First National Bank of Wynne v. Twin Creeks Special Service District et al
Filing
63
MEMORANDUM DECISION denying 36 Motion for Summary Judgment ; granting 38 Motion for Partial Summary Judgment ; granting 39 Motion for Partial Summary Judgment ; granting 42 SEALED Motion for Summary Judgment ; overruling 59 Objections. Signed by Judge Robert J. Shelby on 09/26/2013. (asp)
FILED IN UNITED
COURT, DISTR~[1rgFs DISTRICT
UTAH
S£p 2 6 2013
BYD. MAAI( JONEs
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
FIRST NATIONAL BANK OF WYNNE, an
Arkansas corporation,
DE:Pu
,
CLE:AI(
1YctERK
MEMORANDUM DECISION
AND ORDER
1)
Plaintiff,
vs.
TWIN CREEKS SPECIAL SERVICE
DISTRICT, a Utah special service district,
FEDERAL DEPOSIT INSURANCE
CORPORATION, an independent agency of :
the United States, as Receiver for ARKANSAS :
NATIONAL BANK, NA, et al.,
2)
3)
4)
Defendants.
DENYING DEFENDANT FDIC-R'S
MOTION FOR SUMMARY
JUDGMENT (DKT. 36);
GRANTING PLAINTIFF FNB'S
MOTION FOR SUMMARY
JUDGMENT (DKT. 42);
GRANTINGTHEPARTIES' JOINT
MOTION FOR SUMMARY
JUDGMENT (DKT. 38); AND
OVERRULING FDIC-R'S
OBJECTIONS (DKT. 59)
Civil No. 2:10-cv-01100-RS
Judge Robert J. Shelby
This is an action brought to quiet title to disputed water rights and water stock relating to
a residential property development project in Wasatch County, Utah (the Project). In 2006 and
2007, Arkansas National Bank (ANB) made three successive loans to a development company,
WS Sleeping Indian Ranch, LLC (Sleeping Indian), for the Project. In exchange, ANB obtained
three successive deeds of trust. Each is secured by identical collateral which includes "all water
and riparian rights, wells, ditches, reservoirs, and water stock .... that may now, or at any time
in the future, be part of the real estate .... " With the loans, Sleeping Indian acquired land, water
rights, water stock, and other items needed for its development.
Then, both ANB and Sleeping Indian failed. The FDIC was appointed receiver (FDICR). FDIC-R negotiated the sale of its interest in the first of the ANB-Sleeping Indian deeds of
1
trust to Plaintiff, First National Bank of Wynne (FNB). FNB foreclosed on its collateral under
that first deed of trust. The central issue before the court is whether the water rights and water
stock acquired by Sleeping Indian are part of the collateral FNB possesses pursuant to
foreclosure on that first deed of trust.
FNB initially filed this case in Utah's Fourth Judicial District Court. Defendant FDIC-R
removed the case pursuant to 28 USC§ 1441 (a) and (b), and 12 U.S.C. § 1819(b)(2), which
delineates corporate powers for the FDIC and provides that in general, all suits against the FDIC
"in any capacity ... shall be deemed to arise under the laws of the United States."
On June 6, 2013, the court heard argument on the parties' cross-motions for summary
judgment (Dkts. 36 and 42) and the parties' Joint Motion for Partial Summary Judgment. (Dkt.
39). David C. Wright and John H. Mabey, Jr. appeared on behalf ofPlaintiffFNB. Jared M.
Asbury represented FDIC-R. David B. Harvigsen appeared for Defendant Twin Creeks Special
Service District (Twin Creeks). Lester Perry appeared but offered no argument for Defendant
Ray Weller, an individual member of Sleeping Indian. 1 After considering the parties' respective
memoranda, exhibits, and the argument of counsel, the court ruled from the bench, granting
FNB's Motion for Summary Judgment (Dkt. 42), quieting its title to the subject water rights and
1
Before removal to this court, FNB obtained leave for additional service of process pursuant to
Rule 4(d)(4) ofthe Utah Rules of Civil Procedure. The residential real estate project for which
the water rights at issue were intended is in Wasatch County. The generally circulated
newspaper there is the Wasatch Wave. As ordered, FNB caused to be published in the Wasatch
Wave a notice of this action and FNB's quiet title claims. That notice was approved by Utah
Fourth District Court Judge Derek Pullan. There was no response to that notice. In addition,
although Defendants WS Sleeping Indian and Raymond Weller answered in this action, and have
been served with all motions and other filings, they did not otherwise engage in this litigation,
did not answer discovery, and did not oppose or otherwise respond to either of the cross-motions
for summary judgment. Counsel for Sleeping Indian and Weller personally were present at the
summary judgment hearing but did not participate.
2
water stock described below, and denying FDIC-R's cross-motion for summary judgment. (Dkt.
36). The court also granted the parties' Joint Motion for Partial Summary Judgment. (Dkt. 39).
At the June 6 hearing, the court asked that counsel for FNB memorialize these rulings in
a written order. Counsel for FNB submitted a proposed order on August 16. (Dkt. 58). On
August 26, counsel for FDIC-R filed objections to that order, taking issue with its substantive
analysis on three points of contract and water law. (Dkt. 59). Counsel for FNB responded to the
objections (Dkt. 60), and counsel for FDIC-R filed a reply memorandum supporting the
objections on August 27. (Dkt. 61). As discussed below, the court now memorializes its prior
rulings from the bench. The court also overrules the FDIC-R's objections. The objections
present legal argument, which is inappropriate as an objection to form. DUCivR 54-1 (b).
FACTUAL BACKGROUND
The facts material to resolution of this case are not disputed. The competing title claims
to the contested water rights and stock Gointly called the Water Properties) described below tum
on the application ofUtah water and contract law to the terms of the controlling agreements.
Twin Creeks is a Wasatch County special service district established on June 20, 1994,
pursuant to Utah Code Annotated §17D-1-101, et seq. and Wasatch County Resolution 94-6, to
provided sewage collection, treatment and contract services within its jurisdiction in the Lake
Creek and Center Creek areas of Wasatch County. On August 8, 1994, Twin Creeks' purposes
were expanded to include water services pursuant to Wasatch County Resolution 94-18.
Sleeping Indian is a now-expired Utah limited liability company. It conducted business
in Wasatch County, Utah. Sleeping Indian was the developer of the Project-real property in
Wasatch County commonly known as Sleeping Indian Ranch.
3
On June 27, 2006, Sleeping Indian signed a deed of trust in favor of ANB, securing an
initial loan of$7,494,011 to purchase the Project property (First DOT). The First DOT was
recorded on June 28, 2006. It is secured by trust property consisting of the Project land,
[t]ogether with all rights, easements, appurtenances, royalties, mineral rights, oil
and gas rights, crops, timber ... all water and riparian rights, wells, ditches,
reservoirs, and water stock and all existing and future improvements, structures,
fixtures, and replacements that may now, or at any time in the future, be part of
the real estate described above (all referred to as 'Property').
The First DOT also defines the "Secured Debt" for the collateral to include "Debt incurred under
the terms of all promissory note(s), contract(s), guaranty(ies) or other evidence of debt described
below and all their extensions, renewals, modifications or substitutions," as well as:
all future advances from Lender to Grantor of other future obligations of Grantor
to Lender under any promissory note, contract, guaranty, or other evidence of
debt existing now or executed after this Security Instrument whether or not this
Security Instrument is specifically referenced ....
The First DOT provides that it "is complete and fully integrated." Individual Sleeping Indian
principals-Raymond Weller, Robert Madsen, and Jeffrey Scott-also personally guaranteed the
loan, with Weller having mortgaged his home.
At the time of the First DOT, Wasatch County required each residential lot to have
sufficient water for residential use, plus irrigation water sufficient for a minimum of one-quarter
acre of irrigated area. Additional water could be required depending on individual lot
circumstances.
Money from ANB in hand, Sleeping Indian bought the Project land, consisting of295
acres, along with certain water shares in Lake Creek Irrigation Company, for $5,300,000.
Additional funds loaned under the First DOT were used to pay off stock Weller pledged and to
buy additional water shares.
4
A few months later, in October 2006, ANB extended another line of credit to Sleeping
Indian to purchase more water shares and for other Project costs. The second loan totaled
$2,347,500. A deed of trust relating to that loan (Second DOT) was recorded on October 20,
2006. The Second DOT was secured by precisely the same trust property as the First DOT.
The Project was approved for sixty-six small lots, with seventy-one larger lots in a
contiguous mountain zone area, just outside of Heber City, Utah. The Project is in the service
area of the Twin Creeks Special Service District. Twin Creeks required the transfer of water
rights and water shares (collectively, Water Rights) necessary for the Project before Twin Creeks
would issue a "will serve" letter, which was required by Wasatch County for Project approval.
ANB, the Project lender, ordered an appraisal on the Property, issued as of May 10,2006.
Concerning water, the appraisal identifies the following:
Water Shares
Certificate numbers and water amounts are as follows:
Certificate Number
Total Water Shares
398
3 shares uf Lake Creek Irrigation Primary (27 acre: feet of culinary)
340
21, 1" class shares (21 acre feel of irrigation water)
342
16.5 secondary shares (1/3 acre feet per share)
344
3.5, 3'~ da:;s 1obares (1/15 acre foot per share)
825
1 Lake Creek Primary Share (9 acre feeL)
Under Contract
9 Lake Creek Shares (81 acre feet) scheduled to close 5/26/06
Under Contract
3.5 aL'TC feet of water available via the spring on the subject property.
Currently researching adequate documentation.
B ascd on the above infonnation. this totals 147.23 acre feet of water. Inasmuch as the state
standard in typically 0.43 acre feet per dwelling u11it, the proposed development would require
approximately 65 acre feet of water for culinary purposes (148 homes x .43:::; 63.64 acre feet). The
excess water would likely be used for landscaping and irrigation purposes.
5
In July 2007, Wasatch County's Planning and Zoning Department notified Sleeping
Indian that preliminary approval of the Project required "the water necessary for the
development." On September 5, 2007, the Wasatch County Council notified Sleeping Indian
that "276.02 acre feet of water will be necessary to fully develop and improve" lots and other
areas in the Project. On September 18, 2007, the Wasatch County Planning and Zoning
Department notified Sleeping Indian of the density approval and that preliminary project
approval would happen "once the developer acquires and escrows the water necessary for the
development."
In connection with the anticipated Project approval, on or about October 15, 2007,
Sleeping Indian and Twin Creeks entered into a Sleeping Indian Water Rights Escrow Deposit
Agreement (Escrow Agreement). It provided that Sleeping Indian would transfer "Water
Rights" for "use on the Project and in exchange for a 'Will-Serve Letter"' as follows:
a. "Sleeping Indian will transfer, by quitclaim deed and/or transfer of stock
certificate, the Water Rights [identified in the Agreement's Exhibit C]" to Twin
Creeks free of encumbrance.
b. In exchange, Twin Creeks agreed to issue a "will serve" letter, which is in turn
required by Wasatch County in order to obtain county approval of the Sleeping
Indian Project.
c. Twin Creeks agreed to own, manage and develop the Water Rights for the benefit
of the Sleeping Indian Project and to supply water for the Project.
d. Twin Creeks agreed to file any necessary change applications or other
administrative filings as necessary to develop the Water Rights for beneficial use
and to be a part of the Project.
e. Twin Creeks guaranteed water service to the Sleeping Indian Project as then
designed, to the extent required by Wasatch County, and as necessary to fully
6
develop the Sleeping Indian Project to completion, including residential and
secondary (irrigation) water service for each lot within the Project.
Twin Creeks further confirmed in the Escrow Agreement that the agreed "will serve" letter was
in form and substance satisfactory to Wasatch County to obtain full County approval of the
Project.
The Escrow Agreement identifies the following "Water Rights"- water rights and water
stock--owned by Sleeping Indian "for use on the Project:"
A.
Lake Creek Irrigation Company
13.83 shares
21 shares
38 shares
28.82 shares
Primary Shares 11. First Class Shares 111. Second Class Shares 1v. Third Class Shares1.
B.
Water Right No. 55-12315, representing 97 acre feet of water segregated
from Water Right No. 55-9269.
Further, there was belonging to or a part of the Project 28.82 acre feet of Municipal and
Industrial (M&I) water credit to be supplied to the Project by Twin Creeks. FNB has alleged and
Twin Creeks admits that "on Exhibit C of the Escrow Agreement, the Lake Creek Third Class
shares mistakenly represent the same water that is the 28.82 acre feet ofM&I water credited in or
to be supplied to the Project as part of the Project ... [and that] the number of Lake Creek Third
Class shares dedicated to the Project is 3.5."
The Wasatch County Council provided preliminary approval for the Project on December
19, 2007. The Wasatch County Planning Commission granted final approval for Phase 1 of the
Project (66 single-family lots) on February 14, 2008.
7
As part of the effort to obtain the aforementioned Project approval, on October 17,2007,
Sleeping Indian signed a deed of trust to secure a third loan from ANB in the principal amount of
$2,700,000 for the purchase of additional required water (Third DOT). The Third DOT was
recorded on October 31, 2007. The Third DOT is secured by the same trust property securing
the First and Second DOT's.
On or about December 5, 2007, ANB prepared a loan summary document describing its
three loans for the Project. As of January 2008, the Property included all of the water
rights/shares (276 acre feet either owned or under contract) necessary for full development.
On May 9, 2008, ANB was closed by the Office of the Comptroller of the Currency, and
the FDIC was named Receiver. 2 In September 2008, ANB requested an appraisal of the
Property. Concerning water rights, the resulting appraisal states in relevant part as follows
(emphasis in original):
Water Rights
According to Mr. Kent Madsen and Wasatch County water rights have been dedicated to
Wasatch County for Phase 1 of the subject property. It is uncertain at the time of this report as to
how much water is needed for future development of Phase 2. The subject currently has 55.72
shares of Lake Creek Water and 29.00 acre feet ofM&I water. There are 21.5 shares under
contract as well as 97.62 acre feet, 3.50 acre feet and 1/9 acre feet currently under contract with
various entities. The subject has a total of276 acre feet of water, whether owned or under
contract. Water certificates can be reviewed in the addendum. All values in this report are
contingent upon the subject having all water shares needed for development.
For purpose of the analysis, we assumed these water rights would be reserved or "vested"
with the realty to facilitate and ensure future agricultural uses and future development consistent
with estimated highest and best use.
2
See http://www.fdic.gov/bank/individual/failed/anb.html (providing "Failed Bank Information).
8
SitusServ was the FDIC's servicing agent for the Project from approximately October 17,
2008, through July 15, 2011. 3 On or about March 10, 2009, SitusServ counsel sent to SitusServ
a memorandum with recommendations concerning the ANB loans, which were then in default.
At that time, it was expected that foreclosure of the First DOT (then still owned by the FDIC)
"would probably pay off the senior lien [First DOT]," with possibly no recovery left except
"from the guarantors." On or about March 31, 2009, counsel for SitusServ prepared a Case
Resolution Report, outlining the ANB loans for the Project. According to the Report, both the
Second and Third DOT's were secured by the Project land. The Report states that SitusServ was
to "investigate if any water rights were perfected relating to the Third Deed of Trust and the
value ofthose rights."
The Koepke Law Group represented ANB during 2008. In April 2008, Koepke wrote to
Comer Bank (a participant in the purchase of ANB assets), stating the following:
a. ANB lent funds secured by Second and Third DOT's.
b. Those Second and Third DOT's are "junior lien positions on only the
Development Property."
c. ANB was not foreclosing on those second and third loans, "as any attempt to do
so is ultimately subject to the foreclosure of the [First DOT]."
d. "ANB recognizes that Loan Nos. 2 and 3 almost certainly will be unsecured at the
conclusion of this foreclosure and sale of the Development Property .... "
3
FDIC-R describes SitusServ's role as its "servicer" (FDIC-R Memo., Dkt. 37, at xii), and as an
entity which "handled matters relating to [the Project] in conjunction with and on behalf ofthe
FDIC" during the agreed dates. (FDIC-R Opp. Memo., Dkt. 50 at xi) (emphasis added).
9
In May 2008, Koepke wrote to the FDIC explaining that foreclosure of the First DOT against
"the Development Property" would "cut[] off potential for ANB junior lien recovery."
On April9, 2009, Sleeping Indian executed an Addendum to Real Estate Deed of Trust
(Addendum). Sleeping Indian is the only party to the Addendum, and its Manager, Ray Weller,
is the only signatory to the Addendum, although the Addendum was negotiated between
Sleeping Indian and FDIC. In the Addendum, Sleeping Indian:
a. recites that the "FDIC has been appointed as a receiver for ANB";
b. recites that the Third DOT encumbers certain real property in connection with the
Project;
c. recites that the Third DOT "encumbers all water and riparian rights and water
stock" intended for the Project;
d. recites that a substantial portion of the ANB loan given in return for the Third
DOT were used to purchase specific water rights and water stock in the Lake
Creek Irrigation and Wasatch Irrigation Companies.
In the Addendum, Sleeping Indian purports to have received valuable consideration from an
unidentified entity in return for "confirm[ing] and clarif[ying] that the [Third] Deed of Trust
encumbers all of [Sleeping Indian's] right, title and interest in and to the Water Rights listed on
the attached Exhibit B, and any subsequent rights for water relating to the Property resulting
from the contribution or assignment of the Water Rights to the Service District." The Addendum
does not mention the First or Second DOT's.
On June 30, 2009, FNB and others entered into an Assignment and Assumption
Agreement concerning the First DOT. This Assignment and Assumption Agreement was
recorded on July 7, 2009. It provides that, upon the sale of the First DOT to FNB, the FDIC
"shall have no further interest in the loan."
10
The FDIC sold its remaining interest in the First DOT to FNB on July 30, 2009. On
December 7, 2009, FNB acquired a Trustee's Deed pursuant to a Trustee's foreclosure sale on
the Project. The Trustee's Deed was recorded December 10, 2009.
FNB asked Twin Creeks to inventory the Water Rights. On May 25,2011, Twin Creeks
provided that inventory. (Attached to FNB's Memo. at Ex. 22, Dkt. 43-22). It identified water
rights and water stock certificates transferred to and held by Twin Creeks "for the Sleeping
Indian Project." To summarize, these disputed Water Properties held by Twin Creeks are:
1.
Water Right No. 55-12315, representing 97 acre feet of water segregated
from Water Right No. 55-9269;
2.
28.82 acre feet ofM&I water credit in or to be supplied to the Project by
Twin Creeks; and
3.
Lake Creek Irrigation Company stock as follows:
a.
Primary Shares13.83 shares
21 shares
b.
First Class Shares c.
Second Class Shares38 shares
d.
Third Class Shares3.5 shares
4.
1.14 total shares of Wasatch Irrigation Company Stock. Twin Creeks
explains that the "water represented by these shares is not usable at the Sleeping
Indian Ranch development, so the District conveyed these shares to Heber City in
exchange for 3.876 acre-feet ofM&I water that can be used at the development."
Thus, although Twin Creeks "no longer has possession of the stock certificates,"
it "may be able to undo the exchange, if necessary."
Seven primary shares of Lake Creek Irrigation Company were specifically and separately
encumbered by the First DOT and its accompanying security agreements and collateral pledges
and UCC filings, and there was no contention that they were not so encumbered by any of the
parties.
11
ANALYSIS
I.
THE PARTIES' CROSS-MOTIONS FOR SUMMARY JUDGMENT
Each of the First, Second, and Third DOT's securing loans from ANB to Sleeping Indian
provide that the respective loans are secured by the Project land "[t]ogether with all rights,
easements, appurtenances, royalties, mineral rights, oil and gas rights, crops, timber ... , all water
and riparian rights, wells, ditches, reservoirs, and water stock and all existing and future
improvements, structures, fixtures, and replacements that may now, or at any time in the future,
be part of the real estate described above (all referred to as 'Property')." The critical question in
the parties' cross-motions is whether the water rights and stock that were obtained subsequent to
the First DOT are "part of the real estate" securing the initial loan from ANB. If so, the
remaining question is whether FNB took those rights in first position when it purchased from
FDIC-R its interest in the First DOT. For the reasons discussed below and on the record at the
June 6 hearing, the court answers both questions in the affirmative. As a result, the court finds
that FNB is entitled to summary judgment, and that the FDIC-R's motion for summary judgment
must be denied.
Summary judgment on these issues is proper if"there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter oflaw." FED.R.Civ.P. 56(a).
This case turns on contract interpretation, including the interpretation of the three DOT's and the
Addendum later executed. The interpretation of these documents under the uncontroverted facts
is appropriately decided as a matter of law.
Under Utah law, deeds are interpreted like any other contract. Capital Assets Fin. Serv.
v. Lindsay, 956 P .2d 1090, 1093 (Utah App. 1998). "If the language within the four comers of
12
the contract is unambiguous, the parties' intentions are determined from the plain meaning of the
contractual language, and the contract may be interpreted as a matter oflaw." Trans-Western
Petroleum v. US. Gypsum, 584 F.3d 988, 993 (lOth Cir. 2009) (citing Giusti v. Sterling
Wentworth Corp., 2009 UT 2, ~ 44,201 P.3d 966, 975); see also Mellor v. Wasatch Crest Mut.
Ins. Co., 2009 UT 5, ~ 7, 201 P.3d 1004, 1007 ("Questions of contract interpretation which are
confined to the language of the contract itself are questions oflaw .... "). Additionally,
"whether a contract is ambiguous is a question oflaw .... " Tangren Family Trust v. Tangren,
2008 UT 20, ~ 10, 182 P.3d 326, 329.
Ambiguity is present only when the contract language reasonably supports competing
interpretations offered by the parties. Daines v. Vincent, 2008 UT
51,~
31, 190 P.3d 1269, 1277
(citations omitted). Rarely will a contract support reasonable competing interpretations. !d. at ~
30 n.5. Evaluating the question of ambiguity, the court looks to "harmonize all of the contract's
provisions and all of its terms." Central Fla. Invs., Inc. v. Parkwest Assocs., 2002 UT 3, ~ 12, 40
P.3d 599, 605 (citations omitted). The entire agreement is evaluated-"all of its parts in relation
to each other"-giving a "reasonable construction of the contract as a whole to determine the
parties' intent." Gillmor v. Macey, 2005 UT App 351, ~ 19, 121 P.3d 57, 65 (citations omitted).
The objective is to "look for a reading that harmonizes the provisions and avoids rendering any
provision meaningless." Peterson & Simpson v. IHC Health Serv., Inc., 2009 UT
54,~
13, 217
P.3d 716, 720 (citations omitted).
A. The First DOT governs the ownership of the disputed Water Properties
Under the Assignment agreement between FDIC-R and FNB, FNB purchased 1) FDICR's participation in and any collateral secured by the First DOT, and 2) other items listed in the
13
loan documents set forth in the Assignment. 4 The First DOT was the first-recorded among the
three DOT's. Thus, the First DOT has priority over the others. See FDIC v. Taylor, 2011 UT
App 416 ~ 14, 267 P.3d 949, 957 ("priority of competing interests is determined by Utah's racenotice principles") (citing UTAH CODE ANN.§§ 57-3-102 to -103); Tracy Collins Bank & Trust
Co. v. Seiger, 546 P.2d 237, 238 (Utah 1976) (first recorded trust deed had priority over
subsequent trust deed secured by the same property in foreclosure actions; interest of subsequent
property buyers and lenders was subordinate).
This first position First DOT governs the disposition of the disputed Water Propertieswater rights and stock in the Lake Creek and Wasatch Irrigation Companies. This conclusion is
compelled by the plain language of the three DOT's. Each of these DOT's identify precisely the
same collateral for the respective loans. The critical language in the First DOT is identical to
that in the Second and Third DOT's:
[t]ogether with all rights, easements, appurtenances, royalties, mineral rights, oil
and gas rights, crops, timber ... all water and riparian rights, wells, ditches,
reservoirs, and water stock and all existing and future improvements, structures,
fixtures, and replacements that may now, or at any time in the future, be part of
the real estate described above (all referred to as 'Property').
Thus, each DOT includes as collateral "all water ... rights ... , and water stock ... that may now
or at any time in the future, be part of the real estate described above (all referred to as
'Property')." The "secured debt" under the DOT's included debt incurred under all the notes and
their extensions, renewals, modifications, or substitvtions, as well as future debt obligations.
Each DOT was executed between the same parties, ANB and Sleeping Indian. Each
DOT expressly contemplates certain events that occurred. The plain terms of the First DOT and
4
Those other items include the Headwaters stock, the other seven Lake Creek shares, and the
personal property of the Sleeping Indian members.
14
each subsequent DOT contemplated that Sleeping Indian might "in the future," secure water
rights and water stock, and that any water rights or stock would be part of the collateral. The
plain terms also contemplate that Sleeping Indian might obtain additional loans from ANB to
develop the Property.
For these reasons, the court concludes that when FNB purchased FDIC-R's interest under
the First DOT, it stood first in line to collect any collateral identified therein-the same collateral
identified in the Second and Third DOT's. More specifically, FNB was in first position for "all
water ... rights, ... and water stock ... that may now, or at any time in the future, be part of the
real estate described above (all referred to as 'Property')." FNB has foreclosed now on that
collateral, and is the owner of any rights to it as identified in the First DOT.
The court has considered and does not find compelling FDIC-R's arguments to try to
avoid this clear result. FDIC-R points to the Addendum to the Third DOT that Sleeping Indian
alone executed in April2009 (some three years after the First DOT and 18 months after the
Third DOT). Notwithstanding the identical language in the First and Third DOT's describing the
collateral, FDIC-R contends that by "clarifying" the terms of the Third DOT well after it was
executed, the Addendum somehow encumbers collateral the First DOT does not-the disputed
Water Properties. The Addendum provides that:
1. FDIC is the receiver for ANB;
2. The Third DOT encumbers certain real property in connection with the Project;
and
3. The Third DOT encumbers all water and riparian rights and water stock intended
for the Project.
4. Certain water rights and Lake Creek and Wasatch Irrigation Company stock were
purchased with the funds secured by the Third DOT.
15
In the Addendum, Sleeping Indian "confirms and clarifies that the [Third] Deed of Trust
encumbers all of [Sleeping Indian's] right, title and interest in and to the Water Rights listed on
the attached Exhibit B, and any subsequent rights for water relating to the Property resulting
from the contribution or assignment of the Water Rights to the Service District."
The Addendum does not in any way alter the terms of the First DOT or diminish
whatever collateral the First DOT encumbered. The First DOT provides that it is an integrated
agreement. The First DOT was executed over a year before the Third DOT was signed, and
three years before the Addendum. The First DOT means what its plain terms state, and
encumbers the collateral it describes, regardless of what the subsequently executed Addendum
claims to clarify regarding the Third DOT. By its own terms, the Addendum does not purport to
amend, alter, or add to the meaning of the First DOT. In fact, the Addendum does not mention
the First DOT (or the Second) at all.
The Addendum does not even purport to alter the terms of the Third DOT. Instead,
Sleeping Indian simply summarizes in the Addendum certain terms of the Third DOT, notes
what Sleeping Indian actually purchased with the third loan (water), "clarifies and confirms" that
it intended by the Third DOT to encumber the Water Properties, and contends that ANB has a
security interest in them while they are in escrow. Neither the recitals, nor the clarifications and
confirmations change the Third DOT or what it encumbered. Indeed, the Addendum's
"clarification" that the Third DOT encumbered the Water Properties only underscores that the
identical language in the First and Third DOT's (as well as the Second DOT) each encumbered
the subsequently-acquired water rights and stock as part of their identically defined collateral.
The issue of what collateral secured the First DOT is discussed below in detail.
16
B. The Disputed Water Properties are "part of the real estate" defined as collateral
under the First DOT
The next issue is whether the disputed Water Properties, now held by Twin Creeks for
use on the Property, are part of the collateral defined in the first priority First DOT:
[t]ogether with all rights, easements, appurtenances, royalties, mineral
rights, oil and gas rights, crops, timber ... , all water and riparian rights,
wells, ditches, reservoirs, and water stock and all existing and future
improvements, structures, fixtures, and replacements that may now, or at
any time in the future, be part of the real estate described above (all
referred to as 'Property').
The court finds that under this plain language and Utah law concerning contracts and water
property, the Water Properties are part of the First DOT's collateral.
In reaching this conclusion, the court rejects FDIC-R's arguments that 1) because the
water rights at issue are not "appurtenant to the land," they cannot be "part of the real estate'; and
thus not part of the First DOT's collateral, and 2) that the water stock was not transferred in the
manner required by Utah security statutes evidenced by the transfer of securities or certificates as
contemplated by Article Nine of the Utah Code.
FNB correctly notes that FDIC-R's argument confuses water rights encumbered through
contracts, such as trust deeds, with water rights appurtenant in land conveyances. According to
FNB, the water rights here need not be appurtenant but became "part of the real estate described
above (all referred to as 'Property') when Sleeping Indian transferred the water rights at issue to
Twin Creeks to hold in trust for use on the Project, defined in that Escrow Agreement to be the
295 acre development at Sleeping Indian Ranch. As discussed in more detail below, the court
agrees with FNB's understanding and finds that the language of the parties' agreements
determines this issue. Under the plain language of the First DOT the water rights and stock at
17
issue now became "water ... rights ... and water stock" and "part of the real estate ... all
referred to as 'Property,"' when Twin Creeks acquired them and contracted specifically for Twin
Creeks to hold the requisite water in trust for use on the real estate.
The facts of this case are analogous to those in Loosle v. First Fed. Sav. & Loan Ass 'n.
858 P .2d 999 (Utah 1993). In Loosle, the Utah Supreme Court found that a trust deed
encumbered both inchoate and not-yet-appurtenant water rights associated with particular real
estate. The Loosle court found that the trust deed there encompassed later-acquired water rights
represented by a yet-to-be-finalized application, despite the fact that those water rights were
neither vested nor appurtenant at the time. The Utah Supreme Court noted that inclusion in the
trust deed of additional language beyond reference to appurtenances evidenced the parties' intent
to convey more than simply appurtenant rights. This court concludes that the same result should
inure here.
Further, FNB's interpretation ofthe relevant language in the First DOT is the only
reading that enables the court to give effect to all ofthe terms in the agreement in the First DOT.
Were the court to adopt FDIC-R's reading of the relevant passage, it must effectively write out of
the First DOT terms that have specific and clear meaning. As in Loosle, the language of the First
DOT here indicates that it was anticipated that water rights and water stock would be acquired
after the First DOT. When those later-acquired water rights and stock at issue here were placed
in trust specifically for use on the Property, they became water rights and water stock that were
"part of' the property. The court concludes that FDIC-R's proposed reading does violence to
clear language and the parties' intent throughout the loan transactions.
18
1. Appurtenance is not the test for encumbrance
Actual, beneficial use is the first and primary test for appurtenance. Sanpete America v.
Willardsen, 2011 UT 48, ,-r 47, 269 P.3d 118, 128 (citing Little v. Greene & Weed Inv., 839 P.2d
791, 796 (Utah 1992) ("[A] vested water right is considered appurtenant to the land conveyed
only to the extent that it is used to the land's benefit at the time of the conveyance.")). In this
case, however, the Project never moved beyond approval of a first phase. Nothing was ever
built, and no water was actually used. Appurtenance is not, therefore, the issue.
Rather, the issue is when, if ever, did the Water Properties become "part of' the property
within the meaning of the First DOT? The court finds that this occurred on October 15, 2007,
the date when the acquisition and transfer of those water rights "for use on the Project" resulted
in (as described in the Escrow Agreement) "guarantee[d) water service to the Project ... to the
extent required by the County and as necessary to fully develop the Project to completion,
including residential and secondary (outdoor) water service for each lot."
2. Encumbrance turns on the intent of the parties
Appurtenant water is "part of' the land in the literal sense. Water and land are in that
circumstance treated as one. That is why, when land is conveyed without mentioning water at
all, any "appurtenant" water transfers automatically. See UTAH CODE ANN. § 73-1-11(1) ("A
water right appurtenant to land" passes unless otherwise stated). That has long been Utah law.
Cf Little v. Greene & Weed Inv., 839 P.2d 791, 796 (Utah 1992) ("[U]nless expressly reserved, a
vested water right is considered appurtenant to the land conveyed only to the extent that it is used
to the land's benefit at the time of the conveyance."); Roberts v. Roberts, 584 P.2d 378, 379
19
(Utah 1978) ("a deed which conveys land ... also conveys the right to use appurtenant water,
unless expressly reserved."); Cortella v. Salt Lake City, 72 P.2d 630 (Utah 1937). 5
But water may be "part of' land in a contractual sense, regardless of appurtenance.
Water becomes "part of' land for purposes of encumbrance when parties agree to it; which is to
say that, barring illegality, contracting parties decide what is conveyed or what is encumbered.
By so doing, parties are assumed to use their chosen contract terms according to their plain
meaning, and the court interprets accordingly. Reighard v. Yates, 2012 UT 45, ~ 23, 285 P.3d
1168, 1177 (citations omitted). Furthermore, contract terms are presumably used intentionally,
requiring that the court "consider each contract provision ... in relation to all of the others, with
a view toward giving effect to all and ignoring none." !d. (citations omitted).
Here, the relevant parties-lender (ANB, with its overriding interest in the enhanced
value of its collateral, better ensuring repayment), developer (Sleeping Indian, which without
water service cannot sell a single lot and ultimately repay the lender), and water supplier (Twin
Creeks, which in order to guarantee service must acquire new water rights but puts that burden
where it belongs, on the developer), all agreed both that the Water rights would become a "part
of' the property, and when that would occur.
a. The First DOT's plain terms capture the Water Properties
The First DOT needs no interpretation beyond its plain terms. It conveyed in trust to
secure the first loan the Project land:
[t]ogether with all rights, easements, appurtenances, royalties, mineral rights, oil
and gas rights, crops, timber ... , all water and riparian rights, wells, ditches,
5
The right to the use of water evidenced by irrigation company shares are not deemed, but still
can be, appurtenant to land. UTAH CODE ANN. § 73-1-11(4).
20
reservoirs, and water stock and all existing and future improvements, structures,
fixtures, and replacements that may now, or at any time in the future, be part of
the real estate described above (all referred to as 'Property').
Knowing the purpose of their transaction, the parties went well beyond "appurtenant"
water, identifying additional "water and riparian rights," "water stock" that "at any time in the
future" becomes "part of the real estate .... " Equating "appurtenances" and "part of the real
estate," the FDIC-R would have the instrument read "appurtenances" and ... more
appurtenances-effectively omitting the equally important term "part of," which plainly
supplements "appurtenances."
Loosle draws the encumbrance-appurtenance distinction:
Not only does the trust deed include all 'appurtenances,' but also the language
specifically purports to include all 'rights,' 'water,' and 'water rights' now or
hereafter attached to the property. Because, pursuant to section 73-1-11, a
perfected water right will pass as an appurtenance without specifically mentioning
the vested water right, the trust deed's use of additional language beyond
'appurtenances' to include 'water and water rights' evidences an intent to convey
water rights that had not yet vested and become appurtenant.
858 P.2d at 1003.
b. The Escrow Agreement made the Water Properties "part of' the
Property by guaranteeing water service in exchange
By entering into the Escrow Agreement, Twin Creeks agreed to two primary terms. First,
it agreed that the delivery of the Water Properties "for use on the Project," by itself,
"guarantee[d]" water service to the Project sufficient for full build-out, indoor and outdoor use.
Second, it agreed to assume responsibility for filing the administrative applications concerning
those rights:
[Twin Creeks] will own, manage and develop the Water Rights as it sees fit for
the benefit of the Project and for the general benefit of [Twin Creeks] within its
jurisdiction. [Twin Creeks] will file, at its own risk and expense, any necessary
21
change applications or other administrative filings as necessary to develop the
Water Rights for its beneficial use. [Twin Creeks] will take all risk ... associated
with the Water Rights, including ... reduction of the right ....
The guaranteed water service effective October 15, 2007 under the Escrow Agreement
did not depend on any administrative approval. Sleeping Indian delivered the Water Properties
"for use on the Project," and Twin Creeks "require[d] the transfer ofthe water rights and/or
water shares as necessary for the Project before granting a "Will-Serve Letter." All Sleeping
Indian had to do was transfer the appropriate quantity to Twin Creeks, a figure provided by the
County.
Water on the Project was from that point guaranteed, which is all that concerned Sleeping
Indian (from a development, marketing and loan repayment perspective), and ANB (from an
enhanced collateral perspective). Twin Creeks would then seek the administrative changes
necessary to allow the Water Properties to be used by it, either on the Project or wherever it
needed within its service area. The actual source of the wet water mattered to no party but Twin
Creeks. Administrative risk was passed to Twin Creeks. The Escrow Agreement is the
instrument that made the Water Properties "part of' the property within the meaning of the First
DOT because the acquisition and transfer of those rights "for use on the Project" are what
triggered water service.
The FDIC-R contends that the word "Property" as defined by the parties does not mean
the "water ... rights" and "water stock" at issue. That would render these highly descriptive
terms, which do not mean anything if not connected to using water on land and which describe
extremely valuable property, as mere surplus. Sophisticated parties used the term
"appurtenances," which by definition already captures any appurtenant water rights. They did
22
not even have to use that term because appurtenant water rights transfer unless reserved. UTAH
CODE ANN. § 73-1-11 (1 ). The same parties went much further, capturing other water properties
to be later-acquired.
3. The Escrow Agreement identifies the Water Properties that became "part
of' the Project property
The FDIC-R attempts to extricate the First DOT from its context. This case centers on a
loan to start a nearly 300-acre development from scratch, which was impossible without water.
The entire Project was conceived and pitched to ANB under the overarching and inescapable
requirement that "each residential lot was required by Wasatch County ordinance to have
sufficient water for residential use, plus irrigation water sufficient for a minimum of one-quarter
acre of irrigated area. Additional water could be required depending on individual lot
circumstances." 6 Contracting parties invoke extant law in their agreement. See Hall v. Warren,
632 P.2d 848, 850 (Utah 1981) (parties are "presumed to have in mind all the existing laws
relating to the contract, or to the subject matter thereof."). 7
In Loosle, the court explained that,"[ a]lthough the trust deed does not specifically
mention filings with the state engineer regarding the use of the spring or well, references to these
filings would have been impossible because they were unascertained in 1980 when the trust deed
6
See generally Wasatch County Ordinance §16.08.14(5).
7
Hall quotes the general rule from 17 Am.Jur.2d, Contracts,§ 257, at 654-656:
It is a general rule that contracting parties are presumed to contract in reference to
the existing law; indeed, they are presumed to have in mind all the existing laws
relating to the contact, or to the subject matter thereof. Thus, it is commonly said
that all existing applicable or relevant and valid statutes, ordinances, regulations,
and settled law of the land at the time a contract is made become a part of it and
must be read into it just as if an express provision to the effect were inserted
therein, except where the contract discloses a contrary intention....
23
was signed." 858 P.2d at 1003. Similar to Loosle, neither Sleeping Indian nor ANB here knew
when the First DOT was signed at what point in time the additional water would be acquired; nor
did they know its composition-water rights, stock or a combination. But they did know that it
was coming, and they contracted for that eventuality. The plain terms of each DOT make that
clear in the terms anticipating water rights and stock obtained "in the future." And in the Escrow
Agreement, Sleeping Indian and Twin Creeks further contracted concerning state engineer
matters.
Loosle explains that the question of encumbrance is not divorced from the larger
transaction. Until Sleeping Indian acquired the water it needed, represented by both a water right
and by "water stock," the entire Project was in doubt. Upon acquiring that water and transferring
it under the Escrow Agreement "for use on the Project," in exchange for guaranteed water
service, the actual right to use the acquired water remained, and remains, inchoate, hence Twin
Creeks' agreement to pursue the necessary administrative changes. That risk, however, was
assumed by Twin Creeks in the same transaction that resulted in guaranteed water service,
thereby making the water "part of' the property within the meaning of the First DOT.
Sleeping Indian acquired the Water Properties for use on the Property, and then
transferred them to Twin Creeks in exchange for actual water service. That is what made the
Water Properties "part of' that land for purposes of encumbrance within the meaning of the First
DOT. Indeed, it can be said that water service on the Project was "perfected," but in the
contractual sense, not as a matter of water law. That guarantee happened only because the Water
Properties were acquired for the Project. There was simply no other way to do it because the
24
parties did not know when the First DOT was signed what, if any, water would be acquired.
Loosle is again instructive:
Although the water rights were not appurtenant to the property, we agree with the
trial court that the trust deed encumbered all water rights, both inchoate and
perfected. Therefore, any rights or interest acquired by the Loosles after signing
the trust deed, including their inchoate rights and documents evidencing that right
or interest, are now owned by First Federal by virtue of its purchase at the
foreclosure sale.
Loosle, 858 P.2d at 1003 (emphasis added).
Because the Project failed for other reasons-the unfortunately timed real estate crashthe transfer to Twin Creeks was not "irrevocable," but that only meant that the Water Properties
could be returned, perhaps for use elsewhere, but at least as further protection for ANB' s first
position. This water could not remain in limbo indefinitely. Unused water is subject to
abandonment or forfeiture. UTAH CODE ANN.§ 73-1-4. Twin Creeks could not, therefore,
simply hold the Water Properties. Its interest was in seeing that it achieved the administrative
approval necessary to use that water in its service area.
The "inchoate" nature of the Water Properties is found in the fact that the specific water
rights and stock were yet to be approved for use on the Project, but neither Sleeping Indian nor
ANB were concerned. Neither the lender nor the developer is concerned with what water is used
on the land, only that water is guaranteed. Not a single lot could be sold without it. Water
service is what the Escrow Agreement guaranteed, with Twin Creeks assuming the risk of any
administrative changes. Twin Creeks, in other words, was free to use any approved water at the
25
Project. The Water Properties acquired over time by Sleeping Indian were entirely inchoate as to
the Project land, and they still are. 8
FDIC-R attempts to distinguish Loosle by explaining Loosle 's rationale-that the trust
deed in that case demonstrated "an intent to convey water rights that had not yet vested and
become appurtenant." (FDIC-R Memo., Dkt. 37, at 16). The Loosle deed captured the yet to
vest right "because it would have been appurtenant but for the fact that it had not vested." (!d.).
This is a distinction with no difference. The First DOT, without even trying, captured
appurtenant rights because they transfer by operation oflaw.
UTAH
CoDE ANN. § 73-1-11(1).
The issue is not appurtenance, or "vesting." The issue is whether, at some point prior to
the foreclosure sale, the Water Properties became "part of' the land. They did when Twin
Creeks accepted them for the only reason they were purchased-to put water "on the Project,"
just as the First DOT contemplates. That exchange resulted in Twin Creeks' "guarantee [of]
water service to the Project ... to the extent required by the County and as necessary to fully
develop the Project to completion .... " That is when as a matter of contract the water became
"part of' the property and thus encumbered by the First DOT.
8
The FDIC-R contends that if the water rights are encumbered, as FNB contends, then they
could not be transferred under the Escrow Agreement, which provides for transfer "free and clear
of any liens, mortgages, or other rights of Sleeping Indian ...." But the Escrow Agreement
accounts for this. First, Sleeping Indian had no remaining "rights" in the water rights after the
transfer unless the Project was not approved, in which case the rights would be returned.
Second, Sleeping Indian assumed the risk of transferring encumbered rights when it represented
and warranted that it had "the right and ability to re-convey said water rights .... " Its breach, in
other words, was its problem. ANB was safe in its first trust deed position, so any claim by Twin
Creeks was subject to that senior lien. If the Project gets platted and lots are sold, all parties are
satisfied: ANB gets paid, and the transfer to Twin Creeks is "irrevocable."
26
Land acquisition was just the start. There is no economic benefit without use, which
means development. "The substantial value of property lies in its use," and where the right of
use is denied, "the value of the property is annihilated and ownership is rendered a barren right."
City ofAkron v. Chapman, 116 N.E.2d 697, 700 (Ohio 1953) (citations omitted). There is no
development here without water. Wasatch County Ordinance §16.08.14(5) (Water
Requirements). Knowing that, Sleeping Indian set out to acquire what it needed. It was
repeatedly told that water was essential, and it acquired that water, as the undisputed facts
demonstrate. In July and twice in September 2007, Wasatch County reiterated the water
requirements, including identifying the precise amount of water necessary on September 5, 2007.
Thus, on October 17, 2007, Sleeping Indian signed the Third DOT to secure the third loan from
ANB in the principal amount of $2,700,000 for the purchase of additional water. The Third
DOT is secured by the same trust property as the First and Second DOT's.
Once Sleeping Indian had the necessary water, it then took the next required steppackaging that water and delivering it to Twin Creeks "for use on the Project," which resulted in
the Escrow Agreement's water service "guarantee." That agreement was the final step in
securing water "for use on the Project." Twin Creeks was then obligated to serve water, which
in tum allowed Sleeping Indian to market its lots, setting the stage to repay the lender. The
economic crash that shortly ensued doomed the Project, but not until after the water "for use on
the Project" had been purchased and delivered to Twin Creeks.
The parties are not able to decide that water is "part of' property in a water law sense,
i.e., appurtenant. They can only contract based on the law and their agreed risk. Therefore,
when they identified appurtenances and water rights that at "any time" became part of the
27
property, they did all they could under Loosle and Wasatch County ordinances to ensure that
ANB had encumbered everything connected to the land. ANB and Sleeping Indian were equally
motivated to acquire the water needed for development. Sleeping Indian did that using ANB' s
money, and Twin Creeks agreed, guaranteeing water service in exchange for the delivery of the
Water Properties "for use on the Project."
Based upon the foregoing and the reasons stated on the record at the hearing, the court
GRANTS FNB's Motion for Summary Judgment (Dkt. 42), and DENIES FDIC-R's Motion for
Summary Judgment. (Dkt. 36).
II.
THE PARTIES' JOINT MOTION FOR PARTIAL SUMMARY JUDGMENT
During the course of this quiet title action, FNB and FDIC-R engaged in discussions
concerning the somewhat complicated series of conveyances of one of the water rights at issue,
namely Water Right No. 55-12315. The parties agreed concerning the ultimate disposition of
that water right and stipulated to the relevant facts as discussed below.
On or about September 20, 2007, the Utah Division of Water Rights assigned Water
Right No. 55-12315 to 97 acre-feet of a segregated portion of Water Right No. 55-9269, and
listed Aspen Ridge Ranches, LLC as the owner of Water Right No. 55-12315. On or about
October 15, 2007, Aspen Ridge Ranches, LLC quit claimed to Island Peak Ranch, LLC 97 acrefeet of Water Right No. 55-12315, being a segregated portion of 55-9269. On or about that same
day, October 15, 2007, Aspen Ridge Ranches, LLC owned no portion of Water Right No. 559269 or 55-12315, but did have Water Right No. 55-12315 listed in its name on the Division
records.
28
Prior to 2007, Aspen Ridge Ranches, LLC deeded 207.6 acre-feet of Water Right No. 559269 to Island Peak Ranch, LLC. On or about October 15, 2007, Island Peak Ranch, LLC quit
claimed toWS Sleeping Indian Ranch, LLC 97 acre-feet of Water Right No. 55-12315, being a
segregated portion of 55-9269. On October 15, 2007, Island Peak Ranch, LLC still owned 97
acre-feet of Water Right No. 55-9269, which was now described on the records of the Utah
Division of Water Rights as Water Right No. 55-12315.
The Water Right Quitclaim Deed from Island Peak Ranch, LLC toWS Sleeping Indian
Ranch, LLC dated October 15, 2007, recorded October 26, 2007, as entry number 327767 with
the Wasatch County Recorder, conveyed toWS Sleeping Indian Ranch, LLC 97 acre-feet of
Water Right No. 55-12315, being a segregated portion of 55-9269. By deeding the 97 acre feet
of Water Right No. 55-12315, Island Peak Ranch, LLC conveyed 97 acre feet of Water Right 559269 which showed on the records ofthe Utah Division ofWater Rights as 55-12315.
Aspen Ridge Ranches, LLC, Island Peak Ranch, LLC, WS Sleeping Indian Ranch, LLC
and Utah Water Company are all parties to this quiet title action and each has defaulted. 9
Taken together, these stipulated facts mean that WS Sleeping Indian Ranch, LLC
received full legal title to Water Right 55-12315 on October 15, 2007. Furthermore, FNB and
F.D.I.C. are the only parties necessary to this joint summary judgment. Thus, the court
GRANTS the parties' Joint Motion for Partial Summary Judgment. (Dkt. 39).
9
Defendants WS Sleeping Indian, Raymond Weller and Robert Madsen answered FNB' s
Complaint in this action, but have since refused further participation in the litigation. Their
former counsel was served with the parties' Joint Motion and Memorandum in Support of
Motion for Summary Judgment.
29
JUDGMENT
Based on the foregoing, the court enters the following judgment:
A. The Water Right Quitclaim Deed from Island Peak Ranch, LLC to WS Sleeping
Indian Ranch, LLC dated October 15, 2007, recorded October 26, 2007, as entry
number 327767 ofthe Wasatch County Recorder, conveyed toWS Sleeping Indian
Ranch, LLC 97 acre-feet of Water Right No. 55-12315, being a segregated portion of
55-9269.
B. By deeding the 97 acre feet of Water Right No. 55-12315, Island Peak Ranch, LLC
conveyed 97 acre feet of Water Right 55-9269, which showed on the records of the
Utah Division of Water Rights as 55-12315.
C. FNB's title to the following water rights and water stock shares is hereby quieted, and
FNB is the lawful owner of the following:
1. Water Right No. 55-12315 (representing 97 acre-feet of water segregated
from Water Right No. 55-9269);
2. 28.82 acre-feet ofM&I contract water on the records of Wasatch County
Special Service Area Number 1;
3. The following Lake Creek Irrigation Company stock certificates for the
Sleeping Indian Ranch development:
1.
A portion of Certificate #1031 in the District's name for 43.371
primary shares (of which 13.833 primary shares are for the Sleeping
Indian Ranch development). This Certificate replaced Certificate
#963;
n. Certificate #530 in the District's name for 21.0 first class shares (of
which 21.0 first class shares are for the Sleeping Indian Ranch
development);
111.
Certificate #532 in the District's name for 38.0 second class shares;
and
30
1v. Certificate #533 in the District's name for 3.5 third class shares.
4. The following Wasatch Irrigation Company stock certificates:
1.
Certificate #4517 for 0.80 shares;
u. Certificate #4912 for 0.34 shares; or alternatively
111.
if the share exchange with Heber City is not reversed, 3.876 acre feet
of M&I contract water. 10
D. Twin Creeks Special Service District is hereby ordered to execute and deliver to FNB
a quitclaim deed to Water Right No. 55-12315, consisting of97 acre feet, being a
segregated portion ofWater Right No. 55-9269. 11 Twin Creeks is further ordered to
deliver to FNB the executed but unrecorded Water Right Quitclaim Deed delivered
by WS Sleeping Indian to Twin Creeks for WR 55-12315.
E. Twin Creeks is ordered to endorse and deliver to FNB each of the foregoing share
certificates, which FNB may present for registration or transfer into its name pursuant
to Utah Code Annotated§ 70A-8-301, et seq.
F. Twin Creeks is ordered to engage with Heber City and request that the share
exchange with Heber City be reversed, and then to deliver to FNB an endorsed share
10
Twin Creeks explained that "[t]he water represented by these shares is not usable at the
Sleeping Indian Ranch development, so the District conveyed these shares to Heber City in
exchange for 3.876 acre-feet ofM&I water that can be used at the development. Accordingly,
the stock certificates are now in the name of Heber City, and the District no longer has
possession of the stock certificates. The District may be able to undo the exchange, if necessary.
The District will release the M&I water or shares as instructed by the court."
11
On April12, 2013, and without notice to the parties, the Utah Division of Water Rights recombined WR 55-12315 and 55-9269. On August 12,2013, the Utah Division ofWater Rights
restored the segregation of Water Right No. 55-12315 for 97 acre feet.
31
certificate for 1.14 shares ofWasatch Irrigation Company, if said exchange is
reversed.
G. Twin Creeks is ordered to request that Wasatch County Special Service Area No. 1
record that FNB is the owner of28.82 acre feet ofM&I contract water, or in the
alternative, transfer and assign to FNB, the 28.82 acre feet ofM&I contract water
identified and inventoried by Twin Creeks on May 25, 2011. If the share exchange
with Heber City is not reversed as described above, and endorsed certificates are not
delivered to FNB, then Twin Creeks is ordered to either request that Wasatch County
Special Service Area No. 1 record that FNB is the owner of an additional3.876 acre
feet ofM&I contract water or transfer and assign to FNB the additional3.876 acre
feet ofM&I contract water.
H. As the prevailing party against the FDIC-R, and pursuant to Rule 54(d) of the Federal
Rules of Civil Procedure, FNB is awarded its costs incurred in this action. FNB is to
submit a bill of costs and otherwise comply with Local Rule 54-2.
I.
The Clerk of Court is directed to close the case.
It is so ORDERED.
Dated this
26th
day of September 2013
BY THE COURT
32
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