Sanderson v. Salmon River Canal Co., Ltd., 5083

CourtUnited States State Supreme Court of Idaho
Writing for the CourtBUDGE, J.
Citation45 Idaho 244,263 P. 32
PartiesTHOMAS SANDERSON, for Himself and All Others Similarly Situated, Appellant, v. SALMON RIVER CANAL COMPANY, LIMITED, a Corporation, Respondent
Decision Date26 November 1927
Docket Number5083

263 P. 32

45 Idaho 244

THOMAS SANDERSON, for Himself and All Others Similarly Situated, Appellant,
v.

SALMON RIVER CANAL COMPANY, LIMITED, a Corporation, Respondent

No. 5083

Supreme Court of Idaho

November 26, 1927


POWERS OF CORPORATIONS-CHARTER-ARTICLES OF INCORPORATION-IMPLIED POWERS-CONSTITUTIONAL LAW-CAREY ACT CORPORATIONS-MAINTENANCE LIEN-REPEAL AND AMENDMENT OF LEGISLATIVE ACT-IMPAIRMENT OF OBLIGATION OF CONTRACT-VOID ASSESSMENTS.

1. Since powers of a corporation, like its corporate existence, are derived from grant by sovereign creating it, it has no powers except such as are expressly or impliedly conferred by its charter.

2. "Charter" of corporation, formed under general law conferring on it only ordinary powers, does not consist of articles of incorporation alone, but of such articles taken in connection with law under which organization took place.

3. Canal corporation, organized under the Carey Act (43 U.S. C. A., sec. 641; U.S. Comp. Stats., sec. 4685), to maintain and control a canal and irrigation system and to acquire water rights, and doing all things necessary and proper in supplying stockholders with water, has, under C. S., sec. 4752, implied authority to borrow money and to mortgage its property as security without consent of majority of stockholders.

4. Maintenance lien statute (Laws 1925, chap. 107), which repealed C. S., sec. 3039, and amended sec. 3040, and which did not restrict operation of the act to canal corporations organized under the Carey Act (43 U.S. C. A., sec. 641; U.S. Comp. Stats., sec. 4685), held not unconstitutional as improper classification or denial of equal protection.

5. A legislative act should be held constitutional until it is shown beyond reasonable doubt that it is not constitutional.

6. A law should not be held to be void as repugnant to its constitution in a doubtful case.

7. Laws 1925, chap. 107, repealing C. S., sec. 3039, and amending sec. 3040, relating to collection of maintenance charges by canal companies, held not unconstitutional within Const. U.S. , art. 1, sec. 10, and state Const., art 1, sec. 16, as impairing mortgages of land owner on lands within project where indebtedness secured by his mortgages was not terminated or lessened in amount, nor was he denied right to enforce his contracts.

8. Generally, a statute which does not act on contract itself, but merely on property which is subject of contract, may not be said to impair obligation of contract.

[45 Idaho 245]

9. Since canal company, organized under the Carey Act (43 U.S. C. A., sec. 641; U.S. Comp. Stats., sec. 4685) to maintain a canal and irrigation system within the state, could only make assessments on its capital stock, as provided by C. S., secs. 4733-4736, continuing direct annual assessment on its capital stock, which extended over a period of twenty years, and each assessment, with one exception, was in excess of ten per cent of capital stock named in its articles of incorporation, held void, it not being authorized by Laws 1925, chap. 107, permitting collection of reasonable assessments, since C. S., sec. 4734, governs where limitation on powers to make assessments is indefinite.

10. Mere authorization for assessments contained in articles of incorporation of a company would not empower it to levy assessment in any amount it deems advisable, if a limitation on amount of assessment on its capital stock is contained in the statutes.

ON PETITION FOR REHEARING.

11. When assessments are levied on capital stock of a canal corporation organized under the Carey Act (43 U.S. C. A., sec. 641; U.S. Comp. Stats. sec. 4685), amount and manner of levies are governed by C. S., secs. 4733-4736; but, if assessments are levied under section 3040, as amended by Laws 1925, chap. 107, relating to collection of maintenance charges by canal companies, then levies may be for reasonable amount, based on number of shares or water rights, or proportioned to amount of water rights, or proportioned to amount of water used or owned, or by both methods; but procedure to be followed thereunder must comply with C. S., chap. 138, art. 1, as amended, of which sec. 3040 as amended is a part. [45 Idaho 246]

APPEAL from the District Court of the Eleventh Judicial District, for Twin Falls County. Hon. Hugh A. Baker, Judge.

Action by Thomas Sanderson, a stockholder of defendant company, to enjoin it from issuing bonds, executing mortgage and levying assessment on stock. Judgment for defendant. Reversed.

Judgment reversed. Costs to appellant.

Richards & Haga, for Appellant.

Authority to levy and collect assessments on fully paid corporate stock must be found either in the statute or the articles of incorporation and in Idaho such authority is conferred by C. S., art. 6, chap. 186. (Wall v. Basin Mining Co., 16 Idaho 313, 101 P. 733, 22 L. R. A., N. S., 1013; 6 Cal. Jur., p. 951; Seyberth v. American Commander Min. Co., 42 Idaho 254, 245 P. 392; C. S., sec. 4733.)

The proposed stock assessment or assessments of respondent are in excess of ten per cent of the capital stock of the company and are therefore illegal and void. (C. S., sec. 4734; Cal. Civ. Code, sec. 332; Santa Cruz Ry. Co. v. Spreckles, 65 Cal. 193, 3 P. 661; Pacific Fruit Co. v. Coon, 107 Cal. 447, 40 P. 542; Brown v. San Gabriel etc. Co., 22 Cal.App. 682, 136 P. 542; San Joaquin etc. Co. v. Beecher, 101 Cal. 70, 35 P. 349; Kohler v. Agassiz, 99 Cal. 9, 33 P. 741; Bottle Mountain Min. etc Co. v. Kern, 9 Cal.App. 527, 99 P. 994.)

One stock assessment cannot be levied while a previous one remains unpaid, unless the power of the corporation has been exercised for the purpose of collecting the previous assessment. (C. S., sec. 4735; Cal. Civ. Code, sec. 333; Strouse v. Sylvester, 6 Cal. Unrep. 798, 66 P. 660.)

The maintenance lien statute, C. S., chap. 138, art. 1, is unconstitutional and void because of improper classification. (Crom v. Frahm, 33 Idaho 314, 193 P. 1013; Connolly v. Union Sewer Pipe Co., 184 U.S. 540, 22 S.Ct. 431, 46 L.Ed. 679; 6 R. C. L., p. 381; [45 Idaho 247] Bedford Quarries v. Bough, 168 Ind. 671, 80 N.E. 529, 14 L. R. A., N. S., 418; Smyth v. Ames, 169 U.S. 466, 18 S.Ct. 418, 42 L.Ed. 819, 840; Gulf C. & S. F. Ry. Co. v. Ellis, 165 U.S. 150, 17 S.Ct. 255, 41 L.Ed. 666.)

An unconstitutional statute is null, void and nonexistent and cannot be revitalized by mere amendment of one section incorporating other parts of the void law by reference. (1 Cooley, Const. Lim., 8th ed., pp. 382-384; Norton v. Shelby County, 118 U.S. 425, 6 S.Ct. 1121, 30 L.Ed. 178, 186; Const., art. 3, sec. 18.)

Chapter 107 of the 1925 Session Laws was adopted subsequent to the execution of appellant's mortgages, lessened the value thereof and accordingly impaired the obligation of contract in violation of the state and federal constitutions. (U. S. Const., art 1, sec. 10; Idaho Const., art. 1, sec. 16; 12 C. J. 1057, 1058; Fidelity State Bank v. North Fork Highway Dist., 35 Idaho 797, 31 A. L. R. 781, 209 P. 449.)

A vested mortgage lien may not be impaired or its priority displaced by a subsequent statute. (12 C. J. 1071, 1072; Crowther v. Fidelity Ins. Co., 85 F. 41, 29 C. C. A. 1.)

A corporation cannot sell all its property without the consent of all or at least a majority of its stockholders and the mortgage involved here is invalid over the objection of appellant, a nonconsenting stockholder, and because a majority of the outstanding capital stock did not authorize it. (3 Fletcher, Cyc. Corp., sec. 1998; 2 Fletcher, Cyc. Corp., secs. 1203, 1206; 6 Fletcher, Cyc. Corp., sec. 4011.)

Corporate property held subject to limitations as to use or subject to a trust cannot be so disposed of as to divert it from such use or trust and the proposed mortgage would divert the irrigation system and water rights from the trust established thereon by law in favor of the settlers. (2 Fletcher, Cyc. Corp., sec. 1194; 6 Fletcher, Cyc. Corp., sec. 4012.)

If appellant had not sought the relief prayed for in this action, he might be estopped from raising the question after [45 Idaho 248] the bonds had been sold, and he is therefore entitled to the injunction prayed for. (Huxtable v. Berg, 98 Wash. 616, 168 P. 187; Hall v. Eagle Rock etc. Co., 5 Idaho 551, 51 P. 110.)

James R. Bothwell, for Respondent.

We have no doubt of the power of the Salmon River Canal Company, both under its charter and the statutes of the state, to incur the indebtedness and execute the mortgage here in question. (Hobbs v. Twin Falls Canal Co., 24 Idaho 380, 133 P. 899.)

The levying of a continuing direct annual assessment upon the shares of stock, water rights and lands to which said shares of stock and water rights are now or shall hereinafter be made appurtenant as contained in sec. 3 of the resolution is valid. (Sec. 2, art. of Inc. S. R. C. Co., as quoted above; secs. 9 and 12, By-Laws S. R. C. Co., as above cited; Hobbs v. Twin Falls Canal Co., supra.)

"Ordinarily an assessment may be levied and collected on fully paid stock where authority to do so is conferred by the articles of incorporation." (14 C. J., sec. 1286; Nelson v. Keith-O'Brien Co., 32 Utah 396, 91 P. 30; Forsythe v. Selma Mines Co., 58 Utah 142, 197 P. 586; Huxtable et al. v. Berg, 98 Wash. 616, 168 P. 187; Wall v. Basin Mining Co., 16 Idaho 313, 101 P. 733, 22 L. R. A., N. S., 1013.)

"Where the articles of incorporation make the stock assessable without fixing the amount or prescribing any limit it may be assessed to the extent and for the amount necessary to carry on the corporate business and to save and preserve the property of the corporation and to pay and meet its just debts and obligations." (2 Fletcher, Ency. Corp. (1924 Supp.), sec. 4373, C. S., sec. 3040, amended by Sess. Laws 1925, p. 154.)

The maintenance statute as amended is not subject to the objection of improper classification. (Crom v. Frahm, 33 Idaho 314,...

To continue reading

Request your trial
20 practice notes
  • Aberdeen-Springfield Canal v. Peiper, No. 23912.
    • United States
    • United States State Supreme Court of Idaho
    • 26 Mayo 1999
    ...and that a law should not be held to be void for repugnancy to the Constitution in a doubtful case." Sanderson v. Salmon River Canal Co., 45 Idaho 244, 256, 263 P. 32, 35 (1927). An earlier enactment of I.C. § 42-2201 has been held constitutional when challenged on equal protection grounds.......
  • Eberle v. Nielson, No. 8541
    • United States
    • United States State Supreme Court of Idaho
    • 13 Febrero 1957
    ...903; Ingard v. Barker, 27 Idaho 124, 147 P. 293; Smallwood v. Jeter, 42 Idaho 169, 244 P. 149; Sanderson v. Salmon River Canal Co., Ltd., 45 Idaho 244, 263 P. 32; Packard v. O'Neil, 45 Idaho 427, 262 P. 881, 56 A.L.R. 317; In re Edwards, 45 Idaho 676, 266 P. 665; Chambers v. McCollum, 47 Id......
  • State v. Kouni, 6434
    • United States
    • United States State Supreme Court of Idaho
    • 12 Enero 1938
    ...155 P. 296, L. R. A. 1916D, 573; Packard v. O'Neil, 45 Idaho 427, 262 P. 881, 56 A. L. R. 317; Sanderson v. Salmon River Canal Co., Ltd., 45 Idaho 244, 263 P. 32; Chambers v. McCollum, 47 Idaho 74, 272 P. 707; Williams v. Baldridge, 48 Idaho 618, 284 P. 203; Bannock County v. Citizens' B. &......
  • Penrose v. Commercial Travelers Ins. Co., No. 8129
    • United States
    • United States State Supreme Court of Idaho
    • 29 Octubre 1954
    ...S.Ct. 134, 78 L.Ed. 243; 46 C.J.S., Insurance, § 1405, pp. 712-715. This court in the case of Sanderson v. Salmon River Canal Co., Ltd., 45 Idaho 244, 263 P. 32, recognized and approved the principle set forth in the above cases in the following language appearing on page 258 of 45 Idaho, o......
  • Request a trial to view additional results
20 cases
  • Aberdeen-Springfield Canal v. Peiper, No. 23912.
    • United States
    • United States State Supreme Court of Idaho
    • 26 Mayo 1999
    ...and that a law should not be held to be void for repugnancy to the Constitution in a doubtful case." Sanderson v. Salmon River Canal Co., 45 Idaho 244, 256, 263 P. 32, 35 (1927). An earlier enactment of I.C. § 42-2201 has been held constitutional when challenged on equal protection grounds.......
  • Eberle v. Nielson, No. 8541
    • United States
    • United States State Supreme Court of Idaho
    • 13 Febrero 1957
    ...903; Ingard v. Barker, 27 Idaho 124, 147 P. 293; Smallwood v. Jeter, 42 Idaho 169, 244 P. 149; Sanderson v. Salmon River Canal Co., Ltd., 45 Idaho 244, 263 P. 32; Packard v. O'Neil, 45 Idaho 427, 262 P. 881, 56 A.L.R. 317; In re Edwards, 45 Idaho 676, 266 P. 665; Chambers v. McCollum, 47 Id......
  • State v. Kouni, 6434
    • United States
    • United States State Supreme Court of Idaho
    • 12 Enero 1938
    ...155 P. 296, L. R. A. 1916D, 573; Packard v. O'Neil, 45 Idaho 427, 262 P. 881, 56 A. L. R. 317; Sanderson v. Salmon River Canal Co., Ltd., 45 Idaho 244, 263 P. 32; Chambers v. McCollum, 47 Idaho 74, 272 P. 707; Williams v. Baldridge, 48 Idaho 618, 284 P. 203; Bannock County v. Citizens' B. &......
  • Penrose v. Commercial Travelers Ins. Co., No. 8129
    • United States
    • United States State Supreme Court of Idaho
    • 29 Octubre 1954
    ...S.Ct. 134, 78 L.Ed. 243; 46 C.J.S., Insurance, § 1405, pp. 712-715. This court in the case of Sanderson v. Salmon River Canal Co., Ltd., 45 Idaho 244, 263 P. 32, recognized and approved the principle set forth in the above cases in the following language appearing on page 258 of 45 Idaho, o......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT