Court Opinion

ID: 2750689
Source: CourtListenerOpinion
Date Created: 2014-11-12 23:04:49.984643+00
Date Added: 2024-06-11T10:17:39.169880
License: Public Domain

November 12 2014

                                      DA 14-0044

          IN THE SUPREME COURT OF THE STATE OF MONTANA
                                      2014 MT 295

NORTHLAND ROYALTY CORP.,
a North Dakota Corporation,

           Plaintiff and Appellant,

     v.

DOUGLAS F. ENGEL, Individually; NIKKI ENGEL,
Individually; FRANK A. STEINBECK, Individually;
JOHN F. STEINBECK, Individually; DIRK RONALD
BAXTER, Individually; COLLEEN RAE BAXTER,
Individually; ROBERT G. CANDEE, Individually;
JASON SCOTT HUKILL, Individually; TRACY RUDE,
Individually, LILLIAN DASINGER, Trustee of the
LILLIAN DASINGER FAMILY TRUST;
DOE INDIVIDUALS 1 though 50, Inclusive; and
DOE CORPORATIONS 1-through 50, Inclusive,

           Defendants and Appellees.

APPEAL FROM:       District Court of the Seventh Judicial District,
                   In and For the County of Richland, Cause No. DV 07-37
                   Honorable Katherine M. Bidegaray, Presiding Judge

COUNSEL OF RECORD:

            For Appellant:

                   Mark D. Parker; Parker, Heitz & Cosgrove, PLLC; Billings, Montana

                   Michael P. Manning, Michael A. Monson; Holland & Hart, LLP; Billings,
                   Montana

            For Appellees:

                   H. Malcolm Pippin; Pippin Law Firm, P.C.; Williston, North Dakota
                 Submitted on Briefs: August 27, 2014
                            Decided: November 12, 2014

Filed:

         Clerk

         2
Justice Beth Baker delivered the Opinion of the Court.

¶1     This is the second appeal by Northland Royalty Corporation in its action to quiet

title in mineral rights it purchased from the personal representative of two estates. When

Northland appealed before, we remanded the case to the Seventh Judicial District Court

to consider the applicability of § 72-3-618, MCA. Northland Royalty Corp. v. Engel,

No. DA 11-0467, Order (Mont. Apr. 10, 2012). Northland subsequently moved for

summary judgment on the basis of that statute and now appeals the District Court’s denial

of its motion. The issue we address is whether the District Court erred in denying

summary judgment. We reverse.

                 PROCEDURAL AND FACTUAL BACKGROUND

¶2     This case concerns mineral rights that have passed through three wills and were

purchased by Northland. The minerals are located in North Dakota and in Richland

County, Montana, but only the Montana minerals are before us on appeal.

¶3     In the first will, Charlotte C. Nohle, who died in 1957, left the mineral rights to her

sister, Victoria F. Davis. In the second will, Davis, who died in 1976, left the mineral

rights to her daughter, Helen Jaumotte, and also designated Helen as her estate’s personal

representative. In the third will, Helen, who died in 1991, left the “use and enjoyment of

the income from the mineral interests” to her husband Jay Jaumotte. Helen further

directed that “[u]pon [Jay’s] death, those mineral interests and the use and enjoyment

thereof revert to the issue of Charlotte C. Nohle, in keeping with her Will, specifically to

Floyd A. Engel, Mrs. Ella Steinbeck, Mrs. Dorothy Freeman, and Mrs. Cecil Baxter, and

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each of their issue by representation.” Finally, in her will, Helen designated Jay as her

estate’s personal representative. Defendants and Appellees [Devisees] are “the issue of

Charlotte C. Nohle” referenced in Helen’s will.

¶4     Soon after Helen died in 1991, Jay initiated informal probate proceedings on

Helen’s will in Yavapai County, Arizona, and received letters appointing him personal

representative of Helen’s estate. In April 1992, Jay received letters appointing him as the

successor personal representative of Davis’s estate. In May 1992, Jay swore in a closing

statement that Helen’s estate had been fully administered, but Jay’s attorney did not file

that statement with Yavapai County until 1999. A closing statement for the Davis estate

was not filed until 2009.

¶5     Richard Keller, president and sole shareholder of Northland Royalty Corporation

and a landman by profession, became interested in the minerals. Through examining

documents relating to the minerals and the Davis estate appointment letters, Keller knew

that Jay was the personal representative of Davis’s estate.        In 1997, when Keller

contacted Jay about purchasing the rights to the minerals, Jay represented that he also

was the personal representative of Helen’s estate.

¶6     Before purchasing the mineral rights, Keller sought additional documents relating

to Helen’s estate and the minerals. Keller did not know that Helen’s estate was probated

in Yavapai County. As a result, in attempting to examine Helen’s estate documents,

Keller contacted Richland County, Montana, and Maricopa County, Arizona (where Jay

was residing). Keller failed to find Helen’s estate documents in either of those two

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counties. Also, in the spring of 1997, Keller checked the title on the North Dakota

minerals. In August 1997, three of the Devisees recorded ratifications of an oil and gas

lease on some of the North Dakota minerals.           Keller admitted in court that these

ratifications would have suggested to him that the minerals were held in a life estate, but

testified that he did not see the ratifications because they were not of record when he

examined the title earlier that year. When Northland purchased the minerals in August

1998, Northland acquired “100% of the remaining interests as acquired by Victoria F.

Davis from the Estate of Charlotte C. Nohle” for $15,010. Jay deeded the minerals

“individually, as Personal Representative of the estate of Helen Jaumotte and as sole

Successor Personal Representative of the Will and Estate of Victoria F. Davis.” Jay died

in 2001.

¶7     After purchasing the mineral rights, Northland negotiated a deal to lease the rights

to a third party, but the deal collapsed in 2005 due to problems with Northland’s title. In

2007, Northland brought a quiet title action naming Devisees as defendants. Devisees

counterclaimed and, in 2011, the Seventh Judicial District Court quieted title in their

favor. Northland appealed to this Court, and we remanded to the District Court to

consider the applicability of § 72-3-618, MCA.           Northland moved for summary

judgment, arguing that the statute offered Northland protection against Devisees’ claims

to the minerals. The District Court denied summary judgment on this issue because it

concluded that Northland failed to act in good faith as required by the statute. Northland

appeals that portion of the District Court’s order.

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                               STANDARD OF REVIEW

¶8     We review de novo a district court’s ruling on a motion for summary judgment.

Bailey v. St. Farm Mut. Auto. Ins. Co., 2013 MT 119, ¶ 18, 370 Mont. 73, 300 P.3d 1149.

Summary judgment is appropriate when there is no genuine issue of material fact and the

moving party is entitled to judgment as a matter of law. M. R. Civ. P. 56(e); Smith v.

Burlington N. & Santa Fe Ry. Co., 2008 MT 225, ¶ 10, 344 Mont. 278, 187 P.3d 639.

The interpretation of a statute is a question of law, which we review for correctness. City

of Missoula v. Iosefo, 2014 MT 209, ¶ 8, 376 Mont. 161, 330 P.3d 1180 (2014).

                                      DISCUSSION

¶9     In 1974, Montana adopted a version of the Uniform Probate Code [UPC]. Section

72-1-101, MCA.       Under the UPC, an estate’s administrator is called a personal

representative. Section 72-1-103(45), MCA. If a personal representative improperly

exercises his or her power in administering an estate, the personal representative is liable

to the estate’s beneficiaries. Section 72-3-616(1), MCA. Thus, under that provision of

the UPC, if a personal representative improperly disposes of estate property, beneficiaries

have a remedy directly against the personal representative. By contrast, under § 72-3-

618, MCA, the rights of the third-party purchaser may be protected:

       A person who in good faith and without notice either assists a personal
       representative or deals with a personal representative for value is protected
       as if the personal representative properly exercised the personal
       representative’s power. The fact that a person knowingly deals with a
       personal representative does not alone require the person to inquire into the
       existence of a power or the propriety of its exercise. Except for restrictions
       on powers of supervised personal representatives that are endorsed on
       letters as provided in 72-3-404(3), a provision in any will or order of court
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       purporting to limit the power of a personal representative is not effective
       except as to persons with actual knowledge of the provision.

Section 72-3-618(1), MCA. By providing protection to persons dealing with personal

representatives, the UPC seeks to “avoid the need of obtaining doubt-ending court orders

in routine probate administrations” that would cut against the UPC’s “flexible system of

administration.” Uniform Probate Code Practice Manual 319 (Richard V. Wellman ed.,

2d ed. 1977).

¶10    To determine whether Northland dealt with a personal representative “in good

faith and without notice” under § 72-3-618(1), MCA, Devisees suggest using the standard

for good faith we adopted in Luloff v. Blackburn, 274 Mont. 64, 69, 906 P.2d 189, 191

(1995). There, we examined Montana’s race-notice statute, § 70-21-304, MCA, and

equated “good faith” under that statute with the standard for a bona-fide purchaser: “one

who . . . purchases in the honest belief that his vendor has a right to sell, without notice,

actual or constructive[,] of any adverse rights, claims, interest, or equities of others in and

to the property sold.” Luloff, 274 Mont. at 69 (quoting Foster v. Winstanley, 39 Mont.
314, 316, 102 P. 574, 579 (1909)).

¶11    We decline to define “good faith and without notice” as used in § 72-3-618, MCA,

to require a purchaser’s “honest belief . . . without [actual or constructive] notice”

regarding other parties’ interests in the property. Foster, 39 Mont. at 316, 102 P. at 579.

Such a rule does not fit in the context of dealings with a personal representative. Estate

devisees take devised property “subject to” the estate’s administration, § 72-3-101(2),

MCA, and a personal representative has the power to sell estate property if necessary for
                                           7
the estate’s administration. Sections 72-3-606(1), -613(6), MCA. By the plain language

of these statutes, a personal representative has the power to sell property within the estate,

even if that property is specifically devised in the will. Green v. Gustafson, 482 N.W.2d
842, 846 n.3 (N.D. 1992) (interpreting the UPC to permit a personal representative to sell

estate property regardless of whether the property was devised in a will); contra In re

Estate of Olson, 744 N.W.2d 555, 561 (S.D. 2008) (holding that, outside certain

exceptions, a specific devise restricts a personal representative’s power of sale under the

UPC).1 Thus, although the District Court found that the North Dakota ratifications

provided Northland notice that other parties had interests in the minerals, the ratifications

did not provide notice of a restriction on the “power of [the] personal representative” as

required by § 72-3-618(1), MCA, and are therefore irrelevant.

¶12    Further, § 72-3-618(1), MCA, “explicitly excuse[s] [purchasers] from examining

the terms of the will, court records relating to the appointment, or other sources that

might be relevant to the question of whether the sale is proper as between the fiduciary

and those entitled to the inheritance.” Uniform Probate Code Practice Manual 407.

Because § 72-3-618(1), MCA, relieves a purchaser from having to inquire into the

specific language of a will, the District Court erred by concluding that Keller failed to act

in good faith by failing to locate Helen’s will.
1
  The dissent in Olson pointed out that, because the UPC makes a personal representative’s
power of sale statutory, testators must “draft their wills to explicitly limit, restrict, or eliminate
this power of sale if that is their intent.” Olson, 744 N.W.2d at 577 (Zinter, J., dissenting). In a
subsequent appeal in the same underlying case, the South Dakota Supreme Court held that the
third-party purchaser of the estate’s property acted in good faith under South Dakota’s equivalent
to § 72-3-618, MCA, despite purchasing specifically devised property from the personal
representative. Muhlbauer v. Estate of Olson, 801 N.W.2d 446, 449 (2011).
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¶13    What the statute’s good faith and notice requirements do encompass is whether a

purchaser in good faith believes that the “vendor has a right to sell” by virtue of being an

estate’s personal representative. Foster, 39 Mont. at 316, 102 P. at 579. “In the ordinary

case . . . a [purchaser] would only need to see that the letters were issued and in effect

when a personal representative gave a deed to purchaser.” 3 Patton & Palomar on Land

Titles § 521 (3d ed. 2003). While Keller may not have obtained such independent

verification here, there is no dispute that, at the time that the transaction occurred,

Helen’s estate was open, Jay was the estate’s personal representative, there were no

restrictions placed in Jay’s letters of appointment, and Keller had no actual knowledge of

any restrictions on Jay’s authority.      We thus hold that § 72-3-618, MCA, protects

Northland’s purchase.

                                     CONCLUSION

¶14    We reverse the District Court’s order denying summary judgment and remand for

entry of judgment in Northland’s favor.

                                                 /S/ BETH BAKER

We concur:

/S/ MIKE McGRATH
/S/ LAURIE McKINNON
/S/ MICHAEL E WHEAT
/S/ JAMES JEREMIAH SHEA

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