Hale v. McCammon Ditch Co.

• Decision Date: 15 November 1951
• Docket Number: No. 7737,7737
• Citation: 244 P.2d 151,72 Idaho 478
• Parties: HALE et al. v. McCAMMON DITCH CO.
• Court: Idaho Supreme Court

Page 151

244 P.2d 151

72 Idaho 478

HALE et al. v. McCAMMON DITCH CO.

No. 7737.

Supreme Court of Idaho.

Nov. 15, 1951.

On Rehearing May 8, 1952.

Merrill & Merrill, Pocatello, for appellant.

B. W. Davis, L. F. Racine, Jr., and R. H. Jones, all of Pocatello, for respondents.

KEETON, Justice.

Plaintiffs (respondents), some of the stockholders of the McCammon Ditch Company, a corporation, brought this action against the company to secure a restraining order to restrain defendant from selling shares of stock of plaintiffs for alleged failure to pay assessments thereon, and for a determination of the rights, liabilities and duties of the parties in connection with the maintenance of the irrigation project; to determine what assessments should be made against the stock, and to compel the corporation to keep in good repair all of the ditches, canals and laterals of the entire irrigation system, and for that purpose to assess as maintenance charges an equal and uniform assessment against all shares of stock of the corporation.

Appellant (defendant) is the owner of the right to divert from the Portneuf river 68.95 cu. ft. of water per second for the irrigation of 2447.57 acres of land owned by its shareholders; and is the owner of the main canal approximately three miles in length. From the main canal water is taken into ditches and laterals leading therefrom. The appellant secured its rights by a deed dated June 28, 1901 from the then owners of the water right--the water users prior to that time having operated as an association.

From the main canal, admittedly owned by the appellant company, there are ten laterals carrying water to the various land owners holding stock in the corporation. These were constructed by individuals over and upon their own land leading to and from the main canal. Some laterals were constructed prior to the time the appellant acquired the system, others subsequent to that time. Laterals were constructed by some of the stockholders carrying water from other laterals, and water is delivered over the land of some of the stockholders from these laterals. Some stockholders receive water direct from the main canal.

From the inception of the development of the project, the stockholders receiving water delivered into the laterals from the main canal maintained the laterals at their own expense and received their respective shares of water measured to them from an intake connected with the main canal.

This method of maintaining the irrigation system continued in effect to the year 1929. A dispute then arose among the lateral water users as to who was responsible for the maintenance of the lateral canals. Some lateral water users did not furnish labor or pay their proportional part for the maintenance of the ditches and laterals. In order to provide a plan for the management and upkeep of the ditches and laterals, a majority of the stockholders taking water from the laterals executed and delivered to the corporation what was designated a unilateral agreement in which a majority of such lateral water users, owners and stockholders using the water, appointed and authorized the Board of Directors of the McCammon Ditch Company as manager of such laterals for the year 1929, and subsequent years, or until the power was revoked by a majority of the subscribing stockholders, said agreement being as follows:

'Unilateral Agreement'

'We, the undersigned who received water from the McCammon Ditch Company which said water is distributed to us from the company's main canal into that certain lateral owned by us and which extends from (description) to ________ hereby authorize, appoint, select and direct The Board of Directors of McCammon, Bannock County, Idaho, as managers of such lateral for the year 1929, with all the power to do each and everything necessary and requisite for the orderly distribution of the water through said lateral and for the maintenance and repair of said lateral hereby agreeing to pay, upon demand, our pro rata share for work and labor done and materials, if any bestowed upon said lateral or used in the distribution of said water.

'Dated this 1st day of April, 1929.

'This contract to be in force until revoked by a majority of stockholders of said lateral.

'Signatures'

Forty-four stockholders signed this or a similar agreement.

Subsequent to 1929 other laterals were constructed by water users and appellant continued to deliver water to the lateral water users measured at the intake in the main canal, and performed the necessary labor, maintained the lateral canals, and charged the respective land owners their pro rata part of the cost and upkeep, the amount charged depending on the upkeep expense necessarily incurred during the year in which the charge was made. This arrangement continued through the year 1946.

In November 1947, the Board of Directors of the corporation made a blanket assessment upon all shareholders of defendant for the repair and maintenance of the canal and all laterals. In other words, a blanket assessment covering all expense of the maintenance and upkeep of the main canal or system, and all laterals, thus requiring all the stockholders to share in the expense whether they were benefited by the water distributed by means of the laterals or not, and not considering whether the corporation owned, as part of its system, all laterals through which the water was distributed.

In November 1948, the resolution imposing such blanket assessment against the stock was disapproved and the Board of Directors reverted to the original plan of managing the laterals and distributing the water therefrom, and levied the maintenance cost under the plan formerly adhered to (1929 to 1946).

By this assessment (November 1948) stockholders and water users securing water from the laterals were assessed a greater amount than those who took water from the main canal, and the lateral water users were assessed different amounts depending on the cost of maintenance of the laterals from which the particular stockholders received water. Thus water users taking water from the main canal were assessed $3.75 a share, and the lateral water users, in addition to this amount, were assessed sums varying in amount from $1.21 a share to $10.72 a share. Thus the assessment for maintenance of the irrigation system was not equally or ratably levied on all shares of stock of the company.

This action was then brought by some of the lateral water users to enjoin the collection of the assessment on any basis other than a blanket assessment, that is, equally against all shareholders in proportion to the number of shares owned, the assessment to include the expense of maintenance of the lateral ditches; and further sought to compel the appellant to absorb the transmission losses of water from the intake of said laterals from the main canal to the land upon which the water was used.

Defendant (appellant) in its answer denied ownership of the laterals and alleged that the method of collecting upkeep and cost, and the distribution of the water had been recognized by all the shareholders of the company from the beginning of the canal operations to and through the year 1946.

By way of counterclaim appellant sought judgment against the respondents for the amounts owed by each of them for assessments imposed for work on the laterals pursuant to the unilateral agreement above.

The court found that the appellant was the owner of the main canal and all laterals and that the assessment made for the year 1948 against the stockholders of the corporation was not equally or ratably levied and was illegal, and did wrongfully place a burden on the shares of stock of respondents greater than on other shares of stock of said corporation; and further, that the respondents are entitled to the delivery of water to them and each at a point most convenient where the least waste by evaporation and seepage will occur.

In the judgment the court enjoined the sale of the respondents' stock, holding that the assessment was not ratably or proportionately made and that the respondents were not required to pay by means of stock assessment, or otherwise, for the extra work performed on the upkeep and maintenance of the laterals involved, and further required a pro rata assessment to be based upon the amount of the corporate stock owned by each shareholder; and further decreed the assessment of 1948 void and permanently enjoined levying or attempting to levy an equal disproportionate assessment against the stock.

From the judgment appellant prosecutes this appeal.

Twenty-seven separate assignments of error are made which present generally the legal questions herein discussed.

The appellant asserts the right to make an unequal assessment against the stock in 1948 by virtue of extra work done and material furnished in the upkeep and repair of the lateral irrigation ditches. Nowhere in the unilateral agreement above referred to is the stock of the signers pledged for the payment of this extra work, and none of the signers of said agreement by its terms, or otherwise, agreed that payments to the company for such extra work and upkeep could be collected by an assessment against the stock so held by the signers. By the terms of the unilateral agreement, the water users agreed 'to pay, upon demand, our pro rata share for work and labor done and materials, if any, bestowed upon said lateral where used in the distribution of said water'.

The company having performed the work and furnished the materials contemplated by said agreement, would have a claim on contract against the signers for such work, labor and material, but the same could not be collected by an assessment levied against the stock.

Assessments against the stock made to maintain the system owned by the company, as distinguished from extra work and upkeep on privately owned laterals, would have to be uniform and in ratable amounts, and a call which requires some...