Souza v. Westlands Water Dist.
| Decision Date | 17 January 2006 |
| Docket Number | No. F046478.,No. F045293.,F045293.,F046478. |
| Citation | 38 Cal.Rptr.3d 78,135 Cal.App.4th 879 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Tilva L. SOUZA, Individually and as Trustee, etc., et al., Plaintiffs and Appellants, v. WESTLANDS WATER DISTRICT et al., Defendants and Appellants. Tilva L. Souza, Individually and as Trustee, etc., et al., Plaintiffs and Respondents, v. Westlands Water District et al., Defendants and Appellants. |
By statute, a California water district may add unpaid water charges to its regular assessment against land served by the district. The assessment automatically constitutes a lien on the land, and this is true whether the water was used by the owner or a tenant. This case presents an issue of first impression: Where the water is used by a tenant, does a district forfeit its right to add the charges to the assessment and encumber the land because, had the district followed its own regulations, the tenant would have been required to post adequate security for all the charges in advance or the water would have been turned off? Specifically, does the district lose the statutory rights just described if, pursuant to its regulations, it demands a guaranty before continuing to supply water to a tenant with a history of delinquencies, but then, contrary to its regulations, supplies more water than the guaranty can cover and the tenant again defaults? The trial court's judgment against Westlands Water District answered this question in the affirmative, effectively converting the district's regulations on delinquent customers from a shield for the district to a sword for delinquent customers' landlords. It ruled that the assessment against the land was invalid because the district violated its regulations when it supplied water without obtaining an adequate guaranty from the tenants. This was error. Assuming the district violated its regulation, no authority supports the notion that the violation gave the owner the right to escape an assessment otherwise valid and authorized by statute.
The trial court was also incorrect in its alternative ruling that the landowners were entitled to enforce the regulations as intended third-party beneficiaries of the water agreement between the tenants and the district. The agreement referred to and incorporated the district's regulations. For multiple reasons, however, the owners could not have been third-party beneficiaries as a matter of law.
We decline to address the landowners' argument that the assessment violated their right to equal protection of the laws, which they have raised for the first time on appeal. We reverse the judgment against the district and the award of attorneys' fees the owners obtained as prevailing parties.
Finally, we also reverse the judgment in favor of the owners against the guarantor. The court erred in ruling that the owners could recover as third-party beneficiaries of the guaranty provided by the tenants to the district.
The essential facts are undisputed. We draw them primarily from the trial court's statement of decision.
The plaintiffs are members of the Souza family (the Souzas), who own farmland in the area served by defendant Westlands Water District (the district). They leased the land to Forrest and Edna Mae Beebower (the Beebowers) for the period from March 1, 1999 to October 31, 2001. Among other things, the lease required the Beebowers to pay the water bill.
The Beebowers entered into a contract with the district for irrigation water by executing an Agricultural Water Allocation Application and Purchase Agreement (the water agreement) and submitting it to the district. In the water agreement, the Beebowers promised "[t]o comply with the Terms and Conditions for Agricultural Water Service and the Regulations for the Allocation of Agricultural Water ... both of which are incorporated herein as though set forth at length." Paragraph 18 of the Terms and Conditions provided that "[a]gricultural water service shall not be provided to any water user with delinquent charges. . . ." Paragraph 21 of the Terms and Conditions (paragraph 21) stated:
During the first year of the lease, at the end of 1999, the Beebowers fell behind in their water payments and had delinquent charges for more than 60 days. The district instructed them by letter to comply with paragraph 21. The letter stated that if the Beebowers used the guaranty option, the guaranty must be sufficient to cover all water used through January 31, 2001.
On February 29, 2000, the Beebowers paid all their outstanding charges and had a zero balance on their account on March 1, the first day of the water year. The Beebowers also obtained a guaranty from defendant ACCO Finance Company (ACCO) for future water payments. The district accepted it on April 4, 2000. It guaranteed payments for water purchased after April 3, 2000, up to $98,306, and had an expiration date of October 30, 2000.
At the time the Beebowers were behind in their water payments at the end of 1999 and early 2000, they also fell behind in their rent payments. After they missed the rent payment of $175,000 for the second year of the lease, due on November 1 1999, the Souzas obtained a judgment against them and a writ of possession. The Beebowers subsequently paid the rent, however, and were not evicted.
The Beebowers experienced financial difficulties again in the second year of the lease. They defaulted on their July 2000 water bill for $52,586.02. The district submitted that invoice to ACCO, which paid it. The district subsequently obtained payments of $14,355.80 from ACCO for additional delinquent charges. ACCO refused to pay more, claiming that the balance of the $98,306 guaranty (i.e., $31,364.18) had been consumed by water payments it made on the Beebowers' behalf before they defaulted.
During this period, the Souzas were aware of the Beebowers' financial problems and through their lawyer sent a letter to the district requesting that it provide them with duplicates of the monthly invoices sent to the Beebowers. The district wrote back explaining that copies of each invoice were already being sent to the Souzas and that if they wished additional control over the account, they could substitute themselves as the water users for their parcels. This was never done.
The district continued supplying water to the Beebowers while they were in default and after the ACCO guaranty was exhausted. The Beebowers were never able to pay. On May 15, 2001, the district added the Beebowers' delinquent water charges to the regular assessment on the land. With penalties and interest, the additional assessment was $108,308.95.
The Souzas filed a Notice of Claims Against Public Entity with the district on October 5, 2001, seeking to discharge the assessment. The district denied the Souzas' claims. Next, on December 10, 2001, the Souzas requested that the district waive paragraph 18 of the Terms and Conditions, barring water service to land on which delinquent charges have been incurred, so that farming operations could continue on the land while they sought judicial relief. The district denied this request also, observing that the Souzas had the ability to pay first and pursue relief afterward. To ensure that water would be supplied to the land the next year, the Souzas paid the additional assessment.
The Souzas then filed this litigation against the district and ACCO. Against the district, the complaint alleged eight causes of action: breach of the written water agreement (of which the Souzas claimed to be third-party beneficiaries); breach of an oral promise not to place a lien on the property; breach of fiduciary duty; negligent misrepresentation; negligence; promissory estoppel; removal of cloud on title; and indemnity. Against ACCO, the complaint alleged breach of the guaranty agreement, also under a third-party-beneficiary theory.
The case was tried to the court sitting without a jury. The trial was bifurcated, with the district presenting its governmental immunity defenses in the first phase. The court ruled that the district had immunity from the Souzas' claims of negligent misrepresentation and negligence. During the second phase, after the plaintiffs rested, the court granted judgment for the district on the Souzas' claims of breach of an oral contract (for lack of evidence), promissory estoppel (by plaintiff's stipulation), and breach of fiduciary duty (no such duty between landowner and water district). After the plaintiffs' closing argument, the plaintiffs stipulated to judgment for the district on the claim for removal of a cloud on title.
During trial, the Souzas requested leave to amend their complaint to conform to proof. They sought leave to add a cause of action for a refund of an invalid assessment. The court granted the request over the district's objection. The amended complaint alleged that the assessment was invalid because it resulted from the district's failure to obtain advance payment from the Beebowers or a guaranty covering all charges. The amended complaint also added ACCO as a...
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