In Rolla, the North Dakota Supreme Court reviewed and affirmed a district court decision in a case involving two potentially conflicting reservations within the same deed. George Tank executed a quitclaim deed to his son, Greggory Tank, with an "EXCEPTING AND RESERVING" clause containing standard language reserving the oil, gas and other minerals in and under the subject property unto the grantor. The following sentence in the quitclaim deed " FURTHER EXCEPT[ED] AND RESERV[ED]" unto the grantor a life estate in the subject property, including "the right to lease and receive bonuses, rentals and royalties therefrom." Upon the subsequent death of George Tank, the operator of an oil and gas well on the subject property ceased making payments to the estate of George Tank pursuant to the applicable lease and commenced paying royalties to Greggory Tank, having interpreted that Greggory Tank, as remainderman under the quitclaim deed, had succeeded to all right, title and interest in all of the surface and minerals of the subject property.
The estate of George Tank filed a quiet title action against Greggory Tank asserting that the true effect of the quitclaim deed was to reserve all of the oil, gas and other minerals unto George Tank exclusively, while also reserving a life estate in the surface only, with Greggory Tank as remainderman. The district court determined that the two reservations within the quitclaim deed were ambiguous and then ruled in favor of the estate of George Tank on the basis of testimonies from the attorney who drafted the quitclaim deed as well as George Tank's accountant that it was the intent of the grantor to: (i) reserve a life estate in the surface and the minerals in and under all producing properties, with Greggory Tank as remainderman, and (ii) reserve the mineral rights on all of the non-producing subject property unto himself.
In Rolla, the Court ultimately affirmed the district court’s decision and application of the rule that the grantor’s intent must be ascertained and applied whenever there is ambiguity within a deed; however, the Court also held that the two reservation clauses were not, in fact, ambiguous on the basis that the definition of the word "further" within the second reservation clause meant "in addition" and "going or extending beyond what exists." Accordingly, the Court ruled that the quitclaim deed unambiguously reserved the oil, gas and other minerals unto the grantor, while also reserving a life estate in the surface unto the grantor.
In light of the Rolla decision and the dicta contained therein, North Dakota oil and gas operators and their title examiners should investigate and understand the intent of a grantor of minerals interests whenever multiple and potentially ambiguous reservations are contained within the same deed. With respect to payment of royalties pursuant to a lease covering such minerals, a recorded stipulation and agreement among the interested parties may be necessary to confirm and effectuate such intent of the grantor.