Lines v. Marin Municipal Water District

DRAPER, P. J. Plaintiff, as trustee in bankruptcy for Stegge Development Corporation, had judgment for $21,140. Defendant district appeals. The question is whether the award is justified under the statute providing for relief from forfeiture (Civ. Code, §3275).

In 1955, Stegge owned some 2,500 acres of land, which it planned to develop by construction of more than 3,750 residences. Water service, of course, was essential to the development. Stegge and defendant district executed a written contract which acknowledged the district policy not to finance subdivisions, but to require the subdivider to assume the risk of development by advancing all costs for extension of water [157]service thereto. The agreement set out in detail the water service facilities to be constructed and required that Stegge proceed with all within 60 months. The work was divided into 8 stages, each to serve a particular area of Stegge’s land, but it was expressly provided that “Notwithstanding the separate or stage statement of program and costs, this contract shall be deemed to be non-severable. No part of the service shall be given except upon the express understanding that the whole program will be carried through by both parties. No service will be demanded or requested by Subdivider . . . except on the terms and subject to the limitations hereof.” Provision was made for payment by district to Stegge, by way of refund upon the advances made by him, of one-third of the gross receipts from the added system for a period of five years.

District built, and Stegge paid for, the first stage installation, designed to serve a maximum of 250 homes, including a storage tank which cost $75,630.54. Stegge completed 180 homes, all of which were connected to the water system. In a proceeding begun August 16, 1957, Stegge was adjudicated a bankrupt. The trustee did not affirm, and therefore is deemed to have rejected (11 U.S.C. § 110b), the executory portion of the contract with the district. No work was done or advances made by Stegge or the trustee on the remaining seven stages of the agreement, nor did they offer any additional homes for connection to the stage 1 portion of the system. After December of 1960, defendant connected to that system 70 homes built by one who then held title to a portion of the original Stegge land. This action followed. The trial court adopted plaintiff’s theory that, since he had received only 180 of the maximum 250 connections to be made to the stage 1 develop • ment, there had been a forfeiture of 70/250ths of the cost of the storage tank.