IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

CHARLES K. BRELAND, JR. et al., )

)

)

Plaintiffs, )

)

vs. ) CIVIL ACTION NO. 14-00158-CG-C

)

LEVADA EF FIVE, LLC, )

)

)

Defendant. )

ORDER

This matter is before the Court on the Motion for Partial Summary Judgment 

(Doc. 97), Brief in Support (Doc. 98), and Evidentiary Submissions in Support (Doc. 

99), filed by Levada EF Five, LLC (“Defendant”), and the response (Doc. 103) filed 

by Charles K. Breland, Jr. (“Breland”), Osprey Utah, LLC (“Osprey”), Water Canyon 

Holdings, LLC (“Water Canyon”), Range Creek Holdings, LLC (“Range Creek”), and 

Utah Reverse Exchange, LLC (“Utah Reverse”) (collectively, “Plaintiffs”). For the 

reasons set forth herein, Defendant’s motion for partial summary judgment is due 

to be DENIED.

I. BACKGROUND

The instant action is based on Plaintiffs’ allegations Defendant breached the 

Amended and Restated Agreement (“the Agreement”) entered into between the 

parties. (Doc. 50). Before discussing the relevant provisions of the Agreement and 

facts surrounding the alleged breach, it is necessary to discuss how the Agreement 

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came to be. 

Plaintiffs Osprey, Water Canyon, Range Creek, and Utah Reserve have one 

thing in common; Breland is the sole member of each limited liability company. On 

March 11, 2009, Breland filed for protection under Chapter 11 of the United States 

Bankruptcy Code. Id. at ¶ 12. In order to reorganize under Chapter 11, a 

reorganization plan was filed with the bankruptcy court (Doc. 1-1) and approved 

(Doc. 1-2).1 In order to fund the plan, Breland negotiated with Adrian Zajac to 

transfer his interest in Utah Reserve, Water Canyon, and Range Creek to 

Defendant. (Doc. 50, ¶ 14; Doc. 98, pp. 2–3). Said interest included property located 

in Carbon and Emery Counties, Utah and consisted of approximately 20,676 acres 

of land. Id. In exchange for the transfer, Defendant agreed to payoff a collateral 

agreement between Breland and Cypress Capital (hereinafter, “Cypress 

Litigation”). Breland and Defendant memorialized the Agreement on May 2, 2011. 

(Doc. 99-2; Doc. 103-1).

In the instant matter, three provisions of the Agreement are in dispute. First, 

section eight of the Agreement requires Defendant to invest $10,000,000 in the 

exploration or development of mineral production on the Subject Property, unless 

performance is excused by the force majeure provision. Id. at 8. To date, Defendant 

has not invested $10,000,000 in the property. (Doc. 103-18, p. 169:8–10). Second, 

section twelve of the Agreement requires Defendant to pay up to $1,750,000 to 

 1 Ohana Cabo LLC (“Ohana”) filed the amended plan. Ohana was a party interested in 

purchasing a portion of Breland’s assets but has no relative bearing on the instant matter and is 

not discussed further.

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settle the Cypress Litigation. (Doc. 99-2, pp. 12–13; Doc. 103-1, pp. 11–12). In the 

event the Cypress Litigation settles for more than $1,750,000, Defendant can, but 

has no obligation to, pay the additional sum. Id. But if the Cypress Litigation 

“settlement or judgment amount equals less than $2,900,000, [Defendant] shall pay 

Breland $90,000 to cover reasonable attorneys’ fees and expenses incurred by 

Breland.” (Doc. 99-2, pp. 15–16; Doc. 103-1, pp. 14–15). Ultimately, the Cypress 

Litigation settled for approximately $3.8 million. (Doc. 98, p. 9; Doc. 103, p. 6). 

Third, section fifteen of the Agreement obligated Defendant to pay the outstanding 

property taxes for 2008, 2009, 2010, and 2011 and any future property taxes for the

property. (Doc. 99-2, p. 15; Doc. 103-1, p. 14). Breland paid a portion of the property 

taxes, due to Defendant’s failure to pay from the second half of 2011 on. (Doc. 98, p. 

5).

Presently, Defendant avers that it is due judgment as a matter of law 

because (1) it owes no money to Breland due to the Cypress Litigation judgment 

equaling an amount greater than $2,900,000; (2) Breland can prove no damages 

caused by the property taxes he paid; and (3) it was excused from development of 

the Subject Property by December 31, 2014 due to the force majeure clause. (Doc. 

98, p. 2). The Court will address each argument in turn.

II. ANALYSIS

A. The Summary Judgment Standard

Federal Rule of Civil Procedure 56(a) instructs that “[t]he court shall grant 

summary judgment if the movant shows that there is no genuine dispute as to any 

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material fact and the movant is entitled to judgment as a matter of law.” The trial 

court’s mission is to “determine whether there is a genuine issue for trial” and not 

to “weigh the evidence.” See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 

(1986).

The burden is on the moving party to show that there is no genuine dispute 

as to any material fact. Id. at 256. In conducting its summary judgment analysis, 

the Court must construe all evidence “in the light most favorable to the party 

opposing the motion.” United States v. Diebold, Inc., 369 U.S. 654, 655 (1962).

After the movant meets its burden, the burden shifts to the nonmoving party 

“to make a showing sufficient to establish the existence of an element essential to 

that party’s case.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). If the 

nonmoving party fails to do so, the “complete failure of proof concerning an essential 

element of the nonmoving party’s case necessarily renders all other facts 

immaterial.” Id. at 323. Further, Rule 56 “requires the nonmoving party to go 

beyond the pleadings and by her own affidavits, or by the depositions, answers to 

interrogatories, and admissions on file, designate specific facts showing that there is 

a genuine issue for trial.” Id. at 324 (internal quotation marks omitted). There is no 

genuine issue for trial “[w]here the record taken as a whole could not lead a rational 

trier of fact to find for the non-moving party.” Matsushita Elec. Indus. Co. v. Zenith 

Radio Corp., 475 U.S. 574, 587 (1986).

B. Settlement of the Cypress Litigation

It is undisputed that the collateral litigation was settled for approximately 

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$3.8 million. The parties disagree on whether Defendant was obligated to settle the 

litigation for a much lower amount and whether Defendant owes attorney’s fees to 

Breland. The pertinent portion of the Agreement states:

12. Cypress Litigation. In consideration of the conveyance to 

Levada of the Subject Property, the Leases and the Questar 

Agreements, Levada shall pay the sum that is acceptable to Levada 

and Cypress Capital II (“Cypress”), to Cypress in order to settle the 

Litigation so the Subject Property will be free and clear of any liens 

and/or encumbrances created in connection with the Litigation and the 

subject matter thereof at the time the Subject Property, the Leases and 

the Questar Agreements are conveyed to Levada. Levada shall pay up 

to $1,750,000, but shall have no obligation to pay Cypress any sum in 

excess of $1,750,000 to settle the Litigation, but may pay in excess of 

that amount if it deems it necessary to settle the Litigation. . . .

. . . 

17. Legal Fees. If, on the Closing Date, the Cypress settlement 

or judgment amount equals less than $2,900,000, Levada shall pay to 

Breland $90,000 to cover reasonable attorneys’ fees and expenses 

incurred by Breland and his affiliates in connection with the 

Litigation. Breland and Osprey warrant that the LLCs shall not have 

any obligation to pay attorneys’ fees and expenses in connection with 

the Litigation. Breland shall provide copies of its invoices for attorneys’ 

fees and expenses to Levada. If the Cypress Settlement or Judgment 

amount exceeds $2,900,000, Levada has no obligation to reimburse 

Breland’s attorneys’ fees and expenses incurred in connection with the 

Litigation.

(Doc. 99-2, pp. 12–13, 15–16; Doc. 103-1, pp. 11–12, 14–15). Defendant argues that 

“no payment is due Breland for attorney’s fees under the Agreement, and there was 

no breach of the Agreement,” because “the collateral action was settled for 

$3,855,556.55 and in excess of the $2,900,000 threshold in the Agreement.” (Doc. 98, 

p. 9). Plaintiffs counter that “Defendant failed to settle the litigation for an 

appropriate amount when it had the opportunity to do so.” (Doc. 103, p. 5). 

Specifically, Plaintiffs claim that Defendant had the opportunity to settle the 

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litigation for less than the $2.9 million threshold, was required by the language of 

the Agreement and the duty of good faith to do so, and thus owes attorney’s fees to 

Breland pursuant to section seventeen of the Agreement. Id. at 5–8.

The Agreement provides that Utah law governs the contractual relationship. 

(Doc. 99-2, p. 16; Doc. 103-1, p. 15). When interpreting a contract, a court must 

“first look to the four corners of the agreement to determine the intentions of the 

parties.” Ron Case Roofing & Asphalt Paving, Inc. v. Blomquist, 773 P.2d 1382, 

1385 (Utah 1989). Barring ambiguity, “the parties’ intentions are determined from 

the plain meaning of the contractual language, and the contract may be interpreted 

as a matter of law.” Cent. Fla. Invs., Inc. v. Parkwest Assocs., 40 P.3d 599, 605 

(Utah 2002). If ambiguous language is present, “extrinsic evidence must be looked 

to in order to determine the intentions of the parties.” Id. In that case, the 

interpretation of the contract is no longer a matter of law but a question of fact, 

precluding the court from granting a motion for summary judgment. See Faulkner 

v. Farnsworth, 665 P.2d 1292, 1293 (Utah 1983). A contract term is ambiguous 

“when it is reasonably capable of being understood in more than one sense.” R&R 

Energies v. Mother Earth Indus., Inc., 936 P.2d 1068, 1074 (Utah 1997) (quoting 

Black’s Law Dictionary 73 (5th ed. 1979)). Further, “[t]o demonstrate ambiguity, the 

contrary positions of the parties must each be tenable.” Plateau Mining Co. v. Utah 

Div. of State Lands & Forestry, 802 P.2d 720, 725 (Utah 1990).

Scant evidence was submitted by either party relevant to this claim. 

Defendant’s representative, Adrian Zajac, states in his deposition that Defendant

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settled the litigation for approximately $3.8 million after a judgment was entered 

against Plaintiffs. (Doc. 99-8, p. 9; Doc. 103-20, p. 3). However, Breland asserts in 

his affidavit that Defendant refused to take the opportunity to settle the litigation 

for $1.29 million, an amount much lower than both the Agreement threshold and 

the resulting litigation settlement. (Doc. 103-2, p. 1).

As shown above, the Agreement states, “Levada shall pay the sum that is 

acceptable to Levada and Cypress . . . to Cypress in order to settle the Litigation,” 

and “Levada shall pay up to $1,750,000, but shall have no obligation to pay Cypress 

any sum in excess of $1,750,000 to settle the Litigation, but may pay in excess of 

that amount if it deems it necessary to settle the Litigation.” When read together, it 

is reasonable to interpret the Agreement as providing Defendant with significant

leeway in determining the amount of the settlement. However, it is also reasonable 

to read “Levada shall pay up to $1,750,000” as requiring Defendant to settle the 

litigation for an amount of $1.75 million or less should the opportunity arise. If the 

former is the correct interpretation, then by the plain language of the Agreement

Defendant is relieved of paying Breland the attorney’s fees. On the other hand, if 

the latter is the true intent of the parties, then Defendant potentially breached the 

Agreement. Either interpretation is tenable, and thus by law the provision is 

ambiguous. Extrinsic evidence is needed to determine the intent of the parties, 

preventing this Court from granting summary judgment to Defendant. Therefore, 

Defendant’s motion must be denied on this issue.

C. The Failure of Defendant to Pay Property Taxes

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It is undisputed that Breland paid some of the property taxes after the first 

half of 2011 upon Defendant’s failure to do so. The parties disagree as to whether 

Defendant’s failure to pay constitutes a breach of the agreement. The Agreement 

states in relevant part:

15. Property Taxes. Levada will be responsible for and pay all 

taxes (existing outstanding property taxes for 2008, 2009, 2010, and 

2011), and future property taxes against the Subject Property. Levada 

and Osprey will be responsible for filing state and federal income tax 

returns and payment of each of their respective income taxes.

(Doc. 99-2, p. 15; Doc. 103-1, p. 14). Breland asserts in an affidavit that he has paid 

property taxes totaling “approximately $80,000” beginning with the second half of 

2011 (Doc. 103-2, p. 4), and a representative of Defendant admitted as much in his 

deposition (Doc. 99-8, p. 7; Doc. 103-20, p. 1).

The elements of a breach of contract claim in Utah are: “(1) a contract, (2) 

performance by the party seeking recovery, (3) breach of the contract by the other 

party, and (4) damages.” Bair v. Axiom Design, LLC, 20 P.3d 388, 392 (Utah 2001). 

The thrust of Defendant’s main argument is that Plaintiffs were not harmed by 

Defendant’s failure to pay the property taxes. (Doc. 98, pp. 9–10). Defendant’s brief 

contains only one citation to a single authority to support this contention. Id.

Defendant cites to Eleopulos v. McFarland & Hullinger, LLC, 145 P.3d 1157, 1160 

(Utah Ct. App. 2006), for the argument that, “although there exists a possibility, 

even a probability, of future harm, it is not enough to sustain a claim, and a 

plaintiff must wait until some harm manifests itself to establish a breach of 

contract action.” (Doc. 98, pp. 9–10) (internal quotation marks omitted). Defendant’s 

reliance on this case is not well-taken.

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In Eleopulos, the plaintiffs sued the defendant for “expert and site-study 

fees,” expenditures made due to suspected pollution of the plaintiffs’ land by the 

defendant. Eleopulos, 145 P.3d at 1158. The court of appeals found that the fees 

were “expenses incurred in preparation for trial and . . . not recoverable as 

damages” for the plaintiffs’ breach of contract claim. Id. at 1160.

Here, Breland’s paying of the taxes was not in preparation for trial. Nor was 

his payment based on speculation that he could be harmed by Defendant’s failure to 

pay the taxes on the property. The consequences of tax delinquency are real and 

certain. It appears from the plethora of documents submitted to the Court that 

Breland retained some sort of interest in the property that would be in peril should 

the government place a lien on the property or sell the land for payment of back 

taxes. In fact, Breland might have violated Utah’s duty to mitigate damages had he 

allowed the property to suffer from Defendant’s neglect. See Angelos v. First 

Interstate Bank of Utah, 671 P.2d 772, 777 (Utah 1983) (“The doctrine of avoidable 

consequences, also referred to as mitigation of damages, generally operates to 

prevent one against whom a wrong has been committed from recovering any item of 

damage arising from the wrongful conduct which could have been avoided or 

minimized by reasonable means.”). Viewing the facts in the light most beneficial to 

Plaintiffs as the non-moving party, it is apparent that Plaintiffs have likely suffered 

damages at least in the amount of the tax payment. Thus, Defendant’s main 

argument pertaining to the tax payment fails.

Perhaps Defendant’s failure to pay the property taxes was due to a lack of 

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notification by Breland, as Defendant alleges. (Doc. 98, p. 5; Doc. 103-20, pp. 9–10). 

The Utah Supreme Court has previously held that the failure to pay property taxes 

did not constitute a breach of contract when the seller never notified the buyer of 

the taxes, but the contract in that case provided for a contingency in which the 

seller elected to pay the property taxes. See Madsen v. Anderson, 667 P.2d 44, 47–

48 (Utah 1983). There is nothing in the agreement here that would indicate any 

such arrangement, and the Court is unwilling to make the factual leap it would 

take to find for Defendant. While Defendant’s representative asserts in a deposition

that the company attempted to reimburse Breland for his payment of the taxes

(Doc. 99-8, p. 7; Doc. 103-20, p. 1), Breland argues in his affidavit that there were 

conditions to this reimbursement imposed by Defendant (Doc. 103-2, p. 4). Although 

Breland appears to state in his deposition that he would not accept a no-stringsattached repayment of the taxes unless all of the issues in the case are resolved 

(Doc. 99-1, p. 18), there is a factual dispute as to whether this offer and rejection 

occurred. This disagreement is best left for decision by the fact finder.

The Court is unaware of any statute, precedent, or contract principle that 

requires Plaintiffs to forego paying the taxes and forfeit the land in question before 

gaining the ability to sue Defendant for breach. Nor has Defendant alerted the 

Court to any such authority. Therefore, Defendant’s motion for summary judgment 

on this issue must be denied.

D. The Force Majeure Clause

As a last point, the parties disagree as to whether Defendant breached its 

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development obligation in section eight of the Agreement. It is undisputed that 

Defendant failed to invest $10,000,000 in the exploration or development of mineral 

production of the Subject Property. Section eight of the Agreement states:

8. Development Obligation. No later than December 31, 2014, 

subject to a force majeure event (inability to procure funds shall not 

constitute a force majeure event) including, without limitation, as an 

additional force majeure event, any period where the 6-month moving 

average of natural gas is below $4.25/mmBtu, which event(s) will 

temporarily excuse performance during the period of a force majeure 

event, Levada or its affiliates or assignees shall expend or contribute 

and expend at least $10,000,000 for exploration or development of 

mineral production on the Subject Property, or commence a five well 

drilling program. Payments to acquire additional leases shall not be 

applied to the $10,000,000 exploration and development requirement.

Levada shall have the option to extend this period of the exploration 

and development for two (2) consecutive, one-year periods following 

December 31, 2014 (as extended pursuant to the force majeure 

provisions set forth above), for two (2) one-time payments of $200,000 

for each such one-year period which option shall be exercised by 

written notice thereof given to Osprey prior to the expiration of the 

initial extension period. Each such payment shall accompany such 

notice.

(Doc. 99-2, p. 8; Doc. 103-1, p. 7). 

Defendant argues it is due judgment as a matter of law because the force 

majeure clause excused performance for “most of the time period between execution 

of the Agreement on May 2, 2011, and December 31, 2014,” due to depressed 

natural gas prices. (Doc. 98, p. 6). Further, due to the proclaimed excused 

performance, Defendant maintains its development obligation is excused up to some 

point in 2017 or 2018, depending on the natural gas pricing index used. Id. at 7. On 

the other hand, Plaintiffs defend their claim by arguing that the development 

obligation clause is ambiguous. Plaintiffs assert that the only way to clarify the 

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ambiguity is to ascertain the parties’ intentions through parol evidence, which is a 

material and conflicting issue of fact between the parties. (Doc. 103, p. 14).

In evaluating whether the development obligation clause is ambiguous, the 

legal standard applied in evaluating whether the Cypress Litigation clause (Section 

B) is ambiguous controls. For efficiency sake, it is not restated.

At first blush, the development obligation clause seems straightforward. But 

as Plaintiffs assert, ambiguity emerges in three aspects: (1) the natural gas index to 

be used, (2) computation of six-month moving average, and (3) how excused 

performance affects the stated deadline. (Doc. 103, pp. 14–17).

As to the natural gas index to be used, the four corners of the agreement 

show the force majeure clause excuses development for any period of time where the 

six-month moving average of natural gas is below $4.25/mmBtu. This much is clear.

Who or what dictates when the price of natural gas is below $4.25/mmBtu is 

unclear. Defendant even concedes this point. See (Doc. 98-18, p. 171:13) (Q: Now, 

what standard is it of natural gas? Does it reflect what index or standard that it’s 

tied to as the basis for the six-month moving average of natural gas? A: It does not 

specify a market). Notwithstanding this absence, Defendant maintains that there 

are “two commonly accepted indices for natural gas.” (Doc. 98, p. 6). But Defendant 

does so in a conclusory manner without reference to binding authority. And the 

Court has found no binding authority supporting Defendant’s position.

Conversely, Plaintiffs offer four additional natural gas indices and contend

that the United Kingdom Heren NBP Index (an index not cited by Defendant) “is 

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typically recognized as average for the industry standard.” (Doc. 103, p. 15). 

Plaintiffs cite the Heren NBP Index in the same conclusory manner. Based on the 

agreement giving no clear indication as to the index to be used and the parties’ 

differing positions, the Court finds the Agreement ambiguous as to the natural gas 

index that dictates when the force majeure clause excuses development of the 

property.

Even though there is ambiguity, the Court must decide whether Plaintiffs’ 

interpretation is tenable. In other words, could the price of Utah natural gas be 

based on an index unrelated to Utah. This question can be answered in the 

affirmative. Viewing the evidence in the light most favorable to Plaintiffs, the nonmoving party, the fungible commodity in question could trade in numerous markets, 

around the world, at widely varying prices. See (Doc. 103-2, p. 3) (Breland stating 

he believed the natural gas would be sold internationally). This differs from, say, a 

unique commodity that is priced by only one index or shares of stock that are only 

listed on one exchange. And given the number of indexes available, to say that 

Defendant’s cited indices are the only indices that could apply is not tenable. 

Therefore, because the agreement fails to identify the controlling index, extrinsic 

evidence is needed to determine the intent of the parties, preventing this Court 

from granting summary judgment to Defendant. See Faulkner, 665 P.2d at 1293 

(finding summary judgment improper if a factual issue of what the parties intended 

is present).

The second point of potential ambiguity in the development obligation clause 

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concerns how the “6-month moving average of natural gas” is calculated. Such an 

elementary calculation becomes ambiguous with the absence of key term 

definitions. For instance, the contract uses the term “period” in computing the 

average index price but gives no definition for what makes up a period. As 

Defendant points out, even if mistakenly, a period may vary depending on index 

used. See (Doc. 98, pp. 6–7) (stating that the Platts’ Questar Rocky Mountain 

weighted average uses a daily period and the Henry Hub index uses a weekly 

period). The type of period used in computing the average is material and 

fundamental in evaluating whether the development obligation is excused by the 

force majeure provision. As with the applicable natural gas index, extrinsic evidence 

is needed to determine the intent of the parties. 

The third point of potential ambiguity in the development obligation clause is 

how an excused “period” of performance affects the December 31, 2014 development 

obligation deadline. As stated above, Defendant contends that its development 

obligation was “temporarily excuse[d]” and its deadline is extended to sometime in 

2017 or 2018.

It is beyond dispute that the plain language of the agreement contemplates 

some type of extension of the development obligation deadline. There is no clear 

answer beyond this. As Plaintiffs point out, there is a question as to whether the 

excused period(s) extend(s) the development deadline day for day, week for week, 

etcetera or whether performance was merely excused and the December 31, 2014

deadline is in place. (Doc. 103, pp. 17–18). A good deal of this could turn on the 

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parties’ intentions regarding the index to be used and what was intended by the 

terms within the development clause.

Therefore, the Court finds that the development clause is ambiguous and 

cannot be interpreted as a matter of law. The parties’ intentions regarding the 

ambiguities can only be resolved through extrinsic evidence. For the Court to

resolve the ambiguity would entail weighing the parties’ evidence. Such an action is 

improper in deciding the present motion. Therefore, Defendant’s motion must be 

denied on this issue.

CONCLUSION

Based on the foregoing, Defendant’s Motion for Partial Summary Judgment

(Doc. 97) is hereby DENIED.

DONE and ORDERED this 24th day of November, 2015.

/s/ Callie V. S. Granade 

UNITED STATES DISTRICT JUDGE

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