2020 COA 139
Colo. Ct. App.2020Background
- In 2005 Troy and Shana Hess purchased 160 acres from Judith Hobart; both the purchase contract and warranty deed expressly reserved to Hobart “a life estate in all mineral rights” (including oil, gas, hydrocarbons).
- After the conveyance Hobart executed multiple oil-and-gas leases (Hess ratified one lease in 2010; Hobart later executed additional leases that Hess did not ratify and allegedly did not know about).
- In 2018 the Hesses sued Hobart seeking declaratory relief and asserting claims including breach of fiduciary duty (invoking the UPIA), conversion, civil theft, fraud, negligence, breach of contract, waste, and an accounting, alleging they as remaindermen were entitled to income from post-reservation leases.
- The district court granted Hobart’s C.R.C.P. 12(b)(5) motion to dismiss, finding the reservation unambiguous and giving Hobart the rights to develop minerals and keep income during her life.
- The Court of Appeals affirmed: it held the phrase “a life estate in all mineral rights” unambiguously vested Hobart with the full suite of mineral rights for her lifetime (including entering leases and retaining income); it rejected application of the open mines doctrine and the UPIA to reallocate post-reservation lease income.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the phrase “a life estate in all mineral rights” is ambiguous and what rights it conveys | Hess: ambiguous; lack of explicit income-division means remaindermen should share in post-reservation lease income | Hobart: unambiguous; "all mineral rights" grants life tenant full mineral rights, including leasing and keeping income | Unambiguous; grants Hobart full mineral rights during life, including right to lease and retain income |
| Whether the common-law open mines doctrine entitles remaindermen to post-reservation lease income | Hess: by analogy the open mines doctrine should prevent Hobart from keeping income from leases created after reservation | Hobart: open mines doctrine applies only where leases preexist the life estate; not applicable here | Open mines doctrine inapplicable because leases were not in existence when life estate was created |
| Whether the Uniform Principal and Income Act (UPIA) or trust/estate allocation rules apply to divide mineral income | Hess: UPIA and life-tenant/remainderman allocation principles should “fill the gap” and allocate income | Hobart: UPIA governs trusts/estates (title 15), not conveyances of real property; contract controls | UPIA does not apply; the deed/contract controls and is enforced as written |
| Whether tort claims (conversion, civil theft, waste, fiduciary breach) survive given the reservation | Hess: Hobart acted without consent and wasted the corpus; tort remedies available | Hobart: she had lawful rights to lease and collect income; no wrongful act | Dismissed: no plausible tort claims where life tenant has unambiguous rights to develop and receive income during life |
Key Cases Cited
- Klun v. Klun, 442 P.3d 88 (Colo. 2019) (principles for interpreting contracts; unambiguous terms enforce parties’ intent)
- Owens v. Tergeson, 363 P.3d 826 (Colo. App. 2015) (deed interpretation reviewed de novo; unambiguous deeds enforced)
- Keller Cattle Co. v. Allison, 55 P.3d 257 (Colo. App. 2002) (mineral rights include rights to explore, drill, and enter leases)
- Hudgeons v. Tenneco Oil Co., 796 P.2d 21 (Colo. App. 1990) (the word “all” is unambiguous)
- City of Grand Junction v. Ute Water Conservancy Dist., 900 P.2d 81 (Colo. 1995) (defining plain-meaning approach to contract language)
- Welborn v. Tidewater Associated Oil Co., 217 F.2d 509 (10th Cir. 1954) (open mines doctrine—life tenant entitled to royalties when lease exists at creation)
- Fed. Deposit Ins. Corp. v. Mars, 821 P.2d 826 (Colo. App. 1991) (waste doctrine limits life tenant from injuring remaindermen’s interest)
- O’Brien v. Vill. Land Co., 794 P.2d 246 (Colo. 1990) (conveyance passes title to land and minerals except explicitly reserved)