Teton Coop Canal Co. v. Teton Coop Reservoir Co.

• Decision Date: 13 February 2018
• Docket Number: DA 17-0092
• Citation: 390 Mont. 210,2018 MT 20,412 P.3d 1
• Parties: TETON COOP CANAL CO., Claimant, Appellant and Cross-Appellee, v. TETON COOP RESERVOIR CO., Appellee and Cross-Appellant, and Lower Teton Joint Objectors; Farmers Cooperative Canal Co., Objectors.
• Court: Montana Supreme Court

390 Mont. 210

412 P.3d 1

2018 MT 20

TETON COOP CANAL CO., Claimant, Appellant and Cross-Appellee,

v. TETON COOP RESERVOIR CO., Appellee and Cross-Appellant,andLower Teton Joint Objectors; Farmers Cooperative Canal Co., Objectors.

DA 17-0092

Supreme Court of Montana.

Submitted on Briefs: January 3, 2018

Decided: February 13, 2018

For Appellant and Cross-Appellee: John E. Bloomquist, Bloomquist Law Firm P.C., Helena, Montana

For Appellee and Cross-Appellant: Holly Jo Franz, Ryan McLane, Franz & Driscoll, PLLP, Helena, Montana

Justice Beth Baker delivered the Opinion of the Court.

¶1 Teton Cooperative Canal Company (Teton Canal) appeals a January 31, 2017 order of the Montana Water Court in Case 41O-132, adjudicating Teton Canal's water rights on remand from an earlier decision of this Court. Teton Cooperative Reservoir Company (Teton Reservoir) cross-appeals. We affirm.

¶2 We restate the issues on appeal as follows:

1. Whether the Water Court erred by apportioning volume limits for Teton Canal's 1890 water right claims and the junior 1936 Eureka Reservoir claims;

2. Whether the Water Court erred by removing the Eureka Reservoir as storage under the 1890 Notice while allowing the Glendora Reservoir's storage capacity to be added to the volume limit under the 1890 Notice;

3. Whether the Water Court erred by permitting Teton Canal to store its 1890 direct flow water in the Eureka Reservoir during irrigation season;

4. Whether the Water Court erred by allowing Teton Canal a year-round period of diversion for the 1890 Notice.

FACTUAL AND PROCEDURAL BACKGROUND

¶3 This is the second appeal filed in this case concerning the adjudication of Teton Canal's water right claims on the Teton River. See Teton Coop. Canal Co. v. Teton Coop. Reservoir Co ., 2015 MT 344, 382 Mont. 1, 365 P.3d 442 (hereinafter Teton Canal I ). Teton Canal I was an appeal from a comprehensive order the Water Court issued on February 3, 2015, adjudicating the elements of Teton Canal's water rights in the Eureka Reservoir. We held in Teton Canal I that Teton Canal's claims for the Eureka Reservoir were not properly administered under its 1890 Notice of Appropriation (1890 Notice). Teton Canal I , ¶¶ 43, 54. We set forth in detail Teton Canal's historical background and the early development of Teton Canal's water rights and the Eureka Reservoir. Those facts are not repeated. We describe here additional facts relating to volume and period of diversion relevant to the issues now on appeal.

¶4 Teton Canal's predecessors claimed 3,000 miner's inches of the Teton River for irrigation and for gathering in a reservoir. In March 1899, Teton Canal's predecessor, Montana Land and Water Company (MLWC), filed a complaint in District Court to adjudicate its water rights on the Teton River. MLWC asserted in its complaint that it owned 8,000 acres of agricultural land in Teton County. The District Court decreed a water right of 3,000 miner's inches to MLWC. MLWC v. Farmers Coop Canal Co ., Case No. 209 (Mont. 11th Judicial Dist., June 10, 1901).

¶5 Teton Canal's water rights were again adjudicated in Perry v. Beattie , Case No. 371 (Mont. 11th Judicial Dist., March 28, 1908). In the Perry case, Russell Shepherd, MLWC's successor, claimed water rights under the 1890 Notice and an 1891 Notice.¹ Shepherd claimed ownership of the same 8,000 acres of land identified in the MLWClitigation. By the time the District Court issued its decree in Perry v. Beattie , Shepherd had transferred ownership of the 1890 Notice to Teton Canal. The Perry Court decreed 3,000 miner's inches under the 1890 Notice to Teton Canal.

¶6 We held in Teton Canal I that the 1890 Notice was specific to the Glendora Canal and Glendora Reservoir. Teton Canal I , ¶ 37. The Glendora Reservoir is no longer used by Teton Canal but is owned and operated by a Teton Canal shareholder. The Water Court found that in 1892, Glendora Reservoir's surface area was approximately 47.45 acres. In 1910, the reservoir's surface area remained the same and the dam was recorded as 450 feet long and five feet high. The Water Court also found that Glendora Reservoir stored water for Teton Canal until the development of the Eureka Reservoir.

¶7 Teton Canal, jointly with the State Water Conservation Board, developed the Eureka Reservoir from 1936 to 1937. On December 3, 1936, the Board filed a declaration of intention to store, control, and divert water (1936 Declaration). The 1936 Declaration was filed for record on December 7, 1936. The Water Court found that upon the Eureka Reservoir's completion in 1937, Teton Canal moved its water storage from Glendora Reservoir to Eureka Reservoir. The Eureka Reservoir originally had a storage capacity of 4,000 acre feet. In 1947, the dam was expanded to increase the Eureka Reservoir's storage capacity by 750 acre feet. In 1957, the dam's storage capacity was expanded again by 750 acre feet. The present capacity is 5,500 acre feet. Accordingly, development of the Eureka Reservoir allowed Teton Canal to store more water.

¶8 The Water Court found no credible evidence showing that any water was stored at the Eureka site before the Reservoir was developed in 1937. Teton Canal's shareholder minutes do indicate, however, that off-season diversion occurred in 1923, 1924, and 1933, well before Eureka Reservoir was added to the system. The Water Court found no evidence to determine the nature or extent of Teton Canal's off-season diversion prior to 1963. A Water Commissioner began recording the period of Teton Canal's water diversions in 1963. The Water Court found that the post-1963 Water Commissioner records offered significant information supporting a year-round period of diversion, as well as evidence of historical use.

¶9 There likewise is no record of annual volumes prior to 1963. Teton Canal's expert, John Westenberg, testified that the Water Commissioner's records supported 12,000 acre feet for Teton Canal's irrigation water right claims and 14,000 acre feet for all of Teton Canal's water right claims. On September 28, 2012, Teton Canal and Lower Teton Joint Objectors entered a stipulation (Stipulation) for the purpose of resolving Lower Teton Joint Objectors' objections, "avoid[ing] unnecessary litigation[,] and to describe the historic use of [Teton Canal's] water right claims."² The Stipulation called for an additional 2,000 acre feet as a high-water irrigation claim available in high water years.³ Further, Teton Canal limited its irrigation water right claims to 7,650 acres within its claimed overall 17,322-acre place of use. Based in part on the Stipulation, the Water Court held in its February 3, 2015 Order that Teton Canal's six claims comprised a total volume of 14,000 acre feet.

¶10 In Teton Canal I , we held that: (1) the 1890 Notice was specific to the Glendora Canal and Glendora Reservoir; (2) Teton Canal could not claim the Eureka Reservoir under the 1890 Notice; and (3) the Eureka Reservoir could not relate back to the 1921 Notice because Teton Canal and its predecessors failed to proceed with reasonable diligence in developing the Eureka Reservoir. We remanded to the Water Court to assign a priority date to Teton Canal's Eureka Reservoir water right claims and "for further proceedings consistent with [the] Opinion." Teton Canal I , ¶ 57.

¶11 On remand, the Water Court assigned a priority date of December 7, 1936, to Teton Canal's Eureka Reservoir water right claims. The Water Court determined that it was necessary to address the elements of volume and period of diversion for Teton Canal's water right claims under the 1890 Notice and under the 1936 Declaration. Based on the Stipulation and the evidence submitted during the previous two-day hearing, the Water Court assigned 8,095 acre feet under the 1890 Notice—8,000 acre feet of direct flow and 95 acre feet of storage—and assigned a December 7, 1936 priority date to 3,905 acre feet of storage in the Eureka Reservoir. Lastly, the Water Court held that all of Teton Canal's water right claims have a year-round period of diversion. Teton Canal timely appealed.

STANDARD OF REVIEW

¶12 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 ( Farmers ). Whether a district court complied with remand instructions is a question of law, which we review for correctness. Brown & Brown of MT, Inc. v. Raty , 2013 MT 338, ¶ 8, 372 Mont. 463, 313 P.3d 179.

¶13 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. We review the Water Court's conclusions of law to determine if they are correct. Skelton Ranch, Inc ., ¶ 26.

DISCUSSION

¶14 1. Whether the Water Court erred by apportioning volume limits for Teton Canal's 1890 water right claims and the junior 1936 Eureka Reservoir claims.

¶15 Teton Canal argues that the Water Court improperly expanded upon the scope of remand by assigning volumes. Further, Teton Canal maintains that if the Water Court did not err in assigning volumes, the volume amounts are not supported by the evidence and therefore are clearly erroneous. Teton Canal finally contends that the Water Court's volume limitation is contrary to Montana law because it impermissibly diminished Teton Canal's water rights.

¶16 Teton Reservoir argues that the Water Court correctly addressed the remand instructions to properly administer each water right required by statute. Teton Reservoir contends that the Water Court's volume limits are supported by substantial evidence....