## Facts

- East Jordan Irrigation Company is a nonprofit mutual water corporation holding legal title to water rights in Utah Lake and the Jordan River and delivering diverted water to shareholders for irrigation in Salt Lake County.
- Shareholders own stock entitling them to a pro rata share of deliveries through East Jordan’s canal; the corporation, not shareholders, holds title to the underlying water right.
- Payson City purchased 38.5 shares (representing 186.34 acre-feet) and applied to the Utah state engineer to change the point of diversion to a city-owned well in a basin flowing into Utah Lake.
- Payson also sought to change the place and nature of use to year-round municipal use.
- East Jordan, Salt Lake City, and the Provo River Water Users’ Association protested, asserting the application had to be filed by East Jordan as owner and that the proposed change would impair vested rights in Utah Lake.
- After informal hearings, the state engineer approved the change, concluding Payson could file in its own name based on stock ownership and ordering East Jordan to reduce canal diversions by 186.34 acre-feet per year.

## Issues

1. Whether a shareholder in a mutual water company may file, in its own name and without the company’s consent, a statutory change application altering point of diversion, place of use, and nature of use of the company’s water right.
2. Whether the state engineer has authority to consider and approve a unilateral shareholder-filed change application when the mutual water company holds legal title to the water right.

## Decision

- The Utah Supreme Court reversed the district court’s summary judgment upholding the state engineer’s approval.
- The court set aside the approval of Payson’s change application and remanded for further proceedings.
- The court held that Payson’s ownership of East Jordan stock did not make Payson the holder of a severable, independent water right eligible to be changed unilaterally under the change statutes.
- Because East Jordan held legal title to the water right, the application was not properly brought in Payson’s name, and the engineer’s approval was invalid.

## Legal Principles

- In a mutual water company, the corporation holds legal title to the water right; shareholders generally hold a personal property interest in stock entitling them to water deliveries, not a separately owned portion of the underlying right.
- A change application affecting a water right must be filed by the holder of the right or a duly authorized party; the state engineer’s authority depends on a proper applicant with a legally cognizable interest in the right being changed.
- Corporate governance and the company’s organizing documents constrain unilateral shareholder actions that would alter the corporation’s underlying asset and materially depart from the company’s established delivery structure and purposes.

## Conclusion

The court invalidated a municipal shareholder’s attempt to relocate and repurpose water through a unilateral change application, holding that only the mutual water company holding title (or an authorized filer) may seek statutory changes to the company’s water right.


East Jordan Irrigation Co. v. Morgan, 860 P.2d 310 (Utah 1993)