IN THE SUPREME COURT
STATE OF NORTH DAKOTA
|Brigham Oil and Gas, L. P.,|
|Plaintiff and Appellee,|
|Lario Oil & Gas Company and|
|Murex Petroleum Corporation,|
|Defendants and Appellees.|
|Lario Oil & Gas Company,|
|Third Party Plaintiff and Appellee,|
|Third Party Defendant,|
|Georgette O. Navarro, and|
|The Triple T, Inc.,|
|Third Party Defendants, Intervenors and Appellants.|
|Supreme Court No. 20110016 (consolidated with Supreme Court|
APPEAL FROM ORDER DENYING MOTION TO INTERVENE AND MOTION TO VACATE JUDGMENT DATED DECEMBER 15, 2010, OF THE DISTRICT COURT OF MOUNTRAIL COUNTY, STATE OF NORTH DAKOTA, THE HONORABLE WILLIAM W. McLEES, PRESIDING
REPLY BRIEF OF APPELLANTS THE TRIPLE T, INC., AND
CHRISTINE THOMPSON, AS SOLE TRUSTEE OF THE
NAVARRO 2009 LIVING TRUST AGREEMENT, DATED FEBRUARY 6, 2009
|Sara K. Sorenson|
|ND ID #05826|
|Attorney for Appellants, The Triple T, Inc., and Christine Thompson, as sole Trustee of the Navarro 2009 Living Trust Agreement, dated February 6, 2009|
|OHNSTAD TWICHELL, P.C.|
|901 - 13th Avenue East|
|P.O. Box 458|
|West Fargo, ND 58078-0458|
|TEL (701) 282-3249|
|FAX (701) 282-0825|
|TABLE OF CONTENTS|
|Table of Authorities|
|I.||Law and Argument||2|
|A.||The standard of review as to all issues is de novo.||2|
|B.||The district court erred in failing to vacate the judgment.||4|
|C.||The district court erred in denying the motion to intervene.||7|
|D.||Lario cannot claim a 100% interest in the minerals because|
|Avery, Lario's predecessor in title, never received a deed|
|to a 100% interest..||8|
|Certificate of Service|
|TABLE OF AUTHORITIES|
|Belakjon v. Hilstad, 35 N.W.2d 637 (N.D. 1949)||14|
|Eggl v. Fleetguard, Inc.,|
|1998 ND 166, 583 N.W.2d 812||4, 7|
|Hukill v. Oklahoma Native American Domestic Violence Coalition,|
|542 F.3d 794 (10th Cir. 2008)||3|
|Johnson, Johnson, Stokes, Sandberg & Kragness, Ltd. v. Birnbaum,|
|555 N.W.2d 583 (N.D. 1996)||3|
|Masterson v. Girard's Heirs 10 Ala. 60, 1846 WL 409 (Ala. 1846)||14|
|Messer v. Bender,|
|1997 ND 103, 564 N.W.2d 291||5|
|Rothberg v. Rothberg,|
|2006 ND 65, 711 N.W.2d 219||2|
|State v. White,|
|109 P.3d 1199 (Kan. 2005)||2|
|Wacker Oil, Inc. v. LoneTree Energy, Inc.,|
|459 N.W.2d 381 (N.D. 1990)||6, 7|
|STATUTES AND RULES|
|Cal. Prob. Code § 11753||10|
|Cal. Prob. Code § 12250||10|
|N.D.C.C. § 30.1-18-11||11, 12, 13|
|N.D.C.C. § 30.1-20-07||12|
|N.D.C.C. § 30.1-20-08||12|
|N.D.C.C. § 30.1-20-10||12, 13|
|N.D.C.C. § 30.1-21-06||13|
|N.D.R. Civ. P. 60||3, 4|
|23 Am. Jur. 2d Descent and Distribution § 18||14|
[¶ 1] Lario's position in this matter depends upon this Court finding that a lessee (Lario) may obtain a vested right to 100% of the mineral interests even when the lessor (Avery) was never deeded 100% of those mineral rights. Put another way, Lario contends that the deed to Avery of only 25% of the mineral interests has no effect on Lario's interest, even though Lario concedes that Lario's interest derives from and through Avery. As explained below, the law does not support Lario's conclusions in this regard. The law also does not support Lario's conclusions with regard to the motions to intervene and vacate the judgment.
II.Law and Argument
A.The standard of review as to all issues is de novo.
[¶ 2] At the outset, Lario contends that the denial of the motion to intervene in this case is subject to an abuse of discretion standard. Thompson and Triple T contend that the district court misapplied the law by failing to consider the issue of prejudice in determining whether intervention was appropriate. This Court reviews de novo the application of the legal principles underlying a decision, including whether appropriate factors were considered in making that decision. Rothberg v. Rothberg, 2006 ND 65, ¶ 22, 711 N.W.2d 219, 225 (N.D. 2006); see also State v. White, 109 P.3d 1199, 1203-04 (Kan. 2005) ("Questions of law are presented when an appellate court seeks to review the factors and considerations forming a district court's discretionary decision. . . .
A district court by definition abuses its discretion when it makes an error of law. . . . The abuse-of-discretion standard includes review to determine that the discretion was not guided by erroneous legal conclusions.") (citations and quotations omitted).
[¶ 3] Citing a Tenth Circuit case from 1979 that broadly discusses Rule 60(b), Lario contends that the district court's denial of the motion to vacate pursuant to Rule 60(b)(iv) is subject to an abuse of discretion standard. More current Tenth Circuit case law, which specifically addresses review pursuant to Rule 60(b)(iv), holds otherwise: "Where Rule 60(b)(4) is properly invoked, relief is not a discretionary matter; it is mandatory, and, accordingly, our review is de novo." Hukill v. Oklahoma Native American Domestic Violence Coalition, 542 F.3d 794, 797 (10th Cir. 2008) (citations and quotations omitted). More importantly, this Court has determined that review of a Rule 60(b)(iv) decision is de novo. Johnson, Johnson, Stokes, Sandberg & Kragness, Ltd. v. Birnbaum, 555 N.W.2d 583, 585 (N.D. 1996). ("The decision whether to vacate a judgment under Rule 60(b)(iv), N.D.R.Civ.P., is not within the district court's discretion; . . . if the judgment is void the court must vacate it.").
B.The district court erred in failing to vacate the judgment.
[¶ 4] Triple T and Thompson contend that the judgment in this matter is void pursuant to Rule 60(b)(iv) because of the failure to join them as necessary and indispensable parties. Lario and the district court asserted that the motion to vacate pursuant to Rule 60(b)(iv) was untimely and therefore it was appropriate to deny it. (Appellee's Brief ¶ 75.) As this Court has stated, however:
There is and can be no time limit on judicial relief from a judgment that is, in fact, already a nullity and always subject to direct and collateral attack, and therefore anytime is a reasonable time to set aside a void judgment.
Eggl v. Fleetguard, Inc., 1998 ND 166, ¶ 5, 583 N.W.2d 812, 814 (citations and quotations omitted).
[¶ 5] Lario also now argues that Triple T and Thompson are not indispensable parties. Notably, Lario never made this argument to the district court, and the district court assumed that Triple T and Thompson were indispensable parties. (See Docket No. 41, Thompson App. 29-30.) Lario accordingly waived any argument that Triple T and Thompson were not indispensable parties. Messer v. Bender, 1997 ND 103, ¶ 10, 564 N.W.2d 291 ("We do not consider questions that were not presented to the trial court and that are raised for the first time on appeal.").
[¶ 6] Not only did Lario waive the argument regarding indispensable parties, Lario affirmatively alleged that there was a failure to join indispensable parties. (Thompson App. 14.) Lario is, however, now trying to back out of this concession by stating that it never "identif[ied] which parties were indispensable." (Appellee's Brief ¶ 72.) Lario was correct, however, that there was a failure to join necessary and indispensable parties. The issues involved in this case are similar to those in Wacker Oil, Inc. v. LoneTree Energy, Inc., 459 N.W.2d 381, 383 (N.D. 1990), where two leaseholders sought to determine which lease prevailed. The Court questioned the failure to join the putative owners of the mineral acres, stating "in an action to quiet title all persons appearing of record to have a possible claim or interest in the land involved should be made parties." Id. The Court allowed the action to proceed, but noted: "the absence of [the putative mineral owners] from the action may serve to jeopardize Wacker's rights in the future, inasmuch as any judgment in this action may not be binding on them[.]" Id. To the extent Triple T and Thompson are not allowed to intervene, they assert the judgment is not binding upon them. Id.
C.The trial court erred in denying the motion to intervene.
[¶ 7] Lario does not dispute that the trial court never considered whether there would be prejudice to the parties from the intervention. Instead, Lario argues that it would be prejudiced from the intervention because it would require "delays in the administration of the justice between the parties." (Appellee's Brief ¶ 70.) What Lario fails to consider, however, is that the failure to allow the intervention will undoubtedly delay the administration of justice because if Triple T and Thompson are not allowed to intervene, the judgment is not binding upon them. Wacker Oil, Inc., 459 N.W.2d at 383. Moreover, Triple T and Thompson are allowed to collaterally attack the judgment anytime to set aside the void judgment. Eggl, 1998 ND 166, ¶ 5. The trial court's failure to allow Triple T and Thompson to intervene should be reversed.
D. Lario cannot claim a 100% interest in the minerals because Avery, Lario's predecessor in title, never received a deed to a 100% interest.
[¶ 8] In its Brief, Lario concedes and acknowledges that in a real estate transaction, a grantee can be conveyed no greater interest than the grantor has. (Appellee's Brief ¶ 77.) Accordingly, Lario's interest, derived from Avery, can be no greater than Avery's interest.
[¶ 9] Lario disagrees, however, that Avery's interest was subject to divestment by the Personal Representative. In doing so, Lario does not cite to any legal authority. Instead, Lario argues that if Avery's interest was, in fact, subject to divestment, then: "any oil and gas lease in the state of North Dakota can be made void and a new one with more favorable terms given simply be locating a competent successor to a long-closed probate through which the subject mineral rights passes, making an agreement with the other successors to those rights, and redistributing them." (Appellee's Brief ¶ 40.) (emphasis added). Thus, Lario's argument rests upon the premise that the probate in this matter was closed and the Personal Representative was discharged. Indeed, Lario avers: "at the time that the Dublin Lease was created [on August 25, 2007], there was no personal representative." (Appellee's Brief ¶ 82.) Lario is incorrect.
[¶ 10] According to California law and the California Order, the Personal Representative was not discharged at the time the Dublin Lease was created because she had neither filed the requisite documents for discharge nor conveyed the real property. The California Order on the Petition for Final Distribution provides at paragraph 6: "The personal representative shall be discharged upon the filing of proper receipts and an Affidavit for Final Discharge." (Brigham's App. ¶ 273.) This provision is in accordance with sections 11753 and 12250 of the California Probate Code. In order to file the necessary receipts with regard to real property, "the personal representative shall file a statement that identifies the date and place of the recording and other appropriate recording information for the court order for distribution or the personal representative's deed." Cal. Prob. Code § 11753(b).
[¶ 11] The record does not reflect that the Personal Representative filed the "proper receipts and an Affidavit for Final Discharge" at the time of the Dublin Lease on August 25, 2007. Indeed, she could not have because the personal representative's deed was not recorded until December 12, 2008. (Brigham's App. 338.) Therefore, contrary to Lario's assertions, the estate was not closed and the Personal Representative was not discharged at the time of the creation of the Dublin Lease. This fact is significant because:
Until termination of the personal representative's appointment, a personal representative has the same power over the title to property of the estate that an absolute owner would have, in trust however, for the benefit of the creditors and others interested in the estate. This power may be exercised without notice, hearing, or order of court.
N.D.C.C. § 30.1-18-11 (emphasis added). Lario does not dispute that a personal representative retains power over the title to Estate property until such time as the termination of the personal representative's appointment. Indeed, Lario also does not dispute that those in Lario's position will not pay royalties to a lessor (such as Avery) unless and until the Estate is probated in North Dakota. (See Triple T Appellant's Brief ¶¶ 24-25.) Thus, those in Lario's position will not pay royalties to those holding title as an "heir of" an Estate because such title is not conclusive. Nonetheless, when the shoe is on the other foot and the position is advantageous to Lario, Lario would like the Court to determine that title as an "heir of" an Estate is conclusive. It is not.
[¶ 12] In addition to N.D.C.C. § 30.1-18-11, North Dakota's Probate Code is replete with provisions establishing that title is only conclusive once the Personal Representative deeds the property to the distributee. For example, section 30.1-20-07 provides:
If distribution in kind is made, the personal representative shall execute an instrument or deed of distribution assigning, transferring, or releasing the assets to the distributee as evidence of the distributee's title to the property.
(emphasis added). Moreover, N.D.C.C. § 30.1-20-08 provides:
Proof that a distributee has received an instrument or deed of distribution of assets in kind, or payment in distribution, from a personal representative, is conclusive evidence that the distributee has succeeded to the interest of the estate in the distributed assets, as against all persons interested in the estate, except that the personal representative may recover the assets or their value if the distribution was improper.
(emphasis added). Finally, N.D.C.C. § 30.1-20-10 provides:
If property distributed in kind or a security interest therein is acquired for value by a purchaser from or lender to a distributee who has received an instrument or deed of distribution from the personal representative, or is so acquired by a purchaser from or lender to a transferee of the distributee, the purchaser or lender takes title free of any right of an interested person in the estate and incurs no personal liability to the estate, or to any interested person, whether or not the distribution was proper or supported by court order or the authority of the personal representative was terminated before execution of the instrument or deed. This section protects a purchaser from or lender to a distributee who, as personal representative, has executed a deed of distribution to the personal representative, and a purchaser from or lender to any other distributee or the distributee's transferee. To be protected under this provision, a purchaser or lender need not inquire whether a personal representative acted properly in making the distribution in kind, even if the personal representative and the distributee are the same person, or whether the authority of the personal representative had terminated before the distribution.
(emphasis added) Under this provision, Triple T, who purchased a leasehold interest from Georgette Navarro, who, in turn, received the property via a Personal Representative's Deed, "takes title free of any right of an interested person in the estate." Id. Thus, to the extent Lario claims it is an interested person of the estate, N.D.C.C. § 30.1-20-10, precludes it from arguing that it has superior title to Triple T.
[¶ 13] Lario seems to claim that the Personal Representative did not properly exercise her power in distributing the mineral acres to Georgette Navarro pursuant to N.D.C.C. § 30.1-18-11 because Lario argues that such power was supposed to be exercised for the benefit of "others interested in the estate." (Appellee's Brief ¶ 83.) There are problems with this argument. First, it is not at all clear that Lario is an "interested person" of the Estate, and Lario has not cited any authority to establish that it is. Second, N.D.C.C. § 30.1-20-10, referenced in the preceding paragraph, protects Triple T even against those who claim to be interested in the estate. Third, to the extent Lario is an interested person and is claiming that the Personal Representative made an improper distribution, the remedy would be an action in the probate court; however, the statute of limitations has expired to make a claim against the distributee for an improper distribution. See N.D.C.C. § 30.1-21-06.
[¶ 14] The bottom line is that Lario, by taking a lease from Avery as the "heir of" an Estate, took the risk that Avery's interest (and therefore Lario's interest) would be divested by the Personal Representative. See 23 Am. Jur. 2d Descent and Distribution § 18 ("Real property, on the death of an ancestor, vests immediately in the heirs . . . subject to the rights and duties of the personal representative as to real property[.]"); Belakjon v. Hilstad, 35 N.W.2d 637, 642 (N.D. 1949) (citing and quoting Masterson v. Girard's Heirs 10 Ala. 60, 1846 WL 409, *2 (Ala. 1846) ("[T]he title and right of the heir is subject to the exercise of the statute power [of the Personal Representative]"). Avery's interest (and therefore Lario's interest) was subsequently divested by the Personal Representative. Avery only received a deed to 25% of the minerals. Because Lario's interest derives from and through Avery, Lario only receives an interest to 25% of the minerals. The contrary decision of the district court should be reversed.
[¶ 15] For the reasons set forth above, Triple T and Thompson request that the judgment in this matter be reversed and vacated.
|Dated: March 18, 2011.|
|/s/ Sara K. Sorenson|
|Sara K. Sorenson|
|Attorney for Appellants The Triple T, Inc.,|
|and Christine Thompson, as sole Trustee of the Navarro 2009 Living Trust Agreement, dated February 6, 2009|
|ND ID #05826|
|OHNSTAD TWICHELL, P.C.|
|901 - 13th Avenue East|
|P.O. Box 458|
|West Fargo, ND 58078-0458|
|TEL (701) 282-3249|
|FAX (701) 282-0825|