City of Bend v. Title & Trust Co.

• Decision Date: 01 July 1930
• Citation: 289 P. 1044,134 Or. 119
• Court: Oregon Supreme Court
• Parties: CITY OF BEND v. TITLE & TRUST CO.

289 P. 1044

134 Or. 119

CITY OF BEND v. TITLE & TRUST CO.

Supreme Court of Oregon

July 1, 1930

Department 1.

Appeal from Circuit Court, Multnomah County; Walter H. Evans, Judge.

Action by the City of Bend against the Title and Trust Company. From a judgment for defendant, plaintiff appeals.

Affirmed.

This is an action for money had and received to recover the sum of $15,000 paid by the plaintiff to the defendant pursuant to the terms of a contract dated January 29, 1925, which provided that in consideration of that amount of money the defendant would sell and convey to the city eleven second feet of the waters of the Deschutes river. Pursuant to the contract the defendant executed a proper conveyance; the plaintiff contends, however, that the title conveyed was defective, and that thus the consideration failed. The Circuit Court entered a judgment in favor of the defendant upon an order sustaining a motion for a nonsuit; the plaintiff appealed.

R. B Parsons, of Bend, and A. E. Clark, of Portland (Clark &amp Clark, of Portland, on the brief), for appellant.

Earl C Bronaugh, of Portland (Bronaugh & Bronaugh, Oswald West, and Denton G. Burdick, all of Portland, on the brief), for respondent.

ROSSMAN J. (after stating the facts as above).

Some time prior to the year 1925 the city of Bend became desirous of securing a supply of water for municipal purposes out of the flow of Tumalo creek. Since all of the water of that stream had already been appropriated by others, the officials of the city proposed to secure water from the Deschutes river and trade it for the desired quantity from Tumalo creek. January 29, 1925, the city and the defendant executed the following contract:

"Whereas, the party of the first part is desirous of securing at least eleven (11) second feet of water from the direct perennial flow of Tumalo Creek for municipal purposes, and

"Whereas, the Tumalo water so desired by the first party has been heretofore appropriated for irrigation purposes, and

"Whereas, it is necessary that other water which may be exchanged for said Tumalo water and used for said irrigation purposes be acquired by first party, and

"Whereas, the party of the second part holds title to thirty-three (33) second feet of the direct flow waters of the Deschutes River, said right being based upon what is commonly known as the Drake filing; and

"Whereas, the party of the second part is willing to dispose of said water;

"Now, therefore, in consideration of the provisions and conditions herein contained it is mutually agreed as follows:

"First. The party of the second part agrees to sell and the party of the first part agrees to buy, for the sum of Fifteen Thousand Dollars ($15,000.00), eleven (11) second feet of the perennial direct flow waters of the Deschutes River, said payment to be made as hereinafter provided.

"Second. The party of the first part shall pay for said water in cash, solely from funds derived from a bond issue to be voted by the people for the installation of a municipal water system for the City of Bend; it being understood and agreed that the first party shall be under no obligation to purchase said water in case said bond issue is not approved by the voters.

"Third. In the event said bond issue is approved by the voters, the purchase price of said eleven (11) second feet of water shall be due and payable whenever the party of the second part shall convey to the party of the first part an unencumbered title to the perpetual right to the use of said eleven (11) second feet of the direct flow of the waters of Deschutes River; together with a conveyance from the North Canal Company, warranting the right of the party of the first part to the perpetual use of the said eleven (11) second feet of the direct perennial flow of Deschutes River of priority date October 31st, 1900, delivery and measurement to be made at the intake on Deschutes River of the Deschutes County Municipal Improvement District, at or near the City of Bend, Oregon; it being understood and agreed that the first party shall receive an unqualified, unencumbered right to the perpetual use of eleven (11) second feet of the direct perennial flow of Deschutes River of priority date October 31st, 1900. * * *

"Fifth. It is further understood and agreed that legislative authority is necessary before the proposed exchange of water can be made, and that if Senate Bill No. 65 in its present form, be not enacted as a law during the present session of the legislature, then both parties shall be relieved of any obligation herein set forth. * * *"

The 1925 legislative assembly enacted chapter 53, L. 1925, which provided "that whenever the city * * * shall have acquired the right to appropriate or use from the Deschutes river at least eleven cubic feet per second of water for delivery into the feed canal belonging to Deschutes county municipal improvement district * * * said city shall be * * * authorized to take from the direct flow of Tumalo creek * * * not to exceed eleven cubic feet per second of water for the purpose of providing a supply of water for domestic and municipal purposes. * * *" The bond issue, mentioned in the above contract, was authorized by the voters, and on November 9, 1925, the city delivered to the defendant its warrants in the sum of $15,000, which were paid April 7, 1926. November 9, 1925, the defendant delivered to the plaintiff its bargain and sale deed, which described as the subject-matter of the conveyance the water rights mentioned in the contract, and at the same time the plaintiff received an instrument signed by the North Canal Company which contained the following warranties:

"And the said North Canal Company does covenant with the said City of Bend, Oregon, and its legal representatives forever, that Title and Trust Company is lawfuly seized in fee simple of the above described and granted premises, and has a valid right to convey same; that the said water is free from all incumbrances, and that North Canal Company will and its successors shall warrant and defend the title to said water and the perpetual use thereof with a priority as of October 31, 1900, to the said City of Bend, Oregon, its successors, assigns forever, against the lawful claims and demands of all persons whomsoever."

The plaintiff has not questioned the financial responsibility of the North Canal Company. After the city's transaction with the defendant, it purchased from others a supply of water from the flow of Tumalo creek. These circumstances lead us to infer that the city's failure to resort to the warranties executed by the North Canal Company was not due to any lack of financial worth of the latter.

Before the above instruments were delivered to the city both had been submitted to Mr. C. S. Benson, the municipality's attorney, and had been approved by him as to form. In the consummation of this transaction the city had the advice and counsel of the state engineer, as well as that of Mr. Benson. Due to the fact that the state engineer maintained test stations along the course of the Deschutes river, in the vicinity of Bend, data had been obtained from which it was possible to determine the quantity of water available for the satisfaction of the rights held by the defendant. The city attorney was especially familiar with the legal status and validity of these rights by reason of the fact that he was one of the attorneys who had participated in the litigation which, in the year 1921, culminated in a decree of the circuit court determining the priorities of the various filings for water rights in the Deschutes river. Mr. Benson advised the mayor and city council that in his opinion other individuals, who possessed water rights prior in point of time to those held by the defendant, were entitled to take from the river such large quantities of water that the rights held by the defendant were of doubtful merit. We quote from his testimony the following:

"I advised them against accepting those conveyances as a fulfillment and compliance with that contract * * * and they saw fit to ignore my advice. I am frank in making an acknowledgment, that purported statement on the bottom * * * signed by myself, approves as to form * * * but my position on that was this, I made it plain to the Council, that while so far as they went those two exhibits were satisfactory as to form, in this, that they complied with the memorandum of agreement there which had been executed by the City, they were approved to that extent, that is to say, that they carried out the conditions of the memorandum of agreement, to that extent they were approved. But as to being in compliance with either the letter or spirit of that contract, I made no such approval * * * they don't as I told the Council there in your presence, that until they showed us that they had a title to convey, a proper title, and such a title as we have stipulated for, I withheld my approval of the issuance of these warrants. * * *"

Before the city received the deeds its officials knew that the Tumalo board would not accept the title which the defendant possessed; in fact, the municipal officers received that information from the Tumalo board when they attended their first meeting with the latter in April or May of 1925. At subsequent times the Tumalo board voiced objections to the title which the defendant held. After the city obtained the conveyance from the defendant and the warranties of title from the North Canal Company it sought to effect an exchange with the Tumalo board, but the latter promptly declined to do so for the reasons just indicated. October 22, 1926, almost a year after the defendant made its conveyance to the city, the latter notified the defendant that the title to the water...