                                                                                   August 10 2012


                                     DA 11-0340

           IN THE SUPREME COURT OF THE STATE OF MONTANA
                                     2012 MT 169



CHARLES E. FELLOWS, an Individual,

          Plaintiff and Appellant,

     v.

THE OFFICE OF WATER COMMISSIONER for
the Perry v. Beattie Decree Case No. 371,
and all JOHN DOE WATER USERS,

          Defendants and Appellees.


APPEAL FROM:      District Court of the Ninth Judicial District,
                  In and For the County of Teton, Cause No. DV 11-0110
                  Honorable Laurie McKinnon, Presiding Judge



COUNSEL OF RECORD:

           For Appellant:

                  Peter G. Scott (argued); Gough, Shanahan, Johnson & Waterman, PLLP,
                  Helena, Montana (for Charles Fellows)

           For Appellees:

                  Michael J. L. Cusick (argued); Attorney at Law, Bozeman, Montana (for
                  Patrick Saylor, Ottis and Sylvia Bryan and Farmers Cooperative Canal
                  Company)

                  Holly Jo Franz (argued); Franz & Driscoll, PLLP, Helena, Montana (for
                  Teton Cooperative Reservoir Company)

                  John Bloomquist; Doney, Crowley, Payne. Bloomquist, P.C., Helena,
                  Montana (for Teton Cooperative Canal Company, Eldorado Cooperative
                  Canal Company)

                  David Weaver; Nash, Zimmer, Weaver & Grigsby, PLLC, Bozeman,
                  Montana (for John E. Peebles and William S. Peebles)
                                   Argued: May 23, 2012
                                 Submitted: May 30, 2012
                                  Decided: August 10, 2012

Filed:
         __________________________________________
                           Clerk




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Chief Justice Mike McGrath delivered the Opinion of the Court.


¶1     Charles E. Fellows appeals from the District Court’s order dismissing his

complaint. We reverse and remand for further proceedings.

                 PROCEDURAL AND FACTUAL BACKGROUND

¶2     Fellows owns a water right in Spring Creek near Choteau, Montana, decreed in

1892 in Sands Cattle and Land Co. v. Jackson, Case No. 727. He claims that the flow of

Spring Creek is or was for many years recharged by water seeping from the natural

channel of the Teton River. He claims that the practice of diverting water from the

natural channel of the Teton River, implemented by the District Court’s water

commissioner on the Teton, has adversely affected the water available to satisfy his water

right in Spring Creek.

¶3     A portion of the water rights used in the upper reaches of the Teton River was

decreed in 1908 in Perry v. Beattie, Case No. 371.1 One of the senior (in time) water

rights decreed in Perry was a right to a flow rate of 300 miner’s inches of water decreed

to the Choteau Cattle Company. 2 At the time of the Perry decree Choteau Cattle’s point

of diversion was, and still is, located downstream from a porous gravel section of the

Teton riverbed near Choteau, sometimes referred to as the Springhill Reach. At the time

of the Perry decree and for many years thereafter, Teton River water flowed down its

natural channel and through the Springhill Reach to where Choteau Cattle exercised its

1
  The decrees in Sands and in Perry were entered by the Eleventh Judicial District Court
for Teton County, which is now in the Ninth Judicial District.
2
  A miner’s inch is a method of measuring the flow of water, and 100 inches is equivalent
to 2.5 cubic feet of water per second. Section 85-2-103, MCA.
                                            3
water right. In order for Choteau Cattle to exercise its senior right, more than 300

miner’s inches of water had to remain in the channel to account for the water that seeped

into the ground as the River flowed through the Springhill Reach. Fellows claims that

this seepage water recharged Spring Creek and is a source of the water that he uses from

Spring Creek.

¶4    In the 1950s or 1960s (the date is not clear and may be as late as the 1970s) the

District Court’s water commissioner administering the Perry v. Beattie water rights

pursuant to § 85-5-101, MCA, began diverting Choteau Cattle’s 300 miner’s inches of

water out of the Teton and into the Bateman Ditch, which transports the water around the

Springhill Reach before returning it to the natural channel just above Choteau Cattle’s

point of diversion. In some times of the year no water at all flows through the natural

channel of the Teton River because of the diversion through the Bateman Ditch. The

Bateman Ditch diversion was implemented without express approval of the District Court

and apparently without any other agreement in writing. The Bateman diversion was

implemented for the benefit of upstream appropriators with rights junior to Choteau

Cattle’s right, enabling them to exercise their water rights without having to allow more

than 300 inches to flow through the Springhill Reach to arrive at Choteau Cattle’s point

of diversion. While some of the benefitted users hold rights under the Perry decree, the

practice also benefits one holder of a non-decreed right. Choteau Cattle does not claim

any rights to use the Bateman Ditch and does not claim the Ditch as a point of diversion.

¶5    In February, 2011, Fellows filed a complaint against the water commissioner

administering the Perry v. Beattie decree.      The complaint contained a claim as a

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dissatisfied water user under § 85-5-301(1), MCA; claims based upon private and public

nuisance and negligence; and requests for a writ of prohibition, an injunction and

declaratory relief. The District Court ordered that Fellows serve notice of his lawsuit on

persons who hold decreed water rights in the Teton River.              The District Court

subsequently ordered briefing on several issues, including whether Fellows had standing

to sue under § 85-5-301(1), MCA, as a dissatisfied water user.

¶6     Fellows claims that diverting the flow of the Teton River before it gets to the

gravel section of the riverbed diminishes the flow of Spring Creek and interferes with his

Spring Creek water right.      He claims that Spring Creek and the Teton River are

hydrologically connected via water seepage from the Springhill Reach; that he can prove

the connection; that a source of his right is the Teton River; and that his Spring Creek

right is senior to many of the rights later decreed in Perry v. Beattie. Fellows claims that

as a matter of law he has the right to have the flow of the Teton River remain as it was at

the time of the Perry decree and for many decades thereafter: flowing down the natural

channel and through the Springhill Reach. He contends that the water commissioner’s

practice of diverting the Teton River around the Springhill Reach is contrary to the Perry

decree, and that it adversely impacts his Spring Creek water right. He contends that there

is no justification for diverting Choteau Cattle’s water down the Bateman Ditch,

especially since Choteau Cattle expressly disclaimed any right to use the Ditch to satisfy

its water right.

¶7     Montana has a statewide process for the adjudication of water rights pursuant to

Art. IX, sec. 3(4) of the Montana Constitution. Montana Trout Unlimited v. Beaverhead

                                             5
Water Co., 2011 MT 151, ¶ 2, 361 Mont. 77, 255 P.3d 179. The Legislature created a

Water Court presided over by a chief and an associate water judge with jurisdiction that

encompasses “all matters relating to the determination of existing water rights within the

boundaries of the state of Montana.” Section 3-7-224(2), MCA. The law also provides

for four water divisions presided over by specifically designated water judges with

authority to adjudicate existing water rights. Section 3-7-101, MCA. Finally, state

district court judges have jurisdiction over certain cases that involve existing water rights

and supervision of the distribution of water. Title 3, Ch. 7, Pt. 2, MCA; Title 85, Ch. 2,

MCA. The rights of all appropriators in the Teton River and Spring Creek are currently

being adjudicated by the Montana Water Court. The Water Court has issued temporary

preliminary decrees but not all objections have been resolved and the Water Court has not

issued a final decree.

¶8     After briefing and oral argument the District Court dismissed Fellows’ complaint

on the ground that it failed to state a claim upon which relief could be granted under M.

R. Civ. P. 12(b)(6). The District Court held that Fellows lacked standing to bring an

action under § 85-5-301(1), MCA, as a dissatisfied water user unless he could prove a

hydrological connection between Spring Creek and the Teton River. Further, the District

Court determined that while Fellows had prayed for a declaratory judgment, no such

declaration could be issued without first determining the Spring Creek-Teton River

connectivity issue. The District Court determined that its authority under § 85-5-301(1),

MCA, was limited to enforcing the Perry decree, and that it did not have authority to

determine Fellows’ Spring Creek right. However, the District Court did recognize that it

                                             6
could protect Fellows’ interests by granting “relief appropriate and necessary” pending

final adjudication of all the rights by the Water Court.

¶9     The District Court determined that Fellows was not entitled to a writ of prohibition

to halt the water commissioner from diverting the Choteau Cattle water through the

Bateman Ditch. The Bateman diversion, the court determined, is a way to maximize the

beneficial use of Teton River water for appropriators who hold rights under the Perry

decree and is therefore not unlawful. In addition, the court determined that Fellows had

an adequate remedy at law under § 85-2-406(2), MCA, which allows a district court to

certify certain water distribution controversies to the Water Court. Finally, the court

determined that all of Fellows’ other causes of action could only be addressed if he

brought an action under § 85-2-406(2), MCA, and that the water commissioner was

entitled to judicial immunity under § 2-9-112, MCA.

¶10    The District Court held that Fellows could file an amended complaint requesting

certification to the Water Court under § 85-2-406(2), MCA, and held in abeyance the

claims for injunctive or declaratory relief pending anticipated action by the Water Court

under that statute. Fellows did not file an amended complaint, but instead appealed to

this Court.

                               STANDARD OF REVIEW

¶11    A district court’s decision dismissing a complaint under M. R. Civ. P. 12(b)(6) is

reviewed as an issue of law to determine whether it is correct. This Court will construe

the complaint in a light most favorable to the plaintiff, deeming all factual allegations to

be true. This Court will affirm the dismissal only if it finds that the plaintiff is not

                                              7
entitled to relief under any set of facts that could be proven in support of the claims.

Missoula YWCA v. Bard, 1999 MT 177, ¶ 3, 295 Mont. 260, 983 P.2d 933; Hauschulz v.

Michael Law Firm, 2001 MT 160, ¶¶ 7-8, 306 Mont. 102, 30 P.3d 357; Meagher v. Butte-

Silver Bow County, 2007 MT 129, ¶¶13-14, 337 Mont. 339, 160 P.3d 552.

                                     DISCUSSION

¶12    The issue on appeal is whether the District Court properly applied § 85-5-301(1),

MCA, and dismissed Fellows’ complaint for failure to state a claim upon which relief can

be granted.

¶13    Section 85-5-301, MCA, provides, in part, that “[a] person owning or using any of

the waters of the stream . . . who is dissatisfied with the method of distribution of the

waters of the stream . . . by the water commissioner . . . and who claims to be entitled to

more water than the person is receiving . . . may file a written complaint, duly verified,

setting forth the facts of the claim.” This statute, designed to be the “most practical and

effective means yet devised” to effectuate water right decrees, Quigley v. McIntosh, 110

Mont. 495, 508, 103 P.2d 1067, 1073 (1940), forms a basis for Fellows’ complaint.

¶14    The District Court determined that Fellows’ standing to bring a dissatisfied water

user complaint under § 85-5-301(1), MCA, was dependent upon his being able to prove a

hydrological connection between the Teton River and Spring Creek. The court in turn

determined that Fellows had to initiate a separate proceeding under § 85-2-406, MCA, so

that the connectivity issue could be determined by the Water Court.

¶15    Under current Montana law the jurisdiction to determine existing water rights rests

exclusively with the Water Court. Mildenberger v. Galbraith, 249 Mont. 161, 166, 815

                                            8
P.2d 130, 134 (1991). A district court may supervise the distribution of rights to the use

of water which have previously been decreed by a district court. Baker Ditch Co. v.

District Court, 251 Mont. 251, 255, 824 P.2d 260, 262 (1992). However, a district court

currently lacks authority to adjudicate water rights. In re Petition of the Deadman’s

Basin Water Users Association, 2002 MT 15, ¶ 15, 308 Mont. 168, 40 P.3d 387.

¶16    A long line of cases has constrained the application of § 85-5-301, MCA, to

disputes arising within the confines of a prior water rights decree entered by a district

court. The only purpose of a dissatisfied water user petition is to provide a summary

proceeding to enforce rights determined under a prior decree. In re Kelly, 2010 MT 14, ¶

31, 355 Mont. 86, 224 P.3d 640. The “whole question” in such a proceeding is whether

the water commissioner is distributing water to the respective users according to the

applicable decree. Quigley v. McIntosh, 110 Mont. 495, 499-500, 103 P.2d 1067, 1069

(1940); Allen v. Nichols, 143 Mont. 486, 495, 392 P.2d 82, 86 (1964). A district court

hearing a dissatisfied water user’s complaint may not adjudicate water rights, but may

only enforce rights determined in a prior decree. Luppold v. Lewis, 172 Mont. 280, 288-

289, 563 P.2d 538, 542 (1977). Therefore, the duty of the water commissioner appointed

under the Perry decree is to administer the rights determined in that decree, and a petition

filed under § 85-5-301, MCA, complaining of the actions of the commissioner is limited

to consideration of the rights under that decree. Since Fellows does not derive his Spring

Creek water right from the Perry decree, § 85-5-301, MCA, does not provide a

mechanism for him to complain of the actions of the water commissioner under the Perry

decree.

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¶17    Fellows also requested that the District Court issue relief in the form of a

declaratory judgment under §§ 27-8-101, et seq., MCA. The District Court declined to

consider that relief, however, unless Fellows first obtained certification to the Water

Court for a determination of his water right in Spring Creek. However, as the District

Court emphasized, the issue of whether there is a hydrological connection between the

Teton River and Spring Creek is at the heart of this dispute. The declaratory judgment

statutes serve a remedial purpose, and are to be liberally construed to settle and afford

“relief from uncertainty and insecurity with respect to rights, status, and other legal

relations.” Section 27-8-102, MCA. A district court may declare “rights, status, and

other legal relations whether or not further relief is or could be claimed.” Section 27-8-

201, MCA. Declaratory judgment relief has been invoked in cases involving water rights.

Mont. DNRC v. Intake Water Co., 171 Mont. 416, 558 P.2d 1110 (1977) (action seeking

declaration that appropriator did not have a valid water right); McDonald v. State, 220

Mont. 519, 722 P.2d 598 (1986) (original proceeding seeking declaratory judgment as to

the constitutionality of statutes requiring quantification of water rights); and Mustang

Holdings, LLC v. Zaveta, 2006 MT 234, 333 Mont. 471, 143 P.3d 456 (action seeking

declaratory judgment as to whether a party had the right to divert water through a ditch).

¶18    The District Court disposed of Fellows’ complaint on a motion to dismiss under

M. R. Civ. P. 12(b)(6). It is well established that in considering a motion to dismiss the

district court must construe the complaint in a light most favorable to the plaintiff and

must deem all factual allegations of the complaint to be true. Dismissal for failure to

state a claim is proper only if the district court finds that the plaintiff is not entitled to

                                             10
relief under any set of facts that could be proven in support of the claims. Missoula

YWCA, ¶ 3; Hauschulz, ¶¶ 7-8; Meagher, ¶¶13-14.           In this case Fellows’ verified

complaint alleged that the flow of the Teton River through the Springhill Reach is the

source for his decreed water rights on Spring Creek; that the decree in the Perry case

requires that water be delivered to downstream appropriators through the natural channel

of the Teton River, including the Springhill Reach; that long after the decree in the Perry

case the water commissioner altered the method of water distribution on the Teton River

by bypassing and de-watering the Springhill Reach; and that this had impaired his senior

decreed water rights.

¶19    The allegations of Fellows’ complaint, which at this stage are presumed to be true,

are clearly sufficient to invoke the District Court’s power to issue a declaratory ruling.

While Fellows’ ability to prove a hydrological connection between the Teton River and

Spring Creek is clearly a lynchpin of his case, he is not required to prove that connection

to prevent his complaint from being dismissed for failure to state a claim under M. R.

Civ. P. 12(b)(6).

¶20     Montana law recognizes that ground water and surface water may in fact be

connected. Montana Trout Unlimited v. DNRC, 2006 MT 72, ¶ 9, 331 Mont 483, 133

P.3d 224. The District Court determined that Fellows’ standing was a threshold issue that

depended on the existence of a Teton River-Spring Creek connectivity, but then

dismissed the complaint without giving him the chance to prove connectivity and without

assuming the truth of his allegations.



                                            11
¶21    Fellows’ factual allegations and his request for a declaratory ruling are sufficient

to invoke the District Court’s power to issue a declaratory ruling on the issue of

connectivity. The Fellows right was not part of the 1908 adjudication in Perry, but was

decreed in the 1892 Sands case. His right to Spring Creek water cannot be automatically

subordinated to rights decreed in Perry and we agree with the District Court that if

Fellows can prove hydrological connectivity between Spring Creek and the Teton River,

then the next step should be certification to the chief water judge under § 85-2-406(2)(b),

MCA.

¶22    The District Court is reversed and this case is remanded for further proceedings

consistent with this opinion.



                                                 /S/ MIKE McGRATH


We concur:


/S/ JAMES C. NELSON
/S/ PATRICIA COTTER
/S/ MICHAEL E WHEAT
/S/ BRIAN MORRIS
/S/ BETH BAKER
/S/ JIM RICE




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