E. Cherry Creek Valley Water & Sanitation Dist. v. Greeley Irrigation Co.

E. Cherry Creek Valley Water & Sanitation Dist. v. Greeley Irrigation Co., 348 P.3d 434 (Colo. 2015) (holding that the water court’s resolution of motions for claim and issue preclusion did not constitute a final and appealable judgment because the water court did not address the requisite factual inquiries in the underlying original claim for relief and thus could not be certified for immediate appeal).

In 1998, the Weld County District Court, Water Division 1 (“water court”) quantified and decreed the historical consumptive use yield of the Greeley Irrigation Company (“GIC”) shares in a case that became known as the “Poudre Prairie Decree.” In that decree, the water court directed that the specified quantification of GIC shares could be used in future applications for changes in water rights, absent a showing of other material circumstances the Poudre Prairie Decree did not address.

In 2013, East Cherry Creek Valley Water and Sanitation District and Colorado Water Network, Inc. (“East Cherry Creek Valley”) submitted an application to the water court requesting a change in the place and type of use of its shares in the GIC. That application asserted East Cherry Creek Valley’s right to use the pro-rata allocation of consumptive use that the Poudre Prairie Decree provided. East Cherry Creek Valley also filed a Colorado Rules of Civil Procedure (“C.R.C.P.”) 56(h) motion with the water court, seeking three determinations of law that the Poudre Prairie Decree precluded requantification of East Cherry Creek Valley’s water right, East Cherry Creek Valley did not have the burden to establish claim preclusion by showing a lack of changed circumstances, and the water court should not allow evidence regarding changed circumstances.

The water court denied the motion and found: (i) the Poudre Prairie Decree was subject to requantification if there was a showing of relevant subsequent events not addressed at the time of the decree; (ii) the preclusive effect of the decree was limited to the period before it was entered; and (iii) East Cherry Creek Valley had the initial burden of proving no material circumstances had occurred that would result in injury to other water users. After the water court denied the motion, East Cherry Creek Valley moved under C.R.C.P. 54(b) for an entry of the denial as a final judgment. The State and Division Engineers (“Engineers”) opposed the motion, but the water court granted it, certifying the Rule 56(h) order as final and appealable.

East Cherry Creek Valley appealed to the Colorado Supreme Court (“Court”) on all three issues. The Engineers cross-appealed on two issues and moved for dismissal of East Cherry Creek Valley’s appeal on the grounds that the water court’s order was not a final judgment.

On appeal, East Cherry Creek Valley’s application made one claim for relief — it requested issuance of a decree changing its water right in its GIC shares. The water court’s denial of East Cherry Creek Valley’s Rule 56(h) motion did not address that claim, so the Court held that the water court had not entered a final judgment on East Cherry Creek Valley’s actual claim for relief in the litigation. In reaching this conclusion, the Court reviewed some key legal tenets.

First, Rule 54(b) is an exception to the rule that a trial court’s final judgment must resolve all claims for relief. The Court explained that a trial court may only issue a Rule 54(b) certification if three elements are met: (i) the ruling must be upon an entire claim; (ii) the decision must be the final and ultimate disposition of an individual claim; and (iii) there must be no just reason for delay in entering the final judgment on the claim. In granting the Rule 54(b) motion, the water court reasoned that the parties would benefit from direction from the Court, and the appeal would further judicial administration. However, because these stated justifications did not meet the three requirements laid out in Rule 54(b), the Court held that the certification without a final judgment on the claim for relief was improper.

Second, the Court described what constitutes a claim for relief in the context of a change of water right. The Court described how, unlike other property rights, a water right is the right to use a certain portion of the state’s waters, according to the right’s priority. The state owns the water, and the right to use the water is subject to prior appropriation limitations. The Court noted an application to change a water right is considered a complaint. A water right owner may apply to change the type, location, or time of use, as well as the point of diversion of the right. The Court held that a “claim” for change of water rights is “the aggregate of operative facts that give rise to the right to a change decree.” The issuance of a change decree is subject to a two-pronged factual inquiry. The water court must address the scope, measure, and limit of the water right to be changed, and the conditions necessary to prevent injury to other water rights.

The Court further explained that the first question hinges on the historical beneficial use. To avoid rewarding waste, actual beneficial water use becomes the basis and limit of the water right. The second question addresses what conditions will be necessary in order to ensure that other decreed water rights are not injured by the change. Because East Cherry Creek Valley sought to divert from different points at different rates, the Court reasoned it might be required to make out-of-priority diversions and exchanges or relinquish portions of water available from its shares in order to protect other water rights. The water court reserved these factual issues for trial, but the Court held that the water court needed to make a finding regarding those issues before it could enter a final judgment on the claim.

The Court held that the claim and issue preclusion issues that the water court addressed were affirmative defenses, not separate claims for relief. Because the water court’s decision did not actually resolve an entire claim for relief, there was no final judgment for the Court to address. The Court held that, “By definition, a Rule 56(h) order will not be subject to Rule 54(b) unless the determination of a question of law has a final, dispositive effect on an entire claim.” Absent a final judgment on a true claim for relief, the Court lacked jurisdiction to consider the appeal.

Accordingly, the Court reversed the water court’s certification order, dismissed the appeal, and remanded the case for further proceedings.

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