Marias River Syndicate v. Big West Oil Co.

• Citation: 38 P.2d 599,98 Mont. 254
• Decision Date: 11 December 1934
• Docket Number: 7288.
• Parties: MARIAS RIVER SYNDICATE et al. v. BIG WEST OIL CO. et al.
• Court: United States State Supreme Court of Montana

38 P.2d 599

98 Mont. 254

MARIAS RIVER SYNDICATE et al. v. BIG WEST OIL CO. et al.

No. 7288.

Supreme Court of Montana

December 11, 1934

Appeal from District Court, Toole County; R. M. Hattersley, Judge.

Action by the Marias River Syndicate, a common-law trust, and another against the Big West Oil Company and others, in which the defendants cross-complained. From a 01,38 P.2d judgment for the defendants, plaintiffs appeal.

Remanded with directions.

E. K Cheadle, Jr., of Shelby, and Boyesen, Otis & Faricy, of St Paul, Minn., for appellants.

Freeman Thelen & Freeman, of Great Falls, for respondents.

ANDERSON Justice.

On March 27, 1923, John N. Thelen and wife were the owners of certain real estate in Toole county. On that day they conveyed these lands to James D. Hawkins by warranty deed, with certain exceptions, which was recorded on July 6, 1923. On July 8, 1925, Hawkins and his wife conveyed the lands to C. E. Armstead, trustee, together with 80 per cent. of the oil and gas and other mineral therein and thereunder. Eventually, by mesne conveyance, the plaintiff acquired title to the lands, together with 70 per cent. of the oil and gas rights. The deed from Thelen to Hawkins contained the following provision: "Reserving unto the said parties of the first part a 12 1/2 per cent. interest and royalty in and to all oil and gas and other minerals of whatsoever nature, found in or located upon or under said land or premises above described, or that may be produced therefrom."

Thereafter the interest in the oil and gas reserved in this deed was conveyed in various amounts to the respondents herein. The residue of the oil and gas interests, other than the 70 per cent. conveyed to and owned by the plaintiff, was assigned and conveyed to various other parties, who were originally defendants in this action but who do not appear as respondents, for the reason that the action had been settled as to them.

Prior to October 25, 1928, the plaintiff took possession of these lands and drilled oil wells thereon, and produced oil in considerable amounts. The oil produced prior to the commencement of this action was sold to the Big West Oil Company, and the proceeds thereof were paid to the various parties owning interests in oil and gas as their interests appeared prior to that date. As near as can be determined from the record, this course of conduct continued for approximately a year. After that date, at the request of the plaintiff, the Big West Oil Company impounded the proceeds of 30 per cent. of the oil produced from these premises, representing the shares of the original defendants and other owners of these interests, and the money so impounded was deposited with the clerk of the court soon after the commencement of this action. Additional sums representing the proceeds of these interests, other than that of the plaintiff, were deposited with the court from time to time. The interests of all the defendants who are respondents on this appeal were acquired by mesne assignments or conveyances of the interests reserved by J. N. Thelen and wife in the deed containing the quoted provision.

Plaintiffs brought this action against the Big West Oil Company to recover the sum of money withheld. The company secured an order of interpleader or substitution, whereby it was directed to deposit the funds then impounded with the clerk of court and all other sums which might come into its possession from the sale of 30 per cent. of the oil produced from the premises described, from and after the date of its first deposit until the further order of the court, and that all persons who owned any interest in the 30 per cent. of the oil and gas rights not conveyed to the plaintiff be substituted as parties defendant. The defendants who are respondents here filed their answer, consisting chiefly of a counterclaim or cross-complaint.

The case was tried before the court sitting without a jury, in April, 1932. Briefs were submitted by the parties, and in June of that year the court indicated to counsel that it had arrived at a decision in favor of the respondents, and requested their counsel to prepare findings of fact, conclusions of law, and judgment. It does not appear that the court caused to be made any minute entry, or filed any document or paper with the clerk indicating this conclusion. No judgment, however, was entered within six months subsequent to June, 1932, and on September 19, 1933, plaintiff filed a motion to dismiss the counterclaim or cross-complaint, for failure of defendants to have a judgment entered within six months. This motion, on hearing, was denied, and thereafter findings of fact, conclusions of law, and judgment were made and entered in favor of the defendants. The appeal is from the judgment.

It was the theory of plaintiffs below, and it is contended here, that under the exception or reservation in the deed from Thelen and wife to Hawkins, 12 1/2 per cent. of the oil and gas under the lands was excepted, and that at the time of the conveyance the effect of this exception was to create a tenancy in common with the other owners of the oil and gas in and under these lands, and that therefore the plaintiffs, as tenants in common, had a right to go upon the premises and produce oil therefrom, and that plaintiffs were entitled to deduct from the interests of the defendants in the oil produced their proportionate part of the expenses reasonably incurred in the discovery and production of oil.

The defendants contended in the court below, and now assert, that the plaintiffs must account to them for their portion of the oil produced, free and clear of any charge or expense for discovering and producing the oil from the premises. They base their contentions upon the grounds (a) that by the terms of the deed their interests were excepted, and (b) upon the practical construction adopted by the parties in accordance with their contentions.

On the trial of the case the parties introduced numerous conveyances establishing their respective interests. Plaintiffs produced evidence as to the amount of money expended in discovering and producing the oil, and as to the reasonableness of the charges made. Defendants offered evidence tending in some measure to controvert the reasonableness of the charges made for pumping the oil.

The trial court found in accordance with the contentions of the defendants and entered judgment of dismissal of plaintiffs' complaint, with costs, and ordered the payment of the impounded funds to the defendants, in accordance with their respective interests as found by the court.

Plaintiffs assign error by the trial court in making various findings wherein it was determined that the defendants were owners of certain interests in the oil and gas found on these lands, as royalty, and in making and entering judgment in their favor and against the plaintiffs.

It will be noted that there was no oil and gas lease executed on these premises. Thelen and wife admittedly conveyed all their interest in and to the lands and premises, except the 12 1/2 per cent. interest in the oil and gas, and all the predecessors in interest of plaintiffs likewise so conveyed all their interest in these lands and premises, aside from the interest in the oil and gas expressly excepted.

The provision of the deed under consideration is referred to as a reservation, and the word "reserving" was used. The early writers of the English law distinguished between an "exception" and a "reservation," an exception being in effect a withdrawal from the operation of the grant of a particular portion of the land granted ( Powell v. Big Horn Low Line Ditch Co., 81 Mont. 430, 263 P. 692), and a reservation merely providing for the return of a rent or service regarded as issuing out of the land granted (Summers on Oil and Gas, 137; Mills & Willingham on Oil and Gas, 25). Under these ancient doctrines it was said that the proper place for an exception was in the granting clause, and for a reservation in the reddendum clause.

The modern conception of conveyancing, however, seeks to ascertain the intent of the grantor from a consideration of the entire instrument, without regard to the position of the several clauses, and, in order to give effect to such intent when ascertained, an exception will be construed as a reservation, and vice versa. Mills & Willingham on Oil and Gas, 25; see, generally, Krutzfeld v. Stevenson, 86 Mont. 463, 284 P. 553. Accordingly, the provision under consideration was an exception from the grant made by Thelen and wife to Hawkins.

The deed containing this exception contains no express obligation on the part of any of the parties to discover or produce oil and gas, or...