1 IN TH E COURT OF APPEALS O F THE ST ATE OF NEW MEXICO

2 O pin ionN um

be r: ___

____ ____ 3 Fi lin g D at e: Augus t 22 , 201 6 4 N O. 34, 588 5 DAVID CHRI STO PHER a nd J ULI A M. CHRIST OPHE R, 6 husband and w ife, 7 Pl ai nti ff

s/C ount er -D ef

en dants -Appe lle es , 8 v. 9 KENNET H H. OW ENS, 10 Defen da nt /C ro ss -Defe nd an t-Ap pe ll ee, 11 and 12 SONO RA CORPORATIO N, a New Mex ic o Co rpo ra tio n, 13 D ef

en dant/ Co unt er cl ai m an t/C ro ss- Cl ai m an t- Appe llant. 14 AP PE AL FR OM T HE D ISTRICT C OUR T OF OTER O C OUN TY 15 Jam es Wa ylo n C ou nt s, D ist ri ctJu dg e 16 He nnig hausen & Olsen, L. L. P. 17 A

. J. O lse n 18 Alvin F. Jones 19 O liv iaR. Mi tc he ll 20 Ro swe ll , NM 21 for Appellees David & Julia M. Christopher1 San de rs , Bru in , Col l & W or le y , P.A.

2 K el ly Ma ck Ca sse ls 3 Ro swe ll , NM 4 fo r Appe lle e K en ne th H

. O w en s 5 J. Ro be rt B eau va is , P.A. 6 J. Ro be rt

Be auva is 7 Ru id os o, NM 8 fo r Appe llant1 OPIN ION

2 BUS TAM AN TE, Judge. 3 { 1} This case—wh ich m ay turn out to be m

uch ado about nothi ng—presents an 4 objec t lesson in how not to structure the purchase and sale of w ater interests in New 5 Me xi c o . T h e d i s tr i c t

c o urt r ule d th at Appe lle e K en ne th O w en s di d no t— ind ee d, c oul d 6 not —r es er ve any co gni za

ble w at er int er es t wh en he sol d a ran chto Appe lle es D av id 7 an d Ju lia

Ch ri sto phe r (C hr ist ophe rs ). T he dis tr ic t cour t als o he ld tha t O w en s di d no t 8 pr ovi de a ny

a ct ion ab le w ar

ranty c ove nants w he n he de ed ed his int er es t t o Appe llant 9 Sonora Corporation. O nly Sonora appeals. W e re verse. 10 FACTUAL AND PR OCEDURAL BACKG ROUND 11 { 2} T he his tor ic al f ac ts g ivi ng r ise to thi s c as e ar e sim ple a nd undi sput ed

. I n 19 98 12 Ow ens soldhis “ High Nogal Ranch” to the Christoph ers by warranty deed. T he ranch 13 included

aw a t e r s our c e c om

m on l y kno w n a s t he M a xw e l l S pr i ng s. O w e ns wa s 14 ap pare ntl y

ini tia lly r el uc tant to inc lud e the land sur ro undi ng the Ma xw el l S pr ing s in 15 the sale, but eventually agreed to include the property in exchange for an additional 16 $100 , 000 ove r the sa le pr ic e an d an a gr ee m en t tha t he c oul d r et ai n an in te re st i n th e 1 7 w at e r p r o du c e df

r o m i t

. T h e w a rr a n t y

d e e dc o n v e y i n g th e r e a l e s t a t e i n c l u d e s the 18 following langu age:2

1 Re se rv ing , how ever, a ri ght of w ay ove r the e xis tin g r oa ds f ro m 2 Hig hwa y

54 to th e Apa ch e Ran ch

.

3 T og e t h e r

w i t h af u l l th r e e [

- ] i n c h p i p e l i n e o f w a t e r f r o m M a xw el l 4 Springs to th e H igh Nogal Ranch ho use throug h the existin g three[- ] 5 inc h pi pe li ne . W at er f loww ill be 24 h our s aday 7 day s aw ee k. The 6 balance of w ater produced fr om Maxwe ll Springs no w e xistin g or as 7 de ve lop ed

in the f uture w ill be ow ne d [ fi fty pe rcen t] e ac h by D av id 8 Ch ris to ph er an d Ken ne th H. Owens

. 9 { 3} O w en s t h e n s o l d h i s f i f t y p e r c e n t i n t e r e s t t o Ap p e l l a n t S o n o r a i n 2 0 0 2 usi ng 10 a N ewMexico form rea l estate contract. The real e state being conv ey ed wa s 11 de sc ri be d a s f

oll ow s: 12 A ll the G ranto r’ s r igh t, ti tle a nd i nte re st in an d to the r es er va tio n 13 to h im

of w at er a nd r igh ts the re to f

ro m the Ma xw el l Sp ri ngs loc at ed on 14 the High Nogal Ranch contained in that certa in [ w] arranty [d] eed dated 15 May

8, 1998[,] and filed for r ecord on May 15, 1998[,] in Book 88 9 at 16 Page 43 of the records of Oter o County , N ewMexico, by and betwee n 17 the Gr antor and David Christo pher and Julia M. Christopher, his wife, 18 as Gr antees. The division o f water from said Maxwell S prings is stated 19 the re in a s f

oll ow s: 20 “ T oge ther wi th a f ull thr ee [- ] inc h pi pe li ne of w at er f ro m Ma xw el l 21 Springs to th e H igh Nogal Ranch Ho u s e through the existing three[- ] 22 inc h pi pe li ne . W at er [ f] loww ill be 24 h our s a day 7 day s aw ee k. T he 23 [b] alance of water prod uced from Maxwe ll Springs no w e xistin g or as 24 de ve lop ed

in the f uture w ill be ow ne d [ fi fty p erce nt] e ac h by D av id 25 Ch ris to ph er an d Ken ne th H. Owens .” 26 T his c onve y an ce is in te nded t o no t i m pa ir a ny r igh ts g rante d to the 27 Ch ri sto phe rs , but inc lud es a ll ri ght , ti tle a nd i nte re st i n sa id w at er f ro m 28 the Ma xw el l S pr ing s r et ai ne d by K en ne th H

. O w en s insa id w ar ranty 29 de ed

.3

1 The w arranty

deed acc om

pany i n g the real e state contract r epeated this legal 2 de sc ri pti on and, in acc or d with th e statut or y de ed f orm , c onc lud ed

“ w ithw ar

ranty 3 covenants.” For r easons not im portant to ou r analy sis, the rea l estate contract w as 4 later c onverted to a note an d m o rt gage. A s a result of the conversion, the deed w as 5 reco rd edin Feb ru ary 20 09

. 6 { 4} T he dif

fi cu lti es be tw ee n th e part ie s aro se f ro m th ei r ef

fo rt s to de ve lop and 7 m arket w ater f

rom the Maxwe ll Springs. In January 20 0 3 t h e Ch ristoph ers filed an 8 “ Appl ic at ionf

or P er m it to Appr opr ia te ” w at er f ro m the Ma xw el l S pr ing s w iththe 9 N ewMe xic o S ta te E ngi ne er . T he r ec or d do es not r ev ea l wh at

the c ur re nt s ta tus of

the 10 application is , but it is not di sputed t h at t h e City of A lam ogordo (the City ) filed an 11 obj ec tio n to the Ch ri sto phe rs ’ ap pli catio n w ith the St at e E ngi ne er . In January 200 7 12 the Ch ri sto phe rs and the Ci ty se ttl ed the ir dif

fe re nc es by

e nte ri ng i nto a n a gr ee m en t 13 wher eby

they would not in terfe re w ith each other’ s attem pt s to establish water 14 appropriation righ ts. In a dditi on, the City agree d to pu rchase “up to th e perm itted 15 am ount of Maxw ell Spring[s] water” subj ect to certain conditi ons. The record does 16 not r ev ea l w he the r the Ch ri sto phe rs have r ec ei ve d ape rm it or w he the r thi s a gr ee m en t 17 ha s b een pu t t o a ctua l ef fect as yet. 18 { 5} O n or

about Jul y 2, 200 7, O w en s f

ile d hi s own “ Appl ic at ionf or P erm it to 19 Appr opr ia te ” w at er

f ro m the Ma xw el l S pr ing s. G ive n th at O w en s ha d so l d hi s in te re st4

1 in the Ma xw el l S pr ing s w at er to Sono ra so m e fi ve y ears e ar lie r, it is not c le ar w hy 2 Ow ens filed the application. The record below provides n o clarity on the m atter. In 3 any event, Ow ens’ application and the recording of the Ow ens/Sonora war ranty deed 4 ap pa ren tl y

pro m pt edth e fi li ng of t hi s ac ti on . 5 { 6} In Ma rc h 2 0 0 9 t h e C h r i s t o p h e r s f i l e d a c o m

p l a i n t n a m i n g o n l y O w e n s as a 6 defendant. W ithin three w eeks they filed an am ended com plaint nam ing Sono ra a s an 7 ad dit ion al de fe ndant. T he sub stanti ve al le ga tio ns of the c om pla int s are the sam e. T he 8 co m pla int s sought

ade cl ar at ionthat O w en s di d no t own an in te re st i n th e w at er f ro m 9 the Ma xw el l S pr ing s and tha t hi s at te m pt to r es er

ve a n in te re st i n th e w at er w as a 10 le ga l nu lli ty

. T he c om pla int s a lso a sse rt ed

that si nc e O w en s owne d n o lega lly 11 co gni za

ble int er es t i n th e w at er s of the Ma xw el l S pr ing s, he h ad c onve y ed

nothin g 12 to Sonora. A nd, thus Sono ra had no basis on which it could seek to app ropriate w ater 13 fr om the Ma xw el l S pr ing s eithe r. T he c om pla int s a lso a sse rt ed

c la im s of slande r of 14 title, civil conspiracy , and tortio us interfer ence with the contractual relation s betwee n 1 5 t h e C h r i s t o p h e r s an dth e C i t y. 16 { 7} In iti al ly

r ep re sented b y

the sam e co unse l, O w en s and S onor a fi le d aj oin t 17 an sw er , inc lud ing ac ount er cl ai m f or de cl ar at or

y j udgm en t i n th ei r favor

a s to the 18 legal “ effe ct of the re servation contained in the Ow ens-Christopher deed.”5

1 { 8} Af

ter an initial discovery

period, the parties f

iled m otion s for sum

m ary 2 j udgm ent. Re ly ing on general w ater law principles, the Christoph er s ar g ued that 3 O w en s ne ve r ha d ar ec ogni ze d w at er r igh t i n th e Ma xw el l S pr ing s w at er be ca use he 4 did not do anythi ng r equir ed

by N ew Me xic o law w hil e he ow ne d th e ranc h to have 5 suc h ar igh t a cknow le dge d and a ppr ove d by

the S ta te E n g ine er . T he Ch ri sto phe rs a lso 6 argued that he could no t leg al l y reser ve any interest in the Maxwe ll Springs water 7 because of the inherently speculative nature of such an interest. And, the Christoph ers 8 ar gue d, O w en s’ sim

ple ow ne rs hip of

the land o ve r th e Ma xw el l S pr ing s di d no t by 9 it se lf c reat e an own ers hi p in te res t in th e wat er l oc at edbe ne at h t he lan d. H yd ro R es . 10 Co rp. v . G ray , 2 0 0 7

- N M S C

- 0 6 1 , ¶ 1 7 , 1 4 3 N

. M

. 1 4 2 , 1 7 3 P

. 3 d7 4 9 ( n o t i n g th a t“a 11 w at er r igh t i s no t an auto m at ic sti ck in the bund le of

r igh ts a landowne r re ce ive s up on 12 pur ch as ing e ve n a fee int er es t i n land” ( int er na l qu otatio n m ar

ks and c itatio n 13 om itted)). 14 { 9} St ill r ep re se nte d at the tim e by the sa m e attor ne y , O w en s’ an d S onor a’ s m oti on 15 fo r sum

m ar y j udgm en t to ok an en tir el y dif fe re nt t ac k. T he ir

a rg um en t w as that the 16 Owens /C hr is to ph ers de ed crea te d a “ joi nt rel at io ns hi p i n wh ic h t he y wou ldeach own 17 anund ivi de d [ fi fty

pe rc en t] int er es t i n th e pr es en t or f uture w at er

to be de ri ve d f

ro m 18 Maxwe ll Spring[s] .” Car ry ing th e though t further, Ow ens and Sonora argued that 1 9 t h r o u g h th e d e e d t o th e C h r i s t o p h e r s , O w e n s a n dth e C h r i s t o p h e r s “a g r e e dt o b e c o me6

1 j oin t de ve lop er s a s to the e xc es s w at er de ri ved an d to be de ri ve d f ro m Ma xw el l 2 Sp ri ng[ s]

. ” O w en s and S onor a thu s at te m pte d to f ram e the iss ue a s am atte r of 3 co nt ract be twee n t he pa rti es . 4 { 10} The district court heard argum ents on the two m otion s at the sam e tim e. Over 5 tw o y ears la te r the dis tr ic t c ourt e nte re d a “ Mi nut e O rd er ” gr an tin g th e Ch ri sto phe rs ’ 6 m oti on and d ec lari ng that O w en s and S onor a “ ha ve no r igh ts t o any w at er r igh ts 7 ar isi ng o ut o f the Ma xw el l S pr ing s. ” T he dis tr ic t c ou rt al so denie d O w en s’ and 8 So nor a’s m ot io n f

or sum m ar y j udgm en t. T he dis tr ic t c ourt c er tif ie d it s or de r fo r 9 in te rlo cu to ry

ap pe al , bu t t hi s C ou rt r efu se d t o a ccep t t he ap pe al

. 10 { 11} At this point the parties’ tactics changed

. Th e at torney who had repre sented 11 both Ow ens and Sonora withdrewfrom the case and was re placed by separate counsel 12 fo r the tw o de fe ndants

. S onor a pr om ptl y soug ht le av e to s uppl em en t i ts answ er and 13 add a cross-claim

against O we ns. The cross-claim asserted that O we ns was in breac h 14 of his w ar ranty obl igatio ns unde r the O w en s/S onor a de ed to pr ope rl y co nve y tit le and 15 to de fen d t he ti tl e co nv ey ed

. 16 { 12} A s be fo re , thi s ph as e of the li tig at ionw as c ondu ct ed by w ay of c om pe tin g 17 m otion s for sum

m ary j udgm ent. S onora filed its m otion first, rely ing on the district 18 court’ s ruling th at O we n s had no ownership in the Maxwe ll Springs to argue that 19 Ow ens necessarily

breac hed the warranty covenants of the deed as defined in NMSA7

1 1978 , S ec tio n 47 -1 -3 7 ( 1947 ). O w en s f ile d aleng thy

r es pons e, a rg uin g th at

the 2 w ar ranty c ove nant w as of

no e ff ec t gi ve n th e m an ne r in whic h th e pr ope rty be ing 3 convey ed wa s described i n t h e d ee d . S onora filed a second m otion for sum m ary 4 j udgm ent against Ow ens arguing a breach of contrac t th eo ry t h at relied o n the real 5 estate contract the par

ties entered into in 2002 . Ow ens’ response relied on the theory 6 of m er ge r to ar gue that the r ea l e state c ontra ct w as no l onge r in e ff

ec t or e ve n r el ev an t 7 to th e tr an sa ct io n. 8 { 13} T he dis tr ict co ur t ag reed wit h Owen s’ arg um en ts an d d is m issed S onor a’ s c ro ss9 claim in two orders—a “ M i n u t e Or d er” filed in Dec em ber 2013 and a m ore form al 10 jud gm en t en te redin Marc h 2 01 5. 11 { 14} Interestingly , in Augus t 2014 Ow ens filed a di sclaim er wherein he disclaim ed 12 “ any interest in the water right s which are t he subject of this action.” And, as a m atter 1 3 of h i s t o r i c a l n o t e , th e C h r i s t o p h e r s s o l dth e H i g h N o g a l R a n c h i n F e b r u a ry 200 7 14 re se rv ing in the m s e l v e s “ w at e r r i g h t s f o r c om m er ci al , dom es tic , m

uni ci pa l, ind

ustri al , 15 an d subdiv isi on pur

pose s fr om Ma xw el l Spr ing s per G ranto rs ’ pe ndi ng a ppl ic at ion 16 No. SP- 4896 on file with the O ffice of the N ewMexico State E ngin eer. ” 17 A N A LY SI S 18 { 15} T he odd

c ir cum stanc es in thi s c as e pr es en t thr ee iss ue s: D id O w en s r es er ve any 19 cognizable interest in the water of the Maxwell Springs? If he did no t, did he breac h8

1 an y w ar ranty co ve nants w he n his de ed fa ile d to c onve y to So nor a an y

int er es t i n th e 2 w at er s of the Ma xw el l Sp ri ngs? D id h e br ea cha ny c ontra ct ua l ob lig at ion s w he n th e 3 d ee dh e d el i v er ed t o So n o ra fa i l ed t o co n v ey an y i n t er es ti nth e M ax we l l Sp ri n g s ? We 4 de al wit h e ach is su e in tu rn . 5 A. Ow ens R eserved an Inter est in t he M axw ell Spr ings Waters Rights 6 { 16} W e co nc lud e that O w en s di d r es er ve ac ogni za

ble int er es t i n th e w at er

of the 7 Ma xw el l S pr ing s th at he co uld e nf or ce a s to his buy er s, the Ch ri sto phe rs . W e al so 8 conclude that Owe ns could sell and assign h is interest to Sonora. 9 { 17} Sum

m ary j udgm ent is proper wher e there are no genu ine issues of m aterial f act 10 an d t he m ov an t i s en ti tl edto jud gm en t as a m at te r of law. Se lf v. Uni te d Pa rc el Se rv ., 11 Inc. , 19 98 -NMSC -0 46 , ¶ 6, 1 26 N.M. 39 6, 97 0 P.2 d 58 2. Ou r rev ie w is de no vo . Id

. 12 { 18} Unlike m ost ca ses in which the parties argue about the exist en ce o f mate rial 13 questio ns of fact based on a pletho ra of e vidence in the record, this m atter is m arked 14 by the paucity

of its record. For exam

ple, the deed convey ing the High Nogal Ranch 15 from Ow ens to the Christoph ers is the only docum ent executed b y t hem 16 m em orializing the sale. Th ere are no affidavits in the record from the parties 17 de sc ri bin g w ha t the y tho ught the y w er e buy ing an d se lli ng. T he Ch ris to phe rs ’ 18 deposit ion testim ony in the record do es not reveal any question s and answers 19 co nc er

nin g w ha t the y

tho ught the r es er va tio n langua ge m eant. O w en s’ de posi tio n9

1 te sti m ony

doe s in cl ude his vie wof w ha t he ow ne d in the Ma xw el l S pr ing s. O w en s 2 as se rt ed

in his de posi tio n th at

he ha d no t so ld w at er

r igh ts. Rathe r, in his vie w , he 3 sim ply sold “ half the spring[s]” as an asset that he owned as part of the ranch. He saw 4 it as an a sse t tha t he c oul d se ll or not

. O ve r co ff

ee w ithD av id C hr ist ophe r, O w en s 5 ag re ed to se ll the land sur ro undi ng the Ma xw el l Sp ri ngs if he coul d k eep a fif ty 6 pe rcen t i nt eres t i n t he wate r th atm ig ht be de ve lo pe d fr om it

. 7 {19} Insho rt , the r ec or d is e sse nti al ly de voi d of

e vid ence co nc erning the part ie s’ 8 co nstru ct ionof

the de ed

. G ive n th e state of th e re co rd

w e ar e le ft

to “ int er pr et the 9 intentio n [of the parties] from the language of the instrum ent itself.” Atl. Re f. C o. v. 10 Be ach , 196 8- N MS C- 003, ¶ 8, 78 N

. M. 634, 436 P. 2d 1 07. T hus, the inquir y a s to the 11 m ean in g a nd effec t of th e “ res erv in g” la ng ua ge in th e de ed pr es en ts a que st io n o f la w. 12 Ourrev ie w aga in is de no vo . Papatheofan is v. A llen , 200 9-NMCA-084, ¶ 8, 146 13 N

. M. 840 , 215 P

. 3d 7 78. 14 { 20} In te re sti ngl y , the part ie s do not ag re e on w hic h bo dy of lawsho uld

be appl ie d. 1 5 T h e C h r i s t o p h e r s ar g u e th a tN e wM e x i c o ’s s t a tu t o ry a n dr e g u l a t o ry w a t e r l a wr e g i me 16 overrides all other considerations, and und er that lawOw ens did no t own any water 17 ri ght s th at

he c oul d c onve y

or r et ai n. F ro m

the Ch ri sto phe rs ’ standpo int the onl y 18 relevant undisp uted facts ar e that O we ns never did anything before he soldthe ranch 19 to perfect a

water right as such. H e never f iled for a per

m it to appropriate water

or a10

1 de cl ar at ion of ow ne rs hip of w at er in co nne ct ionw iththe Ma xw el l S pr ing s w iththe 2 St at e E ngi ne er . In fa ct he ha d no de al ing s w ith the St at e E ngi ne er w hil e he ow ne d th e 3 ranc h. A nd h e did

not put the w at er fr om the Ma xw el l Spr ing s to bene fi ci al use f or 4 anything other than lim it ed dom estic use and whatever “ irrigation” occurred 5 na tu ral ly. 6 { 21} Ow ens’ and Sonora’ s posi tion b el o w relied on contract principles. T hey 7 asserted that t he deed reser vation refle cted an intent to cre ate a j oint effort in which 8 the Christoph ers and Ow ens would work together to develop and m arket the w aters 9 of the Ma xw el l S pr ing s. O n a ppe al , S onora ar gue s th at the de ed w as suf fi ci en t t o 10 re se rv e— as a ga ins t the Ch ri sto phe rs —on e- ha lf of the pr e- 1907 r igh ts a sse rt ed by the 11 Ch ri sto phe rs in the Appl ic at ionf or P erm it to Appr opr ia te the y f ile d w iththe S ta te 12 Eng in eer. 13 { 22} The district court appare ntly agree d with the Christophers’ theory of the case, 14 sin ce it

r ule d th at O w en s an d So nor a “ have no ri ght s to an y w at er ri ght s ar isi ng o ut 15 of the Maxwe ll Springs.” W e disagree. 16 { 23} W e be ginby

r em ind ing our se lve s—and the part ie s—tha t the c as e doe s no t 17 inv olv e a cl ai m to “ w at er ri ght s” as a ga ins t the w or ld. Rathe r, the iss ue to re sol ve is 18 w ha t the O w en s/C hr ist ophe rs de ed m eans a s be tw ee n the part ie s to i t. T he c onc ep ts 19 the Christoph ers re ly on are thus largely

irrele vant to th is cas e b ec au s e t hey are15 W e re cognize that issu es can ar ise with regard to the unin tended convey ance 1 16 of un se ve redap pu rte na nt wate r ri gh ts

. Se e Tu rne r v . B ass et t , 200 5- N MS C- 009, ¶ 24, 17 137 N

. M. 381 , 111 P

. 3d 7 01 ( re co gni zi ng a pr es um pti on tha t the iss uanc e of

ape rm it 18 by the State E ngin eer allowing recognized i rrigation water right s to be shifted to oth er 19 users works as severance of those w ater rights from the land). N o one here ar gues that 20 the re w er e an y

pe rm itt ed , lic en se d, or re co gni ze d w at er r igh ts a ppur te nant t o th e H igh 21 N oga l R an chw he n it w as sol d. 11 1 de sig ne d to or de r the ow ne rs hip a nd us e of wate r in a larg er pub lic a re na . W at er

is 2 a publ ic an d sc ar ce r es our ce . Co m pe tin g c la im s a ga ins t i t m ust be kno w n, w ei ghe d, 3 te ste d, a nd b al an ce d. T he c om pe tit ionf or r ec ogni tion of

pe rm itt ed , li ce nse d, and 4 recognized “ water rights” in a scar ce public good—with as ear ly a priority

date as 5 poss ibl e— is wha t d riv es the ne ed f or the statut or

y a nd r eg ulator

y pr oc es s O w en s 6 adm its he ne ve r fo llo w ed

. 7 { 24} Bu t the r eg ulator y pr oc es s of

r ec ogni zi ng and p ri or it iz in g wa te r ri ght s is not 8 ap plicable to the issu es that m ay arise a s betwee n a buy er and seller and how they 9 choose to structure a transaction betw een them selves. The C hristop hers do not assert 1 10 that the y

tho ught the y w er e buy ing ar ec ogni ze d, li ce nse d, a nd p er m itt ed w at er r igh t. 11 O w en s do es not as se rt that he w as se lli ng and r es er vin g ar ec ogni ze d, li ce nse d, and 12 pe rm itt ed

w at er r igh t. I n f

ac t, so far as the re co rd he re is con ce rn ed , the re is sti ll no 1 3 re c o g n i z e d , l i c e n s e d , an dp e rm i t t e dw a t e r r i g h tf o u n d e do n th e M a x w e l l S p r i ngs. 14 What, then, is the m ost lik ely interpretation of what the dee d m eans ? The parties12

1 obvi ouslythoug ht they we re buy ing, selling, an d re serving som ething—with th at 2 som ethin g va lue d by

the m a t $1 00, 000. 3 { 25} It

is a giv enthat O w en s di d not own ar ec ogni ze d “ w at er r igh t” in the se nse 4 that term

is norm ally

use d in NewMexico. H e owned land that included water 5 sour ce s, spe ci fi ca lly the Ma xw el l Spr ing s. A s the landowne r he ha d th e inc hoa te r igh t 6 to p ur sue the de velop m en t, e sta bli shm en t, a nd p er fe ct ionof w at er r igh ts f or the 7 w at er s of

the Ma xw el l S pr ing s. T he Ch ri sto phe rs r ec ei ve d no m or e than O w en s ha d: 8 a r i g h t t o

— or opp ortun ity

to— pur sue the de ve lop m en t, e sta bli shm en t, a nd p er fe ct ion 9 of w at er r igh ts. T he y

too k a dvanta ge of th at opp ortun ity w he n th ey

start ed the ir 10 pr oc eed in gs wit h t he Sta te Eng in eer. 11 { 26} W e fa il to s ee w hy the part ie s c oul d no t a gr ee to spl it o r share that i nc hoa te 12 ri ght to pur sue “ w at er

r igh ts. ” T o th e co ntr ar

y , w e co nc lud e th at th e part ie s c oul d 13 ag re e to s pli t the opp ortun ity a s th ey sawf it an d that ag re em en t wo uld be e nf or ce ab le 14 as be tw ee n th em . T he int er pr et at io n of the de ed

that be st f

its the f ac ts a s w e know 15 the m is that O w en s c onve y ed the r ea lty

w ith in whic h th e Ma xw el l S pr ing s lay , but 16 ke pt— or

r es er ve d—the r igh t t o pu rs ue pe rf ec tio n of aw at er r igh t e qua l t o f

if ty 17 pe rc en t of

w hate ve r w at er

m igh t be pr ova

ble a nd ava ila

ble f or ap plicatio n to 18 be ne fi ci al use . O n the Ch ri sto phe rs ’ sid e of the le dge r, the y re ce ive d th e re al e state 19 sur ro undi ng the Ma xw el l S pr ing s, w hic h in cl ude d th e ri ght to p ur su e perf

ec tio n of13

1 a w at er ri ght to an un div ide d ha lf of the w at er a va ila ble f ro m the Ma xw el l S pr ing s. 2 The de eddo es no m or e th an all oc at e th e o pp or tu ni ty even ly bet ween th em . 3 { 27} T he Ch ri sto phe rs c ite no a uth or ity pr ohi bit ing tw o partie s fr om e nte ri ng i nto 4 anarr an ge m en t su cha s w e de scrib e. A s th ey not e, e xc ep t f

or appur te nant r igh ts, 5 wate r in te res ts are s ep arat e fro m real est at e su rfac e in te res t. Se e H yd ro R es . Co rp. , 6 2007 -N MS C-06 1, ¶ 17. W e se e no r ea son w hy thi s c onc ep t do es not

appl y to the 7 inchoate interest the parties we re dea ling in here. 8 { 28} T he m ost

r el ev an t arg um en t the Ch ri sto phe rs m ak e is tha t O w en s co uld not 9 re se rv e anint er es t be ca use of the spe cu la tiv e na tur e of

his int en t t o di ve rt

w at er . T he 10 cases cited by

the Christophers sim

ply do not apply

here. The f

acts in those cases 11 inv olv e sit

ua tio ns i n w hic h so m eo ne a tte m pts to div er

t m or e w at er

f ro m ac om m on 12 sour ce than the y can ac tua lly use w ith the int en t or pur pose of th en essent ia lly 13 ex to rti ng ot he r po te nt ia l u se rs of wate r fro m th e sa m e so ur ce. Se e M

ill he ise r v . L ong , 14 1900 -N MS C- 012, ¶¶ 30- 32, 10 N

. M. 99, 61 P. 111 (h old ing that sim pl ybeca use 15 cl ai m an ts h ad

div er te d the en tir e run of

the w at er a t i ssu e did

not giv e the m

the abil ity 16 to claim

a right t o all the water when they could no t and had not put it to b eneficial 17 use ); se e als o Ne w M er ce r D itc h C

o. v . A rm str ong , 40 P. 989 (Colo. 1895 ) (sam e); 18 To ohe y v. Ca m pbe ll , 60 P. 396, 397 ( Mon t. 190 0) ( sa m e) ; Powe r v. Switzer , 55 P

. 32, 19 34 -3 5 (M on t. 1 89 8) (sa m e). The re i s n o e vi de nc e o f su ch di ve rs io n o r in te nt he re.14

1 { 29} Furthe r, w e observe th at th e sa m e obj ec tio n—i f av ai la ble a t a ll— co uld

be 2 m ad e to the Ch ri sto ph ers ’ us e an d po te nti al de ve lop m en t of the w at er . T he re is no 3 evidence t hat they had any plan for diversion and us e of the Maxw ell Springs water 4 w h e n th e y p u r c h a s e dth e H i g h N o g a l R a n c h

. A s a r g u e d b y t h e C h r i s t o p h e r s , th e s a me 5 ch ar ge of

spe cu la tio n c oul d be m ad e as to the ir r es er va tio n of “ wate r rig ht s f

or 6 co m m er ci al , dom es tic , m

uni ci p a l , i n d

u s tr i a l , and s ubdi vis ionpur pose s f ro m Ma xw el l 7 Sp ri ngs pe r G ranto rs ’ pe ndi ng a ppl ic at ionN o. S P- 4896 ” w he n th ey sol d th e H igh 8 N oga l R an ch

. T he re is no ev ide nc e that the Ch ri sto phe rs ha d th enappl ie d any of the 9 w at er to be ne fi ci al use . T he re is no indi catio n that a per m it ha d bee n issue d prio r to 10 the sa le or th at on e ha s be eniss ue d to da te

. A s su ch , it c oul d be a rg ue d th at

th e 11 Christoph ers did not have a wate r right to convey or rese rve either. At m ost, they had 12 an in c h o a t e r i g h t t ha t m ig ht ev en tu al ly blo ss om in to a wate r ri gh t. See H anso n v. 13 Turney , 20 04 -NMCA- 06 9, ¶¶9-1 0, 1 36 N.M. 1, 9 4 P .3d1. 14 { 30} It

is im portant t o no te w ha t w e ar e not de ci din g. T he r ec or d do es not a llo wany 15 dis cu ssi on a

bout the na tur e of

the r el at ion shi p be tw ee n O w en s ( now So nor a) an d th e 16 Christoph ers. The district court was cor rect in deny ing th e m otion for sum m ary 1 7 j u d g m e n t a s k i n g i t t o h o l d t h a t a j o i n t d e v e l o p m e n t v e n tu r e h a d b e e n f o rm ed

. T he 18 re co rd doe s no t su

ppor t su char uli ng i n th e sum

m ar y j udgm en t co nte xt; a nd— as w ith 19 oth er a spe ct s of

thi s ca se —m ay ne ve r, ev en af te r dis co ve ry . N ei the r ar e w e de ci din g15

1 w he the r the de ed

m ad e O w en s ( nowS onor a) j oin t te na nt s or c o- te nants or sim ply 2 separate ow ners of an undivid ed half interest. W e leave this and other relate d 3 que sti ons to f

urthe r litigat ionon r em an d. W e de ci de onl y that O w en s and the 4 Christoph ers could divid e the potential for water as betw een t h emselves and, a s 5 be twee n t he m , th e arr an ge m en t i s en fo rceabl e. 6 { 31} G ive n our ru lin g th at O w en s ha d a cogni za

ble int er es t in the d ev el opm en t of 7 the Maxwe ll Springs, which he c ouldreser ve, w e m ust also reverse the district court 8 or de rs co nc er

nin g the f ai lur e of the w ar ranty c ove nants in O w en s’ de ed to So nor a an d 9 apply in g t h e d o ct rine of m erger. Sonora’ s cross-claim wa s based on th e district 10 co ur t ’ s r ul i ng t hat O w e ns ha d no t hi ng t o c on ve y t o S on or a . O ur r ul i ng m e a ns that 11 O w en s di d have som ethin g he c oul d c onve y . T hus, the ratio na le fo r the c ro ss- cl ai m 12 has evaporated. W e re verse on that basi s only . W e venture no opin ion on the law 13 rel ie d o n b y

th e d is tri ctco ur t fo r it s ru li ng . 14 CON CLU SION 15 { 32} W e re ve rs e an d r em an d f or f urthe r pr oc ee din gs co nsi ste nt w iththi s O pin ion

. 16 { 33} IT IS S O ORDERE D.

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1 WE CO NCUR:

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