De Boni Corp. v. Del Norte Water Co.

For over a century, respondent Del Norte Water Company’s articles of incorporation and bylaws have specified how water is to be distributed among its shareholders. For three generations, members of the De Boni family have been actively involved as shareholders, officers and directors of Del Norte Water Company and have approved the articles and bylaws their successor in interest, appellant De Boni Corporation, now questions.

Appellant now complains that the articles and bylaws governing the allocation of “irrigation” water as distinguished from “domestic” water in effect give preferential treatment to some shareholders in the event of a water shortage and are prohibited by Corporations Code section 400.

As we shall explain, the determination of the “threshold requirement,” the number used to determine pro rata water entitlement, treats all shares of stock in precisely the same manner. The allocation is determined by a ratio of the number of shares to the number of acres owned. The trial court determined that this water allocation system is not discriminatory and does not violate section 400. We affirm.

Facts and Procedural History

Respondent Del Norte Water Company…