Crane Falls Power & Irrigation Co. v. Snake River Irrigation Co. , 24 Idaho 63 ( 1913 )

SULLIVAN, J.

This action was brought by the Crane Falls Power & Irrigation Company, a corporation (which will hereafter be referred to as the Crane Falls Company), against the Snake River Irrigation Company (which will hereafter be referred to as the Snake River Company), to quiet title in the plaintiff corporation to four partially constructed irrigation canals along the Snake river, in the southeastern part of Ada county, and to enjoin the defendant corporation from trespassing thereon and appropriating the same to its own use.

The respondent corporation answered the complaint, and upon the issues joined, the court, without a jury, tried1 the case and declined to quiet-plaintiff’s title to either of said canals or work constructed by it, and declined to enjoin defendant, as prayed for, and also dissolved the temporary restraining order theretofore issued in said matter, and entered judgment in favor of the Snake River Company for its costs.

The record shows, among other things, the following facts: There is a body of land consisting of about 8,000 acres, situated in the southeastern comer of Ada county, near Snake river; in 1909 the greater portion of said tract had been entered in the United States land office by various settlers under desert and homestead entries, the greater part being under desert entries; the land was arid in character and the settlers desired to secure water for the irrigation of the same, but as such land was situated at an elevation of from 50 to 200 feet above Snake river, the only feasible method of bringing water upon the land was by means of pumps, and it was necessary for many of said entrymen to have water upon their lands in the spring and early summer of 1910 in order to comply with the land laws of the' United States; the only recourse of such claimants, if water failed them in 1910, was to abandon- their filings thereon and refile under some other form of entry, or spend large sums of money for scrip with which to enter said land, or to abandon them. Some time during the summer or fall of 1909, the Crane Falls Company began negotiations with some of the settlers upon said land with a view to supplying water therefor, and a written contract was entered into on the 10th of November, 1909, with the Crane Falls Company. Said contract was signed on that date but was not a direct contract between the settlers and said company, but was a contract between said Crane Falls Company, and the Apple Cove Water Users’ Association, which association was incorporated in May, 1909, and will hereafter be referred to as the Apple Cove Association.

It appears that as early as May or June, 1909, the settlers, evidently believing that satisfactory terms would be made with said Crane Falls Company, and that a contract would be entered into with it, began signing individual applications to purchase stock of the Apple Cove Association corporation, and by the end of October, 1909, more than seventy per cent of the number of shares in said Apple Cove Association had been embraced in these written applications, as shown by plaintiff’s exhibits 1 to 31, inclusive. It also appears that the settlers appointed a committee, consisting of five of the land owners, to take charge on the part of the .settlers of the matter of the preparation of the main contract, which is marked “Plaintiff’s Exhibit 34,” as well as other matters coming up during the negotiations between the settlers and the Crane Falls Company.

It appears from the testimony that the Crane Falls Company was instrumental in the formation of the Apple Cove Association. The evidence indicates that the Apple Cove Association was incorporated for the purpose of procuring the settlers to sign the contracts with the Crane Falls Company, which contracts are represented by exhibits 1 to 31 contained in the record. After the plant was completed, the settlers were to buy the capital stock of the Apple Cove Association and take over the plant for the water users, or, as stated by witness Chattin, “They were to pay the Crane Falls Irrigation Company for building these ditches and the erection of the plant with the stock of this company [Apple Cove Association], then they were to buy back from them at so much a share.” The board of directors of the Apple Cove Association was composed of the individuals who, prior to the time of its organization, had constituted the committee of the settlers and which still constituted that committee, and whose duty, as such, was to represent the land owners and protect their rights and holdings. Had such irrigation plant been completed, the Apple Cove Association would have performed the very important part that an operating company performs under the Carey act contracts with the state.

The committee representing the settlers and the Crane Falls Company, which latter was represented by Hassler and Shettler, finally agreed on the terms of the contract to be entered into between the Crane Falls Company and the Apple Cove Association. That contract provided that appellant should build at its own expense a complete power and pumping plant and irrigation system, of size and capacity sufficient to deliver water for the proper irrigation of said lands, the system to consist of a power plant and diversion works at Crane Falls, Idaho, and a system of electrically driven pumps and pipelines at Apple Cove, sufficient in size to pump the required amount of water into the heads of the canals which the Crane Falls Company was to build, to carry the water upon the land. In consideration of the building of this system in the manner specified and to be completed by May 1, 1910, appellant was to receive the entire authorized capital stock of the Apple Cove Association. The form of contract agreed upon contained the provision that the Crane Falls Company should give the Apple Cove Association a bond in the sum of $100,000 conditioned upon its faithful performance of the contract. This bond was evidently intended for the purpose of indemnifying the settlers in case they did not get water during the season of 1910, so as to make the requisite proof for the entry of their lands.

It seems clear that up to the time of the execution of said contract it had been understood 'that the Apple Cove Association was to be protected by a bond fully indemnifying the settlers against the loss occasioned by any failure of the Crane Falls Company to keep its contract. At that time a great number of the Settlers had actually signed applications, such as exhibits 1 to 31, contained in the record, for the purchase from the Crane Falls Company of stock in the Apple Cove Association. The first of said applications had been signed in June, 1909. Most of said contracts were signed prior to November 10, 1909, when the contract between the Crane Falls Company and the Apple Cove Association was executed by them, but with an understanding on the part of the settlers of the general nature of the contract to be executed by said corporation, and no doubt on the supposition that a bond would be provided for. It was understood that the main contract should require the Crane Falls Company to construct the power and pumping plant, ditches and diversion works, and receive as full pay for its construction work the entire capital stock of the Apple Cove Association, excepting five shares which were to go to the directors of the association. It also provided that the Crane Falls Company should sell the stock so received of the Apple Cove Association to the settlers, and the applications for the purchase of this stock, as shown by said exhibits 1 to 31, were made and delivered to the committee of settlers for the purpose of authorizing such committee to deliver the applications to the Crane Falls Company when it had satisfied such committee of its ability to fulfill and complete its contract with the Apple Cove Association in the construction of said system and power plant.

It is provided in said application that the Apple Cove Association is organized for the main purpose of securing the construction of an irrigation system and thereafter owning and operating the same; 2d, that the Crane Falls Company proposes to take all of the capital stock of the association for the full payment for the construction of said system; 3d, that the settler is to purchase a certain amount of the stock of the Apple Cove Association owned by the Crane Falls Company at a certain price, approximately $52.50 per share; 4th, that the settler is to assign his land in trust as security for the payment of the stock; 5th, that upon demand the settler shall give such other mortgage or lien upon his land as shall be approved by the State Land Board, in order to further secure the Crane Falls Co.; 6th, that the shares of stock purchased by the settler shall be put up as a further security; 7th, that the settler is to pay his pro rata share of all the tolls and assessments ; 8th, that no water is to be delivered while any instalment is due to the Crane Falls Company ■ 9th, that every share of stock is to represent 1/80 cubic foot of water per acre; 10th, that said application and proposal is entered into with the understanding that it would be accepted and a proper bond executed by the Crane Falls Company on or before October 15, 1909. This latter provision is contained only in applications designated as exhibits 8 and 12 to' 31, inclusive.

It will be noted that the applications relate to the purchase from the Crane Falls Company of the stock of the Apple Cove Association, and that no arrangement, agreement or stipulation is made in regard to any right of way or proposed right of way therein.

In October, 1909, after the terms of the main contract between the Apple Cove Association and the Crane Falls Company had been agreed upon, bnt before the contract was actually executed, C. B. Smith, of Smith, Kerry & Chase, who then -owned nearly the entire capital stock of the appellant and were representing the appellant company, came to Mountainhome, and at a meeting with the settlers’ committee asked that the provisions, of the main contract requiring it to give a $100,000 bond for the performance of said contract be stricken from it. He stated that the bond, if required, would be a hardship on his company, for in order to give it the Crane Falls Company would have to put up a certified check for that amount, and it Would simply be out of the use of that amount of money until the plant was completed, and that they were going to put in a plant and give the users water for the 1910 spring irrigation. At that time it was explained to him that the settlers must have water by the spring of 1910 in order to save their land. But in consideration of the promise of said Smith for the Crane Falls Company, to furnish water to the settlers the following spring, the. settlers ’ committee consented to the elimination of the provision from the bond, and according to that agreement the provision requiring a bond was left out of the contract, and on November 10, 1909, the main contract was signed by the Crane Falls Company and the Apple Cove Association. After the signing of said contract the settlers continued to gather individual applications and agreements for the purchase of stock, until by December 13, 1909, it had agreements covering 4,939 shares in its possession ready to deposit in escrow. It seems that the settlers were dissatisfied with certain parts' of the contract as it then stood and refused to proceed unless a further modification was made. Accordingly, on December 13th, the appellant company, through its vice-president and acting secretary, consented to such modification, and sent to the Apple Cove Association an instrument modifying the contract in several respects, placing an interpretation on certain clauses, waiving the requirement that contracts for 5,600 shares be secured, and stating that the money deposited with the escrow-holder should be returned upon the failure of the Crane Falls Company to prosecute such construction work with reasonable diligence until completion. Upon the receipt of said modification in the form of a letter, and relying upon it, as well as upon the agreement that water would be furnished by the spring of 1910, the ten per cent cash and said applications and certain approved notes were placed in escrow with the First National Bank of Mountainhome.

On an examination of said applications and agreement for the purchase of stock by the settler, it appears that the aggregate amount to be paid for the stock of the Apple Cove Association held by the Crane Falls Company was approximately $230,000, and it appears from the record that the Crane Falls Company had expended between fifteen and seventeen thousand dollars in the construction of canals up to the second day of April, 1910, when it quit work.

It is clear from the provisions of the main contract that the Crane Falls Company was to construct said system of canals, pumps, pipe-lines, etc., which, when constructed, was to be the property of the association, and the appellant corporation was to receive the capital stock of the association for its construction work, which capital stock it was to sell to the settlers; and in the main contract said Apple Cove Association agreed to furnish without expense to the power company, free sites and rights cf way for pumping plants, substations, pipe, transmission and telephone lines for such works. Under the main contract the Apple Cove Association was to secure a right of way from the settlers, and it no doubt was understood that while the settlers were to furnish such right of way, etc., for the construction of such work, it was not intended that they should convey such right of way and sites to the Crane Falls Company. It was simply to furnish them for the erection and construction of such irrigation system, which system was to belong to the settlers when completed. The Apple Cove Association in its said agreement obligated itself to furnish such sites and rights of way for the construction of said system, but this obligation was separate from the obligations contained in the applications of the settler to purchase stock.

The individual contracts of the settler, which were offers to purchase by each settler a certain amount of stock in the Apple Cove Association which was held by the Crane Falls Company were placed in escrow with the First National Bank of Mountainhome to be delivered to the appellant upon the completion of its contract. They were not delivered to the Crane Falls Company, but were merely placed in escrow, and the settlers did not agree that said applications should be delivered to the Crane Falls Company until it had constructed said system in compliance with said main contract.

The Crane Falls Company agreed to commence actual construction work on said irrigation system and power plant within thirty days after being notified by the association that the first payment of ten per cent on a certain number of shares of stock or water rights had been deposited with the First National Bank of Mountainhome. It appears from the record that the Crane Falls Company commenced construction work on its canals but did not do anything toward the construction of its power plant up to the time it ceased work in April, 1910, and as an excuse for not doing so, the appellant claims that it had an application pending in the Department of the Interior of the general government for a right of way for its power plant over public land at Crane Falls, and the record shows that it had not procured that right of way up to the time this ease was tried in the district court, and it appears from appellant’s own showing that it not only did not comply with its contract in the matter of the construction of canals, power and pumping plant, transmission lines, etc., but it had not secured the necessary right of way from the government, without which no diversion of water for power was possible. Appellant made no pretense, and now makes no pretense, of showing that it now or ever will be able to pump water except for the Gem Irrigation District. It is thus made to appear that the delay in constructing said system and in furnishing water to the settlers was due to facts which still exist as to the construction of the system described in said main contract.

After it became evident to the settlers that the appellant company could not furnish water for the season of 1910, or in any manner complete its work according to its contract, the individual applications for the purchase of stock were taken out of escrow by Smith and Chattin. The record shows that it was done on behalf of all those who had signed these contracts; and it further appears that the consent to withdraw those applications for stock from escrow was given by D. W. Shettler on the part of the company. When it was concluded to withdraw said applications from escrow, Mr. Shettler was sent for by the committee. He stated that he was a representative of the Crane Falls Company, and that he was satisfied that the company had not lived up to its part of the contract, and it was satisfactory to permit the withdrawal of said applications from escrow. It appears from the record that Shettler had been active on behalf of the Crane Falls Company, in promoting its interests and in procuring said main contract. He had been very active in seeing that the parties got together on said main contract and had actfed conjointly with the other members of the Crane Falls Company.. At the time when a modification of said contract had been sent to Mountainhome, he signed the same as acting secretary. While it is claimed by counsel for appellant that he had no authority to consent to the withdrawal of said applications from escrow, it appears that he had general authority to deal with the settlers and said Apple Cove Association, in relation to the contract.

We think from all the evidence that the settlers, or the Apple Cove Association, on their behalf, had full right and authority to withdraw said applications from escrow. The Crane Falls Company, under its contract, was to build a power plant, which they claimed would cost $500,000, also a pumping plant', pipe-lines, ditches, etc., which would cost fully $100,000, and the only work done up to the time the company ceased work was the building of the canals or ditches referred to, at an expense of from fifteen to seventeen thousand dollars. The main object and purpose of the settlers was to get water for the land, so that they could make final proof on their desert and other entries during the year of 1910, but nearly two years elapsed after the partial construction of said canals without any further work being done. Some of the settlers lost their lands, some were required to purchase scrip with which to secure title, and others were forced to make refilings. The partially constructed ditches fell into disrepair.

That apparently was the condition of things when the Snake River Company offered to supply water to said settlers, which company is known as a Carey act company, with which company the settlers made a contract for water and under which contract the respondent company proceeded with the construction of its pumping stations, transmission lines and other facilities for furnishing water to the land of the settlers, and entered into the possession of the three partially constructed ditches referred to, and had possession of them at the time of the commencement of this action on March 15, 1912. It has expended considerable money in repairing and completing said partially constructed ditches, and in addition has bought an electrical equipment and pump costing about $30,000 and a. pumping station costing approximately $12,000. It had a water permit and expected to complete its system and furnish water to the land by the 15th of May, 1912.

The respondent corporation claims a right to use said partially completed ditches in question because of an arrangement with the parties over'whose lands said ditches extend, and it claims in addition that in the absence of such an arrangement it would have a better right to said ditches than appellant, because it was in possession of them at the time when this action was brought. It is further claimed that respondent began the construction of its irrigation system and secured its right to the ditches from the settlers on whose land said partially constructed canals were located, with no knowledge that appellant had a claim on said ditches. Said partially completed ditches were on the lands of the settlers and partly filled with sand and in places were caved and washed. Appellant, on the other hand, waited until respondent had expended large sums of money and actually delivered "water to the settlers, then commenced this action, not to secure the value of the ditches on the theory that it owned them, but to enjoin the respondent company from completing said ditches, alleging in this connection that the respondent was insolvent and unable to respond in damages for its purported trespass, an allegation which was denied by the answer and which the appellant company failed to prove on the trial.

The question is then directly presented on the facts, the appellant company itself failing to complete the system in accordance with its contract, to supply the settlers with water, and unable to complete said system after having abandoned it, or at least ceased work on it for nearly two years, can it now maintain this action to enjoin the defendant from using said partially constructed ditches in supplying the settlers with water? We think not. The equities of the case are with the Snake River Company and the settlers.

It is contended by counsel for appellant that the appellant company was the owner of the rights of way over which said partially constructed ditches passed. We cannot agree with that contention. It is true the settlers were to furnish the right of way under the contract, and they were to own the entire system as soon as it was completed. They did furnish the right of way so far as it passed over the land of the settlers, but it was not intended, nor was it necessary, that the title to said right of way should pass to the Crane Falls Company, as the entire system was to become the property of the settlers who purchased the stock of the Apple Cove Association, which the appellant had the right to sell if it complied with its contract.

Said main contract contains a provision that in case the Crane Falls Company fails to furnish water at the time agreed upon, no interest should be charged on the purchase price of said plant until it was furnished. While that is true, it is clear that the intention was to furnish water by the spring of 1910. It failed to furnish water by that time. It has totally failed to perform more than one-fifteenth part of its construction work, and has quit its work altogether. The land wbieb it was to irrigate is now supplied from another system constructed by the respondent. Many of the settlers owning such lands now are net the original settlers who held the land at the time the negotiations were pending and said main contract was executed. The record shows that the appellant could not perform the contract, and a failure did not result from the fact that said applications were withdrawn from escrow. The failure was in part because of the action of the Secretary of the Interior, and in part it would seem to be the fault of appellant for not rushing the work in the construction of said plant before the power site was withdrawn by the Secretary of the Interior, but that was appellant’s misfortune and not the misfortune of the respondent company. This action is not brought to recover the value of said partially constructed ditches or for damages to appellant by reason of the respondent’s use thereof, but is brought on the theory that the Crane Falls Company has an irrigation system with which the respondent is interfering.

(June 21, 1913.) Contract — Construction or — Canals—Ditches—Rights or Wav eor —Over Public Lands — Construction or Statutes. 1." Held, under the "Application and Agreement for the Purchase of Stock” made by the settlers and the contract between the Apple Cove Association and the Crane Palls Power & Irrigation Company, that it was not the intention of the parties to furnish the Crane Palls Company with title to a right of way for the construction of ditches for the irrigation of the lands of the settlers. 2. Under the laws of this state, there are two methods of acquiring water rights: (1) To proceed as the statute directs; (2) To apply unappropriated water to a beneficial use without making application to the state engineer.

After a most careful review of' the entire ease, we are fully satisfied that the judgment of the trial court must be affirmed, and it is so ordered. Costs awarded to respondent.

Ailshie, C. J., and Stewart, J., concur.