No. 80-126 

I:$ THE SUPREME COURT OF THE STATE OF MONTANA 

1980 

THE MONTANA POWER COMPANY, 

Plaintiff and Appellant, 

-vsGAY L. KRAVIK, 

Defendant and Respondent. 

1 from: District Court of the Twelfth Judicial District, 

In and for the County of Hill, The Honorable 

B. W. Thomas, Judge presiding. 

Counsel of Record: 

For Appellant: 

Jardine, Stephenson, Blewett & Weaver, Great Falls, 

Montana 

For Respondent : 

Aronaw, Anderson, Beatty & Lee, Shelby, Montana 

- -- 

Submitted on Briefs: August 1, 1980 

Filed: 41'6 2 7 
Mr. Justice John C. Sheehy delivered the Opinion of the 

Court. 

Montana Power Company appeals from the judgment entered 

March 17, 1980, in the District Court, Twelfth Judicial 

District, Hill County, and from the findings of fact and 

conclusions of law and the order entered in that case. 

Specifically, the Montana Power Company appeals from 

the refusal of the District Court to adopt a certain finding 

with respect to its total cost of purchasing gas from lessors 

under the decision made by the District Court. It also 

requests a finding by us that the method adopted by the 

District Court for determination of market price and procedures 

for future adjustments thereof are consistent with a remand 

from this Court in a prior appeal. 

The issues arise out of an oil and gas lease executed 

in 1967 between Kravik, owner of certain lands in Hill 

County, and the Montana Power Company, by which the company 

agreed to pay royalties in the amount of "one-eighth (1/8) 

of the market price of the gas in its natural state at the 

well." The oil and gas lease subsequently became a part of a 

pooling agreement, after Montana Power Company completed a 

well on the Kravik lands in 1969. At all times since, 

the well has produced natural gas in commercial quantities. 

Montana Power Company is the lessee, producer, purchaser and 

distributor for all the gas taken from the well. The gas 

does not move in interstate commerce. 

The principal issue before the District Court was the 

meaning of the phrase "market price" of the gas produced. 

Montana Power Company commenced a declaratory judgment 

action in the District Court to have a determination made as 

to the meaning of that clause after Kravik demanded increased 

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payments on gas being produced on his lands. Kravik counterclaimed 

for like relief. An earlier decision of the District Court 

came before us in 1978, and in that case we issued an opinion, 

Montana Power Co. v. Kravik (1978) , - Mont. - , 586 P.2d 

298, 35 St.Rep. 1568, setting out instructions to the District 

Court for determining "market price" of the gas produced on 

the Kravik lands. On remand, the District Court took further 

evidence, established a market price for the natural gas of 

$1.75 per thousand cubic feet and provided in the judgment 

which is now appealed from that "if the market conditions 

change materially, the Montana Power Company and Gay L. 

Kravik . . . should attempt to agree upon a market price 

figure taking into consideration the factors [set out in the 

conclusions of law],. . . and if an agreement cannot be 

reached, the parties are free to come back into Court for a 

judicial determination of market price at that time, and the 

Court will retain continuing jurisdiction of this controversy 

for such purpose." 

The appeal of the Montana Power Company raises two 

issues: (1) that the District Court should have adopted an 

additional finding to the effect that the prospective costs 

to the Montana Power Company and its gas customers of royalty 

payments to Kravik and others similarly situated, based upon 

the market price of $1.75 per MCF, will amount to approximately 

$1,525,000 annually; and, (2) a determination by this Court 

that the procedures adopted by the District Court for determining 

market price and for future adjustments are consistent with 

our remand. 

Montana Power Company contends that the additional 

finding should have been adopted by the District Court 

because, without objection by Kravik, testimony was admitted 

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by stipulation which included a number of exhibits setting 

forth an expert's opinion of the estimated increased royalty 

costs to the Montana Power Company, assuming a royalty price 

as adopted by the District Court. 

Kravik contends that the proposed additional finding is 

irrelevant to the issues in the dispute between Kravik and 

the Montana Power Company over the meaning of "market price." 

Rule 52(a), M.R.Civ.P., requi~sthe District Court, in 

a nonjury trial, to find the facts specially and state 

separately its conclusions of law. The purpose of the rules 

requirement of findings of fact in nonjury cases is threefold: (1) as an aid in the trial judge's process of adjudication, 

(2) for purpose of res judicata and estoppel by judgment 

and, (3) as an aid to the appellate court on review. Marriage 

of Barron (1978), Mont . - , 580 P.2d 936, 938, 35 

St.Rep. 891, 894. 

Montana Power Company commenced this case alleging in 

substance that a dispute existed between it and Kravik as to 

the proper interpretation of the words "market price" in 

the oil and gas lease, and that a legal determination of 

that term was required to instruct the Montana Power Company 

in fulfilling its lease obligations. 

Kravik counterclaimed, asking the District Court to 

determine the market price for the gas which was produced 

from his lands by the Montana Power Company and asking for 

some incidental relief. 

Montana Power Company replied to the counterclaim, 

setting up laches as to past payments made, and again requesting 

the District Court to grant the declaratory judgment relief 

prayed for in its complaint. 

Thus, the issues in this case relate solely to the 

dispute between Kravik and the Montana Power Company as to 

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the meaning of the term "market price" in the oil and gas 

lease. The total cost to the Company of the determination 

made by the District Court, taking into consideration all 

other lessors with whom Montana Power Company may be purchasing 

gas, was not an issue contested in the case before the 

District Court, even though the evidence from the expert 

went in by stipulation and uncontested by Kravik. Even 

before the adoption of Montana Rules of Civil Procedure, 

this Court held in Thompson v. Bantz (1959), 136 Mont. 210, 

215, 346 P.2d 982, 985, that where no issue of fact is made 

by the pleadings, the court cannot go outside the issues and 

make findings upon questions not in dispute. The same rule 

obtains under the Montana Rules of Civil Procedure. The 

District Court was not required to make a finding on a fact 

which had no real relevance to the prime issue between 

Kravik and the Montana Power Company: what should the plontana 

Power Company pay to Kravik as the "market price" of gas 

produced from Kravik's lands under the lease. 

With respect to the second question raised by the 

Montana Power Company, whether the District Court conformed 

to the remand of this Court in its determination of procedures 

for the future setting of market price, there is no objection 

by Kravik on appeal. We find that the District Court properly 

provided, by retaining jurisdiction as it has, a method for 

the parties to attempt readjustment of their rate of payment, 

before further litigation. As we said in the earlier decision 

when this case was before us, "if an agreement cannot be 

reached, the parties are always free to come back into court 

for a judicial determination . . ." 586 P.2d at 304. 

The judgment of the District Court is affirmed. \ 
We Concur: 

Chief Justice ,.7 

wd2~ ices