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overlying owner. Overlying rights are correlative like those of surface riparians. Each owner's fair share of water is based on current and beneficial needs, not on the history of past use. The dom- inant concern of the court is maximizing bene- ficial and productive use of water. The California Rule has also come understress as water supplies have become more critical. In Los Angeles v. San Fernando,29 the California Supreme Court reexamined the doctrine of mutual prescription and severely limited its scope by holding that California law prohibits cities from losing title to water rights by pre- scription. Absent the holding in San Fernando, Los Angeles would have lost priority that it claimed based on the existence of historic pueblo rights and on the importation of water from the Owens valley. The court also limited the doctrine of mutual prescription as applied to private parties by requiring a specific finding of actual or constructive notice of the existence of an overdraft before the statutory period begins to run. In addition, the court held that years of surplus break the continuity necessary for the running of a prescriptive period. In the wake of San Fernando, the following propositions regard- ing the California Rule hold: 1) Cities acquire rights to the return flows from imported waters which are superior to any overlying or appropriative rights in native water. 2) Overlying landowners are entitled to use the amount of native water they can putto reasonable and beneficial use on the overlying land less any right lost by prescription. 3) Holders of appropriative rights to ground- water are entitled to have such supplies allocated under the principle that first in time is first in right unless their appropri- ative right has been obliterated by mutual prescription. Prescriptive rights cannot be acquired against a city. The real impact of the California Rule has not been in allocating water supplies, but rather in determining who must pay for more expensive imported water. The history of the California Rule has been an evolving attempt to devise a property rule which permits maximum efficient use of water. As economic and physical con- ditions changed, the rule evolved often in a tortured manner as courts struggled to maintain some consistency with what had gone before. The dominant concern has been to preserve investments in water. Thus, the English Rule was rejected and landowners were assured some rights to groundwater, rights that encouraged 3-8 investment. Appropriation of surplus waters was permitted to encourage use. Eventually, mutual prescription was developed to insure that large investments in groundwater development would not be totally lost. As imported water became more important, the doctrine of mutual pre- scription was restricted to facilitate a more "equitable" sharing of the costs of the importa- tion. An unfortunate side effect of the development of the California Rule has been the development of legal fictions to justify imposition of a legal doctrine (such as implying constructive notice of the beginning of an overdraft in Pasadena, when the existence of such an overdraft could only be determined by massive expenditures on hydro- logic investigations years later). These legal fictions have kept groundwater users from achieving any degree of certainty as to the nature of their rights, at least until recently. Ironically, it was a felt need for certainty which led the California courts to develop the rule of correla- tive rights in the first instance. Socio-Economic Impacts The economic impacts of the California Rule are exceedingly difficult to articulate. Rights in theory are more secure than under either the English Rule or the American Rule due to the "sharing" notion when an overdraft occurs. This increased security of right, however, is signifi- cantly lessened by the possibility that rights can be lost through prescription. Since the statute of limitations on prescription begins to run when an overdraft commences, the security of an over- lying landowner's right can only be preserved by extreme vigilance in the form of expensive and sophisticated hydrologic monitoring. Since "excess" groundwater supplies in a basin are subject to prior appropriation, off-land appropri- ators have secure rights only insofar as they hold early appropriations and surplus waters continue to exist. A major economic advantage of the California Rule is its flexibility. Its emphasis on "sharing" in a variety of circumstances insures that major water investments will not be lost totally. Under the California Rule, a state also has great latitude in adopting regulations without encountering constitutional difficulties. The California Rule thus tends to facilitate efficient use of ground- water but in no way mandates efficient use. The equity impacts of the California Rule also are extremely difficult to isolate. Overlying owners ostensibly are favored over off-land users, but the possibility of the prescriptive loss of rights severely limits this advantage. More- over, the ability to appropriate "excess" water