Court Opinion

ID: 3986290
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:42:25.563186+00
Date Added: 2024-06-11T07:44:19.589488
License: Public Domain

I concur, but with some doubt as to whether in a mutual irrigation company the powers of the corporation are not confined to managing and distributing the water rights *Page 279 
which were turned over to the corporation in exchange for stock, and to managing and distributing such other water as may be acquired by the corporation without objection or by unanimous consent of the stockholders.
What gives me pause is that the real purpose of water appropriators in pooling their interests by turning over their use rights to a corporation for indicia of ownership in the form of stock showing proportionate ownership in the corporation, is essentially not to give the corporation a right either to detract from, or to add to, each stockholder's interest without his consent, but is done as the best means to make common cause in the maintenance of canal systems and distribution of water and also for convenience in transfer of water rights. I think most of the old time settlers conceived of the corporation as a convenience. They thought of it as an association through which they would obtain exactly the same amount of water as they had before, but that the water would be cooperatively managed and distributed. They did not think that the directors or a majority of stockholders could, by increase of the stock, admit more users to the total water nor did they think that the directors, over the objections of stockholders, could obligate them by the purchase of more water. True it is that many mutual irrigation companies have acquired additional water but that may have been because there was either unanimous consent or no objection. Many appropriators might not have exchanged their water rights for stock in a corporation if they had thought that a majority of users might thereafter buy more water, for, although the majority might need more water, certain stockholders might not need any more or might even be unable to put it to beneficial use, and yet be required to take their pro rata share and pay for it. In consequence, I have doubt whether an amendment which permits a purchase of water as in this case, is not an amendment which materially and fundamentally changes the purpose of the corporation. The mere fact that it deals with water, and *Page 280 
even water for irrigation, or further, water for irrigation for lands owned by stockholders, may not be the test.
It is true that the purpose stated by the original articles was to "convey water from Provo River to Provo Bench and lands adjacent thereto and to regulate and control the same for the purpose of irrigation." But it is difficult to see how the object could be otherwise stated even though the purpose was to be confined to water rights owned and conveyed by the appropriators and no more, because such owners might acquire more land on the Bench and desire to transfer the application of their share of water to those lands. Certainly it would not have occurred to the draftsman of the articles specifically to confine the purpose to that of conveying only that water then owned by those who would transfer it for stock. And, indeed, it might have been unwise to do so because, by unanimous consent or without objection, other water might be acquired which would then come within the expressed objects. I suppose the fundamental purpose of a corporation may be changed by unanimous consent, at least so far as the contract between the corporation and stockholders is concerned. In this instance I see nothing inconsistent in the view that the statement of purpose of the corporation does not imply the power to amend the articles to purchase more water.
I am constrained to concur, however, because I can see the practical difficulty of holding that the fundamental purpose of a mutual irrigation company is confined to managing the distribution of only those waters which are conveyed by appropriators in exchange for stock. One stockholder might prevent the acquisition of a small amount of much needed water. It is admitted that the question of whether a change in powers is a material or fundamental one, is subject to considerable variation of reasonable opinion in border line cases. In this case, certainly there is no attempt to change from the purpose of distributing irrigation water to irrigators, to some purpose entirely foreign thereto, nor even to engage in a water venture by the corporation *Page 281 
independent of the lands of its stockholders. If the water was to be acquired to be furnished to a city, or even to develop some new project which the majority of stockholders desired to promote, the case might be different. When variation of opinion is permissible, a balancing of practical considerations may be resorted to in order to arrive at the one best suited to the majority of cases. This impels me to apply the concept that those who turn their property over to a corporation for stock, even though that property be water rights and the object be to receive that same water on the land to which it was thitherto applied, consent to the proposition applicable to corporations in general, to wit: that the majority may amend the articles in such a manner as to add to the original powers of the corporation, even though such amendment be against the wishes of the minority and perhaps detrimental to their interests, so long as the additional power is not one which is not germane to the original objects of the corporation.