Sorenson v. Felton
2011 ND 33
| N.D. | 2011Background
- Irish Oil and Gas, Inc. entered into oil and gas leases in 2008 with Gerald C. Riemer, Doris E. Riemer, Lillie J. Riemer, and Joanne Johnson regarding a single jointly owned parcel.
- Each lease was accompanied by a Letter Agreement in lieu of draft offering a $160.00 per net mineral acre bonus and a 1/6 royalty on production, with a primary term of five years.
- The letter specified timing: a $10,640 bonus within 60 days of signed leases (subject to title approval, with a 30-day extension for title curative issues) and a second $10,640 due January 15, 2009.
- Gerald Riemer testified about discussions with Irish Oil’s landman and Tim Furlong; a memorializing letter referenced potential extension to June 15, 2008, which Irish Oil disputed agreeing to; Furlong claimed extension was agreed.
- On April 30, 2008, Gerald Riemer signed a lease with Continental Oil Company; May 26, 2008 Irish Oil sent the $10,640 payment which the Riemers returned; Lillie J. Riemer voided a later check.
- Irish Oil sued on October 6, 2008 for breach of the leases; the district court granted summary judgment to the Riemers, denied Irish Oil’s motion to amend to add a deceit claim, and dismissed Irish Oil’s complaint with prejudice; the case was appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Interpretation of paragraph 16’s implied covenants clause | Irish Oil: implied covenants, conditions, or stipulations include the extension | Riemers: implied only modifies covenants, not conditions/stipulations; no judicial determination required | District court properly interpreted the clause; not applicable to this express-obligation context |
| Whether failure to timely pay the bonus constitutes total or partial failure of consideration | Irish Oil argues consideration remains and royalty existence sustains contract | Riemers: timely payment constitutes total failure of consideration | Not a per se total failure as a matter of law; remand for fact-finding on extent of failure of consideration |
| Whether the district court abused its discretion by denying amendment to add a deceit claim | Irish Oil seeks deceit based on oral extension and misrepresentation | Riemers: deceit claim would be futile or barred by statute of frauds | The court abused its discretion in denying amendment; deceit claim viable and remand recommended |
| Relation of deceit claim to the statute of frauds | Deceit can be predicated on unenforceable oral promises despite statute of frauds | Statute of Frauds bars contractual claims; deceit may be barred | Statute of Frauds does not bar a deceit claim in this context; majority reverses on this issue (dissent disagrees) |
Key Cases Cited
- Egeland v. Continental Resources, Inc., 616 N.W.2d 861 (N.D. 2000) (contract interpretation; oil and gas leases treated like contracts)
- Shepherd v. Check Control, Inc., 462 N.W.2d 644 (N.D. 1990) (failure of consideration; total vs. partial distinction)
- Burich v. First Nat’l Bank of Belfield, 367 N.W.2d 148 (N.D. 1985) (definition of total vs. partial failure of consideration)
- Lawrence v. Lawrence, 217 N.W.2d 792 (N.D. 1974) (guidance on failure of consideration and contract remedies)
- Schaff v. Kennelly, 61 N.W.2d 544 (N.D. 1953) (early articulation of failure of consideration doctrine)