Grasslands Water Ass'n v. Lucky Leven Land & Cattle Co.

VAN DYKE, J. Appellant, as plaintiff in the trial court, brought this action to recover from the respondent the sum of $884. The complaint alleged that respondent was indebted to appellant on account of an assessment against the respondent as a stockholder of the appellant corporation, made pursuant to the appellant’s by-laws.

It appears that appellant is a nonprofit corporation organized in 1944 principally for the purpose of supplying water to its members who are owners of lands served by appellant. Its by-laws describe the exterior boundaries of the lands which may be served by it and provide that the cost of such service shall be borne by all the stockholders in the proportion that the number of shares of stock owned by each bears to the total outstanding stock of the corporation. The by-laws provide for the levying of assessments as one of the permitted means whereby the necessary funds to pay for the service rendered by the corporation may be raised. Acting under this authority, the corporation in February and July of 1949 levied assessments of $1.00 per acre upon the lands of its stockholders, including respondent. Respondent refused to pay and this action followed.

Basically, respondent’s defense was that it was not a stockholder so as to be liable for the assessments purportedly levied against it. Admittedly, respondent was a stockholder through 1948, but it claims to have withdrawn from the corporation by substantial compliance with the conditions for such withdrawal provided by the by-laws; that any defect in its compliance was waived by appellant and that appellant by its conduct was estopped to claim that respondent had not effectively withdrawn so as to be beyond the reach of assessment. Upon the subject of withdrawal the by-laws provided that all stockholders might cease to become such by surrendering their stock, properly endorsed, to the secretary of the corporation and notifying the corporation in writing at least 30 days before December 31st of any calendar year, of their desire to forfeit their membership in the corporation. There were other conditions, but no claim is made by either party to this action that they were not met. The trial court found in accordance with the contentions of [778]respondent, and from the judgment in its favor this appeal was taken.

It is not claimed by respondent that it either notified appellant in writing of its withdrawal or surrendered its stock to appellant’s secretary, until some time during January of 1949, and it therefore of necessity admits that it did not literally comply with the provisions of the by-laws regarding withdrawal. It relies upon the following facts to sustain the. judgment rendered in its favor. During 1949 respondent drilled a well upon its lands from which it planned to furnish water to its own acreage, and upon the completion and testing of the well intended to withdraw from appellant corporation. Its president testified that about November 28th he began attempting to get in touch with the general manager of appellant, who was also its secretary and treasurer, concerning respondent’s withdrawal. He was unable to reach him but on December 1st he again called the office of appellant on the telephone and was answered by an employee of appellant, its engineer. Respondent’s president told this man that his corporation had drilled its well and wanted to surrender its stock and asked that he be told how to go about it. This question was not answered. On the contrary, the engineer replied “You are all paid up for ’48, why don’t you wait until January of ’49, after the Directors’ meeting, and . . . maybe you can make it so that you can still hang onto your stock.” Respondent’s president, aware that respondent had paid a sum of money per share for the stock when originally purchased, testified that he thereupon waited until the 10th of January. He then learned from a newspaper that although the meeting had been held it had adjourned without any action because a quorum was not present. He thereupon sent in the certificate of stock endorsed in blank with a note to the engineer with whom he had talked, saying “as per our telephone conversation, I am herewith enclosing the Lucky Leven Land and Cattle Company stock for cancellation.” On February 25th following the stock was returned by appellant, the letter of transmittal drawing the respondent’s attention to the provisions of the by-laws governing withdrawal. In the meantime, on February 15th, the appellant’s board of directors declared the first assessment of $1.00 per acre against the respondent and from that time on the appellant has asserted and respondent has denied the respondent’s continued liability through 1949 for its share of the cost of operation of appellant, measured by the two assessments.