No. 14911 

IN THE SUPREME COURT OF THE STATE OF MONTANA, 

1980 

TIM CLAWSON, 

Plaintiff and Respondent, 

VS . 

RONALD D. BERKLUND, 

Defendant and Appellant. 

Appeal from: District Court of the Fifteenth Judicial District, 

Honorable H. James Sorte, Judge presiding. 

Counsel of Record: 

For Appellant: 

Loren J. O'Toole argued, Plentywood, Montana 

For Respondent : 

Gerard M. Schuster argued, Wolf Point, Montana 

Submitted: February 21, 1980 

Decided: my "m 
Mr. Chief Justice Frank I. Haswell delivered the Opinion of the 

Court. 

Plaintiff-respondent Tim Clawson brought this action 

for the cancellation of an oil and gas lease in the ~istrict 

Court for the Fifteenth ~udicial District, Sheridan County. 

The Court found that Clawson, the lessor, was entitled to cancellation and a recorded release of the lease. Defendant Ronald Berklund, the lessee, appeals from the judgment. 

Tim Clawson and Ronald Berklund entered into an oil and 

gas lease covering a portion of Clawson's land on September 30, 

1977. According to the terms of the lease, it was to terminate 

unless an oil or gas well was commenced or an annual rental of 

$720 was paid by the lessee on or before March 10, 1979. 

Two $5,400 sight drafts were issued in conjunction with 

the lease agreement on September 30, 1977, one being a 15 day 

sight draft (Draft No. l), the other a 160 day sight draft (Draft 

No. 2). The drafts contained writing that they were "bonus consideration" for executing the oil and gas lease. 

Both drafts were sent for collection to Midland National 

Bank (Midland) in Billings, Montana, by the Security State Bank 

of Plentywood, Montana (Security State). Midland acknowledged 

receipt of both drafts on October 4, 1977. Draft No. 1 was paid. 

Payment of Draft No. 2 was received by Tim Clawson on March 15, 

1978. Mr. Clawson treated the draft as dishonored, contending 

that payment was due on March 13, 1978; 160 days from October 4, 

1977, exclusive of October 4, is March 13, 1978. 

The lease was recorded in Sheridan County by Ronald Berklund 

on October 6, 1977. his action was initiated on December 11, 

1978, and sought the cancellation of the lease and a recorded release. Ronald Berklund has never tendered payment of the annual 

rental which was to be paid by March 10, 1979. 

The District Court found that the defendant failed to 
comply with the lease agreement by not making timely payment of 

sight Draft No. 2 and by failing to make the annual rental payment as agreed. As a result, plaintiff was entitled to a release 

of the lease filed by the defendant. 

The following issues have been considered on appeal: 

(1) Whether defendant made a timely payment of Draft No. 

(2) In the event the payment of Draft No. 2 was untimely, 

whether it rendered the alleged oil and gas lease invalid? 

(3) In the alternative, if the lease was valid, did it 

terminate by reason of a failure to tender payment of the annual 

rental which was due on March 10, 1979, which date was after litigation concerning the validity of the lease had commenced? 

The issue concerning timeliness of payment requires an 

examination of the provisions of the Uniform Commercial Code (UCC). 

Draft No. 2 appears substantially as follows: 

COLLECT DIRECTLY THROUGH MIDLAND NATIONAL BANK 559499 

Billings, Montana 59101 

September 30, 1977 

One Hundred Sixty (160) Days After Sight and Subject to Approval 

of Title 

Pay to the 

Order of Tim Clawson $5,400.00 

- - - Five Thousand Four Hundred and No/100 - - - DOLLARS 

Consideration for Balance of bonus consideration - executing oil & 

gas lease 

To: Ronald D. Berklund /s/ Ruth L. Berklund 

605 Midland Bank Bldg. Ruth L. Berklund 

Billings, Montana 59101 

AS a result, Ruth Berklund is the drawer, defendant Ronald Berklund 

is the drawee, and plaintiff Tim Clawson is the payee under the 

UCC. Midland is a collecting bank under section 30-3-120, MCA, 
by virtue of the collect directly "through" language. See Engine 

Parts, Inc. v. Citizens Bank of Clovis (1978), 92 N.M. 37, 582 

Section 30-3-501(1)(a), MCA, provides that "presentment 

for acceptance is necessary to charge the drawer and endorsers 

of a draft where . . . its date of payment depends upon such 

presentment." Section 30-3-504, MCA, defines presentment and explains how it is to be made. 

"30-3-504. How presentment made. (1) Presentment is a demand for acceptance or payment made 

upon the maker, acceptor, drawee or other payor 

by or on behalf of the holder. 

" (2) Presentment may be made: 

"(a) by mail, in which event the time of presentment is determined by the time of receipt of the 

mail; or 

"(b) through a clearinghouse; or 

"(c) at the place of acceptance or payment specified in the instrument or if there be none at the 

place of business or residence of the party to accept 

or pay. If neither the party to accept or pay nor 

anyone authorized to act for him is present or accessible at such place presentment is excused." 

The principal issue in the present appeal is when the presentment 

was made upon defendant Ronald Berklund, the drawee, to commence 

the 160 day period. No date of presentment is written on the 

draft or contained in the record. The only evidence concerning a 

date in the collection process is Midland's acknowledgement of 

receipt of the item on October 4, 1977. 

Section 30-3-409, MCA, provides that a drawee is not 

liable on a draft until he accepts it, and section 30-3-410, MCA, 

provides as follows: 

"30-3-410. Definition and operation of acceptance. 

(1) Acceptance is the drawee's signed engagement 

to honor the draft as presented. It must be written 

on the draft, and may consist of his signature alone. 

It becomes operative when completed by delivery or 

notification, 

"(2) A draft may be accepted although it has not been 
signed by the drawer or is otherwise incomplete 

or is overdue or has been dishonored. 

"(3) Where the draft is payable at a fixed period 

after sight and the acceptor fails to date his acceptance the holder may complete it by supplying a date 

in qood faith." (Emphasis added.) 

Defendant Berklund never signed the draft and no date was 

ever written on the draft other than the issuance date, September 

30, 1977. Instead, he attempted payment by a Midland bank draft 

dated March 14, 1978, which was received by Security State on 

March 15, 1978, Plaintiff Tim Clawson contends that since Berklund never provided a date of presentment he may supply the presentment date of October 4, 1977. Plaintiff asserts that this 

date is supplied in good faith since Midland received Draft No. 2 

on October 4 and Mr. Berklund has an office in the same building. 

Further, Mr. Berklund specified his address on the draft as "605 

Midland Bank Bldg." 

We find plaintiff's contention meritorious in light of 

Official Comment 6 to UCC 53-410 and the underlying UCC policy of 

providing a definite time within which to make payment. The comment provides: 

"6. Subsection (3) changes the last sentence of 

the original Section 138. The purpose of the 

provision is to provide a definite date of payment where none appears on the instrument. An undated acceptance of a draft payable 'thirty days 

after sight' is incomplete ,; and unless . thePacceptor -- 

himself writes in a diffc 

authorized to com~lete & the 

the terms of the draft by 

sentment. Any date which 

:rent date the holder is 

acceptance according to 

supplying a date of pre- 

- -- 

the holder chooses to write 

in is effective providing his choice of date is made 

in good faith, Any different agreement not written 

on the draft is not effective, and par01 evidence 

is not admissible to show it." (Emphasis added.) 

Pursuant to section 30-3-410(3), MCA, and Official Comment 

6 we find that respondent Tim Clawson may supply a date of presentment when the drawee fails to provide his written acceptance or 

date thereof. As a result, payment was not received within the 

160 day period. Section 30-3-507, MCA, provides that a draft is 
dishonored when "due acceptance or payment is refused or cannot 

be obtained within the prescribed time." Thus, plaintiff was 

entitled to treat the draft as dishonored since payment was due 

on March 13, 1978 and not received until March 15, 1978. 

Next, we must consider the effect of untimely payment 

upon the oil and gas lease. It is well established that instruments between the same parties, involving the same subject matter 

and executed on or about the same date are to be considered as one 

agreement. Hoerner Waldorf Corp. of Montana v. Bumstead-Woolford 

Co. (1972), 158 Mont. 472, 494 P.2d 293. In addition, parties 

must be presumed to contract with reference to the law in force 

at the time and place of the contract. Moses v. School Dist. No. 

53, Lincoln County (1938), 107 Mont. 300, 86 P.2d 407. Further, 

a series of Montana cases have held that oil and gas leases are 

to be construed liberally in favor of the lessor and against the 

lessee, that time is of the essence even though the contract does 

not so provide, and that forfeiture is favored in oil and gas 

leases. Christian v. A. A. Oil Corp. (1973), 161 Mont. 420, 506 

P.2d 1369; Solberg v. Sunburst Oil & Gas Co. (1926), 76 Mont. 254, 

246 P. 168. Consequently, the two sight drafts are a part of the 

lease agreement, the parties must be presumed to contract with 

reference to the UCC, and the lease is to be liberally construed 

in favor of the lessor. Appellant failed to pay Draft No. 2 in 

compliance with the previously discussed provisions of the UCC. 

Especially in light of the liberal construction of oil and gas 

leases in favor of the lessor, respondent was entitled to a cancellation and recorded release as a result of Mr. Berklund's breach. 

Since the issues previously discussed are determinative of 

this appeal, we need not reach the issue concerning the appellant's 

failure to tender payment of the annual rental after this suit to 

cancel the lease was commenced. 
The judgment of the District Court is affirmed. 

Chief Justice 

We concur: