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Keywords

trustlease
summary judgmenttrustcommon law

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Reese v. Reese-Young, 938 N.W.2d 405, 2020 ND 35

Facts

Cheryl Reese and Tia Reese-Young owned mineral interests in a property in Mountrail County, North Dakota. In 2005, they entered into an oil and gas lease, and after several conveyances, Cheryl reserved a life estate in the minerals when she conveyed her interest to Tia. In 2017, Cheryl sued Tia to assert her rights as the life tenant to the proceeds from oil and gas production, leading to a counterclaim from Tia to quiet title and deny Cheryl any income from the production.

The quit claim deed dated July 22, 2008, creating the life estate at issue in this case, states: WHEREAS, Grantor[s, Dennis Reese and Cheryl Reese,] desire[ ] to transfer said minerals to the Grantee, Tia D. Reese-Young, while reserving a life estate interest to said minerals to the grantors for the term of their lives, then upon the death of both grantors to Tia D. Reese-Young. NOW THEREFORE, for and in consideration of the sum of One Dollar; and other good and valuable consideration, grantors do hereby QUIT CLAIM to grantee, Tia D. Reese-Young, an undivided 12.5% interest – mineral interest only, in and to the following real property lying and being in the County of Mountrail, State of North Dakota, subject to the reservation in grantors of a life estate interest for the term of their lives ….

Issue

Did the district court err in concluding that the open mines doctrine does not apply, thereby denying Cheryl Reese the right to royalties and bonus payments from oil and gas production as the life tenant?

Cheryl Reese argues the district court erred when it concluded that the open mines exception to the doctrine of waste does not apply and that she is not entitled to the revenue from the production of oil and gas on the property.

Rule

The open mines doctrine allows a life tenant to operate mines or wells that were open when the life estate was created and to retain all proceeds from such operations, even if it diminishes the market value of the remainderman's interest.

The open mines doctrine is a common law doctrine that states a life tenant is permitted to operate mines or wells which were open when the life estate was created and is entitled to all proceeds resulting from the operation, even if the use diminishes the market value of the remainderman's interest.

Analysis

The Supreme Court found that the open mines doctrine is applicable in North Dakota, despite the district court's conclusion to the contrary. The court noted that the deed creating the life estate did not explicitly reserve royalties for Tia, and since oil and gas production was occurring prior to the life estate's creation, Cheryl was entitled to the proceeds under the open mines doctrine.

The district court concluded the open mines doctrine did not apply because it is not the law in North Dakota, the language of the deed controls, and there is no clear and explicit reservation of the royalties to Cheryl Reese during her life. The court concluded, as a matter of law, that Cheryl Reese was required to hold the corpus, or proceeds from the oil and gas royalties, in trust for Tia Reese-Young's benefit and that Cheryl Reese was only entitled to the income generated from the corpus during her life.

Conclusion

The Supreme Court reversed the district court's judgment and remanded the case, ruling that Cheryl Reese is entitled to the proceeds from oil and gas production and is not required to hold those proceeds in trust for Tia Reese-Young.

We conclude, as a matter of law, Cheryl Reese is entitled to the proceeds from the oil and gas production, including the royalties and bonus payments, and she is not required to hold the proceeds in trust for Tia Reese-Young. The district court erred in granting summary judgment in favor of Tia Reese-Young.

Who won?

Cheryl Reese prevailed in the case because the Supreme Court determined that the open mines doctrine applied, allowing her to retain the proceeds from oil and gas production.

Cheryl Reese is entitled to the proceeds from the oil and gas production, including the royalties and bonus payments, and she is not required to hold the proceeds in trust for Tia Reese-Young.

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