CITY OF LONG BEACH, Petitioner, v. H. C. MORSE, as City Treasurer, etc., Respondent, 31 Cal. 2d 254

TRAYNOR, J. The city of Long Beach seeks a peremptory writ of mandamus to compel its treasurer to transfer certain revenue from the city’s ‘‘Harbor Revenue Fund” to its “Public Improvement Fund.” The revenue in question was derived from the production of oil and gas from the tidelands and submerged lands within the corporate limits of the city of Long Beach, claimed by the city under legislative grants from the State of California.

Before 1946, under the terms of the charter of the city of Long Beach, the revenue from the production of oil and gas from these lands was devoted to the improvement and maintenance of the harbor of the city of Long Beach and to the payment of principal and interest on bonds issued by the city for harbor purposes. (Long Beach City Charter, § 229x, Stats. 1937, p. 2939, as amended by Stats. 1943, p. 3097.) The city charter was amended in 1946 to provide for the transfer of 25 per cent of the fund in question to the “Public Improvement Fund.” This amendment provides, however, that the “transfer shall be made only in the event that such moneys may be used and expended for the purposes hereinafter stated without violating the provisions of grants by which the City acquired title to all tide and submerged lands from the State of California, to wit, 1911 Statutes, page 1304, 1925 Statutes, page 235, and 1935 Statutes, page 794 . . . the moneys transferred to and placed in the ‘Public Improvement Fund’ shall be used exclusively for the payment of costs and expenses for construction, reconstruction, repair and maintenance of public improvements, ... as shall have been provided for in the official budget of the City adopted by the City Council. ’ ’ (City Charter of Long Beach, § 229x, Stats. 2d Ex.

Sess. 1946, Resolutions, ch. 6, pp. 366, 367.) Respondent refused to make the transfer on the ground that it would be a violation of the charter provision for him to do so, because the revenue transferred to the “Public Improvement Fund” would be used for general municipal improvements unconnected with the purposes and uses provided in the grants of the tidelands and submerged lands to the city.

The city of Long Beach concedes that if the transfer is made, the money would be used for general municipal improvements not limited to the purposes specified in the legislative grants under which the city claims title to the lands. It is contended, however, that these grants restrict, not the use of any revenue derived from the lands, but only the physical uses to which the lands may be put.

The issue in this case, therefore, is whether the use of money derived from the development of oil and gas on these lands for general municipal improvements would violate the terms of the grants under which the city of Long Beach claims title.

In 1911, the State of California transferred whatever title it may have had to the tidelands and submerged lands within the boundaries of the city of Long Beach to that city in trust for certain uses and purposes connected with the development of Long Beach Harbor. (Stats. 1911, p. 1304.) The terms of the original grant were amended by the Legislature in 1925 (Stats. 1925, p. 235) and in 1935 (Stats. 1935, p. 793; 2 Deering’s Gen.

Laws, 1944, Act 4401.) The present provisions of the trust are as follows: “There is hereby granted to the city of Long Beach, a municipal corporation of the State of California, and to its successors, all of the right, title and interest of the State of California, held by said State by virtue of its sovereignty, in and to all of the tide lands and submerged lands, whether filled or unfilled, bordering upon, under and situated below the mean high tide line of the Pacific Ocean, or of any harbor, estuary, bay or inlet, which are within the corporate limits of said city, to be forever held by said city, and by its successors, in trust for the uses and purposes and upon the express conditions following, to wit: “ (

a) That none of said lands shall he used or devoted to any purposes other than public park, parkway, highway, playground, the establishment, improvement and conduct of a harbor and the construction, maintenance and operation thereon of wharves, docks, piers, slips, quays and other utilities, structures and appliances necessary or convenient for the promotion and accommodation of commerce and navigation; and said city, or its successors, shall not, at any time, grant, convey, give or alien said lands, or any part thereof, to any individual, firm or corporation for any purpose whatsoever ; provided, however, that nothing herein contained shall be so construed as to prevent the granting or use of easements, franchises or leases for limited periods, or rights of way in, under, over or across said tidelands or submerged lands for power, telephone, telegraph or cable lines or landings, sewage disposal conduits, wharves and other public uses and purposes consistent with the trust upon which said lands are held, or the leasing or use of such tidelands or submerged lands for limited periods for the construction, maintenance, and operation of nonprofit benevolent and charitable institutions organized and conducted for the promotion of the moral and social welfare of seamen, naval officers and enlisted men, and other persons engaged in and about the harbor and commerce, fishery, and navigation.” (Italics added.) (

b) That the lands shall always be devoted' to the conduct of a public harbor, without expense to the state. (

c) That there shall be no discrimination in connection with the operation of the harbor. (

d) The right to fish in the harbor is “expressly reserved to the people of the State of California.” This statute clearly provides that the state’s interest in the" lands is transferred in trust for certain uses and purposes.

The city is a trustee and as such “assumes the same burdens and is subject to the same regulations that appertain to other trustees of such trusts.” (3 McQuillin, Municipal Corporations, 2d ed., § 1230, referring to charitable trusts.) The city of Long Beach contends that the proceeds from the production of oil and gas is merely income from the land and as such is not covered by any provisions of the trust, on the ground that the trust expressly applies only to the physical uses of the land.

Whether the fund should be regarded as part of the corpus of the trust or merely as a part of the rents and profits of the land, the city as trustee has no right to devote the proceeds to general municipal improvements unconnected with the trust purposes. If the proceeds from the sale of oil and gas are regarded as corpus (see Best. Trusts, § 238; Bogert, Trusts and Trustees, §§ 789, 828), they must be used for the purposes set forth in the legislative grants in trust, for the city, as trustee, clearly has no authority to appropriate the corpus to its own uses contrary to the terms of the trust.

If the proceeds are regarded as income from trust property, the trustee, in the absence of a legislative provision to the contrary, has no more right to them than it has to the corpus. (Civ. Code, § 2229; Provident Land Corp. v. Zumwalt, 12 Cal.2d 365, 375 [85 P.2d 116]; Lamb v. Lamb, 171 Cal. 577, 580-582 [153 P. 913]; Purdy v. Johnson, 174 Cal. 521, 529 [163 P. 893]; see Methodist Benev. Assn. v. Bank of Sweet Spring, 227 Mo.App. 566, 573 [54 S.W.2d 474, 478].) Thus, in Provident Land Corp. v.

Zumwalt, supra, this court held that an irrigation district acquired certain land in trust for the purposes of the California Irrigation District Act (Stats." 1897, p. 263, § 29) and that the rents and profits from such property were likewise subject to the trust.

The act provided that such property was held “in trust for and is hereby dedicated and set apart to the uses and purposes set forth in this act.” Although there was no express provision for the disposition of the rents from such land, the opinion stated that, “Once it is made clear that the lands are held in trust, it necessarily follows that their proceeds, whether by sale or lease, are likewise subject to the trust.

It would be manifestly absurd to say that although the property is held in trust, none of the benefits of the trust accrue to the beneficiaries, and that none of the rents or profits of.the trust property need be used in furtherance of the trust purposes.

On this point, namely, that the land is trust property, held for the ‘uses and purposes’ of the act, and that the proceeds are stamped with the character of the property from which they flow, the statute read in the light of elementary principles, leaves no room for debate.” Similarly, since the “right, title and interest” of the State of California in the lands involved in the present case was granted to the city of Long Beach “in trust for the uses and purposes” set forth in the grants, it necessarily follows that the proceeds from the oil drilled from these lands can be used- only in furtherance of the trust purpose.

The city cites no authority contrary to this principle. It relies on the case of City of Long Beach v. Marshall, 11 Cal.2d 609, 620 [82 P.2d 362], in which this court held that the city had a right to drill oil from the lands so long as such drilling did not interfere with the trust purposes. The court there stated: “Nothing in the grant purports to reserve to the state or to deny to the municipality the minerals or the right to extract them. ...

It is, of course, true that the operations must not be conducted in such manner as to impede the use of the harbor, but there is nothing before us to suggest that drilling will have any such effect.” The city interprets this statement to mean that the only restriction on the city’s right to oil is that the extraction thereof must not interfere with the harbor.

In that case, however, this court was not concerned with the disposition of the proceeds from such operations, for at that time the proceeds were allocated entirely to " [I] mprovement and maintenance of the harbor and servicing and redemption of outstanding harbor improvement bonds.” (Supra at 612.) There was therefore no reason for the court to assume that the city would attempt to appropriate the proceeds for general municipal improvements, and it was unnecessary to consider a limitation implicit in the grant. There is nothing in the case of City of Long Beach v.

Marshall to indicate that the city owns these lands clear of any trust. The court held that the city took title to the lands in fee, but it impliedly recognized, in recognizing the limitation on the right of the city to drill, that the title was held subject to the express trust imposed in the legislative acts of conveyance. Moreover, the court did not purport to overrule City of Long Beach v. Lisenby, 175 Cal. 575, 579 [166 P. 333], which held that the city acquired title to these lands in trust. That ease is cited with approval in the Marsh all case, supra at 619.

In the Marshall case, the court referred to the fact that the Legislature had approved the charter amendment under which the city was authorized to conduct drilling operations on this land. It is notable that subsequent to that case, the Legislature has again referred to the fact that the lands in question were “conveyed in trust to the City,of Long Beach.” (Stats. 1943, p. 2577.) Legislative approval of the present charter amendment cannot be relied on as indicative of a legislative purpose to enlarge the grant or as a legislative construction of its former grants.

The amendment was approved in a joint resolution of the Legislature as required by

article XI

section 8 of the California Constitution, but the resolution and the charter amendment expressly provide that “said transfer shall be made only in the event that such moneys may be used and expended for the purposes . . . stated without violating the provisions of grants by which the City acquired title to all tide and submerged lands from the State of California ...” (Stats. 2d Ex. Sess. 1946, Resolutions ch. 6, pp. 366, 367.) If a legislative

interpretation of the meaning of this and similar grants is necessary, it may be found in

section 6875 of the Public Resources Code with respect to agreements between the State Lands Commission and cities holding title to tidelands under such grants. This

section provides that “If the Legislature has transferred to any city or county the administration of the trust, whether or not limited, under which tide or submerged lands are held by the State, the commission, . . . may enter into agreements upon behalf of the State to compensate any such city or county for the use of surface drilling and operating sites upon such lands from the royalty or revenue to be derived by the State from oil and gas taken from such lands by lessees of the State . .. All money paid to any city or county under this

section shall be used by it solely in furtherance of the trust under which the administration of tide and submerged lands has been transferred to such city or county and for the purposes expressed in the act' so transferring administration of such lands. ’ ’ It is contended that even if the grant as amended in 1925 and 1935 does not authorize the use of revenue from the land for local municipal purposes, the original terms of the grant contain such authorization and the Legislature was without power to deprive the city of this right by subsequent legislation.

By the terms of the original grant the city was granted the land in question for the following uses and purposes: “That said lands shall be used by said city and by its successors, solely for the establishment, improvement and conduct of a harbor, and for the construction, maintenance and operation thereon of wharves, docks, piers, slips, quays, and other utilities, structures and appliances necessary or convenient for the promotion and accommodation of commerce and navigation, and said city . . . shall not, at any time, grant, convey, give or alien said lands, or any part thereof, to any individual, firm or corporation for any purpose whatsoever; provided, that said city . . . may grant franchises thereon, for limited periods, for wharves and other public uses and purposes, and may lease said lands, or any part thereof, for limited periods, for purposes consistent with the trusts upon which said lands are held by the State of California and with the requirements of commerce or navigation at said harbor. . . .” (Italics added, Stats. 1911 p. 1304.) It is suggested that the italicized clause authorized the city to enter into oil leases and to dispose of the proceeds thereof for municipal purposes unconnected with the general purposes of the trust.

This clause was amended in 1925 and 1935 so that it now provides “that nothing herein contained shall be so construed as to prevent the granting or use of easements, franchises or leases for limited periods, or rights of way in, under, over or across said tidelands or submerged lands for power, telephone, telegraph or cable lines or landings, sewage disposal conduits, wharves and other public uses and purposes consistent with the trusts upon which said lands are held. ...” (Italics added.) The 1925 and 1935 amendments have heretofore been regarded as enlargements rather than as restrictions on the terms of the original grant. (See City of Long Beach v.

Marshall, supra, 11 Cal.2d at p. 618.) The only express change in the lease provision that might be regarded as a limitation not previously contained in the grant is the express requirement that the lease be for “public uses and purposes consistent with the trusts upon which said lands are held.” The original grant has been interpreted as providing for a trust for public purposes and as not creating a “trust to carry on a commercial enterprise unaffected by a public use.” (City of Long Beach v. Lisenby, supra, 175 Cal. at 579; see, also, City of Oakland v.

Williams, 206 Cal. 315, 322-328 [274 P. 328], construing an identical provision of a contemporary trust. [Stats. 1911, p. 1258].) By these amendments the Legislature may have sought merely to clarify the meaning of this clause of the grant.

Even if it be assumed, however, that the proviso in the original grant authorized the city to enter into commercial leases and that this authorization extended to oil and gas leases, it does not follow that the city of Long Beach may use the proceeds from the production of oil and gas from these lands for general municipal purposes unconnected with the expressed purposes of the trust.

Under the terms of the original grant, the extent of the right of the city to enter into any type of lease is clearly limited by the “trusts upon which said lands are held by the State of California.” The State of California has claimed title to these lands in trust for all the people of the state and whatever right the state may have to enter into oil and gas leases with respect to the production of oil and gas from these lands is subject to this trust. (Boone v. Kingsbury, 206 Cal. 148, 187-188 [273 P. 797], relying on Illinois Cent. R. R. v. Illinois, 146 U.S. 387, 452 [13 S.Ct. 110, 36 L.Ed. 1018]; cf.

United States v. California, 332 U.S. 19 [67 S.Ct. 1658, 1664, 91 L.Ed. 1889].) Since the lands were held by the state in trust for all the people, and the city holds the lands subject at least to the same trusts, it may not use the proceeds for the local purposes contemplated by the charter amendment. The development of the harbor, on the other hand, is expressly authorized by the grants as a public purpose in the interest of all the people of the state. (See, City of Oakland v.

Williams, supra, 206 Cal. at p. 328.) It follows that the proceeds from the sale of oil and gas from the lands in question may not be used for any purposes other than those specified in the trust conveyances under which the city claims title to the lands. The Legislature specified purposes relating to the harbor that it deemed beneficial to the state as a whole and did not authorize the city of Long Beach to use the corpus or the income of the trust for strictly local improvements. The alternative writ is discharged and the petition for a peremptory writ is denied. Gibson, C.

J., Shenk, J., and Carter, J., concurred. The United. States is not a party to this proceeding and the extent to which the State of California could validly grant to the City of Long-Beach any right in the lands in question under the decision of the United States Supreme Court in United States v. California, 332 U.S. 19 [67 S.Ct. 1658, 1664, 91 L.Ed. 1889], is not in issue.