Trimont Land Co. v. Truckee Sanitary Dist.

• Citation: 145 Cal.App.3d 330,193 Cal.Rptr. 568
• Court: California Court of Appeals
• Decision Date: 25 July 1983
• Parties: TRIMONT LAND COMPANY, Plaintiff and Respondent, v. TRUCKEE SANITARY DISTRICT, Defendant and Appellant; Dart Industries Inc., Intervenor and Appellant. Civ. 19641.

Page 568

193 Cal.Rptr. 568

145 Cal.App.3d 330

TRIMONT LAND COMPANY, Plaintiff and Respondent, v. TRUCKEE SANITARY DISTRICT, Defendant and Appellant Dart Industries Inc., Intervenor and Appellant.

Civ. 19641.

Court of Appeal, Third District, California.

July 25, 1983.

Schneider, Caylor, Dowling & Edwards, Richard J. Schneider, Caylor, Dowling, Edwards & Kaufman and Gary M. Caylor, Grass Valley, for defendant and appellant.

Kronick, Moskovitz, Tiedemann & Girard, Adolph Moskovitz, Leonard M. Friedman, James E. Thompson, Sacramento, Severson, Werson, Berke & Melchior, Kurt W. Melchior and Jan T. Chilton, San Francisco, for intervenor and appellant.

Ellman, Burke & Cassidy, John D. Hoffman and Kenneth N. Burns, San Francisco, for plaintiff and respondent.

SIMS, Associate Justice.

Defendant Truckee Sanitary District (TSD) and intervenor Dart Industries Inc. (Dart) appeal from a judgment of the Superior Court of Sacramento County in favor of plaintiff Trimont Land Company (Trimont). ¹ In essence the judgment limits the number of sewer connections TSD may grant to properties within its territorial confines in order to reserve a portion of its total capacity for the use of Trimont on property outside the district pursuant to a 1971 contract entered into by TSD, Trimont and the County of Placer (County). The judgment was obtained by Trimont following restrictions on sewage disposal capacity imposed on TSD by the Regional Quality Control Board. TSD currently adheres to a "first come, first served" basis for granting sewage connections and objects to the restriction on its ability to serve property within its district due to the reservation of currently unused sewage capacity to Trimont. Dart is a developer of a project within TSD. It objects to the reservation of TSD's sewage capacity for the use of Trimont because such reservation limits Dart's ability to obtain service to its property.

We hold the Legislature did not give sanitary districts such as TSD the power to grant a contractual preference for disposal capacity in the event of a shortage in capacity to those outside the district, who are not ready to use the capacity, where the preference prohibits service to members of the district ready to use the capacity. Thus, insofar as Trimont's contract attempts to provide a perpetual guarantee of disposal capacity under all circumstances, including shortage, the contract is ultra vires. Accordingly, we hold the guarantee void and reverse the judgment.

FACTS

TSD is a sanitary district organized pursuant to the Sanitary District Act of 1923, as set forth in part 1 of division 6 of the Health and Safety Code. (§§ 6400-6924.)

Trimont is a wholly owned subsidiary of Fibreboard Corporation. Fibreboard owned 25,000 acres of land in County known as the Tahoe Tree Farm. In 1970 Trimont was in the process of planning a development of the Tahoe Tree Farm. Trimont caused County to establish County Service Area number 21 to provide services to the planned development. Trimont obtained a Trimont planned to place ski runs, condominiums, single family lots, a golf course, and commercial areas within Northstar. In order to provide sewage service to these facilities Trimont considered several alternatives, the major two of which were an on-site plant or service by TSD. Ultimately it was determined that service by TSD was the most favorable alternative. Since Northstar is not physically within the territorial confines of TSD, it was necessary for Trimont and County to contract with TSD for the sewage service to Northstar.

conditional use permit for one phase of its development known as Northstar-at-Tahoe, commonly referred to as Northstar. The conditional use permit was subject to conditions requiring adequacy of sewage and water facilities.

A series of negotiations took place among County, Trimont and TSD, and these resulted in a written agreement signed on June 1, 1971. The agreement provided that County would construct expansion facilities to TSD's treatment ponds which would vest in TSD. The agreement further provided that: "Upon completion of construction of the expansion facilities, DISTRICT guarantees to receive, process, treat and dispose of an average daily flow of three hundred thousand (300,000) gallons of sewage from DEVELOPMENT."

At the time of the agreement, Trimont leased 50 acres of land from a third party pursuant to a lease containing a clause giving Trimont an option to purchase. Trimont's sole obligation under the TSD-Trimont agreement was to exercise its option to purchase the 50 acres upon demand by TSD within a certain time (the purchase price could be paid by County or by Trimont), to "make available" the 50 acres to TSD, and to transfer title to all or a portion thereof should TSD require fee ownership. ² Trimont made available to TSD 12 of the 50 acres in 1973, and TSD used the 12 acres for sewage disposal between 1973 and 1975. In 1972 and 1973, County caused the expansion facilities to be built. In 1974, TSD demanded fee title to the 50 acres, but Trimont refused to convey and deposited a deed to the land in court in this action. The trial court ruled the deed should be delivered to TSD.

Pursuant to the 1971 agreement, sewage connections were made within Northstar; however, development and sales were slower than anticipated and Northstar has not required the capacity called for in the agreement. For example, as of trial, only 614 condominiums and 262 single-family homes had been built or were under construction at Northstar; TSD had a total of 4250 connections to its sewer system, of which 3335 were located outside of Northstar and 915 connections were at the development.

In 1971 the Legislature enacted an uncodified water act, known as the Tahoe-Truckee Sanitation Agency Act. (Stats.1971, ch. 1560.) Pursuant to that act the regional Tahoe-Truckee Sanitation Agency (TTSA) was formed, with TSD being one of five member districts of the agency. One purpose of TTSA was to construct a regional sewage treatment plant. Funds for the construction were contributed by the United States Environmental Protection Agency, the State of California, and the member districts.

Although in 1971 the parties correctly anticipated that a regional agency would be formed, they failed to anticipate the effect of such an agency. Because the regional facilities were to be constructed in part with federal funds, the project required preparation of an Environmental Impact Statement (EIS) by the federal Environmental Protection Agency. The EIS set forth acceptable population projections for the area to be served by the regional facility, and these population projections were, in turn, translated into restrictions on capacity of the proposed regional facilities by order of June 19, 1975, of the State Water Resources Control Board. Thus, the 1975 order In May 1977 the Lahonton Regional Quality Control Board issued order 6-77-27 which mandated the aforementioned restrictions on capacity. The order also required TSD to cease operating its own ponds when the regional facilities became operational (the regional plant began processing sewage in 1978). The 1977 order of the Lahontan Board was affirmed by the State Board in May 1978 in Order No. WQ 78-8. The legality of the order was not challenged in this action. Thus, at trial, TSD's total capacity to treat sewage, including service of Northstar, was limited to 1.16 mgd. ³

of the State Board restricted capacity of the proposed regional facilities to 4.83 million gallons per day (mgd), of which 1.16 mgd were allocated to TSD, including its contract with Northstar. The state grant contract of August 1975 that provided funds for construction of the regional facilities incorporated the aforementioned restrictions on capacity.

Dart is the successor in interest of LakeWorld Development Corporation (LakeWorld). At about the same time that Trimont was planning its Northstar development in Placer County, LakeWorld was planning a resort development in Nevada County to be known as Tahoe-Donner. As a condition of subdivision map approval, Nevada County required LakeWorld to annex Tahoe-Donner to TSD to obtain sewage service. A little over a year before the Trimont-Placer-TSD contract was formed, TSD and LakeWorld entered into an agreement for annexation of Tahoe-Donner to TSD and the provision of sewer service to Tahoe-Donner by TSD. The agreement provides that LakeWorld would construct facilities for sewage works within Tahoe-Donner and that TSD would accept conveyance of title to those works and "thereafter operate, maintain, repair and replace such works and provide adequate sanitary sewer service therefrom to the lands in the project which those works are capable of serving."

Trimont filed a complaint in 1975 after a regional ban by the Lahontan Board on sewer connections. Dart intervened to assert its claim to a portion of TSD's available sewage capacity. The case was originally brought in Nevada County but venue was changed to Sacramento County due to the participation of parties who are no longer parties to the action.

The trial was lengthy and the exhibits voluminous. In awarding Trimont both declaratory and injunctive relief, the trial court proceeded on a contract theory and determined the 1971 contract constituted a continuing guarantee by TSD to reserve 300,000 gallons per day of its capacity for the benefit of Trimont. In order to prevent a breach of the continuing guarantee the court issued an injunction restraining TSD from granting more than 1000 new connections within its territory even though Trimont was not ready to use its reserved capacity.

DISCUSSION

I

At the outset, TSD contends the trial court was simply wrong in finding, as a fact, that the 1971 agreement provided Trimont with a guarantee of 300,000 gallons of disposal capacity for so long as Trimont needed the capacity. TSD contends the trial court should have found that TSD's promise of allocated...