Johnson v. Hovland

• Decision Date: 22 March 2011
• Docket Number: No. 20100043.,20100043.
• Parties: Mary K. JOHNSON, Robert G. Liebl, Gregory D. Liebl and DeAnn R. Liebl, Plaintiffs and Appellantsv.Bertha HOVLAND, Lambert Hovland, and all other persons unknown claiming any estate in or lien or encumbrance upon the property described in the Complaint, Defendants and Appelleesv.EOG Resources, Inc., Intervenor Defendant.
• Court: North Dakota Supreme Court

795 N.W.2d 294

2011 ND 64

Mary K. JOHNSON, Robert G. Liebl, Gregory D. Liebl and DeAnn R. Liebl, Plaintiffs and Appellants

v.Bertha HOVLAND, Lambert Hovland, and all other persons unknown claiming any estate in or lien or encumbrance upon the property described in the Complaint, Defendants and Appellees

v.EOG Resources, Inc., Intervenor Defendant.

No. 20100043.

Supreme Court of North Dakota.

March 22, 2011.

Zachary Evan Pelham (argued) and Patrick W. Durick (on brief), Bismarck, N.D., for plaintiffs and appellants.Kevin Joseph Chapman, Williston, N.D., for defendants and appellees.KAPSNER, Justice.

[¶ 1] Mary Johnson, Robert Liebl, Gregory Liebl and DeAnn Liebl (collectively, “Liebls”) appeal from a summary judgment entered in favor of the heirs and devisees of Lambert Hovland and Ritter, Laber & Associates, Inc. (collectively “Hovlands”), determining the ownership of certain mineral rights in real property. Because the district court did not err in denying the Liebls' motion to amend their complaint to allege a claim for reformation of a deed and in granting the Hovlands' motion for summary judgment, we affirm.

I

[¶ 2] In 1976, Mathilda Olson conveyed a 50 percent mineral interest in real property in Mountrail County to her daughter, Bertha Hovland. At the time, Bertha Hovland was married to Lambert Hovland. The mineral deed transferring the interest to Bertha Hovland was executed on March 22, 1976, and recorded on March 23, 1976. Two days later, on March 25, 1976, the mineral deed was re-recorded, but containing additional language stating an intention to grant Bertha Hovland a life estate in the 50 percent mineral interest with the remainder going to the Liebls. The re-recorded deed had not been re-signed or re-acknowledged before a notary public. The Liebls are the children and grandchildren of Bertha Hovland from a prior marriage. Under the additional language, Mary Johnson and Robert Liebl, Bertha's children, each received a one-third remainder interest in the conveyance, and Gregory Liebl and DeAnn Liebl, Bertha's grandchildren, each received a one-sixth remainder interest. Bertha Hovland died intestate in 1978, and Lambert Hovland died in 1983. Neither Bertha Hovland nor Lambert Hovland's estate probated the mineral interest at issue.

[¶ 3] In 1978, the Liebls each executed a ratification of an oil and gas lease that Bertha Hovland had entered into in 1976, as having or claiming to have “some right, title or interest in or to the property covered by said Oil and Gas Lease” in the property at issue. In 1990, the Liebls each executed a “Stipulation of Interest” each asserting their respective ownership interest, for total of a 50 percent interest in the property's mineral rights. In 1992, the Liebls each executed an “Oil and Gas Lease” asserting their 50 percent mineral interest ownership in the property. In May 2007, the Liebls executed a “Paid–Up Oil and Gas Lease” with EOG Resources' predecessor, Contex Energy Company, again asserting they own 50 percent of the mineral rights.

[¶ 4] In 2008, the Liebls commenced this action to quiet title to the mineral rights they claimed under the 1976 recorded mineral deeds. Ritter, Laber & Associates answered, seeking affirmation of its interest in the property by virtue of oil and gas leases from heirs and devisees of Lambert Hovland.

[¶ 5] The Hovlands and the Liebls both moved for summary judgment. The Hovlands asserted the mineral deed re-recorded in 1976 was ineffective, and they claimed an ownership of half of Bertha Hovland's original 50 percent mineral interest derived from Lambert Hovland's interest under North Dakota's intestacy laws in effect when Bertha Hovland died. The Liebls claimed their interest under the re-recorded mineral deed in 1976 and also moved to amend their complaint to seek reformation of the first recorded mineral deed.

[¶ 6] The district court granted summary judgment in favor of the Hovlands' claimed interests and denied the Liebls' motion to amend their complaint to assert a claim for reformation of the original 1976 deed. The court concluded the re-recorded mineral deed was invalid and reformation of the first recorded mineral deed was barred by the statute of limitations. The district court held that “at the time of Bertha Hovland's death, one-half of the 50% mineral interest (i.e., 1/4th interest) conveyed to Bertha by Mathilda in 1976 passed to Bertha's husband, Lambert, under intestate succession, N.D.C.C. § 30.1–04–02(4); the remaining one-half of her 50% mineral interest (i.e., 1/4th interest) passed to Bertha's heirs at law under intestate succession, N.D.C.C. § 30.1–04–03.” The court quieted title in the mineral interests, granting a one-fourth interest in the minerals, 1/2 of the 50 percent interest, to the Liebls and a one-fourth interest to the Hovlands.

II

[¶ 7] We review a district court's decision granting summary judgment de novo on the entire record. Davis v. Enget, 2010 ND 34, ¶ 5, 779 N.W.2d 126. Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.” N.D.R.Civ.P. 56(c); see also Dahl v. Messmer, 2006 ND 166, ¶ 8, 719 N.W.2d 341 (“[W]e must consider the substantive evidentiary standard of proof when reviewing a motion for summary judgment.”). In deciding whether summary judgment was properly granted, this Court views the evidence in the light most favorable to the party opposing the motion. Davis, at ¶ 5. The opposing party is also given the benefit of favorable inferences that can be reasonably drawn from the record. Id. [¶ 8] Here, the Liebls also sought to amend their complaint. Under N.D.R.Civ.P. 15(a), once a responsive pleading has been served, a complaint may only be amended by leave of court or by written consent of the opposing party. A district court has wide discretion in deciding whether to permit amended pleadings after the time for an amendment has passed. Darby v. Swenson Inc., 2009 ND 103, ¶ 11, 767 N.W.2d 147. We will not reverse the district court's decision whether to grant a party's motion to amend unless there is an abuse of discretion. Id. A district court abuses its discretion when it acts arbitrarily, unconscionably, or unreasonably, or when its decision is not the product of a rational mental process leading to a reasoned determination. Farmers Alliance Mut. Ins. Co. v. Hulstrand Const., Inc., 2001 ND 145, ¶ 10, 632 N.W.2d 473. When a proposed amendment would be futile, the district court does not abuse its discretion in denying a motion to amend the complaint. Darby, at ¶ 12.

[¶ 9] This Court has also described the standard to be applied when a party moves to amend its complaint in response to an opposing party's summary judgment motion:

If leave to amend is sought before discovery is complete and neither party has moved for summary judgment, the accuracy of the ‘futility’ label is gauged by reference to the liberal criteria of Federal Rule of Civil Procedure 12(b)(6). In this situation, amendment is not deemed futile as long as the proposed amended complaint sets forth a general scenario which, if proven, would entitle the plaintiff to relief against the defendant on some cognizable theory. If, however, leave to amend is not sought until after discovery has closed and a summary judgment motion has been docketed, the proposed amendment must be not only theoretically viable but also solidly grounded in the record. In that type of situation, an amendment is properly classified as futile unless the allegations of the proposed amended complaint are supported by substantial evidence.

Id. (quoting Hatch v. Dep't for Children, Youth and Their Families, 274 F.3d 12, 19 (1st Cir.2001) (citations omitted)). “Other courts have explained that an amendment is futile for purposes of determining whether leave to amend should be granted, if the added claim would not survive a motion for summary judgment.” Darby, at ¶ 13 (citations omitted).

III

[¶ 10] The dispositive issue on appeal is whether the district court abused its discretion in denying the Liebls' motion to amend their complaint to assert a claim for reformation. The Liebls argue the district court erred in denying their motion to amend their complaint to assert a reformation claim after concluding reformation of the initial 1976 mineral deed was barred by the statute of limitations and, in essence, would be futile. The Liebls contend they have a valid claim for reformation of the initial deed.

[¶ 11] Section 32–04–17, N.D.C.C., provides the statutory basis for reformation:

When, through fraud or mutual mistake of the parties, or a mistake of one party which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised on the application of a party aggrieved so as to express that intention so far as it can be done without prejudice to rights acquired by third persons in good faith and for value. “Reformation is an equitable remedy used to rewrite a contract to accurately reflect the parties' intended agreement.” Spitzer v. Bartelson, 2009 ND 179, ¶ 22, 773 N.W.2d 798. This Court has recognized that “equity will grant remedial relief in the nature of reformation of a written instrument, resulting from a mutual mistake, when justice and conscience so dictate.” Ell v. Ell, 295 N.W.2d 143, 150 (N.D.1980). Whether a contract contains a mistake sufficient to support a reformation claim is a question of fact. See Spitzer, at ¶ 23; Heart River Partners v. Goetzfried, 2005 ND 149, ¶ 15, 703 N.W.2d 330.

[¶ 12] The party seeking reformation of a written instrument must establish by clear and convincing evidence that the document does not state the parties' intended agreement. Spitzer, 2009 ND 179, ¶ 24, 773 N.W.2d 798; Heart River Partners, 2005...