NO. 

### 92-113
INTHESUPREME

COURTOFTHESTATEOFMONTANA 1992 JANES.NORBECK,Trustee of the JANENORBECK

Trust dated November20, 1963, Plaintiff, Respondent andCross-Appellant,-vsMRS.M.H. CRAWFORD andMR.M.H.CRAWFORD,her husband, if any, andother heirs, devisees, legatees, creditors, administrators, executors, andassigns of anyof said defendants, if they bedeceased: knownor unknown, andanyandall persons title, claiming orwhomight claim anyright, estate or interest in or lien or encumbrance upon the real property situated in the County of Fallon, State of Montana, described as25%of the net proceeds derived from the production asreserved byGeorge Norbeck in operating agreement with Fidelity GasCompanyincluded in and a part of U.S. Oil and Gas Lease prospecting permit, Billings Serial #021056asto NE1/4, Section 12, Twp. 8N, Rge59Eof M.P.M., Fallon County, Montana or anythereof adverse to Plaintiff's title whether such claim 

### bepresent or contingent including any claim or possible claim of dower, inchoate or accrued,

Defendants, Appellants, andCross-Respondents.
APPEALFROM: District Court of the Sixteenth Judicial District,

In andfor the County of Fallon, TheHonorable JoeL. Hegel, Judge presiding. COUNSELOFRECORD:

ForAppellant: Charles J. Peterson, Mackoff, Kellogg, Kirby & Kloster, Beach, North Dakota For Respondent: Chris Mangen, Jr., Crowley, Haughey, Hanson, Toole &Dietrich, Billings, Montana

_4; ;

Submitted onBriefs: July 23, 1992Justice R. C.McDonough delivered the Opinion of the Court.

Mrs. M.H. Crawford, et al., appeals from ajudgment of the Sixteenth Judicial District Court, Fallon CoUnty. Weaffirm. The sole issue onappeal is: Whether the District Court erred in granting the disputed 25 percent interest in afederal oil andgas lease to Jane S. Norbeck, Trustee of the Jane Norbeck Trust, subject however to 39/40ths of such 25 percent interest being vested in Mrs. M.H. Crawford, et al., upon approval of the Department of the Interior. In 1934, George Norbeck (Norbeck) obtained federal lease,
021056 (b), from the United States Department of Interior. The lease contained a fixed twenty year term and granted the lessee right of renewal upon expiration. The lease also contained a provision barring assignment without consent of the Secretary of the Interior through the land office. Norbeck entered into anoperating agreement with Fidelity Gas Company. He retained record title ownership of the lease, as lessee, with 25percent of the net proceeds of production. Norbeck appointed Fidelity GasCompany as his attorney-in-fact to obtain renewal leases onhis behalf. Subsequently, Fidelity GasCompany assigned the operating rights in the deep formations to Shell Oil Company. In 1935, Norbeck madeanassignment of the 25percent interest to Mrs. M.H. Crawford. This assignment was rejected by the United States Land Office because Mrs. Crawford did not pay the required

2lease bond, or establish the necessary qualifications to own an

interest in the lease. Mrs. Crawford did not pay any delay rentals. After the assignment, Mrs. Crawford had the assignment filed with the county clerk and recorder. Thereafter, Mrs. Crawford took no action in regard to the lease. Fidelity Gasapplied for arenewal lease in 1954 onbehalf of Mrs. Crawford. The land office rejected the renewal because Fidelity Gas did not have authority to act on behalf of Mrs. Crawford, andthe land office did not recognize Mrs. Crawford asa lessee. Fidelity then applied for arenewal lease asattorney-infact for Norbeck. The land office accepted this application and issued a renewal to Norbeck. In 1964 Fidelity applied for the second renewal asattorney-in-fact for Norbeck, andthe renewal was issued. The second renewal lease was put on producing status in 1968. Since then, some $420,000 in production payments have been allocated to the 25percent interest. OnOctober 28, 1968, the land office notified "heirs of George Norbeck" that under federal regulations they hadto establish their succession to his interest in the lease. OnAugust 18, 1987, the Bureau of Land Management (BLM), the successor to the land office, notified the Norbeck heirs that it recognized their interest in the lease.The Norbeck heirs transferred all of their interest in the lease to the Jane Norbeck Trust, Julius A. Bernard, Trustee. Subsequently, Jane S. Norbeck took over as trustee (NorbeckTrustee). OnSeptember 29, 1988, Shell Oil notified the trustee

that Shell had completed its review of the claim to the interest but would not distribute the proceeds without aquiet title action being completed. OnOctober 22, 1990, the Norbeck Trustee began aquiet title action before the District Court. Efforts were madeto locate Mrs. Crawford, but no response was forthcoming. Adefault was taken against Mrs. M. H. Crawford. The District Court quieted title to Jane S. Norbeck, Trustee, on December 7, 1990. Subsequently, the heirs of Mrs. M.H. Crawford (the Crawford heirs) surfaced and filed amotion for relief from judgment. The District Court vacated the default and judgment onJune 4, 1991. The Crawford heirs sought to quiet their title to 39/40ths of the disputed interest. Jane S. Norbeck, Trustee, filed amotion for summary judgment. In response the Crawford heirs moved for partial summary judgment. The District Court, on January 17, 1992, ruled that Jane S. Norbeck, Trustee, owned all the allocated production proceeds. However, the District Court ruled the Crawford heirs could apply to the BLMfor approval of the previously rejected assignment. Should the assignment be approved, the Crawford heirs would own 39/40ths of the disputed interest and the proceeds of production would be allocated to them after the first day of the month following application for approval. This appeal followed.

4Our scope of reviewing motions for summary judgment is the

sameasthe trial court andis aquestion of law. Summary judgment is granted only if nogenuine issue of material fact exists.

The District Court found that federal oil and gas leases are governed bythe Mineral Leasing Act of 1920, P.L. No. 146, 41Stat. 437 (1920), as codified in 30 U.S.C. Sec. 5, 181 et seq. The original statute provided: "[N]o lease issued under the authority of this Act shall beassigned or sublet, except with the consent of the Secretary of the Interior." 30U.S.C. Sec. 187a (1990) provides: [A]ny oil or gas lease issued under the authority of this Act maybe assigned

. . ., subject to final approval by the Secretary

. . to any person or persons qualified to own a lease unddr this Act, and any assignment or sublease shall take effect as of the first day of the lease month following the date of filing in the proper land office of three original executed counterparts thereof, together with any required bond and proof of qualification under the Act of the assignee or subleasee to take or hold such lease or interest therein.

. . . The District Court in light of 30U.S.C. 187a, ruled the Crawford heirs would own39/40ths of the disputed interest upon the approval of the assignment by the BLM. The case of Oasis Oil Co. v. Bell Oil &Gas Co. (W-D. Okla. 1952), 106 F.Supp 954, followed 30U.S.C. § 187a, and held that Oasis Oil Company (the assignor) wasthe sole record holder of the lease andwasentitled to all of the oil runs from the well onthe lease. Oasis at 957. In Q&is, the assignee, Fish, failed to pay the requested fee, and provided insufficient information to the
5Department of Interior which refused to approve the assignment.

Thus, the assignment did not convey any interest in the lease under the statute until the date the Secretary of Interior approved the lease.The Crawford heirs rely onGibbons v. PanAmerican Petroleum Corporation (10th Cir. 1958), 262 F.2d 852, for the proposition that neither Norbeck nor his heirs were obligated under the lease after the assignment. However, this proposition is contrary to the facts before us. The Department of Interior viewed Norbeck asthe record owner of the lease. The renewals were madeand accepted in his name. Arenewal submitted onbehalf of Mrs. M.H. Crawford was rejected because the assignment had never been approved. Delay rentals became the responsibility of Norbeck, whether hepaid them
or not. In Gibbons, the Tenth Circuit stated that Gibbons's failure to submit the assignment for approval could not destroy the obligation of anassignee under the lease. Gibbons at 854. Thus Gibbons rests on the fact that Gibbons did not submit the assignment for approval. Here, Mrs. M.H. Crawford applied to the land office for approval of the assignment and it was rejected. The material facts are not in dispute. Norbeck made an assignment to Mrs. Crawford but she failed to perfect the assignment with the Department of Interior pursuant to the language of the original lease and 30U.S.C. 5187a. Later attempts were madeto have Mrs. Crawford paythe rentals but without success. As
aresult the obligations under the lease remained with Norbeck.

6

### Neither the assignor nor assignee, or their heirs, acted relative

to anyrights they haduntil awakenedbyShell Oil. The District 

### Court ordered the existing proceeds ofthe 25percent interest paid to the Norbeck heirs, however byits order it allowed the Crawford heirs the opportunity toperfect theassignment byseeking approval of the Secretary of Interior under 30U.S.C. 5187a. Basedonthe evidence presented inthe record, weagree with the determination of the District Court andaffirm the District Court.

WeConcur:

7