The opinion of the court was delivered by: Robie, Acting P.J.
Review Denied March 14, 2012
For the better part of 100 years, citizens of the American Southwest have been fighting over the right to water from the Colorado River. While the United States Supreme Court largely settled the interstate conflict over that water nearly 50 years ago, in Arizona v. California (1963) 373 U.S. 546, 83 S.Ct. 1468, 10 L.Ed.2d 542, the court's resolution of the dispute between the states—which limited California's share of the river to far less than the state can use—ensured the fight would continue within the state for years to come.
And so it has. In 2003, three of the major stakeholders in California's share of the Colorado River—the Imperial Irrigation District (the Irrigation District), the Coachella Valley Water District (Coachella), and the Metropolitan Water District of Southern California (Metropolitan)—purported to end a long-running series of disputes over Colorado River water by signing the Quantification Settlement Agreement and (along with numerous other parties) various related agreements, the purpose of which was to "budget their portion of California's apportionment of Colorado River water among themselves" and to "provide a framework for conservation measures and water transfers for a period of up to 75 years." If they thought they were buying peace, however, they were sorely mistaken, for a drop of water cannot do two things at once, and every drop the residents of coastal Southern California want to drink is one that cannot be used to sustain the endangered Salton Sea—which is what brings us to where we are today.
As will be shown, for years after the United States Supreme Court determined that California's share of the water from the Colorado River was to be only 4.4 million acre-feet during normal water years, California was nonetheless able to use much more than that because Arizona and Nevada were not yet able to use their full entitlements. (See, e.g., In re Bay–Delta etc. (2008) 43 Cal.4th 1143, 1153, 77 Cal.Rptr.3d 578, 184 P.3d 709.) During this period, vast quantities of irrigation return flow from the Irrigation District sustained the Salton Sea—that accidental body of water that owes its very existence to the quest for Colorado River water for the Imperial Valley. Eventually, however, pressure built on California to live within its annual 4.4 million acre-feet entitlement and on the Irrigation District to curb its wasteful water use. At the same time, the water needs of coastal Southern California continued to grow.
The Quantification Settlement Agreement and related agreements sought to address these problems in part by making Colorado River water conserved within the Irrigation District's service area available for use by the denizens of coastal Southern California, from San Diego to Los Angeles, in exchange for money to fund the conservation efforts. But environmental interests fear that shipping more Colorado River water to the coast will doom the Salton Sea.
It is within the context of this fight that we are called on to review the judgments in three coordinated cases connected with the Quantification Settlement Agreement.*fn1 In the first case— Imperial Irrigation District v. All Persons Interested—the Irrigation District sought a court determination that the Quantification Settlement Agreement and 12 related agreements were valid ( Code Civ. Proc., § 860 et seq.). (We will refer to this case as the validation action.) In the second case— County of Imperial v. Metropolitan Water District of Southern California et al.—the County of Imperial (the County)—taking a position at odds with the Irrigation District, which supplies all of the County's water—asserted various violations of the California Environmental Quality Act (CEQA) ( Pub. Resources Code, § 21000 et seq.) and the Water Code in connection with the Quantification Settlement Agreement. And in the third case— Protect our Water and Environmental Rights (POWER) v. Imperial Irrigation District et al.—an environmental organization (POWER) asserted CEQA violations in connection with the proposed transfer of conserved Colorado River water from the Irrigation District to the San Diego County Water Authority (San Diego), as well as Coachella and Metropolitan.*fn2
In January 2010, the coordination trial judge found that one of the 12 agreements related to the Quantification Settlement Agreement—specifically, the Quantification Settlement Agreement Joint Powers Authority Creation and Funding Agreement (the Joint Powers Agreement)—was unconstitutional. The Joint Powers Agreement was supposed to provide the principal mechanism for ensuring the mitigation required for implementation of the Quantification Settlement Agreement was completely funded. According to the trial court, the State of California's "unconditional contractual obligation," as part of the Joint Powers Agreement, to pay all of the mitigation costs beyond a particular amount for which the Irrigation District, Coachella, and San Diego were to be liable, was contrary to the appropriation requirement of article XVI, section 7 of the California Constitution, which provides that money may be drawn from the Treasury only through an appropriation enacted by the Legislature. In the trial court's view, the unconditional commitment of an uncertain amount of state funds contravened this appropriation requirement. Accordingly, the trial court entered a judgment in the validation action determining that all but one of the agreements the Irrigation District sought to validate—including the Quantification Settlement Agreement—were invalid.*fn3 Based on its determination that the various agreements were invalid, the trial court then dismissed the two CEQA actions as moot, without adjudicating any of the claims in those actions.*fn4
Ten different parties filed three notices of appeal and two notices of cross-appeal, challenging the trial court's judgment in the validation action and the two CEQA actions. Numerous other parties have filed responsive or amicus curiae briefs. The parties supporting the Quantification Settlement Agreement and related agreements contend the trial court erred in finding the Joint Powers Agreement unconstitutional, while the parties opposing the agreements assert that the trial court did not err and that, in any event, there are other bases to uphold the trial court's judgment in the validation action. As to the CEQA actions, the proponents of those actions contend the trial court erred in dismissing them as moot, and they importune us to adjudicate their CEQA claims in the first instance, to avoid further delay, while the CEQA opponents contend those matters must be addressed by the trial court on remand.
As we explain more fully below, we conclude the trial court erred in determining that the Joint Powers Agreement violates article XVI, section 7 of the California Constitution. While the agreement does unconditionally obligate the state to pay the excess mitigation costs beyond those for which the Irrigation District, Coachella, and San Diego are responsible, the imposition of that obligation on the state does not violate the appropriation requirement of article XVI, section 7 of the California Constitution because nothing in the Joint Powers Agreement gives those three water agencies (or anyone else for that matter) the right to enforce that obligation by drawing money from the Treasury without an appropriation by the Legislature. While the state cannot assert the failure of the Legislature to appropriate funds to pay the excess mitigation costs as a defense to a breach of contract claim under the Joint Powers Agreement—because the state's obligation is "unconditional"—the state cannot be compelled to appropriate funds to satisfy its obligation, although the water agencies might, in appropriate circumstances, be able to enforce the state's obligation against other funds already appropriated. Read in this manner, the Joint Powers Agreement is constitutional.
Nor do we find any other basis for affirming the trial court's judgment in the validation action. To the extent the parties contend the Joint Powers Agreement violates the debt limitation in section 1 of article XVI of the California Constitution, we conclude they are wrong because the state's commitment to pay the excess mitigation costs is contingent on there being excess costs to pay, and a contingent obligation does not qualify as a "debt" or "liability" within the meaning of that constitutional provision. We likewise reject other challenges to the Joint Powers Agreement based on various principles of contract law and reject arguments based on conflict of interest, allegations of misconduct, and the propriety of validation in the first place.
For guidance on remand in the validation action, we also conclude that the trial court lacks subject matter jurisdiction to adjudicate claims under the federal Clean Air Act *fn5 and the National Environmental Policy Act (NEPA).*fn6
As for the two CEQA actions, we conclude that the argument by the Imperial County Air Pollution Control District (the Air District) that the trial court erred in denying its motion to intervene in those actions is not properly before us because the Air District did not appeal from the order denying leave to intervene. We further conclude that the trial court properly granted summary adjudication on the cause of action in the County's CEQA action based on the wheeling statutes. We also conclude that the trial court erred in finding the CEQA actions moot, but we decline to adjudicate those actions in the first instance and instead we remand those actions to the trial court for adjudication. Finally, we conclude the trial court did not abuse its discretion in denying a pretrial motion to dismiss the County's CEQA action because the County failed to name the United States and various other parties as real parties in interest.
For the foregoing reasons, and as explained more fully below, we will reverse the judgments and remand the validation action and the two CEQA actions for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
The War Between The States, Or " The Court Preferred Asparagus "— The Interstate Fight Over Colorado River Water
Illustrating how deep the roots of the disputes before us go, we draw a substantial amount of the general background of these cases from the United States Supreme Court's decision nearly 50 years ago in Arizona v. California, supra, 373 U.S. 546, 83 S.Ct. 1468, 10 L.Ed.2d 542, which involved the earlier, interstate aspect of the fight over Colorado River water. In an opinion authored by Justice Hugo Black, the Supreme Court explained as follows:
"The Colorado River ... rises in the mountains of Colorado and flows generally in a southwesterly direction for about 1,300 miles through Colorado, Utah, and Arizona and along the Arizona–Nevada and Arizona–California boundaries, after which it passes into Mexico and empties into the Mexican waters of the Gulf of California. On its way to the sea it receives tributary waters from Wyoming, Colorado, Utah, Nevada, New Mexico, and Arizona. The river and its tributaries flow in a natural basin almost surrounded by large mountain ranges and drain 242,000 square miles, an area about 900 miles long from north to south and 300 to 500 miles wide from east to west—practically one-twelfth the area of the continental United States excluding Alaska. Much of this large basin is so arid that it is, as it always has been, largely dependent upon managed use of the waters of the Colorado River System to make it productive and inhabitable.... In the second half of the nineteenth century a group of people interested in California's Imperial Valley conceived plans to divert water from the mainstream of the Colorado to give life and growth to the parched and barren soil of that valley. As the most feasible route was through Mexico, a Mexican corporation was formed and a canal dug partly in Mexico and partly in the United States. Difficulties which arose because the canal was subject to the sovereignty of both countries generated hopes in this country that some day there would be a canal wholly within the United States, an all-American canal.
"During the latter part of the nineteenth and the first part of the twentieth centuries, people in the Southwest continued to seek new ways to satisfy their water needs, which by that time were increasing rapidly as new settlers moved into this fast-developing region. But none of the more or less primitive diversions made from the mainstream of the Colorado conserved enough water to meet the growing needs of the basin. The natural flow of the Colorado was too erratic, the river at many places in canyons too deep, and the engineering and economic hurdles too great for small farmers, larger groups, or even States to build storage dams, construct canals, and install the expensive works necessary for a dependable yearround water supply. Nor were droughts the basin's only problem; spring floods due to melting snows and seasonal storms were a recurring menace, especially disastrous in California's Imperial Valley where, even after the Mexican canal provided a more dependable water supply, the threat of flood remained at least as serious as before. Another troublesome problem was the erosion of land and the deposit of silt which fouled waters, choked irrigation works, and damaged good farmland and crops.
"It is not surprising that the pressing necessity to transform the erratic and often destructive flow of the Colorado River into a controlled and dependable water supply desperately needed in so many States began to be talked about and recognized as far more than a purely local problem which could be solved on a farmer-by-farmer, group-by-group, or even state-by-state basis, desirable as this kind of solution might have been. The inadequacy of a local solution was recognized in the Report of the All–American Canal Board of the United States Department of the Interior on July 22, 1919, which detailed the widespread benefits that could be expected from construction by the United States of a large reservoir on the mainstream of the Colorado and an all-American canal to the Imperial Valley. Some months later, May 18, 1920, Congress passed a bill offered by Congressman Kinkaid of Nebraska directing the Secretary of the Interior to make a study and report of diversions which might be made from the Colorado River for irrigation in the Imperial Valley. The Fall–Davis Report, submitted to Congress in compliance with the Kinkaid Act, began by declaring, 'The control of the floods and development of the resources of the Colorado River are peculiarly national problems ...' and then went on to give reasons why this was so, concluding with the statement that the job was so big that only the Federal Government could do it. Quite naturally, therefore, the Report recommended that the United States construct as a government project not only an all-American canal from the Colorado River to the Imperial Valley but also a dam and reservoir at or near Boulder Canyon.
"The prospect that the United States would undertake to build as a national project the necessary works to control floods and store river waters for irrigation was apparently a welcome one for the basin States. But it brought to life strong fears in the northern basin States that additional waters made available by the storage and canal projects might be gobbled up in perpetuity by faster growing lower basin areas, particularly California, before the upper States could appropriate what they believed to be their fair share. These fears were not without foundation, since the law of prior appropriation prevailed in most of the Western States. Under that law the one who first appropriates water and puts it to beneficial use thereby acquires a vested right to continue to divert and use that quantity of water against all claimants junior to him in point of time. 'First in time, first in right' is the shorthand expression of this legal principle. In 1922, only four months after the Fall–Davis Report, this Court in Wyoming v. Colorado [ (1922) ] 259 U.S. 419 [42 S.Ct. 552] 66 L.Ed. 999 held that the doctrine of prior appropriation could be given interstate effect. This decision intensified fears of Upper Basin States that they would not get their fair share of Colorado River water. In view of California's phenomenal growth, the Upper Basin States had particular reason to fear that California, by appropriating and using Colorado River water before the upper States, would, under the interstate application of the prior appropriation doctrine, be 'first in time' and therefore 'first in right.' Nor were such fears limited to the northernmost States. Nevada, Utah, and especially Arizona were all apprehensive that California's rapid declaration of appropriative claims would deprive them of their just share of basin water available after construction of the proposed United States project. It seemed for a time that these fears would keep the States from agreeing on any kind of division of the river waters. Hoping to prevent 'conflicts' and 'expensive litigation' which would hold up or prevent the tremendous benefits expected from extensive federal development of the river, the basin States requested and Congress passed an Act on August 19, 1921, giving the States consent to negotiate and enter into a compact for the 'equitable division and apportionment ... of the water supply of the Colorado River.'
"Pursuant to this congressional authority, the seven States appointed Commissioners who, after negotiating for the better part of a year, reached an agreement at Santa Fe, New Mexico, on November 24, 1922. The agreement, known as the Colorado River Compact, failed to fulfill the hope of Congress that the States would themselves agree on each State's share of the water. The most the Commissioners were able to accomplish in the Compact was to adopt a compromise suggestion of Secretary of Commerce Herbert Hoover, specially designated as United States representative. This compromise divides the entire basin into two parts, the Upper Basin and the Lower Basin, separated at a point on the river in northern Arizona known as Lee Ferry.... Article 3(a) of the Compact apportions to each basin in perpetuity 7,500,000 acre-feet of water a year from the Colorado River System, defined in Article 2(a) as 'the Colorado River and its tributaries within the United States of America.' In addition, Article 3(b) gives the Lower Basin 'the right to increase its beneficial consumptive use of such waters by one million acre-feet per annum.' Article 3(c) provides that future Mexican water rights recognized by the United States shall be supplied first out of surplus over and above the aggregate of the quantities specified in (a) and (b), and if this surplus is not enough the deficiency shall be borne equally by the two basins. Article 3(d) requires the Upper Basin not to deplete the Lee Ferry flow below an aggregate of 75,000,000 acre-feet for any 10 consecutive years. Article 3(f) and (g) provide a way for further apportionment by a compact of 'Colorado River System' waters at any time after October 1, 1963. While these allocations quieted rivalries between the Upper and Lower Basins, major differences between the States in the Lower Basin continued. Failure of the Compact to determine each State's share of the water left Nevada and Arizona with their fears that the law of prior appropriation would be not a protection but a menace because California could use that law to get for herself the lion's share of the waters allotted to the Lower Basin. Moreover, Arizona, because of her particularly strong interest in the Gila, intensely resented the Compact's inclusion of the Colorado River tributaries in its allocation scheme and was bitterly hostile to having Arizona tributaries, again particularly the Gila, forced to contribute to the Mexican burden. Largely for these reasons, Arizona alone, of all the States in both basins, refused to ratify the Compact.
"Seeking means which would permit ratification by all seven basin States, the Governors of those States met at Denver in 1925 and again in 1927. As a result of these meetings the Governors of the upper States suggested, as a fair apportionment of water among the Lower Basin States, that out of the average annual delivery of water at Lee Ferry required by the Compact—7,500,000 acre-feet—Nevada be given 300,000 acre-feet, Arizona 3,000,000, and California 4,200,000, and that unapportioned waters, subject to reapportionment after 1963, be shared equally by Arizona and California. Each Lower Basin State would have 'the exclusive beneficial consumptive use of such tributaries within its boundaries before the same empty into the main stream,' except that Arizona tributary waters in excess of 1,000,000 acre-feet could under some circumstances be subject to diminution by reason of a United States treaty with Mexico. This proposal foundered because California held out for 4,600,000 acre-feet instead of 4,200,000 and because Arizona held out for complete exemption of its tributaries from any part of the Mexican burden.
"Between 1922 and 1927 Congressman Philip Swing and Senator Hiram Johnson, both of California, made three attempts to have Swing–Johnson bills enacted, authorizing construction of a dam in the canyon section of the Colorado River and an all-American canal. These bills would have carried out the original Fall–Davis Report's recommendations that the river problem be recognized and treated as national, not local. Arizona's Senators and Congressmen, still insisting upon a definite guaranty of water from the mainstream, bitterly fought these proposals because they failed to provide for exclusive use of her own tributaries, particularly the Gila, and for exemption of these tributaries from the Mexican burden.
"Finally, the fourth Swing–Johnson bill passed both Houses and became the Boulder Canyon Project Act of December 21, 1928, 45 Stat. 1057. The Act authorized the Secretary of the Interior to construct, operate, and maintain a dam and other works in order to control floods, improve navigation, regulate the river's flow, store and distribute waters for reclamation and other beneficial uses, and generate electrical power. The projects authorized by the Act were the same as those provided for in the prior defeated measures, but in other significant respects the Act was strikingly different. The earlier bills had offered no method whatever of apportioning the waters among the States of the Lower Basin. The Act as finally passed did provide such a method, and, as we view it, the method chosen was a complete statutory apportionment intended to put an end to the long-standing dispute over Colorado River waters. To protect the Upper Basin against California should Arizona still refuse to ratify the Compact, § 4(a) of the Act as finally passed provided that, if fewer than seven States ratified within six months, the Act should not take effect unless six States including California ratified and unless California, by its legislature, agreed 'irrevocably and unconditionally ... as an express covenant' to a limit on its annual consumption of Colorado River water of 'four million four hundred thousand acre-feet of the waters apportioned to the lower basin States by paragraph (a) of Article 3 of the Colorado River compact, plus not more than one-half of any excess or surplus waters unapportioned by said compact.' Congress in the same section showed its continuing desire to have California, Arizona, and Nevada settle their own differences by authorizing them to make an agreement apportioning to Nevada 300,000 acre-feet, and to Arizona 2,800,000 acre-feet plus half of any surplus waters unapportioned by the Compact. The permitted agreement also was to allow Arizona exclusive use of the Gila River, wholly free from any Mexican obligation, a position Arizona had taken from the beginning. Sections 5 and 8(b) of the Project Act made provisions for the sale of the stored waters. The Secretary of the Interior was authorized by § 5 'under such general regulations as he may prescribe, to contract for the storage of water in said reservoir and for the delivery thereof at such points on the river and on said canal as may be agreed upon, for irrigation and domestic uses....' Section 5 required these contracts to be 'for permanent service' and further provided, 'No person shall have or be entitled to have the use for any purpose of the water stored as aforesaid except by contract made as herein stated.' Section 8(b) provided that the Secretary's contracts would be subject to any compact dividing the benefits of the water between Arizona, California, and Nevada, or any two of them, approved by Congress on or before January 1, 1929, but that any such compact approved after that date should be 'subject to all contracts, if any, made by the Secretary of the Interior under section 5 hereof prior to the date of such approval and consent by Congress.'
"The Project Act became effective on June 25, 1929, by Presidential Proclamation, after six States, including California, had ratified the Colorado River Compact and the California legislature had accepted the limitation of 4,400,000 acre-feet as required by the Act.[*fn7] Neither the three States nor any two of them ever entered into any apportionment compact as authorized by §§ 4(a) and 8(b). After the construction of Boulder [now Hoover] Dam the Secretary of the Interior, purporting to act under the authority of the Project Act, made contracts with various water users in California for 5,362,000 acre-feet, with Nevada for 300,000 acre-feet, and with Arizona for 2,800,000 acre-feet of water from that stored at Lake Mead." ( Arizona v. California, supra, 373 U.S. at pp. 552–562, 83 S.Ct. at pp. 1473–1478, 10 L.Ed.2d at pp. 551–556, fns. omitted.)
Following the enactment of the Boulder Canyon Project Act, disputes continued between the states over their respective rights to Colorado River water. "The principal dispute that became increasingly pressing over the years concerned the respective shares of the Lower–Basin States, particularly the shares of California and Arizona. [¶] Th[e] litigation [that led to the first Arizona v. California decision in 1963] began in 1952 when Arizona, to settle this dispute, invoked [the Supreme Court's] original jurisdiction [citation] by filing a motion for leave to file a bill of complaint against California and seven public agencies of the State. Arizona sought to confirm its title to water in the Colorado River system and to limit California's annual consumptive use of the river's waters. Nevada intervened, praying for determination of her water rights; Utah and New Mexico were joined as defendants; and the United States intervened, seeking water rights on behalf of various federal establishments, including the reservations of five Indian Tribes....
"After lengthy proceedings, Special Master Simon Rifkind filed a report recommending a certain division of the Colorado River waters among California, Arizona, and Nevada. The parties' respective exceptions to the Master's report were extensively briefed and the case was twice argued. The Court for the most part agreed with the Special Master, 373 U.S. 546 [83 S.Ct. 1468, 10 L.Ed.2d 542] (1963), and [the Court's] views were carried forward in the decree found at 376 U.S. 340 [84 S.Ct. 755, 11 L.Ed.2d 757] (1964).
"[The court] agreed with the Special Master that the allocation of Colorado River water was to be governed by the standards set forth in the [Boulder Canyon] Project Act rather than by the principles of equitable apportionment which in the absence of statutory directive th[e] Court ha[d] applied to disputes between States over entitlement to water from interstate streams. Nor was the local law of prior appropriation necessarily controlling. The Project Act itself was held to have created a comprehensive scheme for the apportionment among California, Nevada, and Arizona of the Lower Basin's share of the mainstream waters of the Colorado River, leaving each State its tributaries. Congress had decided that a fair division of the first 7,500,000 million acre-feet of such mainstream waters would give 4.4 million acre-feet to California, 2.8 million acre-feet to Arizona, and 300,000 acre-feet to Nevada. Arizona and California would share equally in any surplus." ( Arizona v. California (1983) 460 U.S. 605, 608–609, 103 S.Ct. 1382, 1385–1386, 75 L.Ed.2d 318, 326–327, fn. omitted.)
As the Supreme Court explained further, "Congress intended the Secretary of the Interior, through his § 5 contracts, both to carry out the allocation of the waters of the main Colorado River among the Lower Basin States and to decide which users within each State would get water" "without regard to the law of prior appropriation." ( Arizona v. California, supra, 373 U.S. at pp. 580, 581, 83 S.Ct. at pp. 1487, 1488, 10 L.Ed.2d at pp. 566, 567.) Thus, "it is the [Boulder Canyon Project] Act and the Secretary's contracts, not the law of prior appropriation, that control the apportionment of water among the States. Moreover, ... the Secretary in choosing between users within each State and in settling the terms of his contracts is not bound ... to follow state law." ( Id. at p. 586, 83 S.Ct. at p. 1490, 10 L.Ed.2d at pp. 569–570, italics added.) " [W]here the Secretary's contracts, as here, carry out a congressional plan for the complete distribution of waters to users, state law has no place." ( Id. at p. 588, 83 S.Ct. at p. 1492, 10 L.Ed.2d at p. 571, italics added.) " [T]he Secretary's power must be construed to permit him, within the boundaries set down in the Act, to allocate and distribute the waters of the mainstream of the Colorado River." ( Id. at p. 590, 83 S.Ct. at p. 1493, 10 L.Ed.2d at p. 572, italics added.) Thus, in the absence of an agreement, concurred in by the Secretary of the Interior, a determination of which entity in California received Colorado River water would be up to the Secretary of the Interior, notwithstanding any provisions of California law.
In 1999, in comments recognizing and celebrating the service of former Justice Stanley Mosk on the California Supreme Court, former Chief Justice Ronald George noted that Mosk had argued the Arizona v. California case before the United States Supreme Court during his service as California Attorney General; Chief Justice George described Mosk's argument, and the decision in the case, as follows: "He argued in that case, 'Are we going to give Colorado River water to the people of California to drink or to Arizona for asparagus?' The court preferred asparagus." ( Recognition of Service of Justice Stanley Mosk (1999) 21 Cal.4th 1314, 1321.)
Justice Mosk's argument to the United States Supreme Court recognized that California's interest in maximizing its share of Colorado River water was largely driven by the increasing demand for water for domestic use by the ever-growing population of coastal Southern California. As will be seen, it is the conflict between this growing thirst for water from San Diego to Los Angeles and the desire that that same water be used to save the Salton Sea which is the driving force behind the litigation from which these appeals arise.
The War Within The State, Or They Really Do Want What They Haven't Got—Allocating California's Share Of Colorado River Water
In 1929, the year after the Boulder Canyon Project Act took effect, the Secretary of the Interior requested from California's Division of Water Resources a recommendation of the proper apportionments of California's share of Colorado River water among the various applicants and water users within the state. This request led to the Seven–Party Agreement of August 1931. The terms of this agreement, which apportioned a total of 5.362 million acre-feet of water annually between the parties, were incorporated into contracts between the Secretary of the Interior and various California water users for delivery of Colorado River water under the Boulder Canyon Project Act.
Among the seven parties to the agreement were the Irrigation District, Coachella, and Metropolitan.*fn8 As these parties are central to these appeals, we pause a moment to provide background on them, along with the fourth water agency that is central to these consolidated cases—San Diego.
The Irrigation District was organized in 1911. Its service area covers the Imperial Valley, which is situated in Imperial County between the Colorado River and Arizona on the east, Mexico on the south, Riverside County and the Salton Sea on the north, and San Diego County on the west. The district is the sole source of fresh water for the Imperial Valley, and all of that water comes from the Colorado River. The Irrigation District diverts water equating to a consumptive use of about 3.1 million acre-feet annually, and 98 percent of that water is used for agriculture on nearly 500,000 acres in the Imperial Valley. The remaining 2 percent serves residential customers in nine cities. The water is diverted at Imperial Dam and conveyed through the All American Canal to a 1,667–mile network of canals throughout the district's service area.
Coachella was organized in 1918 to conserve and protect the Coachella Valley's water supplies. Today, those water supplies come from various sources, including Colorado River water transported to the valley via the Coachella Canal, a branch of the All American Canal. Almost all of the Colorado River water that reaches the Coachella Valley is delivered for agricultural use.
Metropolitan was organized in 1928 to provide supplemental water to the coastal plain of Southern California. At its outset, Metropolitan was made up of 11 cities, including Los Angeles. (Cooper, Aqueduct Empire (1968) p. 82.) Today, Metropolitan has 26 member agencies. Metropolitan diverts Colorado River water at Parker Dam on Lake Havasu and conveys that water to its service area via the Colorado River Aqueduct.
San Diego, which is one of Metropolitan's member agencies, was organized in 1944 to bring imported water to the San Diego region. Consisting of 23 member agencies itself, San Diego purchases more water from Metropolitan than any of the 25 other member agencies of Metropolitan. The majority of the imported water San Diego receives from Metropolitan comes from the Colorado River (a lesser amount comes from the State Water Project). Imported water accounts for between 75 and 95 percent of all water used in San Diego's service area.
Returning to 1931 and the Seven–Party Agreement, the agreement apportioned Colorado River water among the various parties by priority but without quantifying exactly how much water each party was entitled to receive. Thus, for example, while 3,850,000 acre-feet of water per year was apportioned to the first three priorities, the agreement did not specify exactly how much of that water was to go to each of the parties entitled to water under those priorities. For instance, the Palo Verde Irrigation District was to receive the first priority for "such waters as may be required" for beneficial use on 104,500 acres of land within the district and between the district and the Colorado River. Obviously, this lack of specificity left the potential for future conflict between the parties.
Even more conducive to future conflict was the fact that the amount of water apportioned in the Seven–Party Agreement (and provided for in the contracts with the Secretary of the Interior) was nearly a million acre-feet more than the basic annual allotment of 4.4 million acre-feet of Colorado River water allocated to California in the Boulder Canyon Project Act—to which the California Legislature had "irrevocably and unconditionally" agreed. This problem was particularly significant to Metropolitan and its member agencies. Under the Seven–Party Agreement, Metropolitan was entitled to a fourth priority of 550,000 acre-feet annually, as well as a fifth priority in the same amount.*fn9 However, because the total amount of water apportioned to the first four priorities was 4.4 million acre-feet—the total amount of California's basic allotment—if California was limited to receiving its basic allotment then Metropolitan would feel the brunt of the shortfall, receiving none of its fifth priority water. As the trial court noted here, "[W]hen California receives [only its basic allotment], [Metropolitan]'s priority [under the Seven–Party Agreement] is only about 550,000 [acre-feet], leaving the [Colorado River Aqueduct, which has an approximate capacity of more than 1.2 million acre-feet per year] over half empty."
For a long time, California was able to regularly use approximately 800,000 acre-feet more than its basic annual allotment of Colorado River water because Arizona and Nevada were not using their full allotments. With growing demand for water in both of those states, however, pressure increased on California to reduce its annual use of Colorado River water in normal years to the 4.4 million acre-feet to which it had agreed. In turn, this pressure led to increased potential for conflict between the parties to the Seven–Party Agreement.
In large part, the foregoing chronology sets the stage for the conflicts and resulting negotiations among the various users of California's share of Colorado River water that led to the Quantification Settlement Agreement and its related agreements and, in turn, to the litigation that gave rise to these appeals. One very important element, however, is missing from the story told so far, and that is the Salton Sea. It is the fate of that accidental body of water—along with the ever-growing thirst for water from San Diego to Los Angeles, and the pressure on California to "live within its means" when it comes to water from the Colorado River—that is the real driving force behind the litigation that has brought us here today. Accordingly, we turn to the history of the sea.
Before the 20th century, various temporary lakes had existed in the depression early settlers named the Salton Sink, created by heavy precipitation or the flow of the Colorado River. (Cooper, Aqueduct Empire, supra, pp. 69–70; http:// www. saltonsea. ca. gov/ history_ chronology. html.) By 1900, however, there was nothing there but salt pools. (Cooper, Aqueduct Empire, supra, p. 70.)
Around that time, the California Development Company dredged a 60–mile ditch from the Colorado River westward to the Imperial Valley as part of the company's effort to promote settlement in the valley. (Cooper, Aqueduct Empire, supra, pp. 70–71.) When that ditch became clogged with silt, the company made a new 60–foot cut in the river bank, and by the fall of 1903 the water from the new canal was irrigating up to 100,000 acres. ( Id. at p. 71.) In the summer of 1904, however, heavy flood waters rushed through the cut, washed out the canal, and began to inundate broad areas of farmland. ( Ibid.) An effort to stem the flood was almost complete when, in November 1905, "the second largest flood in the river's known history came thundering down from its Gila River tributary" and cut a break in the river bank a mile wide. ( Ibid.) For two years, the Colorado River flowed into the Salton Sink instead of the Gulf of California, and the Salton Sea was formed. ( Id. at pp. 71–72.)
After the flow of the Colorado River was restored to its channel in 1907, the Salton Sea eventually would have evaporated but for the growth in agriculture that was supported by increasing diversions from the river, as agricultural drainage from the Imperial, Mexicali, and Coachella Valleys continued to feed the sea. (Cooper, Aqueduct Empire, supra, pp. 72, 74–75.) Indeed, by the late 1970's approximately 1 million acre-feet of irrigation return flow was entering the Salton Sea from the Irrigation District's service area alone, comprising about 71 percent of all inflow into the sea.
While this inflow may have been a boon for the accidental sea, it was the bane of John Elmore, a farmer with land adjacent to the sea who had to protect his land with dikes against the rising sea level and who, in 1980, complained to the Department of Water Resources that the rising waters threatening his property were the result of the Irrigation District's wasteful water management and marketing practices. Upon investigation, the Department of Water Resources determined that misuse of water was indeed occurring. When the Irrigation District failed to take steps to correct the problem to the satisfaction of the Department of Water Resources, they referred the matter to the State Water Resources Control Board (the Board) for hearing.
The result was Water Rights Decision 1600 in June 1984. In that decision, the Board found considerable evidence that water loss within the Irrigation District could be reduced through reasonable conservation measures. The Board noted that beneficial use of water conserved by the Irrigation District could be made by both Coachella and Metropolitan, but the Board also recognized that such conservation would have a significant effect on both the level and the salinity of the Salton Sea. Nevertheless, acknowledging there would soon be insufficient Colorado River water available to satisfy the existing level of demand within California, the Board ordered the Irrigation District to undertake additional conservation measures and to develop a detailed and comprehensive water conservation plan.
In the wake of Water Rights Decision 1600, the Irrigation District engaged in negotiations with Metropolitan to transfer conserved water to Metropolitan in exchange for payments that would be used to fund the conservation program. Unfortunately, those negotiations proved fruitless when the Irrigation District's board of directors rejected a proposed memorandum of understanding that would have transferred 100,000 acre-feet of water annually to Metropolitan in exchange for annual payments of $10 million.
Four years after Water Rights Decision 1600, the Board conducted further hearings on the Irrigation District's unreasonable water use practices and its failure to correct them. As a result of those hearings, in Order WR 88–20 the Board ordered the Irrigation District to enter into an agreement with a separate entity willing to finance water conservation measures in the district or take other measures. Thereafter, the Irrigation District entered into an agreement with Metropolitan for the transfer of approximately 100,000 acre-feet annually from the Irrigation District to Metropolitan.
From 1990 through 1999, California consistently used between 100,000 and 800,000 acre-feet more Colorado River water annually than the 4.4 million acre-feet to which it had irrevocably and unconditionally agreed to limit itself. In 1996, the Secretary of the Interior declared that California must implement a strategy to enable the state to limit its annual use of Colorado River water to the promised amount in normal years and to develop alternate means of meeting its water needs without jeopardizing the use or delivery of Colorado River water to other states.
To that end, in 1998 the Irrigation District entered into an agreement with San Diego for the transfer of up to 300,000 acre-feet of conserved water to San Diego annually (the Transfer Agreement). This was the largest agricultural-to-urban water transfer in United States history. In connection with the agreement, the Irrigation District and San Diego jointly petitioned the Board for approval of the transfer. (See County of Imperial v. Superior Court (2007) 152 Cal.App.4th 13, 20, 61 Cal.Rptr.3d 145.) Metropolitan, Coachella, and the County protested the transfer petition. Metropolitan and Coachella also filed court actions challenging the agreement. Around this same time, Metropolitan asked the Secretary of the Interior to revisit whether the allocations of California's share of Colorado River water provided for in the Seven–Party Agreement should be continued.
The Quantification Settlement Agreement And Related Agreements
Thereafter, negotiations ensued "to consensually settle [the] longstanding disputes regarding the priority, use and transfer of Colorado River water." In October 1999, the Irrigation District, Metropolitan, Coachella, and the state issued a document memorializing the " 'Key Terms' " for a proposed Quantification Settlement Agreement between and among those parties. Three years passed, however, without any definitive settlement being reached.
In 2002, the Irrigation District, San Diego, Coachella, and Metropolitan entered into an agreement whereby Coachella and Metropolitan dismissed their protests to the transfer petition in exchange for the Irrigation District making 100,000 acre-feet of conserved water available annually to Coachella or Metropolitan, leaving 200,000 acre-feet annually for San Diego. Thereafter, in December 2002, the Board approved the Transfer Agreement.
When no definitive Quantification Settlement Agreement was signed by the end of 2002, however, the Secretary of the Interior reduced the Irrigation District's water allocation for 2003. After the Irrigation District obtained a preliminary injunction from a federal court to halt the reduction, the Secretary of the Interior reduced Metropolitan's and Coachella's deliveries instead to keep California within its annual 4.4 million acre-feet allocation.
Thereafter, in October 2003, the Quantification Settlement Agreement and a number of related agreements were finally approved and executed. Among the related agreements was an agreement for acquisition of conserved water between the Irrigation District and Coachella (the Acquisition Agreement).
As described in one of the agreements, the Quantification Settlement Agreement "settle[d] a variety of long-standing Colorado River disputes regarding the priority, use and transfer of Colorado River water, establishe[d] the terms for the further distribution of Colorado River water among [Coachella, the Irrigation District, and Metropolitan] for a period of time based upon the water budgets set forth therein and include[d] as a necessary component thereof the implementation of the ... Transfer Agreement and the ... Acquisition Agreement. These conserved water transfers and the [Quantification Settlement Agreement] are critical components of the State's efforts to comply with the California Limitation Act of 1929, Section 4 of the Boulder Canyon Project Act of 1928 and to implement the California Constitutional mandate of Article X, Section 2." *fn10
In connection with the Quantification Settlement Agreement, the Irrigation District, Coachella, Metropolitan, and San Diego—acting as "co-lead agencies"—prepared a program environmental impact report (EIR) evaluating the potential environmental impacts from the implementation of the agreement (the Quantification Settlement Agreement PEIR). The Irrigation District also prepared an EIR for the water transfers from the Irrigation District to San Diego, Coachella, and Metropolitan (the Transfer Project EIR). ( County of Imperial v. Superior Court, supra, 152 Cal.App.4th at p. 23, 61 Cal.Rptr.3d 145.)
To resolve and allocate responsibility between the Irrigation District, San Diego, and Coachella for environmental mitigation relating to the Transfer Agreement and the Acquisition Agreement, those parties entered into the Environmental Cost Sharing, Funding and Habitat Conservation Plan Development Agreement. Those parties, along with the State of California (by and through the Department of Fish and Game), also entered into the Joint Powers Agreement, which was to serve as "the principal mechanism for ensuring that required mitigation under [state and federal environmental laws] for the[ water] transfers w[ould] be fully paid for." The Joint Powers Agreement allocated responsibility for the environmental mitigation costs among the four parties to that agreement, with the aggregate liability of the three water agencies (the Irrigation District, San Diego, and Coachella) capped at a then-present value of $133 million (the environmental mitigation cost limitation) and with responsibility for any additional costs (excess mitigation costs) to be borne by the state. On this latter point, section 9.2 of the Joint Powers Agreement specifically provided: "[t]he State is solely responsible for the payment of the costs and liability for Environmental Mitigation Cost Requirements in excess of the Environmental Mitigation Cost Limitation," which amount was to "be determined by the affirmative vote of three Commissioners [of the Joint Powers Authority], including the Commissioner representing the State, which determination shall be reasonably made." The agreement further provided that "[t]he State obligation is an unconditional contractual obligation of the State of California, and such obligation is not conditioned upon an appropriation by the Legislature, nor shall the event of non-appropriation be a defense." *fn11
On November 5, 2003, the Irrigation District commenced the validation action by filing a validation complaint in Imperial County Superior Court seeking to validate the Quantification Settlement Agreement and 12 related agreements, including the Joint Powers Agreement, the Transfer Agreement, and the Acquisition Agreement (case No. ECU01649). A week later, the Irrigation District filed its first amended complaint.
On November 7, 2003, POWER commenced its CEQA action by filing a mandamus petition in Imperial County Superior Court challenging the Transfer Project EIR (case No. ECU01653). POWER later filed an answer in the validation action, asserting (among other things) that the Irrigation District was asking "for validation of unconstitutional agreements" and that the Irrigation District had failed "to comply with all environmnental [ sic ] regulations and laws prior to execution of the contracts."
On November 10, 2003, the County commenced its CEQA action by filing a mandamus petition in Imperial County Superior Court challenging the Quantification Settlement Agreement PEIR (case No. ECU01656). The County also filed an answer in the validation action, asserting (among other things) that the Irrigation District did not properly comply with the CEQA before finalizing the Transfer Agreement and approving the Quantification Settlement Agreement.
Parties that filed answers in the validation action supporting the Irrigation District's position included the State of California ex rel. Department of Water Resources and Department of Fish and Game, San Diego, Coachella, Metropolitan, Vista Irrigation District (Vista), and the City of Escondido (Escondido). Parties other than POWER and the County that filed answers in the validation action opposing the Irrigation District's position included the Air District, Cuatro Del Mar (Cuatro),*fn12 Ronald and Laura Leimgruber, the Morgan/Holtz parties,*fn13 Andrew S. Krutzsch, and the Barioni parties.*fn14 Another answering party who aligned himself against the Irrigation District's position was Larry Porter.*fn15
In December 2003, San Diego moved to transfer the validation action and the two CEQA actions from Imperial County to Sacramento County. While those motions were pending, the Irrigation District filed a petition to coordinate the validation action with eight other actions relating to the Quantification Settlement Agreement, two of which were pending in Sacramento County and six of which were pending in Imperial County (including the two CEQA actions). *fn16
In January 2004, the Imperial County Superior Court granted the motion to transfer the two CEQA actions to Sacramento County but continued the hearing on the motion to transfer the validation action to February. In February, the court granted the motion to transfer the validation action as well. A couple of days later, the Chief Justice of California and Chairperson of the Judicial Council authorized the presiding judge of the Imperial County Superior Court to assign a coordination motion judge to determine whether coordination of the nine actions was appropriate.
In March 2004, the presiding judge of the Imperial County Superior Court assigned Judge Donal B. Donnelly as the coordination motion judge. In May 2004, Judge Donnelly ordered the nine actions coordinated, selected this court as the reviewing court with appellate jurisdiction, and recommended that the coordinated proceeding be assigned to a trial judge in Sacramento with CEQA experience.
Later that month, the Chief Justice of California and Chairperson of the Judicial Council authorized the presiding judge of the Sacramento County Superior Court to assign a coordination trial judge. In June 2004, the presiding judge assigned the coordinated proceeding to Judge Roland L. Candee.
In July 2004, the validation action and the two CEQA actions were formally received by the Sacramento County Superior Court and assigned Sacramento County case numbers.*fn17
In August 2004, the County filed an amended mandamus petition in its CEQA action. The first cause of action in that petition purported to allege a claim under the wheeling statutes. The second cause of action contained the County's CEQA claims challenging the Quantification Settlement Agreement PEIR.
Subsequently, two add-on cases (Super. Ct. Imperial County, Nos. ECU01834 & ECU01886)—sometimes referred to as the Western Farms cases—were coordinated with the original nine actions.
In January 2005, the trial court sustained demurrers without leave to amend in two of the coordinated cases filed by the County (Super. Ct. Imperial County, No. ECU01650 & Super. Ct. Sac. County, No. 03CS00082). *fn18 The County sought writ relief from this court, and on March 30, 2005, this court issued an alternative writ and stayed all proceedings in the coordinated cases.
In June 2007, this court affirmed the trial court's ruling. ( County of Imperial v. Superior Court, supra, 152 Cal.App.4th at p. 13, 61 Cal.Rptr.3d 145.) In August 2007, the stay on the coordinated proceeding was finally lifted.
In February 2008, the trial court sustained a demurrer without leave to amend with respect to another of the coordinated cases (Super.Ct.Sac.County, No. 03CS00083), and a judgment dismissing that case was entered in April 2008. (An appeal from that judgment is presently pending in this court.) ( Imperial County Air Pollution Control District v. State Water Resources Control Board (C059264).) That left six of the coordinated cases pending, including the three cases that are at issue in these appeals.*fn19
Following a settlement conference in September 2009, the trial court published a "list of remaining issues" and tentatively set trial dates. The court divided the trial into three phases. Phases 2 and 3—which are not at issue here—were to address the Western Farms cases and the Meyers Farms matter respectively.*fn20 Phase 1, which was divided into three subphases, was to address everything else. Phase 1B was to address the CEQA issues relating to the Quantification Settlement Agreement PEIR, raised primarily in the County's CEQA action (but also raised in answers to the validation action). Phase 1C was to address CEQA and NEPA issues relating to the Transfer Project EIR, raised primarily in POWER's CEQA action. Phase 1A was to address all matters in the validation action not within the scope of phases 1B and 1C. The court tentatively set 11 trial days in November and December 2009 for the trial of phase 1A, 4 trial days in December 2009 for the trial of phase 1B, and 11 trial days in January 2010 for the trial of phase 1C.
The trial of phase 1A went forward as scheduled. On December 10, 2009, the court issued its tentative ruling, in which the court proposed to invalidate 11 of the 12 agreements the County had sought to validate and to dismiss the CEQA challenges as moot. Based on this tentative ruling, the trial court vacated the phase 1B and phase 1C trial dates.
Following the receipt of written comments and oral argument from the parties, the trial court issued its "Statement of Decision Following Phase 1A Trial" on January 13, 2010. After determining that one of the 13 agreements before it in the validation action was "not properly subject to validation," the trial court concluded the Joint Powers Agreement was unconstitutional because it violated article XVI, section 7 of the California Constitution, which provides that "[m]oney may be drawn from the Treasury only through an appropriation made by law and upon a Controller's duly drawn warrant." The trial court apparently concluded that the language of section 9.2 of the Joint Powers Agreement, which made the state's obligation to pay the excess mitigation costs unconditional, notwithstanding the lack of an appropriation by the Legislature, could not be read consistently with the state Constitution, given that the excess mitigation costs were "expressly projected ... to cost well in excess of the constitutional debt limit."
Having determined that the Joint Powers Agreement was unconstitutional, the trial court found that the 11 other contracts had to be invalidated as well because they were "interdependent with the [Joint Powers Agreement]." The court then determined that all of "the CEQA, NEPA and Clean Air Act claims and defenses" in the validation action and the two CEQA actions were moot because of the invalidation of the Quantification Settlement Agreement and the 11 related agreements.*fn21
Subsequently, on February 11, 2010, the trial court issued its judgment. In the validation action, the court decreed that the 12 agreements subject to validation were "void and invalid." The court then dismissed POWER's CEQA action and the County's CEQA action as moot, with the exception that the court entered judgment against the County on its first cause of action in its CEQA action (for violation of the wheeling statutes).
On February 19, 2010, the Irrigation District appealed. That same day, San Diego, Coachella, Metropolitan, Vista, and Escondido filed a joint notice of appeal. On February 23, 2010, the state appealed.
On March 9, 2010, the County and the Air District filed a joint notice of cross-appeal, asserting the trial court had committed various errors in the validation action, the County's CEQA action, and POWER's CEQA action. On March 16, 2010, POWER filed a notice of cross-appeal likewise asserting the trial court had committed various errors in the County's CEQA action and POWER's CEQA action.
On March 1, 2010, all of the appellants, with the exception of the state, filed a petition for writ of supersedeas. The state filed its own supersedeas petition on March 30, 2010. On May 7, 2010, we granted both petitions, staying enforcement of the judgment in the coordinated proceedings pending the finality of our decision on the various appeals and cross-appeals.
With this factual and procedural background in mind, we turn now to the various arguments offered in the hundreds of pages of opening, responding, reply, and amicus curiae briefs. We first address the arguments relating to the validation action, then address those that relate to the two CEQA actions.*fn22
Second, numerous requests for judicial notice were made during the briefing in these cases, and we deferred ruling on six of them pending calendaring and assignment of the panel. We also have not yet ruled on a seventh request filed after the case was calendared for oral argument. As to three of those requests (the request filed by Cuatro on December 2, 2010; the request filed by the County and the Air District on February 10, 2011; and the request filed by the Irrigation District on April 1, 2011), no opposition was filed, so those requests are granted. As to the remaining four requests, we rule as follows:
1) With respect to the request filed by the County and the Air District on November 23, 2010, opposed by Coachella, Metropolitan, and San Diego, we conclude the subject documents are irrelevant to our resolution of these appeals and cross-appeals. Accordingly, we deny this request. (See Hughes Electronics Corp. v. Citibank Delaware (2004) 120 Cal.App.4th 251, 266, fn. 13, 15 Cal.Rptr.3d 244 ["As a general matter, judicial notice is not taken of matters irrelevant to the dispositive points on appeal"].)
2) With respect to the request filed by the Irrigation District on January 7, 2011, opposed by Cuatro, the County, and the Air District, we likewise conclude the subject documents are irrelevant to our resolution of these appeals and cross-appeals and therefore deny this request also.
3) With respect to the request filed by Coachella, Metropolitan, and San Diego on January 10, 2011, opposed by the County and the Air District, we also find the subject documents irrelevant to our resolution of these appeals and cross-appeals and deny this request on that basis.
4) Finally, with respect to the request filed by the County and the Air District on October 31, 2011, opposed by the Irrigation District and San Diego, we also deny this request on the ground that the subject documents are irrelevant to our resolution of these appeals and cross-appeals.
Constitutionality Of The Joint Powers Agreement
1. Article XVI, Section 7 Of the California Constitution—The Appropriation Requirement
On appeal, the state, the Irrigation District, Coachella, Metropolitan, and San Diego all argue the trial court erred in determining the Joint Powers Agreement is unconstitutional under section 7 of article XVI of the California Constitution. As we have noted, that section provides that "[m]oney may be drawn from the Treasury only through an appropriation made by law and upon a Controller's duly drawn warrant."
The trial court's explanation in its statement of decision of how the Joint Powers Agreement violates article XVI, section 7 of the California Constitution is not entirely clear; however, the court appeared to be concerned that because section 9.2 of the Joint Powers Agreement makes the state's obligation to pay the excess mitigation costs "an unconditional contractual obligation" that is "not conditioned upon an appropriation by the Legislature," and because "the event of non-appropriation [is not] a defense," the intended effect of section 9.2 of the Joint Powers Agreement was to entitle the Irrigation District, Coachella, and San Diego (which, along with the state, were the parties to the Joint Powers Agreement) to money from the Treasury to satisfy the state's obligation to pay the excess mitigation costs even without an appropriation of that money by the Legislature. To the extent this was the court's reasoning, the trial court understandably concluded that such a result would contravene section 7 of article XVI of the California Constitution, which allows money to be drawn from the Treasury only by means of an appropriation.
As we will explain, however, we conclude the trial court erred in its interpretation of section 9.2 of the Joint Powers Agreement because under California law there is a fundamental difference between an obligation of the state and the right of the party to whom the obligation is owed to enforce that obligation. While section 9.2 of the Joint Powers Agreement unconditionally obligates the state to pay the excess mitigation costs, the imposition of that obligation on the state does not violate the appropriation requirement of section 7, article XVI of the California Constitution because nothing in the Joint Powers Agreement gives the Irrigation District, Coachella, or San Diego (or anyone else for that matter) the right to enforce that obligation by drawing money from the Treasury without an appropriation.
Under a proper understanding of the Joint Powers Agreement, read consistently with article XVI of section 7 of the California Constitution, if the conditions for the state's payment of excess mitigation costs were to arise but the state refused to appropriate money from the Treasury to pay those costs, then the Irrigation District, Coachella, and San Diego would have a breach of contract claim against the state based on the state's breach of the Joint Powers Agreement, and the state would not be able to assert the lack of an appropriation as a defense to that claim. Nevertheless, even if the water agencies obtained a judgment against the state, they could not force the state to draw money from the Treasury to satisfy that judgment because the separation of powers doctrine precludes the courts from compelling the Legislature to enact an appropriation measure. Thus, in the face of legislative intransigence, it is possible the water agencies could be left with an unenforceable judgment for the unpaid excess mitigation costs, despite the state's unconditional contractual obligation to pay those costs.
While that possible result might appear to make the state's obligation to pay the excess mitigation costs illusory, it does not. This is so because a contract with the government cannot be found illusory just because the Legislature can refuse to appropriate the funds necessary to perform its obligation under the contract; otherwise, many contracts with the government would be illusory.
Thus, as explained more fully hereafter, while the Joint Powers Agreement imposes an unconditional contractual obligation on the state to pay the excess mitigation costs, the agreement does not give the Irrigation District, Coachella, San Diego, or anyone else the right to enforce that obligation by taking money from the Treasury in the absence of an appropriation by the Legislature. Construed in this manner, the Joint Powers Agreement does not violate article XVI of section 7 of the California Constitution, and the trial court erred in concluding otherwise.
a. Standard Of Review And Rules Of Interpretation
"[W]e apply de novo review, exercising our independent judgment as to the meaning of the" Joint Powers Agreement because "[i]t is a judicial function to interpret a contract or written document unless the interpretation turns upon the credibility of extrinsic evidence.... We are guided by the well-settled rules of interpretation of a contract, endeavoring to effectuate the mutual intent of the parties as it existed at the time of contracting insofar as it is ascertainable and lawful." ( City of El Cajon v. El Cajon Police Officers' Assn. (1996) 49 Cal.App.4th 64, 70–71, 56 Cal.Rptr.2d 723.)
In interpreting the Joint Powers Agreement, the following principles of contract interpretation are of particular significance: " 'A contract must be interpreted to give effect to the mutual, expressed intention of the parties. Where the parties have reduced their agreement to writing, their mutual intention is to be determined, whenever possible, from the language of the writing alone.' [Citations.] 'Contract formation is governed by objective manifestations, not the subjective intent of any individual involved. [Citations.] The test is "what the outward manifestations of consent would lead a reasonable person to believe." ' " ( Allen v. Smith (2002) 94 Cal.App.4th 1270, 1277, 114 Cal.Rptr.2d 898.) "It is the outward expression of the agreement, rather than a party's unexpressed intention, which the court will enforce." ( Winet v. Price (1992) 4 Cal.App.4th 1159, 1166, 6 Cal.Rptr.2d 554.) Thus, in interpreting the Joint Powers Agreement, we are not concerned as much with what the parties might tell us they meant by the words they used as with how a reasonable person would interpret those words. *fn23
Of equal importance is the rule that " '[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.' (Civ.Code, § 1643; see also id., § 3541.) Pursuant to this rule, we will not construe a contract in a manner that will render it unlawful if it reasonably can be construed in a manner which will uphold its validity." ( People v. Parmar (2001) 86 Cal.App.4th 781, 802, 104 Cal.Rptr.2d 31.)
"[I]t will not be supposed that the parties entered into agreements contemplating a violation of the law. On the contrary, it will be deemed that they intended a lawful, rather than an unlawful, act, and their agreements will be construed, if possible, as intending something for which they had the power to contract." ( Barham v. Barham (1949) 33 Cal.2d 416, 429, 202 P.2d 289.) "The court may not assume, in the absence of evidence, that the ...