Childs v. Neitzel

• Decision Date: 21 January 1914
• Citation: 141 P. 77,26 Idaho 116
• Parties: C. C. CHILDS et al., Respondents, v. N. J. NEITZEL et al., Appellants
• Court: Idaho Supreme Court

141 P. 77

26 Idaho 116

C. C. CHILDS et al., Respondents, v. N. J. NEITZEL et al., Appellants

Supreme Court of Idaho

January 21, 1914

IRRIGATION PROJECT-PROMOTION OF-CONSTRUCTION OF SYSTEM-WATER CONTRACTS-CONSTRUCTION OF-ASSIGNMENT OF-RIGHTS OF PARTIES-COMPLETION OF SYSTEM-MORTGAGEE-ASSIGNEE-RIGHTS OF-CONSTITUTIONAL LAW.

1. Where a company is incorporated for the promotion of an irrigation scheme and to construct an irrigation system consisting of reservoirs, dams and ditches, and such corporation enters into contracts with persons having land within such project to furnish them water at an agreed price per acre, divided into annual payments with interest on deferred payments, and agrees to complete such system within a certain time and furnish the purchasers of water rights with water, and agrees to turn such system over to such purchasers of water rights after its completion, and thereafter mortgages its interest in such system and water right and also assigns such water right contracts as security for borrowed money, which money is used in the construction of such system, held, that the person loaning the money only acquires such rights and interest as the irrigation company has in such project and such water right contracts, and cannot collect the payments that become due after the time has expired for the completion of such irrigation system and the delivery of water until the said system is completed and the water delivered in accordance with the terms of the water right contracts.

2. Under the provisions of said water right contracts, the Murphy Land & Irrigation Company agreed to complete said irrigation system and turn the same over to the purchasers of water rights within a specified time, and the Murphy company was not the trustee or agent of the water right purchasers for the construction of said system:

3. Neitzel, who loaned the money to said Murphy Land &amp Irrigation Company and took a mortgage and an assignment of said water contracts as security for the payment of the money so loaned, did not become an insurer for the Murphy company to the water right claimants that said system would be completed and the water furnished as provided by said contracts, but acquired no other right than that which the Murphy Irrigation Company had in the collec- tion of deferred payments provided for by said contracts, and cannot enforce the collection of such payments and apply the same on his mortgage debt until said system has been completed and turned over to the water right purchasers as provided by such contracts.

4. The fact that the purchasers of such water rights authorized the Murphy company to assign them does not estop them from setting up as a defense against the payment thereof that said system has not been completed as required by said contracts.

5. Mortgagees or assigns of irrigation project corporations can acquire no greater interest in such project or water right contracts connected therewith than such corporations have.

6. Sec 15 of art. 11 of the state constitution prohibits the legislature from passing any law which would permit the leasing or alienation of any franchise so as to release or relieve such franchise or property held thereunder from any liabilities of the lessor or grantor or lessee or grantee, contracted or incurred in the operation, use or enjoyment of such franchise or any of its privileges.

7. Under the provisions of sec. 2 of art. 15 of the constitution, the right to collect rates or compensation for the use of water is a franchise and cannot be exercised except by authority of and in the manner prescribed by law.

8. Sec. 1 of art. 15 provides that the use of all water now appropriated or that may hereafter be appropriated for sale, rental or distribution is a public use, subject to the regulation and control of the state in the manner prescribed by law.

9. The Murphy Land & Irrigation Company is a public service corporation.

APPEAL from the District Court of the Third Judicial District, in and for Ada County. Hon. Carl A. Davis, Judge.

Action to determine the rights of the several parties under certain water right contracts. Judgment for the intervenors. Affirmed.

Judgment affirmed, with costs of this appeal in favor of the respondent intervenors.

Davidson & Davidson and Richards & Haga, for Appellants.

The record conclusively shows that the land owners had full knowledge that the only assets of the defendant company consisted of the proceeds to be derived from the payment of the amounts due on water contracts, that such payments were to be made from year to year until December, 1916, and that such company having no other assets, it was a matter of absolute necessity to use these contracts to borrow money with which to commence construction, and it was necessary and the respondents did consent to the use of such contracts as collateral security for the money so to be borrowed by the defendant company as the owner thereof, and the defendant company and the defendant Neitzel having advanced the money for this purpose on the faith of these contracts as collateral security, the respondents will not be permitted to repudiate such ownership by the defendant company for the purpose intended. (Hill v. Wand, 47 Kan. 340, 27 Am. St. 288, 27 P. 988; First Nat. Bank v. Kissare, 22 Okla. 545, 132 Am. St. 644, 98 P. 433.)

This is an equitable action, and he who induces another to his injury to act on a given state of facts will not be permitted to repudiate such facts. (2 Pom. Eq. Jur., sec. 804; Illinois Trust & Savings Bank v. City of Arkansas, 76 F. 271, 293, 22 C. C. A. 171, 34 L. R. A. 518.)

One who by act intended to influence the conduct of another and thereby lead him into a line of conduct prejudicial to his interests is estopped from a retraction of such act. (Leland v. Isenbeck, 1 Idaho 469; Lane v. Pacific & I. N. R. Co., 8 Idaho 230, 67 P. 656; Marysville Mercantile Co. v. Home Fire Ins. Co., 21 Idaho 377, 121 P. 1026; Lick v. Munro, 8 Idaho 510, 69 P. 285; Brigham Young Trust Co. v. Wagener, 12 Utah 1, 40 P. 764; Branson v. Wirth, 17 Wall. (U.S.) 32, 21 L.Ed. 566; Dickerson v. Colgrove, 100 U.S. 578, 25 L.Ed. 618; The Ottumwa Belle, 78 F. 643.)

Hawley, Puckett & Hawley, for Respondents, file no brief.

Karl Paine and C. E. Winstead, for Intervenors, cite no authorities.

SULLIVAN, J. Ailshie, C. J., and Budge, District Judge, concur.

OPINION

SULLIVAN, J.

This action was brought by C. C. Childs against N. J., R. E. and H. R. Neitzel, W. D. McReynolds and H. A. Toole, directors of the Murphy Land & Irrigation Co., and the Murphy Land & Irrigation Company, for the purpose of ousting said Neitzels, McReynolds and Toole from the office of directors of said company and to have the offices of president, vice-president, secretary and treasurer declared vacant, and to have a certain mortgage executed by said corporation in favor of H. R. Neitzel declared void and for other relief, and for the appointment of a receiver to take charge of the property of said corporation.

The answer put in issue many of the material allegations of the complaint. This action was based upon the ownership of 2,000 shares of the capital stock of the defendant corporation by said Childs and not upon a contract for a water right.

Upon the trial of the case the lower court granted Childs certain relief prayed for by him and an accounting, but before the findings in the case were filed, Childs waived an accounting, owing to the insolvency of the corporation and the refusal of certain intervenors to assume the major part of the expense of an accounting before a referee. Childs did not appeal from the judgment entered and is only a nominal party in this court, and it appears from the record that the rights of appellant H. R. Neitzel are alone before this court for consideration, so far as appellants are concerned.

A complaint and an amended complaint in intervention were filed in said action, and it is alleged in the amended complaint that the intervenors are holders of certain contracts for water rights under the said Murphy Land & Irrigation Company project, and are the owners and in the possession of more than 3,500 acres of land under said project, which lands intervenors have settled upon and improved at great expense and labor and upon which they and their families are dependent for support. A copy of said water contracts is attached to said complaint in intervention and made a part thereof. The contracts, so far as the covenants and agreements contained therein are concerned, are all the same.

The defendant corporation entered into such agreements with the intervenors and divers other persons, wherein it contracted to construct a certain irrigation system in Owyhee county known as the Murphy project, and to sell to said intervenors and such other persons shares of water appropriated and impounded by it, also certain rights in and to the irrigation system itself. Among other things said contracts contain the following stipulation:

"Each of such shares [of water] shall represent a carrying capacity in said canal sufficient to deliver water at the rate of one-eightieth of one cubic foot of water, per acre, per second of time, or in lieu thereof, in event the company shall hereafter elect to distribute the waters flowing and to flow in its canals by a system of rotation, then the company agrees to deliver to second party under such rotation system a quantity of water equivalent thereto in service."

The contract also provides that all dams, reservoirs, head gates conduits, canals, laterals and other works for the diversion of water shall, at the discretion of the defendant corporation, be and remain its sole property until such time as the said irrigation system shall have been...