Strawberry Water Co. v. Paulsen

• Citation: 207 P.3d 654,220 Ariz. 401
• Decision Date: 29 July 2008
• Docket Number: No. 1 CA-CV 06-0442.,1 CA-CV 06-0442.
• Parties: STRAWBERRY WATER COMPANY, an Arizona public service corporation, Plaintiff/Appellee, v. Randall D. PAULSEN and Virginia Paulsen, husband and wife, Defendants/Appellants.
• Court: Court of Appeals of Arizona

207 P.3d 654 220 Ariz. 401 STRAWBERRY WATER COMPANY, an Arizona public service corporation, Plaintiff/Appellee,
v.
Randall D. PAULSEN and Virginia Paulsen, husband and wife, Defendants/Appellants. No. 1 CA-CV 06-0442. Court of Appeals of Arizona, Division 1, Department C. July 29, 2008. Review Denied April 20, 2009.^*

[207 P.3d 658]

Schneider & Onofry, P.C. By Jon D. Schneider, Luane Rosen, Phoenix, Attorneys for Defendants/Appellants.

Stewart & Bourque, P.C. By Arthur J. Bourque, Timea K. Vicsocsean, Phoenix and Carmichael & Powell, P.C. By Sid A. Horwitz, Phoenix, Attorneys for Plaintiff/Appellee.

OPINION

PORTLEY, Judge.

¶ 1 Randall and Virginia Paulsen ("the Paulsens") challenge the jury's verdict awarding damages to Strawberry Water Company ("Strawberry") for conversion of water and utility tampering. Their appeal challenges a host of issues, but focuses on the trial court's determination that Strawberry had standing to sue; a determination that water can be converted; the failure to give the comparative fault jury instruction; and the trial court's decision to treble the jury damage award pursuant to Arizona Revised Statutes ("A.R.S.") section 40-493 (2001). For the following reasons, we affirm in part, reverse in part, and remand for a new trial.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 Frank Parkinson ("Parkinson") owned a home with a pond and a water company in Strawberry, Arizona. He installed a pipe from his water company's line to supplement the pond.

¶ 3 He sold the water company to Williamson Water Company in 1971, and its ownership, at least in part, passed to United Utilities in 1981, Brooke Utilities in 1996, and Strawberry in 1998. After Parkinson died in 1982, the home and pond were sold to Frances and Mickey Karle ("the Karles") in 1991. The Karles sold the home and pond to the Paulsens in 1996. The Paulsens used the pipe to keep their pond full of water until 2000 when Strawberry discovered the pipe and stopped the flow of water to the pond.

¶ 4 Strawberry sued the Paulsens and the Karles for conversion, utility tampering, unjust enrichment, trespass, and negligence. Although Strawberry dismissed its claims against the Karles, Paulsen's cross-claim kept them in the case. Strawberry stipulated to dismiss the negligence claim against the Paulsens and voluntarily dismissed its trespass claim. Strawberry tried the remaining issues of conversion and utility tampering.¹

¶ 5 After the close of Strawberry's case, the trial court denied the Paulsens' motion for judgment as a matter of law on damages. The jury found that the Paulsens had unlawfully diverted Strawberry's water and determined the damages were $146,925.21. The trial court then trebled the damages pursuant to A.R.S. § 40-493 and imposed sanctions under Arizona Rule of Civil Procedure 68. After the trial court denied the Paulsens' motion for a new trial, they appealed. We have jurisdiction pursuant to A.R.S. § 12-2101(B) (2003).

DISCUSSION

I. Standing to Sue

¶ 6 The Paulsens contest Strawberry's standing to sue them. The trial court ultimately ruled that Strawberry was the real party in interest. See Ariz. R. Civ. P. 17(a).

¶ 7 Standing is a question of law that we review de novo. Robert Schalkenbach Found. v. Lincoln Found., Inc., 208 Ariz. 176, 180, ¶ 15, 91 P.3d 1019, 1023 (App. 2004). The question of standing in Arizona does not raise constitutional concerns because, unlike the United States Constitution, the Arizona Constitution contains no case or controversy requirement. Armory Park Neighborhood Ass'n v. Episcopal Cmty. Servs., 148 Ariz. 1, 6, 712 P.2d 914, 919 (1985). Instead, standing only raises "questions of prudential or judicial restraint." Id. A review for standing helps the courts avoid issuing advisory opinions, guards against mootness, and ensures the full development of the issues. City of Tucson v. Pima County,

207 P.3d 659

199 Ariz. 509, 514, ¶ 11, 19 P.3d 650, 655 (App.2001).

¶ 8 "A party has standing to sue in Arizona if, under all circumstances, the party possesses an interest in the outcome of the litigation." Alliance Marana v. Groseclose, 191 Ariz. 287, 289, 955 P.2d 43, 45 (App.1997). Standing generally requires an injury in fact, economic or otherwise, caused by the complained-of conduct, and resulting in a distinct and palpable injury giving the plaintiff a personal stake in the controversy's outcome. Aegis of Ariz., L.L.C. v. Town of Marana, 206 Ariz. 557, 562-63, ¶ 18, 81 P.3d 1016, 1021-22 (App.2003) (quotations and citations omitted). We interpret the law of standing in conjunction with Arizona Rule of Civil Procedure 17(a), the real party in interest rule. See, e.g., Toy v. Katz, 192 Ariz. 73, 87, 961 P.2d 1021, 1035 (App.1997) (discussing differences between the standing and real party in interest rules).

¶ 9 The Paulsens argue that Strawberry provided insufficient evidence of an ownership interest in the water feeding the pond. Specifically, they contend that the evidence does not delineate the precise water rights transferred each time all or part of the water company was sold.²

¶ 10 Ownership rights are irrelevant to standing in the utility tampering action. An action for utility tampering may be brought by a "utility," see A.R.S. § 40-492 (2001), which is defined as "any public service corporation ... engaged in the ... delivery of ... water service." A.R.S. § 40-491(5) (2001); see also Ariz. Const. art. 15, § 2 ("All corporations other than municipal engaged in ... furnishing water for irrigation, fire protection, or other public purposes ... shall be deemed public service corporations."). To establish standing in the utility tampering action, Strawberry need only show that it or its predecessors were providing the water service to the pipe from which the water was diverted. There is no requirement that Strawberry prove it owns the water it is providing. The Paulsens acknowledge that the water in question passed through Strawberry's water lines and that Strawberry was unilaterally able to cut off the water flow. Therefore, Strawberry, which was providing the water service, has standing to pursue the utility tampering claim.

¶ 11 Ownership is vital, however, for standing in the conversion action. Conversion is "[a]n intentional exercise of dominion or control over a chattel which so seriously interferes with the right of another to control it that the actor may justly be required to pay the other the full value of the chattel." Focal Point, Inc. v. U-Haul Co., 155 Ariz. 318, 319, 746 P.2d 488, 489 (App. 1986) (quoting Restatement (Second) of Torts § 222(A)(1) (1965) (emphasis removed)). Evidence demonstrating that property was transferred from earlier water company sales is relevant for determining ownership.

¶ 12 Water rights are real property interests, Paloma Inv. Ltd. P'ship v. Jenkins, 194 Ariz. 133, 138, ¶ 22, 978 P.2d 110, 115 (App.1998), and thus cannot be converted because they are not chattels, 1 Dan B. Dobbs, The Law of Torts § 63, at 130 (2001). Strawberry argues that the water in its pipes is its personal property and inventory, and therefore this case does not involve "true" water rights. We agree that this case does not directly involve water rights. Instead, it entails the rights surrounding groundwater pumped through a water utility system.³ We must now distinguish groundwater rights

207 P.3d 660

from rights to groundwater after it has been pumped.

¶ 13 A groundwater right is a usufructuary right, that is, a right to use, not own, the groundwater. Town of Chino Valley v. City of Prescott, 131 Ariz. 78, 82, 638 P.2d 1324, 1328 (1981); see also Phelps Dodge Corp. v. Ariz. Dep't of Water Res., 211 Ariz. 146, 149 n. 2, ¶ 13, 118 P.3d 1110, 1113 n. 2 (App.2005) (noting that usufruct is the "right to utilize and enjoy the profits and advantages of something belonging to another so long as the property is not damaged or altered" (quotation omitted)).⁴ The usufructuary right is one to pump groundwater and use the water; meanwhile, there is a separate personal property right to the water itself only when it is possessed and controlled. 1 Waters and Water Rights: A Treatise on the Law of Waters and Allied Problems § 53.2, at 349 (Robert Emmet Clark ed., 1967) (quoting Wiel, Running Water, 22 Harv. L.Rev. 190 (1909)); see also Chino Valley, 131 Ariz. at 82, 638 P.2d at 1328 ("[T]here is no right of ownership of groundwater in Arizona prior to its capture and withdrawal from the common supply ...." (emphasis added)). In Chino Valley, the Arizona Supreme Court reinforced the concept of a personal property interest in groundwater by analogizing it to wild animals, which can move freely as no one's property until "reduced to actual possession and control." 131 Ariz. at 82, 638 P.2d at 1328; cf. Booth v. State, 207 Ariz. 61, 65, ¶ 7, 83 P.3d 61, 65 (App.2004) (explaining that a landowner does not have a property interest in wild animals on the property until "reduced to actual possession and control"). Thus, while groundwater is "used" and possessed pursuant to a groundwater right, there is an absolute ownership of the water by the user until it is abandoned or control is otherwise lost.

¶ 14 Other jurisdictions similarly adopt the view that once water is reduced to possession and control within pipes,⁵ it transforms into personal property. See, e.g., Reynolds v. State, 101 Ga.App. 715, 115 S.E.2d 214, 217 (1960) (holding that water in pipes may be the object of larceny); Hagerman Irrigation Co. v. McMurry, 113 P. 823, 825 (1911) ("Water once reduced to possession and control may be the subject of purchase and sale, or of larceny; and it makes no difference in that respect whether the captured fluid is held in a skin or cask, by an itinerant water vendor, or in the pipes of a modern aqueduct company."); Clark v. State, 14 Okla.Crim. 284, 170 P. 275, 275 (App.1917) (holding that water in pipes may be the object of larceny); Vaughan v. Kolb, 130 Or. 506, 280 P. 518, 520...