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

380 Mont. 146

354 P.3d 579

2015 MT 208

TETON COOPERATIVE RESERVOIR COMPANY, Objector, Appellant, and Cross–Appellee

v.FARMERS COOPERATIVE CANAL COMPANY, Claimant, Appellee, and Cross–Appellant.

No. DA 14–0556.

Supreme Court of Montana.

Submitted on Briefs June 24, 2015.

Decided July 28, 2015.

For Appellant: Holly Jo Franz, Ada C. Montague, Franz & Driscoll, PLLP; Helena, Montana.

For Appellee: Michael J.L. Cusick, Moore, O'Connell & Refling, P.C.; Bozeman, Montana.

Opinion

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

¶ 1 Teton Cooperative Reservoir Company (TCRC) appeals from the order of the Montana Water Court, adjudicating several water right claims of Farmers Cooperative Canal Company (FCCC). FCCC cross-appeals. We affirm.

ISSUES

¶ 2 We review the following issues:

1. Did the Water Court apply an incorrect standard of law when it decided that FCCC's reservoirs were included in its 1895 and 1897 water rights?

2. Were the Water Court's findings regarding FCCC's historical water use clearly erroneous?

3. Was the Water Court's finding that FCCC's water use did not increase after the reservoirs were constructed clearly erroneous?

4. Did the District Court err when it limited FCCC's diversion period in response to TCRC's objections to FCCC's claims?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 3 FCCC was incorporated on June 2, 1897, for the purpose of appropriating, transporting, and using for irrigation water from the Teton River. It acquired its first water right by conveyance from one of FCCC's incorporators shortly thereafter. After several disputes concerning this right, a district court established in Perry v. Beattie, Cause No. 371, Mont. Eleventh Jud. Dist. Ct., Teton Cnty., March 28, 1908, that FCCC had a right to 4,000 miner's inches with a priority date of August 1, 1897. The court also established priority dates and flow rates for a number of other water rights from the Teton River, one of which was for 300 miner's inches with a priority date of June 15, 1895. FCCC bought this right in 1966.

¶ 4 Initially, FCCC exercised its water right by irrigating with whatever water was available as it became available. Since FCCC did not hold the most senior rights to water from the Teton River, this left FCCC inconsistently applying fluctuating amounts of water based on the flow rate of the Teton River and the demands of more senior water users. During an average year, FCCC would be left with little or no water between early July and late Fall.

¶ 5 Within several years of incorporating, FCCC recognized a need to stabilize this water flow. To meet this need, it constructed two reservoirs. The first, Harvey Lake Reservoir, was completed in 1913, and the second, Farmers Reservoir, was completed in 1942. Using its reservoirs, FCCC began to store portions of the water diverted to it during the year. This allowed it to then release water as needed throughout the year, including times when diversions from the Teton River were unavailable or inadequate.

¶ 6 Based on its rights and these practices, FCCC filed statements of claim for its 1895 and 1897 rights. It claimed use of Harvey Lake and Farmers Reservoir as part of those rights. Its statements of claim, along with several issue remarks by the Department of Natural Resources and Conservation, appeared in the temporary preliminary decree for the Teton River, Basin 410. These claims received a number of objections from several entities, including TCRC.

¶ 7 TCRC claims a water right from the Teton River junior to FCCC's 1895 and 1897 rights. TCRC constructed its own reservoir at some point following construction of the Harvey Lake Reservoir and preceding construction of the Farmers Reservoir. Objecting to FCCC's claims, TCRC argued that FCCC's reservoirs were not part of its 1895 or 1897 rights and were instead new, independent appropriations not entitled to the priority dates of either claim.

¶ 8 On July 30, 2014, following a hearing, the Water Court issued an order resolving the objections. In its exceptionally detailed order, it decided that FCCC has a right to 4,000 miner's inches with an 1897 priority date and a right to 300 miner's inches with an 1895 priority date. It also decided that FCCC overstated its period of diversion in its statement of claim. Rather than allowing the January 1 through December 31 period FCCC claimed, it limited FCCC to its historical period of diversion, which it found to be March 1 to November 30. It then found that the reservoirs did not change the period of diversion or the amount of water diverted by FCCC, and it decided that because the reservoirs did not expand Farmer's 1895 or 1897 rights, they did not represent new appropriations of water. Although the Water Court concluded that the reservoirs were not part of the original irrigation system, it nonetheless concluded that the reservoirs could be used as part of the 1895 and 1897 rights because they did not expand the period of diversion, volume, or flow rate of those rights.

STANDARDS OF REVIEW

¶ 9 This Court reviews the Water Court's decisions using the same standards applied to District Court decisions. Eldorado Co–op Canal Co. v. Lower Teton Joint Objectors, 2014 MT 272, ¶ 22, 376 Mont. 420, 337 P.3d 74. We review the Water Court's findings of fact to determine whether 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 has been committed. Skelton Ranch, Inc., ¶ 27. We review the Water Court's conclusions of law to determine whether they are correct. Eldorado Co–op Canal Co., ¶ 21.

DISCUSSION

¶ 10 1. Did the Water Court apply an incorrect standard of law when it decided that FCCC's reservoirs were included in its 1895 and 1897 water rights?

¶ 11 TCRC contends that the Water Court should not have decided that FCCC's reservoirs were a part of FCCC's 1895 and 1897 water rights. It argues that a storage right cannot be added to a direct flow water right and that new storage must instead be treated as a new appropriation not entitled to the priority dates of FCCC's existing rights. TCRC claims that the reservoirs should instead have priority from the dates of their respective first use. We disagree.

¶ 12 Water storage, which stabilizes and conserves water supplies, is encouraged in this state. See § 85–2–101(3), MCA ; Bagnell v. Lemery, 202 Mont. 238, 245, 657 P.2d 608, 611–12 (1983) ; Fed. Land Bank v. Morris,

112 Mont. 445, 454–56, 116 P.2d 1007, 1011–12 (1941). Accordingly, we have held that storage may be added to an existing direct flow water right as long as addition of storage does not interfere with the rights of other appropriators. Whitcomb v. Helena Water Works Co., 151 Mont. 443, 447–48, 444 P.2d 301, 303–04 (1968) ; see Bagnell, 202 Mont. at 246, 657 P.2d at 612. We have held that storage does not interfere with other appropriators' rights as long as it does not expand the storing user's right. Bagnell, 202 Mont. at 244–46, 657 P.2d at 611–12. These cases stand for the proposition that storage may be added to a direct flow right so long as the water user does not store water at a rate exceeding the volumetric flow rate allowed by its direct flow right or at times outside of the diversion period allowed by the direct flow right.

¶ 13 The Water Court applied this rule to this case. It found that FCCC's reservoirs did not expand the 1895 or 1897 rights since the amount of water it diverted and its period of diversion were the same both before and after the reservoirs were constructed. Based on this finding, the Water Court decided that the reservoirs were usable as a part of the 1895 and 1897 rights. The Water Court did not err by doing so. TCRC's argument otherwise is incorrect.

¶ 14 2. Were the Water Court's findings regarding FCCC's historical water use clearly erroneous?

¶ 15 The Water Court found that FCCC's 1895 and 1897 rights consisted of a right to divert 4,300 miner's inches between March 1 and November 30. TCRC claims these findings were clearly erroneous. TCRC argues that there was not substantial evidence to support the Water Court's findings regarding the amount of water historically used. This argument is based on TCRC's contention that no testimonial or documentary evidence predating the construction of either reservoir was admitted into the record before the Water Court. TCRC argues that there was, for this reason, no way for the Water Court to characterize FCCC's historical water use from that period.

¶ 16 We disagree. The findings were supported by substantial evidence, the effect of which the Water Court did not misapprehend. Substantial evidence is “evidence which a reasonable mind might accept as adequate to support a conclusion, even if the evidence is weak or conflicting. It need not amount to a preponderance of the evidence, but it must be more than a scintilla.” Skelton Ranch, Inc., ¶ 27 (citations omitted).

¶ 17 While there was little direct evidence of FCCC's historical water use, the circumstantial evidence before the court combined with what direct evidence there was provided substantial evidence to support the Water Court's finding that FCCC and its predecessors in interest had actually put 4,300 miner's inches of water to beneficial use before either reservoir was constructed. The 1908 decision in Perry v. Beattie is the best evidence of this use. While the court in that case did not provide a detailed discussion about how it made its decision, it did find that “[FCCC] is the owner of four thousand inches of the waters of [the] Teton River, appropriated by it and its predecessors in interest of date August the 1st, 1897”; and that FCCC's predecessors in interest to the 1895 right “are the owners of three hundred inches...