Green River Canal Co. v. Thayn

• Decision Date: 07 November 2003
• Docket Number: No. 20010357.,20010357.
• Citation: 2003 UT 50,84 P.3d 1134
• Parties: GREEN RIVER CANAL COMPANY, Plaintiff, Appellee and Cross-Appellant, v. Lee THAYN, Defendant, Appellant, and Cross-Appellee.
• Court: Utah Supreme Court

84 P.3d 1134

2003 UT 50

GREEN RIVER CANAL COMPANY, Plaintiff, Appellee and Cross-Appellant, v. Lee THAYN, Defendant, Appellant, and Cross-Appellee.

No. 20010357.

Supreme Court of Utah.

November 7, 2003.

Rehearing Denied December 18, 2003.

J. Craig Smith, David B. Hartvigsen, D. Scott Crook, Scott M. Ellsworth, Salt Lake City, for plaintiff.

Steven A. Wuthrich, Montpelier, Idaho, for defendant.

DURHAM, Chief Justice:

INTRODUCTION

¶ 1 Plaintiff Green River Canal Company (GRCC) and Defendant Lee Thayn (Thayn) both own and operate irrigation canals in Green River, Utah. GRCC alleges that Thayn breached agreements made by the parties in 1952 to govern their shared use of certain water diversion facilities owned by Green River when Thayn built and began operating a small hydroelectric power generation facility that used water in excess of the amounts mentioned in the 1952 agreements. The trial court ruled in favor of GRCC, holding that the 1952 agreements are determinative as to both the amount of water each party is entitled to divert through the facilities and the uses to which that water is put. The principal issue before us is whether the 1952 agreements impose a fixed limitation on the amount the parties are entitled to divert through the facilities, or whether the agreement merely describes the parties' 1952 water rights and does not preclude a change in the amount of water diverted through the facilities or a change in the water's use.

BACKGROUND

¶ 2 Approximately six miles north of the City of Green River, Utah, is a crescent-shaped dam that spans the width of the Green River and channels water through certain water diversion facilities and into the parties' irrigation canals. GRCC is a non-profit, mutual water company. In the 1880's, GRCC built an eight-and-a-half mile canal to serve its shareholders. Thayn is the successor-in-interest to a farm and appurtenant water rights purchased from Wilson Produce Company (Wilson) under a 1979 contract. In 1933, in order to irrigate the farmland, Wilson constructed a canal that is approximately forty-two (42) feet higher in elevation than, and parallel to, GRCC's canal. To pump the water up to his canal, Wilson remodeled a small, old, hydroelectric facility once owned by Green River City that sat between GRCC's canal and the river. This building and facility, known as the pump house or powerhouse, delivers water from the pump house up into the canal.

¶ 3 Before the parties' water reaches the pumphouse or their canals, the water must first pass through a series of shared water diversion facilities. In addition to the dam across the Green River, the diversion facilities consist of a 40-foot-wide, 2,500-foot-long, unlined canal known as the "raceway." Water that is diverted from the dam flows in a southerly direction down the raceway through a set of "control gates" that can be utilized to restrict the flow of water for maintenance and repair on the raceway. Water then continues to the foot of the raceway where GRCC's canal carries the flow south to its shareholders. Thayn's pump house is located perpendicular to, and abutting the east side of GRCC's canal inlet. All of the water in the raceway that does not flow down GRCC's canal goes under the pump house through a set of turbines or to Thayn's irrigation pumps to pump water up to his canal. The pump house is also fitted with a set of "radial gates" that Thayn opens periodically in order to flush silt and sand that has built up in the raceway back into the river. In 1992, Thayn renovated the pump house, upgraded the turbines, and put in a small hydroelectric power generation facility at a cost of approximately $300,000.

¶ 4 GRCC and Thayn (via his predecessor, Wilson) are parties to a 1952 Agreement (the 1952 Agreement) that sets out their rights and interests with respect to the ownership and use of these diversion facilities. First, the 1952 Agreement establishes that GRCC owns the dam, the raceway, and the area surrounding the pumphouse parcel, and that Thayn¹ owns the pumphouse parcel itself and a parcel at the head of his canal. Second, the 1952 Agreement establishes a scheme for joint maintenance of the diversion works. While GRCC maintains ownership over the diverting works, Thayn is obligated both to receive all of his water through GRCC's facilities and to pay one-half of the cost of mutual maintenance and upkeep of the dam. Thayn remains responsible for any other expenses for "repair of the raceway, pits and diversion works" that are made on his own initiative. Third, the 1952 Agreement gives each party the right to enter the property of the other "in connection with the reasonable use to be made by each party of the land [at issue]." Fourth, and most importantly for this case, the 1952 Agreement also establishes the priority of water rights for each party. Specifically, paragraph six of the 1952 Agreement states:

It is understood and agreed that before [Thayn] can or may use any water from said dam, diverting works or race way that [GRCC] shall have enough and sufficient water to supply its stockholders. The quantity of water to supply [GRCC's] stockholders is to be exclusively determined by GRCC.

The 1952 Agreement does not make any reference to the parties' claims to use specific quantities of water.

¶ 5 In order to clarify the meaning of paragraph six, on September 30, 1952, GRCC and Wilson executed an amendment to the Agreement (the 1952 Amendment), which addresses the quantities of water that could be diverted by each party.² Specifically, the 1952 Amendment states that GRCC is entitled to 20 cubic feet per second (cfs) year-round for stock watering, and an additional 60 cfs during the irrigation season for a total of 80 cfs. Under the 1952 Agreement, Thayn, through his predecessor Wilson, claims 35 cfs for irrigation purposes and an additional 400 cfs to drive the mechanical pumps needed to deliver water to his canal. The principal issue in dispute here is whether these water claims establish fixed limits on the amounts the parties can divert, or if they merely describe the water rights the parties were claiming in 1952.

¶ 6 The parties' water rights have changed substantially since the 1952 Agreement and Amendment were signed. At the time of the agreements, GRCC's water right was based on an 1881 diligence claim to appropriate 20 cfs year-round for stock watering, and 60 cfs for seasonal irrigation and domestic uses, for a maximum total of 80 cfs. However, in 1974 the State Engineer determined, pursuant to a proposed determination for general adjudication of water rights in the surrounding drainage area, that the amount of GRCC's actual need during the irrigation season is only 60 cfs. The State Engineer has determined that this 60 cfs is inclusive of GRCC's 20 cfs year-round stock watering right, for a maximum of 60, not 80, cfs. ¶ 7 For Thayn's part, the 1952 Amendment does not describe his current water rights either. Wilson's water right in the 1952 Amendment included appropriation of 35 cfs for irrigation and 400 cfs to drive his mechanical pumps. However, these rights had changed substantially by 1981 when Thayn closed on the Wilson property. In 1975 Wilson obtained the right to pump 600 cfs for power during the irrigation season. In 1981, at Thayn's request, Wilson also filed a change application with the State Engineer and received permission to use the 600 cfs to generate power year-round. Thus, notwithstanding the terms of the 1952 Agreement and Amendment, the State Engineer has determined that Thayn is entitled to 35 cfs for irrigation and an additional 600 cfs to generate hydroelectric power, and no objection to that determination has been filed, thus creating a presumptive right under our statutes. See United States Fuel Company v. Huntington-Cleveland Irrigation Co., 2003 UT 49, ¶¶ 17-18, 79 P.3d 945

.

¶ 8 In 1987, Thayn received approval from the Federal Energy Regulatory Commission (FERC) to develop a hydroelectric power generation project using his 600 cfs water right. Thayn rebuilt the old pumphouse to generate hydroelectric power and the new facility went online in May 1992. GRCC alleges that as soon as Thayn's facility was brought online and began producing hydroelectric power, GRCC began having water shortages and problems with water flow fluctuations that impeded its shareholders' access to their water.

¶ 9 On April 28, 1995, GRCC gave notice of default of the 1952 Agreement to Thayn. GRCC asserted that besides disrupting GRCC's use of its prior water rights, Thayn has realized economic gain from the commercial sale of electrical power generated by the water diverted and conveyed by GRCC's diversion and distribution facilities, but has refused to compensate GRCC for the additional and unauthorized use of GRCC's diversion works and water distribution facilities to generate that economic gain.

¶ 10 In June 1995, GRCC instituted this action against Thayn, alleging, among other claims, (1) breach of contract for utilizing the diversion works in excess of the 1952 Agreement and Amendment, (2) equitable relief for loss of profits, and (3) seeking an injunction to prevent Thayn from operating the hydroelectric facility. Thayn answered and counterclaimed, denying that GRCC's interpretation of the 1952 Agreement and Amendment precluded his use of the water right for power generation. As affirmative defenses, Thayn argued that the real nature of the breach of contract and injunction claims was not for recovery of damages, but was an attempt to extort profits from Thayn. Additionally, Thayn argued that GRCC had an adequate remedy at law if in fact any damages really occurred and raised the defenses of laches, estoppel and waiver. Thayn also counterclaimed for his attorney fees and costs.

¶ 11 On June 28, 1996, Thayn filed a motion for summary judgment. Thayn argued that the 1952 Agreement was merely "descriptive" of the parties' respective water rights and did not...