APPEAL from a judgment of the Superior Court of the County of Graham. Arthur T. LaPrade, Judge. Judgment reversed and case remanded with instructions.
Mr. John W. Ross, for Appellant.
Mr. Guy Anderson, for Appellees.
[58 Ariz. 307] LOCKWOOD, C.J.
This is an appeal by Elam Olsen, plaintiff, from a judgment in favor of Union Canal and Irrigation Company, a corporation, called the company, J. H. Asay and Roy A. Layton, defendants. The facts upon which the appeal must be decided are not in serious dispute, and may be stated as follows:
In 1874 various farmers in the Safford valley, in Graham County, began to irrigate their lands from the Gila River. A number of canals were constructed by the mutual efforts of the landowning farmers among them being what is known as the Union canal. During the many years of its existence it has been enlarged and improved and different areas of land have been irrigated there from. It does not appear from the record in whom the original title to the canal property was vested, but in 1891 the Union Canal and Irrigation Company was incorporated, under chapter 2 of title 12 of the Revised Statutes of Arizona of 1887, Civil Code, being the general law covering the ordinary profit-seeking corporation, and the title to the canal and its appurtenances passed to this corporation. Its capital stock was divided into one thousand [58 Ariz. 308] shares of the par value of $25 each, and the usual provisions found in the charters of similar corporations were included. Its purposes were stated as follows:
"2. The general nature of the business of said Corporation is to acquire and own all the property, franchises and privileges of the Union Canal Company and also the Mill Ditch and all its branches and the dam in the Gila River maintained enlarge, increase, extend and lengthen such ditches for conducting water therein from the Gila Giver and other sources for irrigation and distribution thereof to stock holders, then of furnishing water for operating
mills and for sale of water to others. The Contract with C. Layton and the Union Canal Company to remain valid in these articles."
It will be seen that its object was the furnishing of water for irrigation to stockholders and non-stockholders of the company, and for the operation of mills. For many years the company continued operating under this charter substantially as follows: The shareholders of the company were assumed to be entitled to the use of water from the Gila River, through the canal, in proportion to the amount of stock owned by them. Whenever there was a greater quantity of water than was needed by the shareholders for the irrigation of their lands, it was furnished indiscriminately to farmers having lands lying under the canal, many of whom owned little or no stock therein. When, however, the water diminished in quantity, it was delivered only to, or upon the order of, the stockholders, regardless of the date on which the water had first been applied to the lands lying under the canal, or of what lands the water was to be used upon. In other words, the theory was that the right to the use of water followed the ownership of stock in the canal, and not the ownership of land lying under it and which [58 Ariz. 309] had been irrigated therefrom. As a corollary to this theory the practice grew up of the owners of the stock renting the use of their shares to any person who had lands which he desired to irrigate, upon such terms as the owner of the stock saw fit to fix, and water was delivered to the lessee for such application as he might choose.
The first adjudication of the right to use the waters of the Gila River in the Safford valley was made in what was commonly known as the Doan decree in the last years of the last century or the very early years of the present one. This adjudication, however, was not made to the individual lands but rather to each of the various canals of the valley in a lump quantity, and they were allowed to apportion the water so adjudicated to them in such manner as their management saw proper, most of them following the method above indicated. In 1935 the question of the respective priorities to the use of water in the Virden, Duncan, Safford, Winkleman and San Carlos valleys of the Gila River came before the federal district court of the southern district of Arizona, and that court, following as it was compelled to do under the decisions of the Supreme Court of the United States the law of Arizona in regard to the priority of appropriation and use of the public waters of the state, adjudicated the respective priorities of the irrigated lands of the valleys above mentioned by specific acreage instead of by the canals serving the land.
The lands of plaintiff involved in this proceeding, and adjudicated by the federal court in its decree, were first placed in irrigation between the years 1874 and 1904. During this time they drew their appropriated water through another canal known as the Sunflower. This canal, however, was washed out a number of times by Floods, and in 1916 plaintiff commenced [58 Ariz. 310] taking his water from the river to a great extent at least through the Union canal, and this custom was continued, with the consent and approval of the company, up to the time of the beginning of this suit.
In 1938 the charter of the original Union Canal and Irrigation Company was about to expire and a new corporation was formed with the same name, which took over the Union canal. Its purposes were described as follows:
"Article II. The enterprise pursuit, business and occupation in which this corporation proposes to engage is the owning, maintaining, keeping in repair, enlarging, and extending the said Union Canal for irrigation, and domestic purposes; to acquire water and water-rights; to construct and maintain canals, ditches, flumes, dams and reservoirs for the purpose of conducting, storing and distributing water so acquired; to the various appropriators and owners of water rights upon lands under the said Union Canal for irrigating and domestic uses; and to do and transact any and all kinds of business which may or might be done by a natural person that may be necessary or expedient to ...