Berenergy Corp. v. Zab, Inc.

94 P.3d 1228
Procedural entryThis page is a short order in Berenergy Corp. v. Zab, Inc.. Read the opinion of the Court — 94 P.3d 1232
Colorado Court of Appeals·Decided June 3, 2004·No. Nos. 02CA0009, 02CA1872·Published

Opinion

Opinion by

Judge RUSSEL.

In this declaratory judgment action, plaintiff, Berenergy Corporation, appeals the trial court’s judgment dismissing its amended complaint. Defendants, Zab, Inc; Zalman Resources, Inc.; Daven Corporation; and Sport Resources, Inc., cross-appeal the court’s order denying attorney fees. We affirm in part, reverse in part, and remand with directions.

Sheldon K. Beren incorporated Berenergy to invest in drilling and acquisition ventures in oil and gas wells. In 1985, each of Beren’s sons formed a corporation to participate in Berenergy’s ventures. These ventures were operated either by Berenergy or a third party, but never by Beren’s sons’ corporations, which are the defendants here. Beren caused Berenergy to charge defendants $150 per well per month for overhead, a rate significantly below the industry standard.

Beren died in 1996. In 1998, Berenergy tried to sell its interests in wells operated with any defendant, but it found that the marketability of its interests was harmed by uncertainty surrounding the $150 arrangement. Berenergy then brought this declaratory judgment action under C.R.C.P. 57 to determine its rights and obligations with respect to defendants and the $150 arrangement.

The trial court dismissed Berenergy’s case on alternative grounds: (1) the court lacked jurisdiction to grant declaratory relief when the dispute concerned the existence or validity of an oral contract; and (2) Berenergy’s amended complaint failed to state a claim on which relief could be granted. The trial court also found that further amendment of the complaint would be futile because Beren-ergy could not cure the defects inherent in its cause of action. The court awarded de[1231]*1231fendants their costs, but it denied their request for attorney fees.

I. Declaratory Relief on Oral Contract

We first consider the trial court’s jurisdictional ruling. The court held that a declaratory judgment action cannot be used to determine rights under an oral contract. We conclude that this ruling was incorrect.

A. Governing Standards

A declaratory judgment action is appropriate when the rights asserted by the plaintiff are present and cognizable. Lot Thirty-Four Venture, L.L.C. v. Town of Telluride, 976 P.2d 303, 307 (Colo.App.1998), aff'd, 3 P.3d 30 (Colo.2000). A court may refuse to render a declaratory judgment where it would not terminate the uncertainty or controversy giving rise to the proceeding. Section 13-51-110, C.R.S.2003; C.R.C.P. 57(f). A court should not render a declaratory judgment unless it will fully and finally resolve the uncertainty and controversy as to all parties with a substantial interest who could be affected by the judgment. Section 13-51-110; C.R.C.P. 57(f); Constitution Assocs. v. New Hampshire Ins. Co., 930 P.2d 556, 561 (Colo.1996).

The trial court has discretion to determine whether to permit a declaratory judgment action. Constitution Associates v. New Hampshire Ins. Co., 930 P.2d 556, 561 (Colo.1996). An appellate court will overturn the trial court’s decision only for an abuse of that discretion. Troelstrup v. Dist. Court, 712 P.2d 1010, 1012 (Colo.1986).

However, whether a court has jurisdiction under the Uniform Declaratory Judgments Law (UDJL), adopted in Colorado by § 13-51-101, et seq., C.R.S.2003, to determine the existence or validity of an oral contract is a question of statutory interpretation that we review de novo. See City of Colorado Springs v. Conners, 993 P.2d 1167, 1171 (Colo.2000) (whether trial court had subject matter jurisdiction to hear plaintiffs claim under the Governmental Immunity Act was a question of statutory interpretation subject to de novo review); Gorman v. Tucker, 961 P.2d 1126, 1128 (Colo.1998) (interpretation of a statute is a question of law, and an appellate court is not bound by the trial court’s interpretation).

B. Discussion

Berenergy’s case concerns the rate that it charges defendants for operating overhead. Berenergy asked the court to declare that there was no oral contract that would require it to continue charging only $150 per month.

The trial court ruled that it lacked jurisdiction to grant the relief that Berenergy sought. The court based this ruling on language in § 13-51-106, C.R.S.2003, and its corresponding rule, C.R.C.P. 57(b). This language indicates that a person may obtain a declaration of rights under a “written contract”:

Any person interested under a deed, will, written contract or other writings constituting a contract or whose rights, status or other legal relations are affected by a statute, municipal ordinance, contract, or franchise may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status, or other legal relations thereunder.

(Emphasis added.)

In examining this language, the trial court found that the word “contract,” as it appears in the second clause, impliedly refers back to “written contract” in the first clause. Therefore, the court ruled, “the legislature intended to make declaratory relief available only to persons seeking a determination of their rights or obligations under written instruments.”

Berenergy challenges this ruling. Although it does not take issue with the trial court’s interpretation of the language quoted above, Berenergy argues that the court overlooked other relevant language. Citing § 13-51-109, C.R.S.2003, and C.R.C.P. 57(e), Berenergy argues that declaratory relief is not limited to the enumerated situations, but is broadly available to settle controversies in other situations:

The enumeration in sections 13-51-106 to 13-51-108 does not limit or restrict the [1232]*1232exercise of the general powers conferred in section 13-51-105, in any proceeding where declaratory relief is sought, in which a judgment or decree will terminate the controversy or remove an uncertainty.

Section 13-51-109, C.R.S.2003.

We agree with Berenergy. Although § 13-51-106 and C.R.C.P. 57(b) detail situations in which declaratory judgment actions may be brought, they do not restrict the court’s ability to grant declaratory relief in other situations when appropriate. For example, declaratory relief has been held appropriate when the dispute centers, not on the interpretation of a written insurance policy, but rather on factual questions under the policy. See Am. Family Mut. Ins. Co. v. Bowser, 779 P.2d 1376, 1379 (Colo.App.1989).

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Berenergy Corp. v. Zab, Inc., 94 P.3d 1228 (Colo. Ct. App. 2004).

94 P.3d 1228 (Berenergy Corp. v. Zab, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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