Grynberg v. City of Northglenn

• Decision Date: 15 June 1987
• Docket Number: No. 85SC117,85SC117
• Citation: 739 P.2d 230
• Parties: Jack J. GRYNBERG, Petitioner, v. CITY OF NORTHGLENN, Sheaffer & Roland, Inc., Chen and Associates, Inc., and Arrow Drilling Company, Respondents.
• Court: Colorado Supreme Court

Page 230

739 P.2d 230

Jack J. GRYNBERG, Petitioner, v. CITY OF NORTHGLENN, Sheaffer & Roland, Inc., Chen and Associates, Inc., and Arrow Drilling Company, Respondents.

No. 85SC117.

Supreme Court of Colorado En Banc.

June 15, 1987.

Rehearing Denied July 20, 1987.

Welborn, Dufford, Brown & Tooley, Phillip D. Barber, Ellen Toll, Denver, for petitioner.

Popham, Haik, Schnobrich, Kaufman & Doty, Ltd., Gary E. Parish, Janet A. Savage, Denver, for respondent City of Northglenn.

Bender & Fryer, P.C., Stanley B. Bender, Denver, William H. Ebbert, Denver, for respondent Sheaffer & Roland, Inc.

No appearance for respondent Chen and Associates, Inc.

No appearance for respondent Arrow Drilling Co.

LOHR, Justice.

This case was brought by Jack J. Grynberg, the owner of a coal lease from the State of Colorado, claiming that his rights were violated when the City of Northglenn drilled a test hole within the lease boundaries without Grynberg's permission and disclosed the results of the test in a report filed in the public records of the state engineer. The test results showed an absence of commercially recoverable coal deposits. Northglenn had drilled the hole with the permission of the owner of the severed surface estate for the purpose of determining the suitability of the area as a site for a wastewater reservoir. The trial court granted summary judgment for defendant Northglenn and the other defendants, all of whom had participated in drilling the test hole, based on the finding and conclusion that they had no actual or constructive notice of Grynberg's lease, which had not been recorded in the county real estate records, and that the defendants were entitled to the protection of Colorado's recording statute, section 38-35-109(1), 16A C.R.S. (1982). The Colorado Court of Appeals affirmed in Grynberg v. City of Northglenn, 703 P.2d 601 (Colo.App.1985). We granted certiorari and now reverse the judgment of the court of appeals and remand the case for further proceedings.

I.

The relevant facts are established by documents in the record and are not in dispute. In late 1977, the City of Northglenn began a search for potential sites for a wastewater reservoir which would become part of a comprehensive wastewater treatment project. One of the sites selected was the West half of Section 36, Township 1 North, Range 68 West of the 6th P.M., in Weld County, Colorado (the site).

In order to assess the suitability of the site for construction of a reservoir, Northglenn made plans to drill test holes, including one deep hole to determine whether the site contained commercial deposits of coal. The exploration for coal deposits was to be accomplished to obtain information relevant to zoning and to securing the approval of the state engineer. See §§ 34-1-303, -305(1) and (2), 14 C.R.S. (1984) (prohibiting governmental zoning authorities in populous counties from permitting use of any area containing a commercial mineral deposit in a manner that would interfere with extraction of such deposit); §§ 37-87-105(1) and -117, 15 C.R.S. (1986 Supp.) (requiring state engineer's approval of engineering data and plans before certain dams may be constructed).

In order to ascertain the ownership of the site, Northglenn searched the Weld County records, including the records of the county clerk and recorder. This search revealed that the surface estate of the site was owned by a private corporation not a party to this lawsuit and that the severed mineral estate was owned by the State of Colorado. The search also disclosed that the State of Colorado had issued a coal lease to Clayton Coal Company (Clayton Coal), recorded June 6, 1975, that had a primary term of ten years and covered the site. Although the State of Colorado also had issued a coal lease to Jack J. Grynberg including the site together with the remainder of Section 36, Township 1 North, Range 68 West of the 6th P.M. (Section 36), dated July 13, 1977, for a primary term of ten years, that lease had not been recorded in the Weld County records. As a result, Northglenn's search did not disclose the existence of that lease. Northglenn had no actual knowledge of the existence of the Grynberg coal lease.

Prior to conducting any drilling, Northglenn contacted Clayton Coal and learned that it had assigned its coal lease to Adolph Coors Company (Coors). Northglenn then inquired of Coors and was informed that Coors had determined that any coal within the leasehold boundaries was not economically recoverable, and that Coors therefore had abandoned the coal lease.

In December 1977, Northglenn received a proposal for the sale of the surface estate from its owner. Following negotiations, Northglenn entered into an agreement to purchase the surface estate on March 3, 1978, and acquired that estate on June 1, 1978. In late February of 1978, during the course of the negotiations leading up to the sale, Northglenn obtained the permission of the surface owner and drilled test holes on the site. Northglenn never sought permission of the State of Colorado, the record owner of the mineral estate in the site, to accomplish the testing. Neither did Northglenn review the records pertaining to the site that were maintained in the office of the State Board of Land Commissioners. See, e.g., §§ 36-1-101 and -110, 15 C.R.S. (1973) (concerning records to be kept of documents pertaining to state lands, and public nature of records).

The drilling conducted by Northglenn consisted of a number of shallow holes and one that was 600 feet deep. In performing this work defendant Sheaffer & Roland, Inc. acted as general contractor, defendant Chen and Associates, Inc. (Chen) was the soils engineering consultant and supervised the drilling, and defendant Arrow Drilling Company drilled the holes. None of these companies had actual knowledge of the existence of the Grynberg lease during the times relevant to this litigation.

Chen prepared a preliminary engineering geology and soils investigation report based in part on information obtained from the deep test hole drilled on the site. The report stated that the hole was drilled to evaluate the extent of coal deposits in the area and concluded that "it is our opinion that the coal in Section 36 ... does not represent a potentially recoverable resource." Information in the report included the geologic and other data required by the state engineer in order to approve the proposed reservoir. On or about April 25, 1978, Chen filed the report in the state engineer's office where its contents became public information. The state engineer thereafter approved the plans and specifications for the proposed reservoir.

Northglenn first learned of the Grynberg lease when Grynberg contacted the city in mid-May of 1978 to express concern about the drilling activity on the property. Grynberg then brought suit against Northglenn, Sheaffer & Roland, Inc., Chen, and Arrow Drilling Company, based on theories of trespass, assumpsit, wrongful appropriation of geologic information, interference with prospective business advantage, and negligence. The asserted injury that provides the principal basis for all of these claims, directly or indirectly, is the loss of market value of Grynberg's coal lease as the result of the discovery and publication of information that the coal reserves on the property have no commercial value. The defendants filed answers and then moved for summary judgment. ¹ Plaintiff Grynberg filed a cross-motion for partial summary judgment on certain issues of liability. The defendants filed numerous affidavits in support of their motions, and the deposition of Grynberg also was placed in the file.

The defendants argued in support of their summary judgment motions that they had no actual notice of the Grynberg lease and were not on constructive notice of that lease because it had not been recorded with the Weld County Clerk and Recorder. Therefore, they argued, under Colorado's recording act, section 38-35-109(1), 16A C.R.S. (1982), the Grynberg lease was not valid as to them. The district court agreed and also accepted the defendants' argument that they had no duty to examine the records in the office of the Colorado State Board of Land Commissioners in order to ascertain the status of title to the site. Although the district court acknowledged that Grynberg's lease was valid as to the State of Colorado, the court concluded that the lease was ineffective as to the defendants as a result of Grynberg's failure to record it in the county records. Consequently, the court ruled that Grynberg's claims, all of which were predicated on injury to his rights under the coal lease, must fail. Based on this analysis, the district court granted the defendants' motions for summary judgment and denied Grynberg's cross-motion for partial summary judgment.

Grynberg appealed, and the court of appeals affirmed the summary judgments. Grynberg v. City of Northglenn, 703 P.2d 601 (Colo.App.1985). That court held that the recording act by its own terms extends protection to "any class of persons with any kind of rights" and does not limit the persons protected to bona fide purchasers and encumbrancers. 703 P.2d at 602. The court also held that Northglenn obtained protected rights by securing permission to drill from the owner of the surface estate and ultimately purchasing the surface estate. Id. at 603. The court of appeals rejected the plaintiff's claim that Northglenn was on constructive notice of the records in the office of the Colorado State Board of Land Commissioners simply because the county records showed that the state was the record owner of the mineral estate in the site. Id. Concluding that Northglenn was entitled to rely on the condition of title disclosed by the records of the county clerk and recorder, the court sustained the summary judgments. Id. Grynberg then petitioned for certiorari, and we granted that petition.

We first consider whether the owner of a surface...