3 WATERS AND WATER COURSES 222-RECLAMATION OF ARID LAND-GRANT TO STATE CAREY ACT.

The action of the Land Department in approving an irrigation plan adopted by a state under the Carey Act, and segregating the lands embraced therein, is not a conclusive determination that the state is entitled to the land, but whether or not the state has "actually furnished" an ample supply of water for the reclamation of any particular tract of such land to entitle it to a patent under Act June 11, 1896, c. 420, § 1, 29 Stat. 413 (Comp. St. 1916, § 4686), is a question of fact to be determined by the department.

Appeal from the District Court of the United States for the Southern Division of the District of Idaho; Frank S. Dietrich, Judge.

Suit by A. E. Caldwell, W. F. Mikesell, V. E. Morgan, J. E. Pohlman, W. C. Pond, James W. Beauchamp, Carl Washburn, and Harold S. Simms, in their own behalf and in behalf of all persons similarly situated with them, against the Twin Falls Salmon River Land & Water Company, Salmon River Canal Company, Limited, Commonwealth Trust Company of Pittsburgh, trustee, and A. C. Robinson. Decree for complainants (231 Fed. 769), and defendants appeal. Reversed in part.

This ease grows out of the establishment and construction of an irrigation system known as the Salmon River Project under and in pursuance of an act of Congress approved August 18, 1894 (28 St. Lg. 372, 422), and amendments thereto, known as the Carey Act, and of certain legislation of the state of Idaho.

The purpose of the act of Congress is therein expressly declared to be to aid the public land states in the reclamation of the desert lands situate therein, and in the settlement, cultivation, and sale thereof in small tracts to actual settlers. To carry into effect that object, the act provides that the Secretary of the Interior, with the approval of the President, is authorized upon proper application of such public land states to enter into a contract with each of them in which there may be such desert iands as are described by Congress in certain designated previous acts, binding the United States to donate, grant, and patent to the state, free of cost of survey or price, such desert lands, not exceeding 1,000,000 acres, as the state would cause to be irrigated, reclaimed, occupied, and not less than 20 acres of each 160-acre tract cultivated by actual settlers, within 10 years next after the passage of the act, as thoroughly as required of citizens who may enter under a certain preceding act of Congress approved March 3, 1877, and the act amendatory thereof approved March 3, 1891; provided, however, that before the application of any such state is allowed, or any contract is executed, or any segregation of any of the desert lands from the public domain is ordered by the Secretary of the Interior, such state shall file a map of the land proposed to be irrigated, together with a plan showing the mode of the contemplated irrigation, which plan shall be sufficient to thoroughly irrigate and reclaim said desert land and prepare it to raise ordinary agricultural crops, and shall also show the source of the water to be used for its irrigation and reclamation, the Secretary of the Interior being by the act empowered to make necessary regulations for the reservation of the land applied for by the state, to date from the date of the filing of the map and plan of irrigation, such reservation, however, to be of no force in the event such map and plan of irrigation be not approved as required by the act. The act further empowers any state, entering into a contract with the United States through the Secretary of the Interior, to make all necessary contracts to cause the said desert lands to be reclaimed, and to induce their settlement and cultivation in accordance with and subject to the provisions of the act of Congress; the state, however, being prohibited from leasing any of such lands or using or disposing of them in any way except to secure their reclamation, cultivation, and settlement. And the act of

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Congress further provides that, as fast as any such public land state shall furnish satisfactory proof, according to such rules and regulations as may be prescribed by the Secretary of the Interior, that any of said desert lands are cultivated, reclaimed, and irrigated by actual settlers, patents shall be issued to the state or its assigns therefor, provided that the said public land states shall not sell or dispose of more than 160 acres of such desert lands to any one person, and that any surplus of money derived by any such state from the sale of such lands in excess of the cost of their reclamation shall be held as a trust fund and be applied to the reclamation of other desert lands in such state.

By an act approved June 11, 1896 (29 St. Lg. 413, 434), Congress further provided that under any law theretofore or thereafter enacted by any state, providing for the reclamation of arid lands in pursuance and acceptance of the terms of the grant made by the above-mentioned act of August 18, 1894, "a lien or liens is hereby authorized to be created by the state to which such lands are granted and by no other authority whatever, and when created shall be valid on and against the separate legal subdivisions of land reclaimed, for the actual cost and necessary expenses of reclamation and reasonable interest thereon from the date of reclamation until disposed of to actual settlers; and when an ample supply of water is actually furnished in a substantial ditch or canal, or by artesian wells or reservoirs, to reclaim a particular tract or tracts of such lands, then patents shall issue for the same to such state without regard to settlement or cultivation: Provided, that in no event, in no contingency, and under no circumstances shall the United States be in any manner directly or indirectly liable for any amount of any such lien or liability, in whole or in part."

By section 1613 et seq. of the Revised Codes of Idaho, that state accepted the grant so made by Congress, subject to all of its terms and conditions, and provided that the selection, management, and disposal of such desert lands situated in Idaho should be vested in its state board of land commissioners, and further provided that any person, company of persons, association, or incorporated company, constructing, having constructed, or desiring to construct ditches, canals, or other irrigation works to reclaim lands under the provisions of the Idaho statute, should file with the board of land commissioners a request for the selection on behalf of the state by the board of the land to be reclaimed, designating it by local subdivisions, which request should be accompanied by a proposal to construct the ditch, canal, or other irrigation works necessary for the complete reclamation of the land asked to be selected, and which proposal should be prepared in accordance with the rules of the board and in accordance with the regulations of the Department of the Interior, and should be accompanied by the certificate of the state engineer of Idaho that application for permit to appropriate water has been filed in his office, together with the state engineer's report thereon, and shall state the source of water supply, the location and dimensions of the proposed works, the estimated cost thereof, the price and terms per acre at which perpetual water rights will be sold to settlers on the land to be reclaimed; such perpetual rights to embrace a proportionate interest in the canal or other irrigation works, together with all the rights and franchises attached thereto.

Upon the presentation to the state engineer of such proposals, in the prescribed form and setting forth the prescribed facts, that officer is by the state statute required to examine the same and make a written report to the board of land commissioners "stating whether or not the proposed works are feasible; whether the proposed diversion of the public waters of the state will prove beneficial to the public interest; whether there is sufficient unappropriated water in the source of supply; and whether or not a permit to divert and appropriate water through the proposed works has been approved by him; whether the capacity of the proposed works is adequate to reclaim the land described; whether or not the proposed cost of construction is reasonable, and whether or not the maps filed in his office comply with the requirements of said office and the regulations of the Department of the Interior; also whether or not the lands proposed to be irrigated are desert in

character and such as may properly be set apart under the provisions of the aforesaid act of Congress and the rules and regulations of the Department of the Interior thereunder" with a provision for further and personal examination by himself or through a qualified assistant in the event such further examination be necessary to enable him to report intelligently thereon to the board, his disapproval ending the proceeding. In the event of a favorable report by the engineer and the approval thereof by the board of land commissioners, the register of the board is required to file in the local United States Land Office a request for the withdrawal of the land described in the proposal, and upon the withdrawal of such land by the Department of the Interior the board of land commissioners is by the state statute required to enter into a contract with the parties submitting the proposal, which contract shall contain "complete specifications of the location, dimensions, character, and estimated cost of the proposed ditch, canal, or other irrigation works; the price and terms per acre at which such works and perpetual water rights shall be sold to settlers; and the price and terms upon which the state is to dispose of the lands to settlers."

Passing provisions of the state statute not here important to be noticed, it further provides that any citizen of the United States or any person having declared his intention to become a citizen (excepting married women), over the age of 21 years, may make application under oath to the board of land commissioners to enter any of the desert lands in an amount not to exceed 160 acres for any one person, which application shall state that the person desiring to make such entry does so for the purpose of actual reclamation, cultivation, and settlement, in accordance with the act of Congress and the laws of Idaho relating thereto, and that the applicant has never received the benefit of the provisions of the laws of the state to an amount greater than 160 acres including the number of acres specified in the application, and which application shart be accompanied by a certified copy of a contract for a perpetual water right entered into with the person, company, or association authorized by the board of land commissioners to furnish water for the reclamation of such lands, with other requirements not necessary to mention. Upon the filing of such application, together with a partial payment of 25 cents an acre, the board is required to issue a certificate of location of the land to the applicant, such certificate to be recorded when issued in a book to be kept for the purpose; all such lands to be disposed of by the board at a uniform price of 50 cents an acre, half to be paid at the time of entry, and the remainder at the time of making final proof by the settler.

Further provisions of the state act provide for the disposition of the proceeds of sale, and section 1628 is as follows:

"Within one year after any person, company of persons, association or incorporated company, authorized to construct irrigation works under the provisions of this chapter, shall have notified the settlers under such works that they are prepared to furnish water under the terms of their contract with the state, the said settler shall cultivate and reclaim not less than onesixteenth part of the land filed upon, and within two years after the said notice the settler shall have actually irrigated and cultivated not less than one-eighth of the land filed upon, and within three years from the date of said notice the settler shall appear before the register of the state board of land commissioners, a judge or clerk of any court of record within the state, or commissioners to be designated by the board, within the state, and make final proof of reclamation, settlement, and occupation, which proof shall embrace evidence that he is the owner of shares in the works which entitle him to a water right for his entire tract of land sufficient in volume for the complete irrigation and reclamation thereof; that he has been an actual settler thereon and has cultivated and irrigated not less than one-eighth part of said tract; and such further proof, if any, as may be required by the regulations of the Department of the Interior and the board. The officer taking this proof shall be entitled to receive a fee of two dollars, which fee shall be paid by the settler and shall be in addition to the price paid to the state for the land: Provided, that when the register of the board takes final proof, all fees received by him shall be turned into the state treasury. The

commissioners appointed by the board are hereby authorized to administer oaths. All proofs so received shall be submitted by the register to the board, and shall be accompanied by the final payment for said land, and upon approval of the same by the board the settler shall be entitled to his patent. If the land shall not be embraced in any patent theretofore issued to the state by the United States, the proofs shall be forwarded to the Secretary of the Interior, with the request that a patent to said lands be issued to the state. When the works designed for the irrigation of lands under the provisions of this chapter shall be so far completed as to actually furnish an ample supply of water in a substantial ditch or canal to reclaim any particular tract or tracts of such lands, the state of Idaho shall, through the state board of land commissioners, make proof of such fact, and shall apply for a patent to such lands in the manner provided in the regulations of the Department of the Interior."

The next section (1629) provides that, upon the issuance of a patent to any lands by the United States to the state, notice shall be forwarded to the settler upon such land, whereupon it shall be the duty of the board of land commissioners, under the signature of its president, attested by its register, to issue a patent to said land from the state to the settler, and the state statute further provides that the water rights acquired under the state law shall attach to and become appurtenant to the said desert lands as soon as title thereto passes from the United States to the state, and that any person, company, or association furnishing water for such land shall have a first and prior lien on such water right and the land upon which the said water is used for all deferred payments for the said water right, such lien to be in all respects prior to any and all other liens created or attempted to be created by the owner and possessor of the said land, and to remain in full force and effect until the last deferred payment for the water right is paid according to the terms of the contract under which such water right is acquired, and that the contract for the water right upon which the said lien is founded shall be recorded in the office of the recorder of the county in which the land is situated.

The state statute further provides that, upon default of any of the deferred payments secured by any such lien, the person, company of persons, association, or incorporated company holding or owning the said lien, may foreclose the same according to the terms and conditions of the contract granting and selling to the settler the water right, with certain provisions respecting the manner of making the sale, and that at such sale no person, company of persons, association, or incorporated company owning and holding such liens shall bid in or purchase any land or water right at a greater price than the amount due on such deferred payment for such water right and land, and the cost incurred in making the sale of the land and water right, with certain provisions with respect to the redemption of such land and water rights not important to be stated.

The plaintiffs in the case (appellees here), who brought the suit not only for themselves but in behalf of all others similarly situated, are settlers upon their respective tracts embraced by the laws referred to, and hold contracts for water for the irrigation thereof issued by the appellant Twin Falls Salmon River Land & Water Company, the corporation which, pursuant to the Idaho statutes, contracted with that state for the construction of the system and subsequently with the plaintiffs and other settlers. It also issued bonds, to secure the payment of which it assigned as collateral the settlers' contracts to the appellant Robinson, and executed a trust deed on all of its interest in the system to the appellant Commonwealth Trust Company of Pittsburgh, as trustee-all for moneys advanced with which to construct the works.

The appellant Salmon River Canal Company, Limited, is a corporation organized by the construction company with the consent of the state board of land commissioners for the purpose of operating the system and ultimately taking title to it for the same purpose.

The state entered into the contract with the construction company April 30, 1908, and the opening for entry of the lands to holders of water right

agreements was advertised for June 1st of the same year, and contracts covering an aggregate of about 73,000 acres were entered into with the settlers, including the complainants, prior to the bringing of the present suit.

The gist of the bill, as said by the court below, is not that the construction work was improperly done, but that this acreage is greatly in excess of the capacity of the water appropriated for the purpose of supplying its needs, even during ordinary seasons; that the construction company has sold water rights far in excess of the supply, that being, according to the bill and the contention of the appellees, sufficient for about 30,000 acres only, the purchasers of which, including the complainants, should, as alleged and here contended, be preferred and all subsequent purchasers eliminated and their contracts for water canceled.

That there is no other source of supply is undisputed.

The complainants having refused to pay the installments due from them under their respective purchases, on the ground, as alleged, that the construction company has failed to comply with the terms of its contract, and the trustee and the collateral holder having brought suits of foreclosure to enforce such payments, the purpose of this suit, as prayed in its bill, is to obtain a decree adjudging, among other things, that the amounts due from the settlers and contract holders of water rights in the system constitute a trust fund for the purpose of carrying out the objects of the contracts and the furnishing of all of the land, having water rights appurtenant to it under the system, with ample and sufficient water "not less than one-half miner's inch per acre continuous flow, or 24 acre feet per acre if delivered by periods, upon demand of the several owners thereof measured and delivered not more than one-half mile from each quarter section of land on the said irrigation system, and that the trust so declared and created be prior and superior to the rights or claims of any and all persons"; that the lien claimed by the defendant trustee be adjudged subordinate to the rights of the complainants and other water contract holders in the system; that the trustee and all holding under it be enjoined from collecting any money due from the contract holders; that the defendant Robinson be enjoined from collecting any money upon the water contracts assigned to him by the construction company; that such assignments be adjudged void; and that a receiver be appointed by the court with certain specified powers, etc.

The defendants to the bill put in issue, among other things, its chief allegations to the effect that the contract between the construction company and the respective complainants was for a specific amount of water for their respective tracts, at one place in the bill alleged to be "one one-hundredth of one cubic foot of water per acre per second of time for each share or water right sold," with a proportionate interest in the canal, reservoir, and other irrigation works; that the complainants could not successfully reclaim their lands and produce crops with less than 24 acre feet per acre during each irrigating season; and that in no case, according to the contract, "should water rights or shares be dedicated to any lands in said segregation or sold beyond the carrying capacity of the canal, or in excess of the appropriation of water therefor."

The court below declined to admit evidence offered by the defendants for the purpose of showing that the complainants and those in behalf of whom they also sued did not need and could not use the amount of water demanded by them, holding that to be a question the defendants could not raise, to which ruling an exception was reserved, and the ruling is here assigned as

error.

The trial resulted in the following decree, from which the present appeal was taken:

"It is ordered, adjudged, and decreed: That the defendant Twin Falls Salmon River Land & Water Company contracted with the state of Idaho and with the settlers holding agreements for the purchase and sale of water rights that it, the said defendant, would provide a system of canals and reservoirs on what is known as the Salmon River Project, in Twin Falls county, state of Idaho, which in ordinary seasons would furnish a supply of water for irrigation purposes sufficient for the acreage covered by such settlers'