112 F. 693 | U.S. Circuit Court for the District of Southern California | 1902
This suit was brought to foreclose the lien of a certain mortgage or trust deed alleged to have been executed by the defendant Bear Valley Irrigation Company to the complainant, and of certain receivers’ certificates alleged to have been issued pursuant to orders of this court made in the preceding- case of Foster v. Irrigation Co., 65 Fed. 836. The suit was commenced September 16, 1895, but as some of the important questions involved were pending in the appellate courts on appeals from decisions heretofore rendered by this court in other cases, and continued undetermined until recently, it has not been possible to dispose of the case.
To the bill as amended a very large number of parties were made defendants, many of whom answered separately, setting up various rights in themselves, to which answers certain exceptions were filed by the complainant, and are now for disposition. Among them is the answer, as amended, of the defendant Bear Valley Land & Water Company, which latter company, by leave of the court, also filed a cross bill in the suit, to which, among others, the New Bear Valley Irrigation Company and E. H. Spoor, as receiver of the property in question, were made defendants. To the cross bill the Savings & Trust Company, New Bear Valley Irrigation Company, and E. H. Spoor, as such receiver, joined in a demurrer, which is also for disposition. As the answer and cross bill of the Bear Valley Land & Water Company raise questions which go to the root of the suit, it is appropriate to first take up, and dispose of those questions.
The. bill of the complainant, as amended, after alleging the corporate existence of various of the defendants, including the Bear-.Valley
The amended answer of the defendant Bear Valley Rand & Water Company alleges that the purposes for which it was incorporated are “to acquire by appropriation, purchase, condemnation, or otherwise the ownership of water, water rights, and water privileges .in the county of San Bernardino, state of California, and to hold, use, sell, or,lease the same, or any part thereof, for domestic, irrigating, manufacturing, and other beneficial uses; also to acquire, by purchase,
. Substantially the same matters are set up in the cross bill, together with the fact that the defendant E. H. Spoor is, and ever since the 25th day of September, 1895, has been, the duly appointed, qualified, and acting receiver of all the property described in the original and amended bill of complaint of the Savings & Trust Company, and still is in possession thereof as such receiver; and the prayer of the cross, bill is, among other things, that all of the property in question may be decreed to be the property of the cross complainant, and not subject to the lien of the trust deed of October 18, 1892, made to the complainant, nor to the lien of any of the aforesaid receivers’ certificates, and that the return of all of the said property by the receiver to the cross complainant may be decreed.
Applying the ordinary rules of construction to these pleadings, these facts must, for the purposes of the exceptions and demurrers,, be taken’ as true: (1) That the defendant Bear Valley Land & Water Company, to secure the repayment of borrowed money, with interest, executed to the complainant the two trust deeds of March 1 and October 1, 1890. (2) That thereafter, to wit, on the 30th day of December, 1890, it executed to the Bear Valley Irrigation Company, in pursuance of an agreement of sale and purchase theretofore entered into by and between the two corporations, a deed of grant,, bargain, and sale of all of its property, including that covered by the aforesaid deeds of trust of March x and October 1, 1890, subject to all of the obligations of the Bear Valley Land & Water Company, of every character, and conditioned that the Bear Valley Irrigation Company should pay all of the debts and obligations, and carry out and assume all of the contracts, of the Bear Valley Land & Water Company. (3) That thereafter the Bear Valley Irrigation Company applied to the creditor of the Bear Valley Land & Water Company holding its trust deeds of March 1 and October 1, 1890, for an extension of time within which to pay the money due it by the Bear Valley Land & Water Company, which extension was granted, and resulted in the execution of the promissory notes of the Bear Valley Irrigation Company to the Savings & Trust Company, together with interest coupons annexed thereto, and secured by the trust deed of November 18, 1892, covering all of the property that had been transferred by the Bear Valley Land & Water Company to the Bear Valley Irrigation Company on the 30th day of December, 1890, under and pursuant to the deed of grant, bargain, and sale on that day executed as above stated, together with such other property as the Bear Valley Irrigation Company had subsequently acquired, which obligations, so executed by the Bear Valley Irrigation Company to the Savings & Trust Company, were in substitution and renewal of the afores: ‘ 1 indebtedness of the Bear Valley Land & Water Company
Both the amended answer and the cross complaint of the Bear Valley Land & Water Company do deny that the deed of December 30, 1890, conveyed any of its property to the Bear Valley Irrigation Company, and further assert the invalidity of the trust deeds, in that each and all of those instruments were beyond the power of the Land & Water Company to make; but the fact of their execution is not denied, nor is there any denial of the alleged agreement under and in pursuance of which the deed of December 30, 1890, was executed. The questions raised by the Land & Water Company are, therefore, in my opinion, questions of law, and not of fact.
Assuming that the Land & Water Company had not the power to mortgage its property to the Savings & Trust Company, and that the' latter company had not the authority, under its charter, to take such deeds of trust, ought the borrower be heard to say so, while holding onto the money it got in consideration of the mortgages ? I think not. Thomas v. Railroad Co., 101 U. S. 85, 86, 25 L. Ed. 950; Reynolds v. Bank, 112 U. S. 405, 413, 5 Sup. Ct. 213, 28 L. Ed. 733; Bank v. Matthews, 98 U. S. 621, 628, 25 L. Ed. 188; Bank v. Whitney, 103 U, S. 99, 26 L. Ed. 443; Swope v. Leffingwell, 105 U. S. 3, 26 L. Ed. 939. And assuming that the Land & Water Company also acted ultra vires in executing to the Irrigation Company the deed of December 30, 1890, under and in pursuance of which, it appears from the pleadings, it transferred to the grantee named in the deed the possession of all of the property it now seeks to recover, and in-reliance upon which transfer, and upon which deed, and upon the agreement in pursuance of which the deed was executed, the Irrigation Company assumed all of the debts and obligations of the Land & Water Company, and has discharged them in part and repudiated none, so far as appears, ought the Land & Water Company to be heard to assert such excess of power, and to recover the property it undertook to convey and delivered over, the consideration for which it received and does not offer to return? It seems to-me to be very clear that this question should also be answered in the negative.
Property delivered under a void deed or contract may be recovered, or compensation therefor enforced, where, in order to maintain such recovery, it is not necessary to have recourse to the contract, and “is permitted only because of the desire of courts to do justice, as far as possible, to the party who has made payment or delivered property under a void agreement, and which in justice he ought to recover.” Pullman’s Palace-Car Co. v. Central Transp. Co., 171 U. S. 138, 151, 18 Sup. Ct. 808, 813, 43 L. Ed. 108, 114, and cases
The general rule, in equity as at law, is, as said by the supreme court in St. Louis, V. & T. H. R. Co. v. Terre Haute & I. R. Co., 145 U. S. 393, 407, 12 Sup. Ct. 953, 957, 36 L. Ed. 748, 754:
“In pari delicto potior est conditio defendentis; and therefore neither party to an illegal contract will he aided by the court, whether to enforce it or to set it aside. If the contract is illegal, affirmative relief will not be granted, at law or in equity, unless the contract remains executory, or unless the parties are considered not in equal fault, as where the law violated is intended for the coercion of the one party and the protection of the other, or where there has been fraud or oppression on the part of the defendant. Thomas v. City of Richmond, 12 Wall. 349, 355, 20 R. Ed. 453; Spring Co. v. Knowlton, 103 U. S. 49, 26 L. Ed. 347; Story, Eq. Jur. § 298. While an unlawful contract, the parties to which are in pari delicto, remains executory, its invalidity is a defense in a court of law, and a court of equity will order its cancellation only as an equitable mode of malting that defense effectual,' and when necessary for that purpose. Adams, Eq. 175. Consequently it is well settled, at the present day, that a court of equity will .not entertain jurisdiction to order an instrument to be delivered up and canceled upon the ground of illegality appearing on its face, and when, therefore, there is no danger that the lapse of time may deprive the party to be charged upon it of his means of defense. Story, Eq. Jur. § 700a, and cases cited; Simpson v. Howden, 3 Mylne & C. 97; Ayerst v. Jenkins, L. R. 16 Eq. 275, 282. When the parties are in pari delicto, and the contract has been fully executed-on the part of the plaintiff, by the conveyance of property or by the payment of money, and has not been repudiated by the defendant, it is now equally well settled that neither a court of law nor a court of equity will assist the plaintiff to recover back the property conveyed or money paid under the contract. Thomas v. City of Richmond, above cited; Ayerst v. Jenkins, L. R. 16 Eq. 275, 284.”
Upon this ground the exceptions to the amended answer of the Bear Valley Land & Water Company and the demurrers to its cross complaint must be sustained, without regard to other questions argued by counsel.
The answers of the defendants Redlands, Lugonia & Crafton Water Company, West Redlands Water Company, Crafton Water Company, East Redlands Water Company, and others set up, among other things, certain rights growing out of certain certificates called “Class A” certificates, and certain “Deeded Water Agreements,” ^executed by the defendant Bear Valley Land & Water Company ’prior to the execution of its deed to the defendant Bear Valley Irrigation Company, which two classes of obligations, it is conceded on the part of the complainant, stand upon substantially the same grounds. The form of the certificates will be found set out in the case of Foster v. Irrigation Co. (decided by this court Eeb. 11, 1895) 65 Fed. 836, 839. The validity of such contracts is, so far as-this court is concerned, settled by the recent decision of the circuit court of appeals for this circuit in the case of Flume Co. v. Souther, 32 C. C. A. 548, 90 Fed. 164, and 44 C. C. A. 143, 104 Fed. 706.
. It is insisted upon the part of the complainant that, even if the “Class A” certificates and concurrent contracts are valid, they con
The answer of the defendant J. D. Hooker discloses no lien or charge upon the mortgaged property. Although it shows that he is a holder of stock of the defendant Bear Valley Rand & Water Company, he is not in a position to question the deeds of that company in the absence of averments showing that the corporation itself has
The exceptions to the answers of the defendants Perris Irrigation District and Alessandro Irrigation District must, I think, be sustained on the ground that the contracts and certificates therein set up as a basis of the alleged rights of those defendants are alleged to be null and void, and their annulment sought by. cross bills afterward filed by the same defendants by leave of the court. A party is A permitted to assume inconsistent positions in the samé litigation. Davis v. Wakelee, 156 U. S. 1680, 15 Sup. Ct. 555, 39 R. Ed. 578.
The alleged priority of the lien of the receivers’ certificates set up in the complainant’s amended bill, and the foreclosure of’ which is thereby sought, over the rights set up in the answers of the defendants Adolph Unger and R. E. Houghton, is put in issue by those answers, as well as the validity of the certificates themselves. The exceptions thereto must therefore be overruled. Having, according to their answers, a specific interest in a portion of the property cov- . ered by the, complainant’s mortgage, they are in a position to contest in all legitimate ways the validity and extent of the superior liens which the complainant asserts thereon. Stout v. Rye, 103 U. S. 70, 26 R. Ed. 428.
The filing, by leave of the court, of cross bills by the defendants I. R. Ryon and , of Harriet H. Crafts, as the successor in interest of the defendant H. G. Crafts, renders it unimportant to determine whether the rights set up in the answers of those parties could be protected, im the absence of cross bills, under the decision of the supreme court in the case of McPherson v. Cox, 96 U. S. 420, 24 R. Ed. 746.
For the reasons above indicated, orders will be entered (1) sustaining the exceptions to the amended answer of the Bear Valley Rand & Water Company and the demurrers to its cross bill; (2) sustaining 'the exceptions to the answers of the defendants J. D. Hooker, Perris Irrigation District, and Alessandro Irrigation District; (3) overruling the exceptions to the answers of the defendants Redlands, Rugonia & Crafton Water Company, West Redlands Water Company, Grafton Water Company, East Redlands Water Company and others, Muscupiabe Rand & Water Company, Savings Bank of Southern California, P. M. Hitchcock, Seth Marshall, Arrowhead Remon Company, Geo. M. Hord, John W. Roberts, T. J. Wilson, North San .Bernardino School District, E. A. Phillips, S. W. Rittle, Highland Orange & Improvement Company, W. H. Avery, W. j. Blair, Red-lands Heights Water Company, R. Skellie, Edwin Schultz, J. A. Preston, W. A. Errington, George H. Crafts, M. A. Peters, James J. Searle, J. P. M. Phillips, E. J. Roberts, Maud K. Garstin, J. B. Brewer, Mrs. E. P. R. Crafts, A. W. Hatch, J. H. Sternbergh, E. E. Raught, T. P. Christian, John Killifer, Mary French, Albert S. Burney, W. S. Hosking, Alice.G. Williams,. A. P. Hitching, George E.