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Brigham Oil and Gas, L.P v. Lario Oil & Gas Company

August 15, 2011

BRIGHAM OIL AND GAS, L.P.,
PLAINTIFF AND APPELLANT
v.
LARIO OIL & GAS COMPANY, DEFENDANT AND APPELLEE AND MUREX PETROLEUM CORPORATION, DEFENDANT LARIO OIL & GAS COMPANY,
THIRD PARTY PLAINTIFF AND APPELLEES
v.
JON AVERY,
THIRD PARTY DEFENDANT
AND
GEORGETTE O. NAVARRO
AND
THE TRIPLE T, INC.,
THIRD PARTY DEFENDANTS,
INTERVENORS AND APPELLANTS BRIGHAM OIL AND GAS, L.P.,
PLAINTIFF AND APPELLEE
v.
LARIO OIL & GAS COMPANY,
DEFENDANT AND APPELLEE
AND
MUREX PETROLEUM CORPORATION, DEFENDANT LARIO OIL & GAS COMPANY,
THIRD PARTY PLAINTIFF AND APPELLEES
v.
JON AVERY,
THIRD PARTY DEFENDANT
AND
GEORGETTE O. NAVARRO
AND
THE TRIPLE T, INC.,
THIRD PARTY DEFENDANTS, INTERVENORS AND APPELLANTS



The opinion of the court was delivered by: VandeWalle, Chief Justice.

N.D. Supreme CourtBrigham Oil v. Lario Oil, 2011 ND 154

This opinion is subject to petition for rehearing. [Go to Documents]

Brigham Oil and Gas, L.P. v. Lario Oil & Gas Co.Nos. 20100211 & 20110016

[¶1] Brigham Oil and Gas, L.P. ("Brigham"), appealed from a partial judgment dismissing its action against Lario Oil & Gas Company ("Lario") and Murex Petroleum Corporation ("Murex") seeking oil and gas production payments based on a claimed leasehold interest in certain mineral acres in Mountrail County. The Triple T, Inc. ("Triple"), and Christine Thompson, as sole trustee of the Navarro 2009 Living Trust Agreement, appealed from an order denying their motions to intervene and to vacate the judgment. We conclude the district court did not err in ruling as a matter of law that Brigham had no leasehold interest in the claimed mineral acres. We further conclude the court did not err in denying Triple and Thompson's motions. We affirm.

I

[¶2] In 1989 Helen Testerman, a California resident, executed a will devising her "share of the Mineral Rights in North Dakota to my nephew, John H. Avery." Testerman also devised property to her children, Monte C. Testerman and Colleen D. Pando, and to her niece, Georgette O. Navarro. Testerman subsequently inherited additional mineral rights in Mountrail County from her brother when he died in 1996, and the ownership of these mineral rights is the subject of this lawsuit.

[¶3] Testerman died on January 28, 2004, and Pando filed a petition in a California court seeking to admit the will to probate and requesting that she be appointed executor of Testerman's estate. In May 2004, the California probate court appointed Pando executor and authorized independent administration of the estate. On April 6, 2005, Pando filed a final inventory and appraisal with the probate court, but the inventory and appraisal did not expressly mention any North Dakota mineral rights. On April 11, 2005, Pando filed with the probate court a "Petition for Final Distribution on Waiver of Accounting, Allowance of Executrix's Commission, Allowance of Statutory Attorney's Fees, and Report of Executrix" along with waivers of the filing and settlement of the final account signed by Avery, Monte Testerman, and Navarro.

[¶4] On May 4, 2005, Navarro wrote a letter to Pando and Pando's attorney stating she had a copy of the 1997 personal representative's deed of distribution of the additional mineral rights from Testerman's brother's estate and asserting that Testerman had written on the top of the deed: "these mineral rights go to Georgette Navarro by Helen Testerman." In the letter Navarro said "[s]ince my aunt clearly intended the most recent mineral rights to go to me, how is this being handled?" At that time Navarro took no further action concerning Testerman's alleged handwritten comments on the top of the deed.

[¶5] On June 17, 2005, the California probate court issued an "Order on Petition of Final Distribution on Waiver of Accounting" approving the petition and ordering that the "administration of the estate is brought to a close." The order distributed "mineral rights in North Dakota" to Avery, $6,000 to Navarro, and the residue of the estate equally to Pando and Monte Testerman. On August 25, 2007, Avery entered into an oil and gas lease with the Dublin Company ("Dublin") covering the subject property and other lands located in Mountrail County. The lease was recorded on September 5, 2007, with the Mountrail County Clerk and Recorder. Dublin subsequently assigned this lease to Lario.

[¶6] On July 10, 2008, more than three years after the California probate court issued its final order distributing Testerman's estate, Pando filed in Mountrail County district court an application for informal probate of Testerman's estate and sought appointment as personal representative, which was granted. On September 16, 2008, Avery filed a petition with the Mountrail County district court seeking an order distributing Testerman's "mineral rights in North Dakota" in accordance with the June 2005 California probate court order of final distribution. On September 18, 2008, Navarro filed with the California probate court a motion for an order to set aside the prior order of final distribution contending the failure of the court to consider Testerman's alleged handwritten directive, or "holographic codicil," was the result of "extrinsic fraud or mistake." Navarro asked the court to issue a revised order distributing the subject property in accordance with Testerman's handwritten directive. Navarro claimed she did not act earlier because she relied on statements of Pando's attorney that the handwritten directive "did not count." On September 29, 2008, Navarro filed with the Mountrail County district court a petition for an order restraining the personal representative and an objection to the petition for an order distributing estate property, claiming no estate property should be conveyed in North Dakota until the California probate court resolved her pending motion to set aside the order of final distribution. On October 15, 2008, Navarro filed with the California probate court a supplement to her motion containing additional materials in support of her claim.

[¶7] On October 21, 2008, Navarro entered into an oil and gas lease with Triple covering the subject property "and other lands" located in Mountrail County. This lease was recorded on October 31, 2008, and Triple subsequently assigned an 80 percent net revenue interest in the lease to Brigham.

[¶8] On November 5 and 18, 2008, Avery and Navarro executed an agreement which purported to resolve the issue over ownership of the Mountrail County mineral rights. Avery and Navarro stipulated that Avery would receive 100% of the mineral interests Testerman had inherited from her father, and Avery would receive 25% and Navarro would receive 75% of the mineral interests Testerman inherited from her brother, which is the property at issue in this case. Avery and Navarro did not provide notice of the agreement to Dublin, Triple, Brigham or Lario, and those companies were not parties to the agreement. As a result of the agreement, the California probate court did not adjudicate the validity of Testerman's alleged "holographic codicil." The California probate court record lists the matter as "settled," and Navarro's motion was taken off the court's calendar on January 8, 2009.

[¶9] On November 4, 2008, Pando, as personal representative of Testerman's estate, executed deeds of distribution conveying Testerman's interest in the subject property to Avery and Navarro in the percentages set forth in their agreement. The deeds were recorded on December 12, 2008. The agreement was also filed with the Mountrail County district court in counterparts on November 24 and December 5, 2008.

[¶10] In June 2009, Brigham commenced this action against Lario and Murex. Brigham alleged that it is entitled to a percentage of the production from the subject mineral acres through the oil and gas lease executed by Navarro in October 2008, that Lario was wrongfully claiming Brigham's interest in the property through the oil and gas lease executed by Avery in August 2007, and that Murex was wrongfully withholding production payments from Brigham relating to wells located on the subject property. Lario alleged that its oil and gas lease with Avery covered the subject mineral interests and counterclaimed against Brigham for slander of title. Lario also filed third-party complaints against Navarro and Avery for slander of title and breach of warranty. Brigham and Lario both moved for summary judgment. The district court granted summary judgment in favor of Lario, concluding "as a matter of law, that the oil and gas lease which Dublin took from Avery (and subsequently assigned to Lario) is the controlling lease here, and, that Brigham has no interest in the oil and gas leasehold estate in the subject property." The court also dismissed Lario's third-party complaints and its counterclaim against Brigham, making the partial judgment final for purposes of appeal. See Gillmore v. Morelli, 472 N.W.2d 738, 740 n.2 (N.D. 1991) (partial judgment not conclusive until a final judgment disposing of all claims is entered).

[¶11] Navarro died. Approximately one year after the summary judgment hearing, nine months after summary judgment was granted, six months after judgment was entered, and more than four months after Brigham filed its appeal from the summary judgment, Triple and Thompson, as sole trustee of the Navarro 2009 Living Trust Agreement, filed motions to intervene and to vacate the judgment. The district court denied the motions, finding them both untimely. These cases were consolidated for purposes of appeal.

II

[¶12] Brigham argues the district court erred in determining that Lario has the controlling lease and that Brigham has no interest in the oil and gas leasehold estate in the subject property.

[¶13] The standard for reviewing a summary judgment is well established:

Under N.D.R.Civ.P. 56, summary judgment is a procedural device for promptly resolving 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. The party moving for summary judgment must show there are no genuine issues of material fact and the case is appropriate for judgment as a matter of law. A district court's decision on a motion for summary judgment is a question of law that we review de novo on the record. In determining whether summary judgment was appropriately granted, we view the evidence in the light most favorable to the party opposing the motion, giving that party the benefit of all favorable inferences which can reasonably be drawn from the record. Kost v. Kraft, 2011 ND 69, ¶ 4, 795 N.W.2d 712 (quoting Bragg v. Burlington Res. Oil & Gas Co. LP, 2009 ND 33, ¶ 5, 763 N.W.2d 481). Brigham does not claim summary judgment was improper because genuine issues of material fact exist.

[¶14] The district court's lengthy decision determined that although a judgment of a foreign court does not transfer title to real property in North Dakota, see Wacker Oil, Inc. v. LoneTree Energy, Inc., 459 N.W.2d 381, 382 (N.D. 1990), North Dakota courts were required to accept as "determinative" the California probate court's 2005 final order of distribution under N.D.C.C. § 30.1-15-08 (U.P.C. § 3-408). The court determined Avery did not have a "mere expectancy," but had an actual ownership interest in Testerman's "share of the Mineral Rights in North Dakota" immediately upon her death subject to administration of the estate under N.D.C.C. § 30.1-12-01 (U.P.C. § 3-101). The district court determined Avery inherited all of Testerman's mineral rights at the time of her death and resolution of this issue was not dependent upon a judicial adjudication of the validity of the "holographic codicil." In so ruling, the court noted Navarro had accepted a $6,000 distribution from the estate and signed a waiver to the filing and settlement of the final account, and in any event, her attempt to set aside the 2005 final distribution for extrinsic fraud and mistake was likely untimely under California law. The court then determined that under N.D.C.C. §§ 30.1-20-12 (U.P.C. § 3-912) and 30.1-22-01 (U.P.C. § 3-1101) the settlement agreement was binding only between Avery and Navarro and was not binding upon Brigham and Lario because those companies "were not informed that such an agreement was forthcoming." The court concluded "as a matter of law, that the oil and gas lease which Dublin took from Avery (and subsequently assigned to Lario) is the controlling lease here, and, that Brigham has no interest in the oil and gas leasehold estate in the subject property."

A

[¶15] We begin by addressing the two most crucial rulings made by the district court. First, the court ruled Avery inherited and had an interest in all of Testerman's North Dakota mineral rights at the time of her death subject to administration. "Property passes upon death, not upon distribution." Feickert v. Frounfelter, 468 N.W.2d 131, 132 (N.D. 1991). Section 30.1-12-01 (U.P.C. § 3-101), N.D.C.C., provides "[u]pon the death of a person, the decedent's real and personal property devolves to the persons to whom it is devised by the decedent's last will . . . , subject to . . . administration." Because Testerman's will devised her "share of the Mineral Rights in North Dakota" to Avery, Avery had an ownership interest, rather than a "mere expectancy," in the subject mineral rights upon Testerman's death subject to administration. Consistent with Testerman's will, the California probate court's order of final distribution distributed "mineral rights in North Dakota" to Avery.

[¶16] However, North Dakota law applies to "property of nonresidents located in this state." N.D.C.C. § 30.1-02-01(2) (U.P.C. § 1-301). "'It is settled in this State that a court decree or court judgment of another state in its determination of property rights may not directly affect or transfer title to real property situate in North Dakota.'" Wacker Oil, Inc., 459 N.W.2d at 382 (quoting Rozan v. Rozan, 129 N.W.2d 694, 700 (N.D. 1964)); see also In re Reynolds' Will, 85 N.W.2d 553, 562 (N.D. 1957). Initiation of ancillary probate proceedings in North Dakota was required to formally transfer title to the subject mineral rights to Avery. See generally Stratton v. Rose, 484 N.W.2d 274, 275-77 (N.D. 1992). Section 30.1-15-08 (U.P.C. § 3-408), N.D.C.C., provides that a "final order of a court of another state determining testacy, the validity or construction of a will, made in a proceeding involving notice to and an opportunity for contest by all interested persons must be accepted as determinative by the courts of this state if it includes, or is based upon, a finding that the decedent was domiciled at the time of death in the state where the order was made." This statute supports the general purpose of using domicilary law to unify succession of property located in different states. See Estate of Burshiem, 483 N.W.2d 175, 179 n.9 (N.D. 1992). Under N.D.C.C. § 30.1-15-08 (U.P.C. § 3-408), the district court was required to accept the California probate court's final order construing Testerman's will. Because "a party may seek specific ...


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