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Garetson Brothers v. American Warrior, Inc.

Court of Appeals of Kansas

January 11, 2019

Garetson Brothers and Foreland Real Estate, LLC, Appellees,
American Warrior, Inc., Successor in Interest to Kelly and Diana Unruh, Appellant, and Rick Koehn, Defendant.


         1. Generally, a statute operates prospectively unless (1) its language clearly indicates the Legislature's intent that it operate retroactively or (2) the change is procedural or remedial in nature. However, even procedural rules cannot be applied retroactively if they eradicate a vested or substantive right that is so fixed that it is not dependent on any future act, contingency, or decision to make it more secure.

         2. Under the doctrine of continuing jurisdiction, once subject matter jurisdiction is acquired over a case, jurisdiction over that case continues and is not divested until all issues are resolved.

         3. The 2017 amendments to K.S.A. 82a-716 and K.S.A. 82a-717a, although procedural in nature, do not apply retroactively to the owner of a vested water right who sought and obtained injunctive relief in the district court prior to the effective date of the amendments.

         4. The right to appeal is entirely statutory and is not contained in the United States or Kansas Constitutions. Subject to certain exceptions, Kansas appellate courts have jurisdiction to entertain an appeal only if the appeal is taken in the manner prescribed by law.

         5. K.S.A. 2017 Supp. 60-2103(b) requires: "The notice of appeal shall specify the parties taking the appeal; shall designate the judgment or part thereof appealed from, and shall name the appellate court to which the appeal is taken." Therefore, an appellate court only obtains jurisdiction over the rulings identified in the notice of appeal. Notices of appeal in civil cases are more strictly construed than in criminal cases.

         6. Under the facts of this case, where the appellant has appealed only from a specific order yet challenges on appeal rulings not part of that order without any "catch all" language in the notice of appeal, an appellate court is without jurisdiction to consider such issues.

         7. The law of the case doctrine prevents a party from serially litigating an issue on appeal already presented and decided in the same proceeding. The doctrine promotes judicial efficiency while allowing litigants a full and fair opportunity to present their arguments on a particular point. Once an issue is decided by the court, it should not be relitigated or reconsidered unless it is clearly erroneous or would cause manifest injustice.

         8. The clean hands doctrine is based upon the maxim of equity that a party who comes into equity must come with clean hands. In other words, no party can obtain affirmative relief in equity with respect to a transaction in which that party has been guilty of inequitable conduct. Like other doctrines of equity, the clean hands maxim is not a binding rule but is to be applied in the sound discretion of the court.

         9. The application of the clean hands doctrine is subject to certain limitations. Conduct which will render a party's hands unclean so as to deny that party access to a court of equity must be willful conduct that is fraudulent, illegal, or unconscionable. Furthermore, the objectionable misconduct must bear an immediate relation to the subject matter of the suit and in some measure affect the equitable relations subsisting between the parties to the litigation and arising out of the transaction. Stated another way, the misconduct that may justify a denial of equitable relief must be related misconduct rather than collateral misconduct arising outside the specific transaction which is the subject matter of the litigation before the court.

          Appeal from Haskell District Court; Linda P. Gilmore, judge.

          Gerald O. Schultz and Zachary D. Schultz, of Schultz Law Office, P.A., of Garden City, for appellant.

          J. Michael Kennalley, Lynn D. Preheim, and Frank Basgall, of Stinson Leonard Street LLP, of Wichita, for appellees.

          Before Powell, P.J., Atcheson and Gardner, JJ.

          Powell, J.

         Garetson Brothers and Foreland Real Estate, LLC (Garetson) own a number of water rights in Haskell County, Kansas, including water right HS-003. Garetson sought injunctive relief in the Haskell County District Court to prevent the nearest junior water right holders, American Warrior, Inc. and Rick Koehn (American Warrior), from impairing its water right. In accordance with the agreement of the parties, the district court appointed the Kansas Department of Agriculture's Division of Water Resources (DWR) as referee, and subsequently, the DWR issued a report finding that American Warrior's junior water rights were substantially impairing Garetson's water right. As a result, the district court entered a temporary injunction ceasing operation of American Warrior's junior water rights 10, 467 and 25, 275. American Warrior brought an interlocutory appeal, and another panel of this court affirmed the temporary injunction. The district court then conducted a three-day trial and found that American Warrior's junior water rights 10, 467 and 25, 275 were impairing Garetson's senior water right, HS-003. The district court issued a permanent injunction prohibiting American Warrior from exercising its junior water rights. American Warrior now appeals. After a careful review of the record and for reasons more fully stated below, we affirm in part and dismiss in part.

         Factual and Procedural Background

         The matter now before us has been at issue for nearly 14 years. At the heart of this dispute is Garetson's claim that American Warrior is infringing on its senior water right. Over the course of the past 14 years, this case has involved a complaint with the DWR, two temporary injunctions-one of which was vacated by the district court and the other of which was affirmed by another panel of this court in Garetson Brothers v. American Warrior, Inc., 51 Kan.App.2d 370, 347 P.3d 687 (2015), rev. denied 303 Kan. 1077 (2016)-and, ultimately, a permanent injunction. To provide context for the subsequent facts, in February 2017 the district court granted Garetson's request for a permanent injunction against American Warrior. This permanent injunction prohibits American Warrior from utilizing its junior water rights because such use impairs Garetson's senior water right.

         History and Garetson's Complaint with the DWR

         The first neighboring well at issue in this action was approved in 1964 and was assigned appropriation water right numbered 10, 467. The second neighboring well was approved in 1976 and was given appropriation water right numbered 25, 275. Both of the neighboring wells at issue are used to irrigate crops. All of the wells are located in Groundwater Management District 3 in southwest Kansas, overlying the Ogallala Aquifer.

         On March 14, 2005, Garetson, a Kansas general partnership, filed a complaint with the DWR, alleging two neighboring junior water rights were impairing its senior vested water right. At the time, Garetson owned a tract of land in Haskell County upon which a single well was used for crop irrigation. A prior owner of Garetson's land had filed for and received a vested water right in the well on September 12, 1950. This vested right is numbered HS-003. HS-003 is permitted to pump 240 acre-feet at a rate of 600 gallons per minute. The DWR began investigation of the complaint upon its filing.

         Garetson subsequently withdrew its complaint in 2007; however, the DWR continued to investigate, monitor, and record data from the wells at issue and three other neighboring wells from 2005 into the present. In 2005, the DWR installed water level monitoring equipment that over time allowed it to determine the degree of well-to-well interference between HS-003 and the five nearest water rights: 10, 035, 10, 467, 11, 750, 19, 032, and 25, 275.

         The Lawsuit

         On May 1, 2012-seven years after Garetson filed its initial complaint with the DWR-Garetson filed the lawsuit now at issue, alleging impairment of senior water right HS-003 by water rights 10, 467 and 25, 275, then owned by Kelly and Diana Unruh. The Unruhs filed an answer on June 11, 2012, admitting they owned the two junior water rights but denying the allegations of the impairment. For whatever reason, and unbeknownst to Garetson and the district court, the Unruhs misrepresented their ownership of the water rights because in reality, they had sold the property and water rights to American Warrior on May 30, 2012-12 days prior to the filing of their answer. American Warrior's ownership was disclosed in August 2013. American Warrior was aware of the pending water right dispute when it purchased the property from the Unruhs.

         On November 29, 2012, in a phone conference with the district court, Garetson and the Unruhs advised that they agreed to the appointment of the DWR as a fact-finder in the case pursuant to K.S.A. 82a-725. The district court appointed the DWR as the agreed-upon fact-finder, directed the DWR to submit a report to the court, and set the case for review in March 2013.

         The First Temporary Injunction

         The DWR filed its preliminary fact-finder report on April 3, 2013, and it was placed into evidence without objection. The district court granted Garetson's motion for a temporary injunction and ordered "the defendants (Unruh), their successors, their tenets [sic], and their agents . . . to refrain from pumping Well 10, 467 and Well 25, 257." The district court also joined Cecil O'Brate, owner and CEO of American Warrior, as a defendant. The Unruhs filed a motion to establish bond on June 3, 2013.

         On July 11, 2013, numerous procedural motions were set for hearing. At this hearing, the Unruhs requested a continuance on their motion for bond, which the district court granted.

         On August 5, 2013, Garetson filed an amended petition naming American Warrior and Rick Koehn, the tenant farming on American Warrior's land, as defendants. O'Brate was dismissed as an individual defendant, and the Unruhs were no longer named defendants. On October 14, 2013, Garetson transferred its senior water right to Foreland Real Estate, LLC (Foreland), who joined the lawsuit as a named plaintiff.

         On November 3, 2013, the district court heard numerous motions and ultimately vacated the 2013 temporary injunction because the injunction had shut off the water supply to Koehn's crop and he had not received notice of the proceeding. Because the temporary injunction was vacated, the district court did not find a need to set bond. Additionally, the district court denied American Warrior's motion to dismiss for Garetson's alleged failure to exhaust its administrative remedies, holding that K.S.A. 82a-717a provided that any person with a vested water right may restrain or enjoin any diversion or proposed diversion that impairs a water right in any court of competent jurisdiction and that the statute did not require that one must first exhaust his or her administrative remedies to do so. The district court also ordered the DWR to continue as the court-appointed fact-finder and directed the DWR to continue to investigate and report any or all of the physical facts concerning the water rights referenced in this case pursuant to K.S.A. 82a-725. Specifically, that order stated:

"The report shall set forth findings of fact in regard to the degree HS-003 is being impaired by water rights 10, 467 and 25, 257. The report shall set forth the opinions the [the DWR] regarding whether any such impairment . . . [is] a substantial impairment to HS-003. If [the DWR] concludes substantial impairment to HS-003 exists, [the DWR] shall advise as to recommended remedies to curtail the substantial impairment to HS-003 and explain why these remedies are recommended."

         The Second Temporary Injunction

         The DWR filed a second and final report on March 31, 2014. Subsequently, the district court considered Garetson's second motion for a temporary injunction and, on May 5, 2014, issued a temporary injunction, set a bond, and ordered American Warrior and its tenant to curtail use of water rights 10, 467 and 25, 257.

         Interlocutory Appeal to This Court

         American Warrior filed an interlocutory appeal, raising four issues: (1) the admission of the DWR's report into evidence, (2) the consideration given to certain evidence presented by American Warrior, (3) the interpretation of "impair," and (4) the granting of the temporary injunction.

         The panel hearing American Warrior's interlocutory appeal ultimately held that temporary injunctive relief was an appropriate remedy because under the circumstances the district court did not abuse its discretion by ordering American Warrior to stop pumping water from the junior wells during the pendency of the action. 51 Kan.App.2d at 392. The panel also held that the DWR's report had been properly admitted into evidence and that the district court properly considered all of the evidence presented. 51 Kan.App.2d at 386-87. Finally, the panel interpreted K.S.A. 82a-716 and K.S.A. 82a-717a, holding the Legislature did not give the word a special definition in the statute and, therefore, the district court used the proper definition of "impair." 51 Kan.App.2d at 388-89.

         Trial and the Permanent Injunction

         After the temporary injunction was affirmed by another panel of this court, the district court held a three-day bench trial. Two witnesses testified for Garetson, including the chief engineer who prepared the final DWR report. American Warrior called 11 witnesses, including Dr. Kenneth Rainwater, who has his Ph.D. in civil engineering with a specialty in water resources and environmental engineering. Koehn called two witnesses as well.

         Dr. Rainwater did not challenge the factual and statistical data in DWR's report but disagreed with the interpretation of that data. He testified that he did not believe the report was scientifically reliable for numerous reasons. Although Dr. Rainwater accepted the DWR's drawdown tests at their face value and noted that the observed drawdown at HS-003 also included both drawdown in the aquifer as well as energy losses within the HS-003 well itself, Dr. Rainwater concluded HS-003's sizable drawdown was due to its own construction and aquifer limitations. Yet Dr. Rainwater could not provide any computations to determine amount of impairment by the alleged improper well construction, nor did he suggest an alternate equation for use by the DWR and did not state in his report how calculations should have been done.

         After hearing all of the testimony, the district court made numerous findings of fact, which we will not recount completely here but will merely summarize the relevant findings. Importantly, the district court did not find Dr. Rainwater's testimony as credible as Garetson's evidence and the DWR's report. The district court found:

"While Dr. Rainwater's academic credentials are noteworthy, his testimony and opinions lacked the seasoning of someone with real life experience who is actively engaged in the field. The court was not persuaded the water well utilized by HS 003 was improperly constructed or a poor well site. The court found [another witness] to be a credible witness when he discussed drilling multiple dry holes, replacing the well bowls, and the type of screening used in the well. The court also noted Dr. Rainwater accepted [the DWR's] draw down tests at their face value, accepted [the DWR's] factual and statistical data, agreed [American Warrior's] water rights communicated with HS 003 and agreed when [American Warrior's] rights are in use they affect the ability to use HS 003."

         The district court found that the rate of water extraction from the aquifer greatly exceeded the rate of recharge to the aquifer. Specifically, the aquifer has declined about 6 feet on average each year in this area for the last 5 years. The groundwater system in the area recharges somewhere in the range of 0.1 inch to 1.0 inch per year. The water replenishing the area of concern is less than 100 acre-feet per year compared with pumping that has been between 1, 200 and 1, 500 acre-feet per year in recent history for the six water rights studied in the DWR's report. The imbalance between the rate of recharge with the rate of pumping has led to substantial declines in groundwater levels over the decades, causing reduced well yields. Scientists with Kansas Geological Survey have found that, if recent practices continue, well operators in the area are facing the imminent end of the productive life of the isolated compartment of aquifer that they share.

         Due to preirrigation season and early irrigation season pumping, HS-003 was not able to pump after July 1, 2013, despite the injunction placed on American Warrior's water rights in late May 2013. Even when American Warrior's water right 25, 275 did not operate in 2013 and 10, 467 did not operate after May 26, 2013, other neighboring water rights caused significant, and at times impairing, levels of drawdown at HS-003.

         In November 2013, the DWR's step drawdown test found a maximum sustained pumping rate of 404 gallons per minute for HS-003. While HS-003 is authorized at the rate of 600 gallons per minute, the DWR does not believe 600 gallons per minute can be sustained in the current hydrologic setting.

         When all neighboring water rights are operating, American Warrior's water rights account for about half of the impact to HS-003. Garetson's HS-003's total drawdown from the well is 49%; drawdown from American Warrior's 10, 467 is 16% and from 25, 275 is 7%. The three other neighboring rights, which are over twice the distance from HS-003, account for the other 28% of the drawdown. The DWR's final report found that American Warrior's usage of its junior water rights is more immediately impactful on HS-003 because those water rights are closer to HS-003 than other neighboring water rights not owned by American Warrior. Since American Warrior's wells were shut off due to the temporary injunction, Garetson has been able to pump HS-003 longer and pump a higher quantity of water. Although the area has been severely dewatered, the DWR's report concluded that with careful regulation of use there may be sufficient remaining water supply to fulfill HS-003's water right and to provide a limited supply to one other neighborhood water rights.

         The DWR concluded that American Warrior's water rights cannot operate without impairing water right HS-003. HS-003 is worse and weakened when American Warrior's water rights are operating. Specifically, the district court found: "The continued operation of [American Warrior's] water rights would lessen, diminish and weaken HS-003." Although the DWR concluded that Garetson's water right had been substantially impaired by American Warrior's water rights and the other neighboring water rights, HS-003 could ultimately be satisfied if the other wells in the neighborhood were not operating.

         The district court found that Garetson had succeeded on the merits of its claim that its senior water right HS-003 was being impaired by an appropriator with a later priority of ...

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