I. INTRODUCTION AND SUMMARY OF ARGUMENT.
Defendants and Appellants SAMUEL CRUZ and DEBRA RAMIREZ CRUZ (collectively “CRUZES”) appeal from a judgment, to the extent that it incorporates a post-judgment attorneys’ fees award, as well as the post-judgment attorneys’ fees order, in favor of all Plaintiffs and Respondents (collectively “TRYHORN”) following a bench trial.
All individual Plaintiffs and Defendants are members of Plaintiff TRYHORN MUTUAL WATER SYSTEM. This water system provides water to seven families who live on the same street, all of whom are parties in this action. The members agreed to build and did build a well on the property later purchased by the CRUZES. But, they did not record an easement against the property for the well and related equipment. Also, the County did not have any records that showed that TRYHORN obtained required permits to build the well on that property. The CRUZES stated that they were not aware of the well at the time that they purchased the property. A dispute arose over the property rights of TRYHORN and the CRUZES. The CRUZES stopped paying their share of semiannual water system assessments.
TRYHORN brought an action against the CRUZES that alleged, among other things, a Water Code section 7005 claim for declaratory relief to establish an equitable easement over the CRUZES’ property to operate and maintain the well and a Water Code section 7002 claim for contribution of the unpaid water system costs. Over 99 percent of the trial concerned the section 7005 claim for declaratory relief and less than one percent of the trial concerned the section 7002 claim for contribution. The trial court ruled that TRYHORN did have an equitable easement over the CRUZES’ property and determined that the CRUZES owed $647.61 in unpaid water system costs. In light of the substantial evidence standard of review, the CRUZES do not challenge those rulings on the merits. Under Water Code section 7003 and an ancient Supreme Court decision, the trial court granted an award of attorneys’ fees in favor of TRYHORN and against the CRUZES in the amount of $100,000.00.
On appeal, the CRUZES will establish that the trial court erred, as a matter of law, in ordering the CRUZES to pay virtually all of the counsel fees incurred by TRYHORN in this action. Section 7003 authorizes a fee award to a plaintiff who prevails on a claim for contribution of unpaid water system costs under section 7002. Neither section 7003 nor any other statute authorizes a fee award to a plaintiff who prevails on a claim for declaratory relief under section 7005. Here, virtually the entire trial concerned TRYHORN’s section 7005 declaratory relief claim. TRYHORN’s section 7002 claim for contribution had only a cameo role at the trial. Under the circumstances, the trial court’s award of nearly all fees incurred by TRYHORN was not reasonable, as required by section 7003. Also, the fee award necessarily included most of the fees incurred by TRYHORN in litigating its section 7005 declaratory relief claim in violation of the statutory scheme.
The CRUZES additionally will demonstrate that the Supreme Court decision, upon which the trial court relied, is inapplicable. The case is distinguishable because it determined the recoverability of legal fees under a contract, whereas the instant case involves the determination as to whether TRYHORN may receive a fee award under an attorneys’ fees statute. Also, Water Code sections 7000-7010 govern the case at bar and, as a result, the statutory scheme supersedes any contrary ruling in the early Supreme Court decision. Moreover, the case was not a fee-shifting case, but merely decided that the legal fees incurred by the plaintiff in lawsuits against third parties could be recovered under the terms of the contract between the plaintiff and the defendant. Thus, the case cannot support the trial court’s fee-shifting order that compels the CRUZES to pay almost all of the counsel fees incurred by TRYHORN in the lawsuit among those parties. In any event, even if the decision were applicable, it would support only a ruling that the CRUZES must pay no more than their one-seventh share of the legal fees incurred by TRYHORN in this action.
This Court should reverse the trial court’s erroneous attorneys’ fees order. Instead of a remand, this Court should instruct the trial court to enter a new order that denies an award of counsel fees because the amount of water system costs awarded under the section 7002 claim for contribution, as well as the amount of time spent at trial on that claim, were de minimis.
II. EXPLANATION REGARDING APPEALABILITY.
The CRUZES appeal from the trial court’s final judgment. Clerk’s Transcript (“CT”) 499. A final judgment is directly appealable. Code Civ. Proc. §904.1(a)(1). In this appeal, the CRUZES challenge only the trial court’s post-judgment award of attorneys’ fees. Generally, when a judgment decides that the prevailing party is entitled to an award of attorneys’ fees and a later order sets the amount of the fee award, an appeal from the judgment alone is deemed to cover the attorneys’ fees award. Grant v. List & Lathrop (1992) 2 Cal.App.4th 993, 998, 3 Cal.Rptr.2d 654. Here, the judgment did state that the CRUZES shall pay TRYHORN’s attorneys’ fees in an amount to be determined by the court upon noticed motion. CT 367. Under Grant, the CRUZES’ appeal from the judgment should be deemed to include an appeal from the post-judgment order awarding attorneys’ fees.
In Gouskos v. Aptos Village Garage, Inc. (2001) 94 Cal.App.4th 754, 764, 114 Cal.Rptr.2d 558, however, this Court suggested that the Grant rule might not apply in a case where the award of fees was discretionary, rather than mandatory, under the pertinent statute. An award of attorneys’ fees under Water Code section 7003 is discretionary, not mandatory. Given the uncertainty in the law, the CRUZES separately appeal from the trial court’s post-judgment attorneys’ fees order. CT 522.
III. STATEMENT OF THE CASE.
A. Summary of Significant Facts.
As the CRUZES’ appeal is limited to the fee award, their recitation of facts will include only a brief summary of the trial court’s findings on background facts and some of the relevant evidence that explained how the dispute among the parties arose.
The individual Plaintiffs own six homes in a neighborhood on Middlefield Road in Salinas in an unincorporated area of Monterey County. CT 349. The CRUZES now own a home located at 736 Middlefield Road in the same neighborhood. Ibid. TRYHORN is a private, unincorporated association of water system members who established it by a written agreement in 1955. CT 350. TRYHORN supplies water to seven families, including all of the individual Plaintiffs and the CRUZES, on Middlefield Road. Ibid. The water system includes water tanks, pipes and equipment situated on the property owned by Plaintiff RICHARD GRIMES and a well, pump and pipelines on the property now owned by the CRUZES. Ibid. Plaintiffs JOHN and CARROL PLANT, who are TRYHORN members who live next door to the CRUZES, manage the TRYHORN water system and keep its records. Ibid. The TRYHORN members equally share the cost to maintain and operate the water system through periodic assessments. Ibid.
Around 1997, an old TRYHORN well had become contaminated with nitrates. Ibid. JOHN PLANT investigated alternative water sources and well locations and determined that it was necessary to construct a new well at 736 Middlefield Road – the location approved by the Monterey county health department. Ibid. The TRYHORN members, including the then-owner of 736 Middlefield Road, agreed to build a new well on that property. CT 351-352, 354. The TRYHORN members relied upon this agreement, as well as the TRYHORN bylaws, to construct and operate the new well at 736 Middlefield Road. CT 351. TRYHORN did not record an easement for the well and water lines on that property. Ibid. However, the TRYHORN bylaws required members to provide easements for pipelines on their properties. Ibid. The wellhead and pump are set inside a concrete slab which is four inches thick and four feet square. Ibid. A nearby water pipe and electrical box are about two feet above the ground. Ibid.
On April 14, 1999, the CRUZES bought the property located at 736 Middlefield Road. CT 352. They were represented by a real estate agent and used the services of a title company in connection with that purchase. Ibid. They inspected the property before they bought it. Ibid. SAMUEL CRUZ saw the wellhead before he purchased the property, but he did not know it was a wellhead. CT 355. When he saw the concrete slab, he asked his real estate agent to find out what the slab was. Reporter’s Transcript (“RT”) 666:5-24. JOHN PLANT gave the CRUZES’ real estate agent notice that a well and mutual water system existed on the property. CT 355. But, the CRUZES’ real estate agent did not tell them that there was a well on the property. RT 668:22-669:2. A property disclosure statement indicated that there was a seven-party well on the property. CT 355. Yet, when the CRUZES were in escrow, they were not aware of any permits or easements related to a well on the property. RT 661:19-662:6. The CRUZES stated that they did not actually know that a well was on their property until about a year after they bought it. RT 526:8-11, 531:27-533:5, 574:25-575:16, 635:23-637:25, 639:16-640:26, 657:1-28.
The CRUZES understood that they were part of a water system that required all users to pay for water. RT 536:8-537:13. They made the first two semiannual payments for water. Ibid. Then, SAMUEL CRUZ’s mother and stepfather moved into the home and began to make the water payments. RT 589:9-20. His mother and stepfather moved out of the house because the neighbors had made derogatory racial comments to their family. RT 687:20-27. After the dispute arose, the CRUZES stopped making water payments. RT 592:11-22. They did not pay their water assessments for 2003 and 2004 nor their share of the cost to repair a well pump. Ibid.
One day, SAMUEL CRUZ was preparing his backyard to lay sod on it. RT 657:5-16. PLANT came over and told him to stop digging in his backyard. RT 575:8-16, 657:20-28. PLANT stated that CRUZ could not dig there because there were pipes in the yard connected to the well on the property. Ibid. CRUZ asked PLANT why a well was on his property and to show him authority for it because it did not come up in the escrow documents. RT 575:8-16.
The CRUZES investigated records at the county health department. RT 640:27-643:26, 661:9-662:6. When they went to the health department offices, the county employees were not able to show them anything that explained how a well was located on their property. RT 643:23-26, 664:23-665:11, 674:8-675:7 The CRUZES were not able to obtain any documentation that showed that a well properly was built on their property. RT 643:12-26, 662:15-663:4, 675:2-7. SAMUEL CRUZ told PLANT that there was no documentation that supports a well or easement on his property and requested that PLANT provide some documentation. RT 663:5-12.
PLANT eventually gave him a copy of a TRYHORN permit application. RT 663:13-24. But, there were discrepancies on the permit application with respect to the property owners’ names, addresses and assessor’s parcel numbers. RT 663:25-664:6. CRUZ took the copy of the permit application to the county health department to check out its validity and found that it had none. RT 663:25-664:12, 680:26-682:13. He told PLANT that the permit application was not good enough documentation because it had discrepancies. RT 680:26-682:13.
As it turned out, the county health department had issued a permit for the construction of a new well at 736 Middlefield Road. RT 129:5-15. But, the county documents showed an incorrect property owner address. RT 130:2-133:13, 165:5-166:8. After SAMUEL CRUZ came to the county offices and pointed out that the address on the permit did not match the address of the actual location of the well, the county corrected the property owner address on the original permit in its files. RT 133:14-18, 156:13-157:16, 160:9-23.
CRUZ also tried to find permits for the pipes and wiring on his property. RT 675:8-21. He found none. Ibid. The county had issued no permits for the installation of the electrical wiring or water pipes at 736 Middlefield Road. RT 513:2-514:13.
On several occasions, CRUZ asked PLANT to call a meeting of the TRYHORN members. RT 682:27-683:16. On each occasion, PLANT would be hostile and brush him off. Ibid. PLANT told him that everyone was too busy and that no one wanted a meeting. RT 684:1-5. PLANT also told him that the other TRYHORN members did not believe that he had a right to call a meeting. RT 684:21-685:9. CRUZ felt that he meant nothing to the other TRYHORN members. Ibid. Also, the CRUZES felt frustrated because they had tried to get documentation of the TRYHORN property rights and did not receive a satisfactory response from anyone. Ibid.
The CRUZES eventually sent a letter to all other TRYHORN members in which they charged that the well on their property was constructed illegally. Trial exhibit 18 (see CT 31). In that letter, they pointed out that the county health department had no permit or record regarding the installation of the well on their property. Ibid. They also mentioned that they had made several requests for a meeting among TRYHORN members, but effectively were ignored. Ibid. They notified the other TRYHORN members that the use of the well would be terminated in 24 days. Ibid.
The CRUZES did not actually intend to turn off their neighbors’ water. RT 537:20-538:3, 685:10-22. Their purpose in sending this letter was to get everyone’s attention that they were property owners with property rights that must be respected too. RT 647:4-27, 649:6-20, 684:21-685:24. The CRUZES wanted a meeting among TRYHORN members to discuss the documentation of the well, the identity and location of water system components on their property and water rights and billings. RT 649:16-20. They received a lawsuit.
B. Nature of the Action and Relief Sought in Trial Court.
TRYHORN filed a complaint for equitable and statutory relief against the CRUZES. CT 1-8. In its complaint, TRYHORN alleged causes of action for: (a) a prescriptive easement; (b) an equitable easement; (c) an injunction; and (d) relief under Water Code sections 7000-7010 (a declaration of the respective rights of the water system members under section 7005, an order that compelled contribution of unpaid water system costs under section 7002, and an award of attorneys’ fees under section 7003). Ibid. The CRUZES filed an answer to the complaint in which they denied most of the allegations. CT 64-71. They also filed a cross-complaint in which they asserted claims of: (a) quiet title; (b) declaratory relief; (c) trespass; and (d) injunction. CT 72-79. TRYHORN filed an answer to the cross-complaint in which it denied most of the allegations. CT 83-98.
The case proceeded to trial. Virtually the entire trial was devoted to TRYHORN’s claim for declaratory relief. More specifically, almost the entire trial concerned the Water Code section 7005 issues of whether TRYHORN had an easement on the CRUZES’ property and whether the CRUZES had actual or constructive knowledge of the easement at the time that they purchased the property. CT 348-356.
Only a fraction of one percent of the trial related to the Water Code section 7002 issue of TRYHORN’s right to contribution of unpaid water system costs from the CRUZES. In particular, there were 20 lines of testimony in which JOHN PLANT stated that TRYHORN records showed that the CRUZES owed money for their share of TRYHORN expenses in 2002-2004. RT 306:4-14, 307:4-12. Also, there were 10 lines of testimony in which JOHN PLANT recounted a conversation with SAMUEL CRUZ’s stepfather about the CRUZES’ obligation to pay their share of TRYHORN water bills and repairs. RT 314:7-16. There additionally were 24 lines of testimony in which CARROL PLANT testified that the CRUZES did not pay their share of the cost to repair the well pump in 2002, nor any water system assessments for 2003 and 2004; she stated that the total amount of water system costs due from the CRUZES was $560.00, including the cost to repair the well pump. RT 592:2-25. The above 54 lines of questions and answers comprised all of the testimony at trial on the issue of TRYHORN’s right to recover unpaid water system costs under section 7002.
The CRUZES never disputed that they owed the unpaid water system costs. In a colloquy among the court and counsel during closing arguments, the CRUZES’ attorney reminded the court that CARROL PLANT had testified regarding the amount of the unpaid water fees. RT 808:25-809:9. When counsel for TRYHORN stated that the amount due was $560.00, the CRUZES’ attorney did not dispute that amount. RT 809:10-18. In fact, the CRUZES’ attorney even agreed to allow TRYHORN to amend its pleading to conform to proof to allow the recovery of $560.00 in unpaid water costs, rather than the $290.00 amount alleged in TRYHORN’s complaint. RT 816:9-21.
Ultimately, in its statement of decision, the trial court found that TRYHORN had an equitable easement on the CRUZES’ property based upon the fully executed oral agreement among TRYHORN members, including the CRUZES’ seller, to construct a well at 736 Middlefield Road. CT 353-355. The extent of the easement was the right to install, improve, use, maintain and repair the well, pump and water pipes on the CRUZES’ property. Ibid. The court also found that the CRUZES had actual and constructive knowledge of the existence of the well at the time that they purchased the property. CT 355. The predicates for that finding were the disclosures in the documents related to the purchase and sale of the property and JOHN PLANT’s disclosure to the CRUZES’ real estate agent that a well and water system existed on the property. CT 355-356. The court further found that TRYHORN was entitled to a section 7002 contribution from the CRUZES of $560.00 in unpaid water system costs, plus interest in the amount of $87.61. CT 356.
The court declined to grant TRYHORN a permanent injunction, explaining that “[t]he court finds no evidence of Defendants’ physical interference with the well or water system facilities.” CT 355. The court also reasoned that, notwithstanding the threatening letter from the CRUZES to the other TRYHORN members, “there was no evidence that the defendants actually blocked access or did anything else that would lead this Court to find at this point in time that it is appropriate to issue a permanent injunction.” RT 1007:2-12. Thus, the trial court decided the section 7005 declaratory relief and equitable easement claims in favor of TRYHORN, but denied TRYHORN’s request for an injunction. TRYHORN abandoned its prescriptive easement claim at trial. RT 760:15-19.
On the issue of an award of attorneys’ fees, the trial court noted in its statement of decision:
The court also finds that Plaintiffs are the prevailing party. Section 7003 provides that the plaintiff in such an action may recover, as costs, reasonable counsel fees to be fixed by the court. Additionally, under Rodgers v. Riverside Land Etc. Co., (1901) 132 Cal. 9, 12, Plaintiffs may show as an element of expense the attorney’s fees incurred in necessary litigation. In refusing to pay their fair share of the Tryhorn system costs, and in threatening and attempting to cut off Tryhorn’s existing water supply, Defendants have forced the other members of Tryhorn to incur substantial attorneys fees and costs that should properly be paid by Defendants under Water Code section 7003 and the decision in Rodgers.
The trial court entered judgment in favor of TRYHORN. CT 365-369. The judgment reflected the rulings set forth in the statement of decision, including an award of $647.61 in water system costs. Ibid. On the issue of a fee award, the judgment stated: “Plaintiffs are the prevailing party, and Defendants shall pay Plaintiffs’ reasonable attorneys’ fees and costs for bringing and defending this lawsuit, to be determined by this court on Plaintiffs’ noticed motion filed within 21 days from the date this order is filed and served. At such time, this Judgment will be amended to reflect those fees.” CT 367.
C. Order Appealed From.
TRYHORN filed papers in support of its motion for attorneys’ fees and costs. CT 371-465. In its motion, TRYHORN asserted that it was entitled to a fee award under Water Code sections 7001-7003 and the holding in the Rogers case. CT 372. TRYHORN contended that Rogers authorized an award of fees for all hours reasonably spent on the case. CT 375. TRYHORN requested an award of $118,559.50 in fees and $4,431.65 in costs. CT 376.
The CRUZES filed papers in opposition to the attorneys’ fees motion. CT 473-490. They urged that the amount of fees and costs awarded to TRYHORN should be limited in view of TRYHORN’s monetary recovery of only $647.61. CT 482-483.
The trial court entered a post-judgment attorneys’ fees order. CT 511-513. The court awarded TRYHORN $100,000.00 in attorneys’ fees, plus $4,431.65 in costs. CT 512.
IV. QUESTION PRESENTED AND STANDARD AND SCOPE OF APPELLATE REVIEW.
A. Does Water Code section 7003 authorize an award of attorneys’ fees to the prevailing plaintiffs in an action under Water Code sections 7000-7010 where: (a) the trial almost exclusively concerned the issue of a section 7005 declaration of the respective rights of the parties regarding their mutual water system, and (b) the defendants did not dispute the plaintiffs’ entitlement to – nor amount of – a small sum of unpaid water system costs owed under section 7002?
The de novo standard of review applies. The resolution of the sole issue in this appeal will require this Court to interpret and apply section 7003. This Court has recognized that the interpretation of an attorneys’ fees statute and the application of the statute to the circumstances presented in a particular case are questions of law subject to independent review on appeal. Californians for Population Stabilization v. Hewlett-Packard Co. (1997) 58 Cal.App.4th 273, 294, 67 Cal.Rptr.2d 621, overruled on another ground in Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 171-172, 96 Cal.Rptr.2d 518, 999 P.2d 706. In Smith v. Rae-Venter Law Group (2002) 29 Cal.4th 345, 357, 127 Cal.Rptr.2d 516, 58 P.3d 367, the Supreme Court embraced this Court’s decision in Californians for Population Stabilization on the issue of the standard of review in determining that the independent review standard comes into play whenever an appellate court must interpret a statute and apply the statute to undisputed facts. Accord, Sampson v. Parking Service 2000 Com, Inc. (2004) 117 Cal.App.4th 212, 217, 11 Cal.Rptr.3d 595; Department of Forestry and Fire Protection v. LeBrock (2002) 96 Cal.App.4th 1137, 1139, 117 Cal.Rptr.2d 790; Wilson v. Wal-Mart Stores, Inc. (1999) 72 Cal.App.4th 382, 388-389, 85 Cal.Rptr.2d 4.
In construing section 7003, this Court’s fundamental task is to ascertain and implement the Legislature’s intent. Smith, supra, 29 Cal.4th at 358; Trope v. Katz (1995) 11 Cal.4th 274, 279-280, 45 Cal.Rptr.2d 241, 902 P.2d 259. In doing so, this Court should scrutinize the statutory language and give those terms their usual and customary meaning. Ibid. If the words in a statute are clear, an appellate court may not add to or alter those words to achieve an objective that does not appear on the face of the statute. Trope, supra, 11 Cal.4th at 280. If there is no ambiguity in the statutory language, then the reviewing court should presume that the Legislature meant what it said and the plain meaning of the statute governs. Smith, supra, 29 Cal.4th at 358.
A. A Section 7003 Fee Award Can Include Only Fees Incurred to Litigate a Section 7002 Claim for Contribution of Unpaid Water System Costs, Not Fees to Litigate a Section 7005 Claim to Declare the Rights of the Water System Members.
1. Neither Section 7003 Nor Any Other Statute Supports the Trial Court’s $100,000.00 Fee Award to TRYHORN.
In an action involving a dispute between members of a mutual water system, a prevailing plaintiff can recover attorneys’ fees for a successful section 7002 contribution claim, but not for a successful section 7005 declaratory relief claim. By failing to recognize this important distinction, the trial court erred.
California adheres to the American rule regarding the allocation of attorneys’ fees: Each party generally must pay his or her own counsel fees. Trope, supra, 11 Cal.4th at 278. The Legislature codified the American rule when it adopted Code of Civil Procedure section 1021. Ibid. Section 1021 provides, in pertinent part:
Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties.
The Supreme Court has explained that the court has the authority to grant an award of attorneys’ fees in only three situations: (a) a statute allows a fee award in the type of case before the court; (b) a contract between the parties to the lawsuit allows a fee award in the type of case before the court; or (c) one of the three equitable exceptions to the American rule – the private attorney general doctrine, the common fund doctrine, or the substantial benefit doctrine – applies in the case before the court. Trope, supra, 11 Cal.4th at 279.
Here, TRYHORN never pleaded nor tried to prove that a contract authorized the fee award. There was no such contract. Also, TRYHORN never pleaded nor tried to prove that the private attorney general doctrine authorized the fee award. TRYHORN could not do so because it would not be able to show that its judgment – which established an equitable easement only for the benefit of Plaintiffs and a $647.61 monetary recovery – conferred a significant benefit upon the general public or a large class of persons. See Code Civ. Proc. §1021.5. Additionally, TRYHORN never pleaded nor tried to prove that the common fund doctrine authorized the fee award. TRYHORN could not do so because its action did not create a fund from which third parties derived benefits so as to require the passive beneficiaries to pay a fair share of the attorneys’ fees. Kavanaugh v. City of Sunnyvale (1991) 233 Cal.App.3d 903, 908, 284 Cal.Rptr. 698. Moreover, TRYHORN never pleaded nor tried to prove that the substantial benefit doctrine authorized the fee award. TRYHORN could not do so because the substantial benefit doctrine contemplates that an award of attorneys’ fees shall be paid not by the losing parties, but by those who received a share of the substantial benefit that the litigation produced. Woodland Hills Residents Association, Inc. v. City Council of Los Angeles (1979) 23 Cal.3d 917, 943, 154 Cal.Rptr. 503, 593 P.2d 200. No contractual nor equitable basis for a fee award applies.
The trial court’s award of attorneys’ fees to TRYHORN must stand or fall based upon the applicability of Water Code section 7003 – the only statute cited by the lower court and TRYHORN in support of the fee award. Section 7003 was adopted in 1943 as part of the original enactment of the Water Code. Stats. 1943, ch. 368, §7003, p. 1666. Section 7003 was derived from former Civil Code section 843, which was adopted in 1905. Stats. 1905, ch. 440, §2, p. 600. In Westlaw word searches and searches for annotations under section 7003, the CRUZES could not find one case in which a court applied section 7003 or former section 843. Thus, the interpretation of section 7003 appears to be a question of first impression.
Section 7003 provides:
The action authorized by this article may be brought by any or all of the parties who have contributed more than his or their just proportion of the expenses, and the plaintiff may recover, as costs, reasonable counsel fees to be fixed by the court.
Section 7003 confers upon a trial court the discretion to award attorneys’ fees to a prevailing plaintiff in an “action authorized by this article.” Section 7003 is in article 2 of Chapter 1 of Division 4 of the Water Code. The only other statutes in that article are sections 7001 and 7002. Section 7001 provides that when two or more parties are members of a mutual water system, each party is responsible for his or her proportionate share of the reasonable expenses to maintain and repair the water system. Section 7002 provides that a party, who has failed to pay his or her share of expenses under section 7001, is liable for the amount of the unpaid water system expenses in an action for contribution. Accordingly, section 7003 authorizes a trial court to award attorneys’ fees to a prevailing plaintiff only to the extent that the plaintiff’s action involved a claim for contribution of unpaid water system expenses under section 7002.
Significantly, Water Code section 7005 is in article 3 of Chapter 1 of Division 4 of the Water Code. Thus, section 7005 is outside the article that contains section 7003. Section 7005 provides that when two or more persons are members of a private mutual water system, any member can bring an action for a declaration of the respective rights of the members of the water system. There is no statutory basis for a trial court to award attorneys’ fees to a prevailing plaintiff in a section 7005 declaratory relief action.
The statutory language could not be more clear. Section 7003 allows a prevailing plaintiff to receive an award of counsel fees in a section 7002 action for contribution, but not in a section 7005 action for declaratory relief. No statute permits a fee award in a section 7005 declaratory relief action. The plain meaning of the pertinent statutes should govern this Court’s decision. Smith, supra, 29 Cal.4th at 358; Trope, supra, 11 Cal.4th at 280.
Here, it is – or should be – undisputed that nearly the entire trial concerned TRYHORN’s section 7005 declaratory relief action regarding the respective rights of all TRYHORN members, including all individual Plaintiffs and Defendants. Virtually all of the evidence admitted at trial related to the subject of the declaratory relief action – the existence of TRYHORN’s easement on the CRUZES’ property and the enforceability of that easement as a result of the CRUZES’ notice of the easement when they bought the property. There were only 54 lines of testimony on the section 7002 issue of the amount of unpaid water system costs owed by the CRUZES. RT 306:4-14, 307:4-12, 314:7-16, 592:2-25. There were another 35 lines of colloquy among the court and counsel on that subject. RT 808:25-809:18, 816:9-21. The sum of the lines devoted to TRYHORN’s section 7002 contribution claim would comprise about four pages out of a reporter’s transcript of nearly 700 pages – about one-half of one percent of the trial. The other 99.5 percent of the trial involved TRYHORN’s section 7005 declaratory relief claim.
Moreover, the CRUZES never disputed TRYHORN’s entitlement to the unpaid water system costs nor the amount of those costs claimed by TRYHORN. Instead, the CRUZES referred the trial court to the amount of costs specified by CARROL PLANT and stipulated to TRYHORN’s amendment of its pleading to conform to proof to allow TRYHORN to recover $560.00 in costs, rather than the $290.00 amount alleged in its complaint. RT 808:25-809:18, 816:9-21. The section 7002 water system costs issue was not even in dispute.
The amount of a section 7003 fee award must be reasonable. Wat. Code §7003. By awarding TRYHORN $100,000.00 in counsel fees after the trial of the section 7002 issue took up only one-half of one percent of the trial time and the section 7002 award was only $647.61, the trial court did not award TRYHORN a reasonable amount of attorneys’ fees. The trial court necessarily awarded TRYHORN fees for the prosecution of its section 7005 declaratory relief claim. Here, the trial court erred because there is no statutory or other basis for a fee award to a plaintiff who successfully has pursued a section 7005 claim. This Court should reverse the post-judgment attorneys’ fees order.
2. The Rogers Decision Does Not Support the Trial Court’s $100,000.00 Fee Award to TRYHORN.
The trial court ruled and TRYHORN contended that the fee award was justified by the Rogers decision, as well as section 7003. CT 356-357, 372, 375. But, they misplaced their reliance upon Rogers for four reasons.
First, Rogers was decided in 1901 – four years before the Legislature adopted the predecessor to section 7003. Thus, Rogers did not involve the construction of an attorneys’ fees statute, but instead, the interpretation of a contract. Rogers v. Riverside Land & Irrigating Co. (1901) 132 Cal. 9, 11-12, 64 P. 95. The sole issue in the instant appeal is the interpretation of an attorneys’ fees statute – section 7003 – not a contract. For this reason alone, Rogers is distinguishable and has no applicability to the case at bar.
Second, to the extent that Rogers may seem relevant, the statutory scheme in sections 7000-7010 supersede the decision. In Rogers, a grant deed allowed the seller the right to carry water through a canal on the property subject to the seller’s obligation to pay a portion of the cost to maintain and repair the canal. The successor to the buyer incurred legal expenses of $500.00 in a separate action against third parties to restrain those defendants from taking actions that would affect the flow of water through the canal. The successor to the buyer also incurred legal expenses of $25.00 in a second lawsuit against another third party to collect unpaid assessments for the use of water in the canal. The successor to the seller claimed that the attorneys’ fees incurred in the lawsuits against the third parties did not involve maintenance and repair expenses. The Supreme Court construed the contract to mean that the expense of litigation to protect the canal, by preventing or removing physical obstructions, and to keep the canal in good repair constituted maintenance and repair expenses. Id. at 11-12. The Court also held that the legal fees incurred in the collection action to recover unpaid assessments must be shared proportionately by all users of the canal. Id. at 12.
Here, TRYHORN apparently believes that if the attorneys’ fees incurred by the plaintiff in the third party lawsuits was deemed to be recoverable maintenance and repair expenses in Rogers, then the attorneys’ fees incurred by TRYHORN in this action should be deemed to be recoverable maintenance and repair expenses. However, TRYHORN seeks to recover the legal fees that it incurred not in lawsuits against third parties, but in a declaratory relief action to determine the respective rights of the water system members. TRYHORN expressly brought its declaratory relief action against the CRUZES under section 7005. CT 6. As previously explained, neither section 7003 nor any other statute authorizes a fee award to TRYHORN after it prevailed in its section 7005 declaratory relief action. Consequently, the statutory scheme governs the instant case and supersedes any contrary ruling in Rogers regarding the recovery of legal fees.
Third, Rogers is not a fee-shifting case, as the trial court and TRYHORN mistakenly attempted to use it. Rogers merely decided that the legal fees incurred by a water system member in lawsuits against third parties must be shared by other water system members under the terms of a contract between the water system members. It is critical to note that Rogers did not hold that the defendant was required to pay the attorneys’ fees incurred by the plaintiff in the lawsuit between them. As it was not a fee-shifting case, Rogers cannot support the trial court’s order that directed the CRUZES to pay TRYHORN’s attorneys’ fees in the lawsuit between them. Only section 7003 can support a fee-shifting award of counsel fees in this case. But, section 7003 does not allow an award of counsel fees to a plaintiff who successfully litigated a section 7005 declaratory relief action.
Fourth, even if Rogers somehow were applicable, it would not support the order that compelled the CRUZES to pay virtually all of TRYHORN’s fees in the instant case. The result in Rogers was that the legal fees incurred by a water system member in lawsuits against third parties must be shared proportionately by other water system members, not paid in full by the defendant. Therefore, even if Rogers did apply to the case at bar, the result would be that the seven families in TRYHORN, including the CRUZES, must bear TRYHORN’s legal fees in this action in equal one-seventh shares. Rogers cannot reasonably be read to support the result that the CRUZES must pay virtually all of TRYHORN’s counsel fees in this action.
Neither section 7003 nor Rogers supports the trial court’s award of $100,000.00 in attorneys’ fees to TRYHORN and against the CRUZES. As a matter of law, the trial court erred in granting the $100,000.00 fee award. This Court should reverse the trial court’s attorneys’ fees order. Rather than remand the case to the trial court for further proceedings, however, this Court should put this case to rest and not force the parties to incur any more legal fees. TRYHORN’s section 7002 contribution claim produced a de minimis recovery – $647.61. The trial of that claim lasted about five minutes – a de minimis amount of time. The CRUZES did not even dispute TRYHORN’s entitlement to the unpaid water system costs nor the amount of those costs. Under the circumstances, this Court should decline to remand the case and decide that TRYHORN is entitled to no legal fees under section 7003.
For the foregoing reasons, this Court should reverse the trial court’s attorneys’ fees order with instructions that the trial court vacate that order and enter a new order that denies Plaintiffs’ motion for attorneys’ fees. This Court’s instructions also should direct the trial court to conform its judgment to the new order denying an award of counsel fees.
VII. CERTIFICATE STATING NUMBER OF WORDS.
I hereby certify that the number of words in the text of the foregoing brief, exclusive of the tables and this certificate, is 6,339, according to the word count in the WordPerfect 12.0 word processing program that I used to prepare this brief.
Dated: November ___, 2005.
LAW OFFICES OF RUSSELL J. HANLON
RUSSELL J. HANLON
Attorney for Defendants and Appellants
SAMUEL CRUZ and DEBRA RAMIREZ CRUZ