In the 1902 case of Gutierres v. Albuquerque Land and Irrigation Company, the United States Supreme Court was asked to determine whether a lower court had erred in its decision regarding water rights. The plaintiff, Gutierres, claimed that he held prior appropriation rights to use water from a river for his farm before the defendant company diverted it for their own purposes. However, the defendant argued that they were entitled to divert this water due to an earlier Spanish grant which gave them priority over later users like Gutierres. The Supreme Court ruled in favor of Albuquerque Land and Irrigation Company by upholding the validity of Spanish grants under U.S law after New Mexico became part of U.S territory following Mexican-American War (1846-48). They also affirmed that these grants included not only land but also associated water rights necessary for irrigation or other uses on granted lands as per customary Spanish law at time when grant was made.

In the dissenting opinion for Gutierres v. Albuquerque Land and Irrigation Company, it was argued that the majority's decision failed to adequately consider Spanish law and customs which were in place at the time of the original land grant. The dissent contended that under these laws, a community could collectively own water rights without each individual member having to assert their personal claim. Therefore, when certain members sold their lands but not explicitly their water rights, those rights should have remained with them or reverted back to the community rather than being transferred with the land sale as per American common law principles. This interpretation would mean that Gutierres still held valid water rights despite selling his land years earlier. The dissent further criticized how this case was handled by lower courts and believed more thorough investigations into local customs should have been conducted before making any rulings on property disputes involving old Spanish grants.