August 26, 2008

Case of Water Rights Quagmire in Oklahoma Going Back to Trial

By Janice Francis-Smith

In January 2006, physician Richard Stansberry appeared before the Oklahoma County Planning Commission. He was there to explain what was happening with a plan to build a single-family, residential subdivision on a parcel of land he had owned for decades.

"Dr. Richard Stansberry, area landowner, stated that the water rights had been a problem for quite a while," read the minutes from the meeting. "Mr. Stansberry stated that the water right issue was still a problem to be settled by the courts. ... The court case was between Deer Creek Water, Medicine Lodge, and himself."

The Oklahoma Court of Civil Appeals made a decision recently that will keep the issue tangled up in the courts a while longer. The court reversed the District Court of Oklahoma County's decision to grant Stansberry summary judgment in the case, sending the matter back to trial.

Water rights may be handled in much the same fashion as mineral rights, the court agreed - water rights are severable from ownership of the property that originally bestowed the water right. But the case involving Stansberry and Medicine Lodge raised more questions than had been answered by the trial court, the appeals court found.

Stansberry and his business, EAR Inc., owned land in Edmond that had passed through several hands since 1980, when then-owner Walter Sitlington entered into an agreement with Deer Creek Water Corp. Deer Creek is a private business that provides water supply service, established in 1971. When Sitlington later sold his 160 acres, the warranty deed provided the sale and all future sales of the land are subject to the Water Rights Agreement with Deer Creek.

Stansberry bought nearly 55 acres of the land in 1992. In 1994, he conveyed all of his interest in the property to his family business, EAR Inc., by Quit Claim Deed. The deed contained no reference to, nor reservation of, mineral or water rights.

When EAR sold the land in 2004 to developer Medicine Lodge, the deed excepted from the conveyance "covenants, conditions, easements, restrictions and mineral reservations or conveyances of record." Stansberry thought that would be sufficient to protect the Water Rights Agreement in place.

But things got complicated when Medicine Lodge asked Deer Creek to provide utility services to the development Medicine Lodge planned to build on the land. Deer Creek told Medicine Lodge the water rights must be transferred to Deer Creek. So Medicine Lodge filed a lawsuit against EAR and Stansberry to claim ownership of the water rights, which then could be transferred to Deer Creek.

The appeals court first took a look at the laws regarding ownership of water rights. Oklahoma statutes indicate that water rights remain attached to the land, though the right to water may be leased, as Deer Creek did with the original owner of the land in the case.

The Oklahoma Water Resources Board, which issues permits for water use, has rules that state "no permit shall be issued to an applicant who is not the surface owner of the land on which the well is to be located, or does not hold a valid lease from such owner."

Bob Sandbo of the OWRB said such lease agreements for water rights are fairly common, particularly in rural areas. The person who buys land without the accompanying water rights may use water for domestic purposes without a permit, but for additional water usage, the owner would have to lease the water from the person who kept the water rights for the land.

Stansberry's case was complicated by the Quick Claim Deed used to transfer his interest to his family business.

Medicine Lodge argued the water right and the land ownership were once again merged by the transaction. The appeals court found there was too much confusion regarding the deed to justify the summary judgment granted by the district court, and sent the case back for trial.

Tom E. Mullen, attorney for Medicine Lodge, said this was the first case he's seen where a seller attempted in this manner to retain water rights, but he was pleased the court decided further consideration was needed.

Robert Jackson, representing Stansberry, said the decision would be appealed.

Originally published by Janice Francis-Smith.

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