Benson v. Family Tree Corporation, Inc. et al

Filing 214

ORDER. IT IS HEREBY ORDERED: 1. The Court ADOPTS IN PART and MODIFIES IN PART the Report and Recommendation dated June 2, 2020 185 . 2. Defendants' Motion to Dismiss 170 is GRANTED and this matter is DISMISSED WITH PREJUDICE. LET JUDGMENT BE ENTERED ACCORDINGLY. (Written Opinion) Signed by Judge Michael J. Davis on 8/18/2020.(GRR)

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UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

JOHN BENSON and
BRIAN BENSON,
Plaintiffs,

v.

ORDER
Civil File No. 17-3839 (MJD/DTS)

ANN KEMSKE and
JON KEMSKE,
Defendants.
John Benson, pro se.
Brian Benson, pro se.
David C. McLaughlin and Jason G. Lina, Fluegel, Anderson, McLaughlin &
Brutlag, Chtd., Counsel for Defendants Ann Kemske and Jon Kemske.
I.

INTRODUCTION
The above-entitled matter comes before the Court upon the Report and

Recommendation of the United States Magistrate Judge dated June 2, 2020.
Defendants Ann Kemske and Jon Kemske filed objections to the Report and
Recommendation regarding application of res judicata to the claims against
them.
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Pursuant to statute, the Court has conducted a de novo review upon the
record of that portion of the Report and Recommendation to which Defendants
have objected. 28 U.S.C. § 636(b)(1); Local Rule 72.2(b). Based upon that review,
the Court adopts in part and declines to adopt in part the Report and
Recommendation dated June 2, 2020.
II.

CONSIDERATION OF DEFENDANTS’ OBJECTIONS
Plaintiffs argue that the Court should disregard Defendants’ objections to

the Report and Recommendation on the grounds that that they were served late.
Under Local Rule 72.2(b)(1), “[a] party may file and serve specific written
objections to a magistrate judge’s proposed finding and recommendations within
14 days after being served a copy of the recommended disposition, unless the
court sets a different deadline.” “A party may respond to another party’s
objections within 14 days after being served with a copy.” Local Rule 72.2(b)(2).
The Report and Recommendation was filed on CM/ECF on June 2, 2020.
Defendants’ objections were filed on CM/ECF on June 16, 2020, within the 14-day
limit.
Plaintiffs assert that the objections were served on Plaintiff Brian Benson
by U.S. Mail, arriving on June 19, 2020 in an envelope that was stamped with a
Pitney Bowes postal meter stamp dated June 16, 2020. Plaintiffs assert that,
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despite the June 16 meter stamp, the envelope must have been mailed at a later
date because three days is too long for the Postal Service to deliver the mail from
Defendants’ attorneys’ office in Morris, Minnesota, to Brian Benson’s address in
Prior Lake, Minnesota. The issue is further muddled because Defendants
mistakenly filed an affidavit of service for the March 6, 2020 mailing of their
Reply to Brian Benson rather than the affidavit of service for the mailing of the
objections to Brian Benson. [Docket No. 188-1]
The Court need not make a finding regarding whether the objections were
mailed on June 16, or, as Plaintiffs claim, June 17 or 18. The deadline for
objecting to a Report and Recommendation is not jurisdictional, and thus this
Court is not barred from considering late objections. See Vogel v. U.S. Office
Prod. Co., 258 F.3d 509, 515 (6th Cir. 2001) (“[W]here a party files objections after
[the time period allowed by rule], a district court can still consider them.”);
Kruger v. Apfel, 214 F.3d 784, 786–87 (7th Cir. 2000) (noting that the time period
for filing objections “is not jurisdictional,” and thus “the district court [i]s not
barred from considering the late objections”). Even if the Court were to accept
Plaintiffs’ assumptions regarding the current speed of delivery of U.S. Mail in
Minnesota, the objections were, at most, two days late, and Plaintiffs do not

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assert that they suffered any prejudice from the allegedly late service. In fact,
Plaintiffs filed their response to the objections on June 23, a mere one week after
they were filed on CM/ECF and well before the deadline to file such response.
The Court finds that there was no prejudice from any possible late service on
Brian Benson. Finally, the Court notes that “[t]he district judge may also
reconsider on his or her own any matter decided by the magistrate judge but not
objected to.” Local Rule 72.2(a)(3). Therefore, the Court will consider
Defendants’ objections and modify the Report and Recommendation with regard
to the application of res judicata in this case.
Based on the Court’s review, the Court adopts the Report &
Recommendation with the exception that the Court declines to adopt Section II
of the Conclusions of Law, found at pages 10 through 15 of the Report and
Recommendation and entitled “Neither Res Judicata Nor Claim Splitting Bars
the Bensons’ Fraud and Conversion Claims.” Section II is replaced with the
following analysis:
III.

Res Judicata
A.

Applicable Law of Res Judicata

North Dakota law governs the Court’s res judicata analysis because “[t]he
law of the forum that rendered the first judgment controls the res judicata
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analysis.” St. Paul Fire & Marine Ins. Co. v. Compaq Computer Corp., 539 F.3d
809, 821 (8th Cir. 2008).
Res judicata, or claim preclusion, prevents relitigation of claims that
were raised, or could have been raised, in prior actions between the
same parties or their privies. Res judicata means a valid, final
judgment is conclusive with regard to claims raised, or claims that
could have been raised, as to the parties and their privies in future
actions.
Fredericks v. Vogel Law Firm, 946 N.W.2d 507, 510-11 (N.D. 2020) (citations
omitted).
Res judicata applies even though the subsequent claims may be
based on a different legal theory. If the subsequent claims are based
upon the identical factual situation as the claims in the earlier action,
then they should have been raised in the earlier action. It does not
matter that the substantive issues were not directly decided in the
earlier action, the key is that they were capable of being, and should
have been, raised as part of the earlier action.
Fredericks, 946 N.W.2d at 511 (citing Littlefield v. Union State Bank, Hazen,
N.D., 500 N.W.2d 881, 884 (N.D. 1993)). With regard to whether a claim “should
have been raised” in the earlier action, “if the subsequent claims are based upon
the identical factual situation as the claims in the prior proceeding, then they
should have been raised in the prior proceeding.” Littlefield, 500 N.W.2d at 884
(citations omitted).

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[A] judgment on the merits in the first action between the same
parties constitutes a bar to the subsequent action based upon the
same claim or claims or cause of action, not only as to matters in
issue but as to all matters essentially connected with the subject of
the action which might have been litigated in the first action.
Fredericks, 946 N.W.2d at 511 (citation omitted).
“A party with a single cause of action generally may not split that cause of
action and maintain several lawsuits for different parts of the action. Res
judicata is premised upon the prohibition against splitting a cause of action.”
Fredericks, 946 N.W.2d at 512 (citations omitted).
Res judicata under North Dakota law has four elements:
1. A final decision on the merits in the first action by a court of
competent jurisdiction;
2. The second action involves the same parties, or their privies, as
the first;
3. The second action raises an issue actually litigated or which
should have been litigated in the first action;
4. An identity of the causes of action[.]
Mo. Breaks, LLC v. Burns, 791 N.W.2d 33, 39 (N.D. 2010) (citing Sanders
Confectionery Prods., Inc. v. Heller Fin., Inc., 973 F.2d 474, 480 (6th Cir. 1992)).
B.

Final Decision on the Merits

As noted in the Report and Recommendation, in a conclusion to which no
party objected, there was a final decision on the merits in the North Dakota
Action, which was affirmed by the North Dakota Supreme Court.
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C.

Same Parties

As noted in the Report and Recommendation, in a conclusion to which no
party objected, all parties to this federal action participated in the North Dakota
Action: Ann Kemske, Jon Kemske, John Benson, and Brian Benson were all
parties to the North Dakota Action.
D.

Issue Was or Could Have Been Raised

“Under res judicata claim preclusion, a judgment in a prior action is
conclusive ‘as to all claims which, under the rules, might have been put in issue
in the prior trial.” Riverwood Commer. Park, LLC v. Std. Oil Co., 729 N.W.2d
101, 108 (N.D. 2007) (citation omitted).
The North Dakota Supreme Court has
distinguished collateral estoppel, or issue preclusion, and res
judicata, or claim preclusion, in part on the basis of whether an issue
was actually litigated in a prior proceeding, or whether the issue
was raised or could have been raised in the prior proceeding.
Cridland v. N.D. Workers Comp. Bureau, 571 N.W.2d 351, 354 (N.D. 1997)
(emphasis added). Under North Dakota law, “if the subsequent claims are based
upon the identical factual situation as the claims in the prior proceeding, then
they should have been raised in the prior proceeding.” Littlefield, 500 N.W.2d at
884 (citations omitted).
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The parties in the North Dakota Action litigated the same set of facts that
give rise to Plaintiffs’ current claims for fraud, conversion, and declaratory
judgment against the Kemskes: the ownership of the same mineral rights and the
validity and legality of the various transfers and deeds related to those mineral
rights, including the Kemskes’ 1990 deed to Thomas Benson recorded in 2012,
the statement of claim of mineral interest executed by Thomas Benson and
recorded in 2005, and the 2010 deed from Ann Kemske to Family Tree
Corporation, Inc. (“Family Tree”). See Desert Partners IV, L.P. v. Benson, 875
N.W.2d 510, 514-515 (N.D. 2016).
Plaintiffs’ current claims against Defendants are based on the allegation
that Defendants “conveyed the same mineral interests more than one time, the
second time a fraudulent transaction as they no longer held any right title or
interest in the property to convey.” (Am. Compl. ¶ 2.) “Plaintiffs further allege
that Defendants’ actions resulted in a conversion of Plaintiffs[‘] property.” (Id. ¶
3.) Plaintiffs assert Count 1: Fraud, based on the allegation that “the fraudulent
conveyance by Defendants Kemskes deprived [Plaintiffs] of ownership of oil and
gas royalty interests;” Count 2: Conversion of Property, based on the allegation
that the Kemskes’ “actions constitute a conversion of [Plaintiffs’] personal

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property in mineral royalties;” and Count 3: Declaratory Judgment, seeking a
declaration that “the subject property is owned as an undivided interest, and that
any attempted conveyance the consent of all owners is void as a matter of law.”
(Am. Compl. ¶¶ 33, 38, 45.)
John and Brian Benson set forth substantially the same allegations of fraud
against Ann Kemske in their Answer signed on February 22, 2013 and filed in the
North Dakota Action. ([Docket No. 171-2] Lina Aff., Ex. C, Answer and
Counterclaims at 4 ¶ 5 (“That the deed from Ann Kemske to Family Tree
Corporation was not a legal contract due to the formation requirement of a
meeting of the minds insofar that neither party was aware she did not own the
property; either the 160 acres in dispute herein and/or the remaining 1,560 acres
listed in the deed they attempted to convey absent of course intentional fraud.”).)
They also asserted that Ann and Jon Kemske had nothing to convey in 2010 after
they conveyed all of their interest to Thomas Benson in 1990. (Id. at 5 ¶ 8.) John
and Brian Benson asserted: “In fact after Ann Kemske sold/conveyed the subject
property twice, as described herein, she leased it to Petrogulf Corporation on
March 5, 2012 long after the well had been drilled and Petrogulf was informed
that there was no interest to lease by my brother . . . . It appears that Ann

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Kemske would sign anything with anyone whom would give her a check . . .”
(Id. at 10 ¶ X.) And, in the North Dakota Action, the North Dakota Supreme
Court explicitly held that the 1990 deed was valid between the parties to that
deed and those with notice:
Here the Kemskes executed a deed conveying and quitclaiming all
their right, title, and interest in the 160 acres to Thomas Benson in
1990, but that deed was not recorded until 2012. That deed is valid
between the parties to the instrument and those with notice.
Desert Partners IV, L.P. v. Benson, 875 N.W.2d 510, 514–15 (N.D. 2016).
Ultimately, the North Dakota Supreme Court affirmed the trial court’s judgment
awarding Desert Partners and Family Tree ownership of the mineral rights,
Desert Partners IV, L.P. v. Benson, 921 N.W.2d 444, 447 (N.D. 2019), deciding the
very issue – ownership of the subject mineral interest – that Plaintiffs now seek to
have this Court decide to the contrary in their claim for declaratory judgment.
There was no reason that Plaintiffs could not have asserted these same
claims against the Kemskes in the North Dakota Action. There was no statutory
bar to Plaintiffs asserting these claims against the Kemskes. See N.D.C.C. § 3217-08. Cf. Riverwood Commer. Park, LLC v. Std. Oil Co., 729 N.W.2d 101, 108
(N.D. 2007) (holding that “res judicata claim preclusion” does not bar claims
“when a statute explicitly prohibits inclusion of additional claims in the original
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action”). In fact, the transcript from the North Dakota Action reveals that, on
February 3, 2017, John Benson explicitly preserved his right to amend his
pleadings to assert claims against the Kemskes in the North Dakota Action. At
that time, the Kemskes attempted to extricate themselves from the North Dakota
action, explaining that the only reason they were “still involved in this case – is
because we don’t want anybody to amend the pleadings. Right now there’s no
relief requested against Kemskes. And that’s the only reason we’re here. That’s
the only reason we’re participating in this case, to make sure somebody doesn’t
try to amend their pleadings at the date of trial.” ([Docket No. 178] McLaughlin
Aff., Ex. A, Feb. 3, 2017, N.D. Action Tr. 26-27.) John Benson responded: “I am
not going to agree that I’m not going to amend any pleadings. I can amend them
up until the time of trial, and I’m going to reserve that right.” (Id. 28.) This
exchange highlights that not only could John and Brian Benson have asserted the
current claims against the Kemskes in the North Dakota Action, but also, John
Benson knew that he could do so and affirmatively protected his right to do so
until the trial occurred in that case on October 3, 2017. (He filed the current
federal lawsuit on August 18, 2017.) The fact that the Bensons ultimately decided
not to assert claims against the Kemskes in the North Dakota Action is irrelevant.

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Cf. Fredericks, 946 N.W.2d at 511-12 (holding res judicata applied when “the
district court in the first action authorized [the current plaintiff] to bring
additional claims against [current defendants]” but current plaintiff “did not
bring those claims until approximately one month before trial, which the court
struck as untimely,” because “[a]lthough untimely, [current plaintiff’s] were
capable of being raised in the earlier action”).
“By the time they filed their [Answer and Counterclaim] in [the North
Dakota Action] in [February 2013], the [Bensons] were aware of all of the
material facts alleged in this action, and there was no procedural impediment to
the [Bensons] bringing their [fraud, declaratory judgment,] and conversion
claims against [the Kemskes] in [the North Dakota Action].” Finstad v. Beresford
Bancorporation, Inc., 831 F.3d 1009, 1014 (8th Cir. 2016). “But the [Bensons]
elected not to bring the [fraud, declaratory judgment,] and conversion claims in
[the North Dakota Action], and they are barred from pursuing them in a second
action.” Id.
E.

Identity of Causes of Action

“Identity of causes of action means an ‘identity of the facts creating the
right of action and of the evidence necessary to sustain each action.’” Sanders

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Confectionery Prods. v. Heller Fin., Inc., 973 F.2d 474, 484 (6th Cir. 1992), cited in
Mo. Breaks, LLC, 791 N.W.2d at 39.
The North Dakota Action and the current lawsuit against the Kemskes are
based on the “same nucleus of operative facts:” the ownership of the same
mineral rights and the validity and legality of the various transfers and deeds
related to those mineral rights, including the Kemskes’ 1990 deed to Thomas
Benson, the statement of claim of mineral interest executed by Thomas Benson
and recorded in 2005, and the 2010 deed from Ann Kemske to Family Tree. See
Orlick v. Grand Forks Hous. Auth., No. 2:14-CV-54, 2015 WL 10936736, at *4
(D.N.D. Mar. 19, 2015) (“Res judicata bars a second lawsuit based not only on
claims actually raised in earlier litigation, but also on claims which could have
been raised in the earlier litigation. Although [the plaintiff’s] current complaint
references statutes and legal theories not raised in prior litigation, his claims are
based on the same nucleus of operative facts as were his prior claims.”), aff’d, 616
F. App’x 218 (8th Cir. 2015). Now, the Bensons assert that the Kemskes
committed fraud and conversion when Ann Kemske transferred her interest in
the property to Thomas Benson in 1990 and then transferred that same interest to
Family Tree in 2010. Here, the facts underlying Plaintiffs’ fraud, conversion, and

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declaratory judgment claims against the Kemskes and the evidence necessary to
sustain those claims were part of the North Dakota Action. Cf. Rutherford v.
Kessel, 560 F.3d 874, 880–81 (8th Cir. 2009) (“The issue Julie wants to adjudicate
in her quiet title action concerns her alleged ownership in the three
condominium properties. That is the same issue adjudicated in the state trial
court’s order declaring null and void the transfers between Robert to Julie. Both
suits would involve the validity of the unilateral conveyance Julie constructed in
the midst of the personal injury lawsuit between Kessel and her brother. This is
precisely the type of collateral attack upon a prior court’s decision which the
doctrine of res judicata bars.”).
F.

Whether Application of Res Judicata Would Create an Injustice

Application of res judicata in this case would not work an injustice.
Plaintiffs have had ample opportunity to litigate their claims against the
Kemskes. The North Dakota Action was a long-running action, in which
Plaintiffs explicitly reserved their right to amend their pleadings to assert claims
against the Kemskes until the eve of trial, which occurred after Plaintiffs filed
this federal lawsuit. Plaintiff John Benson filed the current lawsuit in an attempt
to enjoin the North Dakota trial. This Court denied that motion, yet Plaintiffs

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still did not exercise their opportunity to assert the current claims against the
Kemskes in the North Dakota Action.
Courts will not permit a litigant to try a part of his case and then, if
he is disappointed with the outcome of the action, to have another
day in court simply by alleging new claims or making a new
demand for relief, when he could have made such demand in the
prior action. In such case, the judgment in the first action is
conclusive between the same parties as to all matters tried in that
action or which, under the rules, might have been put in issue in the
action previously tried, in which judgment was entered and from
which judgment no appeal was taken.
Perdue v. Knudson, 179 N.W.2d 416, 421 (N.D. 1970).
Application of res judicata in this case furthers the policy goals of res
judicata:
A party who brings some claims into one court without seeking
complete relief and brings some related claims in another court, or
who presents some issues in one court proceeding and reserves
others to raise them in another court, invites wasteful expense and
delay. Application of the law of res judicata conserves scarce
judicial resources and avoids wasteful expense and delay.
Cridland v. N.D. Workers Comp. Bureau, 571 N.W.2d 351, 354 (N.D. 1997)
(citation omitted).
G.

Declaratory Relief

As noted in the Report and Recommendation, the Bensons’ third claim for
relief against the Kemskes seeks a declaration that “the subject property [the 160
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acres] is owned as an undivided interest, and that any attempt at conveyance
without the consent of all owners [e.g., the 2010 deed] is void as a matter of law.”
(Am. Compl. ¶ 45.) This claim for declaratory relief was actually litigated in the
North Dakota Action. The requested declaration directly conflicts with the
North Dakota judgment and is clearly barred by res judicata.
Accordingly, based upon the files, records, and proceedings herein, IT IS
HEREBY ORDERED:
1. The Court ADOPTS IN PART and MODIFIES IN PART the Report
and Recommendation dated June 2, 2020 [Docket No. 185].
2. Defendants’ Motion to Dismiss [Docket No. 170] is GRANTED
and this matter is DISMISSED WITH PREJUDICE.
LET JUDGMENT BE ENTERED ACCORDINGLY.

Dated: August 18, 2020

s/ Michael J. Davis
Michael J. Davis
United States District Court

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