Siblings at odds before the North Dakota Supreme Court

Reservations of mineral interests in deeds is tricky business. A particular case in North Dakota was resolved only after five years of litigation — including a trial and an appeal to the state supreme court. As we have written previously, whether in Ohio or North Dakota, shale source rock and horizontal drilling seem to make mineral interests worth fighting for — even between siblings.

Background

George Tank and his wife owned property in McKenzie County, North Dakota. After his wife had passed away, George executed a quitclaim deed conveying his interest in part of his property to one of his five children — his son, Greggory Tank, who had stayed on the farm to work with his parents.

George’s quitclaim deed was captioned “(Life Estate Reserved)” and contained the following reservation clauses:

“EXCEPTING and RESERVING to the Grantor, his successors and assigns, all oil, gas and other minerals now owned by Grantor, including coal, in and under the above-described land, or any part thereof, together with the right of ingress and egress and the use of so much of the surface of the land as is reasonably necessary for the purposes of exploring for, mining, drilling, excavating, operating, developing, storing, handling, transporting and marketing such minerals. Sand, gravel and clay shall be considered part of the surface.

FURTHER EXCEPTING and RESERVING to the Grantor, the full use, control, income and possession of the described property, including without limitation, the right to lease and receive the bonuses, rentals and royalties therefrom, without liability for depletion or waste, for and during Grantor’s natural life.”

When George passed away in 2008, ConocoPhillips, the operator of an oil well on the Tanks’ property, then determined that Greggory owned the minerals. His sister, Debbora Rolla, also representative of her father’s estate, did not agree and brought a quiet title action to determine who owned the mineral interests in the subject property. Rolla v. Tank, 2013 ND 175, 2013 N.D. LEXIS 178, 2013 WL 5476826 (Oct. 2, 2013).

Both parties filed motions for summary judgment. Debbora argued the deeds conveyed the surface interest in the property to Greggory subject to a life estate in George Tank, and reserved to George Tank the entire mineral interests, which presumably would then would go via the will to the siblings. Greggory argued that the effect of the two reservation clauses was to reserve to George Tank a life estate in both the mineral interests and the surface interests, with Greggory as remainderman to the entire interest with no need to look at the will.

The lower court sided with Debbora

The district court determined the deeds were ambiguous, denied the motions, and ordered the parties to proceed to trial. Following a bench trial, in which several persons testified, the court quieted title to the property in Debbora, with this reasoning:

“The Court finds that the testimony presented shows that George’s intent was consistent with Plaintiff’s position, that being that George intended to reserve a life estate in the surface and wanted to reserve the mineral rights on lands with no current well to the children other than Defendant, and intended that Defendant would receive the surface and mineral rights on lands with a current well, and surface on lands with no well.”

Greggory appealed, pointing to the caption of the deed, “(Life Estate Reserved),” to support his argument that George Tank reserved a life estate in the oil, gas and other minerals intending that Greggory get everything. Also, as he testified at trial, that’s what his dad wanted.

The Supreme Court also sides with Debbora

Citing a 2000 Indiana case, the North Dakota Supreme Court responded that a caption on a deed “is of no effect where the conveyance is clear.” Additionally, the caption “does not conflict with our interpretation of the deeds because George Tank did reserve a life estate in the surface estate of the property conveyed.”

Then the court focused on the word “Further,” which begins the second reservation paragraph. The court said,

” ‘FURTHER’ to begin the second paragraph therefore alerts the reader that a distinction is being drawn. The second reservation paragraph does not mention ‘oil, gas and other minerals’ or ‘successors and assigns,’ but reserves ‘to the Grantor, the full use, control, income and possession of the described property, … for and during Grantor’s natural life.’ The second reservation paragraph can only refer to a life estate in the surface of the property because George Tank reserved to himself in the preceding paragraph the ‘oil, gas and other minerals.’ ”

Therefore, the court opined, Greggory’s “argument that the life estate George Tank created in the second reservation paragraph also applies to the distinct reservation of mineral interests created by the first reservation paragraph is not a reasonable interpretation.”

As for Greggory’s testimony regarding his dad’s intentions? Self-serving and, therefore, discounted.

Extrinsic evidence confirms this result

The attorney who prepared the deed testified at the trial that George Tank wanted to reserve all mineral interests for his other children. Also, the attorney testified, George Tank signed a codicil to his will to effectuate this intention and the codicil removed Greggory from the children sharing the retained mineral interests. George Tank’s accountant testified that she prepared a gift tax return for him that only valued the surface interests because George Tank wanted to reserve the mineral interests for himself.

Takeaways

The North Dakota Supreme Court could have reversed the trial court only if it found that the trial court’s holding was “clearly erroneous,” which it was not willing to do. And if it agreed with the trial court that the deed was ambiguous, a decision based on extrinsic evidence seems justified — an easier position for the court to take.

Though this outcome would seem to be the right result based on the facts, don’t take comfort. A court can look to extrinsic evidence to determine the intent of the drafter only when there is ambiguity. Ambiguity, or not, seems to be in the eye of the beholder. The challenge is to avoid it.

Could the drafter have been more explicit in this case? Perhaps. The existence of a caption implies it was a form deed with the reservations typed-in and perhaps, too brief — as proved to be the case. But sometimes elaboration or a custom-crafted deed only adds to the confusion. It’s a tough balance best left to experienced attorneys.