 97-686




                                                                        No. 97-686

                                     IN THE SUPREME COURT OF THE STATE OF MONTANA

                                                                       1998 MT 89N



                                                                  OLIVER GENDREAU,

                                                          Plaintiff and Appellant,

                                                                                 v.

                                                              MICHAEL D. ROUNTREE,

                                                         Defendant and Respondent.




               APPEAL FROM:                   District Court of the Fifteenth Judicial District,
                                                       In and for the County of Daniels,
                                                The Honorable David Cybulski, Judge presiding.


                                                                COUNSEL OF RECORD:

                                                                    For Appellant:

                         Mark T. Errebo; Kurth & Errebo, P.C.; Billings, Montana

                                                                   For Respondent:

                     Loren J. O'Toole II; O'Toole & O'Toole; Plentywood, Montana



                                              Submitted on Briefs: March 19, 1998
                                                   Decided:   April 23, 1998
                                                            Filed:

                                        __________________________________________

                                                  Clerk
                         Justice Jim Regnier delivered the opinion of the Court.

¶1        Pursuant to Section I, Paragraph 3(c), Montana Supreme Court 1996


 file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-686%20Opinion.htm (1 of 6)4/25/2007 4:30:15 PM
 97-686


Internal Operating Rules, the following decision shall not be cited as precedent
but shall be filed as a public document with the Clerk of the Supreme Court
and shall be reported by case title, Supreme Court cause number, and result to
the State Reporter Publishing Company and to West Group in the quarterly
table of noncitable cases issued by this Court.

¶2   On June 30, 1997, Oliver Gendreau filed a complaint in the Fifteenth
Judicial District Court, Daniels County, against Michael Rountree. Gendreau
brought an action against Rountree to relinquish or release an oil and gas lease
which he had entered into with Rountree. Rountree filed a motion for
summary judgment, which the District Court granted on October 3, 1997.
Gendreau now appeals from the order granting Rountree summary judgment.
We affirm.

¶3   The issue on appeal is whether the District Court erred in granting
Rountree's motion for summary judgment.
           FACTUAL AND PROCEDURAL BACKGROUND

¶4   On October 11, 1996, Oliver Gendreau, as lessor, entered into an oil
and gas lease with Michael Rountree, as lessee, on lands in Daniels County,
Montana. The parties executed an extension of the lease on January 12, 1997.
Under the terms of the lease, Rountree had to commence drilling operations
by February 12, 1997, in order to automatically extend the lease under the
lease provisions.

¶5   On June 6, 1997, Gendreau's attorney sent a demand letter to Rountree,
asking him to execute and file a release of the oil and gas lease with the
Daniels County Clerk and Recorder. The reason for this demand was because
"the primary term of the lease has expired and the lease has not been extended
into a secondary term by production or any other reason." Rountree refused
to release the lease.

¶6   On June 30, 1997, Gendreau filed a complaint in the Fifteenth Judicial
District Court, Daniels County, seeking to compel the release of the lease
between him and Rountree. On July 2, 1997, Gendreau applied to the District
Court for a preliminary injunction and temporary restraining order preventing
Rountree from commencing or continuing operations to drill for oil and gas on
the lands covered by the lease. A hearing was held on July 8, 1997, and the
District Court denied the application.

¶7   On July 24, 1997, Rountree filed an answer to the complaint and a
counterclaim against Gendreau. Also on July 24, 1997, Rountree filed a
motion for summary judgment, claiming that Gendreau did not provide
adequate notice of any breach or default as specified in Paragraph 35 of the
lease before commencing this litigation in the District Court.   Paragraph 35,
entitled "BREACH OR DEFAULT," provides in pertinent part:
     [N]o litigation shall by initiated by [Gendreau] with respect to
     any breach or default by [Rountree] hereunder for a period of at
     least sixty (60) days after [Gendreau] has given [Rountree]

 file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-686%20Opinion.htm (2 of 6)4/25/2007 4:30:15 PM
 97-686


          written notice fully describing the breach or default, and then
          only if [Rountree] fails to remedy the breach or default within
          such period. In the event the matter is litigated and there is a
          final judicial determination that a breach or default has
          occurred, this Lease shall not be forfeited or canceled in whole
          or part unless [Rountree] is given reasonable time after said
          judicial determination to remedy the breach or default and
          [Rountree] fails to do so.

Rountree argued that he was entitled to summary judgment because Gendreau
violated the lease by filing his compliant less than 60 days after making his
demand on June 6, 1997.

¶8   On August 7, 1997, Gendreau filed his response, asserting that he was
not terminating the lease because Rountree had breached or defaulted.
Instead, he argued that the lease was no longer in effect because Rountree had
not commenced drilling operations within the primary term of the lease.
Gendreau also argued that a material fact may exist because the parties dispute
whether the lease had expired under its own terms.

¶9   The motion was fully briefed and a hearing was held on September 29,
1997. On October 3, 1997, the court issued an order granting summary
judgment for Rountree and awarding him attorney fees and costs. From this
order Gendreau appeals.
                        DISCUSSION

¶10 Did the District Court err in granting Rountree's motion for summary
judgment?

¶11 The District Court granted summary judgment because it determined
that under Paragraph 35 of the lease it was undisputed that the "lease was
extended beyond its primary term by the commencement of drilling operations
before the expiration of the lease." The court concluded that no other breach
or termination provision, including Paragraph 35, applied under the facts
presented.

¶12 Our standard of review in appeals from summary judgment rulings is
de novo. See Motaire v. Northern Montana Joint Refuse Disposal Dist.
(1995), 274 Mont. 239, 242, 907 P.2d 154, 156; Mead v. M.S.B., Inc. (1994),
264 Mont. 465, 470, 872 P.2d 782, 785. When we review a district court's
grant of summary judgment, we apply the same evaluation as the district court
based on Rule 56, M.R.Civ.P. See Bruner v. Yellowstone County (1995), 272
Mont. 261, 264, 900 P.2d 901, 903. In Bruner, we set forth our inquiry:
     The movant must demonstrate that no genuine issues of material
     fact exist. Once this has been accomplished, the burden then
     shifts to the non-moving party to prove, by more than mere
     denial and speculation, that a genuine issue does exist. Having
     determined that genuine issues of material fact do not exist, the
     court must then determine whether the moving party is entitled

 file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-686%20Opinion.htm (3 of 6)4/25/2007 4:30:15 PM
 97-686


     to judgment as a matter of law. We review the legal
     determinations made by a district court as to whether the court
     erred.
Bruner, 272 Mont. at 264-65, 900 P.2d at 903 (citations omitted).

¶13 On appeal, Gendreau first argues that Rountree's motion for summary
judgment was insufficient to carry the initial burden of proof that no issue of
material fact existed. In essence, Gendreau's argument is that the District Court
should not have relied upon Rountree's assertion that he had commenced
drilling before the lease term ended because Rountree's motion for summary
judgment was based upon whether Gendreau had failed to comply with the
notice requirements of Paragraph 35. Gendreau contends that the District
Court erred by granting summary judgment on grounds wholly unrelated to the
grounds in Rountree's motion and briefs.

¶14 Upon a review of the pleadings and transcripts, we conclude that
Gendreau's first argument is meritless. The main argument presented before
the District Court by both parties was whether or not the lease was in effect
when Rountree received Gendreau's demand letter, asking him to file a release
of the lease. Although Rountree argued that he had been given improper notice
of breach or default before Gendreau commenced litigation, he presented
evidence to the court that the lease was still in effect because he had
commenced drilling operations. Gendreau countered by arguing that the lease
had expired upon its own terms rather than by breach or default. Thus, the
court was required to decide whether the lease was still in effect because
Rountree had commenced drilling during the term of the lease. Therefore, we
conclude that Rountree's brief and motion were sufficient to carry his initial
burden of proof that no issue of material fact existed.

¶15 Next, Gendreau argues that the District Court erred in granting
Rountree's motion for summary judgment because there are genuine issues of
fact which preclude the granting of summary judgment for Rountree.
Specifically, Gendreau contends that there are at least two issues of material
fact:
      1) no evidence was before the court that a drill bit had entered the
      ground prior to the expiration of the primary term of the lease on
      February 12, 1997; and 2) in any case, the cursory activities performed
      on the well location in February were not "commencing drilling
      operations" as defined in the lease and were insufficient to extend the
      lease into a secondary term and hold it for 5 months.


¶16 The District Court stated that "[c]learly there had to be a drilling bit
penetrating the ground to drill the hole to insert the conductor pipe into the
ground on or before February 11, 1997." Therefore, the court ruled that the
"lease was extended beyond its primary term by the commencement of drilling
operations before the expiration of the lease." Finally, the court noted that no
breach or default provision applied under the facts as presented.



 file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-686%20Opinion.htm (4 of 6)4/25/2007 4:30:15 PM
 97-686


¶17 As stated above, the lease would terminate on February 12, 1997, the
end of the primary term, unless drilling operations were being pursued. Under
Paragraph 3 of the lease, the term "commence drilling operations" is defined
as "the actual penetration of the ground by a drilling bit."

¶18 Rountree presented evidence that he had commenced drilling before the
expiration of the lease term. This evidence included an affidavit filed with the
Clerk and Recorder of Daniels County on April 7, 1997, wherein Rountree
states that on February 11, 1997, operations were commenced, conductor pipe
was set, and drilling operations were commenced. Also, the court reviewed
photographs depicting the conductor pipe set into the ground, showing that
drilling had commenced as defined under the lease.

¶19 Gendreau provided the District Court with no evidence that drilling had
not commenced. In fact, it is only by way of argument by counsel at the
summary judgment hearing that Gendreau contended that no drilling had
commenced, thus the lease had expired upon its own terms.

¶20   In order to meet its burden, the party opposing a motion for summary
judgment must present substantial evidence, not mere denial, speculation, or
conclusory statements. Sprunk v. First Bank System (1992), 252 Mont. 463,
466, 830 P.2d 103, 105. "The opposing party's facts must be material and of
a substantial nature, not fanciful, frivolous, gauzy nor merely suspicions."
Fleming v. Fleming Farms, Inc. (1986), 221 Mont. 237, 241, 717 P.2d 1103,
1105. Moreover, the opposing party cannot rest upon mere allegations in the
pleadings, but "has an affirmative duty to respond by affidavits or other sworn
testimony containing material facts that raise genuine issues; conclusory or
speculative statements will not suffice." Groshelle v. Reid (1995), 270 Mont.
443, 447, 893 P.2d 314, 316.

¶21 After a review of the record, we conclude that Gendreau has failed to
establish a genuine issue of material fact with regard to any of his claims. In
fact, the record is devoid of any evidence to contradict Rountree's affidavit
submitted in support of his motion for summary judgment. Rather, Gendreau
relies on speculative and conclusory statements which are not directly
supported by evidence contained within the record.

¶22 Accordingly, we hold that the District Court did not err when it granted
summary judgment in favor of Rountree.

¶23       Affirmed.

                                                                       /S/        JIM REGNIER


We Concur:

/S/       J. A. TURNAGE
/S/       KARLA M. GRAY

 file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-686%20Opinion.htm (5 of 6)4/25/2007 4:30:15 PM
 97-686


/S/       WILLIAM E. HUNT, SR.
/S/       JAMES C. NELSON




 file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/97-686%20Opinion.htm (6 of 6)4/25/2007 4:30:15 PM
