Danley v. Merced Irrigation District

The plaintiff, the appellant herein, as an owner of land situated in the county of Merced and within the exterior boundaries of the Merced Irrigation District, 'began this action for the purpose of restraining the irrigation district and its directors from entering into a certain contract obligating the district to pay to certain persons, hereafter designated as contract holders, annually for seventeen years the sum of $70,000 and upward.

The trial court sustained the defendants’ demurrer to the plaintiff’s complaint without leave to amend and thereafter entered judgment in favor of the defendants.

Prior to the formation of the Merced Irrigation District, the Merced Canal and Irrigation'Company and its successor, the Crocker-Huffman Land and Water Company, entered into contracts with divers persons by the terms and conditions of which contracts said canal company and its successor, the Crocker-Huffman Land and Water Company, agreed to supply water from their canal system to such persons for the purposes of irrigation.

These contracts differ somewhat in formation but are " separable into different classes, one of the contracts of each class being attached to the plaintiff’s complaint as exhibits, to wit, Exhibits “A” to “P,” inclusive. These contracts bound the Merced Canal and Irrigation Company and its

Some of these contracts, such as followed the form of Exhibit “A,” provided for the payment of a certain cash sum, which was therein specified, for a water right not exceeding two and one-half cubic feet per second for irrigating the land therein, described from the date of the contract up to and including the third day of March, 1933. Other contracts, as evidenced by the remainder of exhibits attached to plaintiff’s complaint and executed by the Crocker-Huffman Land and Water Company, provided for the payment of a certain sum in cash upon the execution of the contract and further annual payments in a specified sum during the life of the contract, to wit, from the date of the execution thereof in 1892 until April 30, 1938.

It would appear, from an examination of the transcript, that practically all of the contracts entered into by the Crocker-Huffman Land and Water Company expire at about the same time, to wit, in April, 1938.

The total area of land covered by the contracts just referred to is slightly in excess of 52,379 acres.

In 1920, after due and regular proceedings, the defendant, the Merced Irrigation District, was regularly formed. This district comprises an area of 185,000 acres, including the 52,379 acres covered by the contracts hereinbefore referred to. After the organization of the said Merced Irrigation District and prior to the commencement of this action, the district purchased of the Crocker-Huffman Land and Water Company all its water and water rights and its system of canals and irrigation ditches for the sum of $2,500,000. After a suit had been begun by some of the contract holders against the defendant Merced Irrigation District to determine and establish the rights of the contract holders herein referred to, it appears negotiations for a settlement were entered into which finally culminated in a contract drawn in the form as attached to plaintiff’s complaint and marked Exhibit “Q.”

The said contract involved in this action is proposed to be executed by the Merced Irrigation District as a party of the first part and the contract holders herein referred to as parties of the second part. This agreement recites the execu

It is further covenanted that the agreement shall be set up in a supplemental pleading in the suit begun as aforesaid to determine the rights of the contract holders and that judgment should be entered fixing their rights as herein set forth. It is also further provided in the contract that five per cent of the total amount to be paid to each contract holder was assigned to their attorney as compensation for fees for services in connection with the settlement and adjustment agreed upon.

On the part of the appellant it is insisted that the proposed agreement, if executed, would prove highly detrimental to the interests of the district and on the part of the respondents it is argued that the results would prove beneficial. With this phase of the question, however, we will express no opinion, as it does not really affect the issues to be determined, there being no allegations of fraud or anything of that character in the complaint which calls in question the results that would be reached by the agreement if executed and carried through to final completion. We have to do only with the question of whether the proposed agreement is or is not ultra vires.

Section 2 of the California Irrigation District Act (Stats. 1897, p. 254, as amended by Stats. 1919, p. 717, sec. 2), as it read at the time of the formation of the defendant Merced Irrigation District, provides as follows: “Lands already irrigated and riparian lands may be included in the district if in the judgment of the Board of Supervisors such land will be benefited or if the water used thereon or the rights to the use of water thereon should, in the judgment of the. Board of Supervisors, be taken or acquired for the district.” Under this power the 52,379 acres of land irrigated by the water of the Crocker-Huffman Land and Water Company, were taken into the larger district of 185,000 acres now comprising the Merced Irrigation District. Whether it was set forth in the petition for the organization of the defendant irrigation district that it was the purpose of the larger district to acquire the water rights, etc., of the CrockerHuffman Land and Water system does not appear from the pleadings or transcript in this action but from the fact that the defendant Irrigation District has purchased all the interests of the Crocker-Huffman Land and Water Company subject to the provisions of their contracts with the contract holders hereinbefore referred to, we conclude that such was

Section 61 of the same act (Stats. 1921, p. 1110, sec. 4), after setting forth certain prohibitions relating to the incurring of indebtedness, reads: “Nothing contained in this section shall be construed as limiting the right of the board to enter into any contract or lease for any lands, waters, water rights or other property as elsewhere in this act authorized and by such lease or contract to bind the district for the payment of the consideration specified in such lease or contract, but if the smallest payment to be made under such lease or contract in any year exceeds an amount equal to ten cents an acre for all the land in the district, such lease or contract shall not be valid unless approved by the commission authorized by law to approve the bonds of irrigation districts as legal investments for savings banks, or unless an assessment sufficient to meet all the payments to become due under such lease or contract shall have been or shall be authorized for that purpose in accordance with section fifty-nine of this act.’’

This provision of section 59 (Stats. 1919, p. 668, sec. 13), however, so far as material to the circumstances before this court, is not a grant of power additional to that contained in section 15 heretofore set forth, other than that in the purchasing of the property referred to in section 15, the lease or contract may be so drawn as to extend over a period of time, if the conditions therein set forth are complied with. It does not extend the power of the board so far as section

[1] The words “water and water rights” used in section 15 have a definite and certain meaning. They relate to the waters to be acquired by the district and distributed by it to the different land owners and water rights, as they relate to the land owners, mean, relate to, and indicate the right of the land owner to have and use upon his lands, as occasion requires, the quantity of water called for in his contract or which may be beneficially used in the irrigation of his lands, and so far as water rights are concerned in relation to the district, it embraces the right of the district to take certain waters and convey them through its systems of canals and irrigating ditches to the various points of use. [2] The words “other property” appearing in the section, we think, mean other like property necessary for the construction, use, etc., of the works belonging to the district. [3] The word “necessary” upon which considerable stress has been laid, we think, has a broader meaning than that “which is absolutely indispensable,” but includes that which is reasonably convenient, and appropriate for carrying out the purposes expressed in the section following the use of that word. [4] The word “use,” as it appears in the section following the granting of power to acquire takes on a special signification; in other words, the waters and water rights and other property authorized to be acquired must foe such as is used or may be used in the supply of water to be carried through the canals and irrigating ditches owned by the district. These words relate to the use and the right to the use of the waters to be acquired and not to any compensation to be paid therefor.

[5] With this in view, let us consider again the provisions of the proposed agreement and ascertain what the district proposes to acquire. In the recital portion of the agreement, it is set forth that the district desires to acquire the rights of the said contract holders to receive water at the price provided in said contract. In the granting portion of the agreement on the part of the contract holders, as set forth in paragraph 6 thereof, the contract holders release 'to the district all and any rights which they have to receive water at the rate specified in said contract and then in para

By reason of these limiting provisions in the agreement withholding conveyance of water rights of the contract holders and in view of paragraph 8 (assuming it means as alleged by respondents only a remission of the tolls agreed to be paid by the contract holders under their contracts) the proposed agreement stripped of its verbiage amounts to simply this, if the contract holders will pay all assessments levied upon their lands during the life of the agreement, then the district will refund to them the sum of $70,000 per annum, plus eighty-five per cent of whatever amount of expenses the district may incur and levy taxes for in excess of $146,666 per year. We find nothing in the irrigation ■ laws of California which authorizes or permits any such procedure.

[6] Section 15 unquestionably, as we read it, authorizes the acquisition of the water rights owned and possessed by the contract holders herein referred to, if the acquisition nf the same be found necessary for the use of the district

Again, section 552 of the Civil Code fixes the water right of the contract holders as an easement to be enjoyed upon the payment of such rates and terms as may be established in pursuance of law. This is the easement which the district does not acquire and which the contract holders expressly retain. Also section 662 of the Civil Code defines such right to be incidental or appurtenant to the land when it is by right used with the land and for its benefit.

[7] The second waiver on the part of the contract holders found in paragraph 6 of the proposed agreement does not furnish any consideration for its execution. It reads: “And hereby agree on their own behalf and on behalf of their successors in ownership of the land to which said Contract is attached not to contest any assessment hereafter levied by said District in accordance with law by reason of dues, rights, privileges or immunity growing out of their rights under said Contract.” We do not need to attempt to ascertain what this provision means, but it is manifest that if the assessment is levied “in accordance with law” no contest instituted by the contract holders would be of any avail and an agreement on the part of the district to pay them $70,000 per annum for seventeen years for waiving a right or privilege which they did not possess is an act not authorized by any of the provisions of the laws of the: state relating to irrigation districts. However wise it might: he to avoid litigation, the board of directors of an irrigation district is not empowered to pay land owners in order to induce them to pay their assessments. It is the duty and the legal duty, which can be enforced against every land owner in the district, to pay all assessments which are levied in accordance with law. [8] It appears from the briefs submitted in this cause- that certain statements or promises were made to the contract holders in relation to the acquisition of their water rights by the district. in order to induce them to

By reason of the adjusted compensation or arrangement of payments and credits' provided for in the agreement, respondents argued that the contract holders released the property right to the district and that the district thus acquired the right to deal with the property irrespective of the right which was thus released and that the district obtains the release of its property from an easement or burden upon it and as a result. of the transaction becomes the actual owner of a greater property than it theretofore owned. The fallacy of this statement is made apparent by the following illustration: Under the terms of Exhibit “E,” for example, the Crocker-HufEman Land and Water Company conveys to one E. L. Reed 190.1 cubic inches of the water per second in consideration of a cash payment of $190 and the further payment on the first Monday in September, 1903, of $57.03 and on the first Monday of September thereafter a certain specified sum gradually reduced until the payment is the sum of $19.01. After entering into this agreement, the Crocker-HufEman Land and Water Company conveys its canal system, water, and water rights to the Merced Irrigation District, and after this conveyance the Merced Irrigation District enters into negotiations with E. L. Reed or his assigns changing the terms of the annual payments. The quantity of water, to wit, 190.1 cubic inches, constituting the water right possessed by Reed and his grantors, is expressly eliminated from the agreement. That is to say, both before and after the execution of the proposed agreement, the water right possessed by Reed and his grantors is 190.1 cubic inches. The quantity of water that must be furnished by the district is neither increased nor diminished

[9] Section 55 of the California irrigation laws (Stats. 1911, p. 516, sec. 11) authorizes the board of directors of the irrigation districts, instead of levying assessments, to fix rates of toll charges for irrigation or other public uses declared by the act and collect the sum from all persons using the canal for irrigation or other purposes. As this is a legislative grant and a continuing power, we think the provisions of paragraph 8 purporting to waive the right to exact tolls without the power of the board of directors and, therefore, void. This paragraph of the proposed agreement may be read out of the instrument without affecting other portions thereof and although void in itself does not, we think, bear upon the validity or invalidity of the agreement as a whole.

Although elaborately argued, the rights of the contract holders and the district arising out of any assessment that might be levied are not really before us for determination. In some of the states the statutes provide for a hearing whenever an assessment is levied to determine the benefits to' the lands assessed, but there is no such provision in our irrigation law. Some of the cases hold that these questions are all presumed to have been taken into consideration and settled at the time the district is formed. Thus in the case of Fallbrook Irr. Dist. v. Bradley, 164 U. S. 112 [ 41 L. Ed. 369 , 17 Sup. Ct. Rep. 56 , see, also, Rose’s U. S. Notes], the court says: "The legislature, when it fixes the district itself, is supposed to have made proper inquiry, and to have finally • and conclusively determined the fact of benefits to the land

[10] It is finally insisted that injunction will not lie in this case by reason of the provisions of the latter portion of section 526 of the Code of Civil Procedure setting forth instances in which an injunction cannot be granted. We find nothing in the section referred to which inhibits the issuance of an injunction herein. We have found that the board of directors are not executing any public statute nor are they, in proposing to enter into the agreement referred to, exercising a public ofBce in a lawful manner. Abbott on Municipal Corporations, section 1134, states the law on this question as follows: “A court of equity will interfere and restrain by injunction the execution of a contract by a public corporation where the same involves the illegal use of public moneys or property, where it is ultra vires or illegal because of irregularities in conditions precedent, or where the effect of the contract would be a waste, misappropriation or misuse of public funds or property.” The payment of money proposed to be made under the agreement not being in accordance with law, as we construe the irrigation statutes, it follows that the expenditure of the funds of the district in such a manner would amount to a misappropriation or misuse thereof. This we hold will be enjoined upon the application of a property owner and taxpayer within the district.

We think the trial court should have overruled the defendants’ demurrer to the plaintiff’s complaint. It is, therefore, ordered that the judgment of the trial court herein be and

Hart, J., and Finch, P. J., concurred.

A petition by the respondents to have this cause and Kelsey v. Merced Irr. Dist., post, p. 113 [ 226 Pac. 853 ], heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on May 5, 1924, and the following opinion then rendered thereon:

The petition for transfer of the above-entitled causes to this court after decision in the district court of appeal is denied.

We are satisfied with the conclusion of that court to the effect that the “rights” of the contract holders purporting to be waived, released, or extinguished by the proposed contract are not included within either of the classes of property enumerated in section 15 of the California Irrigation District Act (Stats. 1897, p. 258, as amended by Stats. 1919, p. 661, sec. 1), which the said board is thereby empowered to acquire. We agree with the conclusion that the words “other property” appearing in this section mean other prop-erty necessary for the construction, use, supply, maintenance, repair, or improvements of the system or works belonging to the district. We do not understand that such “other property” is limited to other like property under the rule of ejusdem generis. We withhold our approval from what is said in that opinion respecting the applicability of section 1 of article XIV of the constitution, and sections 552 and 662 of the Civil Code, and the authority of the Railroad Commission to fix rates in such a situation as is discussed herein, and also from the conclusion that the provisions of paragraph 8 of the proposed contract, purporting to waive the right to exact tolls, is a separable covenant which, although void in itself, does not bear upon the validity of the agreement as a whole. The determination of these questions we do not deem necessary to the judgment herein.