Some Quirks and Pitfalls in Dealing
With North Dakota Mineral Interests
Bill Pearce
Fredrikson & Byron, P.A.
The Quagmire of Mineral Interest vs. Royalty Interest
An issue in conveyancing that has created considerable confusion over the years is the
difference between a mineral interest and a royalty interests. A “mineral interest,” for example a
one-half mineral interest in a tract of land, conceptually means ownership of one-half of the
minerals underlying the tract. The interest is real property, although mineral interest are
frequently severed from the surface, meaning that some portion of the mineral interest, or
perhaps 100% of it, is owned by someone other than the owner of the surface. Mineral interests
are freely transferable just like surface interests.
Whenever a mineral interest has been severed from the surface, it includes, as a necessary
element, the right to access the land to develop the minerals and realize their value. This is an
easement, implied as a matter of law, that is part of the ownership of the mineral interest – the
right of access to the minerals, for the purpose of exploring, mining, drilling, extracting, etc. The
mineral owner may do this himself, or, as is of course much more common, he may grant a
mineral lease to another to do the exploration and production, for which the developer pays all of
the costs and receives a much larger share of the minerals produced (“working interest”) than the
mineral owner granting the lease, who retains a portion, his so-called “royalty,” being the right to
a fractional ownership of future minerals, or the proceeds realized from the sale of the minerals,
extracted from the tract under the lease.
Royalty Interest
The term “royalty,” is really used in two related, but somewhat different and perhaps
confusing ways:
(1) Royalty is the mineral owner’s (the lessor’s) interest in the minerals, for example oil
and gas, when and if produced at the surface, at which point the produced minerals themselves
have become what the law considers personal property – natural gas in a pipeline or oil in a tank
truck, for example. It has been severed from the ground by being produced by drilling, mining,
etc.
(2) A “royalty interest,” however is an interest in minerals, but is not a “mineral interest”
as such. It is real property while it is in the ground, and is freely transferable just as a mineral
interest is, as witnessed by the thousands of assignments of royalty that we see in the North
Dakota county land records. This can be a little confusing, but a royalty interest is in effect, part
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of the mineral interest, without some of the attributes of the mineral interest: the right to explore,
develop or extract the minerals in particular. A royalty interest alone carries no right of access to
the land. It entitles the owner to the right to a fraction of production, but carries no right to do
the producing. Commentators are fond of calling a mineral interest a “bundle of sticks,” each
stick representing an interest or right of some kind in the minerals, and a royalty interest can be
thought of as a mineral interest that is missing some of the sticks, for example the right of access
to the land and the right to drill for or mine the mineral.
The Label on the Deed: Is it a Mineral Deed or a Royalty Deed?
The conveyancing problem that has plagued these concepts over the years stems from the
fact that instruments conveying mineral interests or royalty interests may not actually be what
they are called in the title at the top of the document. An instrument that is termed a “Mineral
Deed” may in fact be conveying a royalty interest,” depending on the precise nature of the
interest that it actually conveys by its terms. Conversely a document entitled “royalty deed” may
actually convey a mineral interest. The courts have often reiterated that the name of the
document (“Mineral Deed,” “Royalty Deed,” “Assignment of Royalty”) alone is insufficient to
determine what it really is. The crucial point is what does the document actually convey and
how does it do this? Some of the commonly accepted attributes that distinguish one from the
other are as follows:
Mineral deed: right to access the tract, right to develop, right to grant an interest in and
to oil and gas and related hydrocarbons. The interest being granted is normally described
as the minerals in and under and that may be produced from the described tract, and the
right to ingress and egress by the mineral owner for access to the tract to explore, develop
and market the minerals
Royalty Deed: conveys the right to a specified fraction if and when the mineral is
produced; typically the instrument will convey an interest in and to the minerals
“produced and saved” from the tract, as opposed to the mineral interest language of “in
and under and that may be produced from”
Problems arise, of course, in construing what a given instrument does when there is a
mixture of these concepts in a single instrument. Sometimes the label on a printed mineral deed
form, for example, will be crossed and replaced with the words royalty deed,” or vice-versa. The
courts have frequently pointed out that the label on the document does not control what it
actually is. The issue, as the courts always tell us, is what was the parties’ intent at the time?
This is a rather slippery quest in the law, however: By the time the question has arisen, the
parties may be all long gone and no one is available to say what they meant. Beyond this, the
idea of ascertaining the initial parties’ real intent is, to some degree, a fiction. Sometimes, even
the original parties to the conveyance themselves didn’t know what they were doing, and by the
time the question has arisen perhaps many years later there may well be two diametrically
opposed positions, particularly if the issue is in litigation – two opposite views of what the
parties meant, depending on which result would favor a given party. This makes the
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determination of the “intent of the original parties,” always a subjective matter at best, a very
difficult and perhaps artificial, process.
Dealing With Fractions
It may be asked, why is this distinction so important if it is just a matter of whether the
holder of the interest has development rights or not? A major problem is the difference in what
the two kinds of interest mean in terms of what the owner receives. Suppose I own a 1/16
mineral interest in a tract which I have leased at a 1/6 royalty rate, meaning I will receive 1/16 x
1/6 of the oil and gas produced, free of any cost of exploration and development, or we might say
equivalently I am entitled to one out of every ninety-six barrels of oil produced from the well.
Now suppose that instead of a 1/16 mineral interest, what I own is a 1/16 royalty interest.
In this case, someone else owns the mineral interest (since the owner of a only a royalty interest
has no power to grant a lease of the minerals). Assuming that oil is produced, this is a much
better deal for me, because I am entitled to 1/16 of all of the oil and gas as and when it is
produced, that is one out of every sixteen barrels.
An unusually high fractional interest, for example 25%, in an instrument termed “royalty
deed” has been one factor is assisting courts to find that the instrument must have been intended
as a mineral deed. A royalty interest of even 1/8 would actually be quite high (12.5%) and they
are usually more like 1/4%, 1/2%; you see a lot of old royalty conveyances in much smaller
amounts, such as 1/32%, 1/64%, etc. If there actually were a royalty deed that had carved out a
25% royalty interest, this would mean that only 75% was left, so that the mineral owner would
need to lease at a higher lease royalty than 25% in order to receive anything, and most
developers would not undertake to drill under a lease with a royalty that high if it covered any
significant fraction of the mineral interest in the tract.
Going Deeper into the Quagmire: What Exactly Constitutes a Mineral?
We have been talking about “minerals” as though we knew what they were, but what are
we in fact talking about? It seems as though it should be a simple matter, but the question
plagued North Dakota for some years until it was finally, more or less, settled by statute. The
issue is what is included in a phrase like “oil, gas and related hydrocarbons and all other minerals
of any kind whatsoever.” Language like this has frequently been used in both mineral deeds and
mineral reservation clauses, so we are faced with the question, in looking at title records, of just
what is included by this kind of language. The issue does not arise often with respect to oil and
gas for two reasons: (1) because they are normally specifically mentioned, and (2) historically,
there has never been any real contention that oil, gas and related hydrocarbons are not
“minerals.” In recent times, however, the issue of the status of so-called CBM (coal-bed
methane, that is methane produced with coal mining) has arisen, and more esoterically, there
have been questions about helium, since it a gas that is not a hydrocarbon.
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Is Coal One of the “Other Minerals”?
The principal area in which there has been an issue in North Dakota is whether coal is
included in “other minerals,” but the issue has also arisen with respect to uranium, gravel and
scoria. Unfortunately, with respect to coal the answer depends on the date of the conveyance and
also whether it was done by deed or by reservation.
The problems have arisen not only from the lack of a definition of “minerals” in the
earlier statutes but also from the piecemeal approach that was taken by the statutes attempting to
resolve the question. Prior to July 1, 1955, a deed or reservation of “minerals” covered oil and
gas and related hydrocarbons, coal sulphur, iron, uranium and any other unnamed substance that
was arguably a mineral insofar as its physical characteristics were concerned. The inclusion of
coal in the catchall category “other minerals” was the principal question then, and this was
resolved by several North Dakota Supreme Court decisions holding that coal is a “mineral.”
On the other hand, gravel, clay and scoria, which are substances that are extracted by
surface mining, just as lignite coal is, have been held by the Court not to constitute “minerals.”
The disruption of the surface by surface mining has, to some extent, driven the Court’s analysis
of whether a substance other than coal is a mineral. In a decision holding that sulphur is a
mineral, the Court observed that while it is not possible to specify all the substances that are
“minerals,” generally the term is limited to those substances which are valuable, are not part of
the soil and may be mined without destroying the surface. This may be said to beg the question,
since it requires us to define the “soil,” but at least is provides some basis for analysis.
At any rate, this is where matters stood for documents created prior to July 1, 1955, when
a new statute came into effect, providing that no lease or conveyance of “minerals” separate from
the surface conveyed any interest in gravel, coal, clay or uranium, unless the intent to convey
such substances was specifically and separately set forth in the instrument. Reiss v. Rummel,
232 N.W.2d 40 (N.D. 1975) This meant, as a practical matter, that those substances must be
mentioned by name and would not be covered simply by a general designation of “other
minerals. ”This seems to suggest that coal is not a “mineral,” but the statute did not really define
“mineral,” merely specified that a conveyance of coal must refer to it by name. This statute,
however, did not apply to reservations of minerals, so that coal would still be included as a
“mineral,” even if not mentioned by name in a reservation. This rather bizarre distinction – that
coal was a “mineral,” if you reserved it but was not a “mineral” if you conveyed it – lasted until
1975, when the statute was amended to provide that a reservation of “minerals” covered oil, gas
and related hydrocarbons, coal, sulphur, iron, uranium and any other mineral but did not include
gravel, clay or scoria.
The next change was made in the statute in 1983, which essentially turned the earlier
standard upside down by providing that a mineral deed or reservation covering “minerals”
includes all minerals of any nature whatsoever, including their compounds and byproducts),
except those which are specifically excluded by name in the instrument, but does not grant or
reserve gravel, clay or scoria unless they are specifically mentioned. The exclusion of gravel,
clay and scoria is probably superfluous, since they have been held not to be minerals, so that the
phrase “other minerals” would not include them in any case. So, finally from July 1, 1983,
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forward, the situation is quite simple: a mineral deed or reservation includes all substances that
actually are “minerals,” except those that are specifically excluded from the instrument by name.
This necessarily rather length narrative of the history of this issue in North Dakota, which
seemed to become “curiouser and curiouser,” to use Alice in Wonderland’s description, may
seem a little confusing, and here is a summary:
Time Period
Deed of “Minerals”
Reservation of “Minerals”
Prior to 7/1/55
From 7/1/55 to 6/30/75
All minerals
All minerals except coal and
uranium, unless they were
specifically mentioned by
name
All minerals except coal and
uranium, unless they are
specifically mentioned by
name
All minerals, and their
byproducts and compounds,
except those specifically
excluded by name
All minerals
` All minerals
7/1/75 to 6/30/83
From 7/1/83 to present
Only the minerals specifically
named in the reservation
clause
All minerals, and their
byproducts and compounds,
except those specifically
excluded by name
“Minerals” Means Minerals
The progression from inclusion of all minerals to inclusion only of those named, and then
eventually back to inclusion of all minerals except those specifically excluded, either in deeds or
reservations, can be seen from this chart. We are now in a rational phase, where “other minerals”
means exactly what it ought to—all minerals that have not been specifically excluded. Those
substances which are not actually “minerals,” of course, for example gravel, clay and scoria, are
never included. What might be called some “wiggle room” is still left, of course, since none of
these statutory provisions actually defines the term “mineral.” The Court has told us that certain
substances are not minerals, but of course has not been able to provide a list of all known
minerals. All of this statutory history, with its “flip-flop” over the 28 years from 1955 to 1983,
has led to mineral conveyances and reservations which in some cases, in an excess of caution on
the part of the drafter will name long, long lists of specific minerals.
General Comment on the “Other Minerals” Issue
From a title examiner’s perspective, the flip-flop, if you will, over the nearly three
decades between 1955 and 1983 serves as an interesting example of the Court and the
Legislature wrestling with a problem that doesn’t seem to be a problem on its face. Why would
“minerals” not mean exactly what it says: every substance that is physically a “mineral?”
Then, all we need to do is to establish what is the definition of “mineral.” This is where we were
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before 1955 and where we have been again since 1983. The legislative response to the North
Dakota Supreme Court’s view of “minerals,” which was based on presumed “intent” reflects
public-policy concerns about the severance of minerals from the surface estate. In contrast, the
Oklahoma Supreme Court has long held that “minerals” must be construed in light of the
express substance names—applying the doctrine of “ejusdem generis” instead of the notion of
“ordinary and natural meaning.”
The current law eliminates the need to expressly name each of the minerals that are
intended to be included, as was the case for a period of time, as described above. This
fluctuating standard in North Dakota in these years led to some absurd examples of
instruments in the record that seemed to be trying to name every mineral known to man. One
of the most elaborate that I have seen in recent years expressly named nearly 60 separate
substances as “minerals,” including such exotic ones as rutile, cinnabar, monazite, thorium
and molybdenum, which probably cannot be found within 1,000 miles or more of North
Dakota, except perhaps in museums of geology.
DEALING WITH SOME COMMON MINERAL TITLE ISSUES
There are, of course, many, many title mineral issues that can arise, and it would take
hours to try to cover them all, if that were even possible. What I am going to do in the limited
time we have is to discuss some common issues, some of which you might call quirks, and ways
to handle them.
The Duhig Doctrine: “But I Thought I Had Reserved
a Mineral Interest for Myself!”
One of the “quirks” that may catch a title examiner by surprise the first few times it
shows up is the so-called Duhig Doctrine, which takes its name from a Texas case with the rather
unlikely sounding name of Duhig v. Peavey-Moore Lumber Co. (144 S.W.2d 878 (Tex. 1940).
The classic scenario in which this arises is the situation where there has been a previous
reservation of a fractional mineral interest in a tract of land, and the tract is then conveyed by the
current owner, by a deed in which he or she reserves a fractional mineral interest. For example
suppose that owner A, who owned 100% of the mineral and surface interest in a tract, conveyed
the tract to B, reserving a 1/2 mineral interest. B now owns the surface and a 1/2 interest in the
underlying minerals, and A owns the other 1/2 mineral interest which he reserved. Now suppose
that B sells the tract to C, by a deed in which B also reserves 1/2 of the mineral interest. At first
blush you might think that now C owns the surface but no mineral interest, because A owns 1/2
and B has also reserved the other 1/2 for himself. Under the Duhig Doctrine, however, which is
in effect in North Dakota by virtue of a number of North Dakota Supreme Court decisions, and is
also recognized in most of the other Rocky Mountain states, C now owns 1/2 of the mineral
interest. A, of course, still owns his 1/2, but B owns nothing.
This may come as quite a surprise to B, since he had included language like “reserving
unto the grantor [i.e. himself] a one-half interest in oil, gas, and all other minerals” in his deed
to C. The basis for the Duhig Doctrine, however, is that by virtue of the conveyance in the deed
from B to C, B has undertaken to deliver to C the surface and 1/2 of the minerals because the
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only part of the entire interest which he has reserved, or held back, from the grant is the 1/2
mineral interest. It turns out that the 1/2 “reserved” by B is actually not reserved to him at all but
is the 1/2 already reserved and owned by A. That is, the grant to C includes everything not held
back and all that was held back was a 1/2 mineral interest, which happens to be owned by A.
This may strike the casual reader (or even the careful reader) as odd, since the language in B’s
deed to C speaks of reserving to the grantor, i.e. to B himself. The view of the courts which have
adopted the Duhig Doctrine, and there many in quite a number of states, is that C is to be
favored over B in view of what the deed purports on its face to convey. As the North Dakota
Supreme Court states in Gawryluk v, Poynter, 654 NW2d 400 (2002).
“The effect of Duhig is that a grantor cannot grant and reserve the same mineral interest,
and if a grantor does not own a large enough mineral interest to satisfy both the grant and
the reservation, the grant must be satisfied first because the obligation incurred by the
grant is superior to the reservation.”
No, It Does Not Depend on a Warranty
The rationale for the Duhig Doctrine has been stated by some courts to be the warranty
provision in the usual deed, so that grantor is warranting everything that is not held back, and
this seems to have been a least part of the underpinning in the original Duhig opinion in the
Texas case, but the North Dakota Supreme Court has stated that it is not necessary that the
conveyance be made by a warranty deed in order for the doctrine to be applicable, so the absence
of a warranty provision in the deed in a given case should not be taken to mean that it is not
applicable. The Duhig Doctrine is sometimes said to have arisen to take care of the problem of
“over-conveyances,” and it can be thought of in this way. That is, in our example, there have
been “over-conveyances,” in that A has acquired 1/2, B has reserved another 1/2 and C has
acquired 1/2 under the deed from B, so there is a net over-conveyance to the extent of 1/2 and the
loss is deemed to fall on B.
What happens if, for example, A had reserved a 60% mineral interest and then B
conveys, as before, to C, with a reservation of 1/2 of the minerals. Now C obtains only 40%, of
course, because B has no more than that to give, with A holding the other 60%. Conceptually, if
B gave C a warranty deed, he has breached his warranty to the extent of a 10% mineral interest,
since the deed and hence the warranty, is viewed as having covered 50% of the minerals. B is
left even farther out in the cold in this case, as not only does he receive no mineral interest, but
he owes C the value of a 10% mineral interest under his warranty. I guess you could call this a
“negative reservation” on B’s part.
Conversely, if A had reserved only 30%, then C receives 50% under his deed from B
and B now will have 20%, that is, the amount he had left over after satisfying his deed to C.
B is, in a sense, like the “runt of the litter”: after the food meal is over he gets what is left over.
The wisdom of the Duhig doctrine can be debated forever, but at least it provides what lawyers
call a “bright-line rule,” so that the result is predictable.1
1
But not always: For an exception to the Duhig rule, see the North Dakota Supreme Court decision in
Gilbertson v. Charlson, 301 N.W.2d 144 (ND 1981), where C in my example did not receive everything because
he was the person who already owned a part of the interest.
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In my view, even though I have successfully argued for the Duhig Doctrine in several cases in
the North Supreme Court, it is a counter-intuitive rule and in most cases probably does not
reflect the intention, at least of the grantor. When he/she executes a deed reserving unto the
grantor a 50% mineral interest, the grantor most likely expects to end up with 50% of the
minerals, or at least with some mineral interest. In a classic Duhig case, if there is 50%
outstanding in a third party the grantor ends up with no mineral interest, and this is probably
surprising and even dismaying to the grantor in most cases. Of course, a Duhig result may be
avoided by careful drafting of the reservation, expressing the 50% mineral reservation as “50%
of the mineral interest now owned of record by the grantor,” in which case the grantor is
purporting to convey only one-half of what he/she actually owns. With this clause, the grantor
will end up with 25% of the mineral interest in our example, because the grantee cannot argue
that the grantor was purporting to convey more than one-half of the 50% which he/she owned,
i.e. 25%.
The Plot Thickens: Duhig and Royalty Reservations
The Duhig Doctrine also comes into play when there have been royalty reservations.
Royalty interests can be freely carved out of mineral interests. Suppose that back in 1937,
A, who owned the surface and minerals in a tract, conveyed a 1/16 (i.e. 0.0625%) royalty
interest, carved out of his 100% mineral interest, to B. This means that A’s mineral interest is
now burdened with a 1/16 royalty interest. That is, if and when minerals are produced from the
tract, as by an oil well, for example, then B is entitled to receive, free of cost, 1/16 of the
proceeds. If A has leased his mineral interest to Venture Oil Co., by an oil and gas leases with a
1/6 royalty, then A’s 100% mineral interest is entitled to 1/6 of all of the oil and gas produced.
His previously conveyed royalty interest, however, is a burden on A’s mineral interest, so
A actually receives 1/6 less 1/16, and B receives the 1/16 attributed to his royalty interest.
Venture Oil Co., the lessee, of course receives 5/6.
This is the simple case. Now suppose that before he grants his lease to Venture, A has
sold a 1/2 mineral interest to C. We are assuming that the royalty interest that A granted to
B, prior to the conveyance to C, is still in effect. Now since A only owns 50% of the total
mineral interest, he is entitled to 50% x 1/6, or 1/12 of the oil produced, subject to the carved-out
royalty interest of B, as his (A’s) royalty. You might think that the outstanding 1/16 royalty
interest should burden the whole 100% mineral interest, which it did before A conveyed half of
his mineral interest to C. In other words, the 1937 royalty burden would be something like the
lien of a mortgage burdening the whole interest. This is not the case in North Dakota, however,
as the North Dakota Supreme Court held in Acoma v. Wilson, recently reaffirmed in Wenco v.
EOG Resources, Inc., 822 N.W.2d 701 (ND 2012) that the Duhig Doctrine applies to such
carved-out royalty interests. In other words A’s deed to C purports to convey a full 1/2 mineral
interest and so it must not bear any of the pre-existing royalty burden (even though the 1/16
carved-out royalty owned by B appears in the record, so that C has constructive notice of its
existence). The entire 1/16 royalty burden falls upon A’s remaining interest, so that A is entitled
to only 1/12 – 1/16 = 1/48. If C also leases his 1/2 mineral interest at a 1/6 royalty rate, he will
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be entitled to 50% x 1/6 = 1/12. B is still entitled to 1/16 and A is entitled to his 1/48, for a total,
between A and B, of 1/6 and of course the two lessees share the remaining 5/6:
A:
B:
C:
50% x 1/6 - 1/16 = 1/48
1/16
50% x 1/6 = 1/12
1/48 + 1/16 + 1/12 = 8/48 = 1/6
The doctrine can substantially increase the complexity of doing mineral title opinions, when
various royalty interests may have been carved out of the mineral interest over a period of years.
This is a simple example, but you can visualize that the Court’s decision can substantially
increase the complexity of doing mineral title opinions, where there sometimes are 100 or more
of these carved-out royalty interests in a tract. The result of the Acoma and Wenco decisions,
casting the entire burden of the outstanding carved-out royalty interest on less than 100% of the
mineral interest, seems even less intuitive to me even than applying the Duhig rule to mineral
interest cases, given that the grantee is deemed to be fully aware (from the record) of the
outstanding royalty burden.
Conveying by Both Fractional Mineral Interest and Mineral Acre
Specification of the Amount: Which Method Controls?
Whether a mineral interest is conveyed by a mineral deed or retained under a reservation
clause, it is necessary, of course, to specify what portion of the total mineral interest we are
talking about. The widespread use of “mineral acres” as a means of describing the quantum of
mineral interest being conveyed can result in to ambiguities in descriptions. Conceptually, one
“mineral acre” is defined to be the full mineral interest underlying, or contained in the ground
beneath, one surface acre of land. A 100% mineral interest in a 160-acre tract, therefore, is 160
mineral acres. This seems simple enough, but the use of this terminology can create problems in
various situations, and my own preference would be never to use “mineral acres” in specifying
the amount of interest being conveyed or reserved. If you have anything to do with drafting
conveyances, I urge you to avoid using “mineral; acres” as a means of describing fractional
mineral interests, although I know that petroleum landmen and others traditionally seem to like
the term.
The particular problem I will discuss arises when both a fractional amount and a
specification by mineral acres are used in the same instrument, but I believe that the use of
“mineral acres” at all should be discouraged. There is never any ambiguity in simply specifying
the quantum of interest by using a fraction. For example, suppose A owns 100% of the mineral
interest in a tract containing 160 acres and wishes to convey one-half of his interest to his son B.
This is easy; all he needs to do is execute a deed conveying a 1/2 mineral interest in the tract.
This is commonly described as an “undivided 1/2” mineral interest,” which of course simply
means that the amount of the interest being conveyed – one-half – is the same in every morsel of
the tract. This would be in contrast to A conveying 1/2 of his interest by specifying that 3/4 of
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the 1/2 comes from one portion of the tract and 1/4 of the 1/2 comes from the rest of the tract.
That would be possible, but it is rarely, if ever, done that way.
In my example, there would be no problem if A also stated in the deed that his intent was
to convey an undivided “80 mineral acres.” Given the definition of “mineral acre” as the full
mineral interest underlying one acre of the surface, A’s initial mineral interest could equivalently
be described as 160 mineral acres, and so a conveyance of “80 mineral acres” covers one-half of
his total interest. The specifications by fractional interest and by mineral acres are equivalent in
this case, so the simultaneous use of both creates no problem. The problems arise when the two
methods of specifying the interest in a tract do not agree with each other. This commonly
happens in tracts which include fractional acres. As you know the public lands in the western
states were surveyed by the federal government in the 19th century and laid out in a rectangular
grid system of square sections one mile long and one mile wide, in numbered townships running
north and south and ranges running east and west. This system is referred to as the GLO
(General Land Office) Survey. The Earth’s surface, however, is not flat, so that periodic
corrections need to be made to accommodate a two-dimensional rectangular grid system that
overlies a more or less spherical surface. The solution was to make periodic adjustments in the
layout, with the result that generally along the top and left side of each township there are
numbered “lots,” running from east to west as Lots 1 through 4 and then north to south as Lots 4
through 7, which have acreages that contain somewhat less or somewhat more than 40 acres
each. Irregular lots may also occur when there is a river or other body of water located in the
tract.
Therefore, instead of a 160-acre tract as in the above example, A may own, for example
Lots 1, 2, 3, 4, containing, respectively, 39.84, 39.96, 39.90 and 39.87 acres each, for a total of
159.57 acres, which can also be designated as the N½N½ of the Section. Without keeping this in
mind, suppose A simply considers that he owns 160 acres (as opposed to 159.57) and signs the
same deed as above:--conveying a 1/2 mineral interest in this tract, stating an intent to convey 80
mineral acres. Now we have a direct conflict between the fractional specification and the
mineral acre specification: a 1/2 interest would constitute 1/2 x 159.57, or 79.785 mineral acres,
so that B comes out a little short in terms of mineral acres if we give effect to the fraction only.
He has 1/2 of A’s interest, but not quite 80 mineral acres. In order to convey 80 mineral acres,
A would need to state the fractional interest as 80/159.57, which, of course, is slightly larger than
1/2, which is 80/160. Whichever description of the interest we follow, it will not agree with the
other description. If the total of the four lots contained more than 160 acres, for example 161.03,
the fraction 1/2 will convey slightly more than 80 mineral acres.
So what do we do with this ambiguous deed? Ambiguities are to be resolved, as the
courts are fond of telling us, by looking at the intent of the parties. But what was A’s intent?
Did he wish B to have a 1/2 interest in the minerals, or did he wish him to have a full 80 mineral
acres (leaving A with 79.57 mineral acres)? He thought it was equivalent, because he did not
take into account that he was dealing with a section that contained less than 160 acres, so we
cannot say which one was his intent: 1/2 of his interest or exactly 80 mineral acres. This is the
classic illustration of the problem that can arise from using a fractional interest with a statement
of intent in mineral acres. My personal reason for wishing that the mineral acre concept had
never arisen is that there is never any ambiguity if we use only the fractional specification.
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There is some support in the commentators for using the specification of intent in mineral acres,
but a decision of the North Dakota Supreme Court several years ago is authority for preferring
the fractional interest specification. Hild v. Johnson, 723 N.W.2d 389 (ND 2006) Based on that
case, my own practice in title opinions now is to give effect to the fractional interest
specification, but to include a typical comment and requirement in the opinion, pointing out the
ambiguity and suggesting that a stipulation and cross-conveyance between the parties be
obtained if possible.
Problem With Combining Both Methods
The lack of agreement between the fractional interest specification and the intent clause
as to the number of mineral acres covered occasionally arises in a slightly different situation. In
working on title opinions, I have come across mineral deeds which grant, for example, “an
undivided 5/160 mineral acre interest” and then also specify, either in the description of the
160-acre tract itself or in a subsequent intent clause, “an undivided five mineral acres.” I submit
that the intent here in most cases is probably to convey a 5/160 mineral interest, which would of
course be five mineral acres in the 160-acre tract. If we construe the fractional clause literally as
it is written, however, the two specifications are very different, since “5/160 mineral acres” is not
only not 5 mineral acres but it is very much smaller than 1 mineral acre, since 5/160 is 1/32, so
that read literally this language means 1/32 of one mineral acre, that is 0.03125 mineral acres.
Again, the ambiguity demonstrates the inherent danger of using “mineral acres” at all. The
insertion of the single word “acre” in the instrument has created a substantial ambiguity. In this
kind of situation, in preparing a title opinion, I construe the conveyance to have been intended as
a 5/160 mineral interest, but normally include a requirement for a stipulation or amended
conveyance to clarify the record title.
Those Nasty Fractions. or Lack Thereof
While we are talking about fractional interests, it is worthwhile to mention another issue
that occasionally arises, which I think must derive from a failure on the part of the drafter of the
document to fully understand the difference between fractions and fractional percentages. I
recall a recent instance where the interest conveyed was described as an interest of “1/8 per cent
(0.00125%).” The two numbers are, of course, not the same, as the factor in parentheses is 100
times smaller than 1/8 per cent. This may arise from simple carelessness – i.e. leaving the
percent sign in place after already incorporating the conversion to a decimal, but I think
sometimes that there has been a failure to fully understand fractions and percentages, and what
fractional percentages mean.
This is also an appropriate place to point out that if you are using a computer spreadsheet,
like Microsoft Excel, as we all do these days, you need to be careful when setting up fractional
percentages. If you write a number as “1/8%” Excel, because it always performs mathematical
operations in a specific sequence, will compute this as 1 divided by 8%, which is 12.5 -- very
different from a one-eighth per cent. Inserting a pair of parentheses will solve this: (1/8)%, or
equivalently you could write the number as 1%/8.
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This brings up an unrelated problem that I see from time to time: a mineral deed
conveying “a ________ undivided interest” in a specified tract. This deed is not conveying any
specified amount and therefore, traditionally at common law, would be void and would convey
nothing. It usually appears that the intent was to convey 100% of the grantor’s interest. I am
guessing that that what happens here is that a landowner has not consulted an attorney and has
simply used a form printed mineral deed and has assumed that “undivided interest” means
100% - after all, “undivided” seems to suggest, to a non-lawyer, that there has been no dividing
up of the whole 100% mineral interest.
Third Party Reservations: Don’t Speak to Strangers
You are probably familiar with what is referred to as a “stranger to the title.” The
individual so characterized may not be a “stranger” at all, in fact might be a person who is very
familiar with the land in question, but it is a person who has no interest of record. This may be
because he or she suddenly appears in the chain of title with no basis for an interest, or it may be
someone who appears as a grantee but whose grantor had no interest of record, so that the
conveyance to him or her is what we sometimes call a “rogue deed.” In any case he or she has
no basis in the record for owning any interest, and the North Dakota Title Standards 2-01 say that
we may ignore such persons.
This, again, is another nice, clear “bright line rule.” But such rules sometimes have a
way of becoming fuzzy with time, and this is the case with reservations to third-party strangers
to the title in North Dakota. Prior to 1983, it was clear in this state, based on a North Dakota
Supreme Court decision, and the old common law doctrine, that a purported reservation to a
stranger to the title was void. Stetson v. Nelson, 118 N.W.2d 685 (N.D. 1962). The theory was
that a reservation could not be made by someone who had no interest in the first place; in other
words, a reservation (or exception) could not be made to serve the function of a deed, that is no
interest could be transferred by a reservation to a third party who did not already own an interest.
In 1983, however, in the Court’s decision in Malloy v. Boettcher, 334 N.W.2d 8
(N.D. 1983), overruling Stetson, it was held that a reservation to a spouse who had no previous
interest could be valid if the parties intended an interest to pass to the spouse by the reservation.
The case involved the reservation of a life estate rather than a severed mineral interest, but the
holding would be equally applicable to mineral interests. Thus a reservation to the “grantors,”
when they are spouses but when only one of them owns an interest may be effective as to both
spouses if that was the intent. Spouses normally join in deeds of any interest in North Dakota,
even for severed mineral interests, due to the homestead laws, and so this issue comes up
relatively frequently, but the intent of the spouses is usually not clear as to whether the joinder by
the non-owning spouse was made merely to satisfy any homestead requirement or was actually
intended as a conveyance of an interest to the non-owner spouse to the owner spouse by means
of reservation.
This leaves the question open in each case, so the issue must be resolved by a stipulation
or affidavit of some kind, if the intent of the spouses is not stated in the instrument. The Court’s
12
decision left open the question of whether a reservation to a true “stranger,” i.e. a non-spouse,
can be valid, but this “issue does not often arise. The solution to the problem, of course, is to
provide a clear statement of the parties’ intent when drafting the instrument containing the
reservation, but this is not as often done as it should be, in fact quite rarely.
Conflict between a mineral reservation in a contract for deed
and the subsequent deed. itself
In some cases, a contract for deed for the sale of real property may contain a mineral
reservation but which is then entirely missing, or different in amount, in the subsequently issued
deed upon completion of the contract, or vice-versa. This creates an ambiguity, which must be
resolved by agreement between the parties or by a reformation action. Way back when I started
practicing law we used to think that this was no problem because the contract for deed was
simply merged into the subsequent deed, and the language of the deed itself was controlling. In
Wehner v. Schroeder, however, 354 N.W.2d 674 (N.D. 1984), the Court held that the doctrine of
merger of the contract into the deed did not apply, due to mutual mistake of the parties, and
allowed reformation of the subsequent deed to conform with the mineral reservation that
appeared in the contract for deed but which was omitted from the deed itself.
This may make sense, in that the parties apparently intended at some point, back when
the contract was being drafted, that there should be a mineral reservation. On the other hand, it
might also make sense that they changed their minds and that the failure to include the mineral
reservation in the deed was intentional. The courts are of course always trying to infer the intent,
and this is conceptually reasonable, but in practice often somewhat nebulous. The interest of
successors on both sides are of course again diametrically opposed: The seller’s successors argue
that their grandfather’s intent was to retain all of his minerals, whereas the buyer’s successors
contend, with equal vigor, that their grandfather told them many times that he had been careful to
acquire at least part of the mineral interest as well as the surface. In the eastern part of North
Dakota this would perhaps not matter much, where the mineral interest is a minor consideration,
but it makes an enormous difference in Williams, McKenzie and Mountrail Counties, for
example, who now owns the oil and gas in a tract.
Yes, It Does Matter Where You Insert a Mineral Reservation
The typical mineral reservation appears in the granting clause of the deed or other
conveyance, and operates to withhold the specified fraction of minerals from the grant. A
purported reservation elsewhere in the deed, however, may create an ambiguity and require a
judicial interpretation. In Stracka v. Peterson, 377 N.W.2d 580 (N.D. 1985), the Court held that
the language “subject to reservation of 50% of all oil or minerals” appearing in the deed but not
in the granting clause, did not operate to reserve 50% of the minerals to the grantor but was
rather a limitation on the warranty and referred to the fact that the grantor only owned 50% of the
mineral interest, due to a prior reservation of a 50% interest when the grantor acquired his
interest. The decision was based on the fact that this language created an ambiguity and
therefore allowed extrinsic evidence to be admitted. It appears, however, that this case would
13
have been governed by the Duhig Doctrine. In Mueller v. Stangeland, 340 N.W.2d 450
(N.D. 1983), the Court held that the phrase “excepts from this contract all minerals, including oil
and gas, and all mineral rights not now owned by the Vendor,” which was contained in the
warranty clause rather than in the granting clause, did not reserve or except any mineral interest
to the grantor. See also Monson v. Dwyer, 378 N.W.2d 865 (N.D. 1985).
Distinction between fractional royalty interest and fraction of royalty.
Care must be taken in dealing with fractional royalty conveyances, as the precise
specification of the quantum of interest being conveyed may make a large difference.
1.
Suppose, for example, that A owns a 1/2 mineral interest, which is leased at a royalty
of 15%. His royalty interest, therefore under this lease is 1/2 x 15% = 7.5%.
2.
Now suppose that A assigns “5% of my royalty to B. This is 5% x 7.5% = 0.375%.
But if instead of this, A conveys a “5% royalty interest to B, this is a full 5% of
production, so that A’s royalty under his lease is reduced to 2.5% (7.5% - 5%). It is
no longer a fraction of A’s royalty, i.e. the royalty to which A is entitled under his
lease, but rather a fraction of the entire 100% royalty interest inherent in the 100%
mineral interest. B has 5% rather than 5% of 7.5%, which is a considerable
difference.
3.
The critical difference is between a “fractional royalty” and a “fraction of royalty.”
With the lease in place, A can convey either a fraction of his royalty, i.e. his royalty
under the lease, or a fractional royalty taken out of his mineral interest. Because
fractional royalty interests are subtractive from the mineral interest, fractional royalty
interests larger than 10% are rarely seen, since a burden of that size would make it
difficult to lease the tract (as the lessor would also expect to have a decent amount of
royalty and if 10% is already outstanding this would have reduced the effective lease
royalty to 2.5% in earlier times, when 1/8 royalty was the standard rate).
4.
This difference was noted in opinion in Knox v. Krueger, 145 N.W.2d 904. 908
(N.D. 1966), pointing out the distinction between “1¼% royalty” and “1¼% of
royalty.” The latter, as the Court states, “would convey a much lesser interest.”
Describing the lands as a fractional interest: The “double-fraction” issue.
Suppose that A owns a 50% mineral interest in a tract. He executed a mineral deed
conveying to B an undivided 10% interest in and to the following lands:
“A 50% interest in the E½ of Section 32 in T151N-R95W”
In most cases, the intent was probably to convey a full 10%, taken out of A’s 50%, the reference
to 50% simply referring to his total original interest, so that A would now own a 40% interest.
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Literally, however, what he has conveyed is 10% of his 50% interest, which is only 5%, rather
than the 10% B was probably anticipating. This has created an ambiguity, which is usually
referred to as the “double fraction problem.” The parties’ mistake, if it was a mistake of course,
was to describe the land as a 50% interest in a specified tract, rather than simply to state the legal
description of the land. I have seen this in examining titles, though not often, so that it is not
simply a theoretical issue.
“DORMANT” MINERALS: NORTH DAKOTA TERMINATION OF MINERAL
INTEREST ACT (N.D.C.C. CH. 38-18.1)
The intent of the act, as evidence in the original North Dakota Legislature hearings on
this statute was to provide a mechanism for eliminating old “unused” mineral and royalty
interests from the record to simplify leasing of minerals and eliminate title problems arising from
unlocatable heirs and successors by allowing for a procedure by which the mineral or royalty
interest passes to the current surface owner.
Such statutes (often referred to as Dormant Minerals Acts) have survived constitutional
due process challenges relating to notice requirements and the taking of property without due
process of law. See Texaco v. Short, 454 U.S.516 (1982), validating the Indiana dormant mineral
statute, on which the North Dakota Act is largely based.
Under the Act, if a record mineral or royalty interest has not been “used” for the previous
20 years or more, it may be deemed to have been abandoned. Mere non-use for the 20-year
statutory period is deemed to be sufficient to constitute abandonment. N.D.C.C. § 38-18.1.02.
This contradicts the old common law two-part doctrine that real property could not be abandoned
without both (1) non-use and (2) evidence of the intent to abandon.
Notice must be given to all owners of record interests whose addresses can be determined
“upon reasonable inquiry.” They may then file statements of claim and thereby prevent the loss
of their interests. N.D.C.C. § 38-18.1.06(2). In Spring Creek Ranch, LLC v. Svenberg, 595
N.W.2d 323 (N.D. 1999), the North Dakota Supreme Court that this means more than merely
searching the record for the last known address, but exactly what is required was not specified by
the Court. This means that there is a factual issue in each case as to whether a reasonable inquiry
has been made. In an amendment to the Act, discussed below, a more specific was
________________________.
The question of “used” is the central issue and of course is also a factual issue. The
following eight types of activities constitute “use” of a mineral interest, any of which would take
the interest out of the purview of the Act: N.D.C.C.§ 38-18.1-08.
1.
Production of minerals from the tract
2.
Operations being conducted for injection, withdrawal, storage or disposal of
water, gas, or other fluid substances
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3.
In the case of solid minerals, production from a common vein or seam by the
owners of the interest
4.
A lease, mortgage, assignment or conveyance of the interest appearing in the
record within the previous 20 years
5.
The interest is subject to a recorded order for pooling or unitization
6.
Taxes are paid on the interest [This will not have happened in any case, as
severed mineral interests are not subject to North Dakota property tax.]
7.
A proper statement of claim has been recorded under the Act
Due to the uncertainties inherent in the meaning of “used,” the North Dakota Mineral
Title Standards, and the statute itself as amended, require a quiet title judgment to establish that
title to an unused severed mineral interest has actually passed to the surface owner (as was also
suggested by the U.S. Supreme Court in the Texaco v. Short case). That fact and the
requirement pertaining to “reasonable inquiry” as construed in the Spring Creek case, have
resulted in the North Dakota Termination of Mineral Interest Act being infrequently used in the
past. The surface owner seeking to acquire the “unused” interest under this statute must show
that reasonable inquiry has been made to locate the actual owner. Under the current version of
the statute, as amended after the Spring Creek decision, “reasonable inquiry” means a search of
the county recorder’s records, clerk of court’s records, social security index and “one or more
public internet databases to locate or identify the owner of the mineral interest or any known
heirs of the owner.” The requirement of searching a public internet database,” added by the
amendment to the statute, appears to be a very minimal standard and to have considerably
relaxed the test under the Spring Creek standards.
In the past this statute has not been much used, but there appear to be more of such cases
now, not surprisingly in view of the greatly increased value of the mineral interests in Western
North Dakota. It is a somewhat curious concept, in all of these dormant minerals acts, that the
“abandoned” mineral interests pass to the current surface owner. It does appear as a gift to the
surface owner, since his or her ancestors presumably freely conveyed the mineral interest to
others. Abandoned property normally passes to the State, and this would perhaps be a better
solution, although the State would probably by unlikely to be interested in pursuing the litigation
involved in confirming title to the abandoned interest.
Probate and Heirship Issues: Who Owns That Interest Now?
We all constantly run into the question of what to do about the fact that the ownership of
severed mineral interests fairly often cannot be ascertained from the records due to the passage
of time and the lack of any record evidence as to who succeeded to the interests on the death of
the record owner. In an ideal world, every mineral interest owned by now-deceased person
would have passed through a North Dakota probate or heirship proceeding and there would be a
record of who the current successors are. This is much more often the case with surface
16
ownership, because the surface traditionally had a more readily obvious value and it was
important for the record to reflect who owned it, partly for purposes of keeping track of property
taxes, granting mortgages, etc. With severed mineral interests, the succession is sometimes
documented in the record but often it is not. Partly due to the nature of severed mineral interest:
their value may be questionable and it is frequently an economic decision not to bother with
them upon a death, or, as often occurs, the record owner may have resided thousands of miles
away and, if the mineral interests have not been producing, they may well have been forgotten
about over the years.
If a mineral interest has gone through “probate,” it means that the deceased owner left a
will, which was confirmed as valid in a judicial probate proceeding, that is “probated,” meaning
“proved,” and there will normally be a personal representative’s deed in the record showing who
succeeded to the interest under the will. The terminology is unfortunately often used quite
loosely, but if there is a probated will the “heirs” of the deceased owner do not succeed to the
interest. Those who take under a will are “devisees,” whereas “heirs” means only persons who
would take under the relevant state intestacy statute if the owner had no will, or if his will is not
probated, as discussed below.
Occasionally one sees an actual will in the record, rather than a personal representative’s
deed. A probated will can be used as evidence of title to property, but it is critical to remember
that this means a probated will that has been probated in the states where the mineral interest is
located. The jurisdiction of probate courts over real property, is “in rem,” meaning that it is tied
to the physical location of the land and not to the person of the decedent, so it does not extend
beyond the boundaries of the state where the land is located. A will probated in Minnesota, for
example, has no effect in and of itself on a mineral interest located in North Dakota. A North
Dakota court must probate a will before it can have any effect on mineral interests located in this
state. It is fairly common to see that someone has placed in the record in North Dakota a probate
decree from another state, but this does not accomplish anything. Only a probate proceeding
carried out in North Dakota can serve to determine that title to North Dakota real property,
including interests in minerals, has passed to the devisees under the will. This is subject,
however, to the statute allowing a personal representative appointed in the domiciliary state to
act in North Dakota, discussed below (N.D.C.C. § 30.1-24-05)
Normally, there will be a personal representative’s deed of distribution, distributing the
property to the devisees under a probated will, which shows that title has passed to them. This is
not a crucial document for the passage of title, however, even though the typical personal
representative’s deed of distribution reads like a conveyance. The title to property actually
passes upon death, subject to administration, N.D.C.C. § 30.1-12-01), not upon distribution, so
that it is the fact of death itself, not the distribution of property by a personal representative, that
creates ownership in the successors. Title to the property passes immediately to the decedent's
devisees (assuming a valid will) or heirs, not to the personal representative, but the successors’
ownership of the decedent's assets is subject to creditors' claims, homestead, family allowance,
spouse’s elective share, exemptions, and all of the costs of administration:
The personal representative’s deed of distribution is simply a ministerial act, which
serves to show on the record that the property is not needed for expenses or claims of the estate
17
and that the personal representative is relinquishing his statutory rights of control over the
property. Conceptually, the deed of distribution is more analogous to a release of a lien than it is
to a conveyance. The ownership of the decedent's property will pass to the devisee or heir in any
case, whether there is a deed of distribution or not, although the personal representative is
required by statute to execute the deed when distribution is made in kind: The statutory language
expressly recognizes that the deed does not normally create the title but merely serves as
evidence of title. Some might say this is an over-subtle lawyer’s distinction, but it can be
important if there is no deed of distribution.
As a practical matter, the deed of distribution is important and should be used because in
its absence there could be a question whether the property is free and clear from the control of
the personal representative or whether it might be subject to creditors' claims or be burdened
with estate administration expenses:
To be sure, I am not advocating that we do away with deeds of distribution but simply
pointing out that title passes without them, and this may be important. One example is the case
where there is a deed of distribution in which certain property of the deceased person has been
omitted. Suppose the will provides that the entire residue of the estate passes to A, but some of
the property has not been included in the personal representative’s deed of distribution, and
mineral interest are often overlooked in deed of distribution. Upon checking the estate file,
which has been closed for years, we find that all debts and administration costs have been paid
without the need to sell any estate property. Is it necessary to open the proceeding, reappoint the
personal representative or appoint a new one and prepare a new or supplemental deed? Strictly
speaking, no – title passed under the residue clause of the will at the time of death and the
personal representative no longer has any claim or power over the property. It’s preferable to
have a deed of distribution in the record including all of the decedent’s mineral interests, of
course, for a nice clean title, and the personal representative is required to execute a deed, as
stated above, for a distribution in kind, that is involving an interest in land, but if he/she has not
done that it doesn’t mean that title has not passed, since it not actually the deed that passes title:
“Proof that a distributee has received an instrument or deed of distribution from a
personal representative is conclusive evidence that the distributee has succeeded
to the interest of the estate in the distributed assets, as against all persons
interested in the estate ....”
Intestacy
The discussion so far has been in terms of probated wills. It the deceased person does not
leave a will, or if the will for some reason is invalid, then he/she was intestate and the successors
are those persons specified in the intestacy statute of the state where the property is located.
These are the “heirs,” and there are no heirs if there is a probated will. The term is widely used
very loosely to include all successors to property, but the distinction in the law is very clear, and
has been since medieval times. In effect, the intestacy statutes presumably represent the
collective judgment of the people as to how the decedent would have wished the property to pass
18
if he/she had intended to make a will but for some reason never did so, or if the will is for some
reason found to be invalid.
Identification of Heirs
At common law, the term "heir," or "heir at law," referred only to a person who acquired
land by intestate succession, that is by operation of the intestacy statutes immediately upon the
death of the owner. If the decedent left a valid will devising the property to specific persons,
then he left no "heirs." Heirs took only by descent, that is by the law of intestate succession.
Under the terms of a probated will, on the other hand, the named devisees succeed to the
interests in real property and, whether they were related to the deceased owner by blood or by
law, or not related to him at all, they were not his “heirs,” since they were not taking by descent.
The practical question then, in the context of searching mineral titles, and it comes up
fairly often, is where has the title gone when there is no evidence in the record that a will has
been probated in North Dakota. A deceased person may have been testate in California, of
course, that is the will was probated there, but intestate in North Dakota, where the will has not
been probated. The California probate is irrelevant as far as the North Dakota mineral interest,
which will pass by intestacy. In principle, the determination of the heirs under North Dakota law
seems as though it should be simple, but it reality it is often not so, since it depends on the date
of death and the value of the North Dakota estate. The intestacy laws have been tinkered with
and adjusted frequently over the years, so that it is necessary in each individual case to look at
the statute in effect on the date of death. Even the so-called Uniform Probate Code (UPC),
adopted in North Dakota in 1975, is not totally uniform throughout the states, so that if you are
familiar with the intestacy laws in one UPC state, it does not mean that you will automatically be
familiar with them in other UPC states.
North Dakota does follow in a general way the traditional concept in intestacy that
property, on some kind of fractional basis, passes partly to a spouse and partly descends down
through the bloodline (including adopted children as blood relatives on the same footing as
natural children). Originally, prior to the UPC, a surviving spouse would be entitled to one-half
or one-third of the intestate property and the surviving descendants, that is children,
grandchildren, great grandchildren, etc. would share the other one-half or two-thirds. This is
quite a traditional scheme. North Dakota was traditionally a little less generous to the surviving
spouse, however, if there were no descendants.
For example, in North Dakota from 1945 to 1951, the spouse received the first $25,000
and 1/2 of the balance over that amount, brothers and sisters or nieces and nephews received the
other 1/2 of the balance, except that if a parent or parents were living the threshold amount went
down to $15,000 and the surviving parent or parents received 1/2 of the balance over $15,000. If
there were surviving descendants, then the statute specified a very traditional 1/3 of everything to
the spouse and 2/3 shared among the descendants. If there were no surviving spouse, then
everything passed to the descendants, or if there were none, to the parents. In succeeding years
(1951, 1953, 1961, 1963) changes were made, generally to gradually increase the threshold
amounts below which the surviving spouse received everything, arriving as $100,000 in 1963.
19
The Uniform Probate Code added some complications in 1975 and again, with amendments to
the Code, subsequent years. The surviving spouse may now be entitled to as much as the first
$300,000 plus one-half of the balance over that amount.
The reason for going into this detail is to illustrate why the forms of “affidavits of
heirship,” which are discussed below and which are used widely in North Dakota and other
states, often contain insufficient information to allow the heirs and their shares to be readily
determined. Since 1996, in North Dakota the surviving spouse receives 100% if there are no
surviving descendants or parents. This is quite sensible, preferring the spouse over siblings of
the decedent, or his or her nieces and nephews. If a parent does survive (and no descendants),
then the spouse receives the first $200,000 plus 3/4 of the balance over $200,000 and the parent
receives the other 1/4 of the excess over $200,000. This is not so unusual, as parents were often
included as heirs under prior law, in the absence of descendants.
What is very unusual, however, compared to pre-UPC intestacy law, is that if there are
surviving descendants, all of whom are descendants of both spouses and the surviving spouse has
no others descendants (i.e. children from a different parent than the deceased person, or their
descendants), then the descendants take nothing and the spouse receives 100%, no matter how
large the estate is. Was this a scheme to punish the surviving spouse for having children by a
person other than the deceased? I think not. The rationale is presumably that if all of the
descendants of the surviving spouse are also descendants of the decedent, then the property will
normally stay in the decedent's bloodline at the death of the surviving spouse, by passing to their
joint descendants, so it is appropriate to have the surviving spouse take everything The
descendants will receive it eventually. This assumes, of course, that the decedent and the
surviving spouse do not leave wills, so that the intestacy statutes will apply in both cases.
What happens, then, if the surviving spouse has descendants who are not descendants of
the deceased person, for example children of a prior marriage, which is a very common situation
today? Now the surviving spouse’s share is cut down to the first $150,000 and 1/2 of the excess
over that and the descendants of the deceased share the other 1/2 of the excess. Notice in this
case that the spouses' descendants who are not descendants of the deceased do not take anything
themselves; their existence simply decreases the amount that the spouse receives, and the fact
that they do exist means that the deceased’s descendants do take a share. The idea behind this is
that a non-descendant of the deceased will normally inherit from the surviving spouse , whose
descendant he or she is, and so it is desirable to decrease that spouse’s share because otherwise
such inheritance would ultimately divert property away from the deceased’s own descendants
when the surviving spouse dies.
A somewhat parallel change occurs when it is the deceased spouse who has descendants
who are not also descendants of the surviving spouse. Then the surviving spouse receives the
first $100,000 and 1/2 of the balance over that and the descendants of the deceased spouse share
the other half. The rationale here, of course, is that the descendant of the deceased spouse who is
not a descendant of the surviving spouse will not inherit from the surviving spouse, so that some
prevision needs to be made for him or her. The threshold cut-offs may seem somewhat arbitrary,
but it is possible to understand the general thinking behind these variations. Like so many
statutes that are enacted over the years, their ultimate form is the result of compromise.
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Affidavits of Heirship
The reason for all of this discussion of the North Dakota inheritance laws is to set the
stage for examining the “Affidavit of Heirship,” which, as stated above, is a very common tool
used to try to show on the record how the decedent’s interest passed when there is no probated
will. Taking the current North Dakota heirship statute, we can see such an affidavit (often called
“Proof of Death and Inheritance,” and abbreviated “POD”) should show at least the following
items:
1. Date of death
2. Whether there is a surviving spouse
3. Whether there has been a will probated or an heirship proceeding or appointment of a
personal representative.
4. Whether there are surviving descendants (children of the deceased and children of
deceased children, or children of deceased children of deceased children, etc.), and,
preferably their dates of birth and post office addresses. Note that “descendant” in
modern law includes adopted children or other descendants, on the same basis as blood
descendants.
5. Whether, if there are no surviving descendants, there is a surviving parent or parents (if
the estate exceeds $200,000) and, if, so, their addresses. Note that it is irrelevant
whether the parents of any descendants were married or not, as could be important
under earlier laws.
6. Whether any of the descendants of the decedents are not descendants of the surviving
spouse, if there is one.
7. Whether the surviving spouse, if there is one, has descendants who are not descendants
of the deceased spouse, and if so their identities and post office addresses
8. The size of the North Dakota estate. [generally unknown by the affiant]
Nos. 1, 2, 3 and 4 are obviously necessary, since if a will has been probated the identity
of the intestate heirs will be irrelevant, but if there is no probated will the spouse and descendants
will usually be the heirs. No. 5 is necessary if there are no descendants and if the size of the
estate exceeds $200,000, since the parents or parents begin to share at that point. No 6 and No. 7
are important because these facts affect the point at which the surviving spouse begins to share
the estate with descendants of the deceased, as explained above. No. 8 would be important to
know, since this also affects the point at which the surviving spouse begins to share with
defendants. As a practical matter, of course, the person making the affidavit will usually not
know the size of the North Dakota estate, so that it will not be known whether the intestate estate
is to be shared between the surviving spouse and descendants or parents. The usual solution to
this quandary is to assume that it is below the dollar threshold, so that 100% passes to the spouse,
but then to obtain quitclaim deeds or lease ratifications from each of the descendants (or parents
if there are no descendants), to be sure that all of the heirs have been included. Then the all21
important question (at least to the heirs themselves) of who gets how much is put off until
division order time.
The most important information that is missing from the usual rather sketchy POD’s that
one usually encounters are the questions about whether the descendants of the deceased are also
descendants of the surviving spouse and whether the surviving spouse has any descendants who
are not descendants of the deceased person. The value of the North Dakota estate would be a
very desirable piece of information but it rarely known by the affiant.
One element that is often ignored in recorded affidavits of heirship is that the person
executing it should ideally be a disinterested third party, that is someone who stands to gain
nothing by the distribution of the estate. This often means a non-family member, and of course it
also means someone who was well enough acquainted with the deceased to have knowledge of
the family members and their relationships. This makes it a little difficult sometimes to find
such a person, of course, because the people having most knowledge of the family relationships
are the family member themselves. But not all family members are eliminated, of course. For
example, suppose A dies, leaving a spouse B and three children, two of whom are children of
A and B, one is a child of A but not B, and B has no other children. The interested persons – that
is those who take shares – are the spouse and all three children. The descendant of B who is not
a descendant of A is technically a disinterred person, since he/she does not benefit immediately,
though it would be preferable not to use this descendant to make the affidavit, I think because
he/she is indirectly “interested” as an ultimate heir of B (whose share is affected by the situation
among the descendants). A brother of A, however, for example, would be a disinterested person
in the legal sense, though he might be “interested” in how much his nephews and nieces receive,
because he would not take anything in this case.
The distinction between “interested” in the legal sense and “interested” as we generally
use the term should be kept in mind. I recently ran across a recorded affidavit of heirship that
caused a chuckle for me and others in our office (a welcome light moment after hours of
examining documents). It was signed by the decedent’s daughter, who was an heir, and after her
name she had written “a disinterested person.” She clearly meant that she didn’t care about the
outcome of the distribution of the estate, but she was definitely not a “disinterested person” in
the legal sense of not potentially being entitled to benefit from the distribution. So
“disinterested” is not equivalent to “not interested.”
In practice, it is not unusual to see these affidavits signed by a family member who is an
interested person, and I am not inclined to worry too much about it, since it seems to me unlikely
that fraudulent affidavits would be placed in the record for public view. In securing a POD,
however, it is certainly best to seek out a disinterested third party – a long-term friend or
acquaintance who knows the family sufficiently well.
Benefit of a Formal Adjudication of Intestacy Status
What would clear all of these questions up, of course, is a judgment of intestacy, and
determination of heirs which establishes who the heirs are and in what proportions they take.
One does not see these in the record very often (which does not discourage title attorneys from
recommending them), probably due to fears about the dreaded “cost of probate” and the time
lapse required to complete a proceeding. It is not a really a “probate” proceeding, of course, but
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the proceeding does establish intestacy statue, that is that no valid will has been offered for
probate. It is a formal proceeding, with notice required to all interested persons, where, as
above, “interested” means anyone who would be an heir or who is named in a will which could
still be probated. A court hearing is required if there is any controversy among these interested
persons. There is no informal proceeding that would be parallel to an informal probate
proceeding, which does not require notice or a hearing. By its nature a proceeding for
adjudication of intestacy is a formal proceeding.
The essential practice point, is that merely waiting for three years to pass does not insure
that the estate will pass to the heirs under intestacy. If no proceeding of any kind is commenced
within the first three years, a will, whether later-discovered or whether known but simply not
probated within this period, may subsequently be offered for probate. A will probated elsewhere
may, as pointed out above, be probated at any time in North Dakota, even fifty years later, as
unlikely as that would be. The only safe procedure, therefore, in order to be sure that no will
surfaces at some time in the future, is to bring the proceeding for adjudication of intestacy and
determination of heirs, as discussed above, which will of course cut off any right to subsequently
file a will for probate, even if three years have not passed yet, since such an adjudication will be,
as lawyers are fond of saying, “res judicata” as to the question of testacy.
It is not necessary to commence this intestacy proceeding within the three-year period
following death In the normal case, however, there would be no purpose in waiting. The
application for adjudication of heirs should be brought as soon as practicable after death, in order
to cut off the possibility of a later-discovered will being offered for probate. It may be, of course,
that there is no real likelihood of such a will appearing and that the estate is fairly small and there
is no question as to the identity of the heirs, in which case there may be little purpose in incurring
the expense of securing the adjudication of heirship.
Final Thought – Mineral Reservations by Counties
Prior to March 14, 1941, a conveyance of land by a county transferred the county’s
mineral interest as well as the surface, as a county was not authorized by law to reserve minerals.
De Shaw v. McKenzie County, 114 N.W.2d 263 (N.D. 1962).
Counties were authorized to make 50% mineral reservation from and after March 14,
1941, and prior to July 1, 1951, but any purported mineral reservation by a county during
this interval in lands acquired by delinquent tax proceedings is void. Kershaw v. Burleigh
County, 47 N.W.2d 132 (N.D. 1951); Adams County v. Smith, 23 N.W.2d 973 (N.D.
1946) (A county deed following a delinquent tax sale is by far the most common kind of
conveyance of lands made by counties.)
From and after July 1, 1951, a county has not been authorized to reserve minerals in a
conveyance of land.
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