Braley v. Empire Water Co.

In January, 1906, the Empire Investment Company, hereinafter called the Land Company, owned some 18,000 acres lying on both sides of the Kings River and riparian thereto, which it desired to subdivide and sell. The Land Company also owned 8% shares of stock in the Lemoore Canal & Irrigation Company, hereinafter called the Canal Company, these shares entitling the owner to certain water in addition to its riparian rights in the river. On January 8, 1906, the Land Company, by grant deed, conveyed to the Empire Water Company, hereinafter called the Water Company, certain described ditches and rights of way therefor, situated upon and used in connection with the lands owned by the Land Company, together with "all other water ditches and canals and interest in water ditches and canals which may now be located upon and existing upon said lands or used in connection therewith and owned by the said first party other than those particularly described; the intention being to convey to said second party all water ditches and parts of water system now existing upon said lands or used in connection therewith and owned by the said first party”. This deed acknowledged the receipt of a good and valuable consideration and contained a clause authorizing the Water Company, as agent of the Land Company and its successors in interest, to take the waters of Kings River to which the Land Company’s lands should be entitled, and to distribute the same through the “second party’s water system” in accordance with an agreement of even date therewith. It further provided that no riparian or other water rights were thereby conveyed, that the same

On the same day, the Water Company as first party and the Land Company as second party entered into a contract which, after describing the lands owned by the second party, states that the first party “is the owner of a complete and extensive water distribution system over and through said lands consisting of canals, ditches, pipe-lines, weirs, dams and waterways, which have been constructed and now being extended over said lands, and interest in other canals, controlled by outside parties, and which are hereby referred to as ‘auxiliary canals’ ”, and that both parties mutually desire to create and maintain a binding and permanent arrangement “whereby said water system shall be properly maintained and said water shall through and by means of said system be perpetually delivered and distributed to all of said lands and the subdivisions thereof ’ ’ for the use of the second party and its successors in interest. This agreement provides that the first party shall furnish water to all of said lands; that the first party shall construct and extend the canals of its water system over said land and locate its auxiliary canals so that it may conveniently furnish and

Between 1906 and 1911 practically all of this tract of land was sold by the Land Company. The deed received by each purchaser provided that he should receive with the land “all appurtenances, water and water rights thereunto belonging”, but each deed contained the following: “subject, however, to the rights and privileges of the Empire Water Company, and to the terms and conditions of the water agreement executed between the said grantor and the said Empire Water Company, recorded in Book three (3), page (8), of Contracts, Records of Kings County, California”.

The court found in favor of the defendant, finding in general that no trust existed in so far as the water distributing system is concerned. Among other things, the court found that it is not true that the ditches and water system described in the deed of January 8, 1906, were held in or under any trust; that the title of the Water Company in the distribution system was an absolute title in fee, subject only to a servitude in favor of the land owners who were entitled to receive water through said distributing system, which servitude constituted an easement appurtenant to the lands; that it was the intention of the ipcorporators that, the Water Company should hold both the legal title and beneficial ownership of said ditches in its own right, subject only to • the servitude mentioned; that the covenants and the obligations assumed by the Water Company formed a part of the consideration for the distributing system conveyed to it by the Land Company; and that the remainder of the water system was completed and paid for by the Land Company in accordance with the terms of the contract. The court further found that it was also the intention of the Water Company and all parties concerned that

In considering the sufficiency of the evidence to support the essential findings, we think it appears that the last finding referred to is not inconsistent with the other findings since the beneficial interest the land owners have through their right to be served from the ditch system is not inconsistent with a further right and interest remaining in the Water Company, and, therefore, that point need not be separately discussed. The real question involved is whether or not the situation disclosed by the evidence justifies findings and conclusions to the effect that the general water system involved is not held by the Water Company in trust for the land owners.

The appellants contend that the circumstances conclusively disclose a resulting trust and that the Water Company holds the naked legal title to the distribution system in trust for them as the successors in interest of the Land Company. It is argued that the existence of a resulting trust in all of the water system in favor of the land owners appears from certain evidence indicating that the Water Company was organized by the Land Company as a mere convenience for handling its water department and for the purpose of promoting sales of land; that the Land Company dominated the affairs of the Water Company in practically all its functions until about 1911, when the land was all sold; that admissions were made by certain officials of the Land Company and the Water Company subsequent to the execution of the deed and contract tending to show that a trust was intended; and that this further appears from the provisions of the deed and contract in question. In addition, appellants particularly rely upon the ease of Quist v. Empire Water Co., 204 Cal. 646 [ 269 Pac. 533 ], in which it was held, in considering the same deed and contract in

It does not necessarily follow from the ownership of water rights in connection with certain land that the land owner has the same ownership, either legal or equitable, in the distributing system by which this water is brought to the land. In Allen v. Railroad Com., 179 Cal. 68 [ 175 Pac. 466 , 468, 8 A. L. R. 249 ], the court said:

“The distributing system is a species of real property. (Stanislaus Water Co. v. Bachman, 152 Cal. 716 , 726 [ 15 L. R. A. (N. S.) 359 , 93 Pac. 858 ].) The right of a land owner to receive water not devoted to public use upon land for its benefit, from an outside source, through a system of canals or pipes for conducting it to the land, is an easement attached to the land and a corresponding servitude upon the source of supply and the distributing system.”

In Stratton v. Railroad Com., 186 Cal. 119 [ 198 Pac. 1051 , 1054], a case involving the same water system now under consideration, the court quoted as follows from an earlier case:

“ ‘Where a number of persons owning land are each entitled to take water from a common stream or source, for use upon their respective tracts of land, either by virtue of

an appropriation under the Civil Code or by prescription, or as riparian owners, the water right of each is individual and several, and must be considered as private property and not the subject of public use, although the persons so owning interests in the stream are very numerous and their lands include a large neighborhood. The owners of such water rights may make a joint diversion, and may carry the water from the point of diversion in a common conduit, made with common funds, and in such a case, in the absence of a special contract to the contrary, they will be the owners in common of the division [diversion] works and conduits; but the respective water rights will remain several and will remain private property. If the persons owning such rights see fit to form a corporation and delegate to such corporation the work of making the diversion and distribution, and of constructing and keeping in repair the dams and conduits, reserving to themselves their rights in the water, as was done in this case, they do not thereby dedicate or appropriate to public use the water thus reserved and used by them. The corporation becomes merely their agent for the purpose of serving their several interests, so far as they may be served by a common system of works, the water remaining the subject of individual ownership and private use as before.’ ”

The fact that a corporation acts as agent for the land owners in delivering water is by no means conclusive that the principals are complete owners of the instrumentalities used in carrying out the agency agreement or that they may take over these instrumentalities without compensating the agent therefor. In the ease at bar, the Land Company, while owning the land and the water rights, and before these plaintiffs acquired any interest in either, formed such a corporation and turned over to it a distribution system together with the right and duty of diverting and distributing the water. The conclusion is justified that the situation thus created was not a resulting trust hut a matter of contract, the rights of the parties being expressed in the terms of the agreement, and that the corporation so formed took over the property conveyed to it subject to the rights and obligations created by the contract, including the right of the land owner to the service agreed to be rendered. In actual practice in the irrigated sections of this state, water

The contract recognizes a continuing interest in the Water Company in the property conveyed by the deed, and a continuing obligation on the part of purchasers of land in the tract to pay for the delivery of water, and instead of indicating an intention that the system is to be turned over to the land owners when the tract is all sold, it is expressly stated that the purpose is to make a permanent arrangement not to be changed except by a written instrument executed by all of the parties thereto, their successors or assigns. This contract was not only recorded but each purchaser accepted title to his land subject thereto. While the appellants rely on claimed admissions subsequently made by officials of the Water Company and of the Land Company, these can be of value only as throwing light on the original intention of the parties. Irrespective of any other evidence, the instruments executed at the time sufficiently evidence the lack of any intent to convey the distributing system to the Water Company in trust for the Land Company to support the judgment. (Lezinsky v. Mason Malt etc. Co., 185 Cal. 240 [ 196 Pac. 884 ].)

Most of the evidence relied upon by appellants tends to show certain misrepresentations made by the Land Company in selling land to them and their predecessors, rather than to show the existence of such a trust as is here claimed. In any event, not only did they-take title to their respective lands subject to a particular situation then existing and expressly referred to in their deeds, but nothing is here pointed out that does more than create a conflict. In our opinion, the finding to the effect that the distributing system described in the deed of January 8, 1906, was not conveyed to the Water Company in trust for the land owners in this tract is sustained by the evidence.

Complaint is made of the failure of the trial court to make findings in reference to the issues raised in the allegations of the second cause of action and the answer thereto. The second cause of action related to the removal of the trustee for failure to perform its duty under the trust and, if the judgment rendered upon the first cause

For the reasons given the judgment is affirmed.

Marks, J., and Jennings, J., concurred.