STORIES OF STANISLAUS
A Collection of Stories on the History and Achievements of Stanislaus County
Sol P. Elias
The Compromise Agreement
The following is the compromise agreement entered into by the Modesto Irrigation District with the Trustees appointed therein and with the bondholders:
“This memorandum of agreement, made this 4th day of November, 1901, between the Modesto Irrigation District, party of the first part, the undersigned holders and owners of outstanding indebtedness of said District, of the second part, and Daniel Meyer, Sidney Newell, and F. A. Cressey, parties of the third part,
Whereas, certain differences have heretofore existed between the said Modesto Irrigation District and the bondholders of said district as to the legality of the information and organization of said district and the validity of its outstanding indebtedness, by reason of which the market value of said securities has been decreased, and the said district unable to complete its irrigation system; and,
Whereas, It is the desire of all the parties hereto to adjust such differences upon the basis herein proposed and to cause to be discontinued all litigation affecting the validity of the said District and its bond issues, so that the public confidence in said securities may be restored and said irrigating system completed as soon as possible;
Now, therefore, to effectuate the said purposes,
This Agreement Witnesseth:
First: The parties of the second part hereto agree that they will as soon as possible, place in the hands of Daniel Meyer, Sidney Newell and F. A. Cressey, the parties of the third part, hereto, all bonds, coupons, and other evidences of indebtedness of said Modesto Irrigation District, now owned or controlled by them, and that said parties of the third part, and their successors shall be and they are hereby jointly made the Trustees of said parties
of the second part, for the purpose of carrying out the objects of this agreement.
Second: The party of the first part agrees that it will at once prepare for and authorize the issuance of new bonds in payment for its bonds, coupons, and other evidences of indebtedness now outstanding, which said indebtedness shall not exceed the following amounts:
Principal of said bonds, $800,000
Coupon Indebtedness, 275,000
Outstanding Warrants, 50,000
And the said party of the first part further agrees that before any money is paid by the said Trustees as hereinafter stated, that all suits at law or in equity now pending in any court, wherein said district, or any person owning property within said district or any of its bond issues, or assessments, shall be settled or dismissed, and that an agreement will be signed by said district and such of the individuals owing real estate within the boundaries of said district as shall be satisfactory to the parties of the third part herein, by which it shall be stipulated that the validity of the information of said district and of the said bond issues, is hereby recognized, and that the same shall not be attacked by any of the signers of said document or their successors in interest, and that said document shall be placed in the hands of the said Trustees, and may be filed by them in the office of the County Recorder of Stanislaus County, as soon as the bonds have been refunded as herein provided for.
Third: The parties of the third part as such Trustees are hereby authorized and do hereby agree that as soon as the said bonds have been legally authorized they will exchange the evidences of indebtedness of the said district then held by them for the new bonds bearing interest at the rate of five per cent per annum (sic) and issued in accordance with law.
Fourth: The said Modesto Irrigation District agrees that it has levied or will immediately upon the execution of these presents levy, in accordance with law, a tax upon all the real property in said district for the purpose of raising interest on its outstanding bonds in the sum of not less than $50,000, and that said sum will, when collected,
be paid over to the said Trustees, the parties of the third part herein, in payment for coupons and other evidences of indebtedness held by them, and the said Trustees hereby agree that upon the receipt of said sum they will surrender to the party of the first part, the Modesto Irrigation District, for cancellation evidence of indebtedness against the said district amounting in par value to the sum paid over and that they will cause the sum so received by them to be applied upon the contract which may have been let or shall subsequently be let for the purpose of completing the said irrigation system. The said sum shall be paid to such Trustees not later than January 31, 1902.
Fifth: The party of the first part does further agree that at least one-fourth of the cost of the said contract work shall be borne by said district or the people thereof, independent of the assessment herein provided for, which said amount may be raised by the sale of bonds of the said district.
Sixth: The said Trustees, the parties of the third part, herein hereby agree as soon as they shall have received said sum of $50,000, to detach pro rata from the said new bonds then in their hands, coupons in the order of maturity sufficient in amount to enable them to borrow thereon at a rate not exceeding 6 per cent per annum as sum equal to 40 per cent of the cost of completing said irrigation system, which said 40 per cent shall in no case exceed the sum of $113,000, and that they will also detach from said bonds coupons sufficient upon their face to complete the amount necessary to be raised to complete the construction of said works, not exceeding the sum of $50,000, and surrender their said coupons to the party of the first part upon the payment to the said Trustees by the party of the first part for the construction of the works, the said sum of $50,000 during January, 1903. The $50,000 mentioned in this paragraph is in addition to the $50,000 mentioned in paragraph four.
Seventh: The said Trustees are authorized by the sale, hypothecation (sic), or other disposition, of said first mentioned coupons or so much thereof as may be necessary, to procure a sum not to exceed the aforementioned 40 per cent of the contract price, payable in such installments as such Trustees may deem necessary and to apply the money so obtained to the payment of the said contractor, or so much thereof as may be necessary, and the said parties of the second part hereto, said bondholders, do hereby release any and all right to all of the said coupons so detached for the purposes herein stated.
Eighth: The said district, the party of the first part herein, does further agree that it will levy an assessment and cause to be paid during the month of January, 1903, for the interest due upon its outstanding bonds, a sum at least equal to $50,000, and the said Trustees are hereby authorized and hereby agrees upon the payment of said sum to turn over to the district an amount of coupons equal thereto, detached by them as hereinbefore provided so that upon a basis of a total cost of said canal system of $284,000, the amount to be paid by the several parties hereto will be as follows:
By the District:
In cash or work or one-fourth of the contract price, $71,000
By donation of coupons on new bonds, $113,000
January, 1902, assessment for coupons to be surrendered, 50,000
January, 1903, assessment levied for coupons to be surrendered, 50,000
It being expressly understood and agreed that in no event under the terms of this agreement does the party of the first part, the Modesto Irrigation District, obligate itself in any one year to pay for assessment an amount which shall be greater than one year's interest upon outstanding bonds and all the current expenses of the district.
Ninth: It is further agreed that as soon as practicable the said district shall advertise for a bid or bids in accordance with law for the construction of its said works and that said Trustees shall have the right, in conjunction with the Board of Directors of said district, to appoint a competent engineer to be paid for by the said district, under whose directions and supervisions said work shall be done, and upon whose certificate only said moneys be paid to said contractor.
Tenth: The said parties of the second part hereto, said bondholders, do further appoint the said parties of the third part as their attorneys in fact for the purpose of adjusting with said district any matters which may arise during the completion of said system and said attorneys in fact are hereby authorized to deal with said district and with said bonds and coupons in such manner as may seem to them best in order to effectuate the purposes of this agreement and said attorneys in fact may in their unanimous judgment alter the terms of this agreement, having first obtained the consent of the said party of the first part, to such alteration, and said parties of the second part hereby ratify and confirm all that the said parties of the third part may do in the premises.
Eleventh: It is further provided that the conditions herein contained are mutually concurrent and dependent and that this agreement shall not be binding upon any of the parties hereto unless 80 per cent of the principal and interest indebtedness of said district shall have been placed in the hands of said Trustees as herein provided.
In witness whereof the parties have hereunto set their hands and seals, the Modesto Irrigation District by its President and Secretary thereunto duly authorized by resolution of its Board of Directors.”
MODESTO IRRIGATION DISTRICT
By F. C. DAVIS, President.
C. S. ABBOTT, Secretary.”
The other signatures to this agreement which served to solve all the difficulties of the district and brought litigation to a close and the water to the plains of Paradise Valley, were Carrie McDougald, representing $170,000 bonds; Daniel Meyer, $41,000; Municipal Trust Company, London, $40,000; Colonial and Foreign Company, London, $15,000; Government Stocks Co., London, $10,000; Esher & Borhn, $37,000; I. R. Wilbur, $15,000; Atlantic Gulf & Pacific Co., $20,500; E. Gauthier, $8,500; F. A. Koetitz, by C. F. McCarthy, agent, $13,000; P. W. Butler, McCarthy, agent, $3,000; Mrs. A. E. Barkley, McCarthy, agent, $16,000; Joseph McAvoy, $31,500; The Anglo California Bank, Trustees, $36,500; Campbell & Swigert, $49,000; C. H. Hopkins, $20,000; First National Bank of Los Angeles, by Daniel Meyer, $33,500; The Modesto Bank, J. R. Broughton, Cashier, $3,000.
J. C. Bates, $80,000; and Daniel Meyer, Sidney Newell and Frank A. Cressey, the Trustees.
Al of the requirements of this contract and compromise were complied with by the Modesto District. Bonds were sold to meet the amount that the district should contribute to the construction of the works. These bonds were purchased by the people of the district. The documents agreeing to refrain from contesting the proceedings of the district and its formation was procured and was filed in the County Recorder's office. The bondholders, through their Trustees, contributed the sum of $213,000 to the completion of the works. The election of 1902 for the refunding of the bonds carried by practically a unanimous vote, 433 to 24. The petition for this election was signed by property owners representing 90 per cent of the value of the property of the district.
The suggested legislation was secured providing for the determination of the validity of the funding issue. The agreed case between the Modesto Irrigation District vs. Daniel Meyer, Sidney Newell and F. A. Cressey, trustees of the bondholders of the district, to procure an adjudication of the validity of the new issue of funding bonds was heard in the Superior Court of this county by Judge W. M. Conley of Madera county. The decision for the plaintiff was rendered in June, 1902.
When the favorable import of Judge Conley's decision was learned, it caused a wave of genuine gratification throughout the district. The indications pointed to the speedy completion of the magnificent irrigation project that had lain dormant for so many years. The good fortune that had attended the movements of the boards of directors presaged a happy conclusion of all their efforts.
Transcribed by: Jeanne Sturgis Taylor.
Source: Elias, Sol P., Stories of Stanislaus – A Collection of Stories on the History & Achievements of Stanislaus County. Modesto, CA. 1924.
© 2012 Jeanne Sturgis Taylor.