This occurance is stated in the Colorado Rail Annual #11 on page 174. It states:
"On Tuesday morning, September 11, 1934, a "Mudhen" 2-8-2 locomotive, heavier than the motive power usually used on the Ouray Branch, headed south into the John F. Rice Lumber Company yard, switching cars, near First Street and Third Avenue. At that point the ground was soft from the hot springs near the sanitarium, and one of the rails sank into the ground and turned under the engine. A work train came in from Colona the following day to rerail the engine."
There is no mention as to whether there was any previous use of a Mudhen in Ouray, or any use after that incident. Still....they shoulda known better!