Great Plains Royalty Corp. v. Earl Schwartz Co.

FILED
IN THE OFFICE OF THE
CLERK OF SUPREME COURT
AUGUST 4, 2022
STATE OF NORTH DAKOTA
IN THE SUPREME COURT
STATE OF NORTH DAKOTA
2022 ND 156Great Plains Royalty Corporation,
a North Dakota Corporation, Plaintiff and Appellant
v.
Earl Schwartz Company, a North Dakota
partnership, Basin Minerals, LLC, a North
Dakota limited liability company, SunBehm
Gas, Inc., a North Dakota corporation, and
Kay Schwartz York, Kathy Schwartz Mau, and
Kara Schwartz Johnson, as the Co-Personal
Representatives of the Estate of Earl N.
Schwartz, Defendants and Appellees
No. 20220052
Appeal from the District Court of McKenzie County, Northwest Judicial
District, the Honorable Daniel S. El-Dweek, Judge.
AFFIRMED AS MODIFIED.
Opinion of the Court by Crothers, Justice.
Lynn M. Boughey (argued), Mandan, ND, and James J. Coles (appeared),
Bismarck, ND, for plaintiff and appellant.
Spencer D. Ptacek (argued) and Lawrence Bender (appeared), Bismarck, ND,
for defendants and appellees Earl Schwartz Company, Basin Minerals, LLC,
and Kay Schwartz York, Kathy Schwartz Mau, and Kara Schwartz Johnson as
the co-personal representatives of the Estate of Earl N. Schwartz.
Jon Bogner (argued) and Jordan L. Selinger (on brief), Dickinson, ND, for
defendant and appellee SunBehm Gas, Inc.
Great Plains Royalty Corp. v. Earl Schwartz Co., et al.
No. 20220052
Crothers, Justice.
[¶1] Great Plains Royalty Corporation appeals from a judgment entered on
remand from this Court. Great Plains argues the district court erred in
granting quiet title, dismissing the conversion claim, and awarding costs and
disbursements. Great Plains also argues the defendants’ title claims were
barred by the statute of limitations and abandoned and the court lacked
jurisdiction to enter judgment. We direct the district court to modify the
judgment, and we affirm as modified.
I
[¶2] We provided the background of this case in Great Plains Royalty Corp.
v. Earl Schwartz Co., 2019 ND 124, 927 N.W.2d 880 (“Great Plains I”) and
Great Plains Royalty Corp. v. Earl Schwartz Co., 2021 ND 62, 958 N.W.2d 128(“Great Plains II”). The history is repeated here only as pertinent to the issues
raised in the present appeal.
[¶3] Great Plains went bankrupt in 1968 and its assets were liquidated. The
bankruptcy trustee published a notice of sale listing various assets, including
oil and gas interests. Earl Schwartz purchased the oil and gas interests, and
the bankruptcy court issued an order confirming “the sale of all assets of the
bankrupt corporation to Earl Schwartz.” The order also noted Schwartz agreed
to sell certain interests to SunBehm Gas, Inc., approving the transfer to
SunBehm directly from the bankruptcy estate. The bankruptcy court issued an
amended order confirming “the sale of all of the assets of the bankrupt
corporation included in the Notice of Sale to Earl Schwartz.” The bankruptcy
case was closed in 1974.
[¶4] The case was reopened in 2013 for Great Plains’ creditors to be paid in
full with interest. Various adversary proceedings were brought to determine
ownership of oil and gas interests. The bankruptcy court did not determine
title to the properties subject to this appeal.
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[¶5] In 2016, Great Plains sued Earl Schwartz Co. (“ESCO”) and SunBehm
for quiet title, slander of title and conversion. ESCO and SunBehm filed quiet
title cross claims. A bench trial took place in 2018, and the district court found
the bankruptcy trustee intended to sell 100% of the oil and gas interests owned
by Great Plains at the time of bankruptcy, including those not listed in the
notice of sale. This Court reversed the judgment in Great Plains I and
remanded for further proceedings to determine ownership of the properties and
other claims. 2019 ND 124, ¶ 46.
[¶6] On remand, ESCO and SunBehm argued the bankruptcy order
confirming the sale vested them with title to the properties. The district court
rejected the argument and quieted title to Great Plains. This Court vacated
the title determination and conversion claim in Great Plains II, 2021 ND 62,
¶ 33, and remanded the case “with instructions for the court to determine
whether ownership of any interests in the tracts identified in the notice of sale
passed to ESCO or SunBehm by virtue of the bankruptcy sale and confirmation
order.” Id. We directed the district court to “consider Great Plains’ conversion
claim based on the record and in light of the title determination it makes on
remand.” Id.[¶7] The parties submitted supplemental briefing on remand. Great Plains
argued ESCO’s and SunBehm’s claims were barred by the statute of
limitations, any title claims were limited to the property described in the notice
of sale, and Great Plains was entitled to damages. ESCO and SunBehm argued
the bankruptcy court’s amended order conveyed all assets included in the
notice of sale and the conversion claim should be dismissed.
[¶8] The district court found ESCO and SunBehm obtained equitable title in
all Great Plains’ interests described in the notice of sale and dismissed the
conversion claim. The court entered judgment granting ESCO and SunBehm
all right, title, and interest to the properties in the notice of sale that belonged
to Great Plains at the time of bankruptcy. The court awarded ESCO $16,703.24
in costs and disbursements.
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II
[¶9] Great Plains argues the district court lacked subject matter jurisdiction
to quiet title on properties not listed in the complaint. Great Plains also asserts
the judgment contains properties not listed in any of the pleadings, including
the counterclaims.
[¶10] The issue of subject matter jurisdiction can be raised at any time. Great
Plains II, 2021 ND 62, ¶ 12. “Subject-matter jurisdiction refers to the court’s
power to hear and determine the general subject involved in the action[.]”
Alliance Pipeline L.P. v. Smith, 2013 ND 117, ¶ 18, 833 N.W.2d 464. “A court
has subject-matter jurisdiction over a proceeding if the constitution and laws
authorize the court to hear that type of proceeding.” Id. A district court has
subject-matter jurisdiction to “hear and determine all civil actions and
proceedings.” N.D.C.C. § 27-05-06. Chapter 32-17, N.D.C.C., provides a cause
of action to quiet title and determine claims to real estate in North Dakota.
[¶11] Although cloaked as a jurisdictional issue, Great Plains’ argument really
is one about pleading. Here, Great Plains sued ESCO and SunBehm to quiet
title to three properties. ESCO filed a counterclaim seeking to quiet title to a
number of properties involved in Great Plains’ bankruptcy. The properties
listed in the district court’s judgment appear in the complaint and
counterclaims filed in this case. The district court’s jurisdiction to determine
civil claims coupled with the statutory cause of action to quiet title to real
estate provided the court with authority to resolve the issues presented.
Therefore, Great Plains’ “jurisdictional” issue is without merit.
III
[¶12] Great Plains argues the district court erred in granting quiet title.
[¶13] This appeal stems from a bench trial. The district court’s findings of fact
are reviewed under the clearly erroneous standard, and conclusions of law are
fully reviewable. Great Plains II, 2021 ND 62, ¶ 10. “A finding of fact is clearly
erroneous if it is induced by an erroneous view of the law, if there is no evidence
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to support it, or if, after reviewing all of the evidence, this Court is convinced
a mistake has been made.” Id.A
[¶14] Great Plains argues the district court disregarded the limiting terms in
the notice of sale. Great Plains asserts the interests included in the notice of
sale were for production payments only, so the court erred in awarding ESCO
and SunBehm all right, title, and interest belonging to Great Plains at the time
of bankruptcy.
[¶15] The district court found the bankruptcy trustee acquired all interest
Great Plains had in the properties listed in the notice of sale, and whatever
title Great Plains had at that time was sold to ESCO at the auction. The court
found the notice of sale included descriptions to help prospective purchasers
identify the property. In analyzing the descriptions, the court found the
property interest was more expansive than argued by Great Plains and
determined “because the bankruptcy trustee described the properties as
‘parcels’ with a legal description and not merely a well bore, this includes any
interest Great Plains may have had in the legal description.”
[¶16] At the time of the bankruptcy sale, the trustee was “vested by operation
of law with the title of the bankrupt as of the date of the filing of the petition[.]”
11 U.S.C. § 110(a) (1970). “Real and personal property shall, when practicable,
be sold subject to the approval of the court.” 11 U.S.C. § 110(f) (1970). “The title
to the property of a bankrupt estate which has been sold, as herein provided,
shall be conveyed to the purchaser by the trustee.” 11 U.S.C. § 110(g) (1970).
[¶17] Here, the notice of sale was published in various newspapers and
included a list of assets to be sold at the auction. The notice listed property by
parcel numbers and included a legal description of various properties. Some
properties specified working interests. The notice directed the public to contact
the bankruptcy trustee for “further, complete information as to description,
appraisal, production history or personal property inventory[.]”
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[¶18] In a deposition filed as an exhibit in this case, Myron Atkinson, the
bankruptcy trustee, testified as follows:
“Q. What was your understanding as a trustee as to the nature of
the title you would convey? And I’m specifically looking at, did you
provide any warranties of title or condition or anything like that
related to the assets?
A. No. I could only convey that which I held as trustee in
bankruptcy. It certainly wasn’t my expectation that we were
warranting titles.
....
Q. When you offered the properties where you were selling just
royalties, and some of those royalty interests, I believe, were
described as royalty interests in specific wells, do you recall—I
mean, was there any discussion or mention of something being sold
other than just a royalty interest in a particular well that was
named?
A. Well, first, I have no recollection of any question coming up as
to what’s the nature of the interest being offered. Is it a working
interest? Is it a royalty interest? Is it a mineral interest? I don’t
recall any discussion of that kind at all. I think, you know, I’d have
to assume that the people who were there understood what the
descriptions were and expressed their bidding interest based on
that.
Q. Would it be fair to say, then, basically the representations made
to the bidders were the fact that you published the sale list of
property to be sold and they had to evaluate them?
A. There was no representation of anything other than the
described properties on the advertised notice.
....
Q. Do you recall having any discussion with any of the bidders
about what was being advertised as opposed to what was being
sold, or were they just informed to rely on the notices that they
had?
A. I don’t recall any discussion taking place as to what the nature
of the interest was.”
[¶19] The trustee’s report of sale and petition for order confirming the sale
stated “the assets of the bankrupt estate were offered for sale” and the trustee
opened the bidding for “all of the assets of the estate.” The report states the
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trustee announced all sales were “as is” and “the Trustee warranted neither
title nor condition of the property and that the Trustee was selling merely the
interest of the bankrupt estate and no more.” The bankruptcy court’s partial
amended order confirming sale of assets states the “Referee confirms the sale
of all of the assets of the bankrupt corporation included in the Notice of Sale[.]”
[¶20] On this record, the district court’s findings are supported by evidence
and were not induced by an erroneous view of the law. Thus, the court’s
decision quieting title in favor of the defendants was not clearly erroneous.
B
[¶21] Great Plains argues the properties listed in the judgment are
inconsistent with the properties listed in the notice of sale. ESCO concedes the
judgment contains an error in the classification of certain property.
[¶22] ESCO contends the following land descriptions were not included in the
notice of sale:
“Township 160 North, Range 91 West, Burke County, North
Dakota
Section 3: SW1/4NW1/4, NW1/4SW1/4
Section 4: SE1/4NE1/4, NE1/4SE1/4
Section 10: N1/2NW1/4, NE1/4, NE1/4SW1/4, SE1/4NW1/4,
W1/2SE1/4
Section 11: W1/2NW1/4.”
Paragraph 4 of the judgment lists the aforementioned property as both
“Noticed Properties” and “Unnoticed Properties.” ESCO asserts that property
should be considered “Unnoticed Properties” because it was not included in the
notice of sale. We agree.
[¶23] Upon an appeal from a civil judgment, this Court may modify the
judgment. N.D.R.App.P. 35(a)(1); Thomas v. Thomas, 2020 ND 18, ¶ 9, 937
N.W.2d 554 (directing district court to modify judgment and affirming as
modified). We direct the district court to enter an amended judgment
correcting the classification of property by modifying paragraph 4 to remove
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Township 160 North, Range 91 West, Burke County, North Dakota, Sections
3, 4, 10, and 11 from “Noticed Properties.”
IV
[¶24] Great Plains argues the district court erred in determining the award
amount for ESCO’s costs and disbursements. We agree.
[¶25] Section 28-26-06, N.D.C.C., requires the clerk of court to tax certain costs
and disbursements as part of a judgment in favor of the prevailing party.
Section 28-26-06(2) requires disbursements for “procuring evidence necessarily
used or obtained for use on the trial[.]” “Recovery of expenses is not limited to
evidence actually introduced at trial.” Braunberger v. Interstate Eng’g, Inc.,
2000 ND 45, ¶ 18, 607 N.W.2d 904. However, recovery is limited to expenses
incurred in preparation for trial. N.D.C.C. § 28-26-06(2).
[¶26] Here, ESCO sought the payment of $6,947.06 for “Expenses of Obtaining
Evidence for Use at Trial (N.D.C.C. § 28-26-06(2)).” Its schedule of costs listed
a $4,641.40 landman fee from July 2021 and a $2,296.66 landman fee from
August 2021.1 Great Plains objected to the payment of landman fees because
they were incurred three years after trial. ESCO argued the fees were allowed
under N.D.C.C. § 28-26-06(2) because the landman was hired to gather
evidence for the evidentiary hearing ESCO requested after this Court’s remand
in Great Plains II.
[¶27] The district court did not address Great Plains’ objection to the landman
fees. The court awarded $16,703.24 in costs and disbursements against Great
Plains. That total was determined based on ESCO’s request for $20,922.74,
minus $112.50 for ESCO’s costs in the second appeal and offset by $4,107.00
for Great Plains’ cost for a successful first appeal.
[¶28] Here, trial took place in 2018 and two appeals followed. After the second
appeal, and without confirmation an evidentiary hearing would take place,
1The schedule of costs also listed a $9 fee for land records. The landman fees plus the land record fee
equals $6,947.06.
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ESCO hired a landman to assist in the production of new evidence. Our second
remand directed the district court to “reconsider Great Plains’ conversion claim
based on the record and in light of the title determination it makes on remand.”
Great Plains II, 2021 ND 62, ¶ 33. Because the landman fees were not incurred
for procuring evidence for use at trial, and because the second remand was a
consideration on the record, the district court erred in taxing the new landman
fees to Great Plains.
[¶29] Paragraph 11 in the judgment currently awards $16,703.24 in costs and
disbursements against Great Plains. The landman fees total $6,938.06. We
direct the district court to modify paragraph 11 of the judgment to subtract
$6,938.06 from the award of costs and disbursements taxed against Great
Plains.
V
[¶30] The remaining issues and arguments are either without merit or
unnecessary to our decision. The district court’s decision to quiet title in favor
of the defendants is not clearly erroneous. We modify the judgment to correct
classification of certain property and to subtract the landman fees from costs
and disbursements taxed against Great Plains. The judgment is affirmed as
modified.
[¶31] Jon J. Jensen, C.J.
Gerald W. VandeWalle
Daniel J. Crothers
Lisa Fair McEvers
Jerod E. Tufte
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