Norbeck v. Crawford ( 1992 )

NO. 92-113
IN THE SUPREMECOURT OF THE STATE OF MONTANA
1992
JANE S. NORBECK, Trustee of the
JANE NORBECKTrust dated November 20, 1963,
Plaintiff, Respondent and Cross-Appellant,
-vs-
MRS. M. H. CRAWFORD and MR. M. H. CRAWFORD,her husband,
if any, and other heirs, devisees, legatees, creditors,
administrators, executors, and assigns of any of said
defendants, if they be deceased: and any and all persons
known or unknown, claiming or who might claim any right,
title, estate or interest in or lien or encumbrance upon
the real property situated in the County of Fallon,
State of Montana, described as 25% of the net proceeds
derived from the production as reserved by George Norbeck
in operating agreement with Fidelity Gas Company included
in and a part of U.S. Oil and Gas Lease prospecting permit,
Billings Serial #021056 as to NE1/4, Section 12, Twp. 8N,
Rge 59E of M.P.M., Fallon County, Montana or any thereof
adverse to Plaintiff's title whether such claim be present
or contingent including any claim or possible claim of dower,
inchoate or accrued,
Defendants, Appellants, and Cross-Respondents.
APPEAL FROM: District Court of the Sixteenth Judicial District,
In and for the County of Fallon,
The Honorable Joe L. Hegel, Judge presiding.
COUNSELOF RECORD:
For Appellant:
Charles J. Peterson, Mackoff, Kellogg, Kirby &
Kloster, Beach, North Dakota
For Respondent:
Chris Mangen, Jr., Crowley, Haughey, Hanson, Toole
& Dietrich, Billings, Montana
_ 4; ;
Submitted on Briefs: July 23, 1992
Justice R. C. McDonough delivered the Opinion of the Court.
Mrs. M.H. Crawford, et al., appeals from a judgment of the
Sixteenth Judicial District Court, Fallon CoUnty. We affirm.
The sole issue on appeal is:
Whether the District Court erred in granting the disputed 25
percent interest in a federal oil and gas lease to Jane S. Norbeck,
Trustee of the Jane Norbeck Trust, subject however to 39/40ths of
such 25 percent interest being vested in Mrs. M.H. Crawford, et
al., upon approval of the Department of the Interior.
In 1934, George Norbeck (Norbeck) obtained federal lease,
021056 (b) , from the United States Department of Interior. The
lease contained a fixed twenty year term and granted the lessee
right of renewal upon expiration. The lease also contained a
provision barring assignment without consent of the Secretary of
the Interior through the land office.
Norbeck entered into an operating agreement with Fidelity Gas
Company. He retained record title ownership of the lease, as
lessee, with 25 percent of the net proceeds of production. Norbeck
appointed Fidelity Gas Company as his attorney-in-fact to obtain
renewal leases on his behalf. Subsequently, Fidelity Gas Company
assigned the operating rights in the deep formations to Shell Oil
Company.
In 1935, Norbeck made an assignment of the 25 percent interest
to Mrs. M.H. Crawford. This assignment was rejected by the United
States Land Office because Mrs. Crawford did not pay the required
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lease bond, or establish the necessary qualifications to own an
interest in the lease. Mrs. Crawford did not pay any delay
rentals. After the assignment, Mrs. Crawford had the assignment
filed with the county clerk and recorder. Thereafter, Mrs.
Crawford took no action in regard to the lease.
Fidelity Gas applied for a renewal lease in 1954 on behalf of
Mrs. Crawford. The land office rejected the renewal because
Fidelity Gas did not have authority to act on behalf of Mrs.
Crawford, and the land office did not recognize Mrs. Crawford as a
lessee. Fidelity then applied for a renewal lease as attorney-in-
fact for Norbeck. The land office accepted this application and
issued a renewal to Norbeck. In 1964 Fidelity applied for the
second renewal as attorney-in-fact for Norbeck, and the renewal was
issued. The second renewal lease was put on producing status in
1968. Since then, some $420,000 in production payments have been
allocated to the 25 percent interest.
On October 28, 1968, the land office notified "heirs of George
Norbeck" that under federal regulations they had to establish their
succession to his interest in the lease. On August 18, 1987, the
Bureau of Land Management (BLM), the successor to the land office,
notified the Norbeck heirs that it recognized their interest in the
lease.
The Norbeck heirs transferred all of their interest in the
lease to the Jane Norbeck Trust, Julius A. Bernard, Trustee.
Subsequently, Jane S. Norbeck took over as trustee (Norbeck
Trustee). On September 29, 1988, Shell Oil notified the trustee
that Shell had completed its review of the claim to the interest
but would not distribute the proceeds without a quiet title action
being completed.
On October 22, 1990, the Norbeck Trustee began a quiet title
action before the District Court. Efforts were made to locate Mrs.
Crawford, but no response was forthcoming. A default was taken
against Mrs. M. H. Crawford. The District Court quieted title to
Jane S. Norbeck, Trustee, on December 7, 1990.
Subsequently, the heirs of Mrs. M.H. Crawford (the Crawford
heirs) surfaced and filed a motion for relief from judgment. The
District Court vacated the default and judgment on June 4, 1991.
The Crawford heirs sought to quiet their title to 39/40ths of the
disputed interest. Jane S. Norbeck, Trustee, filed a motion for
summary judgment. In response the Crawford heirs moved for partial
summary judgment.
The District Court, on January 17, 1992, ruled that Jane S.
Norbeck, Trustee, owned all the allocated production proceeds.
However, the District Court ruled the Crawford heirs could apply to
the BLM for approval of the previously rejected assignment. Should
the assignment be approved, the Crawford heirs would own 39/40ths
of the disputed interest and the proceeds of production would be
allocated to them after the first day of the month following
application for approval. This appeal followed.
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Our scope of reviewing motions for summary judgment is the
same as the trial court and is a question of law. Summary judgment
is granted only if no genuine issue of material fact exists.
The District Court found that federal oil and gas leases are
governed by the Mineral Leasing Act of 1920, P.L. No. 146, 41 Stat.
437 (1920), as codified in 30 U.S.C. Sec. 5, 181 et seq. The
original statute provided: "[N]o lease issued under the authority
of this Act shall be assigned or sublet, except with the consent of
the Secretary of the Interior."
30 U.S.C. Sec. 187a (1990) provides:
[A]ny oil or gas lease issued under the authority of this
Act may be assigned . . ., subject to final approval by
the Secretary . . to any person or persons qualified
to own a lease unddr this Act, and any assignment or
sublease shall take effect as of the first day of the
lease month following the date of filing in the proper
land office of three original executed counterparts
thereof, together with any required bond and proof of
qualification under the Act of the assignee or subleasee
to take or hold such lease or interest therein. . . .
The District Court in light of 30 U.S.C. 187a, ruled the Crawford
heirs would own 39/40ths of the disputed interest upon the approval
of the assignment by the BLM.
The case of Oasis Oil Co. v. Bell Oil & Gas Co. (W-D. Okla.
1952), 106 F.Supp 954, followed 30 U.S.C. § 187a, and held that
Oasis Oil Company (the assignor) was the sole record holder of the
lease and was entitled to all of the oil runs from the well on the
lease. Oasis at 957. In Q&is, the assignee, Fish, failed to pay
the requested fee, and provided insufficient information to the
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Department of Interior which refused to approve the assignment.
Thus, the assignment did not convey any interest in the lease under
the statute until the date the Secretary of Interior approved the
lease.
The Crawford heirs rely on Gibbons v. Pan American Petroleum
Corporation (10th Cir. 1958), 262 F.2d 852, for the proposition
that neither Norbeck nor his heirs were obligated under the lease
after the assignment. However, this proposition is contrary to the
facts before us. The Department of Interior viewed Norbeck as the
record owner of the lease. The renewals were made and accepted in
his name. A renewal submitted on behalf of Mrs. M.H. Crawford was
rejected because the assignment had never been approved. Delay
rentals became the responsibility of Norbeck, whether he paid them
or not. In Gibbons, the Tenth Circuit stated that Gibbons's
failure to submit the assignment for approval could not destroy the
obligation of an assignee under the lease. Gibbons at 854. Thus
Gibbons rests on the fact that Gibbons did not submit the
assignment for approval. Here, Mrs. M.H. Crawford applied to the
land office for approval of the assignment and it was rejected.
The material facts are not in dispute. Norbeck made an
assignment to Mrs. Crawford but she failed to perfect the
assignment with the Department of Interior pursuant to the language
of the original lease and 30 U.S.C. 5 187a. Later attempts were
made to have Mrs. Crawford pay the rentals but without success. As
a result the obligations under the lease remained with Norbeck.
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Neither the assignor nor assignee, or their heirs, acted relative
to any rights they had until awakened by Shell Oil. The District
Court ordered the existing proceeds of the 25 percent interest paid
to the Norbeck heirs, however by its order it allowed the Crawford
heirs the opportunity to perfect the assignment by seeking approval
of the Secretary of Interior under 30 U.S.C. 5 187a.
Based on the evidence presented in the record, we agree with
the determination of the District Court and affirm the District
Court.
We Concur:
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