Advocates for Sch. Trust Lands v. State

• Citation: 408 Mont. 39,505 P.3d 825
• Decision Date: 08 March 2022
• Docket Number: DA 21-0314
• Parties: ADVOCATES FOR SCHOOL TRUST LANDS, Plaintiff and Appellant, and K.B. and K.B., by and through their parent and general guardian, Plaintiffs, v. The STATE of Montana, Defendant and Appellee, and Montana Farm Bureau Federation, Montana Stockgrowers Association, Montana Water Resources Association, Association of Gallatin Agricultural Irrigators, Intervenors and Appellees.
• Court: United States State Supreme Court of Montana

408 Mont. 39

505 P.3d 825

ADVOCATES FOR SCHOOL TRUST LANDS, Plaintiff and Appellant,andK.B. and K.B., by and through their parent and general guardian, Plaintiffs,

v. The STATE of Montana, Defendant and Appellee,andMontana Farm Bureau Federation, Montana Stockgrowers Association, Montana Water Resources Association, Association of Gallatin Agricultural Irrigators, Intervenors and Appellees.

DA 21-0314

Supreme Court of Montana.

Submitted on Briefs: January 26, 2022

Decided: March 8, 2022

For Appellant: Roy H. Andes, Attorney at Law, Driggs, Idaho

For Appellee State of Montana: Austin Knudsen, Montana Attorney General, Christian B. Corrigan, Assistant Solicitor General, Helena, Montana, Rachel K. Meredith, Office of the Governor, Helena, Montana, Emily Jones, Special Assistant Attorney General, Jones Law Firm, PLLC, Billings, Montana

For Intervenors: Hertha L. Lund, Christopher T. Scoones, Ben F. Stormes, Lund Law, PLLC, Bozeman, Montana

For Amicus Curiae Rural Montana Foundation: William W. Mercer, Matthew H. Dolphay, Holland & Hart LLP, Billings, Montana

Justice Beth Baker delivered the Opinion of the Court.

¶1 Appellant Advocates for School Trust Lands (Advocates) challenges the constitutionality of House Bill 286 (HB 286), passed by the 2019 Montana Legislature and codified as § 85-2-441, MCA. Advocates alleges that HB 286 violates the Montana Constitution and the 1889 Enabling Act by creating a presumption against State ownership in ground water diverted from private property for use on leased school trust land, thereby reducing the value of those lands. We consider the following restated issues and affirm.

1. Did the District Court err when it granted summary judgment to the State on the ground that Advocates’ challenge to HB 286 is unripe?

2. Did the District Court abuse its discretion when it denied Advocates’ motion to amend its complaint on the ground that adding an as-applied challenge would be futile?

FACTUAL AND PROCEDURAL BACKGROUND

¶2 The Department of Natural Resources and Conservation (DNRC), through its Trust Lands Management Division (TLMD), manages, among other things, state trust lands for the State Board of Land Commissioners, which administers approximately five million school trust land acres. In 2015, TLMD discovered that the State was not listed as an owner on approximately 141 post-July 1, 1973 (post-1973) ground water rights developed or diverted on private land but used on school trust lands. TLMD subsequently filed 141 Water Right Ownership Update Forms (Form 608)—forms typically used to update contact information and to voluntarily transfer water rights—with the DNRC Water Rights Bureau to add the State as co-owner on each water right. Though TLMD notified the affected water rights owners of the change, these private water rights holders had no statutory mechanism with which to object to TLMD's Form 608 filings.

¶3 In response, the 2019 Legislature passed HB 286, codified as § 85-2-441, MCA, to remedy potential due process concerns arising from TLMD's and DNRC's involuntary transfers of private water rights using Form 608. HB 286 created a process by which the State could acquire water rights in privately developed or diverted ground water used on school trust lands. The bill also required the State to rescind any claim to such water rights asserted prior to May 11, 2019—the law's effective date—if it had not complied with the new statutory process; presumably, this included the 141 water rights at issue in 2015.

¶4 Advocates is a non-profit organization working to ensure that the Montana Constitution's trust land commitment is honored. It is the successor in interest to Montanans for Responsible Use of the School Trust (MonTRUST). In September 2019, Advocates filed a complaint for declaratory relief and a permanent injunction against the State, alleging in part that HB 286 is facially unconstitutional because it violates the State's trust obligations imposed by the Enabling Act and the Montana Constitution. Several proponents of HB 286 joined as Intervenors, and Rural Montana Foundation participated as Amicus Curiae for the State. In October 2020, Advocates sought to amend its complaint to include an as-applied challenge to HB 286 and a request for attorney fees. The State moved for summary judgment, and Advocates moved for partial summary judgment. On April 12, 2021, the District Court denied Advocates’ motion to amend and granted summary judgment to the State on the grounds that Advocates’ claim was unripe and its proposed amendment was futile.

STANDARDS OF REVIEW

¶5 We review a district court's grant of summary judgment de novo. Confederated Salish & Kootenai Tribes v. Clinch , 2007 MT 63, ¶ 5, 336 Mont. 302, 158 P.3d 377 (citation omitted). "Issues of justiciability—such as standing, mootness, ripeness, and political question—are questions of law that we also review de novo." Carbon Cty. Res. Council v. Mont. Bd. of Oil & Gas Conserv. , 2016 MT 240, ¶ 9, 385 Mont. 51, 380 P.3d 798 (citation omitted).

¶6 We review a district court's interpretation of a statute de novo. Clark Fork Coal. v. Tubbs , 2016 MT 229, ¶ 18, 384 Mont. 503, 380 P.3d 771 (citation omitted).

¶7 We review a district court's denial of a motion to amend a complaint for abuse of discretion. Emanuel v. Great Falls Sch. Dist. , 2009 MT 185, ¶ 18, 351 Mont. 56, 209 P.3d 244. But we review de novo whether the movant's proposed amendment would be futile. United States v. United Healthcare Ins. Co. , 848 F.3d 1161, 1172 (9th Cir. 2016).

DISCUSSION

Enabling Act of 1889

¶8 Under the Enabling Act of February 22, 1889, the federal government granted to the State of Montana lands "for the support of common schools." Montanans for the Resp. Use of the Sch. Tr. v. State ex rel. Bd. of Land Comm'rs , 1999 MT 263, ¶ 13, 296 Mont. 402, 989 P.2d 800 (hereinafter MonTRUST I ) (citation omitted). As explained in MonTRUST I , ¶ 13, this grant constituted a trust (Trust), the terms of which are set out in Article X, Section 11, of the Montana Constitution :

(1) All lands of the state that have been or may be granted by [C]ongress ... shall be public lands of the state. They shall be held in trust for the people, to be disposed of as hereafter provided, for the respective purposes for which they have been or may be granted, donated or devised.

(2) No such land or any estate or interest therein shall ever be disposed of except in pursuance of general laws providing for such disposition, or until the full market value of the estate or interest disposed of, to be ascertained in such manner as may be provided by law, has been paid or safely secured to the state.

(3) No land which the state holds by grant from the United States which prescribes the manner of disposal and minimum price shall be disposed of except in the manner and for at least the price prescribed without the consent of the United States.

(4) All public land shall be classified by the board of land commissioners in a manner provided by law. Any public land may be exchanged for other land, public or private, which is equal in value and, as closely as possible, equal in area.

We have interpreted these provisions to mean that the State cannot lease an interest in school trust lands if the lease would abrogate the concept of full market value. MonTRUST I , ¶ 36 (citing Jerke v. State Dep't of Lands , 182 Mont. 294, 296, 597 P.2d 49, 51 (1979) (citing Rider v. Cooney , 94 Mont. 295, 309-10, 23 P.2d 261, 264 (1933) )). The Legislature has the authority to determine the method by which full market value is ascertained. Jerke , 182 Mont. at 296, 597 P.2d at 51.

¶9 In MonTRUST I , we determined that several statutes and DNRC policies involving the leasing of school trust lands and resources were facially unconstitutional because they violated the State's obligation to obtain full market value for trust lands. MonTRUST I , ¶¶ 23, 32, 42, 51, 58. Among the laws invalidated in MonTRUST I was a statute that required the DNRC to charge 1972 market values for historic right-of-way deeds; a DNRC policy of charging "significantly below fair market value" for cabin rentals; a statute that authorized the State to issue firewood permits without charging for commercially valuable wood; a statute that granted former lessees up to sixty days to remove movable improvements without charge; and a statute that "allow[ed] trust lands to idle indefinitely" between lessees. MonTRUST I , ¶¶ 23, 32, 42, 51, 58. The key inquiry was whether "the State, in implementing the statute[s], violated its fiduciary duty to obtain full market value." Montanans for the Resp. Use of the Sch. Tr. v. Darkenwald , 2005 MT 190, ¶ 42, 328 Mont. 105, 119 P.3d 27 (citing MonTRUST I , ¶ 36 ).

Montana Water Use Act

¶10 "All surface, underground, flood, and atmospheric waters within the boundaries of the state are the property of the state for the use of its people and are subject to appropriation for the beneficial uses as provided by law." Mont. Const. art. IX, § 3 (3). "The legislature shall provide for the administration, control, and regulation of water rights and shall establish a system of centralized records, in addition to the present system of local records." Mont. Const. art. IX, § 3 (4). Just as the 1889 Montana Constitution "explicitly recognized the right to sell and rent water to others as a beneficial use," our current Constitution "shows a steadfast commitment to recognizing the ability to appropriate water for its ultimate use by a third party." Curry v. Pondera Cty. Canal & Reservoir Co. , 2016 MT 77, ¶ 25, 383 Mont. 93, 370 P.3d 440 (citing Mont. Const. art. III, § 15 (1889)).

¶11 Prior to the enactment of the 1973 Montana Water Use Act (WUA), §§ 85-1-101 et seq., MCA, a water appropriator could obtain a water right by one of two methods: (1) intending to put the water to beneficial use and using the water as intended ("use right"); or (2) complying with the statutory requirements of record notice ("filed right"). Murray...