Reese v. Reese-Young

Dennis Reese and Tia Reese-Young (defendant) owned an interest in minerals underlying property in North Dakota. In 2005, Dennis and Tia entered into an oil-and-gas lease for the property. After several conveyances, Cheryl Reese (plaintiff) and Dennis owned a 12.5 percent mineral interest as joint tenants, and Tia owned a 12.5 percent mineral interest as a tenant in common with Dennis and Cheryl. Oil and gas were being produced on the property by November 2007. In July 2008, Dennis and Cheryl conveyed their 12.5 percent mineral interest to Tia by quitclaim deed and reserved a life estate in the minerals. Dennis died two months later. In 2017, Cheryl brought a quiet-title action against Tia and sought a declaratory judgment that Cheryl was entitled to all mineral proceeds, including oil-and-gas proceeds, derived during Cheryl’s lifetime because Cheryl was the sole remaining life tenant. Tia counterclaimed, seeking a declaratory judgment that Cheryl was not entitled to any oil-and-gas proceeds. In North Dakota, a life tenant’s removal of minerals and acceptance of royalties or other payments from the mineral sales traditionally constituted waste because the life tenant’s actions decreased the estate and the value of the remainderman’s interest. However, Cheryl argued that under the common-law open-mines exception to the waste doctrine, life tenants could operate mines or wells that were open at the creation of the life estate and receive all proceeds from the operation of those mines or wells, even if doing so diminished the remainderman’s interest. The North Dakota Supreme Court had not previously recognized the open-mines exception. The trial court held that the open-mines exception did not apply and granted summary judgment for Tia. Cheryl appealed.