Opinion
E065399
04-12-2018
CALIFORNIA STEEL INDUSTRIES, INC., Cross-complainant and Respondent, v. CCG ONTARIO LLC, Cross-defendant and Appellant.
Grignon Law Firm and Margaret M. Grignon; Hanson Bridgett, Michael J. Van Zandt, and Neil R. Bardack for Cross-defendant and Appellant. Best Best & Krieger, Christopher M. Pisano, and Paeter E. Garcia for Cross-complainant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. CIVRS1108911) OPINION APPEAL from the Superior Court of San Bernardino County. Gilbert G. Ochoa, Judge. Affirmed. Grignon Law Firm and Margaret M. Grignon; Hanson Bridgett, Michael J. Van Zandt, and Neil R. Bardack for Cross-defendant and Appellant. Best Best & Krieger, Christopher M. Pisano, and Paeter E. Garcia for Cross-complainant and Respondent.
This is a slander of title dispute between two companies holding a joint interest in an annual right to extract water from the Chino Basin, a large groundwater basin in the Inland Empire. At the time of the alleged slander, California Steel Industries, Inc. (California Steel) and CCG Ontario LLC (CCG) held a joint right to extract 630 acre-feet (af) per year, as tenants in common. CCG enjoyed the first priority to the water, or the first right to use it, and California Steel had a second priority—that is, it could use whatever amount CCG did not use during a given year.
In fact, the amount was 630.274 af, but we use 630 af as a shorthand for the sake of simplicity. An acre-foot of water is 325,851 gallons—the amount it would take to cover an acre of land to a depth of one foot.
The dispute at the heart of this case arose in late 2008, when CCG sold the annual right to extract the 630 af to a third party, Aqua Capital Management LP (Aqua), without disclosing California Steel's interest in the water. During negotiations, CCG told Aqua that California Steel no longer held an interest in the water, when CCG knew that was not the case. In addition, CCG's grant deed described the transferred interest as "the" right to extract the 630 af, thereby conveying to Aqua that it would be the owner of a sole right unencumbered by a joint interest.
Years after the sale, California Steel attempted to exercise its second priority to the water and in response Aqua sued to quiet title as a bona fide purchaser. After defending itself in that action and ultimately settling with Aqua for a sole right to 315 af, California Steel sued CCG for fraud and slander of title by disparaging its joint interest in the annual water right. After a bench trial, the court found that while CCG's actions did not rise to the level of fraud, the company had committed slander of title. The court ordered CCG to pay California Steel a total of $2,147,543 in damages composed of two parts: (1) $1,974,848, representing half of the sale price Aqua paid for the 630 af ($1.25 million), plus prejudgment interest, to compensate California Steel for the impaired marketability CCG's disparagement caused; and (2) $172,695 in litigation expenses to compensate California Steel for having to defend Aqua's quiet title action.
We are also using a shorthand for this number, the exact amount is 315.137 af.
On appeal, CCG attacks the sufficiency of the evidence supporting the slander judgment and the propriety of the damage award. We find no error and affirm.
I
FACTUAL BACKGROUND
The various water rights discussed in this case are part of a regulated groundwater basin—the Chino Basin—and came to exist through a series of transactions between Kaiser Steel Corporation (Kaiser), California Steel, and CCG. The most critical document in this dispute is the Water Rights Acknowledgment because it establishes the terms of California Steel's and CCG's joint ownership of the annual right to extract 630 af from the Chino Basin. Originally that ownership was shared by California Steel and Kaiser, but in 2000, CCG stepped into Kaiser's shoes as its successor in interest and assumed the terms of the Water Rights Acknowledgment. What follows is the relevant background involving the Chino Basin and the annual water right at issue here.
A. The Chino Basin and the 1978 Judgment
In 1978, the San Bernardino Superior Court issued a final judgment in a years-long litigation over the rights to extract groundwater from the Chino Basin in an action entitled Chino Basin Municipal Water District v. City of Chino, et al., case No. 51010 (the 1978 Judgment). The 1978 Judgment created a water management plan for the Chino Basin by, among other things, setting a safe yield (or maximum extraction amount) for the basin; establishing three stakeholder groups or "pools," each with its own safe yield, rights, and restrictions; and instituting a Watermaster to serve as a sort of referee for the basin, administering the provisions of the judgment, keeping records of water use and ownership, overseeing and approving water transfers, monitoring groundwater levels, and determining the operating safe yield for each year. The San Bernardino Superior Court (the Chino Basin Court) maintains ongoing jurisdiction over water rights in the Chino Basin through its authority to enforce and amend the 1978 Judgment and to resolve new issues that arise under the judgment.
California Steel and CCG are members of the "nonagricultural" pool, which is made up of industrial and commercial businesses. The other two pools consist of agricultural businesses (aptly named the "agricultural" pool) and public entities and water companies (the "appropriative" pool). The 1978 Judgment distinguishes between overlying rights—held by the members of the agricultural and nonagricultural pools, and "appropriative" rights—held by the public entities and water districts that make up the appropriative pool. An "overlying" right to extract groundwater is appurtenant to, or derived from, ownership of land contiguous to the basin. An appropriative right, in contrast, is not appurtenant; one holding an appropriative right may divert the water for use on noncontiguous lands. (See El Dorado Irr. Dist. v. State Water Resources Control Bd. (2006) 142 Cal.App.4th 937, 961 ["Appropriators need not own land contiguous to the watercourse"].) The 1978 Judgment prohibited members of the nonagricultural pool from selling their overlying water rights unless they sold those rights along with the overlying land—"All overlying rights are appurtenant to the land and cannot be assigned or conveyed separate or apart therefrom." Other pertinent provisions of the 1978 Judgment are that new parties acquiring water rights in the Chino Basin must intervene in the action and agree to be bound by the judgment and that a party cannot lose ("by abandonment, forfeiture or otherwise") its water rights unless by filing its own written election with the Watermaster or by order of the Chino Basin Court.
B. Kaiser and California Steel Become Tenants in Common to 630 af
The annual right to extract the 630 af used to belong solely to Kaiser—an original member of the nonagricultural pool. Under the 1978 Judgment, Kaiser owned an annual right to extract a total of 2,930.274 af from the Chino Basin. At the time, Kaiser owned roughly 2,000 acres of land in and around Fontana. In the 1980's, California Steel purchased some of that land and appurtenant water rights and, in 1992, became a party to the 1978 Judgment. At some point after the sale, Kaiser and California Steel began to disagree over land and water rights ownership. In 1995, they reached a settlement that was ultimately approved by the Chino Basin Court (the 1995 Settlement). The relevant components of the 1995 Settlement for this case are the documents that resolve the water rights dispute—the Water Rights Agreement and its incorporated attachment, the Water Rights Acknowledgment.
Section 3 of the Water Rights Agreement states, "In compromise of the disputes between the parties . . . Kaiser and [California Steel] shall execute . . . a 'Water Rights Acknowledgement' in the form attached hereto as Exhibit 'A.'" As described by the Water Rights Agreement, the Water Rights Acknowledgement "describe[s]" the "use and priorities of the 'Joint Water Rights'" as between the parties. Kaiser and California Steel agreed to deliver a copy of the Water Rights Agreement and Water Rights Acknowledgment to the Watermaster "with directions to modify Watermaster's records in accordance therewith." They also agreed to "jointly request that Watermaster correct its records to reflect the allocation set forth in the Water Rights Acknowledgment."
The Water Rights Acknowledgment divides what was formerly Kaiser's sole right to the 2,930 af as follows: (1) 1,000 af to Kaiser in fee (that is, as the sole owner); (2) 1,300 af to California Steel in fee; and (3) the remaining 630 af to be "jointly held" by Kaiser and California Steel. The joint ownership includes, "all right, title, and interest to carried-over and stored water resulting from an under exercise of [the right to extract 630.274 af]."
Crucially, the Water Rights Acknowledgment establishes use priorities and use restrictions as to the parties' joint ownership of the 630 af. For the first 10 years of joint ownership—from July 1, 1995 to June 30, 2005—California Steel held the first priority to extract the 630 af. Before California Steel could exercise that priority, however, it had to exhaust its own 1,300 af and any water it held in storage. Kaiser held a second priority, under which it could use or store any amount California Steel did not use each year. The Water Rights Acknowledgment referred to this as the "interim period."
Starting on July 1, 2005, the use priorities switched, with the first priority going to Kaiser and the second to California Steel. Kaiser's first priority carried a similar restriction to the one that applied to California Steel during the interim period—before Kaiser could use the water it had to exhaust its own 1,000 af and any water it held in storage. "Kaiser shall first exhaust its right to the 1000 acre feet . . . and then any water that it may have in its storage account before making any use of the [630 af]. [California Steel] shall have the right to use any portion of the [630 af] not used by Kaiser." The Water Rights Acknowledgment referred to this as the "final period" because the use priorities and restrictions stayed like this for the remainder of the joint ownership. Because the dispute here concerns use after 2008, the priorities and restrictions of the final period are the relevant ones for this case.
The Water Rights Agreement provided that after escrow on the water rights closed, California Steel "may then record the Water Rights Acknowledgment" with the county recorder. It is undisputed that California Steel never did so.
Shortly after Kaiser and California Steel settled their dispute, Kaiser sold to California Speedway (Speedway), an auto racing company, a portion of its land along with a joint interest in 475 af of the 1,000 af it had formerly owned in fee. Under this joint ownership, Speedway held the first priority to extract the water, but subject to a restriction—it had to use the 475 af on its own property (sometimes described as putting water to beneficial use). With its newly acquired right to extract groundwater, Speedway intervened in the Chino Basin action and became a member of the nonagricultural pool.
C. CCG Acquires Kaiser's Joint Interest in the 630 af
In 2000, Kaiser sold the rest of its property and appurtenant water rights to CCG. The deed conveying the property (the 2000 Kaiser Deed) attaches and incorporates a description of the conveyed water rights as "Exhibit C." Exhibit C says Kaiser conveys to CCG: "(i) 525 annual acre-feet; (ii) 475 annual acre-feet as tenants in common with [Speedway] with [Speedway] having the right of first use; [and] (iii) 630.274 acre-feet as tenants in common with California Steel . . . with [California Steel] having the right of use . . . through June 30, 2004, and Kaiser . . . having the right of first use thereafter." The language in Exhibit C could have been more accurate with respect to the joint ownership of the 630 af. It contains at least two typographical errors. The ownership's interim period ended in 2005, so it should read June 30, 2005, not 2004. Additionally, it was California Steel's right of first use, not right of use altogether, that expired in 2005, so it would have been more precise to include (and was probably an inadvertent error to leave out) the word "first" before the word "use" in section iii. In July 2001, the Chino Basin court approved the sale, issuing an order that contained the language in Exhibit C verbatim. Because California Steel never recorded the Water Rights Acknowledgement containing the full description of the terms of the joint ownership of the 630 af, the 2000 Kaiser Deed and the 2001 court order end up being the only descriptions of the joint ownership in the public record.
As part of the Kaiser/CCG sale, CCG and Kaiser signed an Omnibus Assignment and Assumption Agreement (the Assumption Agreement), under which CCG agreed to assume "[a]ll terms, covenants, conditions, and obligations related to or a part of" various agreements Kaiser had entered into with third parties. The Assumption Agreement referred to these agreements as the "Material Agreements" and listed them in Exhibit 2. Among the list of Material Agreements in Exhibit 2 are the Water Rights Agreement and the Water Rights Acknowledgement. In addition, CCG, Kaiser, and California Steel signed a contract entitled, Global Agreement, which informed California Steel that CCG would be stepping into Kaiser's shoes with respect to various contracts formerly between California Steel and Kaiser. The Global Agreement listed the Water Rights Agreement as one such contract, stating "Kaiser and [California Steel] are parties to that certain Water Rights Agreement dated June 1, 1995, a copy of which is attached hereto as Exhibit 'H' and incorporated herein by reference, the terms of which govern the allocation of certain water rights between the parties."
Before the Kaiser/CCG sale closed, CCG offered to sell to California Steel the water rights it was about to purchase from Kaiser. California Steel declined the offer. At the time, its steelmaking operation did not have an operating groundwater well and the company could not foresee needing additional water.
Shortly after the Kaiser/CCG sale closed, CCG sold its sole right to the 525 af to Speedway in fee, with no use restrictions. In other words, unlike the jointly owned 475 af, which would revert to CCG if Speedway failed to use it, CCG lost all control over the 525 af. This becomes important later because California Steel argued at trial that once CCG lost control of the 525 af, it could no longer exercise its first priority to the 630 af, as the Water Rights Acknowledgment required CCG to first "exhaust its right to the 1000 acre feet . . . and then any water that it may have in its storage account before making any use of the [630 af]."
D. The 2000 Peace Agreement
As noted above, the 1978 Judgment required the water rights of nonagricultural pool members remain appurtenant to the land, meaning those rights could be transferred only along with title to contiguous real property. But in 2000, the Chino Basin parties approved an agreement that, among other things, eliminated the appurtenance restriction and provided nonagricultural pool members with more flexibility in transferring their water rights (the 2000 Peace Agreement). Specifically, the 2000 Peace Agreement amended the transfer restriction in the 1978 Judgment to read, "All overlying rights are appurtenant to the land and cannot be assigned or conveyed separate or apart therefrom for the term of the Peace Agreement except that the members of the Overlying (Non-agricultural) Pool shall have the right to transfer or lease their quantified production rights within the Overlying (Non-agricultural) Pool or to Watermaster in conformance with the procedures described in [this] Agreement." (Italics added.) This also becomes important at trial, because CCG's water expert opined that the 2000 Peace Agreement rescinded the Water Rights Acknowledgment and thus eliminated the use restrictions applicable to CCG's and California Steel's joint ownership.
E. CCG Purports to Sell to Aqua the Sole Right to Extract the 630 af
In 2008, CCG entered into talks with Aqua to sell some of its water rights, resulting in the companies signing a Purchase and Sale Agreement (PSA) in which Aqua agreed to purchase the annual right to extract 630 af for $2.5 million and the water CCG had in storage for $1.5 million. The PSA states CCG "is the owner of 630.274 acre feet" in the Chino Basin "under and pursuant to the [1978 Judgment]." (Italics added.) The PSA also warrants that, to CCG's actual knowledge, the water rights being conveyed were "not subject to any lien, claim or encumbrance."
On November 13, 2008, the Watermaster issued a "Notice of Sale or Transfer" regarding the pending CCG/Aqua sale to interested parties, including a representative from California Steel. The notice informed the parties that CCG intended to sell to Aqua its stored water plus "its share of safe yield of 630.274 acre-feet." (Italics added.)
During the due diligence period, Aqua and CCG received a preliminary title report that contained a link to the 2000 Kaiser Deed. At trial, Aqua's business representative for the deal, David Penrice, testified that when Aqua saw the reference to California Steel and the tenancy in common in Exhibit C to the deed, it became concerned whether the company currently held an interest in the annual right. As mentioned above, Exhibit C provides that California Steel is a tenant in common to the annual right to extract the 630 af "having the right of use . . . through June 30, 2004 [sic]" with "Kaiser . . . having the right of first use thereafter."
On November 21, 2008, Aqua's counsel sent a title objection letter to Tim Peters, CCG's lead attorney for the transaction, asking to discuss the reference to California Steel and the two rights of use in the 2000 Kaiser Deed so it could "better understand these rights, and their possible consequences." Around the same time, CCG's business representative, Michael Del Santo, emailed Peters about the reference to California Steel in Exhibit C, saying, "Not sure what it means but it doesn't look good."
Peters sent a response letter to Aqua on December 2, 2008. He described California Steel as a "non-issue[]" and offered to discuss the matter further over the phone. According to Penrice and Tom Solon, two of the Aqua representatives who participated in those phone calls, Peters told Aqua that California Steel's "interest in the 630 acre-feet had expired." Solon said Peters told them Exhibit C "was a nonevent, it was over with" and that CCG "ha[d] no more responsibility to [California Steel]." At trial, Peters testified he had simply told Aqua that California Steel's right of use had expired, which he believed was consistent with the language in Exhibit C to the 2000 Kaiser Deed.
During these discussions, Del Santo assured Aqua's representatives he would email them whatever documents he found in his research relevant to the California Steel issue. Del Santo ended up finding the Water Rights Agreement and the Global Agreement in CCG's files. On December 9, 2008, he emailed both agreements to Peters, with the subject line "WATER RIGHTS—URGENT!" and asked Peters to call him "ASAP." Over the next two days, Del Santo sent three follow up emails to Peters. The record contains no evidence Peters ever responded to Del Santo, and neither Del Santo nor anyone else from CCG emailed the agreements to Aqua or told Aqua about their existence.
Penrice testified Aqua never would have purchased CCG's right to the 630 af had it known the right was subject to joint ownership. He said Aqua relied on Peters' statements that California Steel no longer had an interest in the water to move forward with the sale. He also said that had he received the Water Rights Agreement during the due diligence period he would have "turned over every stone" to find the Water Rights Acknowledgment, as it was clear from the Water Rights Agreement that the acknowledgement established the terms of the joint ownership.
On December 22, 2008, Peters executed the deed for the sale (the Aqua Deed). That document states CCG conveys to Aqua "The right to extract 630.274 acre-feet of [CCG's] Assigned Share of Operating Safe Yield . . . allocated to [CCG] under and pursuant to the [1978] Judgment." (Italics added.) During his deposition, Peters admitted he knew when he executed the Aqua Deed that California Steel held a joint interest in the annual right to the 630.274 af. Additionally, CCG admitted during discovery that when it executed the Aqua Deed, it had actual notice of California Steel's joint interest.
F. Aqua Sues to Quiet Title as a Bona Fide Purchaser
California Steel uses water as part of its steel making operations. Historically, the company purchased water from a local water utility in Fontana, but then around 2005 or 2006, it refurbished a well on its property and began pumping groundwater using its adjudicated rights to the Chino Basin. Except for that first year of pumping, California Steel always extracted more than 630 af per year, and the company forecasts producing even more groundwater in the future.
Around 2011, California Steel noticed the Watermaster had been accounting for its groundwater extraction from the 1,300 af it owned in fee, as opposed to first exhausting its second priority to the 630 af. California Steel argued at trial that it should have been able to exercise its second priority because CCG, and later Aqua, had not been exercising the first priority. In April 2011, California Steel sent the Watermaster a letter requesting it correct its records to reflect that it had been exercising its second priority to the 630 af before dipping into its 1,300 af for that and the three previous fiscal years. Believing Aqua to be its co-tenant after CCG's sale, California Steel copied Aqua on the letter. In August 2011, California Steel submitted its annual water activity report for the 2010/2011 fiscal year, again informing the Watermaster that it intended to exercise its second priority before its sole right.
A few months later, before the Watermaster responded to California Steel's request, Aqua filed an action to quiet title to the sole right to extract the 630 af, claiming it was a bona fide purchaser. Aqua's complaint alleged that before buying the annual right, it had "discussed with . . . [CCG] on more than one occasion . . . the ownership history . . . , and such discussions confirmed [CCG's] sole ownership."
In 2012, the Watermaster denied California Steel's request to exercise its second priority and credited the entire 630 af to Aqua's storage account for that year. The Watermaster noted in its annual report that a dispute had arisen between the two companies over ownership of the annual right.
California Steel and Aqua ultimately settled their dispute by agreeing to split the annual right in half, with each party owning a sole right to extract 315 af per year. They also agreed the use restrictions in the Water Rights Acknowledgement would no longer apply.
G. California Steel's Suit Against CCG
California Steel cross-complained against CCG in Aqua's quiet title action asserting causes of action for, among other things, fraud and slander of title. California Steel alleged CCG had disparaged its joint ownership of the water by misrepresenting to Aqua that its interest had expired and by executing a grant deed that purported to sell the sole right to extract the 630 af.
At trial, California Steel presented evidence of what the parties colloquially called "the Speedway problem" to explain how it had been damaged by CCG's conduct. Under the terms of the joint ownership—as set forth in the Water Rights Acknowledgement—CCG could not exercise its first priority until it "first exhaust[ed] . . . its right to the 1000 acre feet." When Kaiser sold Speedway a joint interest in 475 af of that 1,000 af, it retained a right of reversion over any amount Speedway did not use each year. However, when CCG sold to Speedway the remainder of the 1,000 af (525 af), it did so in fee without any use restrictions. And, as CCG concedes, the Watermaster's records show that Speedway uses only about half of the 1,000 af per year and stores the rest.
Thus, according to California Steel's expert, Robert DeLoach, by transferring the 525 af to Speedway in fee, CCG lost control of a large portion of the 1,000 af it was required to exhaust before exercising its first priority to the 630 af. Penrice of Aqua also agreed that the "Speedway problem" rendered CCG's first priority to the 630 af an unusable or stranded asset. Penrice testified that had Aqua known the full picture of CCG's and California Steel's joint ownership, it never would have purchased CCG's stranded first priority. Penrice also testified that in September 2011 Aqua was in talks with the Fontana Water Company to sell the 630 af at a price of $12,000 per af, but the deal fell through when it notified the water company of California Steel's joint interest and the use restrictions in the Water Rights Acknowledgment. CCG's expert, Clay Landry, also acknowledged the Speedway problem. When the litigation first began, he drafted a document concluding CCG was unable to exhaust the 1,000 af, and as a result, "neither CCG or Aqua would be able to exercise the 1st priority water right."
California Steel argued that CCG's misrepresentation induced Aqua to purchase the water and it was harmed by the misrepresentation because, had the sale never happened, it could have exercised its second priority each year—thereby freeing up for sale ("either on an annual basis, or a one-time sale in fee") 630 af of the 1,300 af it owned in fee. California Steel acknowledged it had mitigated its loss by settling with Aqua for half of the annual right, thereby reducing its loss to 315 af. To value that loss, California Steel's expert opined the company would have been able to sell 315 af for a present day value of anywhere from $4.2 to $10 million. CCG's expert opined that California Steel's right of second use had no market value on its own, but he conceded that if the first priority were in fact stranded or useless, then California Steel would have full use of the 630 af, and could thus sell an equal amount of its sole right on the water market.
During closing arguments, the court told the parties it was struggling with California Steel's valuation of 315 af ($4.2 to $10 million) and indicated it believed the best evidence of the market value of the water was what Aqua had paid for the 630 af in 2008. California Steel's counsel agreed such a valuation was reasonable and believed it would be based on a constructive trust theory. In its proposed statement of decision, California Steel offered two alternative values for the impaired marketability of the 315 af. The first was based off the 2012 market price of $12,000 per af ($12,000 x 315.137) and totaled $3,781,644. The second was based off the Aqua/CCG sale price and totaled $1.25 million—that is, half of the $2.5 million sale price.
H. The Court's Ruling
The trial court issued a written statement of decision concluding CCG had committed slander of title by disparaging California Steel's interest in order to induce Aqua to purchase its annual right. The court found the disparagement fell short of fraud, however, because Aqua's reliance on CCG's assurances that California Steel's interest had expired was not justifiable. The court explained: "Aqua could have easily discovered the true nature of CCG's title if Aqua had conducted even the minimum of investigation at the Chino Basin Watermaster's Office. Testimony from Watermaster Assistant General Manager, Danielle Maurizio, and CCG's expert, Clay Landry, demonstrated the ease with which Aqua could have discovered the true nature of CCG's title and the existence of the terms and conditions under which the water rights could be used by [California Steel]. Aqua did not justifiably rely because it failed to reasonably investigate as it was contractually obligated to do." The court commented, however, that its fraud ruling had been "a close call."
As to damages, the court awarded California Steel $1.25 million to compensate the company for the impaired marketability of 315 af caused by CCG's disparagement. The court based the award on a constructive trust theory based on its finding that CCG had "wrongfully gained [California Steel's] interest in the right to extract 630.274 acre-feet of water rights, and profited from the sale of [California Steel's] interest to Aqua." The court explained: "CCG sold the entirety of the right to 630.274 acre-feet to Aqua for $2.5 million, yet the value of the interest to CCG was zero . . . . [because u]nder the Water Rights Agreement and its attached Water Rights Acknowledgement, Kaiser (later CCG) must first use all of its water in storage and its sole right to 1,000 acre-feet before it can exercise the right of first use to the 630.274 acre-feet. By 2008, CCG had lost control of the 1,000 acre-foot sole right because it had been sold to [Speedway] in two separate transactions, and Speedway is under no obligation to use the full 1,000 acre-feet in any year. Speedway does not use anywhere near 1,000 acre-feet of groundwater per year. CCG's loss of control of the 1,000 acre-foot sole right renders its first priority to the 630.274 acre-feet unmarketable and valueless . . . and both parties' experts, as well as [Aqua's] Mr. Penrice, testified regarding this problem." The court also found California Steel had mitigated half of those damages by settling with Aqua for a sole right to 315 af. The court awarded prejudgment interest, which brought the amount to $1,974,848. Finally, the court found the $172,695 in litigation expenses California Steel had incurred defending Aqua's quiet title action were reasonable, and awarded the full amount, bringing California Steel's total damage award to $2,147,543.
II
DISCUSSION
A. Sufficiency of the Evidence Supporting Slander of Title
CCG argues the record contains insufficient evidence to support a finding of slander of title. Slander of title is the wrongful disparagement of another's interest in property. (Gudger v. Manton (1943) 21 Cal.2d 537, 541; Finch Aerospace Corp. v. City of San Diego (2017) 8 Cal.App.5th 1248, 1253 (Finch) ["slander of title . . . is a form of the separate common law tort of disparagement, also sometimes referred to as injurious falsehood"].) "The elements of [slander of title] have traditionally been held to be publication, falsity, absence of privilege, and disparagement of another's land which is relied upon by a third party and which results in a pecuniary loss." (Appel v. Burman (1984) 159 Cal.App.3d 1209, 1214; see also CACI 1730.)
We review a trial court's factual findings for substantial evidence, resolving evidentiary conflicts and indulging reasonable inferences in support of the judgment. (Leung v. Verdugo Hills Hospital (2012) 55 Cal.4th 291, 308; see also Estate of Young (2008) 160 Cal.App.4th 62, 75-76 ["in reviewing a judgment based upon a statement of decision following a bench trial, 'any conflict in the evidence or reasonable inferences to be drawn from the facts will be resolved in support of the determination of the trial court decision'"].) "We may not reweigh the evidence and are bound by the trial court's credibility determinations." (Estate of Young, at p. 76.) To the extent the trial court's factual findings depend on the interpretation of contracts or other legal documents, we interpret those documents independently. (ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1266-1267.)
We conclude the record contains substantial evidence to satisfy the elements of slander of title. The PSA warranted that CCG owned the right to extract the 630 af and that the right was not subject to any lien, claim, or encumbrance. (See Black's Law Dict. (8th ed. 2004) p. 264 [defining "claim" as the assertion of an existing right or an interest recognized at law].) However, before the deal closed, Aqua became concerned that might not be the case when it noticed the reference to California Steel's joint interest in the 2000 Kaiser Deed. In direct response to that concern, Peters, CCG's lead attorney for the transaction, told Aqua not to worry about California Steel because the company no longer had an interest in the annual right.
At some point, either before Peters made those statements or shortly after, he learned they were false and that California Steel in fact held a present and ongoing interest in the water. Rather than correct his statements or the statements in the PSA or otherwise set the issue straight, Peters ignored his colleague's emails containing the very documents that establish California Steel's interest (the Water Rights Agreement and the Global Agreement) and executed a grant deed purporting to convey the sole right to extract the 630 af. Significantly, the deed purports to transfer to Aqua the annual right to extract the 630 af from the Chino Basin, not a right or CCG's right. Given that Aqua raised its concern about California Steel's interest directly to Peters, it is reasonable to infer Peters knew Aqua would rely on his false assurances to move forward with the sale. And as Penrice testified, Aqua did rely. According to Penrice, the company would not have purchased the annual right had it known of California Steel's second priority. Finally, California Steel was harmed by Aqua's reliance on CCG's disparaging conduct because it lost its ability to market 315 af of water and was forced to defend itself in Aqua's quiet title action.
CCG makes several arguments as to why its conduct did not constitute slander. We find none of them persuasive.
First, CCG argues it could not have disparaged California Steel's title because the 2000 Peace Agreement effectively eliminated the company's interest in the 630 af. The 2000 Peace Agreement amended the 1978 Judgment to eliminate the appurtenance requirement for sales, permitting nonagricultural members to sell their water rights separate and apart from the land. CCG points out that the 2000 Peace Agreement contains a "supersedence" clause which provides: "Upon execution of this Agreement, any and all existing agreements or contracts between the Parties concerning the precise subject matter of this Agreement are hereby rescinded to the extent that they conflict with express terms herein." CCG argues the supersedence clause applies to the use restrictions placed on CCG in the Water Rights Acknowledgment because those restrictions conflict with the sale provision in the 2000 Peace Agreement. "Thus," CCG argues, "for all intents and purposes, [California Steel's] tenant-in-common interest . . . had effectively expired as of June 30, 2005, because CCG had the right of first use without any restrictions and could use or transfer the annual right. . . . Thus, when CCG sold its water rights to Aqua it did not disparage any right of [California Steel]." (Italics added.)
There are several problems with this argument. First, the use restrictions in the Water Rights Acknowledgment are not in conflict with the sale provision in the 2000 Peace Agreement. The sale provision simply amends the appurtenance restriction in the 1978 Judgment to permit nonagricultural pool members to sell their water rights without also having to sell the contiguous land. Nothing in the Water Rights Acknowledgment prohibits CCG or California Steel from selling or transferring their joint interest in the annual water right. Rather, the acknowledgment simply imposes use restrictions on the interest holders, restrictions CCG assumed when it signed the Assumption Agreement with Kaiser in 2000. In other words, CCG was free to sell its interest in the 630 af to a third party; the Water Rights Acknowledgment did not stop it from doing so. In turn, the third party could accept the terms of the joint ownership as set forth in the Water Rights Acknowledgment or it could negotiate with California Steel to agree to new terms.
Second, even assuming for the sake of argument the 2000 Peace Agreement does rescind the use restrictions in the Water Rights Acknowledgement, it does not follow that California Steel's joint ownership would expire as a result of the rescission. Use restrictions are separate from an interest in an annual water right, and nothing in the 2000 Peace Agreement suggests the parties intended to eliminate any party's existing interests in the Chino Basin water (such an act can only be accomplished by written abandonment or court order). Whether or not CCG's first priority carried use restrictions after the execution of the 2000 Peace Agreement would not change the fact California Steel still owned a joint interest in the form of a second priority. Indeed, the 2000 Peace Agreement was in effect when CCG purchased Kaiser's joint interest in the 630 af and the 2000 Kaiser Deed makes clear California Steel still owned an interest in the water.
As California Steel points out, if CCG's rescission theory were correct (and we conclude it is not), the Chino Basin Court, not this court, should make that determination as it would affect the entire nonagricultural pool and disrupt a potentially large number of agreements.
CCG claims the 2000 Kaiser Deed acknowledges a "post-Peace-1-Agreement-reality" where the Water Rights Acknowledgement's use restrictions no longer apply because Exhibit C identifies no use restrictions. As we observed, Exhibit C could have been more precise in its reference to the terms of the joint ownership, but nothing about it conflicts with the Water Rights Acknowledgement's use restrictions or suggests the parties intend Exhibit C to eliminate them. Exhibit C provides that the 630 af is subject to a tenancy in common, that California Steel has "the right of use" until June 30, 2005, and that CCG "ha[s] the right of first use thereafter." (Italics added.) The obvious implication of Exhibit C is that California Steel has the right of second use after 2005—reference to a first priority implies the existence of a second.
We reject CCG's rescission theory as an excuse for its dishonest and disparaging conduct. CCG should have disclosed California Steel's interest to Aqua because California Steel had a second priority to the water, a material fact that—use restrictions or no—would affect whether Aqua wanted to purchase the water and, if so, how it would manage its water use under the joint ownership.
For its second argument, CCG relies on Finch, a recent case from our appellate district, to contend it did not commit slander of title because it did not specifically disparage California Steel's ownership interest in the deed itself. According to CCG, Finch held "there can be no disparagement of title if there is no specific mention of that entities' title in the deed." Neither Finch nor any other California case has so held. (See, e.g., Alpha & Omega Development, LP v. Whillock Contracting, Inc. (2011) 200 Cal.App.4th 656, 663 [the disparagement necessary for slander of title may be committed by word or act, such as filing a lis pendens].) Instead, Finch simply applies the general rule that the disparaging statement, whether written or oral, must "specifically refer" to the plaintiff. (Finch, supra, 8 Cal.App.5th at p. 1253, citing Hartford Cas. Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277, 284.) The Finch court concluded the plaintiff had not adequately pled its slander of title claim because the alleged disparaging statement, which happened to appear in a letter, did not mention the plaintiff at all. (Finch, at pp. 1253-1254.) Here, in contrast, Aqua asked CCG whether California Steel held an interest in the water and CCG responded that California Steel no longer did. This statement is sufficient on its own to constitute a specific disparagement, but CCG took it a step further by also stating in the deed that it was conveying "the right" to extract the water. In this context, the use of those two words constitutes a specific, if implicit, reference to California Steel. The facts of this case easily satisfy the specific reference rule reiterated in Finch.
Third, CCG argues the slander judgment cannot stand because the court failed to find that Aqua relied on CCG's disparaging statements. We disagree. The court's statement of decision lists reliance as an element of slander of title, finds that Peters "should have known that Aqua would rely" on his statements, and finds that California Steel "suffered a financial loss as a direct result" of Aqua's purchasing the annual right under the assumption it was the sole owner of that right. Necessarily embedded in those explicit findings is the implicit one that Aqua did in fact rely on CCG's assurances that California Steel's interest in the water had expired. (SFPP v. Burlington Northern & Santa Fe Ry. Co. (2004) 121 Cal.App.4th 452, 462 [doctrine of implied findings "directs the appellate court to presume that the trial court made all factual findings necessary to support the judgment so long as substantial evidence supports those findings"].) And the implied finding is supported by substantial evidence. Aqua's Penrice testified the company would not have purchased the annual right had it known it was subject to joint ownership.
We also reject CCG's assertion that the court's finding, in the context of the fraud claim, that Aqua's reliance was not justifiable conflicts with its slander ruling. Unlike fraud, slander of title does not require justifiable reliance, actual reliance is sufficient. (5 Witkin, Summary of Cal. Law (11th ed. 2017) Torts § 747, p. 1033; see also Sumner Hill Homeowners' Assn., Inc. v. Rio Mesa Holdings, LLC (2012) 205 Cal.App.4th 999, 1030 (Sumner Hill) [treating actual reliance not as a separate element of the tort but as a necessary precursor to the element of pecuniary loss].)
Next, CCG argues there is insufficient evidence to satisfy the falsity/reckless disregard of truth element for slander of title because Peters simply represented that California Steel's "right of use" had expired. CCG argues that because Exhibit C to the 2000 Kaiser Deed said the same thing, Peters acted in good faith. This argument overlooks the testimony of the two Aqua witnesses, Penrice and Solon, who testified that Peters assured them California Steel's interest in the water had expired. The trial court believed their testimony over Peters and we will not disturb that credibility determination on appeal. (People v. Hovarter (2008) 44 Cal.4th 983, 996 [except in "rare instances of demonstrable falsity," appellate courts will leave witness credibility to the fact finder].) The statement of decision states "Peters told Aqua that [California Steel's] interest in the 630.274 acre-feet of water rights had expired . . . and that there was nothing to worry about in moving forward with the deal." (Italics added.) In any event, even if Peters had said California Steel's right of use had expired as opposed to its interest, there is still sufficient evidence of reckless disregard of the truth because Peters executed a deed purporting to convey the annual right as a sole right, even though he admitted he knew it was subject to joint ownership.
CCG points out the fraud section of the statement of decision states CCG made its assurances to Aqua in good faith. Specifically, the statement of decision states, "[t]he only statements made by . . . CCG related to the expiration of [California Steel's] right of use . . . [and those] statements were made in good faith belief that they were true" because "CCG relied exclusively on the Kaiser Deed, which expressly stated [California Steel's] right of use had expired in June 2004." CCG argues this apparent conflict with the court's finding of disparagement for slander requires reversal. We disagree. CCG did not raise this purported defect with the trial court when it filed its objections to the statement of decision, and when a party fails to do so, it cannot avoid application of the doctrine of implied findings to uphold the judgment. (E.g., In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133 [to avoid the doctrine of implied findings, any defects in the statement of decision must be brought to the courts attention through specific objections to the statement itself].) "A judgment or order of a lower court is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of its correctness." (Ibid.; see also People v. Geier (2007) 41 Cal.4th 555, 582 ["we review the ruling, not the court's reasoning and, if the ruling was correct on any ground, we affirm"].) We have no trouble squaring the trial court's fraud and slander rulings. The evidence satisfied the elements of slander of title but not fraud because Aqua's reliance on CCG's disparagement was not justifiable.
CCG next claims it never assumed the terms of the Water Rights Acknowledgement because the Global Agreement did not list the acknowledgement as one of the assumed agreements. This argument borders on frivolous. CCG expressly assumed the Water Rights Acknowledgment when it signed the Assumption Agreement, which specifically identifies the Water Rights Acknowledgment as an assumed agreement. CCG contends the Global Agreement carves out the Water Rights Acknowledgment from the body of agreements it assumed by excepting CCG from certain obligations in the Water Rights Agreement. This is incorrect. The obligations the Global Agreement carves out are those Kaiser had already satisfied by the time of assumption. For example, the exception CCG cites covers Section 3 of the Water Rights Agreement, but that section simply requires Kaiser and California Steel to deliver a copy of the Water Rights Acknowledgment to the escrow holder—an obligation that had been long satisfied by the time the parties signed the Global Agreement. Notably, the Global Agreement did not carve out Section 4 of the Water Rights Agreement, the section stating the "use and priorities" of the joint ownership of the 630 af are "described in the Water Rights Acknowledgment." The Assumption Agreement and Global Agreement make it abundantly clear that CCG intended to step into Kaiser's shoes in the joint ownership and it is disingenuous for CCG to now claim otherwise.
CCG raises additional arguments to evade the terms of the Water Rights Acknowledgment, pointing out that because California Steel never recorded the document and because Exhibit C to the 2000 Kaiser Deed was ambiguously worded, even the Watermaster had lost track of California Steel's rights by the time of the Aqua sale. But those arguments miss the point. Regardless of what the Watermaster or any other party believed, CCG knew California Steel possessed a joint interest in the annual right when it executed the Aqua Deed. CCG admitted this fact during discovery and Peters admitted it during his deposition. Despite this knowledge, CCG never corrected the statements it made during due diligence or revised the deed to include quitclaim language. (See Civ. Code, § 1105 [courts will presume a deed conveys "fee simple title . . . unless it appears from the grant that a lesser estate was intended"].)
At trial, CCG submitted a 2007 staff report from the Watermaster concerning the proposed Aqua transaction and the report contains no reference to California Steel's interest in the 630 af.
For example, CCG faults California Steel for not objecting back in November 2011 when the Watermaster issued a notice of the CCG/Aqua sale. But as mentioned above, the notice stated only that CCG intended to sell its share of the 630 af, and thus did not put California Steel on notice CCG was in fact attempting to sell the sole right to extract the water.
Finally, CCG argues it did not commit slander of title because it had in fact exhausted the 1,000 af and therefore could exercise its first priority by selling it to Aqua. CCG argues Speedway's annual use of about 500 af and storage of the rest constitutes exhaustion under the Water Rights Acknowledgment. To the contrary, storing water does not qualify as exhausting the right to use water under the Water Rights Acknowledgment. The Water Rights Acknowledgment requires CCG to both "exhaust its right to the 1000 acre feet . . . and then" exhaust its right to "any water that it may have in its storage account before making any use of the [630 af]." (Italics added.) In other words, "storage" and "exhaustion" are two distinct concepts. Thus, CCG was not entitled to exercise its first priority unless Speedway used the 1,000 and CCG used any water it had in storage. But, more importantly, even if CCG were in a position to exercise its first priority in 2008 when it executed the Aqua Deed, that doesn't excuse its deceptive conduct. California Steel's second priority to the water was a material fact for Aqua to consider before purchasing the water. CCG's misrepresentations led Aqua to believe it could store any amount of the 630 af it did not use each year, when in fact California Steel would have access to it under its second priority.
We conclude substantial evidence supports the trial court's determination that CCG committed slander of title.
B. Damages
1. Impaired marketability
CCG argues the trial court created a new species of damages when it awarded California Steel $1.25 million (an amount representing half the proceeds CCG obtained from the Aqua sale) under a constructive trust theory. We disagree and conclude the damage award was proper.
"The trial court's choice among several legally permissible measures of damages, under the specific circumstances of the case, is a matter of discretion. [Citation.] However, whether a certain measure of damages is permissible given the legal right the defendant has breached, is a matter of law, subject to de novo review." (New West Charter Middle School v. Los Angeles Unified School Dist. (2010) 187 Cal.App.4th 831, 843.)
"The main thrust of the [slander of title] cause of action is protection from injury to the salability of property [citations], which is ordinarily indicated by the loss of a particular sale, impaired marketability or depreciation in value [citations]." (Sumner Hill, supra, 205 Cal.App.4th at p. 1030.) Accordingly, a successful slander of title plaintiff may recover "the pecuniary loss that results directly and immediately from the effect of the conduct of third persons, including impairment of vendibility or value caused by disparagement." (Ibid.)
A constructive trust is an equitable remedy compelling a person who has property to which he is not justly entitled to transfer the property to the person entitled to it. (E.g., Blair v. Mahon (1951) 104 Cal.App.2d 44, 50, citing Rest., Restitution, § 160.) The California Civil Code provides for a constructive trust remedy in situations where the defendant wrongfully obtains some sort of property or interest, broadly referred to as "a thing." (Civ. Code, § 2223.) "One who wrongfully detains a thing is an involuntary trustee thereof, for the benefit of the owner." (Ibid.) The detention need not be morally culpable, just factually incorrect. Constructive trusts are appropriate where the detention occurs by means of "fraud . . . undue influence, the violation of a trust, or other wrongful act," as well as by "accident [or] mistake." (Civ. Code, § 2224.) "A constructive trust 'may be imposed in practically any case where there has been a wrongful acquisition or detention of property to which another is entitled." (Optional Capital, Inc. v. Das Corp. (2014) 222 Cal.App.4th 1388, 1402.)
Here, by purporting to sell the entirety of a jointly held right to a third party, CCG wrongfully obtained California Steel's joint interest in the 630 af, and thus we conclude the court's selection of a constructive trust was fitting. We find United States v. Pegg (9th Cir. 1986) 782 F.2d 1498, 1501 (Pegg) instructive. In that case, the United States sold two adjacent parcels of land to two different buyers—a development company and an individual, Thomas Pegg. (Id. at p. 1499.) One of the lots was vacant and the other contained a house. Pegg purchased the vacant lot and the development company the improved lot, but by mistake their deeds reflected just the opposite. After the parties realized the error, Pegg nevertheless sold the improved lot to a bona fide purchaser. (Ibid.) The United States made the development company whole then sued Pegg. (Ibid.) Applying California law, the Ninth Circuit approved the district court's use of a constructive trust to award the United States the proceeds of Pegg's sale. (Id. at p. 1501.) The Pegg court observed that when a "person with knowledge wrongfully disposes of property of another and makes a profit, he is accountable for those profits." (Id. at p. 1500, fn. 2.) In other words, "the constructive trust extends to property acquired in exchange for that wrongfully acquired and includes 'the direct product,' i.e., profit on and enhancement in value of the property traced into the trust." (Ibid., citing Rest., Restitution, § 160, com. h & § 205; see also Optional Capital, Inc. v. Das Corp., supra, 222 Cal.App.4th at p. 1402 ["Funds may be recoverable under a constructive trust theory where the plaintiff can trace the funds to monies in the defendant's possession"].) Similarly here, the trial court could extend the constructive trust to the proceeds of the Aqua sale.
CCG contends otherwise, arguing a constructive trust is improper because it never actually acquired or obtained California Steel's interest in the water, it merely disparaged that interest to effect a sale. Equity does not split such hairs. "The essence of the theory of constructive trust is to prevent unjust enrichment and to prevent a person from taking advantage of his or her own wrongdoing." (Communist Party v. 522 Valencia, Inc. (1995) 35 Cal.App.4th 980, 990 (Communist Party).) The basic principle guiding California courts on the constructive trust remedy provides that "[c]onstructive trusts are creatures of equity. In dealing with them, equity will disregard mere form, and will ascertain and act on the substance of things." (Elliott v. Elliott (1964) 231 Cal.App.2d 205, 211-212.) CCG induced Aqua to purchase what it represented was a sole ownership in an annual water right by falsely claiming California Steel's interest in the water had expired. As a result of that sale and the ensuing quiet title action, California Steel ended up losing its joint interest in the 630 af. In this context, CCG can be said to have wrongfully obtained California Steel's joint interest. True, CCG did not end up holding the interest, but it did end up holding the proceeds of a sale that never would have closed had it been forthright about California Steel's interest. Under such circumstances, a constructive trust is appropriate.
We also reject CCG's contention the award must be reversed because California Steel did not plead a constructive trust in its complaint. The discretion to award damages under a constructive trust theory lies with the court and is not subject to a pleading requirement. "[T]he court may grant the plaintiff any relief consistent with the case made by the complaint and embraced within the issue. The court may impose liability, regardless of whether the theory upon which liability is sought to be imposed involves legal or equitable principles." (Code Civ. Proc., § 580.) The record in this case supports the court's selection of an equitable constructive trust theory as one way of preventing CCG from being unjustly enriched by its dishonest and disparaging conduct. (Communist Party, supra, 35 Cal.App.4th at p. 990.)
Finally, CCG claims a constructive trust is unworkable on these facts because such a remedy measures damages based on the defendant's gain, whereas damages for slander of title are measured in terms of the plaintiff's pecuniary loss caused by the defendant's disparagement. CCG is correct that damages in slander of title cases are intended to compensate the plaintiff for the impaired marketability caused by the defendant's disparagement. (See, e.g., Glass v. Gulf Oil Corp. (1970) 12 Cal.App.3d 412, 424 (Glass) [a successful plaintiff in slander of title action may recover damages for the loss of access to a reasonably certain market].) "It is not necessary to show that a particular pending deal was hampered or prevented; recovery may be had for the depreciation in market value of the property." (6 Witkin, Summary of Cal. Law (11th ed. 2017) Torts § 1886, p. 1334, citing Davis v. Wood (1943) 61 Cal.App.2d 788, 799 & Glass, supra, at p. 424.) But here, the impaired marketability California Steel suffered and the gain CCG realized as a result of the disparagement are two sides of the same coin.
Put differently, the court could just as easily have awarded California Steel $1.25 million in impaired marketability "damages," as opposed to what it termed a constructive trust over CCG's wrongful gain. As the court explained in its statement of decision, once Aqua purchased the annual right under the mistaken belief it would be the sole owner, California Steel lost its ability to exercise its second priority to the 630 af each year, thereby losing its ability to sell 630 af (which it later mitigated to 315 af) of the water it owned in fee. Rather than use the $12,000 per af valuation California Steel's expert offered at trial (a valuation that would have resulted in a much higher damage award), the trial court determined the Aqua sale price was the best evidence of marketability.
We note there was substantial evidence in the record to support a valuation based on a price of $12,000 per af. In addition to California Steel's expert's valuation, Penrice testified that Aqua had obtained a prospective buyer for the 630 af at that price in 2011, but the buyer (Fontana Water Company) backed out when it learned of Aqua's ownership dispute with California Steel.
At bottom, CCG's problem with the damage award is not about the remedial theory the court employed. CCG's real issue boils down to this: the court found the Speedway problem was a reality that essentially impeded CCG's ability to use the 630 af, whereas CCG is adamant the Speedway problem did not exist because the Peace Agreement rescinded the joint ownership's use restrictions. Having concluded the court's determination is supported by our interpretation of the relevant contracts and substantial evidence, we find CCG's challenge to the impaired marketability award without merit.
2. Litigation expenses
CCG contends we must reverse the litigation expenses award because California Steel did not clear its title in the quiet action, but rather compromised that title when it settled with Aqua for sole ownership of 315 af. CCG misapprehends the concept of compensatory damages in general and of attorney fees as special damages in a slander of title action.
"Tort damages are awarded to compensate a plaintiff for all of the damages suffered as a legal result of the defendant's wrongful conduct." (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 786, citing Civ. Code, § 3333.) "'[A]ttorney fees are permissible as special damages in slander of title actions because "the defendant . . . by intentional and calculated action leaves the plaintiff with only one course of action: that is, litigation. . . . Fairness requires the plaintiff to have some recourse against the intentional malicious acts of the defendant."'" (Sumner Hill, supra, 205 Cal.App.4th at p. 1032.) The litigation need not result in complete title vindication for the slandered party. Rather, a "clear" title in the context of a slander suit refers to "remov[ing] the doubt cast by the disparagement." (Id. at pp. 1030-1031.) CCG caused California Steel to incur litigation expenses in a lawsuit that never would have occurred had CCG not slandered its title to the 630 af and purported to sell the sole right to extract the water. That lawsuit, once settled, removed any doubt as to the ownership of the 630 af.
As a final argument, CCG asserts that California Steel should not be allowed to recover any damages because they were caused by California Steel's own failure to record the Water Rights Acknowledgment. As a result of that failure, CCG contends, the only publicly recorded reference to California Steel's interest appeared in Exhibit C to the 2000 Kaiser Deed. We cannot accept this argument. California Steel's failure to record the Water Rights Acknowledgment had no impact on whether CCG knew of the document's existence. CCG expressly assumed the terms of the Water Rights Acknowledgment in 2000 and had actual knowledge of California Steel's joint ownership before it completed the sale to Aqua. The cause of California Steel's damages was not its own failure to record, but the fact CCG took advantage of that failure years down the line when it attempted to sell California Steel's second priority out from under it.
III
DISPOSITION
We affirm the judgment. Appellant shall pay costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
SLOUGH
J. We concur: MILLER
Acting P. J. FIELDS
J.