author: JUSTICE WEBER JUSTICE TRIEWEILER

text:
    JEFFREY KREGER and LEA ANN KREGER, Plaintiffs and Respondents, v. DANIEL FRANCIS and CHRISTINA L. FRANCIS, Defendants and Appellants.
    No. 94-388.
    Submitted on Briefs March 23, 1995.
    As Amended on Denial of Rehearing July 27, 1995.
    Decided June 15, 1995.
    52 St.Rep. 493.
    898 P.2d 672.
    271 Mont. 444.

      For Appellants: Robert M. Kampfer, Great Falls.
    For Respondents: Joan E. Cook, Miller & Cook, Great Falls.
   JUSTICE WEBER

delivered the Opinion of the Court.

This is an appeal from a decision of the Eighth Judicial District Court, Cascade County granting judgment in favor of Jeffrey Kreger and Lea Ann Kreger for reasonable attorney's fees and costs incurred. We reverse.

We restate the issue on appeal:

Did the District Court err when it ruled Jeffrey and Lea Ann Kreger did not waive their rights to terminate a lease for Daniel and Christina Francis’ breach of the terms of the lease when Jeffrey and Lea Ann Kreger accepted full payment of rent?

On August 1,1993, appellants, Daniel Francis and Christina Francis (Renters) entered into a written rental agreement with respondents, Jeffrey Kreger and Lea Ann Kreger (Landlords). The lease was for a term of six months and included the following provision:

9. We agree to obtain renters insurance for all property leased to us before moving into premises.

Renters applied for and obtained a policy of renters insurance on their belongings at the rented address. The policy of renters insurance was subsequently cancelled by the insurance company, effective October 1,1993, because the Renters had a bad credit rating. Renters were unable to obtain further coverage.

On October 1, 1993, Landlords sent to Renters a 30 day Notice to Quit and Notice Terminating Rental Agreement which referenced the fact Renters were unable to obtain renters insurance as required by Section 9 of the Lease Agreement. The Landlords sent another notice to Renters on October 16, 1993, in the event the prior notice was premature given that Renters had until the end of the day, October 1, 1993, before their coverage terminated. Renters refused to vacate the premises at the end of the 30 day period. So, Landlords filed a cause of action for possession in the Justice Court.

Landlords accepted $600.00 on or about the first day of each month the Renters remained in possession — October, November and December of 1993. Renters vacated the premises at the end of December 1993, after the first trial in Justice Court.

The Justice Court ruled in favor of the Landlords and awarded costs and attorney’s fees in the amount of $452.50 to the Landlords. Renters appealed to District Court and a de novo bench trial was conducted on June 14, 1994. On June 28, 1994, the District Court entered judgment for Landlords and against Renters concluding acceptance of the monthly rent from Renters by Landlords did not waive Landlords’ right to terminate the Rental Agreement for the Renters’ failure to obtain renters insurance. The District Court awarded costs and attorney’s fees to Landlords.

From the District Court’s June 28, 1994 decision, Renters appeal.

Did the District Court err when it ruled Jeffrey and Lea Ann Kreger did not waive their rights to terminate a lease for Daniel and Christina Francis’ breach of the terms of the lease when Jeffrey and Lea Ann Kreger accepted full payment of rent?

The District Court found that the rent was paid current as of the date the Renters vacated the premises. The court concluded the following as a matter of law:

3. Acceptance of the monthly rent from Tenants [Renters] by the Landlord did not waive their right to terminate the Rental Agreement for the Tenants’ [Renters’] failure to obtain Renters Insurance. Acceptance of the payment of rent is a waiver of a claimed breach of a Rental Agreement, only if that claimed breach is the nonpayment of rent. Section 70-24-423, MCA.

The court’s interpretation of § 70-24-423, MCA, is at issue. Section 70-24-423, MCA states the following:

Waiver of landlord’s right to terminate for breach. Acceptance by the landlord of full payment of rent due with knowledge of a tenant’s default or acceptance by the landlord of a tenant’s performance that varies from the terms of the rental agreement constitutes a waiver of the landlord’s right to terminate the rental agreement for that breach unless otherwise agreed after the breach has occurred. The acceptance ofpartial payment of rent due does not constitute a waiver of any right.

Renters point out Landlords accepted full, current monthly rental payments from Renters for three months after the expiration of the renters insurance policy. Renters allege there was never an arrearage of rent and there was never any understanding other than that the payments were made for the current month’s rent. Renters argue the plain language of § 70-24-423, MCA, provides acceptance of rent constitutes a waiver of any breach known to the landlord. Here, Landlords knew Renters’ breached Section 9 of the lease prior to accepting rent. Therefore, Landlords waived this breach when they accepted full payment of rent and, thus, had no basis to evict Renters.

Renters conclude the District Court erred in awarding costs and fees to Landlords because Landlords had no grounds to bring an eviction suit against Renters. Renters request this Court reverse the District Court’s judgment and award costs and fees to Renters.

Landlords argue they did not waive any breach by accepting the rent due and the District Court came to the correct conclusion of law. At no time did they agree the provision of renters insurance was waived. Landlords contend all of their conduct indicates they did not accept the varied performance of the Renters and that they intended to treat the varied performance as a default.

Landlords argue, according to Renters’ analysis, all landlords must refuse payment of rent or else they forgo remedies for a breach. Additionally, Landlords contend that a proffered payment of rent must be accepted by the landlord under the landlord’s duty to mitigate damages.

Our standard of review of the District Court’s conclusion of law is to determine if the District Court’s interpretation of the law is correct. Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 474-475, 803 P.2d 601, 603-604.

We have held, “where the language of the statute is plain, unambiguous, direct, and certain, the statute speaks for itself.” State ex rel. Palmer v. Hart (1982), 201 Mont. 526, 530, 655 P.2d 965, 967. The language of § 70-24-423, MCA, is clear — “[acceptance by the landlord of full payment of rent due with knowledge of a tenant’s default... constitutes a waiver of the landlord’s right to terminate the rental agreement for that breach. ...” (Emphasis added.) We cannot insert limiting language where none exists. Section 1-2-101, MCA; Palmer, 655 P.2d at 969.

Landlords accepted the rent on the first day of the month to which it would be applied. We hold that, for each month where Landlords accepted full rent, Landlords waived their right to terminate the lease for failure to obtain renters insurance.

The District Court’s interpretation of § 70-24-423, MCA, was incorrect. We conclude the District Court erred when it ruled Landlords did not waive their rights to terminate a lease for Renters’ breach of its terms when Landlords accepted full payment of rent.

Renters have requested costs and attorney fees be awarded to them. Attorney fees are authorized by statute or by contract. Joseph Russell Realty Co. v. Kenneally (1980), 185 Mont. 496, 505, 605 P.2d 1107, 1112. Section 70-24-442, MCA, provides:

(1) In an action on a rental agreement or arising under this chapter, reasonable attorney fees, together with costs and necessary disbursements, may be awarded to the prevailing party nonwithstanding an agreement to the contrary.
(2) As used in this section, “prevailing party” means the party in whose favor final judgment is rendered. (Emphasis added.)

The subject Lease/Rental Agreement does not authorize an award of attorney fees; and, under the circumstances of this case, we conclude an award of attorney fees is not appropriate.

The judgment awarding attorney’s fees and costs to Landlords is reversed.

JUSTICES GRAY, NELSON and LEAPHART concur.

JUSTICE TRIEWEILER

dissenting.

I dissent from the majority opinion. I would affirm the District Court’s conclusion that:

Acceptance of the payment of rent is a waiver of a claimed breach of a Rental Agreement, only if that claimed breach is the nonpayment of rent. Section 70-24-423, MCA.

To conclude, as the majority has, that acceptance of rent waives some breach other than nonpayment of rent, will lead to absurd results, is contrary to other provisions in the Landlord and Tenant Act, and is obviously contrary to the intention of the Legislature.

The majority opinion refers to § 1-2-101, MCA, selectively. That section also provides that several provisions of a legislative act are to be construed so as to give effect to all. Furthermore, § 1-2-102, MCA, provides in part that “[i]n the construction of a statute, the intention of the legislature is to be pursued if possible.” The majority opinion satisfies neither of these statutory directives.

In construing § 70-24-423, MCA, we must look at all of its terms and not isolate any particular phrase. Only by doing so can the obvious purpose of the statute be accomplished and absurd results avoided.

When § 70-24-423, MCA, is examined in its entirety, and in the context of the entire Landlord and Tenant Act, it is apparent that the Legislature intended that a landlord’s acceptance of performance by a tenant in some manner that deviated from the literal requirements of the rental agreement would constitute a waiver of the literal requirements. For example, if late payments are accepted, then late payments cannot provide the basis for termination of the contract. However, precluding a landlord from accepting rental payments as a condition to enforcing unrelated terms of the contract, ignores that statutory requirement found at § 70-24-401(1), MCA, that a landlord has “a duty to mitigate damages.” It has the effect of punishing a landlord twice where a tenant breaches a rental agreement in some manner other than by nonpayment of rent.

For example, where rental property is repeatedly damaged by a tenant, contrary to a contractual provision that it be maintained in good condition, a landlord would have to forego future rental payments during the potentially lengthy time it may take to evict the tenant for property damage. Not only does the landlord in that situation sustain property damage, but also the income which may be necessary to satisfy the landlord’s own financial obligations with regard to the property. Surely, this was never the Legislature’s intention. Obviously this result is contrary to the statutory requirement that a landlord mitigate his or her damage. For these reasons, I would affirm the District Court’s conclusion that acceptance by the landlord of payment of rent waives a tenant’s default only when that default is based on failure to pay rent.

CHIEF JUSTICE TURNAGE and JUSTICE HUNT join in the foregoing dissenting opinion.


source: Caselaw Access Project

author: JUSTICE NELSON

license: Public Domain

text:
    MONTANA PUBLIC EMPLOYEE’S ASSOCIATION, a Montana Non-Profit Corporation, Sally Russell, Steve Warn, John Starcevich, Pam Aldridge, Carol Huggins, Joyce Crawford, Kristie Milligan, and Fred Marshall, et al., Plaintiffs and Appellants, v. OFFICE OF THE GOVERNOR, Governor Stan Stephens, MONTANA DEPARTMENT OF TRANSPORTATION, and MONTANA DEPARTMENT OF SOCIAL AND REHABILITATION SERVICES, Defendants and Respondents.
    No. 94-576.
    Submitted on Briefs March 23, 1995.
    Decided June 20, 1995.
    52 St.Rep. 523.
    898 P.2d 675.
    271 Mont. 450.

      For Appellants: Carter N. Picotte, Helena.
    For Respondent: Nick A. Rotering, Lyle Manley, Montana Department of Transportation, Helena; Russ Cater, Montana Department of Social and Rehabilitation Services, Helena.
   JUSTICE NELSON

delivered the Opinion of the Court.

This is an appeal from an order of the First Judicial District Court, Lewis & Clark County, granting Respondents’ motion for summary judgment terminating Appellants’ declaratory judgment action. We affirm.

The issues on appeal are:

1. Whether the District Court erroneously determined that the actions of Governor Stan Stephens did not violate Article II, Section 31 of the Montana Constitution and Article I, Section 10, of the Constitution of the United States.
2. Whether the District Court erroneously determined that Governor Stan Stephens did not violate Article III, Section 1, of the Montana Constitution.

Background

Appellants filed their declaratory judgment action in District Court on January 6, 1993. Following briefing and oral argument on their cross motions for summary judgment, the District Court granted Respondents’ motion and denied Appellants’. In their Complaint, Appellants contend that for a period of at least 15 years previously, the State of Montana had in place a system of employee compensation set forth at §§ 2-18-301, et seq., MCA. That compensation system incorporated basic pay levels, or grades, and a series of sub-levels within each grade, or steps, under which an employee received higher compensation depending upon the amount of time spent in employment. Appellants also contend that for many years, it had been the practice of some state agencies, including the respondent agencies, to subtract or take away steps when promoting employees more than one grade level.

By way of example, Appellants explain that when a person at grade 12, step 6, was promoted to grade 14, the employee would be placed in step 4, thus losing 2 steps and the compensation that went along with the 2-step loss. While the promoted employee would not actually suffer a reduction in compensation, he or she would receive less of a pay increase than if the promotion included not only the higher grade, but also no reduction in steps.

In 1991, the directors of the Departments of Transportation and Social and Rehabilitation Services determined to reinstate the steps lost by qualified employees. Employees were so informed by a written announcement that included instructions for employees to complete and return to their respective departments.

Before the lost steps could be reinstated, however, Governor Stan Stephens issued a May 15, 1991 memorandum to all department directors prohibiting them from reinstating steps lost to multi-grade promotions. Accordingly, the proposed plan to reinstate the lost steps was withdrawn by each department. Appellants contend that the Governor acted unconstitutionally.

Discussion

Under Rule 56(c), M.R.Civ.P., summary judgment is proper only when no material fact exists and the moving party is entitled to judgment as a matter of law. The initial burden is on the moving party to establish that there are no genuine issues of material fact. Once that burden has been met, the burden then shifts to the party opposing the motion to establish otherwise. Spain-Morrow Ranch, Inc. v. West (1994), 264 Mont. 441, 444, 872 P.2d 330, 331-32. In determining the propriety of summary judgment, we will utilize the same criteria as the district court; our review is de novo. Minnie v. City of Roundup (1993), 257 Mont. 429, 431, 849 P.2d 212, 214.

1. Whether the District Court erroneously determined that the actions of Governor Stan Stephens did not violate Article II, Section 31, of the Montana Constitution and Article I, Section 10, of the Constitution of the United States.

Appellants contend that Governor Stephens violated Article II, Section 31, of Montana’s Constitution and Article I, Section 10, of the United States Constitution in prohibiting the step reinstatement plan from being implemented. Both of those constitutional provisions prohibit the respective legislative branches of government from passing legislation that impairs contractual obligations. In rejecting Appellants’ contentions, the District Court concluded that, here, no action was taken by the legislature. Rather, the action taken was by the Governor, and the subject constitutional provisions were, thus, not implicated.

Appellants, however, maintain that because the allegedly offending acts of the Governor were authorized by § 2-15-103, MCA, which provides that, subject to the constitution, the governor shall formulate and administer policies of the executive branch, in essence, his acts were those of the legislature in impairing Appellants’ contracts.

Without agreeing or disagreeing with the District Court’s rationale, we conclude that Appellants’ arguments are resolved at a more fundamental level. In order for there to be an unconstitutional impairment of a contractual obligation, there must first be a contract in existence. Matter of Yellowstone River (1992), 253 Mont. 167, 183, 832 P.2d 1210, 1219. In that case, citing other Montana decisional authority, we stated:

Montana has adopted a three part test to determine whether legislation has violated the impairment of contracts clause. [Citations omitted]. “The threshold inquiry is whether the state law has, in fact, operated as a substantial impairment of the contractual relationship.” [Citations omitted]. Implicit in this inquiry is the existence of a contract. The appellants have failed to demonstrate the existence of any specific contract let alone its impairment. This is fatal to appellants’ claim. (Emphasis added.)

Yellowstone River, 832 P.2d at 1219.

Similarly, Appellants in this case have failed to demonstrate the existence of any contract under which they had a vested right to reinstatement of the lost steps. “It is essential to the existence of a contract that there be ... a sufficient cause or consideration.” Section 28-2-102(4), MCA. Consideration requires that the contracting parties, each as to the other, confer some legal benefit and/or incur some detriment as an inducement to performance. Section 28-2-801, MCA. See also Title 28, Chapter 2, part 8, generally and Boise Cascade Corp. v. First Security Bank (1979), 183 Mont. 378, 391, 600 P.2d 173, 181.

Here, the Appellant employees gave nothing of value for the department directors’ gratuitous offer to reinstate the lost steps and, the offer being gratuitous, it could be revoked at any time. No contract is created when performance is entirely optional with the promisor. Matter of Estate of Haggerty (1990), 246 Mont. 351, 356, 805 P.2d 1338, 1342. See also Boise Cascade Corp., 600 P.2d at 181.

Moreover, Appellants’ prior work could not serve as consideration for the State’s offer to reinstate the lost steps, inasmuch as, generally, past consideration is not sufficient to support a promise. In Tindall v. Konitz Contracting, Inc. (1989), 240 Mont. 345, 783 P.2d 1376, we quoted with approval the following statement of that principle:

“[a] promise supported by past consideration is unenforceable because the detriment did not induce the promise. That is, ‘since the detriment had already been incurred, it cannot be said to have been bargained for in exchange for the promise.’ ”

Tindall, 783 P.2d at 1379.

Accordingly, there being no consideration for the department directors’ offer, no contract was formed under which the appellant employees gained any vested rights to the reinstatement of the lost steps. There being no contract in existence, there were no contract obligations which were impaired by the Governor’s actions. We hold that Governor Stephens’ actions here did not violate Article II, Section 31, of the Montana Constitution or Article I, Section 10 of the United States Constitution.

2. Whether the District Court erroneously determined that Governor Stan Stephens did not violate Article III, Section 1, of the Montana Constitution.

Appellants next contend that Governor Stephens violated the doctrine of separation of powers in that he unlawfully attempted to obstruct the legitimate exercise of duties granted to the Department of Administration by the legislature. Article III, Section 1, of Montana’s Constitution prohibits one branch of government from exercising any power properly belonging to the other two branches.

According to Appellants, by enacting the pre-1991 provisions of the State pay plan, (§§ 2-18-101, et seq., MCA), the legislature, pursuant to Article VI, Section 7, of Montana’s Constitution, charged the Department of Administration as being the executive agency solely responsible for the administration and implementation of that plan, with rulemaking authority in furtherance of those responsibilities. Appellants maintain that the Department of Administration did, by adopting pay plan Rule No. 1809, vest discretion in agency heads for the treatment of steps in the pay plan. Therefore, according to Appellants, since the legislature allocated to the Department of Administration the power to administer the pay plan, the Governor, as the highest executive officer of the State, was without authority to “interfere in or dominate the discretion and judgment of other executive branch officers ... [such as the department directors here] in the exercise of those powers conferred by law upon them, unless the power of review or the requirement of approval is imposed by the Legislative delegation of power.” In countermanding the department directors’ offer to reinstate the lost steps, Appellants conclude that Governor Stephens, thus, violated the doctrine of separation of powers.

The District Court rejected Appellants’ argument, concluding that the Governor was not interfering with the Department of Administration’s delegated authority over the State pay plan, but, rather, was simply exercising his legitimate power over other executive agencies under §§ 2-15-104 and 2-15-103, MCA. We agree with the District Court.

Article VI, Section 4, of Montana’s Constitution vests executive power in the Governor. The statutory duties of executive branch officers and agencies are generally found at § 2-15-101, et seq., MCA, commonly referred to as the Executive Reorganization Act. Section 2-15-103, MCA, recognizes the constitutional status of the governor as the State’s chief executive officer and, subject only to the constitution and other State laws, requires the governor to formulate and administer the policies of the executive branch with “full powers of supervision, approval, direction, and appointment over all departments and their units.” Moreover, that statute provides that whenever a conflict arises as to the administration of the policies of the executive branch of state government, with exceptions not at issue here, “the governor shall resolve the conflict, and the decision of the governor is final.” In addition, § 2-15-201, MCA, further prescribes the powers and duties of the governor including that “[h]e shall supervise the official conduct of all executive and ministerial officers.”

While under § 2-18-102, MCA, and parts 2 and 3 of Title 2, Chapter 18, MCA, the Department of Administration has broad powers and duties to implement and administer the State classification and pay plan as generally set forth in that Title and Chapter, nevertheless, those statutory powers and duties must be read in conjunction with the governor’s statutorily prescribed duties of supervision, approval, appointment and direction over executive agency departments and their heads while also taking into consideration his constitutional status as chief executive officer of the State.

Appellants’ interpretation of the constitutional provisions and statutes mentioned, treats the Governor’s duties and the duties of the Department of Administration and the heads of the executive agencies as regards the classification and pay plan as mutually exclusive. However, we find nothing in the above statutory scheme that supports such an interpretation or that would have prohibited Governor Stephens’ actions in this case. Likewise, we conclude that the doctrine of separation of powers is not violated where the governor exercises the very sorts of powers and duties authorized by the legislature in the statutes it enacted. Contrary to Appellants’ contentions, Governor Stephens did not exercise any power belonging to the legislative branch; he simply executed his statutory duty to supervise and direct the heads of two executive departments in their making of a discretionary decision involving the implementation of the State pay plan. As was the District Court, we are not persuaded to a contrary conclusion by Appellants’ arguments or by any authorities cited. Accordingly, we hold that Governor Stephens’ actions here did not violate Article III, Section 1 of the Montana Constitution.

Finally, Appellants do not cite this Court to any genuine issues of material fact that are in dispute, and, having reviewed the record and the briefs, we are satisfied that there are none. Under the undisputed facts of this case, we hold that Respondents were entitled to judgment as a matter of law.

Accordingly, the Order of the District Court dated September 1, 1994, granting summary judgment to Respondents and denying Appellants’ motion for summary judgment is AFFIRMED.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY, WEBER and LEAPHART concur.


text:
    CARBON COUNTY, a political subdivision of the State of Montana, Plaintiff and Respondent, v. UNION RESERVE COAL CO., INC., a Montana corporation; RED-LODGE BEAR CREEK COAL PARTNERS, a limited partnership; and NORBERT H. KMOCH; et al., Defendants and Appellants, v. FLORENTINE EXPLORATION & PRODUCTION, INC., a Montana corporation, Intervenor, Respondent/Cross-Appellant.
    No. 93-426.
    Heard and Submitted May 16, 1995.
    Rehearing Denied July 27, 1995.
    Decided June 27, 1995.
    52 St.Rep. 529.
    898 P.2d 680.
    271 Mont. 459.

      For Appellants: Robert L. Stephens, Jr., Billings.
    For Respondents: Anthony W. Kendall, Red Lodge; Hon. Joseph Mazurek, Attorney General, Clay Smith, Assistant Attorney General, Helena; James P. Healow, Sweeney & Healow, Billings (Florentine).
    For Amicus Department of State Lands: Tommy H. Butler, Special Assistant Attorney General, Helena.
   JUSTICE NELSON

delivered the Opinion of the Court.

The plaintiff, Carbon County, initiated this suit to quiet title in all of the mineral and mineral rights, excluding the coal and coal rights, on certain lands within the county. Florentine Exploration & Production (Florentine) was allowed to intervene in the action, aligning itself with Carbon County. Following a bench trial, the District Court for the Thirteenth Judicial District, Carbon County, entered judgment for defendant, Union Reserve Coal Co. (Union Reserve), awarding Union Reserve nominal damages of $1.00. From that judgment, the defendant appeals and plaintiff and intervenor cross-appeal. We reverse and remand.

The issues on appeal, as framed by this Court, are:

1. Is coal seam methane gas a constituent part of the coal estate?

2. Did the District Court err in determining that Union Reserve has the right to produce coal seam methane gas from the coal lands?

3. Do the 1993 legislative amendments to § 15-1-101, MCA and § 82-11-101, MCA, and the enactment of § 82-1-111, MCA, constitute an unlawful taking of coal seam methane gas from the owners of coal or coal lands?

4. Did the District Court err in not granting punitive damages to Union Reserve?

FACTUAL BACKGROUND

Prior to October 10, 1974, Carbon County became the owner, through tax deed proceedings, of the entire mineral estate underlying the disputed property. On November 1, 1984, Carbon Comity executed and delivered to Red Lodge-Bear Creek Coal Partners, Union Reserve’s predecessor in interest, a deed which conveyed “[a]ll coal and coal rights with the right of ingress and egress to mine and remove the same from the following described acreage ....”

The deed did not make any reference to gas in general, coal seam methane gas, nor any mineral or hydrocarbon other than coal. The deed reserved a royalty of $.10 “per ton of 2,000 pounds of coal produced and saved from said lands.” The deed made no reference to any royalty on gas that might be produced and saved, nor any other mineral which might be extracted from the property.

On August 21, 1990, Carbon County executed and delivered to Florentine an oil and gas lease whereby Florentine received the right to operate for and produce from the disputed property “oil and all gas including coal seam methane of whatsoever nature or kind ....” The lease was a standard Producer’s 88 lease form, which provided for a royalty of 1/8 of the proceeds from any gas produced from the property. After obtaining the lease from Carbon County, Florentine solicited a protective lease from Union Reserve, but Union Reserve refused to provide such a lease.

On December 7, 1990, Carbon County filed a quiet title action against Union Reserve and various other named defendants, asserting Carbon County’s claims to all of the mineral and mineral rights, excluding the coal and coal rights, on the disputed property. Florentine moved to intervene, asserting that it owned the oil and gas lease and that Union Reserve had no estate, right or claim in the oil and gas including the coal seam methane gas. (At the time of the lawsuit, Florentine had drilled three wells, one of which was in the coal owned by Union Reserve.) Florentine sought injunctive relief and quiet title to the coal seam methane gas.

In its answer, Union Reserve asserted that it was entitled to a judgment declaring that its ownership of the coal and coal rights included the right to extract the coal seam methane gas. In addition, Union Reserve sought a judgment canceling Florentine’s oil and gas lease and monetary damages for Florentine’s trespass on Union Reserve’s property.

Following a July 23, 1992, bench trial, the District Court entered Findings of Fact and Conclusions of Law which found that the coal seam methane gas was part of the coal estate and was included in the conveyance of coal and coal rights by Carbon County to Union Reserve’s predecessor-in-interest. The court further held that Florentine did not acquire by its lease a right to drill and produce coal seam methane gas and that a trespass occurred which resulted in nominal damages of $1.00. The court ordered Florentine to remove its casing from the completed gas well sited on the disputed property.

On April 20, 1993, the District Court entered a Final Judgment and Decree consistent with its Findings of Fact and Conclusions of Law. Union Reserve appealed the District Court’s judgment on the issue of punitive damages. Florentine appealed as to the ownership of the coal seam methane gas.

Subsequent to the District Court’s judgment in this case, Senate Bill 294 was introduced to the 53rd Legislature of the State of Montana proposing changes in the statutory definitions of coal, oil and gas. Sections 15-1-101, MCA, and 82-11-101, MCA, were amended and a new provision, § 82-1-111, MCA, was added. These amendments will be discussed later in this opinion.

DISCUSSION

An explanation of the nature of coal seam methane gas and how it is produced and extracted is necessary in understanding the issues presented in this case. This discussion is derived from the following sources: Jeff L. Lewin et al., Unlocking the Fire: A Proposal for Judicial or Legislative Determination of the Ownership of Coalbed Methane, 94 W. Va. L. Rev. 563 (Spring 1992); Jeff L. Lewin, Coalbed Methane: Recent Court Decisions Leave Ownership “Up in the Air,” But New Federal and State Legislation Should Facilitate Production, 96 W. Va. L. Rev. 631 (Spring 1994); and NCNB Texas Nat. Bank, N.A. v. West (Ala. 1993), 631 So.2d 212.

Coal seam methane gas, also called “coalbed gas” or “coalbed methane,” is formed as a by-product of the “coalification” process. Carbon dioxide and water are incorporated into plants to form various hydrocarbon-based compounds which in turn decay to form peat. When peat is buried under other sediments, the pressure and temperature eventually convert it to coal, methane, and other gaseous byproducts.

Although it is not a chemical part of coal, coal seam methane gas has a weak physical attraction to coal. It can exist freely in the cracks or fractures within the coal seam, but pressure causes most of the gas to be adsorbed within the coal, adhering to the internal surface of micropores in the structure of the coal. Hence, the coal acts as a container for the gas. When the pressure on the surrounding coal is reduced, the gas is released.

Highly combustible and poisonous, coal seam methane gas must be ventilated from coal mines to protect miners from disastrous explosions or inhalation. Originally thought of as only a waste product of the mining process, technological developments in the 1980s and changes in federal law made the gas a commercially viable alternative energy source.

Extraction of coal seam methane gas from coal seams and surrounding strata is generally accomplished by one of three methods: vertical degasification wells, horizontal boreholes or gob wells. Vertical degasification wells are drilled from the surface directly into an unmined coal seam to extract the gas that is trapped or collected there. The release of coal seam methane gas from the coal seam into the well may be increased by various methods of “fracturing” the coal seam near the bottom of the well. Hydrofracturing is the forcing of fluids under pressure into the well so as to cause a fracturing of the coal seam. This process creates fractures in the coal which serve as conduits through which gas can flow to the well’s shaft.

Ahorizontal borehole is a hole bored into the coal seam from a point within the coal mine itself. The coal seam releases some of its adsorbed or trapped gas into the borehole where the gas is then captured and extracted.

Finally, a gob well is a well drilled from the surface to an area near the coal seam. During the longwall mining method, a machine grinds into the wall of the coal seam tearing away the coal. As the machine grinds farther and further into the wall, it leaves behind it a void into which the ceiling of the mine collapses creating a “gob” of rubble. Large quantities of coal seam methane gas collect in this area. The collapse of the ceiling of the mine also leaves the overlying strata unsupported, and gravity causes it to subside and to fracture as well, releasing more gas. Gas from the gob may travel upward into non-coal strata, where it may be collected and extracted through the gob well.

While the ownership of, and right to develop, coal seam methane gas are questions of first impression in Montana, courts in other jurisdictions have struggled with this issue for more than a decade. A brief examination of some of these cases is appropriate in resolving the issues presented in the case before us on appeal.

In 1983, the Pennsylvania Supreme Court was confronted with determining the ownership of coal seam methane gas in United States Steel Corp. v. Hoge (1983), 468 A.2d 1380. In Hoge, a 1920 severance deed conveyed to United States Steel Corporation’s predecessors in title “all of the coal” contained in tracts of land owned by Hoge’s predecessors in title. The deed conveyed the coal “[tjogether with all the rights and privileges necessary and useful in the mining and removing of said coal, including ... the right of ventilation ...” Hoge’s predecessors retained the “right to drill and operate through said coal for oil and gas without being held liable for any damages.”

The Pennsylvania Supreme Court quieted title to the coal seam methane gas in United States Steel Corporation, the owner of the coal. The court concluded that any gas present in the coal “must necessarily belong to the owner of the coal, so long as it remains within his property and subject to his exclusive dominion and control.” Hoge, 468 A.2d at 1383. (Emphasis omitted.) The court determined that Hoge owned only the coal bed gas that migrated into his property surrounding the coal.

The court in Hoge did not attempt to determine the intent of the parties by looking to the plain meaning of the grant. Instead, the court considered the characteristics, origins and history of coal seam methane gas. While this analysis may be appropriate in Pennsylvania, in Montana, when construing a phrase within a contract, “the intention of the parties is to be ascertained from the writing alone if possible ...” Section 28-3-303, MCA.

In Hoge, the reservation of the right to drill for oil and gas is clear. However, the court went beyond the plain meaning of the reservation and determined that the parties could not have intended to reserve what was considered, at the time of the conveyance, merely a waste product. While coal seam methane gas was considered a waste product in 1920, its value was certainly established by 1984, the time of the conveyance to Union Reserve. Thus the rationale of Hoge is distinguishable from the case before us on appeal.

Moreover, while a reservation of the right to drill for oil and gas is not found in the deed to Union Reserve, the express grant of one specific mineral does not imply the grant of all other minerals not referred to in the grant. The maxim expressio unius est exclusio alterius (the expression of one thing is the exclusion of another) is routinely cited in Montana case law. See Matter of Estate of Donovan (1976), 169 Mont. 278, 282, 546 P.2d 512, 514; Teters v. Montana Eastern Pipe Line Co. (1945), 117 Mont. 477, 482, 159 P.2d 515, 517; Berne v. Stevens (1923), 67 Mont. 254, 258, 215 P. 803, 804. Furthermore, this principle has been directly applied to mineral law in Smoot v. Consolidated Coal Co. (1904), 114 Ill. App. 512, 517.

Additionally, in deciding Hoge, the Pennsylvania Supreme Court considered the characteristics of coal seam methane gas in situ, but Montana law currently and historically has provided that the determination of whether or not a substance is considered gas is made “at the wellhead.” See § 82-1-111(2), MCA (1993); § 82-11-101(6), MCA (1983); and § 60-126, RCM (1947).

Four years after Hoge, United States Steel Corporation (now USX Corp.) again found itself embroiled in a case to determine the ownership of coal seam methane gas. In Rayburn v. USX Corp. (N.D. Ala. 1987), No. CIV.A.85-G-2661-W, 1987 U.S. Dist. LEXIS 6920, aff’d 844 F.2d 796 (11th Cir. 1988), a 1960 warranty deed granted to USX Corp. “the minerals and mining rights, except oil and gas and the right to explore for and remove the same. ...” The grantors also covenanted that all coal seams “shall be encased or grouted off’ during the exploration for or production of oil and gas unless specifically exempted by USX Corp. in writing.

The court in Rayburn looked to the language of the deed regarding encasing and grouting off the coal seam as well as the intention of the parties and did not determine whether coal seam methane gas is part of the coal. The court determined that “[t]he clearly expressed intention is that the methane in the coal bed not be available to any well drilled by the grantors who reserved the ‘oil and gas’ or to their assigns.” Rayburn, 1987 U.S. Dist. LEXIS 6920, at *8.

The court also determined that in 1960 when the warranty deed was granted, coal seam methane gas was not considered “commercially recoverable.’’Rayburn, 1987 U.S. Dist. LEXIS 6920, at *9. Once again, while the value of coal seam methane gas may not have been known in 1960, it was certainly considered a valuable resource by 1984 when Carbon County granted the coal and coal rights to Union Reserve. And, unlike the deed in Rayburn, there is no language in the deed to Union Reserve regarding “encasing and grouting off’ the coal seam if wells were to be drilled.

There is also no language in the deed from Carbon County granting “other minerals” to Union Reserve as was the case in Vines v. McKenzie Methane Corp. (Ala. 1993), 619 So.2d 1305. In Vines, McKenzie Methane argued that it held a leasehold interest for the coalbed methane gas pursuant to a lease executed in 1902 between the landowners and the previous mineral owner, USX Corp. Through subsequent assignments, McKenzie held the leasehold interest in “all of the coal, iron ore, and other minerals, in, under, and upon” Vine’s property. Vines, 619 So.2d at 1306.

The Supreme Court of Alabama engaged in a plain meaning analysis and held that “the ownership of methane gas, with the accompanying rights to drill for this substance, was necessarily included in the mineral estates granted in the instruments.” Vines, 619 So.2d at 1309.

Based on this grant of “other minerals,” the Supreme Court of Alabama did not feel it necessary in Vines to address the issue of whether coal seam methane gas is part of the coal estate or part of the gas estate. However, the court was faced with addressing this very issue a few months later in NCNB Texas Nat. Bank, N.A. v. West (Ala. 1993), 631 So.2d 212.

In NCNB, two almost identical deeds from 1953 and 1954 granted to West’s predecessors “all of the coal, and mining rights. ...” The deeds reserved in favor of the Bank’s predecessors everything that was not conveyed, including “all of the oil, gas, petroleum, and sulphur. ...”

The Supreme Court of Alabama held that the coal owners have the “exclusive right” to produce and own coal seam methane gas from horizontal boreholes and vertical degasification wells drilled into the coal seam. NCNB, 631 So.2d at 229. Additionally, the court held that the gas estate has the right to recover coal seam methane gas from the gob area above the coal seam. NCNB, 631 So.2d at 229.

In reaching this conclusion, the Supreme Court of Alabama determined that the language of the deed was unambiguous and did not require it to resort to arbitrary rules of construction to determine what the parties intended. NCNB, 631 So.2d at 222. The court stated:

We can find no scientific or legal basis to support the proposition that coalbed methane gas should be treated as a resource separate and distinct from other natural gas, or from any other gas. The fact that the coalbed methane gas is produced by, and stored within, coal seams does not require the conclusion that a grant of “all coal” includes coalbed methane gas, nor does it require the conclusion that a reservation of “all gas” does not include coalbed methane gas.

NCNB, 631 So.2d at 222-23.

Although this statement would appear to favor the owner of the gas estate, the court concluded that since Alabama follows the non-ownership theory of oil and gas, the coal seam methane gas belonged to the owner of the coal estate. The court explained that:

The nonownership theory of gas ownership, because it recognizes the migratory nature of oil and gas, requires actual possession to establish ownership of the resource, and the right held by the landowner is “the right to reduce the oil and gas to possession or to sever this right for economic consideration.”

NCNB, 631 So.2d at 223.

Unlike Alabama, Montana is an ownership-in-place state, and oil and gas, as long as they remain in the ground, are part of the realty. Stokes v. Tutvet (1958), 134 Mont. 250, 255, 328 P.2d 1096, 1099. Montana also recognizes the rule that the title to mineral interests in land, including oil and gas interests, may be segregated in whole or in part from the rest of the fee simple title. Stokes, 328 P.2d at 1099. This difference in theories of ownership of mineral interests distinguishes NCNB from the case before us on appeal.

The most recent judicial determination of the ownership of coal seam methane gas actually requires us to look as far back as 1907, when President Theodore Roosevelt ordered the Department of Interior to withdraw from public entry and settlement, lands that contained “workable coal” and to suspend issuance of patents on the lands withdrawn. Southern Ute Indian Tribe v. AMOCO Production Co. (D.Colo. 1995), 874 F.Supp. 1142. In 1909 and 1910, Congress passed the Coal Lands Acts which reserved to the United States “all coal” contained in the withdrawn lands upon which entry had been made. In 1938, the federal government restored much of this land to the Southern Ute Indian Tribe along with the reservation of “all coal.” In Ute, the tribe claimed ownership of the coal seam methane gas on the Southern Ute Indian Reservation in southwestern Colorado based on the premise that the land restored to the tribe in 1938 containing the reservation of coal included a reservation of the coal seam methane gas. The United States District Court for the District of Colorado concluded that this reservation of coal by the United States in the Coal Lands Acts did not include a reservation of coal seam methane gas. Ute, 874 F. Supp. at 1151-52. Consequently, the court held that the tribe did not acquire title to the gas when the coal was restored to the tribe in 1938 because title to the gas had previously been conveyed to homesteaders under the Coal Lands Acts of 1909 and 1910. Ute, 874 F.Supp. at 1152.

In arriving at its decision, the court in Ute looked to the plain meaning of the words “coal” and “gas” to determine the intent of Congress at the time the Acts were introduced. After examining various dictionary and statutory definitions of coal and gas, the court determined that “common sense dictates that in 1909 and 1910, Congress intended ‘coal’ to mean the solid rock substance.” Ute, 874 F.Supp. at 1153-54. In addition, the court examined a 1981 decision of the Solicitor of the Interior Department of the United States wherein the Solicitor reached a similar conclusion. Ownership of and Right to Extract Coalbed Gas in Federal Coal Deposits (1981), 88 I.D. 538.

Although the Ute case dealt with federal statutes, a similar analysis can be applied to the case before us on appeal, in that the plain meaning of the language of the deed must be examined to determine the intent of the parties.

ISSUE 1

Is coal seam methane gas a constituent part of the coal estate?

The District Court concluded, as a matter of law, that “[c]oal seam methane is part of the coal and of the coal estate. ...” Our standard of review relating to conclusions of law is whether the trial judge’s interpretation of the law is correct. Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603.

Union Reserve argues that the owner of the coal estate is also the owner of the coal seam methane gas because the gas is an incident to the formation of coal and reposes within the coal structure. Florentine contends that since coal seam methane gas is not a chemical part of coal, it is potentially severable from the coal estate.

An examination of definitions from various sources reveals that coal and gas are mutually exclusive terms. The American Heritage Dictionary 285 (2d C. ed. 1985), defines coal as:

[a] natural dark-brown to black solid used as a fuel, formed from fossilized plants and consisting of amorphous carbon with various organic and some inorganic compounds. [Emphasis added.]

Gas is defined as:

[t]he state of matter distinguished from the solid and liquid states by very low density and viscosity, relatively great expansion and contraction with changes in pressure and temperature, the ability to diffuse readily, and the spontaneous tendency to become distributed uniformly throughout any container. [Emphasis added.]

American Heritage Dictionary 549 (2d C. ed. 1985). As these definitions illustrate, coal is a “solid” and gas is “distinguished from the solid.”

A statutory definition of coal existing at the time the coal and coal rights were conveyed to Union Reserve can be found at § 82-4-203(17), MCA (1983). This section provides:

“Minable coal” means that coal which can be removed through strip- or underground-mining methods adaptable to the location that coal is being mined or is planned to be mined.

Since coal seam methane gas is not mined through “strip- or underground-mining methods”, it cannot be considered part of the coal that was conveyed to Union Reserve under this statutory definition.

In addition to the statute defining “minable coal,” a statutory definition of gas existed at the time of the deed. “ ‘Gas’ means all natural gases and all other fluid hydrocarbons as produced at the wellhead and not defined as oil....” Section 82-11-101(6), MCA (1983) (emphasis added). Since coal seam methane gas is a fluid hydrocarbon and is produced at the wellhead, it falls within this statutory definition of gas and again it is distinguishable from coal, a solid hydrocarbon.

The Montana Department of State Lands has had regulatory definitions of coal and gas since 1980. In the regulations, coal is defined as:

[a] black or brownish-black solid fossil fuel which has been subjected to the natural process of coalification and which falls within the classification of coal by rank: I, anthracite; II, bituminous; III, sub-bituminous; IV, lignite.

26.3.302(1)(g), ARM (emphasis added). Gas is defined in these regulations, along with oil, as:

all hydrocarbons and other substances and elements which are present in the earth in a gaseous or liquid form and produced therefrom. It shall not include coal, lignite, oil shale or similar solid hydrocarbons.

26.3.202(7), ARM (emphasis added).

In addition, the Montana Department of Natural Resources and Conservation defines gas as “all natural gases and all other fluid hydrocarbons as produced at the wellhead and not defined as oil....” 36.22.302(31), ARM (emphasis added). As these regulatory definitions illustrate, gas is a fluid or gaseous hydrocarbon and does not include coal.

Furthermore, the Solicitor of the Department of the Interior has concluded in two separate opinions that coal seam methane gas is distinct from coal and is therefore potentially severable from the coal estate. Rights to Coalbed Methane Under an Oil & Gas Lease for Lands in the Jicarilla Apache Reservation (1990), 98 I.D. 59; and Ownership of and Right to Extract Coalbed Gas in Federal Coal Deposits (1981), 88 I.D. 538.

Accordingly, we conclude that coal seam methane gas is not a constituent part of coal and, thus, it may be severed from the coal estate.

ISSUE 2

Did the District Court err in determining that Union Reserve has the right to produce coal seam methane gas from the coal lands?

The District Court concluded that coal seam methane gas was included in the conveyance of “coal and coal rights” from Carbon County to Red Lodge Bear-Creek Partnership, Union Reserve’s predecessor in interest. In addition, the court concluded that Florentine did not acquire a right to drill and produce the coal seam methane gas when it entered into the oil and gas lease. Again, our standard of review relating to conclusions of law is whether the trial judge’s interpretation of the law is correct. Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603.

Florentine argues that the District Court erred in not considering the plain meaning of the words in the deed to Union Reserve and that, applying the plain meaning rule, Union Reserve’s ownership of “coal and coal rights” includes only coal and does not include coal seam methane gas. Additionally, Florentine contends that the absence of any royalty on oil, gas or any mineral other than coal strongly implies the exclusion from the grant of any other mineral including gas which may be produced or saved from the coal formation.

Union Reserve argues that the term “coal rights” includes the rights to coal seam methane gas and that one of the incidents of the ownership of coal is the necessity, not merely the right, to vent coal seam methane gas in the course of coal mining activities for safety reasons. In addition, Union Reserve contends that it is important for the coal mine operator to have sufficient control over the drilling of wells into the coal to minimize the disruption to the mining process caused by the well.

In reaching its conclusions, the District Court focused on the physical properties of coal and gas without dealing with the language of the grant, the intent of the parties, or title and severance questions. “The words of a contract are to be understood in their ordinary and popular sense ...” Section 28-3-501, MCA; Moore v. Swanson (1976), 171 Mont. 160, 165, 556 P.2d 1249, 1252. We have already determined that, in their ordinary and popular sense, coal is a solid and gas is a fluid or gaseous substance. Hence, gas, including coal seam methane gas, is separate from coal and is not a constituent part of the coal estate.

When construing a phrase within a contract, the court must determine the intent of the parties from the writing alone if possible. Section 28-3-303, MCA; Glacier Campground v. Wild Rivers, Inc. (1978), 182 Mont. 389, 394-95, 597 P.2d 689, 692. See also § 70-20-202, MCA; New Home Sewing Mach. Co. v. Songer (1931), 91 Mont. 127, 132, 7 P.2d 238, 239-40. The plain language of the deed says “coal and coal rights.” The grant does not mention gas of any kind.

In addition, § 28-3-202, MCA, provides:

Effect to be given to every part of contract. The whole of a contract is to be taken together so as to give effect to every part if reasonably practicable, each clause helping to interpret the other.

When looking to other parts of the deed as prescribed by § 28-3-202, MCA, we see that the deed provided only for a per ton royalty on coal but did not provide for a royalty on the coal seam methane gas. It is not a reasonable assumption that Carbon County would have conveyed its rights to the coal seam methane gas, a valuable resource, without some sort of compensation. Moreover, the rules of statutory construction prohibit such an interpretation.

Contract restricted to its apparent objects. However broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract.

Section 28-3-305, MCA.

Contrary to the testimony of Donald Blackburn and Norbert Kmoch that Union Reserve received the entire mineral estate that Carbon County acquired through the tax deed, including silver and gold, Union Reserve only acquired the coal and the incidental right to mine and remove the coal. No other hydrocarbon or mineral resource was conveyed under the narrow language used by the parties in the deed.

Montana is an ownership-in-place state with regard to oil, gas and other minerals.

Both petroleum and gas, as long as they remain in the ground, are a part of the realty. They belong to the owner of the land, and are a part of it as long as they are on it or in it, or subject to his control.

Stokes v. Tutvet (1958), 134 Mont. 250, 255, 328 P.2d 1096, 1099. In addition, title to the mineral interest in land may be segregated in whole or in part from the rest of the fee simple title. Stokes, 328 P.2d at 1099. Under the language of its grant, Carbon County, as owner of the land, conveyed the coal to Union Reserve, but retained ownership of all other mineral interests including coal seam methane gas.

Union Reserve argues that the owner of the coal estate needs to protect its miners and to do so, it must control the gas estate. Union Reserve’s executives testified that they feared that extraction of coal seam methane gas enhanced by stimulation, i.e., hydrofracturing, in advance of mining will damage the roof of the coal seam, rendering entire tracts of coal unminable due to safety concerns. However, testimony presented by experts at trial showed that coal seam methane gas extraction does not harm the marketability or the minability of coal. Rajen Puri, an expert in coal seam methane gas recovery projects, testified that it is beneficial to the coal estate to rid the mine of dangerous coal seam methane gas prior to mining the coal. Additionally, Philip Malone, president of GeoMet, a geologic consulting firm, testified that hydrofracturing does not affect the safety of the mine and that, if degasification is done in advance of mining, it makes the mine safer.

It has long been the law of Montana that the grant of a particular interest in property tacitly carries with the grant those incidents without which the grant would be of no avail. See § 70-1-520, MCA; Yellowstone Valley Co. v. Associated Mortg. Investors (1930), 88 Mont. 73, 80-81, 290 P. 255, 257. Similarly, the transfer of a mineral interest includes, by implication, the incidental rights reasonably necessary to extract the mineral. See Hurley v. Northern Pacific Railway Company (1969), 153 Mont. 199, 202, 455 P.2d 321, 323. While we recognize the need and right of the coal owner to extract and capture coal seam methane gas for safety purposes during the mining process as such an incidental mining right, the existence of that right does not, without a specific grant, also encompass either actual title to the gas estate or the right to produce it for commercial purposes.

Moreover, the evidence at trial clearly demonstrated that the owner of the gas estate can also safely extract and produce coal seam methane gas either in advance of or during coal mining operations.

Accordingly, we hold that as the lessee of Carbon County, the owners of the gas estate, Florentine has the right to drill for and to produce the coal seam methane gas at issue here. We also hold that Union Reserve has a mutual, simultaneous right to extract and to capture such gas for safety purposes, incident to its actual coal mining operations.

We leave to the agreement of the parties or to some future case the issue of whether, and if so, to what extent, the gas estate owner or lessee is entitled to be compensated by the coal owner for gas extracted and captured incident to the coal owner’s mining operations.

ISSUE 3

Do the 1993 legislative amendments to § 15-1-101, MCA, and § 82-11-101, MCA, and the enactment of § 82-1-111, MCA, constitute an unlawful taking of coal seam methane gas from the owners of coal or coal lands?

Prior to 1993, there was no specific reference in the Montana statutes to coal seam methane gas, however, “gas” was defined at § 82-11-101(9), MCA (1991), as “all natural gases and all other fluid hydrocarbons as produced at the wellhead and not defined as oil. ...”

In 1993, the Montana Legislature deleted the definition of gas from § 82-11-101, MCA, and added a new section that defines coal, gas and oil. Section 82-1-111, MCA, provides:

(1) “Coal” means a combustible carbonaceaous rock formed from the compaction and induration of variously altered plant remains. Coal does not include:
(a) methane gas or any other natural gas that may be found in any coal formation;
(b) oil shale; or
(c) gilsonite.
(2) “Gas” means all natural gases and all other fluid hydrocarbons, including methane gas or any other natural gas found in any coal formation, as produced at the wellhead and not defined as oil in subsection (3).
(3) “Oil” means crude petroleum oil and other hydrocarbons, regardless of gravity, that are produced at the wellhead in liquid form by ordinary production methods and that are not the result of condensation of gas before or after it leaves the reservoir.

In addition, the legislature inserted a new section into the Montana Code to insure that all instruments regarding coal, oil and gas are interpreted according to § 82-1-111, MCA. Section 1-4-110, MCA, provides:

When used in any instrument, unless the clear and express terms of the instrument provide otherwise, the terms “coal”, “gas”, and “oil” must be construed as defined in 82-1-111.

The legislature also inserted definitions of gas and natural gas into § 15-1-101, MCA. Section 15-1-101(g), MCA, now provides:

[t]he terms “gas” and “natural gas” are synonymous and mean gas as defined in 82-1-111(2). The terms include all natural gases and all other fluid hydrocarbons, including methane gas or any other natural gas found in any coal formation.

Union Reserve argues that these legislative amendments were simply regulatory and did not affect Union Reserve’s ownership of the gas. In the alternative, Union Reserve argues that if these amendments serve to remove ownership from Union Reserve without compensation, then there is an unconstitutional taking.

Florentine contends that these legislative amendments merely clarified the existing law. In addition, Florentine argues that contrary to Union Reserve’s claim that removal of coal seam methane gas destroys or eliminates the rights enjoyed by the coal estate owner, the extraction of coal seam methane gas actually enhances the value of the coal estate by eliminating a safety hazard.

These amendments to Title 82 of the Montana Code do not take away any rights a coal owner may have to coal seam methane gas. Senate Bill 294 was prospective in nature. It provided that the “rights and duties that matured, penalties that were incurred, or proceedings that were begun before [the effective date of this act] ” are not affected. In the case before us on appeal, we have held that there was a severance of the gas estate from the coal estate, hence, the owner of the coal estate did not have a right to the coal seam methane gas under the plain language of the grant and the question of taking without compensation is necessarily moot.

ISSUE 4

Did the District Court err in not granting punitive damages to Union Reserve?

Because we reverse and remand this case on the central issue of ownership of the coal seam methane gas, the issue of punitive damages is necessarily moot.

Reversed and remanded for further proceedings consistent with this opinion.

CHIEF JUSTICE TURNAGE, JUSTICES TRIEWEILER, HUNT, GRAY, WEBER and LEAPHART concur.


author: DISTRICT JUDGE DOROTHY MCCARTER, sitting for JUSTICE NELSON, delivered the Opinion of the Court. JUSTICE WEBER

text:
    DONALD JARVENPAA, Plaintiff and Appellant, v. GLACIER ELECTRIC COOPERATIVE, INC., Defendant and Respondent.
    No. 94-377.
    Submitted on Briefs December 6, 1994.
    Decided July 11, 1995.
    52 St.Rep. 582.
    898 P.2d 690.
    271 Mont. 477.

      For Appellant: Robert P. Goff and Jean E. Faure, Church, Harris, Johnson and Williams, Great Falls.

      For Respondent: Gary R. Christiansen, Warden, Christiansen, Johnson & Berg, Kalispell.
   DISTRICT JUDGE DOROTHY MCCARTER, sitting for JUSTICE NELSON, delivered the Opinion of the Court.

The plaintiff, Donald Jarvenpaa, brought this action alleging that he was wrongfully discharged by defendant Glacier Electric Cooperative, Inc. (Glacier). Glacier moved for summary judgment, which was granted by the District Court for the Ninth Judicial District, Glacier County. Jarvenpaa appeals from this order. We reverse and remand.

Jarvenpaa began working for Glacier in 1962 and was Manager of Operations at the time of the alleged discharge. On September 29, 1992, Jarvenpaa’s supervisor advised him that his employment would be terminated on December 31,1992, because of problems with his job performance. Jarvenpaa was also informed that he could choose to retire prior to being dismissed and could accept a “Special Early Retirement Package” (SERP) which was being offered to five eligible employees. David Chapman, General Manager of the Board of Trustees, stated in a letter to Jarvenpaa dated November 2, 1992, “[Y]ou are being offered two options — retire under SERP or be terminated December 31, 1992.1 have not made, and do not herein make any offer to negotiate further.” Jarvenpaa responded on November 10, 1992, that he did not believe that Glacier had any basis to terminate his thirty-year employment, but “in view of your ultimatum that if I do not accept the offer of early retirement I will be terminated, I obviously have no alternative in this matter. Accordingly, with reluctance, I accept the offer to retire under SERP as set forth in your letter of November 2, 1992.”

Jarvenpaa subsequently filed this suit for wrongful discharge. The District Court granted Glacier’s motion for summary judgment. Although the court concluded that retirement can be a form of discharge under § 39-2-903(2), MCA, it found that, in this case, retirement was not a discharge because the employee signed an acknowledgement that his retirement was voluntary, and he accepted the benefits of the retirement package; he could have waited to be fired and then file an action for wrongful discharge. The court also concluded that the “retire or be fired” ultimatum was not a constructive discharge -under § 39-2-903(1), MCA, because the choice between discharge and retirement cannot be said to be so intolerable that voluntary termination, in this case retirement, is the only reasonable alternative.

Our standard of review from a grant of summary judgment is the same as that of the district court under Rule 56(c), M.R.Civ.P. Summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. However, summary judgment is not a substitute for a trial on the merits. Morton v. M-W-M, Inc. (1994), 263 Mont. 245, 249, 868 P.2d 576, 578-79.

All reasonable inferences must be drawn in favor of the party opposing the motion. In making its determination, the court must consider the entire record. Smith v. Barrett (1990), 242 Mont. 37, 40, 788 P.2d 324, 326.

Summary judgment motions, however, clearly are not favored. “[T]he procedure is never to be a substitute for trial if a factual controversy exists.” Reaves v. Reinbold (1980), 189 Mont. 284, 288, 615 P.2d 896, 898. If there is any doubt as to the propriety of a motion for summary judgment, it should be denied. Rogers v. Swingley (1983), 206 Mont. 306, 312, 670 P.2d 1386, 1389; Cheyenne Western Bank v. Young (1978), 179 Mont. 492, 496, 587 P.2d 401, 404.

The primary issue in this case, simply stated, is whether an employee, presented with a choice between being fired or accepting an early retirement package, has been “discharged” for purposes of bringing an action under Montana’s Wrongful Discharge From Employment Act.

Montana has chosen to protect the rights of a worker to challenge the validity of an employer’s decision to terminate his or her employment. While Montana law still provides that, absent provisions to the contrary, employment is “at will,” under the Wrongful Discharge From Employment Act, an employer in most cases must have good cause to fire an employee. “Good cause” is defined in the Act as “reasonable job-related grounds for dismissal based on a failure to satisfactorily perform job duties, disruption of the employer’s operation, or other legitimate business reasons.” Section 39-2-903(5), MCA.

In most cases the situation presented is one where the employment was actually terminated by the employer. The Wrongful Discharge From Employment Act, however, also allows for those situations in which the employer has made working conditions so intolerable that the employee is forced to quit — i.e., a constructive discharge. Under the Act, this type of situation is no less wrongful than an actual firing. Constructive discharge is defined in the Act as “the voluntary termination of employment by an employee because of a situation created by an act or omission of the employer which an objective, reasonable person would find so intolerable that voluntary termination is the only reasonable alternative.” Section 39-2-903(1), MCA. This definition is essentially the same as we defined constructive discharge in our pre-Act cases. Kestell v. Heritage Health Care Corp. (1993), 259 Mont. 518, 524, 858 P.2d 3, 6-7. We have held that in determining “whether an employee has been constructively discharged, the fact finder must decide whether the employer has rendered working conditions so intolerable that resignation is the only reasonable alternative.” Kestell, 858 P.2d at 7. This determination must be based on the totality of the circumstances, not on the employee’s subjective judgment that working conditions are intolerable.

In the case before us, the termination was initiated by the employer when it issued its ultimatum to the employee that he would be fired if he did not accept the retirement package. The employer’s statements to this effect were clear and unequivocal. Other courts have held that where an employer tells an employee to resign or be fired, the resignation can be a constructive discharge. Sheets v. Knight (Or. 1989), 779 P.2d 1000; Cameron v. Beard (Alaska 1993), 864 P.2d 538. See also Dept. of Air Force v. Dept. of Emp. Sec. (Utah App. 1990), 786 P.2d 1361, 1365 (where employee resigned in the face of inevitable discharge, the termination was initiated by the employer and was not a voluntary termination).

In Gates v. Life of Montana Ins. Co. (1982), 196 Mont. 178, 638 P.2d 1063, appeal after remand 205 Mont. 304, 668 P.2d 213 (1983), a pre-Act case, the employer asserted that the employee voluntarily resigned, but the employee argued that she signed a letter of resignation under duress when she was given the option of resigning or being fired. We noted that the threshold factual issue of whether the employee’s termination was voluntary or involuntary should be submitted to the factfinder. Gates, 638 P.2d at 1066. However, we have not yet been presented with a situation in which an employee, such as Jarvenpaa, is given a “retire or be fired” choice and chooses the alternative of accepting early retirement rather than the alternative of being fired.

Discussions of when an offer of early retirement actually amounts to a discharge occur most frequently in age discrimination cases. While the elements of an age discrimination claim differ from those in the case before us, the issues involved in determining whether this was in fact a forced termination or a voluntary retirement are substantially the same. Therefore we look to those cases for guidance.

An offer of early retirement does not by itself constitute constructive discharge. Early retirement often provides a beneficial way for older employees to leave the work place.

[M]ost courts have found that an offer of early retirement constitutes a constructive discharge only when the offer is made under terms and conditions where the employee would be worse off whether or not he or she accepted the offer. More simply stated, an offer of early retirement constitutes a constructive discharge when the choice is essentially either early retirement or continuing to work under intolerable conditions, like the threat of termination without benefits.

Smith v. World Ins. Co. (8th Cir. 1994), 38 F.3d 1456, 1461 (citations omitted).

Early retirement is not a discharge if the employee has the power to choose to keep working.

Absent the right to decline an employer’s offer of early retirement and keep working under lawful conditions, the “decision” to take the early retirement “option” is no decision at all. A “choice” between not working with benefits and not working without benefits amounts to, in effect, compulsory retirement.

Hebert v. Mohawk Rubber Co. (1st Cir. 1989), 872 F.2d 1104, 1113. Without this option to choose to keep working, “an employer’s offer of a choice between early retirement with benefits or discharge without benefits is nothing other than a discharge.” Hebert, 872 F.2d at 1113. In reaching this holding, the First Circuit considered and rejected the reasoning of the Sixth Circuit in Ackerman v. Diamond Shamrock Corp. (6th Cir. 1982), 670 F.2d 66.

The standard for determining when a constructive discharge has occurred is virtually the same as that found in the Wrongful Discharge From Employment Act.

[T]he law regards as the functional equivalent of a discharge those offers of early retirement which, if refused, will result in work so arduous or unappealing, or working conditions so intolerable, that a reasonable person would feel compelled to forsake his job rather than submit to looming indignities.

Vega v. Kodak Caribbean, Ltd. (1st Cir. 1993), 3 F.3d 476, 480. In applying this standard to an offer of early retirement,

a plaintiff who has accepted an employer’s offer to retire can be said to have been constructively discharged when the offer presented was, at rock bottom, “a choice between early retirement with benefits or discharge without benefits,” or, more starkly still, an “impermissible take-it-or-leave-it choice between retirement or discharge.”

Vega, 3 F.3d at 480.

In the case before us, the Board of Trustees voted on September 28,1992, to offer the SERP to all five eligible employees. One day later, Jarvenpaa was informed that he would be fired if he did not accept the retirement package. He was specifically threatened with loss of health insurance benefits if he waited to be fired. From these facts, a reasonable jury could conclude that Jarvenpaa was in fact forced to retire and that his termination was not voluntary. A statement by an employer that the employee might be discharged, with a consequent loss of benefits, creates a contested issue of material fact regarding constructive discharge even if the employee accepts an early retirement offer; a reasonable person, faced with a loss of benefits if he waits to be discharged rather than accept retirement, might well feel compelled to resign. Downey v. Southern Natural Gas Co. (5th Cir. 1981), 649 F.2d 302, 305.

The employer makes much of the fact that Jarvenpaa’s lump sum benefit under the SERP was considerably greater than his entitlement if he were terminated. However, there is no indication in the record that Jarvenpaa was offered any greater benefits than any of the other employees eligible for the SERP. Furthermore, these benefits were substantially less than Jarvenpaa asserts he would have received if he had been allowed to continue working until his normal retirement, a choice which he did not have.

The problem with the employer’s argument is the same as that encountered in age discrimination cases; it would permit an employer to escape the consequences of age discrimination or, in this case, alleged wrongful discharge, by .presenting an employee with a Hob-son’s choice of being fired or of taking the retirement package offered. The employer can thus rid itself of what it perceives to be a problem employee without having to account for its action. While the amount of the retirement benefit which he received is relevant to the amount of damages due to Jarvenpaa if he succeeds in this lawsuit, it is not determinative of whether his termination was voluntary or not. “The fact that [the employee], when confronted with the retire-or-be-fired choice, bargained for all that he could get in the way of benefits simply does not change the fact that this was, at bottom, a forced retirement, not a voluntary one.” Hebert, 872 F.2d at 1113.

One point that needs to be kept in mind is that we do not decide here whether Jarvenpaa will prevail on his wrongful discharge claim. We do not decide whether Glacier’s actions to terminate him were wrongful. That is for the trier of fact to decide. What we do decide here is that the circumstances in this case constitute a discharge, rather than a voluntary termination of employment, and therefore Jarvenpaa’s case is sufficient to survive a motion for summary judgment.

We reverse the District Court’s grant of summary judgment and remand for proceedings consistent with this Opinion.

JUSTICES GRAY, HUNT and TRIEWEILER concur.

JUSTICE WEBER

dissents as follows:

The opinion states the primary issue in this case as follows:

The primary issue in this case, simply stated, is whether an employee, presented with a choice between being fired or accepting an early retirement package, has been “discharged” for purposes of bringing an action under Montana’s Wrongful Termination Act.

In its summary judgment, the District Court speaking to that same issue stated:

Choosing to accept the available retirement option was the same as entering into an employment contract or settling a lawsuit, which is another form of agreement. Jarvenpaa agreed that he would retire and accept the benefits and detriments of doing so. Thus, while he may have been discharged, such discharge could not be unlawful.

Prior to discussing the merits of the holding of the opinion in this case as compared to the District Court, I believe it is essential to more fully set forth the basis on the part of the District Court for its decision on summary judgment. Following are pertinent portions of that Order:

The undisputed facts of this case are as follows: Sometime prior to October 23, 1992, plaintiff Donald Jarvenpaa’s supervisor told him he, Jarvenpaa, would be terminated on December 31, 1992. In the alternative, Glacier offered Jarvenpaa the opportunity to take early retirement which would provide Jarvenpaa with over $100,000 in retirement benefits (beyond what he would receive if discharged) and would allow him to continue to participate in Glacier’s health care plan. Jarvenpaa chose to retire and took a retirement package of over $300,000, plus continued coverage under Glacier’s health care plan. This retirement package was available to other qualified employees of Glacier.
Jarvenpaa clams that his choice to retire was a “Hobson’s choice,” no choice at all, and that he was coerced into resigning.
Glacier claims that Jarvenpaa’s choice to accept early retirement precludes any possibility of a finding that Jarvenpaa was discharged.
The definition of the term “discharge” includes resignation. § 39-2-903(2), Mont. Code Ann. (1991). It does not specifically include retirement. However, as retirement is a form of termination of employment it appears to be included in the statutory definition of discharge.
On January 14, 1993, Jarvenpaa signed an EMPLOYEE’S ELECTION TO ACCEPT SPECIAL EARLY RETIREMENT WINDOW which states that Jarvenpaa’s choice to accept the early retirement was “voluntary and ... made of [Jarvenpaa’s] own free will.”
Jarvenpaa accepted the benefits of early retirement. Glacier paid Jarvenpaa over $100,000 for his election to retire. Also, Jarvenpaa was allowed to continue to participate in Glacier’s employee health care plan (with premiums paid by Jarvenpaa.)
Jarvenpaa’s signed acknowledgement that his retirement was voluntary and his acceptance of the benefits provided under the early retirement agreement precludes Jarvenpaa as a matter of law from recovery under Title 39, Chapter 2, part 9, Mont. Code Ann. (Emphasis supplied.)

While not specifically quoted by the District Court in its Order, it is undisputed that the plaintiff and his wife signed the Employee’s Election to Accept Special Early Retirement Window which is attached to plaintiff’s deposition as Exhibit H and which in pertinent part states:

The undersigned employee of Glacier Electric Cooperative, Inc. (the “Cooperative”), and his/her spouse, acknowledge that they have been presented with a copy of the Board Resolution that makes available a Special Early Retirement Window (the “Retirement Window”) for certain employees of the Cooperative, and that they have had a full explanation of the Retirement Window, and opportunity to ask all questions concerning it that they wish to ask.
The undersigned employee and his/her spouse acknowledge that during the window period of 3 months, they have had ample time to examine the provisions of the Retirement Window and consult with anyone they wish. The undersigned parties under stand that the employee’s election under the Retirement Window is voluntary and state that this election is made of the employee’s own free will.
The undersigned employee hereby elects to participate in the Retirement Window. ...
The undersigned spouse of the undersigned employee states that he/she agrees with the election of the employee under the Retirement Window.

I conclude that the following undisputed facts which are contained in plaintiff’s deposition are also relevant on this issue:

(Questioning by defense counsel)

Q: ... Now, as I understand it, and we know from the record that you elected the Special Early Retirement Program, my understanding is you took the lump sum option under that program and received money in a lump sum; is that correct?
A: That’s correct.
Q: And if I understand the payments that you received, you basically got $302,000 as a lump sum under the special program, you got 15,700 and some dollars for contributions that you had made into the program, and you also received 25,000 and almost $900 for accrued vacation and leave and so forth. Is that accurate?
A: Sounds close.
Q: Can you think of any checks I missed out on?
A: Not offhand, no.
Q: Okay.
A: You got, what did you say, 302?
Q: I got 302.
A: Plus 15?
Q: Plus 15, plus 25.
A: Okay. Pretty close, I guess.

An important fact to keep in mind is that, as a part of this Early Retirement, the plaintiff received something over $340,000 in cash, and after receipt of that, he then commenced the present lawsuit.

It is also important to keep in mind one of the facts which was considered and referred to by the District Court. The special retirement accepted by the plaintiff required the expenditure of over $100,000 additional funds by defendant. Again, this is demonstrated in plaintiff’s deposition where he stated as follows:

Q: All right, now, what I want to ask you is, do you know how much it cost the co-op to buy you that special retirement program that you have taken the money from?
A: I have no idea.
Q: Okay. Well, I think that there’s some correspondence in here, maybe the November 2 letter, I’m not sure, but are you aware the co-op paid about $106,000 to get you eligible for that Special Early Retirement Program? Does that number mean anything to you? A: No.
Q: Hundred thousand sound like a ball park figure?
A: Well, are you saying if I was terminated — I know if I was terminated, I’d get 200 according to that letter there, and if I didn’t, I would get 300.
Q: So you got really $100,000 more as part of your lump sum because you took the special retirement; right?
A: Right.
Q: All right. Now, what I don’t understand is why are you saying you were actually discharged when you elected the special—
A: I only had one option or the other.
Q: I understand that.
A: Okay.
Q: Now, if you lose this lawsuit, are you prepared to pay back to the co-op the hundred and some thousand dollars that they have paid to give you the special retirement program that you took?
A: Do you think I should?
Q: I’m asking you.
A: No, I wouldn’t.
Q: Why not?
A: Well, why would I?
Q: Why not?
A: I don’t feel that I should.

We emphasize that the extra $100,000 is clearly consideration for early retirement paid by the defendant Glacier Electric to the plaintiff.

In its Order the District Court pointed out that plaintiff was not compelled to retire in the form that he did and was free to remain employed until discharged when he would receive substantial benefits, although less than he received by retiring, and seek compensation for the discharge in a lawsuit. The District Court stated:

Jarvenpaa was free to remain employed until discharged and then seek compensation for the discharge if he believed it to be without good cause. He would have received all he was entitled to and if he was successful in his lawsuit he would have received damages. Instead, Jarvenpaa chose to accept early retirement and the benefits appurtenant thereto. He did have a choice. The retirement was available to him, and others, and it did not entail the risk that he would be unsuccessful in a lawsuit alleging an unlawful discharge.

This properly emphasizes the distinction between this case and several of the cases cited in the opinion here. This was not a case in which a plaintiff was required to resign or he would receive no benefits.

By accepting early retirement, the plaintiff required that the defendant spend over $100,000 of additional funds to purchase the retirement benefits which he has now received. The analysis of the District Court on this aspect was directly on point when the District Court stated:

Choosing to accept the available retirement option was the same as entering into an employment contract or settling a lawsuit, which is another form of agreement. Jarvenpaa agreed that he would retire and accept the benefits and detriments of doing so. Thus, while he may have been discharged, such discharge could not be unlawful.

This is a key aspect of this case. This is directly comparable to the settling of a lawsuit by agreement which includes the payment of substantial monies to the settling plaintiff.

The opinion points out that in most cases the situation presented is one where the employment was actually terminated by the employer, which of course does not apply here. The opinion then points out that the Wrongful Discharge Act covers those situations where the employer has made working conditions so intolerable that the employee is forced to quit — a constructive discharge. I disagree with the analysis because I find no basis to conclude there was something which could be called a constructive discharge. I agree with the analysis of the District Court which stated:

Glacier’s notice that if he chose not to retire, Jarvenpaa would be terminated for what Glacier considered good cause but Jarvenpaa did not, does not constitute a constructive discharge.
“ ‘Constructive discharge’ means the voluntary termination of employment by a employee.because of a situation created by an act or omission of the employer which an objective, reasonable person would find so intolerable that voluntary termination is the only reasonable alternative.” § 39-2-903(1), Mont. Code Ann. (1991).
The choice between discharge and retirement cannot be said to be “so intolerable that voluntary termination [or retirement] is the only reasonable alternative.”
The Court concludes that Jarvenpaa voluntarily retired. Accordingly, his claim for wrongful discharge must fail.

Certainly the constructive discharge statute does not apply to this type of a situation as there is an absence of a situation which was so intolerable that voluntary termination was the only reasonable alterative. That analysis is just not applicable here.

I agree with the holding of the District Court that plaintiff Jarvenpaa voluntarily retired and therefore his claim for wrongful discharge fails.

I have emphasized the facts in this case because such facts do not warrant the technical legal application or analysis which is applied in the opinion. The uncontradicted facts as established primarily through the deposition testimony of plaintiff Jarvenpaa, establish that there were numerous and clear grounds, as viewed by the employer, to discharge Jarvenpaa. Those conditions were viewed by the employer as being so intolerable as to require his discharge. In its analysis, the employer took into consideration the approximate 30 years of employment by plaintiff Jarvenpaa and concluded it was fair to allow him to retire under the Special Early Retirement package, even though that required an additional expenditure of over $ 100,000 on the part of the employer. At a time when plaintiff was represented by counsel, he executed his Employee’s Election to Accept in which he specifically stated as follows:

The undersigned parties understand that the employee’s election under the Retirement Window is voluntary and state that this election is made of the employee’s own free will.

This is not a case in which the employee was forced to sign this without benefit of counsel. All of the exhibits to which reference has been made were furnished by the defendant Glacier Electric to plaintiff’s counsel and were considered by that counsel who in turn prepared various of the papers submitted by the plaintiff employee. I agree with the analysis of the District Court which concluded that Jarvenpaa agreed (with the advice of his own counsel) that he would retire and accept the benefits and detriments of doing so. Under that circumstance it is unjust to allow the present action to continue.

I would point out that the opinion must be construed by the employer as setting a precedent which tells the employer that it made a mistake when it put up an additional $100,000 plus in order to buy a retirement program and its peace — it should just have said we have an adequate basis to discharge and then do so — making such a discharge we will not consider the number of years of employment or any positive factors in the employee’s favor. The opinion has the effect of inviting extended litigation in connection with the various early retirement plans which have been recently used throughout Montana, and even by the State government itself.

CHIEF JUSTICE TURNAGE and DISTRICT JUDGE TED L. MIZNER (sitting for Justice Leaphart) concur in the foregoing dissent.