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Litigation Update: City of Clearlake vs Highlands Mutual Water Company

August 31, 2026

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Alerts

Litigation Update: City of Clearlake vs Highlands Mutual Water Company

August 31, 2026

Litigation Update 

The Court of Appeal of the State of California, First Appellate District, Division One, recently issued its decision on the legal matter the City of Clearlake vs Highlands Mutual Water Company.

“The Legislature has determined that the best way to give effect to the constitutional prohibition of stock ownership is to direct the secretaries of mutual water companies to cancel appurtenant shares held by public entities. As the statute requires the cancellation of all such shares without limitation, there is no room for the secretary to act arbitrarily. (§ 14300, subd. (a).) We therefore conclude there is no unlawful delegation of legislative power. 

In sum, the City failed to meet its burden to demonstrate that Corporations Code section 14300 is unconstitutional. (People v. Rodriguez (1998) 66 Cal.App.4th 157, 180.) Because the trial court granted the motion for preliminary injunction on the ground that Corporations Code section 14300 was unconstitutional, we must remand the matter to the trial court to permit it to properly evaluate both preliminary injunction factors and exercise its discretion in the first instance.” 

While the Court of Appeal's decision is favorable to Highlands Water Company, the City of Clearlake has elected to continue pursuing the matter by petitioning the Supreme Court of the State of California for review of the appellate decision.


Actualización de Litigios 

El Tribunal de Apelaciones del Estado de California, Primer Distrito de Apelaciones, División Uno, emitió recientemente su decisión sobre el asunto legal Ciudad de Clearlake contra Highlands Mutual Water Company. 

"La Legislatura ha determinado que la mejor manera de dar efecto a la prohibición constitucional de la propiedad accionaria es ordenar a los secretarios de las compañías mutuales de agua que cancelen las acciones anexas en poder de entidades públicas. Como la ley exige la cancelación de todas esas acciones sin limitación, no hay margen para que el secretario actúe arbitrariamente. (§ 14300, subd. (a).) Por lo tanto, concluimos que no existe una delegación ilegal de poder legislativo. 

En resumen, la Ciudad no cumplió con su carga de demostrar que la sección 14300 del Código de Sociedades es inconstitucional. (People v. Rodriguez (1998) 66 Cal.App.4th 157, 180.) Dado que el tribunal de primera instancia concedió la moción de orden cautelar preliminar alegando que la sección 14300 del Código de Sociedades era inconstitucional, debemos devolver el asunto al tribunal de primera instancia para que evalúe adecuadamente ambos factores de la orden cautelar preliminar y ejerza su discrecionalidad en primera instancia." 

Aunque la decisión del Tribunal de Apelación es favorable a Highlands Water Company, la ciudad de Clearlake ha decidido continuar con el asunto solicitando al Tribunal Supremo del Estado de California la revisión de la decisión de apelación.

Alerts

Litigation Update: City of Clearlake vs Highlands Mutual Water Company

August 31, 2026

Litigation Update 

The Court of Appeal of the State of California, First Appellate District, Division One, recently issued its decision on the legal matter the City of Clearlake vs Highlands Mutual Water Company.

“The Legislature has determined that the best way to give effect to the constitutional prohibition of stock ownership is to direct the secretaries of mutual water companies to cancel appurtenant shares held by public entities. As the statute requires the cancellation of all such shares without limitation, there is no room for the secretary to act arbitrarily. (§ 14300, subd. (a).) We therefore conclude there is no unlawful delegation of legislative power. 

In sum, the City failed to meet its burden to demonstrate that Corporations Code section 14300 is unconstitutional. (People v. Rodriguez (1998) 66 Cal.App.4th 157, 180.) Because the trial court granted the motion for preliminary injunction on the ground that Corporations Code section 14300 was unconstitutional, we must remand the matter to the trial court to permit it to properly evaluate both preliminary injunction factors and exercise its discretion in the first instance.” 

While the Court of Appeal's decision is favorable to Highlands Water Company, the City of Clearlake has elected to continue pursuing the matter by petitioning the Supreme Court of the State of California for review of the appellate decision.


Actualización de Litigios 

El Tribunal de Apelaciones del Estado de California, Primer Distrito de Apelaciones, División Uno, emitió recientemente su decisión sobre el asunto legal Ciudad de Clearlake contra Highlands Mutual Water Company. 

"La Legislatura ha determinado que la mejor manera de dar efecto a la prohibición constitucional de la propiedad accionaria es ordenar a los secretarios de las compañías mutuales de agua que cancelen las acciones anexas en poder de entidades públicas. Como la ley exige la cancelación de todas esas acciones sin limitación, no hay margen para que el secretario actúe arbitrariamente. (§ 14300, subd. (a).) Por lo tanto, concluimos que no existe una delegación ilegal de poder legislativo. 

En resumen, la Ciudad no cumplió con su carga de demostrar que la sección 14300 del Código de Sociedades es inconstitucional. (People v. Rodriguez (1998) 66 Cal.App.4th 157, 180.) Dado que el tribunal de primera instancia concedió la moción de orden cautelar preliminar alegando que la sección 14300 del Código de Sociedades era inconstitucional, debemos devolver el asunto al tribunal de primera instancia para que evalúe adecuadamente ambos factores de la orden cautelar preliminar y ejerza su discrecionalidad en primera instancia." 

Aunque la decisión del Tribunal de Apelación es favorable a Highlands Water Company, la ciudad de Clearlake ha decidido continuar con el asunto solicitando al Tribunal Supremo del Estado de California la revisión de la decisión de apelación.

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Highlands Water Company
14580 Lakeshore Drive
Clearlake, CA 95422
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