NO. 87-473

IN THE SUPREME COURT OF THE STATE OF MONTANA
1988

L. R. BRETZ, Plaintiff and Appellant,-vsMILAN R. AYERS,MILAN R. AYERS, Personal Representative of the Estate ofYVONNE AYERS, SHIRLEYM. BROWN, RICHARD C. PACHEK, ZOLLIE KELMAN, GEORGEL. CAMPANELLA,et al.
Defendantsand Respondents.

APPEAL FROM: District Court of the Ninth Judicial District, Inand for the County of Pondera, TheHonorableR.D. McPhillips,Judgepresiding.

COUNSEL OF RECORD:

ForAppellant:

L. R. Bretz, Pro Per,Billings,Montana

For Respondent: Conklin, Nybo & LeVeque;William Conklin, Great Falls, Montana Graybill, Ostrem,Warner & Crotty;George R Crotty, GreatFalls,Montana Anderson, Beatty & Lee; Drawer D,Shelby, Montana Douglas Anderson, CountyAttorney, Conrad, Montana William Sherman, Conrad,Montana

Submitted on Briefs: April 7, 1988 Decided: May 24, 1988 Filed: 

### MAY

### 24

### 1988"

ClerkMr. Justice William E. Hunt, Sr.

## , delivered the Opinion of the Court.

Plaintiff, L. R. Bretz, appeals the decision of the Ninth Judicial District Court, Pondera County, to convert defendants', Milan R.. Ayers; Milan R. Ayers, personal representative of the Estate of Yvonne Ayers; Shirley M. Brown; Richard C. Pachek; Zollie Kelman; George L. Campanella; George R. Crotty, Jr.; Ayers Oil and Gas, Inc.; Paul A. Fink; Evelyn Kelman; Sidney Kelman; Sol Berkowitz; John F. Pachek; Kenneth K. Knight; Lynn M. Seelye; Gene D. Todd; Eugene S. Hufford; William N. Walden; Russel Walden; World Wide Petroleum and Exploration Co.; Roger F7. Kornder; The Village Bank; Petrox Petroleum Co.; Graybill, Ostrem, Warner & Crotty; Jerry Joy; Pati J. O'Reilly; ~unkermier, Clark, Stevens, & Campanella; and Thornton G. Dewey

[defendants],motions todismiss on a quiet title action into

a summary judgment for the defendants. We affirm. The following issues are raised on appeal: 1. Whether the District Court erred when it converted motions to dismiss, Rule 12(b)

### (6)

### , M.R.Civ.P., into motions for summary judgment, Rule 56,M.R.Civ.P.? 2. Whether the DistrictCourt erroneouslymade findings of facts contrary to the evidence? 3. Whether the District Court erred when it dismissed this action with prejudice? On July 25, 1973, Milan R. Ayers and Thornton G. Dewey formed an equal partnership for purposes of dealing in oil, gas and other-minerals. The partnership agreement specifically stated that the "partnership and Dewey's relationship thereto remain as secret and silent as possible, and that business affairs he carried on in the name ofMILAN R. AYERS

# .... " On January 21, 1980,Ayers acquired for the partnership, but in his own name, a 320 acre oil and gas lease located in Pondera County, known as the Aakre lease. Ayers and Dewey dissolved their partnership on December 22, 1980. Neither the partnership agreement nor the dissolution of the partnershipagreementwere recorded. The plaintiff-appellant, Bretz, brought this action in July, 1985, to quiet title to a 21.875% working interest in the Aakre lease. Bretz claims part of this interest by relyingupon an assignmentof 97% of Dewey's supposed 21.875% working interest. Bretz recognizes that defendant ShirleyM. Brown received an interest in the Aakre lease, but argues that she did not receive the entire interest to the lease, but rather only Ayers' 50% interest. Bretz argues that the partnership agreement, which gave each partner equal rights in the management of the partnership,and the dissolution of thepartnership agreement betweenAyers and Dewey established thatDeweywas an owner of record of 50% of the Aakre oil and gas lease. Bretz further argues that even though the partnership agreement and the dissolution agreementwere not recorded, the defendants knew of Dewey's 50% interest and therefore had the requisite notice that would bar the defendants from purchasing Dewey's 50% interest from Ayers. The defendants brought motions to dismiss under Rule 12(b)(6)

## , M.R.Civ.P. In response to these motions to dismiss, Bretz attached eleven documents to his brief opposing those motions to dismiss and argued the contents of those documents throughout his brief. The District Court deemed the defendants' motions to dismiss as motions for summary judgment and found that Bretz's quiet title action isbarred by the statutes of limitations set forth in §5 70-19-401 and -402,MCA. Bretz appeals.The first issueraised on appeal is whether theDistrict Court erred by converting defendants' motions to dismiss under Rule 12(b)(6) into motions for summary judgment? Bretz alleges that summary judgment was not appropriate in this instance because he was not given reasonable opportunity to present all material pertinent to the case and further that genuine issueofmaterial fact exists. We disagree. The applicable rule in this instance is Rule 12(b), M.R.Civ.P., which states: [ilf, on a motion asserting the defense numbered (6)to dismiss for failureof thepleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shallbe treated as one for summary judgment and disposed of as provided inRule 56,and allparties shall be given reasonable opportunity topresent all materialmade pertinent to suchmotion by Rule 56.
The language found in Rule 12(b) and 12(c) addressing converting the respective motion to dismiss and motion for judgment on the pleadings into a motion for summary judgment

are identical. Likewise, the result is identicalwhen mattersbeyond the pleadings arepresented and consideredby the court. Inboth cases, themotion shall be treated as one for summary judgment and disposed of as provided in Rule 56. See Claytonby Murphy 

### v. Atlantic Richfield Co. (Mont. 1986), 717 P.2d 558, 560-61, 43 St.Rep. 717, 719; Matthews v. Glacier General Assurance Co. (1979), 184 Mont. 368, 375, 603 P.2d 232, 236-37. In this instance, Bretz attached eleven documents tohis brief opposing defendants' motions to dismiss. The record reveals that the court considered these documents and did nothing to exclude any material presented to it. The court thus converted the motions todismiss into motions for summary judgment. Bretz did not appear for the oral hearing andnow claims that he did not have a reasonable opportunity to presentmaterialpertinent fora motion for summary judgment. This Court has not previously considered when a party has a reasonable opportunity under Rule 12(b) to present material pertinent for a motion for summary judgment, however, the Court ofAppeals for theNinth Circuit addressed this issue in Grove v. Mead School Dist. No. 354 (9th Cir. 1985), 753 F.2d 1528. In Grove, the plaintiff submitted matters outside the motion to dismiss and invited consideration of them by the court. The court held that a formal notice that the court intended to treat a motion to dismiss as a motion for summary judgment was unnecessary under these circumstances because the party is "fairly apprised" that the court will look beyond the pleadings. Grove, 753 F.2d at 1532-33. Likewise, Bretz himself introduced the extra documentsand invited a consideration of themby the court. Bretz thuswas "fairly apprised" that the court could treat the motions to dismiss as motions for summary judgment. We hold that in this case Bretz, by his

own actions, had a reasonable opportunity to, and did, present pertinentmaterial to the court. Bretz also argues that genuine issue of material fact exists because he contends that all defendants knew of the partnership, its dissolution,and the agreementbetweenAyers and Dewey regardingDewey's interest in the lease. In ordering summary judgment for the defendants, the District Court first recognized that a lessee's interest in an oil and gas lease constitutes an interest in real property, Stokes v. Tutvet (1958), 134Mont. 250, 255, 328 P.2d 1096, 1099; Rist

v. Toole County (1945), 117Mont. 426, 428-29, 159 P.2d 340, 343; Willard v. Federal SuretyCo. (1932),91Mont. 465, 472, 8 P.2d 633, 635,and that under §§ 70-19-401 and -402, MCA, a quiet title action to real property cannot lie unless "theplaintiff, his ancestor, predecessor, or grantor was seized or possessed of the property in question within 5 years before the commencement of the action" (Emphasis added.) Section 70-19-401,MCA. The District Court then found that Dewey, and thus Bretz,were complete strangers to the record title of the Aakre oil and gas lease and thus barred by the statutes tobring a quiet title action. In making this finding, the court first noted that possession of an oil and gas lease is established only by undertaking oil and gas operations upon the land covered by such lease,see Lehfeldtv. Adams (1956), 130Mont. 395, 400, 303 P.2d 934, 937, and that Bretz never alleged and no evidence exists that either Dewey nor himself ever undertook oil and gas operations under the Aakre lease. The court next examinedwhether Bretz or his predecessor in interest,Dewey,

were seised of the oil and gas lease within the five-year period required by the statutes. As the court recognized, "seisin" is defined by this Court as "perfect and complete title." Stephens v. Hurly (1977), 172 Mont. 269, 274, 563 P.2d 546, 549-50. The court found that both Dewey and Bretz

were complete strangers to the record title of theAakre oil and gas lease and thus were not seised of the lease. The court based this finding on paragraphs 4 and 6 of the dissolution agreement. Paragraph 

### 4 of the dissolution agreement states: Milan R. Ayers shallhave and own, and Thornton 

### G. Deweyhereby sells,conveys, assigns,and transfers unto Milan 

### R. Ayers subject to the provisions of paragraph 6 hereof, all of his interest in and to, all of the remaining oil and gas properties of the partnership in the State of Montana not being sold

# . . ., which oil and gas properties shall include

# ...those oil and gasproperties generally set forth and described on exhibit C [theAakre oil and gas leasewas set forth in exhibit C]. As part of the consideration therefor,Ayers agrees toassume and to pay and all remaining debts of thepartnership arising from the oil and gas operation inMontana

# . . . andAyers hereby specifically agrees tohold Dewey freeand harmless from any and all damages, loss, or expense of any kind whatsoever which Dewey might suffer from non-payment of said debtsby Ayers. Paragraph 6of the same agreement states: Ayers hereby covenants and agrees with Dewey to give, grant, and assign to Dewey 

### 3 of any interest retainedby Ayers in theproperties discribed [sic] on exhibit C, provided, however, that in the case of a working interest retained by Ayers, Dewey's 

### 4 interest therein shall be converted to a "carried working interest," carried free of all costs in the ratio of 

### 4 to 

### 1.. 

# .

# . The court found that paragraph 4 of the dissolution agreement constituted a present conveyance by Dewey to Ayers of all of Dewey's interest in the partnership's oil and gas properties, and that paragraph 6 constitutes an executory promise to convey the described interest in the future. The court concluded that neither Dewey nor Bretz were seised of the oil and gas lease within the five-yearperiod as required by the statutes. The court thus entered summary judgment for the defendants. We hold that theDistrict Court accurately accounted for the facts and applied the appropriate law. Paragraph 

### 4 of the dissolution agreement clearly indicates that Dewey conveyed all of his right, title, and interest in the partnership assets toAyers. Paragraph 6merely imposesupon Ayers, at some time in the future, an obligationto convey to Dewey a small "carried working interest" of any interest Ayers might retain in the property. Bretz's argument that the defendants knew of the partnership between Ayers and Dewey, its dissolution, and any supposed interest Dewey held is irrelevant, since Ayers did not retain theAakre leaseandDewey did not retain a 21.875% interest in the Aakre lease. The District Court correctly found that no genuine issue of material fact existed and properly entered summary judgment for the defendants. The second issue Bretz raises on appeal is whether the DistrictCourt erroneously made findings of facts contrary to the evidence. Bretz argues that the District Court overlooked the language in the dissolution agreement, specifically paragraph 6. According to Bretz's interpretation of the dissolution agreement, Dewey conveyed allhis 50% interest to Ayers in paragraph 4 and Ayers reconveyed a 50% interest to Dewey inparagraph 6. As we have noted above, the District Court carefully examined the partnership and dissolution agreements. The courtmade findings of facts consistent with the language of thedissolution agreement. When interpretinga contract,the contract "must receive such an interpretationaswillmake it lawful, operative, definite [and] reasonable 

# .. .," S 28-3-201, MCA, and "[rJepugnanciesin a contract must be reconciled, if possible, by such an interpretation as will give some effect to the repugnant clauses, subordinateto the general intent and purpose of the whole contract." Section 28-3-204, MCA. Bretz's interpretation would render both paragraphs meaningless, since the effect of his interpretation would nullify each paragraph and place each party in their original 50-50 position. Such an interpretation of the two paragraphs is repugnant and not favored by our statutes. In finding that paragraph 4 of the dissolution conveyed a present interest and paragraph 6 constituted an executory promise to convey the described interest in the future, the District Court interpreted these paragraphs of the dissolution agreement so as to give effectto both paragraphs. We thus hold that the District Court made findingsof facts consistentwith the evidence. The third issueraised by Bretz on appeal iswhether the District Court erred when it dismissed this action with prejudice. Bretz contendsthatwhen a statuteof limitations is the basis for dismissing an action, then the action should not be dismissed with prejudice when the passage of time obviates the defense. Rretz thus argues that even if the District Court correctly found that hispredecessor in title, Dewey, did not have "constructive seisen" for five years prior to filing the complaint, he nonetheless should have been entitled to refile and start again. Bretz's basic contention is not applicable in this instance. As previously noted, $ 70-19-401, MCA, requires that Bretz or Deweybe possessed or seised of the Aakre lease within fiveyearsbefore the commencement of the action. The District Court found, and the record and evidence supports, that neither Bretz nor his predecessor in interest, Dewey,

were seised of theAakre lease at the time Rretz brought the quiet title action or at any time prior to the bringing of the action. The mere passage of time will not cure this defect and thus bars Bretz from refiling a quiet title action. IfBretz,however, obtained title to an interest in the lease in the future through a new assignment executed by

someone having title and his new title was not recognized, Bretz could then commence a new action to quiet title. But that is not the case here. We hold that under the present setof facts the District Courtdid not err when itdismissed this actionwith prejudice. P We affirm.//chief Justice



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Justices