Stockdale v. Ellsworth

2017 CO 109, 407 P.3d 571
CourtSupreme Court of Colorado
DecidedDecember 18, 2017
DocketSupreme Court Case No. 16SC798
StatusPublished
Cited by341 cases

This text of 2017 CO 109 (Stockdale v. Ellsworth) 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
Stockdale v. Ellsworth, 2017 CO 109, 407 P.3d 571 (Colo. 2017).

Opinion

JUSTICE MÁRQUEZ

delivered the Opinion of the Court.

¶1 In 2009, XTO Energy, Inc., filed an interpleader action, seeking to resolve competing claims to oil and gas proceeds held by XTO.'XTO named several potential claimants as defendants in the interpleader action, including Seawatch Royalty Partners, LLC (managed by Chester J. Ellsworth) and several alleged heirs of the'record owner of the relevant oil and gas interests. After a -bench trial, the court concluded that a group of individuals — deemed the true heirs of the record owner — -were entitled to the proceeds. Pertinent here, the trial court also ruled that Seawatch’s claims and defenses were frivolous; that Seawatch was an alter ego of Ells-worth; and that Seawatch and 'Ellsworth were jointly and severally liable for any future award of attorneys’ fees. Ellsworth was subsequently joined as a party under C.R.C.P. 21 and served via substituted service. The post-judgment sanctions proceedings continued for another several years, During that time, Ellsworth contested his individual liability, arguing that the .court lacked personal jurisdiction over him; that he had been improperly served; and that Seaw-atch was not, in fact, his alter ego. The trial court rejected these arguments and entered judgment jointly and severally against Seaw-atch and Ellsworth for approximately $1 million in attorneys’ fees. Ellsworth appealed pro se. . . ■ ■ •

¶2 In an unpublished opinion, the court of appeals vacated the judgihent against Ells-worth, holding that the district court lacked jurisdiction to hold him jointly and severally liable for the attorneys’ fee award because, as a nonparty, Ellsworth did not have notice and opportunity to contest his individual liability. XTO Energy, Inc. v. Ellsworth, No, 15CA1114, slip op. at 1, 2016 WL 4498612 (Colo. App. Aug. 26, 2016)..Because we conclude that Ellsworth had adequate notice and opportunity to challenge the alter ego findings that established his individual liability, we reverse the judgment of the court of appeals.

I. Facts and Procedural History

¶3 In 2009, XTO Energy, Inc., a producer of oil and natural gas, filed an interpleader action to determine the rights to certain oil and gas proceeds held by XTO. At the time of filing, XTO operated two natural gas wells that were extracting gas from an area of pooled mineral interests in the Fruitland Formation in La Plata County. One of the record owners of a mineral interest within the pooled area was Roy P. Cardwell, who had recorded his title in 1938. Because Card-well and his heirs could not be located in the 1990s when the Colorado Oil and Gas Conservation Commission authorized the pooling of interests in the area, the proceeds attributable to Cardwell’s interest were held in suspense as the natural gas wells were developed. When XTO filed the interpleader action in 2009, the proceeds attributable to Cardwell’s interest totaled approximately $2.7 million.

¶4 In its interpleader complaint, XTO sought a declaratory judgment as to who should receive the proceeds of Cardwell’s interest. XTO identified as potential claimants the heirs of a Roy P. Cardwell who died in California in 1971 (“California Heirs”); the heirs of a Roy P. Cardwell who died in Kansas in 1980 (“Kansas Heirs”); and two business entities managed by Chester Ells-worth: CEMPCO, Inc. and Seawatch Royalty Partners, LLC. CEMPCO and the Kansas Heirs withdrew them claims to the proceeds prior to trial, and the remaining parties— Seawatch and the California Heirs — stipulated that the California Heirs were the true heirs of the record owner. Seawatch claimed that it was entitled to the proceeds because it had obtained mineral deeds from the California Heirs. The California Heirs, however, claimed that they were entitled to the proceeds because Seawatch had obtained the mineral deeds from them through fraud or deceit.

¶5 After a seven-day bench trial, the trial court (Judge Dickinson) issued its Findings, Order, and Judgment on November 10, 2011. The trial court granted the California Heirs’ claims for rescission of the mineral deeds and assignments to Seawatch, concluding that Ellsworth had obtained them on behalf of Seawatch through fraud and misrepresentation. Specifically, Ellsworth told the California Heirs that there was no oil and gas production in the Cardwell interest and that there may be no minerals to extract, even though Ellsworth (or entities he controlled) had already received over $1 million in proceeds from mineral interests in adjoining lands. Ellsworth also falsely represented to the California Heirs that they could be liable for any costs of production or accidents associated with their interests.

¶6 The trial court found that Seawatch failed to produce any credible evidence to support its assertion that Ellsworth did not make material misstatements or unjustifiably conceal' material facts; the court therefore ruled that Seawatch’s claims and defenses were frivolous and groundless. Pertinent here, the trial court also concluded that “Seawatch was at all material times an alter ego of Ellsworth,” thus piercing the corporate veil and rendering Seawatch and Ellsworth jointly and severally liable for attorneys’ fees incurred by XTO and the California Heirs in responding to Seawatch’s frivolous claims and defenses.

¶7 Seawatch appealed, raising several arguments. During this first appeal, Seawatch argued, among other things, that the trial court’s order holding Ellsworth individually liable for attorneys’ fees must be vacated because the court did not have personal jurisdiction over Ellsworth. The court of appeals affirmed the judgment against Seaw-ateh in a unanimous, unpublished decision, but did not address the argument regarding Ellsworth because the trial court had not yet entered final judgment on attorneys’ fees. We denied certiorari review. XTO Energy, Inc. v. Seawatch Royalty Partners LLC, Nos. 11CA2388 & 12CA1159, 2013 WL 836040 (Colo. App. March 7, 2013), cert. denied, No. 13SC453, 2014 WL 620402 (Feb. 18, 2014).

¶8 While that appeal was pending, XTO and the California Heirs filed motions seeking attorneys’ fees and costs from Seawateh and Ellsworth. XTO and the California Heirs also filed a joint motion to join Ellsworth to the post-judgment proceedings pursuant to C.R.C.P. 21. The trial court granted the motion to join Ellsworth as a party “as authorized by C.R.C.P. 21 and City of Aurora v. Colorado State Engineer, 105 P.3d 595 (Colo. 2005).” After unsuccessful attempts to serve Ellsworth personally, XTO and the California Heirs moved for an order authorizing substituted service, which the trial court granted.

¶9 In 2013, Ellsworth, making what he called a “limited appearance,” filed numerous objections and motions in which he argued that the court lacked, personal jurisdiction over him and that substituted service had been improper. .

¶10 In an order dated April 10, 2014, the trial court denied several pending motions, including Ellsworth’s motion to dismiss for lack of personal jurisdiction.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Montgomery v. Best Buy
Colorado Court of Appeals, 2026
Schmitz v. BBVA
Colorado Court of Appeals, 2025
Bennett v. Peace
Colorado Court of Appeals, 2025
Peo v. Torres
Colorado Court of Appeals, 2025
Love's Oven v. Walters
Colorado Court of Appeals, 2025
Marriage of Stevens
Colorado Court of Appeals, 2025
Marriage of Zunker
Colorado Court of Appeals, 2025
Marriage of Danks
Colorado Court of Appeals, 2025
Tracy v. Surofchek
2025 COA 21 (Colorado Court of Appeals, 2025)
Sigalla v. Meidhof
Colorado Court of Appeals, 2025
Marriage of Gillispie
Colorado Court of Appeals, 2024
Peo v. Curtis
Colorado Court of Appeals, 2024
Estate of Turnbough
Colorado Court of Appeals, 2021
Ins. v. Dakota Station II
2021 COA 114 (Colorado Court of Appeals, 2021)
ge Condominium Association, Inc. v. Lo Viento Blanco, LLC
2020 COA 34 (Colorado Court of Appeals, 2020)

Cite This Page — Counsel Stack

Bluebook (online)
2017 CO 109, 407 P.3d 571, Counsel Stack Legal Research, https://law.counselstack.com/opinion/stockdale-v-ellsworth-colo-2017.