Bothwell v. Fitzgerald
| Decision Date | 04 January 1915 |
| Docket Number | 2431. |
| Parties | BOTHWELL v. FITZGERALD et al. In re AMERICAN FALLS CANAL & POWER CO. |
| Court | U.S. Court of Appeals — Ninth Circuit |
On the 3d day of February, 1901, the state of Idaho entered into a contract with the American Falls Canal & Power Company, a public service corporation of the state of Utah, by the terms of which the canal company agreed to construct a canal and irrigating system from a point on the west bank of the Snake river, into and through certain counties in the state of Idaho, according to certain specifications embodied in the contract, for the irrigation of certain lands which had been segregated by the state of Idaho under and by virtue of the provisions of the act of Congress of August 18, 1894, 28 Stat. 422, c. 301, Sec. 4 (Comp. St. 1913, Sec. 4685), known as and designated the 'Carey Act.' T. E. Fitzgerald and W. A. West were the owners of certain lands included within the area to be irrigated by the irrigating system of the canal company, and as such owners were also the owners of certain shares of perpetual water right out of the waters appropriated by the Canal Company for its irrigating project.
On March 22, 1913, Fitzgerald and West filed suits in the district court of the Fifth judicial district of the state of Idaho for the recovery of damages alleged to have been sustained by them through loss of crops by reason of the failure of the canal company to supply their lands with water pursuant to the contract for the delivery of such water between each of the plaintiffs and the canal company. It was claimed in these suits that the failure of the canal company to deliver water to each of the plaintiffs therein was caused by the fact that a certain branch or lateral of the canal company, known as 'Lateral No. 33,' had been defectively constructed and maintained, in violation of the agreement between the parties. On September 17, 1913, a judgment was rendered in the action of Fitzgerald against the canal company for the sum of $2,715. Subsequently a judgment by confession was rendered in the suit of West against the canal company in favor of the plaintiff therein for the sum of $2,715.
On February 24, 1914, the American Falls Canal & Power Company filed its voluntary petition in bankruptcy in the United States District Court for the District of Utah, and on February 27, 1914, that court entered its order adjudging the company a bankrupt. The judgment for $2,715 obtained by Fitzgerald in his suit against the canal company was listed by the bankrupt in its schedules as a claim against the bankrupt. The judgment by confession for $2,715 obtained by West in his suit against the canal company was not so listed. On March 16, 1914, the appellant herein, Glenn R. Bothwell was appointed trustee of the bankrupt estate.
On April 6, 1914, Fitzgerald and West filed a complaint against the American Falls Canal & Power Company in the district court of the Fifth judicial district of the state of Idaho, in and for Power county wherein they alleged that the canal company after its organization had proceeded to construct and build its canal and irrigating system, but that the same never had been constructed or completed, so as to carry and deliver water for the irrigation of the lands of the plaintiffs; that sufficient water was not available under the irrigating works of the canal company to furnish the water right holders under the system who were to take their water from lateral No. 33 with sufficient water to properly irrigate their lands, and that the plaintiffs were suffering great damage and loss by reason of the destruction of their crops and trees planted on their lands, by reason of their failure to receive water and to have lateral No. 33 completed. The plaintiffs further alleged that the canal company was insolvent in law and in fact, and was unable to pay its debts or meet its current obligations as they became due, and was without means to complete its system, and especially lateral No. 33, so as to deliver water to the plaintiffs' lands. It was further alleged that there were certain deferred payments due and owing from various water right holders to the canal company and that the plaintiffs were entitled to have such deferred payments collected and applied toward the completion of lateral No. 33. The plaintiffs therefore asked that some competent and proper person be appointed by the court, as receiver of the canal company, with power to complete its irrigating system, and with full power to collect sufficient moneys due and owing, or to become due and owing, to the canal company, from the holders of water rights, and to expend so much of the moneys so collected as should be necessary to complete the irrigating system of the canal company, and especially lateral No. 33, so that the plaintiffs might be supplied with the amount of water to which they were entitled under their agreements with the canal company. On the date of the filing by Fitzgerald and West of their complaint for the appointment of a receiver, the state court issued an order to show cause why a receiver should not be appointed pursuant to the prayer of the bill, with full power to complete the canal and irrigating system of the canal company, and especially lateral No. 33 thereof.
On April 11, 1914, the appellant herein, as trustee of the bankrupt canal company, filed a petition in the United States District Court for the District of Idaho, setting forth the bankruptcy proceedings then pending in the United States District Court for the District of Utah, and also setting forth the fact that suit had been brought in the state court of Idaho by Fitzgerald and West, against the canal company, for the appointment of a receiver, for the purposes set forth in the complaint in that suit. The petitioning trustee further alleged that Fitzgerald and West were by their suit in the state court attempting to secure preferences and advantages over other creditors of the bankrupt corporation, and were also seeking to compel the application and use of the assets of the estate to their own special benefit and advantage, and that it would be advisory and to the advantage of the estate that some suitable person be appointed ancillary trustee by the United States court, to act for and in connection with the petitioner in the administration of the estate. The trustee asked for an order to show cause against Fitzgerald and West, and their attorneys, why they should not be permanently enjoined from instituting or prosecuting any proceeding in the state court of Idaho against the trustee, or the bankrupt canal company, and that upon final hearing of such order the court designate and appoint some proper and suitable person as ancillary trustee in bankruptcy of the canal company.
On April 13, 1914, the United States District Court for the District of Idaho issued an order to show cause against Fitzgerald and West and their attorneys, and thereafter, and on April 17, 1914, Fitzgerald and West, through their attorneys, in response to the order to show cause filed their answer, wherein they admitted that they had commenced an action in the state court of Idaho against the canal company with the object of securing the appointment of a receiver to complete lateral No. 33 of the canal system of the bankrupt corporation, and to have the receiver authorized and directed to collect certain deferred payments from the water right holders in an amount sufficient for that purpose. They denied that the application of these deferred payments to the completion of the lateral would in any wise damage the creditors of the bankrupt estate, and, among other things, alleged that the deferred payments to the amount necessary to complete lateral No. 33 were not properly assets of the bankrupt estate. They therefore asked that no restraining order be made as prayed for in the petition filed by the trustee in bankruptcy, but that, if the court concluded that the deferred payments were assets of the estate and should be under the control of an ancillary trustee to be appointed by the court, then that the court treat their complaint filed in the Idaho state court as their petition for the appointment of such trustee, and that the relief prayed for therein be granted by the District Court for the District of Idaho, and that the ancillary trustee appointed by that court be directed to complete lateral No. 33, and that he be authorized to collect the deferred payments for that purpose. A hearing was had before the court below upon the petition for the order to show cause, the order to show cause, and the answer thereto, and on April 17, 1914, that court made and entered the following order:
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