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: 

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## 7Mr. 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, theMontana Power Company appeals from the refusal of the DistrictCourt 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 findingby us that the method adopted by the District Court for determination of market price and procedures for futureadjustments thereof are consistentwith a remand from this Court in a prior appeal. The issues arise out of an oil and gas lease executed in 1967between Kravik, owner of certain lands in Hill County, and theMontana 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 Courtwas the meaning 

### of thephrase "marketprice" 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 -2-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 casewe 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 "marketprice" of the gasproduced 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 considerationthe factors [setout in the conclusionsof 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 suchpurpose." The appeal of theMontana Power Company raises two issues: (1) that the District Court should have adopted an additional finding to the effect that the prospective costs to theMontana Power Company and its gas customers of royalty payments to Kravik and others similarly situated,based upon themarket price of $1.75 per MCF,will amount to approximately $1,525,000 annually;and, (2)a determinationby this Court that the procedures adopted by the District Court for determining market price and for future adjustments are consistentwith

our remand. Montana Power Company contends that the additional finding should have been adopted by the District Court because,without objectionby Kravik, testimonywas admitted -3-by stipulation which included a number of exhibits setting forth an expert's opinion of the estimated increased royalty costs to theMontana Power Company,assuming a royalty price

as adopted by the DistrictCourt. 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 "marketprice." 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 thewords "marketprice" in the oil and gas lease, and that a legal determination of that termwas required to instruct the Montana Power Company in fulfilling its lease obligations. Kravik counterclaimed,asking the District Court to determine themarketprice for the gas which was produced fromhis landsby the Montana Power Company and asking for

some incidental relief. Montana Power Company replied to the counterclaim, setting up laches as to past paymentsmade, 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 theMontana Power Company as to -4-themeaning 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 lessorswithwhom 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 inby stipulation and uncontested by Kravik. Even before the adoption of Montana Rules of Civil Procedure, this Court held in Thompson v. Bantz (1959), 136Mont. 210, 215, 346 P.2d 982, 985, thatwhere no issue of fact ismade by the pleadings, the court cannotgo outside the issues and make findings upon questions not in dispute. The same rule obtains under theMontana Rules of Civil Procedure. The DistrictCourtwas not required to make a finding on a fact which had no real relevance to the prime issue between Kravik and theMontana Power Company: what should the plontana Power Company pay to Kravik as the "market price" of gas produced fromKravik'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 Courtproperly provided, by retaining jurisdictionas ithas, amethod for theparties to attempt readjustment of their rate of payment, before further litigation. As we said in the earlier decision when this casewas 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 DistrictCourt is affirmed. \WeConcur:

Chief Justice

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