Millview Cnty. Water Dist. v. State Water Res. Control Bd.

• Decision Date: 28 September 2016
• Docket Number: A145428
• Citation: 4 Cal.App.5th 759,208 Cal.Rptr.3d 745
• Court: California Court of Appeals Court of Appeals
• Parties: MILLVIEW COUNTY WATER DISTRICT et al., Plaintiffs and Appellants, v. STATE WATER RESOURCES CONTROL BOARD, Defendant and Appellant.

4 Cal.App.5th 759

208 Cal.Rptr.3d 745

MILLVIEW COUNTY WATER DISTRICT et al., Plaintiffs and Appellants,

v.STATE WATER RESOURCES CONTROL BOARD, Defendant and Appellant.

A145428

Court of Appeal, First District, Division 1, California.

Filed September 28, 2016

As Modified on Denial of Rehearing October 26, 2016

As Modified November 3, 2016

Kamala D. Harris, Attorney General, Robert W. Byrne, Assistant Attorney General, Gavin G. McCabe and William Jenkins, Deputy Attorneys General for Defendant and Appellant State Water Resources Control Board.

Neary and O'Brien, Christopher J. Neary and Jennifer O'Brien, Willits, for Plaintiffs and Appellants Millview County Water District.

Carter, Momsen & Knight, Jared G. Carter, Matisse M. Knight and Alexander C. Rich, Ukiah, for Plaintiffs and Appellants Steven L. Gomes and Thomas P. Hill.

Margulies, Acting P.J.

In 2001, Millview County Water District (Millview) began diverting substantial flows from the Russian River under a century-old water rights claim leased from Thomas Hill and Steven Gomes. In 2009, Millview purchased the claim for $2.1 million, just four months after defendant State Water Resources Control Board (Board) issued a notice proposing entry of a cease and desist order (CDO) that would drastically restrict diversion under the claim. After the Board entered the proposed CDO, Millview, Hill, and Gomes (plaintiffs) jointly prevailed in a mandate action filed to challenge the CDO. We affirmed the superior court's order vacating the CDO in Millview County Water Dist. v. State Water Resources Control Bd. (2014) 229 Cal.App.4th 879, 177 Cal.Rptr.3d 735 (Millview I ).

Following our decision, plaintiffs sought an award of attorney fees from the Board under Code of Civil Procedure ¹section 1021.5, arguing they had conferred a substantial public benefit by obtaining a published appellate opinion addressing the issue of water rights forfeiture under California law. Plaintiffs argued the action had constituted a “financial burden” to them, as the term is used in section 1021.5, because they stood to gain no money judgment from the action. The trial court awarded plaintiffs attorney fees with respect to the appeal, although the court declined to award fees incurred during the remainder of the legal proceedings. The Board challenges the award of appellate fees, while plaintiffs have appealed from the denial of fees regarding the rest of the litigation. We vacate the award and affirm the trial court's decision not to award additional fees, concluding plaintiffs failed to provide evidence that the financial cost of the litigation outweighed its potential financial benefits to them.

I. BACKGROUND

California maintains a “dual system” of water rights, which distinguishes between the rights of “riparian” users, those who possess water rights by virtue of owning the land by or through which flowing water passes, and “appropriators,” those who hold the right to divert such water for use on noncontiguous lands. (El Dorado Irrigation Dist. v. State Water Resources Control Bd. (2006) 142 Cal.App.4th 937, 961, 48 Cal.Rptr.3d 468.) Riparian users and appropriators whose claims were staked before December 1914 need neither a permit nor other governmental authorization to exercise their water rights. (California Farm Bureau Federation v. State Water Resources Control Bd. (2011) 51 Cal.4th 421, 428–429, 121 Cal.Rptr.3d 37, 247 P.3d 112.) While there is no predetermined limit on the amount of water an individual riparian user may divert (Phelps v. Water Resources Control Bd. (2007) 157 Cal.App.4th 89, 116, 118–119, 68 Cal.Rptr.3d 350 ), appropriators may divert only so much water as is authorized by their particular water right, assuming the claim was properly perfected by the original claimant (Pleasant Valley Canal Co. v. Borror (1998) 61 Cal.App.4th 742, 776, 72 Cal.Rptr.2d 1 ).

In 1998, Hill and Gomes acquired a 33.88–acre parcel of land adjoining the Russian River (the parcel). As part of the transaction, they were assigned an appropriative water right known as the “Waldteufel claim,” which had been recorded in early 1914 by J.A. Waldteufel, a prior owner of the parcel. As later determined by the Board, Waldteufel claimed the right to divert the equivalent of 1,450 acre-feet per year (afa) from the Russian River.

In 2001, Hill and Gomes sold most of the parcel to a developer, who later constructed homes on it. The same year, they licensed the Waldteufel claim to Millview, which provides water service to an unincorporated area of Mendocino County north of Ukiah. The annual license fee started at $10,000 in 2001 and rose to $30,000 by 2005. Soon after licensing the Waldteufel claim, Millview began diverting water from the Russian River, supplying water not only to the homes built on the parcel but also elsewhere within the boundaries of the district. During the years for which information is available in the record, 2001 through 2008, Millview's diversions varied from a low of 3.76 acre-feet in the first year to a high of 1,174.75 acre-feet in 2005.

In 2006, a private citizen filed a complaint with the Board, contending the Waldteufel claim did not authorize Millview's diversion because the right was riparian rather than appropriative and forfeited by long nonuse. Board staff investigated the claim and, the next year, issued a memorandum concluding that water rights under the Waldteufel claim had indeed been largely forfeited. Staff opined the claim could now support the diversion of no more than 15 afa, dramatically less than the 1,450 afa claimed in Waldteufel's claim. In April 2009, the Board issued a notice proposing entry of a CDO limiting Millview's diversion of water under the Waldteufel claim to a maximum volume of 15 afa. Plaintiffs requested a hearing on the proposed CDO.

A few months later, in August 2009, Hill and Gomes sold the Waldteufel claim to Millview, along with two parcels of real property referred to as “the Riparian Corridor” and “Parcel A, together with any appurtenant water rights.” The purchase price of $2,131,500 was not allocated separately among the assets.² The agreement embodying the sale (the purchase agreement) required Millview to make a down payment of $500,000, with the remainder of the purchase price funded by a promissory note due and payable three years from the close of escrow or “120 days following the time a final order is entered by any Court of competent jurisdiction adjudicating the validity and/or extent of the [Waldteufel claim], whichever is later.”

Although the purchase agreement specified a price for the various assets of $2.1 million, the amount Millview was ultimately required to pay depended entirely upon the outcome of the CDO proceeding. In the event a final court order was entered limiting Millview's diversion under the Waldteufel claim to less than 1.64 cubic feet per second, a reduction in purchase price was to be agreed by the parties or determined by binding arbitration.³ In the event of a more severe limitation on diversion, set at “0.69 [cubic feet per second] during the period of July 1 to November 15,” the purchase price “shall be deemed to be the amount of the down payment and the note shall thereupon be cancelled.”⁴ The purchase agreement required Millview to pursue litigation of the CDO proceeding, but Hill and Gomes were permitted to intervene.

Following an evidentiary hearing on plaintiffs' challenge, the Board issued a CDO in 2011, limiting Millview's diversion under the Waldteufel claim to 15 afa, taken only during the period April through September. Although the Waldteufel claim purported to be a right of appropriation, the Board's order noted the claim did not appear to have been perfected as such because Waldteufel's only demonstrated use of water was for irrigation on the parcel. A finding to this effect would have precluded any appropriation under the claim, but the Board did not base its order on this theory because the original CDO notice did not raise the validity of the Waldteufel claim as an issue.

Accepting the Waldteufel claim as appropriative, the Board found plaintiffs had failed to prove Waldteufel had ever perfected the claimed volume of 1,450 afa. At most, the Board concluded, Waldteufel had diverted 243 afa, exclusively during the months of April through October. This amount fixed a maximum level of diversion under the claim. The Board's limitation of diversion to the much lower 15 afa was based on its finding that diversion in excess of 15 afa had been forfeited by the failure of the owners prior to Hill and Gomes to divert a greater volume.

Millview, Gomes, and Hill filed a petition for a writ of mandate requiring the Board to set aside the CDO. The trial court's order granting the writ was affirmed by this court in Millview I, supra , 229 Cal.App.4th 879, 177 Cal.Rptr.3d 735, although on grounds that were not particularly favorable to plaintiffs. We concluded the Board was correct in questioning the appropriative nature of the Waldteufel claim and in finding the maximum perfected diversion to be 243 afa. However, we found the Board had used the wrong legal standard in determining forfeiture, thereby requiring its order to be set aside. We noted three possible options for the Board on remand, besides dismissal of the proceeding: “(1) The Board can set aside the present CDO and enter a new CDO limiting Millview's diversion under the Waldteufel claim to 243 afa, between the months of April and October....; [¶] (2) The Board can set aside the present CDO and conduct further evidentiary hearings on the issue of forfeiture....; or [¶] (3) The Board can begin again by issuing an amended notice of draft CDO addressing the issue of the perfection of the Waldteufel claim as a right of appropriation and conduct new administrative hearings directed at this issue, alone or in combination with the issue of forfeiture.” (Millview I , at p. 908, 177 Cal.Rptr.3d 735.) If the Board chose to pursue any of those options, there...