Opinion ID: 876900
Heading Depth: 1
Heading Rank: 3

Heading: propriety of the awards to the district and department

Text: We turn now to the portion of the District Court decree which established that the District had an existing right to 3,000 miners inches of Sheep Creek. The District is, and at all times relevant hereto was, a corporation incorporated pursuant to the Montana Water District Act. The District plans to divert all available, excess water from Sheep Creek and transport it through Holmstrom's irrigation ditch to a multi-purpose reservoir in the Newlan Creek Watershed. There, the water will be stored until it can be beneficially used by the District or its customers. It is important to note that the District has not actually diverted any water from Sheep Creek; the District is only a prospective user of Sheep Creek. We must determine whether the District complied with the applicable statutes to establish its rights to future use of the excess water. The District contends that its 3,000 miners inches right can be sustained under two alternative statutes. First, that it obtained an existing right in Sheep Creek on or about June 29, 1973, when the Resources Board assigned its rights in Sheep Creek to the District. The Resources Board's rights in Sheep Creek stemmed from a July 25, 1969 filing made by the Resources Board under section 89-121, R.C.M. 1947. The District contends that the written assignment, dated June 29, 1973, was effective to transfer the Resources Board's existing rights to all of the inappropriated water of Sheep Creek and its tributaries to the District. The District's alternate claim, which was permissively raised during trial, is predicated on a section 89-810 filing made by the District on July 11, 1969. In the documents filed with the Meagher County Clerk, the District claimed an existing right to 75 cubic feet (3,000 miners inches) from Sheep Creek. The only party challenging the award made to the District is Ward. Ward contends that the District does not have any existing rights in Sheep Creek and that the District Court's findings to the contrary must be reversed. We shall begin by discussing the District's rights under section 89-121, R.C.M. 1947 (since repealed). Section 89-121 provided:  Appropriation of waters  recording of notice  date of right. In acquiring the rights and administering the terms of this act herein prescribed and established, the board shall not be limited to the terms of the statutes of the state of Montana relating to water rights heretofore enacted; but, in addition thereto, may initiate a right to the waters of this state by executing a declaration in writing of the intention to store, divert or control the unappropriated waters of a particular body, stream or source, designating and describing in general terms such waters claimed, means of appropriation and location of use, and cause said notice to be filed in the office of the county clerk and recorder of the county where the major portion of the means of diversion or control will be located, which right shall vest in such board on the date of the filing of such declaration. It shall be the duty of the county clerk and recorder of each county of the state of Montana on presentation to receive, record and index such declaration, without charge, in the manner prescribed by law relating to notice of water rights. A certified copy of the record of said declaration shall be received as competent evidence in all courts and deemed to be prima facie proof of all matters therein recited.  The priority of right shall date and continue from the time of such filing or recording, provided the means of actual appropriation shall be commenced by actual work of construction within four (4) years from the date of original recording. Change in means or place of diversion or control shall not affect the right of priority, if others are not thereby injured. Ward advances three arguments to support its claim that the District did not obtain any existing rights in Sheep Creek by the June 29, 1973 assignment. First, that the Declaration of Intention to Store, Control and Divert Water which was filed by the Resources Board on July 25, 1969, was invalid because it was executed by an agent of the Resources Board rather than by the chairman of the Resources Board. Ward claims execution of the documents by an agent was expressly prohibited by section 89-135, R.C.M. 1947. Next, Ward argues that the Resources Board had no authority to assign its existing rights in Sheep Creek. Ward argues that any assignment by the Resources Board would be an impermissible delegation of its rights and authority. Finally, Ward argues that the District and the Resources Board do not have any existing rights in Sheep Creek because they failed to commence actual work of construction on a means of diversion within four years from the date of the original section 89-121 R.C.M. 1947 recording (1969). We find that Wards third argument is dispositive for purposes of interpreting section 89-121. Section 89-121 clearly states that the means of actual appropriation shall be commenced by actual work of construction within four (4) years from the date of original recording. In this case, the original recording took place on July 25, 1969. There is no testimony in the record which establishes that any actual construction took place on or before July 25, 1973. Accordingly, the District cannot claim any existing rights under section 89-121, R.C.M. 1947. Any findings or conclusions inconsistent with this opinion must be stricken. However the District also claims water rights by virtue of section 89-810 et seq., R.C.M. 1947. Ward concedes that the District properly filed its notice under section 89-810, R.C.M. 1947. The chief controversy is whether the District complied with the terms of section 89-811, R.C.M. 1947 (since repealed), which provided:  Diligence in appropriating. Within forty days after posting such notice, the appropriator must proceed to prosecute the excavation or construction of the work by which the water appropriated is to be diverted, and must prosecute the same with reasonable diligence to completion. If the ditch or flume, when constructed, is inadequate to convey the amount of water claimed in the notice aforesaid, the excess claimed above the capacity of the ditch or flume shall be subject to appropriation by any other person, in accordance with the provisions of this chapter. We interpreted section 89-811 in the recent case of the Department of Natural Resources v. Intake Water Co. (1976), 171 Mont. 416, 558 P.2d 1110. In the Intake decision, we clarified the requirements and purpose of section 89-811: The purpose of section 89-811 is to require reasonable diligence in completing the appropriation or forfeiture of the priority of the appropriation as of the day of posting the notice of appropriation. What constitutes reasonable diligence must be determined on an ad hoc, case-by-case basis. The law in this area is summarized by a leading authority, Clark, Waters & Water Rights, Vol. 6, § 514.1, pp. 308, 309, in this language: What constitutes due diligence is a question of fact to be determined by the court in each case. Diligence does not require unusual or extraordinary effort, but it does require a steady application of effort  that effort that is usual, ordinary and reasonable under the circumstances.    So long as the applicant prosecutes the construction of works in good faith with a steady effort, he should be held to have prosecuted with diligence. Intake, 171 Mont. at 434, 558 P.2d at 1120. We hold therefore that the meaning of the words `   proceed to prosecute the excavation or construction of the work by which the water appropriated is to be diverted   ' is not confined to the commencement of actual on-site excavation or construction of the diversion works, but that it encompasses the steady on-going effort in good faith by Intake to prosecute the construction of the project under the circumstances disclosed here. Intake, 171 Mont. at 436, 558 P.2d at 1121. In the present case the District Court held that the District had fully complied with the specifications contained in section 89-811, R.C.M. 1947:  That within the forty days following the District's posting and recording of its said Notice of Water Right, work done by and on behalf of the District consisting of damsite investigations, engineering decisions by geologists, and project plan review and recommendations by federal agencies constituted a sufficient commencement of the construction of the work by which Sheep Creek waters were to be appropriated and diverted to comply with the requirements of Section 89-811 R.C.M., 1947. That the actions by and on behalf of the District thereafter in making surveys and geologic investigations, completing plans, entering into cooperative agreements, soil testing, core drilling, land and easement acquisition and obtaining financing and entering into a contract for the dam construction, which continued through the dates of trial of this action, constitutes prosecution of the construction of the project with reasonable diligence sufficient to comply with the provisions of Section 89-811 R.C.M., 1947. That a letter was written to Montana Water Resources Board dated August 11, 1969, pointing out conflict between the District's 89-811 filing and the Board's 89-121 filing, requesting the Board's release of its filing to the District. That the Montana Water Resources Board replied by letter dated August 15, 1969, agreeing to release the Board's filing to the District when `the project reaches the construction stage.'  That the District fully complied with legal requirements in posting and filing its Notice of Water Right Appropriation on July 11, 1969. That the District proceeded to prosecute the excavation or construction of the diversion works within forty (40) days after July 11, 1969, pursuant to Section 89-811 R.C.M., 1947. It is, of course, this Court's duty to determine if these findings are supported by substantial evidence and in this regard the evidence must be viewed in the light most favorable to the prevailing party in the District Court. It is for the District Court to determine credibility and the weight of the testimony. The record discloses that the following activity took place during the first forty days following the posting of the District's notice of appropriation: (1) The District filed a copy of their notice of appropriation with the Meagher County Clerk. (2) Raymond Smith, a design engineer for the Soil Conservation Service (SCS) testified that his agency was actively involved in the Newlan Creek project during the first forty days after the District posted its notice. (3) Frank Faranchek testified that the watershed economist completed an economic report on the overall project during the first forty days after the District's posting. (4) Mr. Faranchek testified that engineering reports reviewing the work done on the Newlan Creek Watershed were submitted to his office on July 11, 1969. Faranchek indicated that these reports refined some of the cost estimates and the technical date prepared for the project. (5) Mr. Faranchek also testified that data was collected on the recent sales prices of property around and near the Newlan Creek Reservoir. This data was collected so the District might have some working knowledge of the land prices which would be involved in future condemnation or purchase transactions. (6) It was also established that the District and the Montana Department of Natural Resources were corresponding during the first forty days in an effort to clarify the District's rights vis a vis the Department's. We agree that the evidence produced by the District is less convincing than the evidence before this Court in the Intake case. But Intake also establishes that what constitutes reasonable diligence must be determined on an ad hoc, case-by-case basis. Intake at 434, 558 P.2d at 1120. We determine that the evidence is sufficient to support the District Court's finding that the District had proceeded to prosecute the excavation or construction of the work within the first forty days of posting its notice of appropriation. Therefore, the 3,000 miners inch existing right was properly awarded to the District and is hereby affirmed. We will now consider the uncertain right granted to the Resources Board. At the outset we would note that the Resources Board, like the District, can only claim an existing right to Sheep Creek. An existing right is defined as: a right to the use of water which would be protected under the law as it existed prior to July 1, 1973. Section 89-867(4), R.C.M. 1947, now section 85-2-102(7) MCA. Section 36-2.14J(1)-S1400 M.A.C., further provides: (e) `Existing right', in addition to the definition given the term by section 89-867(4) of the Act, includes any appropriation of water commenced prior to July 1, 1973, if completed according to the law as it existed when the appropriation was begun.  Since the Resources Board filed its notice of appropriation on June 23, 1973, an existing right in Sheep Creek was acquired on that date. However, under the law their right would expire unless the means of actual appropriation ... [was] commenced by actual work of construction within four (4) years from the date of original recording. Section 89-121, R.C.M. 1947. When the District Court entered its findings (February 3, 1977), the Resources Board had until June 23, 1977 to begin work to comply with the statute. Accordingly, the District Court was correct in awarding the Resources Board an uncertain right in Sheep Creek. Events subsequent to the District Courts findings must be used to determine whether the Resources Board's existing right has become vested or has expired. All we decide today is that the District Court did not err in awarding the Resources Board an uncertain right on February 3, 1977.