Farley v. Booth Bros. Land and Livestock Co.

• Citation: 52 St.Rep. 46,270 Mont. 1,890 P.2d 377
• Decision Date: 14 February 1995
• Docket Number: No. 94-343,94-343
• Parties: Beulah FARLEY, as an individual and as power of attorney for others; and Armells Land and Cattle Co., a Montana corporation, Plaintiffs and Respondents, v. BOOTH BROTHERS LAND AND LIVESTOCK COMPANY, a Colorado corporation, and Western Energy Company, a Montana corporation, Defendants and Appellants.
• Court: United States State Supreme Court of Montana

Page 377

890 P.2d 377

270 Mont. 1

Beulah FARLEY, as an individual and as power of attorney for others; and Armells Land and Cattle Co., a Montana corporation, Plaintiffs and Respondents, v. BOOTH BROTHERS LAND AND LIVESTOCK COMPANY, a Colorado corporation, and Western Energy Company, a Montana corporation, Defendants and Appellants.

No. 94-343.

Supreme Court of Montana.

Submitted on Briefs Oct. 28, 1994.

Decided Feb. 14, 1995.

Scot Schermerhorn, Freeman & Schermerhorn, Billings, for appellants.

Gary G. Broeder, Billings, R. Sam Oldenburg, Karowsky, Witwer, Miller & Oldenburg, Greeley, CO, for respondents.

NELSON, Justice.

This is an appeal from a Sixteenth Judicial District Court, Rosebud County, Memorandum and Opinion as well as Supplemental Memorandum and Opinion, concluding that Western Energy Company (Western) should be making its payments under the leases at issue, to Booth Brothers Land and Livestock Company (Booth). We affirm.

ISSUES

The following are issues on appeal:

I. Is scoria a mineral for the purposes of deciding the present action?

II. Is Farley entitled to the compensation payable by Western for the use of the surface?

FACTUAL BACKGROUND

The parties have stipulated to an agreed statement of facts. The following is a summary of the pertinent facts from the agreed statement of facts.

"Booth Land and Livestock Company, a successor to Booth Brothers Land and Livestock Company (herein called "Booth") is the owner of ranch property located in Treasure, Big Horn and Rosebud Counties, Montana. The west part of the ranch, located principally in Treasure and Big Horn Counties, was purchased from the Federal Land Bank of Spokane on January 7, 1988, and the east part of the ranch, located principally in Rosebud County, was purchased from Armells Land and Cattle Company on October 12, 1988." Farley's Inc. and Armells Land and Cattle Company were the original surface owners of the properties at issue.

"The ranch is burdened with the rights of the owners of the coal deposits and their lessees to use and consume the surface for coal mining under three agreements. The agreements generally provide that Western Energy Company ("Western") has the right to use the surface of the land subject to the agreements for mining purposes and provides for compensation for such use."

The owner of the coal deposits, the owner of the property subject to the agreements and the lessee under the agreements are as follows:

1. The coal deposits are owned by Burlington Northern Railroad Company. Neither plaintiffs nor Booth own or have any interest in the coal deposits.

2. The surface of the property at issue is owned by Booth.

3. Western is the current tenant with the right to use the surface in connection with its mining of Burlington Northern's coal, under the Consolidation Coal Company Agreement (Consol Agreement), the Surface Lease and the Scoria Lease and holds all rights as a tenant thereunder and has all of the obligations of the tenant under such agreements.

The central issue in the present action is to whom Western should be making payments under the leases associated with the property.

PROCEDURAL BACKGROUND

On June 20, 1990, Farley filed a complaint in the Sixteenth Judicial District Court, Rosebud County, seeking a declaratory judgment that they were to receive royalty payments from Western for Western's use of the surface land. Western filed its answer on August 15, 1990, and Booth filed its answer and counterclaim on March 6, 1991. Booth, in its counterclaim, sought to have title quieted in the property at issue, except for the reservation of mineral rights and the payments under the Consol Agreement and to receive judgment with respect to the payments by Western for the use of the surface of the land. The parties stipulated that Western did not have to actively participate in the action because it is not affected, in any meaningful way, by the decision rendered here. It simply needs to know to whom to send the applicable payments.

The District Court issued an order, filed on July 16, 1993, concluding that "the right to the compensation for damage to surface rights contained in the leases regarding coal deposits passed with the fee to Booth Brothers, except for that which was expressly reserved by Farley." The court also issued a Supplemental Opinion, which was filed on May 11, 1994, stating that scoria was not a mineral for the purpose of this action. This appeal by Farley followed.

DISCUSSION

I.

Is scoria a mineral for the purpose of this action?

Farley states that scoria is located in "a relatively small portion of the United States [and], [i]n eastern Montana, northern Wyoming, and western North Dakota, [it] is used to construct roadways." Farley also asserts that scoria is used to manufacture "mineral wool." It argues that because scoria has limited availability and has a use which is an alternative to its use in constructing roadways, it has an exceptional value above ordinary substances such as sand, clay and gravel, and therefore, should be defined as a mineral. Booth counters that "[t]he District Court correctly decided that 'scoria,' as that term is used in eastern Montana, is akin to gravel and, therefore, not a mineral for conveyancing purposes. Thus, judgment was properly granted to Booth on this issue on the grounds that the scoria rock and all rights under the Scoria Lease had passed to Booth as the subsequent surface owner." We agree with the District Court and Booth.

The term "mineral" has been the source of considerable confusion in mineral law litigation nationwide. As Miller Land & Mineral v. Highway Com'n (Wyo.1988), 757 P.2d 1001, 1002, aptly states:

The courts which have held that the general reservation of "all minerals" is inherently ambiguous have traveled over a long and tortuous path in a complex and hopeless search to discover the particular minerals the parties intended to reserve. The only reliable rule which surfaces from the confusing and inconsistent approaches taken by those courts attempting to ferret out the subjective intent of the parties is that the word "mineral" means what the court says it means. The result is title uncertainty and the need to litigate each general reservation of minerals to determine which minerals it encompasses. (Citations omitted.)

We take this opportunity to clarify, in the context of this case, whether scoria is a "mineral" for the purpose of land transfers in Montana.

At the outset, we are concerned here only with "scoria" that is also characterized as "roof-rock" and which results from burning coal outcroppings. We are not concerned with, nor does our opinion cover, scoria of the basaltic lava variety. Montana statutory law has previously defined the term "mineral" in specific contexts concerning mining regulation. Title 82 is entitled "Minerals, Oil and Gas" and is pertinent to our discussion in the instant case. Section 82-4-303(9), MCA, found under part 3, Metal Mine Reclamation, of Chapter 4, Reclamation, provides one definition for the term "mineral":

"Mineral" means any ore, rock, or substance, other than oil, gas, bentonite, clay, coal, sand, gravel, phosphate rock, or uranium, taken from below the surface or from the surface of the earth for the purpose of milling, concentration, refinement, smelting, manufacturing, or other subsequent use or processing or for stockpiling for future use, refinement, or smelting.

Part 4 of Chapter 4, Reclamation, is entitled Opencut Mining Reclamation and it provides, under § 82-4-403(6), MCA, that:

"Minerals" means bentonite, clay, scoria, phosphate rock, sand, or gravel.

It appears that these definitions of the term "mineral" are not necessarily consistent. In § 82-4-403(6), MCA, "gravel" is a mineral but in § 82-4-303(9), MCA, "gravel" does not come within the definition of the term "mineral." Scoria is included in the definition of "mineral" in § 82-4-403(6), MCA, but it is unclear whether it would be included under the definition of "mineral" in § 82-4-303(9), MCA. However, this apparent inconsistency can be clarified by recognizing that the definition of "mineral" can differ according to the context in which it is used. The definition of the term "mineral" in § 82-4-303(9), MCA, is applicable only with respect to the regulation of metal mine reclamation and the term "mineral" as defined in § 82-4-403(6), MCA, applies only in the context of the regulation of opencut mining reclamation. Thus, the term "mineral," has varying definitions in different contexts.

The issue to be decided here is whether scoria is a "mineral" for the purpose of determining who should receive the payments from Western for the use of the surface of the land and the extraction of the scoria. This is an issue of first impression in Montana, and we therefore, consider case law from other jurisdictions which lead us to conclude that, for the purposes of land transfers including exceptions and reservations, scoria is not a mineral.

In Hovden v. Lind (N.D.1981), 301 N.W.2d 374, the Supreme Court of North Dakota, in deciding whether certain minerals had been reserved in a land sale contract, stated:

Though the word "minerals" has varying definitions, ... this court, prior to the enactment of § 47-10-25, held in Salzseider v. Brunsdale, 94 N.W.2d 502 (N.D.1959), that the term did not, in a reservation clause, include gravel. We believe this precedent applies to materials like clay and scoria also. A reasonable construction of the word "minerals" as used in a land sale contract excludes clay and scoria, as well as gravel.... Furthermore, we concur in the notion that materials like gravel, clay and scoria are not ordinarily classified as minerals because they are not exceptionally rare and valuable. (Citation omitted.)

Hovden, 301 N.W.2d at 378. Holland v. Dolese Company (Okla.1975), 540 P.2d 549, cited in Hovden, involved the question of whether limestone was part of the reserved mineral right at...