Opinion ID: 2334890
Heading Depth: 3
Heading Rank: 1

Heading: Rutter Owns Half Of The ORRI.

Text: Renaissance argues that it holds legal title to the entire 3.75% overriding royalty interest. Renaissance reasons that the trial court could award part of that interest to Rutter only as an equitable remedy. Renaissance relies on the framework we set out in Klondike Industries v. Gibson : It is axiomatic that the holders of legal title to a property are entitled to the proceeds of its sale unless a court imposes on the property an equitable remedy, such as a constructive trust, in favor of another. The burden of proof must fall on the party seeking to impose the equitable remedy. . . .[ [10] ] Renaissance argues that because it has legal title to the 3.75% ORRI, Rutter has the burden of proving that an equitable remedy is appropriate. According to Renaissance, the superior court did not respect this burden and did not make any finding of fact or state any conclusion of law that Rutter had an equitable right to the . . . ORRI. But the superior court's conclusion that Rutter and Renaissance held title to the 3.75% ORRI on an equal basis is supported by the record. Mark Landt, Renaissance's vice president, acknowledged that it was assumed that Renaissance and Rutter would split the remaining override on a 50/50 basis. Landt also testified that Renaissance looked at [Rutter] as a 50/50 partner. Renaissance supports its claim that it alone had legal title by pointing out that in filings with the federal Bureau of Land Management (BLM), Renaissance was the only listed owner. BLM regulations require that [e]ach transfer of record title must be filed with the proper BLM office on a current form approved by the Director. [11] But it is undisputed that Rutter and Renaissance filed these BLM documents only in Renaissance's name in order to avoid posting two liability bonds. These BLM filings also do not establish legal title. Form 3000-3 is the form for filing BLM assignments of title. [12] But Form 3000-3 expressly states that it does not actually establish legal title. In the box where a BLM official signifies approval of the assignment, the form states in bold typeface, This assignment is approved solely for administrative purposes. Approval does not warrant that either party to this assignment holds legal or equitable title to this lease. Similarly, BLM regulations state that [a]pproval does not warrant or certify that either party to a transfer holds legal or equitable title to a lease. [13] The BLM's commentary in the Federal Register when adopting these regulations contains an extensive disclaimer that its filings do not determine legal title. [14] Renaissance claims that the BLM filings function like a property recording system, but this is not accurate. Rather, the filing system appears to be intended to help the BLM administer leases. Form 3000-3's statement that [t]his assignment is approved solely for administrative purposes supports such an interpretation. The filing system's apparent purpose is to inform the BLM of the current owner of each lease, sparing the BLM the trouble of having to laboriously investigate to discover who owns each federal lease. Accordingly, the BLM filings do not support Renaissance's claim that it alone held legal title to the 3.75% ORRI. Renaissance also points to the fact that the sales agreement for the lease was in Renaissance's name alone. But while the agreement purchasing the lease from Craig and Zamarello did name only Renaissance as purchaser, the May 23 agreement between Renaissance and Rutter provided that they were purchasing the lease together. Additionally, the operating agreement of Umiat LLC referred to the lease interest acquired from Craig and Zamarello as belonging to both Rutter and Renaissance: Renaissance Alaska, LLC and Rutter and Wilbanks Corporation shall jointly contribute their one hundred (100%) percent working interest and eighty (80%) percent net revenue interest to Umiat LLC. (Emphasis added.) The fact that Renaissance was the only listed purchaser on the sales agreement was incidental, a product of the parties' desire to avoid posting two bonds with BLM. [15] Because it is clear from the record that Renaissance acquired the Craig and Zamarello lease for the purpose of developing it alongside Rutter, the superior court was correct in its conclusion that Rutter held title to half of the lease interest, including half of the 3.75% ORRI.