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Rocky Mountain Natural Gas, LLC v. Colorado Mountain Junior College District

Court of Appeals of Colorado, Sixth Division

September 11, 2014

Rocky Mountain Natural Gas, LLC, Plaintiff-Appellant,
The Colorado Mountain Junior College District, Defendant-Appellee.

Garfield County District Court No. 12CV125 Honorable James B. Boyd, Judge

Lathrop & Gage LLP, Thomas D. Leland, Leah E. Capritta, Kevin E. Strom, Denver, Colorado; SourceGas LLC, Timothy J. Knapp, Golden, Colorado, for Plaintiff-Appellant

Sullivan Green Seavy, LLC, Barbara J.B. Green, John T. Sullivan, Boulder, Colorado, for Defendant-Appellee



¶ 1 Plaintiff, Rocky Mountain Natural Gas, LLC (RMNG), appeals the summary judgment entered in favor of defendant, the Colorado Mountain Junior College District (CMC). We affirm.

I. Background

¶ 2 This dispute arises from a lease agreement between RMNG and CMC. RMNG is a Colorado utility company that provides natural gas services. CMC is a junior college district organized under sections 23-71-101 to -133, C.R.S. 2013. As relevant here, the board of trustees of a junior college district has the power to "[r]ent or lease district property not immediately needed for its purposes for terms not exceeding three years." § 23-71-122(1)(e), C.R.S. 2013.[1]

¶ 3 In August 2011, RMNG and CMC entered into a lease allowing RMNG to construct and operate a natural gas compressor station on CMC property. Despite the statutory three-year term limit on CMC's authority to lease district property, the lease included an initial term of twenty years, with an option for RMNG to extend the lease for an additional twenty-year term. After the lease was executed, RMNG purchased equipment, incurred fees, and took other action related to the construction of the compressor station. According to RMNG's complaint, RMNG spent approximately $2.5 million in reliance on the lease. RMNG also made payments to CMC pursuant to the lease. During March and April of 2012, a dispute arose over the terms of the lease.

¶ 4 In May of 2012, CMC's board of trustees voted to not recognize the lease, and CMC refunded the payments it had received from RMNG. Thereafter, RMNG sued CMC, seeking a declaratory judgment that the lease was valid, specific performance of the lease, damages as an alternative form of relief for multiple breaches of the lease, and preliminary and permanent injunctive relief.

¶ 5 CMC moved to dismiss RMNG's claims, contending in part that the lease was void, invalid, and unenforceable as a matter of law, because the term of the lease exceeded CMC's statutory authority.

¶ 6 The district court dismissed RMNG's claim for specific performance and determined that the remainder of CMC's motion to dismiss must be treated as a motion for summary judgment.[2] In a subsequent order, the district court held that the lease was void and unenforceable because CMC lacked statutory authority to enter into the lease: "Here, the applicable statute unambiguously limits CMC's power to enter leases to a term of three years or less. The 20-year lease involved in this case exceeded the statutory authority held by CMC." Additionally, the court rejected RMNG's contention that, pursuant to a severability clause in the lease, the lease should be enforced for three years, even if it is not enforceable for twenty years.

¶ 7 As to RMNG's claim for damages, the court determined that RMNG was not entitled to judicial relief. The court discussed the decision in Normandy Estates Metropolitan Recreation District v. Normandy Estates, Ltd., 191 Colo. 292, 553 P.2d 386 (1976), in which the Colorado Supreme Court created a limited exception to the general rule that recovery is not afforded to parties that have entered into unenforceable contracts with municipalities. See also La Plata Med. Ctr. Assocs. v. United Bank, 857 P.2d 410, 417-18 (Colo. 1993). The district court ruled:

Where the absence of relief would be "grossly inequitable[, ]" . . . the limited relief of restoring the private contracting party to its property [can] be granted. Here, CMC returned the lease payment made by RMNG. Although the result may be harsh, under the rule of Normandy, the absence of relief is not grossly inequitable.

¶ 8 Thus, the court granted summary judgment in favor of CMC, ruling that CMC's lack of authority to enter into the lease renders immaterial the other disputed issues of fact.

¶ 9 On appeal, RMNG contends that the district court erred as a matter of law in granting summary judgment in favor of CMC.

II. Standard of Review

¶ 10 We review de novo a district court's grant of summary judgment. Ryder v. Mitchell, 54 P.3d 885, 889 (Colo. 2002). In so doing, we may determine only whether the law was correctly applied and whether a genuine issue of material fact exists. Sims v. Sperry, 835 P.2d 565, 568 (Colo.App. 1992); see also C.R.C.P. 56(c); Churchey v. Adolph Coors Co., 759 P.2d 1336, 1340 (Colo. 1988). In deciding whether summary judgment is appropriate, the court views the facts ...

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