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Strawberry Water Co. v. Paulsen - 7/29/2008

Arizona Court ofAppeals Division One Holds Water Owners Can Have Standing for Conversion Claim Concerning Water That Has Become Personal Property, and Treble Damages Are Not a Form of Punitive Damages.


The previous owners of the Paulsen’s property used a pipe from the Strawberry Water Co. to provide water to the property’s pond, but the subsequent owners of the water company were unaware of the property’s use of their water.  When the company discovered the water use, they disconnected service and sued the Paulsens for utility tampering and conversion.  The jury determined the Paulsens had unlawfully diverted Strawberry’s water and awarded $146,925.21 in damages, and the judge then awarded treble damages pursuant to A.R.S. § 40-493 (the utility tampering damages statute).  The Paulsens appealed the issue of Strawberry’s standing to sue, the jury instructions on comparative fault, the awarding of treble damages, and various other issues.

On appeal, the Paulsens claim that Strawberry did not present sufficient evidence of ownership of the pipe on their property and the water flowing through it to establish standing to sue.  While the law usually treats water rights as real property, the Court held the water at issue here qualified as personal property because Strawberry had reduced the specific water at issue to their possession and control.  The Court noted that Strawberry did not need to establish ownership of the water or pipe on the Paulsens’ property to prove its utility tampering claims, but only needed to show that it provided water service to the pipe from which the water was diverted.  As to the conversion claim, the Court held Strawberry provided sufficient evidence to show that it owned the wells from which the water at issue was pumped, and it was immaterial whether they also owned the pipe on the Paulsens’ land, because there is a rebuttable presumption that Strawberry owned the water if it came from Strawberry’s wells and the Paulsens received it by bypassing the meter.  Therefore, the Court affirmed the judgment of the trial court on the standing issue.

The Paulsens also argued that the trial court erred by not instructing the jury on the issue of comparative fault on the part of Strawberry and other non-parties, including the previous owners of the Paulsens’ property.  The Court affirmed the trial court as to Strawberry’s comparative fault, holding that the defense of comparative fault is not available against the victim in an intentional tort case.  However, the court held the Paulsens could allege comparative fault against other non-parties, and therefore reversed the trial court on that issue.

The Paulsens further argued that treble damages are a form of punitive damages, and therefore must be awarded by the jury, and not the judge.  The Court disagreed, finding that treble damages are not necessarily punitive, because they can also be awarded to compensate for loss or to encourage private law enforcement.  In addition, the case law does not show that treble damages require clear and convincing evidence or an evil mind, as is required for punitive damages.  Therefore, the Court held treble damages are not equivalent to punitive damages, and the judge can decide the issue.

Finally, the Paulsens argued the trial court erred by awarding Strawberry the value of the lost water, instead of just its lost profits.  However, the court dismissed this argument, because the Paulsens provided no evidence that these numbers would have been different.  In light of these rulings, the Court ofAppeals affirmed in part, reversed in part, and remanded for a new trial so the trial court could instruct the jury on the comparative fault of non-parties.

Presiding Judge Portley authored the opinion, with Judges Irvine and Kessler concurring.

 

 

 

 

 

 

 

 

Posted On: 8/4/2008