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Judge rules on ownership of Three Mile Irrigation System

By Michael Howell

Ravalli County District Court Judge James Haynes decided a long and somewhat bitter dispute last month in favor of the Bitter Root Irrigation District. The District was sued in October of 2015 by the group Citizens for Fair Water (CFW) over the question of ownership and operation and maintenance of the Three Mile Gravity Irrigation System. Haynes ruled in favor of the District on December 13, 2017 and declared that the users of the irrigation system were the owners of the system. He reserved judgment with respect to operation and maintenance obligations and costs.

CFW had asked the Court to “declare that BRID is the sole owner of the Three Mile System and that no legal entity apart from BRID has the complete and sole obligation to maintain and operate the Three Mile System as part of the overall BRID irrigation regime.”

BRID, in turn, asked for an opposing declaratory judgment “that BRID is not the owner of the Three Mile Irrigation Measure; that BRID’s obligation as the financing sponsor expires upon repayment of the loans and/or other financing debts and bonds; and that users of the Three Mile System are the owners of the system and are responsible for its operation and maintenance once the sponsor’s financial obligations are fulfilled as to borrowing the funds to assist the users.”

At a hearing on the matter last August, Haynes expressed reluctance to make a summary judgment in the case. He questioned whether it was wise to turn the matter over to the Court to make a decision based on law, instead of hearing and weighing testimony at trial and having a jury decide, or better yet, simply working out a compromise solution. In the end, he said, he just wanted it to be clear to the people in the audience that it was their own attorneys who were asking him to do this.

“One side is going to lose big and it may not come out how a lot of good people are expecting,” Haynes stated at the hearing.

At the time, neither side knew which side he was referring to, but his recent order in the case makes it clear that the Three Mile Gravity Irrigation system, like 14 other irrigation subdistricts in the system, is owned by the users. BRID ownership ends at the main line where the water is released at these “farm turnouts.” Haynes ordered the Three Mile system users to formulate and form an organizational structure and regularly participate in meetings with the BRID Board. Although the ownership of the system was held in trust by BRID as sponsor of the loan/bond that was used to pay for the installation of the system, that contract expired in 2015. BRID was ordered to initiate the procedures to convey the ownership to the Three Mile Irrigation Subdistrict.

Operation and maintenance of the system is a little more complicated. Haynes found that the Three Mile Irrigation Subdistrict owns, “at least in part,” the maintenance and operation easements held in trust by BRID and ordered BRID to initiate procedures to convey, “jointly or in fee,” these easements to the subdistrict. Haynes also ordered both entities to formulate and form an ongoing operation and maintenance policy as well as a Sinking Fund assessment plan to pay for eventual replacement of the system. The Court reserved its ruling in the matter and retained jurisdiction to address these unresolved matters in the future. Operation, maintenance and replacement costs are estimated to be $63,000 annually.

The Three Mile Irrigation System is composed of five separate gravity feed lines serving 529 parcels of real property owned by approximately 414 members.

Haynes notes in his ruling that the Three Mile System was never reflected as a capital asset in BRID’s financial records. He refers to the language in the 1984 District Court’s Decree Determining Validity as being “clear, unambiguous,” and having remained “unchallenged for 33 years.” Haynes called CFW’s argument that BRID owns the Three Mile System because 60% of the total members of BRID voted to finance it and were the beneficiaries of the system, a “red-herring,” that is, “a cured and salted herring used to mislead hounds following a trail.” Haynes states that the initial 1984 decree makes it clear that the Three Mile users were the intended owners of the system and that BRID only took on the debt obligation to enable the financing for purchase of the system by its users. Haynes goes on to criticize the CFW for mis-stating contractual language and taking other statements “out of context” to support its claims.

Haynes goes on to note that “all of the statutory requirements for creation of the Three Mile Irrigation subdistrict were met in 1984,” and that subsequent legislation, passed in 1989, would have allowed BRID at any time to return to the District Court to “obtain ratification of the 1984 proceedings as a formal recognition of the Three Mile Gravity Irrigation System as a subdistrict.” Based on this finding, Haynes declares the irrigation subdistrict as “ratified and recognized according to law, “as well as nunc pro tunc retroactive to the District Court’s Decree Determining Validity on December 6, 1984.”

To sum it all up, Haynes states, “The Three Mile Irrigation Subdistrict owns the Three Mile System, because from the outset in 1979, the intent of the Three Mile group was to replace privately owned ‘surface supply canals and ditches with a buried pressure pipeline.’ The owners of the 3,154.27 acres of real property identified their acreage involved in this replacement effort agreed to become beneficiaries of the Bond Purchase Agreement, traded in their supply canals and ditches for the five buried pipelines, and assumed the obligation to pay off the $1.18 million loan.

“The Subdistrict was the sole beneficiary of BRID’s sponsorship. The Subdistrict used BRID’s status as an authorized agency to obtain at least $1.18 million in matching 50% federal funds. The Subdistrict used BRID to obtain the State funded Bond Purchase Agreement. The Subdistrict used the assent of the entire BRID membership to use BRID’s assets as security for the Three Mile group’s $1.18 million debt obligation.”

He notes that the Subdistrict used BRID to enter into contracts, but states that all the contracts used BRID as the project sponsor. “None of the contracts identify the Subdistrict as a contracting party, yet the Subdistrict performed the promise of BRID (as well as the Subdistrict’s obligation) under the Bond Purchase Agreement by paying off the loan over a 30-year period.”

“The Court easily concludes the Three Mile System was constructed for the benefit of the Subdistrict, was paid for by the Subdistrict as a replacement for the Subdistrict’s leaky, inefficient open ditches, and has been owned by the Subdistrict, albeit in trust, since 1984. The Subdistrict should determine their organizational structure. Then, the BRID Board should initiate the proper procedures to convey the Three Mile System to the Subdistrict, including the attendant 30’ wide maintenance and operation easements, which BRID may determine necessary to jointly own.”

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