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United States v. Barthelmess Ranch Corp.

Supreme Court of Montana

December 28, 2016

United States of America, (Bureau of Land Management), Claimant Barthelmess Ranch Corporation; Double O Ranch, Inc.; Lela M. French; William R. French; Conni D. French; Craig R. French; M Cross Cattle Company., Objectors

          Argued: September 23, 2016

          Submitted: September 27, 2016

         APPEAL FROM: Montana Water Court, Cause No. 40M-300 Honorable Douglas Ritter, Water Judge

          For Appellants: John E. Bloomquist, Rachel K. Meredith (argued), Bloomquist Law Firm, P.C., Helena, Montana

          For Appellee: John C. Cruden, Assistant Attorney General, Elizabeth Ann Peterson, John L. Smeltzer (argued), James J. Dubois, Anna K. Stimmel, Appellate Attorneys, United States Department of Justice, Washington, DC

          OPINION

          Mike McGrath, Chief Justice

         ¶1 This is an appeal by Barthelmess Ranch, Double O Ranch, William French, Conni French, Craig French and M Cross Cattle (the Objectors) from the Water Court's August 11, 2015 Order Granting Partial Summary Judgment and Order Remanding to the Master.

         We affirm.

         ¶2 We restate the issues on appeal as follows:

Issue One: Whether the Water Court erred in concluding that the United States Bureau of Land Management (BLM) holds stockwatering rights under Montana law in reservoirs constructed on federal land for the use of permittees.
Issue Two: Whether the Water Court erred in concluding that the United States owns reserved water rights for stockwatering by permittees in a pothole lake on federal grazing land under the 1926 Executive Order providing for Public Water Reserve 107.

         FACTUAL AND PROCEDURAL BACKGROUND

         ¶3 In Montana's ongoing water rights claims adjudication proceedings, the BLM filed six water right claims related to five reservoirs and one natural pothole. The five reservoir claims are based in Montana law while the Pothole Lake claim is based upon a federal reservation of lands. The water sources are located wholly or partially on federal land, and the BLM claims the right to use each for stockwatering by its grazing permittees and for wildlife. In June 2014 the BLM moved for summary judgment on the objections raised to each claim. The Water Court consolidated those claims, objections and motions for summary judgment into the present single case.

         ¶4 In November 2014 the Water Master recommended summary judgment in favor of the BLM on each of these claims, finding that the claims were valid and properly owned by the BLM. The Objectors objected to the Water Master's recommendation, but agreed in briefing that the BLM had the right to obtain water rights in its name under Montana law for use on federal lands.[1] The Objectors stated the issue as whether the BLM "under applicable state and federal laws, actually made appropriations for beneficial use." The Objectors contend that the BLM did not perfect any water rights and sought an order from the Water Court transferring all of the claimed BLM water rights to the current grazing permittee on the federal lands, and an order terminating all the wildlife claims. The Water Court upheld the Water Master's recommendation in most respects, and the Objectors appeal.

         ¶5 The following is a summary of the BLM claims involved in the present case. Windy Day Reservoir (Claim 40M 74594-00) was built by the BLM in August 1955 with the participation and cost-sharing of Marie Karstens-Redding, the BLM grazing permittee at the time. The French objectors in the present appeal own property surrounding the Windy Day Reservoir. They claim that as early as 1911 individual "free grazers" who were ancestors or predecessors to their current land interests (hereafter "ancestral free grazers") "owned livestock" on the land now containing this reservoir.

         ¶6 North Flat Creek Reservoir (Claim 40M 74590-00) was built by the BLM in 1937. It is partially located on lands patented by Elsie Kemp/Tole in 1923 and conveyed to the Frenches in 1995. Frenches filed a statement of claim to a use right for stockwater out of the reservoir. They claim that as early as 1911 ancestral free grazers placed livestock on the land now containing this reservoir.

         ¶7 Tallow Creek Reservoir (Claim 40M 74670-00) was built by the BLM in June 1936. The Objectors contend that ancestral free grazers in the area of this reservoir owned livestock there as early as 1915, and that their stock grazed in the area and drank water.

         ¶8 Sharon Reservoir (Claim 40M 74883-00) was built by the BLM in 1961 with the assistance of the Oxarart Brothers, grazing permittees at the time. M Cross is a grazing permit successor to Oxararts and has repair and maintenance responsibility for the reservoir. M Cross claims that its ancestral free grazers "owned livestock" on property around Sharon Reservoir "as early as 1917" and that they grazed and watered the stock.

         ¶9 The Water Court found as undisputed facts that the preceding four reservoirs were developed by the BLM and that the BLM's claimed priority date for each stockwater right is the date the reservoir was completed. The BLM does not own livestock, but provides the water for use by grazing permittees and others. The Water Court found that the reservoirs have been "consistently used for stockwatering since they were completed."

         ¶10 The Water Court found that it was undisputed that none of the Objectors or their predecessors filed claims for stockwatering from any of the sources of water that are impounded in the reservoirs. The exception is the claim filed by Lela and William French, claim 40M 169526-00, for stockwater from the North Flat Creek Reservoir.

         ¶11 The Water Court noted that the common law elements of a valid (use right) appropriation of water are intent to appropriate, notice of the appropriation, diversion and beneficial use. In the Matter of the Adjudication of Existing Rights (Bean Lake III), 2002 MT 216, ¶ 10, 311 Mont. 327, 55 P.3d 396. Prior to 1973 an appropriator in Montana could secure a water right simply by putting the water to a beneficial use. Mont. Trout Unlimited v. Mont. DNRC, 2006 MT 72, ¶ 5, 331 Mont. 483, 133 P.3d 224. The Water Court concluded that impoundment of water in a reservoir is a sufficient diversion of water to support a claim to a use right of water under Bean Lake III, and noted that the Objectors contested only whether the BLM had applied the water to a beneficial use. The Objectors contended that since the BLM did not own any livestock of its own, it did not use water from the reservoirs and therefore could not have perfected the stockwatering claims under Montana law.

         ¶12 The Water Court resolved this issue by applying this Court's venerable opinion in Bailey v. Tintinger, 45 Mont. 154, 122 P. 575 (1912), relied upon by both the BLM and the Objectors. Bailey established that a person, association or corporation could appropriate water under Montana law "to sell, rent, or otherwise dispose to others." Under the principles of the Bailey case, an appropriation of water for the use of others was complete upon completion of the diversion system (in this case the reservoirs) and making the water available for use by others. Bailey, 45 Mont. at 166-67, 122 P. at 579. The Water Court concluded that these principles applied to appropriations by the United States and that ownership of stock was not required to complete the appropriation. Finally, the Water Court determined that participation by non-governmental parties in the construction or maintenance of some of the reservoirs did not affect the validity of the BLM claims because Montana law recognizes that multiple claims may exist in the same source of water. St. Onge v. Blakley, 76 Mont. 1, 23, 245 P. 532, 536 (1926); Mont. Trout Unlimited, ¶ 7.

         ¶13 The BLM acquired the Funnells Reservoir (Claim 40M 74655-00) in 1951 when it acquired some of the surrounding property. At that time the dam was in place providing 1.2 acre feet of water storage. The BLM claims a priority date in this reservoir of August 1945. A portion of the reservoir is on Barthelmess land, and Barthelmess filed a stockwater claim in the reservoir. Barthelmess also contends that its ancestral free grazers had stock in the area around Funnells as early as 1915. The Water Court found as an undisputed fact that the reservoir has been used for stockwater consistently since the BLM acquired its interest in the property.

         ¶14 The Water Court concluded that under Montana law the BLM acquired any appurtenant water rights when it acquired the property. Section 85-2-403(1), MCA; Maclay v. Missoula Irrig. Dist., 90 Mont. 344, 353, 3 P.2d 286, 290 (1931). In addition, the Water Court rejected the Objectors' argument that the BLM could not show when the reservoir was constructed or when it was actually used for stockwatering, and that the BLM water claim therefore could only date from when it acquired the property in 1951. The Water Court noted that this argument was inconsistent with the Objectors' own contention that they derived rights from their ancestral free grazers who had grazed animals in the same area since 1915. In addition, the Water Court held that under Montana law a statement of water right claim is prima facie evidence of its content, § 85-2-227, MCA, and Teton Co-Op Canal Co. v. Teton Coop Reservoir Co., 2015 MT 344, ¶ 20, 382 Mont. 1, 365 P.3d 442, and that the Objectors had not carried their burden to prove that essential elements of the BLM water right claim were incorrect. As was the case with the prior BLM reservoirs, the Water Court noted that under Montana law two parties can claim ownership in water rights from the same source.

         ¶15 Pothole Lake (Claim 40M 74579-00) is a natural feature[2] located on BLM land that has been available for use by others. The Objectors, for example, claim that Frenches or their ancestral free grazers grazed stock in the area of the Pothole as early as 1917. The BLM claims a reserved water right in the Pothole with a priority date of April 1926. The claim of a reserved right is based upon the Stock Raising Homestead Act (SRHA) enacted by Congress in 1916 and the Public Water Reserve (PWR) No. 107 signed by the President in April 1926. The SRHA allowed the Secretary of the Interior to reserve lands that "contain waterholes or other bodies of water needed or used by the public for watering purposes." 43 U.S.C. § 300 (1912). The subsequent PWR 107 reserved all springs and water holes on vacant, unappropriated, and unreserved public land throughout the country. The Water Court found that the Pothole Lake was part of the reservation of land and water provided for by PWR 107.

         ¶16 The Objectors contended as to all of the BLM claims, that their ancestral free grazers grazed the land and watered their stock in the available water sources long prior to construction of any of the BLM reservoirs. The Objectors contend that they thereby obtained the sole and paramount right to all of the waters at issue in this case and that any BLM claims to water should therefore be transferred to them.

         ¶17 The Water Court concluded that any stockwatering by the Objectors' ancestral free grazers were direct uses from the water sources, unaided by reservoir impoundments, and are therefore separate from the subsequent BLM reservoir claims. The governing principle of water law is that the existence of a prior right or claim in a particular water source does not preclude appropriation of subsequent rights from the same source. St. Onge, 76 Mont. at 23, 245 P. at 536; Mont. Trout Unlimited, ¶¶ 7-8. This principle is at the core of appropriation water rights under Montana law, allowing multiple appropriators to enjoy rights from the same source of water. The Objectors' claim that prior use by their ancestral free grazers precludes later claims by the BLM or any other person or entity is contrary to the precepts of prior appropriation.

         ¶18 The Objectors also argued that prior Water Court decisions support their argument that they should be given title to the right to use the water stored in the BLM reservoirs.[3]The Water Court disagreed with the Objectors' construction of these decisions. Construing its own decisions, the Water Court found that "neither case addressed any restriction on BLM ownership of stock claims on federal land or found that stock rights on federal land must be owned by permittees." In addition, one of the cases "recognizes that stock rights on federal land are routinely owned by the BLM."

         ¶19 In addition to BLM stockwater claims, the BLM also claimed the right to provide water for wildlife at each of the reservoirs and the Pothole Lake. The Objectors argued that any wildlife use was only incidental to stockwatering, and that the BLM never intended to appropriate water for wildlife, never gave notice of any intent to do so, and never took steps to put water to use for wildlife, thereby precluding any claim under Montana law. The Water Court disagreed, finding that claims for fish, wildlife and recreational use are recognized by Montana law, and that no diversion is required when a diversion is not necessary for the wildlife use. Bean Lake III, ¶ 40.

         ¶20 The Water Court determined that the nature and extent of a water claim for wildlife use "depends on the specific facts surrounding the claimed appropriation" and that wildlife claims must be supported by evidence of intent to appropriate, notice of intent and application of the water to a beneficial use. The Water Court relied upon statements by Congress referencing management of BLM lands for stock and for wildlife as showing intent to do so. In addition, publication of these Congressional statements and enactments gave notice that the BLM intended to appropriate for wildlife. The Water Court found that developing the reservoirs was sufficient appropriation to consummate a right for wildlife uses. Because wildlife uses require less water than consumptive uses such as stockwatering, adding wildlife uses to each of the reservoirs did not expand the amount of water claimed. Therefore, as to the four reservoirs constructed by the BLM, there was sufficient proof of a water right for wildlife.

         ¶21 As to the Funnells Reservoir, the BLM acquired it as a constructed facility in 1951. The Water Court found that the same Congressional enactments that supported a wildlife claim for the first four reservoirs, constructed by BLM, also supplied the required intent for Funnells. While Funnells was originally constructed for stockwatering, the Water Court found that when the BLM acquired it in 1951, wildlife had already benefitted from its water, and after that time it was also managed for wildlife use. This represented a change in the stockwater right the BLM acquired with the reservoir. The law in effect at the time of this change, § 89-803, RCM (1947, repealed in 1973), required no prior approval for a change in use, and the wildlife claim did not represent a new appropriation because it did not expand the amount of water used. Therefore under that statute the Water Court determined that the priority date for the wildlife use related back to the priority of the original appropriation in 1945, before the BLM acquired the facility.

         ¶22 As to the Pothole Lake, the Water Court determined that there are factual issues that remain to be decided concerning the wildlife claim for that water source. The Water Court remanded the wildlife portion of the Pothole Lake claim to the Water Master for further proceedings.

         ¶23 The Water Court last determined that the volume of water for each of the BLM claims remained unresolved. While the BLM argued that the Objectors had not refuted its volume claims, the Water Court accepted the Objectors' argument that they had not been given a full and fair opportunity to present evidence as to the volume of water that should be decreed to each of the BLM storage claims. Therefore the Water Court remanded all of the BLM claims to the Water Master for further proceedings on the volume of each of the BLM storage claims.

         ¶24 The Objectors appeal.

         STANDARD OF REVIEW

         ¶25 This Court recently set out the standards of review in an appeal from the Water Court's review of a Water Master's report. Heavirland v. State, 2013 MT 313, ¶¶ 13-16, 372 Mont. 300, 311 P.3d 813; Skelton Ranch v. Pondera County Canal & Res. Co.,2014 MT 167, ¶¶ 25-27, 375 Mont. 327, 328 P.3d 644. In summary, the Water Court reviews the Water Master's findings of fact under the "clearly erroneous" standard, and reviews the Water Master's conclusions of law to determine whether they are ...


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