Reese v. Reese-Young
| Decision Date | 12 February 2020 |
| Docket Number | No. 20190202,20190202 |
| Citation | 938 N.W.2d 405 |
| Parties | Cheryl D. REESE, Plaintiff and Appellant v. Tia D. REESE-YOUNG, Defendant and Appellee |
| Court | North Dakota Supreme Court |
Scott M. Knudsvig (argued) and Matthew H. Olson (on brief), Minot, ND, for plaintiff and appellant.
Joshua A. Swanson, Fargo, ND, for defendant and appellee.
[¶1] Cheryl Reese appealed from an amended judgment entered after the district court granted summary judgment deciding ownership of certain mineral interests and the right to receive the mineral royalties and bonus payments. Cheryl Reese argues the district court erred when it concluded the open mines exception to the doctrine of waste does not apply and, as a holder of a life estate in the property, she is not entitled to the royalties and bonus payments resulting from the production of oil and gas from the property. We reverse and remand.
[¶2] The minerals at issue in this case underlie the property located in Mountrail County described as:
[¶3] In 2005, Dennis Reese and Tia Reese-Young, who both owned an interest in the minerals at the time, entered into an oil and gas lease for the property. After several conveyances, Dennis and Cheryl Reese owned a 12.5% interest in the minerals as joint tenants, and Tia Reese-Young owned a 12.5% interest in the minerals as a tenant in common with Dennis and Cheryl Reese. In July 2008, Dennis and Cheryl Reese conveyed their 12.5% interest to Tia Reese-Young by quit claim deed and reserved a life estate interest in the minerals. Dennis Reese died in September 2008.
[¶4] In 2017, Cheryl Reese sued Tia Reese-Young to quiet title and for declaratory judgment determining that Cheryl Reese is the sole remaining life tenant in the property and that she is entitled to all of the proceeds to be derived from the minerals during her lifetime. Tia Reese-Young answered and counterclaimed to quiet title and for declaratory judgment determining Cheryl Young is not entitled to any of the income derived from oil and gas production from the property.
[¶5] Both parties moved for summary judgment. Tia Reese-Young argued the deed creating the life estate in Cheryl Reese did not explicitly reserve to Cheryl Reese an interest in the royalties, the deed was unambiguous, there were no disputed issues of material fact, and Tia Reese-Young is entitled to all of the income derived from the oil and gas production as a matter of law. Cheryl Reese argued the unambiguous language of the deed established she reserved a life estate in the minerals and she is entitled to receive the royalty payments under the open mines doctrine because an oil and gas lease had been executed and oil and gas were being produced before the life estate was created.
[¶6] After a hearing, the district court granted Tia Reese-Young’s motion for summary judgment and denied Cheryl Reese’s motion. The court concluded the open mines doctrine did not apply because it is not the law in North Dakota, the language of the deed controls, and there is no clear and explicit reservation of the royalties to Cheryl Reese during her life. The court concluded, as a matter of law, that Cheryl Reese was required to hold the corpus, or proceeds from the oil and gas royalties, in trust for Tia Reese-Young’s benefit and that Cheryl Reese was only entitled to the income generated from the corpus during her life. Judgment was entered.
[¶7] Cheryl Reese moved to amend the judgment and for relief from the judgment under N.D.R.Civ.P. 59(j) and 60(b)(1) and (6). She argued the judgment failed to acknowledge her life estate in the property and should be amended to correct the oversight. The district court granted the motion, and an amended judgment was entered.
[¶8] Cheryl Reese argues the district court erred by granting summary judgment in favor of Tia Reese-Young.
[¶9] Our standard of review for summary judgments is well-established:
Summary judgment is a procedural device for the prompt resolution of a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. A party moving for summary judgment has the burden of showing there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. In determining whether summary judgment was appropriately granted, we must view the evidence in the light most favorable to the party opposing the motion, and that party will be given the benefit of all favorable inferences which can reasonably be drawn from the record. On appeal, this Court decides whether the information available to the district court precluded the existence of a genuine issue of material fact and entitled the moving party to judgment as a matter of law. Whether the district court properly granted summary judgment is a question of law which we review de novo on the entire record.
Fettig v. Estate of Fettig , 2019 ND 261, ¶ 8, 934 N.W.2d 547 (quoting Gerrity Bakken, LLC v. Oasis Petroleum N. Am., LLC , 2018 ND 180, ¶ 8, 915 N.W.2d 677 ).
[¶10] The district court granted summary judgment in favor of Tia Reese-Young and ordered Cheryl Reese, as a life tenant, is not entitled to the royalties and bonus payments from the production of oil, gas, and other minerals from the property. The court explained the open mines doctrine is a common law doctrine, Cheryl Reese could not cite any North Dakota case law that adopted and applied the open mines doctrine, there is no statutory law indicating a policy or intent to follow the doctrine, and therefore the open mines doctrine is not law in North Dakota and does not apply. The court concluded the language of the deed controlled the outcome and the deed did not clearly and explicitly reserve the royalties and bonuses in Cheryl Reese during her life. The court concluded Cheryl Reese has a duty as a life tenant to preserve the property’s value for Tia Reese-Young’s benefit, the life tenant commits waste when it removes an asset from the property which decreases the property’s value, Cheryl Reese would be decreasing the property’s value by profiting from the oil and gas royalties, and any royalties or bonuses derived from the production of oil and gas is part of the corpus of the estate and Cheryl Reese must retain those proceeds in trust for Tia Reese-Young. The court concluded Cheryl Reese is only entitled to the interest income generated from the proceeds of the oil and gas royalties.
[¶11] Cheryl Reese argues the district court erred when it concluded that the open mines exception to the doctrine of waste does not apply and that she is not entitled to the revenue from the production of oil and gas on the property. The open mines doctrine is a common law doctrine that states a life tenant is permitted to operate mines or wells which were open when the life estate was created and is entitled to all proceeds resulting from the operation, even if the use diminishes the market value of the remainderman’s interest. See Restatement (First) of Property § 144 (1936). Cheryl Reese admits this Court has not yet recognized the open mines exception to the doctrine of waste, but she contends this Court has not had an opportunity to address it and there is authority in other states and secondary sources recognizing the open mines exception applies in this type of case.
[¶12] Under N.D.C.C. § 47-02-33, "The owner of a life estate may use the land in the same manner as the owner of a fee simple, except that the owner of a life estate must do no act to the injury of the inheritance." This Court has said, "It is well-settled, a life estate holder ‘is entitled to both the possession and the use of the property ... including the right to rents, issues, and profits generated by the parcel during the tenant’s life.’ " Schroeder v. Buchholz , 2001 ND 36, ¶ 21, 622 N.W.2d 202 (quoting 51 Am. Jur.2d Life Tenants and Remaindermen § 32 (2000) ).
[¶13] However, if the life tenant’s actions or use of the property result in a diminishment of the remainder interest, then the life tenant has committed waste. See Ruggles v. Sabe , 2003 ND 159, ¶ 6, 670 N.W.2d 356. Under the common law doctrine of waste, this Court has said, "Waste may be defined as an unreasonable or improper use, abuse, mismanagement, or omission of duty touching real estate by one rightfully in possession, which results in a substantial injury." Meyer v. Hansen , 373 N.W.2d 392, 395 (N.D. 1985) ; see also Vogel v. Marathon Oil Co. , 2016 ND 104, ¶ 31, 879 N.W.2d 471.
[¶14] Section 47-04-22, N.D.C.C., provides a vested remainderman with a remedy against a life tenant who commits waste, stating:
A person having an estate in fee, in remainder, or reversion may maintain an action for an injury done to the inheritance, notwithstanding an intervening estate for life or years and although after its commission the person’s estate is transferred and the person has no interest in the property at the commencement of the action.
See also Ruggles , 2003 ND 159, ¶ 3, 670 N.W.2d 356. The remainderman has a legal remedy against the life estate holder for any decrease in value of the remainderman’s interest sustained as a result of the life estate holder’s acts injuring the inheritance. Ruggles , at ¶ 3.
[¶15] In Ruggles , 2003 ND 159, ¶ 6, 670 N.W.2d 356, this Court held the remainderman had a cause of action under N.D.C.C. § 47-04-22 based on her allegation that the removal of an airplane hangar from the property resulted in a decrease in the value of her interest. We said the life tenant has a duty not to destroy or remove structures which are located on and add value to the land. Id. at ¶ 5. We held the remainderman was entitled to damages for waste if removal of...
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