DA 06-0429
IN THE SUPREME COURT OF THE STATE OF MONTANA
2007 MT 231N
HUGH GWYNN, CMR FAMILY LIMITED
PARTNERSHIP, and SANDTANA, INC.,
Plaintiffs and Appellants,
v.
KLABZUBA OIL & GAS, INC., and
MONTANA BOARD OF OIL AND
GAS CONSERVATION,
Defendants and Respondents.
APPEAL FROM: District Court of the Twelfth Judicial District,
In and For the County of Hill, Cause No. DV-21-2005-064
Honorable John C. McKeon, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
Loren J. O'Toole, II, O’Toole Law Firm, Plentywood, Montana
For Respondents:
Matthew K. Hutchison, Kaufman, Vidal, Hileman & Ramlow, P.C.,
Kalispell, Montana
Norman C. Peterson, Assistant Attorney General,
Agency Legal Services Bureau, Helena, Montana
Blake M. Pickett, Welborn, Sullivan, Meck & Tooley, P.C.,
Denver, Colorado
Submitted on Briefs: May 2, 2007
Decided: September 11, 2007
Filed:
__________________________________________
Clerk
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Justice Patricia O. Cotter delivered the Opinion of the Court.
¶1 Pursuant to Section 1, Paragraph 3(d)(v), Montana Supreme Court 1996 Internal
Operating Rules, as amended in 2003, the following memorandum decision shall not be cited
as precedent. Its case title, Supreme Court cause number and disposition shall be included in
this Court’s quarterly list of noncitable cases published in the Pacific Reporter and Montana
Reports.
¶2 Hugh Gwynn, CMR Family Limited Partnership, Inc., and Sandtana, Inc.
(Appellants), appeal from an order of the Twelfth Judicial District Court granting summary
judgment to Klabzuba Oil & Gas, Inc. (KOGI) and the Montana Board of Oil and Gas
Conservation (Board). We affirm.
¶3 On August 7, 2003, an entity known as the J. Burns Brown Operating Company
(JBBO) filed an application with the Board to establish a permanent spacing unit for a
proposed gas well in Hill County, Montana. This was JBBO’s second attempt to obtain
permission from the Board to establish a spacing unit for a well in this area. The Board
denied JBBO’s first application because the well’s proposed location was too close to a
boundary line between it and a then-existing well known as the Seven R Farms well,
operated by KOGI. The Board was concerned that the proximity of the proposed well would
adversely affect the rights of KOGI to operate its pre-existing well. Prior to its second
application, JBBO addressed these concerns by negotiating an agreement with KOGI aimed
at ensuring the new well would not affect its interests in the Seven R Farms well. KOGI was
satisfied by the terms of the agreement, and, believing the agreement was sufficient to protect
its interests, withheld its objections to JBBO’s second application. With an awareness of this
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agreement and the express understanding that the new well would not interfere with the
operation of the Seven R Farms well, the Board granted JBBO’s second application and
established a permanent spacing unit for the new well, known as the Rhodes well, by Order
No. 213-2003.
¶4 After the Rhodes well was up and running, Appellant Sandtana, Inc. discovered that
the Seven R Farms well and the Rhodes well were drawn from the same pool of gas. On
February 3, 2005, Sandtana filed an application with the Board to “pool” the interests of all
the parties contained in the permanent spacing unit, including output from the Seven R Farms
well. Sandtana argued the permanent spacing unit created by Board’s Order No. 213-2003
entitled it to do this. Because Sandtana and the other Appellants in this matter are all holders
of leasehold interests in the area covered by the permanent spacing unit, this pooling would
have given them the right to take a share of the proceeds already generated by the Seven R
Farms well. The Board denied Sandtana’s application and subsequently amended its original
order to clarify that the permanent spacing unit created by Order No. 213-2003 covered only
the Rhodes well, and did not include the Seven R Farms well operated by KOGI.
¶5 Appellants challenged the Board’s decision before the District Court. They moved for
partial summary judgment to declare the amended Order No. 213-2003 void under the
doctrine of res judicata. KOGI and the Board also moved for summary judgment on the
grounds that Appellants’ suit was barred under the doctrine of judicial estoppel. Appellants
challenged the application of judicial estoppel to the Board’s decision, arguing that the law
required a de novo trial on the issue of pooling.
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¶6 After extensive briefing and oral argument on all issues involved, the District Court
denied the Appellants’ motions and granted summary judgment to KOGI and the Board. The
District Court concluded the doctrine of judicial estoppel applied to the administrative
proceedings of the Board, barred Appellants from challenging the actions of the Board in this
matter, and that a de novo trial on the pooling issue was not required.
¶7 Appellants maintain on appeal that the District Court erred and should have found the
Board’s amended order void as a matter of law. They argue that the Board failed to follow
the appropriate notice and hearing procedures prior to amending its original Order No. 213-
2003. Appellants further argue that the doctrine of judicial estoppel was improperly applied
by the District Court. We disagree. The record clearly establishes that all the elements of the
doctrine of judicial estoppel were satisfied here and that the District Court correctly
determined this was a sufficient basis upon which to decide this case.
¶8 We have determined to decide this case pursuant to Section 1, Paragraph 3(d) of our
1996 Internal Operating Rules, as amended in 2003, which provides for memorandum
opinions. It is manifest on the record before us that the District Court did not err in its
disposition of this matter. Therefore, we affirm.
/S/ PATRICIA COTTER
We concur:
/S/ KARLA M. GRAY
/S/ JAMES C. NELSON
/S/ BRIAN MORRIS
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/S/ W. WILLIAM LEAPHART
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