Doherty & Co. v. Steele

204 P. 77, 71 Colo. 33
CourtSupreme Court of Colorado
DecidedJanuary 6, 1922
DocketNo. 9450
StatusPublished
Cited by6 cases

This text of 204 P. 77 (Doherty & Co. v. Steele) is published on Counsel Stack Legal Research, covering Supreme Court of Colorado primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Doherty & Co. v. Steele, 204 P. 77, 71 Colo. 33 (Colo. 1922).

Opinions

Mr. Justice Denison

delivered the opinion of the court.

Steele was plaintiff below and obtained a decree requiring Doherty & Company to return to the East Denver Irrigation District certain bonds of that district which had been delivered to them in partial performance of a contract. The facts are fully set forth in the case of The Antero & Lost Park Reservoir Co., et al. v. Lowe, 69 Colo. 409, 194 Pac. 945.

Briefly, the district, in 1910, by its board of directors, entered into a contract with a corporation which we will call the Promotion Company, for the purchase of a completed system of irrigation, — reservoirs, canals, gates, etc., —specified in detail in the contract, with certain water and water rights, all to be paid for by the district in bonds of the district, to the amount of $3,000,000. The contract provided that the system should be completed and turned over to the district not later than June 1st, 1913. The Promotion Company had a contract with The Antero and Lost Park Reservoir Company for the purchase of its system for $1,500,000, and were to extend and enlarge it 1;o satisfy the specifications of the contract. In August, [36]*361912, a supplementary contract was made by the authority of the electors of the district and by that contract $250,000 of the par value of the $3,000,000 bond issue was authorized to be delivered to the Promotion Company upon the transfer to the district by the Promotion Company of a certain small ditch and certain rights of way for ditches, the whole value of which did not exceed $8,000; and the time for the completion of the system was extended to January 1st, 1914. The claim of plaintiff was that this arrangement was a subterfuge to avoid the express provisions of the statute in pursuance of which the transaction was had so as to make the advances of bonds on the purchase price of the' completed system. In view of the decision we have reached, however, that is immaterial.

No work of any importance was done by the Promotion Company. For a little work, however, they obtained $18,000 of the bonds and later $29,000 advance payment on the reservoir called the Irondale, which contained only 800 acre feet of water and was of no value except in connection with the completed system.

The Promotion Company assigned its interests to one Lucas, who, February 3rd, 1913, obtained what was called a modified contract which in the case of Antero &c. Co. v. Lowe we held was void. Under the authority of this void contract $713,500 par value of the district bonds were delivered to Lucas and by him to Doherty & Company, and Lucas, who, it is claimed, was merely a dummy for Doherty & Company, did a large amount of work, but failed to complete the system and has never done so.

The above covers all the essential particulars.

Steele, a taxpayer and landowner of the district, brought this suit on behalf of himself and others, to compel the return of the bonds so delivered, and the court granted the decree upon the theory that the bonds were delivered as an advance payment upon a contract for the purchase of property which, unless completed, was of no value to [37]*37the district, and which was to be completed and delivered as a whole.

In this interpretation of the contracts we agree with the court below. It is manifest that the system unless completed was of no value whatever to the district, that it was ruinous to the district to have the completion fail and that the contract required a complete system to be delivered before payment, and we regard those sections of the statute concerning purchase of completed systems as intended to prevent such difficulties as appear in this case.

We notice nine points which the plaintiffs in error have argued:

1. They say that Steele, the plaintiff taxpayer, had no right to maintain the action. The principal grounds of this argument are that the notice, required to be given to the directors before a taxpayer is entitled to bring such an action, was not given, or was not sufficient, and that the choice of remedies was within the discretion of the board of directors and could not be usurped by a taxpayer or by the court.

It is sufficient answer to this that the district itself urged before the court below and urges here the same relief which is asked by Steele, who asks no relief other than that asked by the district. ■ The district, although in the case from the beginning, has never made objection. • On what reasonable ground can the other defendants now claim that the district was entitled to the exercise of the discretion of the directors before this suit was begun? Have they not exercised it and are they not exercising it now?

We have been able to find no authority on this question of the attitude of the district; but, if we reverse the case on this ground, we say to the district: “You may not have what you ask because you are not asking for it.” “You cannot have what you ask because you. have had no opportunity to decide whether you will ask for it.”

[38]*38We cannot see that it makes any difference when the district had exercised its discretion, if it is doing so now. It has not complained of its deprivation, and those who are complaining are doing so against the earnest protest and to the injury of the district.

To dismiss this bill because the plaintiff, Steele, did not take the right formal step at the start, when the real purpose of that step has been accomplished, would be to “twist the strands of precedent into a rope with which to strangle Justice.” Our opinion is that this point is not well taken.

The case of Antero Co. v. Lowe, et al., is not in conflict with this conclusion. The plaintiffs in that case, taxpayers of this same district, were seeking to compel the district, against its will, to enforce specific performance of these very contracts, a manifest attempt to usurp the discretion of the district authorities; and in all the Colorado cases cited by plaintiff in error the corporation was resisting the action of the taxpayer or stockholder.

2. It is claimed that the complaint states no cause of action against Doherty & Company because the district seeks the recovery of the bonds and an injunction against taxes to pay them; that that remedy is inconsistent with and a renunciation of the remedy of recovery of the value of the bonds.

If the bonds were so wrongfully delivered that they ought to be returned, then they to whom they were so delivered ought to return' them. They cannot relieve themselves of that obligation by transferring the bonds to others, whether those others be holders in due course or not. They are in a position' like that of one who has received another’s goods and sold them and thus converted them to his own use.

If the bonds were delivered conditionally,' as an advance, as the trial court found, then, upon the fulfillment of the condition, i. e., the failure to convey a completed system, they to whom they were so delivered are under obligation to return them, and they cannot relieve themselves of that [39]*39duty, by a transfer to others, holders in due course or otherwise. If they to whom the bonds were delivered have put it beyond their power to return them, equity is not therefore powerless but will require them to compensate the obligors, according to the elementary equity practice. The equity of the case, stripped of its details, we attempt to illustrate under the discussion of point 7.

3.

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Bluebook (online)
204 P. 77, 71 Colo. 33, Counsel Stack Legal Research, https://law.counselstack.com/opinion/doherty-co-v-steele-colo-1922.