Opinion
F075451
12-17-2021
Coordination Proceeding Special Title (Rule 3.3550(c)) v. ANTELOPE VALLEY WATERMASTER, Defendant and Respondent. ANTELOPE VALLEY GROUNDWATER CASES PHELAN PINON HILLS COMMUNITY SERVICES DISTRICT, Plaintiff and Appellant,
Aleshire & Wynder and June S. Ailin for Plaintiff and Appellant. Price, Postel & Parma, Craig A. Parton, and Timothy E. Metzinger for Defendant and Respondent.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County. JCCP. No. 4408, Jack Komar, Judge.
Retired Judge of the Santa Clara Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
Aleshire & Wynder and June S. Ailin for Plaintiff and Appellant.
Price, Postel & Parma, Craig A. Parton, and Timothy E. Metzinger for Defendant and Respondent.
OPINION [*]
PEÑA, ACTING P.J.
This appeal requires the interpretation of language in a stipulated judgment. The judgment was entered in the coordination proceeding known as the Antelope Valley Groundwater Cases (AVGC), which concern the existence and priority of water rights vis-à-vis the Antelope Valley Groundwater Basin (the basin or aquifer). The judgment incorporates a detailed plan (the Physical Solution) to rectify and prevent harmful overdraft conditions caused by excessive pumping of groundwater from the aquifer.
The Physical Solution was negotiated and agreed to by most of the AVGC litigants. Those stipulating parties were found to possess rights to the subject groundwater, and nearly all of them agreed to reduce their production (pumping) from prejudgment levels. With limited exceptions, all postjudgment pumping in excess of a party's allotment of groundwater under the Physical Solution triggers a monetary assessment. A court-appointed administrator is responsible for imposing the assessment and using the funds to purchase replacement water to offset the excess production.
The Physical Solution provides for what the parties call a "grace period" during which assessments are not imposed. The provision ostensibly exempts all groundwater producers from having to pay assessments in connection with production occurring in the years 2016 and 2017. In early 2018, a dispute arose over whether the appellant herein, Phelan Piñon Hills Community Services District (Phelan), is entitled to the exemption. Phelan did not stipulate to the judgment, and its claims of possessing relevant groundwater rights were rejected by the trial court. The judgment authorizes Phelan to continue pumping at prejudgment production levels, but doing so is conditioned upon, inter alia, the payment of replacement water assessments for all groundwater Phelan extracts from the basin.
Phelan filed a motion for declaratory relief regarding its rights and obligations under the judgment, specifically in relation to the two-year exemption provision. The trial court interpreted the judgment as impliedly excluding Phelan from the exemption. We reach the same conclusion. The order denying Phelan's motion will therefore be affirmed.
FACTUALANDPROCEDURALBACKGROUND
The AVGC judgment was affirmed as to Phelan in Antelope Valley Groundwater Cases (2020) 59 Cal.App.5th 241. We incorporate by reference the factual and procedural background set forth therein, which is partially repeated and supplemented here to frame the issues in this appeal.
Litigation Overview
The earliest lawsuits concerning rights to the subject groundwater were filed in 1999 and 2000. In late 2002, a trial commenced to determine the jurisdictional boundaries of the aquifer. Those proceedings were ultimately abandoned, and the parties attempted mediation. The mediator concluded it was necessary to determine the groundwater rights of all interested parties, including parties not yet involved in the litigation.
In 2004, Los Angeles County Waterworks District No. 40 (District 40) filed an action seeking (1) a comprehensive determination of the rights of thousands of individuals, companies, public water suppliers, and public agencies to extract water from the basin and (2) a physical solution to alleviate alleged overdraft conditions and protect the basin's groundwater supply. In 2005, the Judicial Council coordinated the various actions, which collectively became known as the AVGC.
"The phrase 'physical solution' is used in water rights cases to describe an agreed-upon or judicially imposed resolution of conflicting claims in a manner that advances the constitutional rule of reasonable and beneficial use of the state's water supply." (City of Santa Maria v. Adam (2012) 211 Cal.App.4th 266, 287.) For our purposes, in cases like this one, the term means "'an equitable remedy designed to alleviate overdrafts and the consequential depletion of water resources in a particular area, consistent with the constitutional mandate to prevent waste and unreasonable water use and to maximize the beneficial use of this state's limited resource.'" (Id. at p. 288, quoting California American Water v. City of Seaside (2010) 183 Cal.App.4th 471, 480.)
In 2006, District 40 and eight other water suppliers (collectively, the Public Water Suppliers) filed a cross-complaint for declaratory and injunctive relief. The following year, the trial court issued an order declaring the jurisdictional boundaries of the aquifer, i.e., the Antelope Valley Adjudication Area (AVAA). This completed the first of six phases of trial proceedings (Phases 1-6) and made it possible to determine the necessary parties for a comprehensive adjudication.
In addition to District 40, the self-described Public Water Suppliers consisted of California Water Service Company, City of Lancaster, City of Palmdale, Littlerock Creek Irrigation District, Palm Ranch Irrigation District, Palmdale Water District, Quartz Hill Water District, and Rosamond Community Services District.
The Public Water Suppliers' cross-complaint alleged the United States was an essential party to the action. To obtain jurisdiction over the United States, it was necessary to litigate "the undetermined claims of all parties with an interest in the relevant water source." (U.S. v. State of Or. (9th Cir. 1994) 44 F.3d 758, 769; see generally id. at pp. 763-770 [discussing the "McCarran Amendment," i.e., 43 U.S.C. § 666].) To achieve this result, the trial court proposed the use of class action procedures.
In 2007, Rebecca Lee Willis filed a putative class action complaint on behalf of herself and other private landowners in the AVAA (Willis or the Willis Class). The action was filed against the Public Water Suppliers and other defendants. The Public Water Suppliers later amended their cross-complaint to plead class action claims against all "owners of, and/or ... beneficial interest holders in real property within the [AVAA]."
The trial court eventually certified the Willis Class, which was defined as all private owners of land in the AVAA who were "not presently pumping water on their property and did not do so at any time during the five years preceding January 18, 2006." In 2008, a separate group of landowners (the Wood Class or "Small Pumper Class") filed a class action complaint against the Public Water Suppliers and numerous Doe defendants. Phelan was later identified as one of the fictitiously named defendants.
In late 2008, Phase 2 commenced to establish the hydrologic nature of the aquifer within the boundaries of the AVAA. The issue was whether any distinct groundwater subbasins existed that did not have hydrologic connection to other parts of the aquifer. The trial court found all areas of the AVAA were sufficiently hydrologically connected to constitute a single aquifer for purposes of the coordinated proceedings.
Phelan's Involvement
Phelan is a public entity providing municipal water service to over 21, 000 residents of San Bernardino County. The water it supplies is pumped from multiple wells. The AVAA covers parts of southeastern Kern County and northeastern Los Angeles County. Phelan's service area and most of its wells are located outside of the AVAA. However, during its formation in 2008, Phelan acquired a well (Well 14) located within the AVAA.
Well 14 was installed by Phelan's predecessor in 2004 and was first used in late 2005. The initial pumping was de minimis, but production increased to 164.15 acre-feet of water in 2006. Less than 21 acre-feet of water was pumped from the well in 2007, reportedly due to equipment problems, but in 2008 the production increased to 493.27 acre-feet.
In December 2008, Phelan filed an answer to multiple complaints and cross-complaints and filed its own cross-complaint against all other AVGC litigants. Phelan claimed to possess (1) an appropriative right to pump water from the AVAA because the basin's safe yield allegedly exceeded the volume of groundwater pumped from the basin; (2) "municipal priority" rights under California law, "both as a result of the priority and extent of its appropriate and prescriptive rights, and as a matter of law and public policy"; and (3) a right to the "recapture of return flows."
The term "safe yield" generally refers to the amount of water that can be extracted annually without risking permanent depletion of the supply. (Wright v. Goleta Water Dist. (1985) 174 Cal.App.3d 74, 81, fn. 2.) Determining the safe yield requires analysis of "the available groundwater recharge from replenishing sources such as native precipitation and associated runoff, along with return flows from such sources, less losses incurred through natural groundwater depletions such as subsurface outflow or evaporative losses." (Antelope Valley Groundwater Cases, supra, 59 Cal.App.5th at p. 251, fn. 1.) When average annual withdrawals or diversions of the groundwater supply exceed the safe yield, the resulting condition is known as "overdraft." (Jordan v. City of Santa Barbara (1996) 46 Cal.App.4th 1245, 1272.)
Case Consolidation
In 2009, the Public Water Suppliers moved to transfer and consolidate all pending AVGC actions and cross-actions. The motion was granted in early 2010. The consolidation order authorized the parties to settle "any or all claims between or among them[selves] as long as any such settlement expressly provide[d] for the Court to retain jurisdiction over the settling parties for purposes of entering a judgment resolving all claims to the rights to withdraw groundwater from the [basin] as well as the creation of a physical solution if [necessary]."
Phases 3 & 4
In 2011, Phase 3 was conducted to determine the condition of the aquifer and its safe yield. The trial court found the basin was in a state of overdraft due to decades of unregulated pumping. The total safe yield was determined to be 110, 000 acre-feet of water per year (afy).
Phase 4, conducted in 2013, focused on the levels of groundwater production during 2011 and 2012. The trial court found the collective pumping by dozens of parties had exceeded 120, 000 afy in both years of the sample period, and those figures did not include pumping by the Wood Class. Phelan's production was found to be 1, 053.14 acre-feet in 2011 and 1, 035.26 acre-feet in 2012.
Phase 5
Phase 5 began in February 2014. This phase concerned "the issues of federal reserved water rights and claimed rights to return flows from imported water." After a few days of evidence presentation, the trial court stayed the proceedings to facilitate large-scale settlement negotiations. Although Phelan participated in the settlement talks, the parties failed to reach an agreement regarding Phelan's claimed water rights.
Trial of Phelan's Claims ("Stage One")
The trial of Phelan's causes of action was bifurcated. In November 2014, a declaratory relief trial was conducted regarding Phelan's claim of appropriative water rights and the issue of "whether it had a right to return flows created by the return of water from its use in areas outside the adjudication area but within the aquifer boundaries." The parties stipulated to the historical groundwater production from Well 14 as measured in afy:
YEAR
AFY
YEAR
AFY
2004
0.0
2005
1.11
2006
164.15
2007
20.95
2008
493.27
2009
558.65
2010
1, 110.45
2011
1, 053.14
2012
1, 035.26
2013
1, 028.02
In February 2015, a written statement of decision was issued. The trial court determined Phelan "does not have water rights to pump groundwater and export it from the [AVAA]" and "does not have return flows rights to groundwater in the [AVAA]." The decision explains that "[t]he right to return flows is limited to return flows from imported water," but Phelan "never imported any water into the [AVAA] and has not net augmented the groundwater supply in the [AVAA]."
The trial court's findings included the stipulated facts regarding Phelan's annual production. The trial court ruled Phelan's "pumping of groundwater from the Antelope Valley Groundwater Basin negatively impacts the [hydrologically connected] Butte sub basin and the [AVAA]." "Additionally, to the extent 'return flows' from native water pumped by Phelan Piñon Hills enter the [AVAA], they merely 'lessen the diminution occasioned' by [Phelan's] extraction and do not augment the [AVAA's] groundwater supply."
Stipulation for Entry of Judgment
In March 2015, District 40 filed a document entitled "Notice of Filing of Stipulation for Entry of Judgment." The filing included two attachments: a "Stipulation for Entry of Judgment and Physical Solution" (the "Stipulation"), which was signed by the vast majority of AVGC litigants (the stipulating parties), and the stipulating parties' "[Proposed] Judgment and Physical Solution." (Original brackets.) The Stipulation included the following statement:
"The Stipulating Parties, in order to protect the Basin from over-pumping, have stipulated and agreed to the terms of the Judgment and have agreed to substantial cuts to water allocation compared with what they claim under California law, and in the case of the United States, also under federal law. In return, the Stipulating Parties have agreed to provisions in the Physical Solution which are only available by stipulation. These provisions include, without limitation, the right to transfer Production Rights and the right to Carry Over rights from year to year, as set forth in the Judgment. Non-Stipulating Parties, or any other Parties contesting the Judgment, shall not be entitled to the benefit of these provisions, and shall have only the rights to which they may be entitled by law according to proof at trial."
The stipulating parties proposed to allow Phelan to continue pumping and exporting groundwater from the basin "so long as" (1) its total production did not exceed 1, 200 afy; (2) such production would not cause "Material Injury" to the basin; and (3) Phelan paid a monetary assessment for its production, which would be used to purchase corresponding amounts of replacement water, plus the additional payment of "any other costs deemed necessary to protect [the production rights of the stipulating parties]."
[o]verdraft, degradation of water quality by introduction of contaminants to the aquifer by a Party and/or transmission of those introduced contaminants through the aquifer, liquefaction, land subsidence and other material physical injury caused by elevated or lowered Groundwater levels." We recite the definitions of other capitalized terms elsewhere in the opinion. The proposed and final version of the Physical Solution defines "Material Injury" as any impact to the basin resulting from pumping or water storage that causes physical harm to any part of the basin or to "any Producer, Party or Production Right, including, but not limited to,
In April 2015, Phelan filed a formal statement regarding the stipulating parties' agreement. It said, in relevant part, "Phelan Piñon Hills objects to the Proposed Physical Solution primarily based upon the proposal seeking to allocate the entire safe yield amongst settling parties and the proposal seeking to bind Phelan Piñon Hills by having to pay 100% water replacement assessment if and only if water is available and delivery to Phelan Piñon Hills' service area will not injure the basin. The Proposed Physical Solution seeks to be the physical solution for the basin, and in doing so, to bind a non-settling party like Phelan Piñon Hills without the benefits or rights created by other provisions."
Trial of Phelan s Claims ("Stage Two")
The Stage Two trial of Phelan's remaining causes of action took place on August 25, 2015. In a related trial brief, Phelan framed the issues in terms of whether it had appropriative rights as a municipal water provider and whether it should be required to pay replacement water assessments under the terms of any physical solution adopted by the trial court. Phelan opposed "the Stipulated Judgment and Physical Solution promoted by the Public Water Suppliers … [¶] … [¶] [t]o the extent it requires Phelan to pay for every acre-foot of water Phelan pumps from Well 14." The trial brief also discussed Phelan's opposition to nonstipulating parties like itself "being excluded from some terms or benefits available in the Physical Solution."
An opposing trial brief was filed by District 40 on behalf of itself and the Public Water Suppliers, and joinders to the same were filed by other stipulating parties. The Public Water Suppliers were opposed to any future pumping by Phelan within the AVAA "unless it pays an assessment" to allow for the purchase of replacement water. They argued "[d]oing otherwise would be akin to granting rights superior or equal to water rights held by overlying landowners, Public Water Suppliers and the United States."
During the trial itself, Phelan elicited testimony from its expert hydrologist. When Phelan rested its case, District 40 moved for a judgment in favor of the opposing parties. (See Code Civ. Proc, § 631.8.) The trial court deferred its rulings on all Stage Two issues until the completion of Phase 6.
Phase 6 and Final Judgment
Phase 6 was essentially a "prove-up" of the stipulating parties' proposed physical solution. The proceedings began in late September 2015 and concluded approximately five weeks later. District 40 subsequently filed, on behalf of itself and the other stipulating parties (as well as a small group of nonstipulating but "supporting" parties) a proposed final judgment and a proposed statement of decision.
In December 2015, the trial court adopted the proposed judgment and proposed statement of decision as its own. Aside from a few handwritten additions and interlineations, the signed documents were identical to the proposed versions. The statement of decision and judgment were filed separately but on the same date. The document formerly entitled "[Proposed] Judgment and Physical Solution" was attached and incorporated into the judgment. To avoid confusion, we refer to this attachment as the Physical Solution.
The portion of the judgment preceding the attachment states, in relevant part, "Phelan Piñon Hills Community Services District … has no right to pump groundwater from the Antelope Valley Adjudication Area except under the terms of the Physical Solution."
The Physical Solution is a 61-page document (excluding tables, indices, and exhibits) containing 20 enumerated paragraphs and many more subparagraphs (sometimes referred to as "sections" by the parties and trial court). Paragraph 3.5 contains a list of 55 defined terms. Some of the relevant terms, with our bracketed annotations, are as follows:
"3.5.2 Adjusted Native Safe Yield. The Native Safe Yield minus (1) the Production Right allocated to the Small Pumper Class under Paragraph 5.1.3, (2) the Federal Reserved Water Right under Paragraph 5.1.4, and (3) the State of California Production Right under Paragraph 5.1.5. The Adjusted Native Safe Yield as of the date of entry of this Judgment is 70, 686.6 acre-feet per year."
"3.5.14 Groundwater. Water beneath the surface of the ground and within the zone of saturation, excluding water flowing through known and definite channels."
"3.5.15 Imported Water. Water brought into the Basin from outside the watershed of the Basin as shown in Exhibit 9.
"3.5.16 Imported Water Return Flows. Imported Water that net augments the Basin Groundwater supply after use."
"3.5.19 Native Safe Yield. Naturally occurring Groundwater recharge to the Basin, including 'return flows' from pumping naturally occurring recharge, on an average annual basis. Imported Water Return Flows are not included in Native Safe Yield."
[The trial court found the basin's native safe yield to be 82, 300 afy.]
"3.5.21 Non-Overlying Production Rights. The rights held by the Parties identified in Exhibit 3, attached hereto and incorporated herein by reference."
[Exhibit 3 specifies the production rights in terms of afy and percentage of the native safe yield for seven of the original nine Public Water Suppliers (see fn. 2, ante), three other parties characterized as "Public Water Suppliers" under an expanded definition set forth in Paragraph 3.5.35, and, lastly, Boron Community Services District.]
"3.5.24 Non-Stipulating Party. Any Party who had not executed a Stipulation for Entry of this Judgment prior to the date of approval of this Judgment by the Court."
[Despite the capitalization, there are no specific definitions for the terms "Stipulation" and "Entry" or the phrases "Stipulation for Entry" and "Stipulation for Entry of this Judgment."]
"3.5.26 Overlying Production Rights. The rights held by the Parties identified in Exhibit 4, attached hereto and incorporated herein by reference."
[Exhibit 4 identifies over 100 stipulating parties and lists their respective production rights in terms of afy and percentage of the native safe yield. The exhibit also specifies each party's "Pre-Rampdown Production" in terms of afy.]
"3.5.27 Party (Parties). Any Person(s) that has (have) been named and served or otherwise properly joined, or has (have) become subject to this Judgment and any prior judgments of this Court in this Action ….
"3.5.28 Pre-Rampdown Production. The reasonable and beneficial use of Groundwater, excluding Imported Water Return Flows, at a time prior to this Judgment, or the Production Right, whichever is greater.
"3.5.29 Produced. To pump Groundwater for existing and future reasonable beneficial uses.
"3.5.30 Producers. A Party who Produces Groundwater."
"3.5.31 Production. Annual amount of Groundwater Produced, stated in acre-feet of water."
"3.5.32 Production Right. The amount of Native Safe Yield that may be Produced each Year free of any Replacement Water Assessment and Replacement Obligation. The total of the Production Rights decreed in this Judgment equals the Native Safe Yield. A Production Right does not include any right to Imported Water Return Flows pursuant to Paragraph 5.2."
[Phelan has no production rights or rights to imported water return flows.]
"3.5.37 Rampdown. The period of time for Pre-Rampdown Production to be reduced to the Native Safe Yield in the manner described in this Judgment."
"3.5.39 Replacement Obligation. The obligation of a Producer to pay for Replacement Water for Production of Groundwater from the Basin in any Year in excess of the sum of such Producer's Production Right and Imported Water Return Flows.
"3.5.40 Replacement Water. Water purchased by the Watermaster or otherwise provided to satisfy a Replacement Obligation.
"3.5.41 Replacement Water Assessment. The amount charged by the Watermaster to pay for all costs incurred by the Watermaster related to Replacement Water."
"3.5.52 Watermaster. The Person(s) appointed by the Court to administer the provisions of this Judgment."
The Physical Solution mentions Phelan only once by name. The reference appears in Paragraph 6, which generally enjoins all parties from pumping, capturing, and/or transporting groundwater from the basin without specific authorization under the terms of the judgment. The relevant provision reads:
"6.4.1.2 The injunction does not apply to any Groundwater Produced within the Basin by Phelan Piñon Hills Community Services District and delivered to its service areas, so long as the total Production does not exceed 1, 200 acre-feet per Year, such water is available for Production without causing Material Injury, and the District [i.e., Phelan] pays a Replacement Water Assessment pursuant to Paragraph 9.2, together with any other costs deemed necessary to protect Production Rights decreed herein, on all water Produced and exported in this manner."
Paragraph 9.2 explains how the replacement water assessment procedure works and how the assessment is calculated. Basically, the amount of a party's excess production is multiplied by the current price of replacement water. According to the final statement of decision, "the replacement assessment is imposed uniformly on all existing producers in the Basin that produce more than their available allocation in any given year." As of late 2015, "a replacement assessment for an acre foot of water would be approximately $310."
Paragraph 9.2 states, in relevant part, "Except as is determined to be exempt during the Rampdown period pursuant to the Drought Program provided for in Paragraph 8.4, the Watermaster shall impose the Replacement Water Assessment on any Producer whose Production of Groundwater from the Basin in any Year is in excess of the sum of such Producer's Production Right and Imported Water Return Flow available in that Year, provided that no Replacement Water Assessment shall be imposed on the United States except upon the United States' written consent …." Phelan submits "[n]othing in Section 9.2 addresses the mechanism by which a Replacement Water Assessment owed by Phelan will be assessed or how the amount of the assessment will be determined." Since Phelan was found to have neither a production right nor imported water return flows, we assume for purposes of this discussion that its financial obligation is, at a minimum, equal to the amount of its annual production in acre feet of water multiplied by the price of replacement water.
The Physical Solution requires most parties to gradually decrease their annual production from prejudgment levels. The so-called "Rampdown" period lasts seven years, from 2016 to 2023. The relevant provisions, omitting those concerning the "Drought Program" for the Public Water Suppliers, are as follows:
"8. RAMPDOWN
"8.1 Installation of Meters. Within two (2) Years from the entry of this Judgment all Parties other than the Small Pumper Class shall install meters on their wells for monitoring Production. Each Party shall bear the cost of installing its meter(s). Monitoring or metering of Production by the Small Pumper Class shall be at the discretion of the Watermaster, subject to the provisions of Paragraph 5.1.3.2.
"8.2 Rampdown Period. The 'Rampdown Period' is seven Years beginning on the January 1 following entry of this Judgment and continuing for the following seven (7) Years.
"8.3 Reduction of Production During Rampdown. "During the first two Years of the Rampdown Period no Producer will be subject to a Replacement Water Assessment. During Years three through seven of the Rampdown Period, the amount that each Party may Produce from the Native Safe Yield will be progressively reduced, as necessary, in equal annual increments, from its Pre-Rampdown Production to its Production Right. Except as is determined to be exempt during the Rampdown period pursuant to the Drought Program provided for in Paragraph 8.4, any amount Produced over the required reduction shall be subject to Replacement Water Assessment. The Federal Reserved Water Right is not subject to Rampdown."
Initial Disputes re: Paragraph 8.3
The Physical Solution provides for the trial court to retain "full jurisdiction, power and authority for the purpose of enabling [it], upon a motion of a Party or Parties ..., to make such further or supplemental order or directions as may be necessary or appropriate to interpret, enforce, administer or carry out" the judgment. Paragraph 20.3 specifies that any "action, decision, rule, regulation, or procedure of [the] Watermaster" is subject to review by the trial court "on its own motion or on timely motion by any Party ...." In February 2018, the trial court ruled on three such motions brought by the Watermaster, the Public Water Suppliers, and a landowner named Clan Keith Real Estate Investments, LLC (Clan Keith). The ruling is not at issue in this appeal, but Phelan relies on it to support its arguments herein.
The February 2018 ruling provides the following background information:
"All three of the motions in one form or other essentially address the same issue: whether the provisions of Section 8.3 of the Judgment and Stipulation apply to only the parties listed in Exhibit 4 to the Judgment or whether certain other parties also are accorded the benefit of the limitations on imposition of the Replacement Water Assessments during the rampdown period. [Fn. omitted].
"Thus, the issue is whether the [sic] during the years three through seven, commencing January 1, 2018, if the public water producers reduce pumping in equal annual increments until each reaches the production rights set forth in Exhibit 3 to the Judgment at the conclusion of the ramp down period, December 31, 2023 may the Watermaster assess replacement water charges pursuant to Section 9.2 for the difference between the post-rampdown production right and the amount actually pumped or may the public water producers pump an annually reduced amount for those five years paying only if they exceed [t]he reduced quantity for the year."
Clan Keith's motion concerned its alleged entitlement to "the benefit of the provisions" of Paragraph 8.3 despite not being among the parties listed in exhibit 3 or exhibit 4. Clan Keith was classified as a "Supporting Landowner Party" in the judgment and final statement of decision. As stated in the latter document, it was one of "a limited number of parties not signatory to, but supportive of," the Physical Solution.
The trial court's ruling focused on the provisions concerning years 3-7 of the rampdown period. However, it also interpreted the first sentence of Paragraph 8.3, i.e., "During the first two Years of the Rampdown Period no Producer will be subject to a Replacement Water Assessment." The ruling says this language "clearly places all water producers, both Exhibit 3 and Exhibit 4 parties, and supporting but non-stipulating parties who are bound by the judgment, within the provisions of 8.3." The ruling further states, "The specification that 'during the first two years of the Rampdown Period no producer shall be subject to a Replacement Water Assessment …,' (emphasis added) is unqualified. It does not limit the definition of 'producers' to landowner or overlying owner parties."
The Present Dispute
On January 24, 2018, while the above-discussed motions were pending, the Antelope Valley Watermaster (Watermaster) adopted a resolution to impose a replacement water assessment against Phelan for the water it had pumped from the basin in 2016 and 2017. In doing so, the Watermaster concluded Phelan was not entitled to the two-year exemption set forth in Paragraph 8.3. On March 20, 2018, Phelan filed a motion for declaratory relief "regarding its rights and obligations under the [AVGC judgment] … and Watermaster Resolution No. R-18-04 regarding the payment of Replacement Water Assessments by Phelan for 2016 and 2017." Phelan asked the trial court to find "that the Judgment does not obligate Phelan to pay Replacement Water Assessments for 2016 and 2017 and that Watermaster Resolution No. R-18-04 is invalid and of no force and effect because it is inconsistent with the [j]udgment."
Phelan relied on the first sentence of Paragraph 8.3: "During the first two Years of the Rampdown Period no Producer will be subject to a Replacement Water Assessment." Phelan's rationale was as follows: "The 'first two Years of the Rampdown Period' are calendar years 2016 and 2017. [Citations to ¶ 3.5.55 & ¶ 8.2.] A 'Producer' is a 'Party who Produces Groundwater.' [Citation to ¶ 3.5.30.] Phelan is a 'Party,' and Phelan [']Produces Groundwater.' [Citations.] As such, Phelan is a 'Producer,' and pursuant to the express terms of the Judgment, Producers are not subject to Replacement Water Assessments for 2016 and 2017." Phelan also relied on the trial court's February 2018 ruling, arguing "Producer" had already been found to be an "unqualified" term.
Separate oppositions were filed by the Watermaster and District 40 (on behalf of itself and five other Public Water Suppliers). One of the Public Water Suppliers, Palmdale Water District, also summarily joined in the Watermaster's opposition.
The opposing parties argued the exemption in Paragraph 8.3 is impliedly restricted to parties with production rights as defined in Paragraph 3.5.32. They relied in part on Paragraph 6.4.1.2, noting Phelan's continued production of groundwater from Well 14 is conditioned upon its payment for all water extracted from the basin. The Watermaster reasoned, "[T]o find that Phelan has no duty to pay Replacement Water Assessments for its Production in 2016 and 2017 is to allow Production that unquestionably contributes to Overdraft ...." District 40 likewise claimed "it is inarguable that Phelan's pumping harms the Basin and that any pumping of water by Phelan that is not mitigated via replacement water funded by a replacement water assessment will harm the Basin."
The oppositions partially relied on extrinsic evidence, i.e., statements of decision that had not been incorporated into the judgment. (See Key v. Tyler (2019) 34 Cal.App.5th 505, 533, fn. 14 [characterizing a statement of decision as "relevant extrinsic evidence of the scope of the court's prior decision"].) The Watermaster and District 40 both proffered the trial court's final statement of decision from December 2015. District 40 also proffered the trial court's February 2015 statement of decision regarding the Stage One trial of Phelan's claims.
On April 18, 2018, Phelan's motion was heard and taken under submission. On April 27, 2018, the trial court issued a seven-page order denying the motion. The trial court acknowledged the facially unambiguous wording of the two-year exemption, but it concluded "the second sentence of [Paragraph 8.3] makes clear to whom the relief applies." As previously discussed, the second sentence reads: "During Years three through seven of the Rampdown Period, the amount that each Party may Produce from the Native Safe Yield will be progressively reduced, as necessary, in equal annual increments, from its Pre-Rampdown Production to its Production Right."
The trial court ruled the two-year exemption in Paragraph 8.3 applies only "to parties having a right to pump from the native yield but who also have a duty to reduce pumping." In reaching this conclusion, the trial court found it "necessary to consider the court's statements of decisions, the evidence upon which the court based the approval of the [P]hysical [S]olution, and the entirety of the [P]hysical [S]olution and the judgment."
The trial court's ruling focuses on Phelan's lack of rights vis-à-vis the native safe yield, i.e., the lack of a production right as defined in Paragraph 3.5.32 and "described in Paragraphs 5.1 et s[e]q." of the Physical Solution. Phelan's obligation "to pay for water to replace all water it pumps out of the [AVAA]" is repeatedly noted. On a related point, the ruling states:
"The rights granted to Phelan were only to be a purchaser of water so that its use could not impact the status of the aquifer. No expert opinion quantified Phelan's water use as either a plus or a minus-it was intended to have no net impact. If, as it requests, it is not required to pay for water pumped during 2016 and 1017 [sic], its pumping would contribute to the overdraft by pumping water to which it has no right."
The trial court also found it significant that Phelan is not required to reduce its prejudgment production of groundwater, concluding "Phelan received no burdens (other than the water assessment) and would receive no benefits from the stipulation since it had no reduction obligations and was neither a stipulating nor a supporting party to the [P]hysical [S]olution or the judgment. "
The trial court's ruling uses the terms "stipulation" and "physical solution" interchangeably, both in reference to the Physical Solution.
Phelan's timely notice of appeal was filed in May 2018. Briefing was deferred until earlier this year (2021) pending the resolution of separate appeals challenging the merits of the AVGC judgment. The lone respondent's brief in this matter was filed by the Watermaster, to which Palmdale Water District filed a statement of joinder.
DISCUSSION
I. Standard of Review
"Stipulated judgments are interpreted according to ordinary contractual principles." (Sargon Enterprises, Inc. v. University of Southern California (2013) 215 Cal.App.4th 1495, 1508; accord, Mendly v. County of Los Angeles (1994) 23 Cal.App.4th 1193, 1205 ["The same rules apply in ascertaining the meaning of a court order or judgment as in ascertaining the meaning of any other writing"].) "In the absence of extrinsic evidence, we may interpret them as a matter of law." (Sargon Enterprises, Inc., at p. 1508.) "If parol evidence is admitted and is in conflict, the substantial evidence test applies." (Roden v. Bergen Brunswig Corp. (2003) 107 Cal.App.4th 620, 625.)
"When the admissible extrinsic evidence is not conflicting, 'construction of the instrument is a question of law, and the appellate court will independently construe the writing.'" (SLPR, LLC v. San Diego Unified Port Dist. (2020) 49 Cal.App.5th 284, 300.) Although Phelan disputes the admissibility of extrinsic evidence to interpret the judgment, there were no associated conflicts for the trial court to resolve. Therefore, the standard of review is de novo.
II. Law and Analysis
"The goal of contract interpretation is to effectuate the mutual intent of the parties as it existed at the time of contracting insofar as it is ascertainable and lawful." (County of Fresno v. Fresno Deputy Sheriff's Assn. (2020) 51 Cal.App.5th 282, 292.) "When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible …." (Civ. Code, § 1639.) "'We consider the contract as a whole and construe the language in context, rather than interpret a provision in isolation.'" (Starlight Ridge South Homeowners Assn. v. Hunter-Bloor (2009) 177 Cal.App.4th 440, 447.) "'"If contractual language is clear and explicit, it governs."'" (In re Marriage of Hibbard (2013) 212 Cal.App.4th 1007, 1013; accord, Civ. Code, § 1638; see Securitas Security Services USA, Inc. v. Superior Court (2015) 234 Cal.App.4th 1109, 1125 ["The parties' expressed objective intent, not their unexpressed subjective intent, governs"].)
"The proper interpretation of a contract is disputable if the contract is susceptible of more than one reasonable interpretation, that is, if the contract is ambiguous." (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 114.) Phelan reasserts the "plain meaning" argument it made below, insisting the two-year exemption language of Paragraph 8.3 is unambiguous and opposing any use of extrinsic evidence to resolve the parties' dispute. Our de novo analysis thus begins with the question of ambiguity. (See Appleton v. Waessil (1994) 27 Cal.App.4th 551, 554 [the "threshold determination of ambiguity is a question of law"]; accord, Roden v. Bergen Brunswig Corp., supra, 107 Cal.App.4th at p. 625.)
"[T]he 'meaning of language is to be found in its applications. An indeterminacy in the application of language signals its vagueness or ambiguity. An ambiguity arises when language is reasonably susceptible of more than one application to material facts.'" (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 391.) "Accordingly, '[e]ven if a contract appears unambiguous on its face, a latent ambiguity may be exposed by extrinsic evidence which reveals more than one possible meaning to which the language of the contract is yet reasonably susceptible.'" (Ibid.)
"Ambiguity is defined as 'an unclear, indefinite, or equivocal word, expression, meaning, etc.' [Citation.] A word or expression is said to be ambiguous when it is 'open to having several possible meanings or interpretations.'" (Rancho Pauma Mutual Water Co. v. Yuima Municipal Water Dist. (2015) 239 Cal.App.4th 109, 117.) "If the court determines that the contract is reasonably susceptible of an interpretation supported by extrinsic evidence, the court must admit that evidence for purposes of interpreting the contract." (Fremont Indemnity Co. v. Fremont General Corp., supra, 148 Cal.App.4th at p. 114.)
"'The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible.'" (Dore v. Arnold Worldwide, Inc., supra, 39 Cal.4th at p. 391.) We thus engage in a two-step process: "The first is to review the proffered material regarding the parties' intent to see if the language is 'reasonably susceptible' of the interpretation urged by a party. [Citation.] If that question is decided in the affirmative, the extrinsic evidence is then [considered] to aid in the second step, which involves actually interpreting the contract." (Appleton v. Waessil, supra, 27 Cal.App.4th at p. 554.)
For ease of reference, we again provide an excerpt from the Physical Solution in which the disputed language appears. We have italicized the provision at issue:
"8.2 Rampdown Period. The 'Rampdown Period' is seven Years beginning on the January 1 following entry of this Judgment and continuing for the following seven (7) Years.
"8.3 Reduction of Production During Rampdown. During the first two Years of the Rampdown Period no Producer will be subject to a Replacement Water Assessment. During Years three through seven of the Rampdown Period, the amount that each Party may Produce from the Native Safe Yield will be progressively reduced, as necessary, in equal annual increments, from its Pre-Rampdown Production to its Production Right. Except as is determined to be exempt during the Rampdown period pursuant to the Drought Program provided for in Paragraph 8.4, any amount Produced over the required reduction shall be subject to Replacement Water Assessment. The Federal Reserved Water Right is not subject to Rampdown." (Italics added.)
Elsewhere in the writing, the term "Producer" is defined as a "Party who Produces Groundwater." To "Produce" means "[t]o pump Groundwater for existing and future reasonable beneficial uses." The phrase "reasonable beneficial uses" is not defined, and Phelan itself has cited to extrinsic evidence to argue its production constitutes "a reasonable and beneficial use" of groundwater. While there does not appear to be any dispute on that point, the opposing parties submitted extrinsic evidence (i.e., prior statements of decision) to argue there are distinguishing characteristics between Phelan and all other "Producers" that demonstrate an implied intent to exclude Phelan from the exemption.
In its final statement of decision, the trial court found the basin "has been in a state of overdraft with no surplus water available for pumping for the entire duration of Phelan's pumping (i.e., since at least 2005)...." More specifically, "there is no surplus available" for Phelan. The trial court also found Phelan's unmitigated groundwater production "negatively impacts" the basin and "invade[s] other parties' [b]asin rights."
The final statement of decision explains, "The Physical Solution permits Phelan to pump up to 1, 200 AFY from the Basin and deliver the pumped water outside of the Basin for use in the Phelan service area if that amount of water is available without causing material injury and provided that Phelan pays a replacement water assessment. (Physical Solution, ¶ 6.4.1.2.) This allocation and the correlating assessment are fair and reasonable in light of findings made by the Court."
Neither the Physical Solution nor the final statement of decision indicate whether the allotment of 1, 200 afy constitutes a reduction of Phelan's prejudgment pumping from Well 14. However, the additional evidence proffered by the Public Water Suppliers (the February 2015 statement of decision) reveals the annual production from Well 14 through the year 2013 never exceeded 1, 111 acre-feet of water. In other words, the extrinsic evidence shows Phelan is not required to reduce its prejudgment levels of production.
The provision establishing a two-year exemption from replacement water assessments appears within and between paragraphs concerning the rampdown period. It immediately precedes a sentence concerning "the amount that each Party may Produce from the Native Safe Yield" while progressively reducing pumping from "Pre-Rampdown Production" levels. Those circumstances prompt a natural inquiry into how the two-year exemption relates to the rampdown. The question arises even when the paragraph headings are ignored.
Paragraph 20.12 of the Physical Solution states, "Captions and headings appearing in this Judgment are inserted solely as reference aids for ease and convenience; they shall not be deemed to define or limit the scope or substance of the provisions they introduce, nor shall they be used in construing the intent or effect of such provisions." Therefore, the exemption language in Paragraph 8.3 must be interpreted without consideration of the heading under which it is found ("Reduction of Production During Rampdown"). Phelan argues "reference to the Rampdown Period simply defines a period of time during which no Producer will pay a Replacement Water Assessment."
"Rampdown" is defined as the "period of time for Pre-Rampdown Production to be reduced to the Native Safe Yield in the manner described in this Judgment." Cross-referencing the definition of "Pre-Rampdown Production," we see this term means the "reasonable and beneficial use of Groundwater, excluding Imported Water Return Flows, at a time prior to this Judgment, or the Production Right, whichever is greater." It thus appears the sole purpose of the rampdown is to reduce groundwater production. But as discussed above, Phelan is not required to reduce its "Pre-Rampdown Production" during or after the "Rampdown Period."
The fact Phelan is not required to participate in the rampdown-despite the findings that its groundwater production negatively impacts the AVAA-calls into question whether the two-year exemption was intended to apply to Phelan. Adding to the uncertainty is a reference in the same paragraph (¶ 8.3) to "the amount that each Party may Produce from the Native Safe Yield" when Phelan was found not to possess any such production rights. Since all surrounding language concerns the rampdown, the exemption provision is "'reasonably susceptible' of the interpretation urged by" the opposing parties. (Appleton v. Waessil, supra, 27 Cal.App.4th at p. 554.) This latent ambiguity allows us to consider the entire record to interpret the judgment. (See SLPR, LLC v. San Diego Unified Port Dist., supra, 49 Cal.App.5th at p. 299 ["'If an order [or judgment] is ambiguous, the reviewing court may examine the record for its scope and effect and may look at the circumstances of its making'"]; John Siebel Associates v. Keele (1986) 188 Cal.App.3d 560, 565 ["In case of doubt regarding the meaning or consequence of a judgment, or any part of it, the whole record may be examined to ascertain the meaning"].)
Phelan recites the principle that "a contract entered into for the mutual benefit of the parties is to be interpreted so as to give effect to the main purpose of the contract and not to defeat the mutual objectives of the parties." (County of Marin v. Assessment Appeals Bd. (1976) 64 Cal.App.3d 319, 325, italics omitted.) Phelan also relies on Civil Code section 1643: "A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties." (Italics added.) These are relevant considerations, but they do not weigh in favor of Phelan's position.
To determine intentions regarding the execution of a contract, "the court may look to the circumstances surrounding the making of the agreement, including the object, nature, and subject matter of the writing, and thereby 'place itself for this purpose in the same situation in which the parties found themselves at the time of contracting. [Citations]." (Dunne & Gaston v. Keltner (1975) 50 Cal.App.3d 560, 564.) "The construction given the contract by the acts and conduct of the parties with knowledge of its terms, and before any controversy arises as to its meaning, is relevant on the issue of the parties' intent." (Southern Pacific Transportation Co. v. Santa Fe Pacific Pipelines, Inc. (1999) 74 Cal.App.4th 1232, 1242.)
The record shows Phelan not only declined to stipulate to the Physical Solution but actively oppose d the Physical Solution. In doing so, Phelan complained about being required to "pay an assessment for 100% of the water it pumps." As between Phelan and the stipulating parties, the only mutual objective inferable from the record is preservation of the groundwater supply and the prevention of further overdraft. However, the proposed Physical Solution was submitted for the trial court's approval after a finding had been made that Phelan's pumping "negatively impacts" the basin and the AVAA.
As the trial court observed during the motion hearing and in the challenged order, Paragraph 5.1.10 of the Physical Solution generally reflects an intent to limit the applicability of all benefits therein to the stipulating parties:
"5.1.10 Production Rights Claimed by Non-Stipulating Parties. Any claim to a right to Produce Groundwater from the Basin by a Non-Stipulating Party shall be subject to procedural or legal objection by any Stipulating Party. Should the Court, after taking evidence, rule that a Non-Stipulating Party has a Production Right, the Non-Stipulating Party shall be subject to all provisions of this Judgment, including reduction in Production necessary to implement the Physical Solution and the requirements to pay assessments, but shall not be entitled to benefits provided by Stipulation, including but not limited to Carry Over pursuant to Paragraph 15 and Transfers pursuant to Paragraph 16...." (Italics added.)
Phelan argues the words ""including but not limited to'" should be disregarded because "the failure to identify any other specific benefits denied to Non-Stipulating Parties and Non-Supporting Parties would render Section 5.1.10 unconstitutionally vague, a denial of due process, if it were applied to other aspects of the Judgment." We are not concerned with the legality of Paragraph 5.1.10 but rather its probative value with respect to the intentions of those who drafted the Physical Solution, i.e., the stipulating parties.
Further evidence of intent is found in the original Stipulation from March 2015. Again, the relevant excerpt is as follows:
"The Stipulating Parties, in order to protect the Basin from over-pumping, have stipulated and agreed to the terms of the Judgment and have agreed to substantial cuts to water allocation compared with what they claim under California law, and in the case of the United States, also under federal law. In return, the Stipulating Parties have agreed to provisions in the Physical Solution which are only available by stipulation. These provisions include, without limitation, the right to transfer Production Rights and the right to Carry Over rights from year to year, as set forth in the Judgment. Non- Stipulating Parties, or any other Parties contesting the Judgment, shall not be entitled to the benefit of these provisions, and shall have only the rights to which they may be entitled by law according to proof at trial ." (Italics added.)
In its Stage Two trial brief, Phelan argued "[n]o legal or other basis exists to support certain parties being excluded from some terms or benefits available in the Physical Solution. As a party subject to the ultimate Physical Solution for this case, Phelan should be entitled to Carry Over and Transfers like any other party." This evidence is relevant to show Phelan understood, long before the present dispute arose, that the stipulating parties intended to exclude it from the benefits of the Physical Solution. (See Southern Pacific Transportation Co. v. Santa Fe Pacific Pipelines, Inc., supra, 74 Cal. App.4th at p. 1242.) The quoted statements focused on benefits other than those provided in Paragraph 8.3, but a prominent issue in Stage Two was Phelan's opposition to paying "for every acre-foot of water [it] pumps from Well 14."
The Public Water Suppliers and other stipulating parties were adamantly opposed to Phelan pumping any amount of water from the basin without funding the purchase of replacement water to offset the production. The stipulating parties refused to agree to even a "discounted" assessment, claiming "[a]ny such discount would require the [trial] court to re-determine the basin's safe yield." In a separate filing responsive to Phelan's trial brief, the Public Water Suppliers argued, "Phelan declined to participate in the stipulation, and therefore is not entitled to any benefits that arise solely by reason of the stipulation." (Italics added.)
It would be unreasonable to conclude the stipulating parties intended to gratuitously confer hundreds of thousands of dollars in benefits to a nonstipulating, nonsupporting party with no rights to the subject groundwater, especially when doing so would result in the further unmitigated extraction of water from an overdrafted basin. (See Civ. Code, § 1647 ["contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates"]; SLPR, L. L. C. v. San Diego Unified Port Dist., supra, 49 Cal.App.5th at p. 299 [when interpreting ambiguous language in a judgment, the reviewing court "'may look at the circumstances of its making'"].) It is also unreasonable to infer such an intent by the trial court. In its final statement of decision, the trial court described the aquifer as being "so severely overdrafted … that existing pumping must be limited and constraints on new pumping are required in the Physical Solution." There is no evidence to suggest the trial court intended to worsen existing overdraft conditions by allowing Phelan to maintain its unmitigated production for another two years.
Phelan alleges the challenged ruling is inconsistent with the views expressed by the trial court in February 2018, when it was first called upon to interpret Paragraph 8.3. The argument is superficially persuasive. The trial court initially said the two-year exemption provision is "unqualified" but subsequently ruled it "is not unqualified." The earlier ruling is not binding (see Shaw v. County of Santa Cruz (2008) 170 Cal.App.4th 229, 248, fn. 23 [law-of-the-case doctrine does not apply to trial court decisions]), but "[s]ubsequent actions by the rendering judge may be considered as bearing upon the judgment's intended meaning and effect" (People v. Landon White Bail Bonds (1991) 234 Cal.App.3d 66, 76).
In the earlier proceeding, the trial court described the issue as being "whether the provisions of Section 8.3 … apply to only the parties listed in Exhibit 4 to the Judgment or whether certain other parties also are accorded the benefit of the limitations on imposition of the Replacement Water Assessments during the rampdown period." (Italics added.) Put differently, the question considered was whether Paragraph 8.3 applies to the parties listed in exhibit 3 (primarily consisting of the Public Water Suppliers) and a nonstipulating landowner who was not listed in exhibit 4 (Clan Keith). All moving parties possessed production rights and were either stipulating parties (those listed in exhibits 3 and 4) or had supported the Physical Solution (Clan Keith).
In exchange for Clan Keith's support of the Physical Solution, the stipulating parties had included in the proposed judgment a production right for Clan Keith of "64 acre-feet per year." This production right, which was granted as proposed, was less than half of Clan Keith's average annual prejudgment production. In short, Clan Keith was/is required to participate in the rampdown.
The trial court's February 2018 ruling describes 2016 and 2017 as years "during which all stipulating producers may pump from the aquifer without a water replacement assessment." (Italics added.) The next sentence concludes the two-year exemption language "clearly places all water producers, both Exhibit 3 and Exhibit 4 parties, and supporting but non-stipulating parties who are bound by the judgment, within the provisions of 8.3." (Italics added.) All subsequent remarks about the "unqualified" nature of the provisions in Paragraph 8.3 are plainly in reference to those groups of stipulating and "supporting" parties. In reaching its conclusions, the trial court considered whether the moving parties were obligated to reduce their prejudgment production levels. When read in context, the decision does not contemplate the exemption being applied to a nonstipulating party or nonsupporting party with no production rights and no rampdown obligations. It is evident the trial court was not yet aware of the latent ambiguity, i. e., it had not considered the possibility that Phelan would attempt to claim entitlement to the exemption.
The February 2018 ruling as to Clan Keith's entitlement to the exemption is arguably in tension with Paragraph 5.1.10 of the Physical Solution. Clan Keith's production right was granted pursuant to Paragraph 5.1.10, which states that when such rights are conferred upon a nonstipulating party, the party "shall not be entitled to benefits provided by Stipulation." However, the merits of the February 2018 ruling are not at issue in this appeal. The ruling is relevant only insofar as it may reveal the trial court's intentions in December 2015, when it adopted the stipulated judgment as its own, and we have concluded it does not show the trial court ever intended for the benefits of Paragraph 8.3 to apply to Phelan.
Next, Phelan argues its "lack of a 'water right' in the traditional sense" and the fact it is not required to reduce its production are arbitrary distinctions. Phelan also observes Paragraph 8.3 already presumes excess pumping will occur during the "grace period" because none of the producers are subject to assessments during those two years. We have explained why Phelan's lack of involvement in the rampdown is probative. As for its lack of a production right, the trial court found Phelan's unmitigated pumping not only harms the basin but also "invade[s] other parties' [b]asin rights." And while excess pumping by stipulating parties could be expected to perpetuate overdraft conditions in the first two years of the rampdown, the "grace period" is a benefit those parties drafted for themselves "[i]n return" for their agreement to the terms of the judgment-including the reduction of prejudgment production. Although some stipulating parties were not required to reduce their production, all of them stipulated to the judgment.
Phelan's attempt to compare itself to Boron Community Services District (Boron) is unavailing. The opening brief states, "[Boron] also transports water out of the adjudication area, just like Phelan, but it is not excluded from the Replacement Water Assessment grace period by virtue of that fact." Unlike Phelan, Boron is one of the stipulating parties, it has a production right, and it is required to participate in the rampdown by reducing its prejudgment levels of groundwater production.
We are also unmoved by Phelan's argument that the basin is projected to "come into balance" by the end of 2023 with or without the purchase of replacement water to offset its production in 2016 and 2017. Preservation of the water supply was not the sole objective of the stipulating parties or the trial court. The trial court, for example, was very concerned about preventing future land subsidence caused by overdraft conditions. During Stage One, Phelan proffered expert testimony to show the groundwater levels in the Butte subbasin (the region of the AVAA in which Well 14 is located) have remained relatively stable for decades "and there is no land subsidence in the Butte subbasin." Despite this evidence, the trial court found Phelan's pumping "negatively impacts" the entire AVAA. While it is true the trial court agreed to the stipulating parties' delayed mitigation of overdraft conditions during the rampdown period, it does not follow that the court intended for Phelan to further contribute to the problem of overdraft.
In its reply brief, Phelan bizarrely contends its pumping has a positive impact on the AVAA because "it keeps 500 acre-feet per year from leaving the basin and actually benefits the basin." The contention is indefensible. Phelan is referencing the Phase 6 testimony of an expert witness but ignoring the clarification provided by the witness during cross-examination by Phelan's counsel: "There's a benefit to the basin of 500 [afy]. But on the other hand, there's 1, 200 [afy] going out and being exported … so that's the 700 [afy net reduction in the groundwater supply]." (Some capitalization omitted.) We summarized the testimony in Antelope Valley Groundwater Cases, supra, 59 Cal.App. 5th at page 262, explaining the expert "concluded such pumping from Phelan's Well 14 [i.e., 1, 200 afy] would cause the AVAA to have a net loss to the AVAA groundwater supplies of 700 afy." We went on to hold "there is substantial evidence Phelan's pumping harms the AVAA basin's water balance." (Id. at p. 266.)
Lastly, Phelan attempts to invoke Civil Code section 1654: "In cases of uncertainty not removed by the preceding rules, the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist." The argument fails because "this canon applies only as a tie breaker, when other canons fail to dispel uncertainty." (Pacific Gas & Electric Co. v. Superior Court (1993) 15 Cal.App.4th 576, 596; accord, Oceanside 84, Ltd. v. Fidelity Federal Bank (1997) 56 Cal.App.4th 1441, 1448.) For the reasons we have discussed, including consideration of the entire writing (see Civ. Code, § 1641), the circumstances under which it was made (id., § 1647), and all other relevant evidence in the record, it is apparent that neither the drafters of the stipulated judgment nor the trial court itself intended for the provisions of Paragraph 8.3 to apply to Phelan.
DISPOSITION
The trial court's order of April 27, 2018, denying the declaratory relief requested by Phelan Piñon Hills Community Services District, is affirmed. The parties shall bear their own respective costs on appeal.
WE CONCUR: SMITH, J., SNAUFFER, J.
[*] Los Angeles County Waterworks District No. 40 v. Diamond Farming Co. (Super. Ct. Los Angeles County, No. BC325201); Los Angeles County Waterworks District No. 40 v. Diamond Farming Co. (Super. Ct. Kern County, No. S-1500-CV254348); Wm. Bolthouse Farms, Inc. v. City of Lancaster (Super. Ct. Riverside County, No. RIC353840); Diamond Farming Co. v. City of Lancaster (Super. Ct. Riverside County, No. RIC344436); Diamond Farming Co. v. Palmdale Water Dist. (Super. Ct. Riverside County, No. RIC344668); Willis v. Los Angeles County Waterworks District No. 40 (Super. Ct. Los Angeles County, No. BC364553); Wood v. Los Angeles County Waterworks District No. 40 (Super. Ct. Los Angeles County, No. BC391869).