Understanding "Fee Lands" and Vested Water Rights

 
January 2, 2004 

By E. Wayne Hage 

775-482-4817 

Ramona Morrison 

Secretary, Nevada Live Stock Association 

rhmorrison@bww.com or 775-424-0570 

On January 29, 2002, the United States Court of Federal Claims (Court) issued its Final Opinion and Finding of Fact in the property phase of Hage v U.S. This litigation was initiated by the government's argument that Plaintiff could not access the forage and water on lands then administered by the United States Forest Service (USFS) and the Bureau of Land Management (BLM) without a grazing permit. The government's argument was premised on its claim that the grazing lands in question were "public lands"; that the government owned these lands, and therefore, the waters arising on those lands. According to the government, Plaintiff's ability to use the water and forage on the lands in question, was a conditional privilege. The canceling of a grazing permit by the BLM or USFS, according to the government, cancelled any claim Plaintiff had to the forage or water. 

Plaintiff argued that the stockwater rights in question were vested rights, and that the beneficial use of that water was livestock grazing, giving him a property interest in lands of the United States, which is recognized by the Internal Revenue Service (IRS) in estate inheritance tax assessments. 

In the January 2002 Final Opinion and Finding of Fact, the Court held that Plaintiff had not been granted a surface estate right to the grazing lands through any of the federal land disposal laws passed by Congress. The Court explained, in a footnote, that "property rights ... are usually defined by state law." The land disposal laws granted access to the land. Once the lands were accessed by settlers and the water put to beneficial use, property had been created under state law.

 

In its Finding of Fact, the court stated: 

"This court finds that Plaintiffs ... maintained a vested water right in the following bodies of water ... and had title to the fee lands where the following springs and creeks are located:" Pg. 10 ,12 of the Finding of Fact 

In a footnote, the Court set forth reference to the exact boundaries of the fee lands it was referencing. These boundaries include the Meadow Canyon, Monitor, and Table Mountain allotments. 

In dealing with the vested water rights on the southern portion of the ranch, the Court used the same language about vested water rights and title to the fee lands within the boundaries of the Ralston and McKinney allotments. 

The purpose of this paper is to explore the meaning of the Court's use of the term "fee lands" for the purpose of setting the stage for inquiries as to the policy implications of that term as it relates to land and water use in the prior appropriation states.

 

Body 

It is important to note that the Court used the phrase "title to fee lands" where the adjective "fee" is used to describe the lands. The Court did not use the phrase "fee title to the land" where the adjective "fee" is used to describe "title" to land. The courts have held that the phrase "fee title to land" is used where patent has issued. It relates to the subject of property (the rock and mineral) as well as the property (invisible rights and claims). Obviously, grazing allotments themselves are not patented, and the U.S. retains the right to dispose of the mineral in the land through the mining laws. 

Thomas Sowell probably articulated the underlying concept expressed here as well as anyone, when he wrote: 

"Neither 'property' nor the value of property is a physical thing. Property is a set of defined options . . .It is that set of options which has economic value . . .It is the options, and not the physical things, which are the 'property' - economically as well as legally . . .But because the public tends to think of property as tangible, physical things, this opens the way politically for government confiscation of property by forcibly taking away options while leaving the physical objects untouched." - Thomas Sowell 

The courts have also addressed the distinction between property and the subject of property as in the Northwestern Trust Company v Kelly, 48 NC 1267, 189 citing RCL when it states: 

"The word property is not always used in its strict legal sense. It is frequently used to signify, or describe, the subject of property, such as a chattel or tract of land . . .These things, although the subject of property, are, when coupled with possession, but the indicia or visible manifestations of invisible rights."

 

In Hage v U.S. the Court held: 

"This court finds that Plaintiffs presented evidence at trial that showed by the preponderance of evidence that the plaintiffs and their predecessors appropriated and maintained a vested water right in the following bodies of water on the Ralston and McKinney allotments. In addition to certificates of appropriation that were entered into evidence, the plaintiffs also submitted an exhaustive chain of title which showed that the plaintiffs and their predecessors-in-interest had title to the fee lands where the following springs and creeks are located:" Pg. 10 ,12 of the Opinion

 

Discussion 

It is instructive to precisely define two key terms used by the Court in its Findings; "vested" and "fee."

 

Vested: 

The word "vested" has a well understood meaning. It is used to define an estate, either present or future, the title to which has become established in some person or some persons and is no longer subject to any contingency. Snortum v Snortum, 193 NW 304, 305, 155 Minn. 230. 

A "vested right" is property which the law protects. Hoeft v Supreme Lodge Knights of Honor, 45P. 185, 186 133 Cal 91, 33 LRA 174 

A "vested right" is absolute, complete and unconditional in itself. State ex rel Wayne County v Hackman, 199 SW 990, 991, 272 Mo. 600 

A "vested right" is a right which is fixed, unalterable and irrevocable. Miller v Johnstown Traction Co., 74A 2d 508, 511, 167 PA super 22.

 

Fee: 

The grant of a "fee" in land conveys to the grantee complete ownership, immediately and forever with the right of possession from boundary to boundary . . . S.H.A.Ill. ch 30, 12, Magnolia Petroleum Co. v Thompson, CCA Mo., 106 F2d 217, 224, 227, 228. 

The word "fee" is used interchangeably with "fee simple" and "fee simple absolute." It implies an unlimited estate of inheritance when used without any qualifying adjective. Blevins v Smith, 16 S.W. 213, 218, 104 Mo. 583, 13 LRA 441. 

An estate in fee simple absolute means a perfect title. It is the entire and absolute interest in property, or land, from which it follows that no one can have a greater estate. Fink v Darst, 14 Ill. (4 Peck) 304, 308, 58 Am. Dec. 575, quoting Cruise, Dig. Tit. "estate in fee simple" 

The words "vested" and "fee" convey precepts of property law which are as old as the history of law. The word "fee," in particular, has an interesting development from medieval times to the present. In medieval times, it was customary for the king to own the land. Any use of the king's land was a conditional privilege, extended to those who did service to the King. Service could come in the form of participating in the King's wars, or battles, or in some economic, political or religious sense. These privileges were usually proffered for a limited period of time, such as the life of the tenant or as long as the tenant retained his "good standing" with the King. This arrangement allowed for the King to keep his lands producing economically while rewarding those faithful to him. The limited, or temporary, use of the King's lands was referred to as "beneficial use," to use the modern English phrase, or to use the old English phrase, a use limited by time, or circumstance, was called a usufruct. This general concept of land use was predominant in England in the period immediately after the Norman Conquest. 

There were problems with the concept of beneficial use or usufruct. The person holding the usufruct knew that his time on the land was limited. This created an incentive on the holder of the usufruct to take as much out of the land as possible and to invest as little as possible in the lands. The end result of this method of land utilization was a general deterioration of the land resource itself, and a less than efficient economic return to the King. 

To enhance both efficiency of land use and efficiency of economic return, incentives were sought which would encourage both. One of the most negative incentives controlling the tenant's actions was the effort to acquire as great a monetary accumulation as possible, during his tenure on the King's land, so he would have something to pass on to his heirs. Kings realized that the most effective way to reduce inefficiencies in the use of their lands was to make the use of their lands inheritable, thereby creating an incentive, in the tenant's self-interest, to maximize efficiency in land use and economy to the realm. 

If the use of the King's lands was made permanent, the tenant could provide for his heirs by passing the use of the King's land, lawfully, to his posterity. When the beneficial use of the King's land, the usufruct, was made permanent, the beneficial use, or usufruct, became known as the fee. 

The semantic origin of the word fee as set forth in Webster's Dictionary is enlightening in itself, in its relationship to commodity production from the land, particularly livestock grazing. Webster's Dictionary of 1828 gives a contemporary meaning to the word "fee" as it was understood at the time western water law was developing.

 

FEE: 

From the use of cattle in transferring property, or for barter, or payments in cattle ... this word fee, in land, ... originated among the descendents of the northern conquerors of Italy ... all the land in England, except the crown land, is of this kind ... and absolute fee or fee simple is land which a man holds to himself and his heirs forever ... hence, in modern times, the term fee or fee simple denotes an estate of inheritance; and in America, where lands are not generally held of a superior, a fee or fee simple is an estate in which the owner has the whole property, without any condition annexed to the tenure ... In the United States, an estate in fee or fee simple is what is called, in English law, an allodial estate, an estate held by a person in his own right, and descendible to the heirs in general. 

The United States argued that Plaintiff was grazing on public lands, however, the Ninth Circuit Court in United States v Blendar, 128F 910, 913, 63 C.C.A. 636 held: "The words "public lands" are not always used in the same sense. Their true meaning and effect are to be determined by the context in which they are used, and it is the duty of the court not to give such a meaning to the words as would destroy the object and the law, or lead to absurd results." The United States Supreme Court in Bardon v Northern Pacific Ry Co. 12 S. Ct. 856, 145 US 535, 538, 36 L.Ed. 806 held: "It is well settled that all land to which claims or rights of others have attached does not fall within the designation of public land." 

If one is to use the United States Supreme Court definition of public lands, it becomes clear that lands of the United States, to which vested water rights and the use of those water rights have become inheritable, are lands to which rights and claims of others have attached. By this definition, lawfully adjudicated grazing allotments, which are appurtenant to a rancher's base property, are not, and cannot be, public lands. Going back to the comparison in the English law, as stated in Webster, referring to fee lands, "all the land in England, except the crown land is of this kind." The United States courts have held in Myers v United States, 140 F 648, 649, "Lands owned by the province of Quebec and known as "Crown lands" correspond to what is known in this country as public lands." Crown lands do not have rights and claims of others attached. Public lands, in the true sense, do not have rights and claims of another attached. Grazing allotments, with their rights and claims attached in the form of water rights, and the beneficial use or fee associated with those rights, cannot be public lands. 

Stockwater law in the prior appropriation states is a classic illustration of the concept set forth above. When a rancher applies to the state water engineer for the right to acquire a watering source, the state water engineer issues a permit upon evidence that the applicant can, and intends to put the water to beneficial use. 

Both the terms "permit" and "beneficial" use have a temporary connotation. Both terms imply conditions to be met. A rancher, to perfect a permitted water right must meet the terms and conditions of the permit. He must do this in the allotted time period set forth in the permit. Above all, he must demonstrate that he can put the water to beneficial use. The beneficial use of a stockwater is livestock grazing. Proof of beneficial use of a stockwater is proof that sufficient water is available to the livestock grazing in the service area of the water. 

If we re-read the Court's Findings in Hage v U.S. in light of the above discussion: 

"This court finds that Plaintiffs presented evidence at trial that showed by the preponderance of evidence that the plaintiffs and their predecessors appropriated and maintained a vested water right in the following bodies of water on the Ralston and McKinney allotments. In addition to certificates of appropriation that were entered into evidence, the plaintiffs also submitted an exhaustive chain of title which showed that the plaintiffs and their predecessors-in-interest had title to the fee lands where the following springs and creeks are located:" Pg. 10 ,12 of the Finding of Fact Hage v U.S. It becomes clear that when a rancher's stockwater rights have vested and he can prove the same through chain of title, his use of lands of the United States has converted to a fee. The range adjudications, which were based on water rights, and which took place primarily between 1905 and 1968, established the exterior boundaries of the fee lands upon which his water rights are located. 

In a February 5th, 2003 Order, responding to a government Motion for Summary Judgment, the Court in Hage v U.S. held; "As Plaintiff established at trial, the stockwater rights... were possessed by Plaintiff's predecessors in interest long before the grazing permit system was established by the government... the Court is not of the Opinion that the lack of a grazing permit that prevents access to federal lands can eliminate Plaintiff's vested water rights... that pre-date the creation of the permit system." 

When a water right vests, it becomes permanent in ownership and inheritable. The conditions required under the permit, having already been satisfied, no longer apply. 

A vested water right can be acquired in three basic ways: 

1. Proof that the water was being put to beneficial use prior to the advent of statutory water law, or 

2. A determination by a court as in a water adjudication setting forth decreed rights, or 

3. By issuance of a water certificate issued by the state water engineer after satisfying the requirements set forth in the permit. 

When a water right vests, it loses its temporary and conditional status, and now becomes permanent and inheritable. When the beneficial use of the lands for livestock grazing, (the usufruct) loses its temporary and conditional status, the beneficial use becomes a fee.

 

Conclusion 

Under the prior appropriation water doctrine, the states were given lawful (ownership) control of the non-navigable waters within their exterior boundaries and complete control of the disposition of those waters into private ownership. Prior appropriation water law embodies the concept that a person applying for water can claim the use of all land necessary to put the water to beneficial use. 

Under the riparian water doctrine, which applies almost exclusively to those states east of the 100th meridian, the states were given lawful control of the disposal of land into private ownership. The person applying for land rights in those states, had the right to condemn (use) all the water upon those lands necessary to put the land to beneficial use. Under the riparian water doctrine, ownership of subject matter in the way of land extends to a fee in the water, necessary to effect beneficial use of the land. 

In the prior appropriation states, the status of the medieval King as underlying naked title holder of the subject matter in land is replaced by the United States exercising the underlying naked title to the land. As with the kings in medieval times, who authorized the creation of a fee interest in their lands to enhance the economic well-being of the realm by making use of the King's land inheritable, the United States has acknowledged the power of the prior appropriation states to recognize the creation of a fee interest in lands of the United States to enhance the efficiency of resource use and the nation's economic well-being. "... the Court is not of the Opinion that the lack of a grazing permit that prevents access to federal lands can eliminate Plaintiff's vested water rights ... that pre-date the creation of the permit system."