United States v. Alisal Water Corp

          ORDER GRANTING MOTION FOR ORDER CORRECTING CLERICAL MISTAKES RE: DKT. NO. 1000

          EDWARD IDAVILA United States District Judge.

         I. INTRODUCTION

         Interested party Pajaro/Sunny Mesa Community Services District (“PSMCSD”) is presently before the court seeking an order correcting a “clerical mistake” pursuant to Federal Rule of Civil Procedure 60(a).^[1] PSMCSD asks the court to revise a March 4, 2008 order by Judge Fogel approving the Bill of Sale effecting the transfer of certain water systems to PSMCSD. More specifically, PSMCSD asks the court to revise the order so that it identifies two parcels included in the Bill of Sale with sufficient detail to be acceptable to the Monterey County Office of the Assessor (“Assessor's Office”) for secured tax roll purposes. Dkt. No. 1000 (PSMCSD's Motion For Order Correcting Clerical Mistakes Or Mistakes Arising From Oversight Or Omission In Order Approving Original Bill of Sale [Fed. R. Civ. P. 609a)] (hereinafter “Motion”)). Defendant Alisal Water Corporation (“Alco”) and AWC Holdings Trusts oppose the motion.^[2] The County of Monterey filed a statement of non-opposition. For the reasons discussed below, PSMCSD's motion will be granted.

         II. BACKGROUND

         At the request of the Environmental Protection Agency, the United States Attorney General initiated this suit over a decade ago in 1997 against Alco, its president and sole shareholder, Robert T. Adcock (“Adcock”), and others (collectively “Defendants”) for violating the Safe Drinking Water Act and regulations promulgated thereunder. Judge Fogel found that Defendants failed to meet the Maximum Contaminant Level (“MCL”) for microbiological contaminants; failed to report or give public notice of the MCL failures; failed to do required repeat and increased routine monitoring; failed to report the lack of monitoring; failed to retain documents as required; and failed to test for lead and copper in their water in a timely manner. Dkt. Nos. 143 (Order Granting Plaintiff's Motions For Partial Summary Judgment), 248 (Order Granting In Part And Denying In Part Plaintiff's Motion For Partial Summary Judgment; And Denying Defendants' Motion For Partial Summary Judgment). Many of the violations found by the court involved intentional false reporting or non-reporting. Dkt. No. 301 (Findings Of Fact And Conclusions Of Law). The court conducted a bench trial for the purpose of determining an appropriate remedy for the violations, and ordered, among other things, that a receivership be created to take control of the eight water systems operated by Defendants and that the Receiver assess the feasibility of selling seven of the eight water systems. Included among the water systems placed into receivership were those owned by Moss Landing Water System, Inc. (“Moss Landing”) and North Monterey County Water Systems, Inc. (“NORMCO”). Dkt. No. 301 (Findings Of Fact And Conclusions Of Law). After Moss Landing and NORMCO were placed in receivership, PSMCSD began management of the water systems and has continued to do so ever since. Dkt. No. 1000-1 (Decl. of Don Rosa in Support of Motion).

         On April 13, 2004, the court directed the court-appointed Receiver to sell the Moss Landing and NORMCO water systems (and others) to PSMCSD. Dkt. No. 481-1 (Order Regarding Sale Of Receivership Assets). In January of 2008, PSMCSD submitted to the court an application for approval of a Bill of Sale for five water systems, including Moss Landing and NORMCO. Dkt. No. 802-2 (Bill Of Sale). Voluminous Condition of Title reports from the Chicago Title Insurance Company were attached to and incorporated by reference into the Bill of Sale. Dkt. No. 802-2 at 1. Among the Condition of Title reports was one for NORMCO parcel APN 125-151-006-one of the two parcels at issue. Dkt. No 802-12 at 25-31. The Condition of Title report for the other parcel at issue, Moss Landing parcel APN 131-061-008, was inadvertently omitted. The NORMCO and Moss Landing parcels are connected via pipes to the NORMCO and Moss Landing water systems, respectively. Dkt. 100-1 at 3 (Decl. of Don Rosa in Support of Motion). The only purpose and only use of the two parcels are to serve customers of the two water systems. Id.

         On March 4, 2008, Judge Fogel issued an Order Resolving Pending Issues Re Receivership (“March 4, 2008 Order”) which included the following provisions relevant to the instant motion:

1) Pajaro/Sunny Mesa Community Services District (“PSMCSD”) seeks final Court approval of the Bill of Sale for five small water systems in North Monterey County, termination of the existing Management Agreements, and release of all claims. Pursuant to this Court's Order dated April 13, 2004, PSMCSD was designated as the purchaser of the assets of the Moss Landing Water System, Inc., North Monterey County Water System, Inc. (“NORMCO”), Blackie Road Mutual Water System #18, Vierra Canyon Water System, and Langley/Valle Pacifico Water. System. On or about January 12, 2005, PSMCSD entered into “Operational and Management Agreements” with the Receiver for the five systems. In June, 2007, at the Court's direction, PSMCSD engaged the Chicago Title Company to complete title research and production of title documents, easement descriptions, and maps and the Bill of Sale to complete the transfer of the five systems. The Court hereby authorizes and confirms the sale of the five systems to PSMCSD and directs the Receiver to execute and deliver the Bill of Sale that has been presented to the Court.

11) The Receivership shall remain in effect with respect to the San Jerardo water system only. . . .

Dkt. No. 824. PSMCSD submitted the Bill of Sale to the Monterey County Recorder's Office (“Recorder's Office”) on April 11, 2008. Dkt. No. 825. The Recorder's Office, however, did not record the transfer of Moss Landing parcel APN 131-061-008 from Alco to PSMCSD presumably because the Condition of Title report for that particular parcel had been inadvertently omitted from the Bill of Sale. Dkt. No. 100 at 4 (PSMCSD's Motion). The Recorder's Office also did not record the transfer of NORMCO parcel APN 125-151-006 even though the Condition of Title report for this parcel was attached to the Bill of Sale. Id. (citing Dkt. No. 802-12). The transfer of the NORMCO parcel was not recorded because the Bill of Sale did not include a “metes-and-bounds” description for that parcel. Dkt. No. 1005 at 4 (Opp'n of Alisal Water Corporation And The AWC Holdings Trusts To Motion); see also Dkt. No. 1008 at 6 (PSMCSD's Reply).

         Even though Judge Fogel, the Receiver, Alco, and PSMCSD all understood that the Moss Landing and NORMCO water systems were to be sold and transferred to PSMCSD and the Bill of Sale had been recorded, the Assessor's Office continued sending tax notices and demands for payment to Alco for the two parcels at issue. Dkt. No. 1006 at 3. The tax bills were dated November 19, 2008, October 15, 2009, June 22, 2010, November 23, 2010, August 10, 2011, February 15, 2011 and February 16, 2011. Id. Alco forwarded these tax notices to PSMCSD and asked PSMCSD to pay the bills and to take the necessary action to change ownership of the two parcels to PSMCSD. Id. at 6-64. Alco copied the Monterey County Treasurer-Tax Collector on all but one of the letters to PSMCSD. Id.

         On February 23, 2009, the Assessor's Office sent PSMCSD a letter explaining that the two parcels at issue “do not appear to be described” in the recorded Bill of Sale, and therefore the Assessor's Office “cannot change the ownership until a document describing the subject properties is recorded.” Id. at 65. On October 23, 2008, the Assessor's Office wrote to PSMCSD again reiterating that the Bill of Sale did not describe the properties at issue, and therefore the Office of the Assessor's records would continue to reflect that one of Alco's trusts, AWC II Holdings LLC, was the owner of record. Id. at 66. The Assessor's Office also sent Alco a letter stating that the parcels at issue were “referenced” in the April 11, 2008 Bill of Sale but not “described.” Id. at 68. Therefore, the Assessor's Office did not change ownership of the parcels in its records. Id. The Assessor's Office asked Adcock to contact PSMCSD or a title company to prepare and record the necessary conveyance documents to enable the Assessor's Office “to finally remove [Alco] from title and reflect [PSMCSD] as the new owner of record as intended with the recording of the Bill of Sale.” Id.

         Apparently, no action was taken to address the Assessor's Office issue for approximately four years. During that time, Alco continued to receive, but did not pay, the tax bills for the two parcels at issue. Eventually the Receiver's attorney had the Receiver execute an Addendum to Bill of Sale on August 15, 2012, which included as attachments the inadvertently omitted legal description of the Moss Landing parcel and the same legal description of the NORMCO parcel that had been attached to the Bill of Sale. Dkt. No. 1000 at 5 (PSMCSD's Motion). The Receiver's attorneys filed a Notice of Receiver's Execution of Addendum to Bill of Sale on August 23, 2012, and served the Notice on Alco's counsel, the Deputy County Counsel, and others. Dkt. No. 980. The Recorder's Office recorded the Addendum to Bill of Sale on September 19, 2012. Dkt. No. 1001-1 at 25. On August 12, 2013, Judge Fogel issued an Order Discharging Receiver And Terminating Proceedings. Dkt. No. 995.

         A couple of years later, in approximately June 2015, the Monterey County Treasurer-Tax Collector caused its agent, Bid-4-Assets, to conduct an internet auction to sell the two parcels at issue in order to satisfy the delinquent taxes assessed against Alco. Dkt. No. 1005 at 6-7 (Alco's Opp'n). A third-party bidder purportedly purchased both parcels. Id. at 7. The purported sale of the parcels resulted in excess tax sales proceeds of approximately $32, 000 and has led to two state court actions. First, two of Alco's trusts have filed an action against the County of Monterey seeking recovery of the excess tax sales proceeds. Dkt. No. 1007 at 4-16 (AWC Holding Trust v. County of ...