Teton Co-op Canal Co. v. Teton Coop Reservoir, 365 P.3d 442 (Mont. 2015) (holding: (i) the Water Court’s finding that Teton Canal’s predecessors in interest did not develop a certain diversion point was clearly erroneous because they developed the diversion point to build Glendora Canal; (ii) the Water Court’s finding that the Eureka Reservoir’s priority date related back to the 1890 Notice was incorrect because the 1890 Notice did not contemplate the Eureka Reservoir; and (iii) the Water Court, on remand, must determine Eureka Reservoir’s priority date).

In 1890, Teton Canal’s predecessors filed an appropriation notice (“1890 Notice”) for claims along the Teton River for irrigation purposes. Immediately following the 1890 Notice, Teton Canal’s predecessors constructed the Glendora Canal. In 1891, the predecessors filed another larger claim along the Teton River (“1891 Notice”). The 1891 Notice listed a diversion point two miles from the Glendora Canal’s diversion point. Both the 1890 and 1891 Notices described part of the purpose of appropriation as to create reservoirs.

In 1893, Teton Canal’s predecessors sold their interests to a company that later transferred those interests to Russell Shepherd. Shepherd subsequently became involved in a court case adjudicating water rights on the Teton River (“Perry case”). During the Perry case, Shepard transferred his rights to Teton Canal. In 1908, the Perry court issued a decree that effectively extinguished the claims made under the 1891 Notice. While Teton Canal demonstrated interest in developing a reservoir, it had not done so by 1926, the year when the United States General Land Office inspected the site. Teton Canal finally constructed the reservoir in 1937.

In 1982, Teton Canal submitted claims for six distinct water rights along the Teton River in order to comply with the requirements of the Montana Water Use Act of 1973. All six claims listed an identical priority date: April 18, 1890. The point of diversion, the Eureka Canal, was also the same for all six claims. Water distributors, Teton Coop Reservoir Co. (“Teton Reservoir”), Lower Teton Joint Objectors, and the Farmer’s Co-op Canal, all objected to Teton Co-op Canal’s claims to the Eureka Reservoir. Teton Canal settled with all of the objectors besides Teton Reservoir. After conducting evidentiary hearings, the Montana Water Court (“Water Court”) issued an order in favor of Teton Canal. The Water Court held that Teton Canal’s water rights claims related back to the 1890 Notice. Teton Reservoir appealed the judgment of the Water Court to the Supreme Court of Montana (“Court”).

On appeal, Teton Reservoir argued that the Water Court erred in determining that Teton Canal’s claims to the Eureka Reservoir related back to the 1890 Notice. The Court reviewed the Water Court’s findings of fact under the clearly erroneous standard and its conclusions of law for correctness.

The Court first examined whether Teton Canal’s predecessors intended to include the Eureka Reservoir in the 1890 Notice. Teton Reservoir argued that the Water Court erred in determining that Teton Canal’s predecessors did develop the diversion point described in the 1890 Notice. Teton Reservoir also asserted that the Water Court disregarded evidence clearly demonstrating that Teton Canal’s predecessors built the Glendora Canal, which corresponded with descriptions of the 1890 diversion point. The Court reviewed the evidence including maps and testimony from an engineer who had helped construct the Glendora Canal. The Court determined that the Teton Canal’s predecessors did develop the 1890 diversion point when they created the Glendora Canal. Thus, the Court held that the Water Court’s clearly erred in finding the predecessors had never developed the diversion point.

Teton Reservoir next argued that the 1890 Notice did not contemplate the Eureka Reservoir; rather, the 1891 Notice, which the court had since nullified, first asserted the Eureka Canal as a new diversion point. Conversely, Teton Canal argued that it consolidated its practices to include the Eureka Reservoir in the 1890 Notice. The Water Court found that the 1890 Notice contemplated multiple reservoirs including the Eureka Reservoir. On appeal, the Court assessed whether Teton Canal’s claims could relate back to the 1890 Notice. The Court reviewed the evidence and agreed with Teton Reservoir. The Court found that Teton Canal’s predecessors intended the Glendora Reservoir to be part of the 1890 Notice, but intended the Eureka Reservoir to be a part of the nullified 1891 Notice. The Court held the Water Court misinterpreted the nullified 1891 Notice and, therefore, the Water Court was incorrect in finding that Eureka Reservoir had a priority date of 1890.

The Court then addressed Teton Canal’s argument that the Eureka Reservoir is a part of the 1890 Notice because the diversion point “simply moved” to a point upstream following the nullification of the 1891 Notice. The Court noted that the law required “reasonable diligence” on the part of Teton Canal and its predecessors to develop the Eureka Reservoir. In analyzing the reasonable diligence prong, the Court examined evidence of the course of conduct of Teton Canal following the Perry court decree. Because Teton Canal took forty-five years to build the Eureka Reservoir, the Court concluded that Teton Canal failed to proceed with reasonable diligence in developing the Eureka Reservoir site. Therefore, the claims could not relate back to the 1890 Notice, and the Water Court erred in concluding that Teton Canal “aggressively pursued” the development of the reservoir.

Finally, the Court considered what priority date it should assign to the Eureka Reservoir. Teton Reservoir asserted the year should be 1936, the year when construction on the reservoir began. Because Teton Canal did not provide an alternate date, the Court remanded this question to the Water Court.

Accordingly, the Court reversed the order of the Water Court and remanded the case for proceedings consistent with this opinion.

Brian Hinkle

Image: Eureka Reservoir, Montana.  Flickr user Sam Beebe, Creative Commons.


Roland v. Davis

Roland v. Davis, 302 P.3d 91 (Mont. 2013) (holding evidence was insufficient to support a finding of an implied easement because the plaintiff water rights holders failed to prove apparent and continuous use of an unmaintained conveyance ditch that crossed the neighbor’s property).

In 1993 Gene and Melinda Roland (collectively the “Rolands”) purchased a fifty-acre parcel from Roger and Beverly Russ (collectively the “Russes”) in Ravalli County.  The warranty deed for the property did not contain explicit reference to water rights, ditch easements, or appurtenances.  However, the Rolands believed that a water right from Bunkhouse Creek came with the property. The Rolands also believed that a ditch easement existed, which transported the water from Bunkhouse Creek to the property.  Accordingly, the Rolands and the Russes filed a water right transfer certificate that accompanied the closing documents and transferred the water right appurtenant to the deeded land.

In 1994 Fred and Barbara Davis (collectively the “Davises”) also purchased a plot of property from the Russes.  At the time of the purchase, Fred Davis did not observe any ditches on the property, although the Smith Ditch, which leads from Bunkhouse Creek to the Roland’s property, historically crossed the Davis parcel.  In the mid-2000s the Davises participated in a United States Forest Service fire reduction program.  After the Davises cleared the land, remnants of an old ditch that crossed the property became visible.

In 1982 the Russes, before partitioning the land into two plots, filed a statement of claim for a water right on Bunkhouse Creek to irrigate thirty acres that would become a portion of the Roland parcel.  In 1994 the Montana Water Court (“water court”) issued a preliminary decree that included the Russes’ statement of claim.  Finally, in 2004, the water court reduced the irrigation right to twenty acres.

After the water court’s 2004 ruling, the Rolands attempted to reopen use of the Smith Ditch to grow trees as a cash crop, but the Davises did not agree that a ditch easement existed.  In 2009 the Rolands filed a complaint against the Davises in the Ravalli County District Court (“district court”).  The Rolands sought preliminary and permanent injunctive relief, declaratory judgment, and damages for the alleged ditch easement.  The Davises denied Roland’s allegations and filed a counterclaim to quiet title.

At trial, the parties’ experts analyzed a 1958 Ravalli County Water Resources Survey (“Water Survey”) that indicated the Smith Ditch navigating from Bunkhouse Creek across the Davis property to the Roland property.  A 1957 field note from the Water Survey also indicated irrigation of part of the Roland parcel using Bunkhouse Creek water conveyed through the Smith Ditch.  However, the district court, relying on historical United States Department of Agriculture aerial photographs, found that an access road constructed before 1979 severed the Smith Ditch as a means of conveyance to the Roland property.  The district court also found the Rolands’ predecessor in interest abandoned the Smith Ditch when he constructed the access road.  The district court therefore concluded that the Rolands did not have a ditch easement across the Davis property.  The Rolands then appealed the district court’s decision to the Montana Supreme Court (“Court”).

The Court considered two issues on appeal: (i) whether the Rolands’ purchase of the property included a ditch easement by operation of law; and (ii) whether the district court properly determined that the Rolands did not have an implied ditch easement that crossed the Davis property.

Regarding the first issue, the Court agreed with the Rolands that any water rights associated with the parcel automatically transferred to the Rolands upon purchase of the land.  However, the Court also stated that water rights and ditch easements represent separate and distinct property rights.  The court held that a person may own a water right without owning a ditch right.  Accordingly, the Rolands owned water rights to the parcel but did not necessarily receive a ditch easement to transport the water.

The Rolands next argued they received an implied easement when they purchased their parcel. The Court noted that to establish an implied ditch easement the Rolands needed to prove three elements: (i) separation of title; (ii) a use that was apparent and continuous at the time the property was divided; and (iii) reasonable necessity of the easement for the beneficial enjoyment of the land.  The Court held the Rolands met the first element because Russ retained ownership of both properties until the Rolands purchased the fifty-acre parcel in 1993.

Regarding the second element, the Davises argued that the Rolands’ predecessor in interest abandoned the ditch easement because the Russes never used Smith Ditch prior to selling the parcel.  In response, the Rolands argued that mere nonuse was insufficient to establish intent to abandon an easement.  The Court agreed with the Rolands but replied that the Rolands must do more than establish that his predecessor in interest did not abandon Smith Ditch.  In order to prove the existence of an implied easement, the Rolands needed to establish apparent and continuous use of the Smith Ditch at the time they purchased the property in 1993.

With respect to apparent use, the Rolands argued the Davises should have discovered the ditch through reasonable inspection.  First, the Rolands pointed to language in the Davises’ deed indicating they took the property “subject to” all apparent easements.  Additionally, after purchasing the land, Fred Davis admitted seeing remnants of a ditch once the snow melted on the property, but he also stated that water never flowed in the ditch.  The court held the Rolands failed to present evidence that the Russes took any steps to undo the impediments to the Smith Ditch.

With respect to the continuous use of the easement, the Court noted that the Smith Ditch was not used at least since 1979 because the Rolands’ predecessor in interest constructed the access road that halted the flow of Smith Ditch.  Next, the Rolands did not produce evidence that any predecessor in interest attempted to correct the impediments on Smith Ditch before the Russes sold the properties.  The Court therefore held the Rolands failed to establish continuous use of the Smith Ditch easement at the time they purchased the property.  Because the Court held the Rolands did not prove apparent and continuous use, it determined that the Rolands did not acquire an implied ditch easement across the Davises’ property, eliminating the need to proceed to the final element of the implied easement test.  The Court also did not have to determine if the district court properly held that the easement was abandoned because the Rolands failed to establish that they received an implied easement in the first place.

Accordingly, the court affirmed the district court’s holding that the Rolands did not have an implied ditch easement that crossed the Davis property.


Bostwick Props., Inc. v. Montana Dept. of Natural Res. and Conservation, 2013 WL 696352 (Mont. 2013) (holding the Montana Department of Natural Resources and Conservation had the authority to deny a developer a water permit; runoff from impermeable surfaces could not be used in calculating net depletion of surface water; developer’s burden to prove lack of adverse effect was not shifted because of an uncertain hydrological connection or a senior rights holder’s ability to bring administrative action; de minimus use did not establish developer’s lack of adverse effect; developer proved lack of adverse effect for its proposed irrigation season only mitigation plan; and developer was not prejudiced by the bias of the Montana Department of Natural Resources and Conservation).

Bostwick Properties (“Bostwick”) filed an application with the Montana Department of Natural Resources and Conservation (“DNRC”) for a water use permit for municipal use in a subdivision in Gallatin County, Montana.   When DNRC failed to take immediate action, Bostwick sought a writ of mandate to require DNRC to issue the permit or hold a hearing on the matter.  DNRC then denied Bostwick’s water use permit saying it failed to demonstrate no net depletion of surface water, and failed to prove legal availability and lack of adverse impact.  The District Court for Gallatin County (“district court”) granted Bostwick’s writ of mandate request, which DNRC appealed to the Supreme Court of Montana (”Court”).  The Court reversed the district court’s decision and remanded the case to DNRC to hold a hearing on Bostwick’s permit application because Bostwick had not proved lack of adverse effect and DNRC had no legal duty to grant Bostwick’s permit.  After the hearing, DNRC again denied the permit, determining Bostwick’s water use would cause a net depletion of surface water; it failed to demonstrate lack of adverse effect; and its mitigation proposal was inadequate.  Bostwick sought review by the district court, which agreed DNRC failed to show no net depletion or lack of adverse effect, but found Bostwick’s proposed mitigation adequate.  Both Bostwick and DNRC appealed this decision to the Court.

The Court ruled on five issues on appeal.  First it determined whether DNRC had the authority to deny Bostwick’s permit.  Bostwick argued Montana law required DNRC to grant the permit because Bostwick settled all objections.  The Court held that not only must Bostwick resolve all objections, but it must also prove legal availability and lack of adverse effect by a preponderance of the evidence, and DNRC had the authority to deny Bostwick’s permit if it did not do so.

The second issue was whether DNRC and the district court’s requirement Bostwick mitigate its water usage was proper.  Bostwick argues four theories to support the proposition that it would not cause net depletion of surface water or adversely affect senior rights.

First Bostwick asserts paved roads and parking lots in its proposed development prevent water from being used by native plants or evaporating, which can then be collected and used to recharge the Gallatin River.  Bostwick argues DNRC should consider this runoff when calculating if a net depletion exists.  The Court said Montana law did not require DNRC to consider any sources of water other than those sources in the proposed permit; to consider other sources would be contrary to legislative intent; and doing so would cause an absurd result if Bostwick could factor that water into their calculation even though it had not right to use it.

Next, Bostwick argues because there is no way to determine when its proposed extraction of groundwater would cause the Gallatin River to lose water, the DNRC could show no net depletion or adverse effect.  Bostwick asserts DNRC must grant the permit if it cannot prove there is net depletion.  The Court said this attempt to shift the burden of proof to DNRC was impermissible and Bostwick failed to carry its burden to show lack of any adverse effect.

Bostwick then argues the amount of water it applied for is de minimus and would not adversely affect senior rights.  The Court said it was Bostwick’s burden to demonstrate a lack of adverse effect and it failed to do so.

Finally, Bostwick asserts senior rights holders could force Bostwick to stop using water through the administration of priorities, yet again attempting to shift the burden.   The Court once again said that the law was clear; it was Bostwick’s burden to show it would not jeopardize senior rights, and it failed to make that showing.

The third issue was whether the district court’s determination that Bostwick’s mitigation proposal was adequate was proper.  Bostwick’s proposal mitigated it water usage but only during the irrigation season.  The district court noted Bostwick’s non-irrigation season usage could only potentially adversely affect one party, FWP, who said Bostwick did not adversely affect them.  The Court held that while generally settling with objectors was not enough, because there was only one affected party who would not suffer adverse effects, Bostwick met its burden of showing its mitigation plan was adequate.

The fourth issue was whether DNRC could require Bostwick to specifically identify a water right it would use for mitigation.  Bostwick argued providing DNRC with other details including the amount and location of water, timing, and seniority rights was sufficient.  The Court agreed with DNRC that the identification of the specific water right was necessary to fully evaluate the mitigation plan.

The final issue was whether DNRC was biased and therefore prejudiced Bostwick.  Bostwick argued DNRC’s bias during the permit application procedure violated its right to due process.  The Court remanded the case to DNRC after the first denial of Bostwick’s application, despite Bostwick’s request a neutral party hold the hearing.  The district court held there was no prejudice because it independently came to the same conclusions as DNRC.  The Court found this reasoning to be persuasive and held Bostwick failed to show substantial prejudice.

The Court affirmed the judgment of the district court on all counts.

 


Fellows v. Office of Water Com’r, 285 P.3d 448 (Mont. 2012) (holding a district court improperly dismissed a plaintiff’s request for declaratory judgment because the plaintiff’s claim that the stream they had a decreed right in was hydrologically connected to a river the Water Commissioner managed was an unresolved issue of fact, rendering summary judgment inappropriate).

In 1908, the Montana Eleventh Judicial District Court adjudicated the rights on the upper portion of the Teton River and appointed a Water Commissioner to administer the decreed rights.  Fifty to sixty years later, the Water Commissioner began to divert the entire flow of the upper Teton River through the Bateman Ditch diversion around the Springhill Reach, a portion of the river that lost a significant amount of water to seepage.  The Water Commissioner implemented this diversion through the Bateman ditch without the approval of the Eleventh Judicial District Court and without any other agreement between the affected parties.

Charles Fellows (“Fellows”) owns a water right in Spring Creek near Choteau, Montana, that was adjudicated and decreed in 1892.  In February 2011, Fellows filed a complaint in the District Court, Ninth Judicial District, Teton (“district court”), pursuant to MCA § 85-5-301(1), the statute that permits the holder of a vested water right who is dissatisfied with a water commissioners’ method of distribution, to file a complaint with the district court.  Fellows’ alleged the water commissioner’s diversion of the upper Teton River through the Bateman Ditch around the Springhill Reach substantially injured his senior water right in Spring Creek.  Fellows asked the district court to grant declaratory relief until all the water rights between the upper Teton River and Spring Creek could be settled by the state’s Water Court.

The district court determined Fellows’ standing to bring a complaint against the water commissioner of the upper Teton River under MCA § 85-5-301(1) was dependent on his ability to prove the upper Teton River was hydrologically connected with Spring Creek through the Springhill Reach.  The court dismissed Fellows’ complaint finding he must first establish his standing against the water commissioner by resolving the connectivity issue with the state’s Water Court.

Instead, Fellows appealed to the Montana Supreme Court (“Court”).  The Court reversed, holding that the district court was the proper venue for the determination of the connectivity issue and the complaint against the upper Teton River water commissioner.  In examining the claim against the water commissioner, the Court held that because Fellows right was not derived from any rights on the Teton River, he had not statutory claim against the water commissioner.

Second, the Court examined Fellows’ connectivity claim.  The Court held that while the Water Court has exclusive jurisdiction for determining existing water rights, the district court has jurisdiction over the distribution of decreed water rights.  Therefore, the Court held the district court was the proper venue for both the connectivity issue and the complaint against the water commissioner because the Water Court already decreed the rights in Spring Creek and the upper Teton River.

Therefore, viewing Fellows’ allegations of the hydrological connection between Spring Creek and the upper Teton River and the allegations against the water commissioner in a light most favorable to Fellows, the Court held the district court erred in dismissing Fellow’s complaint.

The Court reversed the district court’s order of summary judgment against Fellows and remanded the issue of the connectivity between Spring Creek and the upper Teton River to the district court.


Montana Dep’t of Natural Res. & Conservation v. ABBCO Inv., LLC, 285 P.3d 532 (Mont. 2012) (holding (i) Montana held islands that arose vertically from the river bed after statehood in trust for public schools; (ii) Montana provided sufficient evidence of the boundary of the land to have a legal description of the land in the final judgment; (iii) the district court violated Montana’s due process rights it required the State to reimburse defendant’s for all property taxes and improvements on the land; and (iv) the judgment in favor of Montana allowed the state to recover costs).

The state of Montana filed a quite title action in the Seventh Judicial District Court (“district court”) against landowners concerning three islands, roughly 487 acres, located in the Richland County section of the Missouri River that grew out of the riverbed due to sediment accumulation.  Over time, these islands grew attached to the riverbank.  Defendants Boyde Hardy, Shirley Hardy, Hardy Investments, L.P., and Nickie Roth (collectively “Defendants”) filed an answer and counter claim alleging that they owned parts of the land in fee simple.  The district court granted summary judgment for Montana, finding Montana had title to the land based on the equal footing doctrine.  However, the district court found the islands were not school trust lands, and further found that Montana provided insufficient evidence for the district court to establish a legal description of the land in its final judgment.  In addition, the district court required Montana to reimburse Defendants for all paid property taxes and improvements on the land, and required each party to pay its own costs and fees.  Montana appealed several portions of the district court’s judgment to the Montana Supreme Court (“Court”).

First, the Court held Montana owned the islands in trust for public schools.  The Court analyzed the equal footing doctrine, noting that under this doctrine, Montana took the title to the real property underlying the beds of its navigable waters through its sovereignty rather than through a federal grant.  Therefore, upon statehood, Montana law governed this land.  The parties agreed that the islands formed b  y vertical accretion within a navigable riverbed after statehood, and therefore, State law governed the lands.  The Court applied Mont. Code. Ann. § 77-1-102(1)(b), which states Montana holds land beneath its navigable waters in trust for public schools.

Second, the Court held Montana offered sufficient evidence to provide a legal description of each island.  Montana introduced a metes and bounds description of the land in addition to the surveys and aerial photos it provided in its original claim.  The Court held this evidence sufficient to support a detailed description of each island and therefore the district court erred in not entering a legal description of the land in the final judgment.

Third, the Court held the district court violated Montana’s due process right when it required, sua suponte, Montana to reimburse Defendants for taxes paid and improvements made to the land.  The Court noted that the district court violated the due process notice right when it allowed damages for unjust enrichment when the Defendants did not assert a claim for damages under this theory.

Finally, the Court held Montana was entitled to recover costs because it was the prevailing party in the quiet title action. Under Mont. Code. Ann, § 25-10-101(5), costs are allowed to a plaintiff who has a favorable judgment in an action that involves the title of real estate.  Therefore, Montana was entitled to recover the cost of producing the survey of the boundary of the land at issue.

Accordingly, the Montana Supreme Court reversed and remanded the district court’s judgment for further proceedings consistent with its holding.