Filed in the Qcr.
forado FEB 15 1984 DISTRICT COURT, WATER DIVISION NO. 2, COLORADO
Case No. 80 CW 19
Clcfk
ORDER AMENDING FINDINGS OF FACT, CONCLUSIONS OF LAW, AND DECREE
IN THE MATTER OF THE APPLICATION FOR WATER RIGHTS OF AMITY MUTUAL IRRIGATION COMPANY
IN THE ARKANSAS RIVER
This matter came on for hearing before the undersigned,
by means of a telephonic conference call between the undersigned and the appearing attorneys as hereinafter set forth, upon the
following motions:
(a) Motion for New Trial or to Alter or Amend Judgment filed herein by Colorado Canal Company, Lake Meredith Reservoir
Company and Lake Henry Reservoir Company;
(b) Motion for New Trial or in the alternative to Alter
or Amend Judgement filed herein by CatliiT Canal Company;
(c) Motion for New Trial filed herein by Ft. Lyon Canal
Company; and
(d) Motion for New Trial and Motion to Alter and Amend
filed herein by Southeastern Colorado Water Conservancy District;
on January 20, 1984 commencing at the hour of 2:00 p.m.
The appearances, by telephone, are as follows:
Carl M. Shinn, Esq. of Shinn Lawyers, P. 0. Box 390,
200 West Elm Street, Lamar, Colorado 81052 for Applicant;
Timothy J. Beaton, Esq. of Moses, Wittemyer, Harrison 3 Woodruff,
PC, P. 0. Box 1440, Boulder, Colorado 80306 for Colorado Canal
Company, Lake Meredith Reservoir Company, and Lake Henry Reservoir Company; Rexford L. Mitchell, Esq. of Mitchell 5 Mitchell, PC,
512 N. Main Street, Rocky Ford, Colorado 81067 for Catlin Canal Company; Wayne B. Schroeder, Esq. of Calkins, Kramer, Grimshaw 8 Harring, Suite 3800, One United Bank Center, 1700 Lincoln Street, Denver, Colorado 80203 for the Ft. Lyon Canal Company; and Kevin B. Pratt, Esq. of Fairfield 8 Woods, 1600 Colorado National Bank
Bldg., 950 Seventeenth Street, Denver, Colorado 80202 for the
The Court, thereupon, having reviewed the file, the
various motions, and the arguments presented by Counsel as noted aforesaid, finds and concludes that the Findings of Fact, Con clusions of Law, and Decree entered therein on August 16, 1983
should be amended in the following respects:
(a) The Court now finds that it erred with regard
to certain seepage or transit losses as the same were
set forth in paragraph 20, on page 8, of the Findings
of Fact, Conclusions of Law and Decree entered herein
on August 16, 1983, and therefore amends that paragraph
to read as follows:
"20. The seepage or transit losses were estab lished by stipulation between the parties, approved by the judgment in the Bent County District Court action as fifteen percent (15%) in the Kickingbird Canal, sixteen percent (16%) in the Satanta Canal and twenty-five percent (25%) through the Western Division, i.e. from the diversion point to the
bifurcation structure."
(b) The Court also now finds that additional conditions
ought to be added to those terms and conditions imposed
which are set forth in paragraph 2 commencing on page 13; accordingly, two more conditions shall be imposed, as
follows:
"(i) Applicant shall continue in the future to
pay whatever storage charges that are imposed upon it
by the Arkansas River Compact Administration."
"(j) Applicant shall not in the future increase
its consumptive use of water and shall not add any additional irrigated acres under its system."
(c) The Court now concludes that it was in error in
applying C.R.C.P. 54 (b) to the action as set forth in
paragraph 3 commencing on page 14; accordingly, para graph 3 commencing on page 14 of the Findings of Fact, Conclusions of Law and Decree entered herein on August 16,
1983 should be, and the same is hereby, stricken.
(d) Accordingly, the Findings of Fact, Conclusions
of Law, Judgment and Decree entered herein on August 16, 1983 are amended as hereinabove set forth, and save and except for the amendments herein set forth, the various
-motions for new trial or for amendment filed herein by
the parties as above set forth pursuant to C.R.C.P. 59 (b)
should be and the same are hereby denied.
1984
Dated:February IS, 1984, nunc pro tune January 20,
JOHN C. ST,
Special Water Judge.
xc: Carl M. Shinn
Howard Holme and Kevin B. Pratt Wayne B. Schroeder John J. Lefferdink Timothy J. Flanagan Rexford L. Mitchell Lawrence L. Fenton John Wittemyer Ralph N. Wadleigh
John U. Carlson and Barry C. Vaughan
Division Engineer
State Engineer
Filed in the office of the
Clerk, District Court Water
Division No. 2, State of Colorado
FEB 15 1984
Oerk
-DISTRICT COURT, WATER DIVISION NO. 2, STATE OF COLORADO
^rm- ■ *7^^- ^f ^
Case No. 80CW19
Filed in tho office of the
nn,W_ District Court Water ORDER AND PARTIAL SUMMARY JUDGMENT
Division No. 2, State of
ColoradoIN THE MATTER OF THE APPLICATION FOR WATER RIGHTS OF AMITY MUTUAL IRRIGATION COMPANY
IN THE ARKANSAS RIVER OR ITS TRIBUTARIES
Clerk
Objector, Fort Lyon Canal Company, filed Motion for Summary Judgment, which is opposed by Applicant. Fort Lyon is represented by John J. Lefferdink, Esq. and Applicant by Carl M.
Shinn, Esq.
Oral argument was held on May 25, 1984, and counsel
stipulated that the Court should withhold ruling until it
received a report from counsel as to the results of an informal
settlement conference. On July 19, 1984, such a report was filed, indicating negative results.
The Court has reviewed the files and has heard oral arguments and FINDS AND CONCLUDES;
The mere assertion of a fact without supporting evidence is insufficient to raise an issue of fact on a motion for summary judgment.
Furnishing of water records by Fort Lyon to Amity is
not a condition to the payment of twenty percent of the annual
cost of maintenance and operation by Amity to Fort Lyon.
Fort Lyon is entitled to the sums claimed for maintenance
and operating expense for the years ending October 31, 1982 and
October 31, 1983.From the pleadings, depositions and affidavits that there
is no genuine issue as to any material fact and that Fort Lyon is
entitled to a summary judgment as a matter of law in the following
particulars:
1. On its claim in the amount of $29,912.00 for
maintenance and operating expenses for the year ending October 31,
1982.
I
1,984 ^
FAIRFIELD AMD V/OODB
L c T~cr
,
ORDER AND PARTIAL SUMMARY JUDGMENT 80CW19
PAGE TWO
2. On its claim in the amount of $38,121,00 for
maintenance and operating expenses for the year ending October 31,
1983.
3. For moratory interest on each of said amounts at
the statutory rate from the respective dates billed by Fort Lyon
as follows:(a) On $29,912.00 from October 14, 1983
(b) On $38,121.00 from November 21, 1983
Pursuant to C.R.C.P. 56(d) the Court finds and hereby
orders that it appears without substantial controversy (admitted
by Applicant in oral argument) that Fort Lyon is entitled to a
claim for depreciation for the years ending October 31, 1981,
1982 and 1983. The method of computation of depreciation is in dispute.
NOW, THEREFORE, IT IS ORDERED that summary judgment is hereby entered as set forth above in paragraphs numbered 1, 2 and 3 in favor of Fort Lyon Canal Company against Amity Mutual Irrigation Company.
Dated this Jll' day of July, 1984.
BY THE COURT:
SPECIAL WATER JUDGE
pc: Carl M. Shinn
John J. Lefferdink Division Engineer State Engineer
Fair field and Woods (Holme)
Filed in fhe office of the
Calkins, Kramer, Grimshaw 8 Harring (Schroeder)Clerk, Dlstricf Court Water
Kelly, Stansfield 8 O'Donnell (Flanagan)
Division No. 2, State of
Mitchell 8 Mitchell Colorado
Ralph N. Wadleigh
Holland and Hart (Carolson)
John Wittemyer JUL 27 1984
DISTRICT COURT, WATER DIVISION NO. 2, STATE C
Case No. 80CW19
MOTION FOR SUMMARY JUDGMENT
received
F C0L0l^fl«B022 1966
SOUIWEASTERN COLORADO WATF<
CQWSCRVANCY DISTRICT
IN THE MATTER OF THE APPLICATION FOR WATER RIGHTS OF AMITY
MUTUAL-IRRIGATION COMPANY
OF AMITY
IN THE ARKANSAS RIVER
r
fix
Comes now The Fort Lyon Canal Company ("Fort
Hi??in;
Kramer, Grimshaw &
P p B
& Davis, pursuant to Rule 56 (b),
/"
moves the court for its order granting Fort
Lyon a summary judgment dismissing all of Amity Mutual
Irrigation Company s ("Amity"), remaining claims, and for
grounds shows to the Court:
1944
amounts due under the
1944 Contract constituted a material breach which relieved
Fort Lyon of its contractual duty to perform under the
adjudicated tte issue of
Court Julj"?
summary judgment entered by this
V
/'
is barred by the doctrine of res
J K
that Fort Lyon breached the 1944
« because the issue of Fort Lyon breach was set up by
^d^en? ^ Afi
f-' ^
issues were resolved adversely to Amity by
Lyon's Motion for Partial Summar^
this Court's judgment. > j. wy
^
There is no genuine issue as to any material
fact regarding Amity s breach as established by the partial
summary jud^ent granted by the Court on July 27, 1984 which
excused performance by Fort Lyon and entitles Fort Lyon to
judgment as a matter of law.
^
its
requests that this Court grant
clLmJ
enter judgment dismissing Amity's remaining
j.
r
-i f.
Respectfully submitted, John J. Lefferdink (324)
Lefferdink & Davis Post Office Box 110
Lamar, Colorado 81052
Telephone No. (303) 336-7411
CALKINS, KRAMER, GRIMSHAW & HARRING
B. Schroeder (2447) One'United Bank-Center
1700 Lincoln Street, Suite 3800 Denver, Colorado 80203
Telephone No. (303) 839-3800 Attorneys for The Fort Lyon Canal Company
-2-DISTRICT COURT, WATER DIVISION NO. 2, STATE OF COLORADO
Case No. 80CW19
MEMORANDUM BRIEF IN SUPPORT OF FORT LYON'S MOTION FOR SUMMARY
JUDGMENT
IN THE MATTER OF THE APPLICATION FOR WATER RIGHTS OF AMITY
MUTUAL IRRIGATION COMPANY IN THE ARKANSAS RIVER
I.
STATEMENT OF THE CASE
The Fort Lyon Canal Company ("Fort Lyon") and the Amity Mutual Irrigation Company ("Amity") entered into a
contractual relationship pursuant to a decree and stipulation
for Decree entered October 31, 1944 by the District Court in and for the County of Bent, Colorado in its Civil Action No. 2158 (hereinafter collectively referred to as "the 1944 Contract").
Paragraphs "Seventeenth" and Twenty-First" of the
1944 Contract provide that Amity shall pay annually to Fort
Lyon twenty percent (20%) of the annual cost of maintenance
and operation of the Fort Lyon Canal. Fort Lyon has claimed in this case that Amity breached that agreement by failing to
pay expenses for 1982 and 1983. The Court entered partial
summary judgment in favor of Fort Lyon against Amity on those claims against Amity by Order and Partial Summary Judgment
entered July 27, 1984. A copy of the Order and Partial Summary Judgment is attached as Appendix A. Amity has
\
appealed the Judgment to the Supreme Court, which will hear j
oral argument February 11, 1986.The Court entered summary judgment in favor of Fort Lyon for the year ending October 31, 1982, in the amount of
$29,912.00, and for the year ending October 31, 1983, in the amount of $38,121.00, plus statutory -interest on both amounts. The Court further ordered that Fort Lyon is entitled to depreciation for all three years, but found that the method of calculating depreciation is disputed.
When the Court adjudicated that Amity had failed to comply with its obligations under the 1944 judgment and decree, thus rejecting all of Amity's objections and defenses to the Fort Lyon motion, the Court's summary judgment became
available to Fort Lyon as an adjudication of a breach. Since
Amity is in breach, the breach excuses further performance of
Fort Lyon as a matter of law.
II.
ARGUMENT
A. Standard of Decision.
Rule 56, C.R.C.P., provides a summary means of
disposing of claims or entire suits when the facts of a case
dictate one result under the law. A court may enter summary
judgment when the moving party establishes:
-2-1. that no genuine issue exists as to any material facts; and
2. that the moving party is entitled to judgment as a matter of law.
Backus V. Apishapa Land & Cattle Co., 44 Colo. App. 59, 615 P.2d 42 (1980).
There is no issue of material fact to be resolved. No new issues have been asserted since the Court made such a
ruling in its Order and Partial Summary Judgment dated
July 27, 1984. Fort Lyon is entitled to Summary Judgment in this matter as a matter of law as follows.
B. Amity is barred by the doctrine of res judicata
from asserting that Fort Lyon breached the 1944
Contract.
It is a fundamental principle of jurisprudence that material facts or questions which were directly in issue in a
former action and were judicially determined are conclusively
settled by a judgment rendered therein, and that such facts
or questions become res judicata and may not be relitigated
in a subsequent action regardless of the form that the issue may take in the subsequent action. Green v. Chaffee Ditch Co. , 150 Colo. 91, 371 P.2d 775 (1962). In this respect, the nonexistence of a fact may be established by a judgment which would preclude a party from attempting to prove a fact that he sought unsuccessfully to prove in a prior action. Yates v^ United States, 354 U.S. 298 (335-36).
-3-Colorado courts have considered and applied the
doctrine of res judicata and the derivative doctrine of
collateral estoppel in numerous cases. Brennan v. Grover, 158 Colo. 65, 404 P.2d 544 (1965); Falkenburg v. Sternberg, 154 Colo. 134, 388 P.2d 771 (1964); Hudson v. Western Oil Fields, 150 Colo. 456, 374 P.2d 403 (1962); Green v. Chaffee Ditch Co. , 150 Colo. 91, 371 P.2d 775 (1962). Res judicata
in the strict sense refers to "claim preclusion." Vestal, "Preclusion/Res Judicata Variables; P.arties," 50 Iowa
L. Rev. 27-28 (1964). The doctrine holds that an existing judgment is conclusive of the rights of the parties in any subsequent suit on the same claim. It bars relitigation not
only of all issues actually decided, but of all issues that
might have been decided. It requires an identity of parties or their privies [Restatement, Judgments §§ 83-92 (1942)].
It has been stated as a general rule that where the right to relief in one action rests upon the same point or question which, in essence, was litigated and determined in the prior action, the conclusiveness of the judgment extends not only to every matter which was offered and received to sustain or defeat the claim, but to any other admissible matter which might have been offered for that purpose. Commissioner v. Sunnen, 333 U.S. 591 (1948). Hence, if a material fact, decisive of the case is tendered as an issue and not withdrawn (for example. Amity's claim that Fort Lyon
-4-did not perform under the contract), a determination thereon
adversely to the party tendering it is conclusive against him
in a subsequent action involving the same issue. The Partial
Summary Judgment for Fort Lyon for money damages resulting
from Amity's breach of the contract resolved all of Amity's
claims adversely to Amity.
By granting partial summary judgment to Fort Lyon
on July 27, 1984, and awarding payments-due under the 1944
Contract from Amity to Fort Lyon, the Court recognized that
Amity did in fact breach the contract. In reaching that
conclusion, the Court took into consideration Fort Lyon's
assertions set out in its Brief in Support of its Motion for
Summary Judgment as well as Amity's response to Fort Lyon's
Motion for Summary Judgment. Amity submitted two affidavits
in which affiants asserted that Fort Lyon had not
sufficiently maintained the Fort Lyon Canal and therefore
Amity was not obligated to pay maintenance costs. (Affidavit
of Clifford Verhoeff, p.2; Affidavit of Lewis Davis, p.
6)
(both attached as Appendixes B and C).
The res judicata doctrine holds that "an existing
judgment is conclusive of the rights of the parties in any
subsequent suit on the same claim." C.F.& I. Steel Corp. v.
Charnes, 637 P.2d 324, 328 (Colo. 1981) (quoting Pomeroy v.
Waitkus, 183 Colo. 344, 517 P.2d 396, 399 (1973)). The Court
considered Amity's claims and defenses regarding Fort Lyon's
-5-I
failure to maintain the canal and dismissed these claims and
defenses as having no effect upon the fact that Amity
breached the contract, resulting in the award of money
damages owed to Fort Lyon pursuant to the contract.
Therefore, Amity is foreclosed from claiming any defense
based on Fort Lyon's actions. Further, Amity is foreclosed
from claiming any rights pursuant to Fort Lyon's actions.The actions of Fort Lyon were asserted by Amity in opposition to Fort Lyon's Motion for Summary Judgment. The issues were
weighed and discarded by the Court and cannot be relitigated. Fort Lyon filed for and obtained a partial summary
judgment, and the Court recognized the existence of the 1944
Contract and determined that money was owed to Fort Lyon as a
result of Amity's breach of that contract. In its responsive
brief. Amity submitted that Fort Lyon had not lived up to its duties under the contract and that Fort Lyon owed Amity for
failure to maintain the canal and failure to deliver water.
The Court ruled in Fort Lyon's favor over Amity's claims and defenses. It is apparent that Amity's nonpayment was the breach that excused any further performance by Fort Lyon and
that no claims or defenses alleged by Amity in its responsive
brief may be asserted now. In Pomponio v. Larsen, 80 Colo. 381, 321, 251 P. 534, 536 (1926) the court stated that:
"The best and most accurate test as to whether a former judgment is a bar in subsequent proceedings between the same parties, according to the authorities, is
-6-whether the same evidence would sustain
both, and if it would, the two actions are the same, and this is true, although the two actions are different in form."
Fort Lyon's new motion for summary judgment should be granted
because Amity is asserting the same evidence, claims and defenses that were contained in its responsive brief, which
the Court considered and ruled against in its Order for Partial Summary Judgment.
C. Amity's failure to pay amounts due under the 1944 Contract constituted a material breach which
relieved Fort Lyon of its obligations under the
Contract.
Amity first breached the 1944 Contract by failing to pay maintenance costs to Fort Lyon for the years 1981, 1982 and 1983. Case law holds that reciprocal promises in a contract are mutually dependent and the "breach of one will excuse performance of the other." Morgan v. Singley, 560 S.W.2d 746 (Tex. Civ. App. 1977). If a breach goes to the
"heart of the contract," it is a major breach which
extinguishes the other party's duties under the contract. Gulick V. A. Robert Strawn & Associates, Inc., 477 P.2d 489 (Colo. App. 1970). The Colorado Supreme Court found that where one party to a contract hinders or prevents the other party from performing, the first party has breached the contract, excusing further performance by the second party. Jacobs V. Jones, Colo. , 423 P.2d 321 (1967). "If one party has failed to perform the bargained for exchange.-7-the o-7-ther party may be relieved of a duty to continue its own
performance, where the failure is material and unexcused."
Converse v. Zinke, 635 P.2d 882, 887 (Colo. 1981).
It has been held that failure by a bankruptcy debtor to make payments pursuant to a contract constituted a substantial breach and entitled the other party to suspend future performance. In Hamilton, 18 Bankr. 868 (D. Colo. 1982). A copy of the case is attached as Appendix D. The Order and Partial Summary Judgment entered by this Court recognized the breach by Amity in determining amounts owing
by Amity. Amity's promise to pay to Fort Lyon a percentage
of the cost of maintaining Fort Lyon Canal was essential to
the contractual duty of Fort Lyon to maintain the canal and Amity's failure to pay was therefore a material breach. This
substantial breach by Amity, adjudicates by the Court, relieved Fort Lyon of any contractual duty to perform and Amity is now barred from claiming damages which allegedly
flow from Amity's claim that Fort Lyon has breached the
contract.
Amity's breach, having been adjudicated, excuses
later alleged nonperformance by Fort Lyon.
Wherefore, the remaining amounts claim must be discussed as a result of the doctrines of res judicata and collateral estoppel. The same claims of breach cannot be relitigated, and the fact of a prior breach by Amity cannot
-8-be relitigated. The adjudication of a prior breach by Amity
excuses any alleged Fort Lyon nonperformance. The Courtshould enter judgment dismissing the Amity claims and
declaring as a matter of law that Amity has forfeited any
rights it may have had under the 1944 judgment.
Respectfully submitted.
John J. Lefferdink, (324) Lefferdink & Davis
Post Office Box 110 Lamar, Colorado 81052
Telephone No. (303) 336-7411
CALKINS, KRAMER, GRIMSHAW & HARRING
/n4 B.
Wayne B. Schroeder (2447) One United Bank Center
1700 Lincoln Street, Suite 3800 Denver, Colorado 80203
Telephone No. (303) 839-3800 ATTORNEYS FOR THE FORT LYON
CANAL COMPANY
-9-A
( )
ORDER AND PARTIAL SUMMARY JUDGMENT
80CW19 PAGE TWO
2. On its claim in the amount of $38,121.00 for
maintenance and operating expenses for the year ending October 31,
1983.3. For moratory interest on each of said amounts at
the statutory rate from the respective dates billed by Fort Lyon
as follows:(a) On $29,912.00 from October 14, 1983
(b) On $38,121.00 from November 21, 1983
Pursuant to C.R.C.P. 56(d) the Court finds and hereby
orders that it appears without substantial controversy (admitted
by Applicant in oral argument) that Fort Lyon is entitled to a claim for depreciation for the years ending October 31, 1981, 1982 and 1983. The method of computation of depreciation is in dispute.NOW, THEREFORE, IT IS ORDERED that summary judgment is
hereby entered as set forth above in paragraphs numbered 1, 2
and 3 in favor of Fort Lyon Canal Company against Amity Mutual
Irrigation Company.
^
Dated this day of July, 1984.
BY THE COURT:
JOHTf t><"STATLhR SPflCIAL WATER JUDGE
pc: Carl M. Shinn
John J. Lefferdink Division Engineer State Engineer
Fairfield and Woods (Holme)
Filed in the office of the
Calkins, Kramer, Grimshaw 8 Marring (Schroeder)Clerk, District Court Water
Kelly, Stansfield § O'Donnell (Flanagan)
Division No. 2, State of
Mitchell 8 Mitchell Colorado
Ralph N. Wadleigh
Holland and Hart (Cardlson)
27 1984
John Wittemyer
u
DISTRICT COURT, WATER DIVISION NO. 2, STATE OF COLORADO Case No. 80CW019
AFFIDAVIT IN OPPOSITION TO MOTION FOR SUMMARY JUDGMENT
IN THE MATTER OF THE APPLICATION FOR WATER RIGHTS FOR AMITY
MUTUAL IRRIGATION COMPANY
IN THE ARKANSAS RIVER
STATE OF COLORADO, ) . "
) ss. COUNTY OF PROWERS. )
CLIFFORD VERHOEFF, (hereinafter called and referred to
says ""follows^'
deposes and
1. That he resides at Holly, Colorado.
2. That he has been a member of the Board of Directors
of Amity Mutual Irrigation Company, (hereinafter called Amity)
since about 1966; that he has continuously been Vice-President
of the company for approximately ten to twelve years.
_ , , That he is acquainted with the Motion for Summary
Judgment made in the captioned case by Ft. Lyon Canal Company
(hereinafter called Ft. Lyon)
.
v.«mpciny
3. That Affiant is acquainted with the various
agreements, arrangements, and transactions between the two
companies since he has become a member of the Board of Directors.
4. That he has carefully read the Affidavit in
Opposition to Ft. Lyon's Motion for a Summary Judgment made by
with^the^i?«^-
Superintendent of Amity, and Affiant is acquainted
with the statements made, and to the best of Affiant's knowledge
thP^
Affiant to repeat
them, but Affiant knows that they are true and has personal
knowledge of most of them.
pexsonai
u
n
5. That Affiant remembers a meeting with the Ft. Lyon
Board of Directors, about the Spring of 1966, at which time the full Boards of each company were present and the purpose of the
meeting was to tour the system of the Ft. Lyon. Affiant
remembers that Perry Hill was Superintendent of the Ft. Lyon and
on the occasion that Affiant remembers. Perry Hill and a director
of Ft. Lyon, George Reyher were present. That Perry Hill and
George Reyher both assured the directors of Amity that at that
time the capacity of Ft. Lyon Canal was 1,850 c.f.s., and that
the canal was then in good condition and in a fine state of
maintenance. That, even so. Hill and Reyher were pointing out
to Affiant and others that, with the normal seasonal summer work
to be done, such as digging out the curves on the bends and
straightening them and removing some trees, the capacity of
the canal would then be up to its normal '2,150 c.f.s., so
that it could sure handle the total decrees of each of the
ditches at the head end.
6. That Affiant had not visited the head end of the
Ft. Lyon diversion system until February of 1984, at which time
Affiant was shocked and suprised to see the.sorry state the
Ft. Lyon Canal was in from a standpoint of maintenalice", and
Affiant observed that it was plugged with a tremendous quantity
of sand for the first 30 to 35 miles which seriously reduces
the capacity of the canal.
7. That Affiant, through the years, has become
acquainted with the agreements between Amity and Ft. Lyon and
has attended many meetings at which the Board of Directors or a representative of the Board of Directors of each
company were present. That Affiant recalls no particular
dispute with respect to the settling of the statements concern
ing the maintenance agreement between the two companies which
were written down in the 1944 Stipulation and Decree in the
Bent County case until approximately 1975 or 1976, at which
time, without any notice to Amity, Ft. Lyon greatly increased
its bill to Amity by claiming a much larger per hour figure
for the use of its machinery, as opposed to the actual operating
cost which had been used between the two companies for many
years before; a meeting of the two Boards of Directors was held at Mr. Lefferdink's office in connection with a bill received from Ft. Lyon about that time, at which time the two
Boards of Directors agreed that their superintendents would get
together and settle the bill in question, and would make any
adjustments as to how future bills should be figured.
8. It was reported back to Amity by Howland that the
two superintendents had met, had settled the bill, and had agreed
upon the manner of figuring future bills and the method adopted
-u
I
■)
did not include any so called cominercial rates for the use of
machinery, or depreciation expense with regard to the machinery.
This bill in question was then paid by Amity and accepted bv
Ft. Lyon.
^
9. As Affiant recalls, then there were two or three
years bills which were made by Ft. Lyon to Amity, and Amity
paid for the reason that they were calculated in accordance
with the method the two companies had agreed upon.
10. Then, in about 1980 to 1981, Ft. Lyon again
began to claim the rates for the machinery were too low, and
that it should have commercial rates, or depreciation; Amity
has never agreed to this, and has refused to pay those last
three bills for the reason that Amity has never agreed to the
method of calculation.
11. Also, the Amity board has refused to pay the bills
for the further reason that, with respect to its Great Plains
Decree, which is delivered by Ft. Lyon, Amity has never been
able to get the diversion records from Ft. Lyon, and, although
Ft. Lyon has promised on numerous occasions to make the records
available. Amity had not received them until just recently.
on two occasions when he was present, to-wit*
September 29, 1981 and October 13, 1981 in the offices of
Ft. Lyon at Las Animas, Colorado, at which time the subject of
the delivery of the water records was raised, and on each
occasion. Amity was assured that the water records that it wanted
from Ft. Lyon would be mailed to them within a day or two, but
the records never did come.
Dated May 10, 1984.
:
;.STAJE.;OF COLORADO, )
" V ) BS.
VERH - Affiant
' :.C<:)UNTY TOF PROWERS . )
•
■■
Subscribed and sworn to before me this
dav
/l i -.of May, 1984. ^
" •
My commission expires October 10, 1986.
'
Address^: '•^200 W. Elm Street
Lamar, Colorado 81052
-u
DISTRICT COURT, WATER DIVISION NO. 2, STATE OF COLORADO
Case No. 80CW019
AFFIDAVIT IN OPPOSITION TO MOTION FOR SUMMARY JUDGMENT
IN THE MATTER OF THE APPLICATION FOR WATER RIGHTS FOR AMITY MUTUAL IRRIGATION COMPANY
IN THE ARKANSAS RIVER
STATE OF COLORADO, ) ) BS . COUNTY OF PROWERS. )
LEWIS DAVIS, (hereinafter referred to as Affiant), being
first duly sworn, upon his oath deposes and says as follows:
1. That he resides at Holly, Colorado.
2. That he is, and since November of 1978, has at
all times been the Superintendant of the Amity Mutual Irrigation
Company (hereinafter referred to as Amity).
3. That his duties, among other, as Superintendant of
Amity involve the day to day operation of the company under the
general direction, supervision, and policies established by the
Board of Directors and shareholders, including being the chief
operating officer, responsible for all personnel, office, records,
machinery and equipment, diversion, storage, and distribution of
water, making and following the budget for its fiscal operations,
and attending all meetings of the Board of Directors, the share
holders, and other meetings at which his presence is required or
necessary.4. That, prior to becoming Superintendent of Amity,
Affiant worked for Amity in other capacities for a period since
1963.5. That Affiant is acquainted with a Decree, and a
Stipulation for Decree between Amity and Ft. Lyon Canal Company
(hereinafter referred to as Ft. Lyon).
o
o
That said action was brought to settle
"... among other things such disputes and controversies involve the construction, meaning
and effect of the provisions of said contract respecting division of costs and expenses, as to whether or not any method of division or allocation of the cost of permanent structures,
either in said Western Division of The Fort Lyon
Canal, or in the Kicking Bird Canal, Satanta Canal
and Pawnee Canals and the Queen Reservoir, is
provided for in said contract, and as to whether or not any allocation or method of division
of cost of annual expense of repairs and maintenance,
in the event no water was diverted or was used by
either, or by only one of.the parties from said
reservoirs, is provided for in said contract, and
other matters."6. That the Stipulation also contains the following
paragraphs applying to the issue raised in Ft. Lyon's Motion
for a Summary Judgment:"Seventeenth: For the period commencing the
first day of November, 1943, and ending the 31st
day of October 1947, the defendant agrees to pay
to the plaintiff annually twenty per cent, (20%) of
the annual cost of the maintenance and operation
of the Western Division of The Fort Lyon Canal,
and twenty per cent, (20%) of the cost of any
permanent structures replaced or placed in the
said Western Division; the Fort Lyon Canal Company
agreeing that the cost shall be reasonable, and
in the event said Fort Lyon Canal Company reasonably
deems it necessary that any permanent structure
be placed or replaced in said Western Division, it
will submit its plans, specifications and estimated
costs thereof in advance of said construction, so
that the defendant will have ample opportunity to
object thereto, if it deems it advisable.
Eighteenth: The Fort Lyon Canal Company
agrees to pay annually for the period commencing November 1, 1943 and ending October 31, 1947,
twenty per cent (20%) of the annual cost of maintenance
and operation of the Kicking Bird Canal from the point it leaves the Fort Lyon Canal, the Satanta
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Canal, the Queen Reservoir and Pawnee Canal to
its connection with the Fort Lyon Canal, and all
of the cost of any structure in the Fort Lyon Canal
through which water is delivered from the said
Reservoir outlet to the Fort Lyon Canal, and also to
pay twenty per cent. (20%) of the cost of any
permanent structure placed or replaced in said
portion of Kicking Bird Canal, Satanta Canal,
Pawnee Canal and Queen Reservoir; the Amity Company
agreeing to make the cost reasonable, and in the
event the said Amity Company deems it necessary
that any permanent structures be placed or replaced
in said last described canals and Queen Reservoir,
it will submit its plans, specifications and estimated
cost thereof in advance, so that tha plaintiff
will have ample opportunity to object thereto if it
deems advisable.Nineteenth: There has been established over
a period of years a definite custom as to the
proportion of the Superintendents' salaries,
telephone expenses, and other similar expenses
which are included in the annual operation and
maintenance charges of the respective parties, which
custom shall be continued. Hereafter an annual
settlement of mutual accounts shall be made by the
parties on or before the 31st day of December in any
given year; for the purpose of facilitating the
making of such settlements, the parties shall furnish to each other itemized statements of account for the yearly period ending the previous October 31st, and shall permit an examination of such invoices,
vouchers and other evidence as may be necessary to
substantiate such accounts; the first of such accounts
to be submitted shall be for the period beginning November 1st, 1943, and ending October 31st, 1944, within fifteen days after the end of the period,
and the same procedure shall be followed in each
year thereafter.
Twenty-first: Prior to the first day of
November, 1947, or in any given year thereafter, in
the event the relationship between the parties hereto,
as controlled by this stipulation, shall be in
existence, they shall consult and consider a new
basis of annual expense of maintenance and operation,
and cost of permanent structure and improvements,
and shall take into consideration all matters which
may effect an equitable division of such cost and
expense; it being expressly understood, however,
that until a different agreement is reached, and
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during the pendency of any negotiations therefor,
the basis provided in this stipulation, findings
and decree shall control to the date of the-commencement of an action to obtain a court determination of said division basis."
7. That Ft. Lyon, in its Motion for Sununary Judgment,
claims amount due from Amity to it for fiscal year 1980-1981, 1981-1982, and 1982-1983; that Affiant and Amity, acting
through-its Board of Directors, has disputed each of the statements sent
by Ft. Lyon to Amity, and still disputes the accuracy of them, and denies that the amount sought by Ft. Lyon is due and owing.
8. That the main dispute arises from the fact that, commencing with the 1980-1981 statement from Tt. Lyon, Ft. Lyon added in an item of depreciation to its annual billing to Amity.
9. That Amity received two separate statements from
Ft. Lyon for the year 1980-1981, the first being reflected at
the Exhibit "A", hereto attached, and made a part hereof, and in the 2imount of $38,322.67. That, after receipt of that state
ment from Ft. Lyon in or about February 21, 1983, Ft. Lyon
submitted a so-called "Revised Statement" in the amount of
$56,925.00, and to which statement Ft. Lyon added an item of
depreciation, and also in which Ft. Lyon apparently changed many
of the figures with regard to maintenance and operation expense.
10. That Affiant notices that in paragraph 1 of Ft.
Lyon*s Motion for Summary Judgment, Ft. Lyon demands the sum of
$39,612.00, in the Exhibit "A" hereto attached. Ft. Lyon demands
$38,322.67, and in the revised statement, copy of which is
hereto attached and marked Exhibit "B", Ft. Lyon demands
$56,925.00. That Exhibit "B" was received by Amity on or about
September 20, 1983, pursuant to a letter of transmittal addres
sed to Affiant dated September 19, 1983, copy of which is here
to attached and marked Exhibit "C".
11. That Affiant first became acquainted and concerned
with the item of depreciation contained in the statement rendered
by Ft. Lyon to Amity for the fiscal year 1976-1977, and in which
Ft. Lyon demanded an item of depreciation; that Amity, upon
receipt of that bill, refused to pay the bill for the reason
that it contained the item of depreciation, and returned it to
Ft. Lyon, whereupon Ft. Lyon rendered a revised statement taking
the items of depreciation out, and accepting payment of ®
duced sum, without any sums for depreciation. That the bill so
paid is attached as Exhibit "I", showing no depreciation.
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12. That Affiant became Superintendent at the time
when the statement from Ft. Lyon to Amity for the fiscal year
1977-1978 was rendered, and that the statement for that fiscal
year contains no item of depreciation.
13. That Ft. Lyon now insists that the statement for
each fiscal year must contain items of depreciation, and Amity
refuses to pay the same for the reason that to the knowledge of Affiant for the year 1977-1978, and 1979-1980, the statements contained no items for depreciation, and Affiant is advised by the Directors of Amity, and Affiant has learned from the
correspondence in the files of T^ity, that Amity has always refused to pay depreciation and Ft. Lyon has accepted payment
without depreciation. That this is evidenced bj|^ correspondence
between the companies, as set forth in Exhibit D" hereto
attached, being a Memo dated September 2, 1977 from the Super
intendent of Ft. Lyon to the Board of Directors, and by
Exhibit "E", being a letter from the Superintendent of Amity
to Ft. Lyon dated October 7, 1977, Exhibit "F" being a letter
from Amity to Ft. Lyon dated September 1, 1978, and Exhibit "G"
being a letter from Ft. Lyon to Amity dated October 12, 1978;
all of which indicate that the question of depreciation has been a source of dispute between the companies with Ft.
Lyon, from time to time, attempting to insert it, and Amity always
refusing to pay it.
14. That Affiant, since he has been Superintendent,
has attended several meetings between the Boards of Directors
of the two companies with reference to the matter, and at no time has Amity ever agreed to accept and pay a bill containing depreciation.
15. That, in addition to the question of depreciation on the statement rendered from Ft. Lyon to Amity for the past
several years. Amity also has serious questions about the
computation of the bill, even excluding the item of depreciation,
and that Ft. Lyon seems to now rely upon a new method of
computation adopted by its auditor, Mr. William Trainer, and
that Amity disputes and disagrees with many of the figures
contained in the Affidavit made by Mr. Trainer which is a part
of Ft. Lyon's Motion for Summary Judgment. That, insofar as
is known to Affiant, the provisions of paragraph Twenty-first of
the Stipulation and Decree in Action No. ^158, which is set out
above in this Affidavit, have never been implemented insofar as
the parties arriving at a new or different agreement as to the
method of computing the basis of annual expense, maintenance
and operations; but. Ft. Lyon, acting alone and by itself, seems
to insist that a new basis of calculating and computing them
as originated by its auditor, should be adopted.
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16. That paraqraph Seventeenth of the Stipulation
entered in Case No. 2158 provides that Ft. Lyon, before it places
any permanent structures in the so-called Western Division,
must submit plans, specifications, and estimated costs in ad
vance of said construction so that Amity will have an opportunity
to object thereto. That Affiant, as indicated above, has access to and is in charge of all of the records of Amity; with respectto the replacement of a "trash rack and waste-way No. 1", the only notice or correspondence given by Ft. Lyon to Amity is a
letter dated November 26, 1980, and which is attached as Exhibit
"A" to the Affidavit of Barbara A. Day and contained in Ft.
Lyon's Motion for Summary Judgment. That Amity at no time was
notified of any plans, specifications, or estimated costs withregard to the replacement of the same, and, although Barbara A.
Day has testified in a deposition in this cause that she mailed
many certified letters to Amity with respect to the same during
the period from October, 1980 through March of 1981, Affiantcategorically denies that Amity ever received them; further.
Affiant's recollection on this point is bolstered by the testimony
of Mr. Campbell of the Holly Post Office, who testified in a deposition in this cause that there was no certified mail
originating at the Las Animas Post Office delivered to Amity
during the period of October, November and December of 1980.
17. That, Affiant has been in several meetings between
the Boards of Directors of the two companies and on several occasions. Amity has requested Ft. Lyon to deliver to them
records appertainina to the water diverted by Ft. Lyon into its
canal under the Great Plains Decrees which are owned by Amity.
That on several occasions. Affiant has heard the representatives
of Ft. Lyon agree that the records would be forthcoming at once,
and that Ft. Lyon never at any time, delivered the records with
respect to the water diverted until March 28, 1984, when they
were finally delivered at the offices of the company attorney,
Mr. Lefferdink, during a deposition then being taken of Mr.
Converse, Superintendent of the Ft. Lyon Canal. That partial
records were delivered in August, 1982 but they were not complete
and Affiant and superintendent for Ft. Lyon could not figure them
out.
18. That Affiant has been in several meetings between
representatives of the Boards of Directors of Amity and of Ft.
Lyon, and that Affiant has heard representatives of Amity tell
those of Ft. Lyon that, until Amity receives the records, Amity
was going to refuse to make any of the payments because they
thought that both companies were liable for mutual performances,
and since Ft. Lyon would not deliver the water records to Amity,
Amity had no liability to pay Ft. Lyon whatever bills that Ft.
Lyon might render to Amity.
19. That, in addition. Affiant has inspected the
Western Division of the Ft. Lyon Canal, and that he last inspected
it in February, 1984 and that the canal was in a bad state of
maintenance for the reason that Ft. Lyon has permitted its canal 6
-(J
to become sanded up with very much sand for approximately the
first thirty miles, and Affiant knows that Ft. Lyon cannot carry
and handle the Great Plains water from the river to the Kicking
Bird headgate, as required under the Stipulation of the parties,
and Affiant has heard representatives of Amity insist to the
representatives of the Ft. Lyon that Ft. Lyon should be main—
taining its canal in a much better shape, and that representa
tives of Amity think that Amity are not bound to pay for the
maintenance of the Ft. Lyon Canal when Ft. Lyon Canal is not
able to run the Great Plains Decrees belonging to TUnity. That
for the past several years, since Affiant has been Superintendent,
Ft. Lyon has been able to run only about 1400 c.f.s. in its
canal, which would leave a capacity of only about 450 c.f.s.
for Great Plains, leaving the Arkansas River at La Junta, when,
in fact. Amity is entitled to a diversion of 1150 c.f.s. at that
point, as a result of which. Amity is usually always shorted
of water in periods of high river, because Ft. Lyon takes care
of its decrees first, and takes care of the Great Plains Decree
as a secondary requirement.
20. That the condition of the incapacity of Ft. Lyon
to carry Amity's decrees is acknowledged by the Superintendent
of Ft. Lyon in a letter dated July 9, 1983, hereto attached as
Exhibit "H"; that said situation has existed for the last several
years, but Ft. Lyon refuses to remedy the situation. That the
capacity of the Ft. Lyon Canal at the present time is such that
it apparently is unable to divert more than about 400 c.f.s. to
the Kicking Bird when it is diverting its full 933 c.f.s.,
whereas it should be able to divert and deliver to Kicking Bird
approximately 880 c.f.s. at the Kicking Bird headgate. That
Affiant knows on some occasions since he has been Superintendent
of Amity that Ft. Lyon was able to deliver 870 c.f.s. while running
its full 933 c.f.s., but that the capacity has gone steadily
downward for the past four or five years since Affiant has been
Superintendent and as a result of which Amity loses much water.
21. That, with respect to depreciation mentioned above.Affiant is unable to know how Ft. Lyon computes it for the
reason that, according to testimony of Mr. Paul Converse in a
deposition taken between the parties, all of the machinery
belonging to Ft. Lyon, other than possibly a few motor vehicles,
is of vintage of 15 to 20 years old, and s,hould have been
depreciated out a long time ago.
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22. That insofar as is known to Affiant, the
letter above referred to in paragraph "16" of this Affidavit, being the Exhibit "A" attached to the Affidavit of Barbara A. Day, together with Exhibit "J" hereto attached are the only mention of the "trash rack" or the "trash rack and waste gate #1" received by Amity from the Ft. Lyon Canal Company; and that Affiant knows that Amity never at any
time received from Ft. Lyon any plans, specifications, cost
estimates, material prices or other information with respect to the manner or cost of Ft. Lyon's replacement of the trash
rack and the waste gate.
23. That, although Ft. Lyon states in its Motion
for a Summary Judgment that ". . . there is no genuine issue as to any material fact. . .", Amity claims and Affiant is
aware of many issues with respect to the material facts regarding the subject matter of Ft. Lyon's Motion for a Summary Judgment,
and, on trial, Amitv would expect to call several witnesses
to testify with regard to said matter.
24. That Amity has disputed the bills presented from
Ft. Lyon as is indicated by Exhibit "K" hereto attached, being
a letter dated October 12, 1982 from the lawyer for Amity to
the lawyer for the Ft. Lyon, which sets forth that Amity
objected to the original statement for the year 1980-1981 in the
amount of $38,322.67, and the fact that Amity has pointed out
to Ft. Lyon that, until it obtained the water records. Amity
would dispute the payment of any sum to Ft. Lyon.
25. That Amity has not submitted its statements to Ft. Lyon as provided for in paragraph "Eighteenth" of the
Stipulation between the companies for the reason that, the method of calculation for each company should be the same,
and if Ft. Lyon insists on a new method of calculation. Amity
should not be required to calculate its statement or bill on the old method.26. That the deposit of sand in an irrigating canal diverting water from the Arkansas River is not new
and the removal of sand from the canals is a constant problem
which must be solved either by sluicing or by mechanical
removal, usually by means of draglines. That Amity, as a part
of its usual routine of maintenance and care for its canals, constantly removes the sand deposit from its canals and if it
cannot be removed by sluicing, Amity has a practice of removing it by means of draglines. This is particularly true with
respect to the first section of a canal diverting from the
Arkansas River since it is the nature of sand to come out of
the river, and gradually fill up the head end of the canal.
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C)
and, unless removed immediately from the head end of the
canal, it will continue on down the canal gradually filling
the canal from the point of diversion to as far as"it is
permitted to travel. That Affiant knows of several occasions
where Amity has used its dragline to remove several feet of
sand from the first two or three miles of its canal system
knowing that, unless it is done, the
problem will continue to increase until the capacity of the
canal is greatly reduced.
27. That the sand problem in the Ft. Lyon Canal
as of the present time, extending as it does for the first
approximately 30 miles of the canal, has taken several
years to be deposited and the longer it is permitted to go
unremoved, the more the capacity of the Ft. Lyon Canal will
be reduced.
Dated May 10, 1984. - n -
t-LEWIS DAVIS - Affiant
STATE OF COLORADO, ) ) s s • COUNTY OF PROWERS. )
sworn to before me this 10th day of
May, 1984.My commission expires October 10, 1986.
AddressV ^00 W. Elm St.
Lamar, Colorado 81052
-•'*'2 - • ■**••
• ' •".. *■ . >-. ^ *,'
time. A separate final judgment shall be
enter^ ,n accordance with these findings
of fact and conclusions of law.
18 Bankruptcy reporter
In re Noble J. HAMILTON. Debtor.
FIRST NATIONAL BANK OF COLORA
DO SPRINGS. PUintiff.
V.
Noble J. HAMILTON. Defendant
Bankruptcy No. 81 Mc 1105.
United SUtes Bankruptcy Court,
D. Colorado. March 22, 1982.
* proceeding seeking to
^•ne ,ts nghta regarding its security
^rwment with bankruptcy debtor. The
^nkruptcy Court, John F. McGrath, J
^Id that: (1) application of section of
Bankruptcy Code which provides that
after-quired property is not subject to any lien
f
agreement
en-ter^ into by debtor before commencement
^ he case to bank's security interest in
^btors after-acquired property was not
uriconsUtutional as a Uking of property;
(2) such sutute precluded fixing of a lien
Prepetition security agree
ment between debtor and bank on debtor's
property insisting of crops planted after
filing of the petition; and (3) debtor's
fail-to pay the 50% proceeds from sale of
^e crop pumuant to the agreement with
bank was subsuntial breach entitling bank
to dernand 100% of the proceeds, but debtor
WM allowed to recover from the proceeds
the r^nable, necessary costs of maintain
ing, harvesting, and marketing of the crops.
Ordered accordingly.
APPENDIX D
1. Bankruptcy «=>3
Constitutioiuil Law ^300(])
Application of section of Bankruptcy
pKle which provides that property acquired
by estate or debtor after commencement of
the case is not subject to lien resulting from
"wunty agreement entered into by debtor
t>etore commencement of the case to bank
whose security interest in after-acquired
pro^rty arose prior to effective date of
such section was not unconstitutional as a
tok.^ of property on basis that bank had a
vested property interest in debtor's
after-acquired property, in that since after-ac
quired property was not in existence at
fime of the agreement, most which bank
with debtor was a vested interest, which,
had the pro^rty ever come into existence,
would have become a vested property right.
2. Bankruptcy «=• 189.5
Sation of Bankruptcy Code which
pro-vides that property acquired by the esUte
or debtor after commencement of the case
IS not subject to any lien resulting from
swunty agreement entered into by debtor
before rommencement of case precluded
fixing of a hen resulting from a prepetition
aecurity agreement between bank and
debt-or on property consisting of crops planted
Code, 11 U.S.C.A. § 552(a).
S. Bankruptcy 189.5
Section of Bankruptcy Code which al
lows security agreement entered into before
commencement of a case to extend to pro
ceeds, product, offspring, rents, or profits of
property covered by the security agreement
which were acquired by esUte after com
mencement of the case to the extent provid
ed by such security agreement was not ap
plicable to crqjs planted by debtor after
filing of debtor's petition, even though such
crops were covered by the security agree
ment, in that such crops were
mkruptcy acquired ement of -ing from >y debtor to bank •acquired date of inal as a nk had a •'s after- after-ac-tence at eh bank Teement . which, xistence, ty right 552(a); iich pro-e pro-estatpro-e the case ig from ' debtor -ecluded petition id debt-planted Bankr. hich al-) before to pro of its of eement ;r com- provid-not ap-r afteap-r jh such agree- fter-ac-.S.C.A. 4. Contracts ©=>221(2)
Under agreement between bank and bankruptcy debtor under which bank was to receive 50% of proceeds of debtor's crops, remittance of 50% of the proceeds was not a condition precedent to formation of a con tract, but rather agreement was a simple contract by which bank exchanged its right to demand 100% of the proceeds in return for benefit of having debtor remain in busi ness and pay bank 50% of the proceeds, and debtor, in exchange for right to pse 50% of the proceeds to run his business, agreed to pay bank 50% of the proceeds.
5. Bankruptcy «=>272
Contracts *=312(3)
Failure by bankruptcy debtor to pay 50% of the proceeds received from sale of debtor's crops was a substantial breach of agreement between debtor and bank enti tling parties to suspend their future per formance and entitling bank to demand 100% of the proceeds, but under section of Bankruptcy Code which allows trustee to recover from property securing an allowed secured claim "the reasonable, necessary costs and expenses of preserving, or dispos
ing of, such property to the extent of any
benefit to the holder of such claim," debtor was allowed to recover from the proceeds the reasonable, necessary costs of maintain ing, harvesting, and marketing of the crojis. Bankr.Code, 11 U.S.C.A. § 506(c).
IN RE HAMILTON 869
Che ■». Bkiicy.. IS B.R. 8C8 (IM2)
between these same parties whereby the Bank was to receive 50 percent of the pro ceeds from all monies received upon which the Bank had an interest. Specifically, the questions which must be addressed in order to make a complete determination of the Bank's rights are: (1) Is the application of 11 U.S.C. § 552(a) to the Bank's security interest in the Debtor's after-acquired prop erty unconstitutional? (2) Does the Bank's security interest apply to crops planted af ter the filmg of the Debtor/Defendant's Petition? (3) Is the Bank entitled to 50 percent of the proceeds of the crops in existence before the filing of the Petition, or is the Bank, because of a breach in the parties' agreement, entitled to 100 percent of the proceeds, or is the Debtor/Defend ant, as debtor-in-possession, entitled to an offset against the proceeds received for the
crops for the costs of planting, maintaining,
harvesting, and marketing those crops? The security agreement between the par ties was signed on February 1, 1979, and the crops and the land upon which the crops were to be grown were set forth. The crops consisted of sod, trees, and alfalfa. The parties agree that all alfalfa and trees were in existence at the time of filing. The only dispute, therefore, is regarding the sod. On April 16,1981, when the Debtor filed his Chapter 11 proceeding, the Debtor had 367
acres of sod. He now has 190 acres in sod.
Therefore, the acreage in dispute is the 177
acre difference.
Ronald M. Martin, Colorado Springs, Colo., for plaintiff.
Jimmie D. Mills, Denver, Colo., for debt
or.
ORDER DETERMINING RIGHTS OF BANK
JOHN F. McGRATH, Bankruptcy Judge.
The Court is here called upon to deter mine the rights of the Plaintiff, First Na tional Bank of Colorado Springs (Bank), regarding its original security agreement
with the Debtor/Defendant, Noble J. Ham
ilton, covering after-acquired projierty, and
regarding the subsequent oral agreement
The subsequent agreement between the parties was entered into on May 21, 1981, after the filing of the Complaint in this action. By the terms of this agreement the Bank was to receive 50 percent of the pro ceeds from all monies received by the Debt or upon which the Bank held a security interest. This agreement was never fully executed or filed with the Court, but its existence is not disputed.
A third agreement between the parties has been reached. The parties have agreed that from October 8, 1981, the date of the hearing, to the date when the Court makes
a final decision on the matters in controver
sy, the Debtor will pay the Bank 30 percent
t
870
18 BANKRUPTCY REPORTER
Of the proceeds received from the sale of
the crops. However, the Bank claims that
■t .s entitled to 100 percent of these
pro-also. The parties also agree that the
Bank IS granted relief from sUy on all its
property rights, and the parties further
agree that all of the proceeds from sod sold
"P U"t.l October 8, 1981, are proceeds from
^ that was in place on April 16, 1981, the
date of the filing of the Chapter 11 Peti
tion.
11 U.S.C. § 552 provides;
(a) Except as provided in subsection (b)
of this section, property acquired by the
estate or by the debtor after the com
mencement of the case is not subject to
any hen resulting from any security
agreement entered into by the debtor be
fore the commencement of the case.
(b) Except as provided in sections 363
^c), 545, 547, and 548 of this title.
It the debtor and a secured party enter
into a security agreement before the com
mencement of the case and if the security
interest created by such security agree
ment extends to property of the debtor
-quired before the commencement of
the case and to proceeds, product,
off-spnng, rents, or profits of such property
then such security interest extends to'
•uch proceeds, product, offspring, renU
or profits acquired by the esUte after the
commencement of the case to the extent
provid^ by such security agreement and
by applicable nonbankniptcy law except
to the extent that the court, afte'r notice
and a hearing and based on the equities
of the case, orders otherwise.
