No. 12677
I N THE SUPREME COURT O THE STATE O M N A A
F F OTN
1974
JOANN A M T O G and R. V. BOTTOMLY,
R SR N
P l a i n t i f f s and Respondents,
-vs -
HIGH CREST OILS, I N C . , a corporation,
Defendant and A p p e l l a n t .
Appeal from: D i s t r i c t Court of t h e Twelfth J u d i c i a l D i s t r i c t ,
Honorable R. D. MePhillips, Judge p r e s i d i n g .
Counsel of Record :
F o r Appellant:
Crowley, Kilbourne, Haughey, Hanson and G a l l a g h e r ,
B i l l i n g s , Montana
Cale Crowley argued, B i l l i n g s , Montana
For Respondents :
Hoyt and Bottomly, Great F a l l s , Montana
John C. Hoyt argued, Great F a l l s , Montana
Submitted: February 26, 1974
Decided : BPR - 8 1910
F i l e d :BPR - 2 1974
Mr. Justice Frank I. Haswell delivered the Opinion of the Court.
This appeal is from an order of the district court of
Hill County granting plaintiffs' motion to alter or amend the
court's previous order granting summary judgment for defendant.
From this special order after judgment,defendant appeals.
Respondents, JoAnn Armstrong and R. V. Bottomly, are
successors in interest to Lewis H. Armstrong as lessor in an oil
and gas lease wherein appellant, High Crest Oils, Inc., is lessee.
On November 24, 1972, pursuant to Montana's Oil and Gas
Conservation Act, appellant applied for an order creating the
Bullhook Gas Unit in Hill County, Montana. The lands described
in the Armstrong lease were included in said unit area. The Com-
mission conducted a public hearing on December 14, 1972. John
Hoyt, representing the respondent royalty owners, announced his
presence at the hearing as a protestant to the proposed pooling
unit. Subsequent to the hearing the Commission rendered its re-
port, made findings of fact, conclusions of law, and issued its
order creating the Bullhook Gas Unit effective as of the date of
the hearing. On December 21, 1972, respondent Armstrong filed a
petition for rehearing with the Commission. Said petition was
denied by the Commission on January 29, 1973.
On May 14, 1973, pursuant to section 60-135, R.C.M. 1947,
respondent Armstrong filed a complaint in the district court of
Lewis and Clark County for a judicial review of the order of the
Montana Board of Oil and Gas Conservation Commission creating the
Bullhook Gas Unit. Subsequently, on June 4, 1973, an amended
complaint was filed by both respondents as parties in the action.
On May 16, 1973, respondents filed the instant action in
the district court of Hill County against appellant lessee. Re-
spondents requested a decree cancelling the Armstrong lease and
declaring that appellants had no claim of any kind upon the property
c o v e r e d by t h e s u b j e c t o i l and g a s l e a s e and f o r a n a c c o u n t i n g
o f a l l g a s produced and s o l d from t h e s u b j e c t l a n d l o c a t e d i n
H i l l County, Montana.
P a r a g r a p h s I V and V of t h e H i l l County c o m p l a i n t s e t f o r t h
t h e e s s e n c e of r e s p o n d e n t s ' c o n t e n t i o n s :
"That by t h e t e r m s of t h e l e a s e s e t f o r t h and marked
a s E x h i b i t ' A ' e x e c u t e d by t h e p r e d e c e s s o r i n i n t e r e s t
of p l a i n t i f f s and a s s i g n e d by t h e lessee t h e r e i n t o
d e f e n d a n t h e r e i n t h e l e s s e e i s g r a n t e d t h e r i g h t and
power t o p o o l and combine t h e a c r e a g e c o v e r e d by
s a i d l e a s e w i t h o t h e r l a n d , lease o r l e a s e s i n t h e
v i c i n i t y t h e r e o f a t any t i m e , when i n l e s s e e ' s judg-
ment i t i s n e c e s s a r y o r a d v i s a b l e t o d o s o f o r t h e
p r e v e n t i o n of w a s t e and t h e c o n s e r v a t i o n and g r e a t e s t
u l t i m a t e r e c o v e r y of o i l o r g a s . Such p o o l i n g t o
be i n a u n i t o r u n i t s n o t e x c e e d i n g i n a r e a t h e
a c r e a g e p r e s c r i b e d o r r e q u i r e d i n any f e d e r a l o r s t a t e
law o r d e r , r u l e o r r e g ~ l a t i o n . ~ . . a n d h e r o y a l t i e s
t
s h a l l a c c r u e and be p a i d t o l e s s o r on pooled s u b s t a n c e s
produced from any u n i t i n t h e p r o p o r t i o n , b u t o n l y i n
t h e proportion, t h a t l e s s o r ' s acreage i n t e r e s t i n t h e
l a n d c o v e r e d hereby and p l a c e d i n t h e u n i t b e a r s t o
t h e t o t a l acreage i n t h e land placed i n such u n i t .
"That o v e r t h e o b j e c t i o n s and p r o t e s t a t i o n s of p l a i n -
t i f f s d e f e n d a n t made a p p l i c a t i o n t o t h e Montana O i l
& Gas C o n s e r v a t i o n Commission f o r t h e c r e a t i o n of a
p o o l i n g u n i t which i n c l u d e d p l a i n t i f f s l a n d known a s
t h e B u l l Hook Gas U n i t and t h r o u g h a h i g h powered,
h a s t y p r e s e n t a t i o n induced t h e Commission t o c r e a t e
s u c h u n i t even though t h e g a s u n i t r e q u e s t e d by de-
f e n d a n t v i o l a t e d t h e e x p r e s s terms of i t s o i l and
g a s lease w i t h p l a i n t i f f s by p r o v i d i n g t h a t r o y a l t i e s
t h e r e a f t e r a c c r u i n g t o p l a i n t i f f s s h o u l d be p a i d t o
them a s l e s s o r s n o t i n t h e p r o p o r t i o n t h a t l e s s o r s
acreage i n t h e land placed i n t h e gas u n i t bears t o
t h e t o t a l a c r e a g e of t h e l a n d p l a c e d i n such u n i t
b u t on t h e c o n t r a r y d e f e n d a n t p l a c e d t h o u s a n d s o f
a c r e s of u n p r o d u c t i v e l a n d i n s a i d g a s u n i t and h a s
and i s c o n v e r t i n g p l a i n t i f f s s h a r e o f t h e g a s pro-
duced t o i t s e l f and o t h e r p e r s o n s a l l i n a n u n l a w f u l
and f r a u d u l e n t manner under t h e g u i s e of a ' g a s i n
p l a c e ' formula d i r e c t l y c o n t r a r y t o t h e e x p r e s s t e r m s
and c o n d i t i o n s of t h e a t t a c h e d O i l and Gas Lease a s
s e t f o r t h i n p a r a g r a p h I V above."
The o r d e r of Montana's O i l and Gas C o n s e r v a t i o n Commis-
s i o n c r e a t i n g t h e B u l l Hook Gas U n i t and t h e c o m p l a i n t s f o r j u d i -
c i a l review of t h i s o r d e r f i l e d i n Lewis and C l a r k County p u r s u a n t
to section 60-135, R.C.M. 1947, are included in the Hill County
court record.
On August 22, 1973, appellant filed a motion for summary
judgment in the Hill County action. This motion was argued be-
fore the district court. One month after the hearing on the
motion the court granted the summary judgment. Said order of
summary judgment was filed on November 15, 1973.
After the order for summary judgment was entered the
following actions transpired:
November 16, 1973, respondents1 motion to alter or amend
the judgment was served on the appellant together with supporting
brief.
November 19, 1973, notice of entry of summary judgment
was mailed by appellant to respondent.
November 28, 1973, appellantls brief in opposition to the
motion to alter or amend judgment was served by mail.
December 3, 1973, the district court issued its order
granting respondents1 motion and revoking the courtlsprevious
order granting appellant's summary judgment. This special order
after judgment was filed December 10, 1973.
No notice calling the motion to alter or amend judgment
up for hearing was ever served or filed; no order setting the
motion for hearing was ever made, served or filed; no order con-
tinuing the date for hearing the motion was ever made; no hearing
on the motion was ever held. Eighteen days after summary judg-
ment was filed the district court granted the motion to alter or
amend judgment. From this special order after judgment, this
appeal arises.
Two issues are presented for review:
(1) Should the summary judgment granted to appellant by
the district court be reinstated?
( 2 ) Is t h e o r d e r g r a n t i n g r e s p o n d e n t s ' motion t o a l t e r
o r amend judgment n u l l and v o i d f o r f a i l u r e o f t h e d i s t r i c t
c o u r t t o h o l d a h e a r i n g w i t h i n t e n d a y s a f t e r s a i d motion i s
s e r v e d a s r e q u i r e d by Rule 59, M.R.Civ.P?
On t h e f i r s t i s s u e r e s p o n d e n t s ' a r g u e t h a t t h e h e a r i n g
i n t h e d i s t r i c t c o u r t of Lewis and C l a r k County t o r e v i e w t h e
f i n d i n g s and c o n c l u s i o n s of t h e O i l and Gas Commission w i l l n o t
d e t e r m i n e t h e q u e s t i o n of whether t h e r e h a s been a v i o l a t i o n of
t h e t e r m s of t h e o i l and g a s l e a s e which i s t h e s u b j e c t m a t t e r
of t h e i n s t a n t a c t i o n . Respondents c o n t e n d t h a t t h e s u i t a g a i n s t
t h e O i l and G a s Commission h a s n o t h i n g t o d o w i t h whether o r n o t
t h e l e a s e between Armstrong and High C r e s t h a s been v i o l a t e d s o
a s t o c a u s e a f o r f e i t u r e of t h e l e a s e h o l d i n t e r e s t i n t h a t l e a s e
by High C r e s t .
W a g r e e w i t h r e s p o n d e n t s ' argument t h a t t h e c a n c e l l a t i o n
e
of t h e o i l and g a s l e a s e may be a s e p a r a t e i s s u e upon which a n o t h e r
c o u r t may have j u r i s d i c t i o n . I n t h e c a s e b e f o r e u s , however, we
c a n n o t s u b s c r i b e t o r e s p o n d e n t s ' d i s t i n c t i o n of t h e i s s u e s be-
f o r e t h e two c o u r t s . T h e i r arguments p r e s e n t a d i s t i n c t i o n w i t h -
out a difference. The r e a s o n s advanced b e f o r e t h e H i l l County
d i s t r i c t c o u r t f o r t h e a l l e g e d b r e a c h of lease are t h e a l l e g e d
i l l e g a l i t i e s i n a p p l y i n g f o r , and t h e wrongful c r e a t i o n o f , t h e
B u l l Hook Gas U n i t , c o u p l e d w i t h t h e a l l e g e d wrongful a c t of
i n c l u d i n g t h e l e a s e of r e s p o n d e n t s w i t h i n t h e B u l l Hook Gas U n i t .
These a r e t h e same r e a s o n s g i v e n t o t h e Lewis and C l a r k County
d i s t r i c t c o u r t f o r r e v e r s a l of t h e o r d e r c r e a t i n g t h e u n i t , and
t h e s a m e f a c t u a l arguments i n t h e b r i e f o f r e s p o n d e n t s i n t h i s
c a s e a r e a l s o t h e same p r e s e n t e d t o t h e ~ e w i s
and C l a r k County
d i s t r i c t court.
The r e s p o n d e n t s ' arguments h e r e a r e p r e d i c a t e d upon t h e
i n v a l i d i t y of t h e C o m i s s i o n k o r d e r . The c o u r t h a v i n g j u r i s d i c t i o n
over that question is the district court in Lewis and Clark
County where the challenge to the Commission's order was first
filed. Any consideration by the Hill County district court of
these same reasons, arguments and facts is a collateral attack
upon that judicial review provided in section 60-135, R.C.M. 1947.
Oil and gas conservation laws and the rules, regulations,
and orderspromulgated thereunder, have the effect of modifying
the provisions of existing leases in many respects. This stat-
utory and administrative action is an exercise of the police
power, and the fact that in some instances the lease may have
been procured prior to the legislative or administrative pro-
nunciation is immaterial. Sullivan, Handbook of Oil and Gas Law,
p. 431. In the present case the terms and provisions of the Oil
and Gas Conservation Act are in fact incorporated in the lease
to provide pooling of the land in question in accordance with any
federal or state law, order, rule or regulation.
Respondent's predicate their argument on violation of
that provision of the lease which grants to lessee the right to
pool said leased lands with other land in the vicinity subject
to certain limitations. This provision of the lease, however,
is related to one-well pooling as contemplated by section 60-130,
R.C.M. 1947. It is entirely different from the unitization of
all leases and all wells in an entire reservoir such as the Bull
Hook Gas Unit provided in the Board order pursuant to section
60-131.1, R.C.M. 1947.
The difference between one-well pooling authorized under
section 60-130, R.C.M. 1947 and in respondents' lease, and the
unitization of an entire reservoir under section 60-131.1, R.C.M.
1947, is illustrated in the following language in Sullivan's
Handbook of Oil and Gas Law, at p. 308:
"Under a system of minimum acreage spacing or
specified drilling units the small tract that
cannot meet the requirements of the spacing
rule is denied a well. In order to prevent
confiscation of the recoverable oil beneath such
tracts and to give each owner the opportunity
to produce his fair share thereof, spacing
statutes and regulations provide for pooling.
Pooling is the uniting of separately owned,
small, or irregularly shaped tracts for the
purpose of integrating the minimum acreage neces-
sary for a drilling unit. It is to be distinguished
from unitization or unit operations, which is the
consolidation of all interests in an entire pool,
or a large part thereof, for the purpose of operat-
ing the reservoir as a single producing mechanism."
(Emphasis added.)
Application by the appellant to the Montana Oil and Gas
Conservation Commission for the unitization of a reservoir under
section 60-131.1, R.C.M. 1947, does not constitute a breach of
the one-well pooling provision in the lease. Such unitization
of an extensive reservoir containing multi-leased lands, multi-
producing wells, multi-pools, and multi-spacing or drilling units
is different from the lease provision relating to pooling.
The presumption in this state is that compliance with
the Commission's order constitutes fulfillment of lease or contract
obligations. Section 60-131.8, R.C.M. 1947, provides in part:
" * * * Operations conducted pursuant to an order
of the commission providing for unit operations
shall constitute a fulfillment of all the express
or implied obligations of each lease or contract
covering lands in the unit area to the extent that
such obligations cannot be performed because of the
order of the commission."
Section 60-131.3, R.C.M. 1947, sets forth the terms, con-
ditions, and requirements of the commission order. Subsection (1)
and (3) provide that the commission order shall include:
"(1) A description of the pool or pools or parts
thereof to be so operated, termed the unit area,
but only so much of a pool as has reasonably been
defined and determined by drilling operations to
be productive of oil or gas may be included with-
in the unit area.
in
"(3) A plan for allocating to each tract/the unit
area its fair share of the oil and gas produced
from the unit area and not required or consumed in
the conduct of the operation of the unit area or
unavoidably lost. No such plan shall be approved
by the commission until the commission has con-
sidered the relative value that such share of
production bears to the relative value of all
of the separately owned tracts in the unit area,
exclusive of physical equipment utilized in unit
operations. In so considering such relative value,
the commission shall weigh thesonomic value of the
gas to all persons affected as compared to the
economic value of the oil to all persons affected."
The Commission's order determining "productive" lands and the
allocation of oil and gas as provided in subsections (1) and (3)
respecting respondents' lands within the unit area is the crux
of the argument in both actions. To permit respondents to bring
this second action would permit them to circumvent the statutes.
The order of the Commission to create the Bull Hook Gas Unit
is res judicata except in the appropriate district court in Mon-
tana on judicial review as provided in section 60-135, R.C.M.
1947. See St. John's Lutheran Hosp., Inc. v. State Bd. of Health,
161 Mont. 406, 506 P.2d 1378, 30 St.Rep. 249; Polson v. Public
Service Commission, 155 Mont. 464, 473 P.2d 508.
On May 14, 1973, respondents properly filed a complaint
in the district court in Lewis and Clark County for a review of
the Commission's order. The second action filed two days later
in Hill County involves the same subject matter, the same lessor,
the same lease, and the same land. It is nothing more than a
collateral attack precluded by the first action filed in Lewis
and Clark County.
With respect to the second issue we agree with appellant
that there was a failure on the part of both the respondents and
district court to comply with the time limitations of Rule 59,
M.R.Civ.P. Rule 59(f) entitled "Motion to Alter or Amend a Judg-
ment", provides in part:
" * * * This motion shall be heard and determined
within the time provided hereinabove with respect
to a motion for a new trial."
With respect to the time for hearing on a motion for a new trial,
Rule 59 (d) provides:
"Hearing on t h e motion s h a l l be had w i t h i n 10
d a y s a f t e r i t h a s been s e r v e d * * * e x c e p t t h a t
a t any t i m e a f t e r t h e n o t i c e of h e a r i n g on t h e
motion h a s been s e r v e d t h e c o u r t may i s s u e an
o r d e r c o n t i n u i n g t h e h e a r i n g f o r n o t t o exceed
30 d a y s * * *.
" I f t h e motion i s n o t n o t i c e d up f o r h e a r i n g and
no h e a r i n g i s h e l d t h e r e o n , it s h a l l be deemed
denied a s of t h e e x p i r a t i o n of t h e period of
t i m e w i t h i n which h e a r i n g i s r e q u i r e d t o be h e l d
under t h i s Rule 59."
The t i m e and p r o c e d u r a l l i m i t a t i o n s f o r motions s u b s e -
q u e n t t o judgment s e t o u t i n Rule 59, M.R.Civ.P., a r e mandatory.
S e i b e l v . Y u r i c k , 136 Mont. 39, 344 P.2d 1 2 9 . In recent decisions
by t h i s C o u r t , G i n v . H a r r i n g t o n , 161 Mont. 401, 506 P.2d 1375,
30 St.Rep. 245; and L e i t h e i s e r v . Montana S t a t e P r i s o n , 1 6 1 Mont.
343, 5 0 5 P.2d 1203, 30 St.Rep. 183, w e have r e i t e r a t e d t h e need
t o make f i n a l t h e judgments of t h e d i s t r i c t c o u r t s u b j e c t t o
a p p e a l t h a t would n o t u n n e c e s s a r i l y l e n g t h e n l i t i g a t i o n . I n Cain
and L e i t h e i s e r w e s t r i c t l y a p p l i e d Rule 59, M.K.Civ.P., i n order
t o p u t t o a n end t h e l i t i g a t i o n of t h o s e a c t i o n s .
W e s e e no r e a s o n i n t h i s c a s e t o p r o l o n g t h e a c t i o n and
add t h e e x p e n s e of a second a p p e a l . Thus we have answered b o t h
i s s u e s before t h i s Court.
For t h e r e a s o n s s e t f o r t h above, t h e o r d e r g r a n t i n g surn-
mary judgment on November 1 4 , 1973, i s r e i n s t a t e d , and t h e pur-
p o r t e d o r d e r of December 3, 1973, a l t e r i n g and denying t h e p r i o r
summary judgment, i s r e v e r s e d .
Justice
W e concur:
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Justices