FIRST SECURITY CORPORATION, an Idaho corporation, Plaintiff-Appellant,
BELLE RANCH, LLC, an Idaho limited liability company; JUSTIN FLOOD STEVENSON, ELIZABETH BRETT STEVENSON, and RABO AGRIFINANCE, INC., Defendants-Respondents. BELLE RANCH, LLC, an Idaho limited liability company, Plaintiff-Respondent,
MOUNTAIN WEST BANK, a Division of Glacier Bank; GBCI OTHER REAL ESTATE, LLC, Defendants-Respondents, and SOUTH COUNTY ESTATES, LLC, an administratively dissolved Idaho limited liability company; PENSCO TRUST COMPANY F.B.O. RICHARD D. FOSBURY, IRA #F01EC; PENSCO TRUST COMPANY CUSTODIAN F.B.O., FIRST SECURITY CORP., and DOES 1-5, unknown persons who may claim an interest in the subject water rights, Defendants. RICHARD D. FOSBURY, an individual, Plaintiff-Appellant,
BELLE RANCH, LLC an Idaho limited liability company; JUSTIN FLOOD STEVENSON, an individual; ELIZABETH BRETT STEVENSON, an individual; and RABO AGRIFINANCE, INC., a Delaware corporation, Defendants-Respondents.
from the District Court of the Fifth Judicial District, State
of Idaho, Blaine County. Jonathan Brody, District Judge.
judgment of the district court is affirmed.
Bromley, PLLC, Boise, for appellants First Security
Corporation and Richard D. Fosbury. Christopher M. Bromley
Barker, Rosholt & Simpson, Boise, for respondents Belle
Ranch, LLC, Justin Flood Stevenson, and Elizabeth Bret
Stevenson. Albert P. Barker argued.
Quinney & Nebeker, Salt Lake City, UT, for respondent
Rabo Agrifinance, Inc. Michael D. Mayfield argued.
& Annis, Coeur d'Alene, for respondents Mountain West
Bank and GBCI.
a consolidated appeal involving contested water rights. The
cases involve three separate actions: one brought by First
Security Corporation and two others brought by Richard
Fosbury to quiet title to their purported ownership of
irrigation water rights to land owned by Belle Ranch,
It is agreed by all parties that partial decrees for the
water rights were issued in the Snake River Basin
Adjudication (SRBA) in the name of South County Estates, LLC.
As South County's successors in interest, First Security
and Fosbury argue that their interests in the water rights
are senior and therefore superior to the interest of Belle
Ranch, LLC. Notwithstanding these claims, the district court
quieted title to the water rights in question to Belle Ranch,
LLC. First Security and Fosbury appeal. For the reasons set
out, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
facts of this appeal are lengthy and complex. The opinion
will initially outline the chain of title for all of the
parties in this appeal. Next, it will detail the proceedings
and documents filed with the Idaho Department of Water
Resources. Finally, it will discuss the course of proceedings
in the case.
The Belle Ranch property.
real property to which the water rights in dispute are
appurtenant (the Belle Ranch property) is located in Blaine
County, Idaho. The property consists of 289 acres and has
appurtenant water rights to irrigate those
acres. These water rights are discussed as
fractions of the entire 289 acres. For example,
1/289ths of the water right would correspond to
the irrigation rights associated with one acre out of the
total 289 acres of the Belle Ranch property.
South County, Mountain West Bank, GBCI, and Belle Ranch,
County Estates, LLC, was formed in 2003 and administratively
dissolved in 2011. John Scherer was the managing member of
the LLC, and Fosbury and Charles Holt were members of the
LLC. In 2003, South County acquired what is now the Belle
Ranch property along with the appurtenant water rights. It
then filed a notice of change in water right ownership with
the Department in the name of South County. On October 14,
2005, South County executed a mortgage (First Mortgage)
encumbering the Belle Ranch property and appurtenant water
rights. Mountain West Bank (MWB) was the holder of the
mortgages. That mortgage was subsequently modified in
December 2006. Later, on June 13, 2008, South County executed
another mortgage (Second Mortgage) with MWB encumbering the
Belle Ranch property and the appurtenant water rights. On
October 17, 2008, South County executed another mortgage
(Third Mortgage), also with MWB, further encumbering the
Belle Ranch property and its appurtenant water rights.
2010, South County defaulted on its mortgages with MWB. South
County executed a deed in lieu of foreclosure to MWB on June
17, 2010. The deed in lieu provided that the conveyance
included all appurtenances, including "all water, water
rights, watercourses and ditch rights (including stock in
utilities with ditch or Irrigation rights)[.]" In
conjunction with the deed in lieu, South County executed an
Estoppel Certificate, which likewise stated that all water
rights were included in the conveyance.
same day, MWB transferred the Belle Ranch property to GBCI
Other Real Estate, LLC (GBCI). GBCI executed a special warranty
deed and MWB executed a quitclaim deed, conveying the Belle
Ranch property and its appurtenant water rights to Belle
Ranch, LLC. Belle Ranch, LLC, used loan proceeds from Rabo
Agrifinance, Inc. (Rabo), to purchase the Belle Ranch
since the conveyance to Belle Ranch, LLC, the LLC has been
the owner of record of the Belle Ranch property, paid the
assessments on the water rights, and diverted and
continuously put the water to beneficial use.
South County's successors in interest.
the pendency of the SRBA, South County made seven conveyances
of fractional portions of water rights to its managers or
members and their affiliated entities, accounts, or holdings.
Those conveyances are discussed below.
Big Stick, LLC.
December 7, 2007, South County executed a quitclaim deed to
Big Stick, LLC, conveying 2.8/289ths of the water
rights. Scherer was the managing member of both Big Stick and
South County. On October 14, 2009, a Partial Release of Lien
was executed from MWB to Big Stick. Big Stick later assigned
its interest to Fosbury.
Charles Holt and his Individual Retirement Accounts
County executed three separate quitclaim deeds in which it
conveyed a total of 3/289ths of the appurtenant
water rights to two different Holt IRAs (Holt IRA #H01NH and
Holt IRA #H01NV). These conveyances were dated April 28,
2008, August 8, 2008, and April 8, 2009. However, the deeds
were not recorded until March 1, 2010. On November 28,
2016, the Holt IRAs conveyed 3/289ths of the water
rights via quitclaim deeds to Charles Holt. Holt then
assigned his interest to Fosbury.
Richard Fosbury and his IRA.
March 17, 2008, South County executed a quitclaim deed
conveying 1/289ths of the water rights to
Fosbury's IRA. The deed was not recorded until March 1,
2010. On October 14, 2009, a Partial Release of Lien for the
First Mortgage was executed by MWB's representative to
the Fosbury IRA. There was no mention of either the Second or
Third Mortgages being released by MWB. On September 28, 2008,
South County executed another quitclaim deed to the Fosbury
IRA conveying another 1/289ths of the water
rights. This conveyance was also recorded on March 1, 2010.
MWB also executed a partial release of that additional
conveyance. Again, the release was only in relation to the
First Mortgage and made no mention of either the Second or
Third Mortgages. After these transfers, the Fosbury IRA
purportedly owned 2/289ths of the water rights.
November 11, 2016, the Fosbury IRA conveyed to Richard
Fosbury 2/289ths of the water rights via quitclaim
deeds. The deeds expressly conveyed the fractional water
rights previously conveyed to the Fosbury IRA. After Big
Stick and Holt assigned their interests to Fosbury, Fosbury
purportedly owned 7.8/289ths of the water rights.
First Security Corporation.
25, 2009, South County executed and recorded a quitclaim deed
to Scherer and Holt conveying 7.5/289ths of the
total water rights. A Partial Release of Lien was issued by
MWB on June 25, 2009. On June 10, 2009, fifteen days
before the water right was conveyed to them, Scherer
and Holt executed a mortgage in favor of IIB for
7.5/289ths interest in the total water
rights. The partial release that was previously
issued by MWB was recorded by IIB on June 25,
defaulting on their loan with IIB, Scherer and Holt executed
a Non-Merger Deed in Lieu of Foreclosure conveying ownership
of 7.5/289ths of the water rights to IIB on
September 2, 2014. On October 15, 2014, IIB executed a
warranty deed conveying the same 7.5/289ths of the
water rights to First Security.
Summary of the water rights at the time of this
all of the conveyances, the claimed water rights were as
follows: Fosbury purportedly owned 7.8/289ths of
the total water rights. First Security purportedly owned
7.5/289ths of the total water rights. Fosbury and
First Security concede that Belle Ranch, LLC, owns no less
than 273.7/289ths of the total water rights. As a
result, only 15.3/289ths of the total water rights
are at issue in these appeals.
The SRBA and the Department's filings and
Notices of ownership and Partial and Final Decrees by the
1988, G. Chapman Petersen filed notices of claims in the SRBA
for the five water rights appurtenant to the Belle Ranch
property. After the Belle Ranch property was conveyed to
South County, South County filed a change of ownership in the
water rights appurtenant to the property with the Department,
changing the name of the owner of record to South County.
early 2007, the Director of the Department issued
recommendations in the SRBA, recommending that the water
rights be decreed authorizing 289 acres of irrigation for
beneficial use on the Belle Ranch property. South County was
listed as the claimant of those water rights. On June 28,
2010, the Special Master of the SRBA issued a Special
Master's Report and Recommendation, recommending that the
water rights be decreed to South County. On July 9, 2010, an
amended report recommended the same finding.
August 31, 2010, the district court in the SRBA issued
partial decrees for the water rights, decreeing all five of
the water rights in the name of South County. The partial
decrees were served on South County and included a Rule 54(b)
certificate, meaning they were final adjudications and
consequently appealable decisions. Despite the decrees being
issued after the conveyances to Scherer, Holt, and Fosbury,
the partial decrees were never challenged by them.
acquiring the property in June of 2010, MWB filed a notice of
change in water right ownership with the Department on July
27, 2011. On September 13, 2011, the Department acknowledged
the change in ownership and modified its records to note MWB
as the owner of record. On February 28, 2012, Belle Ranch,
LLC, submitted a notice of change in water right ownership
with the Department to reflect that Belle Ranch, LLC, now