Doxey-Layton Co. v. Clark

• Decision Date: 13 April 1976
• Docket Number: DOXEY-LAYTON,No. 14097,14097
• Citation: 548 P.2d 902
• Parties: COMPANY, a corporation, et al., Plaintiffs and Appellants, v. Vendetta CLARK et al., Defendants and Respondents.
• Court: Utah Supreme Court

Page 902

548 P.2d 902

DOXEY-LAYTON COMPANY, a corporation, et al., Plaintiffs and Appellants, v. Vendetta CLARK et al., Defendants and Respondents.

No. 14097.

Supreme Court of Utah.

April 13, 1976.

Gaylen S. Young, Jr., of Spafford & Young, Salt Lake City, for plaintiffs and appellants.

George E. Mangan, Roosevelt, for Ralphs.

Gregory P. Williams, Salt Lake City, for Chevron.

MAUGHAN, Justice:

Before us is an appeal of the judgment of the district court reforming a warranty deed, because of a scrivener's mistake; quieting title to an undivided 25 per cent interest of the mineral estate, in plaintiffs; quieting title to an undivided 75 per cent interest of the mineral estate, in defendant individuals; and sustaining the leasehold interest of Chevron Oil Company in the entire mineral estate. We affirm.

Plaintiffs advance three points on appeal: (1) That the individual defendant's claim of mistake was barred by a statute of limitation, and that the doctrine of estoppel in pais was not applicable to plaintiffs; (2) That some of the findings and conclusions were based upon hearsay evidence; (3) It was error to hold that plaintiffs could not terminate a leasehold interest of Chevron. These points are dealt with seriatim.

Plaintiffs brought an action to quiet title to a 75 per cent interest in the mineral rights in some property located in Duchesne County; and to have the mineral lease of Chevron terminated.

Plaintiffs claim through a warranty deed, dated August 13, 1963, recorded May 5, 1970. In that deed William and Bertha Ralphs, husband and wife, conveyed the property to K. C. Ranches, Inc.

Under a uniform real estate contract, dated September 7, 1962, William A. and Bertha Ralphs, as sellers, sold the subject land to Hank and Donna Swain, as buyers; expressly reserving 75 per cent of all oil, gas, and mineral rights, and excepting from the obligation to convey, a lease then in existence. The Swains assigned whatever interest they had in this contract to K. C. Ranches, Inc., in August of 1963. In that same month the Ralphs conveyed the subject property to K. C. Ranches, Inc., by warranty deed. This deed contained no reservation of 75 per cent of the mineral rights provided for in the real estate contract. This was the mistake defendants alleged in their answer, and the one the court reformed the deed to rectify. In addition, the deed of August 13, 1963, does not reflect a conveyance of water shares, described in the uniform real estate contract; nor does the record show a conveyance of shares by an independent instrument.

Defendants also filed a counterclaim in which they prayed for an order requiring plaintiffs to quitclaim to them 75 per cent of the mineral rights. The counterclaim also alleged that an employee of Doxey-Layton Company embezzled funds to purchase the interest acquired by K. C. Ranches, Inc. (The employee was the wife of one of the principals in K. C. Ranches.) Upon discovery of these defalcations, Doxey-Layton received an assignment of all K. C. Ranches' interest in the subject property. The defendants also alleged that the plaintiffs knew of the error in the warranty deed, and that said deed did not reflect the terms of the contract, which showed the defendants to have parted with only 25 per cent of their interest in the oil, gas, and mineral rights.

The Uniform Real Estate Contract of September 7, 1962, between Ralphs and Swains, after describing, by metes and bounds, the realty to be conveyed, also listed other potential conveyances, two of which are pertinent here:

130 shares of the capital stock of the Dry Gulch Irrigation Company. Together with Class 'A' stock

Together with an undivided 25% of oil, gas and mineral rights but excepting therefrom a lease now in existence.

At the time the Swains assigned their interest in the contract to K. C. Ranches (August 1963), an error in the legal description was discovered; viz., the West one half of the Northeast quarter, in Section 1, should have read the West one half of the Southeast quarter. To rectify this, an amendment to the Uniform Real Estate Contract was executed by William and Bertha Ralphs and K. C. Ranches, at the latter's request. This amendment was in writing and it stated: the contract contained an erroneous legal description, the contract had been assigned, and the parties desired to amend the legal description; it further said:

2. WITNESSETH: That the seller, for the consideration herein mentioned agrees to sell and convey to the buyer, and the buyer for the consideration herein mentioned agrees to purchase the following described deal property, situate in the County of Duchesne, State of Utah, to wit: (Here the corrected description is made.)

Except as herein modified, all remaining terms, conditions and provisions of said uniform real estate contract shall remain in full force and effect.

Neither the water rights nor the mineral rights were included in this description, or in the subsequent assignment by K. C Ranches to Doxey-Layton. However, when Doxey-Layton conveyed the surface rights by warranty deed to the McConkies, in 1970, the water rights included in the description in the original Uniform Real Estate Contract were included.

At the time the Ralphs executed the amendment to the contract, they were also requested to execute the warranty deed; through which plaintiffs on appeal claim 100 per cent of the mineral rights. The Ralphs were elderly people, and in company with a realtor friend of theirs, a Mr. Gardner, met with Mr. Bennett, the principal of K. C. Ranches. Mr. Gardner read the documents aloud to the Ralphs, and Mr. Bennett assured everyone the only change was in the erroneous legal description, with which Mr. Gardner agreed. The deed had been prepared in Roosevelt, Utah, by an attorney representing the realtor who had sold the property to K. C. Ranches.

Upon execution of the deed, August 13, 1963, it was deposited in an escrow account, to await performance of the obligations precedent to delivery. In September 1965, the Ralphs granted a ten-year lease of the oil rights to Chevron. At that time the Ralphs were record owners of 100 per cent of the mineral rights. On May 15, 1970, after the obligations of the contract were fulfilled by Doxey-Layton, the deed was delivered and recorded. On this same day, Doxey-Layton conveyed the surface rights, and the water shares, by warranty deed to McConkies. In November 1971, William A. Ralphs recorded an affidavit of interest in which he gave record notice that the deed was in error, viz., that it did not reserve 75 per cent of the oil, gas, and mineral interests.

The action resulting in this appeal was filed January 22, 1973, against William A. and Bertha Ralphs, their son Dennis Ralphs, and Chevron Oil Company. Chevron answered February 20, 1973, and alleged that William A. and Bertha Ralphs had died prior to the commencement of the action, and pleaded that the representatives or heirs of the decedents be joined as parties. Plaintiffs responded with an amended complaint in which they admitted the Ralphs were dead, but failed to join their heirs or representatives. The attorney representing Ralphs, including Dennis Ralphs, who had been a party in both the complaint and amended complaint, delayed answering since he had been informed the other named heirs would be joined, and he agreed to accept service on behalf of all of them. Receiving no pleading joining the other named heirs, on June 12, 1973, defendants filed their answer and counterclaim, pleading that the other heirs be made parties to the action. On June 19, 1973, plaintiffs filed a second amended complaint, which included the heirs as parties; together with a reply to the counterclaim. On June 29, 1973, plaintiffs filed a motion for substitution of parties, requesting the heirs be substituted for defendants William A. and Bertha Ralphs.

On these facts plaintiffs raise the three points on appeal, the first of which is that reformation cannot be had because the claim of mistake is barred by the statute of limitations. ¹ This statute allows an action to be brought on the ground of fraud or mistake within three years, but provides the cause shall not be deemed to have accrued until the aggrieved party discovers the facts constituting fraud or mistake. Plaintiffs claim the statute began to run as of the date of execution, viz., August 13, 1963, rather than from the date of delivery--the termination of the escrow.

A deed in escrow, under a conditional sales contract, is effective as a conveyance after performance of the contract obligations, and upon delivery by the depositary. Except for unusual circumstances (those which would create a shocking injustice) which the court does not find present herein, the date of delivery of the deed does not relate back to the date of execution of the deed, or the commencement of the escrow period. ² Thus, in this matter, the limitation period to reform the deed did not commence to run until May 15, 1970.

Plaintiffs make a second thrust with the statute of limitations, by contending that the substitution of parties and filing of the counterclaim do not relate back to the filing of the complaint; and are therefore barred. ³ The facts claimed to support this second thrust are that plaintiffs' action was filed on January 22, 1973, defendants' answer and counterclaim were filed June 12, 1973; and, except for Dennis Ralphs, the heirs were not joined as parties until June 19, 1973.

Generally Rule 15(c), U.R.C.P., will not apply to an amendment which substitutes or adds new parties for those brought before the court by the original pleadings--whether plaintiff or defendant. This for the reason that such would amount to the assertion of a new cause of action, and if such were allowed to relate back to the filing of the complaint, the purpose of a statute of limitation would be defeated.

There is an exception to this rule. The exception operates where there is a...