In re Schutter

547 P.3d 1250

Debra V. SCHUTTER and Sidney J. Schutter, Claimants and Appellants,

and

State of Montana BOARD OF LAND COMMISSIONERS, Objector and Appellee.

DA 23-0314

Supreme Court of Montana.

Submitted on Briefs: January 17, 2024

Decided: April 30, 2024

APPEAL FROM: Montana Water Court, Case No. 41H-0243-R-2021, Honorable Stephen R. Brown, Water Judge

For Appellants: Colleen A Coyle, Coyle Law Firm, PLLC, Bozeman, Montana, KD Feeback, Toole & Feeback PLLC, Lincoln, Montana

For Appellee: Brian C. Bramblett, Montana Department of Natural Resources and Conservation, Helena, Montana, Rachel Meredith, Office of the Governor, Helena, Montana

For Amicus State of Montana: Austin Knudsen, Montana Attorney General, Michael J. Noonan, Assistant Attorney General, Helena, Montana, Emily Jones, Special As- sistant Attorney General, Jones Law Firm, PLLC, Billings, Montana

For Amicus Rocky Mountain Stockgrowers Association, and Greenfields Irrigation District: Jon Metropoulos, Metropoulos Law Firm, Helena, Montana

Justice Beth Baker delivered the Opinion of the Court.

¶1 Appellants Debra Schutter and Sidney Schutter (the Schutters) appeal the Montana Water Court’s grant of summary judgment to the State of Montana Board of Land Commissioners (the Board) on the Board’s objection to the decree of ownership of water right 41H-13169-00 (Claim 13169). At issue is whether the State of Montana holds an ownership interest in a water right developed and diverted on private land for beneficial use on State-owned school trust land. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Claim 13169 is for rights to groundwater used by the Schutters on land located in the NWSESE of Township 1 North, Range 3 East, Gallatin County. The Schutters use a groundwater well located on their private property to irrigate four parcels of land where they grow potatoes and other crops. The general abstract of Claim 13169 describes the four places of use (POU) as:

ID	Acres	Govt Lot	Otr Sec	Sec	Twn	Rge	County
1	160.00	SE	28	1N	3E	GALLATIN
2	160.00	SW	28	1N	3E	GALLATIN
3	160.00	NW	33	1N	3E	GALLATIN
4	50.00	NE	33	1N	3E	GALLATIN

POU Nos. 1, 3, and 4 are private land owned by the Schutters. POU No. 2 is school trust land belonging to the State of Montana. Claim 13169 has a priority date of August 10, 1960.

¶3 In 1960, John Schutter, the Schutters’ predecessor in interest, drilled the well the Schutters now use to exercise Claim 13169. From that well, John appropriated water necessary to irrigate the four parcels—the three he owned and POU No. 2, which he leased from the State—from April 15 to October 25 each year. Consistent with the historical use of the claim, the Schutters pull water from the well sufficient to irrigate 530 acres of cropland. A portion of the total appropriation is diverted and piped across the Schutters’ property to POU No. 2.

¶4 In 2019, the Board filed an objection to Claim 13169, asserting an ownership right in the water used to irrigate POU No. 2. On the Board’s motion, the Water Court granted summary judgment and added the State as co-owner of Claim 13169, limited to that portion of the claim appropriated to irrigate POU No. 2.

¶5 The parties agree to the relevant facts of this dispute. The land that now constitutes POU No. 2 was reserved to the State in 1864, accepted in the General Land Office survey on November 18, 1868, and granted to Montana in 1889. The Board claims no ownership in POU Nos. 1, 3, or 4, or in any portion of Claim 13169 appropriated therefor. The Board further claims no ownership in the well that is located on the Schutters’ private property. The Schutters similarly claim no ownership right in POU No. 2 but claim exclusive ownership of the entirety of Claim 13169.

¶6 Additional pertinent facts are discussed below.

STANDARDS OF REVIEW

[1, 2] ¶7 Summary judgment is appropriate only where "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." M. R. Civ. P. 56(c)(3). We review a district court’s grant of a motion for summary judgment de novo. Advoc. for Sch. Tr. Lands v. State, 2022 MT 46, ¶ 5, 408 Mont. 39, 505 P.3d 825. We review decisions from the Montana Water Court under the same standards of review we apply to the district courts.

Marks v. 71 Ranch, LP, 2014 MT 250, ¶ 13, 376 Mont. 340, 334 P.3d 373.

DISCUSSION

¶8 The utilization of the land of the American West to benefit public education is a policy nearly as old as the United States of America. In 1785 the Continental Congress undertook a program to survey and dispose of the lands of the Western Territory. See An Ordinance for Ascertaining the Mode of Disposing of Lands in the Western Territory, Journals of the Continental Congress, v. 29, p. 923, (hereinafter Western Ordinance) (https://lccn.loc.gov/90898224). The plan called for the division of western land into six-by-six mile "townships." In turn, each township was subdivided into thirty-six one-square-mile sections. The townships and sections were to be sold to the public at auction. Although most of the land was earmarked for public sale, the Continental Congress "reserved the lot No. 16 of every township, for the maintenance of public schools within the said township." See Western Ordinance.

¶9 Nearly one hundred years later, under a new Congress and a new Constitution, the policy of reserving certain land assets for the purpose of funding public education was extended west to what would become the Territory of Montana. See An Act to Provide a Temporary Government for the Territory of Montana, ch. 95, § 14, 13 Stat. 85, 91 (1864) (hereinafter Organic Act). Under the Organic Act, both section sixteen and section thirty- six of each township were set aside for the future benefit of the public schools of Montana. Organic Act, § 14. In 1889, Montana was admitted to the Union. The lands reserved by the Organic Act were granted to the State for sale or lease—the proceeds to be used to establish a permanent school fund. Omnibus Enabling Act of 1889, ch. 130, §§ 10, 11, 25 Stat. 676, 679-80 (hereinafter Enabling Act).¹ Montana accepted the land grants, required they "be held in trust for the people," determined that all proceeds derived from them would be held in the Montana school fund, and declared that the fund "shall forever remain inviolate, guaranteed by the State against loss or diversion." Mont. Const. of 1889, art. XVII § 1, XI, §§ 2, 3. The 1972 Montana Constitution adopted much of the same language, including the provision holding the fund inviolate against loss or diversion. See Mont. Const. art. X, §§ 2, 3, 11.²

[3, 4] ¶10 The lands granted by the Enabling Act constitute a trust governed by the terms the Act sets forth. Montanans for the Responsible Use of the School Trust v. State ex rel. Bd. of Land Comm’rs, 1999 MT 263, ¶ 13, 296 Mont. 402, 989 P.2d 800 (citing Rider v. Cooney, 94 Mont. 295, 306-07, 23 P.2d 261, 263 (1933)). As trustee, the Board³ "is bound, upon principles that are elementary … to secure the largest measure of legitimate advantage" to the trust beneficiaries. State v. Stewart, 48 Mont. 347, 349-50, 137 P. 854, 855 (1913). One of the Board’s duties as trustee is to ensure that "none of [the trust lands], nor any estate or interest therein, shall ever be disposed of … unless the full market value of the estate or interest disposed of … has been paid or safely secured to the State." Enabling Act, § 11 (as amended by the Act of May 7, 1932, ch. 172, 47 Stat. 150, (1932)).

¶11 The above referenced statutes and constitutional provisions speak primarily to land grants. We recognized in In re Powder River Drainage Area, 216 Mont. 361, 702 P.2d 948 (1985) (Pettibone) that land and water rights, however, are inextricably intertwined. In Pettibone this Court unanimously determined that the State "is the owner of a water right diverted or developed on school trust land." 216 Mont. at 368, 702 P.2d at 952. In its order granting summary judgment for the Board, the Water Court relied primarily on and discussed extensively the Pettibone decision.

¶12 A portion of the Powder River preliminary decree awarded a collection of water rights to a group of individuals and ranching operations (collectively Pettibone) for irrigation and stockwatering on both school trust and privately owned land. Pettibone, 216 Mont. at 364-65, 702 P.2d at 950. The Montana Department of State Lands objected to the preliminary decree. Pettibone, 216 Mont. at 364, 702 P.2d at 950. At issue were twenty-three water rights claims, a combination of groundwater wells, developed springs, diverted tributaries, and direct uses. Pettibone, 216 Mont. at 365, 702 P.2d at 950. Of the twenty-three rights, twenty-two were developed with a diversion point on school trust land. Pettibone, 216 Mont. at 365, 702 P.2d at 950. The twenty-third right was a groundwater well with a diversion point that "straddle[d] the border between a state-owned and privately[ ] owned section and [was] used on both." Pettibone, 216 Mont. at 364, 702 P.2d at 950. The school trust lands at issue were granted to Montana by the Enabling Act for the purpose of being applied to the schools and accepted under the 1889 Montana Constitution "[to] be held in trust consonant with the terms of the Enabling Act." Pettibone, 216 Mont. at 365-66, 702 P.2d at 950-51 (internal quotations omitted).

¶13 The legal question in Pettibone was whether the State or the private lessees were the rightful holder of the water rights used on school trust land. After careful consideration of the history and purpose of school trust lands, Montana’s processes for water rights adjudication, and the applicable federal and state laws, we determined that two important points controlled the answer: first, an interest in water appurtenant to school trust land cannot be alienated by the State absent adequate compensation, and second, any law or policy that would infringe upon the State’s...