Tutorial...
Understanding surface estate v. fee
By Wayne Hage
In my lectures on property rights, given to audiences throughout the United States and Canada over the past twenty years, it has become clear that the greatest deterrent to the protection of property rights is that people, in general, do not understand what property is.
This failure to understand the true nature of property, has been noted by the courts. For example, the court in Northwest Trust Co., v Kelly. 48 NC 1267, 189 NW 487, citing RLC states: "The word property is not always used in its strict legal sense. It is frequently used to signify or to describe the subject of property, such as a chattel or tract of land ... these things, although the subject of property are, when coupled with possession, but the indicia or visible manifestations of invisible rights. Much uncertainty and confusion in the decisions have arisen from overlooking this distinction."
Perhaps the most succinct statement, regarding this issue, was expressed by Thomas Sowell, when he wrote:
"Neither property, nor the value of property, is a physical thing. Property is a set of defined options... It is that set of options which has economic value... It is the options, and not the physical things, which are the "property" - economically as well as legally ... but because the public tends to think of property as tangible, physical things, this opens the way, politically, for government confiscation of property by forcibly taking away options, while leaving the physical objects untouched."
Body
I often begin my lectures by asking the audience a question. I point to the lectern I am standing behind, and ask: "If this lectern just appeared here, out of thin air; no one has any rights, claims, or options to use attached to it; would it be property?"
Usually, the audience will ponder this for a moment, and then begin to indicate "no" by shaking their heads accordingly. I then ask the question: "If someone does have rights or claims, the option to use attached to this lectern, would it be property?" The audience usually responds by nodding their heads in affirmation.
I then explain to them that the lectern, with the rights and claims attached, is still not property. The lectern is the physical manifestation of property, or the subject of property. The property consists of those invisible rights and claims which attach to the lectern, not the lectern itself.
When discussing land or water, the concept is the same. The physical land itself is the subject of property. The property consists of those invisible rights and claims which allows someone to use the subject of property, the land. In a water right situation, the same can be said. The water, itself, is the subject of property. The option to use that water, those invisible rights and claims to the water's use, constitutes the property. Property is not substance, and property exists only when there is a force of law and justice which protects the individual's rights to use the subject of, or visible manifestation of, property.
Property comes in many forms. James Madison said in the James Madison letters 478 (March 27, 1792, quoted in Seigan's, Economic Liberties and the Constitution 58 (1980):
"... The term "property" ... in its particular application, means "that dominion which one man claims and exercises over the external things of the world in exclusion of every other individual." In its larger and juster meaning, it embraces everything to which a man may attach a value and have a right; and to which leaves to everyone else the like advantage. In the former sense, a man's land, merchandise, or money is called his property. In the latter sense, a man has a property, in his opinions, and the free communication of them. He has a property of peculiar value in his religious opinions, and in the profession and practice dictated by them. He has property very dear to him in the safety and liberty of his person. He has an equal property in the free use of his faculties, and free choice of the objects on which to employ them. In a word, as a man is said to have a right to his property, he may equally be said to have a property in his rights."
In the free society, envisioned by the Constitution for the United States of America, a Citizen's right to free speech, choice of religion, to keep and bear arms, the freedom to contract, the right to own land, were all forms of property protected from government intrusion by that Constitution. The physical subject spoken of, the physical church, the firearm, the contract, the land was the subject of property. The right to use those physical manifestations of property was, in fact, the property, which was protected by a force of law and justice. Property, then, lies in the right to use the physical object, not the physical object itself.
"The substantial value of property lies in its use; if the right of use is denied, the value of the property is annihilated and ownership is rendered a barren right." City of Akron v Chapman, 160 Ohio St. 382, 52 Ohio Op. 242, 116 NE 2nd 697, 42 ALR 2d 1140 (1953).
Property, in the form of the use of land and water in private hands, was central to the American free society. The central government was strictly limited in its use of property, even though the central government retained control of vast amounts of the subject of property, in both land and water. In the riparian states (primarily those east of the 100th meridian), the central government conveyed the use of the land, as well as the subject of that use, the physical land, by patent, to the citizen. The physical water on the land was not conveyed, but the use of the water, while it remained on the physical land, was conveyed. The government maintained ultimate control of the water, while recognizing the landowner had an inheritable right to use the water, while it was on his land.
In the prior appropriation states - primarily those west of the 100th meridian - approximately fifty percent of the subject matter in the form of land was conveyed, by patent, along with the use of the land. In the west, the central government conveyed the water to the states, and by the citizen putting the water to beneficial use, the citizen could then acquire the use of the land. In the more arid areas of the west, the government did not convey the subject matter in land, but only the use of the land. Most of the land disposal, by use only, was for livestock grazing, where the subject matter in land was retained by the central government, to allow for separate development of the mineral potential through the mining laws.
Property comes in many forms. Property in land or water can be a right to use in the form of a lease; it can be a right to use, subject to other terms and conditions, such as for years, or for life; or it can be permanent and inheritable. The same can be said about property in water. Water also can be leased, or in other ways, subject to terms and conditions, or the right to use water can be permanent and inheritable.
When the property in land or water is subject to terms and conditions, it is often described as a beneficial use or usufruct, signifying its temporary status. When the property, the right to use land or water, is permanent and inheritable and is not subject to conditions, it is called the fee.
Discussion
In Hage v U.S. (USCC 91-1470L) 51 Fed. Cl.Ct. 570 (2002), plaintiff made basically two arguments in support of his property rights on the federal lands. Plaintiff was not asserting that he owned the subject matter in the form of the federal land, the physical manifestation of property. Plaintiff was asserting that he had an inheritable right to use those federal lands, which stemmed from one or both of two sources.
1. An inheritable right to use the federal land for livestock grazing, stemmed from his ownership of the subject matter in water - the use of which, was permanently established for grazing livestock on the federal lands where those water arose, or
2. The various land disposal laws passed by Congress resulted either collectively, or singularly, in the grant of a surface estate right in the federal lands for livestock grazing.
The term "surface estate right" can have a variety of meanings. It can mean ownership of the subject matter in land to a certain depth from the surface. It can mean only the use of the surface. It can mean the use of the surface, without any title to the subject of property - the land itself. A surface estate right can be for a day, or a year, or a lifetime, in which it amounts to a beneficial use or usufruct. A surface estate right can be permanent and inheritable, in which case, it amounts to the fee, even though the physical land, itself, is owned by another. In Roberts v. Wentworth, 59 Mass. (5 Cush.) 192, 193; the court held: "A party may have title to property, though he is not the absolute owner, if he has the actual or constructive possession of title thereto, though another person may be the owner."
And in Shingleton v. State, 133 S.E. 2d 183, 189, 260 N.C. 451, the court likewise held:
"Every right to land is a title, and if a person has actual or constructive possession of property or right of possession, he has title thereto though another person may be owner."
In other words, the phrase "surface estate right" is vague and ambiguous, and can conceivably have as many different meanings as there are people who use it. The use of the term "surface estate" can be, and often is, used in a variety of ways, meaning different things. The use of the word "surface" has at times, been used to describe what more accurately could be referred to as the fee. In Kansas Nat. Gas Co. v. Board of Comm'rs of Neosho County, 89 P 750, 751, 75 Ks. 335, the court opined in referring to the fee:
"In common speech, the non mineral portion of the land ... the proprietor of land who divests himself of title to the minerals which it contains is still spoken as the owner of the "fee" or of the "surface" or of the "land.""
In Warner v. Beers, NY 23 Wend. 103, 141, in expressing a principle of law states:
"Definitions differ in character according to the nature of the thing to be defined ... the word is made intelligible by a description... Strict and essential definitions can generally be given of the terms of positive jurisprudence... This is remarkably the case, for instance, in regards to our common-law terms of real estate, as in "fee," "lease," "warranty"..."
The word fee always means inheritable. Fee means there are no terms or conditions attached to the use. Black's Law Dictionary, 6th Edition, defines fee:
"Fee signifies an estate of inheritance, being the highest and most extensive interest which a man can have in a feud; and when the term, used simply, without any adjunct, or in the form of "fee simple," it imports an absolute inheritance, clear of any condition, limitation or restriction to particular heirs."
The court in Hage v. U.S. correctly denied the surface estate argument. The court held that the United States cannot create property in land or water. The recognition of property in land or water is within the jurisdiction of the state, not the federal government. As the court, in Hage v. U.S., January 29, 2003 Final Opinion and Finding of Facts, in a footnote citing Bd. Of Regents v. Roth, 408 U.S. 564 (1972):
"As a matter of property rights law, this conclusion should not be surprising in light of the U.S. Supreme Court's long-standing definition that these rights are usually defined by state law and other sources, independent of federal protections for private property."
The court properly held that the land disposal laws passed by Congress only created access to the federal lands for plaintiff's predecessors. In themselves, the land disposal laws did not, and, could not have, created property. Property was created when some person took advantage of the access Congress had allowed, went on the land, mixed his labor with the land, and had that property recognized, under state law.
The court did find favorably for Hage on the issue of water rights: "This court finds that plaintiffs presented evidence at trial that showed by the preponderance of evidence that the plaintiffs, and their predecessors, appropriated and maintained a vested water right in the following bodies of water on the Ralston and McKinney allotments. In addition to certificates of appropriation, that were entered into evidence, the plaintiffs also submitted an exhaustive chain of title, which showed that the plaintiffs and their predecessors, in interest, had title to the fee lands where the following springs and creeks are located." Hage v U.S., Final Opinion and Finding of Fact, January, 2002.
The Court repeated these findings relative to the southern Monitor Valley. The fee lands referred to here were clearly defined in the text of the opinion and a footnote, as the area encompassing what are commonly referred to as the Meadow Canyon, Monitor, and Table Mountain grazing allotments.
The court found that plaintiff and his predecessors owned the subject matter in water on the federal lands in question, the use of that water being for livestock watering and irrigation purposes, creating an inheritable right to use in the lands grazed or irrigated. The court also found that the water rights in question were vested.
The word vested has a very specific meaning. A vested right means that the right is permanent, and not subject to terms and conditions. In Hutton v. Autoridad Sobre Hogares De La Capitol, D.C. Puerto Rico 78 F. Supp. 988, 994, 999. held:
"A "vested right" is one which is absolute, complete and unconditional, the exercise of which no obstacle exists and which is immediate and perfect in itself, and not dependent upon a contingency."
It is inheritable. If title to the subject of property, the water, is permanent and inheritable, it follows that the property itself, the use of the water for livestock grazing and irrigation, is also permanent and inheritable. In other words, the use of the federal land for livestock grazing is in the nature of a fee; permanent, inheritable, and not subject to terms and conditions. The court emphasized this point in its February 5, 2003 Order finding that the U.S.F.S. or B.L.M. could not extinguish plaintiff's vested water rights by imposing terms and conditions on their use through a grazing permit, without inuring a claim for monetary compensation for the loss.
Conclusion
In summary, the court in Hage v. U.S. denied plaintiff's claim that the land disposal laws, passed by Congress, created any property rights, surface estate, or otherwise. The court did find that plaintiff had title to the fee lands where plaintiff's waters arose. These fee lands are exactly the same lands the court ruled Plaintiff had not been granted a surface estate right by virtue of the land disposal laws Plaintiff cited.
Fee lands are very common in the British Commonwealth nations. A land owner, in those nations, usually only owns the inheritable right to use the land. The subject matter, land, is retained by the crown, including all the minerals, unless separately disposed to another.
It follows, then, that ownership of the fee usually encompasses a surface estate right, or the right to use the surface of the land in perpetuity. This is true, whether the subject matter land is owned by the fee holder, such as is usually the case, on patented parcels, or whether the inheritable right to use the land is owned separately from the underlying subject matter, such as the fee lands of Britain, or the federal grazing lands of the western United States. However, a person may own a conditional surface estate right, which because of the conditions attached, would not be permanent and inheritable, and therefore not be a fee.
The Court found in Hage that plaintiff had title to the fee lands upon which his vested water rights arose. Thomas Sowell's quote clearly lays out the issues involved in Hage v U.S.:
"Neither property nor the value of property is a physical thing. Property is a set of defined options... It is that set of options which has economic value... It is the options, and not the physical things which are the "property" - economically as well as legally ... but, because the public tends to think of property as tangible, physical things, this opens the way, politically, for government confiscation of property, by forcibly taking away options, while leaving the physical objects untouched."
The U.S.F.S. and B.L.M. did not take the subject matter, the physical spring, creek, well, itself. Those water sources are still where they always were. What the U.S.F.S. and B.L.M. took from Hage was the fee, the inheritable right to use those waters, by attempting to impose terms and conditions on vested water rights through a grazing permit, and denying plaintiff's use of those waters.
