November 24, 2014

Various JDF Forms Amended in October and November

The Colorado State Judicial Branch continued amending JDF forms in October and November 2014, with updated forms released in the criminal, domestic relations, FED, probate, and miscellaneous categories. Forms are available for download here in PDF format, and are available in Word or PDF from the State Judicial forms page.

CRIMINAL

  • JDF 219 – “Juvenile Delinquency – Application for a Public Defender” (issued 11/14)

DOMESTIC RELATIONS

  • JDF 211 – “Request to Reduce Payment for ODR Services and Supporting Affidavit” (revised 10/14)

FORCIBLE ENTRY & DETAINER (FED)

  • JDF 100 – “Instructions for Forcible Entry and Detainer (FED)/Eviction” (revised 11/14)
  • JDF 140 – “Instructions for Forcible Entry and Detainer (FED)/Eviction for Owner Occupied Mobile Home” (revised 11/14)

MISCELLANEOUS

  • JDF 450 - “Order re: Appointment of Counsel at State Expense Other Than the Public Defender in a Criminal or Juvenile Delinquency Proceeding” (revised 11/14)

PROBATE

  • JDF 906 – “Instructions for Probate With a Will” (revised 10/14)
  • JDF 907 – “Instructions for Probate Without a Will” (revised 10/14)

For all of State Judicial’s JDF forms, click here.

Tenth Circuit: When Both Parties to Contract Agree to Its Terms, Third Party Has No Standing to Object

The Tenth Circuit Court of Appeals issued its opinion in Security Service Federal Credit Union v. First American Mortgage Funding, LLC on Tuesday, November 4, 2014.

Security Service Federal Credit Union’s predecessor in interest, New Horizons Community Credit Union, entered into a funding service agreement with First American Mortgage Funding, LLC (FAM) and First American Mortgage, Inc. (together, FAM defendants), under which FAM originated 26 mortgage loans to individual borrowers for the purchase and construction of residential properties in Colorado and California. The closing agents performed closing procedures. Security Service (SSFCU) contended that the FAM defendants and closing agents wrongfully induced New Horizons to fund the loans to straw borrowers, and that the loan transactions were a vehicle to misappropriate $14 million in funds. SSFCU brought claims in district court, but FAM objected, contending that SSFCU was not a proper party in interest to pursue the claims. The district court found for FAM and dismissed SSFCU’s claims with prejudice.

The Tenth Circuit found this case easy to resolve, following 6th Circuit precedent in JP Morgan Chase Bank, N.A. v. First Am. Title Ins. Co., 750 F.3d 573 (6th Cir. 2014). When both parties to a contract agree to its terms, a third party cannot object. Here, both New Horizons and SSFCU entered into a Purchase and Assumption Agreement, where SSFCU had all rights to pursue claims on behalf of New Horizons. FAM, as a third party, had no right to object to SSFCU’s standing. The district court’s dismissal was reversed.

Colorado Court of Appeals: Failure to Exhaust Administrative Remedies Deprived Trial Court of Jurisdiction

The Colorado Court of Appeals issued its opinion in Liberty Bankers Life Insurance Co. v. First Citizens Bank & Trust Co. on Thursday, November 6, 2014.

Subject Matter Jurisdiction—Financial Institutions Reform, Recovery and Enforcement Act—Receiver—Proof of Claim—Doctrine of Administrative Exhaustion—Attorney Fees.

The underlying claims in this case relate to appellant’s (Liberty) participation in two loans with Colorado Capital Bank (CCB) for the purpose of funding the development of a townhome project. CCB was closed by the Colorado Division of Banking on July 8, 2011, and the Federal Deposit Insurance Corporation (FDIC) was named its receiver (FDIC-R). On the same day, First Citizens Bank & Trust Co. (FCBT) purchased the assets and assumed the liabilities of CCB in a purchase and assumption agreement. The FDIC later denied Liberty’s proof of claim, and Liberty thereafter filed suit against FCBT and the FDIC-R in federal court. In the state court proceedings, Liberty filed twelve counterclaims against FCBT, which were dismissed by the court.

On appeal, Liberty argued that the district court incorrectly dismissed its counts 1 through 3 for lack of subject matter jurisdiction. However, Liberty did not properly plead the claims found in its counterclaims in its original proof of claim. Therefore, the district court correctly dismissed those claims for lack of subject matter jurisdiction.

Liberty further argued that the doctrine of administrative exhaustion did not apply in this case. Liberty’s futility argument was based on (1) the transfer of assets and liabilities to FCBT and (2) the FDIC-R’s motion to dismiss in the federal litigation. The jurisdictional bar extends to successors in interest of the failed bank. Further, by failing to properly plead its claims in the proof of claim, Liberty had already failed to exhaust the process provided to it. FDIC-R’s actions in filing a motion to dismiss, therefore, had no bearing on futility. Accordingly, Liberty’s pursuit of relief is not futile “beyond a reasonable doubt,” and does not excuse its failure to exhaust its claims. The district court correctly dismissed those claims for lack of subject matter jurisdiction.

FCBT claimed that it was entitled to reasonable attorney fees incurred on appeal under CRS § 13-17-201. Although Liberty’s counterclaims facially alleged a tort claim of gross negligence and willful misconduct, the overall action was more accurately characterized as a contract action, because all of the counterclaims were based on acts or omissions relating to the alleged breach of the two participation agreements. The essence of Liberty’s action did not sound in tort, so FCBT was not entitled to attorney fees incurred on appeal under CRS § 13-17-201.

Summary and full case available here, courtesy of  The Colorado Lawyer.

Tenth Circuit: The Government Has the Right to Regulate Its Own Property

The Tenth Circuit Court of Appeals issued its opinion in United States v. Jones on Friday, October 3, 2014.

Stanley Jones is a cattle rancher in Wyoming. His brother owns base properties close to two BLM public lands — the Sandstone and Cannady allotments. Mr. Jones frequently allows his cattle to graze on the BLM lands, despite lacking a permit to do so lawfully. After numerous administrative trespass notices and fines, the BLM brought criminal charges against Jones through the U.S. Attorney’s Office in Wyoming for one count of unlawful use of public lands and two counts of allowing his livestock to graze on public lands without authorization. Mr. Jones pled not guilty to all charges and requested a jury trial. At trial, Mr. Jones was convicted on all counts and sentenced to two years probation on each count, to be served concurrently, a $3,000 fine, a $75 special assessment fee, all contingent on his compliance with certain terms and conditions. Pro se, Mr. Jones appealed his convictions.

Mr. Jones implored the Tenth Circuit to consider the true and honest facts, which the Tenth Circuit considered a sufficiency of the evidence challenge. The Tenth Circuit considered the evidence against Mr. Jones, including that he has never been a permittee for grazing on public lands, he was told numerous times that he was not allowed to graze his cattle on the lands, he was told to remove his property from public lands, and he was fined for failure to remove his property and cattle from the public lands. The Tenth Circuit found overwhelming evidence to support Mr. Jones’ convictions.

The Tenth Circuit next addressed Mr. Jones’ contention that the trial court should have allowed his proposed testimony that the government should comply with Wyoming’s fence-out laws. However, this testimony was not related to the issues at hand, and it would have confused the jury. The government has the right to regulate its own property. The trial court’s exclusion of the fence-out evidence was proper.

The Tenth Circuit affirmed Mr. Jones’ convictions.

 

Colorado Court of Appeals: Department of Revenue’s Challenge to Conservation Easement Tax Credits Barred by Statute of Limitations

The Colorado Court of Appeals issued its opinion in Markus v. Brohl, Exec. Dir. of Colorado Department of Revenue on Thursday, October 23, 2014.

Conservation Easement Tax Credits—Review Period by Department of Revenue—Summary Judgment.

In 2004, three pairs of landowners created conservation easements (CEs) on their lands, had them appraised, and sold them to the Otero County Land Trust for a portion of their appraised value. They applied part of the CE tax credits to their 2004 income tax liability. The landowners (CE donors) carried forward the remainder of the CE credits, some for personal use and some for the use of third parties.

On September 28, 2009, the Colorado Department of Revenue (Department) disallowed the entire CE tax credit of one pair of landowners because of a purported deficiency in the appraisal. For the same reason, in April 2010, the Department disallowed the claims of CE tax credits of the each of the second pair of landowners. The disallowances, under a four-year limitations period, affected only the donors’ use of claimed CE credits in the 2005–08 tax years.

On cross-motions for summary judgment, the CE donors argued that the four-year limitations period had expired before the Department acted to disallow their tax credits. The Department argued that the limitations period commenced each time a CE donor or transferee applied a CE tax credit to his or her tax liability and that it could evaluate the original claims for purposes of disallowing the use of credits for the 2005–08 tax years. The district court entered summary judgment in favor of the CE donors.

On appeal, the Department argued that the district court erred in its limitations determination, and that there was a genuine issue of material fact precluding summary judgment as to whether the CE donors had filed false or fraudulent tax returns. The Court of Appeals found that the applicable general statute of limitations was four years, and the time period commenced at the filing of a tax return. Under this system, the Court was inclined to side with the Department.

However, CRS § 39-22-522 specifically addresses the tax consequences of a CE. Under that statute, claimed CE tax credits may be transferred to third parties, who are then bound by “the same statute of limitations” as the CE donor. The Court supported an interpretation where a purchaser–transferee would have a low risk of disallowance of the CE credits by the Department. Here, because the Department did not challenge the validity and value of the CE tax credits prior to April 15, 2009, it was barred from disallowing them.

The Department also argued that there was a genuine issue of material fact as to whether the CE donors filed false or fraudulent tax returns that precluded summary judgment. After reviewing the record, the Court found no genuine dispute of any material fact. The judgment was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Statutory Employer Has Standing to Contest Lapse in Insurance Coverage

The Colorado Court of Appeals issued its opinion in Hoff v. Industrial Claim Appeals Office on Thursday, October 9, 2014.

Workers’ Compensation—Standing—Notice of Cancellation Provision—Estoppel.

Hoff owns a house that she uses as a rental property. After the house sustained hail damage to the roof, Hoff and her husband engaged Alliance Construction (Alliance) to negotiate with their insurance company to resolve their damage claim. A successful resolution was reached, and Hoff contracted with Alliance to repair the roof. Without Hoff’s knowledge, Alliance verbally subcontracted the roofing job to MDR Roofing, Inc. (MDR). Claimant was employed by MDR as a roofer.

While working on the roof in March 2011, claimant fell twenty-five feet to the ground and sustained serious injuries. Claimant sought medical and temporary total disability (TTD) benefits for his work-related injuries. Pinnacol, MDR’s insurer, denied the claim because MDR’s policy had lapsed for failure to pay premiums. Neither Alliance nor Hoff carried workers’ compensation insurance.

In October 2010, before starting the roofing job, Alliance obtained a certificate of insurance (certificate) from Pinnacol’s agent, Bradley Insurance Agency (Bradley), that verified that MDR had workers’ compensation insurance through Pinnacol.

On February 10, 2011, Pinnacol sent a certified letter to MDR advising the policy would be cancelled if payment of a past due premium was not received. The policy was canceled effective March 3, 2011 and letters to that effect were sent to MDR and Bradley.

Claimant was injured on March 10, 2011. On March 11, MDR’s owner went to Bradley’s office seeking to reinstate the policy. He was informed it could be reinstated if he paid the past due premium, paid a reinstatement fee, and signed a no-loss letter. The owner knew claimant had been injured, but he submitted the no-loss letter and did not inform Bradley of the accident.

Pinnacol reinstated the policy on March 11. MDR’s owner returned to Bradley’s office to report claimant’s injuries. Pinnacol contested the claim and cancelled the policy.

The administrative law judge (ALJ) determined that the owner’s failure to disclose claimant’s injuries when he signed the no-loss letter was a material misrepresentation, thus voiding the policy. The ALJ held MDR, Alliance, and Hoff jointly liable for claimant’s medical and TTD benefits. The Industrial Claim Appeals Office (Panel) agreed and affirmed.

Hoff appealed, arguing that Pinnacol was stopped from denying benefits to claimant. Pinnacol argued Hoff had no standing to challenge the cancellation of MDR’s policy.

The Court of Appeals held that Hoff had standing and agreed in part with her argument. Standing is established by Hoff demonstrating (1) she has sustained an injury in fact, and (2) the injury is to a legally protected interest. The first prong was clearly met. The liability imposed on Hoff by the ALJ and the Panel exceeded $300,000. The second prong was met because Hoff argued she was a beneficiary of specific promises that there was a workers’ compensation policy issued to MDR that was in force on the dates stated in the certificate. Her claim is independent of the Pinnacol policy and the Workers’ Compensation Act; it is one for promissory estoppel.

The Court found there were factual findings that need to be addressed by the ALJ regarding the estoppel argument. The case was remanded for a hearing, specifically to determine whether (1) Alliance or Hoff relied on the promises contained in the certificate, and (2) whether circumstances exist such that injustice can be avoided only by enforcement of the promises contained in the certificate.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Although Unusual, Forced Sale Appropriate Remedy to Continuing Trespass

The Colorado Court of Appeals issued its opinion in Graham v. Jules Investment, Inc. on Thursday, October 9, 2014.

Forced Sale in Encroachment Case.

Serenity Springs Wildlife Center is a ten-acre wildlife refuge in El Paso County that houses approximately 140 tigers, lions, and other exotic, threatened, or endangered animals. The refuge was once part of a 320-acre parcel of land. In 1997, a perimeter fence was erected enclosing the refuge and a deed was recorded severing it from the original parcel. In 1998, another deed severed a 36.5-acre parcel directly south from the refuge. A home was built on the severed parcel approximately 1,000 feet from the refuge.

Beginning in 2000, the property went through cycles of foreclosure and reacquisition. It was eventually sold to plaintiffs in 2010. In 2012, plaintiffs hired a surveyor, who told them that 1.7 acres (surrounded by a fence) was on plaintiffs’ parcel. The fence enclosed pens and lion and tiger dens. The footings were 16″-wide concrete slabs buried 2′ to 4′ in the ground and about nineteen lions and tigers lived on the 1.7 acres.

Plaintiffs sued defendants for trespass. The trial court held that the structures alone were not a trespass, but that the use and presence of the structures “deprive[d] . . . plaintiffs of the use of” 1.7 acres of their 36.5-acre parcel and “facilitated a regular, if not continuing trespass” of the refuge’s staff. The court held a hearing on the appropriate remedy. Defendants asked the court to allow them to purchase the 1.7 acres from plaintiffs, because removing the structures and rebuilding them would create a severe hardship. Plaintiffs asked for everything to be removed and the property restored to its “natural state.” The trial court held that under the “unique and unusual facts” of this case, it would order a forced sale of the 1.7 acres to defendants. It ordered conveyance in exchange for $5,870, which was the value of the 1.7 acres according to plaintiffs. The court also ordered payment of $1,737, which was the amount of the application fee for obtaining a waiver from the 35-acre requirement from El Paso County.

On appeal, plaintiffs argued it was error not to find that the structures themselves were a trespass and encroachment. The Court of Appeals did not decide this issue because the trial court had already determined there had been a trespass and had crafted a remedy. Regarding the remedy, the Court found that, though extraordinary, it is not unheard of to order a forced sale when the hardships weigh heavily on the defendant’s side. Therefore, it was not an abuse of discretion to order a sale under these unique circumstances. The judgment was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Treasurer Did Not Undertake Diligent Inquiry as to Actual Residence for Notice

The Colorado Court of Appeals issued its opinion in Cordell v. Klingsheim on Thursday, October 9, 2014.

Tax Lien—Deed—Treasurer—Diligent Inquiry—Notice—Jurisdictional.

Plaintiffs Carl and Wanda Cordell were record owners of a tract of land in La Plata County (Tract 1). Carl Cordell was also the record owner of an adjoining tract (Tract 2). The Cordells failed to pay the taxes owed on the properties, and Brenda Heller purchased the tax liens on the properties. Heller assigned the tax liens to Klingsheim, who later requested and received deeds from the La Plata County Treasurer to the two properties after the Treasurer sent notice to the Cordells. Upon learning of the Treasurer’s deeds, the Cordells filed the present action seeking, as relevant here, a declaratory judgment that the Treasurer’s deeds are void, which the trial court granted.

On appeal, Klingsheim contended that the trial court erred in concluding that the Treasurer had failed to undertake diligent inquiry in attempting to determine Carl’s and Wanda’s residences. The Treasurer sent the notices, by certified mail, to 705 N. Vine, Farmington, New Mexico, which was the address listed for them in the county tax rolls. The return receipts from the mailings, however, indicated that the notices were not delivered to plaintiffs, nor were they delivered to 705 N. Vine. Rather, the receipts indicated that the notices were delivered to Cleo Cordell at 703 N. Vine, and the box for “agent” on the return receipts had not been checked. Despite this discrepancy, the Treasurer conducted no further inquiry to determine whether 705 N. Vine was indeed plaintiffs’ residence.

Such inaction after learning that the notices were not delivered either to plaintiffs or to a person claiming to be their agent does not constitute “diligent inquiry” in attempting to determine their residences. Because a treasurer’s “full compliance” with the requirements of CRS §39-11-128 is jurisdictional, the trial court properly set aside the deeds as void.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Dismissal Prior to Completion of Bankruptcy Case Re-Vests Claims in Debtors

The Colorado Court of Appeals issued its opinion in Mackall v. JPMorgan Chase Bank, N.A. on Thursday, September 11, 2014.

Bankruptcy—Dismissal—Standing—Issue Preclusion—Failure to State a Claim.

Plaintiffs purchased a home and subsequently refinanced it. After the court issued a written order authorizing JPMorgan Chase Bank (Chase), the assigned lender, to sell the house, plaintiffs filed a Chapter 13 petition for bankruptcy. The bankruptcy court dismissed the bankruptcy proceeding before confirmation of a plan or discharge. Plaintiffs thereafter filed a civil complaint against Chase, alleging that Chase’s note was fraudulent and that Chase was not the proper party to enforce it. The district court granted Chase’s motion to dismiss some of plaintiffs’ claims.

On appeal, Chase contended that plaintiffs lacked standing to assert any claims against it because (1) all of the claims were actionable when plaintiffs filed for bankruptcy, and (2) plaintiffs failed to disclose the claims to the bankruptcy court. When a bankruptcy case is dismissed, the debtor is granted standing to assert any claim that it possessed before it filed for bankruptcy, regardless of whether it disclosed the claim to the bankruptcy court during the bankruptcy proceedings. Here, the dismissal of the bankruptcy petition re-vested the claims in plaintiffs, and they had standing to bring those claims against Chase after the dismissal.

Plaintiffs argued that the district court erred in dismissing some of their claims based on issue preclusion. The district court held that both the CRCP 120 order authorizing sale and the bankruptcy court order allowing Chase’s proof of claim precluded some of plaintiffs’ claims. Because the bankruptcy court ruling had preclusive effect on these issues, plaintiffs were barred from re-litigating the issues that were dismissed based on issue preclusion.

Plaintiffs also argued that the district court erred by dismissing several of their claims for failure to state a claim. Because the complaint failed to allege that Chase filed the CRCP 120 actions for any purpose other than to obtain an order authorizing sale, the district court properly dismissed plaintiffs’ abuse of process claim. Plaintiffs’ complaint failed to allege that their property was on the market for sale and, therefore, the district court properly dismissed plaintiffs’ slander of title claim. Additionally, plaintiffs claims for breach of contract, implied covenant of good faith and fair dealing, and promissory estoppel were properly dismissed because the statute of frauds barred any unwritten modification of the loan agreement. Finally, because Chase had the right to seek enforcement of the promissory note against plaintiffs, plaintiffs’ claim for intentional infliction of emotional distress failed. The judgment was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Entire Lease Void Where District Exceeded Leasing Authority

The Colorado Court of Appeals issued its opinion in Rocky Mountain Natural Gas, LLC v. The Colorado Mountain Junior College District on Thursday, September 11, 2014.

Lease—Municipality—Void—Reformation—Equitable Estoppel—Compensation.

Rocky Mountain Natural Gas, LLC (RMNG) and Colorado Mountain Junior College District(CMC) entered into a lease allowing RMNG to construct and operate a natural gas compressor station on CMC property. Despite the statutory three-year term limit on CMC’s authority to lease district property, the lease included an initial term of twenty years, with an option for RMNG to extend the lease for an additional twenty-year term. RMNG spent approximately $2.5 million in reliance on the lease, and CMC thereafter took action to set aside the lease as unenforceable, because the term of the lease exceeded CMC’s statutory authority. The court granted summary judgment in favor of CMC.

On appeal, RMNG contended that the district court erred by determining that the lease was entirely void and unenforceable. Because the evidence did not clearly show that CMC desired to lease the property for less than the twenty-year term stated in the agreement with RMNG, it was within the discretion of the district court to reject reformation of the contract as an appropriate equitable remedy. Further, because the entire contract was void, the court could not use the “savings clause” to reform the contract to the maximum three years. Accordingly, the district court did not err in determining that the term of years could not be reformed and that the entire lease was void and unenforceable.

RMNG also contended that the district court erred by refusing to apply equitable estoppel against CMC to prevent manifest injustice. Where a contract is void because it is not within a municipality’s power to make, the municipality cannot be estopped to deny the validity of the contract. Here, because CMC had no power to lease district property for any term exceeding three years, principles of estoppel do not apply against CMC. Accordingly, the district court did not err when it allowed CMC to deny the validity of the lease.

RMNG further argued that the district court erred because it refused to hold a hearing or make factual findings that would permit it to craft a remedy that fully compensated RMNG for CMC’s breach. CMC refunded the lease payments it received from RMNG. Accordingly, RMNG was fully compensated for the benefit it conferred on CMC and the district did not err when it denied further relief and granted summary judgment in favor of CMC. The judgment was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Notice of Mechanics’ Lien Sufficient when Amended Lien Filed Same Day as Original Lien

The Colorado Court of Appeals issued its opinion in Sure-Shock Electric, Inc. v. Diamond Lofts Venture, LLC on Thursday, August 28, 2014.

Property—Mechanics’ Lien—Contract—Foreclosure—Notice—Equitable Apportionment—Prevailing Party—Costs.

Diamond Lofts Venture, LLC (DLV) was the developer and owner of a building project at 2210 Blake Street in Denver (Blake Street property). Sure-Shock Electric, Inc. (Sure-Shock), as the primary electrical contractor on the project, installed the electrical work throughout the building. Thereafter, Sure-Shock filed a mechanics’ lien for the unpaid contract price. Pursuant to their contract, DLV and Sure-Shock participated in arbitration. The arbitrator determined that Sure-Shock had proved its claims, and awarded it the principal amount claimed in the amended lien statement. The trial court affirmed the arbitrator’s award and entered a decree of foreclosure authorizing the sale of the DLV units to satisfy Sure-Shock’s lien.

On appeal, DLV contended that the trial court erred in allowing Sure-Shock to foreclose on its lien because Sure-Shock failed to comply with the statutory requirements necessary to perfect the lien. The Court of Appeals disagreed. Sure-Shock provided DLV proper notice more than ten days before filing the original lien statement. Sure-Shock was not required to provide an additional notice before it filed its amended lien statement the same day as the original lien to correct the amount claimed. Additionally, although DLV only owned seven of the twenty-nine units in the Blake Street property at that time, Sure-Shock’s lien statement sufficiently identified the property by listing the entire Blake Street property and naming only DLV as the property owner. Finally, Sure-Shock was not required to apportion the unpaid contract price according to the amount due for work on the DLV units, rather than claiming the full amount due.

In its cross-appeal, Sure-Shock contended that the trial court abused its discretion in apportioning the lien. A court may equitably apportion a blanket lien. Here, the trial court determined that an equitable apportionment should be based on the actual benefit enjoyed by each unit. Therefore, Sure-Shock was awarded 33.1% of the lien amount, which corresponded to the total square footage of the DLV units relative to the square footage of the entire Blake Street property. Because Sure-Shock’s electrical work benefited the entire Blake Street property, and Sure-Shock chose to encumber only the DLV units, Sure-Shock may not recover the entire unpaid amount of the contract. Therefore, the trial court’s apportionment was not an abuse of its discretion.

In addition, because Sure-Shock’s lien was determined to be valid, Sure-Shock succeeded on a “significant issue in the litigation.” Therefore, the trial court did not abuse its discretion in concluding that Sure-Shock was the prevailing party and awarding it costs. The judgment was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Tenth Circuit: Subsurface Mineral Rights Lessee May Cross Surface Owner’s Property to Access Leasehold

The Tenth Circuit Court of Appeals issued its opinion in Entek GRB, LLC v. Stull Ranches, LLC on Thursday, August 14, 2014.

Stull Ranches is the surface owner of a tract of property in rural Colorado. Entek GRB leases subsurface mineral rights, and, in order to access those subsurface rights, sought to access them by installing oil wells on the surface of Stull’s property. Entek’s subsurface oil leasehold rights extend onto neighboring property owned by the Bureau of Land Management, and Entek sought to traverse Stull’s property in order to reach the subsurface minerals on BLM’s property, since the only way to access the BLM property was on the existing road crossing Stull’s property. Stull objected, arguing that Entek’s drilling would disrupt Stull’s grouse hunting business. The district court granted summary judgment to Entek regarding access to its wells on Stull’s property, but denied Entek’s request to cross Stull’s property in order to access the BLM land. Entek appealed to the Tenth Circuit.

The Tenth Circuit explored the history of the government’s land grants, specifically as to separate grants of surface ownership and rights to subsurface minerals and water. Stull is the successor in interest of land acquired under the Stock-Raising Homestead Act of 1916, which expressly reserved to the government all mineral rights, along with the right to enter and use as much of the surface as is “reasonably incident” to the exploration and removal of mineral deposits, and the right to enact future laws and regulations regarding “disposal” of the mineral estate. The subsequently-enacted Mineral Leasing Act granted the Secretary of the Interior the right to amend mineral leases, which it did for the lease encompassing the subsurface mineral rights on Stull’s property and the adjacent BLM property in the Focus Ranch Unit Agreement. This agreement deems all drilling and producing operations on one part of a leasehold interest will be accepted and performed on all leasehold interests. Because Entek is allowed to drill through Stull’s surface estate to access its subsurface mineral lease, it is deemed access to all leasehold interests, including the leasehold interest on BLM’s surface property. Entek has the right to use the existing road that traverses Stull’s property in order to achieve efficient access to its subsurface leasehold.

Stull also argued that, in a case involving the prior holder of Entek’s current rights, the district court ruled that the lessee of the mineral rights was not permitted to access a different property in order to reach a well on an adjacent tract. However, that case was not appealed because the prior lessee entered into an agreement with Stull allowing it to traverse Stull’s property. The Tenth Circuit ruled that preclusion was precluded by this prior agreement.

The district court’s grant of summary judgment to Stull was vacated and the case was remanded for further proceedings consistent with the Tenth Circuit opinion.