a change decree to use the Nelson Woods No. 2 right to fill the two ponds or as augmentation credit for out-of-priority diversions into the ponds.

In 1986, the State Engineer informed Empire Lodge that it needed an augmentation plan decree from the water court. From 1987 to 1997, Empire Lodge made its out-of-priority diversions under periodic approvals by the State Engineer that were conditioned on Empire Lodge filing an augmentation plan application with the water court.⁴ These approvals contained conditions requiring substitute water to the Arkansas River and subjecting Empire Lodge's water use to the call of the Moyers' Empire Creek Ditch right.⁵ As a substitute supply, Empire Lodge leased shares of Twin Lakes Reservoir and Canal Company water. The point of replacement into the Arkansas River was below the Moyers' point of diversion on Empire Creek. The Moyers irrigate their property with 4.9 c.f.s. from Empire Creek, decreed under Priority No. 34 to the Empire Creek Ditch.⁶ Empire Lodge did not provide a substitute supply to the Moyers' water right. Over the course of twelve years, Empire Lodge failed to initiate a water court augmentation plan proceeding.

The Moyers placed frequent calls upon Empire Lodge's pond-filling activities. In response to these calls, Empire Lodge sought a futile call determination⁷ from the Division Engineer. Relying on a study Empire Lodge commissioned, the Division Engineer identified conditions upon which a futile call determination might be made, but no futile call determination actually resulted therefrom.

In January 1994, the Moyers sued Empire Lodge in Lake County District Court (Lake County lawsuit) alleging that: (1) Empire Lodge had violated an easement agreement between the Moyers and Empire Lodge; and (2) Empire Lodge had illegally diverted water, causing injury to the Moyers' water rights. In the Lake County lawsuit, the court retained jurisdiction over the easement issue but dismissed the diversion issue as being a "water matter" consigned exclusively to the water court.⁸

On August 23, 1996, without possessing any decree for its pond filling activities, Empire Lodge filed suit in water court for relief against the Moyers claiming that they had: (1) unlawfully expanded their irrigated acreage to include land outside of their decreed place of use without applying for a change of use; (2) were using water for undecreed purposes; (3) were irrigating land required to be removed from irrigation through a "dry-up" covenant in the Parkville Water District water transfer; and (4) were violating the "duty of water" limitation, one cubic foot per second of water per fifty acres, expressed in the decree. Seeking an injunction against the Moyers' water use, Empire Lodge contended that the Moyers' enlargement of its decreed rights had caused their complained-of water shortage, not operation of Empire Lodge's diversions. Empire Lodge also sought an order prohibiting the Moyers from exercising a call through their Empire Ditch decree.

On September 16, 1996, the Water Court issued an order approving stipulations of the parties requiring the Moyers to release the call on Empire Creek for 0.75 c.f.s. for as long as necessary to allow the Beaver Lakes to spill back into Empire Creek and prohibiting the Moyers from irrigating north of the Beaver Lakes Estates' access road for the remainder of 1996, but allowing the Moyers to run water to a reservoir on their land.

On September 18, 1996, with court approval, the Moyers amended their answer and asserted counterclaims, alleging injury to their water right and seeking entry of a declaratory judgment against Empire Lodge:

declaring that Plaintiff Empire [was] illegally appropriating water, illegally storing water and unilaterally implementing a change in use of its water rights without approval of a Court or the State and Division Engineer and that by virtue of such declaration, Plaintiff Empire is not entitled to divert any water for these inappropriate and illegal purposes.

The Moyers also sought an injunction prohibiting Empire Lodge's diversions to the Beaver Lakes in the absence of an adjudicated augmentation plan.

The Water Court issued its Order and Judgment on March 13, 2000. The Water Court dismissed Empire Lodge's claims and issued an injunction against operation of Empire Lodge's out-of-priority diversions pending adjudication of an augmentation plan. With respect to the State Engineer's authority to approve Empire Lodge's out-of-priority diversions, the Water Court observed that the State Engineer has some "not clearly defined" authority, although "such authority may not substitute for or inappropriately intrude upon the authority of the water courts to adjudicate water rights." The Water Court said, "Without an application being filed, with resume notice and possible participation by objectors, the Court is not able to appropriately determine, despite the assurances of the State Engineer, that there has not been or will not be in the...