N. Oil & Gas, Inc. v. Eog Res., Inc.
| Decision Date | 17 April 2018 |
| Docket Number | Case No. 1:16-cv-388 |
| Parties | Northern Oil & Gas, Inc., Plaintiff, v. EOG Resources, Inc., Defendant. |
| Court | U.S. District Court — District of North Dakota |
ORDER GRANTING PLAINTIFF'S MOTION TO DEFER RULING ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
Before the Court is a "Motion for Summary Judgment Dismissing Northern's Claims Because the Limitation Period Expired" filed by EOG Resources, Inc. ("EOG") on July 20, 2017. See Docket No. 22. Northern Oil & Gas, Inc. ("Northern Oil") filed a response on August 24, 2017. See Docket No. 35. EOG filed a reply to Northern Oil's response on September 7, 2017. See Docket No. 40. Northern Oil also filed a motion to defer ruling on EOG's summary judgment motion on August 24, 2017. See Docket No. 36. EOG filed a response to Northern Oil's motion for deferral on September 7, 2017. See Docket No. 39. Northern Oil filed a reply to EOG's response on September 14, 2017. See Docket No. 47. For the reasons set forth below, the Court grants Northern Oil's motion for deferral and therefore denies EOG's motion for summary judgment without prejudice.
Northern Oil is a Minnesota Corporation with its principal office in Minnesota. EOG is a Delaware corporation with its principal office in Texas. See Docket No. 1, p. 1. Northern Oil brought this diversity action against EOG in an attempt to quiet title to a mineral leasehold interest. See Docket No. 1, p. 19. Northern Oil also requests the Court declare EOG acted wrongfully when it made certain deductions from revenue payments it owed Northern Oil, and Northern Oil asks the Court to bar EOG from engaging in such conduct in the future. See Docket No. 1, p. 22.
The conveyances at issue have been the subject of litigation before North Dakota state courts. See Johnson v. Finkle, 837 N.W.2d 123 (N.D. 2013). The deed at the center of the controversy presents a classic Duhig1 scenario—a grant and a reservation, both of which cannot be satisfied because the grantor does not own enough minerals. Axel Anderson owned the surface and minerals in the following property located in Mountrail County, North Dakota:
See Docket No. 1, p. 2. In 1949, Anderson sold half of the minerals in the above-described property to L.S. Youngblood, except for the S1/2NE1/4 and the N1/2SE1/4 of Section 25, Township 158 North, Range 91 West, which he reserved to himself. See Docket No. 24-1. In 1957, Axel Anderson and his wife Norma Anderson entered into a contract for deed ("the Contract for Deed") to sell the property located in Township 158 North, Range 91 West to Henry Johnson; the Contract for Deed contained a provision stating "[t]he grantor reserves a 1/4 mineral interest .. . ." See Docket No. 24-2. On October 4, 1962, the Andersons conveyed the property described in the Contract for Deed to Johnson by warranty deed ("the Warranty Deed"). See Docket No. 1, p. 11. The Warranty Deed contained a provision that stated: "The grantor reserves a 1/4 mineral interest, including gas and oil, with the right of ingress and egress for the purposeof [sic] mining, exploring or drilling for the same." See Docket No. 24-3. Nancy Finkle has succeeded to the Anderson's interests. See Docket No. 1, p. 11. Henry Johnson's interest has been divided among his successors ("the Johnsons"). See Docket No. 1, pp. 11-12. By various oil and gas leases and assignments, Northern Oil acquired 90% of a mineral leasehold interest carved from Finkle's mineral estate; EOG acquired 100% of a mineral leasehold interest carved from the Johnson's mineral estate. See Docket No. 1, p. 12.
The Johnsons brought suit against Finkle in the Northwest Judicial District Court of North Dakota to determine ownership of the 1/2 mineral interest that remained with the Andersons after the conveyance to Youngblood. Finkle, 837 N.W.2d at 134. Finkle brought a counterclaim alleging the Warranty Deed contains a mistake and seeking reformation. Id. Although both Northern Oil and EOG's leasehold interests were of record, neither was named a party to the lawsuit. See Docket No. 1, p. 13. After reviewing various mineral leases and a 1957 delay rental stipulation, the state district court concluded reformation was unwarranted, explaining: "The fact that the Anderson family continued to convey minerals in which they no longer had an ownership interest does not establish a mutual mistake was made when the warranty deed was executed." See Docket No. 24-14, p. 14. The state district court applied the Duhig rule to the Warranty Deed and quieted title in the minerals to the Johnsons. See Docket No. 24-14, pp. 7-8 and 15. Finkleappealed and the North Dakota Supreme Court affirmed. See Finkle, at 133. Finkle then petitioned for a rehearing asserting the North Dakota Supreme Court overlooked her argument regarding the effect of the 1957 delay rental stipulation. Id. at 137. The court denied her petition, stating it "considered Finkle's argument about the delay rental stipulation but it did not change the outcome or affect the analysis." Id. at 138.
EOG drilled a number of oil and gas wells—collectively referred to as the "Lostwood Wells"—on the property in question or on lands pooled with the property in question. See Docket No. 1, pp. 15-16. Prior to the state court judgment, EOG credited Northern Oil with a leasehold interest derived from Finkle's mineral estate, and EOG had been sending Northern Oil production revenue payments. See Docket No. 1, pp. 15-16. On April 20, 2015, EOG sent Northern Oil a letter with the state court judgment enclosed. See Docket No. 35-3. The letter stated EOG would be reversing prior production revenue payments it had made to Northern Oil due to the outcome of the state action:
See Docket No. 35-3, pp. 1-2 (emphasis in original). Further correspondence between Northern Oil and EOG ensued. Northern Oil took the position that the 1957 delay rental stipulation, as well as other documents of record, indicated that the parties to the Warranty Deed intended forAnderson to reserve a 1/4 mineral interest, despite the overconveyance. Northern Oil advised EOG that "the Duhig doctrine can be overcome if a contrary intent can be demonstrated." See Docket No. 1, p. 17. Communication between the parties ultimately ceased and Northern Oil brought this action. See Docket No. 1, p. 18. Northern Oil claims EOG's reversal of prior production revenue payments was wrongful. Northern Oil also asserts the parties to the Warranty Deed intended for Anderson to reserve 1/4 interest, and thus the Duhig rule should not apply. Northern Oil asks the Court to grant a declaratory judgment in its favor. See Docket No. 1, pp. 22-23. EOG has moved for summary judgment. It argues Northern Oil's action is barred because the limitations period has expired. See Docket No. 22.
Summary judgment is appropriate when the evidence indicates no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Davison v. City of Minneapolis, 490 F.3d 648, 654 (8th Cir. 2007); see also Fed. R. Civ. P. 56(a). Summary judgment is not appropriate if there are factual disputes that may affect the outcome of the case under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The moving party always bears the burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The non-moving party may not rely merely on allegations or denials; it must set out specific facts showing a genuine issue for trial. Forrest v. Kraft Foods, Inc., 285 F.3d 688, 691 (8th Cir. 2002). The court must view the facts in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970).
The parties dispute which statute of limitation is applicable to Northern Oil's action. EOG argues that because Northern Oil has requested reformation of the Warranty Deed, the 10-year limitation period set forth in N.D.C.C. § 28-01-15 is applicable. That section states its ten-year limitation period applies to "[a]n action upon a contract contained in any conveyance . . . or instrument affecting the title to real property . . . ." The limitation period under this section commences after the cause of action has accrued. Wehner v. Schroeder, 335 N.W.2d 563, 567 (N.D. 1983).
[A] reformation action accrues, or comes into existence as a legally enforceable right, not at the time the instrument in question is executed, but at the time the facts which constitute the mistake and form the basis for reformation have been, or in the exercise of reasonable diligence should have been, discovered by the party applying for relief.
Ell v. Ell, 295 N.W.2d 143, 151 (N.D. 1980). This rule, referred to as the discovery rule, is based on an objective standard:
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