Northwestern Improvement Co. v. Mon-O-Co Oil Corp.
Northwestern Improvement Co. v. Mon-O-Co Oil Corp.
Opinion of the Court
Plaintiff, a Delaware corporation, brought this action to quiet title to all the oil, gas and mineral rights in and under certain described land situated in Fallon Comity. It alleged ownership of the rights and that defendants claim some unfounded right therein. The defendant Mon-O-Co Oil corporation is the only defendant claiming an interest in the property involved and will hereafter be referred to as defendant. It filed an answer containing two separate defenses or counter claims. The first of these alleged in substance that plaintiff is a subsidiary of the Northern Pacific Railway Company and that the officers and agents of the Northern Pacific are the ones who dealt with the defendant in making the alleged agreement hereinafter mentioned. It alleged that the land described in plaintiff’s complaint is checkerboarded among certain other lands in Township 7 North, Range 60 and 61 East and which other lands were under oil and gas leases to the defendant and comprised a compact and integral unit adapted for the purpose of conducting-oil and gas exploration and development work; that by certain correspondence between plaintiff, acting through its agents the Northern Pacific Railway Company, and the defendant, plaintiff delivered to the defendant a certain writing or permit whereby plaintiff agreed that defendant might explore the
In a second affirmative defense the defendant alleged practically the same matters alleged in the first defense and counter claim and further alleged that in reliance upon all the promises made by plaintiff and upon the extensions granted to defendant by plaintiff, defendant continued drilling operations until they were completed on or about August 12, 1952 to a depth of 2,011 feet and that defendant would not have commenced and conducted the drilling operations had it not been for the promises and extensions referred to in the answer and that under the circumstances plaintiff should be estopped from showing a revocation of the promise and extensions. Throughout the briefs this affirmative defense is referred to as the defense based upon promissory estoppel. The prayer of the answer demanded that plaintiff be ordered to issue a permit pursuant to its promise as alleged in the answer and counter claims. Plaintiff by appropriate pleading denied the material allegations of the answer and counter claims, except that it admitted execution of permit numbered 165 to explore for oil and gas to depths not in excess of 2,500 feet. The issue between the parties is whether defendant is entitled to a permit to explore for oil and gas below 2,500 feet.
The cause was tried to the court without a jury. The court found the issues in favor of plaintiff and entered judgment quieting title in plaintiff and denying any relief to defendant. From the judgment so entered defendant has appealed.
Numerous specifications of error are assigned. The principal contentions are that the court erred in its findings of fact and conclusions of law. The court expressly found that on August 10, 1950, and after there had been an interchange of letters between the parties, plaintiff issued to defendant its permit No. 165 covering the oil and gas rights on the land described in the complaint to the depth of 2,500 feet and on the same day
The evidence consists of a series of letters between the president of defendant and Mr. Gilíes, the chief geologist of plaintiff then residing in Billings. We shall not attempt to review all of the correspondence between the parties. It is sufficient to point out that so far as a permit for exploration below 2,500 feet was concerned, in June 1949, the president of the defendant company wrote to Mr. Gilíes as follows:
“We are interested in obtaining an oil and gas permit from your company, embracing the properties cheeked in red on the enclosed plat. * * *
“If said permit is granted, we assume the terms and conditions will be basically as disclosed in our present permit No. 108. * * * The intent is a Madison Lime test. ’ ’ (Permit No. 108 was one granting the right to drill a well to the depth of 4,000 feet.) The “Madison Lime” was shown to be at a depth of about 8,000 feet.
In reply to this offer, the plaintiff made a counter offer in this language; “* * * we are in receipt this morning of a letter from our Land Commissioner, Mr. L. L. Schwarm, advising that the oil and gas rights for the land listed above will be withheld from other disposition to October first, next, to give you an opportunity to formulate your plans in connection with the development of this territory.”
On July 10, 1950, plaintiff’s agent wrote a letter to Mr. Haugner, president of defendant, in which he stated: “With refer
“The subject was discussed with our Land Commissioner, Mr. L. L. Schwarm, today and he advises that he is willing to issue a regular permit covering the gas rights to a depth of 2,500 feet for the term of one year under which you agree to commence drilling a well within the term on some portion of the premises. He also advised that he is willing to extend the informal option coloring deep rights to Dec. 31, 1950.” By further correspondence it was made clear that oil rights as well as gas rights were intended to be included.
The permit for depths to 2,500 feet referred to in plaintiff’s letter of July 10, 1950, was issued bearing number 165, and defendant commenced drilling a well. Permit 165 and the so-called informal option was extended several times, the last time being on May 4, 1951. On that date a formal document was issued to extend permit No. 165 to August 21, 1951, “and so long thereafter as drilling- operations are diligently conducted. ’ ’
In the letter of transmittal sent with this document this paragraph appears:
“I may say that I am authorized to advise you that the informal option coArering the deep sands on the premises covered by the permit will be continued until August 20, 1951 also.”
Counsel for defendant argue that the use of the word “also” in this paragraph serves to incorporate by reference the clause from the permit extension reading- “and so long thereafter as drilling operations were diligently conducted.”, so that the drilling being done on the well under permit No. 165 would postpone the termination of the “option.” The court was warranted in finding- that this was not so. The contract or agreement considered in its entirety justifies the conclusion reached by the trial court that the permit to drill to a depth of 2,500 feet was considered separate and apart from the “option” to obtain a lease or permit for oil and gas below the 2,500-foot level, and that drilling under permit numbered 165 had nothing
“The grantor [respondent] reserves.the right for itself, its successors or assigns to enter upon the premises for the purpose of mining, boring, drilling for and removing the oil and/or gas from the premises below the depth of twenty-five hundred (2,500) feet from the surface, and all such operations shall be conducted so as to properly protect the rights of the grantee [appellant] under this contract.”
Defendant did not demand issuance of the permit under the informal option until June 10, 1952, which was after the time had expired during which the plaintiff was bound to hold the rights open. Had defendant demanded a permit before the expiration of that time it might have been entitled to it, but once that time passed without a demand by defendant, its right, if such right existed, passed also.
As to defendant’s contention regarding the doctrine of prom-issory estoppel it is sufficient to say that the same evidence showing a want of promise to issue a permit after August 20, 1951, justified the finding by the court that defendant could not and did not lay out any expense in reliance upon such a promise. Where as here there is substantial evidence to support the findings they will not be disturbed by us. Hayes v. Moffatt, 83 Mont. 214, 271 Pac. 433.
Finding no merit in defendant’s contentions, the judgment is affirmed.
Reference
- Full Case Name
- NORTHWESTERN IMPROVEMENT CO., and v. MON-O-CO OIL CORPORATION, FALLON COUNTY, LEWIS S. JENSEN, and
- Cited By
- 1 case
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- Published