Colorado § 7-42-101 - Additional statements in certificates - mutual ditch corporation shares.

§ 7-42-101. Additional statements in certificates - mutual ditch corporation shares.

(1) When three or more persons associate under the provisions of law to form a corporation for the purpose of constructing a ditch, reservoir, pipeline, or any part thereof to convey water from any natural or artificial stream, channel, or source whatever to any mines, mills, or lands or for storing the same, they shall in their articles of incorporation, in addition to the matters otherwise required, state: The stream, channel, or source from which the water is to be taken; the point or place at or near which the water is to be taken; the location, as near as may be, of any reservoir intended to be constructed; the line, as near as may be, of any ditch or pipeline intended to be constructed; and the use to which the water is intended to be applied.

(2) A corporation formed under the "Colorado Revised Nonprofit Corporation Act", articles 121 to 137 of this title, shall have all of the rights and powers granted by this article to the extent not inconsistent with said act, if such nonprofit corporation otherwise complies with the terms and provisions of this article.

(3) In the case of a municipal corporation, county, special district, or entity, as that term is defined in section 7-90-102, that is a member or stockholder of a corporation described in subsection (1) or (2) of this section, an individual officer, partner, member, manager, agent, or employee of the municipal corporation, county, special district, or entity as designated by the municipal corporation, county, special district, or entity is eligible for election to serve as a director of the corporation irrespective of the fact that such individual is not a member or stockholder of the corporation.

(4) (a) Subject to any decree for the water rights held in the name of a mutual ditch corporation and to a mutual ditch corporation's articles of incorporation or bylaws, a mutual ditch corporation delivering direct flow water rights may provide water to only water-requesting stockholders, including stockholders that own shares for which a change in use has been adjudicated or approved. Consistent with each stockholder's request and the available water supply, a mutual ditch corporation may provide water at rates of flow greater or less than each stockholder's pro rata ownership of shares in the corporation. When total stockholder demand exceeds available water supply, a mutual ditch corporation shall provide, to the extent possible, a pro rata amount of water to all stockholders that are requesting water, either simultaneously or, if necessary, by rotating among stockholders in sections or by other equitable methods as determined by the corporation.

(b) Subject to subsection (4)(c)(IV) of this section, if a water court decree authorizing the change in use of the water rights represented by mutual ditch corporation shares contains volumetric limits on the amount of water deliverable to the changed shares, water diverted and delivered by the mutual ditch corporation only counts against the changed stockholder's volumetric limits if the stockholder, or its lessee or designee, takes delivery in accordance with the change in use decree.

(c) A court shall not construe this subsection (4):

(I) (A) To supersede or abrogate the conditions of any final water court decree entered before September 7, 2021; or

(B) To apply to any water court application for which a trial was held before September 7, 2021, or to an appeal of any water court decision or decree resulting from such a trial;

(II) To impede or prevent a stockholder from changing the type of, place of, time of use of, or point of diversion of the water rights represented by the shares in a mutual ditch corporation;

(III) To require or prohibit a reduction in the flow rate available to a stockholder or mutual ditch corporation when the type of, place of, time of use of, or point of diversion of the water rights represented by the shares is lawfully changed;

(IV) (A) To amend or modify the standards in section 37-92-305 for water court approval of a change in use; or

(B) To amend or modify the court's ability to order conditions necessary to prevent an enlargement upon the historical use of water rights for which a change is sought or to prevent a diminution of return flow historically resulting from the use of the changed shares to the detriment of other appropriators; or

(V) To impair the ability of a stockholder to enter into a program identified in section 37-92-305 (3)(c) or to enter into an acquisition transaction provided for in either section 37-92-102 (3) or 37-83-105.

Source: G.L. § 274. G.S. § 308. L. 1891: p. 97, § 1. R.S. 08: § 988. C.L. § 2353. CSA: C. 41, § 141. CRS 53: § 31-14-1. C.R.S. 1963: § 31-14-1. L. 67: p. 656, § 5. L. 92: Entire section amended, p. 248, § 1, effective March 24. L. 97: (2) amended, p. 756, § 8, effective July 1, 1998. L. 2003: (1) and (2) amended, p. 2205, § 14, effective July 1, 2004. L. 2009: (3) amended, (HB 09-1248), ch. 252, p. 1136, § 23, effective May 14. L. 2021: (4) added, (HB 21-1046), ch. 161, p. 915, § 1, effective September 7.

ANNOTATION

Law reviews. For article, "When Corporate Stock Becomes Real Estate", see 21 Dicta 53 (1944). For article, "Irrigation Corporations", see 32 Rocky Mt. L. Rev. 527 (1960). For comment, "Maximum Utilization Collides With Prior Appropriation in A-B Cattle Co. v. United States (196 Colo. 539, 589 P.2d 57 (1978))", see 57 Den. L. J. 103 (1979). For article, "Water Rights — How to Avoid Getting in Over Your Head", see 11 Colo. Law 2143 (1982).

Purpose. Mutual ditch companies were formed expressly for the purpose of furnishing water to shareholders, not for profit or hire. Jacobucci v. District Court, 189 Colo. 380, 541 P.2d 667 (1975).

Purposes of mutual ditch companies discussed. Fort Lyon Canal Co. v. Catlin Canal Co., 642 P.2d 501 (Colo. 1982).

Convenience of members. Mutual ditch companies were organized solely for the convenience of their members in the management of the irrigation and reservoir systems. Jacobucci v. District Court, 189 Colo. 380, 541 P.2d 667 (1975).

Mutual ditches and carrier ditches distinguished. Nelson v. Lake Canal Co., 644 P.2d 55 (Colo. App. 1981).

Powers of carrier ditches. Carrier ditches carry water for sale to consumers who have contracted with the company. Nelson v. Lake Canal Co., 644 P.2d 55 (Colo. App. 1981).

A carrier ditch owns the legal title to a decreed appropriation of water from a natural stream. Nelson v. Lake Canal Co., 644 P.2d 55 (Colo. App. 1981).

Ditch corporations are quasi-public carriers, a means to an end to be resorted to for the purpose of conveying water from the natural streams to places where it may be applied to beneficial uses. Farmers' Indep. Ditch Co. v. Agric. Ditch Co., 22 Colo. 513, 45 P. 444 (1896).

Mutual ditch companies in Colorado have been recognized as quasi-public carriers. Jacobucci v. District Court, 189 Colo. 380, 541 P.2d 667 (1975).

And a corporation owning and operating a ditch becomes a trustee for its stockholders and is bound to protect their interests. Farmers' Indep. Co. v. Agric. Ditch Co., 22 Colo. 513, 45 P. 444 (1896).

Not under corporation statutes. Mutual ditch companies are not organized under the general Colorado corporations statutes, but under special legislation for ditch and reservoir companies. Jacobucci v. District Court, 189 Colo. 380, 541 P.2d 667 (1975).

Because treatment differs. The unique character of mutual ditch corporations mandates different treatment which is not fully in accord with the principles applicable to corporations in general. Jacobucci v. District Court, 189 Colo. 380, 541 P.2d 667 (1975).

Distinguishing rights of corporation and shareholders. The right of the mutual ditch corporation to hold title to the water rights and other property, and to manage the affairs of the corporation, should be distinguished from the right of the shareholders to use the water on their lands. Jacobucci v. District Court, 189 Colo. 380, 541 P.2d 667 (1975).

A mutual ditch company does not own water rights in a traditional sense; however, a mutual ditch company owns contractual water delivery rights. E. Ridge of Fort Collins, LLC v. Larimer & Weld Irrig. Co., 109 P.3d 969 (Colo. 2005).

A mutual ditch corporation does not hold the actual "water rights" in trust. Jacobucci v. District Court, 189 Colo. 380, 541 P.2d 667 (1975).

On the contrary, actual ownership of the water rights is in the shareholder. Jacobucci v. District Court, 189 Colo. 380, 541 P.2d 667 (1975).

As well as interest in property and other works. The shares of stock owned by shareholders in a mutual ditch corporation represent a definite and specific water right, as well as a corresponding interest in the ditch, canal, reservoir, and other works by which the water right is utilized. Jacobucci v. District Court, 189 Colo. 380, 541 P.2d 667 (1975).

Individual shareholders of a mutual ditch company are indispensable parties in an action to condemn the shareholders' decreed water priorities. Jacobucci v. District Court, 189 Colo. 380, 541 P.2d 667 (1975).

Despite responsibility of corporation in maintaining actions. A mutual ditch corporation is responsible for maintaining actions in the corporate name to secure or protect the consumers' water rights or other property and to represent the shareholders in civil actions. Jacobucci v. District Court, 189 Colo. 380, 541 P.2d 667 (1975).

Duty of court to join shareholders. Pursuant to C.R.C.P. 19 and the court's power under C.A.R. 21, the district court should join as parties to a condemnation action those shareholders in a mutual ditch corporation whose water rights would be affected by the condemnation action of the defendant as of the date of the initiation of the condemnation action and all parties in interest. Jacobucci v. District Court, 189 Colo. 380, 541 P.2d 667 (1975).