Public District Can Own Private Stock

Wenatchee Heights Water Co., incorporated in 1920, and Spring Hill Irrigation Co., incorporated in 1899, were private, for‐profit companies that constructed reservoirs and ditches and appropriated water from area waterways and diverted it to their shareholders. They were authorized to acquire water rights. By the early 1980s, both systems' infrastructures were in disrepair. The state of Washington made funds available to repair the water systems, but only public entities could take advantage of them. Both companies decided to dissolve and transfer their assets to the Wenatchee Heights Reclamation District. B.J. Matthews, a shareholder in both companies, brought suit seeking to set aside the dissolutions. The trial court ruled for the district. On appeal, Matthews argued that the state constitution prohibited municipal corporations from owning private company stock. But the court said that a public irrigation district was not a municipal corporation for purposes of the state constitutional provision prohibiting municipal corporations from owning private company stock. According to the court, the term “municipal corporation” excludes quasipublic corporations with limited purposes, such as irrigation districts. The trial court decision was affirmed.