Hall v. Eagle Rock And Willow Creek Water Company

• Decision Date: 01 December 1897
• Citation: 5 Idaho 551,51 P. 110
• Parties: HALL v. EAGLE ROCK AND WILLOW CREEK WATER COMPANY
• Court: Idaho Supreme Court

51 P. 110

5 Idaho 551

HALL v. EAGLE ROCK AND WILLOW CREEK WATER COMPANY

Supreme Court of Idaho

December 1, 1897

IRRIGATION-CONSTRUCTION OF CANAL-DISTRIBUTION OF WATER.-Where a corporation organized for the purpose of constructing a canal to be used for the distribution of water for irrigating purposes, upon the lands of the stockholders in such corporation, whose stock, as shown by its certificates, represents five inches of water to each share of stock, and whose articles of incorporation provide for the assessment of paid-up stock, when authorized by a three-fourths vote of all the stockholders, it is proper and legal for such assessments to be made, and the collection thereof enforced under the provisions of the statute.

SAME-ORGANIZATION OF CANAL CORPORATION.-Where a corporation organized for the purposes above set forth has, for a period of eight years conducted its business, made assessments, and collected the same as provided by title 4 of the Revised Statutes, which action of the corporation has been recognized and acquiesced in by all of the stockholders, the corporation will be deemed to have adopted the provisions of title 4 of the Revised Statutes, although the filing of the certificate indicating its election so to do has not been made.

SECTION 2609 OF THE REVISED STATUTES CONSTRUED.-The provisions of section 2609 of the Revised Statutes as amended by the act of 1891, applies only to the personal liability of stockholders.

(Syllabus by the court.)

APPEAL from District Court, Bingham County.

Reversed, with costs.

F. S Dietrich, for Appellant.

The defendant company was organized in Idaho in 1884, and is in form a corporation; that is to say, it is one of a large class of companies existing in southern Idaho where agricultural lands are artificially irrigated, organized not for profit, but for the purpose of controlling and distributing water for irrigation purposes. In such corporations the stockholders are farmers living along the line of the canal who never expect to receive any dividend but by virtue of their stock are entitled to the use of a fixed amount of the water controlled by the company. No water is sold except indirectly by the sale of stock, and no water is rented unless perchance there be a temporary inability to sell the stock, resulting in a temporary surplus of water. It is what is known as the "Utah" or "Neighborhood" plan of water distribution. Practically the only means the defendant, as one of these companies, has of maintaining itself, paying a water-master, making the necessary repairs, etc., is the dues or assessments exacted from its stockholders, and the practice has always been to levy assessments, such as may be necessary, pro rate upon the shares of stock, to be paid sometimes in labor and sometimes in cash. These assessments or dues are collected in the manner provided by law for the collection of assessments upon stock of ordinary corporations for profit. In February, 1895, such an assessment was, in the ordinary course of the business of the defendant, levied by its board for the purpose of raising money to pay its accrued and accruing expenses. Of this assessment the plaintiff, L. E. Hall, complains, and to enjoin the collection of which this suit is brought. The court's reasoning is a little difficult of apprehension. Apparently it concludes that merely because defendant's officers failed to file the certificate of its adoption of the 1887 law, the provisions of that law are in no way applicable to defendant, even though it actually elected to continue its existence thereunder, and as a matter of fact has continued its existence thereunder for nearly ten years. And what seems wholly incomprehensible is that in one paragraph of its brief conclusions of law, the court finds that the defendant did not adopt the law of 1887 so as to be bound by it, and in the very next paragraph it concludes that defendant has adopted the most important section of the law as amended by the later act. Can we then adopt the vital part without filing the certificate, but be unable to adopt the less important portion in the same manner? The provision of section 2650 as to the certificate is directory, only. The amendatory act respondent misconstrues; the intent of the amendment, Revised Statutes, section 2609, both originally and as amended, does not pertain to the liability of the stockholder to the corporation, or the assessments made by the corporation voluntarily for maintenance expenses, but defines the personal and individual liability of the stockholder to the creditor. If the statute fixes a personal liability, and provides that it may be enforced by assessment, then, in a sense, a personal liability is involved in the assessment. But if the statute as it now stands provides that certain assessments may be voluntarily made upon paidup stock, and the stock sold to pay the same, but the stockholder shall not be individually liable for the assessment, then there is no individual liability. The liability of the stockholder is thus no more "personal" or "individual" than that of a purchaser of mortgaged premises; the premises alone are liable. (Worcester Turnpike Co. v. Willard, 5 Mass. 80, 4 Am. Dec. 39; Andover Turnpike Co. v. Gould, 6 Mass. 40, 4 Am. Dec. 80; Sparks v. Lower Payette Ditch Co., 3 Idaho 306, 29 P. 134.) The court should look beyond the mere form of the defendant's organization and be governed by the actual fact and purpose. While we speak of the "stockholders" and "stock," "members" and "certificates of membership," would, in the premises, be more exact terms. The certificate entitles the member to certain privileges, mainly the use of water, for which he in turn has agreed to pay certain dues to be estimated by the directors upon the basis of the expenses of the company. As in any organization or association of such nature, no profit is expected and the member pays for the privilege or benefit. And under the general rule applicable to such organizations memberships or stock may be forfeited for nonpayment of dues. (Beach on Corporations, c. 29.) And assessments may be imposed by by-laws. (Idaho Sess. Laws, 1890-91, p. 173.)

S. C. Winters and Reeves & Terrell, for Respondent.

The undisputed facts show that the defendant corporation was originally organized in 1884 and the only power given the trustees or directors to levy assessments was calls upon subscribed stock, the par value of which had not been paid. (Idaho Rev. Stats. 1874-75, p. 621, sec. 10.) There was a liability in favor of creditors against the stock of corporations organized under the foregoing law, but the directors had no power to enforce such liability by assessment. This liability could only be enforced at the suit of a creditor against the stockholders of the corporation individually. (Rev. Stats., supra, p. 623, sec. 16; Sparks v. Lower Payette Ditch Co., 3 Idaho 306, 29 P. 134.) The defendant corporation has never adopted title 4 of the Civil Code of Idaho. (Idaho Rev. Stats., sec. 2650.) If the defendant failed to adopt title 4 of the Civil Code, then it continued to operate under the Laws of 1874-75, supra. Under the common law the only liability of a stockholder of a corporation was to the corporation, for the amount unpaid on his stock. (Beach on Private Corporations, secs. 115, 143; ...