Cordua Irrigation Dist. v. Hallwood Irrigation Dist.

Filed 10/20/06 Cordua Irrigation Dist. v. Hallwood Irrigation Dist. CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Yuba)

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Cordua Irrigation District (Cordua) and Hallwood Irrigation Company (Hallwood) share an irrigation canal; a dispute arose over how much each should pay for a fish screen in the canal. This case returns to this court following remand for a trial to determine the reasonable cost of modification of the fish screen and resolution of two other pending cases between the parties. Cordua appeals, raising two contentions. First, it contends the trial court erred in determining the reasonable cost; it argues the court erred in accepting the estimate prepared before the work was done rather than the estimates made afterwards. It also contends the estimate the court accepted failed to account for the substantial excavation and concrete work required. Second, Cordua contends the trial court erred in awarding Hallwood one-half of the proceeds from a contract Cordua has with Ramirez Water District (Ramirez) for delivery of irrigation water.

We modify the judgment. Substantial evidence supports the trial court’s finding of the reasonable cost. The trial court erred, however, in awarding Hallwood half of the proceeds from the Ramirez contract. The judgment is modified to delete the award of $133,776.55 to Hallwood.

FACTUAL AND PROCEDURAL BACKGROUND

Underlying Dispute

The background facts of the dispute are taken from our previous opinion, Cordua Irrigation District v. Hallwood Irrigation Company (Apr. 21, 2004 C043872) [nonpub. opn.]. Cordua serves 9,000 acres of land, mostly rice farms. Hallwood serves 7,800 acres of rice farms, orchards, and pasture. Cordua and Hallwood take water from the Yuba River near the Daguerre Point Dam. Cordua and Hallwood, or their predecessors, contributed to the construction of the irrigation canal.

In the 1970’s, the California Department of Fish and Game built an experimental fish screen in the canal to keep fish from being trapped in the irrigation facilities. In April 1999, Cordua and Hallwood were advised the existing fish screen was inadequate. A new fish screen would be needed to protect the steelhead trout and spring-run Chinook salmon, both of which had been listed under the federal and state Endangered Species Act.

In June 2000, Cordua hired engineer Kit Burton to interact with the engineers from the fisheries agencies and participate in discussions as to how Cordua and Hallwood could make the necessary improvements to the fish screen. Monthly meetings were held from August 2000 until April 2001; Hallwood did not always attend.

On December 20, 2000, Cordua and Hallwood submitted to the fisheries agencies a proposal to modify the existing fish screen. The proposal included an estimate that the cost would be $182,000, based on an estimate prepared by Burton. Charles Mathews, the chairman of Cordua, assumed the role of project manager without objection from Hallwood. Construction began in February 2001, and the fish screen was operational by April. Mathews fired the original contractor who was going too slow and had his own people finish the job.

The original plan was to reuse the existing structure, but Mathews made the decision that it was quicker and cheaper to build a new structure, which required more concrete. The discharge pipe had to be changed to meet environment concerns and the bypass location was changed.

Cordua and Hallwood disagreed on the allocation of costs. They had received grants from the Yuba County Water Agency and Pacific Gas and Electric to defray a portion of the costs. Hallwood paid Cordua $10,000 towards its portion of the cost.

In May 2001, Cordua brought suit against Hallwood to collect Hallwood’s share of the expenses for repair and rehabilitation of the fish screen. The first amended complaint sought recovery based on theories of contribution under Water Code section 7001, breach of contract, and quantum meruit.

After a court trial, the trial court rejected the theories of contribution under the Water Code and quantum meruit; it awarded damages based on breach of contract, using the $180,000 estimated cost as the contract price. The court determined that Hallwood was obligated to pay 44.2 percent of the cost of the agreed-upon fish screen project, based on historic water usage. In 2003, after trial on the first case but before judgment, Hallwood brought suit against Cordua, seeking an accounting of the monies received from Ramirez for use of the canal.

Cordua appealed from the judgment in the first case. This court reversed the judgment and remanded for a limited trial on the reasonable price of modifying the fish screen and installing the bypass pipe. We found the trial court correctly found a contract and supplied the missing term for allocation of costs between the parties. We found, however, that the court erred in setting the contract price at $180,000 because there was no substantial evidence the parties agreed to this price. Instead, the contract price was the reasonable price for the work the parties agreed upon, the modification of the fish screen and installation of the bypass pipe.

A few months after our decision, Cordua brought another suit against Hallwood to recover Hallwood’s share of the costs of maintaining and operating the fish screen.

The three cases were consolidated. After Cordua moved unsuccessfully for summary adjudication on Hallwood’s claim for an accounting, trial was held on the three cases.

Trial Testimony

The testimony at trial was divided into three categories, corresponding with the three issues raised by the three lawsuits. The bulk of the testimony addressed the issue of the reasonable cost of modifying the fish screen and installing the bypass pipe. Cordua presented two experts to testify about the cost if the fish screen had been modified rather than rebuilt. William Jaeger, the chief executive officer of Jaeger Construction, opined the reasonable cost of excavation, the bypass pipeline, and concrete was $283,485. His opinion included the costs of making, clearing, grubbing, dewatering, changes to the subgrade, and reinforcing steel. He believed that leaving the existing structure in place would have added $64,000 to the cost because heavy machinery could not be used and it would be necessary to add crushed rock for a foundation. Jaeger did not use the December 2000 proposal in making his estimate. His estimate used union wages.

Clinton West, the former president of Yuba City Steel Products, now semi-retired as a senior engineer, had been involved in the construction of several fish screens. He provided an estimate of the cost of the steel fabrication and installation work. He based his estimate on the December 2000 proposal, specifications, photos of the project, Burton’s drawings, and site visits. He opined the reasonable price of the steel work was $296,903.

Hallwood did not provide an expert to testify as to reasonable cost. Instead, it relied on the $182,000 estimate prepared by Burton in December 2000. Burton’s estimate included 12 items for a total cost of $182,000. Burton testified his estimate was on the low end, but he did not purposefully “low-ball” it. The project was a complex engineering project and changes would be expected; the parties understood there would be changes. Burton testified his estimate did not include the check structure, the drain box and drain line, solar panels, rerouting the bypass pipe, and environmental costs. Jaeger testified Burton’s estimate did not include any concrete, making the subgrade, rebar, erosion control, and the inlet channel excavation.

The major witness at trial was Charles Mathews, the chairman of Cordua. He testified to the history of the shared irrigation canal. Hallwood and Cordua jointly owned the diversion point and the first 1,000 feet of the irrigation canal, pursuant to an agreement in the early 1900’s. According to Mathews, in 1947 Cordua granted Hallwood an easement to use the next 8,000 feet of canal to the point where Hallwood’s and Cordua’s diversions split. There was no documentation to establish the ownership of this portion of the canal.

Mathews testified about the fish screen and need to modify it when spring-run salmon and steelhead were listed as endangered species. He took over the construction job when the original contractor said he could not complete it in the allotted time. There was so much “muck” in the canal, Mathews decided it was cheaper to remove the concrete stem wall, remove the muck, and pour a slab foundation. Other than the decision to have the bypass pipe go all the way to the river, the fish screen as completed was the same as the December 2000 proposal. Mathews testified the estimates by Jaeger and West did not include permits, engineering, legal and environmental costs. He provided an exhibit itemizing these costs, totaling $66,576.66.

In the late 1970’s, Cordua began negotiations with Ramirez to wheel their water. Ramirez pays Cordua $80,000 a year plus $3.50 for every acre foot in excess of 19,000 acre feet. From the Yuba River to the second diversion point for Ramirez is over 14 miles. Ramirez uses 24 percent of the water going through the canal. The last 25 percent of the water through the canal causes the velocity to increase and creates erosion. Cordua, at its own expense, has enlarged and rocked the canal over the last 10 to 12 years. There is little erosion up to the point of Hallwood’s diversion. Hallwood did not contribute to increasing the capacity of the canal, but tried to stop it as to the first 8,000 feet.

Cordua has paid all costs associated with wheeling Ramirez’s water. Hallwood has always received its water through the joint canal on time; there have been no complaints that Hallwood was prevented from full use of the canal. The only problems arise when the river is low; when the river is adequate, there is enough capacity for all.

Mathews also testified about the expenses incurred in operating the fish screen. He testified that for the past 30 years Hallwood’s stance has been “[y]ou fix it and we’ll talk about it later[.]” Cordua has gotten stiffed every time.

Trial Court’s Ruling

The trial court rejected Cordua’s argument that the expert opinions of Jaeger and West were uncontradicted and had to be accepted. Of the three experts who provided estimates as to the reasonable cost of the work, Burton, Jaeger and West, the trial court found Burton was the most familiar with the fish screen and the only one whose estimate was not based on information generated after Cordua abandoned the original plan. Further, Jaeger and West had based their estimates on artificial timelines previously rejected by the trial court.^[1] Burton’s estimate did not include costs for the check structure, dewatering, or the change to the bypass pipe system. The court added costs for these items and found the total reasonable contract price was $289,432.28.^[2] The court rejected all costs for permits, engineering, legal and environmental incurred after the old fish screen was removed on the basis that Cordua had not shown whether these costs related to the modification of the fish screen or only to the building of a new screen. After deducting certain grants and crediting Hallwood $10,000 for a prior payment, the trial court determined Hallwood’s 44.2 percent share of the cost of the fish screen was $82,569.07.

The court found Cordua and Hallwood co-own the first 1,000 feet of the irrigation canal; the evidence was insufficient to establish the ownership as to the remainder. Based on the rule that where a co-owner in possession leases the property to a third party, the co-owner must account to other co-owners for rents collected from third parties, the court found Cordua owed Hallwood 50 percent of any profits from Ramirez.^[3] Hallwood’s right accrued in September 2001, one year before Hallwood filed a claim against Cordua under the Government Tort Claims Act. Cordua was entitled to offset its ditch maintenance costs from the revenues it received from Ramirez.

The court found Cordua was entitled to recover Hallwood’s 44.2 percent share of the maintenance and operating costs of the fish screen, and prejudgment interest from September 10, 2003. It rejected Hallwood’s requests for offsets.

The court entered a net judgment of $5,500.13 in favor of Cordua. Cordua timely appealed.

DISCUSSION

I. Reasonable Cost of Modification of Fish Screen

Cordua contends the directions on remand were to offer evidence of a hypothetical situation, the reasonable cost of modifying the fish screen, rather than rebuilding it as was done. Cordua contends it offered such testimony, establishing what could and could not be reused and the costs that would have been incurred in reusing portions of the existing screen. Cordua asserts the reasonable price was $646,740.80, and the trial court erred in determining it was less.

Cordua’s opening brief is curiously silent as to the trial court’s acceptance of Burton’s estimate as the reasonable price; instead, it asserts its evidence established the reasonable price. In its reply brief, Cordua addresses this issue. It contends the reasonable cost is that determined after access to the components of the fish screen and inspection of the conditions of the canal; in short, the trial court should have accepted the testimony of its experts. Further, expanding on a point noted in its recitation of the facts in its opening brief, Cordua contends Burton’s estimate failed to include the costs of excavation and concrete.

Hallwood, in turn, devotes much of its argument on this issue to attempting to show that Burton’s estimate was “not off the mark” and actually was higher than West’s as to some items. Hallwood then concocts a bizarre formula to ascertain the reasonable price, giving Hallwood credit where Burton’s estimate was higher than West’s. Hallwood suggests this court should determine the reasonable price.

In our view, the issue before this court is whether substantial evidence supports the trial court’s determination of the reasonable price for modification of the fish screen and installation of the bypass pipe. The standard of review is well settled. “‘In reviewing the evidence on . . . appeal all conflicts must be resolved in favor of the [prevailing party], and all legitimate and reasonable inferences indulged in to uphold the [finding] if possible. It is an elementary, but often overlooked principle of law, that when a [finding] is attacked as being unsupported, the power of the appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the [finding]. When two or more inferences can be reasonably deduced from the facts, the reviewing court is without power to substitute its deductions for those of the trial court.’” (Western States Petroleum Assn. v. Superior Court (1995) 9 Cal.4th 559, 571, quoting Crawford v. Southern Pac. Co. (1935) 3 Cal.2d 427, 429.)

Substantial evidence supports the trial court’s finding that Burton was qualified to give an opinion of the reasonable cost of modifying the fish screen. Burton had been an engineer for 40 years, specializing in water engineering. He held a bachelor’s degree and two master’s degrees in engineering. He worked closely with Mathews on the fish screen project and fully understood the problems of the existing fish screen. Burton worked on the December 2000 proposal and prepared the drawings to implement the proposal. The trial court resolved the factual dispute as to whose opinion best represented a reasonable price. Since the trial court’s finding is supported by substantial evidence, we are not free to substitute our judgment. (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1143.) Therefore, we cannot entertain Cordua’s argument that Jaeger and West were in a better position to establish the reasonable price.

Burton’s $182,000 estimate did not include all the necessary work. The trial court added costs for the check structure, clearing, grubbing, and dewatering, and installation of the bypass pipe. The court rejected Cordua’s offer of additional costs for environmental and other professional services in 2001 because Cordua failed to show these expenses were incurred for modification, rather than rebuilding, of the fish screen.

Cordua contends the trial court failed to consider the majority of the excavation and concrete costs. Relying on Jaeger’s estimate, and deducting the amount the court allowed for clearing, grubbing, and dewatering, and installation of the bypass pipe, Cordua asserts there are $190,065 in excavation and concrete costs unaccounted for and unpaid by Hallwood. Jaeger testified Burton’s estimate did not include any concrete, except for construction of the bypass intake box, or any costs for rebar, making the subgrade, erosion control, or the inlet channel excavation. Burton, however, did not identify these items as missing from his estimate. He identified the missing items as the check structure, the drain box and line, solar panels, the bypass pipe, and environmental costs. Faced with this conflict in the evidence on a factual issue, we defer to the trial court’s credibility determination. (People v. Boyer (2006) 38 Cal.4th 412, 444.)

Substantial evidence supports the trial court’s determination of a reasonable price for modification of the fish screen and installation of the bypass pipe.

II. Hallwood’s Right to a Share of the Ramirez Contract

Cordua contends Hallwood has no right to recover half of the proceeds from the Ramirez contract. It argues Hallwood cannot recover because it was not ousted from possession of the jointly owned property; in fact, the uncontroverted evidence was that Hallwood enjoyed full use of the joint canal with no interference of its rights. Cordua relies on the rule: “A cotenant who is not in possession may only recover the rents and profits, or the value of possession, from the cotenant in possession when there has been an ouster excluding the cotenant from possession, or when the other cotenant’s occupancy was pursuant to an agreement to share the rents and profits from their property. Absent an agreement or an ouster, a cotenant out of possession has no right to recover the rental value of property from a cotenant in possession.” (Miller & Starr, California Real Estate (3d ed. 1989) § 12.4, p. 10, fns. omitted.)

The trial court rejected this argument because Cordua did not exclusively occupy the canal. Instead, it relied on the general rule: “Ordinarily one joint tenant cannot maintain an action against his cotenant for rent for occupancy of the property or for profits derived from his own labor. He may, however, compel the tenant in possession to account for rents collected from third parties. [Citations.]” (Swartzbaugh v. Sampson (1936) 11 Cal.App.2d 451, 455; see also McWhorter v. McWhorter (1929) 99 Cal.App. 293, 296.)

These rules apply where only one party is in possession of the property. They come into play in the situation where a co-owner of property transfers the right to possession of the property to a third party. Whether the transferring co-owner has to share the rent with the other co-owners depends on whether the co-owners who are not parties to the transfer retain the right to use and possess the property. Here there was no transfer of possession of the property, the canal. Cordua, Hallwood, and Ramirez were all entitled to use the irrigation canal and Hallwood retained its full rights to the canal.

Hallwood also relies on cases involving an accounting for mineral royalties. (Atlantic Oil Co. v. County of Los Angeles (1968) 69 Cal.2d 585, 602-603; Dabney-Johnston Oil Corp. v. Walden (1935) 4 Cal.2d 637, 655.) These cases do not apply to this situation either. “A special rule applies to tenancies in common in oil or mineral rights in land. One cotenant may extract ore or produce oil and cannot be prohibited or held liable for waste. Because of the possibility of exhausting the minerals, however, equity holds the producing cotenant liable to the others for their share of the profits. [Citations.]” (12 Witkin, Summary of Cal. Law (10th ed. 2005) Real Property, § 49, p. 99.)

Instead, this case is similar to Waterford I. Dist. v. Turlock I. Dist. (1920) 50 Cal.App. 213. The Turlock Irrigation District and the Modesto Irrigation District were owners as tenants in common of a dam across the Tuolumne River. From the dam, the Modesto district diverted water into a canal on the north and the Turlock district diverted water into a canal on the south. The Modesto district controlled the flow until the river fell below 500 second-feet, at which point the Turlock district controlled the flow. (Id. at p. 215.) The Modesto district contracted with the Waterford irrigation district to enlarge its canal to carry water for the Waterford district. The Waterford district then acquired rights to 60 second-feet of water from the Tuolumne River that were prior in time to either those of the Turlock or Modesto districts. The Waterford district notified the Turlock and Modesto districts of its right to this water. The Turlock district responded that it would not allow water to be delivered to the Waterford district through the dam unless the Waterford district paid the Turlock district compensation. (Id. at pp. 216-217.)

The Waterford district brought suit to enjoin the Turlock district from interfering with the flow of its water. The trial court ruled in favor of the Waterford district and this court

affirmed, adopting the trial court’s opinion. (Waterford I. Dist. v. Turlock I. Dist., supra, 50 Cal.App. at pp. 214, 222.) The court began with the well settled law that a joint owner or tenant in common cannot create an easement in the common estate against his cotenant, but a tenant may, by lease or license, “confer upon another person the right to occupy and use the property of the cotenancy as fully as such lessor or licensor himself might have used or occupied it, if such lease or license had not been granted.” (Id. at p. 217, citing Lee Chuck v. Quan Wo Chong & Co. (1891) 91 Cal. 593, 598.) The court noted there was no interference with the Turlock district’s right to use the dam and no burden was placed on the Turlock district. (Waterford I. Dist. v. Turlock I. Dist., supra, at p. 218.) In addition to adopting the opinion of the trial court, this court observed that the Modesto district could have increased its canal and used the dam for more water for its own purpose, so it could also transfer that right to another. (Id. at p. 220.) Finally, this court noted that allowing the Modesto district to transfer its right to use the dam to the Waterford district, without payment to the Turlock district, furthered the policy of the state to utilize waters “as to produce the greatest amount of good to the industries of the state.” (Ibid.) This court emphasized that where one of several tenants in common of property used to exercise water rights transfers to a third party the right to use such property to exercise its water rights, the other cotenant cannot nullify or interfere with that relationship unless it can show more than a trifling inconvenience and expense; this proposition harmonizes with the state’s policy to use the waters of its streams for the fullest beneficial use. (Id. at p. 22.)

The same reasoning applies here. Cordua could have increased its use of the canal without interfering with Hallwood’s use so there is no reason Cordua could not transfer that right to Ramirez. Cordua paid all the expenses related to Ramirez’s use of the canal; in allocating the cost of the fish screen, Cordua’s share included Ramirez’s share. There was no evidence that permitting Ramirez’s water to be wheeled though the joint canal placed any burden at all on Hallwood. Finally, allowing Ramirez to use the canal to transport its water furthers the public policy of putting the state’s waters to the greatest beneficial use.

The trial court erred in granting Hallwood a right to recover one-half of the proceeds of the Ramirez contract. That portion of the judgment is reversed.

DISPOSITION

The judgment is modified to delete the award of $133,776.55 to Hallwood. In all other respects, the judgment is affirmed. Cordua shall recover its costs on appeal. (Cal. Rules of Court, rule 27(a)(3).)

MORRISON , J.

We concur:

BLEASE , Acting P.J.

CANTIL-SAKAUYE , J.

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^[1] The December 2000 proposal, which served as the contract, provided that most of the work had to be accomplished between January and April 2001. Regardless of whether this timeline was “artificial,” it was what the parties agreed to.

^[2] The actual cost of rebuilding the fish screen was $376,257.91.

^[3] Cordua notes the inequity in allocating 58 percent of the expenses of the fish screen to Cordua, based on historic water usage which includes both Cordua’s and Ramirez’s water, but granting Hallwood 50 percent of the revenue from the Ramirez contract. Further, Cordua wheels water for Ramirez through 14 miles of canals, but the court allocated all the revenue to the first 1,000 feet which was jointly owned.