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Dale Exploration, LLC v. Hiepler

Supreme Court of North Dakota

December 6, 2018

Dale Exploration, LLC, Bakken HBT, II LP, Dale Exploration, LP, and Dale Lease Acquisitions, LP, Plaintiffs
v.
Orville G. Hiepler and Florence L. Hiepler, individually and also as co-trustees of the Orville G. Hiepler and Florence L. Hiepler Family Trust dated January 9, 1997, Defendants and Appellees Bill L. Seerup and Hurley Oil Properties, Inc., Defendants and Appellants and Hefner Company, Inc. Defendant

          Appeal from the District Court of Williams County, Northwest Judicial District, the Honorable Joshua B. Rustad, Judge.

          Adam M. Olschlager, Billings, MT, for defendants and appellants Bill L. Seerup and Hurley Oil Properties, Inc.

          Jonathan T. Garaas, Fargo, ND, for defendants and appellees Orville G. Hiepler and Florence L. Hiepler.

          OPINION

          VANDEWALLE, CHIEF JUSTICE.

         [¶ 1] Hurley Oil Properties, Inc. and Bill L. Seerup appealed from a judgment awarding money damages instead of specific performance for Orville Hiepler's breach of contract, the Mineral Deed, conveying real property. Seerup and Hurley contend the mineral deed signed by Orville Hiepler is enforceable and requires Hiepler to convey the real property currently held by the revocable trust of which he is a settlor, trustee, and beneficiary. We conclude that the mineral deed signed by Orville Hiepler, settlor of the revocable trust, requires conveyance of the property and accordingly, the district court erred in refusing to grant specific performance. We reverse and remand.

         I

         [¶ 2] In 1997 Orville and Florence Hiepler created the "Orville G. Hiepler and Florence L. Hiepler Family Trust Dated January 9, 1997" (the "Trust"). The Hieplers conveyed most of their mineral interests to themselves as co-trustees of the Trust in September 1997. The conveyance was recorded in the office of the Williams County Recorder in March 1998. Under the Trust, which was fully revocable, the Hieplers were grantors, co-trustees, and beneficiaries. Section 1.04(c) of the Trust document gives the settlor the power to add and remove any property from the Trust at any time, without requiring notice to or actions by a trustee.

         [¶ 3] On April 7, 2007, Orville and Florence Hiepler deeded 150 net mineral acres in Williams County to Bill L. Seerup in exchange for $15, 609.00. Included in the Mineral Deed were further assurances and warranty clauses: "Grantor agrees to execute such further assurances as may be requisite for the full and complete enjoyment of the rights herein granted..." and "Grantor does hereby warrant said title to Grantee...." The Mineral Deed contained no mention of the Trust or reference to Orville and Florence Hiepler's role as co-trustees. When the Mineral Deed was executed, the Hieplers, specifically Orville Hiepler, individually owned only 7.3636 mineral acres. The remaining 142.6 mineral acres were owned by the Trust. Orville Hiepler argues that he was unaware of what mineral acres he individually owned when he signed the Mineral Deed.

         [¶ 4] Nine days after receiving the Mineral Deed from Orville and Florence Hiepler, Seerup conveyed 135 mineral acres to Hurley. At trial, Seerup testified that he did not do a title examination on the mineral interests. It is unclear when Seerup became aware that the minerals were titled under the Trust. Seerup did not contact Orville and Florence Hiepler about any issues with the mineral rights until 2011. Seerup testified that he believed Orville Hiepler's signature was sufficient to convey the mineral acres to him, even after learning about the Trust.

         [¶ 5] In 2009 the Trust leased most of its mineral rights to Kasmer & Aafedt Oil, Inc. The lease was originally executed by Orville Hiepler in his individual capacity but was ratified the following year by the Trust via the signatures of Orville and Florence Hiepler as "Co-Trustee of the Hiepler Family Trust Dated 1-9-1987" (sic). These were the same mineral rights Orville and Florence Hiepler deeded to Seerup through the 2007 Mineral Deed.

         [¶ 6] Dale Exploration, LLC, filed suit in fall 2014 to quiet title to 150 net mineral acres conveyed in the Mineral Deed from Orville and Florence Hiepler to Seerup. Florence Hiepler died in 2015. After Florence's death, Orville Hiepler amended and restated the Trust recognizing Orville Hiepler as the sole settlor and Orville and his son, Mark O. Hiepler, as co-trustees. In September 2017, the district court dismissed Dale Exploration's claims on summary judgment, finding no evidence that Dale Exploration had an interest in the disputed property. The court refused to grant summary judgment on either the Hieplers' cross-claim to rescind or reform the Mineral Deed or Seerup's cross-claim requesting specific performance.

         [¶ 7] At a bench trial, the parties stipulated to the Mineral Deed constituting a valid, enforceable, and unambiguous contract that is fully binding between the parties. After trial, the district court asked the parties for proposed findings and conclusions of law. The district court adopted the Hieplers' findings. The court found the Hieplers owned the mineral interests in fee simple as trustees, not as individuals. Additionally, the court found the Hieplers breached the Mineral Deed, but that the breach was of the covenant of seizin [1] and thus the proper remedy was damages under N.D.C.C. § 32-03-11, not specific performance. Damages in the amount of $20, 147.96 were awarded. The court found specific performance was not appropriate since an action at law for the breach of the covenant of seizin was available. Further, the court found that Seerup and Hurley had no claim for the breach of the covenant of further assurances because under N.D.C.C. § 47-10-04 the expense of complying with the further assurances falls onto the buyer.

         II

         [¶ 8] We review a district court's findings of fact under the clearly erroneous standard of N.D.R.Civ.P. 52(a) and its conclusions of law de novo. Service Oil, Inc. v. Gjestvang, 2015 ND 77, ¶ 12, 861 N.W.2d 490; Hoff v. Krebs, 2009 ND 48, ¶ 9, 763 N.W.2d 520. A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, after reviewing all the evidence, we are left with a definite and firm conviction a mistake has been made. Service Oil, Inc., at ¶ 12. While this Court does not "approve as a practice the [district] court's wholesale adoption of one party's proposed findings of fact," once the district court signs the proposed findings, they "bec[o]me the court's findings, and if they adequately explain the basis of the court's decision, they will be upheld on appeal unless clearly erroneous under N.D.R.Civ.P. 52(a)." S ...


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