Title: CARROLL v EATON
Citation: N/A
Docket Number: 12864
State: Montana
Issuer: Montana Supreme Court
Date: October 14, 1975

No. 12864 I N THE SUPREME C O U R T O F THE STATE O F M O N T A N A 1975 WAYNE CARROLL, P l a i n t i f f and Respondent, R A N D A L L N. E A T O N e t a 1. , Defendants and Appellants. Appeal from: D i s t r i c t Court of t h e F i f t h J u d i c i a l D i s t r i c t , Honorable Frank E. B l a i r , 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 : y g & * . - I - Clerk M r . J u s t i c e John Conway Harrison delivered the Opinion of the Court. In t h i s appeal t h i s Court i s asked t o consider and review the r i g h t s of the p a r t i e s concerning the construction of a mining lease. Judgment f o r p l a i n t i f f Wayne Carroll was entered June 10, 1974, i n the d i s t r i c t court, Madison County, and from t h a t judgment defendants Randall Eaton, M. P. Middleton and John Bolinger appeal. The properties which a r e the subject of t h e contested lease a r e known a s the '94ogul Claims", located i n the Gravelly Range Mining D i s t r i c t of Madison County. The business dealings between the p a r t i e s regarding t h i s land date back t o 1963. O n September 20, 1963, Carroll, as lessee, executed a mining lease with Eaton individually, and a s attorney i n f a c t f o r M.P. Middle- ton, a c i t i z e n and resident of Canada. The lease was t o extend f o r two years "and a s long thereafter a s ore or minerals 9 : * s h a l l be produced from s a i d premises i n commercial quantities. 11 Upon the l e s s e e ' s fai.lure t o produce ore, the lease was allowed t o terminate. A second lease was drafted by Carroll, and was executed by the same p a r t i e s on August 16, 1965. In t h i s document, the I I kabendum clause", o r t h a t part of the lease which describes i t s duration, was s e t out i n much greater d e t a i l . The lease again established a "primary term" of two years and a "thereafter term" which was dependent upon the production of ore i n commercial quantities f o r i t s length. Definitional and delay r e n t a l provisions were a l s o included i n an attempt t o specify the r i g h t s of the p a r t i e s : "Commercial quantities s h a l l be and i s hereby defined a s t h a t quantity necessary t o produce t o f i r s t p a r t i e s a t l e a s t $500.00 per year. And i n the event of no operations upon s a i d mining claims , the payment by second party t o f i r s t party of the sum of $500.00 per year as minimum delay r e n t a l s h a l l be s u f f i c i e n t t o hold said mining claim under t h i s lease and t o keep the same i n good standing. I I Pursuant t o lease provisions, the lessee tendered payments of $500 t o the lessors i n 1966, and again i n 1967. A t h i r d payment of $500 i n delay r e n t a l was tendered by the lessee f o r the purpose of extending the lease another year. Lessors accepted the payment without any attempt t o declare a f o r f e i t u r e or terminate the lease, thereby extending it f o r a period of one year. In 1968, the p a r t i e s entered i n t o a new lease, with provisions i d e n t i c a l t o those found i n the 1965 lease. In l i e u of production, the lessee tendered payments of $500 f o r the years 1969 and 1970. A s he had done previously, the lessee again ten- dered a t h i r d delay r e n t a l payment f o r t h e purpose of extending the lease another year. The check was received by the lessors on August 16, 1971. Lessee heard nothing further u n t i l the check was returned t o him on April 17, 1972, more than eight months a f t e r the check had been received by the lessors. Lessor Eaton t e s t i f i e d t h a t he was employed out of s t a t e during most of the time between August 1971 and A p r i l 1972. H e a l s o s t a t e d he knew of t h e existence of the check, instructed h i s wife t o return it, and t h a t h i s absence from the s t a t e resulted i n h i s i n a b i l i t y t o ensure the check was returned within a reasonable time. In September 1971, Eaton entered i n t o another lease ~ ~ i t h John Eolinger. Carroll continued t o tender delay r e n t a l payments through the years 1972 and 1973 i n order t o protect h i s r i g h t s . Both checks were promptly returned by lessors. Under these f a c t s , the d i s t r i c t court found the p a r t i e s intended t h a t the lease be extended, and the lessee was e n t i t l e d t o , and i n fact did r e l y t o h i s detriment upon lessors' retention of h i s check as confirmation and validation of the lease and i t s extension. O n appeal, it i s contended t h a t the d i s t r i c t court erred i n i t s construction of the lease and i n i t s application of the doctrine of equitable estoppel. W e disagree. Traditionally, mining leases iil Jloneana and elsewhere have Seen drafted i n two basic and d i s t i n c t forms. Under the provisions .~f an "or" type lease, the lessee i s obligated t o produce o r pay delay r e n t a l s . The lease can terminate only by mutual consent of ]:he p a r t i e s during the primary term, f a i l u r e t o pay delay r e n t a l s o r an ~ c t i o n by the lessor t o declare the lease forfeited. McDaniel v. Hager-Stevenson O i l Co., 75 Mont. 356, 365, 243 P. 582. When it dppears t h a t the p a r t i e s have executed an "unless" type lease, the 1-essee has t h e option t o produce, pay delay r e n t a l s , o r do n e i t h e r , a l l without incurring obligation. But f a i l u r e t o a c t i s automatic ~ e r m i n a t i o n i n favor of the lessor. Irwin v. Marvel Petroleum Corp., 139 Idont. 413, 365 P.2d 221. Here, the t r i a l court properly found t h a t t h i s was an I I or" type lease i n which the lessee was required t o e i t h e r produce or pay delay r e n t a l s . A s noted from the cases c i t e d , one r e l i a b l e me~hod of determining what type of lease i s intended i s t o look a t t h e nature of the obligations incurred by the lessee. Here, the lease terms obligated the lessee t o pay delay r e n t a l s in l i e u of production f o r the primary period of two years, I I i n order t o keep the lease i n good standing". ]Tad the lessee de- faulted i n these payments, the lessors would c e r t a i n l y have had the option t o i n s i s t upon f o r f e i t u r e o r waive it and sue f o r the r e n t a l s due. Thus the parties c l e a r l y contemplated an "or" lease, and a s such, it was incumbent upon the lessors t o declare a f o r f e i t u r e a t the close of the primary term, i f t h a t was desired. It i s apparent from the record t h a t no such action was taken by the lessors. The only response t o the l e s s e e ' s tender of delay r e n t a l s was t o hold the same f o r a period of time i n excess of eight months. Therefore, the n e t r e s u l t of the l e s s e e ' s tender of payment was a valid andkinding extension of the lease. Having resolved t h i s question on the l a w , t h e r e i s no need t o discuss t h e doctrine of equitable estoppel o r i t s a p p l i c a b i l i t y t o t h e f a c t s . Judgment of t h e d i s t r i c t court i s affirmed. E ' J u s t i c e V e Concur: J u s t i c e s .