Green Ditch Water Co. v. Salt Lake City

390 P.2d 586, 15 Utah 2d 224, 1964 Utah LEXIS 233

• Court: Utah Supreme Court
• Decided: March 23, 1964
• Docket: No. 9795
• Status: Published

Opinions

HENRIOD, Chief Justice, and CALLIS-TER, Justice:

Appeal from a judgment dismissing plaintiff’s complaint. Affirmed, with no costs awarded.

Plaintiff was and is a mutual water company, incorporated in 1915 to distribute its decreed water under the so-called Morse Decree¹ to its shareholders. In 1916 the Secretary of State forfeited plaintiff’s charter for nonpayment of franchise taxes. In 1920, most of the shareholders, as owners of the beneficial, use ² of the decreed Green Ditch Water Company’s rights, themselves made an “Offer of Exchange of Water Rights” to defendant City. This ripened into a binding contract upon the latter’s acceptance and execution of the terms thereof. This agreement and its interpretation, along with the history of its execution are pertinent to- this litigation.

' An examination of the terms of this contract clearly points up an intention on the part of the signatories that in exchange for personal rights in Green Ditch water, Salt Lake City would furnish to the numerous shareholders in the Green Ditch Company, who made the offer, a definite amount of exchange water. It. seems as clear that a personal, individual relationship, with respect to its delivery and use was contemplated, intended and understood.

•Beside the fact that these shareholders, according to the tenor of the exchange agreement, sought out the defendant by way of an affirmative written offer, which was accepted, the personal nature of its terms was highlighted by the following aspects thereof, with our observations added:

1. Throughout the document the shareholder beneficiaries of the offer were referred to in the plural, and it seems obvious that the interest of the parties was foreign to any concept looking toward concentration óf rights thereunder in one person or corporate entity, even though in general terms its provision extended to the assigns of the parties.³

2. The shareholder signatories, having a right to do so,⁴ unreservedly conveyed to defendant “all right, title and interest in and to the perpetual use of the waters * * to which each is respectively entitled, subject to the reservations, terms and conditions in this agreement set forth.” It is the reservation that is the nub of this case and upon which plaintiff relies.

3. “Each of the parties” reserved ownership and right to use 500 gallons per day in the winter, and 900 in the summer, per acre, which by this court was held to mean per share.⁵

4. The gallonage, the offer recited, “shall be distributed and delivered by Salt Lake City, free of all charge and expense, to the respective owners, through water mains to be laid and maintained by Salt Lake City, as hereinafter more specifically set forth.”

5. The water mains “hereinafter * * set forth,” specifically were described, and the supplementation to the language of the next preceding paragraph recited that the defendant would “lay, maintain and operate for the distribution of said water, a suitable’ and efficient water main system * * * as will supply and deliver '* * * to the respective owners thereof, and will keep the, water pressure * * * to 30 pounds to the square inch” and that “said pipeline shall be laid upon the following streets: On Walker Lane from the Eastern end thereof westward to the County Road on Highland Drive; on the Walker Holladay Road from Walker Lane northward to Big Cottonwood Creek Crossing; also on the main County Road or Highland Drive from Walker Lane northward to the crossing of Big Cottonwood Creek.” All of which pointed up a personal relationship between defendant city and the shareholder signatories, for the beneficial use of the exchange water by the latter, — certainly not to one assignee of all of them which is not a beneficial user of the water, but only a distributor thereof.

6. The offer stated that “Salt Lake City shall * * * maintain, at its own expense, suitable devices for the measuring of said water at the points of delivery” and “in the event the parties hereto shall desire to change the place of use of the mater and to have said water delivered to them at a point or points other than in the Green Ditch, Salt Lake City agrees to make such delivery of said water to the changed points of use”

7. Also: “Salt Lake City shall, at its own expense, install proper measuring devices either at the property line or at the point of use⁶ for each private connection leading from the mains and shall measure to the respective water users under said water main system the quantity of water that each respective owner is entitled to.”

8. “If any such water owner uses water in excess of the quantity of water to which he is entitled, he shall pay for the same at the regular Salt Lake City water rate charges at the time of use.

9. Under the contract, defendant City agreed to pay charges against the Green Ditch incident to control, maintenance and distribution of the waters of Big Cottonwood Creek, and otherwise protect the rights of the parties to the agreement.

10. Although the contract specifically provided for charging the signatories for any water used in excess of their gallonage entitlement, there is not one word therein that obligated Salt Lake City to credit the same signatories for any water not used in any month. Since there was a specific charge for any excess used by the signers, and since the contract did not provide a credit for unused water incident to any given month, it seems inescapable to conclude other than that the parties intended that the outright, unconditional grant to the city of all the signers’ right, title and interest should vest in the city absolute ownership and title to the unused water.⁷ That seems to have been the conclusion in the McFarland case, either express or by necessary implication, when it was said that “When the creek water to which appellants’ stock ownership entitled them was turned into the City’s mains, title to such water vested in the City” and that “The City was thereafter free to sell its water to whomever it pleased, including' the stockholders from whom they had purchased it.”

11. The contract further provided that if the City accepted the offer of the water users, it immediately would construct the mains specified (in the streets specifically delineated in the offer, as mentioned above) and deliver to the signatories the water continuously “to which the respective owners, parties hereto are entitled.”

12. The contract further provided that the “City would make connections to the mains up to the property lines, on either side of the street, for the present residents." It even specified the size of pipe when it said the city would furnish the residents on either side of the street, one inch galvanized pipe to make the connection from the mains to their properties. (Emphasis ours.)

Plaintiff’s complaint consists of three causes of action: 1) that since 1918⁸ plaintiff has been the owner of the water, subject of this suit, and that defendant has taken it without plaintiff’s objection, but for which it should pay plaintiff; 2) that the exchange agreements made in 1920 were void because of mutual mistake; and 3) if it were not void, plaintiff was the owner of any of the water which its shareholders did not use under the terms of the exchange agreements by virtue of assignments by them to plaintiff of their interests in the exchange agreements.

Under the pleadings and affidavits, and the specific provisions of the exchange agreement, we believe and hold that the agreement was not only valid, but that title to any unused water to which the signatories otherwise would have been entitled, by virtue of their shareholders’ interests, vested in the City. Holding as we do, the first and second causes of action need not be canvassed.

The only issues left, therefore, are whether, by virtue of the shareholders having assigned their interests in the exchange agreement, the plaintiff has any right to unused water reserved to the individual signatories of the agreement, and whether such signatories by assigning such interests to plaintiff, in all probability could accomplish indirectly what they could not have done directly.

It must be conceded that the record reflects no transfer of their stock certificates to plaintiff, and presumably they are still being serviced by Salt Lake City under the agreement. The tenor of this litigation has to do only with transfer of rights to water not used. The McFarland case indicates that these assignors had no right to any credit for unused water, and it is difficult to see how a simple assignment of such rights that this court has said gave no rise to a credit for such' unused water, could create such a credit where it did not exist before, in light of the true intent and purpose of the 40-year-old compact, reflected by compliance therewith by all signatories up to the McFarland decision and four years thereafter when this litigation arose.

It seems rather obvious that these assignments were designed to obtain water that could not be obtained under the McFarland decision, and it seems equally obvious that should such be the case, the City would have to deliver in one pipe to one entity all unused water claimed by a multitude of shareholders, with one measuring device. The net result, since the plaintiff could allocate to these same shareholders, or other shareholders, all of the unused waters of each, at times when the McFarland case said this couldn’t be done, would be to prevent Salt Lake City from billing water users, since by proper allocation by the plaintiff company, any excess use, or at least a greatly reduced excess use by the individual users, would eliminate the income of the city arising from any excess water delivery for which the individual signatories agreed to pay. Had Salt Lake City contemplated the probability of any such maneuver, (or the offerors, for that matter) it is hardly likely that the City would have accepted the offer with the chance that it would lose the income which, it cannot be gainsaid, surely was a vital and substantial part of the consideration that resulted in the acceptance of the offer for the exchange agreement.

There is no apparent reason why, after 17 years’ acquiescence by plaintiff in a practice and understanding between the City and the offerors in which plaintiff cooperated in furnishing information to the City with respect to its shareholders, and where, over a period of 38 years, all signatories complied with the terms of the exchange agreement, unless it was for the purpose of trying to comply with the interdictions of the McFarland decision’s language, but by a device that seems obvious, attempt to overreach and avoid its real conclusion and implications. If for no other reason, it seems that the plaintiff is a little late in asserting its alleged rights and in using technical language in a contract not consistent with the real and obvious intent and purpose thereof when read as a whole, as interpreted by the McFarland case, and as now construed by this court.

No notice of plaintiff’s claim was given to the City, and within a month before this suit was filed, plaintiff was certifying to the! City the names of shareholders who were entitled to the fruits of the exchange agreement. The record reflects no restrictive endorsement on any transfer of stock certificates. Without any contract between trans-feror and transferee of a stock certificate, and without knowledge of the latter or the City, it seems novel that plaintiff could cláim rights to unused water which this court said did not inure to the benefit of the assignor personally.

Plaintiff makes but one point on appeal: That Salt Lake City v. McFarland, supra, is not controlling here. This sole point is urged because the trial court in a memorandum decision dated November 8, 1962, granted a motion for summary judgment based on the Supreme Court decision in the McFarland case. The decree, which was entered on November 15, 1962, a week later, was signed, dismissing the complaint. No reason was assigned therefor. We have said that even if the trial court assigns a reason for its judgment that may not be well taken, if otherwise there is a solid basis for the judgment, it will be sustained.⁹ Since plaintiff relies solely on the McFarland case as being unauthoritative here, there would be justification for our affirmance of the trial court anyway in view of our observations and conclusions. This is not to say we think the McFarland case uncontrolling. We think a fair reading of the entire decision would impel one to conclude that, it is controlling here.

In the McFarland case we held under, the same contract referred to here, that Salt Lake City obtained title absolute to the shareholder’s water rights and could dispose of the water as it pleased. It is highly significant that we concluded that the shareholder, under the agreement, having failed to use all the water to which he was entitled, still was required to pay for any excess he used in a given month. Since he had claimed credit for unused water at other times, but was required to pay for any excess used in such given month, it seems inescapable to conclude other than that this court, in refusing to construe the contract so as to credit him with unused water at another time, made it obvious that the title to such unused water remained in Salt Lake City, with the correlative implication, if not conclusion, that the contract between the shareholder assignor of his water rights, could not result in the latter’s assigning such unused water to another, — particularly water to be determined conjecturally in the future. This despite the urging by plaintiff that the court in the McFarland case, in obiter, said the question of sale of the water by the shareholder on terms other than those contained in the exchange agreement was not before us in that action. It is now before us and we conclude that any proposed sale of any unused water to a third person would be encumbered with the requirement that any failure beneficially to use any portion of the water to which he was entitled would burden his assignee with the same condition. Under the terms of the contract, clearly evincing an intent to deliver water to dozens of beneficial users, it hardly can be said that plaintiff, strictly a distributor of water, was intended, as an assignee, to be a resident on one side of a street, one of a group designated throughout the contract in the plural, to which latter group of numerous signatories the water was to be distributed in mains specifically to he laid out in a number of streets, deliverable in one-inch pipes, measured by devices to be installed by the City for the residents using the water by individual entitlement, highlighted by numerosity of users,- — not just one, deliverable to points designated, at the property line of the signers, with connections leading from the specified mains thereto, after the installation of the mains in the specified streets became a fait ac-compli.

We think and conclude that in most respects the McFarland case is controlling here and that, irrespective of it, the plaintiff otherwise cannot claim the transmutation of a nonexistent right in his assignor to an existing right in the assignee, where the interest of the whole exchange agreement clearly reflects otherwise, looking to a personal relationship, beneficial use by practically all of the shareholders of Green Ditch, where rights and obligations seem clearly to be not assignable to accomplish a result and purpose not contemplated by the very essence of a specific agreement.

WADE, J., concurs.

1 . Progress Co. v. Salt Lake City, 53 Utah 556, 173 P. 705 (1918).

2 . Genola Town v. Santaquin City, 96 Utah 88, 80 P.2d 930 (1938).

3 . It is diffi'eult to understand liow Salt Lake City, a municipality, could have assigned .its .obligation-to deliver the water it agreed to deliver, to a third party.

4 . See Salt Lake City v. McFarland, 1 Utah 2d 257, 265 P.2d 626 (1954).

5 . Salt Lake City v. McFarland, supra.

6 . There is nothing in this record indicating that plaintiff had any property line to which any water could be delivered for plaintiff company’s personal beneficial use.

7 . In the sense that using such language connotes only a right to use water to the exdusion of others except the state, this court having said that such use is permissive and subordinate to the title in the state of all waters within its boundaries.

8 . By virtue of rights awarded in the Morse Decree, supra, affirmed in Progress Co. v. Salt Lake City, 53 Utah 556, 173 P. 705 (1918).

9 . Tree v. White, 110 Utah 233, 171 P.2d 398 (1946).