PARAS, J. I dissent.
Where “present water users” are by definition owners of “land supplied with water,” it is axiomatic that they are not owners of “land not supplied with water.” Yet that is precisely what the majority has held. Land is not “supplied” with water when no water is physically deposited upon or within it; and this simple reality does not change because such land is owned by one who also owns adjoining land which is supplied with water.
During the years 1918, 1919, and 1920, South Feather was unable to meet its contractual commitments to its consumers and was ordered by the Railroad Commission (now Public Utilities Commission) not to deliver water to lands other than those then served, and not to extend service to new consumers until an adequate supply of water was available. During approximately the same period there were also certain lands in the Palermo system which were entitled to water from that company, but for various reasons had not yet received it.
Defendant was organized to serve the area in 1919, and thereafter negotiated the acquisition of the water rights and irrigation systems of Palermo and South Feather. The applications of the two companies for approval of the transfers were filed simultaneously and consolidated for consideration before the Railroad Commission. A protest was filed by landowners who, although invited to do so, refused to join the district; and who therefore felt in need of some guarantees as to future rates to be charged for water and services.
Negotiations resulted in the withdrawal of the protest upon presentation to the commission of two identical resolutions of the board of directors of the district, each providing for a future supply of one-quarter miner’s inch per acre to the “present water users” of Palermo and South [988]Feather respectively.1 The commission then approved the transfer by order dated December 8, 1922 (hereinafter the “order”).
Among the matters recited in the order was the-subject of undeveloped lands entitled contractually to water but which had not yet received it. The recitation is quoted in footnote 2 of the majority opinion. Thereafter the order dispositively provided: “That the present water users of the two water companies, parties hereto, and those persons or firms desiring to become water users within ten (10) years from the date hereof, shall receive service from the Oroville-Wyandotte Irrigation District at the rates and under the conditions recited in Application 8000 [Palermo] and Application 8018 [South Feather] and in the resolutions of the directors of the Oroville-Wyandotte Irrigation District dated October 20, 1922, submitted and marked as Exhibit 4 in Application No. 8000 and Exhibit 5 in Application No. 8018.”
At the time of the order a large portion of plaintiff’s 166'/2-acre parcel consisted of undeveloped land. Plaintiff developed additional acreage on the parcel up to December 8, 1932, the 10-year cdt-off date; the total developed by then was .146 acres. Significantly, not a single acre of the remaining 20Vi acres was developed in the next 40 years; but in 1972, motivated by the desire to develop them, plaintiff filed this action seeking to establish water rights based on the entire 166'A acres.
The majority concludes that if any part of the 166 Vi acres was receiving water in 1922, the entire parcel was “supplied with water” in 1922. The original contract of 1912 unequivocally deals with a fixed supply of water (25 inches) to the 166Vi-acre parcel as a whole, developed or undeveloped;2 This is a ratio of 1 inch per 6.66 acres. That the contract recognized the then existing lack of development of some of the acreage is made clear by the unrecorded addendum thereto providing for a standby charge of $1 per acre on land “upon which no water is used.” This addendum also provided that “For all water used, the regular charge- of $36.50 per inch, as provided in [the] contract shall be paid” (italics added); it further provided that within five years (from Jan. 4, 1912) “all water provided for . . . shall be put to use and paid for by the [989]consumer.” Thus we observe that although plaintiff (or its predecessor) was entitled to a full 25 inches of water for all the acreage, for the first five years after January 4, 1912, the parcel would be charged only for the water actually used (presumably on a pro-rata acreage basis). The record is silent as to whether all water was in fact paid for after the first five years, although we may infer from the fact that substantial acreage was not developed in 1922 that it probably was not. Be that as it may, the importance of the addendum is its recognition of the distinction between acreage actually using water and acreage entitled to use water but not in fact using it.
In this setting the 1922 order was made, amending the original contract. In defining the term “present water users” it uses the term “land supplied with water.” While this latter term could refer to all land described in any contract for the sale and purchase of water, more reasonably (and especially to these contracting parties in the light of the background of the 1912 contract and addendum) it referred to acreage actually receiving water. Acreage entitled to water but not under cultivation and hence not irrigated, is not “land supplied with water.”
“A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties.” (Italics added.) (Civ. Code, § 1643; see also 1 Witkin, Summary of Cal. Law (8th ed. 1973) Contracts, § 528, p. 450 et seq.; 14 Cal.Jur.3d, Contracts, § 156, p. 398.) For a number of very obvious reasons the interpretation of the majority is unreasonable. To require defendant to hold water in reserve for an untold number of years (in this case 40 -1932 to 1972; it could just as well have been several centuries) awaiting plaintiff’s decision (or indecision) to develop its hitherto unused acreage would be unreasonable; it also hints of a perpetuity (Civ. Code, § 715.2). Such a result causes me to ask what purpose the 10-year limitation then served. The majority answers that the 10-year limitation applies only to those contract holders who did not receive any water for any of the acreage included in their contracts, not to plaintiff (or others) who received some water for some of its acreage.3 This position is untenable; such an artificial distinction is unreasonable. I am convinced that had plaintiff’s officers been asked in 1922 whether there was any time limitation to their corporation’s right to [990]water for undeveloped acreage, they would have promptly answered in the affirmative. I am equally convinced that if the same question had been put to them in 1932 (some of the 1922 officers might well have still been there in 1932), they would have acknowledged that the undeveloped lands had no right to water.
The majority’s interpretation is both impractical and potentially unfair. Under it, an owner of 100 acres with a contract identical to that of plaintiff and who farmed none of it in 1922 would have to develop acreage within 10 years or proportionately forfeit his right to water. But the owner of an adjoining 100 acres with the same contract, who farmed a single acre only in 1922 and that same acre in 1932, not only did not lose the right to water Tor his remaining 99 acres in 1932, but has not lost it yet and will not have lost it in the year 3000. This result is absurd.
The final and most telling argument against the majority’s holding, which the majority has chosen to ignore, is based upon a fundamental rule of interpretation of contracts. The construction which by their actions the parties themselves place upon a contract prior to any controversy is of the utmost importance in ascertaining their intent; no one knows the true understanding of the parties better than they do themselves, and their actions generally reflect it. (Universal Sales Corp. v. Cal. etc. Mfg. Co. (1942) 20 Cal.2d 751, 761 [128 P.2d 665]; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 527, p. 449; Rest., Contracts, § 235, subd. (e).) In this case, how much water was actually used by plaintiff pursuant to the contract between 1932 and 1972? The record discloses that throughout' this 40-year period, not over 36[4] miner’s inches were ever used4 (1 inch for eveiy 4 acres out of the 146 acres developed by 1932). But if the majority’s interpretation is correct, throughout this 40-year period, plaintiff was entitled to 41[4] miner’s inches (% of 166[4] acres). From the fact that plaintiff only had 146 acres under cultivation, it does not follow that plaintiff never in 40 years needed or could have used more than one-quarter inch per acre on such 146 acres. Being entitled to an additional 4% inches throughout this time, one would think that at some time plaintiff would seek it or at least assert its right to it. Yet plaintiff did not show a single instance of demand for more than 36[4] inches or any complaint because of that limitation. Even if it be conceded that plaintiff did not seek the additional 4% inches because they were never needed, if plaintiff truly believed that it had a [991]
Further applying the Restatement section 235(e) standard for interpretation of contracts, it is curious that although 23 acres were developed between 1922 and 1932, not another acre was developed or sought to be developed before 1972. Thus again for 40 years, plaintiff did not feel that it had a contractual right to more water than it was receiving, because in fact such right did not exist.
I would reverse the judgment.
A petition for a rehearing was denied August 12, 1975. Paras, J., was of the opinion that the petition should be granted. Appellant’s petition for a hearing by the Supreme Court was denied September 24, 1975.
It is to be noted that this 1 inch for every 4 acres is substantially more than the 1 inch for every 6.66 acres (25 inches per 16616 acres) called for by the 1912 contract.
The contract provides for the sale and purchase of “twenty-five (25) miners inches continuous flow of water per year for .. . use upon the lands . . . described as . . . about 16616 acres.”
The majority states that its interpretation does not destroy the raison d’etre of the 10-year limitation in the Railroad Commission order. If it hasn’t destroyed it, it has certainly emasculated it.
Obviousiy, for if any more than this had been used, the present controversy could not possibly have existed.