Opinion ID: 2638546
Heading Depth: 1
Heading Rank: 2

Heading: facts

Text: ¶ 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 Thayn [1] 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 preclude any future water rights or usages that might arise. Thayn also asserted laches, estoppel and waiver as grounds for summary judgment, contending that GRCC was aware of Thayn's plans to develop hydroelectric power, but never objected to those plans. GRCC filed its own motion for summary judgment on June 28, 1996, asserting that the 1952 Agreement and Amendment embody enforceable quantitative limits on each party's water rights. GRCC also sought injunctive relief and specific performance of the 1952 Agreement. ¶ 12 The trial court entered summary judgment for GRCC on the breach of contract issue, ruling that the 1952 Agreement and Amendment were unambiguous, certain, definite and enforceable and explicitly limited Thayn to diversion of 35 cfs for irrigation and 400 cfs for power generation to pump the water for irrigation. The trial court further stated that the 1952 Agreement and Amendment were intended to settle the question of each party's rights for all time and did not contemplate an enlargement of Thayn's 435 cfs water right. However, the trial court held that there were disputed issues of material fact regarding Thayn's affirmative defenses of laches, estoppel, and waiver that precluded summary judgment for GRCC. With respect to the claims for specific enforcement of the 1952 Agreement and Amendment and the injunction, the trial court held that an injunction was proper since there were only nominal damages to GRCC and that any damages actually suffered would be impossible to prove. These rulings were to take effect after the trial on the issues of estoppel, waiver, and laches. ¶ 13 Thayn then filed an application for temporary restraining order and a motion for a preliminary injunction in an attempt to prohibit GRCC from constructing a 40-foot wall extending out from its canal and into the raceway, adjacent to and in front of Thayn's pump house. Thayn alleged that the wall would impede or block the flow of water to the pump house. The temporary restraining order was granted, but was subsequently dissolved after an evidentiary hearing on the preliminary injunction motion. The trial court denied the preliminary injunction and dissolved the temporary restraining order because Thayn could not demonstrate that he would suffer irreparable harm since any harm from the wall would be compensable through monetary damages. Furthermore, the court held that Thayn did not have a substantial likelihood of prevailing on the merits because Thayn had no counterclaim pending that involved the wall, meaning that Thayn had no underlying claim on which he could prevail. The trial court awarded GRCC its attorney fees for successfully resisting the imposition of the injunction. ¶ 14 Following a ten-day bench trial, the trial court entered its ruling on waiver, laches, and estoppel, finding that Thayn had failed to carry his burden of proof on any of his affirmative defenses. The trial court also entered its rulings on GRCC's claims for equitable relief. The trial court ruled that GRCC owns the dam, raceway, and control gates, and that GRCC has the contractual right to use the first 80 cfs diverted through the canal during irrigation season and the first 20 cfs year-round. The trial court also held that Thayn has the right to use the next 35 cfs for irrigation during the irrigation season and up to 400 cfs during the irrigation season to pump the water up to his canal. Finally, the trial court ruled that Thayn should be permanently enjoined from using GRCC's diversion facilities for any purpose other than for irrigation and for generating power to pump the water up to his canal unless he obtains the canal company's express written consent and agreement to use the diversion facilities for such purposes. Thayn now appeals the trial court's summary judgment and bench-trial rulings to this court. ¶ 15 On cross-appeal, GRCC argues that the trial court erred in concluding that rule 65A(c)(2) of the Utah Rules of Civil Procedure does not permit the recovery of expenses necessarily incurred in defending against a wrongfully incurred injunction. GRCC also argues that the trial court abused its discretion when it failed to require disgorgement of Thayn's profits and that the trial court erred in finding that the radial sluice gates were appurtenant to the pump house.