Title: Lu Ranching Co. v. United States of America Claim to instream water rights on federal rangeland and determining the priorty dates of those water rights

State: idaho

Issuer: Idaho Supreme Court (civil)

Document:

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 31994
IN RE: SRBA CASE NO. 39576 (SUBCASE
NUMBERS 55-10288B, 55-10289B,
55-10290B, 55-10292B, 55-10293B,
55-10295B, 55-10296, 55-10297B,
55-55-10298, 55-10299B, 55-10300,
55-10301B, 55-10303B, 55-13451, 55-13846
AND 55-13844.)
_______________________________________
LU RANCHING CO.,
Appellant-Cross Respondent,
v.
UNITED STATES OF AMERICA,
Respondent-Cross Appellant.
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Twin Falls, November 2006 Term
2007 Opinion No.  24
Filed: February 9, 2007
Stephen W. Kenyon, Clerk
Appeal from the District Court of the Fifth Judicial District of the State of Idaho,
in and for Twin Falls County.  The Hon. John M. Melanson, District Judge.
The judgment is affirmed in part, vacated in part, and remanded for further
proceedings.
McQuaid Bedford & Van Zandt LLP, San Francisco, California, and Roger D.
Ling, Rupert, counsel for appellant.  Elizabeth Ewens argued.
United States Department of Justice for respondent.  Elizabeth Ann Peterson
argued.
EISMANN, Justice.
This is an appeal from a judgment upholding LU Ranching Company’s claim to instream
water rights on federal rangeland for watering livestock and determining the priority dates of
those water rights.  The district court also denied Lu Ranching Company’s request for an award
of attorney fees.  We affirm the district court’s holding that LU Ranching Company has instream
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water rights, vacate its determination of priority, and remand for a redetermination of the priority
dates of such rights.
I.  FACTS AND PROCEDURAL HISTORY
LU Ranching Company (LU Ranching) is a corporation that has a cattle operation located
in Owyhee County, Idaho.  It owns approximately 5,000 acres of land that it purchased in 1976.
LU Ranching’s predecessors had over the years acquired smaller ranches in order to accumulate
holdings totaling 5,000 acres.  When LU Ranching purchased its real property, it also acquired
grazing rights located on three allotments pursuant to the Taylor Grazing Act, 43 U.S.C. § 315 et
seq.  Those three allotments are called the South Mountain, the Cow Creek, and the Cliffs
grazing allotments.
LU Ranching claimed instream1 stock watering rights with a priority date of May 20,
1872, in thirteen water sources located on federal land within those three grazing allotments.
The United States filed an objection, and the matter was first heard by a special master.  The
special master found that the patents and affidavits filed as proof of homestead by LU
Ranching’s predecessors were sufficient to establish that they had been using federal land and
the water located thereon from the time the original patent holder began living on the land.  The
earliest patent issued to one of LU Ranching’s predecessors was issued on September 29, 1886,
to Ezra Mills.  In his affidavit submitted to obtain the patent, Mills stated that he had lived on
and worked the homestead since June 10, 1876.  The special master therefore found that LU
Ranching was entitled to a priority date of June 10, 1876, for all of its claimed water rights.  Both
parties sought review by the district court.
The district court first addressed the law to be applied.  It held that private parties could
appropriate water on federal land both prior to and after the adoption of the Taylor Grazing Act
in 1934; that no physical diversion was required to appropriate water for stock watering; that an
intent to appropriate was required, but such intent could be inferred from the application of the
water to a beneficial use; that water rights obtained on federal land were appurtenant to the
livestock owner’s nearby deeded ranch property; and that the water rights would pass with a
                                                
1 Although we refer to them as “instream” water rights, the water sources do not need to be streams.  They can be
any natural water source, including springs that simply form pools of water.  Calling them instream water sources
simply means that the water was applied to a beneficial use without diverting it from the water source.
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conveyance of the ranch property if such was the grantor’s intent, which could be inferred from
the circumstances.  The district court then analyzed the facts in light of its statement of law.
The district court held that the special master erred in basing a priority date for all
claimed water rights upon the historical use of only one of the patented properties and in failing
to analyze which water rights were acquired and transferred as appurtenances to which patented
properties.  The district court examined the facts with respect to each of the three grazing
allotments:  South Mountain, Cow Creek, and Cliff’s.  For clarity, the water rights claimed in the
South Mountain allotment can be further divided into those appurtenant to the Duncan
homestead and those acquired by Galo Mendieta.  Likewise, the water rights claimed in the Cow
Creek allotment can be subdivided into those related to that portion of the Mills homestead
located in Section 25 and that portion located in Section 26.
South Mountain allotment—Duncan homestead.  Warren C. Duncan was the first of
LU Ranching’s predecessors to acquire real property in the vicinity of the South Mountain
allotment.  In 1910 Duncan filed a homestead entry application on 160 acres in Owyhee County
and received a patent for the homestead entry on December 9, 1914.  The district court found
that there was no evidence in the record indicating that Duncan raised livestock.
After several mesne conveyances, Patrick O’Keefe purchased the Duncan property on
July 14, 1928.  With the passage of the Taylor Grazing Act in 1934, ranchers were required to
obtain a grazing permit to pasture livestock on federal lands.  On June 24, 1935, O’Keefe applied
for a grazing permit for 200 head of cattle.  That permit was rejected on August 22, 1935, on the
ground that O’Keefe did not own any cattle.  On April 7, 1937, O’Keefe again applied for a
grazing permit, which was granted in 1938 for forty head of cattle and four horses on federal
land within the South Mountain allotment.  On October 14, 1941, O’Keefe sold the Duncan
homestead to Galo Mendieta.
The district court held that the earliest priority date for water rights obtained by O’Keefe
was July 1, 1938, which was the commencement date for the 1938 grazing season.  The court
noted that after 1934, O’Keefe could not have obtained water rights on other federal rangeland
located outside of the land covered by his grazing permit because a valid water right cannot be
initiated by trespass onto another’s property.  Had he obtained water rights on such other federal
rangeland prior to 1934, he could not have continued to use the water located thereon because he
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would not have had access to that land.  The water rights claims related to the Duncan homestead
are 55-10290B and 55-10292B.
Cow Creek allotment—Mills homestead.  Ezra Mills was the first of LU Ranching’s
predecessors to acquire real property in the vicinity of the Cow Creek grazing allotment.  The
district court determined that there was no evidence that Mills was engaged in the livestock
business prior to or contemporaneous with the issuance of his patent.  Mills sold his property on
July 9, 1892, and after several mesne conveyances it was acquired by Mary Shea on May 8,
1909.  The district court found that at that point in the chain of title there was no evidence that
the owner of the Mills property had used it or adjacent federal rangeland for raising livestock.
Mills homestead in Section 26.  On November 8, 1913, Mary Shea conveyed to
George Kellogg the one-half of the Mills property that was located in Section 26.  Kellogg
conveyed the property to William Flora on May 3, 1937.  Flora applied for a grazing permit, but
it did not contain specific information.  After mesne conveyances, the land was purchased by
Henry and Hattie Fretwell on January 3, 1947.  The district court determined that there was no
evidence as to when the property or adjacent public rangeland was used in connection with any
livestock operation prior to the date the Fretwells acquired the property.  On September 6, 1949,
the Fretwells sold the property to Galo Mendieta.  The sale included grazing privileges for
twenty head of cattle within the Trout Creek allotment, which is within the Cow Creek allotment.
The district court found that Mendieta typically began grazing on public rangelands on April 1 of
each year, and so he would not have begun livestock grazing on public land in connection with
his purchase of this property until April 1, 1950.  Thus, the court found that water rights 55-
10299B and 55-10300 have an April 1, 1950 priority date.
Mills homestead in Section 25.  On October 15, 1919, Mary Shea conveyed to
Harry Staples one-half of the Mills property, which was located in Section 25.  After several
mesne conveyances, Patrick O’Keefe purchased the property on January 30, 1933.  On April 7,
1937, O’Keefe submitted an application for a grazing permit, and he was issued a permit for
twenty head of cattle in the Cow Creek grazing allotment commencing on April 15, 1937.  The
district court held that O’Keefe could not have had any water rights on federal land prior to that
date because he failed to mention any such water rights in his application for a grazing permit.
O’Keefe sold the property to Galo Mendieta on August 4, 1941.  Based upon the foregoing, the
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district court determined that water rights 55-10295, 55-10296, 55-10297B, and 55-10298 have
an April 15, 1937 priority.
South Mountain and Cow Creek allotments—Mendieta.  On September 6, 1949, Galo
Mendieta purchased from the Fretwells the half of the Mills homestead that was located in
Section 26.  He had previously purchased the other half of the Mills homestead and the Duncan
homestead.  After his purchase from the Fretwells, Mendieta applied for and obtained grazing
permits in the South Mountain and Cow Creek allotments that exceeded the boundaries of the
grazing permits previously associated with the Duncan and Mills homesteads.  Based upon when
Mendieta typically began grazing on public lands, the district court determined that the priority
dates for water rights claimed as a result of Mendieta expanding his grazing operations would be
April 1, 1950.  That priority date applies to water rights 55-10288B, 55-10289B, 55-10293B, and
that portion of 55-10290B and 10292B not located within the land covered by O’Keefe’s grazing
permit.
Cliff’s allotment.  In 1909 George Ewings, Jr., filed a homestead application for 160
acres of land in Owyhee County, and he received a patent on July 26, 1910.  None of the
historical documents in support of the homestead entry suggest that Ewings was engaged in the
livestock business.  On July 16, 1912, Ewings conveyed the property to Clyde Foster.  On
January 12, 1937, Foster applied for and received a grazing permit, although a copy of it was not
in the record.  In his application, Foster was asked to identify all sources of water owned or
leased by him in connection with his livestock operation on the public domain.  Because Foster
did not list any water sources within the Cliff’s allotment, the district court held that any water
rights he obtained in Cliff’s allotment were based upon appropriations occurring after he made
the grazing application.  The district court therefore held that the earliest priority date for water
right 55-10303B located in the Cliff’s allotment was July 1, 1937, the date he would have begun
grazing under the permit.
Other grazing rights.  LU Ranching acquired other grazing privileges by transfer from
others.  The district court held that there was no evidence in the record of the historic use of
those grazing privileges.  Therefore, LU Ranching failed to prove it had obtained any water
rights in connection with those transfers.  The United States also challenged the special master’s
descriptions of the places of use for some of the water rights.  The district court rejected those
challenges on the ground that the special master’s findings were not clearly erroneous.
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The district court entered a judgment in conformity with its findings, and it certified that
judgment as final pursuant to Rule 54(b) of the Idaho Rules of Civil Procedure.  LU Ranching
timely sought an award of attorney fees under Idaho Code § 12-121 and 28 U.S.C. § 2412(d).
The district court held that attorney fees were not awardable under Idaho Code § 12-121 because
the United States did not assert or defend any matter frivolously, unreasonably, or without
foundation.  With respect to the requested award under 28 U.S.C. § 2412(d), the district court
held that attorney fees were not awardable under that statute because the position of the United
States was at all times substantially justified.  Based upon that ruling, the district court did not
address the issue of whether 28 U.S.C. § 2412(d) permitted a state court to award attorney fees
against the United States.  LU Ranching timely appealed and the United States timely cross-
appealed.
II.  ISSUES ON APPEAL
1.
Did the district court err in determining the priority dates for LU Ranching’s water 
rights?
2.
Did the district court err in denying LU Ranching’s request for an award of attorney fees?
3.
Is LU Ranching entitled to an award of attorney fees on appeal pursuant to Idaho Code § 
12-121 or 28 U.S.C. § 2412(d)?
4.
Did the district court err in holding that instream water rights on federal land can be 
appurtenant to privately owned property?
III.  ANALYSIS
This is a companion case to Joyce Livestock Company v. United States of America, Nos.
32278, 32279, & 32846 (Idaho February 9, 2007).  In Joyce Livestock we addressed the legal
issues applicable to the appeal in this case.  We will not analyze those issues again here, but will
merely refer to the opinion in Joyce Livestock when appropriate.
A.  Did the District Court Err in Determining the Priority Dates for LU Ranching’s Water
Rights?
In the Joyce Livestock case, we vacated the district court’s determination of priority dates
because of certain errors in law made by the district court.  It had held that a livestock owner
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could not obtain water rights on federal land for instream stock watering without evidence of “an
intent to appropriate.”  It also held that the failure to list such water rights in applications for
grazing permits showed the lack of such intent.  It had also held that water rights appurtenant to
real property would not pass with a conveyance of that real property absent evidence that the
grantor also intended to convey the appurtenant water rights.  Finally, it failed to recognize the
significance of predecessors being granted Class 1 grazing permits.  The district court made the
same errors when analyzing the evidence in this case.  We therefore vacate its determination of
priorities for the water rights claimed by LU Ranching and remand for a redetermination of those
priorities in a manner consistent with our opinion in Joyce Livestock Company v. United States.
B.  Did the District Court Err in Denying LU Ranching’s Request for an Award of
Attorney Fees?
Both LU Ranching and Joyce Livestock sought an award of attorney fees pursuant to
Idaho Code § 12-121 and 28 U.S.C. § 2412(d).  The district court denied both of their requests
for the same reasons.  With respect to Idaho Code § 12-121, it found that the United States had
not pursued or defended the matter frivolously, unreasonably, or without foundation.  We
affirmed the district court in the Joyce Livestock case, and for the same reasons we affirm the
district court in this case.  In both cases the district court also denied LU Ranching’s and Joyce
Livestock’s requests for attorney fees pursuant to 28 U.S.C. § 2412(d) because the positions of
the United States were substantially justified.  In Joyce Livestock we affirmed the district court’s
denial on the ground that the statute does not authorize state courts to award attorney fees against
the United States.  We likewise affirm the denial in this case on the same basis.
C.
Is LU Ranching Entitled to an Award of Attorney Fees on Appeal Pursuant to
Idaho Code § 12-121 or 28 U.S.C. § 2412(d)?
LU Ranching seeks an award of attorney fees on appeal pursuant to Idaho Code § 12-121
and 28 U.S.C. § 2412(d).  For the same reasons we denied the request in the Joyce Livestock
case, we do not award attorney fees on appeal to LU Ranching.
D.  Did the District Court Err in Holding that Instream Water Rights on Federal Land Can
Be Appurtenant to Privately Owned Property?
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In its cross appeal, the United States raises two legal issues.  First, it argues that a water
right for instream livestock watering cannot be appropriated without manifestation of some intent
to obtain a water right which goes beyond merely applying the water to a beneficial use.  Second,
it argues that instream stock watering rights on federal land cannot as a matter of law be
appurtenant to privately owned property.  It raised both arguments in the Joyce Livestock case.
For the same reasons we rejected those arguments in that case, we reject them in this one.
IV.  CONCLUSION
We affirm the judgment of the district court holding that LU Ranching has established
water rights and denying its request for an award of attorney fees.  We vacate the district court’s
determination of the priority dates of LU Ranching’s water rights and remand this case for
redetermination of such priority date(s) in a manner consistent with our opinion in Joyce
Livestock Company v. United States.  We deny LU Ranching’s request for an award of attorney
fees on appeal.
Chief Justice SCHROEDER, and Justices TROUT, BURDICK and JONES CONCUR.