People ex rel. City of Downey v. Downey County Water District

This is a quo warranto proceeding challenging the existence of the Downey County Water District. The People claim that by inclusion of the entire area of the district

In 1929 the Downey County Water District was incorporated under the County Water District Law (Wat. Code, div. 12), since then it has operated and maintained a water production and distribution system serving water for domestic and industrial uses. On December 17, 1956, the City of Downey was incorporated; on October 21, 1957, it annexed approximately 99 per cent of the area of the district and on December 6, 1957, the remaining 1 per cent. Thus, on December 6, 1957, the entire territory of the district was contained within the corporate boundaries of the city. At this time the district had a bonded indebtedness in excess of $75,000 evidenced by noncallable general obligation bonds held by private owners within the district. On November 12, 1958, the city council adopted a resolution declaring the merger of the district with the city. Thereafter, on May 19, 1959, the district annexed certain territory located outside the boundaries of the city; thus, since that date not all of the district has been included within the city boundaries.

The main issue is threefold—by virtue of the inclusion of the entire territory of the district by the city through annexation, was a merger effected and the district dissolved; if so, when did the merger occur, and at that time, did the assets and liabilities of the district pass to the city. Relying primarily upon Petition of Sanitary Board of East Fruitvale Sanitary Dist., 158 Cal. 453 [ 111 P. 368 ], appellant’s position is that, in the absence of specific legislation to the effect that under such circumstances a county water district continues its separate existence, on December 6, 1957, when all of the territory of the district was annexed by and included within the city, the district automatically merged with the city and was completely dissolved, and all of its assets, properties, obligations and liabilities were transferred to the city.

We know of no reported case involving the complete inclusion of a water district within a city by annexation of the city, but the general rule in connection with other special districts is that when the territory of a public corporation of

Respondent argues that in any event, the doctrine of merger cannot apply to proprietary functions, and that the conflict of power upon which the rule is based will not here occur since the City of Downey is free not to exercise its power to supply water and has not elected to do so. We find nothing in the rule, or the considerations upon which it is based, that requires an actual existing conflict or an “unavoidable” or “inevitable” clash of authority. That the doctrine of merger contemplates a potential conflict is borne out by the authorities. Dictum in People ex rel. Cuff v. City of Oakland, 123 Cal. 598 [ 56 P. 445 ], later cited and approved in Pixley v. Saunders, 168 Cal. 152 [ 141 P. 815 ], and Petition of Sanitary Board of East Fruitvale Sanitary Dist., 158 Cal.

While a municipality acts in a proprietary capacity in supplying water (City of South Pasadena v. Pasadena Land etc. Co., 152 Cal. 579 [ 93 P. 490 ]), the cases supporting the rule of merger fail to make any distinction between governmental and proprietary functions or impose any such limitation upon its application. Moreover, there can be just as much capability of, or potential, conflict involved in the exercise of a proprietary function as in the exercise of a governmental one. In fact an actual conflict is imminent. On November 12, 1958, the city council adopted a resolution declaring a merger of the district with the city, and demanded the property and assets, operation, control and maintenance, and facilities and appurtenances of the former. The district’s refusal resulted in the within action. In the Fruitvale case,

Constitutional provisions, pertinent legislative enactments and the authorities in this state leave no doubt that the district is a public corporation of more limited powers than the city and that the latter has the power to exercise and is capable of exercising the same functions as well as others essential to local municipal government. Both parties have enumerated various code sections to support the position that one entity has more extensive powers than the other in the area of furnishing water, but our concern is with the broad basic general powers relating not only to municipal government but to the field of water supply inherent in a municipal corporation as compared with the limited special purpose powers inherent in the district. And this appears to have been the view of the court in Petition of Sanitary Board of East Fruitvale Sanitary Dist., 158 Cal. 453 [ 111 P. 368 ], and City of Escalon v. Escalon Sanitary Dist., 179 Cal.App.2d 475 [ 3 Cal.Rptr. 889 ],

Our courts have defined a county water district as a governmental agency (Coachella Talley County Water Dist. v. Stevens, 206 Cal. 400 [ 274 P. 538 ]) exercising, to a limited extent, powers of government vested in it by the legislative enactment from which it draws its right to exist and power of operation (Laguna Beach County Water Dist. v. County of Orange, 30 Cal.App.2d 740 [ 87 P.2d 46 ]); and because it is organized under a special legislative enactment and “lacks the broad legislative, executive and judicial powers of a municipal corporation,” it is not a municipal corporation as that term is technically used in the law of this state. (Supra, p. 745.) In referring to county water districts (as well as municipal utility districts) the court in Galt County Water Dist. v. Evans, 10 Cal.App.2d 116 [ 51 P.2d 202 ], referred to them as “public corporations inferior in power and scope to a municipal corporation” (p. 119); and over a water district—its organization and change of boundaries—the Legislature has plenary control. (Sacramento Mun. Util. Dist. v. All Parties, 6 Cal.2d 197 [ 57 P.2d 506 ].) A water district has only such powers as are given to it by statute and it is an entity, the powers and functions of which are derived entirely from the Legislature.

On the other hand, in addition to the numerous functions essential to municipal government exercised under various constitutional and legislative provisions, the source of the

Respondent and various other water districts filing amicus curiae briefs argue that the grant of power to county water districts by the Legislature vested certain rights in the people residing therein of which they would be wrongfully deprived upon merger, citing Merchants’ National Bank v. Escondido Irr. Dist., 144 Cal. 329 [ 77 P. 937 ]. This case involved an irrigation district, and the controlling statute in effect provided that an irrigation district holds its property in trust for the members of the district who are its beneficiaries; but because of the distinction between irrigation and other districts (Ivanhoe Irr. Dist. v. All Parties, 47 Cal.2d 597 , 656 [ 306 P.2d 824 ]) and the fact that a county water district, as a public agency, holds “property by virtue of a trust in favor of the state” (Laguna Beach County Water Dist. v. County of Orange, 30 Cal.App.2d 740 , 742 [ 87 P.2d 46 ]) the Merchants’ National Bcmk case does not here control. Thus, while the primary right of the inhabitants of a district is to receive water, they have no vested rights in any particular property or assets of the district; but the city by virtue of the transfer of the trusteeship, upon merger, succeeds not only to all of the property and assets of the district held by it in

Whether merger occurs depends not alone on “the probability of a potential conflict between corporations possessing dual authority,” but rests upon the intent of the Legislature in the premises. (City of San Diego v. Otay Municipal Water Dist., 200 Cal.App.2d 672 , 675-676 [ 19 Cal.Rptr. 595 ]; Henshaw v. Foster, 176 Cal. 507 [ 169 P. 82 ]; La Mesa Homes Co. v. La Mesa etc. Irr. Dist., 173 Cal. 121 [ 159 P. 593 ]; Pixley v. Saunders, 168 Cal. 152 [ 141 P. 815 ].) The doctrine of implied legislative intent developed in Petition of Sanitary Board of Fast Fruitvale Sanitary Dist., 158 Cal. 453 [ 111 P. 368 ], is based on a recognition of the Legislature’s absolute power over public corporations established as agencies of the state for purposes of local government. (In re Madera Irrigation Dist., 92 Cal. 296 [ 28 P. 272 , 27 Am.St.Rep. 106 , 14 L.R.A. 755 ].) The Fruitvale case declared that in the absence of a specific provision in the act creating the special district that it shall continue in existence upon being entirely included within the boundaries

While Galt County Water Dist. v. Evans, 10 Cal.App.2d 116 [ 51 P.2d 202 ], involved the annexation of a county water district by a municipal utility district, and a specific provision in the County Water District Law protecting the “legal existence” of the water district upon such inclusion, precluded the applicability of the rule of the Fruitvale case, the court nevertheless at length discussed it and, referring to the plenary power of the Legislature over the organization, dissolution, extent, boundaries, powers and liabilities of special districts, recognized the effect of the Fruitvale decision in a proper situation, and implied that in the absence of an expression of legislative intent, a merger would there have occurred. “We may fairly assume that the legislature, having in mind a situation similar to that discussed in In re Sanitary Board of East Fruitvale Sanitary Dist., supra, deliberately proposed to correct the condition there pointed out and enacted the amendment referred to and has accordingly exer

Like the Sanitary District Act interpreted in the Fruitvale case, the County Water District Law has no specific provision concerning what happens to a district when it is entirely included within the boundaries of a municipal corporation. There is neither an affirmative declaration of legislative intent in the law precluding merger and dissolu

In consideration of the foregoing we find no merit in respondent’s contention that the statutory procedure for dissolution of a water district, found in sections 32850 through 32958, Water Code, precludes automatic dissolution under the rule of merger. The court in City of Escalon v. Escalon Sanitary Dist., 179 Cal.App.2d 475 [ 3 Cal.Rptr. 889 ], rejected a similar contention that the statutory procedure set forth in the Health and Safety Code was the only way of dissolving a sanitary district and precluded dissolution by operation of law. In Petition of Sanitary Board of East Fruitvale Sanitary Dist., 158 Cal. 453 [ 111 P. 368 ], the court, in holding an automatic dissolution took place, found the procedure in the statute for dissolution of the district by action of the electors within the district to be merely an alternative method. And contrary to respondent’s contention, Henshaw v. Foster, 176

There is no dispute that on December 6, 1957, the entire territory of the Downey County Water District was included within the boundaries of the City of Downey by annexation. On that date, a merger of the district with the city having occurred, the district ceased to exist. The effect of merger is declared at page 460 in the Fruitvale ease: “It must accordingly be held that upon the completion of the annexation the powers of the sanitary district and of the sanitary district board ceased ...” and again at page 461; “The judgment is reversed with directions to the trial court to enter a judgment declaring that the East Fruitvale Sanitary District has been dissolved by the annexation proceedings and that it has not nor has its sanitary board any power to issue the bonds in question.” Prom this it is apparent that the effect of annexation is automatic—that merger and dissolution occurs by operation of law at the time of the inclusion of the entire area of the district; as conceded by respondent, “ (T)his merger occurs as a matter of law whenever certain facts and certain relationships exist with respect to two public entities. The action of the doctrine is automatic and does not depend, and by its very nature cannot depend, upon any direct act or upon the consent or violation of either entity.” (R.B., p. 10.) We do not read Dickson v. City of Carlsbad, 119 Cal.App.2d 809 [ 260 P.2d 226 ], to the contrary. While the trial court judgment indicated that merger would

Eespondent maintains that the crucial time for determining whether merger occurred is June 10, 1960, the date of filing the quo warranto proceeding. It argues that the status of the district must be determined from the circumstances existing at that time and the district, having on May 19, 1959, annexed certain territory located outside of the citjq was on June 10, 1960, no longer entirely contained within the city boundaries.

Under the rule of the Fruitvale case, on December 6, 1957, a merger occurred by operation of law, and with the dissolution of the district its authority, privileges, franchise and powers were extinguished; “upon the completion of the annexation the powers of the sanitary district and of the sanitary district board ceased.” (P. 460.) Thus, inasmuch as the district and its powers have been nonexistent since December 6, 1957, its subsequent acts were void for lack of jurisdiction ; its act of annexation on May 19, 1959, was invalid and of no effect and no legal rights may be predicated thereon. (City of San Pablo v. City of Richmond, 148 Cal.App.2d 358 [ 306 P.2d 949 ].) Void from its inception, neither the within action nor any subsequent act of the city or the district vitalized the purported annexation proceeding of the district. (People v. Town of Corte Madera, 115 Cal.App.2d 32 [ 251 P.2d 988 ].) Moreover, a judgment issued in a quo warranto proceeding does not change the status existing at the time the district sought to annex territory outside the city. As said in People v. City of Westmoreland, 135 Cal.App. 517 [ 27 P.2d 394 ]: “If, at the time of its (city’s) alleged incorporation, it was not legally incorporated, its legal status subsequent to that time has not been changed by the judgment. ...” (P. 521.) The validity of the act of annexation

The rule of merger, conceded by respondent to operate automatically and not dependent on any act of either entity, in part disposes of its suggestion that the city is estopped to advocate a merger because it thereafter contracted with the district for water and the city council adopted a resolution declaring that a merger had been effected. But it is the People of the State of California who are the party plaintiff in this proceeding (People v. California Protective Corp., 76 Cal.App. 354 [ 244 P. 1089 ]), not the City of Downey, and the latter’s acts, even if they could constitute an estoppel against it, cannot preclude the People from seeking to enforce their will. A quo warranto proceeding brought in the name of the People is not to redress the wrongs of the relator nor to enforce its rights; it is in no legal sense under the relator’s control. (People ex rel. Budd v. Holden, 28 Cal. 123 .) Thus we conclude that the rule that “the People are not estopped by the acts or conduct of such a relator in another proceeding between different parties’’ (41 Cal.Jur.2d 628; People v. Bass, 15 Cal.App. 62 [ 113 P. 695 ] ; People v. Lowden, 2 Cal. Unrep. 537 [ 8 P. 66 ]) should apply herein, inasmuch as the. doctrine of estoppel is based upon the acts of the parties and operates only against the party performing them, and an estoppel invoked against the People of the State of California under the instant circumstances “would operate to defeat the effective operation of a policy adopted to protect the public. ’ ’ (Lynn v. Duckel, 46 Cal.2d 845 [ 299 P.2d 236 ].) The policy involved herein is declared in Petition of Sanitary Board of East Fruitvale Sanitary Dist., 158 Cal. 453 [ 111 P. 368 ] : “To hold that a sanitary district retains its existence and powers notwithstanding the annexation of its territory to the city would lead to the existence within the territory annexed of two distinct local governmental bodies claiming to exercise the same powers

At this point considerable argument is advanced by respondent based upon constitutional limitations it claims preclude merger. In the main its position is that the application of the doctrine would impair the obligation of the contract represented by the bonds issued by the district; it claims that the bond holders would be deprived of any source of payment. We find no merit in this argument, for under the merger the city would not only succeed to all of the property and assets of the extinguished district but would inherit all of its liabilities including the fundamental obligation of the bonded indebtedness (Town of Mount Pleasant v. Beckwith, 100 U.S. 514 [ 25 L.Ed. 699 ]; City of Roanoke v. Fisher, 193 Va. 651 [ 70 S.E.2d 274 ]); the city would be obliged to assume the indebtedness and there is no limitation on its power to do so which could result in an impairment of the bondholders’ contract; and the city has the same powers with respect to taxation to protect the bondholders as the district.

While the primary right of the people of the district to receive water is necessarily assumed by the municipality which absorbed the district (City of South Pasadena v. Pasadena Land etc. Co., 152 Cal. 579 [ 93 P. 490 ]) and the physical function of supplying water will continue under its authority, upon annexation the city also succeeds to the property and assets of the district and, having accepted the benefits of the merger, the city also acquires its liabilities and obligations. “ ‘The general rule as to disposition of property upon the annexation of a portion of one public corporation to another public corporation is that the property lying in the annexed territory belongs wholly to the corporation to which it is annexed and the annexed territory is freed from all obligation of the debts of the corporation to which it formerly belonged’ ” (Pixley v. Saunders, 168 Cal. 152 , 158 [ 141 P. 815 ] ; Wilson v. Board of Trustees of Sanitary Dist., 133 Ill. 443 [ 27 N.E. 203 , 207]) ; and “the subsisting corporation will be . . . answerable for all the liabilities.” (State ex rel. Consolidated School Dist. v. Smith, 343 Mo. 288 [ 121 S.W.2d 160 , 162]; Town of Mount Pleasant v. Beckwith, 100 U.S. 514 [ 25 L.Ed. 699 ].) “. . . where one municipal corporation is annexed to another the annexing city takes over the functions of the annexed municipality, and the latter by virtue of the annexation is extinguished and its property, powers and

Respondent claims an impairment of the bondholders’ contract by virtue of a limitation upon the city’s right to tax. While it is true that section 43068, Government Code, impresses a maximum limit of $1.00 on each $100 of assessed valuation, exclusive of certain other taxes, any city having a validly-contracted bonded indebtedness is not prevented from levying and collecting taxes for its payment in addition to those therein authorized (§43070). Thus for the bonded indebtedness the city by law acquires from the district, the city may impose a tax over and above the $1.00 limitation. Nor does the city need a 2/3 vote of its voters to approve the assumption of the indebtedness under article XI, section 18, California Constitution, for this constitutional debt limit applies only to the voluntary obligations of a city, not to liabilities imposed on it by law. (Federal Construction Co. v. Wold, 30 Cal.App. 360 [ 158 P. 340 ]; American Co. v. City of Lakeport, 220 Cal. 548 [ 32 P.2d 622 ] ; Arthur v. City of Petaluma, 27 Cal.App. 782 [ 151 P. 183 ].) See also out-of-state cases, State ex rel. Consolidated School Dist. v. Smith, 343 Mo. 288 [ 121 S.W.2d 160 ] ; Rephan v. City of Evansville, 122 Ind.App. 271 [ 102 N.E.2d 514 ] ; True v. Davis, 133 Ill. 522 [ 22 N.E. 410 ], to the effect that an assumption of bonded indebtedness of one public corporation merged with another does not increase the total indebtedness of the latter within the meaning of a constitutional limit.

In City of Escalon v. Escalon Sanitary Dist., there were

For the foregoing reasons the judgment is reversed, with directions to the trial court to enter a judgment declaring the dissolution of the Downey County Water District as of December 6, 1957.

Wood, P. J., and Fourt, J., concurred.

A petition for a rehearing was denied May '18, 1962, and respondent’s petition for a hearing by the Supreme Court was denied June 20, 1962.