Court Opinion

ID: 9957399
Source: CourtListenerOpinion
Date Created: 2024-04-04 15:07:42.886397+00
Date Added: 2024-06-11T08:18:18.734668
License: Public Domain

FILED
                                                                     IN THE OFFICE OF THE
                                                                  CLERK OF SUPREME COURT
                                                                          APRIL 4, 2024
                                                                   STATE OF NORTH DAKOTA

                   IN THE SUPREME COURT
                   STATE OF NORTH DAKOTA

                                 2024 ND 52

Whitetail Wave LLC, a Montana Limited
Liability Company,                                    Plaintiff and Appellant
      v.
XTO Energy, Inc., a Delaware corporation,
the Board of University and School Lands
of the State of North Dakota, the State
of North Dakota,                                   Defendants and Appellees
      and
Department of Water Resources
and Director,                             Intervenor, Defendant, and Appellee

                                No. 20230283

Appeal from the District Court of McKenzie County, Northwest Judicial
District, the Honorable Robin A. Schmidt, Judge.

AFFIRMED.

Opinion of the Court by Jensen, Chief Justice.

Joshua A. Swanson, Fargo, ND, for plaintiff and appellant.

David P. Garner (argued) and Matthew A. Sagsveen (on brief), Assistant
Attorneys General, Bismarck, ND, for defendants and appellees the Board of
University and School Lands of the State of North Dakota and the State of
North Dakota; intervenor, defendants, and appellee Department of Water
Resources and Director.
Spencer D. Ptacek (argued) and Lawrence Bender (on brief), Bismarck, ND, for
defendant and appellee XTO Energy, Inc.
                      Whitetail Wave v. XTO Energy
                              No. 20230283

Jensen, Chief Justice.

[¶1] Whitetail Wave LLC appeals from a judgment determining the
ownership of property in its favor but dismissing its claims against the State
entities, dismissing its claim against XTO Energy, Inc. for the underpayment
of royalties, and awarding XTO a recovery of its attorney’s fees incurred in this
litigation. We conclude the district court did not err in dismissing Whitetail’s
claim asserting an unconstitutional taking against the State, did not err in
dismissing Whitetail’s claim against XTO for the non-payment of royalties, and
did not err in awarding XTO recovery of its attorney’s fees. We affirm the
judgment.

                                       I

[¶2] Whitetail acquired title to property located in McKenzie County
described as:

      Township 154 North, Range 96 West
      Section 25: Lot 5 (49.20)
      Section 26: Lot 7 (33.60), SW/4SW/4, S/2SE/4
      Section 27: Lot 8 (35.10), SE/4SW/4, SW/4SE/4
      Section 34: NW/4NE/4, S/2NE/4, W/2SE/4, SE/4SE/4
      Section 35: N/2, N/2S/2, SW/4SW/4

[¶3] In 2004, Whitetail entered into an oil and gas lease for the property with
XTO’s predecessor, Headington Oil. Under the terms of the lease, Whitetail
was entitled to royalty payments from XTO. In 2009, the Board of University
and School Lands leased oil and gas minerals beneath the Missouri River to
XTO in Section 27, Township 154 North, Range 96 West.

[¶4] In 2015, Whitetail sued the Board, the State of North Dakota, and XTO
to quiet title to the mineral interests associated with the property. Whitetail
also asserted XTO had breached their lease agreement, XTO had failed to
make required royalty payments for the production from the McPete Federal
34X-34 well (McPete unit) comprised of Sections 27 and 34, and the State’s

                                       1
assertion of an interest in the mineral interests constituted an
unconstitutional taking without just compensation. In response to the quiet
title action involving the leased mineral interests, XTO suspended royalty
payments to Whitetail.

[¶5] The Board, State of North Dakota, and Department of Water Resources
(collectively “State”) moved for summary judgment. The district court granted
the State’s motion, concluding N.D.C.C. ch. 61-33.1 applied and provided the
State with ownership of 209.71 minerals in the south half of Section 27 because
those mineral interests were within the ordinary high watermark as defined
within N.D.C.C. ch. 61-33.1. Specifically, the State owns 85.79 acres in the
SE1/4 of Section 27 and 123.92 acres in the SW1/4 of Section 27. Whitetail
owns the remaining acres in the south half of Section 27. XTO moved for
summary judgment. The court granted XTO’s motion concluding XTO was
within the safe harbor provision provided by N.D.C.C. § 47-16-39.1 and did not
breach the parties’ lease agreement when it withheld the royalty payments.
The judgment was silent with regard to the quiet title action as it related to
Sections 25, 26, 34, and 35.

[¶6] Whitetail appealed from the judgment. Whitetail Wave LLC v. XTO
Energy, Inc., 2022 ND 171, 980 N.W.2d 200. We dismissed Whitetail’s first
appeal, concluding the judgment was not final because it did not dispose of all
claims asserted in the action. Specifically, we stated, “Whitetail’s claim to quiet
title in Sections 25, 26, 34 and 35 remains unresolved.” Id. at ¶ 5.

[¶7] Following dismissal of Whitetail’s appeal, the parties entered into a
stipulation resolving the remaining quiet title claims as to Sections 25, 26, 34,
and 35, as well as that portion of Section 27: Lot 8, SE/4SW/4, SW/4SE/4 that
is above the ordinary high watermark. This appeal followed.

                                        II

[¶8] Whitetail argues the district court erred in deciding the State did not
commit an unconstitutional taking of Whitetail’s property. It contends the
State claimed an interest in Whitetail’s property and interfered with
Whitetail’s exercise of its interest. Whitetail does not differentiate the takings

                                        2
clause in the U.S. Constitution from the North Dakota Constitution, analyzing
these claims together. U.S. Const. amend. V; N.D. Const. art. 1, § 16. Because
no party asserts the text or history of the state constitutional provision
requires us to apply a different standard, we analyze the federal and state
takings challenges together. Northwest Landowners Ass’n v. State, 2022 ND
150, ¶ 23, 978 N.W.2d 679.

[¶9] The Fifth Amendment guarantees that private property shall not “be
taken for public use, without just compensation.” U.S. Const. amend. V. “The
takings clause of the Fifth Amendment is made applicable to the states
through the Fourteenth Amendment.” Wild Rice River Estates, Inc. v. City of
Fargo, 2005 ND 193, ¶ 12, 705 N.W.2d 850. Article I, § 16, of the North Dakota
Constitution states that “[p]rivate property shall not be taken or damaged for
public use without just compensation having been first made to or paid into
court for the owner[.]” “Whether there has been a taking of private property
for public use is a question of law.” Wilkinson v. Bd. of Univ. (“Wilkinson I”),
2017 ND 231, ¶ 22, 903 N.W.2d 51. The trial court’s findings of fact will not be
set aside unless they are clearly erroneous under N.D.R.Civ.P. 52(a). Wild Rice
River, at ¶ 10.

[¶10] This action was initiated by Whitetail to quiet title to Sections 25, 26, 27,
34, and 35. The State, in response to the quiet title action, plead a general
denial to Whitetail’s claims, including Whitetail’s claims with respect to
Sections 25, 26, 34, and 35. Whitetail contends the State had no basis to assert
a claim to any minerals outside of Section 27, and the State’s response to the
quiet title action was an unconstitutional taking with regard to Sections 25,
26, 34 and 35.

[¶11] In Wilkinson v. Board of University, we held that a title dispute by itself
does not establish a taking. 2022 ND 183, ¶ 23, 981 N.W.2d 853 (“Wilkinson
III”) (citing Mackin v. City of Coeur D’Alene, 551 F. Supp. 2d 1205 (D. Idaho
2008), aff’d, 347 F. App’x 293 (9th Cir. 2009)). “The State may protect its
interests in a title dispute and must do ‘something more’ than assert title to
complete a taking.” Id. at ¶ 43.

                                        3
[¶12] We conclude this action, initiated as a title dispute to quiet title to
particular mineral interests, does not include the “something more” necessary
for a taking. To protect the public interest in sovereign lands, the State may
have to litigate a quiet title action to determine the extent of its sovereign lands
along navigable waters when the boundaries are disputed. State ex rel.
Sprynczynatyk v. Mills, 523 N.W.2d 537, 540 (N.D. 1994). The State’s act of
responding to the quiet title action is insufficient to be the “something more.”
Wilkinson III, 2022 ND 183, ¶ 43.

[¶13] Because Whitetail has not demonstrated the State committed a taking
in violation of the federal or state constitutions, the district court did not err
in dismissing the takings claim.

                                       III

[¶14] Whitetail argues the district court erred in holding XTO did not breach
its lease with Whitetail and XTO’s withholding of royalty payments fell within
the safe harbor provisions of N.D.C.C. § 47-16-39.1. Whitetail claims the court
found that only a portion of the interest covered by the lease was disputed, and
therefore XTO breached the lease by failing to pay royalties for the portion of
the lease covering undisputed interest.

[¶15] Section 47-16-39.1(1), N.D.C.C., provides that a failure to pay oil and gas
royalties constitutes a breach of the obligation arising under the oil and gas
lease. The safe harbor provision provides, “This section does not apply . . . in
the event of a dispute of title existing that would affect distribution of royalty
payments[.]” Id. (emphasis added).

[¶16] In Vic Christensen Mineral Trust v. Enerplus Resources Corporation, this
Court interpreted N.D.C.C. § 47-16-39.1 and held the safe harbor provision
applied and suspension of royalty payments was lawful when there was a
dispute of title that would affect distribution of royalty payments. 2022 ND 8,
¶¶ 10-12, 969 N.W.2d 175. We also held suspension of all royalty payments is
justified when there is a title dispute, including the payments from a portion
of the royalty interests held that ownership was undisputed. Id. at ¶ 12.

                                         4
[¶17] There was a dispute over the ownership of at least some of the mineral
interests covered by the lease between Whitetail and the State creating a
“dispute of title” that would affect Whitetail’s royalty payments from XTO. As
we held in Vic Christensen Mineral Trust, the statute allows suspension of all
payments by the unit operator to a mineral owner even though only a portion
of the owner’s interests were in dispute, and XTO lawfully suspended royalty
payments to Whitetail for the McPete unit. We conclude the district court did
not err in finding a dispute of title existed that allowed XTO to lawfully
suspend royalty payments to Whitetail for minerals covered by their lease, and
that XTO did not breach its lease with Whitetail.

                                      IV

[¶18] Whitetail asserts the district court erred by awarding XTO its costs and
attorney’s fees as the prevailing party under N.D.C.C. § 47-16-39.1. Whitetail
argues it prevailed on its quiet title action, with the exception of the minerals
in Section 27 below the ordinary high watermark, and the court erred in
determining XTO was the prevailing party in this litigation.

[¶19] In Van Sickle v. Hallmark & Associates, Inc., 2013 ND 218, ¶ 44, 840
N.W.2d 92 (quoting Carpenter v. Rohrer, 2006 ND 111, ¶¶ 34-35, 714 N.W.2d
804), this Court explained as follows:

             Determining who is a prevailing party for an award of
      disbursements under N.D.C.C. § 28-26-06 is a question of law,
      subject to de novo review, while the question of the amount to be
      allowed for disbursements and costs is one of fact, subject to an
      abuse of discretion standard. Nesvig v. Nesvig, 2006 ND 66, ¶ 34,
      712 N.W.2d 299. The determination of who is a prevailing party
      entitled to recover necessary disbursements under N.D.C.C. § 28-
      26-06 is based upon success on the merits, not damages. Dowhan
      v. Brockman, 2001 ND 70, ¶ 11, 624 N.W.2d 690 (citing Lemer v.
      Campbell, 1999 ND 223, ¶ 9, 602 N.W.2d 686). If opposing litigants
      each prevail on some issues, there may not be a single prevailing
      party for whom disbursements may be taxed. Dowhan, at ¶ 11. A
      prevailing party is one “in whose favor a judgment is rendered,
      regardless of the amount of damages awarded.” Black’s Law
      Dictionary 1154 (8th ed. 2004).

                                       5
             “Generally, the prevailing party . . . is the one who
      successfully prosecutes the action or successfully defends against
      it, prevailing on the merits of the main issue . . . the prevailing
      party is the one in whose favor the decision or verdict is rendered
      and the judgment entered.” Dowhan v. Brockman, 2001 ND 70,
      ¶ 11, 624 N.W.2d 690.

[¶20] The district court determined XTO successfully defended against
Whitetail’s claim, prevailed on the main issue (i.e., the issue of whether
Whitetail was entitled to statutory interest or cancellation of its lease under
N.D.C.C. § 47-16-39.1), and had judgment entered in its favor. We conclude the
court did not err in finding XTO to be the prevailing party.

                                      V

[¶21] We conclude the district court did not err in dismissing Whitetail’s claim
of an unconstitutional taking asserted against the State when the State’s
actions were limited to a title dispute, did not err in dismissing Whitetail’s
claim asserted against XTO for the non-payment of royalties because XTO fell
within the safe harbor provision of N.D.C.C. § 47-16-39.1, and did not err in
awarding XTO a recovery of its attorney’s fees as the prevailing party. The
judgment is affirmed.

[¶22] Jon J. Jensen, C.J.
      Daniel J. Crothers
      Lisa Fair McEvers
      Jerod E. Tufte
      Douglas A. Bahr

                                       6