La Junta & Lamar Canal Co. v. Hess
| Decision Date | 12 January 1903 |
| Citation | 71 P. 415,31 Colo. 1 |
| Parties | LA JUNTA & LAMAR CANAL CO. et al. v. HESS et al. (two cases). SAME v. CREAT PLAINS WATER STORAGE CO. SAME v. FT. LYON CANAL CO. |
| Court | Colorado Supreme Court |
Error to district court, Prowers county.
Two actions by John Hess and others against the La Junta & Lamar Canal Company and another; another action by the Great Plains Water Storage Company against the same defendants; and another action by the Ft. Lyon Canal Company against the same defendants. From orders and judgments in favor of plaintiffs defendants bring error. Affirmed.
Chas. J. Hughes, Jr., Tyson S. Dines, and A. Moore Berry, for plaintiffs in error.
Chas E. Gast and Rogers & Shafroth, for defendants in error.
The several questions which plaintiffs in error seek to have determined in the first two causes grow out of the action of the lower court had in the Hess case, after the original and amended decrees were rendered in that action. They were docketed separately, but have been consolidated in this court. According to the title of the third cause, it appears there are two, when in fact there is but one, which is the Hess case, and is the same cause as the first, in which proceedings were had on the petition of the Ft. Lyon Canal Company, of which plaintiffs in error complain. The several causes are so intimately associated, and as the questions presented for consideration in the second and third causes grow out of the first, and relate to the successive steps taken by defendants in error towards obtaining the ultimate relief to which the plaintiffs in the Hess case claim to be entitled, they can best be disposed of in one opinion. For convenience the La Junta & Lamar Canal Company will be designated the 'old company,' the New La Junta & Lamar Canal Company as the 'new company,' and the Ft Lyon Canal Company as the 'Ft. Lyon Company.'
The main matters of which plaintiffs in error complain in the first two cases are the action of the court in directing the receiver to take possession of the property in controversy, entering orders with respect to the payment and securing of the indebtedness incurred by him, and in authorizing the receiver to enter into a contract with the storage company, and, in the third cause, turning the possession of such property over to the Ft. Lyon Company. For a proper understanding of the questions involved, it will be necessary to give a history of the litigation which resulted in the several orders of the trial court of which the plaintiffs in error complain.
The corporation known as the 'Arkansas River Land, Reservoir & Canal Company' and the old company were successively the owners of a canal and irrigation system. The Hess case, which was commenced on behalf of himself and others similarly situated, was instituted against the old company, to compel a specific performance of the contract contained in the water deeds evidencing the water rights owned by them in the canal and appurtenances belonging to that company. This contract provided, in substance, that on the happening of certain contingencies the title to the canal and appurtenances should pass to the owners of such water rights, and vest in a new corporation for their benefit. The water-right owners were to be the owners of the stock in this corporation, distributed among them in the proportion that such water rights bore to the whole number. The judgment in this action was in favor of the plaintiffs, and a decree was entered directing the old company to execute and deliver a deed of conveyance to its canals, reservoirs, and other property rights held in connection therewith to such new corporation as the owners of water rights in the property so conveyed might organize for the purpose of operating and managing it. Prior to this judgment the court had appointed a receiver to take charge of and manage the property pending the litigation. From this judgment the company appealed to the court of appeals, where it was affirmed, except with respect to the organization of the new company. 42 P. 50. On this subject the court of appeals directed that the method provided in the contract contained in the water deeds for the creation of a new corporation to own and control the property for the benefit of the water-right owners should be followed, and remanded the cause for further proceedings in conformity with that order. Pursuant to this judgment, the trial court entered an amended decree, directing the formation of a new company in the manner provided in the contract contained in the water deeds. The old company accepted this decree, and the new company was at once organized. Upon the organization of this company the property was turned over to it, subject to the unpaid indebtedness created by the receiver in the management of the property during the litigation above referred to; the court, however, retaining jurisdiction for the purpose of enforcing the payment of such indebtedness. The new company having failed to discharge the debts incurred by the receiver, petitions were presented by the holders of receiver's certificates evidencing such debts, the purpose of which was to obtain an order which would enable such holders to collect their claims. The new company resisted this petition, but the court directed that it should assume and pay the receiver's certificates. This order not having been complied with, the original plaintiff, John Hess, presented his petition, the object of which was to procure an order authorizing the receiver, in conjunction with the new company, to borrow money to discharge the receiver's indebtedness, the money so borrowed to be secured by a mortgage executed by the receiver and the new company, which should be a first lien upon all the property of the company. It appears that due notice of this application was given both companies and the receiver. An order was entered in accordance with the petition. The new company refused to comply with this order, and Hess then presented an application for an order directing the receiver, independent of the new company, to carry out the decree of the court with respect to borrowing the money and discharging the receiver's indebtedness. This application was resisted by the new company, which appeared for that purpose. A decree was rendered directing the receiver to again take possession of the property, who at once did so. It was also ordered that further hearing on the question of the receiver discharging the previous indebtedness incurred by him should be continued to a day certain, at which time the parties, including the new company, appeared, when an order was entered directing the receiver to execute a certificate for the amount of the indebtedness due, together with a mortgage securing it upon the property. Thereafter the storage company filed its petition, praying that it be permitted to enter into a contract with the receiver authorizing it to utilize the main canal of the property in controversy, and an uncompleted reservoir, for the purpose of conducting and conserving water for storage. It is not necessary to notice the averments of this petition in detail, or to state with particularity the terms of the proposed contract, because the main contention of plaintiffs in error is that the court had no authority, in any circumstances, to direct the execution of the contemplated contract. The petition, however, recites that the consent of more than 60 per cent. of all water-right owners and about 90 per cent. of the actual users of water through the system to such contract had been secured, and the advantages which would accrue to them under this contract. This petition was served upon all the parties to the action, together with notice of the time and place of hearing thereon. To the petition the old company answered, and the new company demurred. The court directed the receiver to enter into a contract with the storage company upon practically the terms and conditions mentioned in the petition and the proposed contract attached thereto.
On the hearing of these several matters it appears substantially from the testimony introduced that the new company had taken no steps to take care of the receiver's indebtedness. In fact, this may be inferred from the position which it assumed in resisting the applications made by interested parties for this purpose. The application of the storage company and the hearing thereon was had in the winter. The canal at this time was in need of repair, but the new company, although it had been in possession of the property for several months, had taken no steps in this direction. The water-right owners were not in a financial condition to bear the expense of making these repairs themselves, nor did the new company have any funds to meet such expenses. The contract with the storage company provided that the latter, in consideration of the privileges granted, should repair...
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