The Court of Appeal again confirmed that the rights to floodwater captured and stored in an aquifer beneath property were not personal property but rather appurtenant to the land and were transferred with the property during a foreclosure sale. Sandton Agriculture Investments III, LLC v. 4-S Ranch Partners LLC, 113 Cal.App.5th 519 (2025).
In August 2017, Sandton Agriculture Investments acquired ranch property through foreclosure after 4-S Ranch Partners defaulted on repayment of a loan. The primary legal issue was whether approximately 500,000 acre-feet of captured floodwater stored in an aquifer beneath the ranch should be classified as personal property or as part of the real property. 4-S argued that the captured floodwater was personal property and did not become part of the real property by virtue of its storage in the aquifer. Sandton contended that the right to extract groundwater is a real property interest and that the captured floodwater was not severed from the real property, thus remaining part of the real property.
As explained in its first opinion in this case, the Court determined that floodwater, once it seeped into the ground and became percolating groundwater, lost its status as personal property and instead became part of the real property. As a result, the water rights were appurtenant to the land and transferred to Sandton during the foreclosure sale, since the water was not severed from the land and could not be individually controlled or identified.
The Court reheard this matter and, in its opinion following rehearing, again held that water in its natural state, including floodwater that seeps and percolates into an aquifer, remains real property unless severed from the land. The Court expressly rejected the theory of “floodwater as personalty through dominion and control” and reaffirmed the severance requirement: water in its natural state (including floodwater that percolates into an aquifer) remains real property unless severed. Because the water here was not severed from the land, the groundwater and related rights were appurtenant to the land and transferred with the land at the nonjudicial foreclosure.
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