2021 Colorado Code
Title 7 - Corporations and Associations
Article 42 - Ditch and Reservoir Companies
§ 7-42-104. Assessment on Stock

1. If any corporation owning any ditch or canal for conveying or reservoir for storing water for irrigation purposes deems it necessary to raise funds to keep its ditch, canal, or reservoir in good repair or to pay any indebtedness theretofore contracted or the interest thereon, the corporation shall have power to make an assessment on the capital stock thereof, to be levied pro rata on the shares of stock payable in money, labor, or both, for the purpose of keeping the property of the corporation in good repair and for the payment of any indebtedness or interest thereon.
2. But no such assessment shall be made unless the question of making the assessment is first submitted to the stockholders of the corporation at an annual meeting or at a special meeting called for that purpose, if a quorum is present, and the majority of stock represented at such meeting, either by the owner in person or by proxy, entitled to vote thereon shall vote in favor of making such assessment; and if said stockholders fail to hold any such meeting or fail to make or authorize any assessment within ninety days after the close of the company's fiscal year, the directors shall have power to make any such assessment at any regular or special meeting called therefor for that year.
3. Such corporation may provide for the sale and forfeiture of shares of stock for such assessment as provided in subsection (4) of this section and may have the benefit of said subsection (4) for the recovery of such assessments by forfeiture or sale of the stock in default, and such corporation shall have a perpetual lien upon such shares of stock and the water rights represented by the same for any and all such assessments until the same are fully paid. Such corporation may also provide that no water shall be delivered until all assessments are paid.
4. The shares of stock shall be deemed personal property and transferable as such in the manner provided by the bylaws, and subscriptions thereof shall be made payable to the corporation and shall be payable in such installments and at such times as shall be determined by the directors or trustees. An action may be maintained in the name of the corporation to recover any installment which shall remain due and unpaid for the period of twenty days after personal demand therefor or, if personal demand is not made, within thirty days after a written or printed demand has been deposited in the post office properly addressed to the post office address of the delinquent stockholder. The directors or trustees may prescribe by bylaws for a forfeiture or sale of stock on failure to pay the installments or assessments that from time to time may become due, but no forfeiture of stock or of the amount paid thereon shall be declared as against any estate or against any stockholder before demand has been made for the amount due thereon either in person or by written or printed notice duly mailed to the last known address of such stockholder at least thirty days prior to the time the forfeiture is to take effect; but the proceeds of any sale, over and above the amount due on said shares, shall be paid to the delinquent stockholder.

History. Source: G.L. § 276. G.S. § 310. R.S. 08: § 991. L. 17: P. 149, § 1. C.L. § 2356. L. 27: P. 263, § 1. CSA: C. 41, § 144. CRS 53: § 31-14-4 . C.R.S. 1963: § 31-14-4 . L. 65: P. 443, § 1. L. 79: (2) R&RE, p. 333, § 1, effective June 15.

Mutual ditches and carrier ditches distinguished. Nelson v. Lake Canal Co., 644 P.2d 55 (Colo. App. 1981).

Treatment differs from corporation. The unique character of mutual ditch corporations mandates different treatment which is not fully in accord with the principles applicable to corporations in general. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).

The relationship between the mutual ditch corporation and its shareholders arises out of contract, implied in a subscription for stock and construed by the provisions of a charter or articles of incorporation. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).

Rights of corporation and shareholders distinguished. The right of the mutual ditch corporation to hold title to the water rights and other property, and to manage the affairs of the corporation, should be distinguished from the right of the shareholders to use the water on their lands. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).

As well as interests. Furthermore, the interests of the shareholders, insofar as the actual appropriation of the water is concerned, are not identical to the mutual ditch corporation. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).

A mutual ditch company does not own water rights in a traditional sense; however, a mutual ditch company owns contractual water delivery rights. E. Ridge of Fort Collins, LLC v. Larimer & Weld Irrig. Co., 109 P.3d 969 (Colo. 2005).

A mutual ditch corporation does not hold the actual “water rights” in trust. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).

On the contrary, actual ownership of the water rights is in the shareholder. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).

As well as interest in property and other works. The shares of stock owned by shareholders in a mutual ditch corporation represent a definite and specific water right, as well as a corresponding interest in the ditch, canal, reservoir, and other works by which the water right is utilized. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).

The shares of stock in a mutual ditch corporation represent the consumer's interest in the reservoir, canal, and water rights. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).

Shareholders in a mutual ditch corporation have the right to change the place of the use of water if other users are not injured thereby. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).

But limitations on stockholder's right to change diversion point permitted. A mutual ditch company bylaw imposing reasonable limitations, additional to those contained in section 37-92-305 , upon the right of a stockholder to obtain a change in the point of diversion, can be enforced. Fort Lyon Canal Co. v. Catlin Canal Co., 642 P.2d 501 (Colo. 1982).

Individual shareholders of a mutual ditch company are indispensable parties in an action to condemn the shareholders' decreed water priorities. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).

Duty of court to join shareholders. Pursuant to C.R.C.P. 19 and the court's power under C.A.R. 21, the district court should join as parties to a condemnation action those shareholders in a mutual ditch corporation whose water rights would be affected by the condemnation action of the defendant as of the date of the initiation of the condemnation action and all parties in interest. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).

Presumptions favor the acts of ditch company officials in assessing stock under this section for the purpose of keeping a ditch in repair, hence it will be assumed by the courts, in the absence of contrary allegations, that the officials have done their duty. Robinson v. Booth-Orchard Grove Ditch Co., 94 Colo. 515 , 31 P.2d 487 (1934).

Stockholder estopped to deny corporate existence and authority to levy assessments. A stockholder of a ditch company who votes in favor of extending its corporate life and for levying assessments on the shareholders is estopped thereafter to deny the corporate existence and its authority to levy assessments. Callahan v. Chilcott Ditch Co., 37 Colo. 331 , 86 P. 123 (1906).

For a stockholder by implication enters into a contract with the company to pay all assessments upon his stock, which may be levied pursuant to this section and the bylaws of the company, of which bylaws the stockholder will be presumed to have had notice. Callahan v. Chilcott Ditch Co., 37 Colo. 331 , 86 P. 123 (1906).

And stockholder is liable for additional assessment levied at adjourned meeting without notice. Where a stockholder paid an assessment levied at a stockholders' meeting, he ratified such meeting and thereby became liable for an additional assessment levied at an adjourned session of that meeting, although he received no notice of such adjourned session, as no notice of such adjournment is necessary. Callahan v. Chilcott Ditch Co., 37 Colo. 331 , 86 P.2d 123 (1906).

“Pro rata”, as used in this section, means according to a measure which fixes proportions according to a certain rate, percentage, or proportion. Robinson v. Booth-Orchard Grove Ditch Co., 94 Colo. 515 , 31 P.2d 487 (1934).

Pro rata basis. The benefit derived from the ownership of stock in a mutual ditch corporation is the right to the exclusive use of the water it represents, the water being divided pro rata according to the number of shares of stock held by each shareholder. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).

Pro rata assessments must be apportioned between classes of stock. Where ditch stock is divided into different classes, each entitled to a different use varying in benefits from maintenance, a pro rata mandate as to assessments on the different classes requires only that the cost of maintenance shall be equitably apportioned between the classes and that the assessment on each share in a given class by the same. Robinson v. Booth-Orchard Grove Ditch Co., 94 Colo. 515 , 31 P.2d 487 (1934).

Subsection (3) allows stoppage of water flow for nonpayment of the cost of upkeep and maintenance of a ditch in the case of formally incorporated ditch companies. Carson v. Williams, 173 Colo. 546 , 481 P.2d 725 (1971).

Assessment for restoration of levy was a repair cost authorized under statute and shareholder who refused to pay assessment was not entitled to return of his shares, nor entitled to damages or attorney fees. Watson v. Vouga Reservoir Ass'n, 969 P.2d 815 (Colo. App. 1998).