No. 12864 INTHE SUPREME COURT OF THE STATE OF MONTANA 1975

WAYNE CARROLL, Plaintiff and Respondent,

RANDALL N. EATON eta

### 1.

## , Defendants andAppellants.
Appeal from: District Court of the Fifth JudicialDistrict, Honorable Frank E. Blair, Judge presiding. Counsel of Record: For Appellants: R. Thomas Garrison argued, Virginia City, Montana For Respondent: Chester L. Jones argued, County Attorney, Virginia

City, Montana

Submitted: September 

### 11, 1975 Decided; -

, \+ ; =


### . " 8- 9 Filed: 

# yg&*.-

I 

### - ClerkMr. Justice John Conway Harrison delivered the Opinion of the Court.
In this appeal this Court isasked toconsider and review the rights of the parties concerning the construction of
a mining lease. Judgment for plaintiff Wayne Carrollwas entered June 10, 1974, in the districtcourt, Madison County, and from thatjudgment defendants Randall Eaton, M. P. Middleton and John Bolinger appeal. The properties which are the subject of thecontested lease areknown as the '94ogul Claims", located in the Gravelly Range Mining District of Madison County. The business dealings between the parties regarding this land dateback to 1963. On September 20, 1963, Carroll, as lessee, executed a mining lease with Eaton individually, and as attorney in fact forM.P. Middleton, 

### a citizen and resident of Canada. The leasewas toextend for two years "and as long thereafter as ore or minerals 9: 

# * shallbe produced from saidpremises in commercial quantities.11 Upon the lessee's fai.luretoproduce ore, the leasewas allowed to terminate. A second leasewas draftedby Carroll, and was executed by the same parties on August 16, 1965. In this document, the
IIkabendum clause", or that part of the leasewhich describes its duration, was set out inmuch greater detail. The lease again established a "primary term" of two years and a "thereafter term" which was dependent upon the production of ore in commercial quantities for its length. Definitional and delay rental provisions
were also included inan attempt to specify the rights of the parties: "Commercial quantities shallbe and ishereby defined as that quantitynecessary toproduce to firstparties

at least $500.00 per year. And in the event of no operations upon saidmining claims

# , the payment by second party to firstparty of the sum of $500.00 per year as minimum delay rental shallbe sufficient tohold said mining claimunder this lease and tokeep the same in good standing.II

### Pursuant to lease provisions, the lessee tendered payments of $500 to the lessors in 1966, and again in 1967. A 

### third payment of $500 in delay rentalwas tendered by the lessee for the purpose of extending the lease another year. Lessors accepted the payment without any attempt todeclare a forfeiture or terminate the lease, thereby extending it 

### for a period of one year. In 1968, the parties entered intoa new lease, with provisions identical to those found in the 1965 lease. In lieu of production, the lessee tendered payments of $500 for the years 1969 and 1970. As

### he had done previously, the lessee again tendered a third delay rental payment for thepurpose of extending the lease another year. The check was received by the lessors
on August 16, 1971. Lessee heard nothing furtheruntilthe check
was returned tohim on April 17, 1972, more than eight months after the check had been received by the lessors. Lessor Eaton testified that he was employed out of state during most of the time between August 1971and April 

### 1972. He also statedhe knew of the existence of the check, instructed his wife toreturn it, 

### and that his absence from the stateresulted in his inabilityto ensure the checkwas returned within a reasonable time. In September 1971, Eaton entered intoanother lease~~ith John Eolinger. Carroll continued to tender delay rental payments through the years 1972 and 1973inorder toprotect his rights. Both checks were promptly returned by lessors. Under these facts, the district court found the parties intended that the leasebe extended, and the lesseewas entitled to, and in fact 

### did rely to his detriment upon 

### lessors' retention of his check as confirmation and validation of the lease and its 

### extension. On appeal, it is 

### contended that the district court erred in its

### construction of the lease and in its 

### application of the doctrine of equitable estoppel. We disagree.Traditionally, mining leases iil Jloneana and elsewhere have Seen drafted in two basic and distinct forms. Under the provisions 

### .~f an "or" type lease, the lessee isobligated toproduce or pay delay rentals. The lease can terminate onlyby mutual consent of ]:he parties during the primary term, failure to pay delay rentals or an ~ction by the lessor to declare the lease forfeited. McDaniel 

### v. Hager-Stevenson OilCo., 75 Mont. 356, 365, 243 P. 582. When it dppears that the parties have executed an "unless" type lease, the 1-esseehas the option to produce, pay delay rentals, or do neither, allwithout incurring obligation. But failure to act isautomatic ~ermination in favor of the lessor. Irwin v. Marvel Petroleum Corp., 

### 139 Idont. 413, 365 P.2d 221. Here, the trial court properly found that this was an
IIor" type lease inwhich the lesseewas required to either produce
or pay delay rentals. As noted from the cases cited, one reliable me~hod of determining what type of lease isintended 

### is to look at the nature of the obligations incurred by the lessee. Here, the lease terms obligated the lessee topay delay rentals in lieuof production for the primary period of two years,
II in order tokeep the lease in good standing". ]Tad the lessee defaulted in these payments, the lessors would certainlyhave had the option to insist upon forfeiture orwaive it and sue for the rentals due. Thus the parties clearly contemplated an "or" lease, and as such, itwas incumbent upon the lessors to declare a forfeiture atthe close of the primary term, if that was desired. It 

### is apparent from the record that no such actionwas taken by the lessors. The only response to the lessee's tender of delay rentals was tohold the same for a period of time in excess of eight months. Therefore, thenet result of the lessee's tender of payment was a valid andkinding extension of the lease.Having resolved this question on the law, there is
no need todiscuss the doctrine of equitable estoppel or its applicability to the facts. Judgment of the district court isaffirmed.

E 'Justice

Ve Concur:

Justices.