Beavers v. Walters

Decision Date11 September 1995
Docket NumberNo. 940131,940131
Citation537 N.W.2d 647
PartiesJ.W. BEAVERS, Jr., as Trustee of the William Herbert Hunt Trust Estate, Plaintiff and Appellee, v. William D. WALTERS, Sr.; Imperial Oil of North Dakota, Inc., a corporation, Defendants and Appellants, and Marvin L. Kaiser; Russell L. Kiker, Jr.; Defendants and Appellees, and Target Energies, Inc.; an unnamed joint venture or enterprise consisting of William D. Walters, Sr., Marvin L. Kaiser, Russell L. Kiker, Jr., and possible other unknown persons; and all other persons unknown claiming any estate or interest in, or lien or encumbrance upon, the herein referred mineral estate, Defendants, Russell L. KIKER, Jr. and Marvin L. Kaiser, Plaintiffs, v. William D. WALTERS, Sr.; and Imperial Oil of North Dakota, Inc., a corporation, Defendants. Civ.
CourtNorth Dakota Supreme Court

Charles S. Miller, Jr., of Fleck, Mather & Strutz, Bismarck, for plaintiff and appellee J.W. Beavers, Jr., Trustee of the William Herbert Hunt Trust Estate.

Mark L. Stenehjem, of Winkjer McKennett Stenehjem Reierson & Forsberg, Williston, for defendant and appellant Imperial Oil of North Dakota, Inc., and Fred E. Whisenand (appearance), of McIntee & Whisenand, PC, Williston, for defendant and appellant William D. Walters, Sr.

Kermit Edward Bye, of Vogel, Brantner, Kelly, Knutson, Weir & Bye, Ltd., Fargo, for

defendant and appellee Russell L. Kiker, Jr. Appearance by Steven A. Johnson, Fargo.

SANDSTROM, Justice.

Imperial Oil of North Dakota and William D. Walters, Sr., have appealed a district court order denying their motion for judgment notwithstanding the verdict or to alter and amend the judgment and from the amended judgment ordering them to pay the William Herbert Hunt Trust Estate (Hunt Trust) $984,020.61, and to pay Russell L. Kiker, Jr., and Marvin L. Kaiser $549,630.60. We affirm.

I

In 1976, Kiker, Kaiser, Walters, and Duane Peterson secretly formed a group to invest in oil and gas interests. Walters was the leader and coordinator. Purchases were to be made in Kiker's name and profits split according to each member's capital contribution.

On January 13, 1977, Kiker, on behalf of himself, Kaiser and Walters, purchased 20 mineral acres in Dunn County from Pete and Lillian Glovatsky, and, on the same day, leased them to Target Energies, Inc., a corporation solely owned by Kaiser, and recorded the mineral deed and lease. After oil development began in 1979, Kiker distributed 37.5 percent of the oil proceeds of the Glovatsky minerals to himself, 37.5 percent to Imperial Oil (Walters' assignee), and 25 percent to Kaiser. Kiker, Kaiser, and Walters each received one-third of the proceeds of the Target lease of the Glovatsky minerals.

Shortly after the Target lease of the Glovatsky minerals was recorded, Hunt Trust sued Kiker and Target to establish the priority of its 1972 Glovatsky lease, which had been recorded in McKenzie County, but, through inadvertence, had not been recorded in Dunn County. Because of false testimony by Kaiser, Kiker's knowledge of the Hunt Trust lease was not imputed to Target and Kaiser, Disciplinary Bd. v. Kaiser, 484 N.W.2d 102 (N.D.1992), resulting in a holding that the Target lease was not subject to the Hunt Trust lease, Hunt Trust Estate v. Kiker, 269 N.W.2d 377 (N.D.1978).

In his October 1988 divorce trial, Kaiser admitted testifying falsely in the 1977 Hunt Trust trial. In December 1988, Kiker and Kaiser settled with Hunt Trust by each paying $305,500 and transferring their interests in the Target lease and the Glovatsky minerals to Hunt Trust.

In 1989, Hunt Trust sued Walters, Imperial Oil, Target, Kaiser and Kiker for damages and a quieting of title. Based upon a 1976 farmout agreement between Hunt Trust and Gulf Oil Corporation (Gulf), Gulf's successor, Chevron, U.S.A., Inc., joined in the action, suing Kiker, Kaiser, Walters, Imperial Oil and the Hunt Trust for damages. In April 1992, Kiker and Kaiser paid Chevron $850,000 for dismissal of Chevron's claims against them and for an assignment of Chevron's claims against Walters and Imperial.

Kiker and Kaiser's cross-claims against Hunt Trust were severed for separate trial. The jury found in favor of Kiker and Kaiser for $305,500. The trial court added attorney fees, and costs and disbursements, and judgment was entered for a total of $377,242.14. We affirmed the damage award and the costs and disbursements, but reversed the attorney fee award in Beavers v. Walters, 537 N.W.2d 653 (N.D.1995), which contains a more complete recitation of the factual and procedural background of this case.

Upon trial of the main action, the jury returned a verdict for Hunt Trust and for Kiker and Kaiser, as assignees of Chevron's claim, in an amount representing the total working interest income lost as a result of the Target lease being held superior to the Hunt Trust lease of the 20 Glovatsky mineral acres. Judgment was entered ordering that Hunt Trust recover $984,020.61 from Walters and Imperial Oil, and that Kiker and Kaiser, as assignees of Chevron, recover $549,630.60 from Walters and Imperial Oil. Walters and Imperial Oil appealed those parts of the judgment.

The district court had jurisdiction under Art. VI, Sec. 8, N.D. Const., and N.D.C.C. Sec. 27-05-06. This Court has jurisdiction under Art. VI, Sec. 2, N.D. Const., and N.D.C.C. Sec. 28-27-01. The appeal was timely under Rule 4(a), N.D.R.App.P.

II

Walters and Imperial Oil contend the trial court erred in prohibiting them from presenting evidence in support of their statute of limitations defense. Receiving and retaining royalties known to belong to another is a continuing tort. Young v. Young, 709 P.2d 1254 (Wyo.1985). The statute of limitations for a continuing tort does not begin to run until the tortious acts cease. See O' Fallon v. Pollard, 427 N.W.2d 809 (N.D.1988); 54 C.J.S. Limitation of Actions Sec. 177 (1987). Actions based on fraud must begin within six years after the claim for relief accrued upon the aggrieved party's discovery of the facts constituting the fraud. Westerso v. Rustad, 517 N.W.2d 404 (N.D.1994). "[A] cause of action, or claim for relief does not accrue until the aggrieved party discovers the facts which constitute the basis for its cause of action or claim for relief." Hebron Pub. Sch. Dist. No. 13 v. United States Gypsum Co., 475 N.W.2d 120, 126 (N.D.1991). Ordinarily, a plaintiff's knowledge is a question of fact. Biesterfeld v. Asbestos Corp. of America, 467 N.W.2d 730 (N.D.1991). "[T]he issue becomes one of law if the evidence is such that reasonable minds could draw but one conclusion." Wall v. Lewis, 393 N.W.2d 758, 761 (N.D.1986).

Walters and Imperial Oil contended at trial that Hunt Trust and Gulf should have known of Kaiser's perjury long before Kaiser's disclosure of it in 1988. Walters and Imperial Oil offered evidence of deeds (outside the Glovatsky chain of title) between Kiker and Kaiser to show there was a relationship between them different than they testified to in the 1977 Hunt Trust trial; evidence Gulf and Hunt Trust had the same legal counsel in 1977; evidence in a 1977 deposition, Kaiser said he had known Kiker for twelve years, he worked as a ranch hand for Kiker for five summers, he began doing legal work for Kiker in 1971, and Kiker had invested in Target two years before the Glovatsky lease; evidence Hunt Trust could have discovered by searching the records of properties adjacent to Glovatsky; a division order issued by Gulf in 1977 showed Kiker, Kaiser and Walters as three of seven mineral owners of one property; evidence William Herbert Hunt later said he "knew" Kiker and Kaiser "were lying back when it happened;" and evidence Hunt's attorney was suspicious of their testimony. The proffered evidence was insufficient as a matter of law to show knowledge on the part of Hunt Trust or Gulf that Kaiser lied about his relationship with Kiker in the 1977 Hunt Trust trial. A suspicion or intuitive sense that Kaiser lied is not the discovery of "facts which constitute the basis for [a] cause of action or claim for relief." Hebron Pub. Sch. Dist. No. 13 v. United States Gypsum Co. at 126. The trial court did not err with regard to the statute of limitations defense. The claims were not barred by the statute of limitations.

Walters and Imperial Oil made an additional argument with regard to Chevron:

"Chevron knew by August 21, 1989 that it had a potential claim, and was aware of the facts on which its claim is based as early as the fall of 1988, yet did not bring its action until September 12, 1990.... The relevant 'discovery rule' statute clearly provides that a plaintiff who is ignorant of his claim due to fraudulent concealment 'may commence an action within one year from the time the cause of action is discovered by him or might have been discovered by him in the exercise of diligence ...' N.D.CENT.CODE Sec. 28-01-24 (1991) (emphasis added). Chevron waited two years."

This Court has held N.D.C.C. Sec. 28-01-24, applies only when an action is otherwise barred by the passage of time. Phoenix Assurance Co. v. Runck, 366 N.W.2d 788 (N.D.1985). Thus, N.D.C.C. Sec. 28-01-24, does not apply to this case.

III

Walters and Imperial Oil contend the trial court erred in refusing to dismiss the claims of Kiker and Kaiser on the ground they were unlawfully attempting to profit from their own wrongdoing through the assignment from Chevron.

Walters and Imperial Oil contend Kiker and Kaiser cannot recover under their assignment from Chevron because N.D.C.C. Sec. 31-11-05(8), provides: "No one can take advantage of his own wrong." This Court has relied on that maxim in decisions holding a wrongdoer may not take advantage of his own wrong against the victim of his wrongdoing. See, e.g., Lizakowski v. Lizakowski, 307 N.W.2d 567 (N.D.1981); Ley v. First Nat'l Bank, 55 N.D. 227, 212 N.W. 841 (1927). The maxim is part of the "clean hands" doctrine of equity. 27 Am.Jur.2d Equity Sec. 137 (1966). A defendant...

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