Powell v. Statoil Oil & Gas

                                                                                   FILED
                                                                           IN THE OFFICE OF THE
                                                                        CLERK OF SUPREME COURT
                                                                            DECEMBER 15, 2023
                                                                         STATE OF NORTH DAKOTA




                  IN THE SUPREME COURT
                  STATE OF NORTH DAKOTA

                                 

Fonda Jo Powell and Mary T. Henke, Co-Personal
Representatives of the Estate of June A. Slagle,
Helen Verhasselt, Trustee of the June Slagle
Family Mineral Trust,                                 Plaintiffs and Appellants
      v.
Statoil Oil & Gas LP, now known as Equinor
Energy LP,                                             Defendant and Appellee



                                 No. 20230098

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

REVERSED AND REMANDED.

Opinion of the Court by McEvers, Justice.

Jordon J. Evert, Williston, ND, for plaintiffs and appellants.

Spencer D. Ptacek (argued) and Lawrence Bender (on brief), Bismarck, ND, for
defendant and appellee.
                     Powell, et al. v. Statoil Oil & Gas
                               No. 20230098

McEvers, Justice.

[¶1] Plaintiffs appeal from a judgment of dismissal entered after an order
granting Statoil Oil & Gas LP’s motion for summary judgment concluded a
dispute of title allowed Statoil to suspend royalty payments and Plaintiffs are
not entitled to statutory interest. Plaintiffs argue the district court erred in
concluding there was a title dispute. Statoil argues this action is barred by the
statute of limitations. We reverse, concluding the action is not barred by the
statute of limitations and the court erred in concluding Statoil lawfully
suspended royalty payments, and remand for further proceedings.

                                       I

[¶2] June Slagle owned mineral interests in McKenzie County prior to her
death on April 23, 2016. One mineral interest was a life estate interest. The
June Slagle Family Mineral Trust (the “Trust”) owned the remainder interest
in the life estate minerals.

[¶3] In April 2010, an oil and gas lease for June Slagle’s life estate minerals
was recorded in the McKenzie County Recorder’s Office. The lease was between
“Fonda Powell, power of attorney for June Slagle” and Brigham Oil and Gas
L.P., and executed by “Fonda Powell POA.” Powell is June Slagle’s daughter;
Brigham was eventually acquired by Statoil, n/k/a Equinor Energy LP. The
lease stated the lessee would pay the lessor a 20% royalty. Brigham issued a
check to “June Slagle [&] Fonda Powell POA” for $223,980 as consideration for
the lease. A power of attorney instrument was never recorded in the McKenzie
County Recorder’s Office.

[¶4] In October 2011, the Patent Gate 7-6 #1H well was spud. The Patent
Gate well produces from a spacing unit comprised of land which includes the
life estate minerals and began producing in April 2012. Statoil is the operator
of the well, and production or drilling operations have continued since first
production. June Slagle was never paid royalties during her lifetime for her
life estate mineral interest. In April 2017, Statoil paid the Trust approximately

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$750,060 for the suspended royalties attributable to the life estate mineral
interest.

[¶5] In May 2019, Plaintiffs commenced this action, alleging Statoil breached
its obligation to timely pay royalties and sought statutory interest. Statoil
answered and moved for summary judgment, arguing Plaintiffs’ claims are
barred by the statute of limitations and it was permitted to suspend royalty
payments due to a dispute of title. Statoil declared it suspended the life estate
royalty payments because June Slagle’s power of attorney instrument was
never recorded. Plaintiffs responded and filed a cross-motion for summary
judgment along with exhibits and an affidavit of Fonda Powell. Powell stated
she provided Brigham a copy of her mother’s power of attorney instrument
when the lease was executed and neither she nor her mother, to the best of her
knowledge and belief, were contacted by Brigham or Statoil informing them of
the alleged title defect created through the failure to record the power of
attorney. Powell stated that she did not become aware of the suspended life
estate mineral royalties until she notified Statoil of her mother’s death.
Plaintiffs filed a “Durable Power of Attorney of June A. Slagle,” executed in
2005 by her son, Gayle Slagle, stating June Slagle designates her daughters
Fonda Powell and Mary Henke as her co-attorneys in fact. Statoil
acknowledges that Brigham received this document.

[¶6] After oral argument on the motions, the district court granted summary
judgment in favor of Statoil, concluding a title dispute existed allowing Statoil
to suspend royalty payments. The court entered a judgment of dismissal.

                                       II

[¶7] Our summary judgment standard of review is well established:

      Summary judgment under N.D.R.Civ.P. 56 is a procedural device
      for the prompt resolution of a controversy on the merits 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. Summary judgment is
      appropriate if the issues in the case are such that the resolution of
      any factual disputes will not alter the result. Whether the district


                                       2
      court properly granted summary judgment is a question of law
      that we review de novo on the entire record. On appeal, this Court
      decides whether the information available to the district court
      precluded the existence of a genuine issue of material fact and
      entitled the moving party to judgment as a matter of law.

Vic Christensen Min. Tr. v. Enerplus Res. (USA) Corp., 

, 

.

                                      III

[¶8] Statoil argues this action is barred by the statute of limitations.
Plaintiffs contend this issue is not properly before us because the district court
did not address the issue. Plaintiffs argue our ruling on the matter would be
an inappropriate advisory opinion and contrary to the Court’s precedent
requiring a cross-appeal.

[¶9] “It is well established that courts will not give advisory opinions on
abstract legal questions, and an action will be dismissed if there is no actual
controversy left to be determined and the issues have become moot or
academic.” Somerset Ct., LLC v. Burgum, 

, 

.
Because the district court dismissed the case on the merits, it did not address
the statute of limitations issue. To the extent the three-year statute of
limitations may apply, as Statoil argues it does, and the relevant facts are not
in dispute, the issue was ripe for summary judgment. The court’s refraining
from ruling on the issue does not render the issue moot. Otherwise, the court
could unilaterally moot any issue by not ruling on the issue. Nor is the issue
academic or raising an abstract legal question. Statoil alleged and argued the
statute of limitations issue in the district court. An appellee is entitled to
attempt to save a judgment by urging any ground asserted in the district court,
regardless of whether a cross-appeal is filed. Hussiene v. Director, N.D. Dep’t
of Transp., 

, ¶ 11, 

. Because Statoil is requesting
affirmance of the judgment and is not requesting a more favorable result on
appeal, Statoil was not required to cross-appeal. Tkach v. Am. Sportsman, Inc.,

 (N.D. 1982) (“In the absence of a cross-appeal, the appellee




                                        3
may only seek affirmance of the judgment, and may not seek a more favorable
result on appeal than he received in the trial court.”).

[¶10] Statoil and Plaintiffs disagree as to the applicable statute of limitations.
Interpreting a statute of limitations is a question of law fully reviewable on
appeal. Kittleson v. Grynberg Petroleum Co., 

, ¶ 22, 

. Statoil argues the applicable statute of limitations is N.D.C.C. § 28-01-
17(2), which states, “The following actions must be commenced within three
years after the claim for relief has accrued: . . . 2. An action upon a statute for
a penalty or forfeiture, if the action is given to the party aggrieved, or to such
party and the state, unless the statute imposing it prescribes a different
limitation.” Statoil asserts Plaintiffs’ claim for statutory interest of 18% under
N.D.C.C. § 47-16-39.1 is an action upon a statute for a penalty that is given to
the party aggrieved. Section 47-16-39.1, N.D.C.C., states in relevant part:

            The obligation arising under an oil and gas lease to pay oil
      or gas royalties to the mineral owner . . . is of the essence in the
      lease contract . . . . If the operator under an oil and gas lease fails
      to pay oil or gas royalties to the mineral owner . . . within one
      hundred fifty days after oil or gas produced under the lease is
      marketed and cancellation of the lease is not sought . . . the
      operator thereafter shall pay interest on the unpaid royalties . . .
      at the rate of eighteen percent per annum until paid.

Statoil contends the 18% interest is “not truly ‘interest,’” but a penalty, citing
definitions of “interest,” the legislative history of N.D.C.C. § 47-16-39.1, and
cases from other jurisdictions describing similar statutory schemes as
penalties.

[¶11] Statoil does not argue N.D.C.C. § 47-16-39.1 is ambiguous. “This Court
does not examine legislative history unless a statute is ambiguous.” City of
Jamestown v. Nygaard, 

, 

.

      “Words used in any statute are to be understood in their ordinary
      sense, unless a contrary intention plainly appears, but any words
      explained in this code are to be understood as thus
      explained.” See N.D.C.C. § 1-02-02. Statutes are construed as a
      whole and are harmonized to give meaning to related

                                        4
      provisions. N.D.C.C. § 1-02-07. If the relevant language is clear
      and unambiguous, “the letter of it is not to be disregarded under
      the pretext of pursuing its spirit.” N.D.C.C. § 1-02-05.

Van Sickle v. Hallmark & Assocs., Inc., 

, 

.
Statoil’s argument that the Legislature intended for the 18% interest to be a
penalty is not persuasive. Turning to the very next section in that chapter,
N.D.C.C. § 47-16-39.2 requires the district court to assess “a civil penalty of
two thousand dollars per day for each day the person obligated to pay royalties
under the lease failed to send the oil and gas royalty payment and production
records” to the board of university and school lands in a successful proceeding
under that section. (Emphasis added.) The Legislature is aware of the
difference between “interest” and a “penalty,” and although there may be an
upper limit where interest becomes a penalty, we will not second-guess its use
of the word “interest” here. Cf. Iverson v. Ingersoll-Rand Co., 

 (8th Cir. 2004) (concluding employee’s claim for $100/day sanction
against employer for untimely disclosure of information under ERISA was an
action upon a statute for a penalty and thus time barred under N.D.C.C. § 28-
01-17(2)); see also Weeks v. Geiermann, 

, 

(explaining statutory prejudgment interest rate under N.D.C.C. § 47-14-05 is
considered compensation for damages for the wrongful detention of money at
a prescribed rate of interest).

[¶12] Plaintiffs argue the ten-year statute of limitations in N.D.C.C. § 28-01-
15(2) applies as determined in Kittleson. Under N.D.C.C. § 28-01-15(2), “An
action upon a contract contained in any conveyance or mortgage of or
instrument affecting the title to real property” must be commenced within ten
years after the claim for relief has accrued. In Kittleson, we analyzed which
statute of limitations applied to a lessor’s breach of contract action for the
underpayment of royalties. We concluded the ten-year statute of limitations
under N.D.C.C. § 28-01-15(2) applied to a breach of contract action for the
underpayment of royalties:

            The legislature has stated that the obligation to pay
      royalties “is of the essence in the [oil and gas] lease contract.”
      N.D.C.C. § 47-16-39.1. . . . [T]he provision here regarding the


                                       5
      payment of royalties is contained in the lease. We conclude the
      obligation to pay royalties under an oil and gas lease is a contract
      contained in a conveyance or instrument affecting title to real
      property within the meaning of N.D.C.C. § 28-01-15(2). We hold
      the ten-year limitation period in N.D.C.C. § 28-01-15(2) applies to
      Kittleson’s breach of contract action for the underpayment of
      royalties under the oil and gas lease.

Kittleson, 

, ¶ 37 (first alteration in original).

[¶13] Here, the oil and gas lease stated the lessee would pay the lessor a 20%
royalty. The obligation arising under a lease to pay royalties “is of the essence.”
Statoil failed to timely pay royalties. Although Statoil has since paid all of the
suspended royalties to Plaintiffs, their action remains, at least in part, one for
breach of the lease. Under N.D.C.C. § 47-16-39.1, the 18% interest is a part of
the mineral owner’s damages; it is compensation for the operator’s breach of
its obligation to make timely royalty payments and an alternative remedy to
cancellation of the lease. The basis of the claim, however, is nonpayment,
underpayment, or, as is the case here, untimely payment of royalties arising
from the oil and gas lease. See Van Sickle, 

 (stating that
under N.D.C.C. § 47-16-39.1 “a failure to pay oil and gas royalties constitutes
a breach of the obligation arising under the oil and gas lease”). Plaintiffs
alleged Statoil untimely paid royalties and sought statutory interest, costs, and
attorney’s fees as damages. Thus, we conclude as a matter of law that the ten-
year statute of limitations, N.D.C.C. § 28-01-15(2), which in Kittleson applied
to a claim for underpayment of royalties under an oil and gas lease, applies
here to the claim for untimely payment of royalties under the oil and gas lease.
Because Plaintiffs’ claims accrued within ten years of commencing this action,
their action is timely under N.D.C.C. § 28-01-15(2).

                                       IV

[¶14] Plaintiffs argue the district court erred in concluding a dispute of title
existed allowing Statoil to suspend royalties. Section 47-16-39.1, N.D.C.C.,
allows the mineral owner to receive 18% interest on untimely royalty
payments, but does not apply “in the event of a dispute of title existing that
would affect distribution of royalty payments.” Accordingly, suspension of

                                        6
royalty payments is lawful under N.D.C.C. § 47-16-39.1 when there is a dispute
of title that would affect distribution of royalty payments. See Vic Christensen,

.

[¶15] In Vic Christensen, the well operator suspended royalty payments to two
sets of mineral owning trusts after informing them of a title dispute. 

. The trusts sued each other to quiet title in the mineral and royalty
interests. Id. at ¶ 6. Although the trusts eventually stipulated to their interests
and the operator paid their suspended royalties, the trust defendants sought
statutory interest against the operator. Id. at ¶¶ 6-7. The district court granted
summary judgment in favor of the trust defendants, concluding there was no
dispute of title allowing the operator to suspend royalty payments. Id. at
¶¶ 7, 9. We reversed, concluding a dispute of title existed where the mineral
owners sued each other to quiet title in their interests. Id. at ¶ 10. We rejected
the trust defendants’ argument that the position taken by the operator in the
title dispute ultimately had to be proven successful to suspend royalties under
the dispute of title provision of N.D.C.C. § 47-16-39.1. Id. at ¶ 11. Rather, the
crucial facts were that the operator notified the mineral owners of a title
discrepancy, and thereafter the mineral owners “sued each other to quiet title,
undoubtedly creating a ‘dispute of title’ that would affect their royalty
payments” from the operator. Id. Thus, we held the operator lawfully
suspended royalty payments. Id.

[¶16] Here, there was no quiet title action between mineral owners claiming
title to the same mineral interest. Nor does Statoil argue June Slagle’s life
estate interest was burdened or affected by another mineral owner’s interest.
Under N.D.C.C. § 47-16-39.4, “If the mineral owner and mineral developer
disagree over the mineral owner’s ownership interest in a spacing unit, the
mineral developer shall furnish the mineral owner with a description of the
conflict and the proposed resolution or with that portion of the title opinion
that concerns the disputed interest.” Unlike the operator in Vic Christensen,
Statoil produced no evidence that it contacted June Slagle concerning a
disputed interest or that it was suspending her royalties.




                                        7
[¶17] Statoil argues that under Vic Christensen it does not matter whether its
position on the title dispute is unsuccessful as long as the title dispute existed.
We need not address the rationale of the district court or the various
arguments made by the parties regarding whether a title dispute existed.
When the dispute is between the mineral developer and the mineral owner,
notice of the dispute is required. As stated above, N.D.C.C. § 47-16-39.4
requires the mineral developer to provide the mineral owner with a description
of the title dispute and its proposed resolution or a title opinion concerning the
disputed interest. Construing N.D.C.C. §§ 47-16-39.1 and 47-16-39.4 together,
if an operator fails to notify a mineral owner of a title dispute affecting her
distribution of royalties and fails to pay royalties within 150 days after oil or
gas produced under the lease is marketed, and cancellation of the lease is not
sought, the operator must pay interest on the unpaid royalties at 18% per
annum until paid. Statoil did not present evidence that June Slagle was
notified of a title dispute, and it is undisputed Statoil failed to pay royalties to
June Slagle on her life estate interest during her lifetime. Accordingly, Statoil
must pay interest at the rate of 18% on untimely paid royalties.

                                        V

[¶18] We reverse the judgment of dismissal and order for summary judgment
and remand for further proceedings consistent with this opinion.

[¶19] Jon J. Jensen, C.J.
      Daniel J. Crothers
      Lisa Fair McEvers
      Jerod E. Tufte
      Douglas A. Bahr




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