Bell v. Land Title Guarantee Co

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
May 17, 2018
2018COA70
No. 16CA2230, Bell v. Land Title Guarantee Company —
Limitation of Actions — When a Cause of Action Accrues;
Contracts — Mutual or Unilateral Mistake
In this case two legal principles intersect:
1. anyone who signs a document is presumed to know its
contents; and
2. a cause of action accrues on the date when both the
claimant’s injury and its cause are known or should have
been known by the exercise of reasonable diligence.
From this intersection, we must determine whether the
presumed-to-know-what-you-signed principle conclusively
establishes, as a matter of law, that the statute of limitations for a
claim against a third person who prepared the document begins to
run on the date the claimant signed it. We conclude that it doesn’t.
COLORADO COURT OF APPEALS 2018COA70
Court of Appeals No. 16CA2230
Weld County District Court No. 16CV30498
Honorable Todd L. Taylor, Judge
Charles C. Bell and Shirley M. Bell,
Plaintiffs-Appellants,
v.
Land Title Guarantee Company, Orr Land Company LLC, and Tammy
Ellerman,
Defendants-Appellees.
JUDGMENT REVERSED
Division II
Opinion by JUDGE HAWTHORNE
Dailey and Welling, JJ., concur
Announced May 17, 2018
Poulson, Odell & Peterson, LLC, Nick A. Swartzendruber, Aaron G. Norris,
Denver, Colorado, for Plaintiffs-Appellants
Frascona, Joiner, Goodman and Greenstein, PC, Britney D. Beall-Eder, Cinthia
Manzano, Boulder, Colorado; Robinson Waters & O’Dorisio, PC, Stephen L.
Waters, Kimberly A. Bruetsch, Denver, Colorado, for Defendants-Appellees
¶1 We all know that we should read carefully and understand any
important document before we sign it. In fact, a principle of
contract law says that anyone who signs a document is presumed
to know its contents. We also know generally that if we have a legal
claim arising from a document we’ve signed, we must file that claim
in court within a certain time or our claim may be barred by a
statute of limitations. And as to when that time starts to run,
another principle of law codified by a Colorado statute says it starts
on the date when both the claimant’s injury and its cause are
known or should have been known by the exercise of reasonable
diligence.
¶2 This case poses a question arising from the intersection of these
two legal principles: Does the presumed-to-know-what-you-signed
principle conclusively establish, as a matter of law, that the statute
of limitations for a claim against a third person who prepared the
document begins to run on the date the claimant signed it? We
conclude that it doesn’t. So we reverse the district court’s order
dismissing negligence and breach of contract claims brought by
plaintiffs, Charles C. Bell and Shirley M. Bell, against defendants,
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Land Title Guarantee Company (Land Title), Orr Land Company
LLC (Orr), and Tammy Ellerman.
I. Facts and Procedural Background
¶3 The Bells hired Orr and its employee Ellerman to represent them
in selling their real property. Orr found a buyer,1 and the Bells
entered into a buy and sell contract with the buyer, which provided
— as pertinent here — that the sale excluded all oil, gas, and
mineral rights in the property. Orr then retained Land Title to draft
closing documents, including the warranty deed. On May 31, 2005,
the Bells signed the warranty deed and sold the property to the
buyer.
¶4 The Bells didn’t know that the warranty deed prepared by Land
Title didn’t contain any language reserving the Bells’ mineral rights
as provided in the buy and sell contract. But, for over nine years,
the Bells continued to receive the mineral owner’s royalty payments
due under an oil and gas lease on the property. In September
2014, the lessee oil and gas company learned that the Bells hadn’t
owned the mineral rights to the property since closing on the buy
1 This appeal was dismissed as to the buyer.
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and sell contract in May 2005. So, it began sending the mineral
owner’s royalty payments to the buyer. After that, the Bells
discovered that the warranty deed they had signed over nine years
earlier didn’t reserve their mineral rights as provided in the buy and
sell contract.
¶5 In May 2016, the Bells filed this negligence and breach of
contract action against defendants. Defendants filed motions to
dismiss under C.R.C.P. 12(b)(5), arguing that the Bells’ claims were
untimely because the statute of limitations had run.
¶6 The district court agreed and granted defendants’ motions to
dismiss. The court reasoned that the Bells’ complaint showed that
they had signed the deed in 2005 (eleven years before filing suit)
and, because they were charged with knowing the contents of the
document they signed, they should have discovered when they
signed the deed that it failed to reserve their mineral rights.
II. Statute of Limitations
¶7 The Bells contend that the court erred in granting defendants’
motions to dismiss because they sufficiently alleged facts that, if
true, establish that the statute of limitations didn’t begin to accrue
on their claims until the oil and gas company ceased payment in
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September 2014, which is when they contend they discovered that
the warranty deed didn’t reserve their mineral rights. We agree.
A. Standard of Review and Applicable Law
¶8 We review de novo a district court’s order dismissing claims
under C.R.C.P. 12(b)(5), and we accept all averments of material
fact in the complaint as true and view all allegations in the light
most favorable to the plaintiffs. Pub. Serv. Co. of Colo. v. Van Wyk,
27 P.3d 377, 386 (Colo. 2001); State Farm Fire & Cas. Co. v. Weiss,
194 P.3d 1063, 1065 (Colo. App. 2008).
¶9 A district court may grant a motion to dismiss based on the
statute of limitations if the plaintiff’s complaint shows on its face
that the claim was not timely filed. SMLL, L.L.C. v. Peak Nat’l Bank,
111 P.3d 563, 564-65 (Colo. App. 2005). So, where the facts alleged
by the plaintiff show when the plaintiff discovered or reasonably
should have discovered the defendant’s misconduct, the court may
determine when the plaintiff’s action accrued as a matter of law.
See Anderson v. Somatogen, Inc., 940 P.2d 1079, 1083 (Colo. App.
1996); see also Morris v. Geer, 720 P.2d 994, 997 (Colo. App. 1986)
(“The time when a plaintiff discovered, or through the use of
reasonable diligence should have discovered, the negligent conduct
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is normally a question of fact . . . . [But] where the undisputed
facts clearly show that a plaintiff discovered, or reasonably should
have discovered, the negligent conduct as of a particular date, the
issue may be decided as a matter of law.”); Palisades Nat’l Bank v.
Williams, 816 P.2d 961, 963 (Colo. App. 1991) (same).
B. Analysis
¶ 10 A plaintiff must commence tort actions within two years from the
date the cause of action accrues, see § 13-80-102(1)(a), C.R.S.
2017, and contract actions within three years from the date the
cause of action accrues, see § 13-80-101(1)(a), C.R.S. 2017. A
cause of action “shall be considered to accrue on the date both the
injury and its cause are known or should have been known by the
exercise of reasonable diligence.” § 13-80-108(1), C.R.S. 2017.
¶ 11 The Bells executed the warranty deed conveying their property on
May 31, 2005. The district court assumed as true the Bells’
allegations that the oil and gas company stopped making royalty
payments to them in September 2014 and the Bells did not learn
that the language reserving mineral rights was not included in the
warranty deed until over nine years after they had signed it. The
Bells filed their complaint in May 2016.
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¶ 12 The court relied on the legal principle that one who signs a
document is presumed to know its contents to determine when the
Bells knew or should have reasonably known of both their injury
and its cause. See People v. Madison, 176 P.3d 793, 805 (Colo.
App. 2007) (“A person is presumed to know the contents of any
document he signs.”); Forman v. Brown, 944 P.2d 559, 562 (Colo.
App. 1996) (same). So, according to the court, the Bells should
have known by exercising reasonable diligence on the day they
signed the deed, May 31, 2005, that the mineral rights reservation
language was not included in it, and thus, their claims against
defendants accrued on that date.
¶ 13 But, the Bells contend that the presumed-to-know principle
applies conclusively only where a party (for example, a grantor)
seeks to avoid the legal effects of a deed in an action against
another party to the conveyance (a grantee), not where a party
(again, a grantor) asserts claims against third parties who failed to
conform the deed to an underlying agreement on that party’s behalf.
We agree.
1. Presumed to Know
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¶ 14 Colorado cases have repeatedly held that one who signs or
accepts a written contract, in the absence of fraud, is conclusively
presumed to know its contents and to assent to them. See Poly
Trucking, Inc. v. Concentra Health Servs., Inc., 93 P.3d 561, 563
(Colo. App. 2004) (“[W]here a party’s unilateral mistake is the result
not of fraud, but of its own failure to use due diligence in reading
the contract before signing it, that party will be held to the terms of
the contract.”); see also Rasmussen v. Freehling, 159 Colo. 414, 412
P.2d 217 (1966) (same); Kovacheff v. Langhart, 147 Colo. 339, 343,
363 P.2d 702, 704 (1961) (same); Erickson v. Knights of the
Maccabees of the World, 71 Colo. 9, 13, 203 P. 674, 675 (1922)
(same); Cordillera Corp. v. Heard, 41 Colo. App. 537, 592 P.2d 12
(1978) (same).
¶ 15 This principle is applied to preserve the integrity and sanctity of
written documents. Any other rule “would throw chaos into all
contract arrangements because a party could avoid responsibility
quite conveniently simply by signing a contract without reading it.”
27 Richard A. Lord, Williston on Contracts § 70:113, Westlaw (4th
ed. database updated May 2017); see also Upton v. Tribilcock, 91
U.S. 45, 50 (1875) (“It will not do for a man to enter into a contract,
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and, when called upon to respond to its obligations, to say that he
did not read it when he signed it, or did not know what it contained.
If this were permitted, contracts would not be worth the paper on
which they are written.”).
¶ 16 But the integrity and sanctity of the warranty deed isn’t
challenged in this case. The Bells’ claims against defendants, who
aren’t parties to the deed, don’t seek to avoid the deed or in any way
affect it. Instead, the Bells’ negligence and breach of contract
claims assert that defendants negligently prepared the warranty
deed on their behalf, and they seek only damages from defendants.
So the purpose of the presumed-to-know principle — to prevent the
Bells from “throw[ing] chaos” into their contract arrangements —
isn’t applicable here. See Dashiell v. Meeks, 913 A.2d 10, 21 (Md.
2006) (“[T]his [presumed-to-know] principle of contract law . . .
‘does not conclusively establish as a matter of law that the statute
of limitations for a legal malpractice claim against the attorney who
prepared the contract expires three years after the date the contract
was signed.’” (quoting Meeks v. Dashiell, 890 A.2d 779, 788 (Md. Ct.
Spec. App. 2006))).
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¶ 17 True, if this case involved simply the Bells’ failure to read an
easily understood deed and the Bells were asking to rescind it to
recover their mineral rights, the presumed-to-know principle would
undoubtedly apply. See Moats v. Prof’l Assistance, LLC, 319 P.3d
892, 898 (Wyo. 2014) (observing that in professional negligence
claims, “[t]here are other facts to balance”). But extending the
principle to determine conclusively, as a matter of law, the accrual
date of a professional negligence or breach of contract claim would,
in our opinion, broaden the principle beyond its intended scope.
And doing so would (1) expand its purpose from preserving the
integrity and sanctity of signed documents to conclusively marking
the accrual of a tort or breach of contract claim against a third
party for statute of limitations purposes; (2) enlarge its generally
recognized application, which is limited to conflicts between parties
to the contract, to include third parties; and (3) distort its function
to encompass third party professional negligence claims.
¶ 18 To be clear, we don’t conclude that the presumed-to-know
principle is inapplicable in all professional negligence cases. We
conclude only that this principle doesn’t conclusively establish, as a
matter of law, that the statute of limitations for a breach of contract
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or negligence claim against a third party who prepared the deed
begins running the day the deed is signed.
2. Motions to Dismiss
¶ 19 We assume, as did the district court, that the Bells did not learn
until September 2014 that the language reserving all oil, gas, and
other mineral rights wasn’t included in the deed they signed on May
31, 2005. See Ybarra v. Greenberg & Sada, P.C., 2016 COA 116, ¶
6 (“In reviewing a motion to dismiss, we accept all matters of
material fact in the complaint as true and view the allegations in
the light most favorable to the plaintiff.”) (cert. granted Feb. 27,
2017). So, taking the complaint’s factual allegations as true, the
Bells filed their negligence and breach of contract claims within the
statute of limitations in May 2016.
¶ 20 Defendants argue that the Bells, using reasonable diligence,
should have discovered earlier than September 2014 that their
warranty deed didn’t reserve any mineral rights. But such a factual
question cannot be resolved in a Rule 12(b)(5) motion to dismiss
ruling. Warne v. Hall, 2016 CO 50, ¶ 9 (holding that a party must
plead sufficient facts that, if taken as true, suggest plausible
grounds to support a claim for relief). We must review whether the
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Bells have alleged in their complaint facts that, when taken as true,
“state a claim for relief that is plausible on its face.” Id. at ¶¶ 1-2
(citation omitted). They have. So we conclude that the court erred
in granting defendants’ motions to dismiss.
III. Conclusion
¶ 21 The district court’s order dismissing the Bells’ complaint is
reversed.
JUDGE DAILEY and JUDGE WELLING concur.
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