No. 91-204 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1991 

EDWARD B. STANFORD, NEAL A. STANFORD, 

and BETH STANFORD, 

Plaintiffs and Appellants, 

-VSROSEBUD COUNTY, MONTANA, a political subdivision, 

BOYD KINCHELOE and MAVIS KINCHELOE, his wife, 

LEE A. ADAMS, MELVIN A. MURI and CLEMENTINE MURI, 

his wife, E.L. GREBE and CAROLINE GREBE, his wife, 

DONALD McSWEYN, OIL RESOURCES, INC., RICHARD C. HOEFLE, 

ROBERT A. MEEK, EARL M. CRANSTON, SIVERT 0. MYSSE, JR., 

et al., 

Defendants, Respondents, and Cross-Appellants. 

APPEAL FROM: District Court of the Sixteenth Judicial District, 

In and for the County of Rosebud, 

The Honorable Joe L. Hegel, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

James P. Healow argued; Sweeney & Healow, Billings, 

Montana 

Joseph W. Sabol argued, Bozeman, Montana 

For Respondent: 

Robert C. Smith argued; John J. Cavan; Cavan, Smith, 

Grubbs & Cavan, Billings, Montana 

DEC 16 1991 Submitted: October 31, 1991 
Justice R. C. McDonough delivered the Opinion of the Court. 

This is an appeal from the judgment of the Sixteenth Judicial 

District, Rosebud County. The parties to the appeal are: the 

Stanfords (appellants), Earl M. Cranston and Richard C. Hoefle 

(appellants), and Boyd and Mavis Kincheloe (respondents). The 

District Court granted summary judgment whereby an oil, gas and 

other minerals royalty, whose title remains in dispute, was 

awarded: 88.889 % to the Kincheloes, 5.555% to Hoefle and 5.556% to 

Cranston as owners of the subject property's mineral interest in 

that proportion. For reasons that follow, the judgment of the 

District Court is reversed. 

Several issues are raised by the appellants. However, our 

review will be limited to the single question of who among the 

contesting parties is entitled to the remaining royalty interest. 

Hoefle and Cranston raise "equitable" issues most of which regard 

Attorney William V. Moore. They claim an interest in Moore's fees 

upon an unjust enrichment theory and a further interest in a 

portion of anything the Kincheloes are awarded on a theory of 

constructive fraud and constructive trust. Attorney Moore is not a 

party in this action and resolution of the issues surrounding 

Attorney Moore is not necessary to determining the title of the 

disputed royalty interest. The constructive fraud and constructive 

trust claims are mooted by this opinion. 

Stanfords allege that Cranston fraudulently induced them into 

quitclaiming their interest in the property to Cranston. Because 

the District Court determined Stanfords did not have any interest 

in the property, it found this issue moot. In light of our 

2 
decision, the fraud claim must now be addressed by the District 

Court, and we do not address it here. 

This case involves quieting title to a royalty interest 

previously reserved by Rosebud County. The subject property was 

originally vested in Northern Pacific Railway Company. Albert 

Farwell purchased the surface estate and later became owner of the 

mineral estate when Northern Pacific Railway Company quitclaimed 

the previously reserved mineral interests. The Stanfords are the 

only remaining heirs of Albert Farwell. 

From 1916 to 1927 taxes assessed on the subject real property 

each year by Rosebud County went unpaid. In 1927, Rosebud County 

applied for and received a tax deed to the subject property. In 

1931, a decree was awarded quieting title in Rosebud County. In 

1944, Rosebud County quitclaimed its interest in the property to 

Adolph Ziesmer reserving to the county a 6.25% royalty interest to 

“all oil, gas and other minerals recovered and saved from the said 

lands”. In 1945, Ziesmer quieted title to the property, 

acknowledging and describing the property as subject to Rosebud 

County’s reservation of the 6.25% royalty. 

Ziesmer conveyed his interest to Jud and Ruby Smith who in 

turn conveyed their interest, with the exception of 25% of the 

mineral interest, to the Kincheloes. The Kincheloes have resided on 

the property since 1950. Smith later conveyed portions of his 

mineral interest to other persons, including Hoefle who conveyed 

one half of his share to Cranston. 

In 1974, Cranston and Hoefle obtained oil and gas leases from 

3 
the Xincheloes and Smith's assigns as lessors to Oil Resources Inc. 

(Cranston's and Hoefle's company) as lessee. Portions of the 

working interest of Oil Resources lease were assigned to Polumbus 

Petroleum who obtained production. Polumbus attempted to determine 

who was entitled to the revenues of the oil it produced and found 

that questions existed regarding the validity of the county's tax 

title and the efficacy of Rosebud County's 6.25% royalty 

reservation. Polumbus initiated an interpleader action in U.S. 

District Court in Billings naming all possible mineral and royalty 

owners as defendants. All revenues attributable to the royalty 

interest were ordered and remain with the clerk of court. 

Several stipulations were entered that resulted in the 

dismissal of many of the defendants and the loss of diversity 

jurisdiction. Meanwhile, the Stanfords filed a complaint in Rosebud 

County alleging the underlying tax deed to the property was void 

and the Stanfords as heirs to Albert Farwell are the owners of the 

entire mineral estate and royalties, and that they were 

fraudulently induced into quitclaiming their interest to Hoefle and 

Cranston. 

The removed interpleader action and the Stanfords' case were 

consolidated with the former action being dismissed. The remaining 

parties in the action were Rosebud County, the Stanfords, the 

Kincheloes, Hoefle and Cranston. The District Court approved and 

adopted a settlement agreement, entered by these remaining parties, 

dismissing Rosebud County from the case and awarding the county 1/2 

or 3.125% of the disputed royalty and 9/16ths of royalties already 

4 
paid into the court. Rosebud County waived, relinquished, and 

released all right, title and interest in what remains of the 

royalty. 

Under the terms of the settlement agreement, "all right, title 

and interest in and to the remaining 3.125% royalty ... shall be 

owned by Kincheloe, Hoefie, Cranston, and/or Stanfords.. . Is. The 

agreement further states that the royalty shall be owned by the 

parties "in such proportion and in accordance with their respective 

interests, if any, as they may be entitled to under the terms of 

any settlement agreement entered into by them or judgment of the 

Court.. . that shall determine their respective rights thereto." 

The remaining claimants each entered a motion for summary judgment 

alleging a legally valid claim to the remaining shares of the 

proceeds of production and the remaining royalty. The District 

Court ruled in favor of the Kincheloes. 

The Kincheloes claim entitlement to a proportion of the 

royalty based on their ownership of 100% of the surface rights and 

75% of the mineral rights. Kincheloes' title in the surface and 

minerals as well as their claim to the royalty interest is based 

upon the tax deed and subsequent quiet title actions which 

Kincheloes argued, and the District Court found, to be valid. 

Alternatively, Kincheloes argue that title in the royalty interest 

is independently established by adverse possession. 

The Stanfords claim entitlement to all of the proceeds of the 

royalty as the sole heirs of Albert Farwell. Stanfords argue that 

the tax title proceedings are void and that as heirs to the pre-tax 

5 
deed title owner, they assert the only valid claim to the royalty 

interest. 

Cranston and Hoefle claim entitlement to all of the proceeds 

of the royalty based upon Cranston's quitclaim deeds from Stanfords 

and upon the same grounds as Stanfords. Because we do not address 

the fraud claim, our analysis involves only Xincheloes' and 

Stanfords' claims. 

We have held that in order to quiet title to any property 

interest, a party must first establish a prima facie claim to 

title. LeVasseur v. Roullman (1933), 93 Mont. 552, 20 P.2d 250. It 

is axiomatic that a party must prevail on the strength of his own 

title and not on the weakness of others. Funk v. Robbin, (1984), 

212 Mont. 437, 689 P.2d 1215. As such, our analysis is reduced to 

a question of whether the parties are able to establish prima facie 

title to the royalty. Our determination is a question of law and 

as such this Court's review will be plenary. Steer, Inc. v. 

Department of Revenue (1990), 245 Mont. 470, 803 P.2d 601. 

The Stanfords' claim of title to the disputed royalty is 

through the pre-tax deed owner, Albert Farwell. Stanfords contend 

that Rosebud County failed to follow proper procedure thus 

rendering the tax sale and Rosebud County's subsequent quiet title 

action defective and void. It is Stanfords' position that while 

the tax deed is void, the creation of the royalty interest was 

confirmed by the August 25, 1989 settlement agreement. Because the 

tax deed is invalid, Stanfords contend the royalty reverts to the 

pre-tax sale claimants. The Stanfords assert that as the 

6 
undisputed heirs to Farwell, who died in 1929, they are entitled to 

the royalty. 

Stanfords maintain the specific jurisdictional defects in the 

tax deed and tax sale proceedings were: 

(a) That no affidavit of proof of service of notice for 

application for tax deed was filed in the office of the 

Treasurer of Rosebud County, Montana, prior to the 

issuance of the tax deed as required by statute; 

(b) That the affidavit of J.L. Freshour, Deputy County 

Clerk and Recorder, dated September 16, 1927, is 

defective and deficient and therefore null and void; 

(c) That the notice of application for tax deed dated 

August 15, 1927, indicates on its face, "That the period 

within the said above described lands and premises may be 

redeemed for the sale to pay the taxes for the year 1916 

has long since expired, . . . I, 

(d) That no affidavit of notice of publication of tax 

sale was filed in the office of the Clerk and Recorder of 

Rosebud County, Montana, by the County Treasurer as 

required by statute. 

The District Court ruled that the 1927 tax deed proceeding 

adequately complied with the statutory notice provisions, the 

County Treasurer had jurisdiction to issue the tax deed to the 

County and that the tax deed was and is valid. We disagree. We 

find the tax title proceedings to be deficient as asserted by 

Stanfords above. 

"Proceedings on tax sales are in invitum. Every essential or 

material step prescribed by the statute must be strictly followed.' 

King v. Rosebud County (1981), 38 St.Rep. 1145, 631 P.2d 711. 

Section 2209, RCM (1921), provides explicit instructions that an 

'affidavit of notice of an application for a tax deed' must be 

filed with the clerk and recorder of the county in which the 

7 
property is situated. There is no record of such an affidavit 

being filed. Furthermore, 5 2201, RCM (1921), states that 

redemption may be made any time prior to giving the notice of and 

application for a tax deed. The notice of application for tax deed 

in the instant case erroneously states that the right to redemption 

has "long since expired." Finally, the record fails to include an 

'affidavit of notice of tax sale' which, pursuant to 5 2212, RCM 

(1921), must also be filed in the office of the treasurer of the 

county. The above evidence makes clear that Rosebud County failed 

to follow the statutes as required; therefore, the tax deed 

proceeding was deficient and the county treasurer did not have 

jurisdiction to issue the tax deed and the issued tax deed was 

void. 

Furthermore, service was not properly achieved upon Albert 

Farwell in the 1931 quiet title action. Specifically, there is a 

failure to establish the necessary level of proof required in an 

affidavit for publication of summons. The applicable statute 

governing the level of proof necessary is § 9484, RCM (1921), which 

provides: 

The affidavit . . . shall clearly show that the necessary 

facts exist, and that the plaintiff has used due 

diligence in all respects as to which due diligence is 

required . . . The facts constitutinq due diliqence shall 

be set out in said affidavit. (Emphasis added.) 

When construing 5 1984, RCM (1921), in Aronow v. Anderson (1940), 

110 Mont. 484, 104 P.2d 104, the Court said: 

The affidavit must show the evidentiary facts upon which 

the ultimate fact is asserted that the defendant resides 

out of the state before a valid order for publication of 

summons can be made. 

8 
The affidavit for publication of summons in the instant case is 

deficient because it fails to recite facts to support its 

conclusion that Farwell resided in Minnesota. Furthermore, no 

specific facts were offered describing a search for Farwell. We 

find the Affidavit for Publication of Summons to have been 

deficient and the 1931 quiet title action is void. Furthermore, 

the 1944 Ziesmer quiet title action is void on the same basis. 

We have held that reservations created by counties following 

defective tax sales remain intact. Richardson v. Richland County 

(1985), 219 Mont. 48, 711 P.2d 777. Here the royalty interest was 

held by Rosebud County until it relinquished and waived all rights 

to it under the settlement agreement. When Rosebud County 

relinquished its interest in this case, the heirs of the pre-tax 

sale owner, Albert Farwell, are able to assert their title because 

they and their predecessor have not been deprived of their title. 

All actions taken relative to the invalid tax sale are void. King 

v. Rosebud County (1981), 38 St.Rep. 1145, 631 P.2d 711. The 

Stanfords, as heirs to Farwell, have established a prima facie 

claim to the royalty on this basis. Because Stanfords have 

established a prima facie claim, the burden shifts to Kincheloes to 

prove a superior title. Cook v. Rigney (1942), 113 Mont. 198, 126 

P.2d 325. 

The Kincheloes contend that the royalty interest can only be 

derived from mineral interests of which Kincheloes undisputedly own 

75%. Kincheloes advance a theory that inasmuch as only mineral 

owners have the right to produce or contract for production, they 

9 
must own some or all of the oil in place. Allegedly, the total 

value of production belongs to the lessee subject to the terms of 

the lease agreement which obligates the lessee to pay lessors 

and/or royalty owners. Kincheloes contend that when the county 

abandoned its claim, the obligation for the lessee to pay that part 

of the royalty was eliminated. In other words, the mineral owners, 

by investing in and being in control of production, are entitled to 

all royalties with the exception of those burdened by the lease. 

Kincheloes' argument essentially promotes a theory that the 

royalty interest should revert to the owners of the mineral 

interest. Kincheloes, as well as the District Court, cite Stokes 

v. Tutvet (1958), 134 Mont. 250, 328 P.2d 1096, to support the 

position that royalty interests are interests in production which 

may only be created by the mineral owner and therefore, since 

Rosebud County abandoned its claim, only the remaining mineral 

interest holders have a right to the royalty. We note that while 

the argument has a logical appeal, it does not appear to be 

supported by Stokes one way or the other and no other authority is 

provided. 

We have previously stated it is important to recognize the 

distinction between mineral interests and royalty interests. 

McSweyn v. Musselshell County (1981), 38 %.Rep. 1260, 632 P.2d 

1095. Mineral interests are the right to develop or lease and to 

keep the proceeds of the lease, whereas royalties are a right to a 

share in production while remaining free from the costs of 

production. Problematic with Kincheloes' theory is that it blurs 

10 
the distinction between the two. If royalty interests are free from 

the cost of production by definition, then it would be inherently 

contradictory to find they can arise from spending time and money 

on production. We decline to find prima facie evidence of 

Kincheloes' title in the royalty interest on the basis of their 

right and title in the minerals. 

The second basis on which the District Court determined that 

Kincheloes have title to the royalty is by the doctrine of adverse 

possession. There is no dispute that the Kincheloes have valid 

title to 100% of the surface and 75% of the minerals. We affirm the 

court's finding that the Kincheloes have fulfilled the elements 

necessary to establish adverse possession of these portions of the 

property. However, we find that Kincheloes do not have an interest 

in the royalty interest by adverse possession. 

The Kincheloes assert title by adverse possession to the 

royalty interest both under color of title and by use and 

occupancy. Color of title is derived through the invalid tax deed 

and subsequent conveyances. The decree allegedly quieting title to 

Ziesmer specifically recognizes that Kincheloesl title is subject 

to Rosebud County's 6.25% royalty interest. Kincheloes are 

successors in interest to Ziesmer. A purchaser has constructive 

notice of every matter that appears in the title and is bound to 

these matters. Pluhar v. Guderjahn (1958), 134 Mont. 46, 328 P.2d 

129. 

A person cannot attack a royalty reservation in a title under 

and through which he bases his rights. Russell v. Texas Company 

LL 
(1956), 238 F.2d 636. In Russell, the court held that a grantee, or 

his successors in interest, needs an independent source of title to 

challenge a mineral reservation of his grantor. Kincheloes (the 

grantees) are estopped by Rosebud County's deed to Ziesmer, through 

which they derived their title or at a minimum their color of 

title, from attacking Rosebud County's (the grantor) royalty 

reservation. Because the Kincheloes' grant expressly subjects the 

property to the county's reservation, they have no color of title 

to the royalty. 

Kincheloes next contend they establish adverse possession by 

use and occupancy without need to rely on color of title. Under the 

adverse possession doctrine, property must be claimed under a color 

of title or by possession which is actual, visible, exclusive, 

hostile and continuous for the statutory period. Burlingame v. 

Marjerrison (L983), 204 Mont. 464, 665 P.2d 1136. 

It is unnecessary to determine whether the royalty in this 

case is a possessory or non-possessory interest; under either, 

adverse possession will not apply. Kincheloes have failed to 

produce evidence that they have in fact possessed or taken the 

royalty. The Kincheloes have never possessed or taken any of the 

proceeds from the royalty which continues to be held by the clerk 

of court, nor, prior to these proceedings, did they ever make an 

adverse claim to the royalty. 

We conclude the Kincheloes did not adversely possess or take 

title to the royalty beginning either under color of title or by 

actual taking, use or occupancy. No further basis for the 

12 
establishment of prima facie title is offered. Instead, the 

remainder of Kincheloes' argument is based upon the defense of 

laches. Kincheloes have failed to demonstrate any claim to title 

whatsoever. Because Kincheloes are unable to establish any claim 

to title in their own right, we conclude Kincheloes have no 

standing to assert any defenses, including laches. 

By virtue of having made a prima facie claim to title, we 

conclude that the Stanfords are entitled to all rights and interest 

in the royalty, subject to the findings of the District Court on 

the issue of fraud. Our conclusion should be construed as unique 

to the unusual circumstances the instant case presents. We by no 

means intend to stray from our holdings in the line of cases 

supporting the position that laches is a bar to pre-tax deed title 

owners. See Richardson v. Richland County, (1985), 219 Mont. 48, 

711 P.2d 777; Anderson v. Richland (1985) 219 Mont. 60, 711 P.2d 

784; Hunter v. Rosebud County (1989), 240 Mont. 194, 783 P.2d 927. 

Here, Kincheloes lack standing to assert the defense that laches 

should apply to the plaintiffs' claim to the royalty interest. 

Laches is a question of the inequity that would result if a 

claim were permitted to be enforced. Filler v. Richland County 

(1991), 247 Mont. 285, 806 P.2d 537. Kincheloes are not in a 

position to be harmed by an inequitable result because they have 

always held their property subject to the royalty. No inequity 

will arise by the enforcement of Stanfords' claim. Because 

Kincheloes lack a valid claim to the royalty, and therefore lack 

standing to raise an equitable defense, and because Stanfords are 

13 
able to make out a prima facie claim to title, the decision of the 

District Court is reversed. 

We Concur: 

Justice 

14 
December 16, 1991 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the following 

named: 

James P. Healow 

SWEENEY & HEALOW 

1250 15th St. West, Suite 202 

Billings, MT 59102 

JOSEPH W. SABOL 

Attorney at Law 

225 Esat Mendenhall 

Bozeman, MT 59715 

John J. Cavan and Robert Smith 

CAVAN, SMITH, GRUBBS & CAVAN 

P.O. Box 1297 

Billings, MT 59103 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATE OF MONTANA 

BY: ?Jw 

Deputy