Oldroyd v. McCrea

• Decision Date: 31 March 1925
• Docket Number: 4229
• Citation: 65 Utah 142,235 P. 580
• Parties: OLDROYD, Land Com'r v. McCREA, Judge, et al
• Court: Utah Supreme Court

235 P. 580

65 Utah 142

OLDROYD, Land Com'r v. McCREA, Judge, et al

No. 4229

Supreme Court of Utah

March 31, 1925

Application for writ of prohibition by John T. Oldroyd, as Land Commissioner, against Wm. M. McCrea, as Judge, etc., and another.

WRIT ISSUED.

Harvey H. Cluff, Atty. Gen., and J. Robert Robinson, Asst. Atty Gen., for plaintiff.

Cheney Jensen, Martineau & Stephens, of Salt Lake City, for defendants.

STRAUP J. GIDEON, C. J., and THURMAN, FRICK, and CHERRY, JJ., concur.

OPINION

STRAUP, J.

In the case of Assets Realization Company v. Sevier River Land & Water Company, an insolvent corporation (hereinafter referred to as the land and water company) a receiver, in June, 1923, was appointed by the district court of the Third judicial district. Prior thereto, and in October, 1918, the land and water company, for money loaned, gave its promissory note to the state in the sum of $ 160,000, and to secure the payment thereof executed to it its mortgage on about 4,000 acres of land in Millard county and 4,000 shares of the capital stock of the Sevier Canal Company, a corporation which mortgage was duly recorded. When these proceedings were instituted there was due and unpaid on the note and mortgage the sum of about $ 184,000. Neither the state nor any one in its behalf was made a party to such receivership proceedings. In October, 1923, on application of the receiver, the district court granted an order authorizing the receiver to issue and sell receiver's certificates in the aggregate amount of $ 250,000, and made them first liens on all of the properties, both real and personal, of the land and water company, and displaced all prior existing liens. In October, 1924, on the further application of the receiver, the court granted an order selling all the property, both real and personal, of the land and water company free and clear of all liens and incumbrances of whatsoever kind or character, except those of the certificates. Thereupon Oldroyd, as land commissioner of the state of Utah, and on its behalf, as plaintiff or petitioner against the district court and the receiver as defendants, applied to this court for a writ of prohibition to restrain the sale, especially of the real estate and stock covered by the state's mortgage.

The defendant demurred to the petition for the writ, and moved to strike portions of it. In the petition it is alleged that the land and water company is a private corporation, and that the district court exceeded its jurisdiction in authorizing the certificates and making them first liens and thereby displacing the prior and existing mortgage lien of the state, and likewise exceeded its jurisdiction in ordering a sale of all the properties of the company, including the real estate covered by the state's mortgage, free and clear of its mortgage. In such particular, after alleging the appointment of the receiver in June, 1923, and the pendency of the action, the substance of the petition is: That the land and water company is not a public or quasi public but a private corporation organized under the laws of the state to acquire title to and ownership in lands and water and to sell them to "divers individuals" at a profit to the company and its stockholders, and at no time rendered any public service; the execution and recording of the state's mortgage in October, 1918, and the amount due and unpaid, making a copy of the note and mortgage a part of the petition; that after the organization of the land and water company there was organized the Sevier Canal Company, a Utah corporation to which the land and water company conveyed all of "its waters and water rights to be perpetually held, owned, used, and enjoyed by the Canal Company and its stockholders for use in the irrigation of lands of such stockholders, in consideration of which the Canal Company sold and transferred a majority" of its shares of the capital stock to the land and water company; "that the status" of the land and water company, "when the receiver was appointed, was that of a private construction company and was under contract to construct ditches and canals for the Sevier Canal Company, and had not the ownership, control, and management of the ditches or canals of the irrigation system, but were owned, controlled, and managed by the Sevier Canal Company"; that in October, 1923, the district court, on petition of the receiver, and on a hearing after notice by publication in a newspaper and by mail to all of the known creditors and claimants ordered and directed receiver's certificates in the aggregate amount of $ 250,000 to be issued and sold and made first liens on all of the properties, real and personal, of the land and water company and paramount to all prior and existing liens of whatever nature or character, and without making the state or other claimants parties to such proceedings, but the state, through the land commissioner and an Assistant Attorney General of the state, "appeared and orally objected to and protested against" the granting of the order on the ground that the court was without jurisdiction, copies of which petition of the receiver and the order of the court were attached to the petition of the plaintiff herein; that on the petition filed by the receiver, on the 14th day of October, 1924, the district court, without notice or a hearing but on an ex parte application of the receiver, on the next day ordered and directed all the properties, real and personal, of the land and water company to be sold for cash free and clear of all liens and incumbrances at a minimum sum of $ 150,000, copies of which petition and order were also attached to and made a part of the plaintiff's petition herein; that such order was made notwithstanding only $ 76,500 of said certificates were alleged to have been sold and that the receiver was unable to sell more, and hence, as alleged by him, was unable to do the acts and things theretofore reported necessary to be done for the preservation of the irrigation system, and for which the certificates were issued; that the petition of the receiver did not set forth sufficient facts to authorize the issuance of the certificates as first liens and to displace prior and existing liens, nor was there averred any necessity to issue the certificates to preserve the existence or to prevent a destruction of the properties of the land and water company, and that the petition for the sale of the properties was so wanting in essentials as not to authorize a sale of the properties in manner as was done, and that the court in such particular further exceeded its jurisdiction in making such order of sale without notice or a hearing; that the evidence adduced by the court on the receiver's petition for the issuance of the certificates was not sufficient to justify or authorize the issuance of them, a transcript of such evidence being attached to plaintiff's petition herein and made a part thereof; that the moneys derived from the sale of the certificates were not expended for the purpose for which they were issued; and that the lands covered by plaintiff's mortgage are in Millard county (in the Fifth judicial district), and not subject to the jurisdiction of the court of the Third judicial district.

The motion to strike is allowed in so far as it is addressed to the allegations of the petition what the evidence was which was heard by the district court, and upon which the order issuing the certificates was based, as well as all other similarly alleged matters dehors the record of the district court, except the allegations respecting the state's mortgage and the character of the corporation of the land and water company and other similar allegations of jurisdictional facts.

The defendants, on the demurrer, contend that the petition does not show any want or excess of jurisdiction, and at most shows, if anything, a mere erroneous exercise of powers of jurisdiction; that the land and water company was a public service company, and on the record the district court was not only authorized but justified in making the orders complained of; that the court in granting the orders, especially the order issuing the certificates and making them first and paramount liens, had jurisdiction both of subject-matter and of person; that such order was final and appealable, and hence the state had an adequate remedy by appeal but failed to avail itself within the time (six months) in which an appeal therefrom could have been prosecuted.

The allegations in the petition for the writ show the land and water company to be a private and not a public or quasi public or public service corporation--not the mere allegation that the company was a private corporation, but the alleged facts showing the nature and character of the corporation and the purposes for which it was organized and the business carried on by it. 7 R. C. L. "Corporations," §§ 14 and 15; 14 C. J. "Corporations," §§ 42-46. Nor is it disclosed by the record before the district court that the land and water company was anything more than a private corporation. In the petition of the receiver for the certificates, it is alleged that the land and water company was organized for the purpose of owning and operating irrigation projects and reclaiming arid lands, and was engaged in the management, control, and operation of an irrigation project in Millard and Juab counties and using water appropriated from the Sevier river a natural stream in the state, and that the project comprised about 35,000 acres upon which many farmers had made their homes, and was responsible for such operation and for a seasonal water delivery "through its subsidiary operating company, Sevier Canal Company," which was alleged to be a mutual co-operative irrigation company...