Granite County Board of Commissioners v. McDonald ( 2016 )

11/03/2016
DA 16-0126
Case Number: DA 16-0126
IN THE SUPREME COURT OF THE STATE OF MONTANA
2016 MT 281GRANITE COUNTY BOARD OF COMMISSIONERS,
Claimant, Objector and Appellee,
v.
ESTHER J. MCDONALD,
Objector and Appellant.
APPEAL FROM: Montana Water Court, Cause No. 76GJ-40
Honorable Russ McElyea, Chief Water Judge
COUNSEL OF RECORD:
For Appellant:
David T. Markette, Dustin M. Chouinard, Markette & Chouinard, P.C.,
Hamilton, Montana
For Appellee:
Blaine C. Bradshaw, Granite County Attorney, Philipsburg, Montana
Submitted on Briefs: July 20, 2016
Decided: November 3, 2016
Filed:
__________________________________________
Clerk
Chief Justice Mike McGrath delivered the Opinion of the Court.
¶1 Esther McDonald appeals from the Water Court’s Order filed January 27, 2016.
We affirm.
¶2 We restate the issues on appeal as follows:
Issue one: Did the Water Court err in its interpretation of the 1906 Decree in the
case of Montana Water, Electric and Mining Co. v. Schuh?
Issue two: Did the Water Court err in deciding whether to apply claim preclusion
doctrines to limit Granite County’s arguments concerning application of the
Schuh Decree?
FACTUAL AND PROCEDURAL BACKGROUND
¶3 This case arises from McDonald’s objection to three water right claims owned by
Granite County, 76GJ 40733-00, 76GJ 94401-00, and 76GJ 94402-00. The County’s
water claims all involve its storage of Flint Creek water in Georgetown Lake reservoir.
McDonald claims senior water rights in the natural flow of Flint Creek, which she diverts
from the Creek below Georgetown Lake. Both the County claims and McDonald’s
objections arise from the terms of the 1906 Decree in Montana Water, Electric and
Mining Co. v. Schuh, by the Circuit Court of the United States, Ninth Circuit, District of
Montana. Both parties are successors in interest to water rights decreed to parties in the
Schuh case. Granite County is a successor to the plaintiff Montana Water, Electric and
Mining Company, and McDonald is a successor to one of the defendants.
¶4 The County’s predecessors built a dam on Flint Creek, creating a reservoir now
known as Georgetown Lake. The purpose of the reservoir was to generate electric power.
The County owns the dam and hydroelectric facility, which it acquired from the Montana
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Power Company in 1997. The operation of the facility is subject to regulation by the
Federal Energy Regulatory Commission (FERC). Two of the County’s water rights used
in the reservoir-hydroelectric facility arise from the Schuh Decree while the third is a
subsequent use right. The County’s rights total 1200 miner’s inches1 or 30 cubic feet per
second. The water used for power generation is returned to Flint Creek below the dam.
STANDARD OF REVIEW
¶5 This Court reviews a lower court’s interpretation of a judgment as a question of
law to determine whether it is correct. Harland v. Anderson Ranch Co., 2004 MT 132,
¶ 20, 321 Mont. 338, 92 P.3d 1160.
DISCUSSION
¶6 Issue one: Did the Water Court err in its interpretation of the 1906 decree in the
case of Montana Water, Electric and Mining Co. v. Schuh?
¶7 McDonald objected to the County’s water right claims in proceedings before the
Water Court, contending that the Schuh Decree requires the County to maintain a
constant flow of 30 CFS in Flint Creek below the Georgetown Lake dam during irrigation
season, regardless of the amount of natural flow into the Lake. McDonald requested that
“information remarks” be included with the abstract of each of the County’s water rights
from Flint Creek, to provide as follows:
At all times during the irrigation season of each year the owner of this right
is to let, turn down and cause to flow into the Flint Creek channel below the
power generation facilities not less than 1200 miner’s inches (30 CFS) of
water.
1
A miner’s inch of water is equal to a flow of 2.5 cubic feet of water per second. Section
85-2-103(2), MCA.
3
Granite County counters that the downstream irrigators are entitled to have the natural
inflow of Flint Creek released below the dam, but that it is not required to release storage
water from the reservoir when the natural inflow from Flint Creek falls below 30 CFS.
Granite County contends that its obligation to McDonald is to assure that the natural
inflow of Flint Creek passes through Georgetown Lake and the hydroelectric facility for
release back into the natural channel.
¶8 The Water Court defined “natural flow” for purposes of this case as the amount of
water that would flow through a stream if there were no interference from the dam. The
Water Court defined storage water as impoundment of the natural flow of a stream for
use during times of low natural flow.
¶9 The Water Court considered the terms of the Schuh Decree as it affected the
respective rights of the parties, summarized as follows: Georgetown Lake was created in
1901 when the Montana Water, Electric Power and Mining Company (the Company)
built a dam across Flint Creek, creating Georgetown Lake. The Company brought the
Schuh action because of claims by downstream irrigators that the reservoir was
interfering with their senior water rights. The Schuh Decree determined that the average
flow of Flint Creek “has not exceeded and does not exceed” 1200 miner’s inches of
water, but the Decree did not define the time of the year covered by that determination.
The Water Court construed that flow finding to apply to the natural flow of Flint Creek
during the irrigation season because the dispute before the Schuh Court pertained to
disputes over irrigation rights. The Water Court determined that the Schuh Court’s
reference to an average flow “impliedly recognizes that natural flows vary from season to
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season and from year to year, with actual flows often falling either above or below the
described average” which is “normal on Montana streams.”
¶10 The Schuh Court determined that the Company returned 1200 miner’s inches of
water to Flint Creek “without deterioration in quality or quantity,” and that the Company
had not impeded “the ordinary and natural flow or passage of the water of said Flint
Creek.” Therefore, the Schuh Court concluded that none of the downstream water users
had been damaged by operation of the dam and hydroelectric plant. The Water Court
determined that these statements by the Schuh Court “recognize that the [downstream
water users] rights were based on natural flow.”
¶11 The Schuh Decree also included a determination of the water rights of the
downstream appropriators, totaling about 5000 miner’s inches of water. The Decree
listed the flow of the appropriation right of each downstream appropriator for irrigation
purposes at the water duty of one and one half miner’s inches of water per acre. While
most of the downstream rights were senior to the Company’s rights, the Decree did not
grant any downstream user a right in the storage water behind the Georgetown Lake dam.
The Water court noted that the Schuh Decree entitled the Company to continue using its
water rights as long as it “uses the water in such a manner that every appropriator further
down the stream shall have, during the irrigating season of each year, the use and
enjoyment of it substantially according to its natural flow.” (Emphasis added.) The
Water Court reasoned that the term “every appropriator” must cover only appropriators
with rights senior to those held by the Company, because the Company had no duty under
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the principles of prior appropriation to preserve the flow of Flint Creek for junior
appropriators.
¶12 The root of the present controversy is the statement in the Schuh Decree that
during the irrigation season the Company must “let, turn down and cause to flow in the
channel of said creek, to-wit Flint Creek, below its electric plant, not less than 1200
miner’s inches of water.” The Schuh Court enjoined the Company from “diverting from
the channel of Flint Creek the water herein decreed to [downstream users].” At the same
time, the Schuh Court recognized that the downstream users’ rights were limited to the
natural flow of Flint Creek, enjoining them from demanding that the Company release
“any greater amount of water than the average natural flow of said stream which in the
irrigating season of each year does not exceed 1200 miner’s inches or 30 cubic feet per
second of water.” The Water Court determined that this language supported Granite
County’s argument that the Schuh Decree did not require it to release storage water to
benefit downstream users.
¶13 Both sides moved for summary judgment in the Water Court, McDonald relying
upon the portion of the Schuh Decree that ordered that 1200 miner’s inches must be
discharged into Flint Creek “at all times” during the irrigation season. The Water Court
found that McDonald’s position conflicts with the express recognition in the Schuh
Decree that the rights of the downstream users were limited to the natural flow of Flint
Creek and with the injunction against the downstream users from demanding any more
than the natural in-flow of Flint Creek. The Water Court found no indication that the
Schuh Court intended to depart from the established Montana precedent that “makes a
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clear distinction between the natural flow rights held by McDonald and the storage rights
held by Granite County.”
¶14 The Water Court explained that limiting the downstream users to the natural flow
of Flint Creek was consistent with established Montana law. The Water Court cited
Beaverhead Canal Co. v. Dillon Electric Light & Power, 34 Mont. 135, 140, 85 P. 880,
882 (1906) (appropriator’s rights are limited to the natural conditions of the stream at the
time of the appropriation); Kelly v. Granite Bi-Metallic, 41 Mont. 1, 108 P. 785 (1910)
(stored water is not available to satisfy rights of downstream users); Donich v. Johnson,
77 Mont. 229, 250 P. 963 (1926) (downstream users had the right to use the natural flow
of the stream to the extent of their appropriations); and Federal Land Bank v. Morris, 112
Mont. 445, 116 P.2d 1007 (1941) (water released from artificial impoundments is not part
of the natural flow). The principle of separating stored water from the natural flow is
recognized by Montana statute, § 85-2-411, MCA.
¶15 The Water Court summarized the relationship between upstream storage and
downstream senior appropriators:
To summarize, downstream appropriators of irrigation rights with
senior priority dates are entitled to the natural flow of a stream as it existed
at the time of appropriation but they cannot demand release of water from
storage when natural flows are unavailable. This has long been the rule in
Montana. And, although the Schuh Decree did not expressly state this rule,
the language of the Decree implicitly recognizes it.
The Schuh Decree’s reference to natural flow was consistent with
the law applicable to storage rights. That law required operators of
reservoirs to make the natural flow of a stream available to senior
downstream appropriators during time of shortage. Under this rule, natural
flow can only be stored when there is enough water to satisfy senior rights
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or when senior rights are not being used. At the same time, the law on
storage does not require release of lawfully impounded storage water when
natural flows drop below the amounts needed by downstream irrigators.
The Water Court also rejected McDonald’s contention that the Schuh Court made a
factual finding that “natural flows in Flint Creek equal 30 CFS every day of the irrigation
season.” To the contrary, the Water Court determined that read in context, the Schuh
Decree enjoined the downstream users’ demands for water beyond a greater amount of
water than the amount of natural flow of the stream above the dam. Further, the water
Court determined that the statement in the Decree that the flow of Flint Creek “has not
exceeded and does not exceed twelve hundred (1200) miner’s inches” was only an
observation that natural flows average that amount of water. The Water Court
determined that the Court in Schuh was undoubtedly aware “that stream flows vary from
year to year and from month to month within the same year.” In conclusion, the Water
Court determined that the Schuh Decree’s instruction to release 1200 miner’s inches “at
all times” was designed to ensure that whatever the Company used for hydroelectric
generation was returned to the stream rather than being diverted elsewhere. “It was not a
literal command to release 1200 miner’s inches every day of the irrigation season
regardless of how much water was naturally available in Flint Creek.”
¶16 Accordingly, the Water Court denied McDonald’s motion for summary judgment
and denied McDonald’s request to add “information remarks” to the statements of the
County’s water rights.
8
¶17 Turning to the County’s motion for summary judgment, the Water Court reiterated
its construction that the Schuh Decree did not direct that the downstream irrigators
receive a benefit—mandatory release of storage water—that the law does not provide.
The Water Court determined that water lawfully impounded in Georgetown Lake is not
“subject to a servitude in favor of downstream irrigators requiring releases to supplement
the natural flows of Flint Creek.”
¶18 The Water Court concluded:
The Court in Schuh did not intend to obligate the owner of
Georgetown Lake to supplement the natural flows of Flint Creek with
storage water. Granite County’s water rights are not subject to a condition
requiring use of storage water from Georgetown Lake to maintain 30 CFS
flows in Flint Creek throughout the irrigation season.
The Water Court granted summary judgment to Granite County, holding that its water
claims to Flint Creek “are not subject to a servitude in favor of McDonald requiring
releases of storage water to supplement the natural flows of Flint Creek.” McDonald
appeals.
¶19 This Court reviews the Water Court’s interpretation of a prior decree as an issue of
law, to determine whether it is correct. Harland, ¶ 20; Levens v. Ballard, 2011 MT 153,
¶ 10, 361 Mont. 108, 255 P.3d 195.
Judgments are to have a reasonable intendment; where a judgment is
susceptible of two interpretations the one will be adopted which renders it
the more reasonably effective and conclusive and which makes the
judgment harmonize with the facts and law of the case. It is imperative, in
view of the contradictory findings and conclusions of the court in the Smith
and consolidated decrees, to ascertain the intention of the court. A decree
9
will not be construed so as to result in a positive wrong where that result
can possibly be avoided.
Gans & Klein v. Sanford, 91 Mont. 512, 522, 8 P.2d 808, 811 (1932) (internal citations
omitted). When a decree is obscure or ambiguous the reviewing court may “refer to the
record in the original case,” Harland, ¶ 23, and a decree is ambiguous “if reasonable
persons differ as to its effect and meaning.” Harland, ¶ 24.
¶20 McDonald argues that the Schuh Decree was ambiguous and that the Water Court
failed to properly apply the pleadings in that case while interpreting the Decree. She
argues that the “entire purpose” of the action was to “determine a quantified flow” that
the dam operator must release for downstream users. To the contrary, the Water Court
expressly construed the Schuh Decree to require the County to release the natural inflow
of Flint Creek during irrigation season, but to not require release of stored water to do so.
This is entirely consistent with the pleadings that McDonald cites.
¶21 While McDonald also asserts that the Decree should be read as expressing the
intent to continue the “historic” operation of the dam, this overlooks the facts that the
dam was built in 1901 and the Decree was issued in 1906. So, while there was some
record of the operation of the dam before the case was submitted for decision, it can
hardly be relied upon as an “historic” record. The Schuh Decree was clearly issued in the
context of established prior appropriation law. The Decree listed the name of each
appropriator with rights from Flint Creek for irrigation purposes, along with the flow rate
of each right and, by implication, the number of acres to be irrigated based upon the
express water duty of one and one half miner’s inches of water per acre. This is similar
10
to many other water adjudication decrees of the early twentieth century under Montana’s
law of prior appropriation. Gwyn v. City of Philipsburg, 156 Mont. 194, 478 P.2d 855(1970) (City owned a dam that diverted the outflow of a mountain lake from Fred Burr
Creek, into its municipal water system. Upon suit by downstream appropriators on Fred
Burr Creek, this Court held that the City was required to release water “not to exceed” the
natural flow from the lake whenever the water in the stream below was less than the
amount required to satisfy downstream rights.). The Water Court therefore properly
construed the prior Decree by concluding that a downstream appropriator has no rights to
water stored behind an upstream dam as long as the dam operator releases the natural
inflow into the stream below the dam.
¶22 The Water Court was tasked with construing and applying a decree drafted over
100 years ago and did so consistently with the applicable law.
¶23 Issue two: Did the Water Court err in deciding whether to apply claim preclusion
doctrines to limit Granite County’s arguments concerning application of the
Schuh Decree?
¶24 The Water Court considered McDonald’s argument that principles of claim
preclusion estopped the County from contending that it was not required to release 30
CFS from Georgetown Lake continuously during the irrigation season. First, McDonald
argued that res judicata barred the County from “attempting to redefine its rights” already
determined in the Schuh Decree. The Water Court disagreed, noting that both parties
“agree the narrow issue is interpretation of the rights already recognized in the Schuh
Decree” and that “[i]nterpreting a decree is not the same as re-litigating matters already
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decided in it.” For similar reasons, the Water Court determined that the County was not
collaterally estopped by the existence of the Schuh Decree.
¶25 The Water Court considered McDonald’s argument that judicial estoppel barred
the County from arguing that it was not required to make continuous releases of 30 CFS
of water during the irrigation season. McDonald relied upon a statement by the County
in FERC and other prior proceedings about its obligations under the Schuh Decree. The
Water Court cited Watkins Trust v. Lacosta, 2004 MT 144, ¶ 33, 321 Mont. 432, 92 P.3d
620, for the principles of judicial estoppel, the purpose of which is to “suppress fraud and
prevent abuse of the judicial process by deliberate shifting of positions to suit the
exigencies of a particular action.” The Water Court determined that McDonald’s judicial
estoppel argument failed because that doctrine “does not apply to changes of position
relating to matters of law. Interpretation of the Schuh Decree involves a statement of
opinion regarding a matter of law, not a statement of fact.” Finding no evidence that the
County intended to commit fraud or abuse the judicial process, the Water Court found
that McDonald did not demonstrate all the elements of judicial estoppel.
¶26 The Water Court dismissed McDonald’s argument that principles of claim
preclusion estopped the County from contending that it was not required to release 30
CFS from Georgetown Lake continuously during the irrigation season. The Water Court
concluded:
Although Granite County has taken contradictory positions in other
proceedings, those proceedings did not involve McDonald, and there is no
evidence that Granite County meant to perpetuate a fraud or abuse the
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judicial process. Granite County’s arguments in this case are not precluded
by the doctrines of res judicata, judicial estoppel or collateral estoppel.
We agree with the Water Court’s conclusion that res judicata does not bar the County’s
arguments made in this case. The County is not attempting to re-litigate settled issues,
but, like McDonald, is only arguing its case for how the ambiguities in the Schuh Decree
should be construed. The Water Court noted that both parties “agree the narrow issue is
interpretation of the rights already recognized in the Schuh Decree” and that
“[i]nterpreting a decree is not the same as re-litigating matters already decided in it.” For
similar reasons, we agree with the Water Court’s determination that the County was not
collaterally estopped in its arguments by the existence of the Schuh Decree.
¶27 Therefore, the Water Court properly considered and applied the principles of claim
preclusion relied upon by McDonald.
¶28 The Water Court’s decision is affirmed.
/S/ MIKE McGRATH
We Concur:
/S/ MICHAEL E WHEAT
/S/ PATRICIA COTTER
/S/ BETH BAKER
/S/ JAMES JEREMIAH SHEA
/S/ JIM RICE
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Justice Laurie McKinnon, specially concurring.
¶29 I agree with the Court’s conclusion that “a downstream appropriator has no rights
to water stored behind an upstream dam as long as the dam operator releases the natural
inflow into the stream below the dam.” Opinion, ¶ 21. I write separately, however, to
address what I believe was ultimately decided in the Schuh Decree and to recognize what
remains unresolved between the parties. The provisions of the Schuh Decree must be
read together, along with the findings regarding natural flow.
¶30 The Schuh Decree recognized that the Company was the owner of, and entitled to,
a total of 1200 miner’s inches of Flint Creek by virtue of certain appropriations made in
1888, 1889, and 1891. Schuh Decree, ¶ 2. The purpose and beneficial use of these
appropriations was to generate electricity. Schuh Decree, ¶ 2. In 1901, as owner of these
appropriations, the Company’s predecessor completed construction of a dam, begun in
1891, for the purpose of storing water diverted pursuant to its appropriations. Schuh
Decree, ¶ 2. In 1902, the Company filed a complaint in federal district court requesting a
determination of the “amounts of water which your orator shall be compelled to allow to
flow from the said storage reservoir during the irrigation season . . . .”
¶31 The Schuh Decree must be evaluated within the context of the Company’s request
to establish a quantity or amount of instream flow. The Schuh court found specifically
that “the amount of water reasonably and necessarily required to run and operate said
electric plant of the complainant to its full capacity, and which has been and now is so
used by the complainant, is about 30 second feet, or 1200 miner’s inches of water.”
Schuh Decree, ¶ 5. Significantly, the Schuh Decree further found that through its electric
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power plant, the Company has permitted to flow down through the natural channel 1200
miner’s inches of water, in such a manner that none of the downstream users have been
damaged. Schuh Decree, ¶¶ 7, 14. More specifically, the Schuh court determined that
the Company
had not – during the irrigating seasons since the construction of its dam,
detained or deprived the defendants of, the ordinary and natural flow or
passage of the water of said Flint Creek, that is in quantities as the same
would naturally run at such times, otherwise than is necessary to the
reasonable and proper operation of its electric plant and machinery.
Schuh Decree, ¶ 9. The Schuh court determined the natural flow rate of Flint Creek
above the dam to be 1200 miner’s inches, which the Company was entitled to divert as
long as it was returned to Flint Creek, in the amount of 1200 miner’s inches, for the lands
of downstream users. Schuh Decree, ¶ 4.
¶32 Importantly, the Schuh court continued to recognize entitlement by downstream
water users to appropriate amounts greater than 1200 miner’s inches, many of which had
senior appropriation dates to the Company. Schuh Decree, ¶ 15. As observed by the
Water Court, those combined rights far exceeded 1200 miner’s inches. Therefore, the
Schuh Decree determined only the amount of instream flow the Company was entitled to
divert and, thereafter return, to Flint Creek. The Schuh court’s conclusion that
downstream users are “enjoined and restrained” from “obstructing or interfering with the
use and enjoyment of said dam and reservoir and the storing of water therein,” and that
the natural flow was 1200 miner’s inches, refers to the amount of water the court
previously established as the natural flow of Flint Creek, which the Company
demonstrated it could use and return to Flint Creek without harm to downstream
15
appropriators. Schuh Decree, ¶ 20. Downstream appropriators were restrained from
demanding “any greater amount of water than the average natural flow” be returned for
downstream appropriators. Schuh Decree, ¶ 20. Therefore, I agree, based on the entirety
of the Schuh Decree, that the Company is not required to release storage water in favor of
downstream users to supplement natural flows of Flint Creek which are below 1200
miner’s inches. The Schuh Decree clarified instream flow which, if available, could be
diverted by the Company, and returned for the lands of downstream users.
¶33 While the Schuh Decree made a specific finding that quantifies Flint Creek’s
average natural flow above the dam, it did not enjoin downstream users with senior rights
from appropriating amounts in excess of 1200 miner’s inches when the flow exceeded
1200 miner’s inches in Flint Creek. These downstream rights, together with those of the
Company, remain subject to the doctrine of prior appropriation. The Water Court
correctly recognized that the law requires operators of reservoirs to make the natural flow
of a stream available to senior downstream appropriators during times of shortage. Thus,
natural flow can be stored only when there is enough water to satisfy senior rights, or
when senior rights are not being used.
¶34 Therefore, I would clarify and definitively reject McDonald’s argument that the
Schuh Decree enjoins downstream users from appropriating no more than 1200 miner’s
inches during the irrigation season. In my opinion, the Schuh Decree established a
quantity of natural flow above the dam only, and it did not enjoin downstream users with
senior rights from appropriating amounts in excess of 1200 miner’s inches when the flow
exceeded 1200 miner’s inches in Flint Creek. It similarly did not compel the Company to
16
draw from its reservoir to supplement instream flow when those rates were below 1200
miner’s inches—the amount the Schuh Decree quantified as a finding of fact as the
average instream flow.
/S/ LAURIE McKINNON
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