Court Opinion

ID: 4160106
Source: CourtListenerOpinion
Date Created: 2017-04-13 16:02:41.201241+00
Date Added: 2024-06-11T14:23:59.991541
License: Public Domain

NOTICE: NOT FOR OFFICIAL PUBLICATION.
 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
                 AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

                                    IN THE
             ARIZONA COURT OF APPEALS
                                DIVISION ONE

                UNITED STATES OF AMERICA, Appellant,

                                        v.

 VERDE DITCH COMPANY; SALT RIVER PROJECT AGRICULTURAL
 IMPROVEMENT AND POWER DISTRICT and SALT RIVER VALLEY
   USERS’ ASSOCIATION; ARIZONA DEPARTMENT OF WATER
   RESOURCES; MONROE LANE NEIGHBORHOOD COALITION;
  YAVAPAI-APACHE NATION; ARIZONA STATE PARKS; PETER J.
   MOLLICK; BRADFORD C. GORDON; KAREN PHILLIPS; DON
             FERGUSON; LEROY MILLER, Appellees.

                             No. 1 CA-CV 15-0690
                               FILED 4-13-2017

           Appeal from the Superior Court in Yavapai County
                          No. P1300CV4772
               The Honorable David L. Mackey, Judge

                             ORDER VACATED

                                   COUNSEL

United States Department of Justice, Washington, DC
By John L. Smeltzer, F. Patrick Barry
Counsel for Appellant
L. Richard Mabery PC, Prescott
By L. Richard Mabery
Counsel for Appellee VDC

Salmon Lewis & Weldon PLC, Phoenix
By John B. Weldon, Jr., Mark A. McGinnis, R. Jeffery Heilman
Counsel for Appellees Salt River

Arizona Department of Water Resources, Phoenix
By Janet L. Miller, Nicole D. Klobas, Kenneth C. Slowinski
Counsel for Appellee Arizona Department of Water Resources

Montgomery & Interpreter PLC, Phoenix
By Robyn L. Interpreter, Susan B. Montgomery
Counsel for Appellee Yavapai-Apache Nation

Brown & Brown Law Offices PC, Eagar
By Douglas E. Brown, David Albert Brown
Counsel for Appellee Monroe Lane Neighborhood Coalition

Bradford C. Gordon, Camp Verde
Appellee

Peter J. Mollick, Phoenix
Appellee

                        MEMORANDUM DECISION

Judge Donn Kessler delivered the decision of the Court, in which Presiding
Judge Peter B. Swann and Judge Kent E. Cattani joined.

K E S S L E R, Judge:

¶1            This case involves post-judgment proceedings filed in
relation to a 1909 judgment establishing rules among Verde Ditch
shareholders for the operation and maintenance of the Verde Ditch, an
approximately eighteen-mile irrigation ditch diverting water from the
Verde River. In the 1909 case of Hance v. Arnold,1 an Arizona territorial court
issued a judgment determining the proportionate interests of eleven

1      Hance v. Arnold et al., P-1300-CV-4772 (Yavapai Sup. Ct. Jan. 1, 1907).

                                      2
                       USA v. VERDE DITCH et al.
                         Decision of the Court

claimants in the Verde Ditch. This judgment (“1909 Decree”) provided that
the Verde Ditch would be administered by the “Verde Ditch Company”
(“VDC”) through court-appointed commissioners.2

¶2           Upon a motion by the commissioners, the superior court
entered an order authorizing VDC to enter a Memorandum of
Understanding (“MOU”) that established a process for determining
“Historic Water Use” (“HWU”) on lands served by the Verde Ditch and for
“conform[ing]” the 1909 Decree to Arizona water law to limit diversions of
Verde Ditch water to lands that have HWU.

¶3             The United States3 appeals from that order, arguing the
Yavapai Superior Court lacked jurisdiction to adjudicate the water rights of
Verde Ditch users and erred in authorizing proceedings that will constitute
such an adjudication. We conclude the Yavapai Superior Court lacks
jurisdiction to approve such agreements among VDC, its members and/or
the Salt River Project Agricultural Improvement and Power District and the
Salt River Valley Water Users’ Association (collectively, “SRP”).4 These
types of agreements are beyond the scope of the 1909 Decree, fall within the
exclusive jurisdiction of the Maricopa County Superior Court as part of the
General Adjudication of All Rights to Use Water in the Gila River System
and Source Gila River Adjudication (“Gila Adjudication”), and could affect
the water rights of persons not involved in such negotiations. The approval
of any such agreements, as part of an MOU or otherwise, must be done
within the context of the Gila Adjudication. Accordingly, we vacate the
order.

2      VDC is an unincorporated association comprised of the successors
and assigns of the original parties to Hance v. Arnold and other users with
rights arising after 1909.

3      The United States is a Verde Ditch shareholder because it acquired
and owns on behalf of the Yavapai-Apache Nation a parcel of land served
by the Verde Ditch in Camp Verde, Arizona.

4       The Association is a water users’ association formed as an Arizona
territorial corporation. The District is an agricultural improvement district
formed pursuant to Arizona Revised Statutes, Title 48, Chapter 17. SRP is a
shareholder in the Verde Ditch and owns 23.57 shares in VDC.

                                     3
                        USA v. VERDE DITCH et al.
                          Decision of the Court

               FACTUAL AND PROCEDURAL HISTORY

    I.    1909 Decree of Hance v. Arnold

¶4            In 1873, the Old Verde Ditch was constructed to divert waters
from the Verde River. The five builders of the Old Verde Ditch were each
entitled to one-fifth of the waters from this ditch for irrigation and domestic
purposes. In 1891, two of the residents who constructed the Old Verde
Ditch, along with one additional resident, constructed the New Verde Ditch
with varying interests in the additional capacity. In 1907, the Hances, Verde
Ditch property owners, filed a complaint in the Yavapai County Territorial
Court alleging that the appropriators upstream of their property along the
Verde Ditch were using water in excess of their entitled shares.

¶5              In the 1909 Decree, the territorial court determined that some
of the parties were “entitled to the use of the waters flowing through [the
Verde Ditch]” in a fractional proportion. The 1909 Decree allotted any such
rights based on a fractional share of VDC and the same share of water
flowing through the Verde Ditch, but not on a specific volume of water to
each user or any other water allocation. Specifically, the court held that
these fractional shares in the Verde Ditch were “common co-ordinate
right[s] equally enjoyed by the several parties, plaintiff and defendants,
without reference to priority of appropriation or use.” (emphasis supplied). The
1909 Decree provided that all of the parties “should contribute to the
expense of the water commissioner including the repair and maintenance
of the ditch . . . in proportion to their several interests.”

¶6            In 1935, the superior court appointed a new commissioner
who was “empowered to enforce the provisions of [the 1909 Decree] with
reference to the payment of assessments for the maintenance and upkeep
of the [Verde Ditch].” The commissioner was also authorized to distribute
water under the proportionate shares established in the 1909 Decree. In
1965, the court promulgated rules and regulations for the administration of
the Verde Ditch.5

5      The current set of rules and regulations (“1989 Rules”) note that the
1909 Decree promulgated broad directives “to govern the operation and
maintenance of the Verde Ditch and to insure adequate funding to defray
operational costs.” The 1989 Rules empower the commissioners to
maintain, repair, and operate the Verde Ditch, as well as stop distribution
of water to shareholders who are in violation of the 1989 Rules.

                                       4
                       USA v. VERDE DITCH et al.
                         Decision of the Court

¶7            Beyond approving rules and regulations for the
administration of the Verde Ditch, the superior court has authorized VDC
to take a variety of actions necessary to operate the Verde Ditch, including
approving drainage modifications, fee schedules, and loans for repairs. The
court also regularly approved annual assessments and appointed new VDC
commissioners. However, the record does not reflect the court has allocated
any rights to water.

    II.   Memorandum of Understanding

¶8            In 2014, VDC petitioned the court for authorization to
“negotiate and execute a Memorandum of Understanding with [SRP].” The
application stated that the purpose of the MOU is to “establish a process
and procedure to facilitate the exchange and confirmation of lands served
by [VDC].” The MOU’s stated function is “to avoid the time and cost of
extensive litigation regarding entitlement to Verde River water . . .
[through] a comprehensive agreement on the delineation of lands served
by the Verde Ditch that have [HWU].” The superior court granted the
commissioners’ application subject to court approval of the MOU.

¶9             The superior court held a series of hearings on objections to
the MOU, including an objection by the United States regarding
jurisdiction. The superior court found it had jurisdiction to approve the
MOU, as it considered the MOU a modification of the 1909 Decree. In 2015,
the superior court entered an order (“August 26 Order”) authorizing VDC
to enter into the MOU. Over the United States’ continuing objection, the
superior court again found that it had “historic authority dating to before
the adoption of the statutes and the general stream adjudication process.”
According to the court, that authority empowered the superior court to
“interpret, adjudicate and enforce water use on the Verde Ditch.” The
superior court found, pursuant to Arizona Rule of Civil Procedure 54(b),
that the order completely “resolve[d] the issue with respect to authorization
of [VDC] to enter into the [MOU].”

¶10            The United States timely appealed. We have jurisdiction
under Arizona Revised Statutes (“A.R.S.”) section 12-2101(A)(2) (2016).6 See
infra Section I.

6      We cite to the current version of statutes unless changes material to
this version have occurred.

                                     5
                         USA v. VERDE DITCH et al.
                           Decision of the Court

                                 DISCUSSION

    I.     Appellate Jurisdiction

¶11             Pursuant to A.R.S. § 12-2101(A)(2), we have jurisdiction over
an appeal “[f]rom any special order made after final judgment.” “A post-
judgment order is appealable when the order involves an issue distinct
from the underlying judgment and immediately affect[s] a party’s rights.”
Williams v. Williams, 228 Ariz. 160, 165, ¶ 20 (App. 2011) (citations omitted).
An order completely disposing of a petition is appealable when the petition
raises a new claim. Id. at 166, ¶ 23. This order is appealable notwithstanding
the fact that the underlying case is still ongoing. Id. at ¶ 22 (citation omitted).
“Failure to allow an appeal from such an order [completely resolving a
petition] could compel all subsequent proceedings . . . to go forward under
a cloud of uncertainty.” In re Estate of McGathy, 226 Ariz. 277, 280, ¶ 15
(2010) (citation and quotation omitted).

¶12            VDC requested court authorization for the MOU and to begin
negotiations with SRP to determine HWU of landowners on the Verde
Ditch. This is an issue distinct from the purpose of the 1909 Decree, which
determined each party’s share in the Verde Ditch and established court
oversight of Verde Ditch administration. Because the court approved
VDC’s petition and empowered it to move forward under the terms of the
MOU, the original petition has been completely addressed. The order is
appealable even though any final agreement with landowners through the
MOU still requires court approval. The order granting VDC authorization
to proceed completely resolves that issue and the appellate court need not
wait for the MOU proceedings to be completed to rule on whether the
superior court had authority to allow those proceedings. Finally, the United
States’ rights are immediately affected by the order, as VDC is now able to
enter agreements regarding Verde Ditch water rights.7

7       In its answering brief, VDC states it no longer has funding to
implement the MOU but that it might enter into agreements with various
members of VDC and SRP outside of the MOU. As VDC and SRP explained
at oral argument, however, VDC remains interested in negotiating and
entering into agreements with VDC members and with persons claiming
rights to water in the Verde Ditch, severing and transferring water rights to
or from third parties, and having the Yavapai County Superior Court
approve such agreements. Thus, the question of the authority of the
Yavapai Superior Court to authorize or approve such agreements remains

                                        6
                         USA v. VERDE DITCH et al.
                           Decision of the Court

   II.     Issue and Standard of Review

¶13            The United States contends the Yavapai Superior Court did
not have jurisdiction to approve the negotiation of water rights through the
MOU because the Legislature placed the exclusive power to allocate water
rights to the Gila River and all its tributaries in the Maricopa County
Superior Court as part of the Gila Adjudication. SRP and VDC claim the
MOU is not an adjudication of water rights, and that, even if it were, it is a
valid exercise of the Yavapai Superior Court’s authority under the 1909
Decree. As SRP and VDC explained at oral argument, the superior court
and the parties desired to not only authorize VDC to enter into the MOU
and to enter into HWU agreements with VDC shareholders and those
claiming rights to the Verde Ditch, but also to approve severance and
transfer of rights to water in the Verde Ditch, reconcile such shares after
negotiation, resolve disputes among various persons claiming vested water
rights to water in the Verde Ditch, and ultimately have the superior court
approve any final agreements. All the parties agree that these rights could
be resolved as part of the Gila Adjudication and that the parties to this
proceeding have filed claims as part of the Gila Adjudication. The United
States contends that such rights and allocations must be made as part of the
Gila Adjudication while VDC and SRP contend they can also be decided by
the Yavapai County Superior Court as part of its continuing jurisdiction
over the running of VDC and the Verde Ditch arising from the 1909 Decree.

¶14            A specific superior court lacks subject matter jurisdiction to
resolve a dispute if the Legislature has vested jurisdiction of such
controversy in a different court. “The superior court shall have original
jurisdiction of [c]ases and proceedings in which exclusive jurisdiction is not
vested by law in another court.” Ariz. Const. art. VI, § 14(1); see A.R.S. § 45-
252(C) (2016) (“The general adjudication shall be brought and maintained
in the superior court in the county in which the largest number of potential
claimants resides.”); In re Rights to Use of Gila River, 171 Ariz. 230, 233 (1992)
(describing consolidation of stream adjudications in the Maricopa County
Superior Court). “Subject matter jurisdiction abates when another county
has already assumed jurisdiction in the same matter.” Gabel v. Tatum, 146
Ariz. 527, 529 (App. 1985) (citation omitted). Thus, the issue presented is
one of subject matter jurisdiction, which is a question of law subject to de
novo review. Ader v. Estate of Felger, 240 Ariz. 32, 43, ¶ 37 (App. 2016)

ripe for consideration and review. As the fundamental issue is the ability of
the court to authorize and approve agreements affecting rights to waters in
the Verde River, the fact that VDC currently does not have resources to
participate in the MOU process does not render this appeal moot.

                                        7
                        USA v. VERDE DITCH et al.
                          Decision of the Court

(citation omitted). We review de novo questions of statutory interpretation.
City of Tucson v. Clear Channel Outdoor, Inc., 218 Ariz. 172, 178, ¶ 5 (App.
2008) (citations omitted).

   III.   Arizona Water Law and the Gila River Adjudication

¶15            Prior to 1919, a person could acquire a surface water right
simply by applying the water to a beneficial use and posting a notice of the
appropriation at the point of diversion. Summary of Ariz. Water Law &
Mgmt., Ariz. Water Atlas, Vol. 1, App. C, 123 (2010),
http://www.azwater.gov/AzDWR/StatewidePlanning/WaterAtlas/doc
uments/appendix_c.pdf. In 1919, the Legislature adopted the Arizona
surface water code (“Water Code”). Id. The Water Code requires that a
person apply for and obtain a permit from the state to appropriate surface
water. Id.; see 1919 Ariz. Sess. Laws, ch. 164, § 5; Stuart v. Norviel, 26 Ariz.
493, 498-501 (1924) (describing statute). Today, applicants obtain that
permit from the Arizona Department of Water Resources (“ADWR”).
Mission       &      Goals,      Ariz.     Dep’t       of      Water       Res.,
http://www.azwater.gov/AzDWR/PublicInformationOfficer/MissionA
ndGoals.htm (last visited Apr. 4, 2017).

¶16            In 1979, the Legislature amended the Water Code to provide
for general stream adjudications. See A.R.S. §§ 45-251 et seq. Under the
Water Code’s stream adjudication chapter, all persons served with notice
must file a “statement of claimant” presenting the particulars of any
claimed water right, including the amount of water and location of irrigated
lands. A.R.S. § 45-254(A), (C) (2016). Following the filing of such statements,
ADWR must investigate the claims and prepare a technical report for the
court to consider, along with any evidence presented by claimants or
objectors, in a final adjudication. A.R.S. § 45-256 (2016). ADWR also must
publish a preliminary technical report for review by claimants, A.R.S. § 45-
256(H), at which point claimants may amend their claims, A.R.S. § 45-
254(E)(1).

¶17            Arizona’s      general    adjudication      statute  authorizes
determination of “the nature, extent and relative priority of the water rights
of all persons in the river system and source.” A.R.S. § 45-252(A). Any water
users whose rights “have not been previously adjudicated under this
article” are eligible to petition to have their rights determined by the court.
Id. “The general adjudication shall be brought and maintained in the
superior court in the county in which the largest number of potential
claimants resides.” A.R.S. § 45-252(C). The Gila Adjudication was thus
initiated in Maricopa County, where the vast majority of claimants reside.

                                       8
                         USA v. VERDE DITCH et al.
                           Decision of the Court

Joseph M. Feller, The Adjudication that Ate Arizona Water Law, 49 Ariz. L.
Rev. 405, 407-08 (2007).

¶18             Conforming with the statutory purpose of a comprehensive
adjudication of surface water rights, the historical and statutory notes to the
Water Code explain that “[u]nless otherwise specifically provided, this act
applies to . . . [a]ll rights to appropriable water initiated or perfected on or
before the effective date of this act.” 1995 Ariz. Sess. Laws, ch. 9, § 24 (1st
Reg. Sess.). Additionally, the Water Code states that

         [n]othing in this chapter shall impair vested rights to the use
         of water, affect relative priorities to the use of water
         determined by a judgment or decree of a court, or impair the
         right to acquire property by the exercise of the right of
         eminent domain when conferred by law. . . . [However,] the
         rights shall be adjudicated as provided in this chapter.

A.R.S. § 45-171 (2016). The chapter includes the general adjudication
statutes. See A.R.S. §§ 45-251 et seq.

¶19           The Gila Adjudication was first filed by SRP in 1974 as an
administrative adjudication of the Upper Salt River. See In re Rights to Use
of Gila River, 171 Ariz. at 232. The case was consolidated with other
proceedings on the Gila River system and became the overall judicial
adjudication of the Gila River system and source after the Water Code was
modified to include the general adjudication statutes in 1979. See id.; A.R.S.
§ 45-252. The Gila Adjudication includes the Salt, Gila, San Pedro, and
Verde River watersheds, which include most of southeastern and central
Arizona. Summary of Ariz. Water Law & Mgmt., at 123. SRP, VDC, the
Yavapai-Apache Nation, the United States, and other individuals and
organizations have filed various statements of claimant in the Gila
Adjudication wherein they claim the right to receive water from the Verde
River through the Verde Ditch. It is undisputed that the water flowing
through the Verde Ditch is part of the Gila Adjudication.

   IV.      Exclusive Jurisdiction of the Gila Adjudication Court

¶20           The parties dispute whether the order authorizing the MOU
and related negotiations and possible agreements to HWU allocation
outside the MOU is subject to the exclusive jurisdiction of the Gila
Adjudication in Maricopa County. We have held that disputes over water
rights in areas encompassed within the Gila River system and source may
not be litigated outside the Gila Adjudication in the Maricopa County
Superior Court. Gabel, 146 Ariz. at 529. Under the reasoning and holding in

                                       9
                        USA v. VERDE DITCH et al.
                          Decision of the Court

Gabel, the Yavapai Superior Court lacks jurisdiction to issue the order
permitting allocation of water rights to the Verde River through the Verde
Ditch.

¶21            In Gabel, property owners brought a declaratory judgment
action in Gila County Superior Court for a declaration of rights with respect
to a ditch and waters diverted through that ditch from Tonto Creek to lands
owned by dozens of property holders. Id. at 528. The complaint, brought
pursuant to A.R.S. §§ 12-1831 et seq., the Uniform Declaratory Judgments
Act, sought a legal declaration of rights in regards to the ditch and waters
of Tonto Creek. Id. We held the Gila County Superior Court did not have
jurisdiction of the case because of A.R.S. § 45-252, which provides for a
general water rights adjudication when the nature, extent, and priority of
water rights are involved. Id. at 529. The court observed that while the Gila
Adjudication was not the same action as the case at issue, it was “inclusive
of all issues raised in appellants’ complaint.” Id. Finally, the court found
that dubbing the ditch action a declaratory judgment was semantics, not
the public policy of the state favoring single proceedings for water rights.8
Id.

¶22           SRP contends that because Gabel did not involve an existing
judgment determining the right to use waters from the ditch entered prior
to the Gila Adjudication, it is not applicable. Rather, SRP argues the Yavapai
Superior Court has retained jurisdiction to enforce and modify the 1909
Decree.

¶23           We disagree with SRP and VDC. The 1909 Decree was limited
to a determination of the original shareholders’ fractional interest in the
Verde Ditch and concomitantly, their fractional interest in water in the
Verde Ditch at any one time without regard to any quantifiable amount of
water. Indeed, the 1909 Decree expressly states that it is not acting to
allocate or appropriate any water rights. See supra, ¶ 5. In contrast, the MOU
or the proposed negotiation of agreements as to Ditch water would

8       Additionally, we stated that “[w]hile ditch ‘maintenance and
management’ could theoretically be separated from the water rights issue,
and thus litigated in a separate action, as a practical matter maintenance
duties follow water rights. The larger action, already underway, can
efficiently and fairly decide the problem of duties correlative with rights.”
Gabel, 146 Ariz. at 529. However, the court held it did not intend to
“foreclose the adjudication in Gila County of traditional property disputes,
e.g. trespass or easement rights.” Id.

                                     10
                        USA v. VERDE DITCH et al.
                          Decision of the Court

determine rights based on historic water usage, place of appropriation, and
date of usage. This is far beyond the terms of the 1909 Decree.

¶24            As such, SRP’s reliance on St. Johns Irrigation & Ditch Co. v.
Arizona Water Commission, 127 Ariz. 350 (App. 1980), is misplaced. St. Johns
held that ADWR did not have authority to issue new water permits when
the water at issue had been fully appropriated by court decree, citing A.R.S.
§§ 45-143(A), 45-171, and 45-231(B). Id. at 352-53. However, A.R.S. § 45-
231(B), which the court found to be “particularly significant in that it
required [ADWR] to ‘accept the determination’ of rights to the use of water
as determined by ‘judgment or decree of a court,’” was repealed in 1979 and
replaced by the general adjudication statute, A.R.S. § 45-252. Id. at 352; 1979
Ariz. Sess. Laws, ch. 139, § 38, eff. Apr. 24, 1979.

¶25            Gabel is the relevant precedent, as the stream adjudication
statute indicates that “the purpose of the adjudications is to quantify,
prioritize, and document by decree existing priority rights to appropriable
and federally reserved water.” San Carlos Apache Tribe v. Superior Court ex
rel. County of Maricopa, 193 Ariz. 195, 205, ¶ 15 (1999). The Gila Adjudication
is inclusive of the HWU addressed by the MOU. See Gabel, 146 Ariz. at 529.
In contrast, St. Johns applies to ADWR and its ability to authorize new
permits when the water source is fully appropriated. “The director [of
ADWR] has general control and supervision of surface water, its
appropriation and distribution, . . . except distribution of water reserved to
special officers appointed by courts under existing judgments or decrees.”
A.R.S. § 45-103(B) (2016) (emphasis added). The statute limits court
appointed officers, such as VDC, to the distribution of water, while ADWR
has the authority to issue new permits when water is available for
appropriation.

¶26           The 1909 Decree gave VDC the authority to manage and
maintain the Verde Ditch and to distribute the waters pursuant to a
percentage interest in the Verde Ditch, not based on any HWU or
quantifiable amount of water flowing through the ditch. That right to
administer the Verde Ditch is protected against the authority of ADWR to
administer it. However, the 1909 Decree did not retain jurisdiction in the
Yavapai Superior Court to adjudicate water rights. Even if it had, that
authority would have ended with the general adjudication statutes and the
Gila Adjudication.

¶27           The general adjudication statute authorizes determination of
“the nature, extent and relative priority of the water rights of all persons in
the river system and source.” A.R.S. § 45-252(A). Any water users whose

                                      11
                        USA v. VERDE DITCH et al.
                          Decision of the Court

rights “have not been previously adjudicated under this article” are eligible
to petition to have their rights determined by the court. Id. (emphasis
added). In other words, only those water users who have had their water
rights determined in a general adjudication are unable to bring further
claims, and those whose rights were determined by other courts may still
litigate their claims. Furthermore, water users must litigate their rights in a
general adjudication, as the act applies to “[a]ll rights to appropriable water
initiated or perfected on or before the effective date of this act.” 1995 Ariz.
Sess. Laws, ch. 9, § 24 (1st Reg. Sess.) (historical and statutory notes).
Additionally, although the Water Code protects vested rights, it also states
that those “rights shall be adjudicated as provided in this chapter.” A.R.S.
§ 45-171. It is clear that the Legislature intended for general adjudications
to be the single determiners of water rights.

¶28           Although both SRP and VDC argue that the MOU is only a
process document and not a determination of rights, the function of the
MOU is to adjudicate water rights in the Verde Ditch. The MOU’s stated
purpose is “to avoid the time and cost of extensive litigation regarding
entitlement to Verde River water . . . [through] a comprehensive agreement
on the delineation of lands served by the Verde Ditch that have [HWU].”
The MOU defines HWU as

       use of the waters of the Verde River System through the Verde
       Ditch that was (a) commenced on a particular parcel prior to
       June 12, 1919 or (b) commenced after June 12, 1919 pursuant
       to a certificate of water right issued by ADWR or other state
       agency of similar jurisdiction prior to January 1, 2014 or
       pursuant to a severance and transfer of a pre-1919 right
       approved under applicable law.

These are water rights. The MOU proceedings are designed to determine
which lands along the Verde Ditch have HWU and to limit the delivery of
Verde Ditch water to those lands. Although the MOU claims the final
agreement “shall not be deemed an adjudication of the water rights for any
particular parcel of land that would otherwise be determined in the [Gila]
Adjudication,” a determination of water rights claims affecting water
delivery for a subset of users is an adjudication of water rights regardless
of any disclaimer in the MOU.

¶29          Similarly, SRP argues that the only effect of the MOU is to
guarantee that SRP will not contest the agreed upon water rights in the Gila
Adjudication. SRP’s contention that the MOU merely allows private
agreements between Verde Ditch shareholders and SRP cannot stand. On

                                      12
                        USA v. VERDE DITCH et al.
                          Decision of the Court

this issue we are persuaded by the Arizona Supreme Court’s reasoning
when it found A.R.S. § 45-257(C) (1999) unconstitutional. That statute
provided that

       [c]laimants [in the Gila Adjudication] may enter into
       agreements regarding the attributes, satisfaction or
       enforcement of their water rights in relation to each other. An
       agreement shall be binding only among the parties to that
       agreement. On request of all parties to the agreement, an
       agreement shall be incorporated by reference into the final
       judgment or decree without modification. Any modification
       to an agreement is valid only if agreed to by all parties to the
       agreement and is binding only among the parties to that
       agreement.

A.R.S. § 45-257(C). In striking down that portion of the general stream
adjudication statute as unconstitutional, the supreme court noted that

       [s]ection 45-257(C) provides that settlement agreements made
       by claimants must be decreed by the court. The statute does
       not give the court authority to review the agreement. In an
       inter sese proceeding such as this adjudication, a court cannot
       be required to incorporate an agreement that may affect the
       availability of water for other claimants or interfere with
       senior rights. Because of the scarcity of water, this may be the
       result even though the statute states that the “agreement shall
       be binding only among [its] parties.”

San Carlos Apache Tribe, 193 Ariz. at 213, ¶ 43 (citation omitted).

¶30            Similarly, we reject SRP’s and VDU’s contention that the
MOU purports to bind only VDC (and its members) and SRP in regards to
HWU and not any other parties to the Gila Adjudication. Given the
statutory evidentiary presumption in favor of prior decrees, see infra ¶¶ 32-
33, and the fact that the MOU and any later agreements must be approved
by the Yavapai Superior Court, we find that allowing the MOU to proceed
would implicate the same issues the Arizona Supreme Court identified in
A.R.S. § 45-257(C). Moreover, as both SRP and VDC acknowledged at oral
argument, as part of this negotiation and agreement process, parties might
be severing and transferring water rights that would affect not only the
parties to this action but other downstream users. This is a far cry from the
1909 Decree which only determined the various interests of the original

                                      13
                        USA v. VERDE DITCH et al.
                          Decision of the Court

VDC shareholders in whatever water was in the Verde Ditch without
regard to quantities of water.

¶31           The 1909 Decree did not determine the rights of Verde Ditch
shareholders to Verde River water as against other Verde River
appropriators. Rather, the 1909 Decree assumed the existence of such rights
and, upon stipulation of the Verde Ditch shareholders, declared rules for
the allocation of water between the shareholders based on their
proportionate interests in the ditch. The jurisdiction exercised by the
Yavapai Superior Court since the 1909 Decree and after the promulgation
of the general adjudication statutes in 1979 have nearly entirely dealt with
maintenance of the Verde Ditch and “traditional property disputes.” Gabel,
146 Ariz. at 529; see supra ¶¶ 6-7 and n.5.

¶32           The argument that the 1909 Decree gave the Yavapai Superior
Court prior exclusive jurisdiction because it predates the Gila Adjudication
must fail. The Water Code treats prior decrees9 primarily as evidence rather
than as binding decrees. Although there is a statutory evidentiary
presumption in favor of a prior decree, the rights in that decree must still
be adjudicated in a general adjudication. “The court shall accept
information in an applicable prior decree as prescribed by § 45-257,
subsection B, paragraph 1.” A.R.S. § 45-261(A)(1) (2016). Section 45-257
states the court shall

       [d]etermine the extent and priority date of and adjudicate any
       interest in or right to use the water of the river system and
       source, provided that when rights to the use of water or dates
       of appropriation have previously been determined in a prior
       decree of a court, the court shall accept the determination of
       such rights and dates of appropriation as found in the prior
       decree unless such rights have been abandoned.

A.R.S. § 45-257(B)(1) (2016); cf. United States v. Superior Court In & For
Maricopa Cty., 144 Ariz. 265, 278 (1985) (citations omitted) (finding A.R.S. §
45-257(B)(1) valid as an exercise of the legislative power to enact
supplementary provisions to the rules of evidence). Thus, while the 1909

9      A “prior decree” is “any judgment or decree entered by a court of
competent jurisdiction that applies to the water right claim or use that is
subject to adjudication.” A.R.S. § 45-251(5).

                                     14
                         USA v. VERDE DITCH et al.
                           Decision of the Court

Decree and the HWU data collected by SRP and VDC might be used as
evidence of water rights, it may only be used in the Gila Adjudication.10

¶33             Furthermore, because the final agreement under the MOU
requires court approval, it would be considered a prior decree. The Gila
Adjudication court would therefore be required to grant the agreement the
evidentiary presumption in favor of prior decrees. Consequently, even
though the MOU states any agreement is only binding between the parties,
it will affect the Gila Adjudication. This is an untenable result.

                                CONCLUSION

¶34           For the reasons stated above, the Yavapai Superior Court
lacks subject matter jurisdiction to authorize the MOU proceedings or the
negotiation and approval of types of agreements contemplated by that

10      SRP cites In re Gen. Adjudication of All Rights to Use Water In Gila River
Sys. & Source, 212 Ariz. 64 (2006) (Globe Equity) to support the proposition
that the Yavapai County Superior Court has continuing jurisdiction under
the 1909 Decree. In Globe Equity, the Arizona Supreme Court found that
water claims by a tribe in the Gila Adjudication were precluded by a 1935
decree issued by the United States District Court adjudicating the tribe’s
rights. Id. at 66, ¶ 1. The court held, on grounds of claim preclusion, that
summary judgment in the Gila Adjudication had correctly been granted
against the tribe. Id. at 69, ¶ 14. Globe Equity is distinguishable on several
grounds. First, the 1935 decree expressly granted the parties water rights
and specified dates of priority, amounts of water, and points of diversion.
Id. at 67, ¶ 6. In contrast, the 1909 Decree grants only shares in the Verde
Ditch and a percentage of the waters therein, with no reference to priority
of appropriation or point of diversion. SRP and VDC cannot rely
successfully on Globe Equity to expand the authorization and jurisdiction of
the Yavapai County Superior Court to include adjudications and
appropriations of water when Hance did not involve such water allocations.
Second, Globe Equity does not hold that the claims should have been
brought in the District Court under its continuing jurisdiction; rather it
holds that summary judgment was properly granted in the Gila
Adjudication because of the preclusive effect of the prior decree which
actually involved appropriation of water rights before the general stream
adjudication statutes were passed. SRP and VDC may submit the 1909
Decree as evidence of purported water rights, but only in the Gila
Adjudication, not in the Yavapai Superior Court to have that court expand
its jurisdiction to affect the Gila Adjudication.

                                       15
                      USA v. VERDE DITCH et al.
                        Decision of the Court

court, SRP, and VDC. Supra, ¶ 13. We therefore vacate the August 26
Order.11

                          AMY M. WOOD • Clerk of the Court
                          FILED: AA

11     Given this holding, we need not discuss the other arguments raised
by the United States seeking vacation of the August 26 Order.

                                      16