In re Wenatchee Heights Orchard Co.

• Decision Date: 03 April 1914
• Docket Number: 5025.
• Citation: 212 F. 787
• Parties: In re WENATCHEE HEIGHTS ORCHARD CO.
• Court: U.S. District Court — Western District of Washington

212 F. 787

In re WENATCHEE HEIGHTS ORCHARD CO.

No. 5025.

United States District Court, W.D. Washington, Northern Division.

April 3, 1914

Walter Schaffner and Raymond D. Ogden, both of Seattle, Wash., for trustee.

Harry E. Wilson, of Seattle, Wash., for H. P. Johnston and others.

Geo. H Bailey, of Seattle, Wash., for F. E. Reyes.

H. C Belt and Corwin S. Shank, both of Seattle, Wash., for S. V Wells.

McClure & McClure, of Seattle, Wash., for G. Beninghausen.

Alexander Stewart and W. P. McElwain, both of Seattle, for W. P McIlvain.

Douglas, Lane & Douglas, of Seattle, for James H. Douglas.

CUSHMAN District Judge.

This matter is before the court upon petition to review two orders of the referee. The same proceeding has been considered, in other phases, upon former hearings. 204 F. 674, and decision of December 3, 1913, 209 F. 84. The bankrupt, upon its organization, acquired some 1,200 acres of land near Wenatchee, Wash., together with shares of stock in an irrigation company. The land was largely platted into 5 and 10 acre tracts, devoted to the cultivation of orchards, and sold under contracts, a portion of which have been fully paid out and deeds given. A considerable number of the contracts are still outstanding. Under these contracts, the grantor, the bankrupt, was to plow the ground, plant the orchards, cultivate, irrigate, and care for them and pay the taxes until the purchase price was fully paid, when deeds would be given. The purchasers under these contracts complain that less water is being furnished than agreed. After the obtaining of certain judgments for damages, on account of the shortage of water, bankruptcy intervened. A petition was denied by the referee, which asked for the expenditure, by the trustee, of funds of the estate to comply with the order of the Public Service Commission of the State of Washington, requiring the now bankrupt to increase the supply of water for irrigation of the land sold by it. This court heretofore sustained the referee's order, and the cause is now before the Court of Appeals of this circuit.

Upon the former proceeding it was asked that these funds be expended in impounding further water by increasing the height of the dam of the irrigation company, which was urged as the only practicable means of complying with the Commission's order. The present petition asks the referee to authorize the expenditure of the funds of the estate for the purchase of further water rights.

To the present petition the creditor Wells objects. The nature of his interest in and past relations with the bankrupt are disclosed in the court's former opinion. 209 F. 84.

The court is asked to distinguish the present matter from that formerly considered, as a justification for which the present petition asks for the purchase of water rights, to be used in effecting the settlement of unliquidated claims for damage on account of the failure of the bankrupt to furnish the amount of water promised under the contracts of sale. To this end, the petition recites:

'Your petitioner further represents that a large number of claims have been filed by the purchasers of property from the said bankrupt, demanding damages for the failure of the bankrupt company to supply sufficient water as provided for by the contracts hereinbefore mentioned, that said claims now filed are unliquidated, and that the amount claimed thereunder is in excess of $100,000.

'Your petitioner further represents that in his opinion the hearing upon the liquidation and allowance of the unliquidated claims for damages hereinbefore referred to will consume a large amount of time, and will entail a large expense upon this estate; that in the opinion of the trustee it would be to the best interests of a large majority of the persons interested in said estate if the additional water stock and water rights hereinabove referred to could be purchased upon the condition that the unliquidated claims for damages should be released; that your petitioner believes that it is essential for a proper administration of said estate that the question as to whether or not your petitioner shall purchase any additional water stock or rights should be speedily determined.'

These allegations, even when supplemented by the full record of the proceeding, are clearly insufficient to warrant the making of the order asked. The referee's order denying this petition is approved and sustained.

The further order of which a review is asked, refused, upon the trustee's petition for instructions, to direct him to pay the taxes upon and cultivate for the season 1914 the lands under sale contracts. The bankrupt sold the tracts of its platted lands under contracts providing for monthly payments over a period of from five to seven years, the bankrupt to care for, cultivate, and irrigate the lands and to pay all taxes and assessments levied thereon, until the lands were paid for, unless the purchaser should elect to take possession thereof. The purchase price of many of the tracts has been fully paid and deeds have been given; but, in a large number of cases, the price has not been fully paid, in which cases the lands have been in the successive possession of the bankrupt, its receiver and the trustee herein, and up to this time have, by them, been cultivated and irrigated, according to the terms of the contracts. During the season 1913 the trustee did this work with the consent of all of the creditors. The creditor Wells objects to its being further done by the trustee. The trustee represents that the costs of such work will equal the crop return accruing to the estate. A large amount of general taxes are due, and in great part delinquent, exceeding, upon the lands covered by the contracts, $3,000. At the time of filing the petition for adjudication, the bankrupt was the owner of only one of these contracts; its interest in the remainder having been assigned to others, who joined in the petition for review.

In the assignment of the contracts, it was provided that the bankrupt should, notwithstanding the assignments, perform all of the conditions of the original contracts, which would include the cultivation, irrigation, and payment of the taxes until full payment for the lands was made. It is clear, under the foregoing conditions, the further cultivation of the lands by the trustee is not justified. The care and cultivation of the tracts by those separately...