Orme v. Salt River Valley Water Users' Ass'n

• Decision Date: 21 July 1923
• Docket Number: Civil 2186
• Citation: 25 Ariz. 324,217 P. 935
• Parties: JOHN P. ORME, Appellant, v. SALT RIVER VALLEY WATER USERS' ASSOCIATION, a Corporation, Appellee
• Court: Arizona Supreme Court

217 P. 935

25 Ariz. 324

JOHN P. ORME, Appellant, v. SALT RIVER VALLEY WATER USERS' ASSOCIATION, a Corporation, Appellee

Civil No. 2186

Supreme Court of Arizona

July 21, 1923

APPEAL from a judgment of the Superior Court of the County of Maricopa. F. C. Struckmeyer, Judge. Affirmed.

Messrs Townsend, Stockton & Drake, for Appellant.

Messrs Kibbey, Bennett, Gust & Smith, for Appellee.

OPINION

McALISTER, C. J.

This action was brought to enjoin the Salt River Valley Water Users' Association from carrying out a contemplated improvement designated as Mormon Flat development No. 1 and to have declared void a proposed bond issue by the association of $1,800,000 in furtherance of it. The trial court refused the relief prayed for, and the plaintiff, John P. Orme, a stockholder in the association, appeals.

Appellee is a corporation organized under the laws of the territory of Arizona on February 9, 1903, for the purpose of providing an adequate supply of irrigation water for the 250,000 acres of land lying within what is known as the Salt River project in this state, by diverting, impounding, developing and pumping water and distributing it to said lands, and by creating transmitting and issuing power to aid therein. Congress had passed on June 17th of the previous year the Reclamation Act, and it was contemplated when the articles of incorporation were adopted that the United States government would construct under its provisions a dam and reservoir on Salt River, in this state, to store water for irrigating the lands conveniently susceptible of irrigation from that source, and to secure action by or aid from the government in building such works as a means towards accomplishing the general purpose of the corporation the articles empowered it to make any contract or arrangement deemed proper, and especially to enter into any agreement with the United States government which might be approved by the Secretary of the Interior or his duly authorized representative relating to the collection and payment to the government of any moneys due it for rights issued by it to members of the association for the use of water from any reservoir or irrigation works acquired or constructed by it. They further authorized the association to comply with any rules or regulations prescribed by Congress or the proper official of the government in reference to the storage or use of water impounded, developed or delivered by it.

The association was organized under the ordinary corporation laws of this state and its articles worked out by the joint effort of the land owners under the proposed project, who were its stockholders, and the officials of the United States Reclamation Service whose duty it was to administer the reclamation law. Membership in the association was limited to the owners of irrigable land lying within the Salt River reservoir district whose exterior boundaries were described in the articles and each owner permitted to subscribe for one share of stock for each acre of land owned by him and no more. His stock entitled him to water for his land to which the water rights represented thereby were made inseparably appurtenant, and each stockholder was required by agreement in writing to subscribe to the articles of incorporation and to declare that he agreed to be bound by their provisions.

The exercise of the corporate powers and the management of the affairs of the corporation were vested in a council of thirty members, which was empowered to enact by-laws and make rules and regulations for its government, a board of governors of eleven members, including the president of the association, whose duty it was to manage, conduct and administer its affairs subject to the provisions of the articles and by-laws, local boards of water commissioners, a president, vice-president, treasurer and secretary. For the purpose of electing members of the council, the Salt River reservoir district was divided into ten districts, from each of which is elected three members of the council and one member of the board of governors, and at elections for these officers or for any other purpose the votes are cast at the various voting precincts throughout the district by the electors in person at the polls by written or printed ballot; each elector or shareholder being entitled to one vote to each share of stock owned by him, not, however, to exceed in the aggregate 160 votes. To be a qualified voter at such an election, the articles require that one be at the time the owner of at least one share of the capital stock of the association and that he shall have been such owner, according to the books of the company, for at least twenty days prior thereto, of the age of twenty-one years or more, and of sound mind.

The articles provide that revenue for corporate purposes shall be raised by levying assessments upon the shareholders, and that such assessments when levied shall become, be and remain until paid a lien on the lands of the shareholders against which they are levied and the stock appurtenant thereto, but that an indebtedness to exceed $50,000 (later raised by amendment to $100,000), except for ordinary operation, maintenance and repair, may not be incurred in any one year unless it be ratified by at least two-thirds of the votes cast at an election called for that purpose, and in no event may the corporate indebtedness exceed two-thirds of the capital stock. The articles provide that the corporation shall endure for twenty-five years, and there is no provision for its renewal or extension; but there is one permitting amendment of the articles by the shareholders at a regular, annual election, or a special one duly called for that purpose.

It appears from the complaint that the aim and object of the association at the time of its organization has been largely accomplished; that the owners of more than 200,000 acres of land in the Salt River reservoir district have become shareholders and by instruments in writing have obligated their lands in the said district to be bound by the provisions of the articles of incorporation and the rules and regulations of its by-laws; that on June 25, 1904, the association entered into a contract with the United States providing for co-operation between the association and its shareholders and the United States government in the construction of a reservoir on Salt River, which reservoir was constructed and has been in operation since 1910 and is known as the Roosevelt reservoir; that a highly developed irrigation system has been constructed for the benefit of the lands of the association's shareholders and was operated by the United States Reclamation Service up to September 6, 1917, when the United States government and the association, after its stockholders at an election held for that purpose had authorized such action, entered into a further contract by which the operation, maintenance and control of said irrigation system were vested in said association upon the terms therein provided, subject, however, to be terminated by either party in the manner therein stated, and the payment of the construction charges amounting to $10,166,021.97 due the United States, of which $9,278,091.31 were unpaid when the bonds were authorized, was assumed by the association; that under said contract the association has, since October, 1917, operated and maintained, and is now operating and maintaining, the aforesaid irrigation works, and during this time has under its articles and by-laws levied and collected assessments upon the lands of its shareholders to pay for operation and maintenance, for the construction charges of the United States, and for the improvements, additions and betterments of the said works made from time to time by the association.

It is further alleged that before the management of the irrigation system was taken over by the association the United States had constructed as incidental thereto, with funds of both the government and the association, a hydroelectric power system, at a cost of practically $4,500,000, by which the waters of the reservoir are made to produce power to be used by the association for these purposes: To pump water from underground sources to supplement the reservoir supply in times of shortage; to drain the lands of its shareholders by pumping surplus waters therefrom; to supply electric power to the farms of its shareholders; and to sell for mining, municipal and pumping purposes in order to raise revenue to enable the association to pay the cost of construction of the reservoir and other works; that to protect this investment, and increase the revenue therefrom and to some extent the amount of water available for irrigation, the shareholders of the association at a special election held for that purpose on January 4, 1923, approved by a vote of more than 14 to 1, though less than one-half of the stock outstanding was voted, the following five propositions, viz.:

(1) The construction of the improvement designated as Mormon Flat development No. 1.

(2) The issuance of the bonds of the association in the sum of $1,800,000 to finance the same.

(3) The levying of an assessment upon the lands of the shareholders at the time of the issuance of said bonds to assure the payment of the interest and principal of such bonds as they become due.

(4) The amendment of the articles of incorporation of the association so as to extend the term of its corporate life for a period of twenty-five years from the date of such amendment.

(5) Amendment of the articles so as to authorize an indebtedness of two-thirds of its capital stock exclusive of the amount due the United States government and assumed by the association.

It appears also that the action of the association on these...