Opinion ID: 2639108
Heading Depth: 1
Heading Rank: 6

Heading: Nature and Scope of State Water Right Claim

Text: [¶ 23] When the Stutzmans became dissatisfied with the BOR's administration of the Buffalo Bill Reservoir, they initially asked the state engineer to issue a secondary permit for their individual share of the stored water and urged the Shoshone Irrigation District to request a secondary permit administratively or pursue such a permit judicially. The state engineer's position on the request was that the Stutzmans must first obtain the cooperation of the BOR, which owned the reservoir permits, before the state would consider a secondary permit. The BOR refused such cooperation until all four irrigation districts within the boundaries of the Shoshone Reclamation Project met certain demands, including a re-survey of irrigable lands, which allegedly the districts could not afford. The Shoshone Irrigation District also declined to take the action urged by the Stutzmans. [¶ 24] Finding themselves unable to obtain the relief they desired through the Shoshone Irrigation District, the state engineer, or the BOR, the Stutzmans went to the district court seeking a declaratory judgment that they had implied secondary rights and these rights should be adjudicated in this general adjudication with the same priority date as the reservoir permits. They based their claim for implied secondary rights on our opinion in Condict v. Ryan, 79 Wyo. 211, 333 P.2d 684 (1958) where we held, under the circumstances of that case, that water stored in a reservoir was intended to be used on certain lands and, therefore, the owners of those lands had an implied secondary right. The Stutzmans claim they have similar vested state water rights that both the BOR and the state have refused to recognize and, consequently, it is proper under the McCarran Amendment and the Wyoming general adjudication statute for the district court to adjudicate those rights in this general adjudication. [¶ 25] The state and United States respond by arguing that all the water in the Buffalo Bill Reservoir was adjudicated by the state administratively in 1963 through the BOR reservoir permits, and confirmed by the court in the Big Horn general adjudication in 1985 and, consequently, the Stutzmans' claims are barred by operation of statute, res judicata, and laches. With regard to the merits of the claims, the state and the United States contend no such rights existed under state law and the state court lacked jurisdiction to determine whether such rights existed pursuant to the federal contracts, statutes, and patents. [¶ 26] The district court found the Stutzmans' failure to challenge the reservoir certificates within the time unequivocally set in the Phase III procedures barred their claims under the doctrines of laches and res judicata. Thus, the district court dismissed their petition on the ground that they failed to state a claim upon which relief could be granted. [¶ 27] The Stutzmans argue the district court erred in finding they had to object to confirmation of the reservoir certificates in 1985 because the certificates did not extinguish their claimed implied secondary rights. Thus, they assert, they had no reason to object either to the adjudication of those certificates by the state in 1963, or the confirmation by the district court in 1985. Further, they argue the issues related to their implied secondary rights are different and distinct from those involved in adjudicating the reservoir permits and, therefore, res judicata cannot apply. Finally, they contend laches does not apply absent evidence of prejudice which has not been adequately alleged, and, in any event, is a question of fact militating against dismissal. [¶ 28] We agree with the district court that the Stutzmans' claims are untimely and, therefore, barred. However, we reach that result by a slightly different route. To determine whether the statutes, the district court's Phase III Procedures, res judicata, or laches bar the Stutzmans' claims brought, for the first time, thirty-seven years after the reservoir permits were adjudicated and fifteen years after they were confirmed by the district court, we must first examine the nature and scope of those claims. [¶ 29] Under administrative procedures adopted by Wyoming, water rights are perfected in three steps. First, a prospective user must apply for a permit to divert or impound state waters. See Wyo. Stat. Ann. § 41-4-501 (LexisNexis 2003) (direct-flow permits) and § 41-3-301 (reservoir permits). Second, if the permit application is approved (upon a finding that water is available and other requirements are met), the applicant is authorized to construct diversion and/or storage structures, and to appropriate water through such structures, in accord with the permit's terms. See Wyo. Stat. Ann. §§ 41-4-503 and 41-4-504 (LexisNexis 2003). Finally, upon presentation of proof of appropriation for beneficial use under a direct-flow permit or proof of construction under a reservoir permit, the Wyoming State Board of Control will issue a certificate formally confirming rights acquired under the permit, with a date of priority relating to the filing of the original permit application. See Budd v. Bishop, 543 P.2d 368, 372 (Wyo.1975); Wyo. Stat. Ann. §§ 41-3-321 & 41-4-512 (Lexis-Nexis 2003). [¶ 30] With regard to reservoirs, the statutes have historically provided for a primary permit to construct a reservoir and secondary permit to apply the stored water to particular lands. Trelease and Lee, Priority and ProgressCase Studies in the Transfer of Water Rights, 1 Land and Water Law Review, 1, 47 (1966). From 1909 to 1921, the statute required secondary permits unless the owner of the reservoir was the same person using the water. Wyo. Stat. Ann. § 41-27 (1957). In 1921, the statutes were modified to establish that the owner of the reservoir was the owner of the right to impound, sell or lease the stored water, which right did not attach to any particular land except by deed. Wyo. Stat. Ann. § 41-34 (1957). The statute was again amended in 1939 to clearly state that secondary permits were permissive, and that version of the statute was in effect at the time the reservoir permits in this case were adjudicated and remains so. Wyo. Stat. Ann. § 41-27 (1957). It provides, any party or parties desiring to appropriate [reservoir] water to particular lands may file ... an application for permit to be known herein as the secondary permit and the relevant administrative requirements for permits only apply [i]n the event [such a] secondary permit may be desired. See Wyo. Stat. Ann. § 41-3-302 (LexisNexis 2003) (emphasis added). [¶ 31] Reservoir owners have the right to allocate stored waters for beneficial uses apart from those rights created by statutes or permits. Indeed, current statutes also provide that: (1) reservoir owners need not enumerate lands to be irrigated from reservoirs; Id.; (2) [t]he use of water stored under [reservoir permits] may be acquired under such terms as shall be agreed upon by and between the parties in interest, see Wyo. Stat. Ann. § 41-3-303 (LexisNexis 2003); (3) a reservoir owner shall be held to be the owner of the right to impound ... water, and the right to sell or lease a portion or all his right to the impounded waters, see Wyo. Stat. Ann. § 41-3-320 (LexisNexis 2003); and (4) reservoir water need not attach to any particular lands and may be sold, leased, transferred and used in such manner and upon such lands as the owner... may desire. See Wyo. Stat. Ann. § 41-3-323 (LexisNexis 2003); see also Wyo. Stat. Ann. § 41-3-101 (n. 7, infra ) (LexisNexis 2003). [¶ 32] The Stutzmans' claim to a state water right, boiled down to its essence, is that they have an implied secondary right under Wyoming common law based on Condict, 79 Wyo. 211, 333 P.2d 684, which, they argue, has not yet been adjudicated because only the right to store water under the reservoir permits was adjudicated administratively in 1963 and confirmed judicially in 1985. Because the Stutzmans' claim of a common law, implied secondary right relies so heavily on Condict, a detailed analysis of that case is warranted. [¶ 33] Condict involved a reservoir owned in equal shares by two brothers, Edwin and Cecil Ryan. In 1910, Edwin Ryan acquired a permit for construction of a reservoir for the purpose of providing additional water for a permitted irrigation ditch that served adjacent farmlands owned by the brothers separately. The brothers did not apply for secondary permits despite the fact such permits were required by statute at that time. [2] Edwin Ryan subsequently mortgaged his farmlands as security for various loans. In 1926, after he defaulted on the loans, Winthrop Condict acquired Edwin Ryan's lands through foreclosure of the mortgages and a sheriff's sale. One year later, in 1927, Edwin Ryan purported to assign his one-half interest in the reservoir to his brother, Cecil. Condict did not learn of the assignment until 1954, when Cecil Ryan sought a certificate of construction for the reservoir claiming exclusive ownership. [3] Id. After learning of the request, Condict lodged an objection with the State Board of Control. This Court's ruling in Condict arose from an appeal of the State Board of Control's order on the contested certificate of construction. Id. [¶ 34] The ultimate question in Condict with respect to the adjudication of the reservoir permit was who owned the reservoir. Id. Although the mortgages granted by Edwin Ryan did not expressly include his one-half interest in the reservoir, this Court held that his attempted assignment of the interest to his brother was invalid because the interest in the reservoir had impliedly transferred with the farmlands as a result of the foreclosure. Id. at 690. In so ruling, this Court noted: (a) the Ryan brothers intended to apply the reservoir waters to designated lands that they separately owned, including the lands conveyed to Condict; (b) the reservoir permit was granted with the specific condition that the reservoir waters be used on such lands, as described in a prior direct-flow permit; and (c) Edwin Ryan gave no indication that he did not intend the value added by his share of the reservoir permit to be part of the security offered for the mortgage loans. Id. at 688-691. [¶ 35] The state and the United States point out several distinctions between the facts in this case and those in Condict, arguing the Condict holding does not operate to provide the Stutzmans the secondary rights they seek. Those distinctions include the fact that the reservoir permits in this case were not similarly conditioned [4] , the statute in effect in 1910 when the Ryan reservoir permits were granted required secondary permits for the use of stored waters, unlike the applicable statutes in this case which make secondary permits permissive, and the dispute in Condict was over ownership of a reservoir while the dispute here is between a reservoir owner and an individual water user. [¶ 36] While the Stutzmans recognize differences between their situation and what occurred in Condict, they contend their argument that the parties here intended the stored water to be utilized on their land is even stronger than in Condict. As evidence of that intent, the Stutzmans point to 1) conditions on reservoir Permits 492R and 751R, which they claim indicate the intent that the stored water be used solely for irrigation on particular lands, including theirs; 2) patents issued by the United States which conveyed the land together with the right to use the water from the Shoshone Reclamation Project as an appurtenance to the irrigable lands in said tract; 3) water rights applications which the federal government required from the Stutzmans' predecessors in interest establishing that the measure of the water right of said lands is the quantity of water which shall be beneficially used for irrigation, but in no case exceeding the share, proportionate to irrigable acreage, of the water supply actually available; and 4) the repayment contract between the United States and the Shoshone Irrigation District as Trustee for the water users within the boundaries of the Shoshone Irrigation District. On the basis of these facts and the Condict case, the Stutzmans contend they have an implied secondary right, which gives them, not the BOR, the power to control their proportionate share of the stored water. They further contend the stored water was intended for the single purpose of irrigating their lands. [¶ 37] As all of the parties acknowledge, the facts upon which the Stutzmans rely to claim an implied secondary right are substantially different than those in Condict. Despite the many differences, we look to Condict and the principles established therein to determine whether the Stutzmans' claim is of a nature that it should have been pursued in 1963 or 1985, and is, therefore, untimely. In considering the timeliness issue, however, we do not decide whether the Stutzmans are legally entitled to an implied secondary right. The Stutzmans have consistently claimed throughout these proceedings that they have an implied secondary right to use the water stored under the BOR's reservoir permits which carries with it the right to demand a proportionate share of the stored water, and that such implied right is necessarily superior to any right of the BOR to control the use of project water. [5] Accepting that as the basis for their claim under state law, we turn to the question of whether it was timely filed.