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Desert Mountain Gold LLC v. Amnor Energy Corp.

Court of Appeals of Utah

November 24, 2017

Desert Mountain Gold LLC, Appellee,
v.
Amnor Energy Corp., Appellant.

         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.

          OPINION

          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 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 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. 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, ...


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