Copeland v. Fairview Land & Water Co. & Lake Hemet Water Co.

The plaintiffs appeal from the judgment and from an order denying their motion for a new trial.

The object of the plaintiffs’ action was to obtain a decree declaring that they were each entitled to receive from The Fairview Land and Water Company sufficient water upon their respective tracts of land for irrigation and domestic use thereon, upon payment of charges sufficient to defray the expenses of keeping up the water system and distributing the water, and to enjoin The Fairview Company from demanding or collecting charges for the delivery of such water in excess of the sum reasonably necessary for the purposes stated, not exceeding ten cents per inch per day of twenty-four

The court adjudged that the plaintiffs McCunn, Bradshaw, Hart, Elise Beck, Catherine Beck, and Emily Compton, as to certain1 land's specifically described, had no right to demand or receive water from either defendant. With regard to the other lands described in the complaint, the judgment was that the plaintiffs are each entitled to the continuous use of water for irrigation and domestic purposes upon their respective tracts of land, to be delivered to them by The Fair-view Land and Water Company, upon the payment of such legal rates and tolls as shall be charged for furnishing the said water, but that none of the plaintiffs had any right or interest in water belonging to The Lake Hemet Water Company. The right of the plaintiffs, except as above stated, to receive water from the water supply in control of the Fair-view Company, on payment of lawfully fixed tolls, was conceded by that company in its answer. Thus, it will be observed, that, except as to the lands first mentioned, the only dispute between the plaintiffs and the defendant, The Fairview Land and Water Company, is whether the charges which the company may impose are limited to the amount necessary to cover the cost of keeping up the waterworks and distributing the water, not to exceed ten cents for each inch per day, or whether the company may charge a greater sum, including reasonable annual interest upon its investment. And the main question on this branch of the ease is whether or not the Fairview Company is the owner of the water itself and may consequently include the value of the water supply as part of the investment upon which it is entitled to a reasonable return as part of its charges for delivering water to the plaintiffs."

1. We think the claim of right to receive water from the supply belonging to The Lake Hemet Water Company is not well founded.

We cannot agree with the argument on behalf of that company that as its water supply consists of water stored in a reservoir, such stored water is personal property which can-.

There are other reasons, however, advanced by that company, which fully support its position. Plaintiff’s claim is based wholly on a contract, dated February 12, 1887, between the Fairview Land and Water Company and the Lake Hemet Water Company. The theory of the plaintiffs is that this contract vested in the Fairview Company a right or interest in the waters belonging to the Hemet Company and that by mesne conveyances, which for the present it is not necessary

“And said party of the first part hereby agrees to and with the said party of the second part that if at any time the water hereinbefore mentioned of said last named party shall be insufficient to supply and irrigate its lands, the said party of the first part will furnish water to said party of the second part upon the same terms and price it furnishes water to other persons by the day or by the run, and will deliver such water into the pipes of said parties of the second part on their said lands at such points on the line of its pipe or pipes to which said parties of the second part may lay their pipes.”

This clause does not operate to transfer to the Fairview Company any property right or interest in the supply of the Hemet Company. At most, it is a mere executory agreement for sales of water, to be effective at the option of the Fair-

There is some discussion of the proposition that the Hemet Company is a public service corporation and that the plaintiffs as beneficiaries of the public use are entitled to take water from its system. There is no direct evidence that the Hemet Company is distributing its water to the public, or for general use, or that its water is, or has been, dedicated to the use of the public or any part thereof. But if it is conceded that its water is devoted to the public use, there is no evidence to show that the lands of the plaintiff are within the area to which such water has been dedicated, or that they are entitled to water from that system, or that the company has any surplus to apply to lands not within the original dedication. (See Montecito etc. Co. v. Hildreth, 139 Cal. 29 , [ 75 Pac. 395 ]; Thayer v. California Dev. Co., 164 Cal. 117 , [ 128 Pac. 21 ].) It follows from these considerations that the judgment

2. For a proper understanding of the differences between the plaintiffs and The Fairview Land and Water Company, a more elaborate statement of facts is necessary. There is no substantial conflict in the evidence as to the facts about to be stated. In the early part of the year 1887, that company, which we will hereafter designate the Fairview Company, was the owner of a tract of land containing 2897 acres of land known as the Fairview Tract, abutting upon the San Jacinto River and being a part of a larger tract comprising a Mexican grant known as the Rancho San Jacinto Viejo. This tract being riparian to the stream, the company had the right to use the water upon the land and to that extent it owned an interest in the waters of the river. Its right was limited to the portions of the stream quitclaimed to it by the contract hereinbefore mentioned between it and the Hemet Company, but it was obviously a riparian right. The land and the water together were very valuable; separately, the land, at least, was comparatively worthless. The Fairview Company adopted the plan of selling the land in parcels together with a share of the water, charging a lump sum for each parcel of land combined with a proportionate share of the water. For this purpose it had the land surveyed and subdivided partly into town lots and partly into parcels of twenty acres each. Thereupon it announced .that it had a water supply for the use of such land; that it would pipe such water to each parcel thereof so surveyed, and that it would sell the land with the right to receive a proportionate share of the water for use thereon at the prices fixed. In order to carry out this plan respecting the water, the Fairview Company, through its board of directors, organized a subsidiary company, called the Florida Water Company, with a capital stock of twenty thousand shares of the nominal par value of five dollars each. To the Florida Company it conveyed all of its rights in the water of the San Jacinto River and its tributaries aforesaid, receiving in exchange therefor all the said stock of the Florida Water Company, except fifty shares which were retained to be used to qualify persons to act as directors and which were accordingly issued to persons designated by the Fairview Company, who thereupon became di

Upon these evidentiary facts the court declared in its findings that the Fairview Company did not sell the lands in question together with water for irrigation and domestic use thereon; that the Florida Company was not formed to hold and control the water for the convenience of the Fairview Company; that there was no intention that the Florida Company, in taking title to the water, should act as agent of the Fairview Company to distribute said water to the purchasers of land from said Fairview Company; that the Fairview Company did not control the appointment of officers and agents of the Florida Company or the election of its directors or direct its policy and business up to the year 1892; that the certificates of stock in the Florida Company declared that each owner of a share was entitled to one-twenty-thousandth part of the water owned by that company, but that, in fact, such holder did not thereby become entitled to said share of said water; and that frotn the time the Fairview Company took possession of the water supply and water system on July 11, 1899, until the beginning of this action, its possession was adverse, not only to the Florida Company, but also adverse to all claim of the plaintiffs or either of them to a right or share in said water supply, and that its said possession was under a claim by the Fairview Company that it was the absolute owner of the water and had the right to impose charges for the sale or delivery thereof to the plaintiffs in excess of the amount required for the expenses of keeping up the system and a fair remuneration for the service, and, in effect, that the Fairview Company was the absolute owner of the water and water supply, so far as the charges therefor were concerned.

We think that these fio dings are contrary to the legal effect of the facts we have stated.

The certificates of stock declared that the holder thereof was “entitled” to a certain part of the water “belonging to” the Florida Water Company. The clear intent of this language, and its legal effect, was to transfer to the holder the title to that part of the water, the same title which the Florida Company held at the time. The Florida Company paid no consideration for the water, except by the issuance of this stock to its vendor. Its holding of the title during the infinitesimal point of time between its receipt of the conveyance of the water and the delivery of these certificates in exchange, was a holding as a naked trustee for the benefit of

When such parcels were sold in this manner, with the certificates of stock carrying the water-right, the Fairview Company immediately became a tenant in common of the water-right with the purchaser, each being entitled to his proportional share therein. As the Fairview Company had actual control of the operations of the Florida Company, by reason of the fact that it held a majority of the stock and did in fact select ■its directors, and as by that means it was in practical control of the waterworks and the distribution of the water for the benefit of all the owners thereof, it stood in the relation of trustee for the owners of the several parcels of land so conveyed. During the time the persons in control of the irrigation district selected the directors of the Florida Company, they occupied a similar trust relation to the several landowners. It is proper to consider in this connection the effect of the purported transfer of the stock to the irrigation district. The authorities are apparently unanimous to the effect that a contract purporting to transfer property to a fictitious person, or to one who is dead at the time, or to a corporation having no legal existence, passes no title at all, but that the title to the property attempted to be transferred remains in the transferrer. (Muskingum, Co. v. Ward, 13 Ohio 127 , [ 42 Am. Dec. 191 ]; Hunter v. Watson, 12 Cal. 376 , [ 73 Am. Dec. 543 ]; Phelan v. San Francisco, 6 Cal. 541 ; Jackson v. Cory, 8 Johns. (N. Y.) 388 ; Douthitt v. Stinson, 63 Mo. 278 ; Harriman v. Southam, 16 Ind. 190 .) There are cases holding that if the corporation has a legal existence, but is merely incapable of holding the particular property, the transfer is good as to all persons except the state which created the corporation. But this exception has no relation to this case, for here the irrigation district never had a legal existence. The result is that the transfer to the irrigation district was wholly void and

It may be conceded that the act of the Fairview Company in taking possession of the waterworks in 1899 and thereafter holding the same and continuing the operation thereof, was adverse to the right and title of the Florida Company thereto, and that after such possession had continued for five years without interruption, whatever right, title, or interest the Florida Company had to the waterworks or to the water supply, thereupon passed to and became vested in the Fairview Company. This fact, however, does not, of itself, divest the title and right of the plaintiffs. The Florida Company had the title to the waterworks and pipes, whether as trustee or otherwise, it is not important to determine. But it did not hold the title to the water-right or to the water. That title, as we have seen, had passed to the holders of the certificates of stock, and the plaintiffs and the Fairview Company were tenants in common thereof. In order to make the possession of the Fairview Company adverse to the plaintiffs and to their right and title to the water thus acquired by them, it was necessary for the Fairview Company, occupying as it did the position of trustee toward plaintiffs, and tenant in common of the water supply with them, to distinctly inform them that it repudiated their claim and right to a share of the water, under their water stock, and that it claimed the ownership of all the water adversely to their title. If it claimed the right to impose charges to cover more than the cost of upkeep and a fair charge for the service of administering the system, it was necessary, under these circumstances, that it should make such claim clearly known to the plaintiffs and give them notice that its charges were for other purposes; otherwise, its conduct in taking possession of the works and distributing the

The mere fact that charges were imposed did not make its possession .adverse. Similar charges had been imposed before and were to be expected. The original understanding was, and the original plan and the said agreements of sale of the parcels plainly imply it, that charges would' be imposed from time to time as they became necessary to repair the works and pay the expense of distribution. During the time the irrigation district officers controlled the system such charges were made, but it does not appear that plaintiffs were informed or believed that by paying such charges they were yielding the ownership of the water which they had bought and paid for. The imposition of charges by the Fairview Company, when it began distributing the water, did not give the plaintiffs notice that their right or title to their proportional share of water was disputed or invaded. They would reasonably suppose that the charges were imposed because of the necessity of raising money to defray the expense of repairs and the cost of the service. The evidence indicates that this was the sole purpose of imposing such charges as were made. The evidence also shows that the information given to the plaintiffs was that the charges were made because of the necessity of raising money for that purpose. There is no evidence that any other purpose was stated to .any of the plaintiffs. We cannot perceive that the fact that the water was delivered as called for and that the charges were fixed by the quantity and without regard to the proportional share of each person, is of any weight as proof of an adverse claim by the Fairview Company. There was no declaration or notice that such method was followed in pursuance of any adverse claim against the right of the plaintiffs. The natural inference would be that it was done in that manner because it was the fairest method of apportioning the common expense. The plaintiffs were given no information that it was done for any other reason. It was not, in itself, incompatible or inconsistent with the ownership of a share of the water supply by the respective landowners. We think, therefore, that the finding of adverse possession, so far as it is intended to declare that the plaintiffs lost their right to their proportional share of the water because of such adverse possession, is contrary to the evidence.

For somewhat similar reasons we are of the opinion that the decision that the lands of McCunn and others above mentioned had no right to the water is erroneous. This conclusion seems to have been based on one or the other of two theories; 1. That their right to the use of the water is that of an appropriator under the provisions of the Civil Code, and that under section 1411 the right ceased when they ceased to make a beneficial use of the water; 2. That their holding is as of a title by prescription, in the nature of a servitude or easement acquired by enjoyment, which, under section 811 of the Civil Code, is extinguished by a disuse thereof for five years. There

Assuming that the right is of a nature which would place it in one or the other of these classes, the conclusion that the right has ceased or has become extinguished, under the circumstances here existing, by no means follows: It might be so if a third person were claiming the -water in opposition to all the parties to this action. But this is not such a case. Here the right was originally gained by the Fairview Company. If it was by diversion or appropriation, that company made it for use on these particular lands, and the diversion, or appropriation, has ever since that time been made by that company or its intermediaries, for the benefit of all the parties. The plaintiffs all derived their titles from and are holding under that company. Where one thus diverting the water and thereby acquiring a water-right, whether by prescription or statutory appropriation, sells an interest in it to another and thereafter continues to divert the water himself for the vendee, the fact that the vendee does not demand or use the water he has bought may, if it is not otherwise beneficially used by some one receiving it from the appropriator, enable some third person to take such unused water and defeat the right of the first appropriator, upon the theory that such part has not been by him applied to a beneficial use. But we do not understand the law to be that such failure to receivé or use the water by the vendee will forfeit his right thereto to the vendor -who has in the mean time continued the diversion, unless such vendor in some .manner informs the vendee that such forfeiture will be claimed because of nonuse, or asserts it against him by some hostile act. Mere failure to take and use the water for which he has, at the time, no need, will not forfeit the right to the vendor, in such a case.

With respect to the theory that it is an easement or servitude originally acquired by enjoyment, it may be said further that, so far as the Fairview Company is concerned, it having acquired the right and thereupon transferred it by contract to the plaintiffs, it is not, as between them and the company, a right acquired by prescription, but it is a right which they have acquired from the company by conveyance, and the doe

But there is no evidence of such appropriation or right by prescription. The right, as we have stated, is a riparian right, and its nature has not been changed. The purpose of the original plan was to preserve to each parcel of land its proportional right to the water. It does not appear that there was any intention to sever or destroy the riparian right, or to convert it into a right of a different character. The fact that the transfer was made through the agency and by means of the stock of the Florida Water Company does not substantially change the nature of the transaction, or the nature of the right transferred. The transfer of the water-right to that company was simultaneous with the retransfer thereof to the Fairview Company by virtue of the issuance to it of the entire capital stock. It was form without substance. It may be conceded that the result of this arrangement would be that by transferring his stock alone, without selling the land, the owner of a parcel would enable the vendee of the stock to have the water delivered to other land and thus the water and the land would be effectually separated. But none of these plaintiffs have done this and the right of each of them has preserved its riparian character. Such a right is not lost by mere disuse. The evidence does not show that the Fair-view Company in any way manifested its intention to take and hold adversely to them the water to which these lands were entitled. Until it did manifest such intention to them, its title against them by prescription would not begin to run. The ease, it appears, was not tried upon the theory that this was necessary.

The judgment and order are affirmed as to The Lake Hemet Water Company. As to The Fairview Land and Water Company, the judgment and order are reversed and the cause is remanded for a new trial of the issues so far as they affect the rights of plaintiffs against that company and in accordance with the views herein expressed.

Henshaw, J., Melvin, J., Angellotti, J., and Sloss, J., concurred.