Zab, Inc. v. Berenergy Corp.

• Decision Date: 05 June 2006
• Docket Number: No. 04SC547.,04SC547.
• Citation: 136 P.3d 252
• Parties: ZAB, INC.; Zalman Resources, Inc.; Daven Corporation; and Sport Resources, Inc., Petitioners v. BERENERGY CORPORATION, Respondent.
• Court: Colorado Supreme Court

Page 252

136 P.3d 252

ZAB, INC.; Zalman Resources, Inc.; Daven Corporation; and Sport Resources, Inc., Petitioners v. BERENERGY CORPORATION, Respondent.

No. 04SC547.

Supreme Court of Colorado, En Banc.

June 5, 2006.

Lindquist & Vennum P.L.L.P., Charles F. Brega, Scott T. Rodgers, Denver, Colorado, Attorneys for Petitioner Zab, Inc.; Zalman Resources, Inc.; and Sport Resources, Inc.

Silver & DeBoskey, P.C., Joe L. Silver, Brian T. Moore, Denver, Colorado, Attorneys for Petitioner Daven Corporation.

Horowitz/Forbes, LLP, Jay S. Horowitz, Peter C. Forbes, Denver, Colorado, Attorneys for Respondent.

Justice MARTINEZ delivered the Opinion of the Court.

We granted certiorari to review the court of appeals' opinion in Berenergy Corp. v. Zab, Inc., 94 P.3d 1232 (Colo.App.2004), and determine whether relief is appropriate under the Colorado Uniform Declaratory Judgment Law (CUDJL) to declare the existence of an oral contract and any rights or duties contained therein.

In light of the statutory language as a whole, we hold that a trial court may exercise its discretion to declare the existence of an oral contract and, if one exists, the terms of that contract, where such relief would "terminate the controversy or remove an uncertainty." § 13-1-109, C.R.S. (2005). In this case, declaratory relief would terminate the controversy and remove uncertainty by defining any contractual relationship between Berenergy and the Beren Sons' Corporations. Accordingly, we affirm the court of appeals and remand this case to the trial court for its consideration of Berenergy's motion for declaratory judgment.

I. Facts and Procedural History

Sheldon Beren formed Berenergy Corporation ("Berenergy") in 1981 to invest in drilling and acquisition ventures of oil and gas wells. Before his death in 1996, Sheldon Beren was the president and sole shareholder of Berenergy.

In 1985, David I. Beren, Zev A. Beren, Daniel J. Beren, and Jonathan Z. Beren (collectively the "Beren Sons") each individually incorporated an independent, wholly owned S-corporation for the purpose of participating in oil and gas drilling acquisition ventures with Berenergy.¹ These four corporations (collectively the "Beren Sons' Corporations") are the Petitioners in the instant action.

Berenergy financed the Beren Sons' Corporations' acquisition of a ten-percent interest in all of the property acquired thereafter. Monthly revenue from the joint holdings was either applied to the loan balances owed by the Beren Sons' Corporations to Berenergy or distributed to them in equal ten-percent portions. Berenergy kept the remaining sixty-percent.

Between 1986 and 1991, Berenergy charged the Beren Sons' Corporations variable rates to cover the overhead costs on the jointly owned wells. In 1991, Berenergy altered the overhead charge to $150.00 per well per month, proportionately reduced, on all properties involving the Beren Sons' Corporations. Berenergy has charged $150.00 per well per month since that time. That charge was applied retroactively to the acquisition date on all then-current projects.

Sheldon Beren died in 1996. At that time, his estate obtained his stock in Berenergy and operational control over the corporation. A dispute arose between Berenergy and the Beren Sons' Corporations as to whether Berenergy had a contractual obligation to continue charging the $150.00 per well per month overhead rate. The parties have not produced a written contract evidencing Berenergy's obligation to continue charging the $150.00 rate.

Pursuant to a 1998 order by the probate court, Sheldon Beren's estate attempted to sell all of its Berenergy interests. Berenergy alleges the estate failed to sell its interest in the corporation because of the uncertainty surrounding the $150.00 per well per month overhead rate.

To clarify its obligations, Berenergy sought a court declaration of (1) the legal relationship between Berenergy and the Beren Sons' Corporations and (2) whether Berenergy had a contractual obligation to continue charging Petitioners the $150.00 fixed rate. Berenergy also sought to recover the amount undercharged since Sheldon Beren's death.

The trial court dismissed Berenergy's claim for failure to state a claim on which relief may be granted. As relevant to this appeal, the trial court alternately held Berenergy's claim must be dismissed because the CUDJL prohibits a trial court from declaring the existence of an oral contract or the terms of one.

The court of appeals reversed. As relevant here, the appellate court first reasoned that the CUDJL permitted a declaration of rights under a purported oral contract. Berenergy Corp., 94 P.3d at 1235-36. Additionally, the court of appeals concluded the trial court incorrectly dismissed Berenergy's complaint for failure to state a claim on which relief could be granted. Id. at 1236.

The Beren Sons' Corporations seek review of the appellate court's ruling that the CUDJL permits a declaratory judgment establishing the existence and terms of an oral contract.²

II. Analysis

In this case, we are asked to decide whether a trial court may exercise its discretion to declare the existence of an oral contract and, if one exists, any duties or obligations contained therein under the CUDJL. In making this determination, we necessarily consider the statutory language of the CUDJL, codified in sections 13-51-101 to 115, C.R.S. (2005) and C.R.C.P. 57.

A. Statutory Interpretation of the CUDJL

Whether a trial court may exercise its discretion in granting declaratory relief under the CUDJL is a matter of statutory interpretation, which we review de novo. See Gorman v. Tucker ex rel. Edwards, 961 P.2d 1126, 1128 (Colo.1998); see also Tidwell ex rel. Tidwell v. City & County of Denver, 83 P.3d 75, 81 (Colo.2003).

In making this determination, we turn to traditional principles of statutory interpretation. When interpreting the meaning of a statute, our goal is to effectuate the intent of the General Assembly. Reg'l Transp. Dist. v. Lopez, 916 P.2d 1187, 1190 (Colo.1996). To achieve that end, we must consider the statutory scheme as a whole to give a consistent, harmonious, and sensible effect to each individual section. Charnes v. Boom, 766 P.2d 665, 667 (Colo.1988). The legislative declaration or purpose aids in our review. § 24203(g), C.R.S. (2005). The legislative declaration of the CUDJL specifically provides that the act be liberally construed and administered. § 13-51-102; Colo. State Bd. of Optometric Exam'rs v. Dixon, 165 Colo. 488, 493, 440 P.2d 287, 289 (1968). The plain language of the CUDJL also instructs us to interpret the act in accordance with its "general purpose to make uniform the law of those states which enact it and to harmonize, as far as possible, with federal laws" related to declaratory judgments. § 13-51-104, C.R.S. (2005).

The CUDJL also recognizes that the courts have the broad "power to declare rights, status, and other legal relations." § 13-51-105, C.R.S. (2005). By failing to define the types of rights or legal relations over which a court may issue relief, the CUDJL recognizes that the trial courts may adjudicate a wide array of subject matters.

The limitations of this broad power are recognized in section 13-51-110, C.R.S. (2005). That section states: "The court may refuse to render or enter a declaratory judgment or decree where such judgment or decree, if rendered or entered, would not terminate the uncertainty or controversy giving rise to the proceeding." Id. (emphasis added). Together, those sections indicate that a trial court may exercise its discretion to "declare rights, status, and other legal relations," section 13-51-105, so long as the declaratory judgment would "terminate the uncertainty or controversy," section 13-51-110. See generally People ex rel. Inter-Church Temperance Movement of Colo. v. Baker, 133 Colo. 398, 404, 297 P.2d 273, 277 (1956). In light of CUDJL's mandate that the act be liberally construed and administered, the combination of these sections suggests that a trial court may declare the existence and terms of an oral contract where such a judgment would terminate an uncertainty or controversy.

The Beren Sons' Corporations, however, claim declaratory judgments are limited to written contracts. To support their argument, they rely on section 13-51-106, C.R.S. (2005). Petitioners argue the section's express reference to "written contracts" and "other writings constituting a contract" requires us to construe all other references to "contracts" in that section as written contracts:

Any person interested under a deed, will, written contract, or other writings constituting a contract or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract, or franchise may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status, or other legal relations thereunder.

§ 13-51-106 (emphasis added). They claim the express inclusion of "written contracts" implies the exclusion of oral contracts.

Petitioners correctly note the first portion of the statute is limited to written contracts: "Any person interested under a... written contract, or other writings constituting a contract...." § 13-51-106. However, the word "or" separates the next clause: "or whose rights, status, or other legal relations are affected by a ... contract...." Id. (emphasis added). Generally, we presume the disjunctive use of the word "or" marks distinctive categories unless the legislative intent is clearly to the contrary. Carlson v. Ferris, 58 P.3d 1055, 1057 (Colo.App.2002); see Armintrout v. People, 864 P.2d 576, 581 (Colo.1993). In the absence of expressed intent to the contrary, the arguable intent of the legislature in this instance was to separate the first clause from the second clause. The second clause refers only to "contracts" and not to ...