Cancellation of Stabio Ditch Water Right on Spearfish Creek, In re

• Decision Date: 23 December 1987
• Docket Number: No. 15600,15600
• Citation: 417 N.W.2d 391
• Parties: In re CANCELLATION OF the STABIO DITCH WATER RIGHT ON SPEARFISH CREEK.
• Court: South Dakota Supreme Court

Page 391

417 N.W.2d 391

In re CANCELLATION OF the STABIO DITCH WATER RIGHT ON

SPEARFISH CREEK.

No. 15600.

Supreme Court of South Dakota.

Dec. 23, 1987.

Allen L. Scovel of Scovel Law Office, Rapid City, for appellants Eugene and Karol Johnson; Stan H. Anker of Anker Law Office, Rapid City, on brief.

Daniel J. Doyle, Asst. Atty. Gen., Pierre, for appellee Water Management Bd.; Roger Tellinghuisen, Atty. Gen., Pierre, on brief.

HERTZ, Circuit Judge.

This is an appeal by Eugene and Karol Johnson (Johnson) from a judgment entered by the circuit court affirming the findings of fact, conclusions of law, and final decision adopted by the Water Management Board (Board), Water Rights Division of the South Dakota Department of Water and Natural Resources. We affirm.

In October 1983 Johnson purchased real property from Stabio. Included in this purchase were eighty-eight (88) acres which had been irrigated under a water right dating back to April 1877. The land in controversy was continuously irrigated from the time the water right was located in 1877 until 1965 when a flood washed out the irrigation system.

In 1962 Stabio leased the land to George Holben. The 1965 flood occurred while George Holben held the lease. George Holben's son, Lester, took over the lease in 1963 and continued on the premises until Johnson purchased the Stabio land in 1983. Lester Holben testified that after the flood in 1965 he and his brother attempted to determine the extent of the repairs necessary to restore the ditch. The headgate and flume were located on adjoining property, however, and access to this property was denied. From 1965 until Johnson's purchase of this property in 1983 no other attempt was made to repair the ditch pursuant to SDCL 46-7-3 or 46-8-1.

It is uncontroverted that there was no irrigation utilizing the Stabio water right between the years 1965 and 1983. Lester Holben testified that during this period there was some irrigation out of a pond situated on the leased property, but this was not related to the Stabio water right.

Prior to Johnson's purchase of the land, Harlan Schmidt, an attorney representing Stabio in the sale of the land, informed Johnson that according to his understanding of the water right law, there no longer was a valid water right because of the nonuse of the right over a period of eighteen (18) years.

Subsequently, Johnson asked his father, Leland Johnson, to ask the Board in Pierre about the status of the water right. Pursuant to this request, Leland Johnson talked with Kevin Larson, an engineer employed with the Board. Leland Johnson informed Kevin Larson that it had been at least two, three or four years since any water from the ditch had been used, and that access for repairs had been denied. Based on this information, Kevin Larson stated, "that there was nothing in the file to indicate anything, like nonuse or abandonment." Larson testified that "everything that I discussed with the Johnsons was based on the original assumption that it had only been two, three or four years since it had been used." Larson further testified that he "mentioned the statute, SDCL 46-5-37 dealing with nonuse, but they also mentioned the problem with access."

Johnson testified that the question of "the water arose before the purchase because it hadn't been used steadily." He admitted that after attorney Harlan Schmidt advised him that there was no water right, he enlisted his father's assistance in making the inquiry in Pierre. Sometime after the purchase it appears Kevin Larson told Johnson and Tom Venholst, an agricultural engineer for the Soil Conservation Service that, according to the information he had, there was a valid water right on the property.

In the summer of 1984 Johnson purchased irrigation equipment and irrigated from the Stabio ditch. In December 1984 the Board authorized an investigation of the Stabio ditch water right. On January 16, 1985, following this investigation, a notice of cancellation was mailed to Johnson. The Board held a hearing on March 6, 1985 and a rehearing on July 10, 1985. On December 4, 1985, a final hearing was held, where the Board entered its findings of fact, conclusions of law and final decision.

The issues raised by this appeal will be addressed in the order briefed and argued to this court.

I.

Is a water right forfeited by operation of law under SDCL 46-5-37 for failure to beneficially use the water for three years or longer?

The Board and the circuit court held that SDCL 46-5-37 is self-executing and automatic forfeiture occurred as soon as three years had passed without use of the right. Johnson claims that forfeiture cannot occur until after a due process hearing pursuant to SDCL 46-5-37.1, and that to hold otherwise would unconstitutionally deny him of a property right.

Before entering upon a discussion of the issue, the pertinent statutes need to be set out in full:

SDCL 46-5-37: Failure to use beneficially appropriated water--Forfeiture for nonuse--Reversion to public. When any person entitled to the use of appropriated water fails to use beneficially all or any part of such water for the purpose for which it was appropriated, for a period of three years, such unused water shall revert to the public and shall be regarded as unappropriated public water.

SDCL 46-5-37.1: Abandonment or forfeiture of permits or rights--Recommendation of chief engineer for cancellation. Upon the initiative of the chief engineer or upon petition by any interested person and after reasonable notice to the holder of the right or permit, if he can be located, the chief engineer may investigate whether or not a water permit or right has been abandoned or forfeited. After the investigation, the chief engineer may recommend cancellation of the permit or right for reason of abandonment or forfeiture. The recommendation, notice and hearing shall be conducted pursuant to the procedure contained in chapter 46-2A.

After the passage of SDCL 46-5-37.1 the Board adopted a rule denominated as ARSD 74:02:01:40, which states:

After the hearing, the board, by majority vote, shall decide whether the water permit or right is to be cancelled or remain in force. The records of the board shall show the reasons for all cancellations.

The issue of automatic forfeiture is one of first impression in this state. In resolving this issue we examine the statutes set out above to ascertain the intent of the legislature. Thereafter, if necessary, we further consider what other jurisdictions have said about this issue.

A statute must be construed according to its manifest intent, and such intent must be derived from the statute as well as other enactments relating to the same subject. Simpson v. Tobin, 367 N.W.2d 757 (S.D.1985). Courts must apply the law as the legislature enacted it, and must search for legislative intent as shown by what the legislature said rather than what it should have said or might have said. State v. Galati, 365 N.W.2d 575 (S.D.1985).

SDCL 46-5-37 in clear language states that failure to use all or any part of a water right for a period of three (3) years results in a reversion to the public of all of such unused water. Standing alone, this statute can be said to be self-executing. The passage of SDCL 46-5-37.1, however, is a clear signal by the legislature that no water right can lawfully be cancelled as a result of claimed forfeiture or abandonment, unless and until a due process hearing has been held. This statute permits cancellation by reason of nonuse only after the chief engineer, upon his own initiative or upon petition by an interested person, concludes an investigation as to whether or not the water right was forfeited because of three or more years of nonuse. After the investigation is completed, SDCL 46-5-37.1 requires that a hearing be conducted with all interested parties given appropriate notice and an opportunity to be heard.

The Board asserts that the purpose of the hearing under SDCL 46-5-37.1 is to determine, after notice has been given to all interested parties, whether or not a right "has been forfeited." Having said this, they nevertheless insist forfeiture automatically occurs upon the passage of three years of nonuse of the water right. This clearly represents a contradiction in terms. If forfeiture immediately occurs after three years in accordance with SDCL 46-5-37, what purpose is served by holding a hearing pursuant to SDCL 46-5-37.1? It obviously serves no useful purpose unless the legislature intended that this latter statute modifies the self-executing language in SDCL 46-5-37, and requires that forfeiture not be declared until a hearing demonstrates that it indeed occurred. This is precisely what has occurred in this case. The Board held three hearings on Johnson's water right claim. All interested persons testified. The Board concluded that forfeiture in fact had been shown; it was then within its power to order cancellation of the Johnson's water right. The fact that the Board and the trial court determined forfeiture was automatic after three years of nonuse is of no consequence to our decision here. The simple fact here is that Johnson's water right was not cancelled until after he had a full opportunity to contest the forfeiture claim. See Sturgeon v. Brooks, 73 Wyo. 436, 281 P.2d 675 (1955).

The fundamental requisite of due process of law is the opportunity to be heard. The constitutional guarantee of due process of law must be applied to and observed in administrative proceedings involving adversary parties. In the Matter of the Application of Midwest Security Transfer, Inc., 354 N.W.2d 728 (S.D.1984).

We hold that there can be no forfeiture of a water right without the due process hearing required by SDCL 46-5-37.1. We further hold that Johnson had a water right up and until the hearing on forfeiture was finalized. This holding is consistent with the spirit and tenor of SDCL 46-5-37 and 46-5-37.1, as well as with the fundamental...