Utah Supreme Court Defines When Water Shares are Appurtenant to Land

In a recent decision (Sanpete America, LLC v. Willardsen, 2011 UT 48) the Utah Supreme Court defined when water shares may be appurtenant (attached) to land and pass with the conveyance of land.

Sanpete America had purchased 110 acres of farmland and water rights from Christian Willardsen pursuant to a land purchase agreement and a warranty deed.  After discovering problems regarding conveyance of the water right at issue, Sanpete America filed a complaint against Willardsen.

The Utah Supreme Court held that the water rights are “appurtenant” to the land.

Utah Code § 73-1-11(4) states that the “right to the use of water evidenced by shares of stock in a corporation shall not be deemed appurtenant to land.”  The Court has consistently stated that this statute establishes a “rebuttable presumption” that water rights represented by shares of stock do not automatically pass to a grantee as appurtenant to the land upon which the water is being used at the time the land is conveyed to the grantee.

However, in analyzing the facts surrounding Sanpete America’s purchase of land from Willardsen, the Court noted that a grantee may rebut this presumption with “clear and convincing evidence” that [1] the water rights were in fact appurtenant and [2] the grantor intended to transfer the water rights with the land, even though no express mention of any water right was made in the deed.

The Court then provided a test for determining when shares are appurtenant to land: (1) whether the use of the water right on the land greatly increased the land’s value; (2) the length of use upon the land, particularly, the length of use beyond the grantor’s ownership; and (3) the extent of use upon the land.

The Court determined that the water rights in question met each of these criteria and was appurtenant to the land because (A) the water right had been used on the land for decades; (B) the water rights were used on all of the land; and (C) the land had very little value without the water rights.

The Court easily determined that Willardsen intended to transfer the water rights to Sanpete America because both parties conceded this point.  Moreover, the warranty deed and quitclaim deed showed the parties’ intention that the water rights be transferred to Sanpete America.

Combining its determination that the water rights were appurtenant to the land, and that Willardsen had clearly intended to transfer the water rights to Sanpete America, the Court held there was clear and convincing evidence to rebut the initial presumption – as set forth under Utah Code § 73-1-11(4) – that the water rights were not appurtenant to the land.

A complete copy of the Utah Supreme Court’s decision can be found here.

This article was researched, written and posted by Clark Duellman