Opinion ID: 2590136
Heading Depth: 2
Heading Rank: 4

Heading: Appellants' Water Rights

Text: In the trial court, respondents contended that neither the Cardozo appellants nor Jess Ranch sustained their burden of proving they possessed any water rights. The trial court agreed as to the Cardozo appellants. The court acknowledged that Jess Ranch testified as to its riparian, overlying, and appropriative rights, and, as the Court of Appeal observed, the evidence showed overlying rights, but the trial court found it unnecessary to determine the effect of those rights on its decision. The Court of Appeal concluded that Jess Ranch need not rely on those rights in order to participate in the physical solution and judgment.
After concluding that several Cardozo deeds had not reserved riparian rights on behalf of the Cardozo appellants, the Court of Appeal nevertheless disputed the trial court's finding that they had no overlying rights. Here, the Court of Appeal reasoned, overlying rights are a property right appurtenant to the land, and are based on ownership. [Citations.] Although limited to the amount needed for beneficial use, irrigation for agriculture is clearly such a use, and respondents did not claim otherwise. [Citations.] After pointing out that overlying rights are dependent on land ownership over groundwater, and are exercised by extracting and using that water, the Court of Appeal concluded: Having shown ownership, extraction and beneficial use of the underground water here, the Cardozo Appellants established overlying rights, and the contrary finding of the trial court is without evidentiary or legal support. [¶] ... [¶] We repeat the guiding principle: `Under California law, [p]roper overlying use ... is paramount, and the right of an appropriator, being limited to the amount of the surplus, must yield to that of the overlying owner in the event of a shortage unless the appropriator has gained prescriptive rights through the taking of nonsurplus waters.  [Citation.]' ( Hi-Desert County Water Dist. v. Blue Skies Country Club, Inc., supra, 23 Cal.App.4th 1723, 1730-1731, 28 Cal.Rptr.2d 909, italics added, original italics omitted.) Thus, while the rights of all overlying owners in a groundwater basin are correlative and subject to cutbacks when the basin is overdrafted, overlying rights are superior to appropriative rights. Here, the trial court did not attempt to determine the priority of water rights, and merely allocated pumping rights based on prior production. This approach elevates the rights of appropriators and those producing without any claim of right to the same status as the rights of riparians and overlying owners. The trial court erred in doing so. Although the Court of Appeal agreed with the Cardozo appellants in doubting the legal propriety of some aspects of the physical solution, the court did not agree that it should reverse the entire judgment without regard to the rights of the stipulating parties. The Court of Appeal explained, While we share the Cardozo Appellants' doubts as to the legal propriety of various aspects of the trial court's physical solution, such as allowing transfer of water produced in accordance with riparian or overlying rights to nonriparian or nonoverlying lands, we do not need to consider those aspects of the physical solution. We see no reason why the parties cannot stipulate to a judgment incorporating the physical solution, nor do we see any reason why a stipulated judgment entered into by a large number of water producers in the Mojave Basin should be totally reversed when the rights of the Cardozo Appellants can be fully protected by appropriate trial court orders on remand. [Citations.] ... [¶] Thus, we protect the rights of the Cardozo Appellants while also respecting the rights of the stipulating parties to agree to a judgment which waives or alters their water rights in a manner which they believe to be in their best interest. Accordingly, the Court of Appeal reversed the trial court judgment against the Cardozo appellants, concluding that the trial court could not ignore their preexisting legal water rights. The court did recognize, however, that the stipulating parties could agree to be bound by the physical solution regardless of any water rights they may have had. At the same time, the Court of Appeal concluded: [A]ny person or entity that produced more than a minimal amount of water in the 1986-1990 period was allowed to stipulate to the judgment, regardless of whether they had any provable water rights. Essentially, they could waive their existing water rights and agree to be bound by the terms of the stipulated judgment, so long as the rights of the nonstipulating parties were respected. [Citation.] The Court of Appeal directed the trial court to exclude the Cardozo appellants from the judgment and to grant them injunctive relief protecting their overlying water rights to the current and prospective reasonable and beneficial need for water on their respective properties. The Court of Appeal also reversed the trial court's May 6, 1996, award of costs to the respondents as the prevailing parties against the Cardozo appellants. The court reasoned that because the Cardozo appellants should have been excluded from the judgment, respondents were no longer prevailing parties. It also directed the trial court to order a refund of any assessments the Cardozo appellants paid under the judgment pending appeal. [14] In all other respects, the court affirmed the trial court judgment as to those appellants. Respondents principally disagree with the Court of Appeal's conclusion that the trial court erred in ignoring the Cardozo appellants' legal water rights in its equitable physical solution and judgment. They initially contend that the Court of Appeal's resolution of the Cardozo appellants' appeal gives those parties the right to extract an unlimited amount of water from the basin. We disagree. When the water is insufficient, overlying owners are limited to their proportionate fair share of the total amount available based upon [their] reasonable need[s]. ( Teliachapi-Cummings County Water Dist. v. Armstrong (1975) 49 Cal.App.3d 992, 1001, 122 Cal.Rptr. 918.) Respondents also argue that overlying pumpers in an overdrafted basin should be required to file an action to adjudicate groundwater rights at the first indication of substantial growth in the area. However, overlying pumpers are not under an affirmative duty to adjudicate their groundwater rights, because they retain them by pumping. ( City of San Fernando, supra, 14 Cal.3d at p. 293, fn. 100, 123 Cal.Rptr. 1, 537 P.2d 1250; Hi-Desert County Water Dist, supra, 23 Cal.App.4th at pp. 1731-1732, 28 Cal.Rptr.2d 909.) As overlying owners, the Cardozo appellants have the right to pump water from the ground underneath their respective lands for use on their lands. The overlying right is correlative and is therefore defined in relation to other overlying water right holders in the basin. In the event of water supply shortage, overlying users have priority over appropriative users. ( City of Pasadena, supra, 33 Cal.2d at p. 926, 207 P.2d 17.) The Court of Appeal properly recognized that the Cardozo appellants retained their overlying rights by pumping, and that no claim of prescription had been asserted to reduce those retained overlying rights. Likewise, no precedent exists for requiring an overlying user to file an action to protect its right to pump groundwater. The laches doctrine did not bar a plaintiffs action, for example, even where defendant cities increased their pumping of an overdrafted water supply long before the action commenced, and development relied on the new water production in the interval. ( Orange County Water District v. City of Riverside (1959) 173 Cal.App.2d 137, 219-220, 343 P.2d 450.)
Although the Court of Appeal was careful not to endorse the physical solution or trial court judgment, it considered whether Jess Ranch had the right to be included in the physical solution on the same terms as some other stipulating parties. The trial court judgment specified free production allowances for the basin's water producers. For most, this value was set at the producer's maximum production during the years 1986-1990. Jess Ranch's free production allowance was calculated differently, and it appealed, contending that it should be allowed to participate in the stipulated judgment on the same terms offered to other producers. Thus, the Jess Ranch appeal presents different issues than does that of the Cardozo appellants. Jess Ranch wishes to participate in the physical solution, but contends it has been prevented from doing so on the same terms offered the other water producers in the Mojave Basin. [15] The Court of Appeal agreed with Jess Ranch, and respondents seek reversal of that judgment. Specifically, the trial court examined Jess Ranch's water use and concluded it failed to establish that the use was reasonable and beneficial. During the period for which water production was reviewed, Jess Ranch had been involved in aquaculture (trout production). Aquaculture requires recirculating water through fishponds, and there is little consumptive use or surface evaporation. Leftover water flows out the other end of the ponds and is applied to irrigation. From a gross annual production of 18,625 acre-feet, the trial court estimated Jess Ranch's total consumptive use at 7,480 acre-feet. The court used this value to set Jess Ranch's free production allowance. The judgment allowed Jess Ranch to continue to produce recirculated water for aquaculture, but required it to discharge the water directly to the Mojave River after this use. In our view, the trial court's estimate of Jess Ranch's free production allowance was based on reasonable assumptions. Although Jess Ranch practiced agriculture and aquaculture during the period used for calculating free production allowances, it is in the process of changing its property use to commercial and residential. The trial court estimated its future consumptive use at 1,300 acre-feet per year. It concluded that evidence did not establish the amount of land Jess Ranch had in agriculture. On the basis of expert testimony, the court multiplied an upward estimate, 600 acres, by 10 acre-feet per acre, with the product representing the agricultural water use. This product was added to the estimated amount of water lost from lake evaporation and the amounts needed for home use and greenbelt irrigation. The sum is Jess Ranch's consumptive use. The court used this value as its free production allowance. Jess Ranch was not the only party whose free production allowance was set equal to its estimated consumptive use. Twenty-five other parties, including the California Department of Fish and Game, maintained fish hatcheries or recreational lakes; their free production allowances were also set at the level of their consumptive use (total production less recirculated water). [16] Some other recreational lakes were given base production rights based on actual production, with the contingency that if they ever ceased production, they could only transfer their consumptive use portion of those rights. [17] The trial court exercised its equitable powers in approving the proposed physical solution and entering the judgment, and the Court of Appeal properly reviewed the judgment under the abuse of discretion standard of review. ( In re Marriage of Doud (1986) 181 Cal.App.3d 510, 524-525, 226 Cal.Rptr. 423.) But where the Court of Appeal found an abuse of discretion as to Jess Ranch, we do not. Equity demands that similarly situated parties be treated similarly. Jess Ranch was one of 26 producers that recirculated water. It seems reasonable to differentiate these users from others that did not recirculate water, but that put their full gross production amount to use. It is difficult to fathom what reasonable, beneficial purpose is served by allowing Jess Ranch to retain both the amount of water used and the amount recirculated.