City of Helena v. Community of Rimini

City of Helena v. Community of Rimini, 2017 MT 145 (June 13, 2017) (Wheat, J.; Rice, J., dissenting) (4-3, aff’d & rev’d)

Issue: (1) Whether § 85-2-227(4), MCA, is impermissibly retroactive as applied to Helena’s water rights claim; (2) whether the Water Court erred in reinstating 7.35 cfs of Helena’s Tenmile Creek water rights; (3) whether the Water Court erred in finding Helena had abandoned .6 cfs of its Tenmile Creek water rights; and (4) whether the Water Court erred in imposing specific place of use restrictions on Helena’s decreed Tenmile Creek water rights.

Short Answer: (1) No; (2) no; (3) yes; and (4)

Affirmed in part, reversed in part, and remanded

Facts: This case is on appeal for the second time, and involves two water rights claims filed by the city of Helena for waters of Tenmile Creek. The creek passes through the old mining community of Rimini, Montana, turns east at Highway 12, and flows northeast just beyond the city’s northwest boundary. Skinner owns junior water rights on Tenmile Creek. He and the community of Rimini objected to Helena’s water rights claims.

In the mid-1880s, miners appropriate water from Tenmile Creek for their mining operations. By 1886, some miners had sold their water to the Helena Water Works Company. In 1903, Whitcomb v. Helena Water Works decreed the water company as the owner of the first two rights on the stream. The first right had a priority date of Nov. 5, 1864, for 225 miner’s inches, and the second had a priority date of Feb. 10, 1865 for 325 miner’s inches. Together, the rights totaled 13.75 cfs.

At the time of the decree, the company diverted 225 miner’s inches through an open ditch near Rimini, into a water treatment facility and then into Helena through two 16” pipelines. It also diverted 325 miner’s inches four miles downstream of the treatment facility through the Yaw Yaw ditch.

The city bought the company’s water rights and treatment facility in 1911. In 1919, the city stopped using the Yaw Yaw ditch for municipal purposes, but continued to lease the water for agricultural use and maintain the facilities for emergency purposes. In 1921, the city replaced the open ditch near Rimini with an 18” concrete diversion pipeline, and added five diversions along Tenmile Creek. All of the creek’s diversions flowed through the Rimini Pipeline, which has a capacity of 13.15 cfs — .6 cfs less than the city’s combined water rights.

In 2011-2012, the water master found that the city abandoned 7.35 cfs of its Tenmile Creek water rights and imposed place of use restrictions on the remainder. Water Judge Mizner held that the master erred by failing to apply Montana’s presumption of municipal nonabandonment statute, and restored the full decreed right of 13.75 cfs. He also adopted the place of use restrictions. Skinner appealed, and the Court remanded for further proceedings due to procedural errors and ambiguities.

Procedural Posture & Holding: On remand, the Water Court adopted the finding that the city abandoned 7.35 cfs of it water rights claim, and ordered the parties to brief whether city could avoid abandonment under § 85-2-227(4), MCA (amended in 2005), and whether the statute is constitutional. After briefing, the court found that the statute created a presumption of nonabandonment, which Skinner failed to rebut, but the city abandoned 6 cfs in the Rimini Pipeline. Skinner appeals, the city cross-appeals, and the Supreme Court affirms in part and reverses in part.

Reasoning: (1) Section 85-2-227(4), MCA, is not impermissibly retroactive as applied to Helena’s water rights claim. The Court relies on Royston, 249 Mont. 425 (1991), to conclude that the 2005 amendments to § 85-2-227(4) merely created a procedural change that did not affect Skinner’s vested rights.

(2) To determine whether the Water Court erred in finding nonabandonment of 7.35 cfs, the Court examines (1) whether the Water’ Court’s findings in support of its application of § 85-2-227(4) are clearly erroneous, and (b) whether the Water Court correctly rejected the water master’s findings regarding Skinner’s proof of intent to abandon. In analyzing (a), the Court concludes the Water Court did not err in finding that the construction of the Rimini Pipeline established a presumption of municipal nonabandonment under subsection (4)(b) of § 85-2-227, MCA; in finding that the 1929 engineering report commissioned by the city established a presumption of municipal nonabandonment under subsection (4)(c) of § 85-2-227, MCA; or in finding that the 1925 fire defense report established a presumption of municipal nonabandonment under subsection (4)(d)(i) of § 85-2-227, MCA.

(2)(b) The Water Court determined that the water master’s findings regarding the city’s abandonment were clearly erroneous, and the Supreme Court agrees.

(3) The Court reverses the Water Court’s conclusion that the city abandoned .6 cfs, the difference between its decreed rights and the capacity of the Rimini Pipeline. Montana’s codification of the growing communities doctrine seeks to ensure that municipalities may appropriate water for future needs. The court concludes that the City was planning for its anticipated requirements and met the criteria for the presumption of nonabandonment for the entirety of its water rights.

We conclude that the Water Court did not err in finding that the construction of the Rimini Pipeline established a presumption of municipal nonabandonment under subsection (4)(b) of § 85-2-227, MCA. The court found that the City built the 1921 diversion pipeline, knowing that the two 1903 transmission pipelines could only deliver a portion of its capacity for beneficial use. As the Water Court stated, “The most reasonable inference from this conduct is that the City was planning for future growth; otherwise the City could have saved taxpayer money by constructing a smaller diversion pipeline.”

(4) The city’s challenge to the place-of-use restrictions is an argument that the application of § 85-2-234(6)(e), MCA, is unconstitutional as applied to their decreed rights. Because the city failed to notify the attorney general of the existence of a constitutional issue as required by the rule 5.1(a), M. R. Civ. P., the Court affirms the dismissal of this claim.

Justice Rice’s Dissent (joined by McKinnon, J., and Baker, J.): Justice Rice dissents from the majority’s conclusion that § 85-2-227(4), MCA, is not impermissibly retroactive. A water right is a property right, and both the amount of water and the priority of its use are substantive parts of that property right. Because a water right depends on its beneficial use, a water right holder may lose the water right through abandonment, the proof of which requires nonuse and intent to abandon. The law of abandonment is an inherent part of the law of beneficial use.

A law is impermissibly retroactive when its application divests or impairs vested rights. Unlike Royston, § 85-2-227(4), MCA, alters the substantive law of abandonment and the evidence necessary to prevail on the issue of abandonment when a city is a party. In other words, the substantive law has changed. Skinner could have prevailed on the issue of abandonment prior to the statute’s enactment, and now cannot. Nonuse has “been stripped of its evidentiary significance, thus essentially creating a conclusive, not rebuttable, presumption in the City’s favor.” ¶ 59.