No. 85-78
IN THE SUPREME COURT OF THE STATE OF MONTANA
DONNA RICHARDSON, MARY FARREN, ETTA
VERNICE SUTTON, and VERNIS KEHR, and
GLORIA R. ROHLFING, Intervenor,
Plaintiffs and Appellants,
RICHLAND COUNTY, a local qovernment
-
in the State of Montana, 4 ..
APPEAL FROM: District Court of the Seventh Judicial District,
In and for the County of Richland,
The Honorable A. B. Martin, Judge presiding.
COUNSEL OF R.ECORD:
For Appellant:
Olsen, Christensen & Gannett; Paul G. Olsen argued,
Billings, Montana
Dunaway, O'Connor & Moe, P.C.; Peder Moe, Jr.,
Billings, Montana
For Respondent :
Victor G. Koch argued, Richland County Attorney,
Sidney, Montana
Submitted: June 28, 1985
Decided: December 17, 1985
Filed: DECi'zj985
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
In Richland County District Court, the plaintiffs
brought an action to quiet title to a 6%% royalty interest
claimed in the production of oil and gas from a one-half
section of Richland County land. Following submission on
extensive stipulated facts, the District Court quieted title
in Richland County and the plaintiffs appeal. We affirm.
The issues which we find to be determinative are:
1. Was the tax deed void because of defects in the sale
proceedings prior to issuance of the certificates of tax
sale, or because of a lack of notice to the property owner in
the course of the tax deed proceedings?
2. If the tax deed was void, was the Obergfell quiet
title action sufficient to establish title by adverse
possession and payment of taxes?
3. Was the exchange of deeds between the plaintiffs and
the Steinbessers (present surface owners) effective in
validating the Richland County claim to the royalty?
4. Was the claim on the part of the plaintiffs barred
by laches extending over a period of approximately 60 years?
The parties raised other issues which are not essential
to this opinion and are not discussed.
This cause was presented to the District Court upon an
agreed statement of facts with supporting affidavits,
exhibits, and answers to interrogatories. The District Court
entered an extensive review of the statement of facts,
findings of fact, and conclusions of law. We summarize the
uncontested facts:
Ernest Stubbs, the father of the plaintiffs, was the
patentee on November 1, 1918. Ernest Stubbs left the land in
1919 and never returned. Taxes became delinquent for the
years 1921 through 1929. Richland County received a tax deed
on August 18, 1930.
On August 7, 1933, Richland County sold the land under
contract for deed to Albert Obergfell. On February 3, 1944,
Richland County quitclaimed the land to Albert Obergfell, but
reserved a 6 royalty interest in the oil and gas to be
produced. Albert Obergfell conveyed the property to August
M. Obergfell (Obergfell) on June 6, 1944. Obergfell brought
a quiet title action and obtained a decree on February 27,
1946. The 1-946 decree contained the following statement
after the property description:
Subject also to a royalty interest of 64%
of all oil, ga.s and minerals, recovered
and saved from the lands above described,
reserved in Richland County, Montana.
Richland County was not a party defendant in the quiet title
action.
In 1970, Obergfell sold to Joe G. Steinbesser and Donald
J. Steinbesser, reserving an undivided one-half interest in
all of the oil, gas and other minerals, excluding coal.
Oil was discovered in May 1979. In 1983, plaintiffs
quitclaimed to Steinbessers all their interest in the land
with the exception of the 6 % % royalty claimed by Richland
County. In exchange for these four deeds, Steinbessers
conveyed to the plaintiffs all of their right, title, and
interest in and to the 6%% royalty claimed by Richland
County. Obergfell, who had reserved an undivided one-half
interest in the minerals, did not execute any conveyance to
the plaintiffs. As a result, the curative effect, if a-ny,of
the Steinbessers' deed is limited to their one-half interest
in the oil, gas and minerals.
The District Court concluded that an underlying question
was whether the plaintiffs could, by their exchange of
quitclaim deeds, sever Richland County's 6&% royalty interest
and redeem only that interest. We conclude that no
redemption was attempted. The plaintiffs did not tender tax
payment to anyone. The agreed facts established that while
the land was in the possession of Richland County, no taxes
were assessed. All taxes assessed thereafter were paid by
respective landowners, and no real property taxes were
delinquent.
The parties asked the District Court to adjudicate who
were: (1) the owner of the 6 % % royalty on oil, gas and
minerals; and (2) the owner of the produced oil. Our holding
will dispose of the first question and eliminate the need for
consideration of the second.
The Findings of Fact of the District Court establish
that prior to the holding of the tax sales, no affidavit of
the County Treasurer establishing publication of notice of
tax sale was filed in the office of the Clerk and Recorder of
Richland County, as required by S 2187, R.C.M. 1921. The
application for tax deed together with supporting documents
showed that the owner was Ernest B. Stubbs of Davenport,
Arkansas. Notwithstanding that statement of ownership, the
affidavit of the Clerk and Recorder showed that the notice of
application of tax deed was mailed to Ernest B. Stubbs at
Sidney, Montana. The District Court pointed out that the
theory of the plaintiff's case was that the tax deed issued
to Richland County on August 18, 1930, was void and a
nullity; that the true owner had the right of redemption
under the statute; and that right of redemption continued
until divested by the required notice. Prior to December 30,
1982, Richland County received $491,937.94 in royalty
payments from production of oil from the tract, and royalty
has accrued since that date.
The District Court took judicial notice of the 1.946
quiet title action and decree, which held that Obergfell had
been in open, notorious, exclusive and adverse possession of
the land for a period in excess of 10 years and had claimed
the same adversely to all the world. Since the issuance of
the tax deed on August 18, 1930, neither the plaintiffs nor
their predecessors in interest were in possession of the
property or made any claim to the property. Ernest B. Stubbs
abandoned the property in 1919 and left Montana. Since 1921
neither the plaintiffs nor their predecessors in interest
have paid any taxes or assessments levied a.gainst the
property, a lapse of over 61 years. Plaintiffs have
completely failed to explain the delay in exercising their
asserted rights. Prior to the commencement of this lawsuit,
no one has questioned the validity of the 6&% royalty claimed
by Richland County.
The District Court adopted conclusions of law that the
quiet title action and the deeds from the plaintiffs
validated Obergfell's and Steinbessers' title to the minerals
and Richland County's right to a share of the mineral
royalties. The court concluded that Richland County would
suffer detriment if required to refund accumulated revenue;
that plaintiffs' predecessor-in-title abandoned the property
in 1919; that the plaintiffs did not assert a claim until
1982 when the royalty interest became valuable; and that
plaintiffs' claim of redemption is barred by laches. The
District Court then concluded that Richland County is
entitled to a decree quieting title to its reserved royalty
of 6%% and to the proceeds realized from that royalty
interest.
Is the tax deed void because of defects in the sale
proceedings prior to issuance of the certificates of tax
sale, or because of a lack of notice to the property owner in
the course of the tax deed proceedings?
Plaintiffs devote an extensive portion of their briefs
and argument to the insufficiency of the tax deed proceedings
and the right of redemption on the part of the plaintiffs.
Section 2182, R.C.M. 1921 provided for publication of
notice of tax sale by the County Treasurer. Section 2187,
R.C.M. 1921 required that after making publication, the
County Treasurer "must file with the county clerk a copy of
the publication, with an affidavit attached thereto." The
agreed statement of facts established that no affidavit was
filed as required by S 2187, R.C.M. 1921.
Section 2209, R.C.M. 1921, as amended by Chap. 156, 1929
Mont. Laws, provided the following with regard to notice of
application for tax deed to the owner:
The purchaser of property sold for delinquent taxes
... must ... serve upon the owner of the
property purchased, if known . .. a written
notice, stating that said property, or a portion
thereof, has been sold for delinquent taxes, giving
the date of sale, the amount of property sold, the
amount for which it was sold, the amount due, and
the time when the right of redemption will expire,
.
. . and the owner of said property ...has the
right of redemption indefinitely until such notice
has been given and the deed applied for, upon the
payment of fees, percentages, penalties and costs
required by law. Notice to any owner, mortgagee or
assignee of mortgagee shall be given by registered
letter addressed to such mortgagee or his assignee
at the post office address of said owner, mortgagee
or assignee ... In case of unoccupied property,
. ..such notice must be posted in a conspicuous
place upon the property, and personally served upon
all owners thereof residing in the county where the
property is situated, and deposited in the post
office address to any known or residing outside of
said county with postage thereon prepaid ...
The parties' stipulated statement of facts and the District
Court's findings of fact establish that the affidavit of the
Clerk and Recorder of Richland County stated: "[Tlhe owner is
Ernest B. Stubbs of Davenport, Arkansas, and notwithstanding
this knowledge, attests to the mailing of notice of
application for tax deed to Ernest B. Stubbs at Sidney,
Montana. "
Notice of application of tax deed to the owner, whether
by mail or publication, has been held to be jurisdictional.
Tax deeds issued without affidavits setting forth the
requisite statements as to notice and occupancy are void.
Yellowstone Inv., Etc. v. Yellowstone County (Mont. 1982),
654 P.2d 508, 39 St.Rep. 2111; Mitchell v. Garfield County
(1-949), 123 Mont. 115, 208 P.2d 497. We conclude that the
tax deed here in question was void.
I1
Was the Obergfell quiet title action sufficient to
establish title by adverse possession and payment of taxes?
In June 1944, Albert R. Obergfell and his wife conveyed
the property to August M. Obergfell. In 1970, August M.
Obergfell and his wife entered into a contract for deed with
Donald J. and Joe G. Steinbesser, in which the Obergfells
reserved an undivided one-half interest in all oil, gas and
other minerals not previously conveyed. On June 2, 1983, Joe
Steinbesser and others conveyed to the plaintiffs all their
right, title and interest in and to the 6 & % royalty claimed
by Richland County. The plaintiffs did not obtain a similar
conveyance from the Obergfells, who had retained an undivided
one-half interest in all oil, gas and other minerals not
previously conveyed.
In 1945, August M. Obergfell commenced a quiet title
action in Richland County. Service of summons in that action
was made upon Ernest B. Stubbs among others by publication.
Service by publication was based upon an affidavit reciting
that Stubbs did not reside in Montana and that his last known
address was R.R. #2, Edna, Kansas. Richland County was not a
party defendant in that action. On February 27, 1946, a
decree was entered quieting title to the land in Obergfell,
with title subject to a royalty interest reserved in Richland
County, Montana, of 64% of all oil, gas and minerals
recovered and saved from the lands.
The plaintiffs contend that the affidavit for
publication of summons was inadequate as to Mr. Stubbs
because it only stated that he once resided in Montana, but
that his last known place of residence was R.R. #2, Edna,
Kansas. The plaintiffs contend that these conclusions are
not sufficient under Aronow v. Anderson (1940), 110 Mont.
484, 104 P.2d 2, in which this Court stated that the
affidavit for publication must show the evidentiary facts
upon which the ultimate fact of nonresidence is asserted,
before a valid order for publication of summons can be made.
In the absence of the complete file of the quiet title
action, we do not rule upon this contention of the
plaintiffs.
As a result, we are not able to conclude that the
Obergfell quiet title action was sufficient by itself to
establish title by adverse possession and payment of taxes.
I11
Was the exchange of deeds between the plaintiffs and the
Steinbessers (present surface owners) effective in validating
the Richland County claim to the royalty?
The District Court concluded that while the tax title
proceedings were defective, such defects were cured by the
quit claim deeds from the plaintiffs to the present owners of
the property. The District Court relied upon the analysis
of royalty in Rist v. Toole County (1945), 117 Mont. 426, 159
P.2d 340, in which this Court stated that royalty means a
share of the produce paid to the owner of the property. The
originator of the royalty is still the owner of the property
while the royalty assignee has an interest in the produce of
the property, which is personal property. The Court pointed
out that an assignment of royalty does not anywhere
constitute a grant of minerals, and no severance from the
land is consummated under such an assignment. The Court also
pointed out that royalty constitutes an interest in the
privilege of producing minerals and is personal property when
it is produced. It is not an interest in the minerals in
place. In other words, a royalty is a privilege a prendre,
not a portion of the fee simple title. Rist, 117 Mont. at
433-34, 159 P.2d at 342-43.
In substance, the District Court concluded that the
conveyance by the plaintiffs was sufficient to pass all title
to the minerals in place, thereby validating the title to
all minerals in the surface owners, and also validated the
royalty interest of Richland County. While we do not
disagree with the analysis of the nature of royal-ty, we do
not conclude that the exchange of deeds was sufficient to
validate the royalty interest of 6%% claimed by Richland
County. In the plaintiffs' deeds to the Steinbessers, there
was an express reservation by the plaintiffs of their claim
and interest in the 6%% royalty claimed by Richland County.
It is true that the plaintiffs are the heirs of Mr. Stubbs,
the original owner. It is also true that their conveyances
to the Steinbessers are sufficient to clear the title of any
insufficiency of the tax deed proceedings as to Mr. Stubbs.
However, the specific exception at 64% royalty in the
plaintiffs' quit claim deed to the Steinbessers is comparable
to any other deed in which a grantor excepts and reserves a
royalty interest. As a result, we conclude that the
plaintiffs did not convey or give up any claim which they had
to the 6%% royalty claimed by Richland County.
Was the claim on the part of the plaintiffs barred by
laches extending over a period of approximately 60 years?
The District Court referred to King v. Rosebud County
(Mont. 1981), 631 P.2d 711, 38 St.Rep. 1145, in which this
Court concluded that the defense of laches was inapplicable
because laches did not commence until oil was produced and
royalties were earned. The District Court concluded that
this Court had overlooked the inchoate ownership of the
royalty interest. We agree that the King v. Rosebud County
analysis was incomplete with regard to laches.
In Matter of Estate of Wallace (1980), 186 Mont. 18, 606
P.2d 136, this Court pointed out that there is no absolute
rule as to what constitutes laches in Montana and that each
case must be determined according to its own peculiar
circumstance. The Court emphasized that laches is not a mere
matter of elapsed time, but is principally a question of the
inequity of permitting a claim to be enforced.
Laches ... is a concept of equity; it means
negligence in the assertion of a right; it is the
practical application of the maxim, "Equity aids
only the vigilant;'' and it exists when there has
been unexplained delay of such duration or
character as to render the enforcement of the
asserted right inequitable. [Cases cited.]
Wallace, 186 Mont. at 25, 606 P.2d at 140. The Court pointed
out that in applying the laches doctrine, the passage of 32
years after issuance of a probate court decree is of such
duration as to make a present attack inequitable. The Court
also held that where, without reasonable excuse for delay,
more than 4 years had passed between the appointment a
trustee and the filing of the lawsuit, that factor, combined
with an elapsed time of 38 years was sufficient to make it
inequitable for the appellant to attempt a legal attack on a
distribution in an estate.
In addition in Barrett v. Zenisek (1957), 132 Mont. 229,
315 P.2d 1001, this Court referred to § 49-119, R.C.M. 1947,
now S 1-3-218, MCA, which states: "The law helps the
vigilant before those who sleep on their rights." The Court
then quoted from O'Hanlon v. Ruby Gulch Min. Co. (1922), 65
Mont. 318, 209 P. 1062, where the Court stated:
While it is true that the statute of limitations
had not run against the claim now asserted by
plaintiffs, that fact alone does not determine
their rights. The delay which will bar relief in
equity is not necessari-ly measured by the period
prescribed by the statute. It may be much less,
depending upon the peculiar circumstances of the
case, and in determining whether laches shall bar a
particular claim it is proper to consider whether a
party or an important witness - -has died, and thg
~ a r t ~
aaairst whom the claim is asserted has been
deprived thereby of important testimony [Citing
case], or whether the property involved has
increased in value [Citina casel, or whether the
property - passed - - h a z s - - innocent
has into