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Ute Water Conservancy v. Fontanari Jr.

2022 COA 125. No. 20CA2132 & 21CA0135. Easements—Unreasonable Interference—Breach of Contract—Declaratory Relief—Injunctive Relief—Damages—Costs.

October 27, 2022

Ute Water Conservancy’s (Ute Water) main water transmission pipeline (the pipeline) delivers approximately two-thirds of the total volume of water to its customers. Rudolph Fontanari Jr. (Rudolph), Ethel C. Fontanari, and the Rudolph Fontanari Jr. and Ethel Carol Fontanari Revocable Trust (collectively, defendants) own two parcels of land that the pipeline crosses (the parcels)—a road parcel and a residential parcel. The residential parcel has a “residence pad” adjacent to the houses located on the parcel. In 1980, defendants’ predecessors-in-interest executed two conveyance instruments granting Ute Water perpetual easements and construction easements on the parcels to construct and maintain the pipeline and burden the parcels. Ute Water constructed the pipeline in 1981, at which time the part of the pipeline on the parcels (the Fontanari portion) was located approximately four feet under a private road on the road parcel. Rudolph later widened the residence pad by 35 feet and lengthened it by 120 feet. The expanded pad encroached onto the road parcel and increased the depth of the pipeline under the road parcel by approximately 12 feet, and it covered areas that Ute Water needed to access the pipeline. In 2014, Rudolph began developing the private road to transport heavy equipment to and from a mine that he owns. He also placed concrete culvert pipes on top of the road and added about 10 to 12 feet of fill to level the road and increase its depth. The added fill covered approximately 300 feet of the pipeline length, and the alterations impacted approximately 350 feet of the Fontanari portion. Before making the alterations, Rudolph did not contact Ute Water to determine the easement boundaries or the pipeline location, and he did not seek court permission to proceed with the alterations.

In 2014, Ute Water learned of the alterations, which impacted its access to the pipeline for maintenance and repairs, increased the likelihood of pipeline damage, and made it harder to detect and locate leaks. Ute Water sued defendants for breach of contract and declaratory and injunctive relief. It then constructed a new pipeline section that bypassed the parcels, stopped using the Fontanari portion, and severed the Fontanari portion from the pipeline and plugged each end of that portion with concrete. At trial, Ute Water requested damages in the amount of the expenses it incurred in relocating the pipeline. The trial court entered judgment in favor of Ute Water on its breach of contract claim for $557,790.31 and awarded Ute Water its relocation expenses. But because Ute Water had already relocated the pipeline, the court denied as moot its claims for declaratory and injunctive relief.

On appeal, defendants contended that the trial court erred by entering judgment in favor of Ute Water because the breach of contract claim, like the declaratory relief claim, was moot. They maintained that there was no justiciable controversy because by relocating the pipeline, Ute Water abandoned the easements. However, the claim for breach of contract was not moot because the court’s ruling on this claim, not the relocation of the pipeline alone, mooted Ute Water’s declaratory judgment claim.

Defendants also argued that the trial court erred by finding that Ute Water had not abandoned the easements when it relocated the pipeline away from the parcels and plugged the Fontanari portion with concrete, and it further erred when it applied the law to this finding. However, given the conflicting testimony on abandonment and evidence that Ute Water could use or replace the Fontanari portion in the future, the trial court did not clearly err by finding that Ute Water had not abandoned the easements.

Defendants further contended that the court erred by entering judgment in favor of Ute Water on its breach of contract claim because Ute Water materially breached the conveyance instrument for the road parcel by placing the Fontanari portion outside the metes and bounds description. However, under the plain language of the conveyance instrument, the easement extends to all roads abutting the metes and bounds description, and the record reflects that when the conveyance instruments were executed, a 50-foot-wide private road abutted the metes and bounds description. Accordingly, the trial court did not clearly err by finding that Ute Water substantially performed under, and therefore did not breach, the conveyance instrument. Additionally, defendants did not contest the trial court’s finding that they unreasonably interfered with Ute Water’s use and enjoyment of the easement. Therefore, the trial court did not clearly err by finding that defendants breached the conveyance instruments and by entering judgment in favor of Ute Water on its breach of contract claim.

Defendants further argued that the trial court misapplied the law by awarding Ute Water breach of contract damages in the amount of the expenses it incurred to relocate the pipeline and erred by awarding damages to Ute Water because it failed to demonstrate that defendants’ breach caused it to incur the expenses associated with the relocation. Courts have discretion to award relocation damages when the owner of the servient estate breaches the conveyance instrument for a utility easement by unreasonably interfering with the easement. Here, the owners of the burdened property did not dispute that they unreasonably interfered with the easement, so the court properly fashioned a remedy at law to compensate the injured party for its damages caused by the unreasonable interference. Further, the cases the trial court relied on do not preclude an award of relocation damages to Ute Water, and the record supports the trial court’s finding that Ute Water’s only viable alternative was to reroute the pipeline. Thus, the court did not err by (1) determining that it had the ability to award money damages and (2) awarding relocation damages to Ute Water after concluding that Rudolph’s actions made relocation of the pipeline reasonable, necessary, and foreseeable.

Lastly, the Court of Appeals rejected defendants’ argument that the trial court erroneously awarded Ute Water its costs. However, Ute Water prevailed on its breach of contract claim, so the trial court had discretion to award it reasonable costs.

The order was affirmed and the case was remanded for further proceedings.

Official Colorado Court of Appeals proceedings can be found at the Colorado Court of Appeals website.

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