927 N.W.2d 467
N.D.2019Background
- In Feb 2012 Williams County executed four oil-and-gas leases with Twin City and Irish Oil after accepting bids and received over $1.3 million in bonus payments; assignments later brought Three Horns and Prairie of the South into the leases.
- Lessees learned in 2013 of potential county mineral-ownership defects, contacted the county in April 2015, and sued in Sept 2015 seeking rescission and restitution; amended complaint (Nov 2016) sought declaratory relief that leases were void for failure to publicly advertise under N.D.C.C. § 38-09-16.
- County conceded it did not publish the statutorily required notice but argued leases fit statutory exceptions (nonoperative and less than minimum drilling unit) and thus publication was not required.
- District court granted summary judgment for Lessees, finding the leases operative (i.e., not non-development/nonoperative), invalid under N.D.C.C. § 38-09-19 for lack of required advertising, and ordered repayment of bonuses, rejecting laches.
- Supreme Court affirmed invalidity of the leases as a matter of law but reversed and remanded the restitution/laches ruling for factfinding on whether Lessees’ delay was unreasonable and whether the County was prejudiced.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether county leases are valid absent statutorily required public advertisement | Lessees: leases invalid under N.D.C.C. § 38-09-19 because county failed to advertise under § 38-09-16 | County: publication not required because leases were nonoperative and under minimum drilling unit, fitting statutory exception | Held: leases invalid; statutory advertising required and no exception applied |
| Whether the leases were "nonoperative" (nondevelopment/nondrilling) | Lessees: leases permit development and thus are operative | County: leases covered less than a drilling unit and argued to be nonoperative | Held: leases are operative (they grant explicit rights to explore, drill, operate) |
| Whether Lessees can recover bonus payments (unjust enrichment/restitution) | Lessees: County unjustly enriched; restitution appropriate because leases void | County: equitable defenses (laches) bar recovery; bonuses spent and repayment would cause hardship | Held: remanded — genuine factual issues exist on laches and prejudice; district court erred concluding laches failed as a matter of law |
| Standard for summary judgment review and application here | Lessees: facts undisputed; summary judgment appropriate | County: factual disputes, especially equitable prejudice, preclude summary judgment on restitution | Held: legal issues resolved for invalidity; factual disputes exist for equitable restitution, requiring remand |
Key Cases Cited
- Hallin v. Inland Oil & Gas Corp., 903 N.W.2d 61 (N.D. 2017) (standard for summary judgment review)
- THR Minerals, LLC v. Robinson, 892 N.W.2d 193 (N.D. 2017) (summary judgment standards)
- Hunt Oil Co. v. Kerbaugh, 283 N.W.2d 131 (N.D. 1979) (mineral estate is dominant over surface)
- Acoma Oil Corp. v. Wilson, 471 N.W.2d 476 (N.D. 1991) (definition and rights incident to a mineral interest)
- Feland v. Placid Oil Co., 171 N.W.2d 829 (N.D. 1969) (implied duty of lessee to operate and develop absent contrary lease terms)
- Northwestern Sheet & Iron Works v. Sioux County, 36 N.W.2d 605 (N.D. 1949) (contracts violating mandatory competitive-bidding statutes unenforceable)
- Stenehjem ex rel. State v. Nat’l Audubon Soc’y, Inc., 844 N.W.2d 892 (N.D. 2014) (doctrine of laches explained)