Serena Vista v. Dept. of Nat. Res. and Con.

• Decision Date: 26 February 2008
• Docket Number: No. DA 06-0759.,DA 06-0759.
• Citation: 179 P.3d 510,342 Mont. 73,2008 MT 65
• Parties: SERENA VISTA, L.L.C., Petitioner and Appellant, v. STATE OF MONTANA DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION, Respondent and Appellee.
• Court: Montana Supreme Court

179 P.3d 510

2008 MT 65

342 Mont. 73

SERENA VISTA, L.L.C., Petitioner and Appellant, v. STATE OF MONTANA DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION, Respondent and Appellee.

No. DA 06-0759.

Supreme Court of Montana.

Submitted on Briefs October 31, 2007.

Decided February 26, 2008.

For Appellant: D. Scott Manning, Sullivan, Tabaracci & Rhoades, P.C., Missoula, Montana.

For Appellee: Anne W. Yates, Tim D. Hall, Britt T. Long, Special Assistant Attorneys General, Helena, Montana.

Justice PATRICIA O. COTTER delivered the Opinion of the Court.

¶ 1 Serena Vista, L.L.C. (Serena Vista) is a Wyoming limited liability company registered to do business in Montana. It owns real property in Ravalli County, Montana, and holds established water rights associated with the property. The Montana Department of Natural Resources and Conservation (DNRC), the agency authorized to regulate water rights in Montana, alleged that Serena Vista had created a "place of storage" on the property that had not been permitted by the DNRC. The agency demanded that Serena Vista cease its storage activities and seek an application to change its water rights. Serena Vista filed a Petition for Declaratory Judgment in the Twenty-First Judicial District Court arguing that DNRC had not promulgated a rule defining "place of storage." The District Court dismissed the Petition with prejudice. Serena Vista appeals. We affirm.

ISSUE

¶ 2 A restatement of the issue on appeal is:

¶ 3 Did the District Court erroneously dismiss with prejudice Serena Vista's Petition for Declaratory Judgment?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 4 Serena Vista owns five water rights associated with its ranching operation in the Bitterroot Valley in Ravalli County, Montana. In February 2006 DNRC received a complaint from other riparian rights' owners alleging that Serena Vista had created a storage pit on its property and that the change in Serena Vista's water activities was adversely affecting their water rights. In March 2006 DNRC notified Serena Vista in writing of the complaint and ordered that, "[i]f the alleged activities are occurring they must cease immediately." The agency also indicated that it would meet with the principals of Serena Vista on the property for an on-site investigation on March 28, 2006.

¶ 5 In April 2006 DNRC issued a letter to Serena Vista requesting additional information pertaining to water activity concerns it identified during its on-site visit. After reviewing the information provided by Serena Vista, the agency found that Serena Vista had changed a point of diversion without notifying DNRC, and had created a "place of storage" without DNRC authorization—both in violation of DNRC regulations. Serena Vista disputed the agency's allegations and requested statutory and regulatory support for them. In June 2006 DNRC explained in writing its underlying legal authority. In July 2006 Serena Vista filed a Petition for Declaratory Judgment arguing that DNRC's finding were "made upon unlawful procedure," were arbitrary and capricious, and were an unwarranted exercise of DNRC's discretion.

¶ 6 In September 2006 DNRC moved to dismiss Serena Vista's Petition on the ground that it failed to state a claim upon which relief could be granted pursuant to M.R. Civ. P. 12(b)(6) (hereinafter Rule 12(b)(6)) and as a result the District Court did not have jurisdiction. DNRC also argued that the agency's letter notifying Serena Vista of water violations was not "a proper subject for a declaratory judgment," and that Serena Vista had failed to exhaust its administrative remedies. Serena Vista opposed the motion to dismiss but in November 2006 the District Court determined that Serena Vista had not exhausted its administrative remedies, and therefore the court did not have jurisdiction to hear the matter under the Uniform Declaratory Judgment Act. It dismissed the Petition with prejudice.

¶ 7 Serena Vista filed a timely appeal from the dismissal of its Petition.

STANDARD OF REVIEW

¶ 8 We review de novo a district court's ruling on a motion to dismiss pursuant to Rule 12(b)(6). Rule 12(b)(6) allows a defendant to move for dismissal of a claim on the ground that the petitioner/plaintiff failed to state a claim upon which relief can be granted. A motion to dismiss under Rule 12(b)(6) has the effect of admitting all well-pleaded allegations in the complaint. In considering the motion, the complaint is construed in the light most favorable to the plaintiff, and all allegations of fact contained therein are taken as true. Plouffe v. State, 2003 MT 62, ¶ 8, 314 Mont. 413, ¶ 8, 66 P.3d 316, ¶ 8 (citations omitted).

DISCUSSION

¶ 9 The issue before us is whether the District Court erred in dismissing Serena Vista's Petition for Declaratory Judgment.¹ Serena Vista presents several arguments on appeal including a challenge under the Montana Administrative Procedure Act (MAPA) alleging that DNRC had unlawfully failed to properly promulgate a "rule" but nonetheless concluded that Serena Vista had violated this "rule." Serena Vista argues, and it is undisputed, that in 2006 the term "place of storage" was not defined by Montana statute or rule. However, DNRC concluded that Serena Vista violated applicable rules by creating a "place of storage" without DNRC approval. DNRC cites Admin. R.M. 36.12.1901(1), which requires that an "application to change a water right . . . must be filed when an applicant desires to change the point of diversion, place of use, purpose of use, or place of storage of a water right." (Emphasis added.)

¶ 10 As noted above, upon notice from DNRC that it was in violation of water rights regulations, Serena Vista asked for the legal authority upon which DNRC based its conclusion. In addition to providing specific legal authority for its position, DNRC addressed the "place of storage" issue in its June 2006 letter by stating that it "has long considered a pumping pit as providing that volume of water necessary to supply the immediate need of the pump capacity. Quantities larger than this are deemed storage." Serena Vista maintains that this pronouncement in DNRC's letter amounted to, or "constituted a rule as defined by statute." It insists that because this "rule" was not lawfully promulgated under MAPA, it is unenforceable.

¶ 11 Premised upon its determination that DNRC's June 2006 letter actually constituted an unlawfully created rule, Serena Vista invokes § 2-4-506(4), MCA (of MAPA), and the Uniform Declaratory Judgment Act, § 27-8-201 through -331, MCA, as authority for its declaratory judgment action, arguing these statutes authorize it to seek a judicial determination of the validity and application of the ostensible "rule." It posits that the "[d]etermination of the validity of an administrative rule is a matter of legal interpretation for the judiciary to decide rather than a regulatory determination requiring agency expertise and exhaustion of agency administrative remedies."

¶ 12 The State responds that, in all likelihood, this matter will be moot by the time this Court reaches its decision because, by that time, DNRC will have a properly promulgated rule defining "place of storage," and Serena Vista has already agreed "to comply with all statutes and regulations." In fact, DNRC promulgated a regulatory definition of "place of storage" in Admin. R.M. 36.12.101(48) (effective February 1, 2008). "Place of storage" is now defined as a "reservoir, pit, pit-dam, or pond." As a result, Serena Vista's claim that DNRC relied upon an improperly promulgated rule to prohibit Serena Vista from continued use of what it refers to as its "irrigation pumping pit," is, therefore, arguably moot.

¶ 13 Serena Vista replies that should such a rule be properly promulgated before our ruling we should nonetheless address its issues on the merits. It maintains that the agency or other State agencies could once again "evade MAPA rule-making requirements by simply implementing ad hoc rules and only properly promulgating rules when the agency's actions are judicially challenged"; therefore, it argues because the agency's actions are capable of repetition, we should address this issue on appeal.

¶ 14 A justiciable controversy must exist for this Court to adjudicate a dispute. Clark v. Roosevelt County, 2007 MT 44, ¶ 11, 336 Mont. 118, ¶ 11, 154 P.3d 48, ¶ 11. We do not render advisory opinions, and we limit our rulings to those matters in which we can grant effective relief. Clark, ¶ 11. Mootness is a...