LEHI — A January auction of water shares that the Lehi Irrigation Company claimed were in delinquency has been voided and shares will be returned to their original owners, officials said on Monday.
"The company, acting on the advice of former counsel, made some mistakes in conducting the sale," said a statement released by the company. "The governing law in this area provides that if errors or omissions are substantial enough, the sales of those shares are void."
John Mabey, the company's current attorney, acknowledged that the company failed to properly publish notice of the impending sale and that the company sold more shares than necessary.
The company sold 58 shares belonging to 25 shareholders at a closed bid auction on Jan. 9. The shares sold had been assessed delinquent fees, but shareholders said they were not notified that the shares would be sold if the fees were not paid.
Several lawsuits were filed against the company following the sale alleging the number of shares sold at the meeting exceeded legal limitations. State law allows selling only the portion of the delinquent share needed to compensate the company for the assessed fee. The company sold entire shares — valued at about $10,000 each — and groups of shares to cover assessment fees amounting to as little as $60.
"The shareholders who had their shares sold will have their shares restored, and then whoever bought the shares at the auction will have their money refunded," Mabey said. "By law, the sale (of the shares at the auction) is void, so the company won't recognize those shares."
Mabey said the company will still collect the fee assessments that are owed, but no decision about holding another auction has been made.
Dee Broadhead, who owns three shares in his wife's name, said he is relieved to have the shares back. Broadhead said he was not notified when the shares were sold and has not yet been officially notified that they have been returned.
Broadhead said he was on the verge of hiring a lawyer since he has not received any response from the company.
"If they have rescinded the sale, I will not proceed any further," he said.
Evan Johnson, another shareholder, already has filed a lawsuit against the company. Johnson alleges his shares, and others, were sold to the board of directors of the company for a fraction of the cost of the shares.
"I think (rescinding the sale) is only half a step," Johnson said. "The board of directors that participated in the sale should resign, or the shareholders should have a meeting where they are voted out."
Lehi City, which hired an outside attorney to examine the auction, is also continuing its investigation. Attorney Michael Zundel said the city has not yet received the information it has requested, therefore it cannot make a decision about its next course of action.
"We don't yet have the information," Zundel said. "But in general, we think that unwinding the sale is a good thing."
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