Hall v. Eagle Rock & Willow Creek Water Co.

HTJSTON, J. This action was brought by the plaintiff to restrain the defendant corporation from selling the shares of said plaintiff in said corporation for the purpose of paying-assessments levied on said shares. Trial was had before the district court without a jury, and judgment rendered in accordance with prayer of the plaintiff’s complaint, perpetually enjoining defendant corporation from selling, or in any manner disposing of, the stock of plaintiff in said corporation in payment of any assessment made thereon, the par value of which stock has been fully paid. From this judgment and decree this appeal is taken. The defendant corporation is one of a class indigenous to the arid portions of our country, and to which, as they involve large interests, the legislation of the country has been especially directed. The defendant corporation was organized in 1884. The purpose of the organization is clearly shown by "its articles of incorporation as they appear in the record, to wit, to furnish water for the irrigation of lands accessible for that purpose. It is true that the purpose expressed includes “mining and manufacturing,” etc., but this may well be attributed to the natural desire to cover all contingencies which might 555 peradventure involve a profit; but tbe court finds as a fact that: “It has always been a provision of the by-laws of the defendant, and it has always been a practice and custom, that the stockholders were entitled to, and have had, the use of five inches of water for every share of stock owned by the stockholder. Such provision is also contained in the certificate of stock.” The ultimate purpose of the organization would therefore seem to be quite apparent. It was not a corporation from which profit was intended to be made outside of the utilization of the water appropriated. No dividends or other profits were intended or anticipated beyond what was derivable from the use of the water. In construing the law applicable to corporations as prescribed by our statutes, we must not be unmindful of the character of, and the purposes for which, the organization under consideration was created. It is claimed by plaintiff that neither under the statutes existing at the time of its creation nor by virtue of its articles of incorporation is the defendant authorized or entitled to levy assessments, and, in default of payment, sell stock, the par value of which has been fully paid up by the stockholder. It is provided by article 3 of the certificate of incorporation of the defendant that “the capital stock of the corporation shall not exceed fifty thousand dollars ($50,000), divided into shares of fifty dollars ($50) each, which shall forever be and remain unassessable, unless otherwise voted by a three-fourths vote of all the stockholders.” The court finds as a fact “that at a meeting of the defendant’s stockholders, held March 17, 1888, it was duly and unanimously voted by three-fourths of the stockholders that its board of directors be empowered to levy assessments upon its capital stock not to exceed five per cent cash and ten per cent labor in one year.” The plaintiff became a stockholder in defendant corporation in September, 1888, and must be presumed to have been acquainted with both article 3 and the action had thereunder. The plaintiff recognized and acquiesced in this action of the corporation for seven or eight years. While it is doubtless true that the defendant corporation never filed the certificate required by section 2650 of the Eevised Statutes of Idaho of 1887, it is nevertheless true, and the fact is so found by the court, “that 556 immediately after the enactment of the Eevised Statutes defendant levied an assessment, and every year since has levied assessments, and collected the same, in accordance with and in pursuance to the laws governing the assessment of stock and the collection of such assessment, and the sale of delinquent stock as contained in the Eevised Statutes of Idaho adopted in 1887.” When the corporation has for a period of eight years pursued a course recognized by the statutes, and known and acquiesced in by the plaintiff, and which course is-absolutely essential to the very existence of the corporation, and not only to the utilization of its property for the purposes for which it was created, but for its preservation, it would not, in our view, be in accord with principles of equity or of common honesty and justice to permit the plaintiff to wreck the corporation upon the ground of a noneompliance with what may well be considered a mere clerical act. The facts that the defendant corporation was not organized for profit outside of the utilization of the water for the benefit of the stockholders; that each share of stock represented, not so. much money, but five inches of water; that assessments were authorized, and were made to be paid two-thirds in labor and one-third in cash in each year — must not be overlooked in applying the statutes to this case. If the theory óf the plaintiff is to be adopted, the destruction of all agricultural interests in this state dependent upon irrigation may be justly apprehended. Unless the paid-up stock of the corporations of the kind of the defendant can be assessed to meet the expense of keeping its property in repair, the utility of its property is lost, the purpose for which the corporation was organized is defeated, and the destruction of its property is only a question of a very short time. The duty of keeping its ditch or canal in repair, as well as the performance of other duties, all necessarily involving expense, are imposed upon the corporation defendant by the statutes under penalties. How are these to be met if the rule contended for by the plaintiff is to find recognition? We do not think that section 2609 of Eevised Statutes, as amended by the act of 1891, affects the question involved in this case. That act refers to the personal Eabilityi of stockholders, and not to the liability of stock to assessments 557 made and necessary not only to carry out the purpose for which the corporation was created, but to preserve its property. To illustrate what appears to us the impracticability of plaintiff’s position, let us suppose a case: The defendant corporation has constructed a canal at an expense of $100,000, which sum is represented by shares of stock fully paid up. The canal is paid for. Its purpose is to distribute water to the shareholders of its stock in proportion to the number of shares held by each at the ratio of five inches of water to every share of stock. The law makes it imperative upon the defendant corporation, not only to keep its canal in repair, but to employ one or more water-masters to superintend the distribution of water, besides other necessary help in keeping the canal in repair, all of which involves expense. How is such expense to be met? Is there any other practicable or feasible way than that pursued by the defendant? We think that under the laws of Idaho the stock in corporations of the character of the defendant in this case is subject to assessments or dues for maintenance expenses, and that the defendant corporation, by its acts, continued for a period of eight years, and recognized and acquiesced in by the plaintiff and all the other stockholders, amounted to an adoption of title 4 of the Civil Code. The judgment of the district court is reversed, with costs. Sullivan, C. J., and Quarles, J., concur.