Chad J. Armstrong; Trista L. Armstrong, Counter-objectors and Appellees. v. << (2023)

¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion and shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court's quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.

¶2 Objector Christine Wagner appeals from the November 2, 2022 Order Adopting Master's Report entered by the Water Court, which adopted the Water Master's report of October 19, 1995 (Report), regarding consolidated claim 41G 214797-00. The Water Master also concluded, in subsequent litigation, that Wagner was bound by a 1995 Stipulation (Stipulation or settlement agreement) entered into between Wagner, Chad and Trista Armstong (the Armstrongs), and the State Board of Land Commissioners (SBLC),¹ and therefore Wagner was prevented from challenging the point of diversion for the claim at this juncture. The Water Court adopted the Water Master's conclusions, and we affirm the Water Court.

¶3 During adjudication of the 1989 Water Court Temporary Preliminary Decree (TPD) for Basin 41G, the Armstrongs claimed water right 41G-143538-00 (Claim 538) for use on their land and adjoining leased state trust lands. They sold their land and the accompanying water right to Wagner in 1989, who also became the lessee of the adjoining state trust land. However, SBLC objected to the ownership of Claim 538, claiming a portion of it and four other water rights for use on the trust lands. To resolve the dispute, the parties subsequently entered into the 1995 Stipulation, wherein SBLC would own an implied claim water right for the water diverted and used on the subject state lands and the four other rights used on the lands, aggregated into a newly created right, 41G-214797-00 (Claim 797), in accordance with the Pettibone doctrine.² Claim 797 adopted the priority and place of use from Right 538, but the sources reflected those of the four other underlying rights. The Stipulation was signed by the parties or their counsel, and filed with the Water Court. In the Report, the Water Master found that “the Stipulation requests the Court to make changes to all the rights claimed in this supplemental rights group and to generate an implied claim from the combined elements of these supplemental rights,” and concluded that, “[u]pon review of the Stipulation, it appears that it is proper and is accepted by the Court.” No objections to these conclusions of the Report were filed, the Report was adopted by the Water Court on January 9, 1996, and the parties have operated pursuant to the terms of the Stipulation ever since.

¶4 In 2018, following the Water Court's issuance of the Preliminary Decree for the Jefferson River, which included SBLC's Claim 797, Wagner filed an objection, arguing that the source and point of diversion for Right 797 were incorrect and should be changed back to the location as identified prior to the Stipulation, asserting the current diversion caused an adverse effect on her water use. The Armstrongs countered by arguing that Wagner's voluntary entry into the Stipulation precluded her from now contesting SBLC's Claim 797. Discovery was conducted regarding the history of the beneficial use, point of diversion, and perfection of the right. However, following a hearing, the Water Master entered an order granting summary judgment to the Armstrongs, concluding Wagner was bound by the Stipulation and therefore could not object on these grounds to SBLC's Claim 797. The Water Master did not undertake consideration of the asserted merits issues regarding the claim.³ Wagner objected.

¶5 The Water Court reasoned the Water Master had found no evidence “Wagner did not intend to be bound by the settlement agreement either before or after its execution,” that Wagner did not allege SBLC had breached the settlement agreement, and that Wagner had not contested the Master's finding that there was no evidence Wagner's consent to the settlement agreement “was the result of mistake, duress, menace, fraud, or undue influence,” but noted, “[h]owever, twenty-seven years after execution of the agreement and issuance of the Master's Report recognizing [Claim 797], Wagner now asserts the point of diversion in the agreement is incorrect and should revert back to the pre-agreement location.” The Water Court explained that, under Rule 17 of the Water Right Adjudication Rules, “[u]nlike other courts, the Water Court has an affirmative obligation to review settlement agreements and reject them if they are deficient” and that, after review, it had approved the Stipulation in 1996. Accordingly, the Water Court, despite “strongly prefer[ing] resolution of water rights issues on the merits,” affirmed the Water Master, concluding that Wagner was bound by the settlement agreement's terms by her willful entry into the agreement and the consideration she had received in exchange, and that re-opening the matter at this point would “undermine the finality of other settlement agreements.” Wagner appeals.

¶6 When reviewing a Water Master's report and the Water Court's associated opinion, two standards of review of relevant: “the standard the water judge applie[d] to the Water Master's report and the standard we apply to the Water Court's opinion.” Marks v. 71 Ranch, LP, 2014 MT 250, ¶ 12, 376 Mont. 340, 334 P.3d 373 (citation omitted). “[T]he Water Court reviews the Water Master's findings of fact for clear error and the Water Master's conclusions of law for correctness.” Marks, ¶ 12. We, in turn, review the Water Court's decision with the same standard as an appeal from a district court, and whether the Water Court applied the correct standard of review is a question of law. Marks, ¶ 13. “Therefore, the Water Court's decision is reviewed under a de novo standard to determine whether it correctly applied the clear error standard of review to the Water Master's findings of fact, and whether its conclusions of law are correct.” Marks, ¶ 13.

¶7 Wagner argues that, according to the record, “the point of diversion was incorrectly listed on the water right abstract of [Claim 797],” an error that persisted following entry of the Stipulation. Thus, according to Wagner, the Water Court lacked a “prerequisite jurisdictional showing” such that the Water Court erred by “rely[ing] on the 1995 Stipulation.” This argument, however, fails to credit the process by which the Claim here was established: all parties willfully and without fraud entered into a stipulation that settled pending litigation by creating an implied right; the stipulation was approved by the Water Master and Water Court without objection in 1995-1996; the parties thereafter operated pursuant to the stipulation's terms; and the stipulation was subsequently incorporated into the Preliminary Decree. The passage of time and the occurrence of these events are not without effect.

¶8 “Settlement agreements are contracts, and are subject to the provisions of contract law.” Bender v. Rosman, 2023 MT 140, ¶ 9, 413 Mont. 89, 532 P.3d 855 (quoting Jarussi v. Farber, 2019 MT 181, ¶ 15, 396 Mont. 488, 445 P.3d 1226). As such, “[a] party is bound to a settlement agreement if ‘he or she has manifested assent to the agreement's terms and has not manifested an intent not to be bound by that assent.’ ” Kluver v. PPL Mont., LLC, 2012 MT 321, ¶ 33, 368 Mont. 101, 293 P.3d 817 (quoting Lockhead v. Weinstein, 2003 MT 360, ¶ 12, 319 Mont. 62, 81 P.3d 1284).

¶9 “The statute of limitations for an action on the grounds of fraud or mistake action is generally two years, but such claims do not accrue ‘until the discovery by the aggrieved party of the facts constituting the fraud or mistake.’ ” In re Platt, 2018 MT 43, ¶ 16, 390 Mont. 338, 413 P.3d 818 (quoting § 27-2-203, MCA). The clock also begins to toll after “in the exercise of due diligence, [the mistake] should have been discovered by the injured party ․” Section 27-2-102(3), MCA. Wagner does not argue that she only recently became aware of the alleged mistake with the Stipulation, and given the nature of the alleged mistake, due diligence would surely have revealed it long ago. As such, we conclude the time to litigate this matter has passed and that Wagner, by agreement and performance, has consented to application of the Stipulation, mistake or not. We conclude the Water Court did not err by concluding the same.

¶10 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our Internal Operating Rules, which provides for memorandum opinions. This appeal presents no constitutional issues, no issues of first impression, and does not establish new precedent or modify existing precedent. In the opinion of the Court, the case presents a question controlled by settled law or by the clear application of applicable standards of review.

¶11 Affirmed.

FOOTNOTES

1.   Specifically, the Trust Lands Management Division of the SBLC.

2.   See Department of State Lands v. Pettibone, 216 Mont. 361, 702 P.2d 948 (1985).

3.   The Water Master corrected a clerical error in the place of use description for the Claim.

Justice Jim Rice delivered the Opinion of the Court.

We concur: MIKE McGRATH, C.J. JAMES JEREMIAH SHEA, J. INGRID GUSTAFSON, J. DIRK M. SANDEFUR, J.