PROJ02195

• Contract/PO #: 07000000090
• Contractor Name: Ditch and Reservoir Company Alliance
• Contract Type: Grant
• Water District: 0
• Loan Projects - Doc Type: Report

The mutual ditch and reservoir statute requires that the ar-
ticles of incorporation of a mutual ditch company state the:

· Stream, channel, or source from which the water is to
be taken;
· Point or place at or near which the water is to be taken;
· Location, as near as may be, of any reservoir intended
to be consnucted;
· Line, as near as may be, of any ditch or pipeline in-
tended to be constmcted; and
· Use that is intended. See e.R.S. @ 7-42-101.

The articles of incorporation also may provide provisions
concerning the purpose or purposes for incorporation, man-
agement of the business of the corporation and regulation of
its affairs. See e.R.S. @ 7-102-102.
The articles are generally more difficult to change or
amend than the bylaws. When drafting articles of incorpora-
tion, carefully think through the intended purposes of the
company, what authority it needs or should have, and the
relationship it plans with its shareholders. Draft the provi-
sions to fit the company. Generally, handle the specific terms
and conditions dealing with the management, operation and
administration of the corporation in the bylaws.

Benefits of incorporation

Unincorporated ditches, otherwise known as co-tenancy
ditches, can experience significant problems involving op-
erations, delivery and cost shming..
Each co-tenants share of the water and ditch is typically
described in his/her deed as an undivided portion of the wa-
ter right, but he/she has no evidence of how much the neigh-
bors own.

In the absence of some kind of joint operating agreement,
no mechanism exists to govern ditch operations or water de-
livelY, and each co-tenant has an equal right to open and close
the ditch diversion structure and his/her own lateral turnout.
This anangement often leads to what one judge called "un-
seemly breaches of the peace along the ditch bank."
Similar problems emerge when it's time to pass the hat
for money to operate and maintain the ditch. The typical
connibution rule is that each co-tenant is obligated to pay
his pro rata share of running the ditch from the headgate to
his lateral turnout, but not beyond. Disagreements over that
apportionment method can lead to protracted litigation.
Incorporation eliminates all of this.
The amount of stock each shareholder owns defines his
pro rata share of both water delivelies and the ditch mainte-
nance expense. Instead of shareholders helping themselves
to what they consider their share, the water is distributed by
a ditch rider employed by the company. The mechanism of
the mutual company is a proven, ideal way to simplify and
harmonize the operation, not only of major ditches, but also
of lateral ditches with numerous users.

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About the authors:

Jack F. Ross, Esq., is a director and shareholder in the Den-
ver law firm of Dufford &. Brown, P.e., 1700 Broad-
way, Suite 2100, Denver, CO 80290, [phone],
[e-mail].

Joanne Herlihy, Esq., is a director and shareholder in Dufford
&. Brown, P.e., [e-mail].

.

John R. Heronimus, Esq., is also a director and shareholder
Dufford &. Brown, P.e., jheronimus@duffordbrown. .
DARCA

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Ditch & Reservoir Company Alliance