Desert Mountain Gold LLC v. Amnor Energy Corp.

2017 UT App 218THE UTAH COURT OF APPEALS
DESERT MOUNTAIN GOLD LLC,
Appellee,
v.
AMNOR ENERGY CORP.,
Appellant.
Opinion
No. 20160654-CA
Filed November 24, 2017
Fourth District Court, Nephi Department
The Honorable Jennifer A. Brown
No. 140600027
Kathryn J. Steffey and Clayton H. Preece, Attorneys
for Appellant
Allen K. Young and Tyler S. Young, Attorneys
for Appellee
JUDGE KATE A. TOOMEY authored this Opinion, in which JUDGES
GREGORY K. ORME and DIANA HAGEN concurred.
TOOMEY, Judge:
¶1 This case arises out of a dispute over a fully integrated
contract between Amnor Energy Corp. and Desert Mountain
Gold LLC relating to mining claims on a property located in Juab
County, Utah. After Amnor failed to timely make an annual
royalty payment required by the contract, Desert Mountain
brought an action for breach of contract. Desert Mountain later
moved for summary judgment, which the district court granted.
Amnor appeals from that order, contending that its failure to
perform was excused because of Desert Mountain’s earlier
alleged breach of the contract’s confidentiality clause. Amnor
further contends that the district court erred in determining that,
under the contract, Amnor’s failure to timely pay one of its
Desert Mountain Gold v. Amnor Energy Corp.
annual royalty payments automatically terminated the contract,
requiring Amnor to, among other things, quitclaim its interest in
the property to Desert Mountain. We affirm.
BACKGROUND
¶2 In July 2011, the parties entered into a fully integrated
contract, whereby Amnor acquired certain mining claims from
Desert Mountain. Under the contract, Amnor was required to
pay Desert Mountain an annual royalty payment of $20,000 “on
or before January 30, 2012 and on or before January 30 of each
successive year to and including January 30, 2016.” In addition,
the contract included a confidentiality clause and provisions
outlining the dispute resolution process the parties were to
follow in the event of a default.
¶3 The first dispute under the contract involved Desert
Mountain’s alleged breach of the contract’s confidentiality
clause. In March 2013, Amnor sent Desert Mountain a notice of
default, alleging that Desert Mountain breached the
confidentiality clause by disclosing the existence of the contract
to an independent contractor who had installed a gate on the
property. In response, Desert Mountain sent a letter to Amnor
disputing the default and explaining that it believed the
disclosure was authorized under the contract. Amnor disagreed
with Desert Mountain’s interpretation of the confidentiality
clause and sent a reply letter in April 2013 to that effect. In its
reply letter, Amnor explained that, because of Desert Mountain’s
alleged breach, it would not provide Desert Mountain further
“data,” as required by the contract, until Desert Mountain cured
the breach. 1 Amnor did not attempt to set up a meeting to
1. It is unclear what data Amnor refused to provide, but upon
Desert Mountain’s request, the terms of the contract required
Amnor to provide Desert Mountain with “records documenting
(continued…)
20160654-CA 2 2017 UT App 218Desert Mountain Gold v. Amnor Energy Corp.
resolve the dispute; rather, it concluded its letter by stating that
it was “willing to meet to discuss” if Desert Mountain wished to
do so. Despite these communications, the parties continued to
perform their respective duties under the contract with the
exception of Amnor’s refusal to provide Desert Mountain with
data relating to the mining claims, and Desert Mountain did
nothing to cure its alleged breach.
¶4 More than nine months after the parties’ communications
regarding Desert Mountain’s alleged breach of the
confidentiality clause, Amnor failed to make the January 30, 2014
royalty payment. Desert Mountain sent Amnor a notice of
default and requested payment. Under the contract, Amnor had
fifteen days after receiving the notice to cure the default.
Although Amnor eventually sent a check for payment, it failed
to do so within the fifteen-day curative window. Desert
Mountain refused the payment. Instead, it sent Amnor a notice
of termination, requesting that Amnor comply with the
contract’s termination provision that required Amnor to
quitclaim its interest in the property to Desert Mountain. Amnor
replied that it would not comply with the termination
provisions.
¶5 In June 2014, Desert Mountain filed an action for breach
of contract. In its answer, Amnor asserted that Desert
Mountain’s claim was barred because of Desert Mountain’s
alleged breach of the contract’s confidentiality clause.
(…continued)
all costs and expenses Amnor has incurred and which it intends
to claim as Expenditures and all Exploration data obtained by
Amnor solely from the Property, including but not limited to
copies of all maps, drilling logs, analyses, test results, geological,
geophysical, and other non-interpretive reports that are based
solely on data obtained from the Property.”
20160654-CA 3 2017 UT App 218Desert Mountain Gold v. Amnor Energy Corp.
Accordingly, Amnor asserted a counterclaim for breach of
contract. Desert Mountain later moved for partial summary
judgment on its claim only.
¶6 Desert Mountain disagreed it had breached the contract’s
confidentiality clause but argued that, “[e]ven assuming, for the
purposes of this Memorandum, Desert Mountain was in default
by breaching the Confidentiality Clause,” it was entitled to
summary judgment because Amnor did not comply with the
contract’s dispute resolution provisions, which were a
prerequisite to enforcement of any remedial provisions Amnor
might have had. Thus, Desert Mountain argued, because the
contract was fully integrated, Amnor’s breach was not excused.
¶7 In its opposing memorandum, Amnor contended it was
excused from performing because of Desert Mountain’s alleged
breach of the confidentiality clause. It also asserted several
additional facts, including that Desert Mountain breached the
confidentiality clause by disclosing the existence of the contract
to an independent contractor. In reply, Desert Mountain
admitted, for the purposes of summary judgment only, that it
had materially breached the confidentiality clause.
¶8 During oral argument on the motion, Amnor asserted the
additional argument that the plain language of the contract
allowed for automatic termination only if Amnor failed to make
every annual royalty payment under the contract. Thus, Amnor
argued, because it missed only one payment, the contract was
not automatically terminated.
¶9 The district court granted Desert Mountain’s motion in a
written ruling. The court first concluded, “Because Amnor did
not pursue the remedies the Agreement mandated, the
Agreement remained in full force and effect after Desert
Mountain’s breach.” Second, the court concluded that Amnor’s
failure to make the 2014 royalty payment triggered the contract’s
automatic termination provision. Amnor filed a timely appeal.
20160654-CA 4 2017 UT App 218Desert Mountain Gold v. Amnor Energy Corp.
ISSUES AND STANDARD OF REVIEW
¶10 Amnor first contends it was excused from paying the 2014
royalty payment in a timely fashion under the “first breach
rule,” because of Desert Mountain’s earlier alleged breach of the
contract’s confidentiality clause. Second, Amnor contends the
contract could not automatically terminate unless Amnor failed
to timely make each of the annual royalty payments.
¶11 Summary judgment is proper where there is no genuine
issue of material fact and the moving party is entitled to
judgment as a matter of law. Utah R. Civ. P. 56(a). We review a
district court’s “grant of summary judgment, as well as the
court’s interpretation of contracts upon which the summary
judgment was based, for correctness.” Ward v. IHC Health
Services, Inc., 2007 UT App 362, ¶ 7, 173 P.3d 186.
ANALYSIS
I. First-breach Rule
¶12 Amnor argues the first-breach rule excused it from
performing its obligations under the contract and that the
district court erred in declining to apply the first-breach rule.
Under the first-breach rule, “a party first guilty of a substantial
or material breach of contract cannot complain if the other party
thereafter refuses to perform.” Cross v. Olsen, 2013 UT App 135,
¶ 25, 303 P.3d 1030 (citation and internal quotation marks
omitted). Further, “[h]e can neither insist on performance by the
other party nor maintain an action against the other party for a
subsequent failure to perform.” Id. (citation and internal
quotation marks omitted).
¶13 While we recognize both the validity of the first-breach
rule and the fact that Desert Mountain admitted that—for the
purpose of summary judgment only—it materially breached the
20160654-CA 5 2017 UT App 218Desert Mountain Gold v. Amnor Energy Corp.
confidentiality clause, we emphasize that “[t]he law of contracts
is based on the principle of freedom of contract.” Robinson v.
Tripco Inv., Inc., 2000 UT App 200, ¶ 40, 21 P.3d 219. Indeed,
“courts ordinarily will not invade the province of the
parties . . . to determine for themselves what the consequences of
a breach of their contracts shall be.” Commercial Real Estate Inv.,
LC v. Comcast of Utah II, Inc., 2012 UT 49, ¶ 29, 285 P.3d 1193(omission in original) (citation and internal quotation marks
omitted). Moreover, when interpreting a contract, “we look to
the language of the contract to determine its meaning and the
intent of the contracting parties.” McNeil Eng’g & Land Surveying,
LLC v. Bennett, 2011 UT App 423, ¶ 8, 268 P.3d 854 (citation and
internal quotation marks omitted). “We also consider each
contract provision . . . in relation to all of the others, with a view
toward giving effect to all and ignoring none.” Id. (omission in
original) (citation and internal quotation marks omitted).
¶14 In the present case, the contract included a detailed
dispute resolution process for the parties to follow in the event
that the alleged breaching party disputed its alleged breach.
Amnor did not comply with the dispute resolution provisions.
¶15 Section 12.3 of the contract, entitled “Disagreement Over
Alleged Default,” provides:
In the event the Party against whom a default is
alleged believes that it is not in default, it may give
written notice to the other Party within such 15-
day or 30-day period, as applicable, setting forth
such fact. The Parties shall then follow the
procedure set forth in Section 12.4 in attempting
to resolve such dispute. In the event that the
Parties agree through informal consultation or
determine through a judicial decision that there has
been a default, this Agreement shall not be
terminated if the defaulting Party shall cure the
20160654-CA 6 2017 UT App 218Desert Mountain Gold v. Amnor Energy Corp.
default within 30 days following such agreement
or determination . . . . If the defaulting Party shall
fail to satisfy such determination in the time
allowed, then the other Party may terminate this
Agreement and may seek such other remedies as it
might have in law or in equity.
It is undisputed that Desert Mountain properly disputed its
alleged breach of the confidentiality clause. In its letter
explaining the ground for its dispute, Desert Mountain stated
that its disclosure of the existence of the contract to an
independent contractor was permitted under the contract. Once
Amnor received the letter, it was required by the contract to
“follow the procedure set forth in Section 12.4.”
¶16 Section 12.4 provides, in relevant part:
The parties agree to devote such time, resources,
and attention as are needed to attempt to resolve
disputes at the earliest time possible . . . . At a
minimum, the Parties shall hold one informal
meeting within 30 days after notice to attempt to
resolve the disputed issue(s).
Section 12.4 further provides that, in the event that the parties
cannot resolve the dispute at an informal meeting, the dispute
“shall be resolved in a legal proceeding.”
¶17 But Amnor did not attempt to hold an informal meeting.
Rather, it sent Desert Mountain a letter in which it disagreed
with Desert Mountain’s interpretation of the contract and stated
it was “willing to meet to discuss” the dispute, if Desert
Mountain wished to do so. Casually indicating a willingness to
meet is much different from attempting to set up a time to meet
and discuss the dispute. Amnor asserts that, by its mere
statement that it was “willing to meet,” it did its part to comply
with section 12.4’s informal meeting requirement. Amnor further
20160654-CA 7 2017 UT App 218Desert Mountain Gold v. Amnor Energy Corp.
asserts that, because Desert Mountain did not take Amnor up on
what it now characterizes as its “request” to meet, Amnor “was
entitled to terminate the agreement or seek such other remedies
as it might have in law or equity,” such as “application of the
First Breach Rule.” But before Amnor could terminate the
agreement or pursue other remedies, it was required to comply
with section 12.4’s demand that it promptly seek legal action in
the event that an informal meeting proved to be unsuccessful.
Amnor does not address this requirement anywhere in its
briefing. But even if it had, waiting fourteen months before
arguing for the first time that it was excused from performing its
obligations under the contract, and invoking the first-breach rule
only in response to Desert Mountain’s breach of contract action,
is hardly sufficient. In any event, at the time Amnor’s 2014
royalty payment came due, the dispute remained unresolved
because of Amnor’s failure to follow the contract’s dispute
resolution procedures. Therefore, Amnor was not excused from
withholding payment.
¶18 Because we must give effect to each provision in the
contract, see McNeil Eng’g, 2011 UT App 423, ¶ 8, we conclude
Amnor was required to comply with the contract’s dispute
resolution process before it could invoke the first-breach rule.
Therefore, the district court did not err in declining to apply the
rule.
II. Automatic Termination
¶19 Next, Amnor contends that the district court erred in
determining that its failure to timely make the 2014 royalty
payment automatically terminated the contract, requiring it to
quitclaim its interest in the property to Desert Mountain. We
reiterate that, when interpreting a contract, we consider each
provision “in relation to all of the others, with a view toward
giving effect to all and ignoring none.” McNeil Eng’g & Land
20160654-CA 8 2017 UT App 218Desert Mountain Gold v. Amnor Energy Corp.
Surveying, LLC v. Bennett, 2011 UT App 423, ¶ 8, 268 P.3d 854(citation and internal quotation marks omitted).
¶20 Sections 3.2 and 8.1(b) of the contract relate to Amnor’s
obligation to make annual royalty payments, and our
interpretation of those sections is critical to resolving this issue.
Section 3.2 provides the following:
In order to keep this Agreement in effect and retain the
Property, Amnor shall pay to Desert Mountain, as
Advance Royalty Payments, the sum of $20,000 on
or before January 30, 2012 and on or before January
30 of each successive year to and including January
30, 2016 provided that this Agreement is in effect
on January 30 of the relevant year, for total
aggregate Advance Royalty Payments of $100,000.
Amnor may, in its discretion, pay Advance Royalty
Payments at a rate faster than required in the
preceding sentence.
(Emphasis added.) Section 8.1(b) addresses termination and
provides that the contract
will automatically terminate upon the failure by
Amnor to pay all of the Advance Royalty
Payments or incur all of the Expenditures in a
timely manner (subject to Amnor’s right to cure
any such failures as provided in this Agreement). If
this Agreement terminates pursuant to this Section
8.1(b), except for the provisions of 8.1(c), this
Agreement shall be of no further force and effect.
Under Amnor’s interpretation, the contract “would only
terminate automatically if Amnor failed to pay every payment
due.” But that interpretation fails to give effect to section 3.2. See
McNeil Eng’g, 2011 UT App 423, ¶ 8. Section 3.2 identifies the
dates by which Amnor was required to make each of its annual
20160654-CA 9 2017 UT App 218Desert Mountain Gold v. Amnor Energy Corp.
royalty payments and states that, to keep the contract in effect
and retain the property, Amnor must timely make the payments
on or before January 30 of each year.
¶21 When reading sections 3.2 and 8.1(b) together, it is clear
that Amnor’s failure to make the 2014 royalty payment in a
timely fashion and its failure to timely cure its default caused the
contract to automatically terminate, requiring Amnor to comply
with section 8.1(c)’s termination procedures, including the
quitclaim requirement.
CONCLUSION
¶22 We conclude that the district court did not err in declining
to apply the first-breach rule where Amnor failed to comply
with the contract’s dispute resolution provisions. We also
conclude that the district court did not err in determining that,
under the contract, Amnor’s failure to make the 2014 royalty
payment and to timely cure its default automatically terminated
the contract. Therefore, summary judgment was appropriate.
¶23 Affirmed.
20160654-CA 10 2017 UT App 218