North Kern Water Storage Dist. v. City of Bakersfield CA2/6 ( 2016 )

Filed 4/21/16 North Kern Water Storage Dist. v. City of Bakersfield CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
NORTH KERN WATER STORAGE 2d Civil No. B260065
DISTRICT, (Super. Ct. No. 56-2011-00408712-CU-
CO-VTA)
Plaintiff, Cross-Defendant and (Ventura County)
Respondent,
v.
CITY OF BAKERSFIELD,
Defendant, Cross-Complainant and
Appellant.
In 1976, the City of Bakersfield (City) entered into virtually identical 35-
year "Basic Term" water supply agreements with North Kern Water Storage District
(North Kern) and three other water districts. North Kern's agreement (hereinafter
"Agreement 76-89" or "the Agreement") differed from the other three in describing what
was to occur after expiration of the Basic Term. At the end of the 35-year Basic Term,
the City decided to unilaterally terminate the agreements. North Kern sued for
declaratory and related relief, contending the City must continue supplying water to
North Kern under the Agreement's Extension Term. At issue is the City's continuing
obligation to furnish water under the Agreement.
The trial court granted the requested relief following a 14-day trial. Taking
into account the similarities and differences between the Agreement and the other water
supply contracts, the circumstances surrounding the parties' execution of the Agreement
and the document's stated purpose, the court reasonably found the parties intended to give
North Kern priority rights to the water beyond the 35-year Basic Term and did not intend
to allow the City to unilaterally terminate the Agreement after the Basic Term. We
conclude substantial evidence supports these findings and affirm.
FACTS AND PROCEDURAL HISTORY
North Kern, which was formed in 1935, consists of approximately 60,000
acres of primarily agricultural land. It requires significant amounts of water for irrigation
and ground water recharge. One of its water sources was Kern River water supplied by
Tenneco West, Inc. (Tenneco). Between 1970 and 1974, North Kern purchased an
average of 54,482 acre-feet of Kern River water from Tenneco each year.1
The City acquired all of Tenneco's Kern River water rights in 1976. The
acquisition entitled the City to more than 125,000 acre-feet of Kern River water per year.
The City did not need all of that water for its own use and proposed to sell some of it to
four water districts: North Kern, Kern-Tulare Water District, Cawelo Water District and
Rag Gulch Water District. The 1975 Final Environmental Impact Report (1975 FEIR)
for the proposed project stated that "[t]he four contracts will be for a term of at least 35-
years, each beginning with the 1976 irrigation season and will supply Kern River water to
supplement and replace some of the existing groundwater service." It further stated that
"[e]ach of the four contractors will have the right of first refusal to purchase available
surplus water from the City at reasonable rates under the existing conditions. Each
contract is subject to extensions of time contingent upon the needs of the City for such
water."2
1
An "acre foot" is a unit of volume containing 43,560 cubic feet. It is defined by
the volume of one acre of surface area to a depth of one foot. To put it in perspective,
"[a]n average California household uses between one-half and one-acre foot of water per
year for indoor and outdoor use." (Water Education Foundation,
http://www.watereducation.org/general-information/whats-acre-foot.)
2
The project also involved the sale to North Kern of a portion of the Beardsley and
Calloway Canals. Although the City retained water conveyance rights in those canals,
North Kern had a right of first refusal to purchase certain rights of the Kern River Canal
2
Consistent with the 1975 FEIR, each of the four contracts sets forth the
Basic Quantity of water to be delivered by the City during the contract's Basic Term,
which is "the 35-year period described in Article III, Section 3.3a." Agreement 76-89
required the City to sell and North Kern to purchase 20,000 acre-feet of nonutility Kern
River water per year on a priority basis. The Agreement recognized that the quantity of
water delivered during the Basic Term will vary year to year, but required a total net
quantity of 700,000 acre-feet.
In contrast, during the Agreement's Extension Term, the quantity required
to be sold to and purchased by North Kern is determined on a year-to-year basis.
Section 3.1b of Agreement 76-89 states: "City shall, after the 35th year of this
Agreement, sell to District and District shall purchase from City, a net total of Kern River
water equal to the Basic Quantity herein until modified or terminated as provided in
Article III, Section 3.3b hereof. Further, City will make available to District Borrow-
Payback Water equal to the Borrow-Payback Quantity in conformance with its priority
herein until modified or terminated as provided in Article III, Section 3.3b hereof."
(Italics added.)
Section 3.3b states that "[t]he Extension Term commences immediately
following the completion of the Basic Term of this Agreement. City shall continue to
supply the Basic Quantity to District pursuant to District's priority provided for in Article
VI, Sections 6.1 and 6.2 hereof, until City shows a need to and the implementation of a
Project to divert all or any portion of the Basic Quantity for use within its boundaries or
for use on City-owned property. In this connection, all other water available to City for
its needs shall be first applied to City's requirements. The Extension Term hereof is on a
year-to-year basis."
and Irrigating Company, which the City acquired from Tenneco, if the City proposed to
sell all or a portion of those rights.
3
Section 6.1 of Agreement 76-89 gives North Kern first priority to the City's
nonutility Kern River water3 after the City meets the pre-existing obligations it assumed
upon its purchase from Tenneco. Section 6.2 continues that priority during the Extension
Term "subject only to City's showing a need to and the implementation of a project to
divert all or any portion of said Extension Quantity of water for City's uses on City-
owned property or the use of said water or portion thereof within City's boundaries. In
this connection, all other water available to City for its needs shall be first applied to City
for its requirements before the Extension Quantity or portion thereof shall be denied to
[North Kern]." The other three contracts confirm that those districts' rights to Kern River
water are subject to North Kern's first priority rights during both the Basic and Extension
Terms.
Prior to commencement of the Extension Term, the City stated its intent to
terminate Agreement 76-89 at the end of the 35-year Basic Term. It contended it had a
unilateral right to terminate the Agreement and, as a result, stopped selling water to North
Kern in January 2012.
North Kern disputed the City's interpretation of the Agreement. In October
2011, North Kern brought this action for declaratory relief, specific performance and
injunctive relief. North Kern requested that the Court interpret the Agreement, pursuant
to Code of Civil Procedure section 1060, and determine and declare that the City should
not be permitted to terminate the Agreement at the end of the Basic Term. It further
requested a permanent injunction requiring the City "to supply water under the
Agreement consistent with the Court's final judgment determining and declaring the
lawful construction of the Agreement and the rights and duties of the parties."
The City cross-complained against North Kern, alleging claims for
declaratory relief, damages and rescission. Following the court trial, in which the parties
proffered 191 exhibits and 13 witnesses, the trial court issued a 27-page Final Statement
3
The term "nonutility Kern River water" refers to the portion of the Kern River
water and water rights acquired by the City which is available for sale to North Kern
because it is not encumbered with pre-1976 public utility obligations to historic canal
companies.
4
of Decision in which it rejected the City's interpretation of the Agreement. "Taking into
consideration the similarities and differences between Agreement 76-89 and the other
three contracts, the circumstances surrounding the parties when Agreement 76-89 was
entered into and the purpose of the Agreement," the court determined "it is clear the
parties intended to give North Kern priority rights to 20,000 acre-feet per year of Kern
River water in the long term future even beyond the 35-years." In particular, the court
found "the parties did not intend to give the City the ability to unilaterally terminate
Agreement 76-89." Instead, the court concluded the parties agreed that it is the amount
of water the City is obligated to sell each year during the Extension Term that may be
"modified or terminated," not the Agreement itself.
The trial court further found that North Kern's priority after 35 years
"would be subject to the City's shown need to and project to divert the 20,000 acre-feet
per year to use the water on City owned property or within its boundaries after having
used all other water the City had available." Consistent with the parties' long-standing
course of performance of the Agreement, the court concluded that during the Extension
Term "[e]ach year a new determination of whether the City would have water sufficient
to deliver to North Kern had to occur depending on the existing conditions especially
since the City was first obligated to use all other available water, a determination that
could not be made without knowing current hydrologic conditions."
Based on these findings, the trial court ruled that the "City shall perform the
terms and provisions of Agreement 76-89 consistent with the Final Statement of
Decision" and permanently enjoined the City from taking any action inconsistent with the
Agreement and Final Statement of Decision. The court retained "jurisdiction for the
purpose of a party returning to [the] Court to obtain relief from violations of [the]
Judgment." The City appeals.
DISCUSSION
A. Standard of Review
The principal issue before the trial court was whether Agreement 76-89
gave the City the unilateral right to terminate the Agreement at the end of the Basic
5
Term. The City maintained it had the right to terminate the Agreement in its entirety if it
shows a need to and an implemented project to divert Kern River water for use on its own
property or within its boundaries. North Kern asserted that it was the quantity of water,
and not the Agreement itself, that could be "modified or terminated" on a yearly basis
during the Extension Term. Because the contract language is ambiguous on this point,
significant extrinsic evidence was admitted to aid the court's interpretation.
When a trial court interprets a contract without the aid of extrinsic
evidence, the appellate court reviews the trial court's contractual interpretation under a de
novo standard and makes an independent determination of the meaning of the contract.
(Tin Tin Corp. v. Pacific Rim Park, LLC (2009) 170 Cal.App.4th 1220, 1225; Parsons v.
Bristol Development Co. (1965) 62 Cal.2d 861, 865.) However, "where extrinsic
evidence has been properly admitted as an aid to the interpretation of a contract and the
evidence conflicts," we apply a more deferential standard of review under which "a
reasonable construction of the agreement by the trial court which is supported by
substantial evidence will be upheld." (In re Marriage of Fonstein (1976) 17 Cal.3d 738,
746-747; Winet v. Price (1992) 4 Cal.App.4th 1159, 1166 (Winet).) "[W]hen, as here,
ascertaining the intent of the parties at the time the contract was executed depends on the
credibility of extrinsic evidence, that credibility determination and the interpretation of
the contract are questions of fact that may properly be resolved by the [finder of fact.]"
(City of Hope Nat. Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 395.)
B. Substantial Evidence Supports the Trial Court's
Interpretation of Agreement 76-89
Under statutory rules of contract interpretation, the mutual intention of the
parties at the time the contract is formed governs its interpretation. (Civ. Code, § 1636;
Principal Mutual Life Ins. Co. v. Vars, Pave, McCord & Freedman (1998)
65 Cal.App.4th 1469, 1478.) The City contends the parties intended in 1976 to grant it
the right to terminate Agreement 76-89 after the Basic Term by showing a need to and an
implemented project to divert Kern River water for use on its own property or within its
boundaries. The trial court disagreed, finding that it is the amount of water the City is
6
obligated to sell to North Kern that may be "modified or terminated" on a yearly basis
following the Basic Term. We conclude the trial court's interpretation of the Agreement
is reasonable and supported by both the language of the Agreement and the extrinsic
evidence introduced at trial.
Section 3.1b of Agreement 76-89 requires that the City sell to North Kern
"a net total of Kern River water equal to the Basic Quantity . . . until modified or
terminated as provided in Article III, Section 3.3b hereof." The trial court determined the
word "until" in this section references its subject, i.e., the City's annual duty to sell to
North Kern the Basic Quantity of Kern River water. Under the court's construction,
therefore, what may be "modified or terminated" is the amount of Kern River water sold
by the City and purchased by North Kern each year.
Section 3.3b states that "[t]he Extension Term commences immediately
following the completion of the Basic Term," and requires that the City "continue to
supply the Basic Quantity to District pursuant to District's priority provided in Article VI,
Sections 6.1 and 6.2 hereof, until City shows a need to and the implementation of a
Project to divert all or any portion of the Basic Quantity for use within its boundaries or
for use on City-owned property." Section 3.3b further clarifies that "all other water
available to City for its needs shall be first applied to City's requirements," and that the
Extension Term "is on a year-to-year basis."
Thus, under section 3.3b, the City is required to supply North Kern with the
Basic Quantity of 20,000 acre-feet of Kern River water each year during the Extension
Term "until City shows a need to and the implementation of a Project to divert all or any
portion of the Basic Quantity . . . ." As in Section 3.1b, the word "until" references the
subject of this sentence, which is the City's annual obligation to supply North Kern with
Kern River water under its first priority rights.
The trial court explained that if, on the one hand, the City can show both a
need and the implementation of a project to divert a "portion" of the available Kern River
supply, then the quantity sold to North Kern is "modified" to the portion not needed by
the City. In other words, if 5,000 acre-feet is needed and diverted by a project, then the
7
remaining 15,000 acre-feet is available for North Kern. If, on the other hand, the City
shows a need and the implementation of a project to divert and use all of the Kern River
supply available in a given year, then the quantity available for North Kern for that year
is "terminated." Before an assessment of that quantity can be made, however, the City
must first apply all other water available for its needs. And because the Extension Term
is on a "year-to-year basis," the City must annually determine if it has Extension Quantity
water available to sell to North Kern. This provision recognizes the possibility that even
if no Kern River water is available to North Kern one year, there may be such water
available in subsequent years and thus the contract remains in force.
Stated differently, the quantity of Kern River water that the City is required
to sell North Kern in the Extension Term is not guaranteed each year. Unlike with the
Basic Term, there is no provision for "makeup water" for any deficiencies because North
Kern is not assured a certain quantity during the Extension Term. Instead, the annual
quantity is variable and North Kern is only assured a first priority right to purchase the
available supply each year. Specifically, the quantity is "a net total of Kern River water
equal to the Basic Quantity" unless that quantity is "modified or terminated" as provided
in Sections 3.1b and 3.3b for that particular year.
The City asserts the trial court erred by finding that the reference to
"termination" in the Agreement did not refer to the term of the Agreement. It argues that
"[t]he only reasonable, logical definition and interpretation of 'termination' as used in the
Agreement would be that the term of the Agreement could end, or conclude, upon the
occurrence of the stated conditions referenced in the Agreement." The word
"termination," however, is not contained in any provision addressing the Extension Term.
Rather, the language of Sections 3.1b and 3.3b provides that the quantity of water sold
can be either "modified or terminated" on a year-by-year basis. Neither section
references termination of the Agreement.
Moreover, the City's argument, while focusing on termination, ignores the
word "modified," which is used in conjunction with the word "terminated" in section
3.1b. As the trial court observed, "the City has not explained in what manner it could
8
'modify' the Agreement upon a showing of a need and a project to divert. A more
reasonable interpretation is that the quantity of water could be modified (something less
than 20,000 acre-feet per year) or terminated (no water would be delivered that year)."
Indeed, recitals in the Agreement confirm the City's intent to make available to North
Kern "a long-term supply of Kern River" water in recognition of it being a "historical
diverter and user of Kern River water."
As the trial court emphasized, Section 5.5 identifies the one circumstance in
which the parties agreed that the City shall have the right to terminate the Agreement and,
in so doing, extinguish North Kern's rights to receive water under the Agreement. This
section states that "in the event of any default by District wherein the total payments in
default equal FOUR-HUNDRED THOUSAND DOLLARS ($400,000), City shall have
the right to terminate this Agreement and thereupon District's rights to receive any water
by reason of this Agreement only shall be extinguished. Upon such termination, any and
all other provisions of this Agreement, both short term and long term, shall also
thereupon be extinguished." This provision demonstrates that the parties knew how to
draft language authorizing the termination or extinguishment of the Agreement when that
was their intent to do so. (See Cardinal Health 301, Inc. v. Tyco Electronics Corp.
(2008) 169 Cal.App.4th 116, 132.) Such language and intent are completely absent from
Sections 3.1b and 3.3b.
The trial court's interpretation is also supported by the provisions of the
Agreement concerning the sale of the Beardsley and Calloway Canals. The Agreement
gave the City the right to use capacity in those canals. There is nothing to suggest the
parties intended that right to be subject to termination, yet that right would terminate if
the City's interpretation of the Agreement were correct.
Furthermore, the City's own actions undermine its interpretation of
Agreement 76-89. As the trial court noted, "Section 3.1b of the Agreement states: 'City
will make available to District Borrow-Payback Water equal to the Borrow-Payback
Quantity in conformance with its priority herein until modified or terminated as provided
in Article III, Section 3.3b hereof.' (Emphasis added.) In 2012, after the City states it
9
terminated the Agreement, the City received water under these borrow-payback
provisions. The City's continued compliance with this provision of the Agreement shows
that not even the City treated the [entire] Agreement as terminated."
In addition, shortly after entering into Agreement 76-89, the City contracted
to sell miscellaneous Kern River water to Rosedale-Rio Bravo Water Storage District.
Certain terms in that contract govern the district's right to purchase water beginning
January 1, 2012. In connection with water sold after that date, the contract "states that
Rosedale-Rio Bravo [Water Storage District] would be entitled to receive nonutility Kern
River water 'except for the twenty thousand (20,000) acre feet per year committed to
North Kern.'" (Italics added.) As the trial court stated, this demonstrates that "in 1976
the City did not expect Agreement 76-89 would end or even be likely to end in 2011."
The City claims the trial court's interpretation of the Agreement is
unreasonable because once the City had shown a need for the water and projects in place
to utilize the water, there would be no reason for it to keep undergoing a year-by-year
determination of its demand for the water. It maintains that in that circumstance, the City
would expect to have a continual, ongoing need for the water in the same or similar
amounts. But this is merely an assumption, not necessarily a fact. The amount of water
available to the City varies from year to year and is dependent upon a number of factors.
It is possible that the City would need all or a part of North Kern's allotment of water in
one year but not in the next. This explains why the parties agreed to a year-by-year
assessment of the City's water needs and available supplies during the Extension Term.
The City stresses that the preamble to the Agreement states that the "City
has determined that under existing conditions and for an interim period of time certain of
said water and water rights will not be needed by [the] City for its own use." The City
argues this language provides the best evidence of the parties' intent regarding the
duration of the Agreement. Even if the City is correct, it does not mean that the interim
period is limited to 35 years. If that were the case, the parties would not have created an
Extension Term. A reasonable interpretation of "interim period" is the period in which
the City does not have a need to and the implementation of a project to divert Kern River
10
water for use within its boundaries or for use on City-owned property. As discussed
above, this period may not be continuous. There may be years during the Extension
Term in which no water is available for North Kern's use and years in which all or a
portion of the 20,000 acre-feet is available. It is logical to assume the City did not wish
to relinquish a market for that water unless absolutely necessary.
The City contends the trial court improperly disregarded the statement of
Dick Diamond, North Kern's General Manager, that North Kern's "anticipation is we will
receive supplies during the extension term, not forever, but for some period of time." It is
well established that evidence of an uncommunicated subjective intent offered to
contradict the express terms of the contract is inadmissible. (Winet, supra, 4 Cal.App.4th
at pp. 1167-1168.) Even if the statement is admissible, however, it is not inconsistent
with the trial court's interpretation. The Agreement could effectively end if the City has
an ongoing, continuous annual need for the water as provided for in the Agreement.
Diamond likely was anticipating that possibility over the passage of time.
The City also argues the trial court's decision is insupportable because it
binds the City to a "draconian" contract which does not reflect the current market for
water. This argument ignores Section 5.1b of the Agreement, which sets forth the
formula for calculating the cost of water during the Extension Term. Instead of paying
the fixed annual fee of $400,000 required during the Basic Term, North Kern must pay
the City based on the "Pumping Costs of producing a like amount of water from the
underground basin overlain by [North Kern] District . . . ." The creation of this formula,
which is calculated on a 5-year running average basis, provides further evidence of the
parties' mutual intent to continue their contractual relationship beyond the Basic Term.
Finally, the City asserts that the trial court erred by overlooking extrinsic
evidence it claims supports its interpretation of Agreement 76-89 and urges us to consider
that evidence on appeal. The City misunderstands our standard of review. Under the
substantial evidence standard, we disregard all conflicts in the evidence and indulge all
reasonable inferences and ambiguities to support the findings and judgment. (Winograd
v. American Broadcasting Co. (1998) 68 Cal.App.4th 624, 631; Kuhn v. Department of
11
General Services (1994) 22 Cal.App.4th 1627, 1632-1633.) Applying this standard, we
conclude substantial evidence supports the trial court's interpretation of the Agreement.
C. The Extension Term's Year-to-Year Basis
is Valid and Enforceable
The City argues that even if the trial court's interpretation of Agreement 76-
89 is reasonable, it is insupportable because it creates a perpetual contract that can never
be terminated. But "California cases have long recognized that a contract may, by its
express terms, provide for a term of duration of indefinite length and without specific
limitation, tied not to the calendar but to the conduct of the contracting parties." (Zee
Medical Distributor Assn., Inc. v. Zee Medical, Inc. (2000) 80 Cal.App.4th 1, 7 (Zee).)
"The rule is that if the contract is to remain in effect so long as one continues to perform
or act in a certain manner . . . the agreement is sufficiently certain to be vital.
[Citations.]" (Zimco Restaurants v. Bartenders Union (1958) 165 Cal.App.2d 235, 237-
238) (Zee at p. 8.); see also Great Western Distillery Products, Inc. v. John A. Wathen
Distillery Co. (1937) 10 Cal.2d 442, 446-447 ["The failure to specifically limit the
duration of the contract did not fatally affect it and did not give rise to a right to terminate
the contract at will without a liability for damages"]. The City acknowledges Bradner v.
Vasquez (1951) 102 Cal.App.2d 338, 344, for the proposition that "[a] contract is not
fatally defective merely because it does not provide a time presently definite for its
termination."
Here, the Agreement's Extension Term is on a year-to-year basis and
continues as long as there is Kern River water available for North Kern to purchase from
the City that is not needed by the City pursuant to Section 3.3b. The Agreement could
effectively end if there is no such water available in the coming years. That
determination, however, must be made on an annual basis. We are not persuaded by the
City's reliance on cases involving periodic tenancies in the landlord-tenant context. This
is a water supply contract, not a landlord-tenant agreement. The rules governing leases
do not apply here.
12
Indeed, the City's argument is further undercut by its own reliance upon
Sawyer v. City of San Diego (1956) 138 Cal.App.2d 652, 660, in which the court upheld a
contract providing for permanent water service. The contract expressly stated that the
realty company or its successors in interest "'shall at all times have the right to take water
for use upon the land known as Del Mar Terrace.'" (Ibid.) The court determined that
"[i]t clearly appears from the language used in the contract . . . that it was the intention of
the parties that the water was to be used on the Del Mar Terrace subdivision by persons
building and maintaining residences thereon and that the city, by agreeing to give them
the right to use such water, 'at all times' for use thereon, was granting a permanent right to
such use." (Ibid.) The trial court found a similar intent here, subject to the limitations
imposed by Sections 3.1b and 3.3b of the Agreement.
D. The Trial Court did Not Abuse its Discretion by Ordering Specific
Performance and Injunctive Relief
The City contends the trial court erred by issuing an unnecessary and
improper "advisory opinion" in connection with the City's demand and need for water,
and by imposing injunctive relief and ordering specific performance without evidence of
any breach of Agreement 76-89. It asks us, at a minimum, to delete Sections II (C) and
(D) of the court's Final Statement of Decision. We decline to do so. We conclude the
trial court properly adjudicated and declared the parties' rights and obligations under the
Agreement's Extension Term. (Code Civ. Proc., § 1060.)
Section 12.2e of the Agreement states that "[i]f any matter essential to this
Agreement is left to the future determination of the parties hereto, each party is required
to accept a reasonable determination as herein provided. It is recognized that this
Agreement is between two public bodies concerned with an extensive water service
project in the public interest, which involves the long-term and historical use of a vital
natural resource of unpredictable supply. In the unlikely event that said entities are
unable to agree upon a reasonable and equitable solution to matters left to future
determination, the matter shall be submitted to and determined by a court of competent
jurisdiction." (Italics added.)
13
North Kern invoked this provision in its complaint. It alleged that the
parties are "unable to agree upon a reasonable and equitable solution to matters left to
future determination under the Agreement, including but not limited to, an actual
controversy over the proper construction of [Sections] 3.1(b), 3.3(b), 5.1(b), 6.1, 6.2, 6.4
and 12.2(d)(e) and (f), and 12.3 of the Agreement." It specifically requested, among
other things, a permanent injunction requiring the City "to supply water under the
Agreement consistent with the Court's final judgment determining and declaring the
lawful construction of the Agreement and the rights and duties of the parties."
The trial court correctly determined the City did not have the unilateral
right to terminate the Agreement at the end of the Basic Term. Instead, the City must
annually assess whether it has Extension Quantity water available for North Kern to
purchase for that particular year. The parties disagreed as to how that amount should be
calculated. The City maintained that because it needed the water for its own use, it could
decline to supply water under the Agreement. But the City must do more than simply
declare a subjective need for the water. Before modifying or terminating the quantity of
water sold to North Kern in any given year, the City must show (1) a need to divert water
from the Kern River, (2) an implemented project to divert water from the Kern River for
use within its boundaries or on City-owned property and (3) that all other water available
to the City has first been utilized for the project.
Based on the extensive evidence presented during trial, the court
determined the City had failed to make such a showing. Specifically, it found the City
did not show a need to divert the water, an implemented project for such diversion or the
unavailability of other water for the alleged project. This portion of the court's Final
Statement of Decision not only confirms that the City breached the Agreement by
deciding to unilaterally terminate it at the end of the Basic Term, but it also clarifies what
the City may or may not do regarding the sale and delivery of Kern River water during
the Extension Term. The City has not demonstrated that these clarifications were
unnecessary to resolve the present controversy surrounding the City's obligations to
14
North Kern. To the contrary, they provide necessary guidance to the parties as they move
forward under the Extension Term.
By way of example, the trial court found that "before [the] City can deny
Extension Quantity water to North Kern the City must first apply all other water available
to the City for its needs." This determination resolves the existing uncertainty or
controversy between the parties on this issue, and will direct the parties in the future so as
to reduce the prospect of subsequent litigation. (See Meyer v. Sprint Spectrum L.P.
(2009) 45 Cal.4th 634, 647 [purpose of declaratory relief "is to liquidate doubts with
respect to uncertainties or controversies which might otherwise result in subsequent
litigation"].)
Moreover, "[a]n equity court has broad powers to fashion a remedy.
[Citation.] It may create new remedies to deal with novel factual situations." (Oceanside
Community Assn. v. Oceanside Land Co. (1983) 147 Cal.App.3d 166, 177; see also
Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 390 [equitable relief is
flexible and allows "new methods of relief for new types of wrongs."].) The trial court's
ruling is directed at curing the wrong committed by the City when it decided to
unilaterally terminate the Agreement at the end of the Basic Term. While the exact
quantity of Kern River water that will be available for sale to North Kern each year
during the Extension Term is unknown, the court's carefully constructed decision
explicitly describes the City's obligations in making that annual determination. The court
did not abuse its discretion by enjoining the City from taking actions inconsistent with
those obligations.
Nor has the City shown that enforcement of the Agreement through specific
performance was improper. The City relies upon Golden West Baseball Co. v. City of
Anaheim (1994) 25 Cal.App.4th 11, for the proposition that specific performance is not
available where there has been no breach of contract. But in this case there was a breach.
The trial court found that the City had improperly terminated at least part of the
Agreement by refusing to sell any Kern River water to North Kern after expiration of the
Basic Term.
15
Lastly, the trial court did not err by retaining jurisdiction to enforce its
declaratory judgment and orders for specific performance and permanent injunction.
"[R]etention of jurisdiction by the court for the purpose of interpreting and enforcing its
judgment is within the scope of declaratory relief." (Dawson v. East Side Union High
School Dist. (1994) 28 Cal.App.4th 998, 1044-1045.) A court also may retain
jurisdiction to ensure the parties' compliance with orders of specific performance and
injunctive relief. (Hutcherson v. Alexander (1968) 264 Cal.App.2d 126, 134.) We have
considered each of the City's contentions on appeal and conclude it has failed to
demonstrate error.
DISPOSITION
The judgment is affirmed. Respondent shall recover its costs on appeal.
NOT TO BE PUBLISHED.
PERREN, J.
We concur:
GILBERT, P. J.
YEGAN, J.
16
Tari L. Cody, Judge
Superior Court County of Ventura
______________________________
Duane Morris LLP, Colin L. Pearce, Jolie-Anne S. Ansley, City Attorney's
Office, Virginia A. Gennaro for Defendant, Cross-complainant and Appellant.
The Law Offices of Young Wooldridge LLP, Scott K. Kuney, Douglas A.
Gosling, Price, Postel & Parma LLP, Timothy E. Metzinger for Plaintiff, Cross-defendant
and Respondent.