Desert Mountain Gold LLC v. Amnor Energy Corp.
409 P.3d 74
Utah Ct. App.2017Background
- In July 2011 Amnor acquired mining claims from Desert Mountain under a fully integrated written agreement. The contract required $20,000 annual royalty payments on or before January 30 each year through January 30, 2016, and included a confidentiality clause and a prescribed dispute-resolution process.
- In March–April 2013 Amnor alleged Desert Mountain breached the confidentiality clause by disclosing the contract to a contractor; Desert Mountain disputed the allegation in writing and asserted the disclosure was permitted under the agreement.
- Amnor thereafter withheld certain contract-required "data" from Desert Mountain and did not initiate the contract’s informal-meeting/dispute-resolution process (it only stated it was "willing to meet"). Desert Mountain did not cure the alleged breach.
- Amnor missed the January 30, 2014 royalty payment; Desert Mountain served a default notice, Amnor failed to cure within the 15-day cure window, Desert Mountain refused late payment, issued a termination notice, and demanded Amnor quitclaim its interest.
- Desert Mountain sued for breach of contract; Amnor counterclaimed and argued it was excused from performance by Desert Mountain’s earlier breach and that the contract only automatically terminated if Amnor missed all scheduled payments.
- The district court granted Desert Mountain’s motion for summary judgment, holding (1) Amnor could not invoke the first-breach rule because it failed to follow the contract’s dispute-resolution procedures, and (2) Amnor’s untimely 2014 payment (and failure to timely cure) triggered automatic termination and the quitclaim obligation. Amnor appealed.
Issues
| Issue | Plaintiff's Argument (Desert Mountain) | Defendant's Argument (Amnor) | Held |
|---|---|---|---|
| Whether Amnor was excused from timely payment under the first-breach rule given Desert Mountain’s alleged prior breach of the confidentiality clause | Amnor must follow the contract’s dispute-resolution provisions before invoking first-breach; because Amnor did not, it remained obligated to pay | Desert Mountain’s earlier breach excused Amnor’s subsequent performance; first-breach rule permits withholding payment | Court: Amnor could not invoke first-breach rule because it failed to comply with the contractual dispute-resolution procedures; summary judgment affirmed |
| Whether a single missed annual royalty payment (and failure to timely cure) automatically terminates the agreement or termination requires failure to pay all scheduled Advance Royalty Payments | The contract’s sections read together allow termination upon failure to timely make required payments; a missed payment + uncured default triggers automatic termination | The automatic-termination clause requires failure to pay all of the Advance Royalty Payments before termination occurs | Court: Read sections 3.2 and 8.1(b) together to give effect to all provisions; a missed payment and failure to timely cure caused automatic termination and triggered quitclaim duties |
Key Cases Cited
- Cross v. Olsen, 303 P.3d 1030 (Utah Ct. App. 2013) (describes the first-breach rule: party first guilty of material breach cannot complain of the other’s subsequent nonperformance)
- Robinson v. Tripco Inv., Inc., 21 P.3d 219 (Utah Ct. App. 2000) (contracts interpreted under freedom-of-contract principles)
- Commercial Real Estate Inv., LC v. Comcast of Utah II, Inc., 285 P.3d 1193 (Utah 2012) (courts ordinarily do not rewrite parties’ agreed contractual consequences)
- McNeil Eng’g & Land Surveying, LLC v. Bennett, 268 P.3d 854 (Utah Ct. App. 2011) (interpret contracts by giving effect to all provisions and construing them together)
- Ward v. IHC Health Services, Inc., 173 P.3d 186 (Utah Ct. App. 2007) (standard of review for contract interpretation and summary judgment)