Atchison v. City of Englewood, 26756

• Decision Date: 11 July 1977
• Docket Number: No. 26756,26756
• Citation: 568 P.2d 13,193 Colo. 367
• Parties: Alfred P. ATCHISON and Ida Mae Atchison, Plaintiffs-Appellants, v. The CITY OF ENGLEWOOD, a Municipal Corporation, and the Martin MariettaCorporation, a Maryland Corporation, Defendants-Appellees.
• Court: Colorado Supreme Court

Page 13

568 P.2d 13

193 Colo. 367

Alfred P. ATCHISON and Ida Mae Atchison, Plaintiffs-Appellants, v. The CITY OF ENGLEWOOD, a Municipal Corporation, and the

Martin MariettaCorporation, a Maryland

Corporation, Defendants-Appellees.

No. 26756.

Supreme Court of Colorado, En Banc.

July 11, 1977.

As Modified On Denial of Rehearings Sept. 6, 1977.

Perry & Perry, William O. Perry, Ralph A. Cole, Thomas C. Singer, Denver, for plaintiffs-appellants.

Bernard V. Berardini, Englewood City Atty., Englewood, Dawson, Nagel, Sherman & Howard, Raymond J. Turner, Denver, Criswell, Petterson & Ballantine, John A. Criswell, Englewood, for defendants-appellees.

CARRIGAN, Justice. ^*

This case has been before this court on two previous occasions ¹ and before the Court of Appeals once. ² The action was initiated by the Atchisons' claim that preemptive rights granted to them by the City of Englewood (hereinafter called the City) were violated. The Atchisons' complaint in the present action sought reformation of the preemptive rights agreement; specific performance, rescission, or damages; and other relief. The trial court reformed the preemptive rights agreement to eliminate the portion of that agreement which violated the rule against perpetuities. However, the trial court refused to grant any additional relief. We affirm the trial court's judgment insofar as it reforms the agreement but reverse that portion of its judgment denying the Atchisons additional relief.

On January 3, 1949, pursuant to a plan to develop its water supply, the City purchased from the Atchisons a ranch with appurtenant water rights. As part of the consideration for the sale, the Atchisons received preemptive rights to buy back or lease the ranch from the City on terms equivalent to those under which the City might offer to sell or lease it to a third party. Before selling or leasing the ranch to a third party, the City was required to make the Atchisons a written sixty day offer to sell or lease on the same terms.

The preemptive rights agreement entered incident to the sale to the City on January 3, 1949, provided, inter alia :

"1. The City hereby gives and grants unto the Atchisons the exclusive and prior right at the option of the Atchisons to repurchase or to lease the lands described in said Warranty Deed of even date herewith to which reference is hereby made for description of said lands; together with any water rights appurtenant to said lands at the time of such sale or leasing at the same price and upon the same terms and conditions upon which the City is willing to sell or lease said real estate and any water rights then appurtenant thereto to any third person ; and the City shall not sell or convey or contract to sell or convey or lease said lands or the water rights that may then be appurtenant thereto to any third person unless and until the City, for a period of sixty days, shall first offer in writing to sell or lease such lands with the then appurtenant water rights, if any, to the Atchisons at the same price and upon the same terms and conditions as in the case of such other sale or contract of sale or lease of such property to any third person . . .." (Emphasis added.)

The Atchisons caused the preemptive rights agreement containing the above paragraph to be recorded by the Arapahoe County Clerk and Recorder on January 25, 1949.

After sale of the ranch and water rights to the City, the Atchisons remained in possession of the ranch pursuant to the January 3, 1949, agreement until March 1, 1950, at which time they leased the ranch from the City for a five-year term. Prior to expiration of that five-year term, however, the City claimed that the Atchisons had breached this lease and purported to cancel it by serving a Notice of Termination of Lease on the Atchisons on September 25, 1951. Among other things, this notice stated that thirty days after service of the notice, the Atchisons would have "no right, title, claim or interest in and to the premises . . .."

The Atchisons denied that they had breached the lease, but having previously made arrangements to acquire a ranch near Colorado Springs, they did not contest the matter, but vacated their prior home and moved.

During the period from March 1, 1952 until May 7, 1956, the City leased the ranch to two different lessees. The notice required by the preemptive rights agreement was not served on the Atchisons prior to either of these leases.

On May 7, 1956, a twenty-five year lease dated March 1, 1956 was executed between the City and the defendant Martin Marietta Corporation (Martin). This lease granted Martin an option, exercisable on or after March 1, 1961, according to a specified price schedule, to purchase the land without the water rights. Again the notice to the Atchisons required by the preemptive rights agreement was not given.

Over ten years later, on November 11, 1966, Martin notified the City that it would exercise its option to purchase the land. Although in 1956 and 1967, Martin received from its attorneys title opinions which informed it of the cloud on the title created by the Atchisons' preemptive rights, no attempt was ever made by Martin or by the City to give notice to the Atchisons or to obtain from them a waiver, consent, or release.

In November, 1966, the Atchisons learned, through newspaper publicity, of Martin's option and the impending sale to Martin. On December 12, 1966, the Atchisons' attorneys demanded that the City offer to sell the land to them as required by the recorded preemptive rights agreement. Notwithstanding this demand, the City, on November 8, 1967, conveyed the property to Martin, reserving the water rights. Shortly after that conveyance, a portion of the ranch was condemned by the United States Government as part of the Chatfield Dam project.

I. REFORMATION.

The trial court reformed the January 3, 1949 agreement by deleting paragraph three of that agreement on grounds of mutual mistake of the parties. The deleted provision stated:

"3. The rights of the Atchisons under this agreement shall be deemed not in tenancy in common but in joint tenancy in them and in the survivor of them, their assigns, and the heirs, and assigns of such survivor." ³

The lawyer who drafted the preemptive rights agreement testified that his responsibility had been merely to draft an agreement previously worked out by the parties and that he had followed in this instance his usual practice during that time period of inserting this standard provision in all real estate contracts. Further he testified that he doubted that this paragraph's meaning or effect had been discussed with anybody. The Atchisons testified that there had never been any discussion or agreement to the effect that the preemptive rights provision would run to their heirs.

The trial court found as a fact that the parties never discussed extending the Atchisons' preemptive rights to their heirs and assigns. In its "Conclusions of Law," however, the trial court inferred from its findings of fact that the parties intended to extend the rights to the Atchisons' heirs and assigns and that they mistakenly believed that such a provision would be enforceable. We decline to follow the trial court's conclusion of law in this regard. The findings of fact and the record demonstrate that the parties intended to create personal preemptive rights exercisable only by Mr. and Mrs. Atchison during their joint lives, and by the survivor of them during his or her life.

Reformation is generally permitted where, as here, the evidence clearly and unequivocally shows that an instrument does not express the true intent or agreement of the parties. Segelke v. Kilmer, 145 Colo. 538, 360 P.2d 423 (1961) (evidence did not meet this test); Hamilton v. Shelton, 74 Colo. 384, 222 P. 350 (1924). Reformation is also appropriate where the variance between the instrument and the true agreement of the parties, hence the mutual mistake of fact, is caused by the draftsman. Gullion v. Plymale, 168 Colo. 245, 450 P.2d 650 (1969); Fenimore v. Stauder, 34 Colo.App. 309, 527 P.2d 943 (1974). Here the evidence was not only clear and unequivocal but uncontradicted. Contrary to Martin's contention that reformation was granted merely to achieve legal enforceability, the evidence demonstrates that the instrument, before reformation, did not reflect the true agreement of the parties.

Even if we were to hold, as Martin argues, that the parties' mistake was one of law, and not of fact, reformation would nevertheless be appropriate because this mistake concerns the private rights of the parties involved. A " 'mistake as to particular private rights may be treated as a mistake of fact . . . .' " Ryan v. Vickers, 158 Colo. 274, 280, 406 P.2d 794, 797 (1965), cert. denied, 383 U.S. 944, 86 S.Ct. 1201, 16 L.Ed.2d 208 (1966) (mistake as to priority of lien on property).

The trial court did not err in reforming the contract between the Atchisons and the City.

II. PROPRIETY OF ADDITIONAL RELIEF.

A. Construction of the Agreement.

The trial court held that the City's lease back to the Atchisons, entered into shortly after their conveyance to the City, entirely satisfied and discharged the City's obligations under the preemptive rights agreement. We disagree. The January 3, 1949 preemptive rights agreement prohibited the City from selling, contracting to sell, or leasing the premises to a third party without first extending an offer to the Atchisons on the same terms. The appellees (the City and Martin) contend that having once leased the ranch to the Atchisons, the City had no obligation to give them notice before selling or contracting to sell the property to a third party. They contend that the word "or" in this context means that the City must respect the preemptive rights agreement either before leasing, before contracting to sell, or before selling, but not before each of these events. We do not agree.

One who is prohibited from three...