Glavin v. Salmon River Canal Co., Ltd.

• Decision Date: 02 May 1924
• Parties: R. GLAVIN, G. A. SALEE, C. L. MCFARLAND, BERYL KUNKEL, J. E. POHLMAN, A. E. CALDWELL, C. W. STRICKLING, R. A. CARTER, ALBERT HOLMQUIST and ORVILLE E. PARROTT, in Their Own Behalf and in Behalf of All Persons Similarly Situated With Them, Respondents, v. SALMON RIVER CANAL COMPANY, LTD., a Corporation, and ROBERT RAYL, Appellants. J. E. CLINTON, Intervenor and Appellant
• Court: Idaho Supreme Court

226 P. 739

39 Idaho 3

R. GLAVIN, G. A. SALEE, C. L. MCFARLAND, BERYL KUNKEL, J. E. POHLMAN, A. E. CALDWELL, C. W. STRICKLING, R. A. CARTER, ALBERT HOLMQUIST and ORVILLE E. PARROTT, in Their Own Behalf and in Behalf of All Persons Similarly Situated With Them, Respondents, v. SALMON RIVER CANAL COMPANY, LTD., a Corporation, and ROBERT RAYL, Appellants. J. E. CLINTON, Intervenor and Appellant

Supreme Court of Idaho

May 2, 1924

CAREY ACT-WATER CONTRACTS-SETTLERS' CONTRACTS-SECRETARY OF THE INTERIOR-STATE LAND BOARD-REDUCTION OF ACREAGE OF IRGATION PROJECT - RELINQUISHMENT BY STATE - VESTED INTEREST IN WATER RIGHT-SALE AND TRANSFER OF WATER RIGHT-BONDS-BONDHOLDERS - TRUSTS-TRANSFER OF STOCK-INJUNCTION-NONJOINDER OF PARTIES-RECORD-DEMURRER.

1. Where the record is silent as to the action of the court upon a demurrer, the demurrer will be deemed to have been waived.

2. Where the acreage of a Carey Act project is reduced on account of insufficient water supply, settlers owning water rights within the excluded area are not deprived of their rights by such reduction of acreage but have a vested right in such water rights, and the same are property subject to sale by the owners and subject to be transferred to lands within the retained area.

3. Where such rights are evidenced by shares of stock in the operating company and the same are purchased by persons other than the operating or construction company and sold to settlers within the restricted area, and such shares of stock are presented to the operating company with a request that the same be transferred and a new certificate issued to the purchaser, the operating company has authority and is required to make such transfer upon its books and to issue a new certificate to the purchaser for the number of shares represented by the old certificate in lieu thereof.

4. The mere fact that bonds of a construction company of a Carey Act project, used in whole or in part in the construction of an irrigation system, were purchased by certain bondholders who formed a bondholders' committee for their protection, and such committee purchased vested water rights dedicated to land which had been excluded from the project, does not constitute the bondholders or the bondholders' committee trustees of such water rights for the benefit of settlers within the retained area.

5. An owner of a water right by purchase or original appropriation may sell the water right separate and apart from his land.

APPEAL from the District Court of the Eleventh Judicial District for Twin Falls County. Hon. T. Bailey Lee, Judge.

Action for injunction to restrain transfer of stock and delivery of water. Judgment for plaintiffs. Reversed.

Judgment of the lower court reversed. Costs awarded to appellants. Petition for rehearing denied.

Jas. R Bothwell and Richards & Haga, for Appellant Salmon River Canal Co.

The excluded settlers had vested water rights. (Sanderson v Salmon River Canal Co., 34 Idaho 145, 199 P. 999.)

Their water rights were property which under the laws of Idaho could be transferred and sold. (Sanderson v. Salmon River Canal Co., supra; Village of Hailey v. Riley, 14 Idaho 481, 95 P. 686, 17 L. R. A., N. S., 86; Bennett v. Twin Falls etc. Co., 27 Idaho 643, 150 P. 336.)

Turner K. Hackman, for Appellant Rayl.

The demurrer of the defendant, Robert Rayl, should have been sustained because of lack of proper parties defendants, it being shown that over 200 land owners within the patented area hold one and five-sevenths shares of stock to each irrigable acre owned by them, and none of these other parties are before the court. (Sanderson v. Salmon River Canal Co., 34 Idaho 145, 199 P. 999; Colorado Milling & Elevator Co. v. Larimer et al., 26 Colo. 47, 56 P. 185; Beasley v. Shively, 20 Ore. 508, 26 P. 847; State v. Guilbert, 56 Ohio St. 575, 60 Am. St. 766, 47 N.E. 551, 38 L. R. A. 519; Hobbs v. Twin Falls Canal Co., 34 Idaho 380.)

"This vested right to the use of the water may be sold and transferred, either with or separate from the land on which it ripened, or changed to other lands, and does not depend upon the point of diversion, the place of application the conduit, or the character of the use." (Sanderson v. Salmon River Canal Co., supra; Arnold v. Roup, 61 Colo. 316, 157 P. 206; Village of Hailey v. Riley, 14 Idaho 481, 95 P. 686, 17 L. R. A., N. S., 86; Bennett v. Twin Falls etc. Co., 27 Idaho 643, 150 P. 336.)

John W. Graham, H. C. Mills and A. A. Fraser, for Respondents.

The individual settlers knew from the terms of the state contract and their individual contracts that all water rights upon this segregation were equal as to amount and priority, and having this knowledge the bondholders' committee could not purchase the outstanding water rights which should be distributed equitably over the segregation. (Whitehorn v. Cranz, 20 Neb. 398, 30 N.W. 406.)

The bondholders having purchased these outstanding water rights to protect their security and comply with the demand of the state and federal authorities that all the available water supply should be applied to the 35,000 acres, cannot claim adversely to the settlers' outstanding rights, but having elected to do so they held them in trust for the settlers upon the 35,000 acre tract. (Shepherd v. Vincent, 38 Wash. 454, 80 P. 779; Hall v. Westcott, 15 R. I. 373, 5 A. 631; Savings & Loan Soc. v. Davidson, 97 F. 696, 38 C. C. A. 365.)

BUDGE, J. McCarthy, C. J., and William A. Lee and Wm. E. Lee, JJ., concur.

OPINION

BUDGE, J.

This action was brought by respondents in their own behalf and in behalf of all persons similarly situated, seeking an injunction to restrain appellant, Salmon River Canal Company, Ltd., from delivering water through its canal system to the settlers receiving water therefrom, in a manner and by a method which it is claimed will result in a discrimination in favor of certain settlers and to the injury and detriment of respondent and all other settlers similarly situated.

From the record the following facts appear: In August, 1907, the state, through its State Board of Land Commissioners, made application to the Secretary of the Interior to segregate, under what is commonly known as the "Carey Act" and acts amendatory thereof and supplemental thereto, 127,707.29 acres of arid lands. The application contemplated the reclamation and irrigation of these lands from the surplus and unappropriated waters of Salmon River, by means of a reservoir to be constructed in Salmon River, the same to have a capacity of 180,000 acre-feet, from which water was to be conveyed and distributed to the lands by an adequate irrigation system. On or about April 10, 1908, the Secretary of the Interior duly segregated the said 127,707.29 acres of arid lands, the same to be irrigated and reclaimed in the manner set forth in and contemplated by the application, such irrigation system to be constructed by or under the supervision of the state of Idaho.

On April 30, 1908, the Twin Falls Salmon River Land & Water Company, a Delaware corporation, sometimes referred to as the "construction company," entered into a contract with the state of Idaho, through its State Board of Land Commissioners, to construct the reservoir and irrigation system and immediately thereafter commenced work thereon. By the terms of the contract the construction company agreed to sell to persons filing upon lands susceptible of irrigation from the system, by a good and sufficient contract of sale, with right of possession and enjoyment by the purchaser pending its fulfillment, a water right or share in said canal for each and every acre filed upon or purchased from the state or acquired from the United States. Each of said shares or water rights was to represent a carrying capacity in the canal system sufficient to deliver water at the rate of one hundredth of one cubic foot per second of time per acre and to represent a proportionate interest in the canal and irrigation system together with all rights and franchises therein, based upon the number of shares finally sold in said canal. It was further stipulated that the price per share should not exceed $ 40. The contract further provided that a corporation should be organized to take over the management and operation of the system, to be known as the Salmon River Canal Company, Limited, such corporation to be capitalized upon the basis of one share of stock for each acre of land to be irrigated from the system; that entrymen or purchasers were to receive, as evidence of their respective interests in the system, one share for each acre entered or filed upon, susceptible of irrigation from the system, and that water available for distribution should be distributed in accordance with the stock held in such corporation by entrymen or purchasers. The appellant corporation, sometimes known as the "operating company," was organized in pursuance of such state contract. The contract also provided that the operating company should be organized before any water rights were sold and that shares should be issued in that company as evidence of the amount of water to which the land owner was entitled, and this procedure was carried out by the construction company in the sale of water rights to settlers.

The state of Idaho, through its State Board of Land Commissioners, in the exercise of its supervisory powers, adopted and approved a form of contract to be used by the construction company for the transfer of shares or interest in the system, in which it was provided that the entrymen or purchasers should pay $ 40 for each share or interest. These contracts are commonly known as "settlers' contracts."

The respondents, their assignors or predecessors in interest made application to said construction company for the...