{"id":19,"date":"2016-10-10T21:32:49","date_gmt":"2016-10-10T21:32:49","guid":{"rendered":"http:\/\/blog.mwjlaw.com\/?p=19"},"modified":"2016-10-10T21:35:20","modified_gmt":"2016-10-10T21:35:20","slug":"utah-supreme-court-defines-when-water-company-shares-are-appurtenant-to-land","status":"publish","type":"post","link":"http:\/\/blog.mwjlaw.com\/?p=19","title":{"rendered":"Utah Supreme Court Defines When Water Company Shares Are Appurtenant to Land"},"content":{"rendered":"

Jon Schutz and David Wright<\/span><\/p>\n

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In <\/span>Sanpete America, LLC v. Willardsen<\/span><\/i>, 2011 UT 48 (issued August 16, 2011), the Utah Supreme Court defined when water shares may be appurtenant to land and pass with land conveyances. \u00a0<\/span><\/p>\n

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Background<\/span><\/p>\n

Sanpete<\/span><\/i> involved 110 acres of farmland (the \u201cLand\u201d) owned by Willardsen. \u00a0In June 1999, \u00a0Sanpete Americas and Willardsen executed an option contract for the Land and water rights. \u00a0Sanpete America was made up of four individuals, including Robert Clyde and Paul Hamilton. \u00a0Mr. Neeley, the escrow agent and Willardsen\u2019s attorney, stated that he did not know anything about water rights and did not guarantee the conveyance of Willardsen\u2019s water rights. \u00a0Mr. Hamilton agreed to take care of the legal description of the water rights to be conveyed and of determining what water rights Willardsen owned. \u00a0Paul Hamilton investigated the water right and concluded that water right 65-920 (WR920) attached to the land and was sufficient to irrigate 200 acres, for a total of 600 acre-feet (af) of water. \u00a0Sanpete America believed the water was worth about $3,000 to $4,000 an af, or $1.8 to $2.4 million. \u00a0Sanpete America intended to purchase the Land and WR920 and sell 100 af of water to pay for the $328,350 purchase price of the Land. \u00a0In researching WR920, Hamilton discovered a reference to 80 shares of stock in South Fork of Ditch 28 Pumping Company (South Fork). \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n

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Sanpete \u00a0and Willardsen executed a Land Purchase Agreement for 109.45 acres, WR920 for a flow of 1.1783 cfs and irrigation of 200 acres, a culinary water well, an irrigation pond, and all other water that was part of the property. \u00a0\u00a0Willardsen executed a warranty deed on August 7, 1999, but did not immediately deliver it to Sanpete because it lacked a description of water right 65-918 (WR918) for a smaller culinary well on the Land. \u00a0Hamilton provided Neeley\u2019s office with a description of WR918, but instead of adding the description of WR918, Neeley\u2019s office replaced the description of WR920 with the description of WR918 . \u00a0Neeley\u2019s office recorded the warranty deed with only a description of WR918. \u00a0The warranty deed included a transfer of all appurtenant water. \u00a0Later, Neeley\u2019s office prepared a deed titled a Warranty Deed, but the language of the deed quitclaimed Willardsen\u2019s interest in WR920 to Sanpete . \u00a0Neeley sent of copy of this deed to the Division of Water Rights to update its ownership records. \u00a0<\/span><\/p>\n

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The Division responded by saying \u00a0WR920 was owned by South Fork, \u00a0which had issued shares to various individuals. \u00a0The Division did recognize Sanpete \u00a0as the owner of sufficient water to irrigate 68.46 acres. \u00a0South Fork had issued 144 shares. \u00a0Willardsen\u2019s predecessor in interest owned 80 shares, which he transferred to Willardsen along with the Land by deed. \u00a0The only other shareholder was Ms. Graser, who held 37 shares. \u00a0South Fork had \u00a0functioned as a corporation for decades. \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n

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Sanpete borrowed the funds to pay Willardsen and sold portions of the land and WR920 to service that loan. \u00a0<\/span><\/p>\n

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Sanpete \u00a0sued Graser, Willardsen, and Neeley. \u00a0It sought to quiet title against \u00a0Graser. \u00a0It sued Willardsen for misrepresentations, breach of the Land Purchase Agreement, and unjust enrichment. \u00a0It sued Neeley for breach of the escrow contract, professional negligence, and breach of fiduciary duties as escrow agent for not following the \u00a0escrow instructions. \u00a0Sanpete reached a stipulated settlement with \u00a0Graser. \u00a0This blog post will address only the claims against \u00a0Willardsen. \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n

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Trial Court Decisions<\/span><\/p>\n

Judge Mower of the trial court dismissed \u00a0Sanpete\u2019s claims. \u00a0He \u00a0ruled that WR920 did not pass by appurtenance. \u00a0He found that \u00a0Hamilton had undertaken the responsibility to describe the water rights and Willardsen had relied on Hamilton\u2019s efforts. \u00a0Judge Mower did rule that Willardsen breached the Land Purchase Agreement by not conveying WR920 by warranty deed, but determined that this did not harm \u00a0Sanpete. \u00a0\u00a0\u00a0<\/span><\/p>\n

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All the parties filed \u00a0motions to amend Judge Mower\u2019s findings and conclusions of law. \u00a0Judge Mower retired and Judge Bagley assumed the case. \u00a0Judge Bagley granted Willardsen and Neeley\u2019s motion and denied \u00a0Sanpete\u2019s motion. \u00a0Judge Bagley determined, among other things, that WR920 was appurtenant to the Land, WR920 was conveyed by appurtenance in the August 7, 1999 warranty deed, Willardsen conveyed clear title on August 7, 1999, Willardsen did not breach the Land Purchase Contract, and Sanpete \u00a0was not entitled to damages or attorney fees. \u00a0\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n

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Utah Supreme Court Decision<\/span><\/p>\n

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The Supreme Court focused on two issues regarding WR920: (1) whether Willardsen conveyed his portion of WR920 under the warranty deed and, if so, (2) whether Willardsen breached his covenant of warranty by not defending Sanpete \u2019s title to WR920 in its suit against Ms. Graser. \u00a0The Court held that \u00a0Willardsen conveyed his portion of WR920 under the warranty deed and that he did not breach his covenant of warranty. \u00a0In short, it determined that Sanpete \u00a0received all of Willardsen\u2019s water rights for the Land and was not harmed, even if it was less water than what \u00a0it had mistakenly calculated. \u00a0The Court \u00a0\u00a0affirmed on all issues. \u00a0\u00a0<\/span><\/p>\n

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The Court held that WR920 was appurtenant to the Land. \u00a0The Court \u00a0relied on Utah Code section 73-3-11, which states that a right to use water based on shares is not appurtenant to land. \u00a0It also stated that this statute creates a rebuttable presumption that a water right represented by shares of stock does not automatically pass to a grantee as an appurtenance. \u00a0This presumption may be rebutted with clear and convincing evidence that the water right is appurtenant and that the grantor intended the water right to transfer with the land, even though it is not mentioned in the deed. \u00a0Therefore, the issue for the Court was whether WR920 was appurtenant to the Land and whether Willardsen intended that WR920 be conveyed by the warranty deed. \u00a0<\/span><\/p>\n

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The Court articulated a test for determining when shares are appurtenant to land: (1) whether the use of the water right on the land greatly increased the land\u2019s value; (2) the length of use upon the land, particularly, the length of use beyond the grantor\u2019s ownership; and (3) the extent of use upon the land. \u00a0The Court determined that WR920 met each of these criteria and was appurtenant to the Land because (1) the water right had been used on the Land for decades: the well for WR920 was drilled in 1934, and Willardsen acquired the water right in 1967 and used it continually since that time; (2) WR920 was used on all of Willardsen\u2019s 109 acres; and (3) it was implicit that the value of the Land was very little without WR920. \u00a0The Court determined that Willardsen intended to transfer WR920 Sanpete \u00a0because both parties conceded this point. \u00a0Also, the documents at issue, the warranty deed and quit claim deed, show the parties\u2019 intention that WR920 be transferred to Sanpete . \u00a0Combining its determination that WR920 was appurtenant to the Land and that Willardsen intended to transfer WR920 to Sanpete , the Court held there was clear and convincing evidence to rebut the presumption that WR920 was not appurtenant to the Land. \u00a0\u00a0\u00a0<\/span><\/p>\n

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The Court found that the exceptions to the conveyance of water rights by appurtenance found at Utah Code section 73-1-11 were not applicable. \u00a0The Court also found that Willardsen did not breach the covenant of warranty. \u00a0<\/span><\/p>\n

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Conclusion<\/span> \u00a0<\/span><\/p>\n

Sanpete<\/span><\/i> is significant because it establishes that one may rebut the presumption that a water right represented by shares of stock does not automatically pass to a grantee as an appurtenance. \u00a0The presumption is rebutted with clear and convincing evidence that the water right is appurtenant and the grantor intended the water right to transfer with the land. \u00a0<\/span>Sanpete<\/span><\/i> also sets forth the criteria for determining when a water right represented by shares is appurtenant to land. \u00a0<\/span><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Jon Schutz and David Wright   In Sanpete America, LLC v. Willardsen, 2011 UT 48 (issued August 16, 2011), the Utah Supreme Court defined when water shares may be appurtenant to land and pass with land conveyances. \u00a0   Background …<\/p>\n

Utah Supreme Court Defines When Water Company Shares Are Appurtenant to Land<\/span> Read More »<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[],"_links":{"self":[{"href":"http:\/\/blog.mwjlaw.com\/index.php?rest_route=\/wp\/v2\/posts\/19"}],"collection":[{"href":"http:\/\/blog.mwjlaw.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.mwjlaw.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.mwjlaw.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.mwjlaw.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=19"}],"version-history":[{"count":1,"href":"http:\/\/blog.mwjlaw.com\/index.php?rest_route=\/wp\/v2\/posts\/19\/revisions"}],"predecessor-version":[{"id":20,"href":"http:\/\/blog.mwjlaw.com\/index.php?rest_route=\/wp\/v2\/posts\/19\/revisions\/20"}],"wp:attachment":[{"href":"http:\/\/blog.mwjlaw.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=19"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.mwjlaw.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=19"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.mwjlaw.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=19"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}