Neal v. Hunt

• Decision Date: 16 October 1975
• Docket Number: No. 11729,11729
• Citation: 112 Ariz. 307,541 P.2d 559
• Parties: Claude NEAL and Rita Neal, his wife, and Truxton Canyon Water Company, Inc., an Arizona Corporation, Appellants, v. Frank HUNT and Francis T. Hunt, his wife, Appellees. Frank HUNT and Francis T. Hunt, his wife, Charles S. Grigg and Blanche Grigg, his wife, and John L. Byers and Susan Byers, his wife, Cross-Appellants, v. Claude NEAL and Rita Neal, his wife, and Truxton Canyon Water Company, Inc., an Arizona Corporation, Cross-Appellees.
• Court: Arizona Supreme Court

Page 559

541 P.2d 559

112 Ariz. 307

Claude NEAL and Rita Neal, his wife, and Truxton Canyon Water Company, Inc., an Arizona Corporation, Appellants, v. Frank HUNT and Francis T. Hunt, his wife, Appellees.

Frank HUNT and Francis T. Hunt, his wife, Charles S. Grigg and Blanche Grigg, his wife, and John L. Byers and Susan Byers, his wife, Cross-Appellants, v. Claude NEAL and Rita Neal, his wife, and Truxton Canyon Water Company, Inc., an Arizona Corporation, Cross-Appellees.

No. 11729.

Supreme Court of Arizona, In Banc.

Oct. 16, 1975.

Rehearing Denied Nov. 18, 1975.

Snell & Wilmer by Mark Wilmer, Phoenix, for appellants and cross-appellees.

Bonn & Anderson by Jeffrey D. Bonn, Jennings, Strouss & Salmon by M. Byron Lewis, Phoenix, for appellees and cross-appellants.

CAMERON, Chief Justice.

This is an appeal and cross-appeal from an injunction granted by the Superior Court of Mohave County which limited defendants, Claude and Rita Neal, and the Truxton Canyon Water Company, Inc., to taking no more than three hundred gallons of water per minute from certain water wells located on property owned by them in the Truxton wash area, thirty miles east of Kingman, Arizona.

We must answer the following questions on appeal:

1. Is the unrecorded agreement made in 1957 between defendants and plaintiffs' predecessor limiting the amount of water which could be used by plaintiffs' predecessor enforceable as to plaintiffs?

2. Is the water in dispute from an underground stream or derived from percolating waters?

3. Was the trial court within its discretion in limiting defendants to three hundred gallons of water per minute from defendant's wells?

The facts necessary for a determination of this case on appeal are as follows. The land in question is located in the Hualapai Valley of Mohave County in northwest Arizona, an area of very limited rainfall. The terrain is one of high plateaus, low mountains and valleys. The washes of the area contain surface water during some parts of the year and there are a few springs and streams. The inhabitants depend for water mainly on deep wells drilled on their land. The land involved is located in a non-critical ground water area as defined under our water code. A.R.S. § 45--308. In 1957 defendant, with the exception of 74 acres, sold his ranch to Hollenbeck. In a separate agreement not mentioned in the deed or recorded, defendant Neal reserved the water rights to the ranch which he had sold except for enough water for the buyer to irrigate 40 acres of crops. The reservation read as follows:

'And reserve further all water rights and waters incident and appurtenant to and within said land as reserved and to the lands sold to Buyers by Sellers in said escrow as hereinbefore set forth, EXCEPT that amount of water as would be necessary for the proper and efficient irrigation of forty (40) acres of cultivated crop land by the Buyers, which amount of water Sellers agree to allow Buyers to extract from said land so reserved by Sellers, in the event that Sellers are not able to extract said amount of water from the lands sold by Sellers to Buyers in said escrow, or any water right incident or appurtenant thereto.'

The ranch changed hands several times and in 1971 its owner Collins sold the ranch consisting of some 2,800 acres of deedland, 540 acres of State Leaseland, and 3,100 acres of Taylor Grazing land to the plaintiff Hunt. On 29 April of that year, and prior to the sale, Collins told Hunt that defendant had some claim to water rights on the ranch. Collins did not show Hunt any document relating to any claim. Hunt searched the county records and finding no document of record concluded that the matter was only a rumor. The next day he purchased the ranch. A few weeks after the sale Hunt and the defendant met at a livestock show and defendant mentioned his water rights. Hunt once again searched for this document in the Mohave County records to no avail. At the end of May, 1971, some 15 years after the sale of the land, the defendant finally recorded the water agreement.

Plaintiffs Mr. and Mrs. John L. Byers have 10 acres and plaintiffs Mr. and Mrs. Charles S. Grigg have 4 acres about 1 mile southwest of the Hunt ranch. Both of these families have wells located on their properties and use their well water for domestic and business purposes. Plaintiffs Mr. and Mrs. Frank Hunt use their Mohave property and well water for domestic and agricultural purposes. The Hunts, Griggs, and Byers' contend that if Neal is allowed to continue pumping the water level will soon drop forcing these families to sink deeper wells.

The defendants want to mine the water and transport it off the land. Besides the Truxton Water Company the defendants' family owns or has dealings with several other family enterprises and has contracts to provide water to various subdivisions and developments in Mohave County as well as to the town of Kingman.

The trial court, on 19 September 1973, entered findings of fact, conclusions of law, and decree permanently enjoining the defendants from removing percolating ground water to lands not overlying the common water supply in an amount greater than 300 gallons per minute. Conclusions of law 2, 3, 4, and 5 read as follows:

'2. The use which defendants propose to make of water from the common supply is a beneficial use but the use will be upon and for the benefit of lands which do not overlie the common supply.

'3. Withdrawal of groundwater from a common supply for a beneficial use upon lands which do not overlie the common supply is unlawful if the water supply to the well of another property owner whose lands overlie the common supply and who propose to make a beneficial use of the water upon his overlying lands is damaged or depleted.

'4. Withdrawal and use of ground water for a beneficial use upon lands which do not overlie a water supply from which the water is withdrawn is not unlawful if the water supply available to the owners of lands overlying the common supply for beneficial use is not thereby damaged or depleted.

'5. Lawful utilization of all available water resources of the state as required for a public or beneficial purpose and use is in the public interest.'

From this the defendants appeal. The Hunts, joined by the Byers' and Griggs, cross-appeal contending that the trial court erred in allowing the defendants to withdraw 300 gallons per minute or any amount for use on land not overlying the common water supply.

UNRECORDED WATER RIGHTS AGREEMENT

A.R.S. § 33--412(A) reads in part:

'All bargains, sales, and other conveyances whatever of lands, tenements and hereditaments * * * shall be void as to * * * subsequent purchasers for valuable consideration without notice, unless they are acknowledged and recorded in the office of the county recorder * * *.'

The term 'hereditament' is a broad one, more comprehensive than either the term 'land' or 'tenement' and almost as comprehensive as the term 'property.' 73 C.J.S. Property § 7d at p. 167. In George v. Gist, 33 Ariz. 93, 263 P. 10 (1928), we indicated that water rights in land must be conveyed in a deed and not a mere bill of sale. We reaffirm that position. Percolating waters, which are not subject to appropriation, are included within hereditaments as found in A.R.S. § 33--412.

The trial court held that Hunt did not have actual knowledge of the 1957 agreement between defendant and Hollenbeck nor was there sufficient evidence to charge Hunt with constructive knowledge of the existence of the agreement prior to his purchase of the ranch. A long time ago this court said:

'* * * Where one has notice of a fact affecting property which he seeks to purchase, which puts him upon inquiry, he is chargeable with the knowledge which the inquiry, if made, would have revealed; and one is put upon inquiry by notice of a claim which is inconsistent with the title he seeks to obtain, and must exercise due diligence to ascertain the facts upon which the claim is based.' Luke v. Smith, 13 Ariz. 155, 162, 108 P. 494, 496 (1910), aff'd, 227 U.S. 379, 33 S.Ct. 356, 57 L.Ed. 558 (1913).

Constructive and actual notice have the same effect. Arizona Land and Stock Co. v. Markus, 37 Ariz. 530, 296 P. 251 (1931).

We believe that when Collins told Hunt, prior to the sale, that defendant had a water right claim this was sufficient to put Hunt on inquiry. We believe further that absent other notice, a search of the record was sufficient under the facts in this case. Defendant, in order to protect his interest, had an obligation to record the instrument and Hunt had an obligation, once Collins told him of defendant's possible water rights, to ascertain if they were correct. The difference is that Neal did nothing, while Hunt attempted, by looking at the record, to ascertain if this rumor was correct. We will construe recording acts so as to afford the greatest possible protection to the person who in good faith endeavored to comply with them. Phoenix Title and Trust Co. v. Old Dominion Co., 31 Ariz. 324, 253 P. 435 (1927). We believe Hunt acted reasonably under the circumstances by searching the Mohave County recorder's office. Finding nothing to confirm the existence of the agreement, he cannot now be charged with having had constructive notice of its existence.

We believe that the trial court was correct in finding that Hunt was a subsequent purchaser for valuable consideration without notice and that the agreement between defendant and Hollenbeck was not binding upon Hunt. Davis v. Kleindienst, 64 Ariz. 251, 169 P.2d 78 (1946).

SOURCE OF WATER

Prior to statehood this court held that there was a presumption that underground waters are percolating in nature and if one asserts to the contrary then this must be affirmatively shown by clear and convincing evidence. Howard v. Perrin, 8 Ariz. 347, 76 P. 460 (1904). A quarter of a century later we had occasion to define the requirements for showing the existence of an underground stream or...