which the defendants asserted by their plea to have been acquired by them under the act of March 3, 1891.1

The defendants waited until October 31, 1903, when a motion was made by a new firm of attorneys to vacate the order of April 7, 1903, allowing the supplemental complaint to be filed, to open the default, to set aside the decree of forfeiture, and to permit the filing of a proposed answer which was tendered with the motion.2 This motion was accompanied by an affidavit of Nathan E. Boyd who alleged that he was a director of the defendant companies and that he had not been informed of the filing of the supplemental complaint or of the taking of the default against the defendants, although he admitted that a copy of the supplemental bill had been mailed to him by one of his attorneys. No statement on the part of any of the defendants' attorneys was filed in support of the motion, either to refute their having had notice of the application for leave to file the supplemental bill or to explain their total inaction after having been served with a copy of the bill on April 7, 1903.

On January 29, 1904, the court overruled the motion and entered an order, the last paragraph of which was as follows:

"And the court, having heard counsel for the plaintiff and defendants, and being fully advised in the premises, doth find that the motion for leave to file said supplemental bill of complaint was served upon the attorneys of record of the said defendants, and that there was no irregularity in the filing of said supplemental bill of complaint, and that it has no power to set aside the decree entered upon said bill at this time upon said application, doth overrule said. motion. ''4

The defendants thereupon took an appeal to the Supreme Court of the Territory of New Mexico, which court on March 2, 1906, affirmed the decision of the lower court denying the motion and entered a decree declaring the right of way obtained by the defendants under the Act of March 3, 1891, to be forfeited, and granting a perpetual injunction restraining the defendants from constructing their reservoir."

In regard to the contention of the defendants that they had not been served with notice of the complainants' motion for leave to file

1 Appendix to the Answer, p. 74.

2 Id., p. 672. 3 Id., p. 673. 4 Id., p. 79. 5 Id., p. 80.

the supplemental bill, the court in its opinion pointed out that attorneys of record were presumed to be present during terms of court wherein their cause was pending, and in contemplation of law were chargeable with notice of all proceedings transpiring in open court in causes wherein they were such attorneys. In response to the defendants' contention that the lower court erred in permitting the supplemental bill to be filed on the ground that it set up a new cause of action, the court held that the matter contained in the supplemental complaint grew out of and was connected with the same transaction as that alleged in the original bill, that the identical relief was prayed for, and that the supplemental complaint was entirely consistent and reconciliable with the purpose of the entire litigation. Furthermore, the original plea of the defendants relied upon the Act of Congress of March 3, 1891, as the basis of all rights claimed by them, and the forfeiture sought by the supplemental complaint was provided for in the same Act. The court further found that there was no irregularity in the rendition of the judgment of default; that it was immaterial whether Mr. Boyd had notice of the proceedings or not, as he was not a party to the suit except as a director of the defendant corporations; that the parties to the suit were the corporations and they were represented by attorneys of record upon whom service was made. In regard to the contention of the defendants that they were restrained from constructing their reservoir while the suit was in progress and therefore no right of forfeiture existed, the court pointed out that the temporary injunction granted May 24, 1897, had been dissolved July 30, 1897, and had never been reinstated. The perpetual injunction granted upon the declaration of forfeiture had been entered more than 5 years after the dissolution of the temporary injunction, and the contention of the defendants was therefore without any merit.

An appeal was allowed from this judgment to the Supreme Court of the United States, and on December 13, 1909, that court rendered its decision unanimously affirming the judgment of the lower court.1 In its opinion, the court reviewed the judgment of the Supreme Court of New Mexico and upheld it in every particular. Thus the suit instituted by the United States against the defendant companies in 1897 was finally settled in favor of the United States, the right of way granted to the American Company over Government lands at Elephant Butte was declared forfeited, and a perpetual injunction was entered restraining the defendants from constructing their proposed dam and reservoir at Elephant Butte.

1 Appendix to the Answer, p. 92.

In commenting on the third and final decision of the Supreme Court of the United States, the British Memorial says:

"It is axiomatic in law that a party may not advantage by his own wrong, but, in such fashion, the defendant companies were penalized for not doing the very thing that for virtually six years,-from May 25, 1897, to May 21, 1903, they had been enjoined not to do.""

This statement is not understood. The temporary injunction was dissolved on July 30, 1897, and was never reinstated. It is not only "axiomatic" in Anglo-American law that an injunction once dissolved can only be reinstated by subsequent affirmative action by the court, but it is expressly found in this case, by the Supreme Court of New Mexico3 and by the Supreme Court of the United States that the injunction was not in force after July 31, 1897. In fact, the claimant company did not even contend in the Supreme Court of the United States that it was technically in force. Its attorneys contented themselves with arguing that claimant company was "in effect” enjoined.

The Alleged Property Rights of the Claimant Company.

In the Memorial of His Majesty's Government it is asserted on page 4 that,

"By virtue of its Charter of Incorporation, and by the said official approval, confirmation and consent of the said Secretary of the

1 British Memorial, p. 24.

2 Final decree dissolving injunction and dismissing complaint, entered July 30, 1897. Appendix to the Answer, p. 2.

In its opinion handed down March 2, 1906, the Supreme Court of New Mexico says:

"Appellant insists that they were restrained from constructing their irrigation system by the United States, and therefore no right of forfeiture existed, but the record before us shows that the injunction originally granted was dissolved July 30, 1897, and was never reinstated. The injunction granted upon the declaration of forfeiture was more than five years after the dissolution of the former injunction. This contention, therefore, does not appear to be well founded." (Appendix to the Answer, p. 91.)

4 In reading the opinion of the Supreme Court of the United States, December 3, 1909, Mr. Justice Harlan says:

"Some stress is laid on the fact that the Government obtained an injunc tion to prevent the defendants from constructing its reservoir and dam. That fact, it is contended, estops the Government from relying on the five years' limitation prescribed by the above act of March 3, 1891, c. 561. But this view is without merit. The preliminary injunction referred to was dissolved July 31, 1897, and was never reinstated. The supplemental bill was taken as confessed on May 21, 1903, and a perpetual injunction was then awarded against the defendants. So that between the dissolution of the preliminary injunction and the granting of the perpetual injunction more than five years elapsed, during which the defendants were not impeded or hindered by any injunction against them. This is sufficient to show that the point just stated is without merit." (Appendix to the Answer, pp. 97-98.)

Interior, the Parent Company had acquired the right to impound and appropriate the flood waters of the Rio Grande (River) for irrigation and other beneficial purposes in the Rio Grande Valley in Sierra and Dona Ana Counties aforesaid, and certain other exclusive rights of way, reservoir rights, and other privileges and special concessions, more particularly set out in the said Charter of Incorporation and provided by certain special Territorial and Congressional enactments, together with the right and title to certain public lands for reservoirs and other purposes."

The Government of the United States joins issue with this statement, and maintains that the rights here asserted to have been vested in the Parent Company are not supported by the evidence submitted and in reality were not so vested.

Although the category of rights claimed is vague in its terms and is nowhere accurately described in the Memorial, it is apparent that the main rights asserted to have been possessed by the American Company are the following: (a) the right to impound and appropriate government-owned waters flowing in the Rio Grande for the purpose of sale to consumers; (b) the right to submerge and use certain government-owned lands by the construction of a reservoir thereon. While both of these rights were essential to the carrying out of the Company's project, nevertheless they are separate and distinct rights, and are derivable from different sources.

In regard to the first right, it may be pointed out that the conditions existing in the arid states were such that the right to the use of water was an exceedingly valuable one, and that in fact without water for irrigation the land in certain sections of the west was practically without value. As a result of this condition there grew up in the western states a definite and distinct body of customs and laws governing the acquisition of water rights which differed in its essential aspects from the rules of the common law obtaining in other states. This body of law was based upon the doctrine of "prior appropriation," and at the time the present case arose its main features were well defined and firmly established in the customs and laws of New Mexico, Colorado, Texas and other western states and territories. Although the application of the principles to the facts was often a matter of considerable difficulty and uncertainty.

The substance of the doctrine was that he who first diverted water from a natural stream and actually applied it to a beneficial purpose obtained a valid right against everyone except the Government to the continued use of so much as he had appropriated. Certain essential steps had to be taken before the right to the water became vested. First, there must have been an actual bona fide intention

upon the part of the appropriator to apply the water to a beneficial use, and in some states and territories (notably New Mexico), a notice of such intention was required by law to be filed with the appropriate officials. Second, there must have been an actual diversion of the water by means of a ditch, reservoir, or other structure. Third, and most important of all, there must have been an actual application of the water to some beneficial use, such as mining or irrigation. Upon the diligent completion of these steps a prior appropriator obtained a right to the continued use of the amount of water which he had appropriated. However, if he failed to complete his appropriation, or did not use due diligence in doing so, he obtained no rights to the water as against anyone.

Inasmuch as the Federal Government owned most of the land in the arid states and the waters flowing thereon, it was necessary for Congress to recognize the validity of the method of prior appropriation before an appropriator of water on Government lands could obtain a valid title, good as against the Government. In 1866 Congress passed an act specifically recognizing and confirming rights which had accrued by priority of possession under the local laws, customs and decisions of the state courts.1 The effect of this act was to permit individuals or groups of individuals to acquire by prior appropriation vested rights to the continued use of surplus non-navigable water flowing on Government lands in those states and territories where the doctrine of prior appropriation had become established.

The law of New Mexico regarding the acquisition of water rights was based upon prior appropriation, and no right to take water vested until the appropriation and application to beneficial use was complete. In addition, the legislature of the territory had passed certain statutes regulating the method of appropriation. In 1887 an act was passed authorizing the formation of companies for irrigation purposes and specifying their powers. In 1891 the legislature provided that persons or companies taking water from any stream should file a notice of their appropriation with the county officials. A corporation in New Mexico desiring to appropriate surplus waters for irrigation purposes had to comply, therefore, both with the well-established requirements of the law of prior appropriation and with the above statutes. If it did so with due diligence, and if its project complied in all other respects with the laws of the United States and of the territory, it acquired, upon