from the District Court of Burleigh County, South Central
Judicial District, the Honorable Thomas J. Schneider, Judge.
M. Fremstad, for plaintiff and appellant.
L. Hogan, Office of the Attorney General, for defendant and
appellee Board of University and School Lands.
Charles L. Dendy (appeared), Special Assistant Attorney
General, for defendant and appellee Tax Commissioner of the
State of North Dakota.
1] Willard Burk appeals from a judgment declaring his claim
that the State, through the Board of University and School
Lands, and the Tax Commissioner (collectively
"State"), have wrongfully withheld gross production
and extraction taxes from his share of oil and gas royalties
was frivolous, entitling them to an award of attorney fees.
We affirm the district court's decision that, as a matter
of law, the State's settlement agreement with Burk did
not exempt him from paying gross production and extraction
taxes on his royalty interest, but we reverse the award of
attorney fees because Burk's claim against the State is
2] In 1991 Burk purchased a tract of Williams County land
from the Bank of North Dakota, which acted as an agent for
the State Treasurer. The quit claim deed reserved 50 percent
of the mineral interest in the Bank. In 2004 the Board of
University and School Lands entered into an oil and gas lease
with Powers Energy Corporation for 100 percent of the mineral
interest in the property. In 2007 Burk entered into an oil
and gas lease with Cody Oil & Gas Corporation. Zavanna,
LLC, subsequently drilled a well on the property.
3] A 2008 title opinion informed Zavanna the State owned 100
percent of the minerals because the Bank, acting on behalf of
the State Treasurer, was not authorized to convey minerals,
and therefore, Burk's lease with Cody was ineffective.
See N.D.C.C. § 15-08.1-03 ("All mineral
interests that may be acquired by the Bank of North Dakota...
must be transferred, assigned, conveyed, and granted to the
state of North Dakota, acting by and through the board of
university and school lands.") Settlement negotiations
ensued between Burk and the State which resulted in a 2011
settlement agreement. The Board, which had the authority to
convey the State's mineral interests, agreed to convey
the property to Burk through a quit claim deed reserving 50
percent of the mineral interest. Under the agreement, Burk
also ratified the Board's lease to Powers.
4] In 2012 Burk sued Zavanna in federal court claiming it was
unlawfully withholding gross production and extraction taxes
from his royalties. Burk asserted that under the settlement
agreement with the State he was entitled to tax-exempt
royalties. The federal court granted Zavanna's request
under Fed.R.Civ.P. 11 to strike this allegation from the
complaint because state "regulations leave no room for
Burk to argue that he assumed the benefit of the State's
tax exemption when he acquired his royalty interest from the
State and an interest under the State's existing lease
via the Settlement Agreement." The federal court refused
to award attorney fees as a sanction, however, because Burk
and his attorney acted in "good faith."
5] Through a different attorney, Burk brought this state
court declaratory judgment action against the State in April
2015, claiming his royalties should not be subject to
taxation based on the parties' settlement agreement. The
district court granted the State's motion for summary
judgment dismissing the action, concluding "[t]heir
agreement has to do with mineral interests and nothing to do
with the tax saying that Mr. Burk wouldn't have to pay
the gross production tax." The court also found the
claim was frivolous and awarded the State $5, 682.18 in
attorney fees because "it's pretty much the same
thing" as the federal court action.
6] Burk argues the district court erred in granting summary
judgment dismissing his action against the State.
7] Our standard of review for summary judgments under
N.D.R.Civ.P. 56 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.... Whether the
district court properly granted summary judgment is a
question of law which we review de novo on the entire record.
Tank v. Citation Oil & Gas Corp., 2014 ND 123,
¶ 8, 848 N.W.2d 691 (quoting Estate of Christeson v.
Gilstad, 2013 ND 50, ¶ 6, 829 N.W.2d 453).
8] There is no dispute in this case that Burk ordinarily
would be subject to payment of taxes on the oil produced and
extracted from the property covered by his oil and gas lease.
See N.D.C.C. §§ 57-51-02 (gross production
tax) and 57-51.1-02 (oil extraction tax). The property of the
state, however, is exempt from taxation. See N.D.
Const. art. X, § 5. Therefore, royalty interests owned
by the state are exempt from both the gross production tax
and the oil extraction tax. See N.D. Admin. Code
§§ 81-09-02-15(1)(b) and 81-09-03-01. Burk argues
he obtained the state's tax exempt status through the
2011 settlement agreement.
9] A settlement agreement is a contract and the parties'
rights and responsibilities are limited by the terms of the
agreement. SeeKuperus v. Willson, 2006 ND
12, ¶ 11, 709 N.W.2d 726. The interpretation of a
written contract generally is a question of law for the
court, making summary judgment an appropriate method of
disposition in contract disputes. SeeMyaer v.
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