Hanks v. McNeil Coal Corp.

• Decision Date: 08 April 1946
• Docket Number: 15464.
• Citation: 114 Colo. 578,168 P.2d 256
• Parties: HANKS v. McNEIL COAL CORPORATION et al.
• Court: Colorado Supreme Court

168 P.2d 256

114 Colo. 578

HANKS v. McNEIL COAL CORPORATION et al.

No. 15464.

Supreme Court of Colorado, en Banc.

April 8, 1946

Error to District Court, Weld County; Claude C. Coffin, Judge.

Action by J. L. Hanks, conservator of the estate of Lee A. Hanks also known as L. A. Hanks, insane, against the McNeil Coal Corporation, and others to set aside a contract, and a deed and surface lease executed pursuant thereto. Judgment of dismissal, and plaintiff brings error.

Affirmed.

Irwin & O'Connell, of Denver, for plaintiff in error.

Stanley T. Wallbank, of Denver, for defendants in error.

STONE Justice.

Lee A Hanks, who was a prosperous farmer and business man in Nebraska, came to Colorado with his family in 1918, at first settling on a farm in Weld county, which included the coal lands involved in this proceeding; then, in 1920 moving to Boulder where he purchased a home, engaged in the retail coal business, and thereafter resided. His son, J. L. Hanks, continued to operate and live on the farm as a tenant. From 1932 to 1934 the father also owned a coal business at Sterling, Colorado, but the manager was not satisfactory and he disposed of it at a loss. A considerable part of the time he further engaged in the business of buying, feeding and selling livestock, in which his son was associated with him. Shortly after 1922 Lee Hanks discovered that he was afflicted with diabetes, and members of his family noticed a progressive change in his physical and mental condition thereafter. He became irritable and easily upset, very critical of his son's work, and increasingly interested in the emotional type of religion. He began to speculate in oil and other doubtful ventures with money needed for payment of debts and taxes. About 1934 he sent his son what he denominated a secret formula for the manufacture of medicine to cure fistula in horses, which was compounded principally of ground china, brick dust, burnt shoe leather and amber-colored glass. If the infection was in the horse's right shoulder, the mixture was to be poured in the animal's left ear, and if on the left shoulder then in the right ear. In 1937 Mr. Hanks started to advertise this medicine through the press under the name of Crown King Remedy. Thereafter he increasingly devoted his efforts and money to the compounding and attempted sale of this concoction, his business judgment became poor and he finally deteriorated mentally to the point that on May 25, 1940, he was adjudicated insane and his son was appointed conservator of his estate.

As to the coal lands here concerned, the evidence shows that Hanks in 1930 executed a twenty-year lease of the quarter section to the defendant coal company for coal mining purposes at ten cents per ton royalty, with a minimum royalty of $2,000 per year, but the son continued to farm the surface. Under this lease the coal mined was as follows: 1930, 2909.30 tons; 1931, 27,806.70 tons; 1932, 59,192.70 tons; 1933, 69,030.10 tons; 1934, 87,661.40 tons; 1935, 80,890 tons; 1936, 76,522.20 tons; 1937, 34,226.76 tons; 1938, 18,268.16 tons. No coal was mined from the Hanks land after 1938, and the total of royalty payments to the date of his deed was $43,158.32. About 1931 Hanks mortgaged this property and thereafter defaulted in payment so that foreclosure proceedings were instituted, as a result of which a decree of foreclosure was entered and the property went to foreclosure sale. Hanks failed to raise sufficient money to make payment during the period of redemption and, in order to save the property from going to deed under foreclosure, in the fall of 1934 he finally executed two mortgages to his judgment creditors, Collins and DeBacher, totaling $30,000, the first mortgage for $16,708.62 representing the amount actually due and owing, and a second mortgage for $13,291.38 representing no indebtedness, but a bonus which he was required by his mortgagees to pay for redemption from the foreclosure and extension of the loan. The second mortgage note was payable ten years after date without interest. As further security, Hanks executed to these mortgage creditors an assignment whereunder a portion of the royalties received under his coal-mining lease was required to be paid toward the liquidation of the debt.

At about the time Hanks learned that the defendant coal company, which had leased other lands lying to the north of his property, was extracting coal from their other leased lands and conveying it by means of the open haulage way through his lands to its shaft located to the south thereof. Hanks made demand for payment of royalty on the coal so transported across his land and there was extended argument and controversy which finally led to discussion of outright purchase of the Hanks property and the ultimate signing of the contract here involved on July 21, 1937, between Hanks and the defendant companies, whereby he contracted to sell said quarter section of land with all water and mineral rights, subject to the aforementioned mortgages, and further to release all claim for haulage of coal through his said lands, in consideration of the payment to him of $5,000 in cash and the execution back of a farm lease upon the surface and water for five years, Hanks as lessee to pay all water charges and taxes, except taxes on coal, during the term of the lease. The present action was brought by the conservator seeking to have the court set aside this contract, and the deed and surface lease executed pursuant thereto. The record is voluminous; the case was carefully considered by the court below and judgment of dismissal entered on findings against plaintiff both on the question of insanity and that of inadequacy of consideration, coupled with unfair advantage and weakness of mind.

It is first urged that the trial court was not supported by the evidence and proper conception of the applicable law in finding Lee Hanks not legally insane at the time of his sale to defendants in 1937. At the time of the insanity adjudication in 1940, he was found to be suffering from senile dementia, paranoia type, a condition that does not come on suddenly, but progresses over a period of years. He was then hallucinating and subject to insane delusions. A psychiatrist testified in substance that there were certain mental changes starting as early as 1930 that continued to increase in intensity and culminated in 1940; that it was difficult to state specifically when his incompetency began; that, as appeared from the testimony and exhibits in the case and from his examination and observation at the psychopathic hospital, it seemed to the witness that Hanks 'might well be considered without full possession of his faculties to attend to his property adequately' at the time of the sale of his property to defendants in July, 1937, and that it was his opinion that Lee Hanks was incompetent in 1937.

Hanks' son, who was in the best position to judge of the business competence of his father, testified: 'Q. Now, my question is, when did you first believe your father was incompetent to look after his business affairs? A. I didn't realize the full extent, the manner he was imposed upon, until after I had the complete files and the complete information. * * * My mind was not totally made up until after he was made incompetent in 1940. I suspicioned that he was doing some very foolish deals all those years from time to time, and it was the summation, the total of everything that finally convinced me. * * * I want the Court to understand that I suspicioned that father needed counsel and aid to handle his business during the years mentioned, and that I did not make up my mind until I had full information of his business dealings, and that was after I was made conservator after father was sent to the hospital.' During all those years the son had intimate business transactions with his father; he leased his farm property on a crop basis; engaged jointly with him in the purchase, feeding and sale of cattle; worked with him in procuring loans; was aware of his efforts to refinance after foreclosure and of his giving the bonus mortgage. The father's attorney conferred with him several times during the negotiations with reference to the sale of the property here sought to be set aside, and testified that he was fully informed of the proposals between his father and the company upon which they dealt.

A Denver banker testified to the making of a substantial loan to Hanks in the fall of 1936 and again in 1939 to finance the purchase of feeder cattle, after personal interview with, and negotiation by, Hanks himself, and that he appeared to have very clearly in mind what he wanted to do in the way of feeding cattle, the kind he wanted, and the amount of feed he had on hand. The president of a Boulder real estate and loan company, who had known Hanks fifteen years, testified to making him a mortgage loan in November, 1938, and meeting him a number of times...