Little Big Warm Ranch, LLC v. Doll

393 Mont. 435

431 P.3d 342

2018 MT 300

LITTLE BIG WARM RANCH, LLC, Movant and Appellant,

v.Cheri L. DOLL and Willie L. Doll, Claimants and Appellees.

DA 18-0123

Supreme Court of Montana.

Submitted on Briefs: September 5, 2018

Decided: December 11, 2018

For Appellant: Hertha L. Lund, Christopher T. Scoones, Lund Law, PLLC, Bozeman, Montana

For Appellees: Monica J. Tranel, Tranel Law Firm, P.C., Missoula, Montana

Justice James Jeremiah Shea delivered the Opinion of the Court.

¶1 Appellant Little Big Warm Ranch, LLC (LBWR) appeals the January 29, 2018 Order of the Montana Water Court, Lower Missouri Division, Beaver Creek Tributary of Milk River-Basin, denying its Motion to Reopen Proceedings and its request to substitute as an objector. We address the following issue:

Whether the Water Court erred in denying Little Big Warm Ranch's Motion to Reopen the case and in denying Little Big Warm Ranch's Motion to Substitute Objector.

¶2 We affirm.

PROCEDURAL AND FACTUAL BACKGROUND

¶3 This case involves two water rights from Big Warm Springs Creek and Little Warm Springs Creek: Claim 40M 168788-00 for stockwater, and Claim 40M 168789-00 for irrigation. Cheri and Willie Doll (the Dolls) and LBWR are the current adjacent landowners and parties to this litigation. The water rights at issue have been the subject of litigation dating back to the 1990s.¹ On June 9, 2000, the District Court certified the underlying water rights to the Water Court for determination. In 2002, the presiding Water Master issued a Draft Water Master's Report (Draft Report).

¶4 In 2005, LBWR predecessors in interest, Lori and Steven Knudsen, sold their land and appurtenant water rights (the Property) to Leslie Greene and John Dudley (Greene/Dudley). On January 23, 2009, an "Interim Water Management Agreement" between the Dolls and Greene/Dudley was filed with the Phillips County District Court. On January 19, 2010, Leslie Greene filed objections to the Dolls' water rights in Claim 40M 168788-00² and Claim 40M 168789-00.³ Greene's objections stated: "The Draft [ ] Report for WC-2000-05 and WC-2000-06 finds this claim to be invalid. The claim should be terminated or withdrawn." On June 13, 2013, Greene/Dudley sold the Property to Carthel Finch, Debbie Finch, W.G. Dement, and Jason Dement (Finch/Dement). Finch/Dement did not attempt to substitute as an objector, and Greene remained the objector in the case. On August 19, 2013, the Water Court issued "Post-Decree Abstracts of Water Right Claim[s]."

¶5 Finch/Dement and the Dolls negotiated a settlement agreement (Settlement Agreement) resolving the Water Court cases, including Cases 40M-171 and 40M-238. The Settlement Agreement stated, in relevant part:

• The certified Water Court cases, WC-2000-05 and WC-2000-06, would be discontinued and dismissed

• The parties would dismiss or withdraw any objections in Water Court as to the Subject Water Rights• The Draft Report would not be used by either party in any judicial or administrative proceeding involving any of them as authority, precedent, a decision, or a determination of any issue involving the water rights

• The Dolls' stock and irrigation claims would be decreed as set out in the post-decree abstracts issued by the Water Court on August 19, 2013.

¶6 In 2014, Finch/Dement was in the process of selling the Property to LBWR. On October 22, 2014, Finch/Dement sent a copy of the Settlement Agreement to LBWR's counsel. On December 3, 2014, the Dolls signed the Settlement Agreement prior to the Property sale to LBWR. On December 11, 2014, all members of LBWR signed an Acknowledgment of the Settlement Agreement as part of the closing on the Property. On December 15, 2014, Finch/Dement sold the Property to LBWR. Finch/Dement signed the Settlement Agreement shortly afterwards, on December 23, 2014. On June 3, 2015, the Water Court held a scheduling conference on Case 40M-171 and Greene's objections. A LBWR co-manager attended the scheduling conference. Greene did not attend. The Dolls moved for dismissal of Greene's objections. The LBWR co-manager made no objection to the dismissal of Greene's objections. The Water Court entered a default against Greene and ordered Greene to show cause why all of her objections to the claims should not be dismissed. On October 8, 2015, the Water Court dismissed Greene's objections in 40M-238 after Greene again failed to appear. On October 9, 2015, Greene/Dudley filed a Notice of Disclaimer, disclaiming interest in eleven water rights cases where Greene/Dudley had filed objections or notice of intent to appear; seven of those cases involved the Dolls and three directly involved LBWR. On November 14, 2016, LBWR and the Dolls filed a Joint Status Report with the Water Court addressing five water claims, including 40M-238, stating both parties "agree that they do not wish to modify any of their currently filed water claim rights." LBWR and the Dolls also informed the District Court both cases had settled and asked for dismissal. The District Court withdrew its prior orders certifying the underlying water rights and dismissed both cases without prejudice.

¶7 On November 29, 2017, LBWR filed a Motion to Reopen Proceedings and a Motion to Substitute Objector for Greene's Interest in Cases 40M-171 and 40M-238.⁴ LBWR argued that the Water Master "failed to make efforts to notice [LBWR] and afford it an opportunity to substitute itself for Greene." On January 22, 2018, the Water Court held oral argument on LBWR's Motion to Reopen Cases 40M-171 and 40M-238. During oral argument, the Water Court noted it was under no obligation to notify LBWR of pre-existing objections. The Water Court further noted that, as a purchaser, LBWR could go to the Water Court record and identify objections to the water rights being purchased or objections filed by a predecessor in interest, and that such information was readily available online. On January 29, 2018, the Water Court denied LBWR's Motion to Reopen and to Assume Objector Greene's Interest. LBWR appeals.

STANDARDS OF REVIEW

¶8 This Court reviews Water Court decisions using the same standards applied to district court decisions. Teton Coop. Reservoir Co. v. Farmers Coop. Canal Co. , 2018 MT 66, ¶ 19, 391 Mont. 66, 414 P.3d 1249. We review a Water Court's evidentiary rulings for an abuse of discretion. Busta v. Columbus Hosp. Corp ., 276 Mont. 342, 353, 916 P.2d 122, 128 (1996). We review the Water Court's findings of fact to determine if they are clearly erroneous. Skelton Ranch, Inc. v. Pondera Cty. 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 made. Skelton Ranch, Inc. , ¶ 27. We review Water Court conclusions of law for correctness. Nelson v. Brooks , 2014 MT 120, ¶ 28, 375 Mont. 86, 329 P.3d 558.

¶9 We review a Water Court's decision to grant a motion for substitution for an abuse of discretion. See Reilly v. Citizens State Bank , 251 Mont. 155, 158–59, 822 P.2d 1088, 1089 (1991) ( M. R. Civ. P. 25(c)"does not mandate substitution" and substitution is a "matter of convenience within the district court's discretion depending on the exigencies of the situation...."). We review a Water Court's ruling on a Motion to Reopen for an abuse of discretion. See Essex Ins. Co. v. Moose's Saloon, Inc. , 2007 MT 202, ¶¶ 16, 19, 23, 338 Mont. 423, 166 P.3d 451. This Court's review of due process claims is plenary. State v. Schaff , 2011 MT 19, ¶ 7, 359 Mont. 185, 247 P.3d 727.

DISCUSSION

¶10 Whether the Water Court erred in denying Little Big Warm Ranch's Motion to Reopen the case and in denying Little Big Warm Ranch's Motion to Substitute Objector.

¶11 Water rights are property rights, and adjudication of property rights requires that a property owner be afforded due process. Harrer v. N. Pac. Ry. Co. , 147 Mont. 130, 134–35, 410 P.2d 713, 715 (1966) ; Mont. Trout Unltd. v. Beaverhead Water Co. , 2011 MT 151, ¶ 71, 361 Mont. 77, 255 P.3d 179 (J. Rice, dissenting); Mont. Const. art. IX, § 3 (4) (providing for an orderly process for adjudicating existing water rights); Title 85, chapter 2, MCA. Due process mandates notice and the opportunity to be heard prior to modification of those rights. City of Missoula v. Mt. Water Co. , 2016 MT 183, ¶ 25, 384 Mont. 193, 378 P.3d 1113 ; Steab v. Luna , 2010 MT 125, ¶ 22, 356 Mont. 372, 233 P.3d 351 ; Mathews v. Eldridge , 424 U.S. 319, 333, 348, 96 S.Ct. 893, 902, 909, 47 L.Ed.2d 18 (1976). "Notice must be reasonably calculated to inform parties of proceedings [that] may directly and adversely affect their legally protected interests." Steab , ¶ 22 (internal citations omitted). Actual notice is explicit information of a fact. Section 1-1-217(1)(a), MCA. Constructive notice is notice imputed by law when a party has actual notice of circumstances that would put a prudent person on inquiry as to a specific fact. Section 1-1-217, MCA.

¶12 Water rights are often appurtenant to the land on which they are used. Axtell v. M.S. Consulting , 1998 MT 64, ¶ 27, 288 Mont. 150, 955 P.2d 1362 (citing MacLay v. Missoula Irrigation Dist. , 90 Mont. 344, 353, 3 P.2d 286, 290 (1931) ). Generally, appurtenant water rights are included with land transfers, unless reserved. Section 85-2-403(1), MCA ; MacLay , 90 Mont. at 353, 3 P.2d at 290. New owners of land with water rights in a Water Court case become a party to the case through Montana's change of water right ownership statutes. See §§ 85-2-403, 85-2-421–424, MCA. However, the Water Court does not independently monitor land or water right transactions and does not know when a water right has been transferred, unless it receives notice from the Department of Natural Resources and Conservation (DNRC). See §§ 85-2-421–426, MCA.

¶13 Substitution of objectors is permissive...