No. 87-361
IN THE STJPREME COURT OF THE STATE OF MONTANA
1988
MONTE VISTA COMPANY, a Montana
Corporation,
Plaintiff and Appellant,
THE ANACONDA COMPANY, a Delaware
Corporation, and WILLIAM G MOUAT,
individually and as agent,
Defendants and Respondents.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Stillwater,
The Honorable Diane G. Rarz, Judge presidinq.
COUNSEL OF RECORD:
For Appellant:
Robert Edd Lee; Crowley, Haughey, Hanson, Toole
and Dietrich, Billings, Montana
For Respondent:
Rockwood Brown; Anderson, Brown, Gerbase, Cebull,
Fulton, Harman and Ross, Billings, Montana (Anaconda?
William H. Bellingham; Moulton, Bellingham, Long0
and Mather, Billings, Montana (Mouat)
Submitted: April 8, 1988
Decided: 4, 1988
Filed: MAY 4 - 1988
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
In December 1980, plaintiff and appellant Monte Vista
brought this action alleging breach of contract and seeking
declaratory judgment and contract reformation. On May 23,
1983, Monte Vista filed an amended complaint which added
claims for interference with economic advantages, bad faith,
civil conspiracy and punitive damages. Subsequently, appel-
lant Monte Vista and respondents Anaconda Company and William
Mouat filed numerous motions, including counter- and cross-
claims and motions for summary judgment. On March 16, 1987,
the Thirteenth Judicial District Court, Stillwater County,
granted respondents' motions for summary judgment against
Monte Vista. From that order, Monte Vista appeals.
On appeal, Monte Vista raises six issues for our re-
view. We have restated the issues as follows:
1. Did the District Court properly determine that
Monte Vista's leasehold interests under the "A" lease were
lawfully terminated by reason of its failure to produce and
its payment of "minimum rentals" for over three consecutive
years?
2. Did the District Court properly determine that
Monte Vista's leasehold rights under the "B" lease expired by
reason of Monte Vista's failure to renew the optional
five-year term?
3. Did the District Court abuse its discretion when it
granted summary judgment against Monte Vista's claims of
interference with economic advantages, bad faith, civil
conspiracy and punitive damages?
Prior to World War I, M. W. Mouat, the forebear and
predecessor in title of the Mouat respondents, began locating
mining claims in the "Stillwater Complex" located in
Stillwater County, Montana. The Stillwater Complex is an area
of large mineral reserves located at the northern edge of the
Beartooth Mountains. The Stillwater Complex contains anoma-
lous concentrations of integrated minerals including copper
and nickel sulfides, chromites and platinum sulfides. From
the 1920s through the 1-940s, M. W. Mouat was active in the
Stillwater Complex and accumulated a significant holding of
both patented and unpatented mining claims.
During World War 11, the United States government
condemned certain mining properties in the Stillwater Com-
plex, including the Mouat interests, for the production of
chrome. Subsequent to World War 11, M. W. Mouat and his
heirs engaged in litigation to recover their condemned prop-
erty. Ultimately, most of the mining properties were re-
turned to the Mouat family.
During the 1950s and until 1962, the Mouats leased the
chrome mine developed during World War I1 to American Chrome
Company. American Chrome produced and stockpiled chrome
concentrates for national defense purposes under a subsidized
contract with the United States government. American Chrome
constructed a mill for processing chrome ores that was locat-
ed on the Mouats' condemned Stillwater mineral properties.
Following a one-year hiatus, in 1963 the Mouats leased
a portion of the Stillwater mineral properties to Monte
Vista. On May I, 1963, Monte Vista, as lessee, entered into
three agreements with the Mouat family, as lessor. In 1964,
Monte Vista suffered serious financial difficulties and was
forced to renegotiate the Stillwater leases. On July 30,
1964, the parties executed an agreement modifying and amend-
ing the 1963 contracts.
The May 1, 1963, agreements included: (1) Mine Lease
,
"A"; (2) Mine Lease "B". and (3) the "Industries Agreement. "
Under Mine Lease "A", Monte Vista leased the "Mouat Chrome
Mine" and all property situated on or within the mining
claims constituting the Mouat chrome mine, for fifty years,
subject to certain provisions. The pertinent provisions of
Mine Lease "A" are as follows:
[This lease shall remain in effect for
fifty (50) years - - long thereafter
and so
as lessee shall:]
-
(a) - -
in each succeeding consecutive 18
month period produce or ship chrome ores
and/or chrome concentrates in commercial
quantities obtained from the leased
premises; or
(b) continue Monte's operations as the
term "Monte's operations" is defined in
Section IV-Royalties and Rentals, of
this lease; or
(c) keep in force and effect the "lease
of all other chromite claims" between
Lessors herein, as lessors, and Lessee
herein, as lessee, which said lease is
of even date herewith and more particu-
larly described in the ~ ~ r e e m e n t - o f
even
date herewith between Lessors Mouat
Industries, Inc., and Monte (said lease
being hereinafter called - - "B" lease) .
Paragraph 11, pp. 4-5, Mine Lease "A".
The term "Monte's Operations" as used in
subparagraph B of Section IV means
Monte's manufacture - sodium chromate,
of
sodium biochromate, potassium chromate
- potassium bichromate and other chrome
or
chemicals derived by Monte from sodium
chromate or sodium -bichromate manufac-
tured by Monte, including the usual
by-products of such manufacture, at
locations that can be reasonably and
economically supplied with chromite
obtained from the Stillwater Complex;
- - mining, processing, and tkans-
and its
wortina of chromite raw materials for
>uch ;anyfacture. [Emphasis added.]
Paragraph I11 B, p. 8, Mine Lease "A".
Mine Lease "A" required Monte Vista to pay the Mouats a
royalty calculated by means of a formula based on production
of ores and concentrates plus a rental based on a percentage
of the profits derived by Monte Vista from "Monte's Opera-
tions." Mine Lease "A" also provided for the payment of
"minimum rentals" to the Mouats should mining operations by
Monte Vista be "totally suspended*' as defined as follows:
C. Minimum Rentals under Total Suspend-
- Operations:
ed
- minimum
No rentals shall - payable
be
under this lease - long -
as as:
(a) in any consecutive eighteen (18)
month ~eriod. Lessee shall wroduce or
ship ores and/or concentrates in commer-
cial quantities obtained from the leased
premises, or
(b) Lessee is continuing Monte's opera-
tions as herTinbefore defined; or
(c) - - B lease shall - - force and
the be in
effect.
In the event that ores or concentrates
are not produced in any period of eight-
een (18) consecutive months in commer-
cial quantities, - the B lease has
and
terminated, - Monte's operations are
and
suspended (such conditions being collec-
tively called "total suspended opera-
tions"), as of the first day of any
annual accounting period, as hereinbe-
fore defined, and such total suspended
operations shall continue to exist - - a
for
eriod of not less than ninety (90) days
P----
thereafter, Lessee shall pay to the
Lessors minimum - - - - of
rental in 1
royalty payable under this lease - as
follows:
(i) $750.00 per calendar month until the
first annual accounting period of total
suspended operations; and,
(ii) $1,250.00 per calendar month during
each succeeding annual accounting period
of total suspended operations.
- any - - -
At time from and after - - of
the end
the third full successive year - -G
of t
accrual - minimum rentals hereunder,
of
the Lessors mav terminate this lease
.
1
upon ninety (90) days' notice - writing
in
to Lessee. [Emphasis added.]
-
Paragraph 111 C, pp. 11-12, Mine Lease "A".
Under Mine Lease "B", Monte Vista leased Mouats' re-
maining chromite mining claims in the Stillwater Complex.
Mine Lease "B" was renewable each five years upon giving the
Lessor not less than ninety days notice in writing. Royal-
ties due the Mouats under Mine Lease "B" were based on
amounts of ore or concentrate produced, similar to Mine Lease
"A". The method of calculating minimum rentals, however, was
much simpler than under Mine Lease "A". Mine Lease "B"
provided that Monte had an obligation to pay a minimum rental
". . . if royalties from said premises for said calendar
month, and for any calendar month thereafter, do not equal or
exceed the sum of $2,000.00, the Lessee shall pay on or
before sixty days following the end of each such calendar
month, such sum as may be necessary to equal the difference
between royalty payments payable for such month and $2,000
. . ." Paragraph IV, p. 7, Mine Lease "B".
The "Industries Agreement" was the third agreement
entered into between Monte Vista and the Mouats. This agree-
ment provided for the sale of the Mouat Chrome Chemical Plant
at Columbus. The Industries Agreement also provided for the
sale of additional patented mining claims. Mine Leases "A"
and "B" were incorporated as "integral and essential" parts
of the "Industries Agreement."
Following the May 1, 1963, execution of the Stillwater
leases, Monte Vista encountered severe financial difficul-
ties. By July 1964, Monte Vista was $14,000 in arrears in
Mine Lease "B" minimum rental payments. Per Monte Vista's
request, the parties, on July 30, 1964, executed a "Letter of
Agreement," (1964 Amendments) which modified and amended the
1963 contracts.
Pertinent provisions of the 1964 Amendments are as
follows :
Amendment No. 4. Beginning August 1,
1964, the monthly rental payable under
the "B" Lease of May 1, 1963, shall be
changed from a rental of $2,000 per
month to a rental of - per month.
$10
Amendment No. 7. For the purpose of
determining minimum rentals under "A"
Lease under Total Suspended Operations,
as described in "C" of Part IV of the
"A" Lease, the "B" Lease shall be con-
sidered in full force and effect until
July 31, 1964. Beginning with August 1,
1964, and the commencement of $10 per-
month rentals under the "B" lease, the
said $10 per month rental payments,
while keeping - -
in full force and effect
the - Lease, - - eliminate the
- "B" will not
necessity - Monte Vista making minimum
of
rental payments - - Lessors - -
to the a s such
may be required & the other provisions
of the "A" Lease. [Em~hasis added.1
Pursuant to the 1964 Amendments, Monte Vista was grant-
ed additional time to pay arrearages for minimum rentals
under Mine Lease "B". Additionally, royalties payable to the
Mouats under Mine Lease "A" were changed from 20 percent to
10 percent of net profits.
In December 1968, the Mouats assigned all their rights,
title and interests in the Stillwater mining leases to the
Anaconda Company (Anaconda). In October 1980 Anaconda, as
lessor, served its notice of termination of the lease agree-
ments on Monte Vista, thereby precipitating this lawsuit.
Mine Lease "A"
As mentioned earlier, the term of Mine Lease "A" was
fifty years and so long thereafter as Monte Vista had: (1)
shipped ores obtained from the lease premises in each suc-
ceeding consecutive eighteen-month period; or (2) continued
"Monte's operations" (mining, processing, transporting and
manufacturing of chromite raw materials); or (3) kept in
force and effect Mine Lease "B". These conditions were
collectively referred to as "total suspended operations."
Mine Lease "A" also granted the Mouats the right to
terminate the lease after three successive years of the
accrual of minimum rentals. Minimum rentals were not pay-
able, however, until - of the three conditions comprising
all
total suspended operations occurred.
Following the 1964 Amendments, Mine Lease "B" minimum
monthly rentals were reduced from $2,000 to $10. Although
Mine Lease "B" remained in full force and effect by payment
of $10 per month, the 1964 Amendments provided "the "B" Lease
will not eliminate the necessity of Monte Vista making mini-
mum rental payments to the Lessors as such may be required by
of the "A" Lease. I In summary, "total
the other provisions - - - '
suspended operations" under Mine Lease "A" would be triggered
by Monte Vista's failure to meet - conditions instead of
two
the previous three.
Pursuant to Mine Lease "A" and the 1964 Amendments,
Monte Vista was obligated to make minimum rental payments if,
(1) Monte Vista did not ship ore in any eighteen-month
period, and (2) Monte Vista discontinued operations. Follow-
ing an additional ninety-day period of total suspended opera-
tions, Monte Vista would be obligated to pay minimum rentals
in lieu of royalties as long as total suspended operations
existed.
Monte Vista began paying minimum rentals in February
1966. Three years later, Monte Vista began a two-month
production of chrome ores and made two royalty payments.
Thereafter, Monte Vista was not required to make minimum
rental payments for eighteen months. In February 1971 Monte
Vista resumed minimum rental payments.
On October 2, 1980, Anaconda, citing the passage of
more than three successive years of the accrual of minimum
rentals, served Monte Vista with its notice of termination of
Mine Lease "A".
Monte Vista contends the District Court erred when it
found (1) that Monte Vista was in a state of total suspended
operations, and (2) that even if Monte Vista was in a state
of total suspended operations, minimum rentals never accrued
for more than three years because Monte Vista always paid the
minimum rentals as they became due.
On review, we must determine if the District Court
properly held there was no contractual ambiguity and that
respondents were entitled to summary judgment as a matter of
law. Section 28-2-905, MCA; Rule 56 (c), M.R.Civ.P. Previ-
ously we held that, when interpreting contracts, it is a
question of law whether there is an ambiguity sufficient to
submit the issue to a jury. Nordlund v. School Dis. No. 14
(Mont. 1987), 738 P.2d 1299, 1301, 44 St.Rep. 1183, 1185. An
ambiguity exists when a contract is subject to two interpre-
tations and par01 testimony can be used to determine what the
parties intended. Martin v. Laurel Cable TV, Inc. (Mont.
1985), 696 P.2d 454, 457, 42 St.Rep. 314, 317; S.W. Co. v.
Schwenke (1977), 176 Mont. 546, 552, 568 P.2d 145, 147.
However, intent of the parties is only looked to when the
agreement in issue is not clear on its face. Glacier
Campground v. Wild Rivers, Inc. (1979), 182 Mont. 389, 394,
184 Mont. 543, 547, 597 P.2d 689, 692. Where the contractual
language is clear and unambiguous on its face, it is this
Court's duty to enforce the contract as drafted and executed
by the parties. Wortman v. Griff (1982), 200 Mont. 528, 536,
651 P.2d 998, 1002.
Appellant contends that Monte Vista was never in a
state of total suspended operations because (1) Mine Lease
"B" was never terminated, and (2) Monte Vista never commenced
the manufacture of chemical compounds defined in Mine Lease
"A" under "Monte's Operations."
Monte Vista's argument that its operations were never
totally suspended because the operations were never started
totally ignores the 1964 Amendments. Amendment 7 provides
that Mine Lease "B", "while keeping in full force and effect
.. . will not eliminate the necessity of Monte Vista making
minimum rental payments to the Lessors . . ." Additionally,
Mine Lease "A", Paragraph I11 C, p. 12, provides: "At any
time from and after the end of the third successive year of
the accrual of minimum rentals hereunder the Lessors may
terminate this lease . .. I When Anaconda terminated Mine
'
Lease "A" in 1980, Monte Vista had paid minimum rentals in
excess of three years.
It is fundamental when reviewing contractual disputes
that we are required to read the entire contract together and
give effect to every part, if reasonably practicable. Sec-
tion 28-3-202, MCA; Bender v. Rookhuizen (Mont. 1984), 685
P.2d 343, 346, 41 St.Rep. 1418, 1422. Additionally, when a
contract is clear and unambiguous, as is Mine Lease "A" and
Amendment 7, we are required to enforce the contract as
written. Wortman, 200 Mont. at 536, 651 P.2d at 1002.
Amendment 7, when read together with Mine Lease "A", clearly
indicates that respondent Anaconda acted within its
contractual rights when it terminated Mine Lease "A".
Monte Vista next contends that even if we agree with
the District Court that Monte Vista was in a state of total
suspended operations, minimum rentals never accrued for more
than three years. Monte Vista supports its contention by
citing that it always paid the minimum rentals as they became
due. Therefore, Monte Vista argues the minimum rentals were
paid and could not accrue.
Mine Lease "A", Paragraph IV C, provides:
At any time from and after the end of
the third full successive year - - of the
accrual - minimum rentals hereunder,
of - .
the Lessors may terminate this lease
upon ninety (90)- days' notice in writing
to the lessee. [Emphasis added.]
We agree with the District Court that "accrual of
minimum rentals" is not limited to accrual of minimum rental
debts. Rather, accrual of minimum rentals simply means
accrual of paid - unpaid minimum rentals. When determining
or
this issue, we are guided by the proposition that words of a
contract must be interpreted by their ordinary and popular
meaning. Rumph v. Dale Edwards, Inc. (1979), 183 Mont. 359,
369, 600 P.2d 163, 168; § 28-3-501, MCA.
Additionally, we note that in 1969, Monte Vista at-
tempted to avoid minimum rental payments and termination
under Mine Lease "A" when it began a two-month production of
chrome ores and made two royalty payments. Monte Vista's
two-month production of chrome ores occurred precisely three
years after Monte Vista commenced making minimum rental
payments. Where the language of a contract is doubtful and
ambiguous, as Monte Vista contends, the conduct of the
parties is often the best indication of the parties' inten-
tions and the true meaning of the contract. See Souders v.
Montana Power Co. (1983), 203 Mont. 486, 493, 662 ~ . 2 d289,
291.
If, arguendo, we accept appellant's argument that
"accrual of minimum rentals" is an ambiguous term, this issue
would be determined in an identical manner. In Energy Oils,
Inc. v. Montana Power (9th Cir. 1980), 626 F.2d 731, 735, the
Ninth Circuit Court of Appeals, in applying Montana contract
law, stated:
The primary function of judicial inter-
pretation is to ascertain and give
effect to the intention of the parties
as expressed in their writing [taking]
into consideration the writing itself,
its purpose and the circumstances lead-
ing up to and attending its execution,
endeavor[ingl to ascertain what the
parties purposed and intended by their
agreement.
A careful review of the record reveals undisputed
evidence that the Mouats entered into the 1963 contracts
expecting the leased properties would be developed, and
chrome ore and chemicals produced so that the Mouats would
receive production royalties. If we accept appellant's
interpretation of the lease, appellant would be able to
control Mine Lease "A" until 2013 without paying production
royalties. Clearly, the parties' intentions would not be
fulfilled by such an interpretation. Accordingly, we hold
the District Court properly found that respondent Anaconda
lawfully terminated Mine Lease "A".
Mine Lease B
Mine Lease "B" provides that Monte Vista pay up to
$2,000 per month minimum rentals if production royalties were
less than $2,000 per month. Mine Lease "B", unlike Mine
Lease "A", does not have a "total suspended operations"
provision. However, the "B" lease could be only renewed "by
giving the Lessors notice in writing ... not less than
ninety days prior to the expiration of [each] 5 year term."
On May 1, 1983, Mine Lease "B" was scheduled to expire.
Monte Vista failed to provide lessor Anaconda with written
notice ninety days prior to the expiration date stating Monte
Vista's intent to renew. We agree with the District Court
that appellant provided no evidence that Monte Vista gave
Anaconda such notice. Therefore, Mine Lease "B" expired at
the end of the five-year term.
Monte Vista contends that Anaconda wrongfully terminat-
ed Mine Lease "B" after the commencement of the Mine Lease
"A" litigation. Monte Vista cites the six elements of estop-
pel and argues that respondent should be estopped from termi-
nating Mine Lease "B" due to alleged constructive fraud and
equitable considerations. See Sweet v. Coburn (1982), 196
Mont. 367, 373, 639 P.2d 521, 524. To support its contention,
Monte Vista cites Anaconda's January 13, 1981, letter which
allegedly lulled Monte Vista "into proceeding with payments
on Mine Lease B pending determination of this proceeding."
In its January 13, 1981, letter, Anaconda directed
Monte Vista to make its $10 minimum rental payments to the
Stillwater County Clerk of Court. Respondent also stated
that it would "continue to accept any minimum rentals ten-
dered by Monte Vista under Mine Lease R . " We agree with the
District Court that Anaconda's offer to continue accepting
the Mine Lease "B" rental payments did not waive Monte Vis-
ta's duty to provide respondent with written notice of its
right to renew.
Claims for Economic Advantanaes. Bad Faith.
Civil Conspiracy and Punitive Damages
Monte Vista brought the above-mentioned claims in
Counts IV through VII of its amended complaint. On June 7,
1983, Anaconda filed a motion for a more definite statement.
Anaconda, in its motion for summary judgment, renewed its
earlier objections regarding the lack of factual support for
Counts IV through VII.
On December 20, 1984, Monte Vista filed a thirty-five
page brief with forty-three attached exhibits in response to
Anaconda's request for a more definite statement. The Dis-
trict Court found that Monte Vista again failed to specifi-
cally address Anaconda's request for specificity and counter
Anaconda's legal arguments. The District Court then stated,
"apparently Monte has either elected to abandon these counts
or believes that the Court will accept Monte's exhaustive
polemic diatribes in lieu of substantive argument."
We agree with the District Court that Monte Vista
repeatedly failed to provide, with particularity, factual
support for its allegations of fraud. Rule 9 (b), M.R.Civ.P.
Monte Vista also repeatedly failed to provide the District
Court with a simple, concise and direct pleading. Rule 8(e),
M.R.Civ.P. The record also supports the District Court's
finding that Monte Vista failed to demonstrate a genuine
issue of material fact and that Monte Vista has merely relied
on lengthy but unsupported allegations. Rule 56(c),
M.R.Civ.P.; see, Larry C. Iverson, Inc. v. Bouma (1981), 195
Mont. 351, 373, 639 P.2d 47, 59.
Accordingly, we hold the District Court properly grant-
ed summary judgment against Monte Vista on its allegations of
fraud, civil conspiracy and bad faith.
The judgment of the District Court is affirmed.
We concur:
2 A Q , w - 9 .&
- e4 Q
Hon. Frank I. Haswell, Retired
Chief Justice, sitting in place
of Mr. Justice John C. Sheehy