Barcellos and Wolfsen v. Westlands Water Dist.

• Decision Date: 10 September 1993
• Docket Number: No. CV-F-79-106 OWW.,CV-F-79-106 OWW.
• Citation: 849 F. Supp. 717
• Court: U.S. District Court — Eastern District of California
• Parties: BARCELLOS AND WOLFSEN, INC., et al., Plaintiffs, v. WESTLANDS WATER DISTRICT, et al., Defendants.

849 F. Supp. 717

BARCELLOS AND WOLFSEN, INC., et al., Plaintiffs, v. WESTLANDS WATER DISTRICT, et al., Defendants.

No. CV-F-79-106 OWW.

United States District Court, E.D. California, Fresno Division.

June 18, 1993.

Opinion Denying Motion for Additions or Amendments to Decision September 10, 1993.

COPYRIGHT MATERIAL OMITTED

William M. Smiland, Donnelly, Clark, Chase & Smiland, Los Angeles, CA, Maria A. Iizuka, U.S. Dept. of Justice, Thomas W. Birmingham, Forrest A. Plant, Sacramento, CA, for plaintiff.

Theodore A. Chester, Jr., Donnelly Clark Chase and Smiland, Los Angeles, CA, for Barcellos and Wolfsen, Inc.

Thomas William Birmingham, Kronick Moskovitz Tiedemann and Girard, Sacramento, CA, for Westlands Water Dist.

Maria A. Iizuka, U.S. Dept. of Justice, Land and Natural Resources Div., Sacramento, CA, for U.S.

Thomas Marcuson, Smurr Henry and Gelegan, Fresno, CA, for Gary Hughes.

Larry W. Telford, Severson and Werson, San Francisco, CA, for Catellus Development.

MEMORANDUM OPINION AND ORDER RE: MOTION TO ENFORCE JUDGMENT

WANGER, District Judge.

Over seventy landowners and water users ("Movants") within "Area I" of Westlands Water District, as defined in paragraph 1.14 of the stipulated judgment entered in this case in 1986 ("Judgment"), seek enforcement of the Judgment requiring Federal Defendants to sell Westlands irrigation water.¹

I. Background

The following facts are undisputed: Westlands entered into a water service contract with the United States in 1963 under which the United States, through the Bureau of Reclamation, agreed to make available for Westlands' purchase 900,000 acre-feet of water from the San Luis Unit of the Central Valley Project ("CVP"). Movants are third party beneficiaries of the 1963 contract. Section 4.1 of the Judgment states that Westlands and the United States "shall perform the 1963 Contract." Section 3 allows any party to the Judgment to obtain relief from violation of the Judgment by filing a motion in this Court sixty days after written notice is provided all other parties. Sufficient notice was provided by Area I representatives.²

On April 7, 1993, the Bureau announced its updated allocations of CVP water for various uses for water year 1993-94. Agricultural contractors south of the Sacramento-San Joaquin Delta, such as Westlands, are to receive 50 percent of their contractual supply of water. Other sources are to receive from 75 to 100 percent of their normal allotment. Acts taken by the Bureau in complying with the Endangered Species Act³ (ESA) and the newly enacted Central Valley Project Improvement Act⁴ (CVPIA) have significantly impacted its allocation decisions. In particular, in response to the listing by the Secretary of Commerce of the winter-run chinook salmon and Delta smelt as threatened species,⁵ operating limitations have been imposed on the pumps which bring water to users south of the Delta.

Movants argue that the 1963 contract imposes a non-alterable contractual obligation on the part of the Federal Defendants to provide no less than 900,000 acre-feet of water to Area I in water year 1993-94. They seek a declaration that Federal Defendants are required to make available for sale all 900,000 acre-feet, or in the alternative, an order 1) requiring Federal Defendants to pay an amount per acre foot necessary to procure substitute water from other sources, 2) enjoining Federal Defendants from enforcing liens or collecting assessments on Area I land, under the 1965 repayment contract, and 3) enjoining Federal Defendants from enforcing the ten-year sale restriction under deed arising from sale of excess lands in Area I.

II. Standards for Interpreting Contract Provisions

Federal common law controls the interpretation of a contract entered pursuant to federal law when the United States is a party. Kennewick Irrigation Dist. v. United States, 880 F.2d 1018, 1032 (9th Cir.1989). "A written contract must be read as a whole and every part interpreted with reference to the whole. Preference must be given to reasonable interpretations as opposed to those that are unreasonable, or that would make the contract illusory." Id.

"Extrinsic evidence is inadmissible to contradict a clear contract term...." Pierce Cty. Hotel Emp. & Rest. Emp. Health Trust v. Elks Lodge, B.P.O.E. No. 1450, 827 F.2d 1324, 1327 (9th Cir.1987). On the other hand, "where a contract's meaning is not clear on its face, its interpretation depends upon the parties' intent at the time it was executed." Arizona Laborers, Teamsters & Cement Masons Local 395 Health & Welfare Trust Fund v. Conquer Cartage Co., 753 F.2d 1512, 1515 (9th Cir.1985) (quotation omitted). The basis for the rule that "extrinsic evidence is inadmissible to interpret, vary or add to the terms of an unambiguous written instrument" is that

if parties to an agreement could not rely on written words to express their consent to the express terms of that agreement, those words would become little more than sideshows in a circus of self-serving declarations as to what the parties to the agreement really had in mind. The parole evidence rule thus enables parties to rely on written instruments as embodying a complete memorial of their agreement, and to avoid costly and disruptive litigation over the existence of oral and implied terms that may or may not have been contemplated by the parties.

Wilson Arlington Co. v. Prudential Ins. Co., 912 F.2d 366, 370 (9th Cir.1990).

"The existence of an ambiguity must be determined as a matter of law." State Farm Mut. Auto. Ins. Co. v. Fernandez, 767 F.2d 1299, 1301 (9th Cir.1985). "A contract is ambiguous if reasonable people could find its terms susceptible to more than one interpretation." Kennewick Irrigation Dist., 880 F.2d at 1032. "`The fact that the parties dispute a contract's meaning does not establish that the contract is ambiguous.'" Id. (quoting International Union of Bricklayers & Allied Craftsman Local No. 20 v. Martin Jaska, Inc., 752 F.2d 1401, 1406 (9th Cir.1985)).

III. Discussion

Federal Defendants do not contest that the 1963 contract obligates the Bureau to provide 900,000 acre-feet of water annually. Yet they contend that the Bureau's compliance with the ESA and the CVPIA has made it impossible to deliver Westlands' entire allocation. They also correctly note that the contract contains a provision limiting that obligation in case of shortage. Any contractual rights Area I landowners and water users have in the 900,000 acre-feet of water is limited by Article 11, which states, in pertinent part:

(a) There may occur at times during any year a shortage in the quantity of water available for furnishing to the District through and by means of the Project, but in no event shall any liability accrue against the United States or any of its officers, agents, or employees for any damage, direct or indirect, arising from a shortage on account of errors in operation, drought or any other causes. ...⁶

(b) In the event that in any year there is delivered to the District by reason of any shortage or apportionment as provided in subdivision (a) of this article or any discontinuance or reduction of service as set forth in subdivision (d) of Article 9 hereof, less than the quantity of water which the District otherwise would be entitled to receive, there shall be made an adjustment on account of the amounts paid to the United States by the District for water for said year in a manner similar to that provided in Article 7. To the extent of such deficiency, such adjustment shall constitute the sole remedy of the District or anyone having or claiming to have by, through, or under the District the right to the use of any of the water supply provided for herein. (emphasis added).

Under Article 11, Movants are claiming "by, under, or through the District," and are entitled to the full contractual allotment only to the extent that a shortage has not arisen due to "any cause." If they are provided less, their sole remedy is an adjustment in their payments.

The parties to the stipulated judgment recognized that this shortage provision was an integral part of the service contract. Paragraph 17.5 of the Judgment states:

In years of water shortage when water deliveries to Central Valley Project water contractors are reduced by the Federal Parties under their respective water service contracts, deliveries to and within the District of water purchased under Article 3 of the 1963 Contract to which the water users in Area 1A and Area 1B have prior rights shall be proportionally reduced along with deliveries to and within the District of the additional water from the Central Valley Project to which lands in the District are entitled. (emphasis added).⁷

Movants contend that Article 11 is invalid because Federal Defendants have "expressly warranted that the water in question can and will be available, and done so repeatedly." They cite case law in which courts have denied operative effect to contract clauses which limit or negate express warranties. That is, Article 11 cannot serve to limit the government's liability because Federal Defendants expressly warranted that water would be available. Movants fail to establish the existence of such an express warranty. They cite extrinsic evidence such as statements made by President Kennedy in the ground-breaking ceremony for the San Luis Unit and a letter written in September of 1960 by the Bureau's assistant regional director. The three provisions of the 1963 contract which they cite create no "warranty of availability."⁸ The weakness of Movants' contention is demonstrated by the fact they cite to Article 11 itself as creating an express warranty. It does not.

Movants also object that Article 11 fails to provide minimum adequate remedies for breach and that its damage provision is unconscionable.⁹ They additionally allege that Article 11 violates public policy as it exempts the government from responsibility for the willful injury of the property...