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Bearce v. Yellowstone Energy Development, LLC

Supreme Court of North Dakota

March 22, 2019

Daniel T. and Debra Ann Bearce, Plaintiffs and Appellants
v.
Yellowstone Energy Development, LLC, Acting By and Through Its Board of Directors, Defendant and Appellee

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

         AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

          Charles L. Neff, Williston, ND, for plaintiffs and appellants.

          Kent A. Reierson (argued) and Trevor A. Hunter (on brief), Williston, ND, for defendant and appellee.

          OPINION

          Jensen, Justice.

         [¶1] Daniel and Debra Bearce ("the Bearces") appeal from a judgment in favor of Yellowstone Energy Development LLC ("Yellowstone") entered following the parties' cross motions for summary judgment. The Bearces challenge the district court's exclusion of parol evidence to support their allegation of fraud in the inducement. The Bearces also challenge the district court's conclusion the Bearces were not owed a fiduciary duty. We affirm the district court's judgment dismissing the Bearces' claim for fraud and their claim for breach of contract. We reverse the district court's dismissal of the Bearces' claim for breach of a fiduciary duty and remand for further proceedings consistent with this opinion.

         I.

         [¶2] In June 2006, representatives of a business entity that would eventually become Yellowstone went to the home of Daniel and Debra Bearce seeking to purchase 170 acres of land owned by the Bearces. Yellowstone successfully secured an exclusive option to purchase the land.

         [¶3] In 2008, Yellowstone exercised its option to purchase the land and the parties entered into a contract for deed. In 2009, Yellowstone and the Bearces modified the contract for deed to alter some of the payment terms. Both the original contract for deed and the 2009 modified contract for deed included the following term providing for the payment of a portion of the purchase price with "shares" of a contemplated ethanol plant:

In addition to the cash amounts stated above, the Sellers shall receive shares in the Buyer's limited liability company totaling a value of $100, 000.00, in the name of the Sellers, to be delivered following financial close of the financing for the Buyer's ethanol plant to be constructed upon the above described real property.

(Emphasis added).

         [¶4] Yellowstone subsequently abandoned its plan to build an ethanol plant on the Bearces' land. Yellowstone then negotiated a long-term lease with a third party to build an oil train loading facility on the Bearces' land.

         [¶5] In July 2010, Yellowstone sent a letter to the Bearces advising them their $100, 000 in "value" would be issued despite Yellowstone's abandonment of the plan to build an ethanol plant. The letter stated ownership units had not yet been issued and explained the Bearces would receive their ownership interest "at the time shares are issued to all its members." Shortly after receiving that letter, the Bearces executed and delivered a deed for the property to Yellowstone.

         [¶6] In December 2011, the Yellowstone Board of Directors approved a multiplier of three units per $1 invested for individuals who had provided initial cash investment in Yellowstone. The Bearces' interest in Yellowstone was not given the 3:1 multiplier. In October 2012, the Yellowstone Board of Directors approved a second multiplier of three units per $1 invested for individuals who had initially provided cash investment in Yellowstone. The Bearces' interest in Yellowstone was not given the second 3:1 multiplier.

         [¶7] Units representing ownership interest in Yellowstone were allocated and placed on a ledger sometime after December 4, 2012. After receiving a "unit ledger" indicating their interest in Yellowstone would not receive the 3:1 multiplier, the Bearces objected. Despite the objection, Yellowstone ...


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