Lewis v. State, Dept. of Revenue
| Decision Date | 05 January 1984 |
| Docket Number | No. 83-48,83-48 |
| Citation | 41 St.Rep. 9,675 P.2d 107,207 Mont. 361 |
| Parties | Jessie T. LEWIS, Estate of Wade V. Lewis, deceased, et al., Plaintiffs and Appellants, v. STATE of Montana, DEPARTMENT OF REVENUE, et al., Defendants and Respondents. |
| Court | Montana Supreme Court |
John Leslie Hamner, Butte, for plaintiffs and appellants.
Poore, Roth & Robinson, J. Richard Orizotti, Butte, R. Bruce McGinnis, Dept. of Revenue, Helena, for defendants and respondents.
Plaintiffs appeal from the order of the Fifth Judicial District Court, Jefferson County, granting defendants' motion for summary judgment. We affirm the order of the District Court.
The issue on appeal is whether the District Court properly granted defendants' motion for summary judgment.
Wade V. Lewis and Jessie T. Lewis granted to Azcon Corporation (Azcon), the exclusive rights to conduct mining exploration and removal and sale of all minerals from real property in the Elkhorn Mountains near Boulder. The agreement of the parties was contained in an "Operational Agreement" dated August 13, 1973. The defendants contend that the agreement was drafted by Wade V. Lewis, now deceased. Plaintiffs claim that the agreement was drafted by Azcon.
The parties' interests in the agreement were assignable. Azcon later assigned its rights and obligations under the operational agreement to Galli Exploration Company. All rights and obligations under the agreement were later assumed by Everett Berg, d/b/a Falcon Explorations. Berg owned the mining interest at commencement of this action.
Wade V. Lewis died in 1974. All property subject to the operational agreement is now solely owned by his wife, plaintiff Jessie Lewis. John T. Lewis, son of Wade and Jessie Lewis, is personal representative of the estate of Wade Lewis. The estate is a party to this action, although a final decree of distribution of the estate was entered in 1975. John Lewis also has power of attorney to conduct the affairs of his mother, Jessie Lewis.
As required by the agreement, an initial payment of $800 and annual rental payments of $3,500 for the years 1974 through 1980 were tendered to plaintiffs in the form of personal or company checks. Plaintiffs cashed the checks, all of which were honored by defendants' banks.
In a letter dated October 20, 1980, John Lewis (Lewis) made various inquiries concerning the mining operation and requested as follows:
"We will prefer to have the preponderance of our royalty, from this and subsequent runs, paid in gold bullion, with the remainder of the total payment via Certified Check."
However, the operational agreement did not require this form of payment and no agreement was made that payment would be as Lewis requested.
On January 23, 1981, Lewis served notice of default under the agreement upon defendants. The notice alleged six specific deficiencies:
The notice stated that pursuant to the operational agreement, defendants had 60 days to remedy the default. Defendant Berg's counsel promptly responded to the notice by letter on February 4, 1981. The letter responded point by point to Lewis' allegations of default.
A check for the $3,500 annual rental was enclosed with the letter. The letter stated that no "Net Smelter Returns" had been received and therefore no royalty payment or statement was yet due. Further, no accounting was required by the agreement because the agreement required only that records be open to inspection during business hours. The letter stated that the records were in fact open for inspection. The "lien" alleged in the notice was explained as having no effect on plaintiffs' interest because it was a judicially-ordered sale of the interest of one of the defendants. That interest was purchased by defendant Berg, who then became the owner of the entire interest under the operational agreement.
Finally, the letter requested clarification as to which records Lewis demanded. Some documents were sent to Lewis and the letter stated that any additional documents would be sent as soon as Lewis clarified his request. Lewis never responded to the letter nor otherwise requested further documents or the opportunity to inspect documents.
On April 13, 1981, Lewis sent defendants notice of termination of the operational agreement. The notice alleged that the defendants had failed to comply with the provisions of the operational agreement and had failed to cure the defaults specified in the default notice. Lewis demanded return of possession of the premises.
Defendant Berg first received net smelter returns from the refinery on April 20, 1981, seven days after the termination notice. The net smelter returns totaled $393,752.19. The earned royalty was then calculated as specified in the agreement. Berg notified plaintiffs by letter dated June 8, 1981 that an earned royalty was due and payable on or before August 1, 1981. By letter dated July 24, 1981, Berg documented the calculation of the earned royalty, pursuant to paragraph 6(d) of the agreement, and enclosed a check for the calculated amount of $20,024.87. Lewis kept this check but never attempted to cash it.
Plaintiffs filed suit on April 27, 1981, seeking declarations that defendants had no interest whatsoever in the subject property, that plaintiffs were sole owners of the property and that the agreement had been void all along or had been properly terminated by the plaintiffs. Plaintiffs asked for damages for loss of minerals and for exemplary damages.
After extensive discovery, including requests for admissions and production of documents, filing of several sets of interrogatories and responses, filing of affidavits, and deposition of Lewis, defendants moved for summary judgment. The issues were briefed and argument was heard by the District Court on October 26, 1982.
The District Court found that the operational agreement was in full effect, that the terms of the agreement were not ambiguous, and that defendants had performed their obligations under the agreement or had cured any default within 60 days as required by the agreement. The Court found there were no remaining genuine issues of material fact and that defendants were entitled to judgment as a matter of law. The Court granted defendants' motion and entered judgment for defendants. Plaintiffs appeal.
Plaintiffs argue that the District Court erred in granting summary judgment. They contend that numerous genuine issues of material fact remain unresolved and that the case should be remanded for trial on the merits. We disagree.
Rule 56(c), M.R.Civ.P. provides that summary judgment is proper where:
"... the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."
The well-settled rules applicable to summary judgment motions are set forth in Krone v. McCann (Mont.1982), 638 P.2d 397, 399-400, 39 St.Rep. 10, 13, and we need not repeat them here.
This action revolves around whether defendants Everett Berg and Falcon Explorations, as Azcon's successors to the mineral interest, were in default of their obligations under the operational agreement. If they were, the question arises whether the default was cured or whether plaintiffs properly terminated the agreement. We will review each alleged default in light of the parties' allegations and the record.
The first default alleged by plaintiffs was defendants' failure to remit the required $3,500 rental payment on the due date of January 2, 1981. It is undisputed that the payment was due on that date but that it was not made when due. However, that payment was made on February 4, 1981. The payment was therefore made within 60 days of the January 23 default notice. Under paragraph 14 of the agreement, payment within 60 days of the notice cured the default.
Plaintiffs argue, however, that the February 4 payment did not cure the default because the payment did not include $17.50 interest as required under section 31-1-106, MCA. However, even assuming that payment of interest was due under the statute, the agreement did not require payment of interest. Failure to remit the interest was not a default under the agreement. Moreover, plaintiffs did not specify in their default notice that interest was due and unpaid. The default clause requires that the notice specify the details of default so that the other party is fully informed. Plaintiffs failed to notify defendants that interest was due. Failure to include a $17.50...
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