No. 8 9 - 1 2 9
IN THE SUPREME COURT OF THE STATE OF MONTANA
1989
HOLLAND HUNTER, HENRY F. HUNTER,
FLORENCE HUNTER, DEBORAH HUNTER,
ALISON HUNTER KINCADE, MARGARET S.
REYNOLDS, TOM. H. REYNOLDS, and
JAMES H. REYNOLDS,
plaintiffs and Appellants,
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ROSEBUD COUNTY, a local governmental 2a ni
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Defendants and Respondents. --
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APPEAL FROM: District Court of the Sixteenth Judicial gistrfit,
In and for the County of Rosebud, -i
The Honorable Alfred B. Coate, Judge presidinq.
COUNSEL OF RECORD:
For Appellant:
Joseph W. Sabol arg,ued,Bozeman, Montana
For Respondent :
W. H. Bellingham argued; Moulton, Bellingham, Longo &
Mather, Billings, (True Oil Col, USA Petro. Corp.,
Carlson, Lair, Brown & Tesoro Petro. Corp.)
Rodd A. Hamman argued; Calton, Hamrnan, Calton & Wolff,
Billings, Montana (Enfield Energy)
Thomas A. Ask argued; Ask & Pratt, Roundup, Montana
(Kincheloe, Mysse, Nielsen, Hendrix, Jennaway)
Robert J. Waller; Veeder, Broeder & Michelotti, Billings,
Montana (Petro-Lewis Funds, Petro-Lewis Agency Corp.,
Petro-Lewis Corp.)
William E. Berger; Wilkins & Berger, Lewistown, Montana
(Ferrell, Rydholm)
Robert L. Johnson, Lewistown, Montana (Johnson)
McKinley Anderson, Bozeman, Montana (Orleman)
Submitted: October 19, 1989
Degided: December 7, 1989
Filed:
Justice R. C. McDonough delivered the Opinion of the Court.
This is an appeal from an action instituted to quiet
title to the minerals, mineral interest, and mineral estate
previously severed from a parcel of real property located in
Rosebud County Montana. Plaintiffs (hereinafter Hunters)
appeal from an order granting summary judgment in favor of
defendants, Boyd Kincheloe, True Oil Company, Petro-Lewis
Funds Inc . , et a1. (hereinafter Kincheloes) . We affirm.
The issues on appeal are:
1. Whether there was a merger of the mineral estate and
the remaining estate.
2. Whether the Hunters' claims are barred by virtue of
the doctrine of laches.
The facts of this case are complicated. On May 22,
1914, the United States issued a patent to the Northern
Pacific Railway Company which included the land that is the
subject of this cause of action. Northern Pacific owned the
land until 1926. On December 17 of that year, it conveyed,
by warranty deed, an undivided one-half interest to F.R.
Bentley, and to Lena E. Hess and Dorothy A. Hess, an undivid-
ed one-quarter interest each. This deed specificall-y
excepted the mineral estate as follows:
. .. excepting and reserving unto the grantor, its
successors and assigns, forever, all minerals of
any nature whatsoever, including coal, iron,
natural gas and oil upon or in said lands, together
with the use of such of the surface as may be
necessary for the exploring for and mining or
otherwise extracting and carrying away of the same,
...
Through conveyances the Bentley and Hess interests in the
property was acquired by Harry and Hester Hunter on October
14, 1929.
Because taxes for the year 1928 had not been paid, after
tax deed proceedings the county treasurer issued to Rosebud
County a tax deed to the property. The tax deed was issued
on August 15, 1932. At that time Northern Pacific still
owned the mineral estate. Therefore, the tax deed only
purported a conveyance of real property less the mineral
estate. In 1933, the Northern Pacific Railroad quitclaimed
its mineral estate "to the owner or owners of the . . .
land." Thereafter the plaintiffs succeeded to the interest
of Harry and Hester Hunter.
Rosebud County, on December 3, 1945, quitclaimed its
interest in the real property to Art Kincheloe. This deed of
conveyance reserved unto the county a six and one-quarter
percent (6*%) royalty interest "of all oil, gas and minerals
recovered and saved from the lands."
On April 29, 1950, Art Kincheloe filed an action to
quiet title to the property. Subsequently a judgment
pursuant to the complaint was entered in favor of Kincheloe
finding Kincheloe to be the owner in fee simple absolute of
all the interest in the lands subject to the county's royalty
reservation. Art Kincheloe and his successors have remained
in possession and use of the property since the conveyance by
Rosebud County in 1945.
On January 2, 1978 drilling for oil and gas was
commenced by lessees of Kincheloes, and since that time four
oil and gas wells have been drilled. As of 1983, over eight
million dollars in revenue had been realized from the wells.
In 1982, the Hunters filed a lawsuit against Rosebud
County, the Kincheloes, and several oil lessees, seeking
title to the mineral estate which included the oil and gas in
the property. The only defendant originally served with
summons and complaint was Rosebud County who was served
during July of 1983. A judgment. was filed on June 8, 1984 in
favor of the Hunters and against Rosebud County as to the
county's 6 %
: royalty interest and such interest is not
involved in the present controversy nor was it appealed.
No further action was taken in the case until August of
1985. At that time, the remaining defendants were served.
In 1988, the Hunters filed a motion for summary judgment,
seeking judgment against the defendants. Subsequently, each
of the defendants in this action filed a motion for summary
judgment against the Hunters. The court found for the
defendants and against the Hunters. This appeal followed.
The trial court ruled that there was a merger of the
remaining estate and the mineral estate when the Northern
Pacific quit claimed its mineral interest to "the owner or
owners of the land." Therefore, when the county conveyed the
land to the Kincheloes, it conveyed the entire estate in the
land including all interest in the mineral estate.
The Hunters disaqree and maintain that once the mineral
estate was severed from the remaining interest they could not
merge into a unitary estate. According to the Hunters,
mineral estates and the remaining estate are of equal dignity
and estates of equal dignity can never merge. In order for a
merger to occur there must be estates of greater and lesser
dignity. Therefore, in order for Rosebud County to have
conveyed the mineral estate to the Kincheloes, it would have
been necessary to effect a separate conveyance of the mineral
estate. Hunters maintain that the conveyance by the county
without mentioning the mineral estate, by way of quitclaim,
deed did not effectively transfer the mineral estate. In
support of this argument, they rely upon a line of Texas
cases. See Humphreys-Mexia Company v. Gammon (Texas 1923) ,
254 S.W. 296; Joyner v. R.H. Dearinq and Sons (Texas 1937),
112 S.W. 2d 1109.
We disagree with Hunters' argument. Their assertion
that the mineral estate and the remaining estate are of equal
dignity is not correct. The general rule is that the owner
of the mineral estate enjoys the dominant estate and the
surface owner of the remaining estate holds the subservient
estate. This theory is based upon the realities that
accompany mineral exploration and development. Obviously, in
order to fully utilize a mineral estate, one usually must
have access to the surface. - Lacy, "Conflicting Surface
See
Interests: Shotgun Diplomacy Revisited", 22 Rocky Mtn. Min.
L. Inst., 731 (1976). See also, Western Energy Co. v. Genie
Land Co. (1981), 195 Mont. 202, 635 P.2d 1297.
When the Northern Pacific conveyed its previously
excepted mineral estate to the owner or owners of the
subservient remaining estate, and both estates came together
in the same owner, the remaining estate was merged into the
mineral estate and there is no reason for further existence
as separate estates. Therefore an unrestricted grant by one
who claims to be the owner of the remaining estate at the
time of the Northern Pacific deed after the merger effected
by such deed, conveys all estates in such real property.
There is no need to specifically describe such individual
estates. At this time Rosebud County claimed to be the owner
and had as a minimum, color of title to the land and was the
record title owner. It follows that the subsequent convey-
ance from the county to the Kincheloes transferred the
county's entire estate, including the mineral estate except
for the royalty reservation previously noted. It was not
necessary for the county to make separate and distinct
transfers of the two estates. It has long been recognized
that a conveyance of property without reference to the
mineral estate carries with it all of the grantor's interest
in the mineral estate. Voyta v. Clonts (1958), 134 Mont.
156, 328 P.2d 655. Based upon this deed, the Kincheloes
received at a minimum color of title to the surface and the
minerals.
The District Court held that the Hunters were barred
under the doctrine of laches from asserting any claim to the
land or otherwise contesting the validity of the tax deed,
which the Hunters maintain was void. It is argued by the
Hunters that they were not required to take any positive
steps to protect their interest in the mineral estate until
active production began. Once production did begin they
actively and promptly moved to protect their right, by filing
this action within the five year period of limitation
provided by S 70-19-401, MCA. Having met this obligation,
they maintain that it cannot now be said that the doctrine of
laches applies.
This argument, however, is not valid in light of our
holding that a merger occurred between the surface and the
mineral estates. Because there was a merger, and the two
interests coincided in the Kincheloes, the doctrine of
laches, if it applies, will apply to all of the interest in
the land including the mineral estate. We must examine the
doctrine of laches and apply its tenents to this case in
order to determine whether it will bar the Hunters' claims.
We begin our discussion by reviewing the pertinent
elements of laches. There is no statutory defense of laches
in Montana, it is a creature of equity. Cremer v. Cremer
Rodeo Land and I;ivestock Company (1979), 181 Mont. 87, 592
P.2d 485. In Montana, there is no absolute rule as to what
constitutes laches. In each case, it must be determined
according to its own particular circumstances. It is not a
mere matter of elapsed time, but rather, is principally a
question of the inequity of permitt-ing a claim to be
enforced. Matter of Estate of Wallace (1980), 186 Mont. 18,
606 P.2d 136.
In two recent cases, this Court has had the opportunity
to examine the doctrine of laches and apply it to circum-
stances similar to the case at bar. See Richardson v.
Richland County (1985), 219 Mont. 48, 711 P.2d 777; Anderson
v. Richland County (1985), 219 Mont. 60, 711 P.2d 784. In
both Richardson and Anderson, this Court itemized significant
factors which it considered in determining the issue of
laches. We will apply these factors to this case.
1) The length of time which the present owners have
used and occupied the land.
In 1945 Art Kincheloe, the respondents' predecessor
in interest, received a quitclaim deed from Rosebud
County, conveying the real property involved in
this case. Since that time, the Kincheloes have
occupied and used the land. They have paid all
real property taxes assessed aqainst the property
for almost fifty years.
2) The length of time during which the plaintiffs and
their predecessors abandoned the property and have not
cla.imed any right to the physical possession of the land and
have not paid any taxes assessed against that land.
In 1932, the Hunters' predecessor in interest and
Hunters lost record title to the property due to
their failure to pay real property taxes on the
land in 1927 and 1928, and since that time neither
they nor their successors have attempted to redeem
the property by payment of the back taxes. It is
clear, therefore, they have had no contact with the
land for approximately fifty years.
3) Whether the property interest claimed has become
extremely valuable.
The subject lands have greatly increased in value
since the Kincheloes obtained title. Four oil and
gas wells have been discovered yielding revenues of
over eight million dollars.
4) Whether or not the plaintiffs first learned of their
claim after the discovery of oil.
In response to Requests for Admissions propounded
by True Oil Company, the Hunters admitted that they
first learned of their possible claims after oil
was discovered.
5) Whether reimbursement of royalties will result in
undue hardship upon the defendants.
In this case, the Kincheloes and the oil companies
would be responsible for the reimbursement of many
thousands of dollars in revenues. In light of the
resources put into the drilling and upkeep of the
wells over a twelve year period, a reimbursement
would work undue and unfair hardship upon the
defendants.
6) Whether or not there are principal parties to the
tax deed proceedings who could furnish first hand knowledge
of the facts surrounding the proceedings.
At least two of the principal parties to the tax
deed proceedings are now deceased. Art Kincheloe,
the defendants' predecessor in interest is dead, as
is the chairman of the Board of County Commission-
ers who executed the 1945 deed. In view of the
time which has elapsed, it appears unlikely that
anyone who was involved with the tax deed
proceedings or the delinquencies of the tax
payments are still alive.
7) Whether the plaintiffs have demonstrated any reason
for the unexplained delay in claiming their asserted rights
between the time of the tax deed, quit claim of minerals
estate by Northern Pacific, and the filinq of the complaint.
In this case, no testimony of any kind has been
introduced either orally or in documentary form to
account for such delay. During oral argument, the
attorney for the Hunters maintained that they did
not do anything to protect their interest between
the time of the tax deed until the filing of the
complaint because they did not have to act until
actual extraction began. However, we note that
during this time period of approximately fifty
years the Hunters made no effort to remain in
contact with the property. As a result of this
neglect, they failed to respond to a quiet title
action brought by the Kincheloes in 1950, despite
the fact that they were named as defendants and
were served by publication. This action resulted
in a decree quieting title in the name of the
Kincheloes in fee simple absolute, which
necessarily carries with it all interests in the
minerals. It is presumed that a person stays in
contact with his property. The fact that the
Hunters did not respond to the quiet title action
and did not remain in contact with the land for
approximately fifty years leads to the conclusion
that any claim they may have had comes within the
doctrine of laches.
8) Whether the plaintiffs sought to redeem the property
and assert their title at any time.
Neither the plaintiffs nor their predecessors in
interest have paid any of the real property taxes
levied against the property since 1927. None of
the foregoing parties have ever sought to redeem
the property from the tax sale. This is especially
pertinent in view of our holding there was a merger
of title. They have not acted in any way which
would assert that they were the "owners" at the
time the Northern Pacific executed its quit claim
deed in 1933, except this belated quiet title
action.
It is clear that all of the significant factors which
this Court considered in the Richardson and Anderson cases
have been answered in favor of the Kincheloes and against the
Hunters. Hunters attempt to distinguish the instant case
Richardson and Andersoq, by pointing out that this case
from -
does not involve roya.lty interests held by a county.
Therefore, unlike those two cases, a ruling in favor of the
Hunters will not deprive the county of revenue nor overburden
the taxpayer by forcing reimbursement of the royalties. We
note, however, that a decision in favor of the Hunters would.
create a significant hardship upon the Kincheloes and the
leaseholders by not only eliminating their interests in the
mineral and leasehold estates and all its ramifications and
loss of investment, but by also requiring payment of
thousands of dollars in royalties. The doctrine of laches
was created to avoid such inequitable results. We therefore
hold that the Hunters are barred by laches from contesting
the validity of the tax deed. Moreover, because we have also
held that a merger occurred between the remaining estate and
mineral estate, it follows that the Hunters are similarly
barred from contesting the Kincheloes title to the mineral
estate.
In view of our holding that the doctrine of laches
applies to the Hunters it is not necessary to discuss issues
relating to adverse possession and res judicata. The
District Court in sranting judgment for the defendants is
affirmed.
sitting for us tide John C.
Sheehy.