Highpointe Energy, LLC. v. Viersen

• Decision Date: 02 June 2021
• Docket Number: No. 119,385,119,385
• Parties: HIGHPOINTE ENERGY, LLC., Plaintiff/Appellee, v. Ralph W. VIERSEN III, Patsy Ann Viersen Brown, Shelly A. Minahan, Trustee of the M.A. Viersen Revocable Trust, Dated May 16, 2007, the foregoing if living, but if deceased, then the unknown heirs, executors, administrators, devisees, trustees, grantees, successors, and assigns of such deceased person or persons HLR Oil & Gas, LLC., Keystone Energy Partners, LLC., Okmulgee Minerals, LLC., Viersen Oil & Gas Co., the foregoing if in existence and if not in existence then the unknown officers, successors, and assigns of such entity, Defendants/Appellants, v. Wake Energy, LLC, and Cline Living Trust dated October 13, 1997. Third-Party Defendants/Appellees.
• Court: Oklahoma Supreme Court

489 P.3d 28

HIGHPOINTE ENERGY, LLC., Plaintiff/Appellee,

v.Ralph W. VIERSEN III, Patsy Ann Viersen Brown, Shelly A. Minahan, Trustee of the M.A. Viersen Revocable Trust, Dated May 16, 2007, the foregoing if living, but if deceased, then the unknown heirs, executors, administrators, devisees, trustees, grantees, successors, and assigns of such deceased person or persons HLR Oil & Gas, LLC., Keystone Energy Partners, LLC., Okmulgee Minerals, LLC., Viersen Oil & Gas Co., the foregoing if in existence and if not in existence then the unknown officers, successors, and assigns of such entity, Defendants/Appellants,

v.Wake Energy, LLC, and Cline Living Trust dated October 13, 1997. Third-Party Defendants/Appellees.

No. 119,385

Supreme Court of Oklahoma.

FILED JUNE 2, 2021

W. Blake Hulse, Oklahoma City, Oklahoma, for Plaintiff/Appellee, Highpointe Energy, LLC.

Robert Inglish, Okmulgee, Oklahoma, MaryGaye LeBoeuf, Oklahoma City, Oklahoma, for Defendants/Appellants, Ralph W. Viersen, III, Pasty Viersen Brown, M.A. Viersen Revocable Trust, HLR Oil & Gas, LLC., Okmulgee Minerals, LLC., and Viersen Oil & Gas.

Treavor R. Henson, Tulsa, Oklahoma, for Third-Party Defendant/Appellee, Cline Living Trust.

Travis P. Brown, David M Mahaffey, Lincoln, C. Hatfield, J. Matt Hill, Oklahoma City, Oklahoma, for Third-Party Defendant/Appellee, Wake Energy, LLC.

KAUGER, J.:

¶1 This cause concerns a dispute over the title of approximately ninety net mineral acres located in McClain County, Oklahoma. It centers around two different chains of title stemming from the same property — one chain resulted from a 1930's foreclosure action and sheriff's deed, and the other chain stemmed from a 1930's bankruptcy proceeding. The dispositive issue in this quiet title action is which chain of title is superior.¹ We hold that because the bankruptcy purchasers could hold no greater rights than the bankruptcy trustee held, the purchasers from the mortgage foreclosure proceeding/sheriff's sale hold the superior title.

FACTS

¶2 The disputed oil, gas, and mineral interests are located in McClain County, Oklahoma, in the SW/4 and the SW/4 SW/4 SE/4 in Section 20, Township 9 North, Range 4 West (collectively, disputed property/mineral interests). McClain County, Oklahoma, is located in the south central portion of the State. The history of the disputed property, insofar as this cause is concerned, began in 1923. On September 29, 1923, Carry Hughes (Hughes), owned the disputed property.² Hughes executed a mortgage covering all surface and mineral interests in the property to The Pittsburg Mortgage Investment Company which was recorded with the McClain County Clerk on October 9, 1923. Later in October of 1923, Pittsburg assigned its mortgage interest in the disputed property to The Women's Home Missionary Society of the Methodist Episcopal Church (the Missionary). The Missionary's assignment was filed of record on January 29, 1925.

¶3 It appears that, beginning in 1927, Hughes also started selling portions of her interests in the disputed property to others. One such purchaser, the Cal-Cul Oil Company, an Okmulgee, Oklahoma corporation (Cal-Cul) is reflected by a January 4, 1927 deed. Okmulgee, Oklahoma, is located in the eastern part of the State. By January of 1933, Cal-Cul, appears as the successor in interest to some of Hughes' interests, as do the Central National Bank of Okmulgee, Sunray Oil Company, and other individuals as well.

¶4 On July 14, 1933, Cal-Cul was adjudged bankrupt in the United States District Court for the Eastern District of Oklahoma, and the court appointed R.E. Lee, as bankruptcy trustee (Trustee) for the company. Subsequently, in April of 1936, while the bankruptcy was ongoing, the Missionary initiated foreclosure proceedings on the disputed property in the McClain County District Court. Hughes, Cal-Cul, the Central National Bank of Okmulgee, Sunray Oil, and several other individuals were listed as defendant/interest owners in the disputed property in the foreclosure proceeding. The Trustee accepted service of the summons in the foreclosure action on behalf of Cal-Cul on May 5, 1936. Apparently, the Trustee neither filed notice of the bankruptcy in the McClain County Clerk's office, nor published notice of the bankruptcy in a McClain County newspaper.

¶5 Both the foreclosure proceedings and the Cal-Cul bankruptcy proceedings were ongoing at the same time in two different courts, in two different parts of the State. It is from these two proceedings in which the two different chains of title to the disputed property initiated.

¶6 The Trustee sold Cal-Cul's assets, including an undivided 2/3 mineral interests to Sam K. Viersen, and an undivided 1/3 to The Central National Bank of Okmulgee, Oklahoma. Okmulgee Minerals, LLC, later acquired The Central Bank's interest in the property, and various family members of Sam Viersen ended up with interests in the disputed property as well. The Trustee's sale of Cal-Cul's interest in the disputed property is reflected in a Trustee Deed, dated October 22, 1937. We refer to this chain of title as the "Viersen" chain.³

¶7 The other chain of title originated out of the foreclosure action and subsequent sheriff's deed. On February 14, 1938, the Missionary obtained a judgment in the foreclosure action, resulting in title to the disputed property. We refer to this chain as the "Missionary" chain. Subsequently, through various conveyances which are not clearly laid out in the record, plaintiff, Highpointe Energy (Highpointe), and the third-party defendant, Wake Energy (Wake), allege that they ended up with portions of interests in the disputed property through the Missionary chain.

¶8 On April 9, 2019, Highpointe Energy filed a quiet title action in the District Court of McClain County, Oklahoma. Highpointe sought to have itself declared the superior interest of the disputed land. Highpointe alleged it received its interest in land pursuant to a Mineral Deed located at Book 2332, Page 232, in the Office of the McClain County Clerk.

¶9 On June 3, 2019, the Viersens answered, and filed a quiet title counterclaim against Highpointe Energy, and a quiet title cross-claim against Wake Energy as a third-party defendant. At some point, another third-party defendant, the Cline Living Trust (Cline), who apparently also claimed some interest through the Missionary chain, was added to the cause. The Viersens argued that Highpointe Energy did not acquire any interest in the disputed land; and any interest Wake Energy or Cline might assert is inferior to the Viersen's interest.

¶10 On June 28, 2020, the Viersens filed a Motion for Summary Judgment. The trial court held a hearing on January 13, 2021, and filed its journal entry of judgment on February 1, 2021. It found that the foreclosure by the Missionary, with notice to the Trustee and Central National, was effective and that it foreclosed the interests of the Viersen chain. It also determined that any equitable considerations are entirely in favor of Highpointe Energy, Wake, and Cline due to the Trustee's unclean hands and various failures in exercising his duties as trustee. The Viersens filed an appeal on March 1, 2021, and we retained the cause on March 2, 2021. The cause was assigned to this chamber on March 30, 2021, without additional briefing ordered.

BECAUSE THE BANKRUPTCY PURCHASERS COULD HOLD NO GREATER RIGHTS THAN THE BANKRUPTCY TRUSTEE HELD, THE MORTGAGE FORECLOSURE PURCHASERS HOLD THE SUPERIOR TITLE.

A.Standard of Review.

¶11 An action to quiet title is of equitable cognizance, and the judgment of the trial court will be affirmed unless found to be against the clear weight of the evidence.⁴ Questions of law are reviewed by a de novo standard.⁵

B.Our Previous Ruling Involved Some Of The Same Parties, The Same Bankruptcy Proceeding, And The Same Trustee As This Cause.

¶12 In 1963, the Court, in Viersen v. Boettcher, 1963 OK 262, 387 P.2d 133, reviewed a similar cause involving the same Cal-Cul bankruptcy proceeding and, consequently, the same bankruptcy trustee as this cause. Viersen also concerned a quiet title action between the plaintiffs Boettchers, and the defendants Sam K. Viersen and Central National Bank of Okmulgee. [The same bank and Viersen found in this chain of title are the same parties in the Viersen Chain of title.]

¶13 The property at issue in Viersen was mineral (royalty) interests under a quarter section of land in Roger Mills County, Oklahoma. As a result of the Cal-Cul bankruptcy, two chains of title also developed. Federal Mortgage Loan Company held a mortgage to the property and assigned it to William Sharp. While under the mortgage, the property owners sold an undivided one-half interest in the minerals to the Cal-Cul Oil Company.

¶14 One chain developed after the Trustee sold the property out of the Cal-Cul bankruptcy to Viersen, without actual knowledge or service of notice of the bankruptcy proceedings or the trustee's sale given to the mortgagor, Sharp. The second chain developed when Sharp foreclosed on the mortgage and the Boettchers purchased the property at the sheriff's sale, pursuant to the mortgage foreclosure judgment. The trial court determined that title belonged to the chain resulting from the sheriff's sale — the Boettchers.

¶15 On appeal, this Court first examined the trustee's sale because it was first in time, setting forth the following rules:

1. Generally, unless the bankruptcy sale is specifically free from liens, only such rights, title and interest as the bankrupt held and owned at the time of the bankruptcy as passed to the trustee, are acquired, subject to any outstanding liens, charges or encumbrances valid and enforceable as against the trustee;

2. If the sale is not expressly ordered to be free and clear of liens, it is a sale subject to liens, and the trustee has no superior rights than the bankrupt had, nor is the trustee regarded as an innocent purchaser for value, without notice of such liens and encumbrances;

3. A

...