Arkansas Val. Sugar Beet & Irrigated Land Co. v. Fort Lyon Canal Co.

• Decision Date: 11 October 1909
• Docket Number: 2,852.
• Citation: 173 F. 601
• Parties: ARKANSAS VALLEY SUGAR BEET & IRRIGATED LAND CO. v. FT. LYON CANAL CO.
• Court: U.S. Court of Appeals — Eighth Circuit

173 F. 601

ARKANSAS VALLEY SUGAR BEET & IRRIGATED LAND CO. v. FT. LYON CANAL CO.

No. 2,852.

United States Court of Appeals, Eighth Circuit.

October 11, 1909

Platt Rogers (John F. Shafroth and Frank E. Gregg, on the brief) for appellant.

Robert S. Gast (Alva B. Adams and H. L. Lubers, on the brief), for appellee.

Before HOOK and ADAMS, Circuit Judges, and PHILIPS, District Judge.

HOOK Circuit Judge.

This was a suit by the Ft. Lyon Canal Company to compel the Arkansas Valley Sugar Beet & Irrigated Land Company to comply with a contract by delivering to complainant annually from a reservoir a certain quantity of water for use in its irrigating system. According to a stipulation of the parties made after the issues were joined, a decree was entered giving complainant what it desired and retaining jurisdiction of the cause for the determination of a defense set up in the answer. Upon further hearing a decree went against defendant as to the matter deferred, and it prosecuted this appeal.

The complainant was incorporated in 1897, under the laws of Colorado, for the purpose of owning and operating what was formerly known as the 'La Junta & Lamar Canal System' and the distribution of water for the irrigation of lands lying under its ditches. The canal and appurtenant properties had been involved in litigation, and were in charge of a receiver appointed by the district court of Prowers county, Colo. The new company, the complainant, was organized with the approval of that court. Its shareholders were the owners of the water rights that had been granted, and it received possession of the canal system from the receiver at the court's direction. The canal extended from the headgate on the north bank of the Arkansas river for more than 100 miles through the counties of Otero, Bent, and Prowers, in the state of Colorado. On December 19, 1896, the Great Plains Water Storage Company was organized to develop certain reservoir sites for the storage of water to be used in another canal system in Bent and Prowers counties, and it was found advisable to use part of complainant's property. So, on October 29, 1897, a contract was entered into whereby the Storage Company secured the perpetual use jointly with complainant of that part of the latter's canal extending from the headgate at the river a distance of about 40 miles, in consideration of which the Storage Company enlarged and improved the same at a great expense. The contract also provided that in a certain contingency, which came to pass, the Storage Company should enlarge and complete for service a reservoir belonging to complainant and thereafter they should use it jointly, the complainant to have therefrom for its own use a fixed proportion of the water stored there. This contract, with some exceptions not material here, was in the same terms as a prior contract between the Storage Company and the receiver, who executed it upon the order of the state court. The defendant company, appellant here, is a New Jersey corporation, and is the successor in interest of the Storage Company.

It was set forth in the bill that, although the 40 miles of complainant's canal had been improved and defendant was enjoying the use of it, neither the defendant nor its predecessor, the Storage Company, had developed the reservoir, but, on the contrary, had diverted the waters which should have gone there into a reservoir of their own, and complainant was denied all use and benefit thereof. It was alleged that the development of its reservoir as agreed upon was essential to complainant's business and was the principal consideration for the contract. The first decree of the trial court pursuant to the stipulation satisfied complainant in this particular by giving it an equal quantity of water from one of defendant's reservoirs. The matter left open for future determination was a defense based upon a provision of the contract that the part of the canal in question when enlarged, and the reservoir when developed and in use, should be in the joint control and management of the contracting parties, and for that purpose the Storage Company should have the right to designate two owners of rights to water under complainant who should be elected annually as two of the five members of complainant's board of directors. For two or three years no controversy arose over this provision, but finally a majority of complainant's shareholders refused to vote for the nominees of the Storage Company. Defendant urged this as a defense to complainant's demand for specific performance of the other provisions of the contract. As already observed, the decree of the trial court upon this matter was against the defendant, and its counsel say the question on this appeal is:

'Should the Ft. Lyon Canal Company and its stockholders elect as directors of said company two of the stockholders of said company designated by the appellant?'

The complainant argues that this question cannot now be entertained, because the first decree gave it the water it was demanding, and therefore fully disposed of the case since defendant did not assert its grievance by way of cross-bill for affirmative...