Grand Valley Irr. Co. v. Fruita Imp. Co.

• Citation: 37 Colo. 483,86 P. 324
• Parties: GRAND VALLEY IRR. CO. v. FRUITA IMP. CO.
• Decision Date: 02 April 1906
• Court: Supreme Court of Colorado

86 P. 324

37 Colo. 483

GRAND VALLEY IRR. CO. v. FRUITA IMP. CO.

Supreme Court of Colorado

April 2, 1906

On Rehearing, July 2, 1906.

Appeal from District Court, Mesa County; Thereon Stevens, Judge.

Action by the Fruita Improvement Company against the Grand Valley Irrigation Company. From a judgment for plaintiff, defendant appeal. Affirmed in part, and in part reversed and remanded.reducing the assessment was in effect the making of a new assessment not affected by the judgment holding the previous assessment invalid.

Chas. F. Caswell, for appellant.

John P Brockway, for appellee.

CAMPBELL J.

The complaint in this action, brought by the Fruita Improvement Company, as plaintiff below, against the Grand Valley Irrigation Company, appellant and defendant below, contained two causes of action. The second cause of action is based upon a breach by the defendant of a contract whereby it promised to pay $1,900 for professional services rendered by John P. Brockway, an attorney, whose cause of action thereon was assigned to the plaintiff. By the first cause of action plaintiff sought to recover of the defendant company the sum of $10,000 damages sustained as the result of an unauthorized sale by the defendant of 1,750 shares of the defendant's capital stock which the plaintiff owned. In the district court there was a judgment for the plaintiff upon the two causes of action in the aggregate sum of $5,397.01, of which $4,825.36 was on the first cause of action and $571.65 on the second.

1. No prejudicial error of the trial judge or jury affecting the second cause of action has been called to our attention. The judgment thereunder will be affirmed.

2. The judgment which the plaintiff recovered under the first cause of action, however, cannot be sustained. The most important question involved in this appeal concerns a ruling of the trial court in the plaintiff's favor that the matters sought to be litigated in this action by the defendant are res judicata by a decree in a former action between the same parties. It becomes necessary, therefore, to state fully the contents of the pleadings in both actions, the evidence which the court admitted, and the rejected offer of proof made by the defendant in the pending action. It appears from both complaints that the defendant irrigation company was organized for the purpose of acquiring water rights and canals, and with the irrigation system thus acquired to supply water for irrigation to its stockholders. Under its charter and by-laws it was not a common carrier of water, did not have the power to make contracts to sell or rent water or to carry for hire, or for any purpose whatever, except to its own stockholders. Its board of directors had the power in January of each year to levy an annual assessment, the proceeds of which could be used only for paying interest on the company's bonded indebtedness and the cost of the maintenance and operation of its canals and ditches for the current year. Provision existed, also for assessments for the same purpose at other, or subsequent times during the year. When an annual assessment is levied, the secretary of the company is required to notify the stockholders of the same, and of the time and manner of paying, by depositing in the post office a suitable notice to the several stockholders, and making publication thereof in some newspaper published in the town of Grand Junction for the period of one week. If any stockholder fails to pay after such notice, the company may resort to one of three methods for compelling payment: First, by refusing to supply him with water; second, by bringing suit in court to recover the amount of the assessment; third, by selling the delinquent stock to the highest bidder after a specified publication of notice of sale. By another by-law each share of stock entitles its holder to receive five-sixteenths of a statute inch of water at any point along the line of defendant's canal as the same was originally built, to be delivered under such regulations as the board of directors prescribes. Each stockholder is also entitled to have water delivered to him not only at any point along this original line, but also on any land lying north or west of a certain ravine into which the company's ditch, as first constructed, emptied. But, if water is delivered at such point beyond the end of the original canal, the stockholder who demands it must pay to the company, in addition to the usual assessment, whatever extra cost is incurred in making such delivery.

In the original complaint filed in February, 1901, as well as in the complaint herein which was filed December 31, 1901, the foregoing facts are recited; and in the later complaint it is further alleged that, in such former action between the same parties in the same court wherein the Fruita Company was plaintiff and the Grand Valley Company defendant, a hearing was had upon the matters then in issue which resulted in a final decree in plaintiff's favor. In that injunction suit, as appears from the complaint therein, it was alleged that the Grand Valley Company had entered into a contract with the Colorado Sugar Manufacturing Company, one of its stockholders, for the delivery of 2,000 inches of water at $2.50 per inch, 1,000 inches of which was to be delivered during the year 1901 for the aggregate sum of $2,500, which contract, it was alleged, was ultra vires the company, in direct contravention of its charter and by-laws hereinabove referred to. The complaint charged that the Grand Valley Company, under its charter and by-laws, could not make any extension of its ditch, or deliver any water beyond the end of its originally constructed canal to any of its stockholders, at the expense of the company itself, or of the other stockholders, but the same could be made only upon the payment by the sugar company, a stockholder, of the entire cost thereof; that the sum of $2,500 was not sufficient therefor, but the cost would be at least $10,000. In order that the Grand Valley Company might carry out that contract, it was charged that its board of directors on January 28, 1901, had made an annual assessment upon its stock of 80 cents per share, which was three or four times as large as it ought to be to meet its regular expenses. The object of this illegal contract was said to be to induce the sugar company to retain its factory at Grand Junction, and its effect would be to make a present by the Grand Valley Company to the sugar company of about $10,000 at the expense of the stockholders of the former, and without any corresponding benefit to them. Because of the irreparable damage which the defendant company and its stockholders would sustain if such illegal contract was carried out, plaintiff, as a stockholder, prayed that the Grand Valley Company be perpetually enjoined from performing its part thereof, and that any assessment which its board of directors had theretofore levied, or might thereafter levy, for the purpose of delivering water to the sugar company at and for the price named, or for any other price except the full and actual cost thereof, be enjoined, and that the 80 cents assessment previously levied be declared void, and that defendant company be enjoined from delivering water to the sugar company beyond the end of its original canal system, unless the sugar company paid all the extra costs and expenses which an enlargement and improvement of the canal for such purpose would entail, and general relief was prayed for. Issues were joined upon this complaint, and a hearing had resulting in findings for the plaintiff, and on March 7, 1901, the court entered a decree which, as it is material here, we quote in full: 'Now, therefore, the court doth order, adjudge, and decree that the said defendants be, and each of them are, perpetually, enjoined from in any manner carrying out the contract (so called) mentioned in the complaint and pleadings herein; and that the defendants. Other than the Colorado Sugar Manufacturing Company, be perpetually enjoined and restrained from levying, or collecting, any assessment or assessments upon the stockholders of the Grand Valley Irrigation Company for the purpose of delivering, or undertaking to deliver, water out of the end of its canal system, or in accordance with the contract with the Colorado Sugar Manufacturing Company * * * in the pleadings in this cause.' This decree has never been appealed from and remains in full force and effect, and as to all matters and things set forth in the complaint in the injunction suit, which has been above summarized, the same, plaintiff says, have become and are res judicata as between the parties to the present action.

The complaint herein then proceeds by alleging that, after the rendition of such decree in the injunction suit, the defendant Grand Valley Company undertook to enter into another contract with the sugar company exactly similar to the former one, except that the sum to be paid by the sugar company for the delivery of 1,000 inches of water during the year 1901 beyond the end of the defendant's canal system was fixed at $6,000, instead of $2,500, as in the first contract, and that such action of the ditch company is in violation of the previous injunction decree and contrary to the provisions of the defendant's by-laws; but, notwithstanding this fact, the ditch company has begun the work of enlarging its canal, so that it may deliver for $6,000 the 1,000 inches of water to the sugar company under the second contract. That the defendant company, acting under its by-laws, had made, during the previous January, one assessment of 80 cents per share upon its capital stock for the legal purpose of carrying out the first, or $2,500, contract already mentioned, and which was the...