Acoma Oil Corp. v. Wilson

• Decision Date: 03 June 1991
• Docket Number: No. 900412,900412
• Citation: 471 N.W.2d 476
• Parties: ACOMA OIL CORPORATION and Clarke D. Bassett Residuary Trust, Plaintiffs and Appellants, v. Clayton D. WILSON, Jr., Allan LeRoy Wilson, and Universal Resources Corporation, Defendants and Appellees. Civ.
• Court: North Dakota Supreme Court

Page 476

471 N.W.2d 476

ACOMA OIL CORPORATION and Clarke D. Bassett Residuary Trust Plaintiffs and Appellants, v. Clayton D. WILSON, Jr., Allan LeRoy Wilson, and Universal Resources Corporation, Defendants and Appellees.

Civ. No. 900412.

Supreme Court of North Dakota.

June 3, 1991.

Dennis Edward Johnson, Watford City, for plaintiffs and appellants.

Richard P. Olson of Olson, Sturdevant & Burns, Minot, for defendants and appellees Clayton D. Wilson, Jr. and Allan LeRoy Wilson.

Jon Bogner of Kubik, Bogner, Ridl & Selinger, Dickinson, for defendant and appellee Universal Resources Corp.

ERICKSTAD, Chief Justice.

Acoma Oil Corporation (Acoma) and the Clarke D. Bassett Residuary Trust (Bassett), appeal from a district court judgment declaring that the current mineral interest owners in a 160-acre tract of land proportionately share the burden of prior assignments of a 6.5% royalty. We reverse and remand for further proceedings.

In 1915 H.O. Moen obtained fee simple title to the 160-acre tract of land in McKenzie County described as:

Township 153 North, Range 95 West

Section 20: NW 1/4

In 1937 Moen made three separate royalty conveyances, cumulatively transferring a 6.5% royalty of all oil and gas produced from the 160 acres, to third parties. The primary dispute in this case is whether the burden of that 6.5% royalty is proportionately shared by the current mineral interest owners.

Moen and his wife conveyed the 160 acres to Clayton D. Wilson, Sr., by warranty deed dated December 18, 1944, and recorded February 7, 1945. Moens' warranty deed did not reserve any mineral interests or mention the prior royalty assignments. Clayton, Sr., then conveyed the 160 acres to himself and his wife, Alma E. Wilson, as joint tenants. The parties to this lawsuit all obtained their interest in the 160 acres through conveyances originating from Clayton, Sr., and Alma Wilson.

By separate mineral deeds, both dated June 17, 1952, and recorded on June 26, 1952, Clayton, Sr., and Alma conveyed an "undivided 35/320 *h" and "an undivided 5/320th interest in and to all the 35/320 *h" and "an undivided 5/320 th interest in and to all the oil, gas, casinghead gas, casinghead gasoline and other minerals in and under" the N1/2 of Section 20 to Thomas W. Leach. The two mineral deeds identified a specific intent to convey 35 and 5 "mineral acres," respectively, in the N1/2 of Section 20. Neither mineral deed indicated that the conveyed interest was burdened by the outstanding 6.5% royalty. Both mineral deeds included the following warranty language:

"TO HAVE AND TO HOLD, The above described property and easement with all and singular the rights, privileges, and appurtenances thereunto or in any wise belonging to the said Grantee herein his heirs, successors, personal representatives, administrators, executors, and assigns forever, and Grantor do hereby warrant said title to Grantee his heirs, executors, administrators, personal representatives, successors and assigns forever and do hereby agree to defend all and singular the said property unto the said Grantee herein his heirs, successors, executors, personal representatives, and assigns against every person whomsoever claiming or to claim the same or any part thereof."

Leach obtained a title opinion, dated June 21, 1952, which noted the outstanding 6.5% royalty in the NW 1/4 of Section 20.

In July 1952 Leach executed a mineral deed to United Properties Incorporated (United), conveying "an undivided 18/320ths interest in and to all oil, gas, casinghead gas, casinghead gasoline and other minerals in and under" the N 1/2 of Section 20. The deed expressed an intent to convey "18 full mineral acres" and said that Leach agreed to "warrant and defend the title" but that he would not "be liable for a breach of warranty in an amount exceeding the actual consideration received" by him. In 1966 United conveyed that interest to Acoma by a mineral deed which included similar warranties. The deeds from Leach to United and from United to Acoma do not refer to the outstanding 6.5% royalty.

Leach also conveyed "an undivided 9/320ths interest in and to all of the oil, gas, casinghead gas, casinghead gasoline and other minerals in and under" the N 1/2 of Section 20 to Clarke D. Bassett by mineral deed dated June 24, 1952. That mineral deed expressed an intent to convey "9 full mineral acres" and also said that Leach agreed to "warrant and defend the title" but that he would not "be liable for a breach of warranty in an amount exceeding the actual consideration received" by him. That mineral deed does not refer to the outstanding 6.5% royalty. Clarke later conveyed a 3/320th interest in the N 1/2 of Section 20 to Arthur Fitzloff. Clarke's remaining mineral interest, a 6/320th interest in the N 1/2 of Section 20, was transferred to the Bassett Trust by a quiet title judgment dated January 3, 1986.

When Clayton, Sr., died on February 8, 1978, his interest in the NW 1/4 of Section 20 passed to his wife, Alma, as joint tenant. Alma died on March 11, 1984, and by probate of her estate and a personal representative's deed of distribution from her estate, dated November 25, 1986, and recorded December 16, 1986, her interest in the NW 1/4 of Section 20 passed to her sons, Clayton D. Wilson, Jr. and Allan LeRoy Wilson (the Wilson children), with each getting an undivided 1/2 interest.

Universal Resources Corporation (Universal) has operated a producing oil and gas well on the NW 1/4 of Section 20 since 1983. A dispute arose as to whether the burden of the 6.5% royalty should be shared proportionately by Acoma, Bassett, ¹ and the Wilson interests, or entirely by the Wilsons. Acoma commenced this action against the Wilson children for breach of warranty and to quiet title. Acoma sought a determination that its mineral interests in the 160-acre tract of land were not burdened by the 6.5% royalty and that the Wilson interests were burdened by that royalty. Acoma also sued Universal, seeking an accounting and recovery of overpayments by Universal to the Wilsons. Bassett intervened as a plaintiff, essentially raising the same claims and seeking the same relief as Acoma.

The parties submitted stipulated facts to the trial court. The court concluded that the rationale of Duhig et al. v. Peavy-Moore Lumber Co., 135 Tex. 503, 144 S.W.2d 878 (1940), was not applicable to this fact situation. The court observed that equitable estoppel ² applied to fact situations which did not conform to the classic Duhig scenario. The trial court applied equitable estoppel and determined that Leach was aware of the outstanding 6.5% royalty because of a contemporaneous title opinion and that he was not "destitute of all knowledge of the true state of the title [and] of the means of acquiring such knowledge." The court concluded that "[e]quity dictates that the royalty burden of six and a half percent created in 1937 by the former owner, Moen, be proportioned among the present mineral owners." The court further determined that the plaintiffs' action was untimely under Section 28-01-15, N.D.C.C. ³

We initially consider the trial court's determination that the 6.5% royalty should be proportionately shared by the present mineral owners. Acoma and Bassett contend that the trial court erred in determining that Duhig, supra, was not applicable and in determining that equitable estoppel dictated a proportionate sharing of the 6.5% royalty by the present mineral owners. Relying on Duhig, they argue that the Wilson interests should bear the entire burden of the 6.5% royalty, because Clayton, Sr., and Alma had sufficient remaining mineral interests to satisfy the outstanding 6.5% royalty when they made their conveyances to Leach.

The defendants respond that Duhig is not applicable to this case because there was no mineral reservation clause in the mineral deeds from Clayton, Sr., and Alma to Leach. They argue that the trial court correctly determined that the 6.5% royalty should be shared proportionately under equitable estoppel because Leach had actual or constructive knowledge of the outstanding royalty.

Under Duhig " 'a grantor who, by warranty deed, purports to convey a fractional mineral interest is estopped from asserting title to a reserved fractional mineral interest in contradiction to the interest purportedly conveyed.' " Mau v. Schwan, 460 N.W.2d 131, 133 (N.D.1990), citing Sibert v. Kubas, 357 N.W.2d 495, 496 n. 1 (N.D.1984). See generally 1 Williams & Meyers, Oil & Gas Law Sec. 311 et seq. (1990).

In Duhig, a third party owned an outstanding 1/2 mineral interest in certain land and the grantor owned the surface and the remaining 1/2 mineral interest. The grantor conveyed the surface to the grantee by warranty deed with a reservation of 1/2 interest in all the minerals under the surface. The grantor and grantee both claimed the 1/2 mineral interest that was not owned by the third party. The Texas Supreme Court concluded that the grantee owned the surface and a 1/2 mineral interest, the third party owned the outstanding 1/2 mineral interest, and the grantor owned nothing.

In reaching that conclusion, the court employed a two-step analysis under principles of estoppel. ⁴ The court observed that the grant clause gave the grantee all of the surface and a 1/2 mineral interest but that the reservation clause reserved a 1/2 mineral interest in the grantor. Because the grantor purported to retain a 1/2 mineral interest and the other 1/2 mineral interest was owned by a third party, the grantor breached the clause warranting title to a 1/2 mineral interest. By analogy to the doctrine of estoppel by deed against assertion of an after-acquired title, the court held that the grantor was estopped to assert the reservation of a 1/2 mineral interest.

Duhig resolves a conflict between grant and reservation clauses under principles of estoppel by warranty, a subset of estoppel by deed, which precludes a warrantor of title from...