No. 85-178 IN THE SUPREME COURT OF THE STATE OF MONTANA 1986

VIRGIL S. PROCTOR, PersonalRepresentative, of the ESTATE OF JESSIEM. SMART, Deceased, IDA S. MIEWALD, ETHEL V. HESS, JULIAE. REID, and JOHN R. STAM, Personal Representativeof the ESTATE OF MINNIE MAY STAM, Deceased, JOHN R. STAM, Heirand Deviseeof MINNIE MAY STAM, and RICHARD S. STAEI, Heir and Deviseeof MINNIE MAY STAM, Plaintiffsand Appellants, and TERESA E. PUCKETT, POLLY KEITH, CECELIA OLSON, PATRICIA LEINHART, BRIDGET M. MATHES and BERNADETT THORNLAND, Defendants and.Appellants,-vsCALISTA M. WERK, ELLA ORTNER, GEORGE ORTNER and LINDA ORTNER, Defendantsand Respondents.

APPEAL FROM: DistrictCourtof the SeventeenthJudicial District, Inand for the Countyof Blaine, The Honorable Chan Ettien, Judge presiding. COUNSEL OF RECORD: ForAppellant: Jardine, Stephenson, Blewett & Weaver; AlexBlewett argued, GreatFalls, Montana Thompson & Swenson; Bruce E. Swenson argued, Havre, Montana ForRespondent: Sias & Ra.nstrom; BruceW. Moerer argued, Chinook, Montana

Submitted: October 29, 1985 Decided: February20I 1986

Filed: 

## FEB;?g

## 1986

b6
,d 

## :&+dJ+ P&> .;y&a,:&*k<k*2yp*/* -- ClerkMr. Justice Fred J. Weber delivered the Opinion of the Court. The Blaine County District Court, interpreting a deed reservation as clear and unambiguous, granted summary judgment for respondents (mineralowners) and against appellants

(royalty owners). Royalty owners appeal. We reverse and remand. The sole and dispositive issue on appeal is whether the deed reservation was ambiguous, thereby demonstrating a genuine issue of materia.1 fact which precluded summary judgment. In June 1944, Rlaine County deeded land to John H. Miewald, reserving 5% of all oil, gas and other mineral-s. Later, in August of the same year, Mr. Miewald deeded the land toMinnie May Stam. Thedeed contained a reservation to Mr. Miewald of "sixpercent of all royalties received for oil and gas removed from the above-described property." 

### Mr. Miewald's 6% royalty reservation of 95% of oil and gas removed has now become vested in the large group of parties referred to as royalty owners but listed as plaintiffs/appellantsand defendants/a.ppellants. In 1968, the mineral owners leased the property subject to a 1/8 landowners' royalty,that being 12+% of oil and gas produced. Later, the property began producing oil and 

### a dispute arose. Themineral owners, whose deed is subject to the royalty reservation,contended that the royalty reserved

was 6% of the landowners' roya.ltyof 124% of 95% of oil and gas produced. Stated differently, if 100 barrels of oilwere produced,Blaine County would be entitled to 5%ofproduction

or 5 barrels and royalty owners would be entitled to 6% of 12%%of the remaining 95 barrels or approximately 3/4 of one barrel of oil.In contrast, royalty owners argued that they were entitled to 6% of 95% of production. In other words, if 100 barrels of oilwere produced, theywould be entitled to 6% of 95barrels or 5.7 barrels. Thus, at issue, was whether the deed reservation conferred a royalty of 5.7 barrels out of every hundred or approximately 3/4 of a barrel out of every hundred. In District Court, each sidemoved for summary judgment. The District Court, ruling on the basis the reservation was not ambiguous, granted summary judgment for the mineral

owners. Was the deed reservation ambiguous, thereby demonstrating a genuine issue ofmaterial factwhich precluded summary judgment? Section 70-1-513, MCA, provides that grants of real property are to be interpreted according to the sameprinciE ples as contracts. Thus,und.erS 28-3-401, MCA, the language of the deed reservation is to govern interpretation if the language is clear and explicit. "Where the language of a written contract is clear and unambiguous, there is nothing to construe and the duty of the court is to apply the language, as written, to the facts of the case.'' Peterson v. Hopkins (Mont. 1984), 684 P.2d 1061, 1063, 41 St.Rep. 1140, 1142-43. However, under 

### 55 28-2-905 and 70-20-202, MCA, if the language isnot clear and explicit, extrinsic evidencemay be used to explain an ambiguity. "Where the terms of an agreement are uncertain and ambiguous,par01 evidence 

### is admissible toprove the interpretation meant by the parties." Rumph

v. Dale Edwards Inc. (1979), 183 Mont. 359, 368, 600 ~.2d 163, 168. See also Souders v. Montana Power Co. (Mont. 

### --Was the deed reservation ambiguous? A deed reservation is deemed ambiguous when taken as a whole, its wording or phraseology is reasonably subject to two different interpretations. See Souders, 662 P.2d at 290. The deed here stated: [slubjectto a reservationhereby made to theparty of the first part to six percent of all royalties received for oil and gas removed from the above-described property

# ..

# . The District Court foundMr. Miewald's reservation comparable to an unambiguous reservation in Nourse v. Kovacevich

(Cal.Ct.App. 1941), 109 P.2d 

### 999. InNourse, which awarded a percents-ge of the landowner'sroyalty and not a percentage of production, the deed reserved: [elqualone-eighth of any royalty 

# ..

# . developed on or received from said land, together with one-eighth of any cash bonus

# .. . Citing Nourse, the DistrictCourt concluded that therewas no ambiguity and that Mr. Miewald's reservation could only mean that the reserving party would take 6% of X% land.ownersf royalty from 95% of the minerals. While we might disagree with the analysis of the District Court, certainly there is a basis for arguing that its interpretation of Nourse was reasonably applicable. We do not find that to be the only conclusion which can be reached from the reservation. The District Court in reaching its decision that the deed reservationwas unambiguous, referred to the 1968 leases executed on the land,under which the landowners' royaltywas 12+% of oil,gas and minerals produced. Yet, as pointed out by the District Court, this was a perpetual nonparticipating royalty because at the time of the reservation, no oil and gas lease was in existence. As a result,the reserved royalty is in no wa.y dependent upon the terms or provisions of an oil. and gas leaseexecuted in 1968. In Stokesv. Tutvet (1958),134Mont. 250, 328 P.2d 1096, relied upon by the District Court for the definition of perpetual nonparticipating royalty, we stated that in thebroadest sense,royalty refers to an interest the landownermay createby outright reservation either before or after the execution of an oil and gas lease,and constitutes

a share in production. Clearly, a landowner could reserve 50% or one-half of all oil and gas to be produced prior to execution of a lease so that he would receive 50 barrels out of every 100 barrels produced. While oil and gas Leases frequently have a 124% landowners' royalty, as was here executed in 1968, there are other oil a.nd gas leases for lesser and greaterpercentages ofproduction. The present reservation is 6%of 

### - all roya.ltiesreceived for oil and gas removed. The Nourse reservation was 1/8 of 

### any oil royalties developed or received. Starting with the Stokes analysis of royalty interests, in contrast to the Nourse analysis by the District Court, it is possible to contend that the reservation meant 6% of allproduction when it spoke of 6%of all royalties. If that were the intent, it would then entitle the royalty owners to substantially more thanwas awarded under the District Court order. We conclude that it is reasonably possible to construe the reservation as meaning 6% of all production received as well asmeaning 6% of the landowners' royalty. As a result,
we conclude that the deed reservationwas ambiguous. It is awell-established principle that summary judgment is only appropriate when there is no genuine issue as to any material fact. In this case, the determinative fact is the interpretation of the deed reservation. Yet the reservation is ambiguous and the true intent of the parties is discernable only with reference to extrinsic evidence. "Summary

### judgment is usually inappropriate where the intent of 

### the contractingparties is an importantconsideration." Twitev. First 

### Bank (N.A.) Western Mont. (Mont. 1984), 692 

### P.2d 471, 472, 41 

### St.Rep. 2518, 2520; 

### Fultonv. Clark (1975), 167

### Mont. 399, 404, 538 P.2d 1371, 1374. 

### We hold 

### that summary judgment

was inappropriate because the deed alone did not establish the true intentof theparties. We reverse and remand for furtherproceedings consistent with this opinion.

We concur:

### A

i&f Justice 1 

### w