March 23, 2019

Colorado Court of Appeals: Reformation of Conservation Deed Appropriate to Correct Mutual Mistake

The Colorado Court of Appeals issued its opinion in Ranch O, LLC v. Colorado Cattlemen’s Agricultural Land Trust on Thursday, February 26, 2015.

Conservation Easement—Summary Judgment—Reformation of Deed Based on Mutual Mistake.

Craig Walker was the sole manager and 99% membership owner of Walker I-Granby, LLC (LLC). Walker owned certain property that he conveyed to the LLC. Walker and the Colorado Cattlemen’s Agricultural Land Trust (Land Trust) then signed a deed of conservation easement (Conservation Deed) that purported to give the Land Trust a conservation easement on the subject property. The Conservation Deed named Walker as the grantor, but Walker had previously conveyed the subject property to his LLC. The LLC should have been the grantor. Neither Walker nor the Land Trust was aware of this error.

Walker, on the LLC’s behalf, then entered into discussions with Ranch O, LLC’s principal about selling the subject property to Ranch O. Walker informed Ranch O of the Land Trust’s conservation easement.

Ranch O bought the subject property from the LLC. The deed conveying the property noted that the subject property was encumbered by a conservation easement held by the Land Trust and noted the recording information for the Conservation Deed.

Ranch O requested a declaratory judgment that the Conservation Deed was invalid and had no force and effect because Walker had no ownership interest in the subject property at the time the Conservation Deed was signed and recorded. The Land Trust answered, seeking a declaratory judgment that the Conservation Deed was valid and enforceable despite the scrivener’s error and reformation of the Conservation Deed to correct any error regarding the identity of the grantor. The Land Trust claimed any error was the result of mutual mistake. The district court granted the Land Trust’s motion for summary judgment and denied Ranch O’s request.

On appeal, Ranch O argued that the undisputed facts precluded the district court from reforming the Conservation Deed based on a mutual mistake of fact. The Court of Appeals disagreed. It found that 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. The mutual mistake justified reforming the Conservation Deed.

Ranch O also argued that reformation violated the policies and purposes behind Colorado’s race-notice statute. The Court disagreed, noting that Ranch O had actual notice of the Conservation Deed before it purchased the subject property. It was also advised of the Conservation Deed in the LLC’s deed to Ranch O. Ranch O, given its actual knowledge of the Conservation Deed, cannot simply ignore it and then seek to defeat its reformation in this action. Reformation is an equitable remedy and equity demands that the Conservation Deed be reformed. The judgment was affirmed.

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