In re Petition of Board of Directors of Columbia Irr. Dist., 25729.

• Decision Date: 03 September 1935
• Docket Number: 25729.
• Citation: 48 P.2d 648,183 Wash. 425
• Parties: In re PETITION OF BOARD OF DIRECTORS OF COLUMBIA IRR. DIST. v. PUDERBAUGH et al. TWEEDT et al.
• Court: Washington Supreme Court

48 P.2d 648

183 Wash. 425

In re PETITION OF BOARD OF DIRECTORS OF COLUMBIA IRR. DIST.

TWEEDT et al. v. PUDERBAUGH et al.

No. 25729.

Supreme Court of Washington

September 3, 1935

Department 2.

Appeal from Superior Court, Benton County; Matt L. Driscoll, Judge.

Proceedings by the Board of Directors of the Columbia Irrigation District and L. A. Tweedt and others, praying that proceedings for refunding outstanding bonds of the district, and for the issuance, exchange, and sale of refunding bonds therefor be examined, approved, and confirmed by the court which was opposed by Henry C. Puderbaugh and others. From a judgment approving and confirming the legality of the proceeding of the Board of Directors, Henry C. Puderbaugh and others appeal.

Affirmed.

Bruce E. McGregor, of Prosser, for appellants.

Moulton & Powell and C. L. Holcomb, all of Kennewick, for respondents.

MITCHELL Justice.

At all times herein mentioned, Columbia Irrigation District of Benton county, Washington, has been, and now is, a legally organized irrigation district under the laws of this state. In 1918, 1919 and 1920, the district sold three issues of its bonds, aggregating $550,000, payable commencing ten years from their dates. It appears that within a few years defaults occurred in increasing numbers as to payments due on interest on the bonds. Accordingly, in 1931, negotiations between the bondholders, the district, and some of the landowners in the district were had that resulted in the making and delivery of three written instruments purporting to change or readjust the outstanding obligations of the district and the consequent liability of some of the lands within the district. This readjustment was attempted by the organization by the bondholders of a corporation under the name of 'Benton County Columbia Company,' hereinafter spoken of as the company, which company entered into a contract dated September 14, 1931, with the Columbia Irrigation District, hereinafter spoken of as contract A, and contemporaneously entered into separate individual contracts with a large number, but not all, of the landowners within the district, hereinafter spoken of as contract B; and at the same time, as a part of the same plan or scheme, a third contract was entered into between the company and Spokane & Eastern Trust Company, as depositary which contract will hereinafter be spoken of as contract C.

Contract A fixes and amortizes the readjusted amount of the district indebtedness and distributes annual payments of the same over and including the years 1931 to 1960.

Contract B releases the lands of the signers from the obligation of outstanding bonds by fixing a definite amount the landowner shall pay. They also provide that the payments shall be made in installments direct to the company, and provide that the company shall pay the annual assessments levied against the land. It was also agreed in these contracts that the bonds should be deposited by the company with a trust company (Spokane & Eastern Trust Company of Spokane) to provide certainty of surrender of the bonds upon final payment.

Contract C regulates the distribution of money received by the company under the landowners' contracts; such payments to be remitted by the company to the county treasurer who, in turn would pay the money to the Spokane & Eastern Trust Company upon surrender of bonds from time to time, which funds were then to be distributed among the bondholders in accordance with the terms of the contract between the company and the trust company.

The parties endeavored without success to operate under these agreements. In 1934, the irrigation district applied to the Reconstruction Finance Corporation for a loan, to be made effective or operative upon the sale and delivery of refunding bonds of the district to the Reconstruction Finance Corporation. A loan was accordingly granted in the sum of $180,000. It may be here stated that, in addition to the three main, original bond issues, the district, in an emergency, issued and delivered bonds, in the sum of $12,500, to the state of Washington, which are also to be refunded by these proceedings, thus calling for a total refunding bond issue of $192,500. The whole scheme from the bondholders' standpoint, further provides for the payment to them by the district of $22,500 cash (less $2,500 deducted for expenses in connection with the making of the loan), making a total amount of $180,000, plus $20,000, or a grand total of $200,000 available to the bondholders.

Upon making arrangements with the Reconstruction Finance Corporation, the irrigation district then proceeded to take the necessary steps to authorize the issue and delivery of the $192,500 refunding bonds. At the conclusion of such proceedings the present petition was filed in the superior court, pursuant to Rem. Rev. Stat. §§ 7499 to 7503, praying, in effect, that the proceedings to authorize the issue of refunding bonds be examined, approved, and confirmed by the court. The petition was filed by the board of directors of the irrigation district pursuant to a resolution adopted by the board.

In substance, the prayer of the petition is: (1) That an order be entered by the court fixing a time and place for hearing the petition, and prescribing the notice to be given in accordance with law; (2) that the court examine into the regularity and correctness of the proceedings connected with the issue of refunding bonds which may in any manner affect their legality or validity, and the right and power of the district, through its board of directors, to levy assessments in the manner and form authorized by the statutes of this state relating thereto for the payment of the bonds and interest thereon; (3) that the court inquire into the contracts A, B, and C, respectively, and adjudicate the rights of all parties thereunder, and the effect, if any, of said contracts upon the validity and legality of the proposed refunding bonds, and to determine to what extent, if any, such contracts may affect the power of the board of the district to levy assessments for the payment of the refunding bonds, as well as the legality of any and all assessments levied for that purpose; (4) that the court fully and completely inquire into and examine all matters referred to in the petition for the purpose of determining and adjudicating the legality and validity of all proceedings described in the petition, the legality and validity of the refunding bonds issued pursuant thereto, the legality and validity of all assessments levied in the manner and form provided by law for the payment of the bonds and the interest thereon, and that the court fully adjudicate the rights of all parties who, under the statute authorizing and governing this proceeding, shall and could lawfully appear and demur to or answer the petition.

Within the time provided by order of court, Henry C. Puderbaugh and his wife, who are landowners within the district and who signed contract B, appeared generally as defendants herein, asserting vested rights under contract B and denying the right of the district to issue refunding bonds and to levy assessments for their payment, thus destroying the effect of their contract B.

Edgar Ludwick and his wife, who are landowners in the same position as the defendants Henry C. Puderbaugh and wife, appeared specially, contesting the power and jurisdiction of the court, and moved for a dismissal of the proceedings on the ground that this is a special confirmation proceeding in which the court has no jurisdiction to inquire into the validity of the proposed refunding bonds or the legality and validity of assessments to be levied in the future for the payment of them.

H. Burfeind and his wife are landowners within the district who refused to sign contract B, and appear as defendants, joining in the prayer of the petition of the directors of the district.

Upon due proof of giving the notice required by law and the order of court of the time and place fixed for hearing the petition, a hearing was had, whereupon findings of fact, conclusions of law and judgment were entered in favor of the petitioner, the board of directors of Columbia Irrigation District.

Henry C. Puderbaugh and wife and Edgar Ludwick and wife have jointly appealed.

The findings of fact entered by the trial court are sustained by a fair preponderance of the evidence. They are not contested on the appeal--questions of law only are involved.

All of the steps necessary to be taken in the proceedings for authorizing the issuance of the district's refunding bonds, and for presenting and hearing the district's petition to the superior court for an order approving and confirming the same, have been found and determined by the superior court to have taken place in the form, manner, and at the times required by law.

An understanding of the authority of an irrigation district to issue refunding bonds is necessary to a proper appreciation and discussion of the assignments of error. Authority is given by statute, sections 7434-1 to 7434-7, Rem. Rev. Stat. as amended by chapter 11, p. 23,...