No. 90-517 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

KEESUN PARTNERS, 

a Wyoming general partnership, 

Plaintiff and Respondent, 

-vs- Ly Sk,LitL 

FERDIG OIL COMPANY, INC. a corporation; CLE~~ OF SIJPI-U'I.~~E COURI 

and SOMONT OIL CO., INC., a corporation, STATE OF pn0rdTANA 

Defendants, Counterclaimants and Appellants, 

KEESUN PARTNERS, a Wyoming general partnership, 

consisting of V.C. KNIGHT, J. KENNETH FINSTAD, 

RONALD VANDERHOEF, individually, and as partners; 

and JOHN DOES 1, 2, 3, 4, and 5 and DOE COMPANIES 

1 and 2, corporations, individually, and as partners 

of Keesun partnership, 

Counterdefendants. 

APPEAL FROM: District Court of the Ninth Judicial District, 

In and for the County of Toole, 

The Honorable R. D. McPhillips, Judge presiding. 

COUNSEL OF RECORD: 

For Appellants: 

Gregory H. Warner and George R. Crotty, Jr. ; 

Graybill, Ostrem, Warner & Crotty, Great Falls, 

Montana 

For Respondent: 

Carolyn Ostby; Crowley, Haughey, Hanson, Toole & 

Dietrich, Billings, Montana 

Filed: 

Submitted on Briefs: May 24, 1991 

Decided: August 1, 1991 

Clerk 
Justice Karla M. Gray delivered the Opinion of the Court. 

The appellants, Ferdig Oil Company, Inc. and Somont Oil Co., 

Inc. (referred to collectively as Ferdig/Somont) , appeal from an 

order of the District Court of the Ninth Judicial District, Toole 

County, granting partial summary judgment in favor of the 

respondent, Keesun Partners. We affirm. 

Ferdig/Somont raises the following issues on appeal: 

1. Did the District Court err in determining that there are 

no genuine issues of material fact as to the absence of a contract 

between the parties? 

2. Did the District Court err in holding that even if a 

contract did exist between the parties, its enforcement is barred 

by the statute of frauds? 

3. Did the District Court err in refusing to consider 

remedies of rescission or restitution and the return of the parties 

to the status quo in granting quiet title relief? 

The appellants, Ferdig Oil Company, Inc. and Somont Oil Co., 

Inc., are Montana corporations in oil and gas production and 

processing. Both corporations have the same ownership and same 

management. Charles Jansky is an officer of both corporations. 

Ferdig is involved primarily in the gathering and processing of 

natural gas. Somont is involved primarily in the production of oil 

and natural gas. The respondent, Keesun Partners, is a Wyoming oil 

and gas producing partnership which was formed in October of 1987. 

J. Kenneth Finstad is a partner in Keesun and acts as operations 

manager. 

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Ferdig/Somont constructed and operates a gas processing plant 

located in Section 28 of Township 35 North, Range 4 West, Toole 

County, Montana. The original intent of Ferdig/Somont in 

constructing the plant was to process both sweet and sour gas from 

its own wells located adjacent to the plant. In the summer of 

1987, Ferdig/Somont presented its lenders with proposals which 

called for extending its gas gathering pipeline system through the 

northern part of Township 35 North, Range 4 West into the southern 

part of Township 36 North, Range 4 West. Ferdig/Somont determined 

that its own well in Section 34 of Township 36 North, Range 4 West, 

along with another well in that section, justified the installation 

of that pipeline. 

Shortly thereafter, Mr. Jansky and Mr. Finstad discussed the 

possibility of a market for gas from additional wells drilled in 

Section 34. On September 16, 1987, Mr. Jansky sent a letter to Mr. 

Finstad and Don Lee, a Shelby attorney who represented both 

Ferdig/Somont and Finstad. The stated purpose of the letter was 

to llsummarize the deal we [Ferdig/Somont] are proposing to enter 

into with Mr. Finstad, et al.I1 for the purchase of wellhead gas on 

a long-term basis. Neither Mr. Finstad nor Keesun, after its 

formation in October of 1987, responded in writing to Mr. Janskyls 

letter. 

Keesun pursued its drilling activities on acreage controlled 

by Keesun and on acreage acquired from Ferdig/Somont and others 

through farmout agreements or outright assignments. Although no 

written gas purchase contract was in place, Ferdig/Somont took 
deliveries of gas from Keesun on a month to month basis. The 

parties apparently were hopeful that an acceptable gas purchase 

contract would eventually be agreed upon and executed. 

Contemporaneous with Keesunfs drilling activities, Mr. Jansky 

sent a number of letters to Keesun setting forth his understanding 

of the state of the negotiations, summarizing proposals and making 

new offers. Keesun did not respond in writing to any of this 

correspondence; it does appear from the record that ongoing 

negotiations occurred, either directly or through attorney Don Lee. 

Eventually, a meeting between Keesun and Ferdig/Somont was 

held on March 3, 1988, at Don Lee's office in an attempt to 

finalize a wellhead gas purchase contract between the parties. 

The following day, Mr. Jansky wrote Keesun another letter in which 

he summarized those terms he believed had been agreed upon and, in 

addition, listed eighteen proposed terms I1stillpending agreement." 

Mr. Jansky wrote: ItThose things still pending agreement are 

summarized in our offer presented below, for you to either accept 

or reject . 'I Ferdig/Somont thereafter instructed Don Lee to prepare 

a draft wellhead gas purchase contract which was then forwarded to 

Keesun for review. 

On May 18, 1988, Keesun communicated its dissatisfaction with 

the draft contract to Don Lee who, in turn, informed Ferdig/Somont 

that Keesun did not agree with the proposed gas purchase contract. 

That same day, Mr. Jansky wrote Keesun a letter alleging that 

Keesun had breached Itits contractual obligations.Ig He stated that 

Ferdig/Somont would release Keesun from those obligations on the 
condition that Keesun relinquish title to four producing wells and 

the leases upon which those wells were located in Section 27 of 

Township 36 North, Range 4 West, and Section 19 of Township 36 

North, Range 3 West. In his letter, Mr. Jansky stated that 

Ferdig/Somont had assigned this acreage to Keesun "in reliance on 

the fact that Keesun represented it would enter into a long term 

gas sales contractIr with Ferdig/Somont. He also stated that since 

all the "acreage . . . was acquired from or via [Ferdig/Somont] in 

accordance with the agreement since breached by Keesun, 

[Ferdig/Somont] wants all this land back." In another letter dated 

May 24, 1988, Mr. Jansky informed Keesun that Ferdig/Somont 

intended to proceed as I1equitable owner" of the disputed wells, and 

that a ItNotice of Interestvf to that effect had been recorded in 

Toole County. 

On June 21, 1988, Keesun filed a complaint in the District 

Court of the Ninth Judicial District, Toole County, seeking relief 

against Ferdig/Somont on four counts. Count I sought quiet title 

relief for the disputed oil and gas leasehold interests held by 

Keesun; Count I1 sought declaratory relief that Ferdig/Somont had 

no right to operate or control the four producing gas wells drilled 

by Keesun on the leases described in Count I; Count I11 sought 

declaratory relief that Ferdig/Somont had no rights to leases 

acquired by Keesun in the future; and Count IV sought an accounting 

and payment for deliveries by Keesun to Ferdig/Somont of gas from 

the disputed wells. 

Ferdig/Somont filed a motion to dismiss which was briefed by 
the parties. Prior to a ruling on the motion to dismiss, Keesun 

filed a motion for partial summary judgment as to Counts I, I1 and 

IV of its complaint. This motion was briefed by the parties and, 

on January 25, 1990, argued to the District Court. 

Ferdig/Somontls motion to dismiss was subsequently denied. 

Thereafter Ferdig/Somont filed its I1Answer, Affirmative Defenses 

and counterclaim^.^^ This pleading set forth numerous affirmative 

defenses and counterclaims most of which were premised upon an 

alleged contractual relationship between Keesun and Ferdig/Somont 

for the purchase of wellhead gas. 

The parties then commenced discovery. Shortly before the 

discovery deadline, the District Court granted partial summary 

judgment to Keesun on July 23, 1.990. The court stated that its 

reason for granting partial summary judgment was that: 

There is nothing before the Court to suggest there is a 

contract between the parties. There is nothing before 

the Court that would take the contract between the 

parties, if there were one, out of the statute of frauds. 

The District Courtls judgment quieted title to the disputed 

leases and wells in Keesun and ordered payment to Keesun for all 

gas delivered to Ferdig/Somont from the disputed wells. The court 

certified its judgment as final pursuant to Rule 54 (b) , M.R. Civ. P. 

Ferdig/Somont then moved the District Court to alter or amend 

its order granting Keesun partial summary judgment. The court did 

not rule on this motion within 45 days and, therefore, the motion 

was deemed denied pursuant to Rule 59(g), M.R.Civ.P. This appeal 

followed. 

The first issue on appeal is whether the District Court erred 

6 
in determining that there are no genuine issues of material fact 

as to the absence of a contract between the parties. Summary 

judgment is properly granted where the record discloses no genuine 

issue of material fact and the moving party is entitled to judgment 

as a matter of law. Rule 56(c), M.R.Civ.P. The party seeking 

summary judgment has the burden of demonstrating the absence of 

genuine factual issues. OtBagy v. First Interstate Bank (1990), 

241 Mont. 44, 46, 785 P.2d 190, 191. If the movant has met this 

burden, the burden then shifts to the non-moving party to 

demonstrate a genuine issue of material fact. OtBasy, 241 Mont. 

at 46, 785 P.2d at 191. To meet this burden, the non-moving party 

must proffer substantial evidence, not mere speculation and 

conclusory statements. Hando v. PPG Indus., Inc. (1989), 236 Mont. 

493, 497, 771 P.2d 956, 959; Frigon v. Morrison-Maierle, Inc. 

(1981), 233 Mont. 113, 117, 760 P.2d 57, 60. 

No evidence exists in the record of a signed written contract 

between the parties. Therefore, the initial question with which 

we are faced is whether an oral contract existed between the 

parties for the purchase of wellhead gas. Ferdig/Somont contends 

that a valid oral contract was entered into by the parties or that, 

at a minimum, factual issues exist regarding the formation of a 

contract. According to Ferdig/Somont, an agreement was reached 

between the parties in which Keesun would sell its gas to Ferdig/ 

Somont for a period of twenty years. Ferdig/Somont contends that 

the September 16, 1987 letter from Mr. Jansky to Mr. Finstad and 

attorney Don Lee set forth the terms of, and confirmed, that 
agreement. Ferdig/Somont further contends that Mr. Janskyls 

correspondence with Keesun and Don Lee after the September 16th 

letter merely reflected negotiations between the parties regarding 

optional additions to and modifications of the basic agreement for 

the purchase of wellhead gas. 

In support of its contention that a contract was entered into 

between the parties, Ferdig/Somont refers to a portion of Mr. 

Finstad's deposition and argues that he testified that Keesun had 

accepted the proposed wellhead gas purchase contract as set forth 

in the September 16, 1987 letter: 

Q [By Mr. Crotty] Is there anything in that letter that 

you did not agree with? 

MS. OSTBY: Objection. The question is too general. 

A The essence of the proposed well head purchase 

contract we . . . I agreed to. 

Ferdig/Somont also refers to a portion of Don Leels deposition 

with regard to the meeting he attended with the parties on March 

3, 1988 as further support that the parties had reached an 

agreement. 

What I recall is when everybody left and went out 

the door that whatever had been discussed at that meeting 

was agreed upon, other than the quantum of overriding 

royalty that Somont would be entitled to on various 

leases. 

All contracts must contain four essential elements. These 

elements are: (1) identifiable parties capable of contracting; (2) 

their consent; (3) a lawful object; and (4) consideration. Section 

28-2-102, MCA. The issue of whether or not there was a contract 

in this case relates to the requirement of consent. 
There must be mutual assent or a meeting of the minds on all 

essential terms to form a binding contract. Chadwick v. Giberson 

(1980), 190 Mont. 88, 92, 618 P.2d 1213, 1215. Consent is 

established when there has been an offer and an acceptance of that 

offer. More specifically, this Court has stated that in order to 

effectuate a contract there must be not only a valid offer by one 

party, but also an unconditional acceptance, according to its 

terms, by the other. Kuchinski v. Security General Ins. Co. 

(1963), 141 Mont. 515, 519, 380 P.2d 889, 891. In this case, the 

purported contract fails for lack of consent. 

The record indicates that, although some of the terms of the 

wellhead gas purchase contract may have been agreed upon, the 

parties were involved in an ongoing negotiation process regarding 

many essential terms of the contract and no finalized agreement was 

ever reached. At the January 25, 1990 hearing on partial summary 

judgment, Don Lee testified as follows: 

Q [By Ms. Ostby] If the parties would have reached an 

agreement, you were to be the scribner [sic] of that 

agreement, were you not? 

A Yes. 

Q Were you ever aware an agreement was reached on all 

the essential terms of a contract, so you could draft 

such an agreement? 

MR. WARNER: Objection, leading. 

THE COURT: It is somewhat, but 1'11 let him answer. 

A On everything? 

Q Yes. 

A No. 
Mr. Lee reaffirmed his belief that there was never any finalized 

agreement between the parties in his subsequent deposition. 

Q [By Ms. Ostby] This letter [referring to the letter 

from Mr. Jansky to Keesun dated March 4, 19881 indicates, 

toward the bottom third of the first page, that there 

were several things Ifstill pending agreement;Ir do you see 

that? 

A Yes. 

Q That accords with your understanding, doesn't it, that 

there were still some things that were pending agreement 

at that time? 

A Yes. 

In addition, Mr. Janskyls own admissions in his letters to 

Keesun demonstrate that no finalized contract between the parties 

existed. In his March 4, 1988 letter to Keesun, Mr. Jansky, on 

behalf of Ferdig/Somont, stated that: 

Along with the latest version of the proposed qas 

purchase contract attached herewith, I want to confirm 

those things Ferdig believes already mutually agreed, 

which will be incorporated in a side agreement executed 

concurrently with the gas purchase contract, and those 

thinss Ferdia acknowledqes as still pendinq asreement. 

Those thinss still pendinq aqreement are summarized in 

our offer presented below, for you to either accept or 

rei ect . [Emphasis added. ] 

Further, in a letter dated April 25, 1988, to the Montana Power 

Company with whom Ferdig/Somont had negotiated a delivered gas 

purchase contract, Mr. Jansky stated: I1[W]e do not yet have 

contracts finalized with Keesun or Berenergy.I1 The date that 

letter was written, April 25, 1988, was more than six months after 

the date upon which Ferdig/Somont now claims a contract was formed 

between the parties. 

Mr. Janskyls own statements in his letters to Keesun and 
Montana Power refute Ferdig/Somontls contention that the 

correspondence subsequent to the September 16, 1987 letter merely 

reflected negotiations regarding optional additions to and 

modifications of a basic agreement between the parties. In our 

view, they also reflect recognition by Ferdig/Somont that the 

parties had not yet agreed upon all essential terms of a contract. 

Ferdig/Somont also contends that this Court should find the 

existence of a contract between the parties based on the doctrine 

of promissory estoppel. The elements of promissory estoppel are: 

(1) a promise clear and unambiguous in its terms; (2) reliance on 

the promise by the party to whom the promise is made; (3) 

reasonableness and foreseeability of the reliance; and (4) the 

party asserting the reliance must be injured by the reliance. Tope 

v. Taylor (1986), 224 Mont. 131, 136-37, 728 P.2d 789, 793. 

With respect to the first element, this Court stated in Keil 

v. Glacier Park, Inc. (1980), 188 Mont. 455, 462-63, 614 P.2d 502, 

506, that promissory estoppel cannot be based on preliminary 

negotiations or an agreement to negotiate the terms of a contract. 

In the present case, the evidence before the District Court 

established nothing more than that the parties had engaged in 

preliminary negotiations and discussions of the terms of a wellhead 

gas purchase contract. Mr. Janskyls letters to Keesun reflected 

that finalization of the terms of a contract would require further 

negotiations between the parties. This evidence does not 

constitute the clear and unambiguous promise necessary to satisfy 

the first element of promissory estoppel. 
Additionally, Ferdig/Somont cannot establish facts sufficient 

to show reliance on any alleged promise by Keesun. In making the 

business decision to install the northern leg of its gas gathering 

pipeline system, Ferdig/Somont had previously determined that its 

own well in Section 34 of Township 36 North, Range 4 West, along 

with another well in that section, justified installation of the 

pipeline. This decision is reflected in Ferdig/Somontls letters 

to its lenders during the summer of 1987, prior to the date of the 

alleged formation of the wellhead gas purchase contract. 

Keesun, as the moving party, met its initial burden of showing 

that no evidence existed to prove the formation of a binding 

contract between the parties. The burden then shifted to 

Ferdig/Somont to show facts sufficient to raise a genuine issue. 

Ferdig/Somont has failed to meet this burden. The District Court 

correctly determined that the evidence proffered by Ferdig/Somont 

was insufficient to raise any genuine issue of material fact as to 

the existence of a gas purchase contract between the parties and, 

thus, properly granted partial summary judgment on this issue. 

Having determined that the record reveals that no valid oral 

contract existed between the parties, it is unnecessary for us to 

address Ferdig/Somontls second issue on appeal regarding the 

applicability of the statute of frauds. 

The next issue on appeal is whether the District Court erred 

by not awarding Ferdig/Somont the remedies of rescission or 

restitution and return of the parties to the status quo when it 

granted Keesun quiet title relief. Ferdig/Somont contends that, 
as consideration for a long-term gas purchase contract with Keesun, 

it assigned various leasehold acreage interests to Keesun. It 

argues that to allow Keesun to retain the benefits of the contract 

in the form of acreage interests assigned to it, without enforcing 

the contract, results in unjust enrichment. Ferdig/Somont argues 

that it is entitled to rescission of those assignments, 

restitution, and the return of the parties to the status quo based 

on the theories of repudiation or breach of contract and fraud. 

We disagree. 

Mr. Finstad's affidavit and accompanying documents show that 

the lease assignments were separately executed written contracts 

for which consideration was received by Ferdig/Somont. For 

example, with respect to the tlSpencer-Lohof" lease assignment in 

Section 27 of Township 36 North, Range 4 West, Ferdig/Somont 

retained a 7%% overriding royalty interest. 

Mr. Jansky admitted that he considered the assignments to be 

separate land contracts. When questioned during the January 25, 

1990 hearing on partial summary judgment about one of the disputed 

wells in Section 19 of Township 36 North, Range 3 West, Mr. Jansky 

testified as follows: 

Q [By Ms. Ostby] And, it [the Section 19 acreage] was 

not part of that Contract, was it? 

A No, ma'am. 

Q And, despite the fact that it's not part of the Contract 

that you're contending was breached, you're claiming ownership? 

A Yes, ma'am. 

The record shows that Keesun drilled the well in Section 19 
pursuant to a separate, written farmout agreement between Western 

Natural Gas Company (WNG) and Ferdig/Somont and, in turn, a 

separate, written assignment to Keesun of Ferdig/Somontls rights 

under the WNG agreement. Again, Ferdig/Somont retained a 7$% 

overriding royalty. Nowhere in these documents is there any 

language suggesting the assignments to be dependent upon some other 

agreement. 

In addition, the record does not reveal any fraud on Keesunls 

part. There is nothing to indicate that Keesun intended to mislead 

or deceive Ferdig/Somont by concealing material facts, or that 

somehow Ferdig/Somont was misled to its detriment. To the 

contrary, the record clearly establishes that Mr. Jansky was fully 

aware that negotiations were ongoing. We hold that the District 

Court did not err in rejecting Ferdig/Somontls claims of rescission 

and restitution. 

Affirmed.