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California Pines Property Owners Association v. Robert Pedotti

May 24, 2012


(Super. Ct. No. CU08110) APPEAL from a judgment of the Superior Court of Modoc County, Laura J. Masunaga, Judge. (Judge of Siskiyou Sup. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Affirmed.

The opinion of the court was delivered by: Mauro , J.


California Pines Property Owners Association (the Association) appeals after the trial court resolved a dispute over water diversion rights in favor of defendant Robert Pedotti.

The Association owns land in the community of California Pines in Modoc County, California, including the land where Donovan Reservoir (Reservoir) and its dam are located. Pedotti owns the nearby 1,761-acre Diamond C Ranch (Ranch), where he has raised over 1,000 head of cattle and farmed alfalfa and other natural grasses for livestock.

Pedotti and the Association are assignees of a 1986 50-year water storage agreement (the Agreement) entered into by predecessor owners. Among other things, the Agreement provides: Pedotti has a right to certain water that flows into the Reservoir (Ranch Water)*fn2 and certain water delivery systems that can divert Ranch Water out of the Reservoir. Pedotti needs the Reservoir to store Ranch Water for Ranch operations. At the same time, the Association needs the Ranch Water to maintain the Reservoir level and the aesthetic value of the waterfront area of the California Pines subdivision. Thus, Pedotti can store Ranch Water in the Reservoir, but he cannot impede the flow of Ranch Water into the Reservoir, and he must use "best efforts" to maintain a full Reservoir, subject to natural circumstances beyond Pedotti's control. The Agreement does not define "best efforts."

The dispute between the parties involves Pedotti's use of Ranch Water in 2006 through 2008. The trial court ruled in Pedotti's favor on each of the Association's causes of action.

On appeal the Association contends (1) "best efforts" means the efforts required of a fiduciary; (2) in interpreting the Agreement, the trial court should have considered extrinsic evidence of the circumstances surrounding the making and the pre-dispute implementation of the Agreement; (3) substantial evidence does not support certain trial court findings; (4) the trial court erred in requiring the Association to prove breach of contract elements on its cause of action for violation of the licenses; and (5) the trial court erred in concluding that Pedotti's water interest had priority over the Association's interest.

Addressing the Association's first contention in the published portion of this opinion, we conclude that when a contract does not define the phrase "best efforts," the promisor must use the diligence of a reasonable person under comparable circumstances, not the diligence required of a fiduciary.

In the unpublished portion of this opinion, we address the Association's remaining contentions, concluding: the trial court did not err in ruling that the extrinsic evidence proffered by the Association was not relevant; the Association fails to establish that the trial court's findings are not supported by substantial evidence or that any error was prejudicial; any error in requiring the Association to prove breach of contract elements was harmless because the evidence supports the trial court's finding that Pedotti did not violate the licenses; and on the relevant issue as to whether Pedotti breached the Agreement and violated the licenses, the trial court found that he did not, and the evidence supports the trial court's findings.

We will affirm the judgment.


Viewing the evidence in the light most favorable to the prevailing party, giving him the benefit of every reasonable inference and resolving all conflicts in the evidence in support of the judgment (As You Sow v. Conbraco Industries (2005) 135 Cal.App.4th 431, 454), we glean the following from the record.

In 1960, the State Water Rights Board, now the State Water Resources Control Board (Board), issued a license for diversion and use of water, license No. 6293. License No. 6293 grants the licensee a right to use Ranch Water from the Rye Grass Swale in an amount not to exceed 565 acre feet per year for the purpose of irrigation. The license designated a specific geographic area (a "place of use" that is now part of the Ranch) where the water could be put to beneficial use.

In 1972, the Board issued a second license for diversion and use of water, license No. 9869, granting the licensee a right to use Ranch Water from the Rye Grass Swale in an amount not to exceed 669 acre feet per year, with a maximum withdrawal of 400 acre feet in any one year, for purposes of irrigation, stockwatering, and recreational uses. Stockwatering is using water for commercial livestock. (Cal. Code Regs., tit. 23, § 669.) Once again, the license designated a specific place of use (now another part of the Ranch that is contiguous with the place of use for license No. 6293) where the water could be put to beneficial use.

To cooperate in the use of the licenses, the Agreement was originally entered into between Leisure Industries, Inc. (Leisure), the predecessor owner of the Reservoir land, and Judith Carlsberg and the estate of Arthur Carlsberg, the former Ranch owners. The Agreement specified that Leisure would allow the Ranch to continue to store Ranch Water in the Reservoir, and the Ranch would not "impede the flow of Ranch Water" into the Reservoir and would "use its best efforts to maintain the water level" of the Reservoir to an elevation of at least 4,353 feet above sea level (the level at which the Reservoir is considered full), "subject to natural disasters, Acts of God, and other physical forces" beyond the control of the Ranch.

In 1992 Leisure assigned its interests in the Agreement to the Association, and in 1993 Pedotti purchased the Ranch and acquired interests in the Agreement and the licenses from the Carlsberg family.

Pedotti has been irrigating with Ranch Water since he purchased the Ranch. Water collected under each license was "commingled" in the Reservoir and flowed out of the Reservoir through the same outlet. Although Pedotti could estimate how much Ranch Water went to each license's place of use, he could not distinguish the water collected under each license when the water was drawn from the Reservoir.

Pedotti used a flood irrigation system (open earthen ditches) to move Ranch Water to irrigate his pastures and fields. To divert water from the Reservoir to the Ranch, Pedotti opened a sliding gate which allowed Ranch Water to flow through a conduit from the Reservoir to a distribution box. From the distribution box, Ranch Water flowed through valves; one valve carried water north and the second valve carried water west. Ranch Water travelled from the valves to the various pastures and fields on the Ranch through six to eight miles of ditches. Because he had a gravity-feed system, Pedotti could not use Ranch Water outside the designated places of use in 2006 through 2008.

Flood irrigation was typical for ranches in Modoc County with "low input sustainable livestock operations," and it was an adequate and appropriate irrigation system for the Ranch. Most flood irrigated pasture systems in Modoc County used earthen ditches to deliver water to the fields.

Pedotti's expert witness was Dr. Donald Lancaster, who had been the farm advisor and county director for the University of California Cooperative Extension Service in Modoc County for 32 years. As farm advisor, Dr. Lancaster worked with farmers and ranchers on crop and pasture irrigation and management. He published a book on irrigated pasture management in northeastern California, and he also conducted research and published on the subject of irrigation systems. In addition, he worked with the manager of the Ranch in the 1980's before Pedotti purchased it. Dr. Lancaster was familiar with the Reservoir, observed Pedotti irrigate the Ranch with Ranch Water, and worked with Pedotti on his irrigation and ranch management practices.

The Association's expert witness was Mr. Edward Schmit, a civil engineer who never worked on a flood irrigation or stockwatering system for a ranch in northeastern California. (RT 142, 150) He worked with landowners in northeastern California only once, on a wetlands restoration project near the city of Adin in 1996 and 1997. Although he admitted it would be important for him to see how Pedotti irrigated his fields, Mr. Schmit did not visit the Ranch or observe Pedotti irrigate. Mr. Schmit saw Pedotti's property over a fence and from an airplane in 2009 at a time when Pedotti did not use any Ranch Water.*fn3

According to Dr. Lancaster, an enclosed pipe would be the most efficient water delivery system, but such a system was not practical for many flood-irrigated systems. Dr. Lancaster opined that given the system in place at the Ranch and the scope of Pedotti's livestock production, it would not be economically feasible for Pedotti to replace his flood irrigation system with a wheel line or center pivot sprinkler system. It would cost over $200,000 to install a wheel line to irrigate 500 acres. In addition, because of the sediment in the reservoir water, Pedotti would have to filter the water to prevent the nozzles in the sprinklers from clogging up. A pivot system for 500 acres would cost at least $500,000. Such a system would require installing a pump, main line and towers and converting overhead power lines to underground systems. A sprinkler irrigation system was also inappropriate for the Ranch because it requires a reliable source of water and there was insufficient Ranch Water available for such a system.

Pedotti typically began irrigating from the Reservoir on April 1. When he irrigated, he checked the irrigation on a daily basis, sometimes for multiple days. He irrigated if it appeared to him, based on his examination of the soil at the root zone, that further irrigation was needed.

Pedotti irrigated during the winter to ensure that there was water available in the soil in the spring. This practice was common and appropriate because of the unpredictability of winter precipitation and as a hedge against drought conditions.

Pedotti maintained his irrigation ditches in 2006 through 2008 by using fall grazing or burning. Allowing cattle to graze in irrigation ditches helped to reduce the amount of vegetation in the water channel so that water could flow more efficiently through the ditches. This was standard practice in Modoc County.

Although it was not best practice to irrigate when cattle are in the field, this was also a common practice in Modoc County. It was not Pedotti's custom and practice to do so, but on occasion he irrigated from the Reservoir while cattle grazed in the lands being irrigated.

Mr. Schmit opined that having livestock in a field during irrigation was not an acceptable practice, because the livestock will compact the soil and make the surface of the field uneven. This causes "ponding" and makes irrigation in the field less efficient in the future. However, the fields at the Ranch were established and well-sodded and there was no compaction problem in Pedotti's fields. Compaction of the soil was not a serious problem in Modoc County because the freezing and thawing of the soil in the winter mitigated any compaction of the soil that may have occurred in the summer.

Additionally, Pedotti's fields did not require re-leveling for the flood irrigation system he used. The field adjacent to the Cal Pines Community Services District sewer ponds, which Mr. Schmit saw in 2009 and opined needed to be re-leveled, did not require leveling because it had never been irrigated.

The Association did not have a way to measure the volume of water in the Reservoir, but Pedotti used two methods to measure the volume of Ranch Water he used. He measured the Reservoir's surface elevation level before and after irrigation, and he used various weirs throughout his irrigation system. Pedotti subtracted the amount of water lost through evaporation (typically about 36 inches or 40 percent per season) from the total water loss to arrive at the volume of Ranch Water used.

Surface elevation measurement was an accepted and commonly used method for measuring water usage. Mr. Schmit criticized the use of surface elevation measurement because it failed to account for inflow to the Reservoir, but he admitted he did not know whether there was inflow to the Reservoir in 2006 through 2008.

Water can also be effectively measured using a V notch weir. A weir can be used at any point in the delivery system. Dr. Lancaster did not recommend the use of a water meter because of the amount of sediment and vegetation in the Reservoir. Very few water meters were used in Modoc County, and meters were used on pump systems, not on surface-delivered irrigation systems.

In 2006 through 2008, Pedotti took less Ranch Water than he was permitted to take under either license. Although the licenses permitted Pedotti to irrigate a total of 512.6 acres on the Ranch, the Reservoir did not hold sufficient water, even when full, to irrigate 500 acres of alfalfa fields and native pastures. Additionally, the water supply from Rye Grass Swale was inconsistent. Pedotti recalled that the Reservoir was full only four times in 16 years. The Association's administrator, Henry Drury, recalled only two years when the Reservoir was full: 1999 and 2006. Consequently, pursuant to a verbal agreement with a neighboring property owner, Pedotti used Canyon Creek to irrigate some of the ...

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