Desert Mountain Gold LLC v. Amnor Energy Corp.

• Decision Date: 24 November 2017
• Docket Number: No. 20160654-CA,20160654-CA
• Citation: 409 P.3d 74
• Parties: DESERT MOUNTAIN GOLD LLC, Appellee, v. AMNOR ENERGY CORP., Appellant.
• Court: Utah Court of Appeals

409 P.3d 74

DESERT MOUNTAIN GOLD LLC, Appellee,

v.AMNOR ENERGY CORP., Appellant.

No. 20160654-CA

Court of Appeals of Utah.

Filed November 24, 2017

Kathryn J. Steffey and Clayton H. Preece, Attorneys for Appellant

Allen K. Young and Tyler S. Young, Attorneys for Appellee

Judge Kate A. Toomey authored this Opinion, in which Judges Gregory K. Orme and Diana Hagen concurred.

Opinion

TOOMEY, Judge:

¶1 This case arises out of a dispute over a fully integrated contract between Amnor Energy Corp. and Desert Mountain Gold LLC relating to mining claims on a property located in Juab County, Utah. After Amnor failed to timely make an annual royalty payment required by the contract, Desert Mountain brought an action for breach of contract. Desert Mountain later moved for summary judgment, which the district court granted. Amnor appeals from that order, contending that its failure to perform was excused because of Desert Mountain's earlier alleged breach of the contract's confidentiality clause. Amnor further contends that the district court erred in determining that, under the contract, Amnor's failure to timely pay one of its annual royalty payments automatically terminated the contract, requiring Amnor to, among other things, quitclaim its interest in the property to Desert Mountain. We affirm.

BACKGROUND

¶2 In July 2011, the parties entered into a fully integrated contract, whereby Amnor acquired certain mining claims from Desert Mountain. Under the contract, Amnor was required to pay Desert Mountain an annual royalty payment of $20,000 "on or before January 30, 2012 and on or before January 30 of each successive year to and including January 30, 2016." In addition, the contract included a confidentiality clause and provisions outlining the dispute resolution process the parties were to follow in the event of a default.

¶3 The first dispute under the contract involved Desert Mountain's alleged breach of the contract's confidentiality clause. In March 2013, Amnor sent Desert Mountain a notice of default, alleging that Desert Mountain breached the confidentiality clause by disclosing the existence of the contract to an independent contractor who had installed a gate on the property. In response, Desert Mountain sent a letter to Amnor disputing the default and explaining that it believed the disclosure was authorized under the contract. Amnor disagreed with Desert Mountain's interpretation of the confidentiality clause and sent a reply letter in April 2013 to that effect. In its reply letter, Amnor explained that, because of Desert Mountain's alleged breach, it would not provide Desert Mountain further "data," as required by the contract, until Desert Mountain cured the breach.¹ Amnor did not attempt to set up a meeting to resolve the dispute; rather, it concluded its letter by stating that it was "willing to meet to discuss" if Desert Mountain wished to do so. Despite these communications, the parties continued to perform their respective duties under the contract with the exception of Amnor's refusal to provide Desert Mountain with data relating to the mining claims, and Desert Mountain did nothing to cure its alleged breach.

¶4 More than nine months after the parties' communications regarding Desert Mountain's alleged breach of the confidentiality clause, Amnor failed to make the January 30, 2014 royalty payment. Desert Mountain sent Amnor a notice of default and requested payment. Under the contract, Amnor had fifteen days after receiving the notice to cure the default. Although Amnor eventually sent a check for payment, it failed to do so within the fifteen-day curative window. Desert Mountain refused the payment. Instead, it sent Amnor a notice of termination, requesting that Amnor comply with the contract's termination provision that required Amnor to quitclaim its interest in the property to Desert Mountain. Amnor replied that it would not comply with the termination provisions.

¶5 In June 2014, Desert Mountain filed an action for breach of contract. In its answer, Amnor asserted that Desert Mountain's claim was barred because of Desert Mountain's alleged breach of the contract's confidentiality clause. Accordingly, Amnor asserted a counterclaim for breach of contract. Desert Mountain later moved for partial summary judgment on its claim only.

¶6 Desert Mountain disagreed it had breached the contract's confidentiality clause but argued that, "[e]ven assuming, for the purposes of this Memorandum, Desert Mountain was in default by breaching the Confidentiality Clause," it was entitled to summary judgment because Amnor did not comply with the contract's dispute resolution provisions, which were a prerequisite to enforcement of any remedial provisions Amnor might have had. Thus, Desert Mountain argued, because the contract was fully integrated, Amnor's breach was not excused.

¶7 In its opposing memorandum, Amnor contended it was excused from performing because of Desert Mountain's alleged breach of the confidentiality clause. It also asserted several additional facts, including that Desert Mountain breached the confidentiality clause by disclosing the existence of the contract to an independent contractor. In reply, Desert Mountain admitted, for the purposes of summary judgment only, that it had materially breached the confidentiality clause.

¶8 During oral argument on the motion, Amnor asserted the additional argument that the plain language of the contract allowed for automatic termination only if Amnor failed to make every annual royalty payment under the contract. Thus, Amnor argued, because it missed only one payment, the contract was not automatically terminated.

¶9 The district court granted Desert Mountain's motion in a written ruling. The court first concluded, "Because Amnor did not pursue the remedies the Agreement mandated, the Agreement remained in full force and effect after Desert Mountain's breach." Second, the court concluded that Amnor's failure to make the 2014 royalty payment triggered the contract's automatic termination provision. Amnor filed a timely appeal.

ISSUES AND STANDARD OF REVIEW

¶10 Amnor first contends it was excused from paying the 2014 royalty payment in a timely fashion under the "first breach rule," because of Desert Mountain's earlier alleged breach of the contract's confidentiality clause. Second, Amnor contends the contract could not automatically terminate unless Amnor failed to timely make each of the annual royalty payments.

¶11 Summary judgment is proper where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Utah R. Civ. P. 56(a). We review a district court's "grant of summary judgment, as well as the court's interpretation of contracts upon which the summary judgment was based, for correctness." Ward v. IHC Health Services, Inc. , 2007 UT App 362, ¶ 7, 173 P.3d 186.

ANALYSIS

I. First-breach Rule

¶12 Amnor argues the first-breach rule excused it from performing its obligations under the contract and that the district court erred in declining to apply the first-breach rule. Under the first-breach rule, "a party first guilty of a substantial or material breach of contract cannot complain if the other party thereafter refuses to perform." Cross v. Olsen , 2013 UT App 135, ¶ 25, 303 P.3d 1030 (citation and internal quotation marks omitted). Further, "[h]e can neither insist on performance by the other party nor maintain an action against the other party for a subsequent failure to perform." Id. (citation and internal quotation marks omitted).

¶13 While we recognize both the validity of the first-breach rule and the fact that Desert Mountain admitted that—for the purpose of summary judgment only—it materially breached the confidentiality clause, we emphasize that "[t]he law of contracts is based on the principle of freedom of contract." Robinson v. Tripco Inv., Inc. , 2000 UT App 200, ¶ 40, 21 P.3d 219. Indeed, "courts ordinarily will not invade the province of the parties ... to determine for themselves what the consequences of a breach of their contracts shall be." Commercial Real Estate Inv., LC v. Comcast of Utah II, Inc. , 2012 UT 49, ¶ 29, 285 P.3d 1193 (omission in original) (citation and internal quotation marks omitted). Moreover, when interpreting a contract, "we look to the language of the contract to determine its meaning and the intent of the contracting parties." McNeil Eng'g & Land Surveying, LLC v. Bennett , 2011 UT App 423, ¶ 8, 268 P.3d 854 (citation and internal quotation marks omitted). "We also consider each contract provision ... in relation to all of the others, with a view toward giving effect to all and ignoring none." Id. (omission in original) (citation and internal quotation marks omitted).

¶14 In the present case, the contract included a detailed dispute resolution process for the parties to follow in the event that the alleged breaching party disputed its alleged breach. Amnor did not comply with the dispute resolution provisions.

¶15 Section 12.3 of the contract, entitled "Disagreement Over Alleged Default," provides:

In the event the Party against whom a default is alleged believes that it is not in default, it may give written notice to the other Party within such 15-day or 30-day period, as applicable, setting forth such fact. The Parties shall then follow the procedure set forth in Section 12.4 in attempting to resolve such dispute. In the event that the Parties agree through informal consultation or determine through a judicial decision that there has been a default, this Agreement shall not be terminated if the defaulting Party shall cure the default within 30 days following such agreement or determination .... If the defaulting Party shall fail to satisfy such

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