Vic Christensen Mineral Trust v. Enerplus Resources Corp. , 2022 ND 8 ( 2022 )

FILED
IN THE OFFICE OF THE
CLERK OF SUPREME COURT
JANUARY 6, 2022
STATE OF NORTH DAKOTA
IN THE SUPREME COURT
STATE OF NORTH DAKOTA
2022 ND 8Vic Christensen Mineral Trust, Plaintiff
v.
Enerplus Resources (USA)
Corporation, Defendant, Cross-Claim
Defendant, and Appellant
and
Meyer Family Mineral Trust,
Joann Deryce Struthers Trust,
and Steven J. Reed Living Trust, Defendants, Cross-Claim
Plaintiffs, and Appellees
No. 20210050
Appeal from the District Court of Dunn County, Southwest Judicial District,
the Honorable William A. Herauf, Judge.
REVERSED.
Opinion of the Court by Tufte, Justice.
Jacob F. Fischer (argued) and John P. Streelman (appeared), Denver, Colorado,
and Zachary E. Pelham (appeared), Bismarck, North Dakota, for defendant,
cross-claim defendant, and appellant Enerplus Resources (USA) Corporation.
Jon Bogner (argued) and Jordan L. Selinger (on brief), Dickinson, North
Dakota, for defendants, cross-claim plaintiffs, and appellees Meyer Family
Mineral Trust, Joann Deryce Struthers Trust, and Steven J. Reed Living Trust.
Vic Christensen Mineral Trust v. Enerplus Resources Corp.
No. 20210050
Tufte, Justice.
[¶1] Enerplus Resources (USA) Corporation (“Enerplus”) appeals from the
second amended judgment and adverse summary judgment orders holding it
liable for suspending royalty payments to Meyer Family Mineral Trust, Joann
Deryce Struthers Trust, and Steven J. Reed Living Trust (collectively, “Trust
Defendants”). Enerplus argues it was justified in suspending payments under
N.D.C.C. § 47-16-39.1, which allows for suspending payments in the event of a
dispute of title. We reverse, concluding Enerplus was justified in suspending
royalty payments to the Trust Defendants.
I
[¶2] Victor Christensen owned certain land in Dunn County, including an
area referred to as the “W1/2.” In 1952, he deeded a 5/128 royalty interest1 to
Henry Roquette for all of the oil and gas produced from the W1/2 (“Roquette
Deed”). Thereafter, Victor Christensen transferred his remaining interest in
the W1/2 to his wife, Mildred Christensen.
[¶3] In 1957, Mildred Christensen deeded the W1/2 to Joe Reed and Deryce
Reed (the “Reeds”), reserving a 4/5 mineral interest, and thereby conveying a
1/5 mineral interest to the Reeds. In 1968, Henry Roquette conveyed the 5/128
royalty interest to Mildred Christensen.
[¶4] The Vic Christensen Mineral Trust (“VCMT”) now owns the 4/5 mineral
interest in the W1/2 that was formerly owned by Mildred Christensen. The
Trust Defendants collectively own the 1/5 mineral interest previously conveyed
to the Reeds.
[¶5] Enerplus, an oil and gas producer, operates wells within the W1/2. Prior
to production, Enerplus hired a title examiner to provide a drilling title
1Enerplus disputes the size of the royalty interest on appeal. Because this issue is immaterial to our
decision, we assume without deciding that Victor Christensen deeded a 5/128 royalty interest.
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opinion. The title opinion states the royalty interest, now held by VCMT,
burdens the Trust Defendants’ interest in the W1/2; and there is a discrepancy
with the land acreage in the Roquette Deed, which affects the size of the royalty
interest. In October 2017, Enerplus informed VCMT and the Trust Defendants
of these issues, required they enter into a stipulation clarifying their ownership
interests, and suspended royalty payments to VCMT and the Trust
Defendants. VCMT and the Trust Defendants did not stipulate to the royalty
interest at that time.
[¶6] In January 2019, VCMT sued the Trust Defendants to quiet title,
alleging it owns the royalty interest on the Trust Defendants’ 1/5 mineral
interest in the W1/2, and the royalty interest is larger than 5/128 based on the
Roquette Deed. The Trust Defendants counterclaimed to quiet title, alleging
their 1/5 mineral interest has no royalty burden. In April 2019, VCMT and the
Trust Defendants stipulated to their interests with VCMT agreeing to forgo
any rights to the royalty interest. Enerplus then paid VCMT and the Trust
Defendants their suspended royalty payments.
[¶7] The Trust Defendants sought statutory interest from Enerplus for
suspending their royalty payments. After cross-motions, the district court
granted summary judgment in favor of the Trust Defendants and against
Enerplus. Enerplus appeals the orders granting summary judgment holding it
liable for suspending payments to the Trust Defendants.
II
[¶8] Our summary judgment standard of review is well established:
Summary judgment under N.D.R.Civ.P. 56 is a procedural
device for the prompt resolution of a controversy on the merits if
there are no genuine issues of material fact or inferences that can
reasonably be drawn from undisputed facts, or if the only issues to
be resolved are questions of law. Summary judgment is
appropriate if the issues in the case are such that the resolution of
any factual disputes will not alter the result. Whether the district
court properly granted summary judgment is a question of law
that we review de novo on the entire record. On appeal, this Court
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decides whether the information available to the district court
precluded the existence of a genuine issue of material fact and
entitled the moving party to judgment as a matter of law.
Hild v. Johnson, 2006 ND 217, ¶ 6, 723 N.W.2d 389 (citations omitted).
A
[¶9] Enerplus argues the “safe harbor” provision of N.D.C.C. § 47-16-39.1
applies, rendering its suspension of royalty payments to the Trust Defendants
lawful. Section 47-16-39.1, N.D.C.C., provides that an operator’s obligation
under an oil and gas lease to pay oil and gas royalties to the mineral owner is
“of the essence.” A breach of the obligation may constitute grounds for
cancellation, but if cancellation is not sought, failure by the operator to pay
within 150 days after oil or gas produced is marketed shall accrue interest on
the unpaid royalties at the rate of 18 percent per annum until paid. Id. The
safe harbor provision provides, “This section does not apply . . . in the event of
a dispute of title existing that would affect distribution of royalty payments, . . .
however, the operator shall make royalty payments to those mineral owners
whose title and ownership interest is not in dispute.” Id. (emphasis added). The
district court concluded the safe harbor provision did not apply, stating:
The dispute of title between VCMT and the Trust Defendants
comes solely as a result of the actions of Enerplus and its title
attorney. Had the title opinion been correct in the first place and
had there been no erroneous suggestions that the 5/128ths Royalty
burdened the 1/5 ownership of the Trust Defendants, there would
have been no dispute.
[¶10] Enerplus contends a dispute of title existed that would have affected
distribution of royalty payments; specifically, its title examiner’s
determination that the Trust Defendants’ 1/5 mineral interest was burdened
by VCMT’s royalty interest, and that burden was more than 5/128 interest due
to the acreage discrepancy. As a result, Enerplus informed VCMT and the
Trust Defendants of these issues, required a stipulation of interest concerning
the royalty, and suspended all payments to VCMT and the Trust Defendants.
Subsequently, VCMT sued the Trust Defendants to quiet title to the royalty
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interest, and the Trust Defendants counterclaimed to quiet title to 1/5 of the
mineral interest unburdened by any outstanding royalty. Thus, there was a
dispute of title existing that would affect distribution of royalty payments.
Applying the plain language of N.D.C.C. § 47-16-39.1, we conclude Enerplus’
suspension of royalty payments to the Trust Defendants was lawful.
[¶11] The district court and the Trust Defendants read a heightened standard
into the safe harbor provision, requiring a successful title claim to be advanced
by Enerplus, as opposed to merely a dispute of title existing. But see Leavitt v.
Ballard Expl. Co., 540 S.W.3d 164, 174 n.9 (Tex. App. 2017) (noting, “[W]e
observe that nothing in [the Texas statute] requires a payor like [the operator]
to evaluate the legal merit of a dispute, only that such a dispute exists.”). Even
if Enerplus’ alleged title dispute was ultimately unsuccessful, or the dispute
was “manufactured” by Enerplus as the Trust Defendants assert, VCMT and
the Trust Defendants sued each other to quiet title, undoubtedly creating a
“dispute of title” that would affect their royalty payments from Enerplus.
Accordingly, Enerplus lawfully suspended royalty payments to the Trust
Defendants.
B
[¶12] Enerplus argues the district court erred by concluding Enerplus
wrongfully withheld payment on the undisputed 123/128 royalty interest held
by the Trust Defendants, which was not potentially subject to the 5/128 royalty
interest. The last provision of N.D.C.C. § 47-16-39.1 provides that when there
is a dispute of title, “the operator shall make royalty payments to those mineral
owners whose title and ownership interest is not in dispute.” Because the Trust
Defendants are mineral owners whose title and ownership interest was in
dispute, this provision, by its plain language, does not apply. Thus, the court
erred in concluding Enerplus acted unjustifiably in suspending more than
5/128 of its payments to the Trust Defendants. Under N.D.C.C. § 47-16-39.1,
Enerplus was entitled to suspend all royalty payments to the Trust Defendants
derived from their 1/5 mineral interest in the W1/2.
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III
[¶13] We conclude a dispute of title existed allowing Enerplus to lawfully
suspend royalty payments to the Trust Defendants. Because there are no
genuine issues of material fact, Enerplus is entitled to judgment as a matter
of law. We reverse the district court’s second amended judgment and summary
judgment orders holding Enerplus liable for suspending royalty payments to
the Trust Defendants.
[¶14] Jon J. Jensen, C.J.
Gerald W. VandeWalle
Daniel J. Crothers
Lisa Fair McEvers
Jerod E. Tufte
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