903 N.W.2d 712
N.D.2017Background
- Edward J. Brown owned a fractional mineral interest in Mountrail County; he died in 1977 intestate, survived by wife Janet and daughters Barbara Corwin and Patricia Goldberg. No North Dakota probate occurred until 2013.
- Hess obtained and recorded leases from Corwin and Goldberg in May 2011, acquired permits, and began drilling wells on the tract.
- Sundance, unable to locate Edward Brown or successors, brought a 2013 trust action under N.D.C.C. § 38-13.1-01; the court found Sundance had made diligent efforts and created a trust, and the trustee leased the minerals to Sundance (lease executed July 17, 2013; recorded Aug. 8, 2013).
- Sundance later sued Hess and the heirs to quiet title to the leasehold; both parties moved for summary judgment claiming superior leasehold rights.
- The district court treated the trust action findings as res judicata, granted summary judgment to Sundance (quieting title to Sundance’s lease), and entered final judgment; Hess appealed.
Issues
| Issue | Plaintiff's Argument (Sundance) | Defendant's Argument (Hess) | Held |
|---|---|---|---|
| Whether the trust-action findings are res judicata in the quiet-title case | Trust judgment establishing diligent effort and the trustee’s lease forecloses relitigation; Sundance is a good-faith purchaser | Trust action did not determine superior lease rights or notice issues; res judicata should not bar quiet-title claims | Court: Trust action is not res judicata for the quiet-title dispute; reversed district court’s res judicata ruling |
| Whether Sundance was a good-faith purchaser without notice of Hess’s lease | Sundance acquired lease from trustee and recorded first in chain; no constructive notice of Hess’s unrecorded earlier conveyance in the chain | Hess recorded leases in 2011 and had active permits/wells; Sundance had or should have had constructive/inquiry notice | Court: Existence of genuine dispute of material fact about notice; summary judgment for Sundance inappropriate; remanded |
| Which recording statute/version governs (pre-2013 vs. 2013 amendment of N.D.C.C. § 47-19-41) | (Implicit) Apply current law favoring recorded interests | Pre-2013 law applies because rights arose before Aug. 1, 2013 | Court: Pre-2013 § 47-19-41 applies (constructive notice relevant) |
| Whether Hess may raise a due-process challenge for lack of actual notice in the trust action in this quiet-title case | (Not primary in opinion) | Section 38-13.1-01 required actual notice to parties with an interest; denial of due process | Court: Declined to reach constitutional claim; such challenges must be raised in the trust action, not by collateral attack here |
Key Cases Cited
- Kulczyk v. Tioga Ready Mix Co., 902 N.W.2d 485 (N.D. 2017) (res judicata and privity principles)
- Desert Partners IV, L.P. v. Benson, 875 N.W.2d 510 (N.D. 2016) (constructive notice and duty of inquiry in mineral-record contexts)
- Swanson v. Swanson, 796 N.W.2d 614 (N.D. 2011) (good-faith purchaser is mixed question of fact and law; duty to inquire)
- Diocese of Bismarck Trust v. Ramada, Inc., 553 N.W.2d 760 (N.D. 1996) (good-faith purchaser without notice standard)
- Farmers Union Oil Co. v. Smetana, 764 N.W.2d 665 (N.D. 2009) (requirement that purchaser acquire rights without actual or constructive notice)
- Northern Oil & Gas, Inc. v. Creighton, 830 N.W.2d 556 (N.D. 2013) (leases create rights when contractually enforceable, not only on recording)
- First Nat’l Bank v. Big Bend Land Co., 164 N.W. 322 (N.D. 1917) (recorded instruments give constructive notice)
- Hanson v. Zoller, 187 N.W.2d 47 (N.D. 1971) (properly recorded deed in tract index gives constructive notice)