2015 COA 20
Colo. Ct. App.2015Background
- Walker (sole manager and 99% owner of an LLC) had conveyed the subject property to Walker I-Granby, LLC, but a recorded conservation deed (Conservation Deed) granted a conservation easement and mistakenly named Walker, not the LLC, as grantor.
- Walker and the Colorado Cattlemen's Agricultural Land Trust (Land Trust) executed and recorded the Conservation Deed; both parties were unaware the LLC, not Walker, was the record owner.
- Ranch O, LLC purchased the property from the LLC; the deed to Ranch O prominently disclosed the Conservation Deed (recording date and reception number) and Ranch O had actual knowledge of the recorded easement before purchase.
- Ranch O sued seeking a declaration that the Conservation Deed was invalid because the named grantor (Walker) was not the record owner when the deed was executed and only record owners can create conservation easements.
- The Land Trust counterclaimed seeking reformation of the Conservation Deed to correct the grantor to the LLC on the ground of mutual mistake; Walker and the LLC disclaimed interest and consented to reformation.
- The district court granted summary judgment for the Land Trust, ordered reformation to name the LLC as grantor, and rejected Ranch O’s argument that reformation violated Colorado’s race-notice recording statute; Ranch O appealed.
Issues
| Issue | Ranch O's Argument | Land Trust's Argument | Held |
|---|---|---|---|
| Whether the Conservation Deed may be reformed for mutual mistake because the named grantor was not the record owner | No—undisputed facts preclude reformation; deed is invalid because Walker wasn’t owner | Yes—both parties mistakenly believed Walker (as the owner/principal) should be named; intent was to have the owner convey the easement | Reformation permitted: mutual mistake shown; deed did not reflect parties’ true agreement and should be corrected to name the LLC |
| Whether section 38-80.5-104(1) (owner must create easement) bars reformation | Reformation is precluded because Land Trust should have confirmed record ownership before conveyance | The statute does not bar reformation; negligence in failing to discover ownership does not defeat reformation absent bad faith | Statute does not bar reformation; reforming effectuates the parties’ intent and the statute’s purpose |
| Whether reformation violates Colorado’s race-notice recording policy / protects bona fide purchasers | Ranch O contends reforming a "wild deed" harms recording statute purpose and bona fide purchaser status | Ranch O had actual notice and the LLC’s deed to Ranch O conspicuously referenced the recorded Conservation Deed; purchaser with actual notice cannot ignore the instrument | Reformation does not violate race-notice policy; Ranch O had actual notice and cannot claim bona fide purchaser protection |
| Whether factual dispute exists that Walker acted only personally, not for the LLC, precluding summary judgment | Ranch O later asserted Walker might have been acting individually, creating factual dispute | Land Trust showed Walker was the LLC’s principal and acted for the LLC; Ranch O failed to raise this in district court | No genuine dispute; Ranch O is precluded from raising this belated argument on appeal; summary judgment for Land Trust affirmed |
Key Cases Cited
- Md. Cas. Co. v. Buckeye Gas Prods. Co., 797 P.2d 11 (Colo. 1990) (reformation appropriate only when instrument fails to reflect parties’ true agreement; mutual mistake requires shared erroneous conception)
- Segelke v. Kilmer, 360 P.2d 423 (Colo. 1961) (reformation denied where no evidence of meeting of the minds about what parties would have done if they had known the omitted fact)
- Carpenter v. Hill, 283 P.2d 963 (Colo. 1955) (negligent failure to discover facts shared by both parties does not bar rescission or reformation absent bad faith)
- Atchison v. City of Englewood, 568 P.2d 13 (Colo. 1977) (purchaser with actual notice of an encumbrance cannot ignore it and then defeat its reformation)
- Rocky Mountain Fuel Co. v. Clayton Coal Co., 134 P.2d 1062 (Colo. 1943) (references to unrecorded instruments bind contracting parties but not uninformed third parties)