Opinion
NOT TO BE PUBLISHED
Super. Ct. No. CVCS060820
SIMS, Acting P. J.Plaintiffs Rainbow Farms, Huntley Farming, Christy Vantress Farming, Heryford Family Farms, and JWT Corp. (collectively, Rainbow) sought to grow rice on farm lands leased from Robert Leal, who is not a party to this lawsuit. In 2004, Rainbow submitted an application to receive Leal’s share of water from defendant Natomas Central Mutual Water Company (Natomas Central).
Respondent was erroneously sued as “Natomas Mutual Water Company.” Respondent’s bylaws, as well as its pleadings, list its name as “Natomas Central Mutual Water Company.” (Italics added.) Accordingly, we correct the caption in this case to properly name respondent.
Water delivery was delayed when a power transformer of nonparty Pacific Gas & Electric (PG&E) broke down. After a poor crop resulted, Rainbow sued Natomas Central for failing to seek an alternate way to deliver irrigation water more quickly. A jury found that Rainbow was not bound by the waiver of the right to sue for delayed delivery of water set forth in Natomas Central’s bylaws. The jury also found Rainbow had assumed the risk of crop failure as an inherent risk of farming. Although judgment was entered in Natomas Central’s favor, the trial court nonetheless granted Natomas Central’s motion for judgment notwithstanding the verdict on grounds that Rainbow was bound by the bylaws’ waiver provisions.
On appeal, Rainbow argues that the trial court erred in concluding that the waiver/release provisions of Natomas Central’s bylaws barred suit, and that the jury instructions misstated the law on assumption of risk. We shall affirm.
FACTUAL AND PROCEDURAL HISTORY
Natomas Central’s Organization and Bylaws
Natomas Central is organized as a mutual water company. A mutual water company is “any private corporation or association organized for the purposes of delivering water to its stockholders and members at cost, including use of works for conserving, treating and reclaiming water.” (Pub. Util. Code, § 2725.) Consistent with its organization, Natomas Central’s bylaws declare its purpose is to “acquire, store and supply [irrigation water] at cost” for use by shareholders and their tenants.
Shareholders must own land within Natomas Central’s service area and be approved for membership. Shares in Natomas Central provide the right to receive an allocation of water, which is drawn from the Sacramento River. To this end, Article IV, section 2 of Natomas Central’s bylaws provides: “Shares Appurtenant to Land. Any water or water rights acquired by the Corporation shall be available for use only by shareholders of this Corporation or their lessees, except as otherwise herein provided in accordance with California Corporations Code Section 14300. [¶] Shares in the Corporation shall be transferable only with the land for which it is issued unless forfeited under Corporations Code Section 14303. A conveyance of the land shall serve to authorize a transfer of stock to the purchaser upon endorsement on the certificate and the surrender of the certificate to the Secretary of the Corporation.”
Corporations Code section 14300 provides, in part: “Any corporation organized for or engaged in the business of selling, distributing, supplying or delivering water for irrigation purposes may provide... in its articles or bylaws that water shall be sold, distributed, supplied or delivered only to owners of its shares and that the shares shall be appurtenant to certain lands when the same are described in the certificate issued therefor; and when the certificate is so issued and a certified copy of the articles or bylaws recorded in the office of the county recorder in the county where the lands are situated the shares of stock shall become appurtenant to the lands and shall only be transferred therewith, except after sale or forfeiture for delinquent assessments.... Notwithstanding this provision in its articles or bylaws, any such corporation may sell water to the [public entities] or, to any other mutual water company, or, during any emergency resulting from fire or other disaster involving danger to public health or safety, to any person at the same rates as to [its shareholders]....”
Corporations Code section 14303 provides that if a shareholder fails to pay assessments, the water rights may be sold as if not appurtenant to the land or may be forfeited to the water company.
The costs of water delivery are paid by the shareholders as assessments and charges for specific services. Even when the lands are farmed by tenants, Natomas Central deems water requests to be authorized by and the financial responsibility of the shareholder. Thus, invoices for water costs are sent to the shareholder rather than tenants.
The bylaws address the application process as follows: “Each shareholder shall on an annual basis submit to the Corporation a written application for water supply (the ‘Application’) which designates the amount of water the shareholder expects to utilize during the upcoming year, the approximate schedule under which that water will be needed, and such other information as deemed necessary by the Board of Directors for the efficient operation of water delivery by the Corporation. The application shall also include a release of the Corporation by the shareholders of all claims related to the quality of water delivered to the shareholders and the timing of this delivery.”
Article XIII of the bylaws contains the following waiver/release provisions: “Section 4.Waiver of Right to Bring an Action. The shareholders hereby agree on their own behalf and on behalf of their tenants, assignees, heirs, distributees, guardians, and legal representatives that they will not, directly or indirectly, make a claim against, bring a lawsuit, action, or other proceeding against, or attach the property of the Corporation [or its agents] for injury or damage of any nature resulting directly or indirectly from: [¶]... [¶] 2) the quantity of water supplied or the interruption of water service of the Corporation; or [¶] 3) the negligence of the Corporation [or its agents] or their failure to act, in preventing... interruptions in the water quantities supplied; or [¶] 4) the failure of the Corporation [or its agents] to provide notice of... the failure or unavailability of facilities to transport or convey water to or for the benefit of any shareholder....
“Section 5.Release. The shareholders hereby agree on their own behalf and on behalf of their tenants, assignees, [etc.] to release the Corporation [and its agents] from any lawsuits, actions, proceedings, claims, demands, or causes of action based on or related to the Released Matters.
“Section 6.Civil Code Section 1542. The shareholders hereby release the Corporation [and its agents] from all actions, claims, or demands that any shareholder, or tenant, assignee [etc.] of any shareholder now have or may hereafter have for injury or damage resulting from the Released Matters. The shareholders understand that this release is to be broadly construed to prevent any claims or actions against the Corporation [or its agents] relating to the Released Matters. The shareholders specifically waive all rights to bring future claims against the Corporation [or its agents] based on or related to the Released Matters that otherwise would have been available under Civil Code Section 1542, which states as follows: [¶] ‘A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with debtor.’”
The bylaws further state that the waiver/release provisions constitute a contract that also binds any person on whose behalf shareholders request water: “The shareholders (and all other persons on whose behalf the shareholders enter this agreement) are bound to the terms and conditions of these bylaw provisions. The shareholders are aware that this is a release of liability and a contract between themselves (and all other persons on whose behalf the shareholder enters this agreement) and the Corporation and/or the released persons and agree to it of their own free will. The shareholders further acknowledge that they have been presented several alternative proposals to address the issue of liability arising out of the terms and conditions of this Article XIII in light of these alternatives.” (Capitalization omitted.)
Delayed Water Delivery During the 2004 Planting Season
Leal owns land within the Natomas Central service area and is a shareholder in the corporation. In 2002, Leal leased farm land to Rainbow, which includes various farming businesses of Jim Vantress and his extended family. As we shall point out, the Leal-Rainbow leases were not admitted in evidence at the trial of this case.
In mid-April 2004, Rainbow submitted a “FORMAL APPLICATION FOR IRRIGATION WATER - 2004,” listing field and gate numbers, gross acreage, type of crop (rice), and the name of the property owner. In preparing the application, Rainbow reviewed documents attached to it – Natomas Central’s 2004 “Water Application Notice” and “Notice of Assessments and Charges.” These documents explained how to fill out the application and stated the charges and fees. The irrigation cost for rice fields was $48.45 per acre.
These documents also stated: “Whether the owner or a tenant occupies the land, all requests for water are deemed to be under the authorization of the owner, and therefore are ultimately the financial responsibility of the property owner. Water will be furnished at the request of either the owner or the tenant.” The bylaws were not part of the documents given to Rainbow but were referenced in the notice of assessment and charges, which said that changes had been made “in an effort to clearly state the by-laws and policies of the Company.”
At oral argument, Rainbow’s counsel asserted the invoices for Rainbow’s irrigation water were sent to Rainbow rather than to Leal. Our review of the record shows that David Fisher, Natomas Central’s controller and office manager, testified that the 2004 invoices for water requested by Rainbow Farms indicated that Leal was responsible for payment. Although the invoices themselves were mailed to Rainbow, Leal remained responsible for their payment. And, Rainbow was unable to request water except under Leal’s rights as shareholder in Natomas Central.
The rice planting season spans April and May. In 2004, Rainbow planted its rice “on the late side,” between May 18 and June 11. Once rice seeds are planted, the land must be quickly flooded, drained, and then re-flooded after an application of herbicide.
In late May or early June 2004, a power transformer owned and maintained by PG&E broke down and ceased to provide power to Natomas Central’s water pumps. This disruption of power caused a delay in the provision of water to portions of Natomas Central’s service area, including some of the parcels leased to Rainbow. The pumps stopped working when Rainbow was applying herbicide and attempting to re-flood the fields. At the same time, other farmers in the service area also needed water for their fields. Due to the loss of power to the pumps and the competing needs of others, Rainbow’s parcels did not get the water they needed. As a result, the land dried to the point that the pumps were unable to re-flood the fields quickly enough for the rice plants to produce a crop that season.
During oral argument, Rainbow’s counsel asserted that PG&E’s power transformer failure did not cause the delay of water to Rainbow’s fields. Our review of the record shows that the PG&E transformer’s failure was a substantial factor in the failure to deliver the water.
Rainbow files suit against Natomas Central
Rainbow filed a complaint alleging negligence and breach of contract by Natomas Central. The matter proceeded to trial by jury. At the close of trial, the court gave Special Jury Instruction No. 1, which stated: “The water rights involved in this case are appurtenant to the land. [¶] The word ‘appurtenant’ means ‘belonging to’ or ‘annexed to.’ The word ‘appurtenant’ is utilized in leases for the purpose of including any easements or servitudes used or enjoyed with the leased premises. A thing is deemed to be appurtenant to land when it is by right used with the land for its benefit.”
Neither party designated the pleadings as part of the record on appeal, and the opening statements to the jury were not reported. We deduce from the record that the complaint alleged claims for negligence and breach of contract.
Special Jury Instruction No. 2 told the jurors: “A landowner who leases its property can only transfer the rights that it possesses in the land. Likewise, an entity or person who leases property from the landowner, can only receive such property rights that the landowner possesses.”
The jury was then instructed with CACI No. 451 as follows: “Natomas Central Mutual Water Co. claims that each Plaintiff may not recover any damages because it agreed before the incident that it would not hold Natomas Central Mutual Water Co. responsible for any damages. [¶] If Natomas [Central] Mutual Water Co. proves that there was such an agreement and that it applies to Plaintiffs’ claim[s], then you must find that Natomas Central Mutual Water Co. is not responsible for Plaintiffs’ harm.”
The jury returned a special verdict. In response to the first question –- “Have the Plaintiffs waived the right to sue Defendant Natomas Central Mutual Water Company?” –- the jury answered “No.”
On the special verdict form, the jury marked “X” next to the word “No.” A handwritten notation inconsistently stated: “Yes 8-4.” Neither party addresses the inconsistency. When the trial court polled the jurors, the clerk said the verdict of at least nine jurors was “No.” When asked if this was their verdict, nine jurors said, “Yes,” this was their verdict. The jury proceeded to answer the next question about assumption of risk —- a question it would not have reached if it had found that Rainbow had waived the right to sue.
In response to the second question -– “Did the Plaintiffs assume the risk of the farming activities in 2004?” -– the jury marked “Yes,” with a handwritten notation “10-2.”
Nine jurors said this was their verdict when polled in court.
The court entered judgment in favor of Natomas Central. Rainbow moved for a new trial on grounds that the trial court should not have instructed the jury on assumption of risk. Natomas Central moved for partial judgment notwithstanding the verdict, arguing Rainbow was bound by the waiver provisions in the bylaws because the water rights were appurtenant to the land.
The trial court granted Natomas Central’s motion for partial judgment notwithstanding the verdict. In relevant part, the order stated: “The evidence at trial established that plaintiffs are bound by the waiver provision in defendant’s bylaws, and thus waived their right to sue defendant as a matter of law. Plaintiffs presented no substantial evidence to the contrary.”
Although a trial court may grant partial judgment notwithstanding the verdict (Beavers v. Allstate Ins. Co. (1990) 225 Cal.App.3d 310, 332), here the order granting the motion was not partial in nature. The order finally resolved all issues (other than attorney fees) between the parties.
Rainbow filed a second motion for “new trial” to challenge the trial court’s grant of judgment notwithstanding the verdict. The trial court denied both of Rainbow’s motions for new trial, and entered an amended judgment in favor of Natomas Central.
Rainbow timely filed notice of appeal.
We asked the parties to file supplemental briefing to address the following issues: (1) whether the leases between Rainbow and Leal were entered into evidence in the trial court and made part of the record on appeal, (2) whether, on the evidence adduced in the trial court, Rainbow’s right to apply for Leal’s water allocation from Natomas Central was in the nature of a license, and (3) if the water right acquired by Rainbow was a license, could Rainbow have obtained a right to receive water greater than what Leal had. We have received and considered the supplemental briefs filed by Rainbow and Natomas Central regarding these issues.
DISCUSSION
I
Natomas Central’s Immunity from Suit Under its Bylaws
Rainbow contends the trial court erred in granting judgment notwithstanding the verdict on grounds that Natomas Central’s bylaws immunize it from suit by tenants of a shareholder. Rainbow reasons that its failure to expressly agree to the waiver/release provisions in Natomas Central’s bylaws means that it retained the right to sue for breach of contract and negligence. Rainbow further argues the waiver/release provisions are unconscionable. We shall reject Rainbow’s contentions.
A
“A party is entitled to a judgment notwithstanding the verdict on a timely motion if there is no substantial evidence to support the verdict and the evidence compels a judgment for the moving party as a matter of law. (Code Civ. Proc., § 629; [citation].) If the motion challenges the sufficiency of the evidence to support the verdict, we review the ruling under the substantial evidence standard. [Citations.] If the motion presents a legal question based on undisputed facts, however, we review the ruling de novo. [Citation.]” (Gillan v. City of San Marino (2007) 147 Cal.App.4th 1033, 1043.) We review claims of unconscionability of contract provisions de novo when there are no material facts in dispute on the issue. (Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094, 1099-1100 (Szetela),
B
In California, owners of real property have long formed mutual water companies to secure, allocate, and deliver water to irrigate their lands. (See, e.g., Miners' Ditch Co. v. Zellerbach (1869) 37 Cal. 543, 545; Stone v. Imperial Water Co. No. 1 (1916) 173 Cal. 39, 42-43 (Stone).) A shareholder’s stake in a mutual water company is a property interest. “The right evidenced by the stock certificates is a right to receive water and is primarily a right in real property.” (Valley View Water Co. v. Browne (1951) 104 Cal.App.2d 177, 180; Stone, supra, 173 Cal. at pp. 42-43.) Mutual water companies may be organized to make their ownership shares and concomitant water allocation rights appurtenant to the land. (Corp. Code, § 14300, fn. 2, ante.)
A lease of land does not automatically entitle the tenant to the landowner/shareholder’s water rights if the mutual water company’s bylaws reserve to shareholders the nontransferable right to request or cancel water. When the mutual water company is organized to preserve shareholders’ rights to authorize requests for or cancellations of water allocations, the shareholders cannot lease the water right to their tenants. The hallmark of a lease is the right of a tenant to exclude all others –- even the landlord –- from possession. “‘The distinguishing characteristics of a leasehold estate are that the lease gives the lessee the exclusive possession of the premises against all the world, including the owner [citation], and its term is limited to endure for a definite and ascertained period, however short or long the period may be. [Citation.]” (Golden West Baseball Co. v. City of Anaheim (1994) 25 Cal.App.4th 11, 32 (Golden West), quoting Howard v. County of Amador (1990) 220 Cal.App.3d 962, 972.)
Even if the water right cannot be leased due to the terms of a mutual company’s bylaws, a shareholder may nonetheless contractually agree to make requests for water on behalf of a tenant or to allow the tenant to apply for an allocation of water under the shareholder’s rights. “Permanent rights to the use of water for irrigation may still be obtained by contract....” (Stanislaus Water Co. v. Bachman (1908) 152 Cal. 716, 730 (Stanislaus); Fresno Canal Etc. Co. v. Park (1900) 129 Cal. 437, 445.)
If the tenant contractually receives authorization to make a request for irrigation water under the rights of the shareholder, the tenant acquires a license. “A licensee has express or implied authority from the owner to perform an act or acts upon property. Like an easement, it is an interest in property which is less than an estate.” (Golden West, supra, 25 Cal.App.4th at p. 36.) Whether express or implied, a tenant’s authorization to request the landowner/shareholder’s allocation from a mutual water company constitutes a license.
The rights acquired under license cannot exceed the property rights possessed by the licensor. It is well established that one who grants property rights to another cannot convey more than he or she has. (See Qualls v. Lake Berryessa Enterprises, Inc. (1999) 76 Cal.App.4th 1277, 1284 (Qualls) [holding concessioner cannot grant license with rights greater than those received in original concession agreement]; United Pacific Ins. Co. v. Cann (1954) 129 Cal.App.2d 272, 276 [concluding “[i]t would fly in the face of logic to hold that a tenant can convey to another by way of grant, assignment, mortgage or otherwise greater rights than the tenant himself has in the property”]; see also Lee v. North Dakota Park Serv. (1977) 262 N.W.2d 467, 474 [holding that labeling a grant of property interest a “lease” could not expand rights amount only to a license].) Tenants with license to apply for and receive allocations from a mutual water company may not escape restrictions imposed on their landlord/shareholders’ water rights.
C
Rainbow does not dispute that Natomas Central’s bylaws contain a waiver of the right to sue for delayed delivery of water, or that the waiver would have prevented Leal himself from suing the corporation. While acknowledging that it applied for the water under Leal’s rights as a shareholder of Natomas Central, Rainbow nonetheless contends that it should not be constrained by Leal’s waiver of the right to sue. Rainbow relies on the fact that the application for water during the 2004 growing season did not provide express notice of the waiver as required by the bylaws. We reject the argument.
Here, the leases between Rainbow and Leal were not admitted into evidence and are not part of the record on appeal. The evidence in the record establishes that Rainbow had a license to apply for Leal’s share of water from Natomas Central. Rainbow applied directly to Natomas Central for Leal’s water allocation, which indicates that it had at least an implied authority to apply for the water.
The failure of the parties to introduce the leases into evidence precludes our publication of this opinion.
Rainbow had a license –- but no more –- because it had the right to apply for Leal’s share of water even though it was unable to exclude him from the application and payment for the water. Attached to Rainbow’s application for irrigation water, the notice of assessments and charges noted, “all requests for water are deemed to be under authorization of the owner....” Although water would be delivered “at the request of either the owner or the tenant,” landowner/shareholders retained the ability to “limit the authority of the tenant” to request water at any time before water delivery actually began. After delivery, water bills remained the financial responsibility of the landowner/shareholders. Being unable to exclude Leal from the process of requesting, cancelling, or being financially responsible for the allocation from Natomas Central, Rainbow had no more than a license to apply for the water. (Golden West, supra, 25 Cal.App.4th at p. 36.)
As a licensee, Rainbow’s right to the water allocation could not have exceeded Leal’s rights. (See Qualls, supra, 76 Cal.App.4th at p. 1284.) Leal’s right to an allocation of water from Natomas Central was inextricably entwined with the waiver of the right to sue. Thus, Rainbow as licensee took the water with the same restriction on the right to sue that its licensor had. Rainbow seems to concede this inescapable conclusion when acknowledging, in its supplemental brief, that “[n]o one would quarrel with [the] principle” that “a licensee or tenant may have no ‘greater rights’ than the licensor/landlord.”
Leal’s right to water from Natomas Central was defined in its bylaws. Natomas Central’s bylaws were duly recorded in the county recorder’s office in September 2000. Recordation provides constructive notice about the “obligations, burdens, easements, or servitudes” imposed on the water rights by the bylaws of a mutual water company. (Stanislaus, supra, 152 Cal. 716, 722.)
Rainbow’s ignorance of the terms of the recorded bylaws did not negate the restrictions on the water rights agreed to by the shareholders who formed the mutual water company. (Stanislaus, supra, 152 Cal. 716, 722-724, 728; see also Fresno Canal Etc. Co. v. Dunbar (1889)80 Cal. 530, 535 [purchaser of land was bound by restrictions on water rights of which he had notice].) Rainbow received constructive notice provided by the recordation of Natomas Central’s bylaws, which contained the waiver/release provisions.
Rainbow attempts to deflect the application of constructive notice of the bylaws’ waiver/release provisions by focusing on the bylaws’ requirement that a release of liability be included in each application for water delivery. The application for irrigation water in 2004 did not include notice of the release as required by the bylaws. Even so, the application gave Rainbow actual notice that Natomas Central had bylaws governing the water allocations. Accompanying the application for water was a letter in which Natomas Central’s general manager exhorted, “Please take time to reacquaint yourself with the attached information. There have been additions and clarifications in this year’s ‘Notice of Assessments and Charges for 2004’. These changes were made in an effort to clearly state the by-laws and policies of the Company. If you have any questions, please contact the office at (916) 419-5936 and ask to speak to me.” Rainbow thus received actual notice that bylaws governed water allocation.
Based on the actual and constructive notice of Natomas Central’s bylaws, Rainbow’s claim of ignorance about the terms of the bylaws must fail. The California Supreme Court rejected a similar claim a century ago in Fresno Canal Etc. Co. (1889)80 Cal. 114. In that case, Easton agreed to a covenant appurtenant to the land in order to secure water from Fresno Canal & Irrigation Company. (Id. at pp. 116-117.) Easton later sold the land to Rowell, who subsequently refused to pay the bill submitted by the water company. (Ibid.) Appealing the judgment against him, Rowell contended that he was not bound by the covenant because he was unaware of its terms. The Supreme Court rejected the argument, explaining that “defendant had actual notice of the water-right when he purchased the land. He testified that at that time he knew that there was a water-right... connected with the land, but did not know its terms. It seems to us that such knowledge was sufficient to put him on inquiry as to the water-right; that by pushing the inquiry he might have ascertained its exact condition; and that it was his duty to make the inquiry. Easton, or either of the officers of the [water] company, could have informed him of the right and its terms. He cannot, by failure to inquire, relieve himself of the obligation which inquiry would have shown bound the land. He cannot be allowed to shut his eyes, and say he did not see, when by opening them he might have seen.” (Id. at pp. 116-117.)
The Supreme Court’s rejection of ignorance as a defense to the terms of the water right applies here with equal force. Rainbow had actual and constructive knowledge of the fact that water from Natomas Central was governed by the corporation’s bylaws. That Rainbow did not avail itself of the opportunity to familiarize itself with the bylaws does not excuse it from application of those terms. (Fresno Canal Etc. Co. v. Rowell, supra, 80 Cal. at p. 117.) Accordingly, the trial court correctly concluded that Rainbow was bound by the waiver/release provisions of Natomas Central’s bylaws.
To countenance Rainbow’s argument would encourage ignorance by lessees and licensees of restrictions indisputably binding upon their lessors and licensors. This would lead to the absurd result that licensees could acquire greater water rights than shareholders themselves could convey. (But see Qualls, supra, 76 Cal.App.4th at p. 1284.) Such a holding would also allow tenants to lay claim to exemptions from easements and other non-obvious restrictions on lands. We cannot allow ignorance to dissolve valid property restrictions.
Even if we were to assume Rainbow was entitled to notice of the actual waiver provision in Natomas Central’s bylaws, there is no miscarriage of justice on this record because Rainbow, as licensee, had no reasonable expectation of receiving an uninterrupted supply of water, even when the failure to supply water was the fault of a third party--here PG&E. Rather than guaranteeing water at a desired rate and in sufficient quantity, Natomas Central’s bylaws found the right of its shareholders to an allocation of water in the same mold containing the waiver of the right to sue for delay or even total lack of water.
Rainbow counters that tenants do not possess lands subject to the covenants binding upon the landowners. In so arguing, Rainbow relies on a section in Witkin, which states: “In California, the covenant ‘binds those only who acquire the whole estate of the covenantor in some part of the property.’ [(Civ. Code, §] 1465 [‘A covenant running with the land binds those only who acquire the whole estate of the covenantor in some part of the property’].) Hence, the lessee of a lessor-covenantor is not bound, for the lessee does not acquire the entire estate of the covenantor, but only an estate for years. (Higgins v. Monckton (1938) 28 Cal.App.2d 723, 728 [Higgins].)” (12 Witkin, Summary of California Law (10th ed. 2005) Real Property, § 436, p. 508.) An examination of Higgins reveals that Rainbow misplaces its reliance on the section of Witkin citing that case.
In Higgins, supra, 28 Cal.App.2d 723, seven owners of a four-thousand acre island in the delta region of Contra Costa County entered into an agreement in 1902 for the purpose of reclaiming land by draining it and erecting levees around the island’s perimeter. (Higgins, supra, 28 Cal.App.2d at p. 726.) The covenant to maintain the levees was agreed to “be a perpetual burden upon the lands of the several parties, and their successors in interest, and should be binding on them as such.” (Ibid.) In 1936, the levees failed and destroyed large asparagus crops tended by tenants. (Id. at p. 727.) When the tenants sued the landowners for failure to maintain the levees, the question became whether the tenants themselves had the duty to maintain the levees. (Id. at pp. 727-728.) The Court of Appeal held that only the landowners, not the tenants, were required to maintain the levees. “The ‘burden’ is the contribution from the landowner of his proportionate share of the assessments levied for work and maintenance of the levees. It should be noted that no one of the lessees assumed the burden to maintain or repair the levees, that the whole purpose of the original contracts was to reclaim these lands at the mutual expense of the landowners....” (Id. at p. 729.) Thus, the tenants were not subject to the duty imposed by the 1902 covenant. (Ibid.)
Higgins does not apply because Rainbow is not required to fulfill an obligation that Leal failed or refused to perform. Rainbow does not seek to be excused from a duty owed under a covenant running with the land, but to enlarge upon the right owned by the landowner/shareholder by taking the water right with a newly conjured right to sue.
Restrictions on property, as opposed to covenants to perform certain duties, bind not only landowners but all others who possess the property with constructive notice of the constraints. (See Alfaro v. Community Housing Imp. System & Planning Ass'n, Inc. (2009) 171 Cal.App.4th 270, 279; Pavkovich v. Southern Pac. Ry. Co. (1906) 150 Cal. 39, 49.) Rainbow was bound by the same waiver/release as its landowner/shareholder whose ration of water it requested from Natomas Central. Rainbow could not have acquired a greater property interest than Leal could convey. Thus, Rainbow could not have secured the benefit of Leal’s water right without also accepting his waiver of the right to sue.
D
Rainbow urges us to declare the waiver/release provisions of Natomas Central’s bylaws to be procedurally and substantively unconscionable. Rainbow asserts Natomas Central’s surprise invocation of the waiver/release provisions of the bylaws was procedurally unconscionable. As a matter of substantive unconscionability, Rainbow reasons that a water company should not be allowed to accept payment for water and then enjoy immunity after failing to deliver. We reject Rainbow’s contentions.
Unconscionable contract provisions in an agreement cannot be given legal effect. “Procedural unconscionability addresses the manner in which agreement to the disputed term was sought or obtained, such as unequal bargaining power between the parties and hidden terms included in contracts of adhesion. [Citation.] Substantive unconscionability addresses the impact of the term itself, such as whether the provision is so harsh or oppressive that it should not be enforced. [Citation.] These elements, however, need not be present to the same degree. ‘[T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.’” (Armendariz [v. Foundation Health Psychcare Services, Inc. (2000)] 24 Cal.4th [83,] 114.)” (Szetela, supra, 97 Cal.App.4th at pp. 1099-1100, footnote omitted.)
In forming Natomas Central, its shareholders executed a mutually binding agreement to waive suit against the corporation. Without doubt, Rainbow’s landlord would be unable to establish procedural unconscionability in his capacity as shareholder in Natomas Central. “Procedural unconscionability focuses on the manner in which the disputed clause is presented to the party in the weaker bargaining position. When the weaker party is presented the clause and told to ‘take it or leave it’ without the opportunity for meaningful negotiation, oppression, and therefore procedural unconscionability, are present.” (Szetela, supra, 97 Cal.App.4th at p. 1100.) The shareholders, in an arm’s length transaction, structured the corporation in a manner they thought advantageous.
The effect of the waiver/release provisions of the bylaws is that all recipients of water from Natomas Central, whether shareholders or their tenants, occupy the same position in lacking the right to sue for delayed delivery of water. The waiver/release provisions are not the product of lopsided bargaining power or surprise tactics, but represent a permissible agreement established among equals.
Rainbow may have been unaware of the terms governing the water rights in question. However, as we have already explained, ignorance does not provide excuse from the terms governing Natomas Central or the water it provided. Rainbow had actual and constructive notice of the terms when it submitted the application for irrigation water during the 2004 growing season. The failure to inquire about those terms does not justify a later claim of unfair surprise. (Fresno Canal Etc. Co. v. Rowell, supra, 80 Cal. at p. 117.) The letter from Natomas Central’s general manager presented an easy method for inquiring about the terms and restrictions on the water allocation. Although Rainbow applied for the benefit of Leal’s water, it failed to inquire into the restrictions accompanying the allocation. We find no procedural unconscionability.
On the issue of substantive unconscionability, we find that a waiver by all shareholders of the right to sue constitutes a rational method of organizing a corporation dedicated to providing irrigation water. Indeed, such a release/waiver may be indispensable policy for an entity such as Natomas Central.
Thus, water may not always be available in sufficient quantities to fulfill all requests by owners and their tenants within the corporation’s service area. Even if available, the rate of delivery may not always suffice to placate all who have applied for an allocation of water. The testimony in this case indicates that maximizing rice crop yields requires fields to be flooded and re-flooded as quickly as possible. Here, Rainbow’s poor rice crop was not caused by a total lack of water during the growing season, but merely by failure to deliver water quickly enough to prevent the ground from drying at a critical time. Among rice growers receiving water from a common source, there can be great competition for a sufficient rate of water. Here, the water was delivered too slowly for Rainbow’s purposes even after the PG&E power transformer was fixed because other farmers were trying to flood their fields at the same time.
In forming Natomas Central, the shareholders were allowed to structure the company to discourage lawsuits as a way to jockey for better position on the water delivery schedule. Although a water company can be organized without requiring waivers from suit by shareholders and their tenants, it is not unconscionable for shareholders to decide that their best interests are served by agreeing to immunize the corporation from suit. Such an arrangement does not impose unacceptably harsh terms. (Szetela, supra, 97 Cal.App.4th at p. 1100.) Neither does it shock the conscience to hold tenants to the same restrictions as are binding on their landlord/shareholders.
The trial court did not err in granting judgment notwithstanding the verdict on grounds that Rainbow was bound by the bylaws’ waiver/release provisions.
II
Assumption of Risk
Given our conclusion that Rainbow is subject to the bylaws’ waiver of the right to sue Natomas Mutual, we need not address Rainbow’s alternate contention that the trial court misinstructed the jury on assumption of risk.
DISPOSITION
The judgment and amended judgment are affirmed. Natomas Central Mutual Water Co. shall recover its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)
We concur: HULL, J., CANTIL-SAKAUYE, J.