High v. Davis

• Decision Date: 12 September 1978
• Docket Number: SCP-2486
• Citation: 584 P.2d 725,283 Or. 315
• Parties: Wallace HIGH, Richard Atchison, Charles L. Milbrandt and Robert Lovell, Appellants, v. Luther DAVIS and Helen E. Davis, husband and wife, Skyline Enterprises, Inc., Lomas & Nettleton Financial Corp., and Cascade Aviation, Inc., Respondents. The LOMAS & NETTLETON COMPANY, a Connecticut Corporation, Respondent, v. SKYLINE ENTERPRISES, INC., an Oregon Corporation, et al., Defendants, Wallace E. High, Richard G. Atchison, Charles L. Milbrandt, Robert S. Lovell, Floyd Thomas Morrell, James McFarland and Deane Stearns, Appellants. TC 3636, TC 3630
• Court: Oregon Supreme Court

Page 725

584 P.2d 725

283 Or. 315

Wallace HIGH, Richard Atchison, Charles L. Milbrandt and Robert Lovell, Appellants, v. Luther DAVIS and Helen E. Davis, husband and wife, Skyline

Enterprises, Inc., Lomas & Nettleton Financial

Corp., and Cascade Aviation, Inc., Respondents.

The LOMAS & NETTLETON COMPANY, a Connecticut Corporation, Respondent, v. SKYLINE ENTERPRISES, INC., an Oregon Corporation, et al., Defendants, Wallace E. High, Richard G. Atchison, Charles L. Milbrandt, Robert S. Lovell, Floyd Thomas Morrell, James

McFarland and Deane Stearns, Appellants.

TC 3636, TC 3630; SCP-2486.

Supreme Court of Oregon, In Banc.

Argued and Submitted June 5, 1978.

Decided Sept. 12, 1978.

Brad Littlefield, of Goldsmith, Siegel, Engel & Littlefield, Portland, argued the cause and filed the briefs for appellants.

Gile R. Downes, of Jensen, DeFrancq, Holmes & Schulte, Portland, argued the cause for respondents The Lomas & Nettleton Co. and Lomas and Nettleton Financial Corp. With him on the brief was Ted Jensen, of Jensen, DeFrancq, Holmes & Schulte, Portland.

TONGUE, Justice.

These two suits were consolidated on appeal because of the identity of issues raised. In the first case filed Wallace High and others (hereinafter "claimants") sought a declaratory judgment that they were entitled to exclusive and perpetual hunting, fishing and recreational rights on certain real property formerly owned by Luther Davis and that their rights were superior to the rights of Lomas & Nettleton. The second case was a suit by Lomas & Nettleton to foreclose the two mortgages it had on that real property.

The trial court held that although Lomas & Nettleton had some knowledge that there might be claimed rights to hunting and fishing privileges, the documents purporting to convey the interests did not adequately describe the property and did not give claimants an interest in the property superior to the mortgages. Upon de novo review of the evidence we reverse the decree of the trial court.

Summary of facts.

These suits involve the assertion by the claimants of hunting, fishing and recreational rights on property known as the Luther Davis Ranch, a large body of land located in Wasco, Sherman and Gilliam Counties. Davis was interested in developing the property for an exclusive hunting and fishing club. As part of his overall plan he sold the property by land sale contract to Devsal, Inc., which was to proceed with the sale of memberships in the development. The contract also contemplated that the "operation" would be transferred to the John Day Recreational and Development Corporation (JDRDC) which would promote and sell memberships. It was also agreed that Davis would execute documents granting the purchasers of memberships the exclusive right to hunt, fish and use the property in perpetuity and that these documents would be separately recorded as encumbrances on the property. Before JDRDC actually sold the membership agreements various amendments were made to the land sale contract to facilitate the development of the property and the sale of memberships. Devsal later assigned its interest in the land sale contract to JDRDC, but this took place after the execution of all of the membership agreements which are at issue in this case. ¹

Apparently the development never got off the ground, although a small number of memberships had been sold. Eventually the vendee's interest in the land sale contract was assigned back to Davis. Davis subsequently conveyed the property to Skyline, Inc., which borrowed the money and issued the mortgages that are the subject of the foreclosure suit.

As previously noted, the trial court held that although Lomas & Nettleton may have had notice or knowledge of the membership agreements, that notice or knowledge, even coupled with the other information available to Lomas & Nettleton, was not sufficient "to create a permanent interest in land which would have priority over a subsequent purchaser or mortgage." The trial court held that it did not need to reach the question whether the membership agreements were valid as between the parties to them. We disagree with this approach. In our view, the controlling question to be decided in this case is whether the membership agreements conveyed interests in the land to the claimants. If they did then, in our opinion, claimants would have priority over all but bona fide purchasers without notice of their interests. ²

The validity of the membership agreements.

A. JDRDC could convey the hunting and fishing rights to the Luther Davis ranch.

Lomas & Nettleton contends the claimants could not have acquired any rights because during the period in which the membership agreements were executed, September to December 1965, JDRDC had no interest in the property and that its subsequent acquisition was null and void.

The record reveals that between September and December 1965, when the membership agreements were executed, Luther Davis had the vendor's interest (legal title) and Devsal had the vendee's interest (equitable title). It was not until August 19, 1968, that Devsal assigned its vendee's interest to JDRDC. In other words, notwithstanding the recital in the membership agreements that "John Day Recreational Development Company is the owner of a large body of land," JDRDC in fact had no interest in the land at that time.

Lomas & Nettleton's contention overlooks the fact that ORS 41.350(3) conclusively presumes, between the parties, the truth of the recitals in a written instrument. It follows that JDRDC and its successors in interest, including Lomas & Nettleton, are bound by the recital that JDRDC owned the property. Cf. Emmons et al. v. Sanders et al., 217 Or. 234, 241, 342 P.2d 125 (1959). ³

However, a further complication is introduced in this case. On January 23, 1967, Devsal was involuntarily dissolved by the corporation commissioner and on August 14, 1968, JDRDC was involuntarily dissolved. It was later reinstated, but on August 19, when Devsal assigned its vendee's interest to JDRDC, neither corporation was in legal existence.

ORS 57.630(2) provides:

"Whenever any such corporation is the owner of real or personal property, or claims any interest or lien whatsoever in any real or personal property, such corporation shall continue to exist during such five-year period for the purpose of conveying, transferring and releasing such real or personal property or interest or lien therein, * * *."

Thus, Devsal was able to convey its vendee's interest even after its dissolution. However, Lomas & Nettleton contends that JDRDC could not accept the conveyance while it was involuntarily dissolved, citing Klorfine v. Cole, 121 Or. 76, 82, 85, 252 P. 708, 254 P. 200 (1927). This court held in that case that a purported conveyance to a dissolved corporation was a nullity because the corporation was "civilly dead." The question in the instant case is whether JDRDC's reinstatement by the corporation commissioner on January 21, 1970, validated transactions made during the period of suspension.

There is a split of authority on the question whether reinstatement of a repealed corporate charter validates all acts of the corporation in the interim period of suspension. See Annot., 13 A.L.R.2d 1220 (1950). While some states hold that reinstatement "relates back" to the time of repeal, this court has held that reinstatement does not cancel the dissolution Ab initio, Lents, Inc. v. Borstad, 251 Or. 296, 299, 445 P.2d 597 (1968). The opinion in that case notes, however, that the court was not there concerned with the validation of corporate acts between dissolution and reinstatement. In Gillen-Cole Co. v. Fox & Co., 146 Or. 208, 224, 29 P.2d 1019 (1934), this court held that a reinstated corporation ratified what had been done on its behalf during the period of suspension. ⁴ JDRDC, after reinstatement, assigned the vendee's interest in the land sale contract back to Davis. This action, in our opinion, was ratification by JDRDC of the acceptance on its behalf of the benefits of the contract while the corporation was dissolved.

B. The membership agreements did not violate the Statute of Frauds.

Claimants' purported interest in the property based upon their membership agreements can be classified as a "profit a prendre." In Bingham v. Salene, 15 Or. 208, 214, 14 P. 523 (1887), this court stated that the right to take something from the land of another, including hunting and fishing, is a "profit a prendre." The element of participation in the soil and its produce distinguishes a profit from an easement. A grant of a profit a prendre is a grant of an interest in the land itself, and within the statute of frauds. Id. at 212-13, 14 P. 523. See also Hahner, An Analysis of Profits A Prendre, 25 Or.L.Rev. 217, 218, 233 (1946).

The parties both recognize that the central issue in these cases is the adequacy of the property description in the membership agreements to satisfy the statute of frauds, ORS 41.580. ⁵ Claimants also contend that Lomas & Nettleton is a "stranger" to these agreements and is precluded from raising the statute of frauds. This contention may well have merit. See Ringler v. Ruby, 117 Or. 455, 244 P. 509 (1926), and City of Medford v. Bessonette, 255 Or. 53, 58, 463 P.2d 865 (1970). We need not decide that question, however, because we find the property description to be adequate, for reasons which we shall now discuss.

It is conceded that the location of the land and its description cannot be determined from the membership agreements alone. Lomas & Nettleton argues that the description in the agreements is patently ambiguous and that, for this reason, no extrinsic evidence can be admitted to identify the property covered by the agreements, citing Hertel v. Woodard, 183 Or. 99, 191 P.2d 400 (1948); Bingham v. Honeyman, 32 Or. 129, 51 P. 735 (1898); Noyes v. Stauff, 5 Or. 455 (1875).

Although this court has, in the past, sometimes used the terms "latent" and "pat...