Ranch O, LLC v. Colo. Cattlemen's Agric. Land Trust

• Decision Date: 26 February 2015
• Docket Number: Court of Appeals No. 13CA2204
• Parties: RANCH O, LLC, Plaintiff–Appellant, v. COLORADO CATTLEMEN'S AGRICULTURAL LAND TRUST, Defendant–Appellee.
• Court: Colorado Court of Appeals

361 P.3d 1063

2015 COA 20

RANCH O, LLC, Plaintiff–Appellant,

v.COLORADO CATTLEMEN'S AGRICULTURAL LAND TRUST, Defendant–Appellee.

Court of Appeals No. 13CA2204

Colorado Court of Appeals, Div. I.

Announced February 26, 2015

Berg Hill Greenleaf & Ruscitti LLP, David G. Hill, Josh A. Marks, Heidi C. Potter, Boulder, Colorado, for Plaintiff–Appellant.

Heizer Paul LLP, Edward T. Ramey, Eric R. Jaworski, Denver, Colorado, for Defendant–Appellee.

Opinion

Opinion by JUDGE GABRIEL

¶ 1 In this action concerning the validity of a deed of conservation easement, plaintiff, Ranch O, LLC, appeals the grant of summary judgment to defendant, Colorado Cattlemen's Agricultural Land Trust (the Land Trust). We conclude that (1) the district court correctly reformed the deed based on a mutual mistake as to the grantor of the conservation easement and (2) reforming the deed did not violate the public policies and purposes behind Colorado's race-notice statute. Accordingly, we affirm.

I. Background

¶ 2 Craig J. Walker was the sole manager and ninety-nine percent membership owner of Walker I–Granby, LLC (LLC). Walker owned certain property (the subject property) that he conveyed to the LLC.

¶ 3 Thereafter, Walker and the Land Trust signed a deed of conservation easement (the Conservation Deed), which purported to grant the Land Trust a conservation easement on the subject property. The Land Trust subsequently recorded this Conservation Deed.

¶ 4 Notably, the Conservation Deed named Walker as the easement's grantor. As noted above, however, Walker had previously conveyed the subject property to his LLC. Thus, the LLC, rather than Walker, should have been the grantor of the Conservation Deed. Walker was not aware of this error, and the Land Trust was not aware that the subject property was owned by the LLC and not Walker.

¶ 5 Thereafter, Walker, on the LLC's behalf, entered into discussions with Ranch O's principal about the possibility of selling the subject property to Ranch O. During these discussions, Walker informed Ranch O's principal of the Land Trust's conservation easement.

¶ 6 Ranch O subsequently bought the property from the LLC. Notably, the deed conveying the property to Ranch O provided, in bold type and all block capital letters:

THE SUBJECT PROPERTY IS ENCUMBERED BY THAT CERTAIN DEED OF CONSERVATION EASE

MENT FOR THE WALKER–GRANBY RANCH HELD BY THE COLORADO CATTLEMEN'S AGRICULTURAL LAND TRUST RECORDED ON DECEMBER 31, 1998 AT RECEPTION NUMBER 98013967 IN THE LAND RECORDS OF GRAND COUNTY, COLORADO.

This deed's legal description of the subject property matched the legal description of the subject property set forth in the Conservation Deed.

¶ 7 After purchasing the property, Ranch O initiated these proceedings, seeking, as pertinent here, a declaratory judgment that the Conservation Deed was invalid and had no force and effect. Ranch O asserted that the Conservation Deed was invalid because (1) Walker had no ownership interest in the subject property at the time the Conservation Deed was signed and recorded and (2) a conservation easement could only be created by the record owner of the property to be burdened. Walker and the Land Trust were unaware of the problem with the Conservation Deed until Ranch O brought it to their attention, just before filing suit.

¶ 8 The Land Trust then filed its answer and counterclaims. The counterclaims added Walker and the LLC as additional defendants and sought, among other things, (1) a declaratory judgment that the terms of the Conservation Deed were valid and enforceable, notwithstanding the alleged scrivener's error as to the identification of the grantor; and (2) reformation of the Conservation Deed to correct any errors regarding the identity of the grantor. In support of these claims, the Land Trust argued that the misidentification of the grantor in the Conservation Deed was the result of a mutual mistake between the parties to that instrument.

¶ 9 Walker and the LLC disclaimed any interest in the lawsuit and consented to the relief that the Land Trust requested. Ranch O, however, moved for summary judgment, and the Land Trust then filed a cross-motion for summary judgment.

¶ 10 The district court ultimately denied Ranch O's motion and granted the Land Trust's cross-motion. The court concluded that both Walker and the Land Trust were mistaken that Walker should be named as grantor on the Conservation Deed, and the court ordered reformation of the Conservation Deed to recite the name of the grantor as the LLC. In addition, the court rejected Ranch O's assertion that reformation would be contrary to the policies and purposes of Colorado's race-notice recording statute and concluded that reformation would not prejudice Ranch O because it had notice of the encumbrance and bought the subject property subject to the conservation easement.

¶ 11 Ranch O now appeals.

II. Standard of Review

¶ 12 We review de novo an order granting a motion for summary judgment. Colo. Cmty. Bank v. Hoffman,2013 COA 146, ¶ 36, 338 P.3d 390, 396. Summary judgment is proper only when the pleadings and supporting documents show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. C.R.C.P. 56(c); Colo. Cmty. Bank,338 P.3d at 396. In determining whether summary judgment is proper, a court grants the nonmoving party any favorable inferences reasonably drawn from the facts and resolves all doubts in favor of the nonmoving party. Colo. Cmty. Bank,338 P.3d at 396. In responding to a properly supported summary judgment motion, however, the nonmoving party may not rest on mere allegations or demands in its pleadings but must provide specific facts demonstrating the existence of a genuine issue for trial. Id.; accordC.R.C.P. 56(e).

III. Mutual Mistake

¶ 13 Ranch O first contends that the district court erred in granting summary judgment for the Land Trust because the undisputed facts precluded the district court from reforming the Conservation Deed based on a mutual mistake of fact. We are not persuaded.

¶ 14 At the outset, we note that in Oken v. Hammer,791 P.2d 9, 11 (Colo.App.1990), the division stated:

¶ 15 The general rule is that if a conveyance or encumbrance document fails to reflect that the conveyor is functioning in a fiduciary or representative capacity, and that person does not have a personal or independent interest in the subject property, the document is considered as having been executed in the fiduciary or representative capacity.

¶ 16 Although this rule appears to be applicable here, neither party raised the issue in the district court or on appeal, and the district court did not address it. Accordingly, we will not rule on that basis.

¶ 17 We conclude, however, as did the district court, that the parties to the Conservation Deed made a mutual mistake of fact and that reformation was therefore the appropriate remedy.

¶ 18 Our supreme court has stated:

Reformation of a written instrument is appropriate only when the instrument does not represent the true agreement of the parties and the purpose of reformation is to give effect to the parties' actual intentions. The evidence must clearly and unequivocally show that reformation is appropriate under the circumstances. A mistake caused by a scrivener's error so that a written agreement does not correctly state the parties' actual intentions and expectations may be remedied by reformation. However, a mutual mistake requires that both parties must “labor under the same erroneous conception in respect to the terms and conditions of the instrument.”

Md. Cas. Co. v. Buckeye Gas Prods. Co., 797 P.2d 11, 13 (Colo. 1990)(quoting Smith v. Anderson, 121 Colo. 175, 181, 214 P.2d 366, 370 (1950); citations omitted).

¶ 19 Here, the evidence clearly and unequivocally showed that reformation was appropriate because both parties to the Conservation Deed mistakenly believed that it correctly identified the grantor and that the grantor had the authority to convey the conservation easement. Moreover, it was undisputed that both parties intended that the Conservation Deed be signed by the owner, so that the Deed would effectively convey the easement.

¶ 20 In these circumstances, we agree with the district court that the Conservation Deed did not represent the true agreement of the parties and that the parties' mutual mistake justified reforming the Conservation Deed to reflect that the actual owner of the property, namely, the LLC, was the grantor of the conservation easement. SeeRobert W. Thomas & Anne McDonald Thomas Revocable Trust v. Inland Pac. Colo., LLC,No. 11–cv–03333–WYD–KLM, 2012 WL 4443309, at *14 (D.Colo. Sept. 25, 2012)(reforming a deed of trust that mistakenly identified the subject property's prior owner, rather than its current owner, as the grantor, where the parties clearly intended that the deed of trust be signed by the owner of the property so that the deed of trust would secure the defendant's obligations under a note); Yates v. Hill,761 A.2d 677, 680 (R.I. 2000)(holding that the trial court properly reformed a real estate contract signed by a trust's sole trustee in her individual capacity, where the property was actually owned by the trust and both parties to the contract mistakenly entered into the agreement based on their belief that the trustee individually owned the property).

¶ 21 We are not persuaded otherwise by Ranch O's arguments to the contrary.

¶ 22 First, Ranch O argues that because the Land Trust was ignorant of the LLC's existence when it entered into the Conservation Deed, there could have been no mutual mistake. The doctrine of mutual mistake “applies only where both parties are mistaken as to the same basic assumption. Their mistakes need not be, and often they will not be, identical.” Restatement (Second) of Contracts § 152cmt. h (1981). Accordingly, as occurred here, parties can be mutually mistaken regarding a contracting party's identity even when their mistakes on that issue are not identical....