Title: California Oregon Power Co. v. Beaver Portland Cement Co. et al. No. 612 - Argued April 5, 8, 1935. Decided April 29, 1935
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 Material Information
Title: California Oregon Power Co. v. Beaver Portland Cement Co. et al. No. 612 - Argued April 5, 8, 1935. Decided April 29, 1935
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Language: English
Publisher: 55 Supreme Court Reporter
Spatial Coverage: North America -- United States of America -- Florida
Abstract: Jake Varn Collection - California Oregon Power Co. v. Beaver Portland Cement Co. et al. No. 612 - Argued April 5, 8, 1935. Decided April 29, 1935 (JDV Box 86)
General Note: Box 22, Folder 3 ( Court Cases of Water Rights in States Other Than Florida - 1990 ), Item 26
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Full Text

55 S. Ct.

(4) denounces unjust discrimination and the
injustice exists whether the Commission has
so found or not. The answer is that Congress
has not vested courts with jurisdiction to de-
termine whether state rates discriminate
against interstate commerce, and the statu-
tory District Court had no more authority
to investigate that question at the behest of
any party before it than would any other
state or federal court in an action for an over- -
charge. Congress has directed that the fact
*329 -
of *discrimination shall be ascertained solely
by the Commission.
Finally, it is said that the Coast Line's
equity is the greater because the state rates
have been found to- be confiscatory.: ,No
Florida court has so found. ,Confiscation was
not and could not be-the-Issue before the In-
terstate Commerce Commission in either the.
original or the reopened proceeding. Two
scales of rates, both in themselves within the-
zone of reasonableness, may upon examina-
tion disclose undue discrimination. The con-.
fiscatory character of the intrastate rate may
be and often is an element to be considered
upon the issue of discrimination, but obvious-
ly the order of the Commission could not be
based upon that alone. If the statement
means that in the restitution proceeding the
statutory District Court found the state rates
were so low as to be confiscatory, the answer
is that in a suit to recover overcharges the
court had no jurisdiction to investigate a
claim of confiscation under the Fourteenth
The case is not to be decided according to
the character ascribed the first order of the
Commission. Whether called void or void-
able, the order gave the railroad no right to
collect the sumi exacted. If, as must be
conceded, the carrier took, under and by
force of that order, money to which it was
not in law entitled, the conclusion necessarily
follows that it must restore what was so
To hold that the claimants may not have
restitution is to say that.invalid, void, or-
voidable orders of the Commission have pre.-
cisely the same force and effect as orders law-
fully made, if from extrinsic facts and mat-,
ters not cognizable by -the court the conclu-
sion may be drawn that the Commission might
have made a valid order-in the circumstances.
So to hold is to recognize in a restitution pro-
ceeding a jurisdiction which in no other cir-
cumstances and in no other case could a

federal court exercise, *and to permit that
court to ignore and nullify action in a field
within the state's sovereign power.

DEIS, and Mr1. Justice STONE, concur in
this opinion.

295 U. S..142
-CO. et al.
No. 612.

Argued April 5, 8, 1935.

Decided April 29, 1935.
1. Waters and water courses <=94
Statutes recognizing policy of appropria-
tion of water for beneficial use under local
customs, legislation, and judicial decisions of
arid land states, as measure of water rights "
on public domain, apply to rights acquired
both before and after their enactment (30
USCA 52 and note; 43 USCA 661, par. 2
and note).

2. Waters and water courses ->5
Desert Land Act making nonnavigable
water supply upon public lands free for ap-
propriation and use, effected severance from
land of all waters upon public domain not
theretofore appropriated, and patents issued
thereafter in desert land states or territories
carried therewith of their own force no com-
mon-law water rights (Desert Land Act 1877,
1, 43 USCA 321).

3. Waters and water courses =-5
Government as owner of public domain
has power to dispose separately of land and
water thereon.

4. Waters and water courses e@7
Terms of Desert Land Act, making non-
navigable water supply upon pub~ip lands
free for appropriation, must be read'into ev-
ery patent thereafter issued by federal gov-
ernment with same force as though express-
ly incorporated therein (Desert Land Act
1877, 1, 43 USCA 321).

5. Waters and water courses =>9 -
Grantee of land under United States pat-
ent in desert land state takes only such title
to flowing waters on land as is fixed or ac-

Q For other cases see same topic and KEY NUMBER in all Key Number Digests and Indexes


knowledge by customs, laws, and judicial
decisions of state in which land is located
(Desert Land Act 1877, 1, 43 USCA 321).

6. Waters and water courses =8
Desert Land Act leaving nonnavigable
supply- of water on public lands in desert
land states free for appropriation in contra-
vention of common-law rights is not limited
to desert land entrymen (Desert Land Act
1877, 1,43 USCA 321).

7. Waters and water courses <=9 -
Desert Land Act making nonnavigable
waters on public lands in desert land states
subject to appropriation does not curtail pow-
er of states to legislate, but leaves question
of water rights on public domain subject to
Splenary control of respective states (Desert
Land Act 187T, 11, 43 USCA J 321).:

On Writ of Certiorari to the United States
Circuit Court of Appeals for the Ninth Cir-
Suit by the California Oregon Power Com-
pany against the Beaver Pnrtland Cement
SCompany and another. A decree partly ad-
verse to plaintiff was affirmed by the Circuit
Court of Appeals [73 F.(2d) 555], and plain-
tift brings certiorari.
*MIr. A. E. Reames, of Medford, Or., for pe-
*Mr. W. Lair Thompson, of Portland, Or.,
for respondents.
*Mr. Justice SUTHERLAND delivered the
opinion of the Court.
This is a suit brought by petitioner in a
federal District Court for Oregon against re-
spondents, to enjoin them from interfering
with the waters of Rogue river in the state
of Oregon in any such way as to.lessen the
volume which flows over and along petition-
er's land, and particularly *from carrying on
any drilling or blasting operations in the bed
:f the stream or removing rocks or other
material therefrom. Following a trial, the
District Court made findings of fact and ee-
tered a decree denying the relief prayed fo ,
--'except that .respondents were enjoined from
so carrying into effect their operations as to
reduce the level of Rogue river below a des-
ignated elevation above sea level, and in an-
other particular not necessary to be stated.
The Circuit Court of Appeals affirmed the

decree, 73 F.(2d) 555, and we brought the
case here on certiorari, 294 U. S. 701, 55 S.
Ct. 507, 79 L. Ed. -.
Rogue river is a nonnavigable stream;
and in its course flows through and between
lands of petitioner on the east bank of the
river and lands of respondents upon the west
bank, the thread of the stream being the
boundary between the two. Petitioner's
lands were acquired by a predecessor in in-
terest in 18S85 by patent from the United
States under tie Homestead Act, May 20,
1862 (12 Stat. 392). The lands were purchas-
ed by petitioner and conveyed to it in 1921.
Petitioner is a public service corporation en-
gaged in manufacturing and supplying elec-
trical current to its customers. The city of
Gold Hill, a municipal corporation, owns the
lands on the west side of the river, and the
Beaver Portland Cement Company is in pos-
session of them, together with certain adju-
dicated water rights and permits issued from
the office of the state engineer, under a con-
tract of sale from the city. The blasting com-
plained of was all west of the thread of the
stream, on respondents' property, and was
for the double purpose of freeing the chan-
nel, incident to the use of the water rights
adjudicated and permitted, and securing bro-
ken stone for a dam to be used in. connection
with a power plant which the cement com-
pany was about to build.
Neither petitioner nor any of its predeces-
sors in interest has ever diverted the waters
of the river for beneficial use on the real
property or sought to make an actual appro-
priation thereof. The sole claim is based up-
on the *common-law rights of a riparian pro-
.prietor, which petitioner says attached to
the lands when the patent was issued to its
first predecessor .in title.
Petitioner insists that prior to the adop-
tion of the Oregon Water Code of 1909 (Laws
1909, p. 319), infra, the common-law rule that
the riparian owner was entitled to the nat-
ural flow of the stream across or along the
border of his land in its accustomed channel
was recognized and in full force in the state
of Oregon. Respondents contend to the con-
trary. Both cite many Oregon decisions and
argue the- matter at length. But an exami-
nation of the authorities leaves the question
in doubt. In dealing with cases where the
parties making conflicting claims were both
riparian owners, the doctrine of the common
law seems to have been recognized. Other

-For other cases see same topic and KEY NUMBER in all Key Number Digests and Indexes

(C Term,





55 S. Ct.

cases appear to accept what is called a mod-
ified form of the common-law rule; and still
other decisions apparently enforce the rule
of appropriation. It is suggested by respond-
ent that, prior to the adoption of the Water
Code in 1909, the policy in respect of water
rights was developing and the law on the
subject of riparian rights was in a state of
flux. There appears to be reason in the sug-
gestion. But, in view of the conclusion to
which we have come, it is unnecessary to pur-
sue the inquiry further.
In 1909, the Water Code was adopted by
the state Legislature. Or. Laws," 1909, c.
216 (page 319). The act provides that all
water within the state shall be subject to.
appropriation for beneficial use; but nothing
therein is to be construed to take away or im-
pair any vested right. In respect of a ripa-
rian proprietor, vested right is defined as
an "actual application of water to beneficial
use prior to the passage of this act *
to the extent of the actual application to
beneficial use." Section 70, p. 340. -The Code
provides for the adjudication of water.rights
upon a petition to the state engineer. And
any court in which suit is brought to deter-
mine such rights may, in its discretion, trans-
fer *the case to the state engineer for deter-
mination. But no decision of the state engi-
neer is to become final until confirmed by the
court designated as having jurisdiction under
the act. The procedural provisions of the
act have been sustained as constitutional by
this court. Pacific Live Stock Co. v. Lewis,
241 U. S. 440, 36 S. Ct. 637, 60 L. Ed. 1084.
The court below held: (1) That the home-
stead patent of 1885 carried with it the com-
mon-law right to have the stream continue to
flow in its accustomed channel, without sub-
stantial diminution; but (2) that, while this
was a substantial property right which could
not be arbitrarily destroyed, it nevertheless
was subject to the police power of the state
and might be modified by legislation passed
in the interest of the general welfare; and
upon the latter ground the Water Code was
upheld and the claims of respondents sus-
First. The first question is of especial im-
portance to the semiarid states of California,
Oregon, and Washington, where climatic con-
ditions in some sections so differ from those
In others that the doctrine of the common
law may be of advantage in one instance,
and entirely unsuited to conditions in anoth-
er.... Probably, it was this diversity .ot con-
ditions which gave rise to more or less con-'

fusion in the decisions, not only of Oregon,
but of California, in respect of the subject.
We have already spoken of the former; and
one has only to compare the decision of the
Supreme Court of California in Lux v. Hag-
gin, 69 Cal. 255, 4 P. 919, 10 P. 674, with Mo-
doc L. & L. S. Co. v. Booth, 102 Cal. 151,
36 P. 431, to realize that the rule with re-
spect to the extent of the application of the
common law of riparian rights is, likewise,
far from being clear in the latter.
The question with which we are here pri-
marily concerned is whether-in the light of
pertinent history, of the conditions which ex-
isted in the arid and semiarid land states, of
the practice and attitude of the federal *gov-
ernment, and of the congressional legisla-
tion prior to 1885-the homestead patent in .
question carried with it as part of the grant-
ed estate. the common-law rights which' at-".
tach to riparian proprietorship. If the an-
swer be in the negative, it will be unnecessa-
ry to consider the second question decided by
the court below.
For many years prior'to the passage of the
Act of July 26, 1866, c. 262, 9, 14 Stat. 251,
253 (30 USCA 51 and note, 43 USCA 661,
par. 1, and note), the right to the use of wa-
ters for mining and other beneficial purpos-
es in California and the arid region general-
ly was fixed and regulated by local rules and
customs. The first appropriator of water
for a beneficial use was uniformly recognized
as having the better right to the extent of his
actual use. The common law with respect
to riparian rights was not considered applica-
ble, or, if so, only to a limited degree. Water
was carried by means of ditches and flumes
great distances for consumption by those en-
gaged in mining and agriculture.. Jennison'
v. Kirk, 98 U. S. 453, 457, 458, 25 L. Ed. 240.
The rule generally recognized throughout the
states and territories of the arid region, was
that the-acquisition of water by prior appro-
priation for a beneficial use was entitled to
protection; and the rule applied whether the
water was diverted for manufacturing, irri-
gation, or mining purposes. The rule was ev- -
idenced not alone by legislation and judicial.
decision, bat by local and customary-taw and
usage as well. Basey'v. Gallagher, 20 Wall.
670, 683, 684, 22 L. Ed. 452; Atchison v. Pet-
erson, 20 Wall. 507, 512, 513, 22 L. Ed. 414.

[I] This general policy was approved, by
the silent acquiescence of the federal govern-
ment,.until .t received formal confirmation at
the hands of Congress by the Act of 1866, su-



pra. Atchison v. Peterson, supra. Section 9
of that act provides that: "Whenever, by pri-
ority of possession, rights to the use of water
for mining, agricultural, manufacturing, or
other purposes, have vested and accrued, and
the same *are recognized and acknowledged
by the local customs, laws, and the decisions
of courts, the possessors and owners of such
vested rights shall be maintained and pro-
tected in the same; and the right of way for
the construction of ditches and canals for
the purposes herein specified is acknowledged
and confirmed. *"
This provision was "rather a voluntary
recognition of a pre-existing right of posses-
sion, constituting a valid claim to its con-
tinued use, than the establishment of a new
one." Broder v. Natoma Water & Min. Co.,
101 U. S. 274,:276, 25 L. Ed. 790; United
States v. Rio Grande Dam & Irrig. Co., 174
U. S. 690, 704, 705, 19 S. Ct. 770, 43 L. Ed.
1136. And in order to make it clear that the
grantees of -the- United States would take
their lands charged with the existing servi-
tude, the Act of July 9, 1870, c. 235, 17, 16
Stat. 217, 218 (30 USCA 52 and note, 43 US
CA 661, par. 2 and note) amending the Act
of 1866, provided that: "* All pat-
ents granted, or preemption or homesteads al-
lowed, shall be subject to any vested and
accrued water rights, or rights to ditches and
reservoirs used in connection with such wa-
ter rights, as may have been acquired under
or recognized by the ninth section of the act
of which this act is amendatory [this sec-

The effect of these acts is not limited to
rights acquired before 1866. They reach into
the future as well, and approve and confirm
the policy of appropriation for a beneficial
use, as recognized by local rules and customs,
and the legislation and judicial decisions of
the arid land states, as the test and measure
of private rights in and to the nonnavigable
waters on the public domain. Jones v.
Adams, 19 Nev. 78, 86, 6 P. 442, 3 Am. St. Rep.
788; Jacob v. Lorenz, 98 Cal. 332, 335, 336,
33 P. 110.
If the acts of 1866 and 1870 did not consti-
tute an entire-abandonment of the common-
law rule of running waters in so far as the
public lands and subsequent grantees there-
of were concerned, they foreshadowed the
more positive declarations of the Desert Land
Act of 1877, which it is contended did bring

about that result. That *act allows the entry
and reclamation of desert lands within the
states of California, Oregon, and Nevada (to
which Colorado was later added), and the
then territories of Washington, Idaho, Mon-
tana, Utah, Wyoming, Arizona, New Mexico,
and Dakota,1 with a proviso to the effect that
the right to the use of waters by the claimant
shall depend upon bona fide prior appropria-
tion, not to exceed the amount of waters ac-
tually appropriated and necessarily used for
the purpose of irrigation and reclamation.
Then follows the clause of the proviso with
which we are here concerned: "* All
surplus water over and above such actual ap-
propriation and use, together with the water
of all lakes, rivers, and other sources of wa-
ter supply upon the public lands and not nav-
igable, shall remain and be held free for the
appropriation and use of the public for irri-
gation, mining and manufacturing purposes
subject to existing rights." Act March 3,
1877, c. 107, 1, 19 Stat. 377 (43 USCA 321).
For the light which it will reflect upon the
meaning and scope of that provision and its
bearing upon the present question, it is well
to pause at this point to consider the then ex-
isting situation with respect to land and wa-
ter rights in the states and territories named.
These states and territories comprised the
western third of the United States; a vast
empire in extent, but still sparsely settled.
From a line east of the Rocky Mountains al-
most to the Pacific Ocean, and from the Cana-
dian border to the boundary of Mexico, an
area greater than that of the original thir-
teen states, the lands capable of redemption,
in the main, constituted a desert, impossible
of agricultural use without artificial irriga-
In the beginning, the task of reclaiming
this area was left to the unaided efforts of
the people who found their way by painful
effort to its inhospitable solitudes. These
*western pioneers, emulating the spirit of so
many others who had gone before them in
similar ventures, faced the difficult problem
of wresting a living and creating homes from
the raw elements about them, and threw
down the gage of battle to the forces of na-
ture. With imperfect tools, they built dams,
excavated canals, constructed ditches, plowed
and cultivated the soil, and transformed dry
and desolate lands into green fields and leafy
orchards. In the success of that effort, the

1 Later to become the states of North and South Dakota.

728 .

(Oct. Term,


5S S. Ct.

general government itself was greatly con-
cerned, not only because, as owner, it was
charged through Congress with the duty of
disposing of the lands, but because the settle-
ment and development of the country in
which the lands lay was highly desirable.
To these ends, prior to the summer of 1877,
Congress had passed the mining laws, the
homestead and pre-emption laws, and, final-
ly, the Desert Land Act. It had encouraged
-and assisted, by making large land grants to
aid the building of the Pacific railroads and
in many other ways, the redemption of this
immense landed estate. That body thorough-
ly understood that an enforcement of the
common-law rule, by greatly retarding if not
forbidding the diversion of waters from their
accustomed channels, would disastrously af-
fect the policy of dividing the public domain
into small holdings and effecting their distri-
bution among innumerable settlers. In re-
spect of the area embraced by the desert land
states, with the exception of a comparatively
narrow strip along the Pacific seaboard, it
had become evident to Congress, as it had to
the inhabitants, that the future growth and
well-being of the entire region depended upon
a complete adherence to the rule of appropria-
tion for a beneficial use as the exclusive cri-
terion of the right to the use of water. The
streams and other sources of supply from
which this water must come were separated
from one another by wide stretches of
parched and barren land which never could
be made to produce agricultural crops except
by the *transmission of water for long dis-
tances and its entire consumption in the proc-
esses of irrigation. Necessarily, that in-
volved the complete subordination of the
common-law doctrine of riparian rights to
that of appropriation. And this substitution
of the rule of appropriation for that of the
common law was to have momentous conse-
quences. It became the determining factor
in the long struggle to expunge from our vo-
cabulary the legend "Great American Des-
ert," which was spread in large letters across
the face of the old maps of the far west.
[2] In the light of the foregoing considera-
tions, the Desert Land Act was passed, and
in their light it must now be construed. By
its terms, not only all surplus water over and
above such as might be appropriated and
used by the desert land entrymen, but "the
water of. all lakes, rivers, and other sources
of water supply upon the public lands and
not navigable" were to remain "free for the
55 S.CT.--4(iY

appropriation and use of the public for irri-
gation, mining and manufacturing purposes."
If this language is to be given its natural
meaning, and we see no reason why it should
not, it effected a severence of all waters upon
the public domain, not theretofore appropri-
ated, from the land itself. From that prem-
ise, it follows that a patent issued thereafter
for lands in a desert land state or territory,
under any of the land laws of the United
States, carried with it, of its own force, no
common-law right to the water flowing
through or bordering upon the lands con-
veyed. While this court thus far has not
found it necessary to determine that precise
question, its words, so far as they go, tend
strongly to support the conclusion which we
have suggested.

In United States v. Rio Grande Dam & Ir-
rigation Co., 174 U. S. 690, 19 S. Ct. 770, 43 L.
Ed. 1136, the government sought to enjoin
the irrigation company from constructing a
dam across the Rio Grande river in the ter-
ritory of New Mexico, and from appropriat-
ing the waters of that stream. The object of
the company was to impound the waters and
distribute the same for a variety of purposes.
The company defended on the ground that the
site of the dam was within the arid region,
and that it had fully complied with the water.
laws of the territory of New Mexico in which
the dam was located and the waters were to
be used. The Supreme Court of the territory
affirmed a decree dismissing the bilL This
court reversed and remanded the case, with
instructions to inquire whether the construc-
tion of the dam and appropriation of water
would substantially diminish the navigability
of the stream, and, if so, to enter a decree
restraining the acts of the appellees to the
extent of the threatened diminution. The
opinion, dealing with the question of riparian
rights, said that it was within the power of
any state to change the common-law rule
and permit the appropriation of the flowing
waters for any purposes it deemed wise.
Whether a territory had the same power the
court did not then decide. Two limitations
of. state power were suggested: First, in the-
absence of any specific authority from Con-
gress, that a state could not by its legislation
destroy the right of the United States as the
owner of lands bordering on a stream to the
continued flow, so far, at least, as might be
necessary for the beneficial use of the govern-
ment property; and, second, that its power
was limited by that. of the general govern-


a Ir I II


ment to secure the uninterrupted navigabili-
ty of all navigable streams within the limits
of the United States. With these exceptions,
the court, however, thought (174 U. S. page
706, 19 S. Ct. 770, 776) that by the acts of
1S66 and 1877 "Congress recognized and as-
sented to the appropriation of water in con-
travention of the common-law rule as to con-
tinuous flow," and that "the obvious purpose
of congress was to give its assent, so far as
the public lands were concerned, to any sys-
tem, although in contravention to the com-
mon-law rule, which permitted the appro-
priation of those waters for legitimate indus-
tries." And see *Bean v. Morris, 221 U. S.
485, 487, 31 S-.Ct. 703, 55 L. Ed. 821;. Van
Dyke v. Midnight Sun Mining & Ditch Co. (C.
C. A.) 177 F. 85, 88-91.
In Gutierres v. Albuquerque Land & Irr.
Co., 188 U. S. 545, 23 S. Ct. 338, 47 L Ed. 588,
it was held that the acts of 1866 and 1877
recognized, in respect of the public domain,
the validity of the local customs, laws, and
decisions of the'territories as well as of the
states in respect of the appropriation of wa-
ters, and granted the right to appropriate
such quantity as might be necessarily used
to irrigate and reclaim desert land, and the
right of the public to use the surplus for ir-
rigation, mining, and manufacturing purpos-
es subject to existing rights.
In Boquillas Land & Cattle Co. v. Curtis,
213 U. S. 339, 29 S. Ct. 493, 53 L. Ed. 822, this
court, while finding it.unnecessary to decide
whether lands in the arid regions patented
after the Desert Land Act were accepted sub-
ject to the rule that priority of appropriation
gives priority of right, said that the decision
of the Supreme Court of Oregon to that effect
in Hough v. Porter, 51 Or. 318, 95 P. 732, 98
P. 1083, 102 P. 728, proceeded "on plausible
And in Schodde v. Twin Falls Land & Wa-
ter Co., 224 U. S. 107, 122, 32 S. Ct. 470, 56
L. Ed. 686, an Idaho case which .sharply pre-
sented conflicting claims under the common-
law rule and the rule of appropriation, this
court held that such common-law rights as
were incompatible with the rule of prior ap-
propriation for-.beneficial use could not co-
Sexist with the-latter-system.: -- .
Only four of the desert land states have
spoken upon the matter, and their decisions
are not in harmony. The Supreme Court of
Oregon in Hough v. Porter, 51 Or. 318, 95 P.
732, 98 P. 1083, 102 P. 728, held that the le-
gal effect of the language already quoted

from the Desert Land Act was to dedicate
to the public all interest, riparian or other-
wise, in the waters of the.public domain, and
to abrogate the common-law rule in respect
of riparian rights as to all lands settled upon
or entered after March 3, 1877. The supple-
mental opinion which deals with the subject
beginning at page 382 is well reasoned, and
*we think reaches the right conclusion. Sub-
sequent decisions in Oregon are to the same
,effect. Hedges v. Riddle, 63 Or. 257, 259, 260,
127 P. 548; Hill v. American Land & Live-
stock Co., 82 Or. 202, 207, 161 P. 403; Allen
v. Magill, 96 Or. 610, 618, 619, 189 P. 986, 190
P. 726.
This view was followed by the Supreme
Court of South Dakota in Cook et al. v. Evans
et al., 45 S. D. 31, 38, 185 N. W. 262, and
Haaser v. Englebrecht, 45 S. D. 143, 146, 186
N. W. 572.
The Supreme Court of Washington in Still
v. Palouse Irr. & Power Co., 64 Wash. 606,.
612, 117 P. 466, gave a more limited construc-
tion to the Desert Land Act, holding that
*thereby Congress recognized and assented to&
the appropriation of water in contravention
to the common-law right of the riparian own-
er only in respect of desert lands granted un-
der the act. See, also, Bernot v. Morrison, 81
Wash. 538, 559, 560, 143 P. 104, Ann. Cas.
1916D, 290.
In San Joaquin & Kings River Canal & Ir-
rigation Co. v. Worswick, 187 Cal. 674, 690,
203 P. 999, the Supreme Court of California
followed the Washington court in holding
that the language of the Desert Land Act ap-
plied only to desert land entries.
To accept the view of the Washington and
California courts would, in large measure, be
to subvert the policy which Congress had in
mind ; namely, to further the disposition and
settlement of the public domain. It is safe-to
say that by far the greater part of the public
lands in the desert land states and territories
susceptible of reclamation in 1877 was re-
mote from the natural sources of water sup-
ply. But these lands were subject to entry,
not only under the Desert Land Act, but un-
der other acts as well. Congress must have
known that innumerable instances would
arise where lands thereafter patented under
the Desert Land Act and other lands patent-
ed under the pre-emption and homestead
laws, would be in *the same locality and would
require water from the same natural sources
of supply. In that view, it is inconceivable
that Congress intended to abrogate the com-


(0 'erm,


* ?






_I _

55 S. Ct.

mon-law right of the riparian patentee for
the benefit of the desert landowner and keep
it alive against the homestead or pre-emption
[3-5] As the owner of the public domain,
the government possessed the power to dis-
pose of land and water thereon together, or
to dispose of them separately. Howell v.
Johnson (C. C.) S9 F. 556. 558. The fair con-
struction of the provision now under review
is that Congress intended to establish the rule
that for the future the land should be patent-
ed separately; and that all nonnavigable
waters thereon should be reserved for the use
of the public under the laws of the states and
territories named. The words that the- water
of all sources of water supply upon the public
lands and not navigable "shall remain and
be held free for the appropriation and use of
the public" are not. susceptible of any other
construction. The only exception made is
that in favor of existing rights; and the only
rule spoken of is that of appropriation It
Is hard to see how a more definite intention
to sever the land and water could be evinced.
The terms of the statute, thus construed,
must be read into every patent thereafter is-
sued, with the same force as though express-
ly incorporated therein, with the result that
the grantee will take the legal title to the
land conveyed, and such title, and only such
title, to the flowing waters thereon as shall be
fixed or acknowledged by the customs, laws,
and judicial decisions of the state of their lo-
cation. If it be conceded that in the absence
of federal legislation the state would be pow-
erless to affect the riparian rights of the Unit-
ed States or its grantees, still, the authority
of Congress to vest such power in the state,
and- that it has done so by the legislation to
which we have referred, cannot be doubted.
[6] *The proceedings in connection with the
adoption of the Desert Land Act bear out this
view. The bill which subsequently became
the act was called up for consideration in the
Senate on February 27, 1877. The report of
the committee, among other things, said that
the larger portions of the lands bordering on
the streams had been appropriated; 'that: the
provisions of the bill would enable settlers by
combined efforts to construct more extensive
works and reclaim lands now worthless;- that
a system had already grown up in the states

and territories included in the bill which rec-
ognized priority of appropriation as the rule
governing the right to the use of water, limit-
ing the amount to that actually used, and
thus avoiding waste. Senator Sargent of Cal-
ifornia, who was in charge of the bill, in the
course of the debate said- that one great diffi-
culty had been that "cattle-men go under a
fictitious compliance with the terms of the
pre-emption law and take their land along
the margin of the streams, and then there is
no possibility of getting water to the back
country at all. I want to provide so that per-
sons in the back country may go above such
a person, for instance, on Humboldt River,
Sand take the water out and conduct it on-to
the back lands." Cong. Record, vol. V, pt. 3,
44th Cong., 2d Sess., pp. 193-1966. There is
nothing in the language of the act, or in the
circumstances leading up to or accompanying
its adoption, that indicates an intention on
the part of Congress to confine the appropria-
tion of water in contravention of the com-
mon-law doctrine to desert land entrymen. -

[7] Second. Nothing we have said is meant
to suggest that the act, as we construe it, has
the effect of curtailing the power of the states
affected to legislate in respect of waters and.
water rights as they deem wise in the public
interest. What we hold is that following the
act of 1877, if not before, all nonnavigable
waters then a part of the public domain be-
came public juris, subject to the plenary *con-
trol of the designated states, including those
since created out of the territories named,
with the right in each to determine for itself
to what extent the rule of appropriation or
the common-law rule in respect of riparian
rights should obtain. For since "Congress
cannot enforce either rule upon .any state,"
State of Kansas v. Colorado, 206 U. S. 46, 94,
27 S. Ct. 655, 666, 51 L. Ed. 956, the full pow-
er of choice must remain with-the state. The
Desert Land Act does not bind or purport to
bind the states to any policy. It simply rec-
ognizes and gives sanction, in so far as the
United States and its future grantees are con-
cerned, to the state and local doctrine of ap-
propriation, and seeks to remove what other- .-: ,:
wise might be an impediment to its full and -
successful operation. See State of Wyoming
v. Colorado, 259 U. S. 419, 465, 42 S. Ct 552, 2-i
66-L. Ed. 998.2

2 In this connection it is not without
significance that Congress, since the pas-
sage of the Desert Land Act, has repeat-

edly recognized the supremacy of state
law in respect of the acquisition of water
for the reclamation of public lands of the

1 _

p 732


*The public interest in such state control in
the arid land states is definite and substan-
tial. In Clark v. Nash, 198 U. S. 361, 370, 25
S. Ct. 676, 679, 49 L. Ed. 1085, 4 Ann. Cas.
1171, this court accepted that view to the ex-
tent of holding that in the arid land states
the use of water for irrigation, although by a
private individual, is a public use; and sus-
tained as constitutional a state statute which,
for purposes of irrigation, permitted an in-
dividual to condemn a right of way for en-
larging a ditch across the land of another.
Mr. Justice Peckham, delivering the opinion
of the court, said: "The rights of a riparian
owner in and to the use of the water flowing
by his land are not the same in the arid and
mountainous states of the West that they
are in the states of the East. These rights
have been altered by many of the Western
states by their constitutions and laws, be-
cause of the totally different circumstances
in which their inhabitants are placed, from
those that exis in the states of the East, and
such alterations have been made for the very
purpose of thereby contributing to the growth
and prosperity of those states, arising from
mining and the cultivation of an otherwise
valueless soil, by means of irrigation. This
court must recognize the difference of climate
and soil, which render necessary these differ-
ent laws in the states so situated."
For the foregoing reasons, we affirm the de-
cree of the court below, passing without con-
sideration the second question discussed by
that court and upon which its decision rest-
ed, as to which we express no opinion.
Decree affirmed.

(Oc.. Term,

295 U. S. 123
No. 582;

Argued March 14, 15, 1935.

Decided April 29, 1935.
1. Internal revenue cg-7(11, 19)
Where margin trader has purchased
shares of same corporation through broker
at different times and prices, lots sold are
sufficiently identified with particular lots pur-
chased where margin trader has,. through
broker, designated the securities to be sold
as those purchased on particular date and at
particular price, and it is not essential that
identification be made through means of cer-
tificates, and it is only when such designa-
tion was not made at time of sale, or is not
shown, that "first-in, first-out" regulation is
to be applied (Revenue Act 1928, 22, 111-
113, 26 USCA 2022, 2111-2113).

2. Constitutional law C=286
"First-in, first-out" regulation, constru-
ed as inapplicable in determining taxable
gain on sale of corporate stock purchased on
margin where margin trader has through
broker designated the securities to be sold
as those purchased on particular date and at
particular price and where such fact is
shown, held not invalid as denying due proc-
ess (Revenue Act 1028, 22, 111-113, 26 US
CA 2022, 2111-2113; Const. Amend. 5).

3. Internal revenue 0=25
Circuit Court of Appeals, on review of
proceedings of Board of Tax Appeals, is with-
out power to make any fact findings, court's
function being to decide whether correct rule
of law was applied to facts found and wheth-
er there was substantial evidence before
Board to support findings made.

United States and lands of its Indian
wards. Two examples may be cited:
The Reclamation Act of 1902, c. 1093,
32 Stat. 388, directed the Secretary of the
Interior (section 8 [43 USCA 383]) to
proceed in conformity to the state laws in
carrying out the provisions of the act, and
provided that nothing in the act should
be construed as affecting or intending to
affect or in any way interfere with the
laws of any state or territory "relating to
the control, appropriation, use, or dis-
tribution of water used in irrigation."
The Act of June 21, 1906, c. 3504, 34
Stat. 325, 375, made an appropriation for
constructing irrigation systems to irrigate
lands of the Uncompahgre, Uintah, and

White River Utes in Utah, with the pro- -
viso that "such irrigation systems shall
be constructed and completed and held
and operated, and water therefore appro-
priated under the laws of the State of
Utah," etc. This was amended by the In-
dian Appropriation Act of March 3, 1909,
c. 263, 35 Stat. 781, 812, which again rec-
ognized the supremacy of the laws of
Utah in respect of appropriation, and pro-
vided that the appropriation should "be
used only in the event of failure to pro-
cure from the State of Utah or its officers
an extension of time in which to make
final proof for waters appropriated for
the benefit of the Indians."




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