U.S. Supreme Court
Tulare Irrigation Dist. v. Shepard, 185 U.S. 1 (1902)
Tulare Irrigation District v. Shepard
Submitted January 13, 1902
Decided March 2, 1902
185 U.S. 1
The Tulare Irrigation District, in California, issued and sold its bonds for the purpose of constructing its irrigation works. The proceeds were used for that purpose by the corporation, and the works were by means thereof constructed. The corporation then refused to pay the bonds, and denied its liability on them upon the ground that it was never legally organized as a corporation, and hence had no legal right to issue any bonds. Held, on the authority of Douglas County Commissioners v. Bolles, 94 U. S. 104, that common honesty demanded that a debt thus incurred should be paid, and that there was nothing in the facts in this case to set aside the application of that principle; that, if anything could constitute a de facto corporation the defendant is one, and that, being thus a de facto corporation, none but the state can question its existence.
Under the circumstances stated in the opinion of the court, the landowner is estopped from setting up the defense of the want of notice, as against the plaintiff in this case.
This is a writ of error to the Circuit Court of the United States for the Southern District of California, sued out for the purpose of reviewing a judgment of that court in favor of the defendant in error in an action brought by him against the irrigation district only, to recover interest due on certain coupons chanroblesvirtualawlibrary
attached to bonds issued by the district for the purpose of raising money to build its irrigation works. It appeared from the complaint that the plaintiff was a resident of Michigan, and that the Tulare Irrigation District had at all times since September 2, 1889, been a corporation duly incorporated under the laws of the State of California, and since that time had been acting as such corporation; that, under the laws of such state, the irrigation district duly issued its bonds for the amount of $500,000, with coupons attached; that the plaintiff was a bona fide purchaser and holder of certain of those coupons, and that he had paid full value for the same, in the usual course of business, and before any of them were due or dishonored, and in good faith and without any notice of any defect or invalidity of the same or any of them. Judgment for $13,185 and interest was demanded. The defendant demurred to the complaint, the demurrer was overruled, 94 F. 1, and the defendant then answered.
The answer, among other things, set up various alleged irregularities and omissions which occurred in the attempted formation of the irrigation district, on account of which, as contended, the corporation never was legally formed and never had power to issue bonds, and whatever bonds may have been issued were for those reasons void. The individual defendants at this stage applied to the court for an order permitting them to intervene in the action as parties therein, and to unite with the defendant corporation in resisting the claims of the plaintiff in this action. The court thereupon ordered that the petitioners' complaint in intervention should be filed without prejudice to the plaintiff's motion to strike out the same. They then filed what they termed their complaint in intervention in this action (which is nothing more than an answer to the complaint), in which they set up that the defendant Kelly was a citizen of the United States and a resident of the State of Massachusetts, and that, ever since January 1, 1889, he had been, and was at the time of the commencement of the suit, the owner of the land which is described and which was situate within the boundaries of the County of Tulare, California, and within the boundaries of the alleged Tulare Irrigation District; that Jauchius, the other defendant, chanroblesvirtualawlibrary
was a citizen of the United States and a resident of the State of California, and that he, ever since January 1, 1889, had been the owner of certain other described real property also situate in the district, and they alleged that they were interested in the subject matter of the action and in the success of the defendant; that, if the bonds and coupons mentioned in the plaintiff's complaint were adjudged valid claims against the district, then the property of interveners in the district would be assessed and taxes levied thereon to pay the claim of the plaintiff. They then set up substantially the same defenses that were pleaded by the irrigation district in its answer; also, that to permit the collection of the bonds would take defendants' property without due process of law and in violation of the federal Constitution.
The chief defect as set up in both pleadings and specially argued here was in regard to the organization of the district, the defect being an alleged insufficiency of the notice of the intended presentation of the petition to the board of supervisors, by reason of which, as averred, no legal notice was given, and therefore all subsequent proceedings were void and of no effect. Subsequently to the service of the answer, Jauchius died, and his executor was made a party in his place.
The case came to trial upon a stipulation to waive a jury, was submitted upon an agreed statement of facts, and thereafter the court made its general findings in favor of the plaintiff, assessed his damages at the sum of $13,185, and ordered judgment against the irrigation district for that sum.
It was stipulated that any of the facts contained in the statement might be offered in evidence by any party to the action, and when so offered, the party not offering the same might object to such facts or any of them upon legal grounds which might exist against their admissibility. The statement of facts contained twenty-one paragraphs. The first twelve were offered in evidence on the part of the plaintiff and received by the court under the defendant's objection and exception. The facts thus admitted showed that, under the provisions of the irrigation act of the State of California approved March 7, 1887, an effort was made in the County of Tulare to form an irrigation district chanroblesvirtualawlibrary
to be known as "Tulare Irrigation District," and such proceedings were had in that behalf that what purported to be a certified copy of an order of the board of supervisors of that county was duly filed with the county recorder on September 14, 1889; that order recited that the Board of Supervisors of Tulare County, State of California, met as a board of canvassers on Monday, September 2, 1889, for the purpose of determining the result of the special election held in Tulare County on August 24, 1889, to vote upon the subject of the organization of the Tulare Irrigation District and officers therefor, by which it appeared that there were 484 votes cast in favor of forming the district, and 7 against it. The order then continued as follows:
"And we further declare the territory embraced in the following described limits, to-wit: [describing territory], an irrigation district duly organized under the name and style of 'Tulare Irrigation Distriing described limits, to-wit: [describing territory], an irrigation district duly organized under the name and style of 'Tulare Irrigation Distriing described limits, to-wit: [describing territory], an irrigation district duly organized under the name and style of 'Tulare Irrigation District,' being situate in the County of Tulare, State of California."
This declaration was made in accordance with section 3 of the act to form irrigation districts. The order further declared the election of the directors in the various divisions of the district.
The persons declared by the order of the board of supervisors to have been elected as officers of the district immediately thereafter assumed to organize as such officers, and thereupon entered upon their duties the same as though said district had been legally organized and as though they had been legally elected as such officers, and they and their successors in office have ever since continued to act as such officers and to maintain the name of "Tulare Irrigation District," and in its name have caused the defendant to act as though it was in every respect legally organized as an irrigation district under the act of the legislature, and in that behalf it has at all such times had the name "Tulare Irrigation District" printed upon a sign above a door in front of an office in which the archives and papers of said defendant are kept, and its board of directors have met from time to time in such room from the time of such purported organization thereof until the present weekly and sometimes oftener, averaging chanroblesvirtualawlibrary
twice a month. In June, 1890, pursuant to the provisions of the statute, an election was held within the district to determine whether its bonds should be issued, resulting in favor of issuing the same, and in the years 1891, 1892, 1893 its board of directors purported to issue bonds of such Tulare Irrigation District in the sum of $500,000, being 1,000 bonds of the face value of $500 each, and levied assessments on the property embraced in said district, purporting to act in so doing under the act of the legislature, and previous to July 1, 1896, it assessed, levied, and collected taxes upon the lands in such district of over $100,000, and paid the same out through its treasurer as interest upon such bonds; the proceeds arising from the sale of the bonds have been used by the district in constructing a system of canals, ditches, and laterals through the lands of the district, by means of which such lands have been irrigated; it has engaged in litigation as plaintiff in suits before the issuing of such bonds, and therein alleged that it was a corporation under the provisions of the act of the legislature, and from the time of its purported organization until the present time, whatever it has done and performed, it has done and performed in the same manner as if it had been legally organized as such district, in full compliance with the law, and so continues to act and hold itself out as a corporation organized under that law. No one ever brought suit or took any action to prevent the issuing of any of the bonds, nor was any suit or action ever brought to annul or cancel or have declared void any of the bonds until after the year 1896. No action in the nature of a quo warranto was ever commenced, nor any other proceeding, to test the validity of the organization of the district.
The plaintiff at the commencement of the action was the holder and owner of the coupons upon which action was brought, and became the holder of the coupons on which he brought his action under the circumstances detailed in the agreed statement of facts, showing that he was a bona fide holder for value without notice.
The plaintiff also offered, and the same was received, in evidence the judgment roll in In the Matter of Tulare Irrigation District, in the superior court of Tulare County, which was a chanroblesvirtualawlibrary
proceeding under what is called the California Confirmation Act in regard to irrigation districts, and which is mentioned in Tregea v. Modesto Irrigation District, 164 U. S. 179, 164 U. S. 181. The proceedings under this confirmation act showed a judgment of the court confirming the validity of the organization of the district. This was duly objected to, and received under the exception of the defendants. After some oral evidence had been given in regard to the execution of the bonds by the officers of the district, the plaintiff rested.
The defendants then offered separately each of the remaining paragraphs from thirteen to twenty-one, both inclusive, in the agreed statement of facts, and each, under the objection of the plaintiff and exception of the defendants, was excluded. From the facts thus offered, it appears that a petition addressed to the Board of Supervisors of Tulare County was on July 1, 1889, filed with the board at a regular meeting; that this petition was printed and published prior thereto for two weeks during the month of June, 1889, and in a newspaper printed and published in Tulare County. The petition contained a statement that the petitioners were freeholders owning land within the district which was described in the petition, and that it was all situated within Tulare County, and that the petitioners desired to provide for the irrigation of the same; that the proposed district as described was susceptible of one mode of irrigation from a common source and by the same system of works, by conveying the waters of Kaweah River by means of dams thereon and by main and distributing canals therefrom. The petitioners prayed that the district described in the petition be organized into an irrigation district under the Act of the Legislature of California approved March 7, 1887. The petition then gave the boundaries of the proposed district, and asked that it be designated as the Tulare Irrigation District. The petition was signed at the end thereof, each petitioner stating the number of acres owned by him. Following these signatures was a paper like this:
"Pursuant to the statutes in such cases made and provided, notice is hereby given that the above and foregoing petition
will be presented to the Board of Supervisors in and for the County of Tulare at their first regular meeting in the month of July, 1889, to-wit, on Monday the 1st day of July, 1889 at which time any person or persons desiring so to do may present their objections, if any they have, why said petition should not be granted."
The signatures to the petition were not repeated at the end of the notice. This notice was in the same type as the petition, and in the newspaper it was enclosed, with the petition, between two black lines across the column, the first at the head of the petition and the last at the end of the notice.
The alleged defect in this publication consists in the fact that, although the petition was printed in full and the names of the signers with the number of acres owned by them follow the petition, yet, as the notice of the presentation of the petition follows the signatures to such petition, and the notice is not signed by the petitioners, it lacks those essential signatures, and for that reason is not a valid notice, and becomes in law no notice whatever.
The defendants also offered in evidence a second judgment in the Matter of the Tulare Irrigation District setting aside the former judgment of confirmation and refusing to confirm the validity of the organization of the district. The judgment was excluded upon the objection of the plaintiff. All these offered facts having been excluded, the court made a general finding in favor of the plaintiff. The individual defendants now contend that the court, in granting judgment for the plaintiff, did in effect permit the taking of their property without due process of law in violation of the Constitution of the United States.