Teton Coop v. Farmers Coop.

04/03/2018
DA 16-0322
Case Number: DA 16-0322
IN THE SUPREME COURT OF THE STATE OF MONTANA
2018 MT 66TETON COOPERATIVE RESERVOIR COMPANY,
Claimant and Appellant,
LOWER TETON JOINT OBJECTORS,
Objector and Appellee,
FARMERS COOPERATIVE CANAL CO. and
TETON COOPERATIVE CANAL COMPANY,
Objectors, Appellees,
and Cross-Appellants.
APPEAL FROM: Montana Water Court, Case No. 41O-84
Honorable Douglas Ritter, Water Judge
COUNSEL OF RECORD:
For Appellant:
Holly Jo Franz, Ryan McLane, Franz & Driscoll, PLLP, Helena, Montana
For Appellee Farmers Cooperative Canal Co.:
Michael J.L. Cusick, Moore, O’Connell & Refling, PC,
Bozeman, Montana
For Appellee Teton Cooperative Canal Company:
John E. Bloomquist, Bloomquist Law Firm, P.C., Helena, Montana
Submitted on Briefs: January 17, 2018
Decided: April 3, 2018
Filed:
__________________________________________
Clerk
Chief Justice Mike McGrath delivered the Opinion of the Court.
¶1 Teton Cooperative Reservoir Company (Teton Reservoir) appeals an April 27,
2016 order of the Montana Water Court in Case 41O-84, adjudicating Teton Reservoir’s
water rights. Teton Cooperative Canal Company (Teton Canal) and Farmers Cooperative
Canal Company (Farmers) cross-appeal. We affirm.
¶2 We restate the issues on appeal as follows:
Issue One: Whether the Water Court erred in determining that Teton Reservoir’s
1902 Notice of Appropriation was valid.
Issue Two: Whether the Water Court erred by applying the equitable doctrine of
laches to Teton Reservoir’s 1902 Notice of Appropriation.
Issue Three: Whether the Water Court erred in decreeing Teton Reservoir an
annual volume totaling 60,000 acre feet for storage in the Bynum Reservoir.
Issue Four: Whether the Water Court erred in refusing to limit Teton Reservoir’s
wintertime diversions to one-half of the available water in the Teton River.
FACTUAL AND PROCEDURAL BACKGROUND
¶3 Teton Reservoir is one of four irrigation companies located on the Teton River.
Teton Reservoir was incorporated in May 1906, for the purposes of acquiring,
developing, and improving the Bynum Reservoir and to complete one or more diversion
canals to take water from the Teton River to the reservoir. Teton Reservoir has acquired
four water rights. Teton Reservoir filed a Statement of Claim for each of its four water
rights in the current water right adjudication process for the Teton River Basin.
However, the only water right claim contested from the Water Court’s Order is the claim
based on the 1902 Notice of Appropriation (1902 Notice) filed by Donald Bradford
(Bradford).
2
¶4 Bradford filed a Notice of Appropriation claiming 3,000 cfs from the Teton River
on July 3, 1902. The stated purpose of the 1902 Notice was “for the purpose of irrigating
and reclaiming lands lying in said Teton County.” The 1902 Notice did not identify a
reservoir. Shortly thereafter, Bradford commissioned a survey of the project. Engineer
Walter Mathews (Mathews) performed the survey and on November 29, 1902, Mathews
filed his survey report. Mathews identified a point of diversion, a reservoir with a 69,500
acre feet capacity, and surveyed over twenty-nine miles of distribution canals. Once
Mathews’s survey was approved by the Government Land Office (GLO), Bradford
acquired the rights of way and tried to obtain funding for the project to develop a canal
and reservoir system.
¶5 By 1906, Bradford was unable to obtain funding to develop the reservoir and canal
system and conveyed the 1902 Notice and the rights of way to the Wagnild group. The
Wagnild group incorporated Teton Reservoir in May 1906. Teton Reservoir obtained the
funding to develop the Bynum reservoir and canal system (Bynum System). Between
1906 and 1909 construction on the Bynum System progressed. In 1907, the original
diversion point was completed. In 1909, Teton Reservoir began to pursue a potential
Carey Act project to acquire more land for irrigation.1 Pursuing the Carey Act project led
to internal conflict among Teton Reservoir’s shareholders. Teton Reservoir’s
shareholders were in direct conflict with one another until 1914. Despite the internal
1
The Carey Act was passed in 1894 by the federal government to promote settlement and
irrigation of public lands in the West. Specifically, the Act provided a grant of up to one million
acres of federal land to each western state “free of cost” if the State could cause such lands to be
“irrigated, reclaimed, occupied and not less than twenty acres of each one hundred and sixty acre
tract cultivated by actual settlers.” 43 U.S.C. § 641.
3
conflicts, Teton Reservoir continued to make progress on the Bynum System. In 1910
and 1911, several engineers discovered problems with the design and construction of the
dam that required resolving before Teton Reservoir could divert any water. By 1915,
Teton Reservoir had relocated the diversion point because the original diversion point
was in a poor location on the river, and it had resolved the dam’s design problems. The
1962 Teton County Water Resource survey indicated that Strabane Gage Station started
diverting floodwaters to the Bynum Reservoir in 1918.
¶6 In 1919, GLO Commissioner Tillman inspected the reservoir site and questioned
the proposed Carey Act project. The Water Court found that the inspection marked a
shift by Teton Reservoir to return to the original plan to develop the Bynum System and
abandon the Carey Act project. Teton Reservoir’s board officially abandoned the Carey
Act project in 1925 by resolution. Due to Tillman’s inspection, local irrigators began to
promote formation of the Bynum Irrigation District (BID). In 1920, BID was established.
The BID commissioned an engineer to evaluate the status of the Bynum System.
Engineer S.B. Robbins issued his report on November 10, 1920, providing
recommendations to improve the Bynum System so that it could divert and store water to
its fullest capacity. However, BID could not finish the Bynum System until it received
approval to sell bonds. Between 1920 and 1925, Teton Reservoir maintained the Bynum
System. In 1925, BID received approval to sell bonds, bought eighty percent of Teton
Reservoir’s stock, and began implementing Engineer Robbins’ recommendations. By
1927, Teton Reservoir’s current point of diversion, intake canal, reservoir, and
distribution canals were in place. When completed, the Teton Reservoir’s diversion canal
4
capacity was 1,000 cfs and the Bynum Reservoir had a capacity between 85,000 and
90,000 acre feet.2
¶7 During that period, Teton Canal developed limited water storage in the Glendora
Reservoir under its 1890 Notice of Appropriation. Teton Coop. Canal Co. v. Teton Coop.
Reservoir Co., 2015 MT 344, 382 Mont. 1, 365 P.3d 442 (hereinafter Teton Canal I). In
1936, Teton Canal expanded its water storage capacity with the development of the
Eureka Reservoir. Teton Canal again expanded the Eureka Reservoir in 1947 and 1957.
Teton Canal I, ¶ 14. In 2015, this Court determined that the Eureka Reservoir use could
not relate back to Teton Canal’s 1890 Notice and must be given a separate priority date.
Teton Canal I, ¶¶ 55, 57. We affirmed the Water Court’s determination that the priority
date for the Eureka Reservoir is December 7, 1936. Teton Coop. Canal Co. v. Teton
Coop. Reservoir Co., 2018 MT 20, ¶ 17, 390 Mont. 210, ___ P.3d ___.
¶8 In 1908, the District Court issued a decree adjudicating water rights on the upper
Teton River. Perry v. Beattie, Case No. 371 (Mont. 11th Judicial Dist., March 28, 1908)
(hereinafter Perry decree). The Perry decree adjudicated Teton Canal’s predecessors’
and Farmers’ predecessors’ water rights. Teton Reservoir was not a party to the Perry
decree.3 Significantly, Teton Reservoir never sought to reopen the Perry decree to
establish its water rights in relation to other appropriators.
2
The 1902 Notice claimed 3,000 cfs. However, Teton Reservoir only claimed 1,000 cfs
for its claim, 41O 113433-00.
3
The Water Court speculated that Teton Reservoir’s predecessor was not a party to the
Perry decree because Teton Reservoir was not diverting any water by 1908.
5
¶9 Historically, Teton Reservoir’s water rights have been administered by the water
commissioner appointed by the District Court to distribute water under the Perry decree.
In 1946, the water commissioner refused to turn water into Teton Reservoir’s ditch, and
Teton Reservoir passed a resolution instructing the directors to take steps to clarify Teton
Reservoir’s water rights. However, the Water Court found no evidence indicating that
effort had been undertaken. In 1952, the water commissioner again shut off Teton
Reservoir’s water diversion to provide water to Farmers. Teton Reservoir objected but
did not file a formal dissatisfied water user complaint. Teton Reservoir, Farmers, and the
water commissioner met with the District Court to discuss the administration of water. In
1953, the District Court directed the water commissioner to continue delivering the total
decreed right to Farmers before Teton Reservoir. Teton Reservoir did not dispute the
District Court’s direction.
¶10 In 2006, for the first time, Teton Reservoir filed formal objections to Teton
Canal’s water right claims. The objection asserted that the Eureka Reservoir use could
not relate back to Teton Canal’s 1890 Notice. In 2009, Teton Reservoir filed a
Dissatisfied Water User Complaint in District Court because Water Commissioner
Leonard Blixrud reduced Teton Reservoir’s flow to half the available flow in the Teton
River. Teton Reservoir alleged that the water commissioner did not have the authority to
administer Teton Reservoir’s water rights as they were not part of the Perry decree.
Teton Reservoir sought injunctive relief to restrain the water commissioner from
interfering with its diversions. On September 21, 2009, the District Court resolved Teton
Reservoir’s Dissatisfied User Complaint, finding that Teton Reservoir had voluntarily
6
participated in the administration of the Perry decree for nearly forty-seven years and it
was judicially estopped from asserting otherwise.
¶11 Specifically, the District Court determined:
[Teton Reservoir] has known since the first appointment of a water
commissioner over 47 years ago, that is was not a decreed water user under
the Perry v. Beattie decree. [Teton Reservoir] has maintained its position
of participating with the decree’s administration for the past 47 years.
Water reports of [Teton Reservoir’s] water usage since 1964 have been
filed in these legal proceedings; [Teton Reservoir] has paid the water
commissioner since 1964 for its water; and [Teton Reservoir] has benefited
from consistent management by a water commissioner of [Teton
Reservoir’s] water for the past 47 years. . . . Lastly, to allow [Teton
Reservoir] to change its position would disrupt the orderliness and
consistency of water distribution along the Teton River. [Teton Reservoir]
is the largest off stream reservoir on the Teton. [Teton Reservoir’s]
reservoir, Bynum, has a holding capacity of 90,000 acre feet of water.
[Teton Reservoir] seeks annually to fill Bynum to capacity. Other storage
appropriators such as Farmers’ and [Teton Canal] store water and rely on
distribution of water during the non-irrigation season as well. To allow an
unregulated upstream diversion to [Teton Reservoir’s] reservoir would be
injurious to these other storage rights and decreed users downstream who
have come to rely on the water commissioner’s control and regulation of
[Teton Reservoir’s] water usage.
However, the District Court recognized that “the significance of prior history and usage
set forth in the depositions of Judge McPhillips and Commissioner Bud Olson will be for
the Montana Water Court and not this Court to decide” and “this Court has no authority
to decrease a water right in order to avoid a cessation of in-stream flow.”4
4
By statute, the water court is vested with exclusive jurisdiction relative to all matters
relating to the determination of existing water rights within the boundaries of the State of
Montana. Section 3-7-501, MCA; Baker Ditch Co. v. District Court, 251 Mont. 251, 255, 824
P.2d 260, 260 (1992). District courts are granted the authority to supervise the distribution of
water that has already been adjudicated and to enforce such water decrees. See § 85-2-406(3),
MCA. The district court is bound by the existing water right decrees. Baker Ditch Co., 251
Mont. at 255, 824 P.2d at 260.
7
¶12 Beginning on December 10, 2012, the Water Court held a four-day hearing to
adjudicate Teton Reservoir’s water rights. Bud Olson, who served as the water
commissioner from 1962 to 2000, testified that he consistently delivered water to Teton
Reservoir even though it was not a part of the Perry decree. Olson treated Farmers and
Teton Canal as senior to Teton Reservoir for all water deliveries. Olson further testified
that he would limit Teton Reservoir’s wintertime diversions based on requests of the
Department of Montana Fish, Wildlife, and Parks (the Department) for instream flow.
Olson noted that the request by the Department was one he chose to respect and was not
dictated by any decreed water right.
¶13 Subsequent water commissioners followed Olson’s policy of treating Teton
Reservoir as junior to those rights in the Perry decree. Leonard Blixrud, a former
Farmers officer, board member, and water commissioner followed Olson’s policy.
Blixrud testified that: (1) Teton Reservoir’s water was administered as junior to Farmers
and Teton Canal, (2) if Teton Reservoir’s 1902 Notice had senior priority it would take
everything in the river and effectively “destroy” Farmers and seriously impact Teton
Canal, and (3) Farmers and Teton Canal shareholders rely on Teton Reservoir’s water
being administered as a junior right to obtain enough irrigation water to stay in business.
¶14 Teton Canal shareholder Charles Crane also opposed giving Teton Reservoir’s
1902 Notice senior priority. Crane testified that stored water in the Eureka Reservoir
allows Teton Canal shareholders to irrigate late into the growing season when its priority
is out of date, and that without the stored water in the Eureka Reservoir, Teton Canal
would be out of water by July 1st most years. He asserted that changing past practice
8
would have a serious impact on the ability of Teton Canal and its shareholders to meet
their financial obligations.
¶15 BID president and Teton Reservoir board member Mark DeBruycker testified
regarding Bynum Reservoir’s volume. DeBruycker stated that Teton Reservoir estimates
total available volume each year and limits the annual allotment to fifty percent of the
available water. DeBruycker testified a full allotment requires diverting 40,000 acre feet.
DeBruycker indicated that Teton Reservoir’s practice favors carryover water for the next
year rather than increasing the allotment to its shareholders because of the uncertainty of
available flow from year to year.
¶16 The Teton River water commissioner records and Teton Reservoir’s table of
reservoir levels provide limited historical information on Teton Reservoir’s diverted
volume to the Bynum Reservoir. However, the 1962 Teton County Water Resources
Survey stated that the “average annual storage is 75,000 acre feet with a drawdown of
about 35,000 to 40,000 acre feet of water used during the irrigation season.” Upon
examination of these records along with DeBruycker’s testimony, the Water Court found
that Teton Reservoir diverted as much water as possible when it was available. The
Water Court determined that Teton Reservoir had two goals: (1) provide its shareholders
full allotment, and (2) store sufficient carryover water for the following year.
¶17 John Peebles also testified regarding the flow amount Teton Reservoir diverts
during wintertime. John Peebles owns property downstream from Teton Reservoir’s
point of diversion. He testified that Teton Reservoir often takes the entire flow of the
9
river during its wintertime diversions. The Water Court noted the November 1985 water
commissioner’s record also indicated that Teton Reservoir was getting the entire flow.
¶18 After the four-day hearing, the Water Court issued an Order on April 27, 2016.
The Water Court concluded: (1) Teton Reservoir is barred by laches from claiming
senior priority of its 1902 Notice; (2) Teton Reservoir’s 1902 Notice complied with the
1885 Montana Appropriation Act; (3) Teton Reservoir is entitled to a 60,000 acre feet
volume limit on its 1902 Notice for the Bynum Reservoir; and (4) Teton Reservoir is not
restricted to one-half of the available flow in the Teton River during its wintertime
diversions.
STANDARD OF REVIEW
¶19 This Court reviews the Water Court’s decisions using the same standards applied
to district court decisions. Teton Coop. Reservoir Co. v. Farmers Coop. Canal Co., 2015
MT 208, ¶ 9, 380 Mont. 146, 354 P.3d 579. We review the Water Court’s findings of
fact to determine if they are clearly erroneous. Skelton Ranch, Inc. v. Pondera Cnty.
Canal & Reservoir Co., 2014 MT 167, ¶ 26, 375 Mont. 327, 328 P.3d 644. A finding of
fact is clearly erroneous if it is not supported by substantial evidence, if the trial court
misapprehended the effect of the evidence, or if after reviewing the entire record this
Court is left with the definite and firm conviction that a mistake was committed. Skelton
Ranch, Inc., ¶ 27. Evidence is substantial if “a reasonable mind might accept [it] as
adequate to support a conclusion, even if the evidence is weak or conflicting. It need not
amount to a preponderance of the evidence, but it must be more than a scintilla.” Skelton
Ranch, Inc., ¶ 27. We review the Water Court’s conclusions of law to determine if they
10
are correct. Skelton Ranch, Inc., ¶ 26; Wicklund v. Sundheim, 2016 MT 62, ¶ 9, 383
Mont. 1, 367 P.3d 406.
DISCUSSION
¶20 Issue One: Whether the Water Court erred in determining that Teton Reservoir’s
1902 Notice of Appropriation was valid.
¶21 A properly filed statement of claim for an existing water right “constitutes prima
facie proof of its content . . . .” Section 85-2-227(1), MCA; W. R. Adj. R. 19. This
prima facie validity may be overcome if the objector “prove[s] by a preponderance of the
evidence that the elements of the original claim ‘do not accurately reflect the beneficial
use of the water right as it existed prior to July 1, 1973.’” Nelson v. Brooks, 2014 MT
120, ¶ 37, 375 Mont. 86, 329 P.3d 558 (quoting W. R. Adj. R. 19). Teton Reservoir
properly filed its statement of claim for existing water rights; accordingly, the claim
serves as prima facie evidence that the information contained in it is true. Section
85-2-227(1), MCA; W. R. Adj. R. 19. Therefore, Teton Canal and Farmers had the
“burden to show by a preponderance of the evidence that the information in the claim is
incorrect.” Marks v. 71 Ranch, Ltd. P’ship, 2014 MT 250, ¶ 16, 376 Mont. 340, 334 P.3d
373 (citations omitted).
¶22 In its cross-appeal, Teton Canal argues that Teton Reservoir’s 1902 Notice failed
to comply with Montana’s 1885 Appropriation Act (1885 Act). Teton Canal argues that
the 1902 Notice had several fatal flaws, including: (1) the place of intended use
description was vague; (2) it failed to identify a reservoir; (3) Bradford’s intent was
11
speculative when filed; and (4) it failed to construct the canal and reservoir system with
reasonable diligence.
¶23 Teton Reservoir argues that the 1902 Notice complied with Montana’s 1885 Act.
More specifically, Teton Reservoir contends that the 1885 Act does not require a specific
place of use description or require identification of a storage reservoir. Teton Reservoir
further maintains that under the 1902 Notice it exercised reasonable diligence in
constructing the Bynum System in compliance with the statute.
¶24 The 1885 Act required a notice of appropriation to state the quantity of claimed
water and the purpose of claimed water, as well as the place of intended use, means of
diversion, date of appropriation, name of appropriator, name of stream, and an accurate
description of point of diversion. Section 89-810, RCM (1947) (repealed 1973). When
filing a notice of appropriation, “the claimant must have an intention to apply the water to
a useful or beneficial purpose.” Bailey v. Tintinger, 45 Mont. 154, 178, 122 P. 575, 583
(1912). An appropriator’s intent must be determined by acts and surrounding
circumstances at the time of the appropriation. Wheat v. Cameron, 64 Mont. 494, 501,
210 P. 761, 763 (1922). Under the 1885 Act, Teton Reservoir’s 1902 Notice could not
“ripen into a valid appropriation until the . . . statutory requirements for a completed
appropriation [were] met.” Montana Dep’t of Natural Resources & Conservation v.
Intake Water Co., 171 Mont. 416, 431, 558 P.2d 1110, 1118 (1976). Section 89-811,
RCM (1947) (repealed 1973), provided that an appropriator has a valid appropriation if
the appropriator “proceeds to prosecute the excavation or construction of the work by
which the water appropriated is to be diverted.” In Intake, we interpreted § 89-811,
12
RCM, concluding that an appropriator is not required to commence “actual on-site
excavation or construction of the diversion works” to preserve its priority date, but the
appropriator must demonstrate that it made a “steady on-going effort in good faith . . . to
prosecute the construction of the project under the circumstances.” Intake, 171 Mont. at
436, 558 P.2d at 1121; Teton Canal I, ¶ 45.
¶25 Teton Canal argues that the place of intended use and omission to identify a
reservoir invalidated Teton Reservoir’s 1902 Notice. The 1902 Notice claimed 3,000 cfs
from the Teton River “for the purposes of irrigation and reclaiming lands by lying in said
Teton County.” The 1902 Notice identified the intended place of use as Teton County.
There was no statutory requirement that the intended place of use description had to
include a specific land description. The Water Court found that diverting 3,000 cfs
would require irrigating a large area and therefore the description of “Teton County” was
sufficient. The Water Court correctly determined that the 1902 Notice’s intended place
of use was sufficient. Further, the statutory requirement for a valid notice of
appropriation did not require that an appropriator identify a specific reservoir at the time
of filing of a water right.5 The Water Court correctly determined failure to identify a
reservoir in the notice of appropriation did not invalidate Teton Reservoir’s 1902 Notice.
¶26 Teton Canal also asserts that Bradford’s intent at the time of filing was
speculative. The record reflects that when Bradford filed the 1902 Notice he intended to
5
Storage in a reservoir may be added after a notice of appropriation is filed to an existing
direct flow water right as long as addition of storage does not interfere with the rights of other
appropriators. See Whitcomb v. Helena Water Works Co., 151 Mont. 443, 449, 444 P.2d 301,
304 (1968).
13
develop a large water diversion and storage system for the purpose of “irrigating and
reclaiming lands in Teton County.” Upon filing the 1902 Notice, Bradford
commissioned a survey by Mathews. Mathews filed his report with the GLO on
November 29, 1902. The report and survey provided details for the project Bradford
intended to develop. Mathews’s report included a survey of a reservoir with a capacity of
69,500 acre feet and twenty-nine miles of distribution canals. Additionally, in 1903,
Bradford acquired the rights of way for the Bynum System from the GLO. Bradford’s
acts and surrounding circumstances at the appropriation show his intent to create a large
diversion and reservoir system for the purpose of irrigation in Teton County. The Water
Court correctly determined that Bradford showed intent to develop a large diversion and
reservoir system under the 1902 Notice and planned to put such water to beneficial use.
¶27 Finally, Teton Canal argues that the Bynum System was not prosecuted with due
diligence under the 1902 Notice. Bradford filed his Notice of Appropriation on July 3,
1902. Between July 3, 1902, and 1906, Bradford commissioned a survey, acquired the
rights of way, and tried to obtain funding for the project to develop the Bynum System.
In 1906, the 1902 Notice and all of the rights of way were conveyed to Teton Reservoir.
From 1906 to 1909, Teton Reservoir progressed with the construction of the Bynum
System, including completing the original point of diversion.
¶28 In 1910 and 1911, engineers discovered problems with the design and construction
of the Bynum Reservoir’s dam, which required repairs before water could be stored. The
Water Court found that Teton Reservoir resolved these issues by 1915. Additionally, in
1915, Teton Reservoir relocated the point of diversion. The Water Court found that the
14
Bynum System was sufficiently developed by 1915 to divert some water, store that water,
and deliver it to irrigators. In 1918, Teton Reservoir began diverting floodwaters into the
Bynum Reservoir.
¶29 In 1920, an engineer was hired to assess the current status of the Bynum System.
The engineer documented Teton Reservoir’s ongoing issues with the headgate, intake
canal, and dam. He made recommendations to improve the system. Between 1920 and
1925, Teton Reservoir maintained the Bynum System until it could finish the project. By
1925, BID received approval to sell its bonds and began improving the Bynum System.
In 1927, Teton Reservoir’s current point of diversion, intake canal, reservoir and
distribution canals were completed.
¶30 The record reflects that Teton Reservoir made steady on-going efforts to prosecute
the construction and development of the Bynum System. The evidence shows that after
filing the 1902 Notice, Teton Reservoir’s predecessors continued to develop the Bynum
System despite construction and design issues and lawsuits until 1927. Although the
evidence shows that the Bynum System was sufficiently developed by 1915 to divert
some water, any water delivery “constitute[d] a fraction of the eventual capacity of the
[Teton Reservoir’s] system.” The evidence further shows that after 1915, Teton
Reservoir continued to develop and improve the Bynum System until the system was
completed in 1927. Upon completion, the Bynum System could divert and store water to
its fullest capacity as contemplated by the 1902 Notice. Based on the evidence, we
conclude that Teton Reservoir sufficiently prosecuted the construction of the Bynum
System with due diligence until its completion in 1927. Thus, Teton Reservoir complied
15
with § 89-811, RCM (1947) (repealed 1973). The Water Court correctly concluded that
the 1902 Notice was a valid appropriation under the 1885 Act.
¶31 Issue Two: Whether the Water Court erred by applying the equitable doctrine of
laches to Teton Reservoir’s 1902 Notice of Appropriation.
¶32 Teton Reservoir argues on appeal that the Water Court erred in determining that it
is barred by laches from asserting its senior priority date over Teton Canal. Teton
Reservoir contends that it was entitled to presume the water commissioners were properly
distributing water according to priority and had no duty to reopen the Perry decree.
Teton Reservoir further maintains that the Water Court erred when it relied on Teton
Canal’s conclusory statements showing prejudice.
¶33 Laches is an equitable remedy that can apply when a person is negligent in
asserting a right. Cole v. State ex rel. Brown, 2002 MT 32, ¶ 24, 308 Mont. 265, 42 P.3d
760 (citations omitted). Laches exists “where there has been an unexplainable delay of
such duration or character as to render the enforcement of an asserted right inequitable,
and is appropriate when a party is actually or presumptively aware of his rights but fails
to act.” Cole, ¶ 24 (quoting Larson v. Undem, 246 Mont. 336, 340, 805 P.2d 1318, 1321
(1990). Laches is not a mere matter of elapsed time, but rather, it is principally a
question of the inequity of permitting a claim to be enforced. Cole, ¶ 25 (citing Hunter v.
Rosebud Cnty., 240 Mont. 194, 199, 783 P.2d 927, 930 (1989).
¶34 Laches applies only if the court finds lack of diligence by the party against whom
the defense is asserted and prejudice to the party asserting the defense. Wicklund, ¶ 40
(internal citations omitted). Lack of diligence may be demonstrated when a claimant
16
contemporaneously believes another is violating his or her right, yet the claimant allows
the alleged unlawful act to continue without objection. Algee v. Hren, 2016 MT 166, ¶ 9,
384 Mont. 93, 375 P.3d 386. A party is held to be presumptively aware of his rights
where the circumstances of which he is cognizant are such as to put a person of ordinary
prudence on inquiry. Cole, ¶ 24. A party asserting laches must provide evidence, more
than conclusory statements, to prove prejudice. Anderson v. Stokes, 2007 MT 166,
¶¶ 20-21, 338 Mont. 118, 163 P.3d 1273.
¶35 In this case, the Water Court found that Teton Reservoir failed to assert its senior
priority water right to the prejudice of Teton Canal. This lack of diligence can be traced
to 1936, the year that Teton Canal developed the Eureka Reservoir. Teton Reservoir was
aware of Teton Canal’s development of the Eureka Reservoir and that the Eureka
Reservoir would provide additional water storage not previously available to Teton
Canal. Teton Canal began storing water in the Eureka Reservoir in 1937. Teton
Reservoir was further aware of Teton Canal’s expansions of the Eureka Reservoir in
1947 and 1957. However, at no point, until objections were filed in 2006, did Teton
Reservoir contend that Teton Canal’s storage right in the Eureka Reservoir was junior to
its 1902 Notice.
¶36 Moreover, Teton Reservoir knew its 1902 Notice was not adjudicated in the Perry
decree in 1908. Teton Reservoir allowed the Perry decree to control the administration
of its water rights despite not being a party to the decree. In 1946 and 1952, Teton
Reservoir took issue with the water commissioner’s administration of its water right, yet
remained silent despite passing an internal resolution to clarify its water rights. Teton
17
Reservoir could have filed a petition to reopen the Perry decree to establish its rights
regarding the 1902 Notice but decided against it.6 Teton Reservoir allowed the Perry
decree to control its diversions of water from the Teton River since at least 1940 despite
knowing that its water rights were not adjudicated in the Perry decree. Thus, Teton
Reservoir failed to diligently assert it had a senior priority water right.
¶37 For nearly seventy years, Teton Reservoir acquiesced in the water commissioners’
administration, knowingly allowing Teton Canal to store water with a junior priority
water right. The Water Court correctly concluded that Teton Reservoir’s delay in
bringing a claim for a senior priority right against Teton Canal constituted an
unexplainable delay and was of such character as to render enforcement of its newly
asserted right inequitable.
¶38 The Water Court also determined that enforcing Teton Reservoir’s senior priority
water right would be prejudicial to Teton Canal. The water commissioners administered
water based on the Perry decree for nearly seventy years. Finally, in 2009, Teton
Reservoir did challenge the authority of the water commissioner to administer water at its
headgate. In the 2009 ruling on Teton Reservoir’s Dissatisfied Water User Complaint,
the District Court held:
[S]torage appropriators such as Farmers’ and [Teton Canal] store water and
rely on distribution of water during the non-irrigation season as well. To
allow an unregulated upstream diversion to [Teton Reservoir’s] reservoir
would be injurious to these other storage rights and decreed users
6
Section 89-835, RCM (1947) (repealed 1973), provided that any time after the entry of
a decree, any person who had or claimed a valid water right, prior to the entry of the decree, may
petition the court which entered the previous decree for an order making him a party to such
decree and establishing his right.
18
downstream who have come to rely on the water commissioner’s control
and regulation of [Teton Reservoir’s] water usage.
The Water Court determined that Teton Canal would be injured because it has come to
rely on the water commissioner’s administration of Teton Reservoir’s 1902 Notice as
junior to the Perry decreed rights.
¶39 Teton Reservoir argues that the Water Court relied on conclusory statements to
find prejudice. However, the record supports that allowing Teton Reservoir to assert its
senior priority would be injurious to Teton Canal. Teton Reservoir’s reservoir, Bynum, is
the largest off-stream reservoir of the Teton River. Teton Reservoir has a maximum
holding capacity of 90,000 acre feet. In comparison, Teton Canal’s Eureka Reservoir has
a maximum holding capacity of 5,500 acre feet. Teton Canal I, ¶ 14. The testimony of
Blixrud and Crane asserted that allowing Teton Reservoir to have senior priority would
deplete the water in the river and compromise Teton Canal’s ability to store water it has
relied on for the past seventy years. Crane testified it would adversely affect Teton Canal
shareholders because water stored in the Eureka Reservoir is instrumental in irrigating
their crops late in the irrigation season. If Teton Canal is not able to fill the Eureka
Reservoir, Teton Canal shareholders’ businesses will be significantly impacted. Teton
Canal and other storage appropriators under the Perry decree have come to rely on Teton
Reservoir’s junior priority status. There was significant evidence for the Water Court to
determine that allowing Teton Reservoir to enforce a senior priority would prejudice
Teton Canal. It has relied on Teton Reservoir’s “junior priority” for nearly seventy years.
19
¶40 The Water Court correctly concluded that Teton Reservoir is barred by laches
from asserting senior priority over Teton Canal for its 1902 Notice water right. Teton
Reservoir’s 1902 Notice and claim will be administered in the future as junior in priority
to Teton Canal’s 1936 Eureka storage right. We need not address whether the Water
Court properly applied the doctrine of waiver because this issue is dispositive.
¶41 Issue Three: Whether the Water Court erred in decreeing Teton Reservoir an
annual volume totaling 60,000 acre feet for storage in the Bynum Reservoir.
¶42 On cross-appeal, Farmers argues the Water Court erred in decreeing Teton
Reservoir an annual volume for storage in the Bynum Reservoir in excess of Teton
Reservoir’s annual needs. Farmers further contends that Teton Reservoir is not entitled
to carryover storage in the Bynum Reservoir. Teton Reservoir argues that it is entitled to
20,000 acre feet of carryover storage in the Bynum Reservoir. Teton Reservoir maintains
that substantial evidence supports the Water Court’s determination that Teton Reservoir
was entitled to carryover storage.
¶43 Montana’s Water Use Act requires that a final decreed water right must state the
amount of water included in the right by volume for “reservoir storage rights.”7 Section
85-2-234(6)(b)(i)-(ii), MCA. Water storage, which stabilizes and conserves water
supplies, is encouraged in this state. Farmers, ¶ 12 (internal citations omitted). The
controlling principle of Montana water law is the right to beneficially use water—without
beneficial use, the right ceases. Curry v. Pondera Cnty. Canal & Reservoir Co., 2016
7
The Act gives the Water Court discretion to declare both flow rate and volume if the
water judge determines that both are needed “to adequately administer the right.” Section
85-2-234(6)(b)(iii), MCA.
20
MT 77, ¶ 25, 383 Mont. 93, 370 P.3d 440 (internal citations omitted). This Court has
acknowledged that an appropriator may have a right to carryover storage in a reservoir
for beneficial use in subsequent years. Federal Land Bank v. Morris, 112 Mont. 445,
456, 116 P.2d 1007, 1012 (1941); see McDonald v. State, 220 Mont. 519, 537, 722 P.2d
598, 609 (1986).
¶44 The record supports the Water Court’s decision to limit Teton Reservoir to a
volume amount of 60,000 acre feet for storage in the Bynum Reservoir, including 20,000
acre feet for carryover storage.8 The Water Court recognized that there is no evidence
that provides a number for carryover water. Nevertheless, the totality of the
circumstances supported a 20,000 acre feet volume limit for carryover storage. We
agree.
¶45 The record reflects that Teton Reservoir’s diversion amounts varied greatly from
year to year and it has relied on carryover storage. The Water Court determined that
40,000 acre feet reflected the full allotment to Teton Reservoir shareholders. BID
president DeBruycker testified that Teton Reservoir favored carryover water for next year
rather than increasing the allotment to its shareholders. The 1962 Teton County Water
Resource survey stated the Bynum Reservoir “average annual storage is 75,000 acre feet
with a drawdown of about 35,000 to 40,000 acre feet of water used during the irrigation
season.” The record further supports that Teton Reservoir diverted as much water as it
could but rarely filled the reservoir in one year. The Water Court noted the lack of
8
Farmers does not appeal the allocation of 40,000 acre feet representing full allotment to
shareholders.
21
evidence of the amount Teton Reservoir diverted each year for carryover storage stating,
“the amount of carryover is less clear, but an additional 20,000 AF is a reasonable figure
representing a high average of [Teton Reservoir’s] historical diversions.” The Water
Court relied on what little information was provided by the water commissioner records
and Teton Reservoir’s table of reservoir levels. The Water Court further recognized there
is no evidence indicating that Teton Reservoir’s practices in regard to carryover storage
have ever resulted in wasting water. Taken together, the record supports the Water
Court’s determination that Teton Reservoir historically has diverted and relied on
carryover storage in the Bynum Reservoir. The Water Court’s assignment of 20,000 acre
feet of carryover storage in the Bynum Reservoir was supported by substantial evidence.
¶46 Issue Four: Whether the Water Court erred in refusing to limit Teton Reservoir’s
wintertime diversions to one-half of the available water in the Teton River.
¶47 On cross-appeal, Farmers also argues that the Water Court erred by not limiting
Teton Reservoir to one-half available flow during wintertime diversions. Specifically,
Farmers contends the Water Court misapprehended the evidence regarding the water
commissioners’ historical water management practice. Teton Reservoir argues the Water
Court did not err because there was substantial evidence to support that Teton Reservoir’s
wintertime diversions were not limited to one-half of the available flow. Teton Reservoir
maintains that the Water Court did not misapprehend the evidence. The Water Court
found that “the evidence at hearing indicates that Water Commissioners Olson and
Blixrud did attempt to limit [Teton Reservoir] winter diversions to half the available flow
in the Teton River.” Despite this evidence, the Water Court determined that this water
22
management tool was not administering any decreed water right or applied in any
consistent way.
¶48 Farmers argues that the District Court’s 2009 order on Teton Reservoir’s
Dissatisfied Water User Complaint should control. In the order, the District Court
directed the water commissioner to reduce the amount of water being diverted to Teton
Reservoir “to be consistent with the prior practice of allowing half the river to flow
downstream.” District courts are granted the authority to supervise the distribution of
water that has already been adjudicated and to enforce such water decrees. Baker Ditch
Co., 251 Mont. at 255, 824 P.2d at 260; § 85-2-406(3), MCA. However, district courts
are not vested with the power to determine existing water rights. Section 3-7-501, MCA.
Thus, a district court is bound by the existing water decree. Baker Ditch Co., 251 Mont.
at 255, 824 P.2d at 260. Therefore, the District Court’s order resolving Teton Reservoir’s
Dissatisfied Water User Complaint did not alter Teton Reservoir’s water right and is not
controlling in the adjudication of Teton Reservoir’s water right by the Water Court.
¶49 The Water Court determined that limiting Teton Reservoir to one-half of the
available water from the Teton River during its wintertime diversion was a practice or
tool implemented by the court-appointed water commissioners to manage the water rights
on the Teton River. The water commissioners limited Teton Reservoir’s diversion
because the Department of Fish, Wildlife and Parks requested that it do so. The
Department was not a party under the Perry decree.9 Teton Reservoir’s water right does
9
The Water Court noted that the Ownership Index for Basin 41O did not include a
Montana Department of Fish, Wildlife and Parks water right claim for the Teton River.
23
not contain a provision that restricts its water rights from being enforced in order to avoid
a cessation of instream flow. Limiting Teton Reservoir’s wintertime diversions to
conserve water under the authority of the water commissioners is not based on Teton
Reservoir’s water right. Thus, the Water Court correctly decreed Teton Reservoir’s
wintertime diversion based on the 1902 Notice rather than on a practice implemented by
the water commissioners.
¶50 The Water Court was free to determine based on the evidence available whether
Teton Reservoir’s water right historically had been limited to one-half of the available
flow. Based on the record, the Water Court determined that Teton Reservoir was not
limited to one-half of the available flow and there is no indication in the water
commissioner records that such a policy was implemented or applied with consistency.
The Water Court gave more weight to the testimony of Peebles and the water
commissioner records than the testimony of previous water commissioners stating that
such policy was implemented. The Water Court’s refusal to limit Teton Reservoir’s
wintertime diversions to one-half of the available flow based on water commissioners’
diversion practices was supported by substantial evidence.
CONCLUSION
¶51 The Water Court’s determination that Teton Reservoir’s 1902 Notice was validly
appropriated under the 1885 Act was correct. The Water Court’s determination that
Teton Reservoir is barred by the equitable doctrine of laches from claiming senior
priority to Teton Canal’s water right is also affirmed. With respect to Farmers’
cross-appeal, the Water Court did not err in assigning the Bynum Reservoir a 60,000 acre
24
feet volume limit, including 20,000 for carryover storage, and refusing to limit Teton
Reservoir’s wintertime diversions.
¶52 Affirmed.
/S/ MIKE McGRATH
We Concur:
/S/ JIM RICE
/S/ DIRK M. SANDEFUR
/S/ JAMES JEREMIAH SHEA
/S/ BETH BAKER
25