A.G. Golden v. SM Energy Company
2013 ND 17
| N.D. | 2013Background
- Golden owned oil and gas leases in McKenzie County and entered a 1970 letter agreement with Universal preserving a 4% overriding royalty and creating a joint area of interest (AMI).
- The AMI covered Sections 19, 20, 29–32 in T153N R95W and Section 2 in T152N R96W; future lease interests within the area were to be offered at cost to Universal, with Golden receiving a 4% overriding royalty from leases Universal acquired and vice versa.
- In the 1980s Universal acquired leases including the Thompson lease and assigned a 4% overriding royalty to Golden; in 1993 Universal assigned its interests to Tipperary, then to Nance (and ultimately to SM via mergers).
- SM operates the Thompson-Federal well and the Wilson well; the Thompson-Federal unit includes both Thompson and Federal leases; royalties on Thompson were paid, but not on the Federal lease; four percent royalties for the Wilson well were paid since 2009, but not for earlier periods.
- Golden and others filed suit seeking declaratory relief, quiet title, and an accounting; the district court granted partial summary judgment finding SM assumed the AMI and expanding the judgment beyond pleadings to additional AMI wells, and awarded retroactive royalties on the Wilson well.
- SM appeals challenging (1) assumption of the AMI by predecessors, (2) expansion of the judgment to unpled properties, and (3) retroactive royalties on the Wilson well; the court grants relief in part, reverses in part, and remands.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did SM assume the AMI clause via assignment? | Golden asserts the 1993 assignment to Tipperary (and subsequent assignments to SM) unambiguously conveyed the AMI terms. | SM contends the assignment language limited obligations to expressly conveyed leases and did not run AMI terms with the land. | Ambiguity exists; remand for trial to determine intent and whether assignee assumed the AMI obligations. |
| Scope of the judgment—whether it may include unpled AMI properties | Golden seeks broader relief beyond pleaded issues as necessary to enforce AMI. | SM warns expansion violates notice and due process by including unpled, unlitigated properties. | The district court erred in expanding to unpled properties; remand for proper issue-specific adjudication. |
| Retroactive royalties on the Wilson well | Golden contends SM underpaid royalties on Wilson under the AMI and must pay retroactively. | SM argues Acoma Oil Corp. v. Wilson excused underpayments when division orders were followed. | Acoma is distinguishable; Golden is entitled to retroactive royalties due to unjust enrichment and detrimental reliance. |
Key Cases Cited
- Acoma Oil Corp. v. Wilson, 471 N.W.2d 476 (N.D. 1991) (retroactive royalty recovery depends on detrimental reliance and unjust enrichment; division orders not dispositive)
- Rosenberg v. Son, Inc., 491 N.W.2d 71 (N.D. 1992) (assignment may delegate duties; duties pass by intent and conduct)
- Grimes v. Walsh & Watts, Inc., 649 S.W.2d 724 (Tex. Ct. App. 1983) (assumed obligations require consent; assignment does not automatically bind assignee)
- Westby v. Schmidt, 779 N.W.2d 681 (N.D. 2010) (extrinsic evidence admissible to resolve contract ambiguities; conduct after transaction may show acceptance of benefits)
- N.D.C.C. § 9-03-25, – (N.D. 1996) (statutory concept discussed re: acceptance of benefits; not a standalone case)
- Langer v. Bartholomay, 2008 ND 40, 745 N.W.2d 649 (N.D. 2008) (contract ambiguity and extrinsic evidence reviewed)