Maragos v. Newfield Production Company
2017 ND 191
| N.D. | 2017Background
- Newfield Production Company operates four oil and gas wells on a parcel in McKenzie County; the George S. Maragos Residuary Trust (the Trust) claims a 1/8 of 1% royalty interest in that property.
- The Trust traces title: H. H. Hester conveyed a 1/8% royalty to George S. Maragos in 1937; Maragos kept it until his death, and administrators assigned it to the Trust in 1985.
- Newfield has relied on a division order/title opinion allocating royalties and, based on that division order, concluded Hester had no interest to convey in 1937 and therefore has not paid royalties to the Trust.
- The Trust sued Newfield for an accounting and unpaid royalties; both parties moved for summary judgment. Newfield argued it was not a proper defendant because it had no competing royalty interest.
- The district court granted Newfield summary judgment, concluding Newfield had no stake and was not a proper party; the court relied on Acoma Oil Corp. v. Wilson and denied Trust’s claims for fees and interest under N.D.C.C. § 47-16-39.1.
- On appeal, the Supreme Court of North Dakota reversed and remanded, finding Newfield failed to show entitlement to judgment as a matter of law and that summary judgment was inappropriate without resolving the Trust’s title claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Newfield is a proper party defendant for underpaid royalties | Trust: Newfield can be sued for underpayments because no signed division order exists and the Trust claims title to the 1/8% royalty | Newfield: It has no competing interest and thus no stake; operator should not be liable when it has paid according to its division order | Reversed: If Trust holds a valid interest, Newfield is a proper defendant; district court erred in finding Newfield not a proper party without resolving title |
| Whether Acoma bars Trust’s claim against the operator | Trust: Acoma does not bar recovery here because no signed division order between Trust and Newfield exists | Newfield: Acoma means underpaid owners should seek payment from overpaid reciprocal owners, not the operator | Court: Acoma applies differently when a signed division order exists; here absence of a signed division order means Acoma does not automatically bar Trust’s claim against Newfield |
| Whether Newfield could rely solely on its division order to defeat liability | Trust: Newfield cannot safe-harbor itself by unilaterally asserting a division order without proving its accuracy | Newfield: Its division order shows Hester conveyed no interest, justifying nonpayment | Held: Newfield cannot rely solely on its division order; it must prove the division order’s accuracy before avoiding liability |
| Whether summary judgment was appropriate | Trust: Genuine disputes of material fact remain regarding title and Newfield’s liability | Newfield: No genuine issue; it has no stake and is entitled to judgment as a matter of law | Held: Summary judgment was inappropriate; district court must determine validity of Trust’s claimed interest and then consider joinder and liability issues |
Key Cases Cited
- Acoma Oil Corp. v. Wilson, 471 N.W.2d 476 (N.D. 1991) (distinguishes liability of operator based on whether party signed a division order)
- Krenz v. XTO Energy, Inc., 890 N.W.2d 222 (N.D. 2017) (summary judgment standard review)
- Riverwood Commercial Park v. Standard Oil Co., 797 N.W.2d 770 (N.D. 2011) (summary judgment burden and review)
- Markgraf v. Welker, 873 N.W.2d 26 (N.D. 2015) (summary judgment inappropriate if reasonable differences exist in inferences)
- Northern Oil & Gas, Inc. v. Creighton, 830 N.W.2d 556 (N.D. 2013) (courts cannot decide disputed facts on summary judgment)
- Farmers Union Oil Co. of Garrison v. Smetana, 764 N.W.2d 665 (N.D. 2009) (district court may not weigh evidence or determine credibility on summary judgment)