Adaman Mutual Water Company v. United States
Decision Date | 26 May 1960 |
Docket Number | No. 16583.,16583. |
Citation | 278 F.2d 842 |
Parties | ADAMAN MUTUAL WATER COMPANY, a corporation, Appellant, v. UNITED STATES of America, Appellee. |
Court | U.S. Court of Appeals — Ninth Circuit |
Snell & Wilmer, Phoenix, Ariz., for appellant.
Perry W. Morton, Asst. Atty. Gen., Jack D. H. Hays, Phoenix, Ariz., for appellee.
Before BONE, POPE and HAMLIN, Circuit Judges.
Appellant, Adaman Mutual Water Co., is the crux of a land utilization program of some complexity. In 1943 Goodyear Farms, a corporation, formed from lands which it owned in Maricopa County, Arizona, a Reclamation Project designed to demonstrate the feasibility of dividing large land holdings into traditional family sized farms. The area encompassed by this Project was exceedingly dry, and surface water for irrigation was unobtainable. Underground water had to be pumped and distributed, and to provide this service to the small farms envisioned in the Project, at minimum cost, appellant, a mutual, non-profit corporation, was organized.
Appellant's articles of incorporation prohibit anyone from holding company stock who neither owns land within the Project outright nor under agreement of sale. The owners of Project land, on the other hand, may subscribe for that number of shares equal to the number of acres owned.1 Each share of stock entitles its holder to a prorata share of water, and both water rights and stock are made appurtenant to the land upon which the water is to be used. In addition, the stock and the land to which it is appurtenant are subject to prorata assessments to be made from time to time by appellant to pay both for the capital investment in the irrigation facilities and for the operation and maintenance of the irrigation system. The assessments, once made, become a lien on the land and on the stock and water rights appurtenant thereto. If an assessment is not paid on time, appellant may foreclose upon the debtor's land and stock. No assessment can be made, however, upon stock appurtenant to land that has never been cultivated, that is, until cultivation begins.
The stock subscription agreement, which must be signed by each landowner receiving appellant's stock, stipulates that the stock and the right to receive water are to be forever inseparable from the land, that the transfer of the land automatically transfers the stock and the rights to water, and that the transfer of land without stock or stock without land is of no effect. If, however, it becomes impracticable to irrigate a segment of Project land the water rights appurtenant thereto may be severed from the land upon the owner's request. In addition, water rights may be forfeited by voluntary abandonment, by non-use for the term prescribed by law, or by failure of the owner of the land to which the rights are appurtenant to pay assessments levied by the company. By subscribing for stock, the landowner agrees to abide by the articles of incorporation, by-laws and regulations of appellant.
No provision is made for termination of the duty to pay assessments once the landowner accepts that burden by subscribing for appellant's stock and commencing to cultivate his land. The duty to pay assessments apparently is to continue even in the event that the right to water for the assessed land is forfeited. By not gearing the duty to pay assessments to the use of appellant's irrigation facilities, the backers of the Project avoided possible catastrophe. For if the duty to pay assessments were to terminate with the cessation of water use, the cost of irrigation to those continuing to work the land could become increasingly intolerable as their more easily discouraged neighbors discarded desert farming for some other occupation.
In 1953 the United States entered the picture by bringing condemnation proceedings against 233 acres or 8.3% of the land area within the Project. Most, but not all, of this segment had been transferred by Goodyear through warranty deed or agreement of sale. Only a small fraction of the condemned land was held under lease from the original owner. The compensation claims of those in possession have all been settled. In addition, appellant has been paid for ditches and other physical facilities located upon the condemned area of land.
The only question presently raised is whether or not appellant is entitled to be compensated for the loss of a portion of Project land since the remaining area will be subject to increased assessments in the future to pay for the maintenance, replacement and operation of the communal irrigation system, the cost of which has not been appreciably lessened by the condemnation. In other words, does the diminution of appellant's assessment base constitute the taking of a compensable interest under the Fifth Amendment?
We take as a point of departure what the Supreme Court said in United States v. General Motors Corp., 1945, 323 U.S. 373, at pages 377-380, 65 S.Ct. 357, at pages 359-360, 89 L.Ed. 311:
Stated more succinctly, the Government must pay for all tangible interests actually condemned and for intangible interests directly connected with the physical substance of the thing taken. Comment, 18 U.Chi.L.Rev. 349 (1951).2 The consequential loss rule, much maligned, ibid; Comment, 67 Yale L.J. 61 (1957); and somewhat dented, United States v. General Motors Corp., supra; Kimball Laundry Co. v. United States, 1949, 338 U.S. 1, 69 S.Ct. 1434, 93 L.Ed. 1765, is with us still. It cannot be ignored.
When a parcel of land is condemned, the courts have tended to identify direct, compensable losses with interests includible in the bundle of rights which form conceptually the fee itself, rights which are said to be interests or estates in the land. See United States v. Welch, 1910, 217 U.S. 333, 30 S.Ct. 527, 54 L.Ed. 787 (easement); Brooklyn Eastern District Terminal v. City of New York, 2 Cir., 1944, 139 F.2d 1007, 152 A.L.R. 296 (same); Creasy v. Stevens, D.C.W.D.Pa.1958, 160 F.Supp. 404, 411 (right of access); Tucker v. United States, D.C.D.R.I.1922, 283 F. 428 (profit a prendre). Since this distinction is apparently designed to accord some degree of predictability to the classification of remote and direct losses, it need not be applied as an unwavering principle. See Caltex (Philippines), Inc. v. United States, 1951, 100 F.Supp. 970, 974, 120 Ct.Cl. 518, reversed on other grounds, 1952, 344 U.S. 149, 73 S.Ct. 200, 97 L. Ed. 157. Nonetheless, if an interest in land is lost as a result of the taking of...
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