North Dakota Supreme Court Highlights
By Scott O . Diamond , Joshua A . Swanson , and Ian McLean
Authors ’ Note and Caveat : The following cases of interest were recently decided by the North Dakota Supreme Court . Because the following contains the authors ’ summary of the decisions , the reader is encouraged to read the entire published decision to determine its precedential value , if any , in any given case .
Matter of Michael J . Tharaldson Trust , 2023 ND 2 . Filed 1 / 5 / 23 .
E . M . appealed a district court order concluding Matthew Tharaldson was the sole beneficiary of the Michael J . Tharaldson Irrevocable Trust Agreement II (“ Trust II ”) and was thus entitled to the trust assets . E . M . argued , among other things , he was a beneficiary under the Michael J . Tharaldson Irrevocable Trust Agreement (“ Trust I ”). The Supreme Court affirmed the district court , concluding Matthew Tharaldson was the sole beneficiary under the plain language of either Trust I or Trust II .
Trust I was executed by Michael Tharaldson in February 2007 , and Trust II in October 2011 . Bell Bank was the trustee of both trusts . Bell Bank merged Trust I into Trust II . In 2017 , Michael died intestate , and a probate was opened to administer his estate . Tharaldson was unmarried and had three children , including E . M . Bell Bank filed this action in 2019 to determine the trust beneficiaries and approval of asset distribution . Bell Bank claimed the sole beneficiary was Michael ’ s brother , Matthew . E . M . objected to the petition .
The Court held the primary objective when interpreting a trust is to determine the settlor ’ s intent . When a trust instrument is unambiguous , the settlor ’ s intent is determined from the language of the trust document . Whether a trust is ambiguous is a question of law . The Court explained the general rules of construction of written documents apply to the construction of trust instruments . The Court concluded the special power of appointment applied to both Michael ’ s potential wife and his descendants , holding the provision at issue , Article 4 ( 2 )( a ), was clear when read in context with Article 4 ( 2 )( b ). The language provided Matthew was the sole remainder beneficiary if Michael did not exercise the special power of appointment in the testamentary instrument , and he did not exercise the special power of appointment .
Accordingly , the Court held Michael ’ s intent was clear based on the unambiguous language of either Trust I or Trust II , that upon his death , because he had not exercised his special power of appointment , Matthew was the sole beneficiary .
Shafer v . Scarborough , et al ., 2022 ND 233 . Filed 12 / 22 / 22 .
Shafer appealed from a judgement confirming an arbitration award in his favor against Diamond Development & Custom Homes , LLC (“ Diamond ”), arguing the district court erred by failing to increase the amount of damages he was awarded . Schafer also argued the Supreme Court should narrowly expand the standard for reviewing an arbitration award . The Court affirmed , holding the district court did not err in confirming the arbitration award . The Court likewise refused to expand the standard for reviewing an arbitration award .
Shafer sued Scarborough , and his business , Diamond , alleging he entered a contract with Diamond as the general contractor to build a home for $ 678,000 ; that Diamond failed to timely construct the home ; that there were numerous defects in Diamond ’ s work ; and there were substantial mold and water issues . The district court previously granted Scarborough ’ s motion to compel arbitration and stayed the proceeding . The arbitrator issued a final award for Shafer , finding that Diamond breached the parties ’ contract and its warranties under the contract . The arbitrator ruled Shafer suffered damages as a result of these breaches , awarding Shafer $ 419,057.71 in damages for the breaches , $ 26,702.13 in prejudgment interest , and $ 21,226.31 for the cost of arbitration , for a total award of $ 466,986.15 .
Shafer moved in district court to modify the arbitration award and increase the damages to the full contract amount of $ 678,000 , arguing Diamond did not substantially complete the home , and the full amount of the contract was the proper measure of damages . The district court confirmed the arbitrator ’ s award , adopted the arbitrator ’ s findings , and determined the arbitrator correctly applied North Dakota law to the findings and the award was not irrational .
The Court held that review of an arbitration award is limited and will not be vacated unless it is completely irrational . The clearly irrational standard of review gives an arbitrator “ every benefit of every doubt .” The Court explained this standard provides an arbitrator the widest latitude to exercise their authority and arrive
Scott O . Diamond is the owner of Diamond Law Firm in Fargo where he practices municipal law , criminal law , and general litigation .
Joshua A . Swanson is a shareholder at Vogel Law Firm in Fargo where he practices energy law , construction and property law , and general litigation .
Ian McLean is a shareholder at Serkland Law Firm in Fargo where he practices in commercial litigation , municipal and education law , and criminal law .
22 THE GAVEL