Somont Oil Co., Inc. v. Nutter

743 P.2d 1016, 228 Mont. 467, 44 State Rptr. 1685, 99 Oil & Gas Rep. 537, 1987 Mont. LEXIS 1016
CourtMontana Supreme Court
DecidedOctober 6, 1987
Docket87-066
StatusPublished
Cited by8 cases

This text of 743 P.2d 1016 (Somont Oil Co., Inc. v. Nutter) is published on Counsel Stack Legal Research, covering Montana Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Somont Oil Co., Inc. v. Nutter, 743 P.2d 1016, 228 Mont. 467, 44 State Rptr. 1685, 99 Oil & Gas Rep. 537, 1987 Mont. LEXIS 1016 (Mo. 1987).

Opinion

MR. JUSTICE HARRISON

delivered the Opinion of the Court.

This appeal arises from a bench trial which occurred in the Ninth Judicial District on June 17 and 18, 1986, and thereafter by deposition, before the Honorable Robert M. Holter. The District Court issued a judgment supported by findings of fact and conclusions of law on December 18,1986. Judgment was rendered in favor of plaintiff-respondent Somont Oil Company, Inc.(“Somont”). Defendants John and Peggy Nutter appeal. We affirm.

This appeal involves the parties’ rights and obligations under an agreement to develop and operate a mineral interest on a parcel of land in Toole County, Montana. The Nutters own 80% of the mineral rights to . the tract of land in issue. Respondent Somont claims the remaining 20% of the mineral rights. Additionally, Somont claims it is the proper lessee of one-half of the Nutters’ mineral interests as assignees of a mineral lease executed by the Nutters to a third party. The sequence of events and pertinent facts in this case are fairly complex.

The original owner of the land involved was Anna Kenny who received ownership through a patent from the United States Government. Anna Kenny is now deceased. In 1920, Anna Kenny leased the mineral interests underlying the land to Gordon Campbell. Anna Kenny reserved a landowner’s royalty interest and the lease was structured to remain in force for twenty years or for so long after that period that oil was produced from the land in commercial quantities. In 1922, Anna Kenny conveyed an interest to Stevenson Associated Royalties Company (“Stevenson”). In that conveyance, Kenny granted Stevenson 20% of her royalty payments under the lease to Campbell. Additionally, Stevenson received a reversionary interest in 20% of the minerals in the event the Campbell lease was ever forfeited or canceled.

*469 Campbell eventually assigned his lease interest to Texaco, Inc. Texaco developed and maintained oil wells on the property but eventually ceased production. Texaco later abandoned the lease and filed a release on March 13, 1981. According to the terms of the lease with Campbell and the grant to Stevenson, 80% of the interest in the minerals underlying the land have reverted to the successors of Anna Kenny, while the remaining 20% reverted to the successors of Stevenson.

Upon Anna Kenny’s demise, Marie Kenny succeeded to her interest in the land. In 1974, Marie Kenny conveyed the property to defendants John and Peggy Nutter. The contract for deed was recorded on January 2, 1976. A warranty deed executed by Marie Kenny was filed on February 20, 1981. By virtue of the conveyance and Texaco’s abandonment of their mineral lease, the Nutters claim 80% of the mineral rights to the land.

Despite the conveyance to the Nutters, Marie Kenny conveyed an oil and gas lease on the same land to Somont in September of 1979. Because of the conveyance to the Nutters, both parties agree the lease from Marie Kenny to Somont is void. Somont filed a release of the void lease in August of 1984.

The remaining 20% mineral interest originally granted to Stevenson by Anna Kenny in the form of a reversionary interest follows a lengthy chain of title. We will discuss this chain of title more fully under the third issue raised by appellants. Suffice it to say that in 1980 Somont claimed title to this 20% mineral interest by instruments with the personal representatives of one L.R. Baily, holder of one-half of the 20% interest, and the personal representative of one A.H. Raymond, holder of the other one-half. Subsequently, Somont began oil exploration and development on the property.

On March 6, 1981, the Nutters and Buffalo Jump Oil and Gas, Inc. (“Buffalo Jump”), a Montana corporation, entered into an oil and gas lease and a supplemental agreement to operate the mineral interests belonging to the Nutters. Appellant John Nutter and the president of Buffalo Jump, Chris Owen, negotiated the agreement. On May 1, 1981, Buffalo Jump assigned its interest in the Nutter lease and agreement to Rimrock Drilling Company (“Rimrock”). Rimrock is a partnership consisting of Chris Owen and Norman Eberhardt as partners. Rimrock subsequently developed oil wells which produced oil in commercial quantities. John Nutter assisted in the oil operation and the District Court found that he acted in the capacity of an employee rather than a joint operator. The result *470 was that both Somont and Rimrock were simultaneously developing oil well operations on the land. Each operation maintained separate storage tanks and pipelines.

On February 1, 1984, Rimrock assigned its interest in the Nutter lease to Somont. The Nutters and Somont subsequently engaged in a dispute regarding their rights and obligations in developing and operating the oil pumping operation. Somont alleged John Nutter padlocked oil production equipment located on the property and sold approximately $5,000 of crude oil produced by Somont. Somont sought a declaratory judgment to clarify and determine the rights and obligations of Somont and the Nutters pursuant to the lease agreement between Buffalo Jump and the Nutters. A complaint was filed with the District Court on March 22, 1984.

A preliminary hearing was held on March 30, 1984 and a stipulation was created dictating the oil operations until the time of trial. The stipulation directed a joint operation in which Somont would conduct the actual day-to-day operations subject to a right of inspection by the Nutters. Somont was to pay a portion of the gross proceeds of the operation into a special account established by the court pending the outcome of the litigation. An order directing the scope and contents of the stipulation was apparently signed on March 30, 1984, but was not filed until November 7, 1985 after a dispute arose between the parties while acting under the stipulation. Somont alleged that as a result of omissions and contradictory actions by the Nutters, it refused to make the scheduled payments. Following a hearing on November 7, 1985, the District Court issued findings of fact and an order stating that the order directing the stipulation was still in effect and Somont was ordered to make the payments.

The case was tried on June 17 and 18, 1986, and additional evidence was taken in July by deposition. On December 18, 1986, the District Court issued findings of fact, conclusions of law, and an order. The contested issues were resolved in favor of Somont.

The District Court concluded that as a result of the assignment from Rimrock to Somont, Somont held all of the rights and obligations of Buffalo Jump and Rimrock under the agreement entered March 6, 1981.

The District Court directed that Somont would continue to conduct the day-to-day operations in developing the mineral estate. It required Somont to operate “in a manner consistent with good practices in the oil and gas industry and in conformance with the rules *471 and regulations of the Board of Oil and Gas Conservation for the State of Montana.” The Nutters were given the right to inspect the operations at any time, but were prohibited from interfering with the operations without the consent of Somont or a court order. Somont was required to provide the Nutters with monthly statements indicating gross production from the property, royalties paid, taxes paid, and operational and development costs.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Brooke v. State
2020 MT 187 (Montana Supreme Court, 2020)
S & P Brake Supply, Inc. v. STEMCO LP
2016 MT 324 (Montana Supreme Court, 2016)
Valerie Bridgeforth v. Dale Jones
Court of Appeals of Tennessee, 2015
Conner v. City of Dillon
2012 MT 21 (Montana Supreme Court, 2012)
Gurley v. King
183 S.W.3d 30 (Court of Appeals of Tennessee, 2005)
In Re Estate of Bolinger
1998 MT 303 (Montana Supreme Court, 1998)
Smith v. Johnson
798 P.2d 106 (Montana Supreme Court, 1990)
Hilbig v. Central Glass Co.
777 P.2d 1296 (Montana Supreme Court, 1989)

Cite This Page — Counsel Stack

Bluebook (online)
743 P.2d 1016, 228 Mont. 467, 44 State Rptr. 1685, 99 Oil & Gas Rep. 537, 1987 Mont. LEXIS 1016, Counsel Stack Legal Research, https://law.counselstack.com/opinion/somont-oil-co-inc-v-nutter-mont-1987.