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 opinion of the court was delivered by: Eismann, Justice.
The judgment is affirmed in part, vacated in part, and remanded for further proceedings.
This is an appeal from a judgment upholding Joyce Livestock Company's claim to instream water rights on federal rangeland for watering livestock, determining the priority dates of those water rights, and rejecting the claim of the United States that it also has instream water rights based upon appropriations by those it permitted to use the rangeland after enactment of the Taylor Grazing Act in 1934. The district court also denied Joyce Livestock Company's request for an award of attorney fees. We affirm the district court's holding that Joyce Livestock Company has instream water rights, vacate its determination of priority, and remand for a redetermination of the priority dates of such rights. We uphold its denial of the water rights claimed by the United States and its denial of Joyce Livestock Company's request for attorney fees.
I. FACTS AND PROCEDURAL HISTORY
Joyce Livestock Company (Joyce Livestock), a limited partnership formed in 1985, is a cattle operation located in Owyhee County, Idaho. It owns approximately 10,000 acres of land that is an accumulation of twenty-nine different homesteads and small ranches. The earliest patents in the chain of title of the properties owned by Joyce Livestock were issued in 1898. It filed a claim for instream*fn1 stockwater rights in Jordan Creek with a priority date of 1898. The United States filed overlapping claims for instream stockwatering with a priority date of 1934, the year of adoption of the Taylor Grazing Act, 43 U.S.C. § 315 et seq.
The matter was first heard by a special master. He recommended that the water rights claimed by Joyce Livestock be denied because there was no evidence that Joyce Livestock's predecessors had attempted to exclude other ranchers from using the water source used by the predecessors. Absent such evidence, the special master concluded that the predecessors lacked the requisite intent to acquire water rights. The special master also recommended that the water right claimed by the United States be granted, with a priority date of June 28, 1934, the date of enactment of the Taylor Grazing Act. According to the special master, the actions of the United States, through the Bureau of Land Management, in making the rangeland available to ranchers combined with its management of the rangeland demonstrated an intent to appropriate water and constituted a diversion of the water and an application of it to a beneficial use.
The district court reviewed the special master's recommendations. It held that the special master erred in holding that Joyce Livestock's predecessors lacked the intent required to obtain a water right. The district court ruled that the necessary intent could be inferred from the act of watering livestock. The district court determined, however, that Joyce Livestock's predecessors could not have obtained water rights on federal land unless their applications for grazing permits filed under the Taylor Grazing Act showed that they understood or believed they had acquired such water rights. Because such evidence was lacking from the grazing permit applications, the district court held that the earliest priority date Joyce Livestock could establish for its water rights was April 26, 1935. That was the date on which John T. Shea filed an application for a grazing permit.
The district court also denied the United States's water rights claim. There was no evidence that the United States had appropriated any water by grazing livestock. The district court noted that under Idaho law, a water right obtained by the lessee of real property is owned by the lessee unless the lessee was acting as an agent of the lessor in acquiring the water right. In this case, the United States did not show that any of Joyce Livestock's predecessors were acting as its agent when they acquired water rights.
The district court entered a judgment awarding Joyce Livestock a water right with a priority date of April 26, 1935, and denying the claims of the United States. It certified the judgment as final pursuant to Rule 54(b) of the Idaho Rules of Civil Procedure.
Joyce Livestock sought an award of attorney fees against the United States. The district court held that it was not entitled to an award under Idaho Code § 12-121 because the United States did not act frivolously, unreasonably, or without foundation in asserting its water rights claim and opposing the claim of Joyce Livestock. It likewise denied an award pursuant to 28 U.S.C. 2412(d) because it found the position of the United States substantially justified. Both Joyce Livestock and the United States appealed.
1. Did the district court err in finding that Joyce Livestock had acquired a water right on federal land for watering stock?
2. Did the district court err in determining the priority date of Joyce Livestock's water right? 3. Did the district court err in denying Joyce Livestock's request for an award of attorney fees under Idaho Code § 12-121 and 28 U.S.C. § 2412(d)?
4. Did the district court err in denying the United States's claim for a water right for watering stock?
5. Is Joyce Livestock entitled to an award of attorney fees on appeal?
A. Did the District Court Err in Finding that Joyce Livestock Had Acquired a Water Right on Federal Land for Watering Stock?
1. An appropriator can obtain a water right in nonnavigable waters located on federal land. When the arid regions of the West were initially settled, local custom and usage held that the first appropriator of water for a beneficial use had the better right to the use of the water to the extent of his actual use. California Oregon Power Co. v. Beaver Portland Cement Co., 295 U.S. 142 (1935). "The rule generally recognized throughout the states and territories of the arid region was that the acquisition of water by prior appropriation for a beneficial use was entitled to protection." Id. at 154. That custom likewise prevailed among the early settlers in what became the State of Idaho. As this Court explained in Drake v. Earhart, 2 Idaho 750, 753-54, 23 P. 541, 542 (Idaho Terr. 1890), with respect to the early emigrants to this area:
They found a new condition of things. The use of water to which they had been accustomed, and the laws concerning it, had no application here. The demand for water they found greater than the supply, as is the unfortunate fact still all over this arid region. Instead of attempting to divide it among all, thus making it unprofitable to any, or instead of applying the common-law riparian doctrine, to which they had been accustomed, they disregarded the traditions of the past, and established as the only rule suitable to their situation that of prior appropriation. This did not mean that the first appropriator could take all he pleased, but what he actually needed, and could properly use without waste. Thus was established the local custom, which pervaded the entire west, and became the basis of the laws we have to-day on that subject. Very soon these customs attracted the attention of the legislatures, where they were approved and adopted, and next we find them undergoing the crucial test of judicial investigation.
"This general policy [of prior appropriation] was approved by the silent acquiescence of the federal government, until it received formal confirmation at the hands of Congress by the Act of 1866." California Oregon Power Co. v. Beaver Portland Cement Co., 295 U.S. 142, 154 (1935). Section 9 of that Act, codified at 30 U.S.C. § 51, provided:
Whenever, by priority of possession, rights to the use of water for mining, agricultural, manufacturing, or other purposes, have vested and accrued, and the same are recognized and acknowledged by the local customs, laws, and the decisions of courts, the possessors and owners of such vested rights shall be maintained and protected in the same; and the right of way for the construction of ditches and canals for the purposes herein specified is acknowledged and confirmed; but whenever any person, in the construction of any ditch or canal, injures or damages the possession of any settler on the public domain, the party committing such injury or damage shall be liable to the party injured for such injury or damage.
"This provision was 'rather a voluntary recognition of a pre-existing right of possession, constituting a valid claim to its continued use, than the establishment of a new one.'" Id. at 155 (quoting Broder v. Natoma Water & Min. Co., 101 U.S. 274, 276 (1879)).
In 1877 Congress passed the Desert Land Act to encourage and promote the economic development of the arid and semiarid public lands of the Western United States, including those in what would become the State of Idaho. "The federal government, as owner of the public domain, had the power to dispose of the land and water composing it together or separately; and by the Desert Land Act of 1877 (c. 107, 19 Stat. 377), if not before, Congress had severed the land and waters constituting the public domain and established the rule that for the future the lands should be patented separately." Ickes v. Fox, 300 U.S. 82, 95 (1937). As the Supreme Court said two years earlier in California Oregon Power Co. v. Beaver Portland Cement Co., 295 U.S. 142, 161 (1935), with reference to the Desert Land Act, "It is hard to see how a more definite intention to sever the land and water could be evinced." The Court also stated that the Desert Land Act "simply recognizes and gives sanction, in so far as the United States and its future grantees are concerned, to the state and local doctrine of appropriation . . . . The public interest in such state control in the arid land states is definite and substantial." Id. at 164.
Thus, the appropriation of the nonnavigable waters within this State, including those located on federal land, is a matter of state law. "[A]ll nonnavigable waters were reserved for the use of the public under the laws of the various arid-land states." Ickes v. Fox, 300 U.S. 82, 95 (1937). "While the basics of the doctrine of prior appropriation is the same from state to state, the doctrine has evolved to meet the specific needs of each state and thus differs among the western states. Congress understood this fact and that is why the laws concerning appropriation were left up to each individual state." Idaho Dept. of Water Resources v. U.S., 122 Idaho 116, 124, 832 P.2d 289, 297 (1992).
"One who has appropriated water and beneficially used it has a right to the use of the water independent of his ownership of the land." Sanderson v. Salmon River Canal Co., 34 Idaho 145, 160, 199 P. 999, 1003 (1921). Idaho has long recognized that an appropriator can obtain a water right in waters located on federal land. Keiler v. McDonald, 37 Idaho 573, 218 P. 365 (1923); Short v. Praisewater, 35 Idaho 691, 208 P. 844 (1922); Sarret v. Hunter, 32 Idaho 536, 185 P. 1072 (1919); Le Quime v. Chambers, 15 Idaho 405, 98 P. 415 (1908); Hillman v. Hardwick, 3 Idaho 255, 28 P. 438 (1891). The appropriator simply must follow Idaho law in obtaining that water right.
The United States argues that prior to the enactment of the Taylor Grazing Act, the ranchers should not have been able to obtain a water right by grazing livestock on public lands because they did not have the right to exclude others from those lands or from water sources located on those lands. The United States is correct that one rancher did not have the right to exclude another from grazing livestock on public lands. Buford v. Houtz, 10 U.S. 305 (1890). A water right, however, is not based upon having exclusive access to a water source. It does not constitute ownership of the water. See, Idaho Conservation League, Inc. v. State, 128 Idaho 155, 156-57, 911 P.2d 748, 749-50 (1995) ("The state's ownership of the water that is the subject of the adjudication, is not before the SRBA court, nor is that ownership interest in any way diminished by the adjudication of claimants' rights. The proprietary rights to use water, which are the subject of the SRBA, are held subject to the public trust"). The prior appropriation doctrine recognizes that two or more parties can obtain a right to use water from the same source. "[T]wo parties may at the same time be in possession of water from a creek and neither hold adverse to the other; each may justly claim the right to use the water he is using, without affecting the rights of the other." Graham v. Leek, 65 Idaho 279, 144 P.2d 475, 480-81 (1943) (quoting from St. Onge v. Blakely, 245 P. 532, 536 (Mont. 1926)). Thus, an appropriator need not have exclusive access to federal lands in order to obtain a water right in waters situated on those lands.
2. Under the constitutional method, an appropriator could obtain a water right for stock watering without diverting the water from the water source. "Until 1971 Idaho recognized two methods of appropriating water of the state both of which were equally valid: the statutory method of appropriation and the constitutional method of appropriation." Fremont-Madison Irrigation Dist. and Mitigation Group v. Idaho Ground Water Appropriators, Inc., 129 Idaho 454, 456, 926 P.2d 1301, 1303 (1996). In 1971 the legislature amended Idaho Code §§ 42-103 and 42-201 to require compliance with the statutory application, permit, and license procedure in order to acquire new water rights. Ch. 177, §§ 1 & 2, 1971 Idaho Sess. Laws 843-44. "Although new appropriations could not be made under the constitutional method after 1971, the validity of existing constitutional appropriations continues to be recognized." State v. U.S., 134 Idaho 106, 111, 996 P.2d 806, 811 (2000) (citation omitted).
The constitutional method of appropriation generally requires an actual diversion in order to obtain a water right. Under the constitutional method, however, "[n]o diversion from a natural watercourse or diversion device is needed to establish a valid appropriative water right for stock watering." State v. U.S., 134 Idaho 106, 111, 996 P.2d 806, 811 (2000). Thus, Joyce Livestock's predecessors could obtain a water right under the constitutional method by watering their livestock at water sources on the public range without having to divert the water or modify the water source.
Even though we refer to it as the constitutional method of appropriating water, the Idaho Constitution did not create the doctrine of prior appropriation. "The rights of appropriators were regulated in the first instance by local customs, and out of these initial sources grew our present laws and rules with respect to irrigation." Sarret v. Hunter, 32 Idaho 536, 542, 185 P. 1072, 1074 (1919). "The framers and adopters of our Constitution were familiar with the prevailing customs and rules governing the manner in which water might be appropriated . . ., and they gave it form and sanction by writing it in the fundamental law of the state." Id. at 543, 185 P. at 1075. "The rule in this state, both before and since the adoption of our constitution, is . . . that he who is first in time is first in right." Brossard v. Morgan, 7 Idaho 215, 219-20, 61 P. 1031, 1033 (1900). Thus, water rights obtained in a manner that is now called the constitutional method of appropriation are entitled to protection even though the water was appropriated prior to the adoption and ratification of our Constitution in 1889 and its approval by Congress in 1890. Hillcrest Irrigation Dist. v. Nampa & Meridian Irrigation Dist., 57 Idaho 403, 66 P.2d 115 (1937) (upholding priorities of 1864, 1869, and 1887); Branstetter v. Williams, 6 Idaho 574, 57 P. 433 (1899) (upholding priority of 1863); Drake v. Earhart, 2 Idaho 716, 23 P. 541 (1890) (upholding priority of 1879).
3. Joyce Livestock's predecessors obtained water rights on federal land for stock watering. Under the constitutional method of appropriation, "a water user could make a valid appropriation without a permit, most commonly by diverting the water and putting it to beneficial use." State v. U.S., 134 Idaho 106, 111, 996 P.2d 806, 811 (2000). Because no diversion is required in order to obtain a water right for stock watering under the constitutional method, Id., Joyce Livestock's predecessors could obtain water rights for stock watering simply by applying the water to a beneficial use. There is no dispute that watering livestock is a beneficial use of water. Stevenson v. Steele, 93 Idaho 4, 453 P.2d 819 (1969). Therefore, they could obtain water rights simply by watering their livestock in the springs, creeks, and rivers on the range they used for forage.
The United States argues that there must also be evidence that Joyce Livestock's predecessors intended to obtain a water right. The district court agreed, but held that the intent could be inferred if the predecessors applied the water to a beneficial use. We have not held that an intent to obtain a water ...