Golden Eye Resources, LLC v. Ganske
2014 ND 179
| N.D. | 2014Background
- Siblings Debra Ganske, Wesley and Michael Borgen, Sue Evans, and Linda McCoy (the Borgens) owned mineral interests in Williams County and executed oil-and-gas leases with Golden Eye in December 2009 after negotiations.
- The Borgens allege Golden Eye made material misrepresentations during negotiations (e.g., that Golden Eye would drill and operate the wells itself, had a “permit man,” owned acreage and permits, had prior drilling success, and would drill the Borgens’ interests first), inducing them to lease to Golden Eye instead of a higher-paying offer from Tracker.
- In May 2010 the Borgens learned Petro‑Hunt obtained a drilling permit for a nearby well and Golden Eye had only a minority interest; they then notified Golden Eye of rescission for fraudulent inducement and later of cancellation for alleged lease assignment breaches.
- Golden Eye sued to quiet title to the leases and for damages; the Borgens counterclaimed for rescission or cancellation. The district court granted summary judgment for Golden Eye, holding the Borgens’ fraud claims barred (parol evidence, puffery, statute of frauds) and quieted title in Golden Eye.
- The Supreme Court reversed and remanded, holding the district court erred in barring the Borgens’ fraudulent‑inducement claims on summary judgment and that the Borgens are entitled to a jury trial on their rescission claim at law.
Issues
| Issue | Plaintiff's Argument (Golden Eye) | Defendant's Argument (Borgens) | Held |
|---|---|---|---|
| Whether parol evidence bars Borgens’ fraudulent‑inducement claims | Parol evidence rule prohibits admitting oral promises that contradict a written, integrated lease. | Parol evidence does not apply where party alleges fraud in inducement; extrinsic evidence is admissible to prove fraud. | Court: Parol evidence rule inapplicable to fraudulent inducement; district court erred to bar those allegations. |
| Whether alleged statements were mere puffery or actionable misrepresentations | Many statements were opinion/puffery and not material facts supporting fraud. | Statements included concrete past/present facts and promises made without intent to perform — actionable fraud. | Court: Several statements alleged present/factual misrepresentations or promises without intent and are not mere puffery; summary judgment improper. |
| Whether promises about future drilling are barred as nonactionable predictions | Future promises/predictions are not actionable absent intent to deceive. | Promises made with no intention to perform constitute actual fraud under statute. | Court: Statute expressly includes promises made without intent; such allegations can support fraud. |
| Right to jury trial on rescission claim at law | No right to jury; rescission treated as equitable historically (cites dicta). | Borgens complied with statutory rescission procedure under N.D.C.C. §9‑09‑04 and thus have a legal claim entitling them to a jury. | Court: Borgens’ rescission was an action at law under §9‑09‑04 and they are entitled to a jury trial. |
Key Cases Cited
- Van Sickle v. Hallmark & Assocs., Inc., 2013 ND 218, 840 N.W.2d 92 (summary judgment standard)
- American Bank Ctr. v. Wiest, 2010 ND 251, 793 N.W.2d 172 (consent to contract and fraud principles)
- Citizens State Bank‑Midwest v. Symington, 2010 ND 56, 780 N.W.2d 676 (parol evidence exception for fraud in inducement)
- Erickson v. Brown, 2008 ND 57, 747 N.W.2d 34 (rescission for fraud; intent to deceive nullifies consent)
- Kary v. Prudential Ins. Co. of Am., 541 N.W.2d 703 (distinguishing puffery from actionable misrepresentations)
- Poeppel v. Lester, 2013 S.D. 17, 827 N.W.2d 580 (majority rule: parol evidence inapplicable to fraudulent inducement)