Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Burk v. State

Supreme Court of North Dakota

February 16, 2017

Willard Burk, Plaintiff and Appellant
v.
State of North Dakota, by and through its Board of University and School Lands and Ryan Rauschenberger, Tax Commissioner of the State of North Dakota, Defendants and Appellees

         Appeal from the District Court of Burleigh County, South Central Judicial District, the Honorable Thomas J. Schneider, Judge.

          Joel M. Fremstad, for plaintiff and appellant.

          Hope 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.

          OPINION

          McEVERS, JUSTICE.

         [¶ 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 not frivolous.

         [¶ 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.

         II

         [¶ 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).

         A

         [¶ 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. Nodak Mut. Ins. ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.