Bretz v. Ayers

NO. 87-473
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
L. R. BRETZ,
Plaintiff and Appellant,
-vs-
MILAN R. AYERS, MILAN R. AYERS, Personal
Representative of the Estate of YVONNE
AYERS, SHIRLEY M. BROWN, RICHARD C. PACHEK,
ZOLLIE KELMAN, GEORGE L. CAMPANELLA, et al.
Defendants and Respondents.
APPEAL FROM: District Court of the Ninth Judicial District,
In and for the County of Pondera,
The Honorable R.D. McPhillips, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
L. R. Bretz, Pro Per, Billings, Montana
For Respondent :
Conklin, Nybo & LeVeque; William Conklin, Great Falls,
Montana
Graybill, Ostrem, Warner & Crotty; George R Crotty,
Great Falls, Montana
Anderson, Beatty & Lee; Drawer D, Shelby, Montana
Douglas Anderson, County Attorney, Conrad, Montana
William Sherman, Conrad, Montana
Submitted on Briefs: April 7, 1988
Decided: May 24, 1988
Filed: MAY 2 4 1988"
Clerk
Mr. Justice William E. Hunt, Sr. , delivered the Opinion of
the Court.
Plaintiff, L. R. Bretz, appeals the decision of the
Ninth Judicial District Court, Pondera County, to convert
defendants', Milan R.. Ayers; Milan R. Ayers, personal
representative of the Estate of Yvonne Ayers; Shirley M.
Brown; Richard C. Pachek; Zollie Kelman; George L.
Campanella; George R. Crotty, Jr. ; Ayers Oil and Gas, Inc. ;
Paul A. Fink; Evelyn Kelman; Sidney Kelman; Sol Berkowitz;
John F. Pachek; Kenneth K. Knight; Lynn M. Seelye; Gene D.
Todd; Eugene S. Hufford; William N. Walden; Russel Walden;
World Wide Petroleum and Exploration Co.; Roger F . Kornder;
7
The Village Bank; Petrox Petroleum Co.; Graybill, Ostrem,
Warner & Crotty; Jerry Joy; Pati J. O'Reilly; ~unkermier,
Clark, Stevens, & Campanella; and Thornton G. Dewey
[defendants], motions to dismiss on a quiet title action into
a summary judgment for the defendants. We affirm.
The following issues are raised on appeal:
1. Whether the District Court erred when it converted
motions to dismiss, Rule 12 ( b ) (6), M.R.Civ.P., into motions
for summary judgment, Rule 56, M.R.Civ.P.?
2. Whether the District Court erroneously made findings
of facts contrary to the evidence?
3. Whether the District Court erred when it dismissed
this action with prejudice?
On July 25, 1973, Milan R. Ayers and Thornton G. Dewey
formed an equal partnership for purposes of dealing in oil,
gas and other-minerals. The partnership agreement specifi-
cally stated that the "partnership and Dewey's relationship
thereto remain as secret and silent as possible, and that
business affairs he carried on in the name of MILAN R. AYERS
. . . ." On January 21, 1980, Ayers acquired for the part-
nership, but in his own name, a 320 acre oil and gas lease
located in Pondera County, known as the Aakre lease. Ayers
and Dewey dissolved their partnership on December 22, 1980.
Neither the partnership agreement nor the dissolution of the
partnership agreement were recorded.
The plaintiff-appellant, Bretz, brought this action in
July, 1985, to quiet title to a 21.875% working interest in
the Aakre lease. Bretz claims part of this interest by
relying upon an assignment of 97% of Dewey's supposed 21.875%
working interest. Bretz recognizes that defendant Shirley M.
Brown received an interest in the Aakre lease, but argues
that she did not receive the entire interest to the lease,
but rather only Ayers' 50% interest. Bretz argues that the
partnership agreement, which gave each partner equal rights
in the management of the partnership, and the dissolution of
the partnership agreement between Ayers and Dewey established
that Dewey was an owner of record of 50% of the Aakre oil and
gas lease. Bretz further argues that even though the
partnership agreement and the dissolution agreement were not
recorded, the defendants knew of Dewey's 50% interest and
therefore had the requisite notice that would bar the
defendants from purchasing Dewey's 50% interest from Ayers.
The defendants brought motions to dismiss under Rule
12 (b)(6), M.R.Civ.P. In response to these motions to dis-
miss, Bretz attached eleven documents to his brief opposing
those motions to dismiss and argued the contents of those
documents throughout his brief. The District Court deemed
the defendants' motions to dismiss as motions for summary
judgment and found that Bretz's quiet title action is barred
by the statutes of limitations set forth in §5 70-19-401 and
-402, MCA. Bretz appeals.
The first issue raised on appeal is whether the District
Court erred by converting defendants' motions to dismiss
under Rule 12(b)(6) into motions for summary judgment? Bretz
alleges that summary judgment was not appropriate in this
instance because he was not given reasonable opportunity to
present all material pertinent to the case and further that
genuine issue of material fact exists. We disagree.
The applicable rule in this instance is Rule 12(b),
M.R.Civ.P., which states:
[ilf, on a motion asserting the defense numbered
(6) to dismiss for failure of the pleading to state
a claim upon which relief can be granted, matters
outside the pleading are presented to and not
excluded by the court, the motion shall be treated
as one for summary judgment and disposed of as
provided in Rule 56, and all parties shall be given
reasonable opportunity to present all material made
pertinent to such motion by Rule 56.
The language found in Rule 12 (b) and 12 (c) addressing con-
verting the respective motion to dismiss and motion for
judgment on the pleadings into a motion for summary judgment
are identical. Likewise, the result is identical when mat-
ters beyond the pleadings are presented and considered by the
court. In both cases, the motion shall be treated as one for
summary judgment and disposed of as provided in Rule 56. See
Clayton by Murphy v. Atlantic Richfield Co. (Mont. 1986), 717
P.2d 558, 560-61, 43 St.Rep. 717, 719; Matthews v. Glacier
General Assurance Co. (1979), 184 Mont. 368, 375, 603 P.2d
232, 236-37.
In this instance, Bretz attached eleven documents to his
brief opposing defendants' motions to dismiss. The record
reveals that the court considered these documents and did
nothing to exclude any material presented to it. The court
thus converted the motions to dismiss into motions for summa-
ry judgment. Bretz did not appear for the oral hearing and
now claims that he did not have a reasonable opportunity to
present material pertinent for a motion for summary judgment.
This Court has not previously considered when a party
has a reasonable opportunity under Rule 12(b) to present
material pertinent for a motion for summary judgment,
however, the Court of Appeals for the Ninth Circuit addressed
this issue in Grove v. Mead School Dist. No. 354 (9th Cir.
1985), 753 F.2d 1528. In Grove, the plaintiff submitted
matters outside the motion to dismiss and invited
consideration of them by the court. The court held that a
formal notice that the court intended to treat a motion to
dismiss as a motion for summary judgment was unnecessary
under these circumstances because the party is "fairly
apprised" that the court will look beyond the pleadings.
Grove, 753 F.2d at 1532-33. Likewise, Bretz himself
introduced the extra documents and invited a consideration of
them by the court. Bretz thus was "fairly apprised" that the
court could treat the motions to dismiss as motions for
summary judgment. We hold that in this case Bretz, by his
own actions, had a reasonable opportunity to, and did,
present pertinent material to the court.
Bretz also argues that genuine issue of material fact
exists because he contends that all defendants knew of the
partnership, its dissolution, and the agreement between Ayers
and Dewey regarding Dewey's interest in the lease. In order-
ing summary judgment for the defendants, the District Court
first recognized that a lessee's interest in an oil and gas
lease constitutes an interest in real property, Stokes v.
Tutvet (1958), 134 Mont. 250, 255, 328 P.2d 1096, 1099; Rist
v. Toole County (1945), 117 Mont. 426, 428-29, 159 P.2d 340,
343; Willard v. Federal Surety Co. (1932), 91 Mont. 465, 472,
8 P.2d 633, 635, and that under §§ 70-19-401 and -402, MCA, a
quiet title action to real property cannot lie unless "the
plaintiff, his ancestor, predecessor, or grantor was seized
or possessed of the property in question within 5 years
before the commencement of the action" (Emphasis added.)
Section 70-19-401, MCA. The District Court then found that
Dewey, and thus Bretz, were complete strangers to the record
title of the Aakre oil and gas lease and thus barred by the
statutes to bring a quiet title action.
In making this finding, the court first noted that
possession of an oil and gas lease is established only by
undertaking oil and gas operations upon the land covered by
such lease, see Lehfeldt v. Adams (1956), 130 Mont. 395, 400,
303 P.2d 934, 937, and that Bretz never alleged and no evi-
dence exists that either Dewey nor himself ever undertook oil
and gas operations under the Aakre lease. The court next
examined whether Bretz or his predecessor in interest, Dewey,
were seised of the oil and gas lease within the five-year
period required by the statutes. As the court recognized,
"seisin" is defined by this Court as "perfect and complete
title." Stephens v. Hurly (1977), 172 Mont. 269, 274, 563
P.2d 546, 549-50. The court found that both Dewey and Bretz
were complete strangers to the record title of the Aakre oil
and gas lease and thus were not seised of the lease. The
court based this finding on paragraphs 4 and 6 of the disso-
lution agreement. Paragraph 4 of the dissolution agreement
states:
Milan R. Ayers shall have and own, and Thornton G.
Dewey hereby sells, conveys, assigns, and transfers
unto Milan R. Ayers subject to the provisions of
paragraph 6 hereof, all of his interest in and to,
all of the remaining oil and gas properties of the
partnership in the State of Montana not being
sold ... , which oil and gas properties shall
include ... those oil and gas properties general-
ly set forth and described on exhibit C [the Aakre
oil and gas lease was set forth in exhibit C]. As
part of the consideration therefor, Ayers agrees to
assume and to pay and all remaining debts of
the partnership arising from the oil and gas opera-
tion in Montana ... and Ayers hereby specifically
agrees to hold Dewey free and harmless from any and
all damages, loss, or expense of any kind
whatsoever which Dewey might suffer from
non-payment of said debts by Ayers.
Paragraph 6 of the same agreement states:
Ayers hereby covenants and agrees with Dewey to
give, grant, and assign to Dewey 3 of any interest
retained by Ayers in the properties discribed [sic]
on exhibit C, provided, however, that in the case
of a working interest retained by Ayers, Dewey's 4
interest therein shall be converted to a "carried
working interest," carried free of all costs in the
ratio of 4 to 1.. . .
The court found that paragraph 4 of the dissolution agree-
ment constituted a present conveyance by Dewey to Ayers of
all of Dewey's interest in the partnership's oil and gas
properties, and that paragraph 6 constitutes an executory
promise to convey the described interest in the future. The
court concluded that neither Dewey nor Bretz were seised of
the oil and gas lease within the five-year period as required
by the statutes. The court thus entered summary judgment for
the defendants.
We hold that the District Court accurately accounted for
the facts and applied the appropriate law. Paragraph 4 of
the dissolution agreement clearly indicates that Dewey
conveyed all of his right, title, and interest in the
partnership assets to Ayers. Paragraph 6 merely imposes upon
Ayers, at some time in the future, an obligation to convey to
Dewey a small "carried working interest" of any interest
Ayers might retain in the property. Bretz's argument that
the defendants knew of the partnership between Ayers and
Dewey, its dissolution, and any supposed interest Dewey held
is irrelevant, since Ayers did not retain the Aakre lease and
Dewey did not retain a 21.875% interest in the Aakre lease.
The District Court correctly found that no genuine issue of
material fact existed and properly entered summary judgment
for the defendants.
The second issue Bretz raises on appeal is whether the
District Court erroneously made findings of facts contrary to
the evidence. Bretz argues that the District Court over-
looked the language in the dissolution agreement, specifical-
ly paragraph 6. According to Bretz's interpretation of the
dissolution agreement, Dewey conveyed all his 50% interest to
Ayers in paragraph 4 and Ayers reconveyed a 50% interest to
Dewey in paragraph 6.
As we have noted above, the District Court carefully
examined the partnership and dissolution agreements. The
court made findings of facts consistent with the language of
the dissolution agreement. When interpreting a contract, the
contract "must receive such an interpretation as will make it
lawful, operative, definite [and] reasonable ... ,"
S 28-3-201, MCA, and "[rJepugnancies in a contract must be
reconciled, if possible, by such an interpretation as will
give some effect to the repugnant clauses, subordinate to the
general intent and purpose of the whole contract." Section
28-3-204, MCA. Bretz's interpretation would render both
paragraphs meaningless, since the effect of his
interpretation would nullify each paragraph and place each
party in their original 50-50 position. Such an
interpretation of the two paragraphs is repugnant and not
favored by our statutes. In finding that paragraph 4 of the
dissolution conveyed a present interest and paragraph 6
constituted an executory promise to convey the described
interest in the future, the District Court interpreted these
paragraphs of the dissolution agreement so as to give effect
to both paragraphs. We thus hold that the District Court
made findings of facts consistent with the evidence.
The third issue raised by Bretz on appeal is whether the
District Court erred when it dismissed this action with
prejudice. Bretz contends that when a statute of limitations
is the basis for dismissing an action, then the action should
not be dismissed with prejudice when the passage of time
obviates the defense. Rretz thus argues that even if the
District Court correctly found that his predecessor in title,
Dewey, did not have "constructive seisen" for five years
prior to filing the complaint, he nonetheless should have
been entitled to refile and start again.
Bretz's basic contention is not applicable in this
instance. As previously noted, $ 70-19-401, MCA, requires
that Bretz or Dewey be possessed or seised of the Aakre lease
within five years before the commencement of the action. The
District Court found, and the record and evidence supports,
that neither Bretz nor his predecessor in interest, Dewey,
were seised of the Aakre lease at the time Rretz brought the
quiet title action or at any time prior to the bringing of
the action. The mere passage of time will not cure this
defect and thus bars Bretz from refiling a quiet title
action. If Bretz, however, obtained title to an interest in
the lease in the future through a new assignment executed by
someone having title and his new title was not recognized,
Bretz could then commence a new action to quiet title. But
that is not the case here. We hold that under the present
set of facts the District Court did not err when it dismissed
this action with prejudice. P
We affirm.
//chief Justice
4. *
Justices