NO. 85-554 INTHE SUPREME COURT OF THE STATE OF MONTANA 1986

KINGSBURY DITCH CO., Petitioner and Respondent,

DEPARTMENTOF NATURAL RESOURCES AND CONSERVATION,et al., Respondents and Appellants.

F..PPEAL FROM: DistrictCourt of the First JudicialDistrict, Inand for the County of Lewis & Clark, The Honorable

### W. W. Lessley, Judgepresiding.

COUNSELOF RECORD:

ForA.ppellant: Jardine,Stephenson,Blewett & Weaver;K. Dale Schwanke argued for PonderaCanal,Great Falls, Montana CandaceWest,Dept. ofNatural Resources, Helena, Montana; Donald D. MacIntyre argued for Dept. of Natural Resources, Helena,Montana

For Respondent: Loble & Pauly; LesterLoble argued forKingsbury DitchCo., Helena,Montana

Submitted: September 11, 1986 Decided: October 9,1986 

### OCT

## 9

# -~86 Filed:

Clerk

### Mr. Justice William E. 

### Hunt, Sr., delivered the Opinion of theCourt.

Kingsbury Ditch Company filed an application with the Department of Natural Resources and Conservation (DNRC) to change the point of use of a water right as required by the Water Use Act of 1973, 5 

### 85-2-402, MCA (1983). Pondera County Canal and Reservoir Company and many others filed objections to the proposed change, and a hearing date was set. During the course of the proceedings, the DNRC hearing examiner made several procedural rulings. Kingsbury asked the Water Court to review two of those rulings. The Water Court reversed both rulings. The DNRC and Pondera appeal. Wevacate and remand. Pondera raises this issue on appeal. Did judicial review properly lie from the interlocutory rulings of the hearing examiner? Both appellants raise the following two issues: (1) Whether the District Court erred in ordering that the burden ofproof must be placed on the objector in a contested case hearing for a changeofuse application before the DNRC? (2) Whether the District Court erred in ordering the hearing examiner to impose discovery sanctions prior to hearing to assure compliance with petitioner's request for discovery? Kingsbury Ditch Company has a pre-1973 water right. Subsequent to the passage of the Water Use Act of 1973,they applied forDNRC approval to change the point ofuse of that water right as required by 5 

### 85-2-402,MCA (1983). Public notice of the proposed change was given and a prehearing conferencewas scheduled. Thehearing examiner detailed theissues for the prehearing conference in her order of October 18,1983. The order read: The issues i.n the Hearing will be whether the Applicant has shown existence of the statutory criteria for change in place and method of use pursuant toMCA 

### 5 85-2-402. The Objectors

## -- have the burden of proof to show that their rights will be 

### --- -- adverseq affected 

### by the change proposed 

### by the Applicant. (Emphasisadded.) This order was clarified by another order issued by the hearing examineron October 19, 1984. Itread: [A!s in all administrative proceedings, the 

### - Applicant bears the burden of pursuasion (sic) on 

### - all ultimate issues, i.e.: the scope of the existing right subject to the change request, and lack of adverse affect to other appropriators. The Objectors herein bear the burden of production on the scope [and] existence of their riqhts,and the kind and character of adverse affect alleged.

(Emphasisadded.) After the prehea.ring conference was sched.uled, the hearing examiner ordered all parties to participate in discovery. Kingsbury served a discovery request on all parties on December 21, 1983. On December 23, 1983 the hearing examiner, in response to Kingsbury's motion, issued an order for discovery, requiring all parties to respond within 30 days to Kingsbury's discovery request. On January 27, 1984,Kingsbury moved the hearing examiner to dismiss the objections of the objectors who failed to respond to the discovery request. Thehearing examiner stated that shehas discretion as a hearing examiner to order discovery and impose sanctions for failure of a party to complywith her order. She noted that
numerous objectors were unrepresented by counsel, and their ability to respond.to discovery requests was limited. One such objector who attended the prehearing status conference indicated a willingness to respond to the discovery request but an understandable inability to comprehend exactly what a

### response should entail. The hearing examiner ruled that dismissal is a harsh sanction, especially against one unrepresented by counsel in an administrative proceeding where water users typically appear

### pro

# E. Further, there had been no allegations of bad faith on the part of non-responsive parties. She held there was a less drastic
means to protect Kingsbury's fundamental right to fairness and proceduraldueprocess. She denied themotion todismiss the objections without prejudice and ruled that if the objectors appeared at the hearing with substantive testimony of which Kingsbury was unaware, a continuance sufficient for Kingsbury tomeet the evidencewould be granted. Kingsbury sought judicial review of these two orders in the District Court. Judge Loble deemed himself disqualified and Judge Lessley assumed jurisdiction. The facts on appeal
were stipulated to and following briefing Judge Lessley reversedboth orders. He ruled:

[Tlhe Hearing Examiner below will return to her original Order

# .. .namely "Theobjectorshave the burden of proof to show that their rightswill be adversely affected by the change proposed by the Applicant." and

[Bleforethe time set for the next hearing in this Cause, the Examiner shall prepare such Orders as are necessary to assure compliance with Petitioner's request for Discovery; that such Order will. carry the condition of Sanctions for failure to comply. On appeal, Pondera argues judicial review was not appropriate. Pondera contends that pursuant to MAPA, 

### the only types of administrative orders that are subject to judicial review are final decisions in which the aggrieved party has exhausted his administrative remedies. Section2-4-702,MCA. The exception to that rule is $ 2-4-701,MCA, which allows review of a "preliminary, procedural, or intermediate agency action or ruling

# . . . if review of the final agency decision would notprovide an adequate remedy." Pondera contends adequate relief is available by way of a reviewof the finalagency decision. Pondera also argues that pursuant to $ 2-4-704, MCA, when judicial review is undertaken, the reviewing court may
reverse or modify "if substantial rights of the appellant have been prejudiced" by administrative findings which are: violative of constitutional or statutory provisions; in
excess of the statutory authority of the agency; made upon unlawful procedures; affected by other error of law; arbitraryor capricious; characterizedby abuse of discretion
or clearly unwarranted exercise of discretion. Pondera argues no prejudice to Kingsbury has ever been shown or alluded to and that the reviewing court did not have grounds to reverse. The orders appealed here are clearly intermediate, procedural orders of the hearing examiner. There has been no final decision as yet, nor an exhaustion of administrative remedies as required by S 2-4-702, MCA. A preliminary, procedural, or intermediate agency ruling may be reviewed if review of the final agency action would not provide an adequate remedy. Section 2-4-701, MCA. There has been no showing in this case that a reviewof the finalagency action would provide an inadequate remedy. We therefore hold that judicial review did not lie from the orders of the hearing examiner. Since we have decided that judicial review is not proper,we decline to address the two remaining issues raisedby appellants, instead we vacate the decision of the lower court and remand for furtherproceedings.

We Concur:

Chief Justice

stices