938 N.W.2d 405
N.D.2020Background
- Dennis and Cheryl Reese (joint tenants) and Tia Reese-Young (tenant in common) originally shared a 12.5% mineral interest; an oil & gas lease was executed in January 2005 and production began by November 2007.
- In July 2008 Dennis and Cheryl quitclaimed their 12.5% mineral interest to Tia while reserving a life estate in the minerals to Dennis and Cheryl; Dennis died in September 2008.
- Cheryl sued in 2017 seeking a declaratory judgment that, as life tenant, she is entitled to mineral royalties and bonuses during her life; Tia counterclaimed that Cheryl is not entitled to income from production.
- The district court granted summary judgment to Tia, concluding North Dakota does not recognize the open mines doctrine and holding Cheryl must preserve the corpus (royalties) for the remainderman and may only keep income from investment of that corpus.
- The North Dakota Supreme Court reversed: it held the open mines doctrine is part of North Dakota common law, applies where a lease/production preexisted the life estate and the deed did not exclude the doctrine, and therefore Cheryl is entitled to royalties and bonuses during her life and need not hold the proceeds in trust for the remainderman.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of the open mines doctrine | Cheryl: doctrine applies because lease and production existed before life estate, so life tenant may continue production and keep proceeds. | Tia: doctrine is not law in ND; statutory scheme governs life tenant/remainderman relations and precludes the doctrine. | Court: Open mines is part of ND common law, applies here because a lease and production predated the life estate and deed did not exclude the doctrine. |
| Whether the deed reserved royalties to the life tenant | Cheryl: reservation of a life estate in minerals supports her right to royalties under open mines. | Tia: deed lacks an explicit reservation of royalties, so life tenant is not entitled to production proceeds. | Court: Deed reserved a life estate but did not exclude open mines; under the doctrine Cheryl is entitled to royalties/bonuses. |
| Whether taking royalties is waste / whether life tenant must hold proceeds in trust | Cheryl: continued production under open mines is not waste; she may retain proceeds. | Tia: removal of minerals diminishes remainder value and constitutes waste; life tenant must hold corpus for remainderman and may keep only income. | Court: Continued production under open mines is permitted and not treated as waste here; Cheryl need not hold proceeds in trust. |
Key Cases Cited
- Fettig v. Estate of Fettig, 934 N.W.2d 547 (summary judgment standard cited)
- Schroeder v. Buchholz, 622 N.W.2d 202 (life tenant entitled to possession, rents, issues, and profits during life)
- Ruggles v. Sabe, 670 N.W.2d 356 (life tenant duty not to injure inheritance; waste doctrine)
- In re Estate of Conley, 753 N.W.2d 384 (common law as part of state law and how to ascertain it)
- Finstad v. Ransom-Sargent Water Users, Inc., 849 N.W.2d 165 (statutes govern and displace conflicting common law)
- Kimbark Expl. Co. v. Von Lintel, 391 P.2d 55 (example of open mines doctrine applied to oil & gas)
- Clyde v. Hamilton, 414 S.W.2d 434 (royalties from mines open at life estate commencement belong to life tenant)