Ward Petroleum v. Kent

Opinion

20CA1513 Ward Petroleum v Kent 01-06-2022

COLORADO COURT OF APPEALS

Court of Appeals No. 20CA1513

Weld County District Court No. 19CV30538

Honorable Todd Taylor, Judge

Ward Petroleum Corporation, individually and as assignee of Wolf Resources,

LLC; and Ward Energy Investments, LLC, individually and as assignee of Wolf

Resources, LLC,

Plaintiffs-Appellants,

v.

Gregory Kent; Dacono Investments, Inc., a Colorado corporation; and General

Land Development Corporation, LLC, a Colorado limited liability company,

Defendants-Appellees.

JUDGMENT AFFIRMED AND CASE

REMANDED WITH DIRECTIONS

Division VI

Opinion by JUDGE WELLING

Fox and Johnson, JJ., concur

NOT PUBLISHED PURSUANT TO C.A.R. 35(e)

Announced January 6, 2022

Spencer Fane LLP, Troy R. Rackham, Jacob F. Hollars, Denver, Colorado, for

Plaintiffs-Appellants

Woods|Aitken, LLP, Alvin M. Cohen, Denver, Colorado, for Defendants-

Appellees

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¶ 1 Plaintiffs, Ward Petroleum Corporation and Ward Energy

Investments, LLC (collectively, Ward), appeal the trial court’s

summary judgment decision in their contract dispute arising out of

a purchase agreement with defendant Gregory Kent. We affirm.

I. Background

¶ 2 To best understand the events giving rise to this litigation, we

will start from the beginning. Over twenty years ago, Gregory Kent

purchased two parcels of property: Section 1 and Section 34. In

2008, Kent conveyed the parcels to a limited liability entity and

then from that limited liability entity to Dacono Investments, Inc.

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(Dacono); Kent was the sole shareholder of both entities. In 2009,

Dacono obtained a $4.25 million bank loan and mortgaged Section

1 as collateral for the loan.

¶ 3 In 2010, Dacono began to fall behind on the loan payments.

In June 2010, Kent attempted to sever the mineral rights of

Section 1 by executing a mineral deed conveying the Section 1

1

In at least one of the documents in the record Dacono

Investments, Inc., is referred to as “Dakono Investments, Inc.” This

discrepancy isn’t identified or raised by the parties as an issue in

their briefing in this court, so we don’t address it further.

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mineral interests from Dacono to himself; the mineral interest deed

was recorded. Kent didn’t have permission from the bank to sever

the mineral interests from the mortgaged parcel.

¶ 4 In 2012, the bank declared a default on the loan and the court

authorized the sale of Section 1 through a foreclosure auction. At

the foreclosure auction, the bank purchased the property. The

bank’s confirmation deed contained no reservation of mineral rights

for Section 1 to Kent, meaning the bank’s deed didn’t reflect Kent’s

attempt to sever the Section 1 mineral rights following Kent’s pledge

of the property to the bank.

¶ 5 Now we turn to the events giving rise to this litigation. In

2018, Kent agreed to sell the Section 34 mineral rights to a

company called Wolf Resources. After purchasing the Section 34

mineral rights from Kent, Wolf Resources offered to also purchase,

and Kent agreed to sell, the Section 1 mineral rights. Wolf

Resources then discovered a title issue that revealed that Kent

didn’t own the Section 34 mineral rights that Wolf Resources had

purchased from him. It isn’t clear from the record how the title

problems involving Section 34 were discovered by Wolf Resources.

After discovering that Kent didn’t own the Section 34 mineral rights,

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Wolf Resources and Kent amended the purchase agreement for the

Section 1 mineral rights to reflect a price reduction equivalent to

what Wolf Resources had paid for the Section 34 mineral rights

(that Kent didn’t own).

¶ 6 The amended purchase agreement for the Section 1 mineral

rights contains two clauses that are relevant here. First, the

purchase agreement states that Wolf Resources has no other claims

against Kent and waives and forever releases Kent from any claims,

known or unknown. Second, the purchase agreement states that

Wolf Resources is taking title without any warranty and that any

claims against Kent are limited by the terms of the mineral interest

deed and the purchase agreement. And the mineral deed for

Section 1 incorporated into the purchase agreement contains a six-

month claim limitation. The purchase agreement was executed on

May 3, 2018. The mineral deed was executed on May 14, 2018.

¶ 7 After Wolf Resources purchased the Section 1 mineral rights

from Kent, Wolf Resources sold them to Ward — the plaintiffs in

this case. After the conveyance from Wolf Resources to Ward was

complete, Ward discovered that Kent also didn’t own the Section 1

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mineral rights that he purported to sell to Wolf Resources (and that

Wolf Resources then sold to Ward).

¶ 8 In May 2019, Wolf Resources assigned any and all claims it

had against Kent relating to the sale of the Section 1 mineral rights

to Ward. In June 2019, Ward commenced this action against Kent

alleging fraud by misrepresentation, concealment or nondisclosure,

negligent misrepresentation, violation of the Colorado Consumer

Protection Act, breach of contract, and unjust enrichment.

¶ 9 Kent filed a motion for summary judgment on all of Ward’s

claims. The trial court granted summary judgment in favor of Kent,

concluding that the plain language of the purchase agreement and

the mineral deed between Wolf Resources and Kent barred Ward’s

claims. Ward appeals.

II. Analysis

¶ 10 Ward raises four contentions on appeal. Specifically, Ward

contends that the trial court erred by (1) failing to recognize that

Kent breached the covenant of seisin; (2) granting Kent’s summary

judgment motion on Ward’s unjust enrichment claim; (3) granting

Kent’s summary judgment motion on Ward’s fraud and negligent

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misrepresentation claims; and (4) granting Kent’s summary

judgment motion on Ward’s fraudulent concealment claim.

¶ 11 Because we are reviewing the trial court’s grant of summary

judgment, we review each contention de novo, applying the same

standard as that court. Poudre Sch. Dist. R-1 v. Stanczyk, 2021 CO

57, ¶ 12. A court may grant a motion for summary judgment when

the pleadings and supporting documents establish that there is no

genuine issue as to any material fact and that the moving party is

entitled to judgment as a matter of law. See C.R.C.P. 56(c); Gibbons

v. Ludlow, 2013 CO 49, ¶ 11. The moving party has the initial

burden of demonstrating the absence of a genuine issue of material

fact. See AviComm, Inc. v. Colo. Pub. Utils. Comm’n, 955 P.2d 1023,

1029 (Colo. 1998); Wallman v. Kelley, 976 P.2d 330, 332 (Colo. App.

1998). If this burden is met, then the burden shifts to the

nonmoving party to adequately demonstrate by relevant and

specific facts that a real controversy exists. See City of Aurora v.

ACJ P’ship, 209 P.3d 1076, 1082 (Colo. 2009); Churchey v. Adolph

Coors Co., 759 P.2d 1336, 1340 (Colo. 1988).

¶ 12 We address each contention below.

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A. Covenant of Seisin

¶ 13 Ward first contends that Kent breached the covenant of seisin

because he didn’t actually own the Section 1 mineral rights that he

purported to sell. The covenant of seisin is a promise by the seller

that he owns the property and has the rights of ownership.

Bernklau v. Stevens, 150 Colo. 187, 194, 371 P.2d 765, 769 (1962).

“The generally accepted rule is that a covenant of seisin is broken, if

at all, when it is made.” Id.

¶ 14 Ward argues that by conveying the mineral deed to Wolf

Resources for the Section 1 mineral rights, Kent promised that he

owned those mineral rights, and therefore the covenant of seisin

was breached at the time of the purported conveyance because he

didn’t actually own the mineral rights he was selling.

¶ 15 While we agree that the breach of the covenant of seisin was

adequately alleged, we conclude that the purchase agreement and

mineral deed expressly bar this claim. We reach this conclusion in

two different ways.

¶ 16 First, the purchase agreement provides that Wolf Resources

took title without any warranty, specifically: “Wolf acknowledges

that it is taking title without any warranty whatsoever, except as

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granted in the revised Mineral Deed which is attached hereto as

Exhibit A and made a part hereof, and based only on its own

investigation and not any statements made by Seller.” Second, the

mineral deed contains this time limitation: “Notwithstanding the

foregoing, any warranty or agreement made by Grantor [Kent]

regarding title shall terminate and be of no effect on the date which

is six (6) months after the date of this Mineral Deed and no claim

may be made thereafter.”

¶ 17 Because Wolf Resources acknowledged that it was taking title

without any warranty whatsoever and because the six-month

window had closed by the time Ward filed suit, we conclude that the

purchase agreement and the mineral deed expressly bar Ward’s

claim arising under the covenant of seisin. Accordingly, summary

judgment on this claim was properly granted.

B. Unjust Enrichment

¶ 18 Ward argues that the trial court erred in granting summary

judgment on its unjust enrichment claim because of material fact

disputes raised by Ward.

¶ 19 A person is unjustly enriched when they benefit due to an

unfair detriment to another. Salzman v. Bachrach, 996 P.2d 1263,

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1265 (Colo. 2000). The proper remedy upon a finding of unjust

enrichment is to restore the harmed party to the position it formerly

occupied either by the return of what it formerly had or by the

receipt of its monetary equivalent. Lewis v. Lewis, 189 P.3d 1134,

1141 (Colo. 2008).

¶ 20 The claim of unjust enrichment is a judicial creation designed

to remedy the benefit to one party that comes at the unfair

detriment of another. Salzman, 996 P.2d at 1265.

¶ 21 Although a claim for unjust enrichment provides an equitable

remedy and doesn’t depend on any contract, oral or written, see

Lewis, 189 P.3d at 1141, a plaintiff can’t prevail on a claim of

unjust enrichment where the express terms of a contract between

the parties bar that claim. Printz Servs. Corp. v. Main Elec., Ltd.,

949 P.2d 77, 82 (Colo. App. 1997) (if an express contract exists and

an implied contract is alleged to co-exist and relate to the same

subject matter, the provisions of the express contract supersede the

alleged terms of the implied contract), aff’d in part and rev’d in part

on other grounds, 980 P.2d 522 (Colo. 1999).

¶ 22 The time bar that defeated Ward’s covenant of seisin claim is

equally fatal to the unjust enrichment claim. Specifically, the

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mineral deed’s language provides: “Notwithstanding the foregoing,

any warranty or agreement made by Grantor [Kent] regarding title

shall terminate and be of no effect on the date which is six (6)

months after the date of this Mineral Deed and no claim may be

made thereafter.” (Emphasis added.) This language expressly bars

any claim regarding title after six months. Ward’s unjust

enrichment claim is simply a repackaged title claim. Ward can’t

circumvent the express terms of the mineral deed by reframing this

claim as one for unjust enrichment. This is because a party cannot

recover for unjust enrichment by asserting a quasi-contract when

an express contract covers the same subject matter; the express

contract precludes any implied-in-law contract. Printz Servs. Corp.,

949 P.2d at 82; Stanford v. Ronald H. Mayer Real Est., Inc., 849

P.2d 921 (Colo. App. 1993); see also Interbank Invs., LLC v. Eagle

River Water & Sanitation Dist., 77 P.3d 814, 816 (Colo. App. 2003).

¶ 23 Because the unjust enrichment claim is barred by the terms of

the mineral deed, summary judgment on that claim was properly

granted.

C. Interpretation of the Purchase Agreement and Mineral Deed

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¶ 24 Next, Ward contends that the trial court erred in its

interpretation of the purchase agreement and the mineral deed.

Ward’s argument focuses on the following language in the purchase

agreement:

Wolf warrants that, in exchange for the

reduction of the Purchase Price as set forth in

this paragraph, it has no other claims against

Seller for the Prior Transaction or any other

transaction, and in consideration of Seller

reducing the Purchase Price, hereby waives

and forever releases [Kent] from any claim

whatsoever, whether known or unknown,

including but not limited to any claims which

might have arisen under the Prior Transaction.

(Emphasis added.)

¶ 25 Specifically, Ward contends that “has” refers only to claims

that Wolf Resources may have had at the time the purchase

agreement was signed and doesn’t release Kent from liability for

claims arising in the future. We disagree.

¶ 26 As stated above, the claims that Ward is asserting are all

connected to the title — that is, each claim arises out of Kent not

actually owning the mineral rights that he purported to convey.

These claims are expressly barred by the mineral deed’s six-month

time limitation on “any warranty or agreement . . . regarding title.”

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Even assuming that the word “has” refers only to claims that

existed at the time the agreement was executed, Ward’s argument

doesn’t defeat the six-month time limit in the mineral deed.

D. Fraud, Negligent Misrepresentation, and Fraudulent

Concealment

¶ 27 Lastly, we address Ward’s three tort claims: (1) fraud;

(2) negligent misrepresentation; and (3) fraudulent concealment.

These claims are different than the covenant of seisin claim and the

unjust enrichment claim because they are contract formation

claims. That is, if Ward’s claims of fraud, negligent

misrepresentation, or fraudulent concealment succeed, they

invalidate the contract and therefore would also escape the grasp of

Kent’s defenses that rely on the express terms of the contract.

1. Economic Loss Rule Isn’t A Bar to Ward’s Fraud Claims

¶ 28 As a threshold matter, Kent contends that the three tort

claims are barred by the economic loss rule. We disagree.

¶ 29 The economic loss rule doesn’t apply to claims arising from a

defendant’s pre-contractual conduct because, at that time, there

was no contract that could have subsumed identical tort duties.

Hamon Contractors, Inc. v. Carter & Burgess, Inc., 229 P.3d 282,

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291, 293 (Colo. App. 2009); see also Van Rees v. Unleaded

Software, Inc., 2016 CO 51, ¶ 15 (explaining that the economic loss

rule does not bar claims “based on misrepresentations made prior

to the formation of the contracts, which [the plaintiff] alleges

induced him to enter into the contracts and therefore violated an

independent duty in tort to refrain from such conduct”). The

alleged misrepresentations and fraud by Kent that give rise to these

three claims were precontractual, meaning the fraud claims aren’t

barred by the economic loss rule. Therefore, we will address the

merits of each claim below.

2. Fraud and Negligent Misrepresentation

¶ 30 Ward contends that the trial court erred by granting summary

judgment when there were material factual disputes regarding its

fraud and negligent misrepresentation claims.

¶ 31 To establish fraud, Ward has to prove that (1) Kent made a

fraudulent misrepresentation of material fact; (2) at the time the

representation was made, Kent knew the representation was false

or was aware that he didn’t know whether the representation was

true or false; (3) Ward relied on the misrepresentation; (4) Ward had

the right to rely on, or was justified in relying on, the

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misrepresentation; and (5) the reliance resulted in damages.

Barfield v. Hall Realty, Inc., 232 P.3d 286, 290 (Colo. App. 2010).

¶ 32 To prevail on its negligent misrepresentation claim, Ward must

prove that (1) in the course of Kent’s business or in a transaction in

which he had a pecuniary interest; (2) Kent supplied false

information for the guidance of others in their business

transactions; (3) Kent failed to exercise reasonable care or

competence in obtaining or communicating the information; and

(4) Ward justifiably and detrimentally relied on the

misrepresentation. Id.

¶ 33 Ward’s fraud and negligent misrepresentation claims both fail

as a matter of law on the element of justifiable reliance. If a party

claiming fraud has access to information that was equally available

to both parties and would have led to the discovery of the true facts,

that party is not justified, as a matter of law, in relying on the

alleged false representation. Vinton v. Virzi, 2012 CO 10, ¶ 17.

¶ 34 Vinton is instructive in this regard. In Vinton, the plaintiff

alleged fraud after she was damaged by reliance on

misrepresentations by the defendant concerning the titles to certain

properties and their respective deeds. Id. at ¶ 16. Our supreme

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court held that because the official records regarding the properties

were accessible to the general public in a publicly recorded system,

the plaintiff in Vinton had no right to rely on the false

representation. Id. at ¶ 17.

¶ 35 Ward argues that Vinton is not on point because several

reviews of the public records didn’t reveal the truth, and therefore

the access to the public records wasn’t equal. We disagree, and

believe the present case is analogous to Vinton.

¶ 36 Here, as in Vinton, the documents that would have revealed

the ownership status of the mineral interests were recorded and

publicly available and accessible. Ward doesn’t contend otherwise.

Nor does Ward contend that material information was missing from

the public record. Instead, Ward contends that the title search

didn’t reveal the information about the true owner of the Section 1

mineral rights. Ward’s contention is, in essence, that the public

record was confusing, not that the information wasn’t in the public

record or was otherwise unavailable. Although we acknowledge

that the public record relating to the Section 1 mineral rights may

be confusing or convoluted, the history of the various transactions

can be pieced together, as evidence to determine that Kent

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ostensibly does not own the Section 1 mineral rights. That a real

estate transaction or series of transactions may make a title history

confusing isn’t enough, though, to create a genuine dispute

regarding the element of reasonable reliance. This is because any

reliance on Kent’s alleged representations (or silence) regarding his

ownership of the mineral rights was unreasonable as a matter of

law. Accordingly, Ward’s fraud and negligent misrepresentation

claims fail as a matter of law.

3. Fraudulent Concealment

¶ 37 Ward’s final claim is for fraudulent concealment. The

elements of fraudulent concealment are: (1) concealment of a

material existing fact that in equity and good conscience should be

disclosed; (2) knowledge on the part of the party against whom the

claim is asserted that such a fact is being concealed; (3) ignorance

of that fact on the part of the one from whom the fact is concealed;

(4) the intention that the concealment be acted upon; and (5) action

on the concealment resulting in damages. Kopeikin v. Merchs.

Mortg. & Tr. Corp., 679 P.2d 599, 602 (Colo. 1984).

¶ 38 To prevail on a claim of fraudulent concealment, Ward must

prove that Kent actually knew of a material fact that was not

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disclosed and that Kent’s nondisclosure was intended to cause

Ward to act differently than it might otherwise have done if the

information had been disclosed. Id.

¶ 39 This claim too fails as a matter of law for the reasons outlined

in Vinton (though we acknowledge this is a closer call). As we

understand it, Ward contends that because Kent knew about the

bank foreclosure on the Section 1 property and his subsequent

attempt — without permission from the bank — to transfer the

Section 1 mineral rights back to himself, this, in part, was material

information that Kent should have affirmatively disclosed to Wolf

Resources when Wolf Resources asked if there were any issues with

the property.

¶ 40 Even if Wolf Resources asked Kent whether he knew about any

problems with the Section 1 property, our review of the record

discloses that the information that Ward alleges Kent had a duty to

disclose is information that was undisputedly available and

accessible in the public record. Specifically, the deed transferring

title of Section 1 to Dacono Investments was signed by Gregory Kent

as President and recorded on October 3, 2008. The pledge of

Section 1 as collateral for the loan between the bank and Dacono is

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signed, again, by Gregory Kent as President of Dacono and recorded

on August 10, 2009. Kent’s attempt to sever the mineral rights

from Dacono back to himself as an individual — whether with or

without permission of the bank — is recorded on September 28,

2010. And then the bank’s foreclosure on, the court’s authorization

for the sale of, and the subsequent purchase by the bank (and then

to Carlile Capital, LLC) of Section 1 are also all recorded

transactions, recorded on March 7, 2012, October 26, 2012, and

March 22, 2013, respectively. Simply put, this all occurred and

was recorded in the public record well in advance of the 2018

agreements between Kent and Wolf Resources. Because Ward had

access to information that would’ve revealed that Kent didn’t own

the Section 1 mineral rights, Ward can’t prevail on a fraudulent

concealment claim based on an alleged failure to disclose that

publicly available information. See Vinton, ¶ 17.

¶ 41 Because the information that forms the basis of Ward’s

fraudulent concealment claim was equally available to Ward, this

claim too fails as a matter of law.

E. Appellate Attorney Fees

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¶ 42 The purchase agreement contains the following fee-shifting

provision:

In the event an unsuccessful claim is brought

by Wolf against [Kent] with regard to the

limitations on damages as set forth herein,

[Kent] shall be awarded its attorney’s fees and

costs. This section shall bind any assignee of

this Purchase Agreement and the Mineral

Deed.

Kent is the prevailing party on appeal and has a contractual right to

recover reasonable attorney fees and costs. Therefore, Kent is

entitled to an award of his reasonable attorney fees and costs

incurred in defending this appeal. Because a trial court is better

situated to resolve the factual issues associated with the

entitlement to attorney fees, we exercise our discretion under C.A.R.

39.1 and remand for the trial court to determine and award Kent

appellate attorney fees. See In re Marriage of Beatty, 2012 COA 71,

¶ 22.

III. Conclusion

¶ 43 For the reasons set forth above, the judgment is affirmed and

the case is remanded to the trial court for it to award Kent his

reasonable attorney fees and costs incurred on appeal.

JUDGE FOX and JUDGE JOHNSON concur.