Court Opinion

ID: 9588541
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:35:26.802808+00
Date Added: 2024-06-11T09:37:31.484031
License: Public Domain

LATIMER, Justice.
I dissent.
In view of the fact that I disagree with some of the statements made in the prevailing opinion with respect to the chain of title of the land and water I deem it advisable to set up the history of plaintiffs’ and defendants’ titles.
The parties agreed that title to both the land and water was vested in the Utah Valley Land and Water Company, it having acquired the property on the 26th day of February, 1920, by deed from Lewis Thompson and Theodora M. Thompson, his wife. That company mortgaged the property to the First Security Bank of Provo, a corporation; payments became delinquent and the mortgage became in default; foreclosure proceedings were instituted; and, on November 21, 1933, the sheriff’s certificate of sale was issued. On August 3, 1934, the First Security Bank of Provo assigned the certificate of sale to the Colorado *79Development Company and on the 16th day of August, 1934, a sheriff’s deed was issued in which that company was designated as the grantee. The deed included the ditches, laterals and water rights of every nature used on or belonging to the lands.
On the 27th day of November, 1937, the Colorado Development Company, by quitclaim deed, transferred the land and water rights to O. A. Penrod. On the same date and apparently to remove all doubt as to the title to the water system Penrod obtained a quitclaim deed from the Utah Valley Land and Water Company to the reservoirs, dams, canals, flumes, ditches and easements of every kind and nature and all water rights previously owned by that corporation. It thus appears that on November 27, 1937, Pen-rod had obtained the record title to all of the lands, water, and water system involved in or incidental to this litigation. On the 11th day of January, 1938, Penrod by quitclaim deed conveyed his interest in and to the real property to the Commercial Bank of Spanish Fork. It should be noted at this point that while Penrod conveyed his interest on the date mentioned, the deed was not placed of record until December 29,1944, and that until that time the county records and tax notices would show that he was the legal owner of the property. Moreover, during that seven year period neither Penrod nor the bank ever disclosed that the conveyance had been executed. The Commercial Bank of Spanish Fork, together with other grantors, conveyed the real estate to plaintiffs on the 29th day of March, 1945.
On the 16th day of December, 1939, Penrod conveyed his interest in the water and irrigation system to the current Creek Irrigation Company pursuont to a plan discussed and recommended to the residents of the Elberta area by Penrod and plaintiff P. P. Thomas. Apparently, the water and the irrigation system are still owned by that irrigation company.
*80The defendants obtained their title to the particular property in controversy on November 3, 1941, by purchasing tax titles from Utah County. The record shows that they obtained two other parcels of land in that district; one parcel of 29 acres was obtained from Robert E. Clemants and wife on the 13th day of November, 1940; and another 40 acre tract was acquired on July 30, 1943, from James H. Mikkelson, who was an active participant in the meetings out of which the reorganization was effectuated.
In considering the facts of this case and the principles I discuss, it should be kept in mind that I believe, contrary to plaintiffs’ contention, the property with which the El-berta people were concerned was both the irrigation system and the lands. Apparently, a satisfactory arrangement was made to distribute the water and revest title to the irrigated property. The question left for determination does not deal with either of those but involves land which was above the level of the irrigation system and which could not be irrigated. The relevancy of the testimony dealing with the irrigated properties and the irrigation system is to show the relationship of the parties, the nature of the transaction, the reasons the people of the community were led to believe that Penrod was acting in a fiduciary capacity, and, finally, why transactions such as this for acquiring title to the land without water are not separate and isolated from the overall community venture. If each transaction was separate and distinct we might be confronted with a different principle than is presented here where a person seeks to profit several ways from a single enterprise.
Now as to the merits. Some time during the year 1937, the residents of Elberta began holding mass meetings in an effort to save their property and protect their homes. The Utah Valley Land and Water Company was defunct, the Colorado Development Company was apparently not ser*81vicing the residents of the community, the water system was in a bad state of repair, the water was being distributed by property holders, part of the property had gone to tax sale for the 1931 taxes, and it was necessary that some action be taken to protect or reacquire the lands and water rights of the citizens of that community.
Previous to September 21, 1937, O. A. Penrod had been appointed chairman of a committee to investigate the means of dealing with the critical situation. For reasons not disclosed by the record, the committee failed to function properly and so on November 27, 1937, he purchased the lands and water and had himself designated as grantee in the deeds. He also contacted the county commissioners of Utah County about perfecting his title by purchasing tax deeds. On September 21, 1937, at a meeting held in the Elberta Ward Stake House, Penrod reported to an assembled group of property owners that he had submitted a bid to purchase the Elberta project. The scope of the discussion was such that it is apparent the project involved both land and water. He had obtained both and the conversations encompassed both. On December 8, 1937, Pen-rod again reported his activities to the group at a community meeting and he stated in substance that he had tried to interest other parties and other committeemen in working out a project but his hands had been tied in acting for the people, so he had acted alone and purchased the property. When he was accused of acting against the best interests of the other residents he vigorously insisted he was acting for their benefit and to protect their interests. He reported he paid the sum of $2,500 and that while he had taken title in his own name he was willing to protect the people and permit them to purchase the property for the sum he had invested plus a few dollars of expense money. The county commissioners of Utah County were present at the meeting and one of them explained the procedure for re-purchasing the property and stated that it could be *82redeemed for the sum of $2 per acre. At the same meeting Mr. P. P. Thomas, who is one of the plaintiffs in this action, took an active part in the discussion, verified Penrod's statements and stated that he, Thomas, was not interested in the land but if the people would show some interest and form an irrigation district perhaps the bank of which he was an officer and director might become interested enough to advance some funds.
At a subsequent meeting on December 11, 1937, plaintiff P. P. Thomas suggested that an irrigation company be formed, explained the necessary steps for its formation and stated that in view of the fact that Penrod had acquired the company holdings (apparently referring to the Colorado Development Company, as successor to Utah Valley Land and Water Company) that the committee deal with him. Penrod was present at this meeting, participated in the discussion and withdrew as a committee member because title was in his name and it would be necessary for the committee to deal with him.
As a result of these discussions, it was concluded by the majority of the citizens that an irrigation company should be formed to own the irrigation system and distribute the water. This was subsequently accomplished. The water system was transferred to the company and the stockholders were assessed to make a payment of $3,500 to Pen-rod. Apparently, this sum was paid to him in consideration of his executing a deed to the water system to the Current Creek Irrigation Company. If the reports made by Pen-rod were accurate, the $3,500 amount paid was in excess of the sum invested by him for both the land and water as he originally claimed $2,500 as the amount expended, and the deed for the water system shows a consideration of $100, while the deed to the property shows a consideration of $2,000.
On June 3, 1940, a committee of Elberta residents met *83with the County Commissioners of Utah County in regards to working out an arrangement for purchasing title to the land which had been sold for failure to pay taxes. Penrod was present at that meeting and after discussing the dilemma he stated that he and his partners had all the land they desired, that the lands with water rights had been disposed of, the water company had been reorganized, and if the people of the district desired they could purchase from the county all the remaining property. He further stated that he and his associates were not interested in any of the land above the canal and it would be proper for the land owners to acquire all that was left. In view of the fact that his deed to the bank had not been recorded at the time of this meeting, the record title to the land under discussion was in him and it is a fair assumption that all parties considered that he or the county was the true owner of the property. After this conversation, purchases, including those made by the defendants, were made of the unirrigated properties.
There are a number of exhibits and testimony adding weight to the theory that Penrod was acting as a trustee for the benefit of the residents of that community. I do not refer to all of the exhibits or relate all of the testimony for the reason that the majority opinion reverses the trial court on the grounds that plaintiffs were bona fide purchasers for value without notice and that the defendants were not misled by statements of Penrod. That holding only requires that I state sufficient evidence to sustain the trial judge’s contrary findings.
The first question concerns whether plaintiffs are bona fide purchasers of the property for value without notice of defendants’ claim and as such cut off any equitable rights the defendants might have. The trial court found that they had notice and the majority opinion takes issue with this. I am of the opinion that the trial court’s finding is appropriate and the majority opinion in error.
*84The record does not disclose when the plaintiff partnership, Elberta Land and Water Company, was formed. The first affidavit for doing business under an assumed name indicates that it was formed prior to March 8, 1945, and it was shortly after that date that the propery was conveyed to it. At that time P. P. Thomas, Joseph Hanson, Charles H. Dixon, and Max Thomas, together with others, were members of the partnership and the first two were grantors in the deed. Those four parties actively participated in the reorganization of the water company and in the transactions dealing with the attempts of the residents of Elberta to save their property. P. P. Thomas was an officer of the Commercial Bank of Spanish Fork, advised the residents as to methods of procedure, was an active participant in all of the transactions, and he had full knowledge of the relationship between the bank, himself, the partnership, Penrod and the landowners. Approximately 30 days before Penrod executed the deed to the bank of Spanish Fork P. P. Thomas reported to the property owners that Penrod was the owner of the property and that all transactions should be carried on with him. The record does not indicate that at any time thereafter he ever notified any person that the property had been conveyed to the bank and that Penrod was divested of his interest. If the deed was delivered on the date of its execution it was held unrecorded by the bank for a period of approximately seven years. The plaintiffs did not receive their tax title to the property until 1941 and so there was a period of at least three years in which the bank could have charged defendants with notice of its claimed interest and cast upon them the duty to determine its interest.
While the three other members of the partnership were not so well informed as to all details they had sufficient information to charge them with the duty of inquiring into the rights of parties in possession of the property and those who might have acquired rights between 1937 and *851945. The partnership did not acquire title from the bank until that year and defendants had been in possession of the property for at least four years prior to this date. Moreover, P. P. Thomas and Joseph Hanson had some undisclosed interest in the property as they joined in the conveyance as grantors. They, in effect, were both grantees and grantors and they cannot escape the claim that they had notice of the equities.
I am likewise of the opinion the trial judge was correct when he ruled that plaintiffs were not purchasers for value. The majority opinion claims the deed presumes consideration and that there is no evidence in the record to overcome the presumption. The evidence I find and the inferences I make lead to a contrary conclusion. The testimony suggests that Penrod borrowed the money from the bank to make the original purchase from the two companies and that the bank was not interested in buying any land in that area. If such is the case, then it is a reasonable inference that the deed was to secure the repayment of that loan and therefore was, in fact, a mortgage. This conclusion is further strengthened by the deeds and the articles of incorporation of the Current Creek Irrigation Company. It appears that the residents of Elberta were notified that the money had been borrowed from the Bank of Spanish Fork and that an assessment would be necessary to repay at least part of the loan. This information came from both Penrod and an officer of the bank. The assessment was levied, the loan was repaid and no one claimed any other or different consideration for the execution of the deed. In addition to that, an inspection of the instruments in the record shows that in all instances involving deeds United States revenue stamps were placed on all instruments except the two quit claim deeds, the one from Penrod to the bank and the other from the bank to plaintiffs. As I understand the federal requirements, an internal revenue stamp must be placed on a deed prior to re*86cording if the consideration equals $100. Recording of the instrument without a stamp would be a circumstance which could be considered in determining whether the deed was given for a valuable consideration.
In disposing of the first two issues, I would hold that there was evidence to sustain the trial court’s findings that plaintiffs had actual notice of the equities in favor of purchasers of the tax titles and that they were not purchasers for value.
The most difficult question hinges on whether plaintiffs can be estopped from claiming defendants’ title invalid because of plaintiffs’ claim that the representation did not relate to a present fact. I concede that the doctrine of promissory estoppel should only be applied in exceptional cases, but I believe this is one which calls for the application of that rule. If the plaintiffs can question the legality of defendants’ title in this instance then all property owners who purchased land from the county under the proposed reorganization plan stand likely to lose their property. If the question can be raised against one purchaser it can be raised against all and grave injustice will result.
It is a generally accepted rule that in order to furnish the basis for an estoppel the representation or assurance must relate to some present or past fact as distinguished from mere promises or expressions of opinions as to the future. The reason on which the doctrine of estoppel rests largely fails when the representation relates only to the present intention of a party.
That broad rule has certain exceptions and it has been narrowed by certain cases in which an estoppel has been predicated on promises as to future conduct. According to the doctrine of “promissory estoppel” an estoppel may arise from the making of a promise, if it was intended that the representation should be acted upon, and the refusal *87to enforce it would create an injustice. The following statement, of the principle is taken from paragraph 53, Estoppel, 19 Am. Jur. 657:
“The doctrine of ‘promissory estoppel’ is by no means new, although the name has been adopted only in comparatively recent years. According to that doctrine, an estoppel may arise from the. making of a promise, even though without consideration, if it was intended that the promise should be relied upon and in fact it was relied upon, and a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice. Promissory estoppel is sometimes spoken of as a species of consideration or as a substitute for, or the equivalent of consideration; but the basis of the doctrine is not so much one of contract with a substitute for consideration, as an application of the general principle of estoppel, since the estoppel may arise, although the change of position of the promisee was not in any way an inducement to the promise and was not regarded by the parties as any consideration therefor.
“The doctrine of promissory estoppel is most widely recognized and most frequently applied in cases of promises or representations as to an intended abandonment of existing rights. Some courts have even stated that these are the only cases in which promises as to the future may be the basis of an estoppel. The better-considered statements of the doctrine, however, do not contain this limitation, and the courts have actually applied the doctrine in numerous instances which could not fairly be said to involve an abandonment of an exisiting right.”
Volume 31, C. J. S., Estoppel, § 80, p. 289, states the doctrine in the following language:
“The doctrine of estoppel by representation is ordinarily applicable only to representations as to facts either past or present, and not to representations or promises concerning the future which, if binding at all, must be binding as contracts.
“Notwithstanding the unanimity of the courts with respect 'to the preceding statement as the statement of a general rule, representations as to the future or promises have been enforced or permitted to operate as a basis of an equitable estopple if to do otherwise would help perpetrate a fraud or cause injustice in a case where the representation or promise has been made to induce action or is reasonably calculated to induce action and has in fact induced action on the part of the party setting up the estoppel. This exception has come to be known as the doctrine of promissory estoppel. In such cases it is held that the party making the promise is estopped to assert lack of consideration therefor. Of course, a promise cannot be the basis of an estoppel if any other essential element is lacking.
*88“The most frequent application of the doctrine permitting a promise or representation as to the future to raise an estoppel has been said to be the well recognized exception to the general rule presented where the statement relates to an intended abandonment of an .existing right, and is made to influence others who have in fact been influenced by it, where substantial injustice will result unless the promise is enforced. It has been said that this is the only case in which a representation as to the future can be held to operate as an estoppel.”
The doctrine I quote above was referred to with approval by this court in Elliot v. Whitmore, 23 Utah 342, 65 P. 70. I quote from page 354, 25 Utah Reports, page 74 of 65 P.:
“Even taking these conversations in the most favorable view for appellant, there was absolutely no statement upon the part of the defendants of an intended abandonment .of an existing right. * * * it has frequently been held that an estoppel will not arise simply from a breach of promise as to future conduct, or from a mere disappointment of expectations. The only case in which a representation as to the future can be held to operate as an estoppel is where it relates to an intended abandonment of an existing right.”
The facts which I believe bring this case within the quoted authorities are these: During the year 1937 Pen-rod participated along with the residents of Elberta in their attempts to reacquire the water and lands of that district. He originally operated as a member of the committee, but when the members failed to perform in accordance with his desires he purchased the land and water. He notified the residents of that community that the property had been purchased by him for their benefit and that he was the owner of the same, subject to their rights to repurchase at his cost. Throughout all the dealings it was represented to the Elberta residents that Penrod was the owner of all the properties previously held by the Utah Valley Land and Water Company and the Colorado Development Company, and up until the time these defendants purchased the property no contrary information had been furnished to anyone connected with the project. The county records were such that any party dealing with the land was entitled to act on the belief that Penrod was the true owner. At the time of the meeting with the County *89Commissioners on June 3, 1940, the county records indicated that Penrod was still the owner and even though a deed had been executed by him he represented that he and his associates owned and controlled the property and that they were relinquishing all rights they had in and to the property not then purchased. It can, of course, be argued that the title belonged to Utah County and not to Penrod, but if the tax proceedings were invalid, and the court so found, then the ownership never changed.
There are many reasons why the deed given by Penrod to the bank in 1938 did not divest him of title. As previously indicated, the transaction appears to have been a mortgage of the property and not a transfer, and the acts and conduct of Penrod and P. P. Thomas, an officer of the bank, are consistent with that view of the deal. All parties were led to believe that Penrod was the owner and that any interest the bank had in the property was merely that of a secured creditor. Such being the case, when Penrod on June 3, 1940, in the presence of the citizens’ committee made the statement that he and his associates had all the property they intended to deal with and that the other parties were free to purchase the remaining land, he made a promise intending that it should be relied upon. It was in fact relied upon, and to permit those claiming under him, when they were not bona fide purchasers for value, to escape its enforcement would result in an injustice. Pen-rod had the right, as owner of the property, to retain it. Yet, he represented to the people of that community that he intended to abandon that right and now those who associated with and claim under him seek to escape the legal effect of that representation on the theory that he could change his mind. I believe they should be estopped to so assert.
The last question to be disposed of is whether or not a representation, in order to be the basis for an estoppel, *90must be made with intention, by the one who is to be es-topped, that it shall be acted upon by the very person who claims the benefit of the estoppel.
A representation, in order to effect an estoppel, need not be made directly to the party acting on it. It is enough if it was made to another with the intention or expectation that it would be acted upon by him or any and all persons having an interest in the subject matter. Pomeroy’s Equity Jurisprudence, Yol. 3, 5th Edition, paragraph 811, announced the following principle:
“It has frequently been said, in most general terms, that the conduct amounting to a representation, in order to constitute an estoppel, must be done with the intention, by the one who is to he estopped, that it shall be acted upon by the very person who claims the benefit of the estoppel, or, as is sometimes said, that it shall be acted upon by another person. In short, there must always be the intention that the conduct shall be acted upon either by some person, or by the very person who afterwards relies upon the estoppel. While such intention must sometimes exist, and while the proposition is therefore true in certain cases, it would be very misleading as a universal rule. In many familiar species of estoppels no intention can possibly exist. The requisite, as applicable to them is well expressed by an eminent judge: It is not ‘necessary, in equity, that the intention should be to deceive any particular individual or individuals. If the representations are such, and made in such circumstances, that all persons interested in the subject have the right to rely on them as true, their truth cannot be denied by the party that has made them, against any one who has trusted to them and acted on them * * *. Where a man makes a statement in a manner and under circumstances such as he must understand those who heard the statement would believe to be true, and if they had an interest in the subject-matter would act on as true, and one, using his own means of knowledge with due diligence,' acts on the statement as true, the party who makes the statement cannot show that his representation was false, to the injury of the party who believed it to be true, and acted on it as such; that he will be liable for the natural consequences of his representation, and cannot be heard to say that the party actually injured was not the one he meant should act.’ This mode of stating the doctrine may in equity apply to every kind of estoppel, even to those by which an owner of land is precluded from asserting his legal title.”
The representations in this case were such that all persons interested in the Elberta property could be reasonably expected to rely on them. Penrod made the statements in *91a manner and under circumstances such that he must have intended that those who heard them would believe them to be true, would act on them and would repeat them to others who likewise would rely on them. He, therefore, cannot be heard to say that defendants were not the ones he meant should purchase the property.
The majority opinion concedes that there was evidence that the statement made by Penrod on June 3, 1940, was conveyed to the defendants. It goes without saying that a tax title is less vulnerable to attack if the owner abandons his right to the property, and, his representation to that effect was of importance to these purchasers.
WADE, J., concurs in the dissenting opinion of LATI-MER, J.