Sandvick v. Lacrosse

• Citation: 747 N.W.2d 519,2008 ND 77
• Decision Date: 18 April 2008
• Docket Number: No. 20070146.,20070146.
• Parties: Monte SANDVICK and Joedy Bragg, Plaintiffs and Appellants v. William R. LaCROSSE; Frank B. Haughton, Jr.; Empire Oil Company; Nisku Royalty, L.P.; FH Petroleum Corporation; and Tammy LaCrosse, Defendants and Appellees
• Court: United States State Supreme Court of North Dakota

747 N.W.2d 519

2008 ND 77

Monte SANDVICK and Joedy Bragg, Plaintiffs and Appellants v. William R. LaCROSSE; Frank B. Haughton, Jr.; Empire Oil Company; Nisku Royalty, L.P.; FH Petroleum Corporation; and Tammy LaCrosse, Defendants and Appellees

No. 20070146.

Supreme Court of North Dakota.

April 18, 2008.

Michael T. Andrews (appeared), H. Patrick Weir (argued), and David L. Tilden (on brief), Vogel Law Firm, Bismarck, N.D., for plaintiffs and appellants.

Patrick W. Durick (argued) and Larry L. Boschee (on brief), Pearce & Durick, Bismarck, N.D., for defendants and appellees.

SANDSTROM, Justice.

[¶ 1] Monte Sandvick and Joedy Bragg appeal the district court judgment dismissing their lawsuit against William LaCrosse and Frank Haughton following a bench trial in which the court found neither a partnership nor a joint venture existed between the parties in regard to oil and gas leases held by the parties. We reverse and remand, concluding on the basis of the facts found by the district court that there was a joint venture and that LaCrosse and Haughton breached their fiduciary duties of loyalty to Sandvick and Bragg.

I

[¶ 2] In May 1996, Sandvick, Bragg, LaCrosse, and Haughton purchased three oil and gas leases in Golden Valley County, North Dakota. The leases were known as the Horn leases. The Horn leases were standard, paid-up leases with terms of five years and did not contain any provision for extending or renewing them. Empire Oil Company, owned by LaCrosse, held record title to the leases. The leases were purchased from the parties' credits in the Empire Oil Company JV checking account. Sandvick testified the parties' initial intent was to try to sell the leases during the five-year term.

[¶ 3] Aside from the Horn leases, the parties had previously owned other oil and gas leases together. Haughton had owned other leases with Sandvick, and LaCrosse was also involved in some of these other leases. Some of the leases were purchased before the Horn leases, and some were purchased after.

[¶ 4] In November 2000, Haughton and LaCrosse purchased three oil and gas leases on the Horn property. These leases were referred to as the "Horn Top Leases" and were set to begin at the expiration of the initial Horn Leases. The term "top lease" is defined in Howard R. Williams & Charles J. Meyers, Manual of Oil and Gas Terms 1285 (8th ed.1991), as a "lease granted by a landowner during the existence of a recorded mineral lease which is to become effective if and when the existing lease expires or is terminated." The top leases covered the same acreage as the Horn Leases and had a five-year term, with the title in the name of Empire Oil Company. The top leases were not recorded until December 2001. Prior to purchasing the top leases, LaCrosse and Haughton twice offered to purchase Sandvick's and Bragg's interests in the Horn leases, but Sandvick and Bragg refused. Haughton testified he did not inform either Sandvick or Bragg that he and LaCrosse had purchased the top leases.

[¶ 5] In 2004, Sandvick and Bragg sued LaCrosse and Haughton, claiming they breached their fiduciary duties by not offering Sandvick and Bragg an opportunity to purchase the top leases with them. The trial was limited to the issues regarding the existence, life span, and scope of a partnership or joint venture. Following the bench trial, the district court concluded no partnership or joint venture existed.

[¶ 6] The district court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. § 27-05-06. The appeal is timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. art. VI, §§ 2 and 6, and N.D.C.C. § 28-27-01.

II

[¶ 7] On appeal, Sandvick and Bragg argue the district court erred in concluding the parties were not partners. In North Dakota, a partnership is "an association of two or more persons to carry on as co-owners a business for profit." N.D.C.C. § 45-13-01(19). The crucial elements of a partnership are (1) an intention to be partners, (2) co-ownership of the business, and (3) a profit motive. Tarnavsky v. Tarnavsky, 2003 ND 110, ¶ 7, 666 N.W.2d 444. "The existence of a partnership is a mixed question of law and fact, and the ultimate determination of whether a partnership exists is a question of law." Id. Questions of law are fully reviewable on appeal. J.P. v. Stark County Social Services Bd., 2007 ND 140, ¶ 9, 737 N.W.2d 627.

[¶ 8] The district court concluded a partnership did not exist between the parties. In its memorandum opinion following trial, it found the parties were not co-owners of a business. It found the parties' undertaking was very limited and did not coincide with the definition of a business. It found that the parties entered into the leases for a set period of time and that their activity, rather than being a series of acts, was limited to that occurrence.

[¶ 9] Under comment 1 to § 202 of the Revised Uniform Partnership Act, a "business" is defined as "a series of acts directed toward an end," and under N.D.C.C. § 45-13-01(4), "includes every trade, occupation, and profession." North Dakota adopted the Revised Uniform Partnership Act in 1995, Ziegler v. Dahl, 2005 ND 10, ¶ 14, 691 N.W.2d 271, and is codified in N.D.C.C. chapters 45-13 through 45-21. We interpret uniform laws in a uniform manner, N.D.C.C. § 1-02-13, and may also look to the drafters' comments to interpret its provisions. See, e.g., Estate of Zimmerman, 2001 ND 155, ¶ 14, 633 N.W.2d 594.

[¶ 10] In this case, the parties entered into the Horn leases for a specific period. The court found their intention was to try to sell the leases. The court also found the parties were involved in other oil- and gas-related undertakings with various other parties, including, in some instances, the parties involved in this case. Haughton testified that he had jointly owned other leases with LaCrosse and Sandvick. Bragg testified the Horn leases were a separate investment. The court found these other undertakings were separate and apart from the Horn leases. We conclude the purchase of the Horn leases was a separate act undertaken by the parties, not a series of acts. On the basis of the evidence in the record and the testimony at trial, we conclude the district court did not err in concluding a partnership did not exist.

III

[¶ 11] Sandvick and Bragg argue the district court erred in concluding a joint venture did not exist. A joint venture is similar to a partnership but is more limited in scope and duration, and principles of partnership law apply to the joint venture relationship. SPW Associates, LLP v. Anderson, 2006 ND 159, ¶ 8, 718 N.W.2d 580. "For a business enterprise to constitute a joint venture, the following four elements must be present: (1) contribution by the parties of money, property, time, or skill in some common undertaking, but the contributions need not be equal or of the same nature; (2) a proprietary interest and right of mutual control over the engaged property; (3) an express or implied agreement for the sharing of profits, and usually, but not necessarily, of losses; and (4) an express or implied contract showing a joint venture was formed." Id. at ¶ 10 (citations omitted). There is, however, no fixed formula for identifying the joint venture relationship in all cases, and each case will depend upon its own unique facts. Id.

[¶ 12] The district court concluded the parties were not members of a joint venture when they acquired the Horn leases. It made the following findings of fact, which supported its conclusion:

7. Bragg never talked to Haughton about the investment in the Horn Leases and had no agreement with Haughton concerning the purchase of additional leases, the purchase of Horn minerals, or the purchase of leases on minerals adjacent to the Horn property. Sandvick had no written or oral agreement with either Haughton or Lacrosse concerning the acquisition of a new lease following the expiration of the Horn Leases.

8. At the time of the acquisition of the Horn Leases, Bragg had no agreement with Lacrosse concerning the development of those leases. Lacrosse never agreed to make Sandvick and Bragg a part of any subsequent lease of the Horn minerals. If Bragg had any expectations concerning the development of the Horn Leases, they were not communicated to Haughton.

. . . .

10. No agreement was entered into, express or implied, limiting the parties' abilities to continue activity which did not include the other parties to these proceedings.

11. None of the parties intended to be exclusively involved in this undertaking, and they knew that the other parties would continue to do business which would not include them.

. . . .

13. Under the circumstances, the parties had no expectations that the other parties would refrain from investing in the area without offering to the other parties an opportunity to join in the investment.

[¶ 13] The court, however, also made findings that reflected a joint venture; specifically, the court found: (1) LaCrosse opened a checking account under the name Empire Oil JV Account; (2) the leases were purchased from the parties' credits in the Empire Oil Company JV account in equal shares; (3) title to the leases was held in Empire Oil Company's name; and (4) the parties' intent in acquiring the leases was to sell them. At trial, Bragg, LaCrosse, and Haughton testified that any profits would have been shared had the Horn leases been sold. This testimony, along with the court's findings above, demonstrates the existence of a joint venture. We conclude a joint venture did exist in regard to the parties' purchase of the Horn leases, because the leases were purchased out of the parties' checking account funds in equal shares, they were titled in Empire Oil's name rather than each of the parties' names, and profits were going to be shared if the leases were sold.

IV

[¶ 14] Having concluded a joint venture exists, we look to the scope of the venture and decide whether any...