Is a Water Use Authorization an enforceable contract?
In a recent case before the Utah Court of Appeals, the issue of whether a Water Use Authorization can constitute an enforceable contract came before the court. In Brasher v. Christensen, the Utah Court of appeals was asked to overturn the trial court’s determination that a 2013 Water Use Authorization was not an enforceable contract. Ultimately, the court of appeals upheld the lower court’s decision, finding that “the 2013 WUA was not, by itself, an enforceable contract.” Furthermore, the court of appeals determined that the trial court did not err when it determined that there was no meeting of the minds to establish an oral contract between the parties.
Brasher’s Need for More Water
Appellee/Defendant Vikki Christensen owns a 260-acre farm in Emery County, Utah, which ownership includes the rights to use irrigation water on the farm. Christensen’s water rights “are represented by 780 shares of stock in the Huntington-Cleveland Irrigation Company (HCIC).” Appellant/Plaintiff Reed Brasher owns or leases some 100 acres of land in Emery County. Brasher raises cattle and grows alfalfa to feed his cattle on those 100 or so acres.
During the summer and fall months, Brasher allows his cattle to graze on 60 acres of irrigated pasture. During the winter and spring months, Brasher feeds his cattle alfalfa that is farmed from his approximately 30 acre alfalfa farm. Brasher, like Christensen, owns water stock in HCIC. However, his shares in HCIC are sufficient to irrigate only 45 acres of his 100 acre farm. As a result, Brasher must lease enough water to irrigate the remaining 55 acres of his farm to feed his cattle.
Brasher Enters into Water Use Authorization Agreement with Ms. Christensen
In order to irrigate the remaining acreage of his farm, Brasher entered into an agreement with Christensen, whereby Brasher leased 215 class A water shares. As part of their negotiations, Brasher asked Christensen to lease him the water “until further notice,” but Christensen declined. Brasher and Christensen both signed a Water Use Authorization form provided by HCIC, which set forth the 2012 start of Brasher’s water lease.
Brasher’s Water Rights Cutoff
On the Water Use Authorization form, Brasher checked the box next to “until further notice,” despite the fact that Christensen told Brasher she was unwilling to agree to such an open-ended lease term. In light of Brasher’s actions, HCIC contacted Christensen to determine whether she actually intended to lease Brasher the water “until further notice.” Christensen informed HCIC that she did not, and that Brasher’s lease was just for the 2012 season, ending on October 31st.
Brasher Approaches Christensen With Offer to Buy Farm and Lease Water Shares
In February 2013, Brasher became aware that he could qualify for a subsidized federal program to install sprinkler irrigation on his farm through the National Resources Conservation Service (“NRCS”), so long as he could establish access to sufficient water shares. Brasher contacted Christensen to inquire whether she would be interested in leasing him water during the 2013 season. Christensen declined Brasher’s offer, explaining that she was not sure that the water Brasher was interested in leasing would be available. After several more failed attempts by Brasher to lease the water from Christensen, Brasher told Christensen that he had $5,000 in earnest money and asked Christensen if she would meet with him to discuss the details of his offer.
In March 2013, Brasher, Christensen, and Christensen’s friend, Nedra Swasey, met to discuss Brasher’s offer at Christensen’s home. Before the meeting, Christensen purportedly told her friend that she would not lease the water to Brasher unless he offered to buy the farm. Brasher brought two forms with him to the meeting: a blank Water Use Authorization form and a blank Offer to Purchase Real Estate form. After Brasher and Christensen negotiated the terms of their real estate deal, Ms. Swasey filled in the forms supplied by Brasher, and both parties signed it.
The agreement allowed Brasher to take possession of Christensen’s farm on March 25, 2013, but allowed Christensen to remain in the farmhouse until April 2, 2014. The agreement further required Brasher to pay Ms. Christensen $5,000 earnest money, but Brasher never paid that money to Christensen.
Brasher and Christensen Also Discuss Water Use Authorization Form
As part of their meeting, Brasher and Christensen also discussed the terms of the potential waters shares lease. Brasher filled out the Water Use Authorization form, and both parties signed the form. The Water Use Authorization form read in pertinent part, ““In accordance with a lease and/or other agreement, I Vikki Christensen am authorizing Reed Brasher to call for: 215 shares of Class A Water from my [HCIC] water account starting at the beginning of 2013 irrigation season.” At the close of their meeting, Brasher left a check for approximately $1,300 with Christensen as payment for the water shares lease. However, Christensen never cashed that check.
Brasher Falsifies Water Use Authorization Form
Christensen kept with her the signed Real Estate Purchase Offer, and Brasher took the signed Water Use Authorization form to make copies for the parties, but never returned a copy to Christensen. Instead, Brasher delivered the signed Water Use Authorization form to HCIC. The Water Use Authorization form delivered to HCIC set forth that the water shares lease would continue until “the end of 2018 irrigation season,” and that it was payable 3/15 each year.”
During trial, it was revealed that Brasher had added the aforementioned terms after meeting with Christensen. It was also revealed during trial that Christensen told Brasher that she needed to discuss the terms of both the Real Estate Purchase Offer and the Water Use Authorization before proceeding with the deal and that the water shares lease was contingent upon Brasher buying the farm. Brasher told the trial court that the water shares lease was independent of the offer to purchase the farm and that Christensen only told him that she needed to discuss the offer to purchase the farm with her attorney, and not the Water Use Authorization, before proceeding.
Christensen Nixes Deal
Between March 13th and 24th, Brasher attempted to call Christensen a number of times to determine if she in fact wanted to accept his offer. Christensen never returned any of Brasher’s calls. Finally, the day before Brasher was to take possession of the farm, Brasher and Christensen spoke over the phone. Brasher told the trial court that, after the phone call ended, he was under the belief that his offer would not be accepted.
Brasher Begins Drawing Water Even Though Deal was Rejected
Even though his offer to purchase the farm was not accepted, Brasher began drawing water at the beginning of April, on the belief that the water lease was independent of the offer to purchase the farm. After Brasher began drawing water, HCIC contacted Christensen to confirm that she wanted to lease Brasher water through the 2018 water season. Christensen told HCIC the she did not want to lease the water to Brasher, instructing HCIC to stop providing water to Brasher. As a result, HCIC cutoff Brasher’s water. Upon finding out that HCIC had terminated his water shares, Brasher allocated his own HCIC water shares to his alfalfa fields and sold all but a few of his cows.
Trial Court Dismisses Brasher’s Claims for Damages
Subsequently, Brasher sued Christensen for damages arising out of the loss of his alfalfa crop for the 2013 year and for losses related to his cattle operation, which amounted to approximately $150,000. Following a bench trial, the trial court dismissed Brasher’s complaint, “determining that the WUA was not an enforceable contract but rather an instruction from one shareholder to HCIC to deliver water to another person, and that there was no meeting of the minds as to the terms of an oral contract between the parties to lease water.” Brasher appealed.
On appeal, the Utah Court of Appeals was faced with two issues: 1) whether the trial court erred when it determined that the 2013 Water Use Authorization was not an enforceable contract; and 2) whether the trial court erred when it determined that there was no meeting of the minds to establish an oral contract.
A Water Use Authorization is Not an Enforceable Contract
As to the first issue, the court of appeals upheld the lower court’s determination that the 2013 Water Use Authorization agreement did not, in and of itself, constitute an enforceable contract. There, the court of appeals concluded:
[T]he trial court correctly determined that the 2013 WUA was not an enforceable contract. In particular, it seems clear that the terms of the form did not require offer and acceptance or consideration. The “WUA instructs HCIC to deliver water to one of the parties for a period of time,” nothing more. And as the trial court held, the WUA “by its very terms” expressly conditions its enforceability upon “a lease and/or agreement,” contemplating that the parties have reached a separate agreement as to the lease of HCIC stock. The terms of the form detail no offer by one party, no acceptance by another, and no consideration. The form is devoid of language establishing a contractual relationship between Brasher and Christensen. Consequently, the trial court correctly concluded that the 2013 WUA was not, by itself, an enforceable contract between Brasher and Christensen.
No “Meeting of the Minds,” No Oral Contract
Turning to the second issue, whether there was a meeting of the minds sufficient to establish an oral contract, the court of appeals held:
We therefore conclude that the trial court’s finding was supported by evidence and that the court did not clearly err when it found that Christensen told Brasher she needed to discuss the terms of the WUA and the Offer with her family and attorney “before anything was final.” We further conclude that because Brasher testified that he believed the two agreements were independent of each other and Christensen testified to the contrary—that she intended them to be contingent upon each other—the trial court did not err when it concluded there was no meeting of the minds sufficient to create an oral contract.
Two Key Takeaways
The main takeaway from the court of appeals’ ruling is that a Water Use Authorization, while able to authorize a party to use water from the shares of another, does not, standing alone, create an enforceable contract among the parties. As a result, even if a party is authorized to use water from another party’s shares, there is no ability to enforce that agreement, absent more. Additionally, even where a Water Use Authorization does not constitute an enforceable contract, the parties may still enter a binding oral agreement over the water shares, but only if there is a meeting of the minds.
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