A recent decision of the California Court of Appeal provides key insight into the transfer of water rights when land is subdivided or sold, holding that such water rights should be divided in proportion to the size of the land subdivided or sold rather than the historic water use on each parcel. The case, Nicoll v. Rudnick,[1] clarifies an important question concerning the transfer of water rights, and may have significant impact on landowners, developers, public agencies, and agricultural business in California.
The case involves land owned by J.W. Nicoll which was separated into two lots: the “Nicoll Ranch” lot, comprising 142.79 acres; and the “Nicoll Field” lot, comprising 157.70 acres. In 1902, Nicoll acquired a right to appropriate water to both lots from the Kern River. Through an unrelated series of events, Nicoll Field was foreclosed on by Nicoll’s bank, and was eventually acquired by John W. Rudnick. Nicoll retained ownership of Nicoll Ranch, but many years later a dispute between Nicoll and Rudnick over the Kern River appropriated water rights arose, ultimately leading to litigation which called into question the proper distribution of water to each lot.
At trial, Nicoll testified that prior to the foreclosure, Kern River water was used to irrigate approximately 135 acres of Nicoll Ranch and only 45 acres of Nicoll Field. Based on these facts, Nicoll argued that water rights should be allocated in proportion to such water use, which would result in Nicoll Ranch holding 75% of the water rights (because Nicoll Ranch historically used 75% of the Kern River water). This would leave Rudnick (owner of Nicoll Field) with 25% of the Kern River water rights, based on a corresponding lower historic water use.
Rudnick disputed this approach, and argued that the full volume of Kern River water rights attached to both lots jointly. Thus, according to Rudnick, when the water rights were split, each lot was entitled to retain its proportionate share of the Kern River water based on lot-size, not historic use. Under this approach, Nicoll Field was entitled to 52% of the Kern River water, based on the fact that Nicoll Field comprised 52% of the land area originally owned by Nicoll. Because Nicoll Ranch comprised only 48% of the original land area, only 48% of the Kern River Water would be available to that lot under this approach.
The trial court agreed with Rudnick’s position and ordered that 52% of the Kern River appropriation must go to Nicoll Field. Nicoll appealed.
In assessing these issues, the Court of Appeal applied the well-established California law that the right to water is a real property interest that is both incidental and appurtenant to land,[2] and affirmed the trial court’s decision because it found that the entire original land area (consisting of both Nicoll Ranch and Nicoll Field) received appropriated Kern River water. When the original land area was divided between the Nicoll Ranch lot and the Nicoll Field lot, none of the conveying documents mentioned any reservation of water rights. The Court of Appeal interpreted the absence of such language to mean that the Kern River water rights passed in proportion with each lot’s size, and not in proportion to any difference in water usage.
In reaching this result, the Court noted an important distinction in the legal doctrine of “actual and beneficial use.” Under this doctrine, claims between separate water appropriators may be decided in favor of the claimant who establishes his/her historic use of water, as opposed to an appropriator who neglected to fully utilize his/her share of water. While Nicoll argued that this doctrine should apply to the Nicoll Ranch (which historically used a greater proportion of the Kern River water than Nicoll Field), the Court of Appeal held that this doctrine did not apply where, as here, the lots were previously conjoined as a single parcel when the water was first appropriated. In such instance, the appropriative right applies to the entire area of land, such that a subsequent division of that land will result in an equal division in water rights.[3]
Property owners and prospective buyers should be mindful when dividing property or purchasing a divided property that has appropriated surface water rights. When a single parcel possesses appropriated water rights and is thereafter subdivided, the absence of an express reservation of water rights to a specific lot may result in division of water rights according to the proportional ownership of the property.
For any questions regarding water rights, please contact Matthew Gorman at (562) 699-5500.
[1] Nicoll v. Rudnick (2008) 160 Cal. App. 4th 550.
[2] Fullerton v. State Water Resources Control Board (1979) 90 Cal. App. 3d 590, 598.
[3] Trimble v. Hellar (1913) 23 Cal. App. 436.
