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Big Wood Ranch, LLC v. Water Users' Association of the Broadford Slough

Supreme Court of Idaho

March 2, 2015

BIG WOOD RANCH, LLC, Plaintiff-Counterdefendant-Appellant,
v.
WATER USERS' ASSOCIATION OF THE BROADFORD SLOUGH AND ROCKWELL BYPASS LATERAL DITCHES, INC., Defendant-Counterclaimant-Respondent

2015 Opinion No. 28

Appeal from the District Court of the Fifth Judicial District of the State of Idaho, Blaine County. Hon. Robert J. Elgee, District Judge.

Judgment, reversed. Award of attorney fees and costs, reversed.

Perkins Coie, LLP, Boise, attorneys for appellant. Richard C. Boardman argued.

Robertson & Slette, PLLC, Twin Falls, attorneys for respondent. Gary D. Slette argued.

WALTERS, J. pro tem. Chief Justice BURDICK, Justices EISMANN and HORTON CONCUR. J. JONES, Justice, specially concurring.

OPINION

[158 Idaho 1017] WALTERS, J. pro tem

This action stems from attempts bye the Water Users' Association of the Broadford Slough and Rockwell Bypass Lateral Ditches, Inc. (Association) to collect assessments from Big Wood Ranch, LLC (BWR) for maintenance performed by the Association on the Broadford Slough (Slough) and Rockwell Bypass (Bypass), which are conduits for the delivery of surface water to property owned by BWR and some of its neighbors. The water at issue originates from the Big Wood River in Blaine County, Idaho. The Association claims it has a statutory right to collect assessments for its maintenance of this water delivery system, a contention BWR disputes. On summary judgment, the district court determined that the Association was validly formed pursuant to Idaho Code section 42-1301, and, after a bench trial, found BWR owed payment for these outstanding assessments. BWR appeals, challenging the validity of the Association's formation under the statute, as well as the court's alternative contract and equity-based theories for granting judgment in favor of the Association. We reverse the judgment and the award of attorney fees and costs in favor of the Association.

I. Factual and Procedural Background

The properties and water features at issue are located near Bellevue, Idaho. The Slough and Bypass serve as conduits for the delivery of surface water to properties along a stretch of the Big Wood River. The Association was formed for the stated purpose of maintaining both the Slough and the Bypass, which maintenance is funded by annual assessments charged to Association members. The assessments are apportioned based on the volume of water a particular member is legally entitled to use. The Association's Bylaws were adopted on April 16, 2002, after notice was provided to the owners of water rights along the Slough and Bypass, and its Articles of Incorporation were filed with the Idaho Secretary of State on May 3, 2002. The Articles recite that the Association was formed pursuant to Idaho Code section 42-1301. There were 17 original members of the Association. BWR was not the owner of the property at the time the Bylaws were adopted and the Articles were filed.

Marc Richards (Richards) is the sole and managing member of BWR. In 2006, BWR purchased the property at issue at 303 Broadford Road from Jann Wenner (Wenner). Wenner was one of the 17 founding members of the Association. Wenner paid the Association's invoices during his ownership, but there are no facts in the record to indicate whether Wenner informed BWR of the Association's existence. BWR purchased the 117 acre property for $5,000,000, sight unseen, and Richards admitted to never undertaking an inspection of the property or its water rights, beyond consulting with a licensed realtor and a title insurance company. Certain of the transaction documents related to purchase ( e.g., the warranty deed and title report) failed to identify or reference the Association, however the Purchase and Sale Agreement contained a provision expressly advising BWR to seek advice regarding any water rights acquired with the property.[1] While the Association filed its Articles with the State in May 2002 and began invoicing its members shortly thereafter, it failed to record evidence of its existence in Blaine County prior to BWR's purchase of the property in June 2006.

Because Wenner lived in New York during his ownership of the property, he authorized [158 Idaho 1018] Robert Bouttier (Bouttier), another original Association member and neighboring land owner, to farm and irrigate the property. Specifically, Bouttier was permitted to keep and graze his horses on the land, which required Bouttier to plant and irrigate the pastures, maintain the fences, abate weeds and fallen trees, and generally monitor the property in Wenner's absence. Irrigating the pastures involved Bouttier calling the Association for delivery of Wenner's surface water, an activity Wenner ratified through his payment of the Association's invoices. Shortly after BWR's purchase from Wenner, Richards met personally with Bouttier on the property. Richards advised Bouttier to continue operating exactly as he had under Wenner. The parties seem to agree that the conversation between Richards and Bouttier did not go into great detail or specificity regarding Bouttier's activities. Regardless, after BWR's purchase, Bouttier continued grazing, irrigating, and farming exactly as he had done during Wenner's tenure, including calling for delivery of surface water by the Association.

In late 2007, the Association attempted to submit its first invoice to BWR, but admits to having difficulty locating BWR by mail. BWR contends it did not receive this invoice until late 2008/early 2009. BWR refused to pay the initial and subsequent assessments, in part, based on its understanding that it was already paying annual dues to Water District No. 37 for delivery of its surface water.

On July 29, 2010, the Association commenced a small claims action against BWR in the magistrate division of the district court seeking to collect outstanding assessments for the years 2007--2009. At the time the small claims action was filed, the outstanding balance totaled $4,950. On November 5, 2010, BWR filed a complaint in district court seeking declaratory relief regarding the rights and obligations of both parties with respect to any past and future assessments owed to the Association. On the same date, BWR filed a motion to consolidate the Association's small claims action with BWR's newly filed district court action, which was granted on November 8, 2010. On December 20, 2011, the Association filed its answer and counterclaim, wherein it sought, inter alia, declaratory relief regarding the legality of the Association's formation, its statutory authority to deliver surface water to Association members, and its right to collect assessments for the same. The Association sought recovery of delinquent assessments from BWR in the amount of $7,550. On January 9, 2012, BWR filed an answer to the counterclaim, and on April 12, 2012, the Association filed a notice waiving all affirmative defenses asserted in its answer.

On April 23, 2012, the parties filed cross-motions for summary judgment, each accompanied by memoranda in support and numerous affidavits. On May 21, 2012, the district court held a hearing on the parties' cross-motions for summary judgment. Following oral argument, the district court ruled from the bench, granting summary judgment in favor of the Association on its counterclaim seeking a declaration that the Association was validly formed under Idaho Code section 42-1301 and denying BWR's motion for summary judgment. While determining that the Association was properly formed under the statute, the district court found disputed issues of fact remained as to whether BWR was a member of the Association, whether the Association was entitled to recover assessments from BWR beyond the statute under alternate theories of contract, quantum meruit, and unjust enrichment, and, if so, what amount was recoverable. On June 15, 2012, the district court issued a written order memorializing its May 21, 2012 rulings from the bench. Specifically, the district court found that the Association was " validly formed and is of continuing authority to act pursuant to Idaho Code [section] 42-1301, et seq." ; that the Slough " is a canal for purposes of water right delivery pursuant to Idaho Code [section] 42-1301, et seq." ; that " [a] legal question exists over whether [BWR] is a member [of the Association]" ; and, that " the issue of the amount of assessments or charges, if any, owing to the [Association] by [BWR]" remains outstanding.

The remaining issues were addressed during a bench trial on three separate days, spanning from November 2012 to January [158 Idaho 1019] 2013. The unusually protracted and fragmented three-day trial was caused by Richards' failure to appear on two occasions. Specifically, due to a miscommunication between BWR's counsel and Richards, Richards was in Hawaii on November 13, 2012, the original trial date set for this action. Although certain witnesses testified and evidence was submitted, the trial was continued to December 18, 2012, to afford Richards an opportunity to appear and testify. However, on December 18, 2012, Richards was again absent because he was again in Hawaii, this time due to an alleged mechanical failure impacting his flight home. BWR was ordered to pay the costs and attorney fees incurred by the Association in connection with its December appearance. The trial concluded on January 4, 2013, with Richards appearing and testifying.

On February 28, 2013, the district court entered written findings of fact and conclusions of law and granted judgment in favor of the Association for BWR's delinquent assessments. On motion by BWR, the district court adjusted two of its factual findings and also awarded costs and attorney fees to the Association under Idaho Code section 42-1307, but otherwise left untouched its judgment and findings in favor of the Association. Specifically, a second amended judgment was entered against BWR on June 18, 2013, wherein BWR was ordered to pay outstanding assessments (with statutory penalties and interest) in the amount of $9,500, as well as $2,209.19 in costs, and $72,875 in attorney fees. BWR timely filed a notice of appeal on July 30, 2013.

II. Issues on Appeal

1. Whether the district court erred in concluding that the Association was validly formed pursuant ...


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