The Nevada Supreme Court ruled Thursday that ownership of water rights isn't tied to ownership of the land they are on.
The issue was raised in a case where the water rights that were part of a 520-acre land sale were put up as collateral for a loan.
E.A. Collins bought the land and used the water rights, but not the land, as security. After he went into bankruptcy, the rights were sold by a corporation, CFB.
It was after the 2001 foreclosure sale that Adaven company purchased the land where the water rights were located. Adaven filed with the state engineer to convey the water rights permit to their control but CFB blocked that saying it owned the water rights.
Adaven countered with a lawsuit arguing transferring the water rights separately from the land amounts to severing the water rights from the land, which is only allowable with approval from the state engineer. Since CFB didn't get the engineer's approval, they argued they own both the land and the water rights.
The high court, in an opinion by Justice Jim Hardesty, disagreed.
"Contrary to Adaven's assertion, nothing in (state law) prevents the transfer of water rights ownership to someone other than the owner of the land," he wrote.
The opinion says state law only deals with the place where the water is used, not ownership.
"Because the transfer of ownership to water rights does not allow the new owner to automatically use the water at a different location, that transfer does not amount to a severance."
To use those water rights outside that acreage, the opinion states, the owners would have to apply to the state engineer to sever them from that property and transfer them to another location.
Under Nevada law, water rights must be transferred by a deed recorded at the recorder's office in the county where those water rights are located.
Adaven lawyers argued they had no way of knowing the water rights were separately owned, but the high court agreed with CFB that there was a deed of trust encumbering the water permit and Adaven had a duty to find out what that encumbrance was.
The opinion was signed by all seven members of the Nevada Supreme Court.
• Contact reporter Geoff Dornan at firstname.lastname@example.org or 687-8750.