Day v. Buckeye Water Conservation & Drainage Dist.

• Decision Date: 30 June 1925
• Docket Number: Civil 2428
• Citation: 28 Ariz. 466,237 P. 636
• Parties: GEORGE DAY, Appellant, v. BUCKEYE WATER CONSERVATION AND DRAINAGE DISTRICT and J. G. SCHWEIKART, A. F. LAFFERTY and S. LESLIE NARRAMORE, Constituting the Board of Directors of the BUCKEYE WATER CONSERVATION AND DRAINAGE DISTRICT, Appellees
• Court: Arizona Supreme Court

237 P. 636

28 Ariz. 466

GEORGE DAY, Appellant, v. BUCKEYE WATER CONSERVATION AND DRAINAGE DISTRICT and J. G. SCHWEIKART, A. F. LAFFERTY and S. LESLIE NARRAMORE, Constituting the Board of Directors of the BUCKEYE WATER CONSERVATION AND DRAINAGE DISTRICT, Appellees

Civil No. 2428

Supreme Court of Arizona

June 30, 1925

APPEAL from a judgment of the Superior Court of the County of Maricopa. Dudley W. Windes, Judge. Affirmed.

Mr Frank J. Duffy, for Appellant.

Messrs Kibbey, Bennett, Gust, Smith & Lyman, for Appellees.

OPINION

LOCKWOOD, J.

The Buckeye Irrigation Company, a corporation, is now and long has been the owner of an irrigation system, consisting of diversion works in the Gila River below the mouth of the Agua Fria and a canal system extending in a general westerly direction therefrom.

For many years some 16,000 acres of land have been irrigated from this canal. Under the articles of incorporation of the Company, each shareholder must own an acre of land for every share of stock he holds, and the stock is inseparably attached to the particular land served.

In the year 1922, a number of the stockholders desired to organize an irrigation and drainage district, for the purpose of improving their diversion and drainage works and the additional purpose of rounding out the project by including some 6,000 acres of land irrigable from the Buckeye Canal, but which was not at the time represented by stock in the canal, or receiving water therefrom. The district was duly organized according to law under the provisions of chapter 149 of the Session Laws of 1921, as modified by chapter 6 of the Session Laws of 1922 (Sp. Sess.), which last was apparently passed with this particular situation in view taking the name of Buckeye Water Conservation & Drainage District. Hereinafter in this opinion the Buckeye Irrigation Company will be called the Company and the Buckeye Water Conservation & Drainage District will be called the District.

On the 13th of October, 1923, the board of directors of the District and the Company entered into a certain agreement. It is extremely lengthy and we will not set it forth in full, but the substantial provisions are as follows: After reciting the facts that the District was organized to provide irrigation and drainage facilities for the land therein, and that the Company owned an irrigation system for the purpose of irrigating the 16,000 acres of land above referred to, with its capital stock appurtenant to the land, and that the District was organized for the purpose of irrigating all the land therein owned by the shareholders of the Company as well as the nonshareholders, it further states that it was necessary that the District acquire the use of the Company's irrigation and drainage work and improve the same. It proceeds to estimate the value of the Company's property at some $600,000 and the total cost of improving the same and purchasing it from the Company by the District at $1,600,000 stating it was not advisable to attempt to issue district bonds to that extent for purchasing the system as well as improving the same. It was then mutually agreed: First, that the District would, if possible, issue $1,000,000 worth of bonds, for the purpose of making the necessary improvements on the Company's property; second, that, if and when the bonds were issued, the improvements should be made on said property in accordance with a determined plan under the direction of both the Company and the District, and paid for out of the bond issue of the District; that the Company's indebtedness, then amounting to over $110,000, should also be paid therefrom, and the property of the Company as it existed at the commencement of said improvements be valued in a certain manner. The Company agreed, in return for this large expenditure of money, to divert from the Gila River all the water it could legally take for the irrigation of the land of the District, giving all the land therein equal service so far as it legally could. It further agreed to issue to all the owners of land who were not already stockholders, on their application therefor, stock to represent their land without further payment; it being agreed that the payment by the District above set forth was payment for the stock. The title to all of this property was to remain in the Company until the happening of one of several contingencies, with the proviso that, under any circumstances if the District took the title, it must pay for the property its appraised value, plus 8 per cent compound interest. The District further agreed to raise by taxation each year an amount sufficient to take care of its running expenses and its bonds, and in addition thereto 8 per cent interest on the estimated value of the Company for distribution among its original shareholders. There upon the District proceeded to adopt the plan in said contract as its general plan of proposed work under the law and file with the board of supervisors a map and list as provided by section 11(a), chapter 149, Session Laws of 1921, and secured from the state certification board an approval of the bond issue and the plans. Thereafter said bond issue was duly submitted to the voters of the District, and was defeated, whereupon the board of directors declared the result of the election in accordance with section 11(b), chapter 149, Session Laws of 1921.

On the 7th of October, 1924, the District and the Company entered into a supplementary agreement which was, in substance, as follows: After reciting the failure of the previous bond issue and a second attempt by the District to submit a modified proposition which had never been carried to completion, and a mass meeting of the land owners of the District which approved a bond issue of $200,000, it was agreed that the District should submit the bond issue for $200,000, which money should be used for opening up a new canal to make more safe the then existing head of the Company's system, and to pay some $100,000 of the Company's bonds, and that in return therefor the Company would carry water for the irrigation of all the District lands through its system as far as possible, but would not grant the same rates to nonshareholders as to shareholders. It further provided that the District might still buy the Company property at the appraised value, and that any time within five years from the date of the supplemental contract the Company might request the District to proceed under the original agreement and it would do so.

Thereafter the District postponed the adoption of the original general plans and set up a new general plan in accordance with the supplemental agreement. No new survey map, or list, was made, and filed with the supervisors, but the state board of certification approved the new plan and the proposed bond issue of $200,000, which was duly submitted to the electors of the District, and carried. Thereafter the bonds were advertised for sale and awarded to the First Securities Company of Los Angeles as the highest and best bidder, but before their delivery plaintiff herein, being the owner of land within the District not represented by stock in the Company, brought suit to enjoin the issuance of the bonds. He raises five objections to their validity, which we will consider as seems advisable.

The first and most serious objection is that the contracts and general plans above referred to violate provisions of section 7, article 9, of the state Constitution, which reads as follows:

"Neither the state, nor any county, city, town, municipality, or other subdivision of the state shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation, or become a subscriber to, ro a shareholder in, any company or corporation or become a joint owner with any person, company, or corporation, except as to such ownerships as may accrue to the state by operation or provision of law."

It must be conceded that, if the District is an "other subdivision of the state" within the meaning of section 7, supra, the bond issue is unconstitutional. It is inseparably united with a contract which provides for the purchase of stock in a private corporation with the funds of the District and its donation to individuals. Such a contract is plainly prohibited by the Constitution. But is the District such a "subdivision"? It is true that in Kinne v. Burgess, 24 Ariz. 463, 211 P. 573, we held an electrical district to be a political subdivision of the state within section 13, article 7, of the Constitution, and it is doubtless true that an irrigation district is also such a subdivision within the same section, and for the same reasons. Bond issues of any such district must be approved by the property taxpayers whose property is subject to the lien of the bonds.

We did not, however, pass upon the question raised herein, and it does not necessarily follow that either an electrical or irrigation district is within the term of section 7 supra. Constitutional limitations are necessarily broad and general in their terms, and must be construed in view of the surrounding circumstances and the evils they were designed to meet rather than according to the strict rules of interpretation of penal codes and contracts. This or a similar provision is found in the Constitution of nearly every state in the Union, and is the outgrowth of a situation extremely prevalent in the last half of the nineteenth century. As was well said by the Supreme Court of Montana in Thaanum v. Bynum Irr. Dist. et al., 72 Mont. 221, 232 P. 528, in construing a constitutional provision almost verbatim like ours, and its application to the purchase by an irrigation district of shares of stock in private water...