James v. Barker , 99 Colo. 551 ( 1935 )

A DEED of trust was given on certain lands and water rights, by the owner, who also was the owner of supplemental water rights represented by certificates of stock in two reservoir companies. This stock was pledged as additional security to the deed of trust which was regularly foreclosed on all land and water rights specifically mentioned therein, in full satisfaction of the principal of said loan, and all charges thereon, and the trustee's deed, by its printed form, conveyed all "appurtenances thereunto belonging." The foreclosure sale was to the successor of the grantee, who was the holder of the pledge of the additional shares of stock, and who continued to hold same under claim of ownership, by conveyance, evidenced by the trustee's deed, claiming that the shares of stock represented supplemental water rights connected with the land conveyed and were "appurtenant thereto." This suit is by the successor in interest of the grantor named in the deed of trust, to recover the water rights represented by the stock certificates or their value. Judgment below was for defendants. The plaintiff contends that the obligation represented by the deed of trust was fully discharged by the trustee's sale of the land and water rights described therein, and that since the shares of stock were pledged only as additional security, and there being no deficiency remaining after the sale in foreclosure, to which the additional security might have been applied, that the certificates are being illegally withheld from plaintiff.

The Nonpareil Investment Company, on November 19, 1919, owned two eighty-acre tracts of land in Crowley county, Colorado, each having a full paid perpetual water right in the Colorado Canal. It also was the owner at that time of 160 shares of the capital stock of the Twin Lakes Reservoir and Canal Company, and 160 shares of the capital stock of the Lake Meredith Reservoir Company. On that date, it executed and delivered to A. F. Enyart of Crowley county, its promissory note in the sum of $15,000, bearing eight per cent interest per annum. To secure payment thereof, it on the same day, executed its deed of trust to the public trustee of Crowley county, conveying the two eighty-acre tracts of land together with one full paid eighty-acre water right with each tract, in the Colorado Canal, and in addition thereto, pledged as additional security, the 160 shares of capital stock in each of the reservoir companies, by endorsing the certificates in blank and depositing same with the grantee. These shares were not mentioned in the deed of trust. In March, 1920, the Nonpareil Company conveyed to James, plaintiff in error, one of said eighty-acre tracts together with full paid water rights in the Colorado Canal, and assigned to James 80 shares of Twin Lakes stock, and 80 shares of Lake Meredith stock. April 22, 1920, it conveyed the other eighty-acre tract to James with one full paid eighty-acre water right and assigned to James 80 shares of Twin Lakes stock and 80 shares of Lake Meredith stock. This represented all of the shares of stock of the reservoir companies then owned by the Nonpareil Company. In January, 1921, James sold to one Lyles, with the express consent of Enyart, the grantee and holder of the note and pledges heretofore mentioned, 30/80th of the Colorado Canal water right, 30 shares of the Twin Lakes stock, and 30 shares of the Lake Meredith stock. The sale was effected by a partial release of the deed of trust by Enyart and the property transferred by deed of conveyance through the public trustee. The transfer of the shares of stock was effected by Enyart handing the certificates to James who surrendered them for cancellation, and he had issued in lieu thereof, certificates to Lyles for the 30 shares he had bought in each corporation, and new certificates for the remaining shares owned by James which were then redelivered and repledged to Enyart, to be held in connection with the security for the deed of trust. James received $3,000 from the sale of this stock, and applied $2,000 as a payment on the principal and $500 on interest.

November 1, 1927, notice of election and demand for foreclosure of the trust deed was recorded by the owner of the note and the public trustee pursuant thereto caused publication of notice of trustee's sale. This published notice contained the description of the land and water rights specifically named in the deed of trust. Sale was had December 3, 1927, at which the owner of the note was the only and successful bidder, his bid of $24,609.99, being the full amount of the unpaid principal, together with interest accrued and all other charges, leaving nothing due on the note. None of the shares of stock of the reservoir companies was advertised for sale or sold. Certificate of sale issued, and at the expiration of redemption period, trustee's deed was delivered to holder of the certificate, conveying the land and water rights described in the deed of trust, the deed containing the usual, "together with all and singular the privileges and appurtenances thereunto belonging" clause, which also appears in the deed of trust.

At the time of the transfer by plaintiff to Lyles of a portion of the reservoir rights evidenced by these certificates of stock hereinbefore mentioned, plaintiff executed to Lyles, a "Deed of Transfer of Water Rights" in which reference was made to these stock shares, as supplemental water rights attached to thirty acres of land described in the "water deed" and the certificates of stock, and relinquished and surrendered all right to the further and future use of the water represented thereby on any part of the lands to which the rights then attached. The purpose was to enable Lyles to transfer the rights to other land owned by him and apparently was an acknowledgment by plaintiff that the water rights represented by the stock certificates, were appurtenant to a certain tract of land.

The by-laws of both reservoir companies contain a provision to the effect, that in order to obtain and hold shares of stock, it was necessary to own land susceptible of irrigation from the Colorado Canal, to which rights from the Colorado Canal then attached. It would then be possible for a person to own rights in these two reservoir companies for supplemental use, and a share of stock could be had for each acre of land owned. In other words, rights under the Colorado Canal could be owned, without ownership of stock in reservoir companies, but there could be no ownership of stock in the reservoir companies unless the owner also held rights in the Colorado Canal. The land of the Nonpareil Company was under the Colorado Canal, to which a water right therefrom attached. This ownership qualified the Nonpareil Company to hold the reservoir stock which it owned and pledged as security for the loan evidenced by the deed of trust. The stock certificates described the exact land to which the rights they represented attached, and this land was the land described in the deed of trust which was foreclosed as hereinbefore mentioned.

The evidence tends to show that the land on which the deed of trust for $15,000 was given, if only the water right from the Colorado Canal was included, would be worth from $10 to $35 per acre, but with the supplemental rights, as evidenced by stock in the two reservoir companies, it would be worth from $100 to $125 per acre. There was over $24,000 due on the indebtedness at the time of the foreclosure.

Are these water rights, represented by the stock in the reservoir companies, appurtenances to the land involved in the foreclosure, and were they conveyed by the trustee's deed? The answer is the decision of this case. Plaintiff argues that they are not, that they may be conveyed independently of the land; further that they were pledged for use only in the event of a deficiency at sale of the land and water rights described in the deed. Defendants contend that they are appurtenances to the land covered by the deed of trust; that they are necessary to the beneficial enjoyment of the land; that the land did not have practical value for agricultural purposes without them; that the value of the land with these supplemental water rights approximated the bid at the trustee's sale, and that it may be presumed from the circumstances existing at the time the deed of trust was given, that all these rights were intended to be included in the conveyance of the property.

[1, 2] That all of the water rights involved were at all times used on the land, does not seem to be questioned. That they were indispensable to give to the land the value necessary to secure the amount of the loan made, is not seriously in doubt. That they were considered to be included in the transaction conveyance would logically induce the bid as made at the sale. That water rights are sometimes conveyed by a deed to land, that is silent on the subject, is settled law. Arnett v. Linhart, 21 Colo. 188,40 Pac. 355; Gelwicks v. Todd, 24 Colo. 494,52 Pac. 788. A water right used, as here, for the irrigation of land, will pass under the appurtenance clause in a conveyance of land, without a specific mention in the deed, if the presumption arising from the circumstances of the transaction, make it appear that it was the intention of the grantor that it should so pass. King v. Ackroyd,28 Colo. 488, 66 Pac. 906.

[3] The grantor in the deed of trust indicated no other intention than that the essentials for the full value, use and benefit of the land, should be had by the grantee, indeed he emphasized such intention by his pledge of the stock to the latter. Examination of these certificates discloses that they are not in the form of the ordinary stock certificate, but are special in form and contain a description of the land to which they attach. Plaintiff acknowledged this condition, in his conveyance to Lyles of part of these rights. The reservoir rights were necessary to a complete use of the land conveyed by plaintiff, and not being expressly reserved by him, they passed with the conveyance.

The judgment of the trial court was right and is affirmed.

MR. JUSTICE HILLIARD and MR. JUSTICE BOUCK dissent.