Court Opinion

ID: 8024663
Source: CourtListenerOpinion
Date Created: 2022-09-09 02:32:55.396332+00
Date Added: 2024-06-11T16:36:47.166201
License: Public Domain

MR. JUSTICE ANGSTMAN:
(dissenting).
Months ago and during the 11 months’ period of gestation which produced the opinions prepared by Mr. Justice Freebourn and Mr. Justice Bottomly (the case having been argued to this court in January 1954), I wrote my views on all the contentions made by the attorney general.
While the opinion of Mr. Justice Freebourn is based upon but a single point I shall state my views on each point raised by the attorney general.
As stated in the opinion of Mr. Justice Freebourn, relator brought this proceeding to enjoin the defendants from conducting any sales or receiving any bids upon leases for oil and gas upon any school trust lands upon terms other than those prescribed by Chapter 122, Laws of 1953. The petition alleges in substance that the attorney general has held Chapter 122 to be unconstitutional and that the defendant board in consequence threatens to, and unless restrained from so doing, will present *479for competitive bidding certain school lands for oil and gas leases on forms used prior to the passage of Chapter 122, Laws of 1953. Ford Johnson was permitted by the court to intervene in the case. He takes the same view of the law as does relator.
Demurrers were filed to the petition of relator and to the complaint in intervention which were overruled by the court. Defendants elected not to plead further. Judgment was accordingly entered in favor of relator and in favor of plaintiff in intervention for the relief demanded by them. Defendants have appealed from the judgment.
There are two principal questions presented by the appeal. First, does Chapter 122, Laws of 1953, violate the Enabling Act, and second, does it violate the state Constitution? The district court answered both questions in the negative.
Chapter 122 authorizes leases “for a primary term or period of ten (10) years, and as long thereafter as oil or gas in paying quantities shall be produced thereunder. ’ ’
Section 11 of the Enabling Act was amended by Congress in 1948, 62 Stat. 170, to read as follows: “* * * Leases for the production of minerals, including leases for exploration for oil, gas, and other hydrocarbons and the extraction thereof, shall be for such term of years and on such conditions as may be from time to time provided by the legislatures of the respective States * * This was done upon request of the Montana legislature contained in Senate Joint Memorial No. 7, 1947 Session Laws, page 811. It was accepted by the Montana legislature in 1949, Ch. 18, Laws of 1949.
The attorney general contends that a lease in the form prescribed by Chapter 122 is not authorized by the amended Enabling Act. His contention is that the lease authorized by Chapter 122 is not for a term of years as provided in the amended Enabling Act.
The complaint in intervention contains the history of the amendment in the Congress of the United States and a copy of the report of a legislative committee of the House wherein is contained an explanation of the bill, which among other things *480states: “The purpose of this bill, as amended, is to amend the enabling act of the States of North Dakota, South Dakota, Montana, and Washington, whereby these States will be permitted to make leases for the life of the well on oil-bearing property rather than for a limited period of time, as is required by the present law. ’ ’
To the committee report was attached a statement by the Department of the Interior approving the proposed amendment in which it was stated, among other things, as follows: “The general practice as to public lands at present is to issue oil and gas leases for a definite term and so long thereafter as oil and gas are produced. I know of no reason which would militate against extending authority to the State to do likewise with respect to its school lands.”
It has long been the rule that in construing a constitutional provision (and the same rule would apply to the Enabling Act), the proceedings and debates of the framers and the history of the measure may be examined as tending to show what its terms were understood to mean. State v. Camp Sing, 18 Mont. 128, 44 Pac. 516, 32 L. R. A. 635; Murray Hospital v. Angrove, 92 Mont. 101, 10 Pac. (2d) 577; Nichols v. School District No. 3, 87 Mont. 181, 287 Pac. 624; State ex rel. Federal Land Bank v. Hays, 86 Mont. 58, 282 Pac. 32; State ex rel. Vickers v. Board of County Com’rs, 77 Mont. 316, 250 Pac. 606. The same rule prevails in the United States Supreme Court. United States v. Flores, 289 U. S. 137, 53 S. Ct. 580, 77 L. Ed. 1086; McFeely v. Commissioner of Internal Revenue, 296 U. S. 102, 56 S. Ct. 54, 80 L. Ed. 83; McLean v. United States, 226 U. S. 374, 33 S. Ct. 122, 57 L. Ed. 260; Church of Holy Trinity v. United States, 143 U. S. 457, 12 S. Ct. 511, 36 L. Ed. 226.
If there were any doubt about the meaning of section 11 as amended, and particularly as to whether it authorized a lease for as long as oil or gas is produced on the land, that doubt is completely dispelled by the legislative committee report as to the purpose of the Act under consideration. That report clearly shows the purpose to be to authorize leases “for the life of the *481well rather than for a limited period of time.” I think Chapter 122 is in harmony with amended section 11 of the Enabling Act.
But the attorney general contends that amended section 11 never was properly accepted by the State of Montana. He points out that when the state accepted the grants of land by the seventh section of Ordinance No. I of the Constitution of Montana, it also adopted the sixth section reading, “That the ordinances in this article shall be irrevocable without the consent of the United States and the people of said state of Montana.” He contends that the people of Montana never consented to the amendment by congress of section 11 of the Enabling Act.
This question is not properly presented in this procedure. The complaint in this action alleges that defendants are threatening to receive bids on school lands for oil and gas leases on forms used prior to those prescribed by Chapter 122.
Section 11 of the Enabling Act has been amended several times before the one made in 1948 and the amendment in each instance was accepted by the Montana legislature and not by a vote of the people of Montana. It follows that if the attorney general’s contention that a vote of the people be necessary, then all leases made under the law under which he proposes to operate would likewise be invalid. In other words, his contention, if sustained, would not justify a lease in the form which he advises and which defendants threaten to issue. The consent of the people of Montana under Ordinance I, sec. 6, of the Constitution is properly expressed by the legislature of Montana. That a vote of the people was not contemplated is quite plain from the ordinances themselves. Thus by section 2, the Convention itself expressed the agreement of the people of Montana without an election, and section 6 of Ordinance I simply means that the people of Montana may give their consent through their duly elected representatives just as the consent of the United States is given through Congress. But it is certain that if leases cannot be granted under Chapter 122 for want of an acceptance of the amended Enabling Act by the people of Montana, then they cannot be *482granted under the laws in effect prior to its passage because those laws are subject to the same objection.
The next contention of defendants is that Chapter 122 is unconstitutional as being in conflict with Article XVII, see. 1, of our Constitution which prohibits the disposition of state lands “unless the full market value of the estate or interest disposed of, to be ascertained in such manner as may be provided by law, be paid or safely secured to the state.” Their contention is that under section 3 of Chapter 122 the legislature recognizes that a lease for as long as oil and gas is produced is worth more than a 20-year lease and has a value in excess of the agreed royalty payment since it gives to holders of leases for a 20-year term the right to exchange them for the type of lease provided in Chapter 122 upon payment of a sum “which is the full market value of the exchange, as determined” by the board of land commissioners.
There is, of course, no question but that a lease for as long as oil and gas is produced is more valuable than a 20-year lease. The point overlooked by defendants is that this value is taken into account at the time the bid is made for the lease.
It is the competitive bidding, pointed out in State ex rel. Dickgraber v. Sheridan, 126 Mont. 447, 254 Pac. (2d) 390, and as to this there was no disagreement among the members of this court, that brings to the state the market value of the lease. That a lease for such period as oil or gas is produced is worth more than a 20-year lease is conceded in this case.
In relator’s petition it is alleged “that the failure and refusal of the defendant Land Board to offer a lease for oil and gas on state lands in the form and terms of said Chapter 122 * * * will result in a reduction in the amount of money that will be bid as first year rental for said leases by the representatives of such industry, and will reduce the amount of money that will be available for distribution to the school districts as a distributive share of the said interest and income fund for the fiscal year 1953-54. ’ ’ This allegation is admitted for the purpose of the demurrer. A few of the many cases declaring this to be the rule are: State ex *483rel. Stuewe v. Hindson, 44 Mont. 429, 120 Pac. 485; Manley v. Harer, 73 Mont. 253, 235 Pac. 757; Mills v. Pope, 90 Mont. 569, 4 Pac. (2d) 485; Rhoades v. School District No. 9, 115 Mont. 352, 142 Pac. (2d) 890, 160 A. L. R. 1; Davis v. Park Securities Corp., 117 Mont. 393, 159 Pac. (2d) 323.
Defendants contend that the only way to obtain the actual market value of a lease after oil or gas is discovered is to have competitive bidding after the discovery of oil or gas. If this contention were sound, then the same objection, but in lesser degree, would lie against the 20-year lease in other words, a 20-year lease might be producing oil for nearly the full 20-year period, and in fact, all the oil or gas may be recovered within the 20-year period without ascertaining the value of the lease by competitive bidding after the discovery of oil or gas.
Such a conclusion would nullify all the leases heretofore issued and would make it impossible to lease lands for oil and gas purposes in the future because no one would bid for a lease knowing that upon the discovery of oil or gas it would be thrown open for competitive bidding. Only one well out of nine results in production, Bulletin, American Association of Petroleum Geologists, Vol. 37, No. 6, Table III, page 1193; hence those who embark upon such an undertaking know that it is speculative in character. This court has so recognized it. Steven v. Potlatch Oil & Refining Co., 80 Mont. 239, 260 Pac. 119. Notwithstanding its speculative and uncertain character, yet it has a market value. Montana R. Co., v. Warren, 6 Mont. 275, 12 Pac. 641.
In affirming the opinion in the Warren case, supra, the United States Supreme Court said: “That this mining claim, which may be called ‘only a prospect,’ had a value fairly denominated a ‘market value,’ may, as the Supreme Court of Montana well says, be affirmed from the fact that such prospects are the constant subject of barter and sale. Until there has been full exploiting of the vein, its value is not certain, and there is an element of speculation, it must be conceded, in any estimate thereof. And yet uncertain and speculative as it is, such pros*484pect has a market value * * Montana R. Co v. Warren, 137 U. S. 348, 11 S. Ct. 96, 97, 34 L. Ed. 681.
Likewise this court has held that the requirements of obtaining the full market value are met by competitive bidding at the time the lease is issued. State ex rel. Robbins v. Bonner,......Mont. ......, 270 Pac. (2d) 400, 11 St. Rep. 215. If subsequently the lease obtains a greater value the lessee may not be compelled to pay more than the rental provided in the lease because that would not be a “legitimate advantage” but an “illegitimate advantage.” Rathbone v. State Board of Land Com’rs., 100 Mont. 109, 47 Pac. (2d) 47.
As well might it be contended that if the driller encounters a dry hole which eight out of nine are, then the state should reimburse him for the drilling expense. “Market value” is the amount that would be arrived at by fair negotiations between a willing seller and a willing buyer. Rider v. Cooney, 94 Mont. 295, 23 Pac. (2d) 261; United States v. Miller, 317 U. S. 369, 63 S. Ct. 276, 87 L. Ed. 336.
The Supreme Court of North Dakota has upheld a lease under the amended Enabling Act which was identical with that authorized by Chapter 122 as against the contention that it was unconstitutional. State ex rel. Rausch v. Amerada Petroleum Corp., 78 N. D. 247, 49 N. W. (2d) 14.
Defendants contend that under the Constitution the land board is a trustee for the sale and leasing of school lands. This contention is correct. Reasoning from there, they contend that while the legislature may make “regulations and restrictions”, Art. XI, see. 4, of the Montana Constitution, the board must administer the trust so as to obtain the largest measure of legitimate advantage to the state, and in any case principles of trust law should be applied and the trustee must use the same degree of prudence in the management of the trust as he would use in his own affairs. By the amendment to the Enabling Act, Congress provided how the trust shall be carried out. It provided that the leases may be “for such term of years and on such conditions as may be from time to time provided by the legislatures. ’ ’ Chapter *485122 was enacted pursuant to this authorization. It constitutes “regulations and restrictions as may be prescribed by law” within the meaning of Article XI, sec. 4, of our Constitution. Leuthold v. Brandjord, 100 Mont. 96, 47 Pac. (2d) 41.
As evidence of the fact that the trust will be prudently administered by executing leases under Chapter 122 is the fact that the United States has for some time been leasing its public lands on identical terms provided in Chapter 122, and individuals and corporations throughout the state have leased their own lands on the same terms and conditions as contained in Chapter 122. The standard of care required of a trustee is stated in 54 Am. Jur., Trusts, sec. 322, page 256, as follows: “Generally, the standard or measure of care, diligence, and skill required of a trustee in the administration of a trust is that of an ordinarily prudent man in the conduct of his private affairs under similar circumstances, and with a similar object in view.”
I think the district court properly held that Chapter 122 is not unconstitutional and that it is in harmony with amended section 11 of the Enabling Act and that the judgment should be affirmed.