Court Opinion

ID: 878652
Source: CourtListenerOpinion
Date Created: 2013-06-04 22:49:15.460125+00
Date Added: 2024-06-11T15:35:19.368246
License: Public Domain

No. 83-48

                   IN THE SUPREME COURT OF THE STATE OF MONTANA

                                            1983

JESSIE T. LEWIS, Estate of
WADE V. LEWIS, deceased, et al.,

                                Plaintiffs and Appellants,

STATE OF MONTANA, DEPARTMENT
OF REVENUE, et a1 ,       .
                                Defendants and Respondents.

APPEAL FROM:        District Court of the Fifth Judicial District,
                    In and for the County of Jefferson,
                    The Honorable Frank E. Blair, Judge presiding.

COUNSEL OF RECORD:

         For Appellants:
                    John Leslie Hamner, Butte, Montana
         For Respondents:

                    Poore, Roth and Robinson; J. Richard Orizotti,
                    Butte, Montana
                    R. Bruce McGinnis, Dept. of Revenue, Helena,
                    Montana

                                       Submitted on Briefs:   September 15, 1983
                                                   Decided:   January 5, 1984

Filed:    ;_
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                                       Clerk
Mr. Justice Fred # J . Weber delivered the Opinion of the Court.
      Plaintiffs appeal from the order of the Fifth Judicial
District Court, Jefferson County, granting defendants' motion
for summary judgment.          We affirm the order of the District
Court.
      The    issue   on   appeal      is whether       the District Court
properly granted defendants' motion                 for summary judgment.
      Wade V.    Lewis and Jessie T.               Lewis granted to Azcon
Corporation (Azcon), the exclusive rights to conduct mining
exploration and removal and sale              of all minerals from real
property in the Elkhorn Mountains near Boulder.                     The agree-
ment of the parties was contained in an "Operational Agree-
ment" dated August 13, 1973.           The defendants contend that the
agreement was        drafted    by    Wade    V.    Lewis,    now    deceased.
Plaintiffs claim that the agreement was drafted by Azcon.
      The parties' interests in the a-qreementwere assignable.

Azcon later assigned its rights and obligations under the
operational agreement to Galli Exploration Company.                       All
rights and obligations under the agreement were later assumed
by Everett Berg, d/b/a Falcon Explorations.                   Berg owned the
mining interest at commencement of this action.
      Wade V. Lewis died in 1974.            All property subject to the

operational agreement          is    now   solely     owned   by    his wife,
plaintiff Jessie Lewis.              John T. Lewis, son of Wade and
Jessie Lewis, is personal representative of the estate of
Wade Lewis.     The estate is a party to this action, although a
final decree of distribution of the estate was entered in
1.975.    John Lewis also has power of attorney to conduct the
affairs of his mother, Jessie Lewis.
      As required by the agreement, an initial payment of $800

and   annual rental payments of              $3,500 for the years 1974
through     1980 were tendered to plaintiffs in the form of
personal or company checks.    Plaintiffs cashed the checks,
all of which were honored by defendants1 banks.
     In a letter dated October 20, 1980, John Lewis (Lewis)
made various inquiries concerning the mining operation and
requested as follows:
     "We will prefer to have the preponderance of our
     royalty, from this and subsequent runs, paid in
     gold bullion, with the remainder of the total
     payment via Certified Check."
However, the operational agreement did not require this form
of payment and no agreement was made that payment would be as
Lewis requested.
    On January 23, 1981, Lewis served notice of default
under the agreement upon defendants.   The notice alleged six
specific deficiencies:
    "1. Second Party [defendants] has failed to pay to
    First Parties [plaintiffs] the certain $3,500.00
    annual rental due and payable on January 2, 1981;
    according to paragraph 5. of such agreement.
    "2. That Second Party has realized "Net Smelter
    Returns" from the operation of such Claims; and
    Second Party has failed to pay to First Parties the
    certain "Royalty" for such Net Smelter Returns
    called-for in said agreement, during the Royalty
    Periods specified therein. That Second Party has
    further failed to send First Parties the statement
    called-for in paragraph 6 (d) of such agreement.
     "3. That Lessee has failed to account to Lessor
     for all minerals mined, processed and sold from
     such claims as required by such agreement.
     "4. That Lessee has failed to keep open to inspec-
     tion of Lessor complete records of the entire
     central milling transaction as required by such
     agreement.
    "5. That Lessor is informed and believes that the
    Lessee, Second Party, has allowed a pretended lien
    to attach to said claims in the proceedings of
    cause 79-5193 in the Second Judicial District Court
    of Washoe County, Nevada; contrary to the provi-
    sions of Paragraph 9. of said agreement.
     "6. That Lessee has failed to provide Lessor with
     all maps, assay reports, drilling results, records
     and other data at the end of each year as provided
     in Paragraph 11 of such agreement."
      The    notice      stated that pursuant         to    the    operational
agreement, defendants had              60 days to remedy the default.
Defendant Berg's counsel promptly responded to the notice by
letter on February 4, 1981.              The letter responded point by
point to Lewis' allegations of default.
      A check for the $3,500 annual rental was enclosed with
the letter.       The letter stated that no "Net Smelter Returns"
had   been    received     and    therefore      no   royalty      payment    or
statement was yet due.            Further, no accounting was required
by the agreement because the agreement required only that
records be open to inspection during business hours.                         The
letter   stated     that    the    records    were     in    fact    open    for
inspection.       The "lien" alleged in the notice was explained
as having no effect on plaintiffs' interest because it was a
judicially-ordered        sale    of    the   interest      of    one   of   the
defendants.       That interest was purchased by defendant Berg,
who then became the owner of the entire interest under the
operational agreement.
      Finally, the letter requested clarification as to which
records Lewis demanded.            Some documents were sent to Lewis
and the letter stated that any additional documents would be
sent as soon as Lewis clarified his request.                       Lewis never
responded    to    the    letter nor      otherwise requested           further
documents or the opportunity to inspect documents.
      On April      13, 1981, Lewis sent defendants notice of
termination of the operational agreement.              The notice alleged
that the defendants had failed to comply with the provisions
of the operational agreement and had                  failed to cure the
defaults specified in the default notice.                    Lewis demanded
return of possession of the premises.
      Defendant Berg first received net smelter returns from
the   refinery     on    April    20,    1981,   seven      days    after    the
termination    notice.      The   net   smelter   returns   totaled
$393,752.19.     The earned   royalty was then calculated as
specified in the agreement.         Berg notified plaintiffs by
letter dated June 8, 1981 that an earned royalty was due and
payable on or before August 1, 1981.        By letter dated July
24, 1981, Berg documented the calculation of the earned
royalty, pursuant to paragraph 6(d) of the agreement, and
enclosed a check for the calculated amount of $20,024.87.
Lewis kept this check but never attempted to cash it.
     Plaintiffs filed suit on April 27, 1981, seeking decla-
rations that defendants had no interest whatsoever in the
subject property, that plaintiffs were sole owners of the
property and that the agreement had been void all along or
had been properly terminated b 7 the plaintiffs.
                              l                        Plaintiffs
asked for damages for loss of minerals and for exemplary
damages.
    After extensive discovery, including requests for admis-
sions and production of documents, filing of several sets of
interrogatories and      responses, filing of     affidavits, and
deposition of Lewis, defendants moved for summary judgment.
The issues were briefed and argument was heard by the Dis-
trict Court on October 26, 1982.
    The District Court found that the operational agreement
was in full effect, that the terms of the agreement were not
ambiguous, and that defendants had performed their obliga-
tions under the a.greement or had cured any default within 60
days as required by the agreement.         The Court found there
were no remaining genuine issues of material fact and that
defendants were entitled to judgment as a matter of law.       The
Court granted defendants' motion and entered judgment for
defendants.    Plaintiffs appeal.
       Plaintiffs   argue   that    the   District   Court    erred   in
granting     summary   judgment.      They   contend   that    numerous
genuine issues of material fact remain unresolved and that
the case should be remanded for trial on the merits.                  We
disagree.
       Rule 56(c), M.R.Civ.P.   provides that summary judgment is
proper where:
       ". .
          . the pleadings, depositions, answers to
       interrogatories, and admissions on file, together
       with the affidavits, if any, show that there is no
       genuine issue as to any material fact and that the
       moving party is entitled to a judgment as a matter
       of law. l1

       The well-settled rules applicable to summary judgment
motions are set forth in Krone v. McCann (Mont. 1982), 638
P.2d 397, 399-400, 39 St.Rep. 10, 13, and we need not repeat
them here.
       This action revolves around whether defendants Everett
Berg and Falcon Explorations, a.s Azconls successors to the
mineral interest, were in default of their obligations under
the operational agreement.         If they were, the question arises
whether the default was cured or whether plaintiffs properly
terminated the agreement.          We will review each alleged de-
fault in light of the parties1 allegations and the record.
       The first default alleged by plaintiffs was defendants1
failure to remit the required $3,500 rental payment on the
due date of January 2, 1981.              It is undisputed that the
payment was due on that date but that it was not made when
due.    However, that payment was made on February 4, 1981. The
payment was therefore made within 60 days of the January 23
default notice.     Under paragraph 14 of the agreement, payment
within 60 days of the notice cured the default.
       Plaintiffs argue, however, that the February 4 payment
did not cure the default because the payment did not include
$17.50    interest as required under section 31-1-106, MCA.
However, even assuming that payment of interest was due under
the     statute,      the   agreement     did     not    require   payment    of
interest.       Failure to remit the interest was not a default
under the agreement.          Moreover, plaintiffs did not specify in
their default notice that interest was due and unpaid.                       The
default clause requires that the notice specify the details
of    default    so    that     the    other    party    is    fully   informed.
Plaintiffs failed to notify defendants that interest was due.
Failure to include a $17.50 interest payment is immaterial.
        Plaintiffs' default notice next alleged that defendants
had failed to make royalty payments as due and had failed to
provide the required statement detailing the royalty calcula-
tion.    Plaintiffs argue that the agreement is ambiguous as to
when royalty payments were due and that this ambiguity must
be    resolved against defendants because Azcon drafted the
agreement.      At least, they argue, there is a remaining factu-
al issue as to who drafted the agreement.                     Plaintiffs argue
the     authorship      issue     is    crucial    and    precludes     summary
judgment.       Further, plaintiffs argue that this ambiguity
gives rise to a question of                    intent which makes       summary
judgment inappropriate in this case.
        Plaintiffs' contentions depend upon the existence of an
ambiguity in the contract.                The language of the contract
itself is to govern its interpretation if the language is
clear and explicit and does not involve an absurdity.                        Sec-
tions 28-3-401 and 28-3-303, MCA.                It is necessary to deter-
mine    who   drafted       the   contract      only     where   the   contract
contains an ambiguity that cannot be resolved by other rules
of interpretation.          Section 28-3-206, MCA.            "Ambiguity exists
when a contract taken as a whole in its wording or phraseol-
ogy is reasonably subject to two different interpretations."
S-W Co. v. Schwenk (1977), H+3- Mont. 481, 485, 568 ~ . 2 d145,

     The operational agreement provides:
     "6.   (a) Second Party agrees to pay First Parties
     as earned royalty on all minerals mined, milled and
     shipped (or mined and shipped without milling) from
     the Property a percentage (determined as hereinaf-
     ter set forth) of the Net Smelter Returns.
     "(b) 'Net Smelter Returns' shall mean the net
     proceeds received by second party for said minerals
     sold by Second Party to a mill, smelter, mint,
     refinery or other bona fide purchaser (hereinafter
     sometimes called 'the purchasing plant') after
     deduction of all of the following expenses:
     "(i) Charges made by the purchasing plant for
     treatment of the minerals, however termed, and all
     other deductions by the purchasing plant including
     penalties for impurities and metal losses.
     "(ii) Costs of transportation of said minerals from
     the mine to the purchasing plant."
The percentage to be applied to net smelter returns to deter-
mine the amount of the earned royalty is based upon the crude
ore value per ton.       A table in the agreement specifically
shows the percentage for each possible value per ton.         The
crude ore value is determined by dividing net smelter returns
by the total number of dry tons mined to produce the minerals
shipped to the refinery.
     The agreement further provides:
     "(d) Each calendar quarter shall constitute a
     Royalty Period commencing with the calendar quarter
     during which production from the Property first
     commences.   Payments of royalty shall be made by
     Second Party to First Parties on or before the
     first day of the second month following the close
     of each Royalty Period.     Such payments shall be
     accompanied by a statement signed by an authorized
     representative of Second Party showing the Net
     Smelter Returns and the Crude Ore Value Per Ton of
     the minerals mined from the Property settled for by
     the purchaser during the preceding Royalty Period."
     Plaintiffs argue that under these provisions of the
agreement, a   royalty    payment was   due   February   1, 1981,
because minerals were extracted and shipped to the refinery
during the last calendar quarter of 1980.          Further, they
argue that even if this interpretation is not clearly cor-
rect, there is an ambiguity as to payment date which raises a
material issue of fact.       We disagree.
      Plaintiffs1 argument is based upon defining "production"
as mere extraction and shipment of minerals.           "Production" is
not so defined in the agreement and that definition is absurd
when considered in light of all royalty provisions contained
in the agreement.     Under plaintiffs' reading of the contract,
payments   would   be   due    before   the   amount    due    could   be
calculated.     Moreover, plaintiffs complained of nonpayment on
January 23, 1981, before the payment would have been due
according to their interpretation.
      Defendants did not receive the first net smelter returns
from the refinery until April 20, 1981, seven days after
plaintiffs1 termination notice.            Under    the terms of the
agreement, it is impossible to calculate the earned royalty
until net smelter returns are received.            Upon receipt of the
net   smelter    returns,     defendants   calculated    the    payment
amount, began preparation of the statement required by the
agreement, and notified plaintiffs that a payment was due on
August 1, 1981.      The payment and statement were tendered on
July 24, 1981.     Plaintiffs do not dispute that the amount was
correctly calculated.
      The due date was calcula-ted by          treating the second
calendar qua.rter of 1981, the period in which the first net
smelter returns were received, as the royalty period.              This
calculation was entirely consistent with the language of the
agreement.
      The defendants clearly performed according to the only
reasonable meaning of the agreement.          Reading the agreement
as a whole, it is clear and unambiguous.           There is no factual
issue as to the intent of the contracting parties or the
meaning of the agreement.     Determining the parties' obliga-
tions under the agreement was a legal question which the
District Court properly determined by looking at the language
of the agreement itself.    See Farmers State Bank of Victor v.
Johnson (Mont. 1980), 610 P.2d 1172, 1174, 37 St.Rep. 880,
883.
       Plaintiffs make several other allegations regarding the
royalty payment.     They contend defendants had minerals in
their possession and intentionally delayed receipt of net
smelter returns.     However, plaintiffs presented absolutely
nothing to support this allegation.     Unsupported conclusory
or speculative statements do not raise a genuine issue of
material fact.    Gates v. Life of Montana Insurance Co. (Mont.
1982), 638 P.2d 1063, 1066, 39 St.Rep. 16, 19.
       Plaintiffs also argue that defendant's personal check
was insufficient to constitute tender because plaintiffs had
notified defendants that they preferred to receive payment in
gold bullion or certified check.    But the agreement does not
require payment by gold bullion or certified check.      Defen-
dants never agreed to such payment.     The evidence is undis-
puted that all previous payments had been made by personal or
company check, that all checks had been honored and that
plaintiffs had     no reason to anticipate dishonor of this
check.     Defendants did not default by making payment by
personal check.
       The third specification of default was that defendants
had failed to account to plaintiffs for all minerals mined,
processed and sold.      But the agreement requires only that
defendants maintain accounts and keep them open to inspection
during business hours.     It does not require that defendants
furnish an accounting to plaintiffs.   There is no evidence in
the record to suggest that defendants failed to keep such
records or allow inspection.
       The fourth alleged default was failure to keep open for
inspection complete records of the "central milling transac-
tion. "      However, defendants made clear in their response to
the default notice that all records were open to inspection
and always had been.        Plaintiffs never asked to inspect the
documents     and   never   requested   that    records    located    in
out-of-state offices be brought to Boulder for inspection.
Defendants were willing to cooperate in allowing inspection
and did not default in this respect.
       The fifth specification of default was that defendants
had allowed a lien to attach to the mining claims.                  This
allegation referred to a notice of judicial sale of the
interest of defendant Martineau.        Berg and Martineau had been
partners in a joint venture which succeeded to Azcon's inter-
est.      Berg sued Martineau, resulting in a court-ordered sale
of Martineau's interest which Berg purchased.             The judicial
sale did not affect plaintiffs' interest, but related only to
Martineau's interest in the mining rights.            The agreement
requires only that "no liens from any act of Second party" be
allowed to "remain" on the property.           Even if this judicial
sale constituted a lien within the meaning of the agreement,
a question we need not decide, it was removed before the
60-day remedy period had expired.
       Finally, plaintiffs alleged in the default notice that
defendants had failed to provide "all maps, assay reports,
drilling results, records and other data at the end of each
year."     Again, the default notice did not give details suffi-
cient to inform defendants how they could correct the defi-
ciency.     Defendants informed plaintiffs that they were unsure
what documents or      information was     lacking and      asked    for
clarification of plaintiffs' demands.                  Defendants offered to
send any documents they had.             Plaintiffs received, but never
responded to        this request for clarification.                   Plaintiffs

cannot      claim    default    where    they     failed    to    specify     the
deficiency as required by the agreement.
      Plaintiffs argue that a genuine issue of material fact
remains as to whether defendant Berg is actually the succes-
sor to Azcon's interest in the operational agreement.                       Berg
set forth in affidavits the facts relating to his acquisition
of   that    interest.         His   explanation is        supported by       the
record.      Plaintiffs offered absolutely no facts to refute
Berg's    statements.         They offered only denials that Berg's
statements were true.            Plaintiffs' unsupported allegations
are insufficient to raise a genuine issue of material fact.
The trial court has no duty to anticipate possible proof.

Gates, 638 P.2d at 1066, 39 St.Rep. at 19.
      Plaintiffs argue that their mere denial by affidavit of
the statements in their opponents' affidavits is sufficient
to   raise    a     factual    issue.     We     disagree.        Rule   56(e),
M.R.Civ.P.    provides that affidavits shall be made on personal
knowledge     and     shall    set    forth     such    facts    as   would   be
admissible in evidence.              The party opposing the motion for
summary judgment must present facts which are material and
substantial.         Cheyenne Western Bank v. Young               (1978), 179
Mont. 492, 497, 587 P.2d 401, 404.
      Plaintiffs have offered no facts to support their alle-
gations regarding Berg's interest.              There is no genuine issue
of material fact on this point nor on any among the host of
other alleged        "issues" plaintiffs raise in an attempt to
preclude summary judgment.            These "issues" are either irnrnate-
rial or mere unsupported allegations, none of which deserves
discussion.
       Plaintiffs     further     contend     that    the    operational
agreement violates the rule against perpetuities, section
70-1-408, MCA.      We reject this argument.
       Section 4 of the agreement provides for an                 initial
five-year term.      The agreement could then be extended for a
second five-year term if the second party is actively engaged
in prospecting, developing or mining the property.            After the
second five-year term, if the second party is engaged in
commercial production of minerals, the agreement would con-
tinue for four additional consecutive five-year terms and
then for an additional period of time so long as an active
mining operation is being carried on by the second party.
       In Montana Consolidated Mines Corp. v. O'Connell (1938),
107 Mont. 273, 85 P.2d 345, mining property was leased:
       ". . . for the period of two years from and after
       the execution of this contract with the privilege
       in the party of the second part to extend this
       contract from year to year provided the party of
       the second part works said mine continuously from
       and after the date of this agreement and subject to
       the terms thereof." 107 Mont. at 274, 85 P.2d at
       345.
The Court quoted from Haeffner v. Green Fire Brick Co. (Mo.
1934), 76 S.W.2d 122, which stated that a right to renew or
extend a lease limited by the clause "so long as paying
minerals    are     found,"     although    indefinite,     was   not     a
perpetuity.     Further, the Missouri court stated that "[ulnder
the law of this state, and generally, a lease is not made
void by reason of a covenant of perpetual renewal." 107
Mont. at 282, 85 P.2d at 349, quoting Haeffner, 76 S.W.2d at
126.   This Court found that the provision did not violate the
rule   against perpetuities.          Here, the      extension of       the
agreement   is    limited     first by     "commercial production of
minerals" and then by the continuation of "an active mining
operation."        There is no merit to plaintiffs' claim that the
operational agreement violates the rule against perpetuities.
    We      need    not   address   the   parties'   lengthy   argument
regarding the applicability of the forfeiture statute because
the agreement is clearly in effect.
     Finally, plaintiffs complain that the District Court did
not enter findings of fact and conclusions of law.             However,
there is no requirement that the District Court do so under
these circumstances.         Rule 52 (a), M.R.Civ.P.    provides that
findings and conclusions are not required on summary judgment
motions.     Downs v. Smyk (1979), 185 Mont. 16, 19, 604 P.2d
307, 309.
     There being no genuine issues of material fact, and
defendants being entitled to judgment as a matter of law, the
District Court's order granting summary

We concur:
A