IN THE SUPREME COURT

STATE OF NORTH DAKOTA

2022 ND 221

Scotty Fain, Sr., Scotty Fain, Jr., 

and Kris Durham, Plaintiffs and Appellants

v.

Integrity Environmental, LLC, Andrea Vigen, 

Lewis Vigen, and Kelly Harrelson, Defendants and Appellees

No. 20220068

Appeal from the District Court of Williams County, Northwest Judicial 

District, the Honorable Paul W. Jacobson, Judge.

AFFIRMED.

Opinion of the Court by Jensen, Chief Justice.

Emily J. Ramage (argued) and H. Malcolm Pippin (on brief), Williston, ND, for 

plaintiffs and appellants.

Morgan E. Wentz (argued), David J. Smith (on brief), and Tyler J. Malm (on 

brief), Bismarck, ND, for defendants and appellees.

FILED 

IN THE OFFICE OF THE 

CLERK OF SUPREME COURT 

DECEMBER 8, 2022 

STATE OF NORTH DAKOTA
1

Fain v. Integrity Environmental

No. 20220068

Jensen, Chief Justice.

[¶1] Scotty Fain, Sr., Scotty Fain, Jr., and Kris Durham appeal from a district 

court judgment entered following findings that there was no contract between 

the parties, no transfer of an ownership interest in Integrity Environmental,

LLC, and no violation of fiduciary duties as alleged in its complaint against 

Integrity Environmental, LLC (“Integrity Environmental”), Andrea Vigen, 

Lewis Vigen, and Kelly Harrelson. They also challenge the court’s findings that 

a substitute arrangement agreed upon by all parties led to an accord and 

satisfaction, novation, and waiver of contractual rights. Because we conclude 

the district court did not err in its finding regarding a novation and 

substitution for the parties’ contractual obligations, we affirm the court’s 

judgment.

I

[¶2] In the spring of 2019, the parties discussed formation of an 

environmental clean-up company that would do business, in part, on Indian 

reservations. After several meetings, the parties signed an operating 

agreement (“original agreement”) that set terms for the creation of Integrity, 

LLC (“Integrity”). The operating agreement allocated membership interests to 

Andrea Vigen, Lewis Vigen, Kelly Harrelson, Fain Sr., Durham, and Fain Jr., 

in exchange for initial contributions of $100, $100, $100, $100, $75,000, and 

$75,000.

[¶3] To be eligible to perform the intended services, the business must have 

Tier 1 status, achieved by exclusive company ownership by a Native American. 

Andrea Vigen was a member of the Mandan, Hidatsa and Arikara Nation and 

could satisfy the Tier 1 ownership requirement. The originally discussed 

ownership allocation would not satisfy the requirement of exclusive Native 

American ownership.

[¶4] At the time the Integrity operating agreement was signed, Andrea Vigen 

was the owner of Integrity Environmental. Integrity Environmental had Tier 
2

1 status. The parties dispute whether the operating agreement for Integrity 

was prepared in anticipation of organizing a new business entity or related to 

a transfer of ownership in Integrity Environmental.

[¶5] Durham provided $150,000 to Integrity Environmental in two separate 

increments in June and July 2019. Integrity Environmental continued to 

operate through summer and fall while the parties contemplated but never 

formally signed a consultant agreement, amended contract, and loan 

agreement that would replace the original agreement. A recording from a 

September 2019 conversation indicates the parties discussed a subsequent 

loan arrangement that would preserve Integrity Environmental’s Tier 1 status 

and operations on the reservation.

[¶6] In December 2019, Andrea Vigen sent a letter to Fain Sr., Fain Jr., and 

Durham advising them that Integrity Environmental would be terminating 

their relationship. The letter characterized Durham’s $150,000 to Integrity 

Environmental as a loan, and included a check for $3,000 in interest along with 

confirmation that Durham had already cashed two checks sent to him totaling 

$150,000.

[¶7] Fain Sr., Fain Jr., and Durham filed a complaint claiming breach of 

contract and fiduciary duty. Following a bench trial, the district court found 

that all parties knew a Native American needed to maintain exclusive 

ownership of Integrity Environmental in order to maintain its Tier 1 status, 

that the plain language of the original agreement created a new company 

called Integrity, that no mutual consent or consideration existed among the 

parties to enforce the original agreement, and that subsequent negotiations led 

to a final, substituted loan agreement which created an accord and satisfaction, 

voluntary waiver of contractual rights, and novation. The court also dismissed 

Fain Sr., Fain Jr., and Durham’s argument that a mutual mistake about the 

name of the company could lead to reformation, and that Integrity 

Environmental, Andrea Vigen, Lewis Vigen, or Kelly Harrelson violated their 

fiduciary duties. Fain Sr., Fain Jr., and Durham appeal arguing the district 

court erred in its findings of fact and conclusions of law.
3

II

[¶8] Fain Sr., Fain Jr., and Durham challenge many of the district court’s 

findings regarding whether or not the parties agreed to create a new business 

entity or transfer ownership interests in an existing entity, whether there were 

subsequent agreements, and whether the subsequent agreements were 

satisfied. At the center of the court’s decision is the finding the parties entered 

into a novation eliminating all of their existing obligations by agreeing to treat 

Durham’s $150,000 payment as a loan. Because the court’s findings regarding 

a novation are dispositive, we begin our review with consideration of those 

findings.

[¶9] “Novation is the substitution of a new obligation for an existing one.” 

N.D.C.C. § 9-13-08. A novation is made by contract and is subject to all rules 

governing contracts. N.D.C.C. § 9-13-09. Novation can be made between the 

same parties as long as intent is shown to extinguish the old obligation. 

N.D.C.C. § 9-13-10. Along with intent, novation requires mutual assent and 

sufficient consideration. N.D. Pub. Serv. Comm’n v. Valley Farmers Bean Ass’n, 

365 N.W.2d 528, 543 (N.D. 1985). Additionally, terms of the contract, the 

character of the transaction, and the facts and circumstances surrounding the 

transaction can establish novation. Jedco Dev. Co., Inc. v. Bertsch, 441 N.W.2d 

664, 666 (N.D. 1989). Acceptance or endorsement of a check is not by itself 

conclusive of novation. Schmitt v. Berwick Tp., 488 N.W.2d 398, 401 (N.D.

1992). However, parties entering into a novation need not agree about the 

meaning of the terms within the original obligation. Id. The existence of a 

novation is a question of fact subject to a clearly erroneous standard of review. 

Bearce v. Yellowstone Energy Dev., LLC, 2019 ND 89, ¶ 20, 924 N.W.2d 791. “A 

finding of fact is clearly erroneous if it is induced by an erroneous view of the

law, if there is no evidence to support it, or if, on the entire record, we are left 

with a definite and firm conviction a mistake has been made.” Welch Const. & 

Excavating, LLC v. Duong, 2016 ND 70, ¶ 5, 877 N.W.2d 292.

[¶10] Fain Sr., Fain Jr., and Durham argue the district court erred in finding 

that a novation discharged the original agreement. They contend the $150,000 

given by Durham to Integrity Environmental was a capital contribution and 
4

not a loan because there was not the presence of a strict debtor-creditor 

relationship due to an absence of a fixed maturity date, and the thin 

capitalization structure of the company meant that Integrity Environmental 

was completely dependent upon Fain Sr., Fain Jr., and Durham for the 

financing of their operation.

[¶11] The district court found that the parties’ original plan was to create a 

new company that would use Integrity Environmental’s Tier 1 status “as a 

gateway for their new company to work on the reservation.” The court found 

that “[t]he parties were aware that the inclusion of non-Native American 

owners (such as the Plaintiffs) would have destroyed Integrity 

Environmental’s Tier 1 status and drastically diminished the company’s 

business.” To remedy this concern, the court found the parties engaged in the 

following actions:

[T]he first operating agreement was abandoned in favor of a 

$150,000 loan. All of the parties were aware of the Tier 1 status 

and they wanted to preserve Integrity Environmental’s ability to 

work on the reservation. In fact, it was clear from the parties’ 

discussions in the recording (Exhibit 37) played in court that 

Plaintiffs were providing a $150,000 interest free loan for six (6)

months. Plaintiffs’ intent to substitute the [original agreement] 

with a loan arrangement is fatal to their argument that the Court 

should uphold it.

The district court’s findings are also supported by the parties’ documented 

attempts to negotiate an amended contract and consulting agreement. These 

findings satisfy the requirement of intent to extinguish an old obligation under 

N.D.C.C. § 9-13-09.

[¶12] A novation requires intent, mutual assent, and sufficient consideration. 

The district court addressed the requirement of mutual assent and 

consideration when it found a September meeting between the parties 

illustrated mutual assent to preserve Integrity Environmental’s Tier 1 status 

by eliminating any plans of Fain Sr., Fain Jr., and Durham to have an 
5

ownership interest in the company, and created a loan agreement by which 

Durham would provide $150,000 to be paid back within six months. The court 

found that sufficient consideration was provided when Durham accepted

performance by repayment. The court found the loan was paid back by three 

checks issued by Integrity Environmental, one in June 2019 for $50,000, 

another for $100,000 in July 2019, and a final check for $3,000 for accrued

interest in December 2019. The court found that Durham cashed all but the 

check for interest noting, “[I]t is undisputed that the full amount of the loan 

was repaid to Mr. Durham and deposited in his account in October 2019. No 

other money was exchanged between the parties to this action.”

[¶13] While acceptance of a check is not by itself conclusive of novation, there 

were other circumstances surrounding the transaction cited by the district 

court that supported its conclusion. The court noted that Integrity 

Environmental was an existing company, formed in 2016 and operated only by 

Andrea Vigen, whose “integral component of its business plan” involved her 

membership with the Mandan, Hidatsa and Arikara Nation so that the 

company would be a Certified Indian Company with Tier 1 authority to conduct 

operations on the reservation. The court also noted that Fain Sr., Fain Jr., and 

Durham did not participate in the management of Integrity Environmental, 

that no shares or interests were ever issued to anyone but Andrea Vigen, and 

that no bill of sale or assignment was ever drafted. Furthermore, much of the 

contested issues in this case—whether formation rules were satisfied in the 

signing of the original agreement or what terms the original agreement 

included—are irrelevant in the context of the later novation. These findings 

are consistent with our rationale in Jedco Dev. Co., Inc. in that a totality of 

facts and circumstances in this case establish a novation agreed upon by all 

parties. Furthermore, as established in Schmitt, the fact that both parties 

disagree as to which company (Integrity or Integrity Environmental) was being 

invested in during the signing of the original agreement is irrelevant given the 

later novation creating a substitute arrangement.

[¶14] The district court’s findings satisfy the requirements of mutual assent 

and sufficient consideration under N.D.C.C. § 9-13-09 and N.D. Pub. Serv.

Comm’n. After reviewing the record, we conclude the court’s findings were not 
6

induced by an erroneous view of the law, there is evidence in the record to 

support the findings, and we are not left with a definite and firm conviction a 

mistake has been made. The district court’s findings regarding the novation 

are not clearly erroneous.

III

[¶15] The district court’s findings related to a novation between the parties are 

not clearly erroneous. We affirm the district court’s judgment.

[¶16] Jon J. Jensen, C.J.

Gerald W. VandeWalle

Daniel J. Crothers

Lisa Fair McEvers

Jerod E. Tufte