Siana Oil & Gas Co., LLC v. Dublin Co.
Siana Oil & Gas Co., LLC v. Dublin Co.
Opinion
*139 [¶ 1] Greggory Tank appeals from an amended judgment quieting title to royalty interests in property located in McKenzie County in favor of several of the defendants ("the defendants"). We reverse the district court's amended judgment quieting title to the royalty interests in favor of the defendants and direct the entry of judgment quieting title in favor of Tank. We remand this case to the district court for determination of whether Tank is barred from the recovery of royalty payments previously made to the defendants and, if not barred, the amount of the recovery.
I
[¶ 2] In June 2014, Tank sued numerous defendants seeking to quiet title to royalty interests in proceeds from the production from an oil and gas well. Most of the defendants did not appear or settled with Tank. The remaining defendants who are the appellees in this appeal contested the quiet title action initiated by Tank.
[¶ 3] The royalty interests at issue were subject to several possible conveyances. Tank claims ownership of a 16 percent royalty interest based on an unbroken chain of title utilizing filed county records dating back to the federal fee patent. Included within that chain of title is a 1931 purchase of the property by McKenzie County under a tax foreclosure sale. The County subsequently sold and transferred the property in 1945.
[¶ 4] The defendants claim various percentages of royalty interests under a recorded 1938 assignment of an 11 percent royalty to oil and gas produced on the property. The 1938 assignment was granted by Hagen J. Carlson and Esther Carlson. The defendants responded to the complaint asserting that Tank's claim was barred by the Marketable Record Title Act ("MRTA") under N.D.C.C. ch. 47-19.1, the statute of limitations provided in N.D.C.C. § 28-01-05, adverse possession and laches. The defendants' 11 percent interest is within the interest claimed by Tank. The defendants requested a judgment in their favor quieting title to their 11 percent collective interest.
[¶ 5] The parties brought cross-motions for summary judgment. In response to Tank's motion for summary judgment, the defendants did not produce any evidence that their, or any, mineral interests had been severed from the property prior to McKenzie County's 1931 acquisition of the property through the tax lien foreclosure. The defendants did not produce any evidence of a transfer from McKenzie County to any other party after the 1931 tax lien foreclosure and before McKenzie County's sale and transfer of the property in 1945 to Tank's predecessors in interest. The defendants did contend that Tank's claim to the royalty interest failed as a matter of law, and in the alternative, that there are material questions of fact regarding the validity of McKenzie County's acquisition of the property through the tax lien foreclosure proceedings, asserting that Tank failed to prove that McKenzie County had properly served the owner of the property as required in the tax lien foreclosure proceedings.
[¶ 6] The district court granted summary judgment quieting title in favor of *140 the defendants. The order documenting the district court's determination was prepared by counsel for the defendants and summarily concluded that "all of the defenses [asserted by the defendants] are well-founded and apply." No further analysis of the defenses is provided in the order. The order stated, without analysis, that the defendants had proven the "origins" of their chain of title and Tank had failed to establish that the defendants' title was invalid.
II
[¶ 7] "Summary judgment is a procedural device used to promptly resolve a controversy on the merits without a trial if either party is entitled to judgment as a matter of law and the material facts are undisputed or if resolving the disputed facts would not alter the result."
Riedlinger v. Steam Bros., Inc.
,
[¶ 8] In deciding whether to grant summary judgment, the district court may consider the pleadings, depositions, admissions, affidavits, interrogatories, and inferences to be drawn from the evidence.
Riedlinger
,
III
[¶ 9] Tank asserts he is entitled to summary judgment as a matter of law because he can trace an unbroken chain of title from the federal fee patent to his acquisition of the property. The defendants argue that their 11 percent royalty interest was severed from the property through the 1938 conveyance and that their interests can be traced through an unbroken chain of title back to the 1938 conveyance. Tank counters that the royalty interest could not be severed from the property through the 1938 conveyance because the tax lien foreclosure in 1931 terminated any *141 interest other than McKenzie County's interest in the property.
[¶ 10] The defendants' assertion that they acquired an interest in the property through the 1938 conveyance fails for two reasons. First, the defendants did not produce any records establishing that the grantors of the 1938 conveyance, the Carlsons, ever had an interest in the property at issue. While the parties agree that the Carlsons owned an interest in adjacent property, no evidence was provided establishing how the Carlsons acquired any interest in the 11 percent royalties they allegedly conveyed through the 1938 conveyance. Absent evidence that the grantors from which the defendants' claimed ownership interest arises had an interest in the property, it is impossible to conclude as a matter of law that the 11 percent royalty interest had been severed from the property through the 1938 conveyance.
[¶ 11] Second, this Court's decision in
Payne v. A.M. Fruh Co.
,
In this case the land in question was sold to the county for the taxes for the year 1932. Subsequent tax sale certificates were issued for the years 1933, 1934 and 1935. No redemption was made for these tax sales and a tax deed was issued to Williams County in 1941. As has been stated the royalty interests of the defendants were first severed from the former owner's title to the land in the years 1936 and 1937 or after the tax lien had attached to the land. The county's tax deed therefore gave it title or color of title to the whole estate in the land including the royalty interests. Nystul v. Waller , N.D.,84 N.W.2d 584 . When Kamp purchased the land from the county in 1943, he received whatever title or color of title that the county had. Kamp entered into possession of the land in 1943 and paid the taxes thereon for more than ten years prior to the commencement of this action.
Id . at 31.
[¶ 12] In this case, no minerals were severed from the property before the 1931 tax lien foreclosure. The property was sold to McKenzie County in 1931 for the unpaid taxes for the year 1930. No redemption was made for the tax sale and a tax deed was issued to McKenzie County in 1941. The royalty interests of the defendants were allegedly severed from the land through the 1938 conveyance after the tax lien had attached to the land. The 1941 tax deed gave the County title or color of title to the whole estate in the land including the royalty interests.
Payne
,
[¶ 13] The district court appears to have placed the burden on Tank to prove that the defendants' title to their alleged royalty interest was invalid. As explained in our decision in Payne :
A tax deed is an independent grant from sovereign authority which gives a new complete and paramount title, which has nothing to do with the prior chain of title. Nelson v. Kloster ,68 N.D. 108 ,277 N.W. 390 [ (1938) ] ; Baird v. Stubbins ,58 N.D. 351 ,226 N.W. 529 ,65 A.L.R. 1009 [ (1929) ] ;
*142 Peterson v. Reishus ,66 N.D. 436 ,266 N.W. 417 ,105 A.L.R. 724 [ (1936) ]. Such a deed, by the provisions of Section 2206, C.L.1913 (the law in force when the deed in this case was executed), is "conclusive evidence of the truth of all of the facts therein recited and prima facie evidence of the regularity of all of the proceedings from the assessment and valuation of the land by the assessor up to the execution of the deed." In Twedt v. Hanson ,58 N.D. 571 ,226 N.W. 615 , 618 [ (1929) ], this court stated: "This deed being prima facie evidence of the regularity of the proceedings, we therefore presume that the notice of expiration of redemption was properly served as required by law, and the burden of proof is upon the appellant to show a contrary state of facts." It follows from what has been said above that a tax deed, valid upon its face, creates a presumptive title in the grantee to the entire estate in the land upon which the taxes for which the land was sold were a lien and that such presumption of title continues in effect until it has been overcome by the affirmative action in court, by suit or counterclaim on the part of a person who has a sufficient interest to challenge the title.
Payne
,
[¶ 14] The tax deed in this case created a presumptive title to the entire estate related to the royalties at issue in favor of Tank's predecessor in interest. That "presumption of title continues in effect until it has been overcome by the affirmative action in court, by suit or counterclaim on the part of a person who has a sufficient interest to challenge the title."
Payne
,
IV
[¶ 15] Although we have concluded that Tank has title to the property, it is necessary to address the district court's conclusion that "all the defenses [asserted by the defendants] are well-founded and apply." Those "defenses" include the assertions that Tank's claim was barred by the MRTA under N.D.C.C. ch. 47-19.1, the statute of limitations provided in N.D.C.C. § 28-01-05, adverse possession and laches.
[¶ 16] The MRTA is codified in N.D.C.C. ch. 47-19.1. Section 47-19.1-07, N.D.C.C., provides in part: "The holder of an interest in severed minerals is deemed in possession of the minerals if that person has used the minerals as defined in section 38-18.1-03 and the use is stated in the affidavit of possession provided for in this section." The defendants concede that no affidavit of possession as required by N.D.C.C. § 47-19.1-07 was recorded. As a matter of law, the defendants' failure to comply with the requirements of the MRTA prevents the MRTA from applying to this case.
See
Black Stone Minerals Co., L.P. v. Brokaw
,
*143 [¶ 17] The defendants' claim of adverse possession and affirmative defense that the statute of limitations barred Tank's quiet title action both require that the defendants had possession of the royalties. A claim for adverse possession is statutorily defined by N.D.C.C. § 47-06-03 and requires "actual open adverse and undisputed possession" by the defendants for a period of ten years. The statute of limitations relied upon by the defendants is provided in N.D.C.C. § 28-01-05 and requires Tank to have initiated within twenty years after the defendants "seized or possessed" the property. The defendants' claim of adverse possession and affirmative defense based on the statute of limitations both fail as a matter of law because the defendants did not have "possession" of the property.
[¶ 18] Tank asserts that the statute of limitations defense and adverse possession claim fail as a matter of law because a royalty interest cannot be possessed until the minerals have been extracted from the ground. The defendants assert that because royalty interests are an interest in real property, the royalty interests can be possessed. Both parties rely on our decision in
Finstrom v. First State Bank of Buxton
,
[¶ 19] In Finstrom , we stated:
Before determining whether the statute of limitations had expired on Finstrom's contract and conversion claims, we must determine what interest Finstrom appears to hold in order to determine when his rights accrued. From the facts as set forth in the record, it appears that Finstrom had a right to royalties under the lease with Jeffers for gravel mined on his land. We have held "that an unaccrued oil and gas royalty is an interest in real property." GeoStar Corp. v. Parkway Petroleum, Inc. ,495 N.W.2d 61 , 67 (N.D. 1993). The gravel royalties in the instant case are analogous to petroleum royalties. Compare NDCC § 38-11-01(2) (1987) with NDCC § 38-11.1-03(5) (1987) (recognizing both oil and gas as well as all other "valuable inert lifeless substance[s] ... found within the earth" as minerals yet promulgating different regulations for their extraction); see also NDCC § 47-10-24 (Supp. 1993) (recognizing that when specifically included, gravel is treated like all other minerals). Before severance of the gravel, the unaccrued royalty was an interest in real property. GeoStar Corp. ,495 N.W.2d at 67 ; see also Corbett v. La Bere ,68 N.W.2d 211 , 214 (N.D. 1955) (stating that royalties in oil and gas, until brought to the surface and reduced to possession are interests in real property). However, once Jeffers had extracted the gravel, Finstrom's royalty interest had accrued. See Black's Law Dictionary , 20-21 (6th ed. 1990) (defining "accrue" as meaning created, vested or matured). The severance of the gravel marks a change in the nature of any interest therein. "[A]n interest or right in accrued oil and gas royalties is personal property...." Corbett ,68 N.W.2d at 214 , see also Federal Land Bank of St. Paul v. State ,274 N.W.2d 580 , 583 (N.D. 1979) (deciding for tax purposes that " 'produced' or 'severed' minerals are personal property, not real estate"); NDCC § 41-09-05(1)(h) (Supp. 1993) (defining "goods" for UCC purposes to include "all things which are movable at the time the security interest attaches," and not including "minerals or the like (including oil and gas) before extraction") (emphasis added); 58 C.J.S. Mines and Minerals § 213 (1948) (stating that "it has usually been held that oil and gas rents and royalties are profits issuing out of the land; and, while they become personal property after they have accrued, until they accrue they are part of the estate remaining in the lessor").
*144 Upon severance of the gravel, the royalty interest accrues and becomes a personal property interest.
[¶ 20] In
Finstrom
we recognized that prior to extraction of the minerals royalty interests are interests in real property. The defendants assert that because royalties are an interest in real property they can be "possessed." The defendants' assertion ignores much of this Court's analysis in
Finstrom
. Specifically, in
Finstrom
we recognized that "it has usually been held that oil and gas rents and royalties are profits issuing out of the land; and, while they become personal property after they have accrued, until they accrue they are part of the estate remaining in the lessor."
[¶ 21] We conclude that royalty interests cannot be "possessed" until the minerals have been extracted from the ground, at which point they become personal property. Therefore, royalty interests cannot be "possessed" for purposes of the statute of limitations in N.D.C.C. § 28-01-05 or for purposes of adverse possession under N.D.C.C. § 47-06-03. Having concluded that possession could not be achieved prior to the extraction of the minerals, the defendants' claim of adverse possession and affirmative defense based on the statute of limitations were barred as a matter of law.
[¶ 22] The district court also summarily determined that the defendants' asserted defense of laches was a valid defense to Tank's quiet title action. This Court has previously recognized that an individual who holds legal title to the property is not required to take action against an adverse claim that cannot ripen into a valid claim adverse to their title.
See
Grandin v. Gardiner,
In Bailey v. Hopkins ,152 N.C. 748 ,67 S.E. 569 , 570 [ (1910) ], it is said:
"A landowner cannot be expected to bring action against every man who, while not in possession, shall declare he claims an interest in the property, under penalty to the owner after the lapse of 10 years of being barred of action for a later assertion of title."
In Secret Valley Land Co. v. Perry ,187 Cal. 420 ,202 P. 449 , 451 [ (1921) ], the Supreme Court of California in considering both laches and the statute of limitations expressed itself pertinently as follows:
"A defendant holding the legal title, or a paramount claim to the legal title, is not called upon to take action against a hostile claim which is not of a nature to ripen into a valid adverse title."
*145 Farmers' Loan & Trust Co. v. Denver, L. & G. R. Co .,126 F. 46 ,60 C.C.A. 588 [ (1903) ] ; Hays v. Marsh ,123 Iowa 81 ,98 N.W. 604 [ (1904) ].
Id . Because Tank possessed valid title to the real property he was under no obligation to take action against the defendants because their royalty interests could not ripen into a valid adverse title to the real property. The conclusion that Tank's request to quiet title to the property was barred by the doctrine of laches was erroneous.
[¶ 23] The defendants' assertion of the defense of laches with regard to royalty payments that have previously been made is a different question than the assertion of laches against Tank's quiet title action. Royalty payments accrued as the result of the operation of an oil well first in 1982 through 1983 and again from 1998 through the present date. Those payments have been made to the defendants. Until this quiet title action Tank had taken no action to recover the prior royalty payments.
[¶ 24] Laches does not arise from a delay or lapse of time alone, but is a delay in enforcing one's rights which works a disadvantage to another.
Sall v. Sall
,
[¶ 25] The defendants rely on a 1957 lawsuit filed by Tank's grandparents against the defendants' predecessors over title to the royalty interest to establish awareness of the dispute. The defendants also rely on division orders signed by Tank in 2008 and by his father in 1983 indicating royalty interests less than what Tank claims in this proceeding. The defendants assert they acted in good faith because a 2002 title opinion confirmed their title. The defendants argue they have been disadvantaged by the delay because numerous sources of testimonial and documentary evidence are no longer available. In response, Tank argues the defendants did not act in good faith because many of the deeds in their chain of title are quit claim deeds and some of the defendants acquired their interests after this litigation began. Tank also argues that the defendants did not act in good faith because they should have known the 1945 tax deed extinguished their predecessors' royalty interests, an assertion of law disputed by the defendants. Under the circumstances of this case material questions of fact and the inferences to be drawn from those facts remain and the imposition of summary judgment on the defendants' assertion of laches with regard to prior payments was not appropriate.
V
[¶ 26] We reverse the district court's amended judgment quieting title to the royalty interests in favor of the defendants and direct the entry of judgment quieting title in favor of Tank. We remand this case to the district court for determination of whether Tank is barred from the recovery *146 of all, or some, of the royalty payments previously made to the defendants and, if not, the amount of the recovery to which Tank is entitled.
[¶ 27] Jon J. Jensen
Lisa Fair McEvers
Daniel J. Crothers
Jerod E. Tufte
Gerald W. VandeWalle, C.J.
Reference
- Full Case Name
- SIANA OIL & GAS CO., L.L.C., Plaintiff v. DUBLIN CO.; Greg & Nancy Vance Family LP; Richard Lyons Moore; Michael Harrison Moore ; William Joy Charitable Trust; Stephens Scott Moore Test; Kasmer & Aafedt Oil, Inc.; Doris Muggli Trust; Kirby Family Trust; Ashley Resources; Evelyn Margaret Rauch; Brenda Hecht Chupp; Daniel McCarthy Trust; Perrine 850II Trust; Cheryl Miltonberger; Rollin A. Warner; James L. Taylor; Edgar J. Cooper; William H. Wallraff; Dana C. Eckenback; O.H. Olson; O.B. Herigstad; Marsha R. Butler McGovern; Craig McGovern; Kirk McGovern; Oscar Herum; Rensch Family Mineral Trust; Larry R. Swan; Lisa M. Swan; Scott M. Swann; Avalon North LLC; Dakota West Energy LLC ; Timothy P. Olson; Barbara A. Kelly; Gregory F. Olson; John M. Landry; Laura Conzet; Donna Landry Sorenson; Hazel Jean Babier Life Estate; Lary & Fay Moberg; James Moberg ; Belden Moberg; Tyrell Moberg; John Moberg; Kerry Stone; Melissa Fevold; Chandra Stone ; Alletta Stone; Jenica Stone; Celeste Stonecipher; Marilyn Querciagrossa; Anthony Querciagrossa; Kimberly Querciagrossa; Michael Querciagrossa; Gerry Hammond ; Corrina Beesley-Hammond; Kimberly Murillo; Joseph Paul Huber; Kathleen Patricia Huber Garvin; And Kelly H. Baxter Estate, Defendants and Robert J. Kellogg; Joseph R. Kellogg; Terry L. Harris ; Defendants and Appellees and Greggory G. Tank, Defendant and Appellant Greggory G. Tank, Plaintiff and Appellant v. ABH Baxter LP AKA Baxtro LLC AKA Blairbax LLC AKA Buffy Energy LLC, Terry L. Harris, 4M Minerals, LLLP, Joseph R. Kellogg, Robert J. Kellogg, Defendants and Appellees and Sarah Anderson, Ashley Resources, Inc., Avalon North LLC, Hazel Jean Bahler, Sandra Bahler Byrd, Corrina Beesley-Hammond, the Bishop of Bismarck Diocese, Lucille Broyles, Chaparral Energy LLC, Brenda Hecht A/K/A Brenda Hecht Chupp, Laura Conzet, Edgar J. Cooper A/K/A Edgar J. Couper, Dakota West Energy LLC, the Dublin Company, Dana Eckenbeck, Melissa Fevold, Kathleen P. Huber-Garvin, Gerry Hammond, Brenda Hecht, Carol Ann Hedberg-Nayes, Elaine Lenore Hedberg-Anderson, Laurenitus Arthur Hedberg, Greg W. Hennessy, James R. Herigstad, Oscar Herum, H.H. Hester, Pringle Family Mineral Trust, Jane F. Hirst, Trustee, the Personal Representative of the Estate of Bernice Huber, Joseph Paul Huber, the Personal Representative of the Estate of Paul J. Huber, Douglas C. Jarrett, Kasmer & Aafedt Oil, Inc., Barbara A. Kelly, Kirby Family Trust, Virginia J. Kirby and Jerry L. Kirby as Co-Trustees, Trust B Created by Last Will and Testament of Ward M. Kirby Dated August 30, 1984, Virginia J. Kirby and Jeffrey K. Kirby, as Co-Trustees, J. H. Kline, Kathy J. Kuntz, John M. Defendants and Appellees Landry, Susan Manning, Daniel McCarthy Trust U/A Dated July 9, 1976, American Bank & Trust Company, Trustee, Daniel T. McCarthy Trust, Bremer Trust, N.A., Trustee, Craig McGovern, Kirk McGovern, Marsha R. Butler McGovern, Cheryl Miltonberger, Belden Moberg, James Moberg, John Moberg, Larry Moberg and Fayann A/K/A Fay Moberg, Tyrell Moberg, Kevin Moore SSMTT GTES Exempt Trust as Revised and Restated on December 22, 2008, Kevin Moore, Trustee, Kevin Moore SSMTT Nonexempt Trust as Revised and Restated on December 22, 2008, Kevin Moore, Trustee, Michael Harrison Moore, Richard Lyons Moore, Ryan Moore SSMTT OST Exempt Trust as Revised and Restated on December 22, 2008, Ryan Moore, Trustee, Ryan Moore SSMTT Nonexempt Trust as Revised and Restated on December 22, 2008, Ryan Moore, Trustee, Doris Muggli Trust U/T/A DDT 7/18/85, Mary Ann Muggli Haws and John Muggli Co-Trustees, Trust Agreement Dated 8-21-81, Doris Muggli, Trustee, Kimberly Murillo, C.M. Nelson, Gregory F. Olson, O.H. Olson, Timothy P. Olson, Trust Agreement Dated December 22, 1937, S. Alden Perrine and Verne E. Joy, Trustees, Perrine 850II Trust, William S. Perrine and John A. Perrine, as Co-Trustees, William Joy Charitable Trust, U/D/T/DTD 11-30-88-ARI, Alden J. Perrine, Trustee, Michael Purdy, Anthony Querciagrossa, Kimberly Querciagrossa, Marilyn Querciagrossa, Michael Querciagrossa, EMR Revocable Trust Dated January 25,1978 Lloyd R. Rauch and Evelyn Margaret Rauch, Co-Trustees, Evelyn Jean Reneer, Rensch Family Mineral Trust, Harold J. Rensch, Trustee, Brian Sorenson and Donna L. Sorenson Revocable Living Trust by Declaration of Trust Dated November 9, 2011, Brian Sorenson and Donna Landry Sorenson, Trustees, Alletta Stone, Chandra Stone, Jenica Stone, Kerry Stone, Celeste Stonecipher, the Personal Representative of the Estate of Ann L. Swan, Lisa M. Swan, Scott M. Swan, Helen Webster, Personal Representative of the Estate of James L. Taylor, Greg and Nancy Vance Family Limited Partnership, Jeffrey Vanlaningham, William H. Wallraff, Rollin A. Warner, J.C. Zeller, Sharon Sketting, Personal Representative of the Estate of J.H. Klein, Joan R. Toohey, Personal Representative of the Estate of J.C. Zeller and Ruth Wallrath and Executrix of the Estate of J.C. Zeller, the Personal Representative of the Estate of H.H. Hester, Stephen W. Pollard, Personal Representative of the Estate of Rollin A. Warner, the Personal Representative of the Estate of James L. Taylor, Charger Resources LLC, Siana Oil & Gas Co., LLC, All Other Persons Unknown Claiming Any Estate or Interest In, or Lien or Encumbrance Upon, the Property Described in the Complaint, Defendants
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- 3 cases
- Status
- Published