Gerrity: District Court
The case arose from unconventional circumstances. In 2013, several mineral owners initiated a suit to determine the amount of interest conveyed by the operative deeds (2013 suit). Although leases covered nearly all of the minerals at issue, none of the mineral owners notified the lessees of the quiet-title action.
The defendants in the 2013 suit succeeded in convincing the district court to ignore the second of the two conflicting fractions in the deeds’ granting clauses. For example, instead of the conveyed minerals equaling 1/8 of 1/2 of the minerals owned by the grantor, the court reasoned that the deeds conveyed 1/8 of 100 percent of the minerals in the subject lands.
But just weeks after the district court issued its decision in the 2013 suit, Gerrity filed a separate quiet-title action naming all lessees, mineral owners, and other interested parties, including those party to the 2013 suit. To the chagrin of the 2013 suit defendants, Gerrity convinced the district court to reach the opposite conclusion. The district court multiplied the two sets of fractions together to determine the mineral interest conveyed by the deeds.
Gerrity: Appeals Court
On appeal, the 2013 suit defendants argued that the district court erred in the second action in interpreting the deeds and that the second action itself was impermissible because the decision in the 2013 suit controlled. The North Dakota Supreme Court rejected both arguments.
First, the court concluded that the defendants offered no reasonable explanation for why the two sets of fractions should not be read together. Specifically, the court accepted Gerrity’s argument that the fraction in each of the deeds’ granting clauses must be applied to the “fractions qualifying the individual descriptions of the property interests conveyed by the granting clause.” Id. at 682. In doing so, the court determined that the “defendants do not offer a logical explanation why the second fraction in the  deeds, which indicates the fraction owned by the grantor, should be ignored.” Id. at 683. The court reiterated that it “construe[s] . . . deeds as a whole to give effect to each provision.” Id.
Second, the North Dakota Supreme Court held that the judgment obtained in the 2013 suit could not bind Gerrity because it was not a party to that suit. The defendants asserted that the second action constituted an impermissible collateral attack on the 2013 suit. The court, however, found that line of argument to lack merit. It noted at the outset that a quiet-title action “is not binding on any persons having interests in leases and wells who were not made parties to the action.” Id. at 684. And it further remarked that “[t]his case illustrates the frail nature of a quiet title action and judgment that fails to include as parties persons of record and others who appear to have an interest in the subject party.” Id. at 685. Consequently, the court vacated the judgment in the 2013 suit and established that lessees are necessary parties to any quiet-title suit affecting their leased mineral interests. Because the 2013 suit omitted all lessees, among other interest holders and unknown parties, it could not stand.
The North Dakota Supreme Court’s decision establishes that anyone seeking to quiet title to mineral interests in North Dakota must include all necessary parties, including lessees, or risk subsequent and potentially inconsistent judgments. The ruling also provides additional direction for construing granting clauses under North Dakota law.
Andrew Glenn is an associate in the Denver, Colorado, office of Beatty & Wozniak, P.C.