Nev-Cal Electric Securities Co. v. Imperial Irr. Dist.

• Decision Date: 23 November 1936
• Docket Number: No. 8106.,8106.
• Citation: 85 F.2d 886
• Parties: NEV-CAL ELECTRIC SECURITIES CO. v. IMPERIAL IRR. DIST. et al.
• Court: U.S. Court of Appeals — Ninth Circuit

85 F.2d 886 (1936)

NEV-CAL ELECTRIC SECURITIES CO. v. IMPERIAL IRR. DIST. et al.

No. 8106.

Circuit Court of Appeals, Ninth Circuit.

September 23, 1936.

As Modified on Denial of Rehearing November 23, 1936.

COPYRIGHT MATERIAL OMITTED

Call & Murphey, of Los Angeles, Cal., Henry W. Coil, of Riverside, Cal., and Hickcox & Trude, of El Centro, Cal., for appellant.

Harry W. Horton and Geo. R. Kirk, both of El Centro, Cal., and A. L. Cowell, of Stockton, Cal., for appellees.

Before WILBUR, GARRECHT, and HANEY, Circuit Judges.

GARRECHT, Circuit Judge.

From an order and decree dismissing the appellant's amended bill of complaint for failure to state a cause of action and denying a preliminary injunction, an appeal has been brought to this court.

The suit was filed by the appellant on its own behalf; as a landowner in the Imperial irrigation district, hereinafter referred to as "the district"; as the owner of a direct, beneficial interest in the funds and property legal title to which is held in trust for the owners of land within the district; and, finally, as a taxpayer or assessment payer, on behalf of the district.

The expressed purpose of the suit is to recover on behalf of the district and the landowners therein $35,000 already alleged to have been expended, and to enjoin the further expenditure of funds of the district, or the incurring of any liabilities or the levying or collection of any special assessments upon the lands of the appellant.

It is also sought to enjoin the taking of any steps for the purpose of constructing, acquiring, or operating any electrical generating transmission, or distribution system or selling electrical energy produced from such electrical system.

A principal and controlling issue is the constitutionality of the act of 1919, as amended, entitled "An act to provide for the development of electrical power by irrigation districts." Deering's General Laws of California 1923, Act 3868, pp. 1503-1504.

The original complaint dealt chiefly with a proposed Diesel engine electrical generating plant at Brawley, Cal., and the distributing lines in connection therewith for the distribution and sale of electricity within the cities of Brawley and Imperial, Cal., and not elsewhere in the district. On March 21, 1935, the appellant, by leave of court, filed an amendment to its bill of complaint, dealing with alleged threatened expenditures and liabilities in excess of $12,000,000 for the acquisition and construction "of electrical generating plants, wires, lines and appurtenances for the generation, distribution and sale of electrical energy not less than two-thirds of which said defendants threaten and intend to, and will, generate for sale and use outside the boundaries of said district," etc.

On March 11, 1935, immediately prior to the time when the first payment would be due on the contract for the Diesel engine generating plant at Brawley, and within a few days after work was commenced on the construction of distribution lines in that city in connection with the engine plant, the appellant obtained a temporary restraining order and an order to show cause why a preliminary injunction should not be issued, restraining and enjoining the appellees from making any expenditures, incurring any liabilities, or taking any other steps looking to the generation, distribution, or sale of light or power.

Affidavits were presented by both sides on the matter of a preliminary injunction. One of the affidavits presented by the appellees was that of M. J. Dowd, chief engineer and general superintendent of the appellee district, who stated, on information and belief, that the appellant "is a holding corporation and that either through identity of stock holdings, or through direct ownership, * * * it is the owner of and controls the operation of * * * the Southern Sierras Power Company," which, he alleged, had "an absolute and complete monopoly" in the power business throughout the appellee district and in the Coachella Valley. Dowd also charged likewise on information and belief that the appellant had instituted the present suit on behalf of the Southern Sierras Power Company, "wholly and solely for the purpose of attempting to use this court as an instrumentality to hamper, delay and interfere with the program of the Imperial Irrigation District, * * * and of assisting said Southern Sierras Power Company in maintaining the monopoly," etc.

A. B. West, president of the appellant corporation, submitted an affidavit denying all the foregoing allegations made by Dowd, with the exception of the statement that the Sierras Company has sold all the electric energy used in the appellee district and the Coachella Valley. West, however, denied the existence of a monopoly.

The restraining order continued in full force, except for two modifications, for 10 months, and until the date of the order and decree from which the present appeal is being prosecuted.

On December 21, 1935, the court below, in a memorandum of conclusions, held that the amended bill of complaint failed to state facts sufficient to entitle the appellant to any relief, and that therefore the bill should be dismissed. The same memorandum also announced that the appellant was not entitled to any preliminary injunction.

On January 15, 1936, the court signed findings of facts and conclusions of law on the preliminary injunction, and signed the order and decree from which this appeal has been taken.

Since, as the appellees concede a motion to dismiss admits, subject to an exception to be discussed later, all the well-pleaded allegations of the bill of complaint, we will set forth somewhat fully the averments of the bill, including a few that were ordered stricken by the court. The appellant, however, states in its brief that it "is not dependent upon any stricken portions in order to show the bill of complaint as amended states a cause of action."

The appellant's amended bill of complaint alleges that the appellee Imperial irrigation district was organized on July 25, 1911, under the provisions of the California Irrigation District Act (Stats. of Cal. 1897, p. 254, as amended, Deering's General Laws of California 1931, Act 3854; Id., 1933, Supp.). The district is wholly within Imperial county, Cal., and embraces an area of more than 600,000 acres, susceptible of irrigation from a common source, namely, the Colorado river, and by the same system of works, consisting of about 3,000 miles of main and lateral ditches fed from the waters of the river.

Situated within the district are the cities of Brawley and Imperial, the former containing not more than 1,280 acres and a population of not more than 11,000, and the latter with an area not exceeding 2,560 acres and a population not exceeding 2,000. The total population of the district is approximately 60,000. There are four other cities in the district — El Centro, Calexico, Calipatria, and Holtville, the total area of which is 4,000 acres and the total population of which is 18,900.

The appellant is the owner of two tracts of land containing 149.7 acres and 80 acres. Both tracts have, since the incorporation of the district, been liable for assessments levied by the district to pay for the costs of developing the irrigation system for the lands within the district, which assessments have been paid. The appellant's lands also remain liable for special assessments made by the district, and for the operations, liabilities, and expenses of the district, as provided by the California Irrigation District Act. The actual and reasonable value of the appellant's lands is $22,900.

In addition, it appears from the bill of complaint that all of the property acquired by the appellee district, including the moneys expended for the purposes complained of, was realized from special assessments on the lands within the district levied for irrigation purposes on the basis of benefits conferred upon the lands within the district; or consists of moneys realized from the sale of bonds issued by the district for such purposes, to be repaid by special assessment upon the lands of the district on the basis of benefits conferred upon the lands; or, finally, consists of the proceeds, avails, rents, issues, or profits of the property so acquired.

It is then averred that all of the acts and threatened acts complained of are claimed by the appellees to be authorized by the act of 1919, supra, the text of which is set out in full in the bill. It is alleged that the statute is void and unconstitutional, and that the appellant will be deprived of its property without due process of law and denied the equal protection of the laws, contrary to the Fourteenth Amendment of the United States Constitution, in the following three particulars:

(a) In that it purports to authorize any irrigation district to engage "in the private commercial business" of "manufacturing, distributing and selling electrical energy in unlimited quantities, and without any limitation as to whom the same may be sold to, or as to the place where the same can be distributed or sold," etc.

(b) In that it purports to authorize the use of funds collected, or to be collected, by special assessment upon all the lands within the district to be used for such purposes outside of the district, and not in accordance with any assessments levied by the district and "irrespective of any benefits to the lands of plaintiff," etc.

(c) "In that to enforce said statute so as to authorize said district, or any of its officers, to do any of the acts hereinafter alleged to have been done," etc., "under the supposed authority of said statute, or to use any of the funds or property of said district, or to assess the lands of the plaintiff for such purposes, will deprive the plaintiff of its property without due process of law," etc.

Then followed a group of averments setting forth the acts done and threatened to be done under the supposed authority of the act of 1919.

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