Santa Clara County Superior Court, No.: CV053142, Honorable Kevin J. Murphy Trial Judge
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Hanson Bridgett, Joseph M. Quinn, Adam Hofmann; and Stanly T. Yamamoto for Defendant and Appellant.
Silicon Valley Law Group Jeffrey S. Lawson, Johnson & James, Robert K. Johnson, Omar F. James; and Timothy S. Guster for Plaintiff and Respondent.
Daniel S. Hentschke for Association of California Water Agencies as Amicus Curiae.
Plaintiff Great Oaks Water Company (Great Oaks), a water retailer, brought this action challenging a groundwater extraction fee imposed on water it draws from wells on its property. The power to impose such a fee is vested in defendant Santa Clara Valley Water District (the District), under the Santa Clara County Water District Act (District Act or the Act) (Stats. 1951, ch. 1405, p. 3336 et seq., West’s Ann. Wat.-Appen. (1999 ed. & 2012 supp.) ch. 60, p. 354 et seq.). Among the District’s major responsibilities is preventing depletion of the acquifers from which Great Oaks extracts the water it sells. The trial court awarded a complete refund of the charges paid by Great Oaks, and in the alternative a partial refund, on the grounds that the charge violated the provisions of both the District Act and Article XIII D of the California Constitution (Article 13D), which impose procedural and substantive constraints on fees and charges imposed by local public entities. We hold that (1) the fee is a property-related charge for purposes of Article 13D, and thus subject to some of the constraints of that enactment; (2) however, it is also a charge for water service, and as such exempt from the requirement of voter ratification; (3) the pre-suit claim submitted by Great Oaks did not preserve any monetary remedy against the District for the violations of Article 13D found by the trial court; and (4) the trial court failed to apply a properly deferential standard of review to the question whether the District’s setting of the fee, or its use of the resulting proceeds, complied with the District Act. Accordingly, we will reverse the judgment.
A. The District Act
Prior to adoption of the District Act, the Santa Clara Valley was plagued by overdraft of the underlying groundwater basin, causing among other things the subsidence of land-with resulting disruption of roads and structures-and the intrusion of salt water into groundwater acquifers. A similar pattern
marked much of the American settlement of California. Over the years the Legislature created numerous local districts and agencies to address this and other water management issues. As pertinent here, the Legislature created the District in 1951 by adopting the District Act. (Stats.1951, ch. 1405, p. 3336 et seq.) The District’s territory is coextensive with the County of Santa Clara. (District Act, § 2.) The Act recites the intention that the District will, among other things, “(3) Provide for the conservation and management of... water... for beneficial and useful purposes, including spreading, storing, retaining, and causing the waters to percolate into the soil within the district. [¶] (4) Protect, save, store, recycle, distribute, transfer, exchange, manage, and conserve in any manner any of the waters. [¶] (5) Increase and prevent the waste or diminution of the water supply in the district. [¶] (6) Obtain, retain, protect, and recycle drainage, stormwater, floodwater, or treated wastewater, or other water from any sources, within or outside the watershed in which the district is located for any beneficial uses within the district.” (District Act, § 4.)
The Act empowers the District to establish zones of benefit within its boundaries and to “institute zone projects for the specific benefit of such zones.” (District Act, § 3.) It empowers the District to levy property taxes and
assessments to pay its general operating costs and activities “of common benefit to the district.” (Id., § 13, subd. (1).) It also grants the District the power “to levy and collect a ground water charge for the production of water from the ground water supplies within a zone or zones of the district which will benefit from the recharge of underground water supplies or the distribution of imported water in such zone or zones.” (Id., § 26.) The Act declares such charges to be “in furtherance of district activities in the protection and augmentation of the water supplies for users within a zone or zones of the district which are necessary for the public health, welfare and safety of the people of this State, ” and authorizes their imposition “upon the production of ground water from all water-producing facilities, whether public or private, within said zone or zones of the district for the benefit of all who rely directly or indirectly upon the ground water supplies of such zone or zones and water imported into such zone or zones.” (Id., § 26.3 (section 26.3).) The proceeds of such charges are to be used “exclusively” for four enumerated purposes, discussed in greater detail below. (Ibid.; see fn. 23, post.)
The Act requires the District to issue an annual report containing “a recommendation as to whether or not a groundwater charge should be levied in any zone or zones of the district during the ensuing water year and, if any groundwater charge is recommended, a proposal of a rate or rates per acre-foot for agricultural water and a rate or rates per acre-foot for all water other than agricultural water for the zone or zones.” (District Act, § 26.5, subd. (a).) The District is required to publish the report by the first Tuesday of April, and to hold a hearing on it on the fourth Tuesday of April, following notice to the public with “an invitation to all operators of water-producing facilities... and to any person interested in the district’s activities... to call at the offices of the district to examine the report.” (Id., § 26.6.) At the hearing, any operator of a water-producing facility, or other interested person, may “appear and submit evidence concerning the subject of the written report.” (Id., § 26.6.) Before the end of a “[w]ater year, ” defined as July 1 through June 30 (id., § 26.1), the board is to “determine whether or not a groundwater charge should be levied in any zone or zones” (id., § 26.7, subd. (a)(1)), and if so, “shall levy, assess, and affix the charge or charges against all persons operating groundwater-producing facilities within the zone or zones during the ensuing water year” (id., § 26.7, subd. (a)(2)). The rate within a given zone is to be uniform, except that the rate for agricultural extractions “shall not exceed one-fourth of the rate” for non-agricultural extractions. (Id., § 26.7, subd. (a)(3)(D).)
The Act declares that monetary claims against the District “are governed by Part 3 (commencing with Section 900) and Part 4 (commencing with Section 940) of Division 3.6 of Title 1 of the Government Code, except as provided therein. Claims not governed thereby or by other statutes or by ordinances or regulations... shall be prepared and presented to the governing body, and all claims shall be audited and paid, in the same manner and with the same effect as are similar claims against the county.” (District Act, § 30.)
B. District’s Zones
Although we are directed to no competent evidence on this point, Great Oaks asserted in its trial brief-and the District has never denied-that the District has only two permanent zones, designated W 2 and W 5. Great Oaks described Zone W-2 as comprising approximately 240 square miles in the northern part of the county, while W-5 consists of about 14 square miles in the southern part. They are sometimes referred to as the North County zone and the South County zone, respectively.
At the time of trial, Great Oaks operated 19 wells of which 16 were located in Zone W-2, and three in Zone W-5.
C. Notice and Hearings on 2005-2006 Charge
On or about March 1, 2005, the District mailed a “notice of hearings on groundwater charges for 2005-2006” to about 4, 500 well owners in the county. (See pt. I(F)(1), post.) According to later recitals by the board, the accuracy of which is not contested, the written report required by section 26.5 of the Act was duly prepared, and was delivered to the clerk of the board on March 22, 2005. The board thereafter held hearings on the proposed rates on April 5, April 11, and April 19. On April 19, 2005, the board adopted Resolution 05-28 setting groundwater charges for 2005-2006. For extractions in Zone W-2, the per-acre-foot charge was $420 for non-agricultural use and $42 for agricultural use. In Zone W-5 the respective charges were $215 and $21.50.
D. Pre-Suit Claim
On May 20, 2005, Great Oaks submitted a claim to the District under Government Code section 900 et seq. The sole stated ground for recovery was that the District was “illegally using pump tax revenues for purposes outside the four (4) statutorily specified uses, and that to cover those unauthorized expenditures the amount of the pump tax is excessive.” It was further asserted that the District had “damaged Great Oaks by requiring it to
pay more than necessary for the pump tax, ” such that the District was “indebted to Great Oaks for the amount it charged over and above what was necessary to fulfill the statutorily listed uses for pump tax revenues.” The claim concluded with the statement, “Great Oaks hereby makes a claim for the refund of the amount which it was overcharged for the pump tax and requests that the [District] lower the pump tax and modify its uses of pump tax revenues to come into conformity with the Act.” The District took no action on the claim, causing its rejection by operation of law on July 5, 2005. (See Gov. Code, § 912.4, subds. (a), (c).)
E. Proceedings Below
Great Oaks filed this action on November 22, 2005. The matter was tried on an amended complaint, filed January 26, 2006, asserting eight causes of action: (1) “Demand for Refund, ” in that the District was (a) using charges for purposes not authorized by section 26.3, including flood control and revenue pooling; (b) including costs of treated water in the groundwater charge; and (c) imposing an improper tax “in violation of California Constitution Article XIII [sic]”; (2) “Improper Pooling of Groundwater Charges” in a common fund with other revenues, in alleged violation of section 26 of the District Act; (3) “Failure to Assess and Collect Groundwater Charge Revenue” from dewatering facilities, in alleged violation of section 26.1 of the Act; (4) “Unfair Competition, ” in that the District was “setting and collecting groundwater charges to encourage the purchase of its treated surface water”; (5) “Injunction” prohibiting the District from (a) spending groundwater proceeds for uses not authorized by the Act; (b) failing to prohibit the waste of water; (c) using groundwater proceeds to subsidize production of treated water; and (d) failing to obtain voter approval for increases “as required by Article XIII [sic of the California Constitution”; (6) “Declaratory Relief” regarding “the appropriate components of the groundwater charge and the requirements for an affirmative public vote on groundwater charge or tax assessments proposed by the District in excess of [District Act] Section 26 limits”; (7) “Petition for Writ of Mandate” in that the District had abused its discretion “(a) in collecting groundwater charges in excess of the benefits provided to Great Oaks; (b) in creating groundwater charge zones without consideration of whether Great Oaks uses treated surface water; (c) in not collecting groundwater charges as described above; (d) [in] failing to regularly obtain a favorable vote of zone residents before increasing groundwater charges, and (e) in spending the monies collected by
the groundwater charge for purposes not authorized by §26.3 of the [District] Act, including but not limited to flood control and revenue pooling”; and (8) “Request for Attorneys Fees...” in that Great Oaks was prosecuting the action on behalf of ratepayers, and was thus entitled to fees under Code of Civil Procedure section 1021.5.
A demurrer by the District was sustained without leave to amend as to the unfair competition cause of action, and was otherwise overruled. The District answered the remaining causes of action, generally denying them and asserting 46 affirmative defenses, including failure to give timely and proper notice of all claims under Government Code section 905 et seq.
On June 12, 2008, the parties filed a joint case management statement requesting trial in two phases, the first addressing specified “threshold issues” and the second concerning “appropriate remedies, and any remaining non-substantive issues.” The issues to be addressed in “Phase I” were: “(a) Whether the District has violated the District Act, including whether the District abused its discretion, or the Act, in the manner in which it accounts for the collection, use and allocation of groundwater charges; [¶] (b) Whether the District has violated Article XIII of the California Constitution [sic; see fn. 5, ante]; [¶] (c) Whether the District is required under the District Act to prevent the waste of water under the Water Code and collect groundwater charges for dewatering wells in Santa Clara County.” The statement set forth a briefing schedule for these issues, and recited the parties’ agreement that “with respect to the issues above, to the extent that Great Oaks does not address in its opening brief a specific expenditure or allocation, or other specific budget item, it will be barred from challenging that item in this case; and to the extent that the District does not raise a defense in its opposition brief, it will be barred from asserting that defense as to the issues tried in Phase 1.”
Great Oaks filed a trial brief arguing that the groundwater charge was unlawful in several respects. The first five specifications posited that the charge was imposed on an incident of property ownership and was thus subject to the requirements imposed on such charges by Article 13D. Great Oaks contended that the District had violated that provision by failing to secure voter approval for the charge and failing to give notice and hearing conforming to the article’s requirements. It also contended that the charge violated the substantive constraints of Article 13D in that it exceeded the proportionate cost attributable to Great Oaks, included charges for services not used by or immediately available to Great Oaks, and exceeded the sum required to provide the property-related service on which it was assessed. (See Article 13D, § 6, subd. (b)(1).) Great Oaks further contended that the charge violated the District Act in numerous respects, including the District’s alleged failure to
define zones according to benefits received, as contemplated by the District Act; failure to tie the groundwater charge to benefits actually conferred on groundwater supplies; inclusion in the groundwater charge of costs for treating surface water, although Great Oaks received no benefit from such treatment; use of groundwater charges for purposes other than those authorized by the District Act, including “water utility enterprise functions” and watershed projects; use of Water Utility Enterprise Fund monies, including groundwater charge proceeds, to cover a loss of revenues occasioned by the state’s interception of $51 million in property taxes; use of Water Utility Enterprise Fund monies, including groundwater charge proceeds, to pay about one-sixth of the "general fund overhead, ” which in turn was applied to such projects as a child care center, solar energy project, residential property, and marketing; reliance on a “pooling policy, ” in violation of the District Act’s restrictions on the use of groundwater charge revenues and in excess of the District’s powers under the Act; and failure to assess the groundwater charge on extractions for dewatering purposes, in violation of section 26.1 of the District Act, which requires that the charge be levied on all water producing facilities.
By stipulation, the parties submitted thousands of pages of documentary evidence including declarations and deposition excerpts, as well as live testimony, in support of their respective positions. (See pt. II(B)(3), post.) On June 9, 2009, the court issued an amended statement of decision on Phase 1. The court concluded that the groundwater charge was subject to Article 13D because it was “remarkably similar” to the one that this court held subject to that article in Amrhein, supra, 150 Cal.App.4th 1364. The court rejected the District’s contention that the charge was one for water services and thus exempt from Article 13D’s voter approval requirement. It also rejected the contention that the charge fell outside Article 13D insofar as Great Oaks incurred it due to a business activity. It found that the charge did not serve “a significant regulatory purpose.” Therefore, the court concluded, the District had violated Article 13D by failing to give the notice prescribed in that provision and by failing to secure the prescribed approval by voters or affected owners.
The court rejected many of Great Oaks’s claims concerning violations of the District Act. However it found persuasive Great Oaks’s contentions that the District abused its discretion and violated the District Act when it based the groundwater charge not upon a cost-of-service analysis but on suppositions, which the court considered inflated, about the benefits conferred. The court noted that the District had failed to change its ratesetting methodology despite an independent audit in 2000 which concluded that the revenue recovered from some classes of customers might be subsidizing others, and which recommended that the District “review its agricultural water pricing practice for adequacy and fairness.” The court also concluded that the District
“improperly used groundwater revenue for activities not within the scope of Section 26.3 of the District Act, ” “unwisely commingled groundwater revenue with other monies, ” and over-budgeted for specific items, then failed to credit the resulting surpluses back to Great Oaks.
The court rejected the District’s contention that Great Oaks had failed to exhaust its administrative remedies, finding that the pre-suit claim submitted by Great Oaks “complied with both the Government Code and Section 30 of the District Act.”
For reasons that will appear, it is unnecessary to recapitulate the proceedings in Phase II. Trial proceedings concluded on February 2, 2010, with issuance of a judgment awarding Great Oaks “a refund of groundwater charges in the amount of $4, 623, 095.52 plus interest.” The judgment also awarded $1, 306, 830 “under the District Act, ” but recited that the two awards were made “in the alternative, ” such that Great Oaks could recover one or the other, “but not both.” The judgment included a declaration that “(1) The District was required to comply with Article XIII D before imposing the groundwater charge. The District imposed the groundwater charge without complying with Art XIII D, Section 6, including the failure to secure proper voter approval both by failing to comply with proper notice requirements and failing to obtain ballot affirmation; (2) The Defendant violated the District Act by not basing the groundwater charge on the costs of service in accordance with §26.3. As a result, the Plaintiff was overcharged because of, inter alia, subsidies made for treated water, over-budgeting for employees, cost of equipment and water contract purchases; and, (3) the Defendant abused its discretion under the District Act when it improperly used groundwater revenue for activities not within the scope of Section 26.3 of the District Act and when it commingled groundwater revenues with other monies.” The court declined to issue an injunction or writ of mandate (see pt. II(B)(2), post). It reserved the issues of costs and attorney fees.
The District filed a timely notice of appeal.
F. Attorney Fees
On or about April 5, 2010, Great Oaks filed a motion for reasonable attorney fees under Code of Civil Procedure section 1021.5. The motion asserted that Great Oaks had incurred fees of some $1.45 million, which should be multiplied by a lodestar of two to yield an award of about $2.9 million. By order made and entered on July 19, 2010, the court denied the motion, finding that Great Oaks had “failed to demonstrate that the financial burden of private enforcement was such as to make the award appropriate.” Great Oaks filed a timely notice of appeal. We will dispose of that appeal by
separate opinion. (See Great Oaks Water Co. v. Santa Clara Valley Water Dist. (Mar. 26, 2015, No. H035885) [nonpub. opn.].)
I. Article 13D
Article 13D was adopted in 1996 as part of Proposition 218. It limits the power of local public entities to impose “assessments, fees, and charges.” (Article 13D, § 1.) It is not suggested here that the groundwater charge constitutes an assessment, so the question is whether it constitutes a “ ‘[f]ee’ or ‘charge.' " (Art. 13D, § 2, subd. (e).) The two terms are interchangeable for purposes of Article 13D, which defines them to mean “any levy other than an ad valorem tax, a special tax, or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service.” (Article 13D, § 2, subd. (e), italics added.) The applicability of the article thus turns on whether the groundwater extraction charge is imposed on Great Oaks “as an incident of property ownership.”
If Article 13D applied, it subjected the charge to three requirements. First, it required the District to give advance notice of the proposed charge to affected owners and to conduct a hearing at which owners could submit protests; if a majority of owners lodged such protests, the charge could not go into effect. (Article 13D, § 6, subd. (a).) Second, unless the charge was for “sewer, water, [or] refuse collection services, ” it could not take effect unless it was ratified by a majority of voters or, at the District’s option, by two-thirds of affected owners. (Id., § 6, subd. (c).) Finally, the charge had to satisfy a number of substantive constraints, essentially to the effect that it be tailored to the benefit conferred on each affected parcel or owner. (Id., § 6, subd. (b).)
The trial court found that the extraction charge was a property-related charge and that the District failed to comply with the notice-and-hearing requirement or the voter-ratification requirement. We have concluded that (1) the charge was indeed property-related for purposes of Article 13D; (2) the charge was one for water service and thus exempt from the voter ratification requirement; and (3) while the charge was subject to the notice-and-hearing requirement, the procedures followed by the District satisfied that requirement. Accordingly, the trial court’s conclusion that the charge violates Article 13D cannot be sustained.
B. Standard of Review
The characterization of a fee or charge for purposes of Article 13D presents “ ‘a question of law for the appellate courts to decide on independent review of the facts.’ ” (Apartment Ass’n of Los Angeles County, Inc. v. City of Los Angeles (2001) 24 Cal.4th 830, 836 [102 Cal.Rptr.2d 719, 14 P.3d 930] (Apartment Ass’n), quoting Sinclair Paint Co. v. State Bd. of Equalization (1997) 15 Cal.4th 866, 874 [64 Cal.Rptr.2d 447, 937 P.2d 1350]; see California Farm Bureau Federation v. State Water Resources Control Board (2011) 51 Cal.4th 421, 436 [121 Cal.Rptr.3d 37, 247 P.3d 112] (Farm Bureau); cf. Greene v. Marin County Flood Control and Water Conservation Dist. (2010) 49 Cal.4th 277, 287 [109 Cal.Rptr.3d 620, 231 P.3d 350], citing Apartment Ass’n, supra, at p. 836 [“We review questions of law about the meaning of Proposition 218, as other questions of law, de novo.”]; see also Griffith v. Pajaro Valley Water Management Agency (2013) 220 Cal.App.4th 586, 590 [163 Cal.Rptr.3d 243] (Griffith); Howard Jarvis Taxpayers Assn. v. City of Salinas (2002) 98 Cal.App.4th 1351, 1354-1359 [12l" Cal.Rptr.2d 228]; Silicon Valley Taxpayers Assn, Inc. v. Santa Clara County Open Space Authority (2008) 44 Cal.4th 431, 449-450 [79 Cal.Rptr.3d 312, 187 P.3d 37] (Silicon Valley).)
Great Oaks agrees that we should “employ a de novo standard of review when examining the District’s assertions of error under Article XIIID, exercising [our] independent judgment in reviewing the District’s levy and collection of groundwater charges.” However, Great Oaks emphasizes that Article 13D “shift[s] the burden of proof of procedural and substantive compliance with Article XIIID to the local agency.” (Italics omitted.) It thus alludes to, but does not cite, Article 13D, section 6, subdivision (b)(5), which states, “In any legal action contesting the validity of a fee or charge, the burden shall be on the agency, to demonstrate compliance with this articler (Italics added.) The plain meaning of this language is that once a charge is
found to be subject to Article 13D’s constraints, the agency has the burden of demonstrating that it in fact conforms to those constraints. (See Farm Bureau, supra, 51 Cal.4th at p. 436 [challenger has burden of proof “to establish a prima facie case showing that the fee is invalid”].) Here we are addressing the threshold question whether the trial court properly found the charge subject to Article 13D’s constraints. Article 13D does not purport, by its terms, to dictate a burden of proof, let alone a standard of review, on that question. However, as the authorities cited in the previous paragraph establish, the distinction seems to be without practical significance, because a de novo standard of review applies in either case. (See Silicon Valley, supra, 44 Cal.4th at p. 450 [parallel provision concerning assessments was intended to eliminate judicial deference to agency action; “courts should exercise their independent judgment in reviewing whether assessments that local agencies impose violate article XIII D”
Of course, application of an independent standard of review does not require or permit us to substitute our judgment for that of the trial court on purely factual questions as to which the trial court’s finding is supported by substantial evidence. (See Morgan v. Imperial Irrigation Dist. (2014) 223 Cal.App.4th 892, 917 [167 Cal.Rptr.3d 687], review denied May 14, 2014, S216740 ["Silicon Valley... does not change the substantial evidence standard of review and does not allow us to independently resolve issues of disputed fact already decided by the trial court.”].) It does not appear, however, that the trial court’s imposition of liability under Article 13D depends on any such factual issues.
C. Property-Related Charge
In two previous opinions we have contended with the issue of Article 13D’s applicability to groundwater extraction charges resembling the one at issue here. (See Amrhein, supra, 150 Cal.App.4th 1364; Griffith, supra, 220 Cal.App.4th 586.) Our further study of the matter has led us to conclude that any charge on the extraction of groundwater will typically place a direct burden on an interest in real property and is thus incidental to property ownership. This is because any extraction of groundwater by a longtime extractor like Great Oaks is almost certain to involve the exercise of a right in real property. Since a charge on that activity directly burdens the exercise of that right, it must be deemed incidental to it, and thus to ownership of real property.
Under California law, a right to extract groundwater typically falls into one of three categories: overlying, appropriative, or prescriptive. (City of Barstow v. Mojave Water Agency (2000) 23 Cal.4th 1224, 1240 [99 Cal.Rptr.2d 294, 5 P.3d 853] (Barstow).) Prescriptive rights need not concern us here, but it is clear that overlying and appropriative rights are rights in real property.
An overlying right is the right of the owner of land to extract as much of the water lying under it as can be beneficially used on it. (Barstow, supra, 23 Cal.4th at p. 1240.) Such a right is incidental to property ownership in two senses: First, “ ‘it is based on the ownership of the land and is appurtenant thereto’ ” (Ibid, quoting California Water Service Co. v. Edward Sidebotham & Son (1964) 224 Cal.App.2d 715, 725 [37 Cal.Rptr. 1] (California Water Service)); second, its exercise directly benefits-indeed it can only be exercised to benefit-the overlying land (see Barstow, supra, at p. 1240 [right is “ ‘to take water from the ground underneath for use on [owner’s] land within the basin or watershed’ ” and is “restricted to a reasonable beneficial use”]). As an appurtenance to land such a right is itself a form of real property. (See Civ. Code, § 658.) That it is incidental to ownership of the property also follows from the statutory definition of “appurtenant” as a synonym of “incidental.” (Civ. Code, § 662 [“A thing is deemed to be incidental or appurtenant to land when it is by right used with the land for its benefit, as in the case of a way, or watercourse, or of a passage for light, air, or heat from or across the land of another.”].) It follows that any charge imposed upon the exercise of an overlying right directly burdens, and must be considered incidental to, the ownership of property.
An appropriative right differs from an overlying right in that it does not depend on ownership of overlying land. It consists of a right to extract water for beneficial use on any land to which the appropriator may choose to conduct it. “Any water not needed for the reasonable beneficial use of those having prior rights is excess or surplus water and may rightly be appropriated on privately owned land for non-overlying use, such as devotion to public use or exportation beyond the basin or watershed [citation].’ ” (Barstow, supra, 23 Cal.4th at p. 1241, quoting California Water Service, supra, 224 Cal.App.2d at p. 725; see People v. Shirokow (1980) 26 Cal.3d 301, 307 [162 Cal.Rptr. 30, 605 P.2d 859] ["The appropriation doctrine contemplates the diversion of water and applies to ‘any taking of water for other than riparian or overlying
uses.’ ”]; United States v. State Water Resources Control Bd. (1986) 182 Cal.App.3d 82, 101 [227 Cal.Rptr. 161] ["The appropriation doctrine confers upon one who actually diverts and uses water the right to do so provided that the water is used for reasonable and beneficial uses and is surplus to that used by riparians or earlier appropriators.”].)
This of course describes nearly all of the extractions at issue here. In a supplemental letter brief, Great Oaks asserted somewhat vaguely that some of the water it extracts is reserved for its own use. No thanks to it, we have found some comparably vague evidence to similar effect in the record. It is undisputed, however, that the vast majority of water extracted by Great Oaks is not put to beneficial use upon its own land, but is sold to others for their (presumably beneficial) use. The right thus exercised-and burdened by the extraction charge-is that of an appropriator, not an overlying owner.
We have nonetheless found authority to the effect that when a landowner operates a waterworks for commercial distribution of water to persons beyond his or her property, both the works and any distribution system connected to it are appurtenances to the owner’s property. (Trask v. Moore (1944) 24 Cal.2d 365, 370 [149 P.2d 854]; see Garden Water Corp. v. Fambrough (1966) 245 Cal.App.2d 324, 327 [53 Cal.Rptr. 862] [trial court properly found water system for distribution to subdivision homes was real property]; Harper v. Buckles (1937) 19 Cal.App.2d 481, 484-485 [65 P.2d 947] [cited and followed in Trask, supra, 24 Cal.2d 365].) To the extent these suggestions are correct, it would seem to follow that the appropriative water right being exercised by such an owner, if not severed by some intervening act, is also appurtenant to the land where the works are situated. To the extent appropriative rights are appurtenant to specific parcels of land, any charge directly burdening their exercise must be considered incidental to property ownership for the same reasons we have cited with respect to extraction for overlying use.
More basically, however, it appears that an appropriative right, in and of itself, is a kind of real property for at least some purposes, whether or not it is appurtenant to a particular dominant estate. (See Wright v. Best, supra, 19 Cal.2d at p. 380 [“a water right by appropriation is independent of ownership and possession of land and subject to sale separately from it”]; id. at p. 381 [party’s predecessor “was the owner of an appropriative right, severable and alienable from the land to which it is appurtenant”]; id. at p. 382 [“An appropriative right constitutes an interest in realty.... It can therefore appropriately serve as a servient estate to which an easement may be annexed." (citations omitted)].)
The applicability of this principle to the question before us presents a question that is far from simple. In San Francisco v. County of Alameda (1936) 5 Cal.2d 243 (54 P.2d 462] (CCSF), the question was whether a
county could continue to collect property taxes on water rights a city in another county had purchased from a water company, which had itself acquired them by purchase or condemnation from riparian owners in the taxing county. The city asserted that the rights were governed by the general rule exempting public property from taxation. (Cal. Const., art. XIII, former § 1, repealed Nov. 5, 1974; see Cal. Const., art. XIII, § 3.) The county argued that they fell under a 1914 constitutional amendment permitting the taxation of “lands and... improvements” owned by a local public entity outside the taxing county’s borders, provided the rights were subject to taxation when the entity acquired them. (Cal. Const., art. XIII, former § 1, repealed Nov. 5, 1974; see Cal. Const., art. XIII, § 11.) The dispositive question, wrote the court, was “whether the water rights acquired by [the city] by purchase from the... [w]ater [c]ompany were included within the term ‘land’ as used in the constitutional amendment, and, as such, therefore separately assessable in Alameda county.” (CCSF, supra, at p. 246.) Relying heavily on the purpose of the amendment (discussed below), the court answered this question in the affirmative.
A similar question was presented in Waterford Irr. Dist. v. County of Stanislaus (1951) 102 Cal.App.2d 839 [228 P.2d 341] (Waterford), where a county sought to tax an irrigation district’s right to divert water from a river. As a municipal corporation, the district was protected by the exemption noted above except insofar as the right fell within the exception for lands and improvements outside its borders. The district contended that “the water right, being an appropriative right and not riparian to nor appurtenant to any land, does not constitute land nor improvement on land within the meaning of those terms as used in the constitutional provisions.” (Id., at p. 842.) The court agreed that the origin of the rights at issue distinguished CCSF, the holding in which “was primarily based upon the stipulated fact that the water rights there taxed were riparian in origin; and the holding that they were embraced within the meaning of the word ‘land’ as used in the Constitution was arrived at by considering the original nature of those rights as having been part and parcel of the riparian lands.” (Id. at pp. 843-844.) It concluded, however, that despite this distinction, the rights before it also remained taxable. It quoted at length from a treatise declaring that appropriative water rights are themselves a species of real property: “ ‘A water-right of appropriation is real estate, independent of the ditch for carrying the water, and independent of ownership or possession of any land and independent of place of use or mode of enjoyment, whereby the appropriator is granted by the government ...