Trujillo v. CS Cattle Co.

• Decision Date: 12 April 1990
• Docket Number: No. 18129,18129
• Citation: 790 P.2d 502,109 N.M. 705,1990 NMSC 37
• Parties: Margarito TRUJILLO and Swope Farm and Livestock Co., Plaintiffs-Appellants, v. CS CATTLE CO. and Eagle Nest Reservoir Corporation, Defendants-Appellees, v. ANGEL FIRE CORPORATION, Defendant-Intervenor-Appellee.
• Court: New Mexico Supreme Court

Page 502

790 P.2d 502

109 N.M. 705

Margarito TRUJILLO and Swope Farm and Livestock Co., Plaintiffs-Appellants, v. CS CATTLE CO. and Eagle Nest Reservoir Corporation, Defendants-Appellees, v. ANGEL FIRE CORPORATION, Defendant-Intervenor-Appellee.

No. 18129.

Supreme Court of New Mexico.

April 12, 1990.

Rehearing Denied May 11, 1990.

Steven E. Schmidt, John W. Danfelser, Albuquerque, for plaintiffs-appellants.

Charles T. DuMars, Albuquerque, Kastler & Kamm, Paul A. Kastler, John William Clever, Raton, for defendants-appellees CS Cattle Co. and Eagle Nest Reservoir Corp.

Kanter & Everage, Elvin Kanter, Albuquerque, for defendant-intervenor-appellee Angel Fire Corp.

OPINION

BACA, Justice.

Appellants, Margarito Trujillo and Swope Farm and Livestock Company, brought suit against CS Cattle Company (CS), its wholly owned subsidiary Eagle Nest Reservoir Corporation, and intervenor Angel Fire Corporation seeking inter alia a declaratory judgment, injunctive relief, and damages for breach of contract regarding appurtenant water rights. Appellants sought to have CS's regulations regarding its reservoir declared invalid as violative of certain covenants in Trujillo's and Swopes' deed granting water rights and sought injunctive relief preventing the enforcement of the regulations. They also sought damages for breach of contract and tort. The district court, following a bench trial on the merits, determined that the regulations promulgated by CS were reasonable and that the covenant by which Trujillo claimed water was ambiguous on the issue before the court. It interpreted the covenant in favor of appellees, and granted the judgment in their favor.

We find that the contract was not ambiguous and reverse the judgment.

FACTS

CS was granted a permit to construct a reservoir with a priority date of 1907. The water right permit was confirmed by an adjudication decree in 1929. Appellants received appurtenant water rights through two warranty deeds granted by CS Cattle Company conveying certain acreage to their predecessors in interest in 1933 and 1951. The 1933 deed conveying 462.2 acres of land stated that 135 of the acres have "water right[s] under Permit Number seventy-one (71)." The instrument continued that the conveyance of land was made:

Together with the right, as an appurtenance to said lands, to demand and receive of the waters of the Cimarron River and its tributaries, impounded and to be impounded by what is known as the Eagles [sic] Nest Dam and Reservoir owned by [the Charles Springer Cattle Company (now CS) ], an amount of water delivered to said land sufficient for beneficial use in the proper irrigation thereof, for the growing of crops thereon without waste of said water, limited to the maximum amount of one and one-half (1 1/2) acre feet per acre per annum on not to exceed one hundred and thirty-five (135) acres of land actually irrigated during each year.

The 1951 deed contained the following agreement concerning the water rights:

1. It is understood and agreed that the water right appurtenant to said land above described is a right for the irrigation of 972 acres, said water right being a part of the water right represented by Permit No. 71. [The Charles Springer Cattle Company (now CS) ] hereby agrees that, without cost to [appellants' predecessor] it will deliver all of the water appurtenant to the said 972 acres of irrigated land at the diversion dam now serving said land and located on the Cimarron River, and that no maintenance charges or other charges whatsoever shall be made to [appellants' predecessor] for the upkeep of the Eagle's [sic] Nest Dam and Reservoir from the said reservoir to the said diversion dam on the Cimarron River * * *

2. To guard against a shortage of irrigation water for the irrigated lands hereby conveyed, [the Charles Springer Company (now CS) ] agrees that of the water stored in the Eagle's [sic] Nest Dam and Reservoir, it will not sell or deliver water for any use whatsoever to any person or party not having a vested water right for the same at the date of this deed, at any time when the water stored in the said Eagle's [sic] Nest Dam and Reservoir is less than 20,000 acre feet, except with the written consent of all parties having vested water rights under said Permit No. 71, or their heirs or assigns.

(Emphasis added.)

The agreement continued that the water rights vested under Permit No. 71 included those assigned to appellants through the 1933 deed. It had become apparent that at times the water supply would be less than required to meet all the rights to the water. CS agreed to grant those parties, including appellants' predecessor in interest, that had contracted for water as of 1951, a priority date equal to that of the permit, 1907. These first tier users were granted the rights contained in the above deed. The first tier users had rights to approximately 10,040 acre feet of water per annum; parties with priorities antedating the permit also had rights to approximately 10,000 acre feet per annum.

Pursuant to the covenant, the first tier users met annually through 1981 to determine the appropriate pro rata allocation of water stored in the reservoir. In 1983, however, CS unilaterally promulgated regulations through which it sought to sell water when the reservoir contained less than 20,000 acre feet without the consent of the first tier users. CS further asserted the right to limit appellants' water rights to water received in the preceding year rather than water stored in the reservoir.

The amended regulations adopted by CS in 1988 state in pertinent part:

3. Adoption to Contracts by Reference; Court Reference

(a) All of the contracts and deeds for water issued by, and executed between, the CS and the reservoir water users shall be subject to these Regulations as though set forth in full detail in the contracts and deeds to the degree they apply in each contract or deed.

(b) The incorporation by reference of these Regulations shall also be true of all contracts and deeds for License 71 waters or water rights issued heretofore by the CS. All persons who have rights under License 71 shall be bound by these Regulations and all contracts, deeds and other documents evidencing or manifesting such person's rights under License 71 shall be deemed modified to conform to the provisions, terms and interpretations of these Regulations.

* * * * * *

9. New Contracts

Under License 71, CS may contract from time to time and on terms it may determine, water from the storage pool for beneficial use, in a bulk quantity or as second tier rights, and may also so contract for storage privileges for municipal or domestic use in the reservoir.

* * * * * *

12. Standby Pool

(a) CS has declared, by use and by contract, that there is a standby pool of 20,000 acre feet of water in the Reservoir, to be maintained, contracted, delivered out of storage, distributed or stored in the Reservoir. Such water has been, and will in the future be, beneficially used under New Mexico law for public recreation, game and fish, and other recognized beneficial uses.

(b) CS may, from time to time, sell, deliver and distribute, in bulk quantity contracts for beneficial use, any portion of the standby pool * * *.

* * * * * *

17. Carryover Water or Annualized Carryover Storage Water

* * * The privilege of first tier water rights to the limited storage under the water storage year/use year and carryover provisions of these Regulations, is derived in part from the clause contained in certain contracts and deeds which proscribe a sale or delivery of water when the reservoir has less than 20,000 acre feet of water. The water storage year/use year and carryover storage privileges herein provided supplants such clause in its entirety, intent and meaning.

Appellants contest the regulations, which they claim abrogate the rights granted them through their deeds. They claim that appellees' contention that the deed is ambiguous regarding the 20,000 acre foot reservoir and thus allows appellee unilaterally to impose the regulations is meritless, and that, if the provisions in the deed create a nonbeneficial use of water, CS is not the proper party to assert that claim.

Appellants have presented the following issues for our consideration in support of its argument that the district court should be reversed: (1) the deeds unambiguously granted them certain rights, and those rights should be determined by this court as a matter of law; (2) because the language of the deeds is unambiguous, parol evidence should not have been admitted to demonstrate an ambiguity; (3) the doctrine of merger precludes admission of the executory purchase contracts into evidence; (4) estoppel by deed bars CS from asserting rights contrary to its deeds; (5) the deeds, if ambiguous, should be interpreted against CS as drafter; (6) certain findings of fact are not supported by substantial evidence; and (7) enforcement of the agreements contained in the deeds does not result in waste.

CS has construed the issues somewhat differently, and contends: (1) the covenant properly was found to be ambiguous, and substantial evidence supports the trial court's construction; (2) appellants own a contract right to receive water from the reservoir, and do not own, as an appropriative right, any part of Permit 71; (3) appellants' contract for irrigation water does not entitle them to a 20,000 acre foot pool; and (4) the regulations in fact improve the operation of the reservoir and make more water available to appellants than there was previously.

We do not find it necessary to address all of the issues raised in order to resolve properly the case before us. Many of CS's contentions are premised in the ambiguity of the deed, a premise we find in error. Accordingly, we consider whether the deed is ambiguous, whether extrinsic evidence properly was admitted, whether estoppel by deed bars CS from asserting rights contrary to the deed, and...