State of California ex rel. State Lands Com. v. County of Orange

• Citation: 184 Cal.Rptr. 423,134 Cal.App.3d 20
• Court: California Court of Appeals
• Decision Date: 20 July 1982
• Parties: STATE of CALIFORNIA, ex rel. STATE LANDS COMMISSION, Plaintiff and Appellant, v. COUNTY OF ORANGE, et al., Defendants and Respondents. Civ. 26210.

Page 423

184 Cal.Rptr. 423

134 Cal.App.3d 20

STATE of CALIFORNIA, ex rel. STATE LANDS COMMISSION, Plaintiff and Appellant, v. COUNTY OF ORANGE, et al., Defendants and Respondents.

Civ. 26210.

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

July 20, 1982.

Hearing Denied Oct. 21, 1982.

George Deukmejian, Atty. Gen., N. Gregory Taylor, Asst. Atty. Gen., Nancy Alvarado Saggese, Deputy Atty. Gen., for plaintiff and appellant.

Adrian Kuyper, County Counsel and Arthur Wahlstedt, Jr., Asst. County Counsel, Santa Ana, for defendants and respondents.

STANIFORTH, Associate Justice.

The State of California, acting through the State Lands Commission (the State), brought this action for declaratory relief, an injunction, accounting and restitution against the County of Orange (the County) and its Harbors, Beaches and Parks District. The State seeks to halt the County's practice of spending for its own municipal purposes revenue derived from tidelands improvements at Dana Point Harbor. In 1961, the State granted its interest in these tidelands to the County through a trust grant ¹ stating as its purpose the promotion of harbor construction, operation and related activities. The County contends its spending is authorized by a clause of this grant allowing it to "collect and retain rents" from improvements it constructed at the harbor, and upon this premise brought a general demurrer to the complaint. The superior court sustained the demurrer without leave to amend, and dismissed the complaint. This appeal followed. We reverse.

FACTS

The facts underlying this action outline a trustor-trustee relationship between the State and the County. Upon its admission to the United States in 1850, the State became the owner in fee simple of tidelands ² within its boundaries. Under Public Resources Code section 6301, the State Lands Commission is vested with all residual jurisdiction and authority over tidelands which have, like these, been granted to another governmental subdivision. The Legislature, by Statutes 1961, chapter 321, section 1, pages 1361-1362, granted in trust to the County the Dana Point ³ tidelands involved in this dispute. This grant provides, in pertinent part:

"There is hereby granted to the County of Orange and to its successors all of the right, title and interest of the State of California held by said State by virtue of its sovereignty in and to all that portion of the tidelands and submerged lands of the Pacific Ocean within the County of Orange, State of California, in the following area: [legal description of Dana Point,] the same to be forever held by said county and by its successors in trust for the uses and purposes and upon the express conditions following, to wit:

"(a) That said lands shall be used by said county, and its successors, only for the establishment, improvement and conduct of a harbor, and for the construction maintenance and operation thereon of wharves, docks, piers, slips, quays and other utilities, structures, facilities and appliances necessary or convenient for the promotion and accommodation of commerce and navigation, and for recreational use, public park, parking, highway, playground, and business incidental thereto; and said county, or its successors, shall not, at any time, grant, convey, give or alien said lands, or any part thereof, to any individual, firm or corporation for any purposes whatever; provided, that said county, or its successors, may grant franchises thereon for limited periods (but in no event exceeding 50 years), for wharves and other public uses and purposes and may lease said lands, or any part thereof, for limited periods (but in no event exceeding 50 years), for purposes consistent with the trust upon which said lands are held by the State of California, and with the requirements of commerce and navigation at said harbor, and collect and retain rents from such leases." (Italics added.)

The original version of subdivision (a) of this section, before its amendment to the above language, emphasized recreational uses above harbor uses. It provided, in part:

"(a) Said lands shall be used by said county and by its successors solely for the establishment, improvement and conduct of public parks, public beaches, parkways, highways, playgrounds, recreation areas, or harbors or for the establishment and construction of bulkheads or breakwaters ... and other utilities, structures and appliances necessary or convenient for the promotion or accommodation of commerces and navigation, the purposes stated hereinabove, and the protection of the lands within said county."

Also, the original version appended no "collect and retain rents" clause, which appears in the enacted version of this statute, and in some 45 other similar grants around the state, to that provision allowing the County to lease lands "for purposes consistent with the trust upon which said lands are held by the State of California."

Further subdivisions of this instrument, as enacted, reserve access, use, mineral, fishing and other rights to the public and the State, and provide the granted lands would have reverted to the State if the County had failed (as it did not) to construct the stated improvements within 10 years.

At a cost of some $12 million of its funds, the County completed (in 1972) construction of the small craft harbor at Dana Point, as contemplated by the trust grant. ⁴ It has leased out various concessions at the harbor (food, fuel, entertainment, etc.) and accumulates considerable revenue from these arrangements. The State's complaint alleges the County uses these revenues for services, purposes and improvements not located on or related to the granted lands. These revenues have been expended on such municipal services as lifeguard services on nearby city beaches, membership in local greenbelt commissions and tourist and visitors' bureaus. In 1979-1980 alone, $1 million of these revenues were spent for non-trust purposes. Upon learning of these expenditures, ⁵ the State objected to this practice by the County, notifying it trust revenues "must be used on the trust lands or to purchase and improve adjacent uplands to enhance the trust value of the Dana Point tidelands." The State alleges this conduct by the County constitutes: (1) misapplication of trust revenues (Civ.Code, § 2229); ⁶ (2) violation of trust purposes, trustee duties, and the California Constitution's "gift clause" (art. 16, § 6); (3) irreparable injury to the State from this continuing course of conduct.

The County admits by its demurrer (for the purposes of these proceedings) the truth of the State's allegations of manner of its spending of Dana Point revenues, but contends the grant authorizes it to "collect and retain" for its own use that amount of the revenue generated by the County's developments on the harbor which exceeds the costs of maintaining and developing the harbor. Further, it contends its development of the harbor was a form of consideration for the continuing receipt of the revenue.

The trial court initially sustained the demurrer with leave to amend, then, pursuant to telephone conversations with counsel, ruled the demurrer was sustained without leave to amend, and denied the preliminary injunction barring further expenditure of trust revenues. On appeal, the State contends these rulings were abuses of the trial court's discretion.

DISCUSSION

I

On appeal from a judgment entered on demurrer, the allegations of the complaint must be liberally construed with a view to attaining substantial justice among the parties. (Youngman v. Nevada Irrigation Dist., 70 Cal.2d 240, 244-245, 74 Cal.Rptr. 398, 449 P.2d 462.) If there is any reasonable possibility the plaintiff can state a good cause of action, it is error and an abuse of discretion to sustain the demurrer without leave to amend. (Ibid.; Temescal Water Co. v. Dept. Public Works, 44 Cal.2d 90, 107, 280 P.2d 1.) These principles, combined with the rules of statutory construction general and special ⁷ here applicable, compel the conclusion the complaint adequately states four causes of action. In People v. California Fish Co., 166 Cal. 576, 597, 138 P. 79, the court outlined the necessary principles for interpreting statutes authorizing the granting of tidelands:

"[S]tatutes purporting to authorize an abandonment of ... public use will be carefully scanned to ascertain whether or not such was the legislative intention, and that intent must be clearly expressed or nececessarily implied. It will not be implied if any other inference is reasonably possible. And if any interpretation of the statute is reasonably possible which would not involve a destruction of the public use or an intention to terminate it in violation of the trust, the courts will give the statute such interpretation."

The court in City of Berkeley v. Superior Court, supra, modernized these guidelines as follows:

"[S]tatutes purporting to abandon the public trust are to be strictly construed; the intent to abandon must be clearly expressed or necessarily implied; and if any interpretation of the statute is reasonably possible which would retain the public's interest in tidelands, the court must give the statute such an interpretation." (Id., at p. 528, 162 Cal.Rptr. 327, 606 P.2d 362.)

II

The County contends the statutory clause allowing it to "collect and retain rents" constitutes a clear abandonment of the State's or the public's interest in the proceeds of the trust. Conversely, the State asserts the County's construction of the trust grant violates the purposes of the trust and trustee duties. The relevant case law on the subjects of tidelands trusts purposes and assets supports the State's position as pled in its complaint.

In City of Long Beach v. Morse, 31 Cal.2d 254, 188 P.2d 17, the Supreme Court held the city could not use proceeds from the sale of oil and gas obtained from trust grant tidelands for any purposes other than those specified in the trust...