Opinion
No. 75-604
Decided March 18, 1976.
Action to quiet title to dam site brought by company that held bonds issued in 1930's by now abolished Mineral Resources Board, which board issued the bonds for construction of dam. From summary judgment entered, both parties appealed.
Affirmed
1. QUIETING TITLE — Ownership of Bonds — Mineral Resources Board — Dam Site — Statutory Remedy Exclusive — No Basis for Action. If the plaintiff acquired any equitable interest in dam site through its ownership of certain bonds issued by Mineral Resources Board for construction of dam thereon or as the beneficiary of a resulting trust, this would be a sufficient basis upon which to predicate a quiet title proceeding; but since plaintiff's remedy as owner of the unredeemed bonds is governed by statute which statute limits the obligation of the State for repayment of the bonds to revenues from operation of the dam site, or lease, sale, or other disposition thereof, that statute precludes the creation of equitable property rights in the project in any bondholders, and thus plaintiff's status as owner of the bonds does not afford a basis for quiet title action to the dam site.
2. Plaintiff — Potential Beneficiary — Tailings Disposal Project — No Resulting Trust — No Basis for Action. Even if plaintiff, as owner of certain bonds issued by Mineral Resources Board for purpose of constructing dam to impound mill tailings, was, as subsidiary of mine operator, a potential beneficiary of the tailings disposal project when mines were reactivated, this fact does not establish resulting trust in dam site for plaintiff's benefit because nothing obligated the Mineral Resources Board to operate and maintain the dams indefinitely and nothing indicates that abandonment of project was not justified; hence, plaintiff could not, on resulting trust basis, prosecute quiet title action to dam site.
Appeal from the District Court of Park County, Honorable Howard E. Purdy, Judge.
Ben L. Wright, Jr., for plaintiff-appellant and cross-appellee.
J. D. MacFarlane, Attorney General, Jean E. Dubofsky, Deputy Attorney General, Edward G. Donovan, Assistant Attorney General, Wayne B. Schroeder, Special Assistant Attorney General, David Ris, Special Assistant Attorney General, for defendants-appellees and cross-appellants State Mineral Resources Board and State of Colorado and defendant-appellee City of Fairplay.
Division II.
In an action by plaintiff, Fairplay Alma Tailings Disposal Company, to quiet title to approximately 30 acres of land (the dam site) located near the City of Fairplay, the trial court granted a motion for summary judgment filed by defendants State of Colorado and City of Fairplay. Both Fairplay Alma and defendants seek this review of conclusions of law reached by the trial court in granting the motion. We affirm the judgment.
This controversy stems from the activities of the Mineral Resources Board created in 1937 by the General Assembly for the purpose, inter alia, of constructing various facilities for the development and utilization of mineral resources. Statutory provisions governing the activities of the Board are contained in Chapter 92, Article 35 of the 1953 Revised Statutes, and references to those statutes in this opinion will be by section numbers in Article 35.
Section 2 granted the Board authority to construct reservoirs and other facilities for treatment and disposal of mill tailings; section 3 provided that the Board was to have perpetual existence; and section 4 authorized the Board to acquire land necessary for its projects. Section 5, however, required that the cost of all facilities be paid from the proceeds of revenue bonds issued by the Board for each project.
Pursuant to section 6, the bonds were to have a maturity date of not more than 20 years, to bear interest, and to contain a statement "on their face" that the State was not obligated to pay the principal and interest thereon except from a "sinking" fund derived from charges imposed for use of the facilities constructed by the Board. Section 6 expanded further on the limitation of the State's liability in providing that the bonds:
"Shall not constitute or be a debt . . . of the state of Colorado, and shall be secured only by the revenues to be derived from the operation of the project for the construction of which such bonds are issued and by the funds received from the sale, lease, or other disposition of such project."
Section 7 somewhat contradicts the quoted provision of section 6 by granting the Board the discretion to secure bonds by a trust indenture "containing provisions for conveying in trust or mortgaging the project. . . ."
While section 13 authorized any bondholder to institute suit to enforce all rights granted by Article 35 and that while any bonds were outstanding, the "powers, duties, or existence of the board shall not be diminished or impaired in any manner that will affect adversely the interests and rights of the holders of such bonds," section 11 specifically provided that:
"No liability or obligation of any kind whatever shall be incurred under the provisions of this article beyond the extent to which money shall be provided under the authority of this article."
The record discloses that in 1938 the Board entered into written contracts with Denver and certain other water appropriators from the Middle Fork of the Platte River. The contracts recited that the Board had agreed with the owners and operators of the mines in the Alma-Fairplay Mining district, located upstream, to construct a dam across the river for the purposes of impounding mill tailings. The parties to the contracts agreed that if the tailing contents of water passing over the dam were reduced to a point "not exceeding 5% by weight," legal action would not be instituted against the mine operators for water pollution.
The Board obtained approximately $14,000 from the issuance of revenue bonds, purchased the dam site for approximately $1,500, and erected a dam or dams. In excess of $10,000 of these bonds were redeemed with the proceeds of fees charged the mine operators before mining activity in the area was terminated by executive order of the President following commencement of World War II. Thereafter the tailings project was abandoned and the dams either deteriorated or were destroyed.
The General Assembly repealed Article 35 and thus abolished the Board in 1963. See Colo. Sess. Laws 1963, ch. 204, sec. 5 at 725.
In its complaint, Fairplay Alma alleged that it was the holder of four unredeemed bonds. While conceding that the State holds legal title to the dam site by reason of the repeal of Article 35, Fairplay Alma claims an equitable interest in the dam site based upon: (1) Ownership of the unredeemed bonds; and (2) as a subsidiary corporation of a mine operator for whose benefit the dams were originally constructed.
The State and City of Fairplay answered denying that Fairplay Alma held any title in the subject property, asserted various affirmative defenses to its claim, including statutes of limitation, and requested a decree quieting title in the State. The City apparently is attempting to purchase the dam site from the State.
Following oral argument on the motion for summary judgment, the trial court concluded that: (1) Fairplay Alma acquired an "equitable title" to the subject property by reason of its ownership of the outstanding bonds; but that (2) this title was insufficient, as a matter of law, upon which to quiet title. Defendants challenge the first conclusion, and Fairplay Alma seeks to reverse the second.
[1] We conclude that if Fairplay Alma acquired any equitable interest in the dam site through ownership of the bonds or as the beneficiary of a resulting trust, then a sufficient basis would exist upon which to predicate a quiet title proceeding. See Munson v. Marks, 52 Colo. 553, 124 P. 187; Brown v. Wilson, 21 Colo. 309, 40 P. 688. However, we agree with defendants that the allegations of the complaint, together with Fairplay Alma's answers to interrogatories, fail to demonstrate, as a matter of law, the existence of any equitable interest in the dam site.
As to the claim of title predicated on Fairplay Alma's status as a bondholder, even if section 7 may be construed as granting the Board authority to mortgage the dam site as security for repayment of the bonds, there is no allegation that such a mortgage was executed. Hence, Fairplay Alma's remedy is governed by section 6 which limits the obligation of the State for repayment of the bonds to revenues from operation of the dam site, or lease, sale, or other disposition thereof. We may not, under the guise of statutory construction, interpret section 6 to include a remedy which was excluded by the General Assembly. Contrary to Fairplay Alma's contention here, the fact that the Board was abolished while indebtedness on the bonds was outstanding, in violation of section 13 did not create property rights in the dam site in any of the bondholders.
[2] Even assuming that Fairplay Alma, as the subsidiary of a mine operator, occupied the position of a potential beneficiary of the tailings disposal project when the mines are reactivated, contrary to Fairplay Alma's argument here, such fact does not establish a resulting trust in the dam site for its benefit. This is because neither Article 35 nor the written contracts with Denver and the other individuals obligated the Board to operate and maintain the dams indefinitely. Moreover, there is no suggestion in the record before us that the circumstances prevalent at the commencement of World War II failed to justify abandonment of the project. Hence, we find no merit to Fairplay Alma's resulting trust theory.
While the trial court erred in its conclusion of law that Fairplay Alma acquired an equitable interest in the dam site, we affirm its judgment quieting title to the dam site in the State as successor in interest to the title of real property owned by the Mineral Resources Board.
Judgment affirmed.
JUDGE ENOCH and JUDGE STERNBERG concur.