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Fleck v. Missouri River Royalty Corp.

Supreme Court of North Dakota

December 7, 2015

Nathaniel Fleck and Alma Bergmann as Co-Trustees of the George J. Fleck Trust, Plaintiffs and Appellants
v.
Missouri River Royalty Corporation, Exxon Mobile Corporation, and Mountain Pacific General Inc., Defendants and Appellees

Page 330

Appeal from the District Court of McKenzie County, Northwest Judicial District, the Honorable Robin A. Schmidt, Judge.

Ariston E. Johnson (argued) and Dennis E. Johnson (appeared), Watford City, N.D., for plaintiffs and appellants.

Michael D. Schoepf (argued) and Lawrence Bender (on brief), Bismarck, N.D., for defendants and appellees Missouri River Royalty Corporation and Exxon Corporation.

Zachary E. Pelham (appeared), Bismarck, N.D., for defendant and appellee Mountain Pacific General, Inc.

OPINION

Page 331

Daniel J. Crothers, Justice.

[¶1] Nathaniel Fleck and Alma Bergmann as trustees of the George J. Fleck Trust (" Fleck" ) appeal from a summary judgment quieting title to an oil and gas lease in favor of Missouri River Royalty Corp., Exxon Mobil Corp. and Mountain Pacific General, Inc. (collectively " defendants" ). We reverse and remand, concluding that the district court misapplied the law in interpreting the lease and that summary judgment was not appropriate.

I

[¶2] Fleck owns mineral interests in McKenzie County described as the south half of section 10 in range 100 west of township 150 north. In 1972, Fleck's predecessors in interest executed an oil and gas lease in favor of the defendants' predecessor in interest. The lease term was ten years and as long thereafter as oil or gas was produced. The lease also provided it would not expire if production ceased after expiration of the primary term if the lessee resumed operations to drill a well or to restore production within ninety days. In 1982, the Fleck 1 well was completed and the lease extended.

[¶3] On February 22, 2012, Fleck served the defendants with a notice of forfeiture and a demand for release of the lease. On September 6, 2012, Fleck sued the defendants to quiet title, alleging the oil and gas lease expired due to a failure to produce oil or gas in paying quantities. The defendants answered, counterclaimed and requested the court declare the lease remained valid and in effect by the continued production of oil and gas from the Fleck 1 well and by the commencement of operations to restore production.

[¶4] Fleck moved for summary judgment, arguing they were entitled to a declaration quieting title to the mineral interests because the lease terminated when the Fleck 1 well stopped producing in paying quantities in 2010 and the defendants failed to engage in new drilling or reworking operations within ninety days. Pacific Mountain General and Missouri River Royalty separately moved for summary judgment, arguing the lease extended into its secondary term and remains valid and in effect based on the continued production of oil and gas by the Fleck 1 well. Exxon Mobil joined Missouri River Royalty's motion.

[¶5] The district court granted the defendants' motions for summary judgment. The court interpreted the lease and found production in paying quantities was not required to extend the lease, the well consistently produced an average of a few barrels per day, production was continuous at all relevant times and any cessation of production was temporary. The court concluded:

" The Fleck Lease was thus extended into its secondary term and remains valid and in effect based on the continued production of oil and gas by the Fleck 1 well and by the commencement of operations to restore production from the Subject Lands within ninety (90) days of any temporary cessation of production and the continued prosecution of such operations until production was restored. Because any temporary cessation of production was timely restored and, therefore, did not lead to the cancellation of the Lease, the Fleck Lease remained in full force and effect at all relevant times."

Judgment was entered declaring the oil and gas lease is valid and in effect, and quieting title ...


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