Nygaard v. Robinson, 10445

• Decision Date: 15 November 1983
• Docket Number: No. 10445,10445
• Citation: 341 N.W.2d 349
• Parties: Peter A. NYGAARD, Jr., and Lynette Nygaard, husband and wife, and Peter A. Nygaard, Jr., and Albert Ley, Co-Trustees of the Joan K. Walter Mineral Trust and the Mary Pauline Nygaard Mineral Trust, Plaintiffs and Appellees, v. D.G. ROBINSON and W.R. Barth, Defendants, and HNG Oil Company, Defendant and Appellant. Civ.
• Court: North Dakota Supreme Court

Page 349

341 N.W.2d 349

Peter A. NYGAARD, Jr., and Lynette Nygaard, husband and wife, and Peter A. Nygaard, Jr., and Albert Ley, Co-Trustees of the Joan K. Walter Mineral Trust and the Mary Pauline Nygaard Mineral Trust, Plaintiffs and Appellees, v. D.G. ROBINSON and W.R. Barth, Defendants and HNG Oil Company, Defendant and Appellant.

Civ. No. 10445.

Supreme Court of North Dakota.

Nov. 15, 1983.

Dwight C. Eiken of Bjella, Neff, Rathert, Wahl & Eiken, Williston, for plaintiffs and appellees.

Jane Fleck Romanov of Fleck, Mather, Strutz & Mayer, Bismarck, for defendant and appellant.

VANDE WALLE, Justice.

Defendant HNG Oil Company ("HNG") appealed from the judgment of the district court, McKenzie County, determining that plaintiffs Peter Nygaard, Jr., Lynette Nygaard, and the trustees of two mineral trusts ("Nygaards") were entitled as lessors to terminate, pursuant to Section 47-16-36, three mineral leases assigned to HNG. The district court held that HNG was not a bona fide purchaser of the assigned leases and that the Nygaards could cancel the leases because the lessees, defendants D.G. Robinson and W.R. Barth, failed to pay the bonus consideration. The district court awarded to the Nygaards statutory damages, costs, and reasonable attorney fees pursuant to Section 47-16-37, N.D.C.C. We affirm.

The following events involved three different sets of leases: a single lease covering 625 mineral acres, dated February 23 1982; a set of three leases covering the same area, dated April 22, 1982, and acknowledged on the same date; and a set of three leases covering the same area, dated April 22, 1982, and acknowledged on April 28, 1982.

In February 1982 defendant Donald Robinson approached plaintiff Peter A. Nygaard, Jr. ("Nygaard") about leasing 625 mineral acres owned one-third by Nygaard and his wife, Lynette Nygaard, and two-thirds by two mineral trusts which were established for his sisters. Plaintiffs Nygaard and Albert Ley acted as co-trustees for the trusts. Robinson initially offered Nygaard $62,500 for the lease, which amounts to $100 per mineral acre. Nygaard rejected the offer.

On February 23, 1982, Nygaard signed a lease covering the 625 mineral acres. He did not give the original lease to Robinson because Robinson did not provide any bonus consideration. Nygaard instead gave Robinson a lease designated as a copy, knowing that Robinson would show the lease to oil and gas companies in order to assign the lease for profit. The bonus consideration specified in the original lease was $150,000, which amounts to $240 per mineral acre.

Robinson showed the lease to defendant Bill Barth, a landman. Robinson and Barth then contacted John Kane, the owner of Sage Oil & Gas Company. Kane and a former partner, Victor Stabio, a landman for Adobe Oil and Gas Company, decided to try to sell the lease by showing the copy to others. Barth offered the lease to Kane for $200 per mineral acre; Stabio offered it to others for $225 per mineral acre.

Stabio was dissatisfied with the numerous provisions crossed out in the lease and requested that Robinson and Barth obtain three new leases covering the same area with more favorable terms. On April 21, 1982, Robinson called Nygaard about the lease he received on February 23, 1982. The next day, April 22, 1982, the son of co-trustee Ley acknowledged the second set of three oil and gas leases executed by Nygaard.

Robinson and Barth brought the new leases to Stabio. Stabio still was dissatisfied with the leases, but hoped to sell revised leases to Charter Oil Corporation. Stabio prepared three new leases for Robinson and Barth to take to Nygaard for his signature. Robinson and Barth agreed to see Nygaard, but stated that they would need a cashier's check payable to Nygaard for $62,500, which amounts to $100 per mineral acre. Stabio gave them the leases and the cashier's check. Stabio asked Robinson and Barth to execute blank assignments to Sage Oil Company.

On April 26, 1982, Charter officials discussed the leases with HNG. The next day Charter called Stabio and informed him that HNG was willing to buy the leases for $171,875, which amounts to $275 per mineral acre. On that day HNG orally committed itself to purchase the leases, but subject to approval of the title and after review of the leases which still needed to be executed by Nygaard. On that same day Barth and Robinson then assigned the leases to Sage. On April 27, 1982, Sage assigned the leases to Charter, and Charter assigned the leases to HNG. HNG sent Charter a letter dated April 28, 1982, to confirm in writing its commitment to purchase the leases.

On April 28, 1982, Robinson visited Nygaard at his home in order to have Nygaard execute the three leases that Stabio had prepared. According to Nygaard, before he signed the leases, he received a call from Albert Metcalf, a landman for HNG. Metcalf asked Nygaard if he was offering to lease the land for $100 per mineral acre and if the land was already subject to a working interest agreement with another company. Nygaard told Metcalf that $100 per mineral acre was too low. He added that he had not executed any lease for the land and that he would be willing to deal directly with HNG for $240 per mineral acre. He also stated that HNG should question the person who indicated that the land could be leased for $100 per mineral acre. Metcalf declined on behalf of HNG to accept Nygaard's offer. To establish the date of this conversation, Nygaard referred to his phone records which he made in the course of his business transactions.

Metcalf did not dispute the content of this conversation. Metcalf claimed, however, that this conversation occurred five or six days before April 28.

While Robinson was at Nygaard's home on April 28, Nygaard signed the leases. Robinson also gave Nygaard the $62,500 cashier's check drawn by Stabio and made payable to Nygaard. Robinson asked Nygaard to specially endorse the check, making it payable to Robinson. Robinson explained that he would use the endorsed cashier's check to supplement the funds expected from a partner. Robinson stated that with this check and the partner's funds he would be able to pay a 15-day sight draft in the amount of $150,000 as bonus consideration. Nygaard agreed to specially endorse the check and he then accepted the 15-day sight draft. HNG received the leases on the same day, April 28, 1982.

Two days later Stabio went to Williston to do a title search; the title to the leases required minor curative work. HNG tendered to Charter a 5-day sight draft for $171,875.

When the 15-day sight draft became due, the bank dishonored the draft. Before the dishonor, Robinson had informed Nygaard that the bank would dishonor the draft, and he had given Nygaard a check for $150,000. This check was similarly dishonored. Robinson gave Nygaard a second check for $150,000, which the bank also dishonored. Nygaard called HNG, Stabio, Kane, and Barth, seeking payment of the bonus consideration.

Because he had not received any of the bonus consideration, Nygaard gave HNG statutory notice of termination and forfeiture of the leases on June 14, 1982, pursuant to Section 47-16-36, N.D.C.C. The trial court declared void the adverse claims of Robinson, Barth, and HNG, and it awarded to the Nygaards statutory damages, costs, and reasonable attorney fees in the amount of $9,757.06, pursuant to Section 47-16-37, N.D.C.C.

On appeal HNG raises three issues. First, it contends that the trial court erred in holding that HNG was not a bona fide purchaser for value without notice when it purchased the leases from Charter, its assignor. Second, HNG maintains that because Section 47-16-37, N.D.C.C., allows a trial court to award statutory damages, costs, and reasonable attorney fees to a prevailing lessor and not to a prevailing lessee, Section 47-16-37 violates the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution and Sections 21 and 22 of Article I of the North Dakota Constitution. Finally, HNG argues, in the alternative, that even if Section 47-16-37 is not unconstitutional, the trial court abused its discretion in awarding statutory damages, costs, and attorney fees to the Nygaards.

I

Before considering the first issue we discuss HNG's contention that this court has broad discretion in reviewing whether or not the trial court erred in holding that HNG was not a bona fide purchaser for value without notice, and that the standard of Rule 52(a), N.D.R.Civ.P., is not the appropriate standard of review.

In Earth Builders, Inc. v. State, Etc., 325 N.W.2d 258, 259 (N.D.1982), we stated that the determination of whether or not an individual leased property in good faith without notice was "a mixed question of fact and law" fully reviewable "without the strictures imposed by Rule 52(a), N.D.R.Civ.P." Although a broad interpretation of Earth Builders would suggest that this court uses a de novo standard of review when examining the issue of a bona fide purchaser for value without notice, we emphasize that the issue presents mixed questions of fact and law.

In E.E.E., Inc. v. Hanson, 318 N.W.2d 101, 104 (N.D.1982), we distinguised between findings of fact and conclusions of law "Findings of fact are the realities as disclosed by the evidence as distinguished from their legal effect or consequences. Where the ultimate conclusion can be arrived at only by applying rules of law the result is a 'conclusion of law.' "

See also Slope Cty., Etc. v. Consolidation Coal Co., 277 N.W.2d 124 (N.D.1979). A finding of fact is reached by natural reasoning, and a conclusion of law is reached by fixed rules of law. Northern States Power Co. v. Hagen, 314 N.W.2d 278 (N.D.1982).

In distinguishing between a finding of fact and a conclusion of law, this court also considers whether or not events are undisputed. In Slope Cty., Etc. v. Consolidation Coal Co., 277 N.W.2d at 127, we stated:

"[I]f facts are undisputed and only...