Stokes v. Tutvet, 9594

• Decision Date: 11 August 1958
• Docket Number: No. 9594,9594
• Parties: T. P. STOKES, Plaintiff and Respondent, v. Martin TUTVET and Aslaug Berg Tutvet, husband and wife, Defendants and Appellants.
• Court: Montana Supreme Court

Page 1096

328 P.2d 1096

134 Mont. 250

T. P. STOKES, Plaintiff and Respondent, v. Martin TUTVET and Aslaug Berg Tutvet, husband and wife Defendants and Appellants.

No. 9594.

Supreme Court of Montana.

Aug. 11, 1958.

Selden S. Frisbee, Cut Bank, for appellants.

Ernest J. McCabe, Jr., Great Falls, for respondent.

CASTLES, Justice.

This is an appeal from a judgment in favor of plaintiff in an action for specific performance which arose over the interpretation of a contract for the conveyance of land. Upon trial before the court without a jury the court rendered its judgment in favor of plaintiff and against the defendants.

In the fall of 1947, the defendants listed their lands for sale with a real estate broker, one Fjosee. As a result of Fjosee's endeavors, a contract was entered into between the parties, the defendants as first party sellers and the plaintiff as second party buyer. The sellers and the buyer never personally met and discussed terms. The plaintiff and respondent, hereinafter referred to as the buyer, first talked to Fjosee a few days before he purchased the property. For all that appears in the record, the only discussion had between Fjosee and the buyer concerned the purchase price and terms of payment. Fjosee was the only intermediary between the parties themselves, and he was acting as the sellers' agent. It was stipulated that the contract was drawn by an attorney employed by Fjosee, but that the attorney did not see or talk with either party. Whether or not the intention of the parties was expressed in any negotiations had does not appear because the trial court ruled out any evidence as to intent on the basis that the written contract was clear, certain and unambiguous and could not be explained by parol evidence.

By the contract the sellers agreed to sell to the buyer certain land described in the contract, and the contract contained the following exception and reservation:

'* * * excepting and reserving unto the said first parties all except two percent (2%) of the landowner's royalty rights in and to all oil, gas and other minerals in, under or upon said premises, said two per cent (2%) of said landowner's royalty rights to be deeded to the said second party.'

The contract provided that the sellers were to convey 'by a good and sufficient Warranty Deed'; and that was the only provision concerning the type of conveyance to be used by the sellers.

At the time the contract was entered into there was no lease for oil and gas exploration.

The buyer made all of his payments as the contract provided up to the final payment.

At the time the buyer tendered the final payment to the sellers through the real estate broker Fjosee, he also tendered a deed to be executed by the sellers in which there was contained a reservation to the defendants of 10 1/2 percent of the landowner's royalty of the oil and gas, thus attempting to indicate that landowner's royalty was only 12 1/2 percent. This deed was not returned to the buyer and was not produced at the trial.

The sellers executed and delivered to the buyer a warranty deed conveying the land described in said contract which warranty deed contained the following provision as a reservation and exception:

'Saving and Excepting and Reserving unto the parties of the first part, their successors and assigns, all of the oil and gas and other minerals, in under and that may be produced from said lands.'

Along with the deed the sellers also executed and delivered a royalty assignment of 2 percent landowner's royalty of all of the oil and of all of the gas produced and saved from the lands described in the contract.

The buyer refused to accept these conveyances contending that they did not comply with or fulfill the terms of the contract.

Following several attempts to complete the transaction, the plaintiff buyer commenced this action. The complaint is one seeking specific performance. It set out the execution of the contract; the fulfillment of the terms thereof by the buyer and tender of the last payment due; the execution by the sellers of the deed with the reservation hereinbefore referred to, delivery of which was refused by the buyer 'for the reason that the description of the property to be conveyed is not in accordance with the terms of the contract'; and the offer of the sellers to convey to the buyer 'two percent of the oil and gas and other minerals in and under and that may be produced from said lands' which was refused by the buyer for the reason that it was not in accordance with the terms of the written contract. The buyer then prayed for judgment requiring the sellers to execute and deliver to the buyer a sufficient conveyance of the property 'wherein said property be described as hereinbefore set forth, and together with all tenements, hereditaments, and appurtenances thereto belonging or in anywise appertaining, excepting and reserving unto the said first parties all except two percent (2%) of the landowner's royalty rights in and to all oil, gas and other minerals in, under or upon said premises.'

The answer alleged that it was the intention of the sellers to convey only the surface of the property and a royalty interest of 2 percent of the oil, gas and other minerals to be produced and saved from said property, and that the sellers were to except from the conveyance and reserve to themselves all oil, gas and other minerals in, under and upon said premises; further alleged the execution of the deed and royalty assignment; and that by the tendered deed and royalty assignment the sellers had complied with the terms of the contract.

The answer then contained a cross-complaint in which all of the foregoing matters are set out and in addition alleges: that in view of the fact the litigation has arisen, the quoted exception and reservation provision of the contract is ambiguous and uncertain and that to execute the conveyances demanded by the buyer would only result in further confusion and litigation and would continue to render the title doubtful; and that in order to effect the intention of the parties to the contract the conveyances delivered by the sellers are proper and in accordance with the provisions of the agreement. The cross-complaint then asked for a declaratory judgment adjudicating the rights of the parties and declaring that the deed and royalty assignment therebefore tendered are in compliance with and in performance of the contract.

The trial court rendered its judgment whereby it ordered the sellers to execute and deliver to the buyer a good and sufficient warranty deed, in usual form, conveying to the buyer the lands in question with the following exception and reservation: 'excepting and reserving unto the said defendants all of the landowner's royalty rights in and to all oil, gas and other minerals in, under or upon said premises, Excepting two percent (2%) of such landowner's royalty rights.'

From this judgment and decree the sellers have appealed.

The specifications of error resolve themselves into a consideration of whether the reservation and exception contained in the contract is ambiguous and uncertain and whether evidence should have been received to ascertain the intention of the parties.

It is quite clear from the record in the trial court that the trial judge made his rulings on evidentiary matters on the basis that the terms of the contract were not ambiguous. He stated: 'To me the terms of the contract are not at all ambiguous. They are in the ordinary language of reservations covering matters of that kind.'

We can only observe that the case law in Montana on the subject leaves much to be desired, and that the terms of the reservation and exception in the aforementioned contract leave much to be desired in the language used. The wording is susceptible of several interpretations and we think reasonably so. The trial court was thrown into error by his belief that the terms of the contract were not at all ambiguous.

Certain basic, well-established rules with relation to the field of oil and gas conveyancing should be stated before we enter into a discussion of how this case should be decided.

First, Montana is an ownership-in-place state with regard to oil, gas and other minerals. 'The general rule is that--'Both petroleum and gas, as long as they remain in the ground, are a part of the realty. They belong to the owner of the land, and are a part of it as long as they are on it or in it, or subject to his control. When they escape and go into other lands, or come under another's control, the title of the former owner is gone, and when produced on the surface they become personal property and belong to the owner of the well.' (18 R.C.L. 1205; Lanyon Zinc Co. v. Freeman, 68 Kan. 691, 75 P. 995, 1 Ann.Cas. 403.)' Gas Products Co. v. Rankin, 63 Mont. 372, 393, 207 P. 993, 998, 24 A.L.R. 294; followed in Homestake Exploration Corp. v. Schoregge, 81 Mont. 604, 264 P. 388.

Second, Montana recognizes the rule that the title to the mineral interest in land, including oil and gas interests, may be segregated in whole or in part from the rests of the fee simple title. Rist v. Toole County, 117 Mont. 426, 159 P.2d 340, 342, 162 A.L.R. 406; Krutzfeld v. Stevenson, 86 Mont. 463, 284 P. 553; Broderick v. Stevenson Consol. Oil Co., 88 Mont. 34, 290 P. 244.

Third, Under a mineral deed conveyance, that is a conveyance of the mineral fee, the grantee is the recipient of the following incidents: '1. The right to go upon the land, conduct exploratory operations, and produce oil and gas. If there is a subsisting oil and gas lease, this right is subject thereto, but may be exercised if and when the lease terminates;

'2. The right to execute an oil and gas lease. If there is a subsisting lease this right is also subject thereto;

'3. The right to a share in the bonus under future leases;

'4. The right to a share in the rentals under existing and future leases;

'5. The right to share in the royalties...