Udall v. State Loan Board of Arizona

• Decision Date: 17 January 1929
• Docket Number: Civil 2757
• Parties: LEVI S. UDALL and LOUISA L. UDALL, Plaintiffs, v. THE STATE LOAN BOARD OF ARIZONA; J. C. CALLAGHAN, Treasurer; GEORGE W. P. HUNT, Governor of the State of Arizona; JAMES H. KERBY, Secretary of the State of Arizona, and J.C. CALLAGHAN Treasurer of the State of Arizona, as Members of the State Loan Board of Arizona, Defendants
• Court: Arizona Supreme Court

273 P. 721

35 Ariz. 1

LEVI S. UDALL and LOUISA L. UDALL, Plaintiffs, v. THE STATE LOAN BOARD OF ARIZONA; J. C. CALLAGHAN, Treasurer; GEORGE W. P. HUNT, Governor of the State of Arizona; JAMES H. KERBY, Secretary of the State of Arizona, and J.C. CALLAGHAN Treasurer of the State of Arizona, as Members of the State Loan Board of Arizona, Defendants

Civil No. 2757

Supreme Court of Arizona

January 17, 1929

Original proceeding for Writ of Mandamus by Levi S. Udall et al., against J.C. Callaghan, James H. Kerby and George W. P Hunt, composing the State Loan Board. Demurrer to petition overruled and peremptory writ granted.

Mr Isaac Barth and Mr. Gilbert E. Greer, for Plaintiffs.

Mr John W. Murphy, Attorney General, for Dependants.

OPINION

McALISTER, J.

This is an original proceeding in which the plaintiffs, Levi S. Udall and Louisa L. Udall, his wife, are asking for an order directing the treasurer of the state of Arizona to accept the sum of $728.39 in full payment of their note to the state of Arizona for $1,050 and to command G. W. P. Hunt, Governor, James H. Kerby, Secretary of State, and J. C. Callaghan, Treasurer, as members of the State Loan Board, to execute and deliver to them a satisfaction of the mortgage securing the said note, and to reassign and deliver to them the certificate of thirty shares of stock of the Lyman Water Company.

The case is presented upon an agreed statement of facts, the material portions of which follow. On the Little Colorado River in Apache County, Arizona, was located in 1916 and prior thereto a dam which impounded water for the irrigation of several thousand acres of land belonging to different individuals. This dam was washed out during that year by floods, and afterwards the various land owners who had been using the waters impounded by it for irrigating their lands, including the plaintiffs or their predecessors in interest, requested the State Treasurer, the Secretary of State, and the Governor, who compose the State Loan Board, to aid them in rebuilding it, and these officers loaned these land owners $120,000, and secured its repayment by taking mortgages from the owner of each tract of land to be irrigated thereby, and the money was used to reconstruct the dam and improve and construct the canals and laterals necessary to put the land under cultivation. None of it, however, was paid directly to the several persons to whom it had been loaned, but the state treasurer, through their written authorization, turned it over to, or upon the order of, the Lyman Water Company, a corporation, which then held title to the dam and reservoir sites, and had agreed to rebuild them. This company began construction and carried it on under the supervision and direction of an engineer appointed by the Governor of the state, but whose salary it itself paid.

After work on the dam had proceeded for some time, a change in the supervising engineer was made by the governor, and the succeeding engineer thought that certain portions of the work had not been carried on properly, but should be torn out and reconstructed, and that it would be necessary to raise additional funds to complete the dam. Thereupon the land owners applied for additional and new loans on their several tracts of land, and these secured by mortgages on these lands were made, the original notes and mortgages being released and discharged. As before, they each gave the state treasurer written authority to pay the money loaned them to the Lyman Water Company to be used in reconstructing the dam.

After the work of rebuilding had continued for some time under the second supervising engineer, a third one was appointed, and he determined that certain portions of the previous construction should be torn out and new work put in, and that still additional funds would be necessary to complete the dam. Thereafter other lands were taken into the project, and new and additional loans secured by the lands thereunder, new notes bearing six per cent interest, and new mortgages being executed by the various land owners, including the plaintiffs. As before, those procuring loans gave the state treasurer written authority to pay the whole of their loans to the Lyman Water Company to be used in completing the dam. However, the understanding at the time each person procured his loan was that the proceeds thereof would be paid out by the state treasurer in satisfaction of bills approved and incurred by the Lyman Water Company in constructing the dam, canals, and other parts incident to the irrigation of said land, and not to the company directly, and, with the exception of $20,000 expended in 1926 delinquent taxes and assessments, the proceeds of said loan were so disbursed.

It was also understood and agreed between the persons procuring said loans and the state treasurer that the latter should be and remain a member of the board of directors of the Lyman Water Company.

The plaintiffs were the owners of thirty acres of farm land under the Lyman dam, and, upon representation of the state of Arizona, through its officers and agents, that the state would expend for their use and benefit the sum of $1,050 in the reconstruction of the dam, the ditches, and laterals, they executed to the state in 1920 for this sum a promissory note bearing six per cent interest and maturing fifteen years later, and secured its repayment by a mortgage upon this thirty acres of land and thirty shares of the capital stock of the Lyman Water Company which they transferred to the state loan board and authorized any one of its members to vote by delivering therewith their proxy thereto.

The funds in question were derived from the sale and rental of institutional lands granted to the state by the Enabling Act, and were loaned pursuant to sections 108 to 116, chapter 5, Second Special Session, of the second legislature.

In 1927 the plaintiffs and other owners of land under the Lyman Dam Project represented to the legislature that they had executed to the state of Arizona notes secured by mortgages for sums greatly in excess of the amounts expended by the state for their use and benefit, in that the sums spent in the construction of the dam, ditches, and laterals above described did not equal one-third of the amounts of their notes and mortgages to the state, and asked it to relieve them from paying the portion they did not receive. The legislature, after investigating the proposition, evidently felt that their cause was just, and, to give effect to this conviction, enacted chapter 40, Session Laws of the Regular Session of that year, which is in the following language:

"An Act to compromise and settle the claims of Martin Jensen [and fifty-seven other named persons] and to recognize the liability of the State of Arizona in the expenditure of permanent school funds intended to be loaned to the settlers under the Lyman Dam, Apache County, Arizona; making an appropriation therefor and further providing for the ascertainment and report by the Loan Commission of the loss the State of Arizona has suffered on moneys loaned on land under the Lyman Dam Project.

"Be it enacted by the Legislature of the State of Arizona:

"Section 1. The Loan Commission of the State of Arizona is hereby authorized and directed to settle certain claims against the State of Arizona made by settlers under the Lyman Dam, by reducing certain loans now outstanding and held by the Loan Commission and secured by real estate mortgages, by amounts equal to fifty per cent. of the original moneys loaned; said amount deducted and the names of the persons entitled to relief are as follows:

Acres

Shares

Per Cent.

Number

Name

Amount

Mtg.

Pledged

Charged off.

583

Levi S. Udall

$1,050.00

30

30

$525.00

Section 2 appropriates from the general fund the sum of $93,734.83 the total amount deducted from the sums due by the fifty-eight persons named, to be paid into the permanent school fund, or into the fund from which the loans were made, at the rate of $10,000 per year until such funds have been re-established. The last section, 3, is not material to this inquiry.

Following the passage of this chapter, plaintiffs offered the state treasurer $728.39, one-half of $1,050 plus the interest, in payment of their note, and demanded satisfaction of the mortgage and reassignment of the...