MacMaster v. Onstad

• Decision Date: 28 October 1957
• Docket Number: No. 7666,7666
• Citation: 86 N.W.2d 36
• Parties: A. D. MacMASTER and Neva H. MacMaster, Plaintiffs and Respondents, v. H. G. ONSTAD, Defendant and Appellant.
• Court: North Dakota Supreme Court

Page 36

86 N.W.2d 36

A. D. MacMASTER and Neva H. MacMaster, Plaintiffs and Respondents, v. H. G. ONSTAD, Defendant and Appellant.

No. 7666.

Supreme Court of North Dakota.

Oct. 28, 1957.

Rehearing Denied Nov. 27, 1957.

Syllabus by the Court.

1. No lease or conveyance of mineral rights or royalties, separate from the surface rights in real property, grants any interest in gravel, coal, clay or uranium unless the intent to convey such interest is specifically and separately set forth in the instrument of lease or conveyance. Chapter 235, Laws of N.D.1955.

2. The language of a contract is to govern its interpretation if the language is clear and explicit and does not involve an absurdity. Sec. 9-0702, NDRC 1943.

3. When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone if possible, subject, however, to the other provisions of Chapter 9-07. Section 9-0704, NDRC 1943.

4. The whole contract is to be taken together so as to give effect to every part if reasonably practicable. Each clause is to help interpret the others. Section 9-0706, NDRC 1943.

5. The words of a contract are to be interpreted in their ordinary and popular sense rather than according to their strict legal meaning, unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed. Section 9-0709, NDRC 1943.

6. Where a lease of real property with the privilege of mining for oil, gas, casinghead gas, casinghead gasoline and all other minerals includes sulphur by specific mention in the royalty clauses of the lease, beds of crystalline sulphur and sulphur compounds, which cannot be recovered by means of the operation of an oil and gas well, are included in the lease.

7. Where the maxim 'ejusdem generis' is applied in construing the words 'all other minerals' as used in an oil and gas lease, the classification adopted, must be sufficiently broad to include all minerals which are specifically mentioned in the lease.

8. Neither the classification 'hydrocarbons' nor the classification 'minerals which can be recovered by the operation of an oil and gas well' is sufficiently broad to include deposits of crystalline sulphur or sulphur compounds.

9. Where an oil and gas lease granted the privilege of mining and operating for oil, gas, casinghead gas, casinghead gasoline and all other minerals; provided for a royalty of one-eighth upon oil and gas and a royalty of one-tenth on all other minerals mined and marketed and a royalty on sulphur of fifty cents a long ton; the intent of the parties, as disclosed by the lease, was that the lessee was authorized to produce other minerals not associated with, and distinctly different from, oil and gas.

10. The words 'all other minerals' contained in a lease of real property for the purpose of mining and producing oil and gas and all other minerals do not include all inorganic matter but are subject to some limitations.

11. Reformation of an instrument may not be granted in an action to determine adverse claims unless the party seeking reformation has set forth the facts which would entitle him to reformation and has prayed for such relief in his pleadings.

Burk & O'Connell, Williston, for appellant.

Bjella, Jestrab & Neff, Williston, for respondents.

Cox, Pearce & Engebretson, Bismarck, as amicus curiae.

BURKE, Justice.

This is a statutory action to determine adverse claims to real property. Issue was joined upon the question of whether an oil and gas lease by which the plaintiff leased certain lands to the defendant with the exclusive right of mining and operating for and producing oil, gas, casinghead gas, casinghead gasoline and all other minerals, gave to the lessee an interest in, and the right to extract from the described land, minerals other than those specifically named in the lease and those which could be recovered through the drilling and operation of an oil and gas well. The trial judge construed the lease and applying the rule of ejusdem generis in the construction of the words 'and all other minerals' held that the lease granted an interest only in such minerals 'as are, or can be, produced in connection with, and as an incident of the production of oil and gas through the means of a well,' and did not grant an interest in minerals which are extracted from the land by other types of mining operations. The defendant has appealed from the judgment and demanded a trial de novo in this court.

The lease is one of the standard forms of oil and gas leases. It is entitled: 'Oil and Gas Lease'. The more important provisions of the lease are as follows:

'Witnesseth: That the lessor, for and in consideration of One (1) Dollar (1.00), cash in hand paid, receipt of which is hereby acknowledged, and of the covenants and agreements hereinafter contained in the part of the lessee to be paid, kept and performed, has granted, demised, leased and let, and by these presents does grant, demise, lease and let exclusively unto said lessee with the exclusive right of mining, exploring by geophysical and other methods, and operating for and producing therefrom oil, gas, casinghead gas, casinghead gasoline, and all other minerals, and laying pipe lines, telephone and telegraph lines, and building tanks, power stations, gasoline plants, ponds, roadways and structures thereon to produce, save and take care of said products, and the exclusive right of injecting water, brine and other fluids into sub-surface strata, and housing and boarding employees and any and all other rights and privileges necessary, incident to, or convenient for the economical operation alone, or conjointly with neighboring land, for the production, saving, and taking care of oil, gas, casinghead gas, casinghead gasoline, and all other minerals, and the injunction of water, brine and other fluids into subsurface strata, all that certain tract of land situated in the County of Williams, State of North Dakota; described as follows, to wit:

Township 156 North, Range 102 West

Section 30: E 1/2 SW 1/4, Lots 3 and 4

of Section _____ Township _____ Range _____ and containing 160 acres, more or less, it being the purpose and intent of the lessor herein to lease, and lessor does hereby lease, all of the lands owned by the said lessor which adjoin the lands above mentioned or which lie in the section or sections herein specified.

'Subject to the other provisions hereof, it is agreed that this lease shall remain in force for a term of Two years from this date (herein called 'primary term') and as long thereafter as oil gas, casinghead gas, casinghead gasoline or other mineral is produced from said leased premises.

'In consideration of the premises the said lessee covenants and agrees:

1st. To deliver to the credit of the lessor, free of cost, in the pipe line to which lessee may connect his wells, the equal one-eighth part of all oil produced and saved from the leased premises, or at the lessee's option, to pay to the lessor for such one-eighth royalty, the market price for oil of like grade and gravity prevailing on the day such oil is run into the pipe line or into storage tanks.

'2nd. To pay the lessor one-eighth, at the market price at the well for the gas so used, for the gas from each well where gas only is found, while the same is being used off the premises, and lessor to have gas free of cost from any such well for all stoves and all inside lights in the principal dwelling house on said land during the same time by making his own connections with the wells at his own risk and expense.

'3rd. To pay lessor for gas produced from any oil well and used off the premises or for the manufacture of casinghead gasoline, one-eighth, at the market price at the well for the gas so used, for the time during which such gas shall be used, said payments to be made monthly.

'4th. To pay or deliver to lessor, on all other minerals mined and marketed, one-tenth cither in kind or value at the well or mine, at lessee's election, except that on sulphur the royalty shall be fifty cents (50cents) per long ton.'

The balance of the lease sets forth specific rights of the parties in connection with an oil and gas operation upon the leased premises.

The issue arising upon a construction of this lease is in part settled by chapter 235, Laws of N.D.1955. This chapter provides:

'No lease or conveyance of mineral rights or royalties separate from the surface rights in real property in this state shall be construed to grant or to convey to the grantee thereof any interest in and to any gravel, coal, clay or uranium unless the intent to convey such interest is specifically and separately set forth in the instrument of lease or conveyance.'

The lease was executed September 24, 1956, and is therefore governed by these statutory provisions. It follows that the words 'all other minerals', as used therein, do not include gravel, coal, clay or uranium.

The construction of the lease generally is subject to certain statutory rules of interpretation. Those which we consider pertinent here are as follows:

'The language of a contract is to govern its interpretation if the language is clear and explicit and does not involve an absurdity.' Section 9-0702, NDRC 1943.

'When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone if possible, subject, however, to the other provisions of this chapter.' Section 9-0704, NDRC 1943.

'The whole of a contract is to be taken together so as to give effect to every part if reasonably practicable. Each clause is to help interpret the others.' Section 9-0706, NDRC 1943.

'The words of a contract are to be understood in their ordinary and popular sense rather than according to their strict legal meaning, unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed. Section 9-0709,...