Wicklund v. Sundheim

Wicklund v. Sundheim, 2016 MT 62 (March 9, 2016) (Baker, J.; McKinnon, J., dissenting) (4-1, rev’d)

Issue: (1) Whether the district court properly admitted the testimony of an English professor interpreting the language of the warranty deed’s royalty interest reservation; (2) whether the district court erred by resolving the ambiguity in the 1953 warrant deed in favor of Sundheims; and (3) whether the district court improperly applied the doctrine of laches to deny Teisingers’ claim to the 3/5 royalty interest.

Short Answer: (1) No; (2) yes; and (3) yes.

Reversed and remanded for entry of judgment in Teisingers’ favor

Facts: In 1953, Teisingers conveyed several sections of real property to Sundheims by warranty deed, and included language reserving “three-fifths (3/5ths) of Land owners [sic] oil, gas and mineral royalties and three-fifths (3/5ths) of any and all delay rentals on present and existing oil and gas leases now of record against the lands herein described,” subject to “such oil and gas leases” and any assignments of record. Teisingers’ predecessor granted an oil and gas lease to Hill on certain sections of the property; that lease was released in 1958.

The parties dispute whether the reservation in the 1953 deed applies to all royalty interests in the property or only to delay rentals on oil and gas leases existing at the time of conveyance. All parties to the deed have died, and there is no evidence as to which party drafted the deed.

In 2011 and 2012, True Oil, LLC, Brigham Oil & Gas, LLC, and Whiting Oil Gas Corp. began exploration and drilling. Whiting obtained a legal opinion in 2012 that sais the reservation in the deed is arguably ambiguous and advised Whiting to obtain either stipulation from the parties that Teisingers own a 3/5 landowners interest, or a judicial determination of the reservation.

Sundheims refused to stipulate, and Teisingers filed this quiet title action in May 2013. The district court denied cross-motions for summary judgment and held a two-day bench trial.

Sundheim presented expert testimony from an English professor at Rocky Mountain College, who analyzed the deed language and concluded the reservation was ambiguous. He further opined that the ambiguity should be resolved by applying the phrase “on present and existing oil and gas leases” to modify both royalties and delay rentals. Teisingers objected to the testimony as irrelevant both before and during trial, and the district court overruled the objections. 

Procedural Posture & Holding: At the end of trial, the district court entered findings, conclusions, and an order denying Teisingers’ claim for a 3/5 royalty interest. Teisingers appeal, and the Supreme Court reverses.

Reasoning: (1) The interpretation of the royalty reservation’s language is a legal conclusion for the court. Expert testimony on a legal conclusion is inadmissible. The district court erred by admitting this testimony.

(2) The Court agrees that the deed is ambiguous. The issue is how the district court should have resolved the ambiguity after it found that extrinsic evidence of the original parties’ intent was lacking or irrelevant. Deeds are interpreted in the same manner as contracts unless otherwise provided “in this part.” § 70-1-513, MCA. Under § 70-1-516, a reservation in any grant to a private party is to be interpreted in favor of the grantor. Although Teisingers did not cite this statute below, it is additional authority that supports their legal theory, and is therefore appropriate for consideration on appeal.

Additionally, the district court ignored extrinsic evidence in construing the 1952 deed. The Court holds that the district court’s conclusion that the extrinsic evidence presented was of little value is clearly erroneous.

(3) The district court held that Teisingers’ claim is barred by laches, citing Hunter v. Rosebud County. The Court holds this was error. The finding that Teisingers failed to timely assert their royalty interest is not supported by substantial evidence, and Sundheims have not shown that any delay caused them prejudice. 

Justice McKinnon’s Dissent: Justice McKinnon dissents for a number of reasons. The statute that the Court applied to resolve the deed’s ambiguity was not raised by the parties at trial, and should therefore not have been considered on appeal. Further, the statute says that a grant is to be interpreted in favor of a grantee, “except that a reservation in any grant and every grant by a public officer or body, as such, to a private party is to be interpreted in favor of the grantor.” § 70-1-516, MCA. The Court’s interpretation is contrary to the general rule and has never been precisely addressed in prior cases. Requiring issues to be raised below ensures the accuracy and integrity of the Court’s decision making process through the adversarial process. This statute has never been interpreted as between private parties, only in the context of the grantor being a public body.

Justice McKinnon further believes the district court correctly weighed and considered the extrinsic evidence, and did not misapprehend the effect of the evidence.