Rasnic v. ConocoPhillips Co., 2014 ND 181

In 1988 Norris and Beverly Hildre executed a mortgage to American State Bank covering their real estate and minerals “owned of record by mortgagor.”
In 1990 Ruby Mortensen conveyed certain mineral interests to Norris Hildre (reserving a life estate), so the Hildres acquired additional mineral interests after the 1988 mortgage.
American State Bank foreclosed the 1988 mortgage in 1993, purchased the property at sheriff’s sale, and later conveyed title; through a chain of transfers, Rita Sue Rasnic acquired the property described in the sheriff’s deed.
Rasnic sued to quiet title to the mineral interests the Hildres obtained in 1990, asserting those minerals inured to the bank under N.D.C.C. § 35-03-01.2(4).
The district court granted summary judgment for the Hildres, concluding the mortgage’s language limited the lien to minerals “owned of record” by the Hildres when the mortgage was executed, so the 1990 minerals were not encumbered.
The Supreme Court affirmed, holding the mortgage’s plain language did not encumber after-acquired separate mineral interests and § 35-03-01.2(4) applies when the mortgagor purports to mortgage property not then owned and later acquires title.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Did the 1988 mortgage encumber minerals the Hildres acquired in 1990?	Rasnic: § 35-03-01.2(4) makes after-acquired title inure to mortgagee, so the 1990 minerals inured to American State Bank.	Hildre: Mortgage expressly covered only minerals “owned of record by mortgagor” at execution, so later-acquired minerals not covered.	The mortgage’s plain language limited the lien to minerals owned of record at execution; 1990 minerals not encumbered.
Does N.D.C.C. § 35-03-01.2(4) apply to these facts?	Rasnic: The statute’s text automatically applies to title acquired by mortgagor after mortgage execution.	Hildre: The statute applies where mortgagor purports to mortgage property not owned at the time and later acquires title; here the Hildres did not purport to mortgage what they did not own.	§ 35-03-01.2(4) is construed to apply when mortgagor purports to grant an interest not owned and later acquires title; it does not apply where mortgage expressly limited coverage to interests owned of record at execution.

Poyzer v. Amenia Seed & Grain Co., 381 N.W.2d 192 (N.D. 1986) (contract interpretation rules apply to mortgages)
Hellstrom v. First Guaranty Bank, 209 N.W. 379 (N.D. 1926) (equitable liens may be created on future-acquired property to effectuate parties’ intent)
Merchants’ Nat’l Bank v. Miller, 229 N.W. 357 (N.D. 1930) (after-acquired title inures to mortgagee where mortgagor later reacquires title or acquires title after purporting to mortgage)
Nord v. Nord, 282 N.W. 507 (N.D. 1938) (application of equitable estoppel where mortgagor purports to mortgage property not owned and later acquires title)
Sickler v. Pope, 326 N.W.2d 86 (N.D. 1982) (recognition that mineral interests can be severed from surface estate)