North Kern Water Storage Dist. v. Kern County

• Decision Date: 28 March 1960
• Citation: 179 Cal.App.2d 268,3 Cal.Rptr. 636
• Court: California Court of Appeals
• Parties: NORTH KERN WATER STORAGE DISTRICT, a water storage district organized and existing under provisions of Callfornia Water Storage District Laws, Plaintiff and Appellant, v. COUNTY OF KERN, a political subdivision of State of California, Defendant and Respondent. Civ. 6043.

Page 636

3 Cal.Rptr. 636

179 Cal.App.2d 268

NORTH KERN WATER STORAGE DISTRICT, a water storage district organized and existing under provisions of Callfornia Water Storage District Laws, Plaintiff and Appellant, v.COUNTY OF KERN, a political subdivision of State of California, Defendant and Respondent.

Civ. 6043.

District Court of Appeal, Fourth District, California.

March 28, 1960.

Rehearing Denied April 11, 1960.

Hearing Denied May 25, 1960.

Baker, Palmer, Wall & Raymond, Bakersfield, for appellant.

Roy Gargano, County Counsel, County of Kern and Rex R. Mull, Bakersfield, for respondent.

COUGHLIN, Justice.

This is an appeal from a judgment denying plaintiff's right to recover taxes paid by it under protest.

Section 1 of article XIII, of the California Constitution provides that property of a 'municipal corporation within this State shall be exempt from taxation, except such land and the improvements thereon located outside of the * * * municipal corporation owning the same as were subject to taxation at the time of the acquisition of the same by said * * * municipal corporation.'

The plaintiff is a water storage district which it alleges, and the defendant concedes, is a municipal corporation within the meaning of the aforesaid section of the Constitution.This allegation and concession are based on principles governing the decision in Rock Creek Water District v. County of Calaveras, 29 Cal.2d 7, 172 P.2d 863 which held that a water district is such a municipal corporation.

On January 1, 1952 the Kern County Land Company, a corporation and several other corporations, being subsidiaries of plaintiff company, as first parties, and the plaintiffNorth Kern Water Storage District, as second party, executed an agreement involving certain water rights which are the subject of this controversy.First party was referred to therein as the 'Companies' and second party as the 'District'.By this agreement the Companies 'agree that the district * * * shall have the right in perpetuity, subject to the provisions of this agreement, to divert, transport to the District, and use so much of the water accruing to the water rights' owned by the Companies, not to exceed a maximum amount pursuant to a prescribed monthly schedule.The Companies reserve the right to 'divert and use all such water, except the water actually diverted by the District pursuant to this agreement.'The following restrictions were placed on the purposes and place of use by the District: 'Any and all waters which shall be diverted by the District from the Kern River pursuant to this agreement may be used for the purpose of irrigation, stock watering and underground water replenishment and for no other purpose or purposes whatsoever,' and, 'Any and all waters diverted by the District from the Kern River hereunder may be used within the present boundaries of the District, but not elsewhere.'It was further provided that 'the District shall have no right to assign this agreement, either voluntarily or by operation of law, without the prior written consent of the above-named Kern County Land Company'.

The Companies' water rights are described in the agreement as follows:

'The water rights constituting the subject of this agreement are those certain rights to divert water from the Kern River in Kern County, California, which are known and identified by the following names, priority dates and quantities:'

then followed a specific designation of names, priority dates and quantities and a recital that these rights were subject to the claims of other parties.These claims were specifically described.Under this agreement, the plaintiff diverts water from the Kern River; causes it to be transported by canals, pursuant to another agreement contemporaneously executed with companies owning such canals; and uses it within the district.In transit the water is comingled with other water being transported through the same canals.The places of diversion are not within the district.None of the land in the district adjoins the Kern River.

In 1957, the assessor of Kern County, by an escape assessment proceeding covering the years 1955, 1956 and 1957, assessed the water rights acquired by the plaintiff through the aforesaid agreement.A tax levy against plaintiff in the sum of $95,220 resulted.Plaintiff paid the tax under protest and brought this action to recover the amount so paid upon the ground that the water rights in question were not taxable property or, if taxable property, that they were exempt from taxation.

The cause was tried upon a stipulation of facts supplemented by evidence produced at the time of trial.From a judgment entered in favor of the defendantthe plaintiff has appealed.

When this matter was argued orally before this court, counsel for plaintiff stated that the determinative question on this appeal concerned the situs of the water rights in question for taxation purposes.Section 1 of Article XIII of the California Constitution, as heretofore noted, exempts from taxation all property of the plaintiff district except such lands and the improvements thereon located outside of the district as were subject to taxation at the time of acquisition.A water right is land within the meaning of the aforesaid exception.City and County of San Francisco v. County of Alameda, 5 Cal.2d 243, 54 P.2d 462;Waterford Irr. Dist. v. County of Stanislaus, 102 Cal.App.2d 839, 228 P.2d 341;Alpaugh Irr. Dist. v. County of Kern, 113 Cal.App.2d 286, 293, 248 P.2d 117;Oakdale Irr. Dist. v. County of Calaveras, 133 Cal.App.2d 127, 135, 283 P.2d 732, 735.No contention is made to the contrary.Nor is it contended that the water rights owned by the companies were not 'subject to taxation' at the time plaintiff acquired them.

Plaintiff argues that its water rights are located within its boundaries because the water obtained thereunder may be used only within those boundaries and 'not elsewhere' and, consequently, are tax exempt as they do not come within the constitutional exception heretofore noted.Reliance is placed on the decision in the case of Spring Valley Water Co. v. County of Alameda, 88 Cal.App. 157, at page 169, 263 P. 318, at page 323, wherein the court was considering the situs of water rights and made the statement: 'The use locates the right.'

Defendant contends that the situs of plaintiff's water rights is the place of diversion; that the principles applied in the cited case sustain this contention; that the foregoing statement from that case must be considered in context with the facts therein; and that the decisions in Waterford Irr. Dist. v. County of Stanislaus, 102 Cal.App.2d 839, 228 P.2d 341, andCity and County of San Francisco v. County of Alameda, 5 Cal.2d 243, 54 P.2d 462, are controlling and sustain its position.

Spring Valley Water Co. v. County of Alameda, supra, 88 Cal.App. 157, 263 P. 318, involved a consideration of the situs, for tax purposes, of water rights conveyed by riparian owners to the plaintiff water company authorizing it to divert water for nonriparian uses; pursuant thereto the plaintiff diverted water from Alameda Creek, which ran through certain districts for whose benefit the defendant county had collected taxes levied against these rights; however, the place of diversion was outside of these districts.The court held that the water rights in question were not subject to taxation by the districts because they were not riparian to any lands within the districts; that they were separate and distinct rights.Respecting the nature of the rights conferred upon the plaintiffthe court stated (88 Cal.App. at page 165, 263 P. at page 321):

'What the plaintiff did acquire by these grants was exactly what the court found, to wit, the right to divert water from Alameda creek for business, commercial, and nonriparian purposes at a specified point on said creek without the territorial limits of the districts here involved."

that (88 Cal.App. at page 167, 263 P. at that (88 Cal.App. at page 167, 263 P. at page 322):

'* * * the severed right, apart from and distinct from any claim of ownership in or to the land, cannot be classed as a riparian right, a part and parcel of the soil.'

that (88 Cal.App. at page 168, 263 P. at page 323):

'* * * when plaintiff made actual diversion of the waters of Alameda creek at a point above the lands of the consenting land owners and, as found here, devoted the waters to a useful nonriparian use, the right of plaintiff was and is in no sense riparian, but it is a separate and individual right * * *';

that (88 Cal.App. at page 168, 263 P. at page 323):

'With reference, then, to the right of plaintiff herein to divert the waters of Alameda creek at a point without the territorial limits of the districts involved, and to put the waters diverted to nonriparian uses without the said districts, we hold that the situs of that right on the stream is at the point of actual diversion and not within the territorial limits of any of the districts named.'(Emphasis added.)

and, (88 Cal.App. at page 169, 263 P. at page 323):

'Repeating, we hold that the situs of the right, here involved is at the place of its enjoyment; namely, at the point of diversion.Conceding, as claimed by appellant, that a right may be taxed even if not enjoyed, nevertheless when the right and the actual user thereof combine the necessity of speculating upon the situs of an unenjoyed right does not arise.The use locates the right.'(Emphasis added.)

The foregoing quotations clearly indicate the court did not announce a general rule that the place of use of water obtained under a water right authorizing a diversion for nonriparian uses establishes the location of that right for taxation purposes.To the contrary, the court holds that the situs of such a right 'is at the place of its enjoyment; namely, at the point of diversion.'This holding is adverse to plaintiff's contention.

The case of Waterford Irr....