Blakely v. Ft. Lyon Canal Co.

• Decision Date: 02 March 1903
• Citation: 31 Colo. 224,73 P. 249
• Parties: BLAKELY v. FT. LYON CANAL CO. PUBLIC GUARANTY SAV. BANK et al. v. SAME.
• Court: Colorado Supreme Court

73 P. 249

31 Colo. 224

BLAKELY v. FT. LYON CANAL CO.

PUBLIC GUARANTY SAV. BANK et al. v. SAME.

Supreme Court of Colorado

March 2, 1903

Error to District Court, Bent County.

Appeal from District Court, Bent County.

Suit by the Ft. Lyon Canal Company against E. E. Blakely, the Public Guaranty Savings Bank, and others. Judgment for plaintiff. Defendant Blakely brings error. Defendant bank and others appeal. Affirmed.

John R. Smith, for plaintiff in error and appellants.

Charles E. Gast and Platt Rogers, for defendant in error and appellee.

GABBERT J.

The questions involved in these cases grow out of the judgment of the lower court rendered in an action brought by defendant in error and appellee against plaintiff in error and appellants to cancel water rights claimed by them in what is now known as the 'Ft. Lyon Canal.' Several of the propositions presented for determination are the same in each case, and they will therefore be considered together.

The basis of plaintiff's claim, as stated in the complaint filed in the court below, is that the water rights in controversy (excepting those held by the Henry and Porter Investment Companies) are excess rights; that is to say rights purchased by the defendant after the estimated capacity of the canal had been disposed of. To this complaint the defendants interposed general and special demurrers which were overruled. Plaintiff in error elected to stand by his demurrer, and judgment was rendered annulling the deeds evidencing the water rights in which he was said to claim an interest. He brings that judgment here for review on error. The appellants answered. On the trial of the issues thus made, the findings of fact and conclusions of law were in favor of plaintiff, and judgment was rendered in its favor canceling the deeds evidencing the water rights claimed by the defendants who answered. From that judgment they appeal.

In order to understand the questions raised by the demurrer, a brief statement, embracing the essential averments of the complaint, is necessary. We omit, however, that portion of the complaint which relates to statements which the plaintiff abandoned (except as to the Henry and Porter Investment Companies) before judgment was rendered, and for the present, also, omit that portion specially relating to the water rights claimed by these companies.

According to the complaint, it appears the Arkansas River Land, Reservoir & Canal Company and the La Junta and Lamar Canal Companies successively owned the canal in which water rights were sold, now known as the 'Ft. Lyon Canal.' These several water rights were evidenced by deeds which provided that when the estimated capacity of the canal was disposed of, and water rights were outstanding and in force equal to that capacity upon which a certain proportion of the contract price had been paid, and a certain other proportion thereof had been fully paid for, then the title to the canal should pass to the owners or holders of such contracts. It further provided the manner a company should be organized which should take the title for the benefit of the purchasers of water rights, and, after the title was so vested and the water rights fully paid for, the obligations of the company selling such rights, with respect to keeping the canal in repair and supplying water through the same, should cease. These companies collectively sold water rights aggregating 1,010 cubic feet per second of time, which is largely in excess of the estimated capacity of the canal and reservoir system to supply. The rights claimed by defendants (except those held by the Henry and Porter Investment Companies) were issued after the estimated capacity of the canal had been sold, and after contracts and deeds conveying such rights had been recorded in one or more of the counties through which the canal extended. After the capacity of the canal had been oversold, one Hess, a water-right holder in the canal, on behalf of himself and others similarly situated, commenced an action to enforce the specific performance of the contract mentioned in the deeds. The trial of this action resulted in a judgment holding that the water-right owners were the owners of the canal (42 P. 50), and such proceedings were subsequently had that the title to the canal was vested in the Ft. Lyon Company for their benefit. This company avers that, in making distribution of its shares of capital stock, it is embarrassed in determining what water rights to recognize as entitled to participate in the ownership of the property, and sets out those sold after the estimated capacity of the canal had been disposed of, which includes those held by the defendants (excepting those above noted), and asks that they be canceled.

In support of the claim of counsel that the complaint does not state a cause of action, it is contended that it is deficient, in that it makes no offer to return the consideration which the defendants paid for their water rights, and that the contract in the deeds which was enforced in the Hess Case requires the Ft. Lyon Company to fulfill the obligations of the companies selling the water rights which it is now sought to cancel. These propositions are based upon the theory that the same contractual relations exist between the plaintiff company and the defendants as existed between the latter and the companies from which they purchased their water rights. Such, however, is not the relation between the parties to this action. By the very terms of the contract contained in the deed issued to the several purchasers of water rights by the companies selling them, the purchasers became the owners of the property when the estimated capacity of the ditch was sold, and the other conditions existed which, according to the contract, brought about this result. In other words, the purchasers of water rights did not become the successors of the companies selling such rights, but the mere vendees of the property thus transferred. That part of the contracl embraced in the deeds upon which counsel for defendants rely in support of their claim that the purchasers assumed the obligations of the company or companies from which they purchased only goes to the extent of releasing the vendor companies from the obligations to keep the canal in repair and supplying water through the same after the conditions existed which, according to the terms of the contract, vested the property in the purchasers of water rights, and divested the companies of all further interest therein. The plaintiff company therefore in no sense stands in the shoes of the corporations which disposed of these excess water rights, nor is it in any manner responsible for the obligations of the companies selling such rights. This being true, it necessarily follows that the plaintiff is not required to plead as a condition precedent an offer to return the consideration paid for the excess rights, because it was not a party to these transactions, and no obligation rests upon it with respect to the contracts evidencing the sale of such rights upon the theory that it is required to fulfill the obligations assumed by the companies selling them.

It is next claimed that, according to the averments of the complaint, the plaintiff is estopped from now asserting that the companies selling the excess rights which it is sought to have canceled had no authority to make such sales, because, by representing that they had water rights for sale, they would not be permitted to say, after having received the consideration, that in fact the estimated capacity of the ditch had been disposed of before these excess rights were sold. As applied to the companies making the sales, this doctrine may be correct; but, as we have already endeavored to point out, the plaintiff in the present action has not assumed any obligations incurred by the companies selling these excess rights, and no such relation exists between the plaintiff and these companies which would estop it, because they were estopped. Each purchaser of a water right, so long as the estimated capacity of the ditch was not exhausted, became an owner pro tanto in the property. The plaintiff company was organized for the purpose of representing these owners, and controlling the property in their interest. The vendees of water rights assumed no obligations arising from the action of their vendors in attempting to sell that which they had no right to dispose of, and which was already vested in others. The title to the property which they thus purchased is now vested in the plaintiff for their use and benefit, and it assumed no obligations which they themselves did not incur. So that, while the doctrine of estoppel, as contended for by counsel, may be applicable to the companies selling these excess water rights, it is in no sense applicable to the plaintiff, for the obvious reason that no such relationship exists between it and the company selling the water rights as to estop it, because the vendors of those whom it represents may be estopped.

It is next urged that the contracts which it is sought to cancel have been executed, and that no sufficient grounds have been stated in the complaint which would justify a court of equity in exercising the extraordinary power of annulling an executed contract.

Here again, it is sought to invoke the application of a principle of law upon the mistaken theory that the contracts sought to be canceled are binding upon the plaintiff. In short, as to this and the preceding reasons urged in support of the contention that the complaint is insufficient, the answer is that the purchasers of water rights up to the estimated capacity of the canal became its owners; that by their contracts of purchase they assumed no obligations other than those...