Skelton Ranch, Inc. v. Pondera Cnty. Canal & Reservoir Co.

• Decision Date: 27 June 2014
• Docket Number: No. DA 12–0698.,DA 12–0698.
• Court: Montana Supreme Court
• Parties: SKELTON RANCH, INC., Claimant and Appellant, v. PONDERA COUNTY CANAL & RESERVOIR COMPANY, Defendant and Appellee; Gregory W. Duncan, Sherri L. Donovan and Terry L. Dougherty, Claimants and Appellants, v. Pondera County Canal & Reservoir Company, Defendant and Appellee.

375 Mont. 327

328 P.3d 644

SKELTON RANCH, INC., Claimant and Appellant,

v.PONDERA COUNTY CANAL & RESERVOIR COMPANY, Defendant and Appellee;

Gregory W. Duncan, Sherri L. Donovan and Terry L. Dougherty, Claimants and Appellants,

v.Pondera County Canal & Reservoir Company, Defendant and Appellee.

No. DA 12–0698.

Supreme Court of Montana.

Submitted on Briefs Jan. 2, 2014.

Decided June 27, 2014.

For Appellants: Gregory W. Duncan, Attorney at Law, Helena, Montana (Attorney for Skelton Ranch, Inc.) Holly Jo Franz, Franz & Driscoll, PLLP, Helena, Montana (Attorney for Gregory W. Duncan, Sherri L. Donovan and Terry L. Dougherty).

For Appellee: John E. Bloomquist, Doney Crowley Payne Bloomquist, P.C., Helena, Montana.

Justice MICHAEL E. WHEAT delivered the Opinion of the Court.

¶ 1 Claimants Gregory Duncan, Sherri Donovan, and Terry Dougherty (collectively, Duncan) and Skelton Angus Ranch, Inc. (Skelton) appeal from a decision of the Montana Water Court that amended the Water Master's (Water) Report and adopted it as amended. We affirm.

¶ 2 We address the following issues:

¶ 3 1. Did the Chief Water Judge properly admit historical documents prepared by Pondera County Canal & Reservoir Company (Pondera) in anticipation of litigation?

¶ 4 2. Did the Chief Water Judge correctly reject the Master's findings regarding certain variables used to determine the historical capacity of a flume on the Thomas ditch?

¶ 5 3. Did the Chief Water Judge correctly determine that portions of the claimants' water rights had been abandoned or never perfected?

¶ 6 4. Did the Chief Water Judge correctly adopt the Master's conclusion that the claimants did not acquire any water rights by adverse possession?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 7 This matter comprises two joined cases, both involving claims to water diverted from the South Fork of Dupuyer Creek in Two Medicine River Basin, into Gansman Coulee, for irrigation in the Teton River Basin.

¶ 8 In the adjudication process, Duncan and Skelton filed statements of claim for existing rights based on various Notices of Appropriation (NOAs) filed between 1895 and 1913. The claims share a single point of diversion from the South Fork, Dupuyer Creek, through the Thomas ditch, to the claimants' lands. The Duncan property is positioned where the diverted water enters Gansman Coulee, and the Skelton property adjoins the Duncan property further downstream. Pondera diverts water from South Fork, Dupuyer Creek, downstream of the Thomas ditch. Pondera filed notices of intent to appear in the adjudication of Skelton's and Duncan's claims. A Temporary Preliminary Decree for Teton River Basin was issued on December 29, 2005. The objections at issue here stem from that decree.

¶ 9 Following a hearing, the Master, in his Report, quantified and assigned priority dates to the claimed water rights. The Master concluded the capacity of a flume through which the water was diverted after the Thomas ditch washed out around 1908 limited the quantity of water that had historically been put to beneficial use and could be claimed. After reviewing the evidence, the Master concluded that the initial flume was built around 1912. Certain water rights were limited in quantity to the capacity of the 1912 flume. The 1912 flume washed out several times and was completely rebuilt in 1931. The 1931 flume was significantly larger than the 1912 flume. Construction of the 1931 flume resulted in creation of new “implied” water rights, with a 1931 priority date, to be distributed among the parties. Because he concluded the flume's capacity limited the water rights, the Master concluded that claimed quantities of water exceeding the capacity he calculated had been abandoned or never perfected.

¶ 10 The Master's Report recognized that determining the flume's original capacity had been complicated by the number of repairs and improvements that took place over the years. In addition, the Master noted that the original flume had been washed out and rebuilt on many occasions. “In fact,” he wrote, “maintaining this diversion has been a huge problem.” This, he suggested, was in part due to frequent flood events that caused “significant destruction.”

¶ 11 Information about the flume around the time of its construction primarily derived from documents Pondera compiled in the early 1900s, after it began investigating the water rights in the area to determine the viability of attempting to obtain land under the Federal Carey Land Act. All parties acknowledge that the documents generated by these investigations were created—at least in part—in anticipation of litigation of the water rights on Dupuyer Creek. Prior to the hearing before the Master, the claimants moved to exclude these documents because they were prepared in anticipation of litigation and contained self-serving declarations. The Master determined they were admissible as ancient documents.

¶ 12 The available information revealed that, in 1912, H.A. Bestor (Bestor), apparently a surveyor or engineer for Pondera, estimated the flume was 24 inches wide and 8 inches deep, with a slope of .003. Bestor calculated the flume's capacity at 4.22 cubic feet per second (cfs); the claimants' expert witness Ryan Casne (Casne) opined that calculation was based on water flowing through the flume at that time rather than the flume's maximum capacity. In 1918, a diary entry provided by Pondera documented the size of the flume at approximately 23 inches wide, 10 inches deep, and 400 feet long. Various interviews with local residents conducted in the early 1920s indicated that the flume washed out in 1916, was rebuilt by 1918, and that part of the flume was rebuilt in 1920. One of the interviewees anecdotally opined that the rebuilt flume was “the same size” as the previous structure—but actual measurements did not corroborate this estimate. Notes taken by a Pondera employee named Mattison, dated August 26, 1920, measured the flume at 24 inches wide and 11 inches deep. An Exhibit from Pondera based on 1921 and 1922 field work calculated the flow rate of the flume at 3.49 cfs. An affidavit from Woodrow W. Collins mentioned a dam, which the Master concluded was “a significant system improvement” in the 1930s. In 1936, a memorandum drafted for Pondera's predecessor documented the flume was 30 inches wide, 22 inches high and 200 feet long; and estimated the flow rate at 12–15 cfs. From 1947 to 1999, the claimants' predecessors testified, the flume was approximately 36 inches wide, 24 inches deep and 300 feet long.

¶ 13 The parties, recognizing the significance of flume capacity, submitted expert testimony regarding that capacity. Experts used two different formulas to calculate the flume's capacity or flow rate: Manning's formula for an outlet-controlled structure, and the formula for an inlet-controlled structure. Testimony explained that the flume's length would determine whether the structure was outlet—or inletcontrolled; if the structure was 300 feet long or greater, experts agreed it was likely outlet-controlled, and its capacity best determined using Manning's formula.

¶ 14 Everyone who calculated the original 1912 structure's capacity assumed that its slope was .003 and that the roughness coefficient was .012, figures taken from Bestor's 1912 Report. Expert Casne, assuming the flume was 24 inches wide and 8 inches deep, calculated the flume's capacity at 4.6 cfs. Pondera's expert Bruce Anderson (Anderson) relied on Bestor's 1912 calculation and concluded that 4.22 cfs was a reasonable flow rate for the original flume. The Master performed an independent calculation using Manning's formula for an outlet-controlled structure using an online calculator. Assuming the flume was 24 inches wide by 11 inches deep, and the slope was .003, he calculated the flow rate was 7.6 cfs, almost double the rate any expert witness calculated.

¶ 15 As for the 1931 flume, assuming that the flume was an inlet-controlled structure, expert testimony estimates of its flow rate ranged from 20.0 cfs to 21.97 cfs. Assuming it was an outlet-controlled structure, estimates varied almost 300 percent, due to use of different slopes and roughness coefficients. There was no reliable slope information for the flume after it was enlarged around 1931. Again, the Master performed an independent calculation and arrived at a much larger amount of water using Manning's formula than the experts did using the formula for inlet-controlled structure. Critical, here, is that Manning's formula, the formula for an outlet-controlled structure, relies heavily on slope. On the other hand, in the calculation for an inlet-controlled structure, slope is not relevant. In calculating the flow rate of the reconstructed 1931 flume, the Master used the slope coefficient from the 1912 flume, in Manning's formula.

¶ 16 The Chief Water Judge rejected the Master's findings on the capacities of the two flumes and associated water rights because he concluded that the Master “misapprehended the effect of the evidence.” The Chief Water Judge replaced the Master's findings with factual findings he considered better supported by the evidence in the record, pursuant to his authority under M.R. Civ. P. 53(e)(2) and Rule 23, W.R.Adj.R.

¶ 17 With regards to the capacity of the original 1912 flume, the Chief Water Judge explained that the dimensions the Master used in conducting his calculations were not supported by the record and were different from those used by the experts who testified. Specifically, the Chief Water Judge found that the flume dimensions the Master used in his calculations were based on the 1920 flume structure, rather than the original 1912 flume—even though the Master used the slope and roughness coefficients from the 1912 flume. The Chief Water Judge pointed out that using a later measurement was problematic because the purpose of determining the original flume's capacity was to quantify the amount of water originally put to...