Opinion
Hearing Granted March 14, 1946.
Appeal from Superior Court, Calaveras County; A. I. Pierovich, Judge.
Action by Rock Creek Water District against County of Calaveras to recover taxes paid under protest. Judgment for plaintiff, and defendant appeals.
Judgment affirmed.
Virgil M. Airola, Dist. Atty., of San Andreas, for appellant.
C. R. Montgomery, of Sacramento, for respondent.
OPINION
ADAMS, Presiding Justice.
Plaintiff brought this action to recover from defendant taxes paid under protest. The complaint alleged (paragraph I) that plaintiff was ‘a public agency of the State of California,’ organized under the provisions of the California Water District Act, Stats.1913, p. 815, and amendments, its territory lying within the county of stanislaus; (paragraph III) that it was the owner in fee simple of certain described property in Calaveras County, which property had been assessed for taxes for the year 1942-1943 in the sum of $96; that plaintiff had paid said taxes under protest, claiming that said property was exempt from taxation under the provisions of Article XIII, section 1, of the Constitution of California.
Defendant duly answered said complaint and specifically admitted the allegations of paragraph I; but regarding paragraph III denied that plaintiff was the owner in fee simple of the property described in its complaint, and alleged that it was the owner of but a qualified title which was subject to termination by virtue of an agreement under which it acquired title, and because said agreement and a deed of same date were executed and delivered without the consent of the Railroad Commission; and that its property was not exempt, ‘by virtue of the method and manner in which same was agreed to be transferred and conveyed in and by said agreement and deed aforesaid.’
On the trial of the issues thus presented documentary evidence was introduced and certain stipulations entered into which show the facts to be as follows.
Plaintiff district is a water district organized under the California Water District Act, aforesaid, and lies entirely within Stanislaus County, but the property which was the subject of the tax in question lies within Calaveras County, and consists of a reservoir system. Shortly after the organization of the district, and on May 12, 1941, it entered into an agreement with R. G. Kann, who was trustee for the former stockholders of a corporation which had owned the reservoir system, to purchase said system. Kann secured from the Railroad Commission an order approving the agreement and authorizing the sale ‘substantially’ in accordance with the agreement. Subsequently and on February 27, 1942, plaintiff and Kann entered into a new agreement rescinding that of May 12, 1941, providing for the immediate conveyance of the reservoir system; and on the same date a grant deed under which plaintiff claims fee simple title was executed and delivered to it. The deed recited that it was made in consideration of the agreement of the district to make punctual payments at the times stated therein, and on the express condition that in the event of default in the making of any such payment the grantor might elect to declare the deed void, whereupon the whole property should revert to the grantor and the amounts paid be retained as liquidated damages and rental. The deed was filed with the Railroad Commission on March 11, 1942. It was stipulated that all payments due to date of trial had been paid by the district.
The trial court made findings substantially in accord with the foregoing, and also found that it was not true that Kann, as trustee, was the ‘real or equitable or beneficial owner of the property,’ but that the plaintiff was such owner. It also found that the sale was made in accordance with the order and authorization of the Railroad Commission. Its conclusions of law were that plaintiff was a ‘public agency of the State of California,’ and that the property in controversy was exempt from taxation under the provisions of Article XIII, section 1, of the Constitution of California. Judgment for plaintiff was entered accordingly, and defendant was enjoined from further assessing the property described in the complaint.
On this appeal it is first contended by appellant that plaintiff is not a ‘state agency,’ but is a municipal corporation as that term is used in Article XIII, section 1, of the Constitution; and that, though property owned by the state or by any county, city and county, or municipal corporation is exempt from taxation under the aforesaid constitutional provision, nevertheless the property upon which the tax in controversy was levied comes within the exception of ‘such lands and the improvements thereon located outside of the county, city and county or municipal corporation owning the same.’ This contention is in direct conflict with defendant’s answer in which it admitted the allegation of paragraph I of the complaint that plaintiff was a ‘public agency of the State.’ But aside from such admission there is ample authority for holding that water districts formed under the Act of 1913 under which plaintiff district was formed, Stats.1913, p. 815, are agencies of the state and not municipal corporations within the meaning of the above mentioned constitutional provision. In Turlock Irrigation District v. White, 186 Cal. 183, 198 P. 1060, 17 A.L.R. 72, it was held that an irrigation district is a state agency and exempt as such under Article XIII, section 1, of the Constitution, and not a municipal corporation whose property, ‘located outside of the county, city and county or municipal corporation owning the same,’ is not exempt. The court there said: 186 Cal. page 187, 198 P. page 1062, 17 A.L.R. 72:
‘The nature of an irrigation district has been a matter of judicial investigation and interpretation, and it has been held that such a corporation is not a municipal corporation, but a ‘public corporation for municipal purposes.’ Fallbrook Irr. Dist. v. Bradley, 164 U.S. 112, 17 S.Ct. 56, 41 L.Ed. 369, [ see, also Rose’s U.S. Notes]. As to swampland, drainage, levee, and reclamation districts, similar to irrigation districts, it has been held that they were not municipal corporations. People ex rel. v. Levee Dist. No. 6, 131 Cal. 30, 63 P. 676; People ex rel. v. Sacramento Drainage Dist., 155 Cal. 373, 103 P. 207; Swamp Land Dist. No. 150 v. Silver, 98 Cal. 51, 32 P. 866; and Reclamation Dist. No. 70 v. Sherman, 11 Cal.App. 399, 105 P. 277. See, also, People v. Selma Irr. Dist., 98 Cal. 206, 208, 32 P. 1047, and cases there cited. The amendment in question must be considered to have been framed and submitted to the people with these decisions in mind, by which it was settled that such corporations were not ‘municipal corporations."
And in Laguna Beach County Water District v. County of Orange, 1939, 30 Cal.App.2d 740, 745, 87 P.2d 46, it was held that a county water district formed under the Act of 1913, Stats.1913, p. 1049, lacks the broad legislative, executive and judicial powers of a municipal corporation and that it is not a municipal corporation as that term is technically used in the laws of the state; and that plaintiff district was not subject to the tax imposed by the County of Orange upon its property in that county not lying within the water district. Petition for hearing in the Supreme Court was denied. Also see The Housing Authority v. Dockweiler, 14 Cal.2d 437, 453, 94 P.2d 794, in which plaintiff authority was held not to be a municipal corporation within the terms of the constitutional provision.
Appellant attempts to evade the force of the foregoing decisions by declaring that the rule in the former was erroneous, and that because the water district dealt with in the latter was formed under the Act of 1913, page 1049, the county water district act, while plaintiff district was formed under the act of 1913 found at page 815, plaintiff should be held to be a municipal corporation even though a county water district be held to be a state agency. However, there would seem to be less reason to hold districts formed under the latter act to be municipal corporations than to hold those under the former to be such corporations.
Water districts such as plaintiff are formed, not by and for the benefit of a whole county or a municipality, but by and for the benefit of the holders of title to lands susceptible of irrigation, and are formed for the sole purpose of irrigating the lands of such property owners. The act providing for their formation is substantially the same as that providing for the formation of irrigation districts, Stats.1897, p. 254, and the reasoning of the court in Turlock Irrigation District v. White, as to why irrigation districts are not to be included within the words ‘municipal corporations’ as used in the constitutional amendment of 1914, Art. XIII, sec. 1, supra, and the reasoning in such cases as hold that reclamation districts, drainage districts, flood control districts, and the like are not municipal corporations, is equally applicable here. See Reclamation Dist. No. 551 v. County of Sacramento, 134 Cal. 477, 66 P. 668, People v. Richards, 86 Cal.App. 86, 91, 260 P. 582, and cases cited in Turlock Irr. Dist. v. White, supra.
While it is argued, with some justification, perhaps, that there is just as much reason why lands owned by a water district and lying outside of the district itself should be taxed for the benefit of the county in which they are situated as there is for taxing lands similarly situated which are owned by a city, the constitutional provision does not in terms include such bodies as irrigation districts, water districts, reclamation districts, etc., and the fact remains that the Supreme Court has decided that districts formed for such purposes are not ‘municipal corporations’ within the meaning of that provision.
Appellant also argues that only such districts as had been held by the courts to be state agencies (and not municipal corporations) prior to the amendment of Article XIII, section 1, in 1914, should be held to be such state agencies, relying apparently upon the statement in the Turlock Irrigation District case, that the amendment must be considered to have been framed and submitted to the people with those decisions in mind. But section 1 of Article XIII was amended in 1944, the proposed amendment having been framed by the legislature, and adopted by the people May 16, 1944. All this was subsequent to the decision of the Supreme Court in Turlock Irrigation District v. White, 1921, Laguna Beach County Water District v. County of Orange, 1939, and The Housing Authority v. Dockweiler, 1939. Therefore, by the same reasoning the legislature must be considered to have framed the later amendment having in mind the aforesaid decisions including that holding that districts formed under the county water district act are not municipal corporations within the meaning of the language of thesection. Had it been intended that such districts should be brought within the scope of the constitutional provision we may assume that the legislature in framing the later amendment would have so provided.
Appellant also argues that in view of the decisions in In re Bonds of Orosi Public Utility District, 1925, 196 Cal. 43, 235 P. 1004, Morrison v. Smith Bros., Inc., 1930, 211 Cal. 36, 293 P. 53, and Metropolitan Water District v. County of Riverside, 1943, 21 Cal.2d 640, 134 P.2d 249, the words ‘municipal corporation’ as used in the constitutional provision should be construed to include all districts except irrigation, reclamation, swamp-land, drainage and levee districts, regardless of their purpose and the legislation under which such districts might be formed. But except that in the Metropolitan Water District case it was said that neither the Turlock nor the Orange County case may be accepted as an authoritative determination that a metropolitan water district, such as plaintiff in that action, was not a municipal corporation as that phrase is employed in the constitutional provision, there is nothing in any of those cases indicating that a district formed for irrigation purposes only, as is plaintiff in this action, is to be classed as a municipal corporation within the constitutional provision. Ample reasons for holding the utility districts dealt with in those cases to be municipal corporations and not state agencies, under the legislative enactments under which they were formed, are stated in the opinions; and the distinctions between them and districts formed for irrigation, reclamation and similar purposes are pointed out. In the Morrison case it was said, 211 Cal. page 44, 293 P. page 56: ‘We feel that sufficient has been said to show that such quasi-municipal corporations as respondent more closely resemble municipal corporations proper than they do state agencies, such as irrigation and reclamation districts.’ And it may properly be said here that districts such as plaintiff more closely resemble state agencies such as irrigation districts than they do such quasi-municipal corporations as utility districts. Even in the Housing Authority case it was said, 14 Cal.2d pages 453, 454, 94 P.2d 803:
‘Such an authority is not unlike an irrigation district which, though held not to be a municipal corporation within the meaning of the quoted constitutional provision, has been held to be a public corporation for municipal purposes whose property is exempt from taxation. Turlock Irr. Dist. v. White, 186 Cal. 183, 198 P. 1060, 17 A.L.R. 72; Anderson-Cottonwood Irr. Dist. v. Klukkert [13 Cal.2d 191], 88 P.2d 685. Similarly reclamation districts have been declared to be public agencies whose properties are likewise exempt from taxation. Reclamation Dist. v. County of Sacramento, 134 Cal. 477, 66 P. 668. In Laguna Beach Water Dist. v. Orange Co., 30 Cal.App.2d 740, 87 P.2d 46, 47, it is stated that ‘It must be conceded that it has always been the policy of the law in California since the adoption of the present Constitution, to exempt from taxation property of the state and state agencies generally classified as public corporations.’’
And in the Metropolitan Water District case it was pointed out that the district was formed by uniting several municipalities and a municipal water district, and that it would be unreasonable to interpret the constitutional provision as permitting cities to unite in a water district and thus secure an exemption which they would not be entitled to as individual municipalities. The Orosi and Morrison cases were there considered, but the distinction between irrigation and reclamation districts and those under consideration in those cases was again pointed out. We are unable to find any such distinction between districts formed under the Water District Act set forth in the Statutes of 1913 at page 815, and irrigation districts formed under the Act of 1897, p. 254, as justifies a holding that the former are municipal corporations within the meaning of Article XIII, section 1, of the Constitution.
Appellant also urges, but without citation of authority, that because the original agreement of sale entered into between Kann and respondent in 1941 was superseded by the agreement of February 27, 1942, and the latter agreement was not submitted to the Railroad Commission, the sale under the later agreement was void. However, the trial court found that the sale was made in accordance with the order and authorization of the Commission, and appellant has not pointed out anything to show the contrary. The order of the Commission authorizing the sale stated that the transfer should be made ‘substantially in accordance with the terms and conditions of the agreement’ of 1941, and it appears to have been so made. A verified statement that the sale had been consummated and possession of the property turned over to the grantee was filed with the Commission by Kann. The deed was duly recorded and a certified copy of same was also filed with the Commission. The said Commission has manifested no dissatisfaction with the manner in which the transaction was carried out, or with the conditions thereof, and nothing has been shown by appellant to justify a holding that the sale was void.
A further contention is made by appellant that under the agreement between Kann and plaintiff and the deed by which the property sought to be taxed was conveyed to plaintiff, the ownership of the property should be held to be in Kann, the grantor, and, therefore, subject to taxation pending the fulfillment of the conditions set forth in the deed, to wit, payment in full of the purchase price. No authority is cited in support of appellant’s position. Furthermore, it does not appear that the property was assessed to Kann; it was presumably assessed to the district in which the title stood of record (Revenue and Taxation Code, sec. 405, St.1941, p. 3111), and appellant is contending in this action for the right to retain taxes thereon paid by respondent. But regardless of any real or apparent inconsistency in the arguments of appellant, we are of the opinion that title to the property taxes is in plaintiff and that it is the owner in so far as the right to exemption is concerned. The deed by which the property was conveyed is a grant deed, and the provision that should plaintiff default in payment of the unpaid installments of the purchase price the property should revert to the grantor does not have the effect of constituting Kann the owner of such property for the purposes of taxation. A somewhat similar contention was made in The Housing Authority v. Dockeiler, supra, but the court there said, 14 Cal.2d page 454, 94 P.2d 803: ‘Nor do we believe that the right of tax exemption fails because of the possibility of a foreclosure in which title to the property might be lost. The status of the property as tax-exempt or nontax-exempt while in the hands of an authority is not altered by its possible status after disposition by the authority.’
A case directly in point is Town of Wolf River v. Wisconsin Michigan Power Co., 217 Wis. 518, 259 N.W. 710, 98 A.L.R. 1369. There defendant owned certain real property which it conveyed to Valley Camp Association to hold for the use of the Boy Scouts of America. The deed of conveyance contained a provision that should the grantee suffer the use of the premises for any other purpose than as a camp site for boy scouts the conveyance should become void and the title, on demand, should revert to the grantor who should then have the right to re-enter. The deed also provided that the grantor reserved the right to repurchase, upon notice, within a specified time, and upon payment of the price paid by the grantee.
The court said that this resulted in the grantee’s holding title to the premises subject to being disposessed upon breach of a condition subsequent, and in no way affected the title held by the grantee; that the qualification annexed whereby the estate might be defeated upon breach of the condition left the title in the grantee good as long as he observed the condition. Property exempt from taxation in the state included that held by boy scout organizations, and the property in question was held exempt. Also see Village of Hibbing v. Commissioner of Taxation, 217 Minn. 528, 14 N.W. 923, 927; Connecticut Junior Republic Ass’n v. Town of Litchfield, 119 Conn. 106, 174 A. 304, 95 A.L.R. 56, and cases cited in note 98 A.L.R. 1372.
The judgment is affirmed.
PEEK and THOMPSON, JJ., concur.