Louisiana-Pacific Corp. v. Humboldt Bay Municipal Water District

*154 Opinion

In this action we consider whether a municipal water district can unilaterally abrogate selected provisions of its contracts by declaring, 18 years after the first contract was executed, that its statutory power to enter into contracts does not include the power to contract with respect to rates.

The action was submitted to the trial court upon stipulated facts which may be summarized as follows: The Humboldt Bay Municipal Water District (hereinafter District) was formed in November 1956 pursuant to the Municipal Water District Act of 1911, Water Code section 71000 et seq. One of the express intents and purposes of the formation was to induce Louisiana-Pacific Corporation and Crown-Simpson Corporation (hereinafter appellants) to locate their pulp mills within the District’s boundaries. At the time of the 1956 election, the voters of Humboldt County understood that the assurance of a water supply to appellants was a means of inducing appellants to locate their mills in Humboldt County.

In accordance with the express purpose of inducing appellants to locate within its territory, District entered into separate agreements (hereinafter First Agreement) with appellants…

I agree with the majority that the three pertinent provisions of the Water District Act—Water Code sections 71614 (authorizing a district to fix rates), 71616 (providing criteria for rate fixing), and 71592 (authorizing the district to enter into contracts)—should be interpreted in such a way as to harmonize them in accordance with what appears to be the overall intent of the Legislature. It appears to me, however, that the majority’s interpretation—which leaves districts free to enter into long-term contracts establishing rates without regard to the criteria set forth in section 71616—produces a dissonant result. The message conveyed by the majority’s opinion is that the governing board of a water district, approached by a potential user interested in conducting business within the district’s jurisdiction, is free to enter into a contract with the user establishing rates for whatever number of years it chooses (in this case, 43 years), and without regard to the relationship between the rates so established and the district’s operating expenses, or amounts required for repairs and depreciation, surplus for expansion, payments on bonded debts, and repayment of advances. The…

In this action we consider whether a municipal water district can unilaterally abrogate selected provisions of its contracts by declaring, 18 years after the first contract was executed, that its statutory power to enter into contracts does not include the power to contract with respect to rates.

The action was submitted to the trial court upon stipulated facts which may be summarized as follows: The Humboldt Bay Municipal Water District (hereinafter District) was formed in November 1956 pursuant to the Municipal Water District Act of 1911, Water Code section 71000 et seq. One of the express intents and purposes of the formation was to induce Louisiana-Pacific Corporation and Crown-Simpson Corporation (hereinafter appellants) to locate their pulp mills within the District's boundaries. At the time of the 1956 election, the voters of Humboldt County understood that the assurance of a water supply to appellants was a means of inducing appellants to locate their mills in Humboldt County.

In accordance with the express purpose of inducing appellants to locate within its territory, District entered into separate agreements (hereinafter First Agreement) with…