                                                                                               11/03/2016


                                          DA 16-0126
                                                                                           Case Number: DA 16-0126

                 IN THE SUPREME COURT OF THE STATE OF MONTANA

                                         2016 MT 281



GRANITE COUNTY BOARD OF COMMISSIONERS,

              Claimant, Objector and Appellee,

         v.

ESTHER J. MCDONALD,

              Objector and Appellant.



APPEAL FROM:           Montana Water Court, Cause No. 76GJ-40
                       Honorable Russ McElyea, Chief Water Judge


COUNSEL OF RECORD:

                For Appellant:

                       David T. Markette, Dustin M. Chouinard, Markette & Chouinard, P.C.,
                       Hamilton, Montana

                For Appellee:

                       Blaine C. Bradshaw, Granite County Attorney, Philipsburg, Montana



                                                   Submitted on Briefs: July 20, 2016

                                                              Decided: November 3, 2016


Filed:

                       __________________________________________
                                         Clerk
Chief Justice Mike McGrath delivered the Opinion of the Court.


¶1    Esther McDonald appeals from the Water Court’s Order filed January 27, 2016.

We affirm.

¶2    We restate the issues on appeal as follows:

      Issue one: Did the Water Court err in its interpretation of the 1906 Decree in the
      case of Montana Water, Electric and Mining Co. v. Schuh?

      Issue two: Did the Water Court err in deciding whether to apply claim preclusion
      doctrines to limit Granite County’s arguments concerning application of the
      Schuh Decree?

                 FACTUAL AND PROCEDURAL BACKGROUND

¶3    This case arises from McDonald’s objection to three water right claims owned by

Granite County, 76GJ 40733-00, 76GJ 94401-00, and 76GJ 94402-00. The County’s

water claims all involve its storage of Flint Creek water in Georgetown Lake reservoir.

McDonald claims senior water rights in the natural flow of Flint Creek, which she diverts

from the Creek below Georgetown Lake. Both the County claims and McDonald’s

objections arise from the terms of the 1906 Decree in Montana Water, Electric and

Mining Co. v. Schuh, by the Circuit Court of the United States, Ninth Circuit, District of

Montana. Both parties are successors in interest to water rights decreed to parties in the

Schuh case. Granite County is a successor to the plaintiff Montana Water, Electric and

Mining Company, and McDonald is a successor to one of the defendants.

¶4    The County’s predecessors built a dam on Flint Creek, creating a reservoir now

known as Georgetown Lake. The purpose of the reservoir was to generate electric power.

The County owns the dam and hydroelectric facility, which it acquired from the Montana

                                            2
Power Company in 1997. The operation of the facility is subject to regulation by the

Federal Energy Regulatory Commission (FERC). Two of the County’s water rights used

in the reservoir-hydroelectric facility arise from the Schuh Decree while the third is a

subsequent use right. The County’s rights total 1200 miner’s inches1 or 30 cubic feet per

second. The water used for power generation is returned to Flint Creek below the dam.

                                STANDARD OF REVIEW

¶5     This Court reviews a lower court’s interpretation of a judgment as a question of

law to determine whether it is correct. Harland v. Anderson Ranch Co., 2004 MT 132,

¶ 20, 321 Mont. 338, 92 P.3d 1160.

                                        DISCUSSION

¶6     Issue one: Did the Water Court err in its interpretation of the 1906 decree in the
       case of Montana Water, Electric and Mining Co. v. Schuh?

¶7     McDonald objected to the County’s water right claims in proceedings before the

Water Court, contending that the Schuh Decree requires the County to maintain a

constant flow of 30 CFS in Flint Creek below the Georgetown Lake dam during irrigation

season, regardless of the amount of natural flow into the Lake. McDonald requested that

“information remarks” be included with the abstract of each of the County’s water rights

from Flint Creek, to provide as follows:

       At all times during the irrigation season of each year the owner of this right
       is to let, turn down and cause to flow into the Flint Creek channel below the
       power generation facilities not less than 1200 miner’s inches (30 CFS) of
       water.


       1
        A miner’s inch of water is equal to a flow of 2.5 cubic feet of water per second. Section
85-2-103(2), MCA.
                                                3
Granite County counters that the downstream irrigators are entitled to have the natural

inflow of Flint Creek released below the dam, but that it is not required to release storage

water from the reservoir when the natural inflow from Flint Creek falls below 30 CFS.

Granite County contends that its obligation to McDonald is to assure that the natural

inflow of Flint Creek passes through Georgetown Lake and the hydroelectric facility for

release back into the natural channel.

¶8     The Water Court defined “natural flow” for purposes of this case as the amount of

water that would flow through a stream if there were no interference from the dam. The

Water Court defined storage water as impoundment of the natural flow of a stream for

use during times of low natural flow.

¶9     The Water Court considered the terms of the Schuh Decree as it affected the

respective rights of the parties, summarized as follows: Georgetown Lake was created in

1901 when the Montana Water, Electric Power and Mining Company (the Company)

built a dam across Flint Creek, creating Georgetown Lake. The Company brought the

Schuh action because of claims by downstream irrigators that the reservoir was

interfering with their senior water rights. The Schuh Decree determined that the average

flow of Flint Creek “has not exceeded and does not exceed” 1200 miner’s inches of

water, but the Decree did not define the time of the year covered by that determination.

The Water Court construed that flow finding to apply to the natural flow of Flint Creek

during the irrigation season because the dispute before the Schuh Court pertained to

disputes over irrigation rights. The Water Court determined that the Schuh Court’s

reference to an average flow “impliedly recognizes that natural flows vary from season to

                                             4
season and from year to year, with actual flows often falling either above or below the

described average” which is “normal on Montana streams.”

¶10    The Schuh Court determined that the Company returned 1200 miner’s inches of

water to Flint Creek “without deterioration in quality or quantity,” and that the Company

had not impeded “the ordinary and natural flow or passage of the water of said Flint

Creek.” Therefore, the Schuh Court concluded that none of the downstream water users

had been damaged by operation of the dam and hydroelectric plant. The Water Court

determined that these statements by the Schuh Court “recognize that the [downstream

water users] rights were based on natural flow.”

¶11    The Schuh Decree also included a determination of the water rights of the

downstream appropriators, totaling about 5000 miner’s inches of water. The Decree

listed the flow of the appropriation right of each downstream appropriator for irrigation

purposes at the water duty of one and one half miner’s inches of water per acre. While

most of the downstream rights were senior to the Company’s rights, the Decree did not

grant any downstream user a right in the storage water behind the Georgetown Lake dam.

The Water court noted that the Schuh Decree entitled the Company to continue using its

water rights as long as it “uses the water in such a manner that every appropriator further

down the stream shall have, during the irrigating season of each year, the use and

enjoyment of it substantially according to its natural flow.” (Emphasis added.) The

Water Court reasoned that the term “every appropriator” must cover only appropriators

with rights senior to those held by the Company, because the Company had no duty under



                                            5
the principles of prior appropriation to preserve the flow of Flint Creek for junior

appropriators.

¶12   The root of the present controversy is the statement in the Schuh Decree that

during the irrigation season the Company must “let, turn down and cause to flow in the

channel of said creek, to-wit Flint Creek, below its electric plant, not less than 1200

miner’s inches of water.” The Schuh Court enjoined the Company from “diverting from

the channel of Flint Creek the water herein decreed to [downstream users].” At the same

time, the Schuh Court recognized that the downstream users’ rights were limited to the

natural flow of Flint Creek, enjoining them from demanding that the Company release

“any greater amount of water than the average natural flow of said stream which in the

irrigating season of each year does not exceed 1200 miner’s inches or 30 cubic feet per

second of water.” The Water Court determined that this language supported Granite

County’s argument that the Schuh Decree did not require it to release storage water to

benefit downstream users.

¶13   Both sides moved for summary judgment in the Water Court, McDonald relying

upon the portion of the Schuh Decree that ordered that 1200 miner’s inches must be

discharged into Flint Creek “at all times” during the irrigation season. The Water Court

found that McDonald’s position conflicts with the express recognition in the Schuh

Decree that the rights of the downstream users were limited to the natural flow of Flint

Creek and with the injunction against the downstream users from demanding any more

than the natural in-flow of Flint Creek. The Water Court found no indication that the

Schuh Court intended to depart from the established Montana precedent that “makes a

                                           6
clear distinction between the natural flow rights held by McDonald and the storage rights

held by Granite County.”

¶14    The Water Court explained that limiting the downstream users to the natural flow

of Flint Creek was consistent with established Montana law. The Water Court cited

Beaverhead Canal Co. v. Dillon Electric Light & Power, 34 Mont. 135, 140, 85 P. 880,

882 (1906) (appropriator’s rights are limited to the natural conditions of the stream at the

time of the appropriation); Kelly v. Granite Bi-Metallic, 41 Mont. 1, 108 P. 785 (1910)

(stored water is not available to satisfy rights of downstream users); Donich v. Johnson,

77 Mont. 229, 250 P. 963 (1926) (downstream users had the right to use the natural flow

of the stream to the extent of their appropriations); and Federal Land Bank v. Morris, 112

Mont. 445, 116 P.2d 1007 (1941) (water released from artificial impoundments is not part

of the natural flow). The principle of separating stored water from the natural flow is

recognized by Montana statute, § 85-2-411, MCA.

¶15    The Water Court summarized the relationship between upstream storage and

downstream senior appropriators:

               To summarize, downstream appropriators of irrigation rights with
       senior priority dates are entitled to the natural flow of a stream as it existed
       at the time of appropriation but they cannot demand release of water from
       storage when natural flows are unavailable. This has long been the rule in
       Montana. And, although the Schuh Decree did not expressly state this rule,
       the language of the Decree implicitly recognizes it.
               The Schuh Decree’s reference to natural flow was consistent with
       the law applicable to storage rights. That law required operators of
       reservoirs to make the natural flow of a stream available to senior
       downstream appropriators during time of shortage. Under this rule, natural
       flow can only be stored when there is enough water to satisfy senior rights

                                              7
       or when senior rights are not being used. At the same time, the law on
       storage does not require release of lawfully impounded storage water when
       natural flows drop below the amounts needed by downstream irrigators.

The Water Court also rejected McDonald’s contention that the Schuh Court made a

factual finding that “natural flows in Flint Creek equal 30 CFS every day of the irrigation

season.” To the contrary, the Water Court determined that read in context, the Schuh

Decree enjoined the downstream users’ demands for water beyond a greater amount of

water than the amount of natural flow of the stream above the dam. Further, the water

Court determined that the statement in the Decree that the flow of Flint Creek “has not

exceeded and does not exceed twelve hundred (1200) miner’s inches” was only an

observation that natural flows average that amount of water.            The Water Court

determined that the Court in Schuh was undoubtedly aware “that stream flows vary from

year to year and from month to month within the same year.” In conclusion, the Water

Court determined that the Schuh Decree’s instruction to release 1200 miner’s inches “at

all times” was designed to ensure that whatever the Company used for hydroelectric

generation was returned to the stream rather than being diverted elsewhere. “It was not a

literal command to release 1200 miner’s inches every day of the irrigation season

regardless of how much water was naturally available in Flint Creek.”

¶16    Accordingly, the Water Court denied McDonald’s motion for summary judgment

and denied McDonald’s request to add “information remarks” to the statements of the

County’s water rights.




                                            8
¶17    Turning to the County’s motion for summary judgment, the Water Court reiterated

its construction that the Schuh Decree did not direct that the downstream irrigators

receive a benefit—mandatory release of storage water—that the law does not provide.

The Water Court determined that water lawfully impounded in Georgetown Lake is not

“subject to a servitude in favor of downstream irrigators requiring releases to supplement

the natural flows of Flint Creek.”

¶18    The Water Court concluded:

              The Court in Schuh did not intend to obligate the owner of
       Georgetown Lake to supplement the natural flows of Flint Creek with
       storage water. Granite County’s water rights are not subject to a condition
       requiring use of storage water from Georgetown Lake to maintain 30 CFS
       flows in Flint Creek throughout the irrigation season.

The Water Court granted summary judgment to Granite County, holding that its water

claims to Flint Creek “are not subject to a servitude in favor of McDonald requiring

releases of storage water to supplement the natural flows of Flint Creek.” McDonald

appeals.

¶19    This Court reviews the Water Court’s interpretation of a prior decree as an issue of

law, to determine whether it is correct. Harland, ¶ 20; Levens v. Ballard, 2011 MT 153,

¶ 10, 361 Mont. 108, 255 P.3d 195.

       Judgments are to have a reasonable intendment; where a judgment is
       susceptible of two interpretations the one will be adopted which renders it
       the more reasonably effective and conclusive and which makes the
       judgment harmonize with the facts and law of the case. It is imperative, in
       view of the contradictory findings and conclusions of the court in the Smith
       and consolidated decrees, to ascertain the intention of the court. A decree


                                            9
       will not be construed so as to result in a positive wrong where that result
       can possibly be avoided.

Gans & Klein v. Sanford, 91 Mont. 512, 522, 8 P.2d 808, 811 (1932) (internal citations

omitted). When a decree is obscure or ambiguous the reviewing court may “refer to the

record in the original case,” Harland, ¶ 23, and a decree is ambiguous “if reasonable

persons differ as to its effect and meaning.” Harland, ¶ 24.

¶20    McDonald argues that the Schuh Decree was ambiguous and that the Water Court

failed to properly apply the pleadings in that case while interpreting the Decree. She

argues that the “entire purpose” of the action was to “determine a quantified flow” that

the dam operator must release for downstream users. To the contrary, the Water Court

expressly construed the Schuh Decree to require the County to release the natural inflow

of Flint Creek during irrigation season, but to not require release of stored water to do so.

This is entirely consistent with the pleadings that McDonald cites.

¶21    While McDonald also asserts that the Decree should be read as expressing the

intent to continue the “historic” operation of the dam, this overlooks the facts that the

dam was built in 1901 and the Decree was issued in 1906. So, while there was some

record of the operation of the dam before the case was submitted for decision, it can

hardly be relied upon as an “historic” record. The Schuh Decree was clearly issued in the

context of established prior appropriation law. The Decree listed the name of each

appropriator with rights from Flint Creek for irrigation purposes, along with the flow rate

of each right and, by implication, the number of acres to be irrigated based upon the

express water duty of one and one half miner’s inches of water per acre. This is similar

                                             10
to many other water adjudication decrees of the early twentieth century under Montana’s

law of prior appropriation. Gwyn v. City of Philipsburg, 156 Mont. 194, 478 P.2d 855

(1970) (City owned a dam that diverted the outflow of a mountain lake from Fred Burr

Creek, into its municipal water system. Upon suit by downstream appropriators on Fred

Burr Creek, this Court held that the City was required to release water “not to exceed” the

natural flow from the lake whenever the water in the stream below was less than the

amount required to satisfy downstream rights.). The Water Court therefore properly

construed the prior Decree by concluding that a downstream appropriator has no rights to

water stored behind an upstream dam as long as the dam operator releases the natural

inflow into the stream below the dam.

¶22    The Water Court was tasked with construing and applying a decree drafted over

100 years ago and did so consistently with the applicable law.

¶23    Issue two: Did the Water Court err in deciding whether to apply claim preclusion
       doctrines to limit Granite County’s arguments concerning application of the
       Schuh Decree?

¶24    The Water Court considered McDonald’s argument that principles of claim

preclusion estopped the County from contending that it was not required to release 30

CFS from Georgetown Lake continuously during the irrigation season. First, McDonald

argued that res judicata barred the County from “attempting to redefine its rights” already

determined in the Schuh Decree. The Water Court disagreed, noting that both parties

“agree the narrow issue is interpretation of the rights already recognized in the Schuh

Decree” and that “[i]nterpreting a decree is not the same as re-litigating matters already



                                            11
decided in it.” For similar reasons, the Water Court determined that the County was not

collaterally estopped by the existence of the Schuh Decree.

¶25    The Water Court considered McDonald’s argument that judicial estoppel barred

the County from arguing that it was not required to make continuous releases of 30 CFS

of water during the irrigation season. McDonald relied upon a statement by the County

in FERC and other prior proceedings about its obligations under the Schuh Decree. The

Water Court cited Watkins Trust v. Lacosta, 2004 MT 144, ¶ 33, 321 Mont. 432, 92 P.3d

620, for the principles of judicial estoppel, the purpose of which is to “suppress fraud and

prevent abuse of the judicial process by deliberate shifting of positions to suit the

exigencies of a particular action.” The Water Court determined that McDonald’s judicial

estoppel argument failed because that doctrine “does not apply to changes of position

relating to matters of law. Interpretation of the Schuh Decree involves a statement of

opinion regarding a matter of law, not a statement of fact.” Finding no evidence that the

County intended to commit fraud or abuse the judicial process, the Water Court found

that McDonald did not demonstrate all the elements of judicial estoppel.

¶26    The Water Court dismissed McDonald’s argument that principles of claim

preclusion estopped the County from contending that it was not required to release 30

CFS from Georgetown Lake continuously during the irrigation season. The Water Court

concluded:

             Although Granite County has taken contradictory positions in other
       proceedings, those proceedings did not involve McDonald, and there is no
       evidence that Granite County meant to perpetuate a fraud or abuse the



                                            12
       judicial process. Granite County’s arguments in this case are not precluded
       by the doctrines of res judicata, judicial estoppel or collateral estoppel.

We agree with the Water Court’s conclusion that res judicata does not bar the County’s

arguments made in this case. The County is not attempting to re-litigate settled issues,

but, like McDonald, is only arguing its case for how the ambiguities in the Schuh Decree

should be construed. The Water Court noted that both parties “agree the narrow issue is

interpretation of the rights already recognized in the Schuh Decree” and that

“[i]nterpreting a decree is not the same as re-litigating matters already decided in it.” For

similar reasons, we agree with the Water Court’s determination that the County was not

collaterally estopped in its arguments by the existence of the Schuh Decree.

¶27    Therefore, the Water Court properly considered and applied the principles of claim

preclusion relied upon by McDonald.

¶28    The Water Court’s decision is affirmed.



                                                  /S/ MIKE McGRATH


We Concur:


/S/ MICHAEL E WHEAT
/S/ PATRICIA COTTER
/S/ BETH BAKER
/S/ JAMES JEREMIAH SHEA
/S/ JIM RICE




                                             13
Justice Laurie McKinnon, specially concurring.

¶29    I agree with the Court’s conclusion that “a downstream appropriator has no rights

to water stored behind an upstream dam as long as the dam operator releases the natural

inflow into the stream below the dam.” Opinion, ¶ 21. I write separately, however, to

address what I believe was ultimately decided in the Schuh Decree and to recognize what

remains unresolved between the parties. The provisions of the Schuh Decree must be

read together, along with the findings regarding natural flow.

¶30    The Schuh Decree recognized that the Company was the owner of, and entitled to,

a total of 1200 miner’s inches of Flint Creek by virtue of certain appropriations made in

1888, 1889, and 1891. Schuh Decree, ¶ 2. The purpose and beneficial use of these

appropriations was to generate electricity. Schuh Decree, ¶ 2. In 1901, as owner of these

appropriations, the Company’s predecessor completed construction of a dam, begun in

1891, for the purpose of storing water diverted pursuant to its appropriations. Schuh

Decree, ¶ 2. In 1902, the Company filed a complaint in federal district court requesting a

determination of the “amounts of water which your orator shall be compelled to allow to

flow from the said storage reservoir during the irrigation season . . . .”

¶31    The Schuh Decree must be evaluated within the context of the Company’s request

to establish a quantity or amount of instream flow. The Schuh court found specifically

that “the amount of water reasonably and necessarily required to run and operate said

electric plant of the complainant to its full capacity, and which has been and now is so

used by the complainant, is about 30 second feet, or 1200 miner’s inches of water.”

Schuh Decree, ¶ 5. Significantly, the Schuh Decree further found that through its electric

                                              14
power plant, the Company has permitted to flow down through the natural channel 1200

miner’s inches of water, in such a manner that none of the downstream users have been

damaged. Schuh Decree, ¶¶ 7, 14. More specifically, the Schuh court determined that

the Company

       had not – during the irrigating seasons since the construction of its dam,
       detained or deprived the defendants of, the ordinary and natural flow or
       passage of the water of said Flint Creek, that is in quantities as the same
       would naturally run at such times, otherwise than is necessary to the
       reasonable and proper operation of its electric plant and machinery.

Schuh Decree, ¶ 9. The Schuh court determined the natural flow rate of Flint Creek

above the dam to be 1200 miner’s inches, which the Company was entitled to divert as

long as it was returned to Flint Creek, in the amount of 1200 miner’s inches, for the lands

of downstream users. Schuh Decree, ¶ 4.

¶32    Importantly, the Schuh court continued to recognize entitlement by downstream

water users to appropriate amounts greater than 1200 miner’s inches, many of which had

senior appropriation dates to the Company. Schuh Decree, ¶ 15. As observed by the

Water Court, those combined rights far exceeded 1200 miner’s inches. Therefore, the

Schuh Decree determined only the amount of instream flow the Company was entitled to

divert and, thereafter return, to Flint Creek.      The Schuh court’s conclusion that

downstream users are “enjoined and restrained” from “obstructing or interfering with the

use and enjoyment of said dam and reservoir and the storing of water therein,” and that

the natural flow was 1200 miner’s inches, refers to the amount of water the court

previously established as the natural flow of Flint Creek, which the Company

demonstrated it could use and return to Flint Creek without harm to downstream

                                            15
appropriators. Schuh Decree, ¶ 20. Downstream appropriators were restrained from

demanding “any greater amount of water than the average natural flow” be returned for

downstream appropriators. Schuh Decree, ¶ 20. Therefore, I agree, based on the entirety

of the Schuh Decree, that the Company is not required to release storage water in favor of

downstream users to supplement natural flows of Flint Creek which are below 1200

miner’s inches. The Schuh Decree clarified instream flow which, if available, could be

diverted by the Company, and returned for the lands of downstream users.

¶33    While the Schuh Decree made a specific finding that quantifies Flint Creek’s

average natural flow above the dam, it did not enjoin downstream users with senior rights

from appropriating amounts in excess of 1200 miner’s inches when the flow exceeded

1200 miner’s inches in Flint Creek. These downstream rights, together with those of the

Company, remain subject to the doctrine of prior appropriation.         The Water Court

correctly recognized that the law requires operators of reservoirs to make the natural flow

of a stream available to senior downstream appropriators during times of shortage. Thus,

natural flow can be stored only when there is enough water to satisfy senior rights, or

when senior rights are not being used.

¶34    Therefore, I would clarify and definitively reject McDonald’s argument that the

Schuh Decree enjoins downstream users from appropriating no more than 1200 miner’s

inches during the irrigation season. In my opinion, the Schuh Decree established a

quantity of natural flow above the dam only, and it did not enjoin downstream users with

senior rights from appropriating amounts in excess of 1200 miner’s inches when the flow

exceeded 1200 miner’s inches in Flint Creek. It similarly did not compel the Company to

                                            16
draw from its reservoir to supplement instream flow when those rates were below 1200

miner’s inches—the amount the Schuh Decree quantified as a finding of fact as the

average instream flow.


                                      /S/ LAURIE McKINNON




                                        17
