Solberg v. Sunburst Oil & Gas Co.
| Citation | 246 P. 168,76 Mont. 254 |
| Decision Date | 22 April 1926 |
| Docket Number | 5868. |
| Parties | SOLBERG v. SUNBURST OIL & GAS CO. |
| Court | United States State Supreme Court of Montana |
Appeal from District Court, Toole County; George Bourquin, Judge.
Action by Martin Solberg against the Sunburst Oil & Gas Company. Judgment for plaintiff, and defendant appeals. Affirmed.
See also, 235 P. 761.
Homer G. Murphy and Hurd, Rhoades, Hall & McCabe, all of Great Falls, for appellant.
Louis P. Donovan, of Shelby, for respondent.
This is the third appeal in an action to compel the release of record of a certain oil and gas lease and for damages for failure to clear the record thereof.
The lease covered 320 acres of land in Toole county, and was executed by plaintiff, Solberg, to one Gordon Campbell on July 19, 1920. It granted to Campbell the lands described for the period of 20 years, but for the sole purpose of mining and operating for oil, gas, etc., and in consideration of this demise Campbell agreed to pay to the plaintiff 12 1/2 per cent. royalty on all oil and gas marketed from the premises and to commence a well upon the premises within 3 years. The only covenant of the lessee, however, with which we are concerned, is a like agreement to "commence drilling operations for oil in what is known as the Rocky Ridge Dome" within 8 months from and after the date of the lease, and "to prosecute such operations diligently thereafter, unless prevented by strikes, the elements, unavoidable accident, or other causes beyond the control of the second party, until a well 2,500 feet in depth is drilled or until oil * * * is discovered in paying quantities at a lesser depth." This clause does not provide for the payment of rental as an alternative to drilling, nor does the lease, in terms, provide for its termination or forfeiture on failure to comply with its provisions. The only reference to default, forfeiture, or notice is found in the following clause:
"It is further agreed that, in case of the default of the party of the second part in the performance of any of the terms and conditions of this lease, the said party of the second part shall execute and deliver, within 30 days after demanded, a full discharge, satisfaction, and release of the party of the first part from all the terms and obligations of this lease and option to purchase and all the obligations thereof."
The complaint alleged the execution and recordation of the lease and its subsequent assignment to defendant, and then alleged that the lessee and his successors and assigns failed to commence drilling operations on the Rocky Ridge Dome "on or before March 19, 1921, and did further fail to prosecute said operations diligently thereafter," etc., and that by reason of said failure "the said lease became, and was, forfeited"; that the defendant neglected and refused for 60 days after such forfeiture to have the lease released of record, and does still neglect and refuse so to do, and by reason of such neglect and refusal plaintiff was prevented from making a new lease or otherwise disposing of the premises, to plaintiff's damage in the sum of $16,000. The complaint then alleged that written demand to clear the record of said lease was served upon defendant on August 18, 1922. This complaint was filed October 7, 1922.
The answer, in addition to denials, pleaded performance of the terms and conditions of the lease, and waiver and estoppel, which pleas were met by a reply.
The action was brought under the provisions of sections 6902, 6903, and 6904, Revised Codes of 1921, which authorize the institution of an action for damages for failure to clear the record of a lease which has been forfeited, after written demand to do so. Section 6903 provides that in such an action the plaintiff, having complied with the directions of these sections, may recover from the defendant the sum of $100 damages and "* * * any additional damages that the evidence in the case will warrant."
On the first trial the district court held the action to be in equity, and on that theory discharged the jury and rendered judgment for defendant. An appeal was taken, and, in reversing the judgment, this court declared that the primary object of the above statutes was "to penalize the lessee for a failure to clear the record after forfeiture of the lease," and "was intended by the lawmakers as a legal remedy," and accordingly held that the case was an action at law in which the plaintiff was entitled to a jury trial. Solberg v. Sunburst Oil & Gas Co., 70 Mont. 177, 225 P. 612. On a retrial the trial court rendered and caused to be entered a judgment of nonsuit, on the theory that no forfeiture was shown, and, on appeal from this judgment, we again reversed the trial court, for the reason that, whereas the lease required the lessee to "commence drilling operations" on or before March 19, 1921, plaintiff's proof established the fact that the test well was not "spudded in" until April 14, 1921, and that, by the language employed in the contract, the lessees agreed, within a specified time, "to commence drilling operations for oil and continue to a maximum depth of 2,500 feet," the performance of which conditions could not be accomplished by placing timbers and material upon the ground, but only by the operation of a drill in the ground. We therefore held that a showing that the first entry of the drill in the ground on April 14, 1921, made out a prima facie case of default and forfeiture. In the opinion we called attention to the fact that plaintiff had pleaded general damages only, and that "there was no proof or offered evidence that the plaintiff could have leased the lands to any other person, nor that he had suffered any special damage in consequence of defendants' failure to discharge the lease of record." Solberg v. Sunburst Oil & Gas Co., 73 Mont. 94, 235 P. 761.
The cause was again remanded for a new trial, and came on for hearing on July 8, 1925, at which time plaintiff was granted leave to amend the complaint by substituting, for the former allegation of damages, the following:
"That, if the defendant Sunburst Oil & Gas Company had released said lease of record within twenty (20) days after said written demand for release, plaintiff could, and would, have sold an oil and gas lease on the said premises above described; and that, by reason of defendant's neglect and refusal to release the said oil and gas lease from the record, all prospective purchasers of oil and gas leases on said premises were dissuaded and prevented from purchasing an oil and gas lease thereon, and refused and still refuse to purchase the same; that the plaintiff, by reason of said neglect and refusal of the defendant, * * * has been unable to sell an oil and gas lease on said land, and has been injured * * * in the sum of $16,000."
To the complaint as amended, defendant demurred on the ground that the allegations contained in the amendment were indefinite and uncertain, in that they failed to disclose to whom, if any one, plaintiff could or would have sold a lease or for what amount, or under what circumstances such a sale could have been made, and do not disclose in what manner plaintiff suffered special damages. This demurrer was overruled. Defendant asked leave to file a supplemental answer showing that, in July, 1923, the lands in question were sold on foreclosure of the mortgage thereon and were not thereafter redeemed, which leave was denied.
The cause was finally submitted to the jury and a verdict for plaintiff in the sum of $5,980 was rendered, and judgment thereon duly entered. Defendant moved for a new trial, which motion was denied, and thereafter defendant appealed from the judgment.
Defendant has made numerous assignments of error, which, however, are not argued in the usual manner; instead, counsel have discussed generally the law and the evidence with reference to the defendant's position and contentions herein, and, as each point is made, assert its applicability to certain assignments or groups of assignments. The questions thus presented will sufficiently appear in this opinion without their statement at this time.
1. As it is not expressly provided by the terms of the contract under consideration that time shall be considered of the essence of the contract, and counsel for the defendant contend that forfeitures are frowned upon by the law and that a lease should be strictly construed against the lessor, it first becomes necessary to determine what rules of construction should be followed as to these matters.
Oil and gas leases differ from the ordinary and well-known forms of leases in existence and heretofore construed in this state such as leases on city property and agricultural and grazing lands, in that, in the latter classes of leases valuable property rights are at once acquired by the lessee and immediate possession usually yielded by the lessor, and the occupancy by the lessee either improves, or at least does not materially injure, the leased premises; he gets no right to take away any part of the soil, and during the term of the lease, in the absence of extraordinary circumstances, the value of the property remains reasonably stable, while, on the other hand, no particular value attaches to an oil and gas lease until after development and the production of oil or gas in paying quantities. The holding of a lease for this latter purpose, without prospecting or operating, inures only to the benefit of the lessee as a speculator, and possession of the premises is not usually yielded at once, and, when yielded, the lessor usually retains possession of the larger part of the surface ground. When the lessee finally takes possession and commences operations, the lessor's lands may be riddled with holes and cluttered with derricks and other...
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