NO. 84-23
I N T H E S U P R E M E C O U R T O F T H E S T A T E O F MONTANA
1984
P H Y L L I S E D I N G T O N a n d BOW V A L L E Y
PETROLEUM, I N C . , a n d F L A R E ENERGY
CORPORATION,
P l a i n t i f f s and A p p e l l a n t s ,
VS.
C R E E K O I L COMPANY, a Wyoming Corp.,
and L O U I S BIBY,
Defendants, Cross-Complainants,
a n d Cross-Appellants,
and
SIGNAL DRILLING CO., et al.,
Defendants.
A P P E A L FROM: D i s t r i c t C o u r t of t h e S e v e n t h J u d i c i a l D i s t r i c t ,
I n and f o r t h e C o u n t y of R i c h l a n d ,
H o n o r a b l e R. C . M c D o n o u g h , Judge p r e s i d i n g .
COUNSEL O F RECORD:
For A p p e l l a n t s :
H a b e d a n k , C u m m i n g , B e s t and Maltese, S i d n e y ,
Montana
O t t o T. H a b e d a n k argued and R o b e r t J. S a v a g e
argued, Sidney, M o n t a n a
For D e f e n d a n t s - C r o s s - A p p e l l a n t s :
J a m e s R. Carlson, Jr., argued, Hysham, Montana
Submitted: June 4 , 1984
Decided: October 29, 1984
F i l e d :
'If3 2 d 884
' 7
-
f?/
M.
r Justice John C. Sheehy delivered the Opinion of the
Court.
In this case the District Court, Seventh Judicial
D i s t r i c t , Ri.chl.and County had. b e f o r e it. t h e q u e s t i o n which of
two o i l and g a s l e a s e s was l e g a l l y i n e f f e c t a s t o p r o d u c t i o n
from an o i l well- under t h e l e a s e s from and a f t e r December
On February 2 , 1962, P h y l l i s Edington e n t e r e d i n t o an
oil and gas lease with John W. Batts covering mineral
i n t e r e s t s owned by h e r i n Richland County, Montana. During
t h e p r i m a r y t e r m o f t h e l e a s e a p r o d u c i n g w e l l was d r i l l e d .
The working i n t e r e s t i n t h e w e l l was a s s i g n e d by B a t t s t o
Creek O i l Company which o p e r a t e d and produced t h e w e l l u n t i l
July 1973. P r o d u c t i o n wa.s s t o p p e d a t t h a t ' t i m e by an o r d e r
of t h e Montana O i l and Gas Commission b e c a u s e o f sa-ltwater
seepage from a s a l t w a t e r d e p o s i t p i t a t t h e wel-I s i t e . The
t r i a l c o u r t , i n i t s f i n d i n g s o f f a c t , found t h a t s o l v i n g t h e
problem of saltwater seepage was within the reasonable
control of Creek Oil. Company. The remedy w a s s e a l i n g t h e
l e a k a g e w i t h a t r u c k l o a d o f mud which was a v a i l a b l e . Creek
O i l Company d i d n o t resume p r o d u c t i o n o f t h e w e l l w i t h i n 90
days a f t e r i t s c e s s a t i o n pursuant t o paragraph 8 ( c ) of t h e
Edington L e a s e , t o - w i t :
" I n t h e e v e n t of c e s s a t i o n o f p r o d u c t i o n and
operations hereunder after the primary term
t h e r e o f , t h e lessee s h a l l have a p e r i o d o f n i n e t y
( 9 0 ) d a y s w i t h i n which t o resume o p e r a t i o n s o r
p r o d u c t i o n , and i f o p e r a t i o n s o r p r o d u c t i o n a r e
resumed w i t h i n such t i m e , t h e n t h i s l e a s e s h a l l
c o n t i n u e i n f o r c e a s i f t h e r e had n e v e r been any
i n t e r r u p t i o n i n t h e operations o r production, t h a t
i s subject only t o l i m i t a t i o n s set f o r t h i n Section
2 hereof. "
Section 2:
"Subject to the further provisions hereof, this
lease shall remain in force for a term of 5 years
from this date, called 'Primary Term' and as long
thereafter as either (1) oil, gas, or other
minerals are produced (whether or not in paying
quantities) from the leased premises, or (2)
operations are conducted on the leased premises, or
( 3 ) there is a well or wells on the leased
premises, which, although capable of producing oil,
gas, or other minerals in paying quantities
hereunder is shut in for lack of market or
outlet.
"Operations as used herein means all operations for
the drilling of a well for oil or gas, including
building of roads, preparation of the drill site,
moving in for drilling, drill.ing, deepening,
plugging back, reworking or recompleting and also
secondary recovery operations benefiting the leased
premises."
On December 12, 1974, Phyllis Edington executed a second
oil and ga.s lease to Wendell H. Elliott, which lease was
recorded in the records of Richland County. On May 2 , 1980,
Phyllis Edington executed a further oil. and gas lease to
Mountain & Plains Company which lea.se was recorded on May 2,
1980, in the records of Richland County. Mountain & Plains
Company assigned its lease to Bow Valley Petroleum, Inc. on
May 13, 1980, and this assignment was also recorded. in the
county records.
In December 1980, Creek Oil Company and Louis Riby
entered the lands and resumed production of the oil well..
On November 18, 1981, Bow Valley assigned one-half of
its leasehold right, title and interest under its lease to
Flare Energy Corporation. That assignment was also duly
recorded.
Edington, Bow Val-ley Petroleum, Inc. , and Flare Energy
Corporation, as plaintiffs, filed an action to quiet title,
in effect, to the oil produced from the lands a.fter December
1980, and in due course, trial was had in January 1983. On
April 6, 1983, the District Court entered its first findings
of f a c t , c o n c l u s i o n s o f law, and o r d e r . The D i s t r i c t C o u r t
held that the lease had terminated under its express
provisions in October 1973, and that, by re-leasing her
p r o p e r t y t o E l l i o t t , Edington had a s s e r t e d an i n t e r e s t i n t h e
p r o p e r t y o f r e c o r d which was a d v e r s e t o t h a t c l a i m e d by t h e
defendants. The c o u r t a l s o h e l d t h a t t h e m i n e r a l ownership
of Edington and the leasehold interest of Bow Valley
Petroleum, I n c . and F l a r e Energy C o r p o r a t i o n a-re s u p e r i o r t o
any c l a i m e d i n t e r e s t of Creek O i l and Biby, whose c l a i m s a r e
w i t h o u t any r i g h t whatever. The c o u r t a l s o r u l e d t h a t t h e
d e f e n d a n t s had no r i g h t , t i t l e , o r i n t e r e s t i n t h e minerals
under the lands. However, the D i s t r i c t Court found t h a t
Creek O i l Company and Biby were entitled to 874% o f the
p r o d u c t i o n from t h e well- from Decemher 1980 t o t h e d a t e of
his order. Later the District Court amended that
determinatior, to entitle d.ef e n d a n t s Creek O i l Company and
Biby to 874% of all production of the well up to and
including January 26, 1983, the date the trial in the
D i s t r i c t C o u r t ended.
The c o u r t a l s o rul-ed, on A p r i l 6 , 1983, t h a t t h e c a s i n g
i n t h e w e l l i s t h e p r o p e r t y of Bow V a l l e y P e t r o l e u m , I n c . and
F l a r e Energy C o r p o r a t i o n , b u t t h a t s a i d Bow V a l l e y P e t r o l e u m ,
I n c . and F l a r e Energy C o r p o r a t i o n must pay t o Biby and Creek
O i l Company t h e p r e s e n t v a l u e of s a i d c a s i n g l e s s t h e c o s t of
removal. A f t e r a f u r t h e r hearing, t h e D i s t r i c t Court r u l e d
t h a t Bow V a l l e y and F l a r e Energy s h o u l d pay Creek O i l and
Biby t h e sum of $5,250, which r e p r e s e n t s t h e p r e s e n t v a l u e of
t h e c a s i n g l e s s t h e c o s t of removal.
Both p a r t i e s a p p e a l from t h e judgment o f t h e D i s t r i c t
Court. P l a i n t i f f s P h y l l i s E d i n g t o ~and Bow V a l l e y P e t r o l e u m ,
I n c . a p p e a l on t h e f o l l o w i n g i s s u e s :
I-. That t h e defendants, Creek Oil. Company and Biby,
were bad faith trespassers on December 1980, when they
resumed o i l p r o d u c t i o n of t h e s u b j e c t w e l l .
2. T h a t Creek O i l Company and Biby a r e n o t e n t i t l e d t o
any s h a r e of t h e p r o d u c t i o n o r c o s t o f p r o d u c t i o n b e c a u s e of
their bad faith trespass in December 1980, nor are they
entitled to credit for expenses incurred or deduction of
c o s t s of p r o d u c t i o n .
3. There i s i n s u f f i c i e n t e v i d e n c e t o s u p p o r t t h e t r i a l
c o u r t ' s f i n d i n g s t h a t $5,250 r e p r e s e n t s t h e p r e s e n t v a l u e of
t h e c a s i n g l e s s i t s c o s t o f removal.
Creek O i l Company and L o u i s bib^ c r o s s - a p p e a l and r a i s e
t h e following issues:
1. The D i s t r i c t C o u r t failed t o give e f f e c t t o the
f o r c e majeure c l a u s e o f t h e l e a s e .
2. The E i s t r i c t C o u r t failed t o give e f f e c t t o the
j u d i c i a l a s c e r t a i n m e n t c l a u s e of t h e l e a s e .
3. The judgment of t h e D i s t r i c t C o u r t unduly e n r i c h e s
Bow Val-ley, I n c .
4. There is insufficient evidence to support the
essential- findings of t h e D i s t r i c t Court.
5. The c o u r t s h o u l d n o t have p e r m i t t e d t h e u . s e o f t h e
d i s c o v e r y d e p o s i t i o n o f M r s . Edington a t t h e t r i a l .
FORCE MAJEURE
The f o r c e majeure c l a u s e i n t h e l e a s e , under which Creek
O i l and Biby c l a i m t h e i r i n t e r e s t s , provid-es:
"17. T h i s l e a s e s h a l l n o t e x p i r e , t e r m i n a t e o r be
f o r f e i t e d i n whole o r i n p a r t n o r s h a l l l e s s e e b e
1 i a b l . e i n damaqe f o r f a i l u r e o f l e s s e e t o comply
w i t h any expreLs o r i m p l i e d c o v e n a n t s h e r e u n d e r - s o
l o n g as c ~ r n ~ l i a n c ~ h e r e w i s h h i n d e r e d , d e l a y e d ,
t
revented o r i n t e r r u p t e d 2 f o r c e majeure. The
:ern ' f o r c e m a j- e u r e ' a s used h e r e i n s h a l l mean and
i n c l u d e s t a . t e and f e d e r a l s t a t u t e s , a l l o r d e r s ,
r u l e s and r e g u l a t i o n s of any governmental body
(either federal, state or municipal) fire, storm,
flood, war, rebellion, riots, strikes, differences
with workmen, acts of God, breakage or failure of
machinery or equipment, inability to obtain
material or equipment or the authority to use the
same (after effort in good faith), failure of pipe
lines normally used to transport or furnish
facilities for transportation or any other cause
(whether similar or dissimilar) beyond the
reasonable control - lessee. "
of (Emphasis added. )
Creek Oil and Ei.by maintain that the order of the
Montana Oil and Gas Commission in July 1973, which suspended
production of oil under their lease, is covered by the force
majeure clause and that thereby the lease cannot be
terminated for their failure to comply with any express or
implied covenants of the lease. They claim that the force
majeure clause has the effect of suspending termination
provisions contained in paragraph 8 (c), quoted above, and
that their only responsibility, once the well was shut in,
was to exercise due diligence in returning the well to
production. They further contend that eccnomic factors
material to the question of reasonable diligence shou1.d be
considered, including the cost of disposing of the saltwater
and the market price of the crude oil at the time.
Edington and Bow Valley, on the other hand, contend that
the underlying reason for the State Oil and Gas Commission
order to shut in the well was the defendants own wrongdoing
in permitting saltwater seepage and therefore the force
majeure clause does not apply. They point out that.
substantial evidence in the record supported the court's
findings that. Creek Oil could rea.sonably solve the saltwater
problem, that Edington lost royalty payments for over seven
years by their suspension of production, and that Creek Oil
and Biby suspended production of oil for economic reasons and
not for reasons covered by the force majeure clause.
It is obvious that the purpose of the force majeure
clause in this oil and gas lease was to relieve the lessees
from harsh termination of the lease due to circumstances
beyond control of the lessees that would make their
performance under the lease untenable or impossible. The
force maieure clause, if applicable, would have the effect of
suspending the clause for termination by reason of cessation
of operations. 4 Williams, - - - - S 683.2 at 392,
Oil and Gas Law,
suggests that the effect of the force majeure clause in an
oil and gas lease is to amend a paragraph such as 8 (c) to
read: "upon failure of production during the secondary term,
unless such failure was due to force majeure."
The District Court made findings of fact that the
Montana Oil and Gas Commission would have allowed further
production of the subject well if Creek Oil had sealed the
saltwater pit; that Creek Oil could have corrected the
problem of leakage with a truckload of mud which was
available; that a natural saltwater seep existed where Creek
Gil had located its saltwater bit and Creek Oil did not make
a request to the Commission for a variance to allow the
saltwater to seep to the natural. pit; tha.t solving the
problem was reasonab1.y possible and within the control. of
Creek Oil. These findings are supported in the record and
bind this Court unless clearly erroneous. Rule 54 (b),
M.R.Civ.P. We do not find the court in error.
In appl.ying the law, the District Court determined that
the force majeure clause did not apply because the problem
which caused the well to be shut in, and its solution, were
not beyond the control of Creek Oil and Biby. Wilson v.
Talbert (Ark. 1976), 535 S.W.2d 807. See Hixson v. Parker
(Ark. 1957), 307 S.W.2d 210.
Under the findings, the District Court properly applied
the law to the force majeure clause here. Where the action
of the governmental unit to shut in the well, as in this
case, is brought about and continued in force by the wrongful
or improper action of the lessees, they cannot rely on the
force majeure clause to escape the other termination
provisions of the oil and. gas lease. The force majeure
clause is not an escape way for those interruptions of
production that could be prevented by the exercise of
prudence, diligence, care, and the use of those appliances
that the situation or party renders it reasonable that. he
should employ. Jutte v. The George Shiras (3rd Cir. 1894),
61 F. 300. The other contentions of Creek Oil and Biby
respecting the force majeure clause are without merit.
THE JlJDICIAL ASCERTAINMENT CLAUSE
The oil and. gas lease held by Creek Oil Company
contained a judicial ascertainment clause. Such cl.a.usesvary
from lease to lease, and from jurisdiction to jurisdiction,
according to the practice of those in the industry. In this
case the judicial ascertainment cl-ause was stated in
paragraph 14:
"14. This lease shall never be forfeited or
cancel-led for breach of implied covenant until it
shall have been finally judicially determined that
such breach exists and lessees shall ha.ve failed
within a reasonable time of such final
determination, to remedy such breach."
Creek Oil Company and Biby contend that the obligation,
if any, of lessees under the lease to cure the saltwater
seepage problem was an implied covenant; that it was the duty
of the lessors, before the lease could be terminated or
cancelled, to proceed through court for a determination that
a breach of covenant actually existed; and after such
determination tha.t Creek Oil Company and Biby were entitled
to a reasonable time to remedy such breach. Since the
lessors did repair to court proceedings in this case, Creek
Oil Company and. Biby contend that their oil and gas lease is
stiI.1 in effect because there has been no judicial
ascertainment of a breach of an implied convenant.
This particular oil and gas lease does not contain a
notice provision for termination of the lease by lessors in
the case of a. breach of an implied covenant under the lease.
Creek Oil Company and Riby, however, equate the ?udicial
ascertainment clause with a notice clause and contend that we
should apply the same rule with respect to the judicial
ascertainment clause in this case that was applied in
Christian v. A. A. Oil Company (1973), 161 Mont. 430, 506
P.2d 1369, relating to a failure to give notice.
The District Court. determined that the 9 0 day cessation
of production clause was an express covenant and as such the
judicial ascertainment clause did not apply to it.
It is beycnd cavil, from the plain language of the
lease, that the judicial ascertainment clause applies only to
breaches of implied covenants of the lease. See Eitel v.
Alford (Colo. 1953), 257 P.2d 955.
For most purposes, courts construe oil and gas ].eases
under the rules of contract interpretation. 2 Summers, -
The
- - - - and Ga.s (1959), Ch. 12, 5 371, at 484, et seq.
Law of Oil -
This oil and gas lease had extended beyond its primary
term of 5 years. Because a producing oil well had been
completed by the lessees under their lease, leasehold rights
vested in the lessees for a secondary term as long as (1) oil
and gas or other minerals were produced (whether or not in
paying quantities) from the lease premises; or ( 2 ) operations
were conducted by lessees on the leased premises; or (3)
there was a well or wells on the leased premises that,
although capable of producing oil and gas or other minerals
in paying quantities thereunder, is or were shut in for lack
of a market or outlet.
Paragraph 8(c) of the oil and gas lease provided a
limitation on that leasehold estate and term, however. In
the event of "cessation of production and operations" after
the primary term of the lease, the lessee is given a period
of 90 days in which to resume operations or production and,
if resumed within the 90 days, the lease would continue in
force as if there had never been any interruption in the
operations or production.
In their leasehold estate under the oil and gas lease,
therefore, lessees had the contractual duty not to cease
either production or operations for a period of more than 90
days. Their duty of production of minerals or the conduct of
operations was an express condition for the continuance of
the leasehold estate. When, as it clearly appears here,
lessees allowed the production to cease and operations not to
be conducted for a period of more than 90 days, their oil and
gas lease terminated and ended by its own terms. McQueen v.
Santa Oil Company (6th Cir. 1954), 213 F.2d 889.
In Hall v. McWilliams (Tex. Civ. App. 1966), 404 S.W.2d
606, where a producing well was shut down because the
!esseest saltwater permit was suspended by governmental
action, no production occurred, and no drilling or reworking
operations were conducted for a period of more than 60 days
the Texas court held that the lease had terminated under its
own terms (that lease contained a 60 day provision). The
court said it could not be held to be a "temporary" stoppage
where the cessation of production lasted more than 60 days.
We determine that under the facts of this case, the
judicial ascertainment clause was not called into effect and
that, because of the cessation of production and lack of
conduct of operations hv the lessees on the leased premises
for a period of 90 days, the Creek Oil Company and Biby lease
terminated by it.s own provisions. The lessees had no
leasehold estate upon which to rely when they reentered the
premises to produce oil in December 1980.
IfiINOCENT - WILLFUL TRESPASS
V.
The District Court found t.hat Creek Oil Company and Eiby
were qood faith trespassers until the time of trial, January
26, 1983, and thereafter bad faith trespassers. The District
Court found as facts that the Creek Oil Company and Biby
acted in good faith, their entry and possession were
peaceful, and they had acted in an honest belief up to and
inc1ud.i.n.g
the trial of the action. The District Court found
that at the trial, the defendants became aware of all the
facts that constituted their claims as well as the facts upon
which the plaintiffs based their claims and consequently,
subsequent t.o January 26, 1983, in producing said well. have
acted as a trespassers in bad faith.
The District Court also found that the equipment on the
well site when production was di.scontinued in 1973 wa.s in a
state of disrepair. Louis Biby, on behalf of the defendants,
prior to December 1980, made substantial expenditures of time
and money including $269,000.00 for permanent improvements to
the well.
Based on its finding of good faith to the time of trial,
the District Court prorated the gross value of all oil sold
from the well through March 1983 as follows:
Phyllis Edington (12+%) $ 16,062.98
Creek Oil and Biby 82,207.16
Row Valley ~etroleum
TOTAL
Bow Valley appeals from the order of the District Court
with respect to its share of the production, contending that
Creek Oil and Biby were bad faith trespassers from and after
December 1980, and are entitled to no recompense for the cost
of production nor from the proceeds of the oil. Also, that
Bow Valley and Flare Energy should be awarded the full value
of the working interest proceeds from the oil, subject to a
5% overriding royalty to Mountain & Plains Oil Company.
The argument of Bow Valley respecting the distribution
of the proceeds arises from a difference in the measure of
damages based on whether Creek Oil Company and Biby were in
good faith or bad faith in trespassing upon the leased
premises as explained. by Sullivan, Handbook - - - - Gas
of Oil and
- at 58 and 59:
Law,
"In the case of good faith trespassers the measure
of damages that must be paid is the value of the
oil and gas in place. Because of the difficulty in
proving such value in place, courts have adopted
the measure as being the value of the petroleum at
the surface, whether in tank or pipeline, less the
reasonable cost of production. The costs of
~roduction include the cost of drilling and
equipping the well in addition to the expense of
brinqing it to the surface . .
.
"Where the trespa.ss has been made in bad faith, no
deduction is allowed for the cost of production.
The proper measure of damages in such a case is the
value of the petroleum at the surface . . ."
Important to this discussion is the finding of the
District Court that the Creek Oil Companv and Biby first
became aware of all the facts which constitute their claim
and the facts whj ch constitute the plaintiff's claim at the
trial of the action. Bow Val-ley disputes this finding,
claiming that, from the evidence before the District Court,
Creek O i l Company and Biby ha.d actual and constructive notice
that their lease had terminated.
It i s certain that Creek Oil Company and Biby
. had
constructive notice of the recorded instruments, including
oil and gas leases and assignments, that were given by
Edington, and those acting under her, after Creek Oil Compzny
ceased production in 1973 and before production was resumed
in December 1980. We have recited in the first part of this
opinion those particular instruments.
Bow Valley further claims that Creek Oil Company and
Biby had actual notice of the claims of Bow Valley and its
subsequent assiqnees. In particular they point to the
provisions of the agreement between Creek Oil Company and
Biby, constituting Creek Oil's proposal for resumed
production on the premises, which was expressly made subject
to a "favorable resolution of the top lease" given by the
royalty owner. Creek Oil Company's president was aware on
December 4, 1976 that Edington had issued the first lease
which expired after a two year term. On June 7, 1977,
Edington's attorney wrote to Creek Oil Company their
contention that the Creek Oil Company lease had expired under
its own terms.
Of equal wejght in determining that Creek Oil Company
and Biby were aware that their lease had terminated is the
language of their own oil and gas lease, with the specific
provisions in it for termination upon cessation of production
for 90 days. It seems impossible that they could have an
honest and reasonable belief in the superiority of their
title. Sullivan, Handbook - - - - Gas Law, at 58.
of Oil and -
The controlling case in this situation is Reickhoff v.
Conso!.idated Gas Company (1950), 123 Mont. 555, 217 P.2d
1.076. In that case, Consolidated drilled a gas well on lands
on which Reickhoff held a valid oil and gas lease.
Consolidated had commenced an action against Reickhoff and
others seeking to quiet title to the real estate and minerals
and. the District Court had entered. its order or decree in
favor of Consolid.ated. Reickhoff was inducted into the U.S.
Army the day before the decree was filed. Consolidated, upon
entry of the decree, went on the leased. lands, removed
Reickhoff's oil drilling rig, set up its own rig, and started
drilling. Reickhoff appealed the Distrj.ct Court decision to
the Montana Supreme Court and the judgment in favor of
Consolidated was reversed. Consolidated Gas Co. v. Reickhoff
(19441, 116 Mont. 1, 151 P.2d 588. Thereafter Reickhoff
sought recovery from Consolidated for the value of the gas it
had produced from the well and claimed that Consolidated was
a bad faith trespasser. In finding the trespass wil.lful this
Court said:
". . . That the company was a trespasser on the
leased lands is beyond doubt. But the company says
it was not a willful trespasser for it entered
under the district court's decree, assuming to
annul the lease and to quiet title in it. However,
it knew the law gave to Reickhoff the right of
appeal and that on such appeal the decree might be
either reversed, modified, a-£firmed,or the case be
sent back for the taking of further evidence or a
new trial-. It knew Reickhoff had vigorously fought
the suit and that he was likely to appeal from the
judgment entered against him. In misjudging the
law and Reickhoff the gas company acted at its
peril. It assumed the attendant risk of drilling
the well on the lands leased to Reickhoff and of
having the trial court's judgment reversed on
appeal, but it took the chance and lost.
" . . . 'Why should one be treated as acting in
good faith when dealing with property as his own,
when he knows all of the facts which constitute his
claim, as well as the claims of his adversary,
which facts, when properly construed, give him no
title to the land? Such a holding would make every
man a judge of the law in his own case, instead of
being bound by the law as interpreted by those
charged with that duty. We must therefore conclude
that the defendants, when they drilled the wells on
these lands, were willful trespassers, just as much
so as though there had. been no question but that
the plaintiffs had the superior right. They could
not decide the disputed question in their own
favor, and then proceed with the hope that their
acts woul-d be characterized by this Court as in
good faith, even though their judgment upon the law
of the case should not be approved. ' " (Citations
omitted. ) Reickhoff v. Consolidated Gas Co.
(1950), 1-23 Mont. 555, 562, 563, 217 P.2d 1076,
1079, 1080.
Reickhoff is applicable to this case. Creek Oil Company
and Biby were willful trespassers when they entered upon the
lands for which their oil. and gas lease had expired to
recommence drilli~goperations. As willful trespa-ssers they
are not entitled to recover either proceeds from the oil
produced or the cost of producing the oil. The District
Court was clearly erroneous in findha good faith up to the
time of trial. Rule 54(b), M.R.Civ.P.
Creek Oil Company and Biby further argue that in
determining good faith. we should take into account that they
have never taken possession of the funds from the sale of the
oil, that such funds have been deposited in court, and that
the sa.le of the oil has been commercially reasonable. They
also argue that finding them bad faith trespassers would have
the effect of unjustly enriching Bow Valley which has not
done anything to produce the oil.
Yet, it is Bow Valley's right to the working interest in
its lease that Creek Oil Company and Biby usurped, without
any basis for relying on the superiority of the Creek Oil
title to the leasehold. interest. Their essential act. of
willful trespass was going upon the land to reproduce the
well in the face of the provisions in their own lease that it
had terminated for cessation of production. Creek Oil
Company and Biby have continued to usurp Bow Valley's right
to the working interest throughout the litigation.
Preserving the proceeds does not ameliorate their bad faith
trespass.
VALUE - CASING
OF
The District Court found that Creek Oil Company and Biby
were entitled to receive from Row Valley $5,250.00 as the
present value of the casing in place in the oil well, less
its costs of removal.
The District Court arrived at its figure by determining
the present value of the 5,000 feet of casing at $3.75 per
foot less the cost of removal, $2.70 per foot. In reaching
this finding, the court admitted the evidence of value of the
casing was "sketchy," that the casing was 17 years old, and
the amount of removable pipe is speculative. Accordingly,
Bow Valley argues that the decision of the District Court is
speculative and conjectural and should be set aside.
This Court has approved the concept that in assessing
damages, the trier of fact must exercise calm and reasonable
Ijuc7tgment and the amount of the award. rests of necessity in
the sound discretion of the trier of fact. Johnson v. Murray
(Mont. 1982), 656 P.2d 170, 1.75, 39 St.Rep. 2257. When there
is strong evidence of the fact of damage, a defendant should
not escape liability because the amount of damage cannot be
proved with precision. Johnson, supra; Jarussi v. Board of
Trustees of School District No. 28 (Mont. 1983), 664 P.2d
316, 318, 40 St-Rep. 720, 723. We have adopted the concept
that. a wrongdoer is not allowed to escape by merely paying
nominal damages if there is any reasonable way in which the
.
am0ur.t that he should pa-y in damages can be determined..
Therefore, if the damages are measured by a method which is
reasonably definite, and not likely to give compensation in
excess of the loss suffered, the damages brill be approved.
Laas v. Montana State Highway Commission et a.
]. (1971), 157
Mont. 121, 131, 483 P.2d 699, 704. Although these rul-es of
damages apply against wrongdoers, there is no reason why we
should not apply the same rules here where it is undoubted
that Creek Oil Company and Biby are entitled to recover for
the present value of the casing less its costs of removal.
We hold that in view of the difficulty in ascertaining
the value of the casing, the Court adopted a reasonable
method and price for determining the damages based on the
evidence of experts before it.. We therefore affirm the award
of the District Court with respect to the value of the
casing.
- - EDINGTON DEPOSITION
USE OF
Creek Oil Company and Biby claim on appeal that it wa.s
improper for the District Court to allow the deposition of
plaintiff Mrs. Phyllis Edington to he used at trial in her
absence as a witness.
Creek Oil and Riby contend that the deposition of Mrs.
Edington was taken as a "discovery deposition," that she is a
resident of Sidney, Montana, where the trial was held, and
that she was not "unavail.able" for appearamce as a witness as
Rule 804 (c)( 1 5 ) , M.R.Evid., requires.
Testimony in the case indicated that at the time of the
trial Phyllis Edington was residing in Mesa, Arizona, and
that she spent part of the time in Arizona and the remainder
of the year in Sidney. At the time of the trial she was in
Arizona. The District Court permitted the use of her
deposition under the terms of Rule 32 (a)(3) ( R ) . Tha.t rule
provides t
" T h e d.eposition of a witness, whether or not a
party, may be used by any party for any purpose if
the court finds:
"(B) That the witness is at a greater distance
than LOO miles from the place of trial or hearing,
unless it appears that the absence of the witness
was procured by the party offering the
deposition;. . ."
lJnd.er the record in this case, the District Court was
clearly within the provisions of Rule 32(a), allowing the use
of the deposition of Mrs. Edington, although she was a party
to the action. No other distinction is made in the Montana
Rules of Civil Procedure between depositions taken in
d.iscovery, and those intended to be used at trial. The
provisions of Rule 804, M.R.Evid., are not appl..icableto the
problem of the use of the Edington deposition. Rule 8 0 4 is
directed to hearsay exceptions. It is Rule 32, M.R.Ci~.P.
that governs the use of depositions at trial. We find no
error in the use of the Edington deposition.
DECISION
Affirmed in part and reversed in part, and remanded to
the District Court for entry of judgment in a-ccordance with
this opinion.
We Concur:
a4-.4.ii~/&.,ueea
Chief Justice
Justices