Whatley v. Wood

• Decision Date: 13 November 1961
• Docket Number: No. 19609,19609
• Citation: 148 Colo. 349,366 P.2d 570
• Parties: William J. WHATLEY, Plaintiff in Error, v. Dorothy Stevens WOOD, Truman Stevens Wood, Ben Brown Wood, Marie G. Murphy, and Wallace E. McGowan, as Executor of the Estate of Irene McGowan, Deceased, Defendants in Error.
• Court: Colorado Supreme Court

Page 570

366 P.2d 570

148 Colo. 349

William J. WHATLEY, Plaintiff in Error, v. Dorothy Stevens WOOD, Truman Stevens Wood, Ben Brown Wood Marie G. Murphy, and Wallace E. McGowan, as Executor of the Estate of Irene McGowan Deceased, Defendants in Error.

No. 19609.

Supreme Court of Colorado, En Banc.

Nov. 13, 1961.

Rehearing Denied Dec. 18, 1961.

Clifford W. Mills, Eugene H. Tepley, Denver, for plaintiff in error.

Lewis, Grant & Davis, Zarlengo, Zarlengo & Seavy, Teller Ammons, Denver, for defendants in error.

MOORE, Justice.

We will refer to plaintiff in error as plaintiff and to defendants in error as defendants or by name where less than all of them are identified.

The action was brought by plaintiff to remove a cloud on the title to numerous patented mining properties located in Garfield county amounting in the aggregate to 1,899.60 acres of land. It is alleged in the complaint that plaintiff is the owner of the property; that defendants assert some interest therein adverse to plaintiff; that defendant John V. Cuddy (who prosecuted a separate writ of error in case No. 19551 decided as of even date herewith) claims a leasehold interest in said property, and that said claimed leasehold is void. The prayer of the complaint is that the court adjudicate the rights of all the parties with respect to said property; that defendants be required to set forth the nature of their claims; and for a decree that defendants have no interest in the real estate, adjudging that plaintiff is the owner in fee simple and entitled to possession of the property. In response to a motion of defendants, plaintiff filed a 'More Definite Statement' which incorporated certain recorded deeds and other documents of record to which we will refer as required.

Defendants by answer denied that plaintiff owned the property; admitted that they claim an interest therein; admitted the leasehold interest asserted by Cuddy and alleged that it was valid; admitted the existence of the documents appearing of record in the Recorder's office and alleged that said recorded instruments established that, '* * * title to said property has been vested in the defendants for twenty years or more'; and denied the validity of any and all documents under which the plaintiff claims. In all sixteen separate defenses are set forth in the answer of defendants. Our determination of the controlling issue renders it unnecessary to make a detailed analysis of all of these allegations. Generally, defendants rely on several statutes of limitation and allege that there was a gross inadequacy of consideration for the deed upon which plaintiff relies, received from one Leach, with whom it is alleged he conspired to defraud the defendants and enrich himself. It is further alleged that plaintiff is not entitled to bring the action for the reason that he is not a stockholder or creditor of the defunct corporation which formerly owned the real estate. Defendants sought a decree that they were the owners of the property.

Trial was to the court and judgment entered as prayed for by defendants. Plaintiff seeks review of the judgment by writ of error.

The facts giving rise to this controversy are involved, and we outline only those considered pertinent to the issues to be determined as follows:

The Colorado Carbon Company was organized as a Colorado corporation November 16, 1915, for a period of twenty years, for the purpose of acquiring title to oil shale lands in Colorado and for the operation thereof. By patent issued in 1923 the corporation became the owner of all the land in dispute. Prior to 1928 Richard E. Leach, T. E. Stevens and Charles P. Murphy were the directors and officers of said company. At a meeting of stockholders held April 12, 1928, these directors were again elected to the posts they had theretofore held. No subsequent election was ever had and the three named persons constituted the 'board of directors acting last before the time of its [the corporation] dissolution,' under the provisions of 1935 C.S.A., chapter 41, section 62 (C.R.S. 1953, 31-6-1 et seq. repealed by corporate code adopted by the Session Laws of 1958, page 203 et seq., section 148). The corporation was dissolved November 16, 1935, at which time its corporate life expired under its original charter.

Annual reports filed with the Secretary of State of the years 1928 through and including the last report filed March 15, 1935, listed the above named Stevens, Leach and Murphy as directors of the corporation. The said last report was signed by Stevens as president and one Gibble as acting secretary, and contained a statement that Leach was also secretary and treasurer of the corporation.

Ad valorem taxes levied against the lands of the defunct corporation were unpaid and tax certificates issued. January 2, 1938, an application was made to the treasurer by J. C. Rigney for the issuance of a treasurer's deed to the property. April 6, 1938, an action was commenced in the district court of Garfield county by the said Stevens, Murphy, and Leach as 'trustees of the creditors and stockholders of the Colorado Carbon Company,' in which action the said Rigney, the county treasurer, and others, were named defendants. The prayer of the complaint sought an injunction against the issuance of the treasurer's deed and a notice of lis pendens was filed with the county clerk and recorder. The complaint was verified by an attorney (who will hereinafter be referred to as 'the lawyer') appearing as one of counsel for the said surviving trustees. No appearance on behalf of defendants named in said action ever was made.

On May 5, 1938, a praecipe to dismiss the above mentioned action with prejudice, signed by attorneys for plaintiffs, was filed. On the same day a treasurer's deed to the lands in dispute was issued to Rigney the applicant therefor, although no judgment of dismissal of the action ever was entered. Rigney thereupon immediately (May 5, 1938) executed a quitclaim deed to the land involved, to the lawyer. The grantee of this deed had theretofore been employed by the trustees to protect the assets of the trust and, as will hereafter be seen, the law will not permit him to become the purchaser and owner, in his own right, of property he was employed to protect.

Between May 5 and June 20, 1938, the lawyer executed a fifty-year grazing lease in favor of one Mahaffey upon all of the real estate in dispute. This lease contained the following:

'The said lessor [the lawyer] does not warrant or guarantee title in himself to the said premises, but merely agrees to lease to Mahaffey the said premises under such title as he has acquired.'

The only consideration recited in the lease was the undertaking by Mahaffey to pay all taxes that might accrue against the property during the term of the lease. The validity of this instrument is the subject matter involved in cause No. 19551 before this court and determined by opinion announced this date.

On the 20th day of June, 1938, four additional pertinent events took place: (1) The lawyer quitclaimed the property in dispute to T. E. Stevens and Charles P. Murphy, two of the surviving directors; (2) on the same day Stevens and Murphy as trustees of the defunct corporation wrote an offer to themselves, as creditors of the corporation, to deed the property from themselves as surviving trustees to themselves individually in satisfaction of whatever debt was owed to them by the defunct corporation; (3) on the same day, and before the same notary public employed by the lawyer for the acknowledgment of his deed to Murphy and Stevens, the said Charles P. Murphy and T. E. Stevens describing themselves in both the body of the deed and over their signatures as 'the sole surviving directors and as such, trustees of creditors and stockholders of the Colorado Carbon Company, a defunct Colorado corporation,' executed to themselves individually a deed to the disputed land; and (4) on the same date the lawyer assigned the undated Mahaffey grazing lease to Stevens and Murphy.

Charles P. Murphy died December 24, 1953, and the defendants Marie G. Murphy and Wallace E. McGowan, as executor of the estate of Irene McGowan deceased, claimed an interest in the property under the last will and testament of Charles P. Murphy. T. E. Stevens died April 12, 1957, and the defendants Dorothy Stevens Wood, Truman Stevens Wood, and Ben Brown Wood claimed an interest in the property as grantees without consideration under a gift quitclaim deed from T. E. Stevens. Following the death of Stevens and Murphy the sole surviving director of the defunct corporation was Richard E. Leach.

On March 7, 1958, plaintiff, having shortly theretofore learned of the foregoing chain of events, secured a quitclaim deed executed by Richard E. Leach as the sole surviving director, and, as such, trustee of the creditors and stockholders of the Colorado Carbon Company a defunct Colorado corporation. The consideration paid for this deed was $150 and the deed was promptly placed of record in the office of the Clerk and Recorder of Garfield county. Institution of this suit followed.

The pertinent portion of the judgment and decree of the trial court is as follows:

'1. That the defendants Dorothy Stevens Wood, Truman Stevens Wood, and Ben Brown Wood are the owners in fee simple of an undivided one-half interest in and to the following described real estate situate in the County of Garfield and State of Colorado, and that the defendant Marie G. Murphy and the successors to the interest of Irene McGowan, deceased, are the owners in fee simple of an undivided one-half interest in and to the following described real estate situate in the County of Garfield and State of Colorado, all subject to the leasehold estate of the defendant, John V. Cuddy, as set forth in the lease recorded in Book 189 at Page 577 Garfield County Real Estate Records:

'(Here follows a description of the property)

and that complete fee...