PROJ01957

• Contract/PO #: C150012
• Contractor Name: Model Land and Irrigation Company, The
• Contract Type: Loan
• Water District: 19
• County: Las Animas
• Loan Projects - Doc Type: Feasibility Study

&il! ~1

7ibttC &~~7-? C

[gj ~{~~U \~/ r
SEP 2 8 1999

Attorneys At Law
1775 Sherman Street. Suite 1300
Denver, Colorado 80203
[phone]. Fax: [phone]

Extension 133

OFFiCE OF TIlE
T AITOR."'EY GE,'-'1i:P'A,L
N~~r;"RALRESOL1{CES .2
&'i\ LROi'l'MENT SECTION

September 27, 1999

Ms. Linda 1. Bassi, Esq.
Assistant Attorney General
Natural Resources and Environment Section
Attorney General's Office
1525 Sherman Street, 5th Floor
Denver, Colorado 80203

Re: Model Land & Irrigation Company CWCB Loan.

Dear Linda:

In connection with the proposed loan from the Colorado Water Conservation Board (the
"CWCB") to the Model Land & Irrigation Company ("Model") for rehabilitation of the outlet
works of Black Hills Reservoir in Las Animas County, we have reviewed the two contracts dated
May 28, 1966, (the "Contracts") between Model and the Purgatoire River Water Conservancy
District (the "District") to determine whether they require the consent or approval of the District
for Model to grant the CWCB a security interest in water rights owned by Model, or in Model's
rights under the contracts themselves. For the following reasons, we have concluded that while
no such consent or approval is required in connection with the granting of a security interest in
Model's water rights, granting a security interest in Model's rights under the Contracts, however,
would require the consent of the District.

Model's Water Rights. As a general rule, real and personal property can be conveyed and
encumbered unless prohibited by law or the terms of a private agreement or document. In this
case, neither the law nor the Contracts contains any prohibition on Model granting a security
interest in Model's water rights to third parties. Although paragraph 9 of each of the Contracts
pledges Model's assets and powers to the payment of Model's payment obligations to the
District, it is not a negative covenant which would prohibit such a grant, and we are unaware of
any other document which contains such a prohibition. However, as you know, any security
interest obtained by the CWCB in Model's water rights will be subject to the Contracts and the
District's rights under the Contracts.

The Contracts Each of the Contracts contain a provision stating that Model "may not
assign this Contract or any portion thereof to any other person or entity without prior written
approval of the District." In our view, the granting ofa security interest in Model's rights under
the Contracts is probably a form of assignment within the meaning of this provision, requiring the