February 17, 2019

Colorado Court of Appeals: Treasurer Did Not Undertake Diligent Inquiry as to Actual Residence for Notice

The Colorado Court of Appeals issued its opinion in Cordell v. Klingsheim on Thursday, October 9, 2014.

Tax Lien—Deed—Treasurer—Diligent Inquiry—Notice—Jurisdictional.

Plaintiffs Carl and Wanda Cordell were record owners of a tract of land in La Plata County (Tract 1). Carl Cordell was also the record owner of an adjoining tract (Tract 2). The Cordells failed to pay the taxes owed on the properties, and Brenda Heller purchased the tax liens on the properties. Heller assigned the tax liens to Klingsheim, who later requested and received deeds from the La Plata County Treasurer to the two properties after the Treasurer sent notice to the Cordells. Upon learning of the Treasurer’s deeds, the Cordells filed the present action seeking, as relevant here, a declaratory judgment that the Treasurer’s deeds are void, which the trial court granted.

On appeal, Klingsheim contended that the trial court erred in concluding that the Treasurer had failed to undertake diligent inquiry in attempting to determine Carl’s and Wanda’s residences. The Treasurer sent the notices, by certified mail, to 705 N. Vine, Farmington, New Mexico, which was the address listed for them in the county tax rolls. The return receipts from the mailings, however, indicated that the notices were not delivered to plaintiffs, nor were they delivered to 705 N. Vine. Rather, the receipts indicated that the notices were delivered to Cleo Cordell at 703 N. Vine, and the box for “agent” on the return receipts had not been checked. Despite this discrepancy, the Treasurer conducted no further inquiry to determine whether 705 N. Vine was indeed plaintiffs’ residence.

Such inaction after learning that the notices were not delivered either to plaintiffs or to a person claiming to be their agent does not constitute “diligent inquiry” in attempting to determine their residences. Because a treasurer’s “full compliance” with the requirements of CRS §39-11-128 is jurisdictional, the trial court properly set aside the deeds as void.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Supreme Court: Reformation Not Necessary for Commercial Option Entered Into Prior to Enactment of Statutory Rule Against Perpetuities Act

The Colorado Supreme Court issued its opinion in Atlantic Richfield Co. v. Whiting Oil & Gas Corp. on Monday, March 3, 2014.

Equity Oil Company—Reformation of Future Interests in Property—Statutory Rule Against Perpetuities Act—Common Law Rule Against Perpetuities—Nondonative Transfers

In this case, the Supreme Court considered whether a nondonative, commercial option entered into before the passage of the Statutory Rule Against Perpetuities Act is subject to reformation under CRS § 15-11-1106(2). As a threshold matter, the Court examined whether the option violated the common law rule against perpetuities, and concluded that it does not. Because the commercial option negotiated by the parties was fully revocable, it posed no practical restraint on alienation, and did not violate the common law rule against perpetuities as that rule was construed in Supreme Court case law before passage of the Statutory Rule Against Perpetuities Act.

The Court held that because the option did not violate the common law rule against perpetuities, no reformation was necessary. Accordingly, the Supreme Court affirmed the judgment of the court of appeals on different grounds, and did not reach the questions of whether § 15-11-1106(2) provides for reformation of nondonative, commercial instruments, or whether the lower courts’ application of that section to the option here was unconstitutionally retrospective.

Summary and full case available here.

Tenth Circuit: Filing Lis Pendens Does not Create a Transfer of Interest in Property Under Bankruptcy Code

The Tenth Circuit Court of Appeals published its opinion in Ute Mesa Lot 1, LLC v. First-Citizens Bank & Trust on Monday, November 25, 2013.

Ute Mesa is a real estate developer in Colorado. In October 2007, it received a $12 million loan from Defendant-Appellee United Western Bank (“Bank”) to finance the construction of a single family home. First-Citizens Bank & Trust acquired United’s interest in the loan and state court claims. To secure the loan, the Bank prepared a deed of trust incorrectly identifying Ute Mesa’s sole member as the owner rather than Ute Mesa. Because the grantor under the deed of trust was not the owner of the property, the deed of trust was ineffective in giving the Bank a lien on the property.

In May 2010, the Bank filed suit in Colorado state court seeking reformation of the deed of trust and a declaration that it had a first priority lien on the property. Two days later, the Bank filed a notice of lis pendens in the Pitkin County real property records. In August 2010, Ute Mesa petitioned for Chapter 11 bankruptcy relief. Ute Mesa continued as debtor in possession of the property. In April 2011, Ute Mesa filed an adversary proceeding against the Bank seeking to avoid the lis pendens as a preferential transfer. The bankruptcy court granted the Bank’s motion to dismiss, and the federal district court affirmed.

Ute Mesa argued that under 11 U.S.C. § 547(e)(1)(A), a “transfer of an interest in property” occurs when a bona fide purchaser cannot acquire an interest superior to that of a creditor. According to Ute Mesa, because the lis pendens prevents a bona fide purchaser from acquiring an interest in the property superior to the Bank’s interest, the lis pendens qualifies as a transfer of an interest in the property. The Bank argued that the first and only step of the analysis is to determine whether an underlying property interest exists under state law. Because a lis pendens is merely a notice and does not constitute a lien, no transfer occurred. The Tenth Circuit agreed with the Bank and affirmed.

Tenth Circuit: FDCPA and State Law Claims Arising From Foreclosure Properly Dismissed for Failure to State a Claim

The Tenth Circuit published its opinion in Burnett v. Mortgage Electronic Registration Systems, Inc. on Friday, February 1, 2013.

Charlene Burnett filed an action against James H. Woodall, the successor trustee appointed by Mortgage Electronic Registration Systems, Inc. under the trustee deed securing her home, (MERS), and fifty unnamed individuals. The complaint asserted violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., the Utah Consumer Sales Practices Act (USCPA), Utah Code Ann. § 13-11-1 et seq., and related claims arising out of the foreclosure of her home. The district court granted Woodall’s motion and dismissed her complaint under F.R.C.P. 12(b)(6).

After discussing the Iqbal/Twombly pleading standard  as interpreted in Khalik v. United Air Lines, 671 F.3d 1188 (10th Cir. 2012), the Tenth Circuit analyzed Burnett’s claims to see if she had “set forth plausible claims.” Burnett argued that Woodall violated the FDCPA because MERS had no authority to appoint him as trustee so he had no authority to foreclose her property. The trust deed expressly granted MERS “the right to foreclose and sell the Property” and Burnett consented to those terms. “The plain language of the trust deed undermines her argument that MERS lacked the authority to appoint Mr. Woodall as successor trustee for the purpose of foreclosing on her property.” The court also rejected Burnett’s argument that MERS lost its authority to foreclose once her debt was securitized and sold to another lender.

Burnett also argued that Woodall violated § 1692e of the FDCPA by making false representations as to the nature and character of the debt. The court found her allegations too vague and conclusory because she failed to include details or concrete examples in her complaint regarding the demands for payment. She should have included dates received and who sent the demands. The court also found her complaint lacking regarding her § 1692g FDCPA claim that the defendants violated that provision by failing to provide notices within five days of the first communication with the debtor. Burnett failed to identify when the initial communication took place or from whom it came.

The court also found Burnett’s state law claims were correctly dismissed and affirmed the district court.

Colorado Court of Appeals: Economic Loss Rule Does Not Apply to These Claims Regarding Duties a Residential Broker Owes a Landlord

The Colorado Court of Appeals issued its opinion in Wahrman v. Golden West Realty, Inc. on December 8, 2011.

Interlocutory Review—C.A.R. 4.2.

Barbara Wahrman petitioned for interlocutory review of the district court’s order that the economic loss rule barred her breach of fiduciary duty and negligence claims against defendants Golden West Realty, Inc. and Kathleen Smith. The petition was denied.

Defendants acted as Wahrman’s broker in leasing and managing her residential rental property. According to Wahrman, the tenants significantly damaged the property during and in connection with the termination of the tenancy. She alleged defendants were liable because they obtained an adverse credit report on the tenants but failed to inform Wahrman, inspected the property but failed to note the damage, consented to violations of the lease, and advocated on the tenants’ behalf.

On defendants’ Motion for Determination of Question of Law, the trial court requested briefing on the economic loss rule and then held that it barred the breach of fiduciary duty and negligence claims. It then granted Wahrman’s Motion for Interlocutory Appeal without making any findings.

C.A.R. 4.2 allows an interlocutory appeal when (1) immediate review may promote a more orderly disposition or establish a final disposition of the litigation; (2) the order from which an appeal is sought involves a controlling question of law; and (3) the order from which an appeal is sought involves an unresolved question of law. The Court of Appeals found that whether the economic loss rule applies to claims regarding the duties a residential broker owes to a landlord appeared to be a question of first impression in Colorado and, therefore, assumed it was an unresolved question of law.

However, the Court found nothing to suggest why the economic loss question is a controlling question of law in this case. The petition could have been denied for this reason alone. The Court also found that the assertion that immediate review may support more orderly disposition based on the specter of retrial and attendant additional cost was not a reason that would support interlocutory review. The petition was denied and the appeal was dismissed.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on December 8, 2011, can be found here.

Colorado Court of Appeals: Property Encumbered By a Valid Lien Not Asset under Colorado Uniform Fraudulent Transfer Act

The Colorado Court of Appeals issued its opinion in Board of County Commissions of the County of Park v. Park County Sportsmen’s Ranch, LLP on October 27, 2011.

Colorado Uniform Fraudulent Transfer Act—Jury Verdict—Evidence—Asset—Lien—Successor Liability—Foreclosure—Notice—Accommodation Party.

Defendants appealed the jury verdicts and trial court judgments in favor of plaintiffs on their claims of fraudulent conveyance, civil conspiracy, successor liability, and quiet title. The judgment was affirmed in part and reversed in part, and the case was remanded for further findings.

Defendants contended that the jury’s verdict under the Colorado Uniform Fraudulent Transfer Act (CUFTA) was not supported by sufficient evidence. A fraudulent transfer under CUFTA includes the transfer of an asset; however, an asset does not include “property to the extent it is encumbered by a valid lien.” Here, because defendant Park County Sportsmen’s Ranch, LLP (PCSR)was encumbered by valid liens that exceeded its value at the time of foreclosure, it was not an asset under CUFTA. Further, defendants signed the 2002 note as accommodation to the parties under CRS § 4-3-419, because they did not receive any direct benefit from the loan. Therefore, the verdict was not supported by the evidence, and the judgment was reversed. Additionally, the jury’s verdict on civil conspiracy was reversed because it was based on the alleged fraudulent transfer.

Defendants contended that the jury’s verdict on successor liability must be reversed. Generally, a corporation that acquires the assets of another corporation does not become liable for its debts. Here, however, the indirect transfer of assets through a foreclosure sale supports successor liability despite the fact that the property lacked any equity. Additionally, the evidence supports the jury’s verdict that defendant JJWM, LLP was liable as a successor corporation, because (1) the original four partners of PCSR, the previous corporation, also were the only four partners of JJWM; (2) both partnerships had the same purpose; (3) JJWM acquired the sole asset of PCSR; and (4) PCSR also was JJWM’s sole asset. This evidence was sufficient to support the jury’s verdict on successor liability under the mere continuation exception.

Defendants argued that the trial court erred by reattaching plaintiffs’ original judgment liens to the ranch owned by JJWM. Because the individual defendants were accommodation parties, the foreclosure sale was valid and, except for Thornton’s lien due to defective notice, the foreclosure extinguished the other plaintiffs’ judgment liens. Based on this conclusion, the trial court’s order attaching plaintiffs’ original judgment liens to the ranch was reversed, except as to Thornton.

Defendant City of Aurora contended that the trial court erred by (1) finding lack of notice to Thornton of the foreclosure; and (2) voiding Aurora’s quitclaim deed from JJWM for a portion of the ranch. Because the record shows that the notice to Thornton was defective, the foreclosure did not extinguish its judgment lien. Because no fraudulent transfer occurred under CUFTA, the court’s order voiding the quitclaim deed was reversed.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on October 27, 2011, can be found here.

Colorado Court of Appeals: Merger of Title Doctrine Does Not Extinguish a Prescriptive Easement when Sole Owner of Servient Estate Holds Title to Dominant Estate in Joint Tenancy with Spouse

The Colorado Court of Appeals issued its opinion in Westpac Aspen Investments, LLC v. Residences at Little Nell Development, LLC on October 13, 2011.

Preliminary Injunction—Merger of Title—Prescriptive Easement.

This case presented an issue of first impression as to whether the merger of title doctrine extinguishes a prescriptive easement when the sole owner of the servient estate holds title to the dominant estate in joint tenancy with his spouse. The Court of Appeals concluded it does not.

Westpac Aspen Investments, LLC (Westpac) sued Preston and Betty Henn (the Henns) for injunctive relief requiring the Henns to remove a fence and locked gate blocking access to an express easement, and to quiet title to a prescriptive easement across the Henns’ lot for pedestrian access to Westpac’s property. The trial court entered a preliminary injunction against the Henns prohibiting them from obstructing access to Westpac’s property.

On appeal, the Court was asked to decide whether it was error for the trial court to have granted the preliminary injunction. To decide that, the Court had to determine whether there was error by the trial court regarding the factual and legal conclusions on which the injunction depended. It held there was no error and affirmed.

Westpac and the Henns own neighboring residential lots in the Tipple Woods subdivision at the base of Aspen Mountain, adjacent to the Aspen Resort ski area. The subdivision was created in 1959 and comprised five lots, three of which were on a steep slope inaccessible by motor vehicles. In 1960, to enable access to the upper lots, the original owners created an express easement on which they built a tramway and a staircase. The tram terminated in the highest lot (Lot 3), now owned by the Henns.

In 1984, the owner of the adjacent lower lot divided it into two lots. Westpac now owns Lot 2, adjacent to Lot 3, which Westpac claims enjoys the benefit of a prescriptive pedestrian easement across Lot 3 that had been in use since the early 1960s. The 1984 plat that created Lot 2 and the lower lots also contained the express tram and staircase easement. The terrain prevented direct access to Lot 2 from the easement. Because the tram ended within Lot 3, pedestrian access to Lot 2 was by way of a footpath across a portion of Lot 3. No express easement was created for this path.

The Residences at Little Nell Development, LLC, and related developer entities (collectively, Little Nell) wanted to build luxury condominiums on the three lower lots. In 2005, it filed an Amended Plat that consolidated the three lower lots, designating them the “Residence Lot” and assigning the current numbers to the lots Henn and Westpac now own. Little Nell removed the tram and built a pedestrian staircase that ends within the Henns’ lot in essentially the same location as the historic tram and staircase. They obtained a temporary access easement during construction from adjacent property owners for the benefit of the upper lots.

After construction of the staircase was completed, Westpac resumed accessing its property by way of the footpath across the Henns’ property and, without proper permits, installed a heated sidewalk on the path. The Henns then, also without proper permits, installed a fence and locked gate across the path leading to the Westpac property, thereby preventing access to the staircase. Westpac filed this lawsuit, seeking to quiet title to an easement based on the footpath and to require the Henns to remove the gate and fence. The court granted a preliminary injunction.

On appeal, the Henns argued that Westpac did not demonstrate a reasonable probability that it would prevail on the merits of its claim for a prescriptive easement. The Court disagreed. The Henns did not challenge the findings that the use of the path was open and notorious, but argued Westpac could not establish it was used continuously without effective interruption because it was not used during construction of the new house on Lot 2 in 2000 and during the Little Nell construction in 2005. The Court noted that intermittent use on a long-term basis satisfies the requirement for continuous use. The trial court found the owners of Lot 2 used the path for at least forty-three continuous and uninterrupted years from 1962 to 2005; therefore, the prescriptive period was fulfilled in 1980 (eighteen years after its commencement in 1962).

The Henns argued that the use was not adverse because the owners of Lot 3 gave permission for the path’s use. The Court noted that an owner’s acquiescence of use is not permission. The trial court found and the testimony reflected that the path was used for forty-three years without permission being explicitly sought or received. Thus, the trial court did not err in finding a reasonable probability that the Henns’ property is subject to a prescriptive easement benefiting Westpac’s property.

The Henns contended that in 1989, the owner of Lot 2 also owned Lot 3, and that under the doctrine of merger, adverse use of the footpath ended, any easement was terminated, and any subsequent use did not qualify for a new prescriptive easement. The Court noted that the common ownership for the doctrine of merger to apply must be absolute and that was not the case here. In 1978, William Yarbrough took title to Lot 3. On June 27, 1989, Yarbrough and his wife, Julia, bought Lot 2 and took title as joint tenants. Eleven days later, on July 7, 1989, the Yarbroughs conveyed Lot 2 to the Julia Kinloch Yarbrough Revocable Trust. On September 5, 1989, Yarbrough sold Lot 3 to a third party. Westpac bought Lot 2 in 2002, and the Henns acquired Lot 3 in 2004. The Henns’ argument was that William Yarbrough’s ownership interest in both lots during the eleven days in July 1989 resulted in a merger of title that terminated the prescriptive easement for the footpath and restarted the prescriptive period. The Court agreed with the trial court that because William Yarbrough was never the sole owner of both lots, the easement was not extinguished.

The Henns also argued that the lack of use of the easement during the construction in 2000 and 2005 extinguished the prescriptive easement. The Court disagreed, finding no evidence of any intent on the part of Westpac or its predecessor to abandon the easement during construction.

The Court rejected the Henns’ argument that the trial court erred by granting a preliminary injunction. The trial court thoroughly analyzed the situation and made findings on each of the Rathke factors, all of which were supported by the record. [Rathke v. MacFarlane, 648 P.2d 648, 653-54 (Colo. 1982).]

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on October 13, 2011, can be found here.

Colorado Court of Appeals: The Purchase of Machinery to Generate Electricity for Sale is Exempt from Taxation because Electricity is Tangible Personal Property

The Colorado Court of Appeals issued its opinion in Public Service Co. of Colorado v. Colorado Dep’t of Revenue on September 15, 2011.

Sales and Use Tax—Electricity—Tangible Personal Property—Manufacturing.

Defendants, the Colorado Department of Revenue and M. Michael Cooke, in her official capacity as executive director of the department (collectively, Department), appealed from the judgment of the trial court reversing the Department’s final determination that plaintiff, Public Service Company of Colorado (taxpayer), was not entitled to a refund of sales and use taxes it paid on the purchase of machinery and machine tools used in the generation and distribution of electricity. The judgment was affirmed.

The Department argued that the district court erred in finding that electricity is tangible personal property and not subject to sales and use taxes. The parties stipulated that electricity is a commodity that is traded as a commodity on futures exchanges. Because electricity falls within one of the regulation’s clearly delineated categories of tangible personal property, the purchase of machinery and machine tools used in the manufacturing or generation of electricity, for sale or profit, is exempt from taxation under the machinery exemption and the enterprise zone machinery exemption.

The Department also argued that the generation of electricity is not manufacturing within the meaning of the sales and use tax statutes and regulations. However, the generation of electricity is manufacturing within the meaning of the sales and use tax statute and regulations, even though neither coal, gas, nor nuclear energy is physically incorporated into the finished product. Therefore, the production of electricity is manufacturing for purposes of the machinery and enterprise zone machinery exemptions.

The Department further contended that the step-up and step-down transformers must be excluded because they are used only for transmission and not for manufacturing, and that manufacturing is limited to a “contiguous plant site.” The manufacture of electricity, however, is not completed until the electricity is in a form usable by the retail customer, which occurs at the last step-down transformer prior to entering the consumer’s meter. Thus, the transformers are a necessary part of the generation or manufacture of electricity for use by the retail customers of the taxpayer for purposes of the machinery and enterprise zone machinery exemptions.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on September 15, 2011, can be found here.

Colorado Court of Appeals: Plaintiffs’ Tort Claims Properly Barred by the Economic Loss Rule

The Colorado Court of Appeals issued its opinion in A Good Time Rental, LLC v. First American Title Agency, Inc. on June 9, 2011.

Economic Loss Rule—Contract—Negligent Misrepresentation.

In this action involving a failed commercial real estate transaction, plaintiffs, A Good Time Rental, LLC, Noble Petroleum, LLC, and Arugula Investment, LLC, appealed from the summary judgment in favor of defendant First American Title Agency, Inc., doing business as First American Heritage Title Company, Inc. (American Heritage). The judgment was affirmed.

A Good Time Rental and Noble Petroleum owned a fee simple interest and a leasehold interest, respectively, in adjacent parcels of real estate in Douglas County, Colorado. Restaurant Operating Company, LLC (ROC) proposed to exchange two properties located in California for the two Colorado properties. The deal fell through, and plaintiffs brought negligence and negligent misrepresentation claims against American Heritage, alleging that it had negligently breached the duty to “exercise reasonable care and competence” in conducting the closing or making sure all necessary documents had been received and reviewed. The trial court barred plaintiffs’ claims under the economic loss rule.

On appeal, plaintiffs argued that the trial court erred in granting summary judgment in favor of American Heritage based on the economic loss rule. The Court of Appeals disagreed. American Heritage was obligated to exercise reasonable care, skill, and faithfulness in transferring the property subject to the closing and as instructed. This duty, however, was not independent of the parties’ contract—namely, the closing instructions prepared by plaintiffs. The “foreseeable damages” that American Heritage allegedly failed to avoid through the exercise of reasonable care amounted to plaintiffs’ loss of the benefit they expected under the contract: a promissory note as consideration for their real property. Thus, the tort duty allegedly breached imposed the same duty of care as the parties’ contract: to act as necessary to obtain the note from ROC and deliver it to plaintiffs, thus avoiding the very loss about which they complain. This duty, therefore, was implicit in their contract and plaintiffs’ tort claims were properly barred by the economic loss rule. Additionally, even if American Heritage had a fiduciary relationship with plaintiffs, its contractual duty to provide closing and settlement services cannot serve as the basis of any tort claim seeking additional compensation for its alleged failure to perform that same contractual obligation.

This summary is published here courtesy of The Colorado Lawyer. Other summaries by the Colorado Court of Appeals on June 9, 2011, can be found here.

DORA Division of Real Estate Adopts New Cease and Desist Rule

The Department of Regulatory Agencies’ Division of Real Estate has adopted a new permanent rule regarding conservation easements. The purpose of the rule, entitled D-1 Cease and Desist, is to fulfill the legislative directive to promulgate necessary rules concerning the state income tax credit that may be claimed for the donation of a conservation easement.

Specifically, the Division of Real Estate states that the purpose of this new rule is to define discipline authorized in CRS § 12-61-720(11). The definition will allow the Director of the Division the ability to impose discipline for noncompliance on an organization for negotiating or accepting a conservation easement if they are not in compliance with CRS § 38-30.5-104(2) and 12-61-720.

D-1 Cease and Desist

If the Division of Real Estate has reasonable cause to believe any public or private organization is not in compliance with section 38-30.5-104 (2), C.R.S. and section 12-61-720, C.R.S., the Director of the Division of Real Estate may enter a order requiring such organization to cease and desist from attempting to hold a conservation easement for which a state tax credit may be claimed.

This permanent rule will be effective on September 14, 2011.

A hearing on the new rule will be held on Monday, July 18, 2011 at the Colorado Division of Real Estate, 1560 Broadway, Suite 1250 C, Denver, Colorado 80202, beginning at 10 am.

Any interested person may participate in the rulemaking process by submitting written data, views, and arguments to the Division of Real Estate. Those interested are asked to submit their materials in writing no less than ten days prior to the hearing date. However, all materials submitted prior to or at the rulemaking hearing or prior to the closure of the rulemaking record will be considered.

Full text of the proposed changes and the new rule can be found here. Further information about rule and hearing can be found here.

Colorado Supreme Court: Water Court’s Judgment and Decree Upheld Regarding Determination of Historical Consumption Use of Burlington-FRICO Water Rights

The Colorado Supreme Court issued its opinion in Burlington Ditch, Reservoir and Land Co. v. Metro Wastewater Reclamation Dist. on May 31, 2011.

Determination of Historical Consumptive Use of Water Rights—CRS § 37-92-305—Unlawful Enlargement of Water Rights—“One-Fill” Rule—Preclusive Effect of Prior Water Court Orders and Decrees—New Structures and Points of Diversion.

Appellants Burlington Ditch, Reservoir and Land Company (Burlington), Farmers Reservoir and Irrigation Company (FRICO), United Water and Sanitation District (United), Henrylyn Irrigation District (Henrylyn), and East Cherry Creek Valley Water and Sanitation District (ECCV) challenged the order and decree of the water court regarding its determination of historical consumptive use of water rights, the effect of prior decrees and new structures related to the Burlington Canal, the application of the “one-fill” rule, and the impact of these decisions on appellants’ senior rights to use the waters of the South Platte River.

This case arose from two applications seeking changes in points of diversion and storage of water rights, as well as changes from irrigation to municipal use for Burlington and FRICO water rights with 1885, 1908, and 1909 priority dates. These changes were precipitated by the United–ECCV Water Supply Project, aimed at providing a renewable source of water to replace Denver Basin groundwater on which ECCV previously relied.

To prevent an unlawful enlargement of the Burlington–FRICO water rights, the water court limited appellants’ 1885 Burlington direct flow water right to 200 cubic feet per second, historically diverted and used for irrigation above Barr Lake. Likewise, the 1885 Burlington storage right was limited to annual average reservoir releases of 5,456 acre-feet. The water court further determined that seepage gains into the Beebe Canal, water collected through the Barr Lake toe drains, and diversions at the Metro Pumps could not be given credit in the calculation of historical consumptive use. The court determined that historical releases from Barr Lake, rather than a pro rata share of the one-fill rule,constitute the proper measure of storage rights. The water court concluded that its system-wide analysis of historical consumptive use was not precluded by the orders and decrees issued in FRICO Case No. 54658 and Thornton Case No. 87CW107. The court imposed conditions to prevent injury to other water rights by the heretofore undecreed diversions via the Globeville Project. The Supreme Court upheld the water court‘s judgment and decree.

Summary and full case available here.

Colorado Supreme Court: State Engineer’s Orders Curtailing Well Owners’ Use of Water in Their Wells Is Not a Taking

The Colorado Supreme Court issued its opinion in Kobobel v. State of Colorado on March 28, 2011.

U.S. Const. amend. V and XIV—Colo. Const. art. II, sec. 15—Water Law—Inverse Condemnation—State’s Cease and Desist Orders Curtailing Tributary Groundwater Well Pumping—Water Court Jurisdiction

The supreme court affirms the water court’s dismissal of plaintiffs’ inverse condemnation claim. The court holds that the well owners’ claim is a water matter within the exclusive jurisdiction of the water court because it is predicated on the well owners’ right to use the water in their decreed wells. The court further holds that the state engineer’s orders curtailing the well owners’ use of the water in their wells did not constitute a taking in violation of article II, section 15 of the Colorado Constitution or the Fifth and Fourteenth Amendments to the U.S. Constitution. The cease and desist orders simply curtailed the well owners’ out-of-priority diversions consistent with Colorado’s prior appropriation doctrine. Because the well owners cannot show that the State infringed on a constitutionally protected property right, they are not entitled to just compensation for the “taking” of that alleged right.

Summary and full case available here.