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)
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 predispute 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.
In the unpublished portion of this opinion, we address the Association’s remaining contentions, concluding the trial court did not err in ruling that the extrinsic evidence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.
BACKGROUND
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)
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.
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 wás 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 die 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 adviser and county director for the University of California Cooperative Extension Service in Modoc County for 32 years. As farm adviser, 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 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. 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.
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.
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 releveling for the flood irrigation system he used. The field adjacent to the California Pines Community Services District sewer ponds, which Mr. Schmit saw in 2009 and opined needed to be releveled, 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.
Dr. Lancaster opined that Pedotti applied his knowledge and experience to “the management system” and used his maximum efforts to irrigate the Ranch with Ranch Water as beneficially and efficiently as possible. According to Dr. Lancaster, Pedotti was “in the upper echelon of the producers with systems similar to his.” Dr. Lancaster testified that Pedotti was “an efficient” and “proficient” irrigator and was very aware of the Ranch’s water needs, his water delivery system, and its ability to deliver water to his pastures and fields. Pedotti testified that he irrigated using Ranch Water “[t]o the utmost of’ his ability.
As permitted under license No. 9869, Pedotti also took water from the Reservoir for stockwatering purposes. Pedotti stockwatered throughout the year by moving water from the Reservoir to earthen ditches. Mr. Schmit opined that using watering troughs or a pond for stockwatering would be “more efficient in terms of water usage.” But according to Pedotti, troughs would not be practical in the fields where he irrigated.
The Association filed a complaint against Pedotti asserting causes of action for (1) breach of contract, (2) violation of reasonable and beneficial use of water, and (3) injunctive relief. The complaint alleged that Pedotti breached the Agreement by failing to use his best efforts to maintain the water level of the Reservoir, taking more water than reasonably permitted under the Agreement, and failing to apply Ranch Water to beneficial use in 2006, 2007 and 2008. The complaint further alleged that Pedotti violated the terms of the licenses by using unreasonable quantities of Ranch Water, applying Ranch Water to lands not specified in the licenses, applying Ranch Water for purposes not listed as permitted beneficial uses under the licenses, and failing to take appropriate measures to conserve water. The Association sought specific performance of the Agreement, the appointment of a water master to regulate the amount of Ranch Water used by the Association and Pedotti, and an order limiting Pedotti’s use of the Ranch Water.
STANDARD OF REVIEW
A judgment of the trial court is presumed to be correct, and all intendments and presumptions are indulged to support it on matters as to which the record is silent. {Denham v. Superior Court (1970)
DISCUSSION
I
The Association contends the trial court erred by equating best efforts with the implied covenant of good faith and fair dealing and finding that Pedotti satisfied his contractual duty to use best efforts by exercising “good” or “typical” efforts. In the Association’s view, the duty to use best efforts is akin to the duty owed by a fiduciary and requires more than usual or reasonably diligent efforts. The Association claims the best efforts provision in the Agreement required Pedotti to place the Association’s interest (having a full or mostly full Reservoir) above Pedotti’s interest (using Ranch Water for the Ranch). We disagree.
Courts have held that a best efforts clause, without more, does not create a fiduciary relationship. (Olympia Hotels Corp. v. Johnson Wax Development Corp. (7th Cir. 1990)
California courts have enforced best efforts contracts but have not defined the term “best efforts.” (Gilmore v. Hoffman (1954)
Gilmore, supra,
When one of the pumping plants furnishing water to the leased property failed, the defendants made some effort to repair the pump on three occasions. (Gilmore, supra, 123 Cal.App.2d at pp. 317-318.) However, the plaintiff was unable to irrigate his crop for about one and a half months. (Id. at p. 315.) After three attempts to repair the pump, the defendants drilled a new well. (Id. at p. 318.) In the meantime, the plaintiff’s crop did not survive. (Ibid.)
The trial court found that the defendants’ failure to “do such other things as might be necessary” to supply water to the plaintiff showed a lack of diligence resulting in the plaintiff’s damages. (Gilmore, supra,
Courts from other jurisdictions have held that when a contract does not define the phrase “best efforts,” the promisor must use the diligence of a reasonable person under comparable circumstances. (Coady Corp. v. Toyota Motor Distributors, Inc. (1st Cir. 2004)
Best efforts does not mean every conceivable effort. (Triple-A Baseball Club v. Northeastern Baseball, supra,
Thus, while we agree with the Association that a promise to use “best” efforts is different than a promise to act in “good faith” (2 Farnsworth on Contracts, supra, § 7.17c, p. 405),
In this case, the trial court stated that the best efforts clause did not create a fiduciary relationship and had to be examined in the context of the Agreement and what constituted best practices for a rancher in Modoc County using his water rights licenses for the stated purposes. The trial court did not apply an erroneous standard.
Nonetheless, the Association asserts that the courts in Brogdex Co. v. Walcott (1954)
Brogdex did not involve a breach of contract claim. (Brogdex, supra,
In re Marriage of Hublou involved a trial court finding that the respondent did not use her best efforts to obtain employment as contemplated by a dissolution judgment. (In re Marriage of Hublou, supra,
The promisor in Cooper neglected to take any action to perform its contractual obligation. (Cooper, supra,
Accordingly, the Association’s contention lacks merit.
II-V
The judgment is affirmed.
Hull, Acting P. J., and Robie, J., concurred.
Notes
The source of the Ranch Water is an area known as the Rye Grass Swale.
The trial court gave more weight to Dr. Lancaster’s expert opinion than the opinion of Mr. Schmit. Because the trier of fact determines the weight to be given expert testimony (Glover v. Board of Retirement (1989)
Farnsworth distinguishes the standard of best efforts from that of good faith: “Good faith is a standard that has honesty and fairness at its core and that is imposed on every party to a contract. Best efforts is a standard that has diligence as its essence and is imposed on those contracting parties that have undertaken such performance. The two standards are distinct and . . . best efforts is the more exacting ...” (2 Farnsworth on Contracts, supra, § 7.17c, p. 405, fn. omitted.)
See footnote, ante, page 384.