New York Trust Co. v. Farmers' Irr. Dist.

GARLAND, Circuit Judge (after stating the facts as above). [1] The consideration on the part of plaintiffs for the proposal of June 22, 1915. was the taking over of defendant’s irrigation works by the United States, the negotiations to accomplish which they desired to further and facilitate. The details, terms, and conditions of such taking over, other than those specified in the proposal, were to be worked out by a board composed of the persons named therein. The plaintiffs are not parties to the contract of December 12, 1917. The parties to that contract find no fault with it, and so far as the record shows are willing to perform it. As the details, terms, and conditions thereof, other than those specified in the proposal, were left to a board appointed by the plaintiffs themselves, they cannot complain of such details, terms, and conditions, unless it can he said that they necessarily render the contract void; in other words, the plaintiffs, to show a failure of consideration for the proposal, must show that the contract of December 12, 1917, and the deed executed by defendant in pursuance thereof, do not for some reason constitute a taking over by the United States of defendant’s irrigation works, within the meaning of those words as used in the proposal, or that the contract is so repugnant to the specified terms of the proposal as to render it void. Taking up the objections made by counsel for plaintiffs to the validity of the contract of December 12, 1917, we proceed to consider the contention that the defendant had no authority under the laws of Nebraska to make it, and that, if said laws confer such authority, such laws and the acts of defendant thereunder are void, as attempts to surrender and grant to the United States the inalienable sovereign powers of the state of Nebraska, known as the police power and powers of taxation and eminent domain. By the last clause of the proposal of June 22, 1915, it is made apparent that the bondholders anticipated that there might be a want of legal authority on the part of defendant to enter into an agreement whereby the United States could take over and operate the defendant’s irrigation canal. Therefore the board appointed by the proposal was authorized to join with the defendant in securing the requisite authority. [2] The defendant is a public ’corporation of Nebraska. Section 3465, Rev. Stats. Neb. 1913, prescribes the powers and duties of the board of directors of such corporation. Section 3467 of the same statutes provides how the title to property of such corporations shall be held. Undoubtedly for the purpose of enabling irrigation districts organized under the laws of Nebraska to co-operate with the United States in the matter of irrigation projects, as contemplated by the Act of February 21, 1911, 36 Stat. 925, 926 (Comp. St. §§ 4738-4740), the Legislature of Nebraska on March 28, 1917, passed chapter 191, Laws of Nebraska 1917, p. 464. Under the decisions of the Supreme Court of Nebraska, this law would not be affected by section 11 of article 3 of the stale Constitution, which provides in substance that no law shall be amended unless the new act contains the section or sections so [794] amended. Chapter 191 above referred to is an independent act, complete in itself. State v. Cornell, 50 Neb. 529, 70 N. W. 56; Zimmerman v. Trade, 80 Neb. 503, 114 N. W. 641; State v. Ure, 91 Neb. 31, 135 N. W. 224; Stewart v. Barton, 91 Neb. 96, 135 N. W. 381; State v. Hevelone, 92 Neb. 748, 139 N. W. 636; Hoopes v. Creighton, 100 Neb. 517, 518, 160 N. W. 742, L. R. A. 1917C, 1146, Ann. Cas. 1917E, 847; Allan v. Kennard, 81 Neb. 289, 116 N. W. 63. [3] By chapter 83, Laws 1917, p. 196, section 3467, R. S. Neb. 1913, was amended so that by chapter 191, supra, and chapter 83, full power and authority, in our opinion, was given to the defendant to make the contract of December 12, 1917. Chapter 82, Laws Neb. 1917, p. 194, in amending section 3465, Rev. Stat. Neb. 1913, expressly authorized control of the service by the defendant for the purpose of enforcing irrigation taxes. We are unable to find from this legislation or the contract that the sovereign powers of the state of Nebraska referred to were invaded or attempted to be granted away. [4, 5] It is claimed, however, that as the United States is to operate the irrigation system that the amount of expenses for operation and maintenance are within its control, and therefore the right to determine the amount to be levied is taken from the defendant. We are of the opinion that this is not a reasonable construction of the language used. The defendant is only obliged to levy and collect taxes sufficient to meet the necessary expenses of operation and maintenance of the irrigation works and system, and what the necessary expenses are the defendant has a right to determine for itself, because its obligation to levy the taxes extends only to the amount necessary for the operation and maintenance of the irrigation works and system. By the contract of August 10, 1915, made between the Tri-State Land Company, the defendant, and the United States, it was agreed that the charges, for operation and maintenance of the irrigation system should be estimated in advance by defendant’s board of directors. So that prior to December 12, 1917, it had been settled as to. where the power to determine the amount of the annual expenses for operation and maintenance should be lodged. The mere management and operation of an irrigation system for the benefit of the landowners cannot be said to be an exercise of any of the powers of state sovereignty. If the defendant had employed a manager to operate its system, the manager would not be exercising any of the powers of state sovereignty, and the fact that defendant conveyed its irrigation system to the United States, who was its creditor, in trust, for the purpose of management, does not change the situation. [6] It had also been provided by the contract of August 10, 1915, above mentioned, which obligated the defendant and the Tri-State Land Company to pay to the United States $475,000 for water stored in the Pathfindef reservoir, and which granted to the United States a permanent carriage right of 250 second feet of water through defendant’s main canal from the North Platte river to Red Willow creek for the irrigation of an additional unit to be included in the North Platte project of the United States, that the United States should pay to defendant as an operation and maintenance charge for the carriage of [795] water through defendant’s main canal one-fifth part of such amounts as should be expended by defendant each year for the operation and management of its works used in diverting and carrying the water of the United States. The facts recited show that the United States had a direct and important interest as-to how defendant’s irrigation system should be managed. It was to use this system for carrying its own water, and also was a creditor of defendant in the sum of $475,000, •both of which important interests the evidence shows were in danger of being lost through the inability of the defendant to longer operate its irrigation system. It is also recited in the contract of December 12, 1917, that the co-operative use of the defendant’s drainage works would be for the benefit of the North Platte project of the United States. We are of the opinion that the foregoing facts bring the situation within the provisions of section 2 of the Act of February 21, 1911, 36 Stat. 926, which authorizes the Secretary of the Interior, upon terms to be agreed upon, to co-operate with irrigation districts for the construction or use of reservoirs, canals, or ditches as might'be advantageously used by the government and irrigation districts. So far as the expenditure of money by the United States in connection with the irrigation works is concerned, the contract provided that all these expenditures should finally be paid by the defendant as part of the operation and maintenance of the irrigation works. We have no doubt but that the Secretary of the Interior had full power and authority to make the contract. The fact that he did make it shows a construction by the Department of the Interior of the statutes relating to the Reclamation Service favorable to the contention of counsel for defendant. [7] It is further claimed by counsel for the plaintiffs that the Secretary of the Interior had no authority to bind the United States to operate any irrigation project which the United States did not hold by absolute title. We are of the opinion that the laws in existence relating to the Reclamation Service gave the United States the power to take over the operation of the irrigation system for the purpose of securing the payment of a debt contracted by the system to the United States. Not much specific authority is needed for a creditor to take over the management of a debtor’s property with the latter’s consent, in order to protect the creditor’s rights. [8, 9] The objection that the taking over of defendant’s irrigation system was not made within the time limited by the proposal, or the contract with the United States completed within such time, even if the statement upon which the objection is based is true, which we do not decide, cannot be relied on by plaintiffs to defeat their contract as the delay was caused by them. The contention that the words “take over,” found in the proposal, meant that the United States should purchase the irrigation works of defendant and become the owner thereof, must fail, as being contrary to the intention of the parties making and accepting the proposal. The primary meaning of the words is “to assume control or management of,” and in any event the transaction between the defendant and the United States was clearly a taking over of the irrigation system, whatever the words might mean in some other con [796] nection. It will hardly be contended that the words ever are or could' be used for the purpose of conveying title. The “details, terms, and conditions for the taking over” were left to a board appointed by the plaintiffs. Their action as to the manner of taking over is very strong evidence of how the plaintiffs and defendant understood the meaning of the words. If the plaintiffs had intended that there should be a purchase by the United States of the irrigation system, it would have been very easy to have said so in the proposal. There was no consideration for a purchase mentioned, and at the time the proposal was made no one knew just what arrangement could be made with the United States. To have tied the matter up, so that there must be a purchase, would have defeated the object of the proposal in the beginning. There would be $2,000,000 in bonds left to be paid after the cancellation of the $203,000 in bonds, and' nothing was said about the United States assuming the payment of the. bonds. The first whereas clause of the proposal speaks of the-United States taking over and operating the Farmers’ Irrigation District canal. If the words “take over” meant an outright purchase of the irrigation system, plaintiffs would have had no interest in the operation of the system. We are of the opinion that, from the proposal itself, no other meaning can be given to the words “take over,” except that they meant the assumption and control or management of the irrigation system. [10] We find no violation of the express stipulations of the proposal, and if the details, terms, and conditions of the taking over are not satisfactory, they are as the board appointed by the plaintiffs themselves made them. So far as the contract being burdensome is concerned, the situation of the parties must be taken into consideration.. The record fairly shows that the bonds held by plaintiffs would have-been worthless if the defendant had been obliged to continue alone to manage and operate the affairs of the irrigation system. $203,000 worth of bonds surrendered, where there was a possibility of saving $2,000,000 would seem to be a small matter. It would extend this opinion beyond all reasonable limits to notice everything that has been discussed in the briefs of counsel. As to the main contentions, we are .satisfied that at the time the court entered its final decree, its action was just and right between the parties. [11] So- far as the appeal of the defendant is concerned, the questions raised thereby are not entirely free from difficulty. Defendant claims that, if its acceptance and the performance of the conditions of the proposal made a valid contract between the plaintiffs and defendant, that contract ought to be enforced as of the date when defendant claims it had fully performed the conditions required of it; to be more specific, not later than January 1, 1918. The judgment for the plaintiffs is for interest coupons which became due July 1, 1918. If the contract should be enforced as of January 1, 1918, then there would be $203,000 in bonds which would have drawn no interest after that date, and the balance of the bonds would have drawn interest in accordance with the terms of the proposal or contract between the parties. The amount involved is, of course, considerable. Generally speaking, [797] if it could be said that the delay in the performance of the contract was wholly attributable to the plaintiffs, then the contract ought to be enforced as of the date claimed. Section 6 of the contract, however, provides that it shall not become binding and effective until there has been submitted to the Secretary of the Interior satisfactory evidence that $203,000 of the $2,203,000 bonds of the defendant outstanding had been canceled, and that there had been deposited with the Secretary certified copies of the agreement entered into between the plaintiffs and the defendant, and such agreement declared by him in writing- as satisfactory. The refusal of the plaintiffs to perform the terms of the proposal prevented a strict compliance with this section. It was, however, a matter between the defendant and the United States, and the Secretary of the Interior was satisfied with the decree of the court compelling the plaintiffs to perform the terms of the proposal. If the United States or the Secretary of the Interior was satisfied, the plaintiffs cannot be heard to complain, so far as compliance with section 6 is concerned. The objections of the plaintiffs to the performance of the proposal cannot be said to be frivolous. Some of the objections present questions concerning which lawyers might differ, and therefore the court cannot say that the plaintiffs intentionally and without cause delayed the settlement between the parties. We are inclined to the view that the trial court’s action in the premises should be sustained, and we therefore affirm the decree below; plaintiffs and defendant paying all the costs of their own appeal. Affirmed.