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,




                                    1
 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,

 

, 386 (Colo. 2001); State Farm Fire & Cas. Co. v. Weiss,

 

, 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,

 

, 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., 

, 1083 (Colo. App.

 1996); see also Morris v. Geer, 

, 997 (Colo. App. 1986)

 (“The time when a plaintiff discovered, or through the use of

 reasonable diligence should have discovered, the negligent conduct


                                    4
  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, 

, 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, 

, 805 (Colo.

  App. 2007) (“A person is presumed to know the contents of any

  document he signs.”); Forman v. Brown, 

, 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., 

, 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, 

, 

(1966) (same); Kovacheff v. Langhart, 

, 343,

  

, 704 (1961) (same); Erickson v. Knights of the

  Maccabees of the World, 

, 13, 

, 675 (1922)

  (same); Cordillera Corp. v. Heard, 

, 

  (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, 

, 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, 

, 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, 

, 788 (Md. Ct.

  Spec. App. 2006))).




                                    8
¶ 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, 

, 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


                                     9
  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., 

, ¶

  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, 

, ¶ 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


                                     10
  Bells have alleged in their complaint facts that, when taken as true,

  “state a claim for relief that is plausible on its face.” 

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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