Unpublished Disposition, 852 F.2d 572 (9th Cir. 1985)

Conrad Sigurd PEDERSON, et al., Plaintiffs-Appellees,v.RICHLAND COUNTY, MONTANA, a body corporate and politic, apolitical subdivision, Defendant-Appellant.

No. 85-3995.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Sept. 9, 1988.Decided June 29, 1988.

Before HUG^*  and BEEZER, Circuit Judges, and LELAND C. NIELSEN,^**  Senior District Judge

MEMORANDUM^*** 

Richland County Appeals from the order of the United States District Court granting summary judgment in favor of the Pedersons. We reverse and remand.

The determinative issues are:

1. Whether the district court erred in concluding that the portion of the decree granting the County a royalty reservation was void on the basis of lack of jurisdiction, and

2. Whether the Pedersons' suit is barred by the doctrine of laches.

The parties raised other issues which are not essential to this opinion and are not discussed.

The facts are as follows: In the 1930's, Richland County took tax deeds to five tracts of land because the original owners failed to pay the property taxes. No challenge has been made to the validity of the tax deeds. In 1940, Edward Erickson, plaintiffs' predecessor in title, purchased the five tracts from the County. The County conveyed the five tracts to Erickson by quitclaim deeds. The deeds for tracts 1, 3, 4, and 5 did not contain a reservation of any royalty interest in oil and gas. The quitclaim deed for tract 2 did contain a reservation in favor of the County of a six and one-quarter percent (6 1/4%) royalty interest in oil and gas.

In 1948, Erickson commenced a quiet title action in the Richland County District Court for the purpose of obtaining a confirmation deed and quieting title against the people who had owned the property prior to the County. Richland County was not named a party to this action, but the County Treasurer was named.

On January 5, 1949, the district court entered its default decree, prepared by Erickson's attorney, quieting title to the five tracts in Erickson. The district court also decreed a six and one-quarter percent (6 1/4%) royalty interest to the County in all five tracts. A confirmation deed was executed the same day also containing the six and one-quarter percent (6 1/4%) royalty reservation.

Neither Erickson nor his wife ever challenged the reservation. By 1976, Rosemary Pederson owned one-half of the mineral rights to the land. In October, 1978, and April, 1979, Rosemary Pederson signed division orders from Pennzoil Oil Company acknowledging a six and one-quarter percent (6 1/4%) royalty reservation in Richland County. Richland County began collecting royalties based upon the reservation from the time the land became productive. The Pedersons filed suit on February 6, 1984, seeking a ruling from the district court that the royalty interest claimed by the County is null and void and that the County be ordered to account to the plaintiffs for all funds received under the reservation.

On cross motions for summary judgment, the district court granted summary judgment to the Pedersons for tracts 1, 3, 4, and 5. The court found that since the County was not named a party to the 1949 quiet title action, the decree of that court granting the County a royalty reservation exceeded the court's jurisdiction, was void ab initio, and could be attacked at any time by a party in interest, whether a party to the original suit or not. The court granted summary judgment to the County for tract 2, since Erickson's original deed to that tract did contain a royalty reservation. Richland County appealed.

The first issue raised by the County is whether the district court erred in concluding that the portion of the decree granting the County a royalty reservation was void on the basis of lack of jurisdiction. We agree with the reasoning of the district court and hold that it did not. The district court stated:

In 1949, when the district court decreed a 6 1/4% royalty reservation in favor of the county in all five tracts the court exceeded its jurisdiction because the county was not a party to the case and the issue of the 6 1/4% royalty was not before the court. A judgment can be rendered only for or against a party to an action or proceeding. The rights and liabilities of persons not parties cannot be adjudicated. Moore v. Capital Gas Co., 117 Mont. 148, 158 P.2d 302 (1945). Unless the person and the issue are before a court, that court has no more power to render a judgment in favor of such person than it has to render a judgment against him. A decree granting relief beyond the issue submitted, being beyond the jurisdiction of the court, is void ab initio and may be collaterally attacked at any time by a party in interest, whether a party to the suit or not.

Pederson v. Richland County, CV-84-25, mem. op. at 3 (D. Mont. June 20, 1985). Recent decisions of the Montana Supreme Court, however, have permitted the doctrine of laches to be applied in similar situations.

This brings us to the second issue raised by the County--whether the plaintiffs' suit is barred by the doctrine of laches. Laches is an equitable doctrine meaning negligence in the assertion of a right so as to render the enforcement of the right inequitable. Estate of Wallace, 186 Mont. 18, 26, 606 P.2d 136, 140 (1980). There is no absolute rule as to what constitutes laches in Montana, and each case must be judged by the particular circumstances involved. Id. at 25, 606 P.2d at 140.

Laches has been applied in oil and gas royalty reservation cases in Montana. In Lowrance v. Gunderson, 157 Mont. 532, 487 P.2d 511 (1971), plaintiff sought to quiet title in herself to an oil and gas royalty reservation claimed by Gunderson. Plaintiff claimed her right through her predecessor in interest, Mr. Wight. Wight's claim dated from 1928, yet Wight never asserted any claim against Gunderson. Wight died in 1957, and his interest passed to Lowrance, who filed an action in 1966, nine years later. The Montana Supreme Court, in holding that plaintiff's claim was barred by laches, noted that the laches of her predecessor was compounded by plaintiff's own nine-year delay in filing suit, even though the land had been in production since 1935. Id. at 535, 487 P.2d at 513. The court further found that:

[I]f the property involved is of a speculative or fluctuating character, more than ordinary promptness is required of a claimant; he must press his claim at the earliest possible time. This rule is applied with great strictness in the case of oil or mining property, since it is of a specially precarious nature, and is exposed to the utmost fluctuations in value.

Id. at 536-37, 487 P.2d at 514 (quoting 30A C.J.S. Equity Sec. 118, at 68) (emphasis added).

In two recent cases, not available to the district court at the time of its decision, the Montana Supreme Court applied the doctrine of laches in quiet title actions where the tax deeds that were contested by plaintiffs were held to be void for jurisdictional defects. In Richardson v. Richland County, 711 P.2d 777 (Mont.1985) and Anderson v. Richland County, 711 P.2d 784 (Mont.1985), plaintiffs were successors in interest to original property owners who had lost property for failure to pay property taxes. The County took the property by tax deed, later selling the land but retaining a six and one-quarter percent (6 1/4%) royalty reservation. Plaintiffs brought an action challenging the County's reservation based upon infirmities in the tax deed proceedings. In both cases, the Montana Supreme Court barred plaintiffs' claims based upon laches. Richardson, 711 P.2d at 783; Anderson, 711 P.2d at 788-89. The court discussed significant factors warranting the application of laches. They included: that plaintiffs' predecessor abandoned the property years before the suit; the greatly increased value of the property; that plaintiffs learned of their claim after the discovery of oil; the amount of royalties received by the County, the reimbursement of which would fall upon County taxpayers; that the principal parties to the proceedings are decreased; and that plaintiffs had not shown reasons for the delay in filing suit. Richardson, 711 P.2d at 782-83; Anderson, 711 P.2d at 788.

Because the applicability of laches is a factual question, we remand this case to the district court. The district court must apply the factors enumerated in the above-cited cases and determine whether or not plaintiffs' claim is barred by laches. The court must especially determine at what point the plaintiffs and their predecessors in interest, the Ericksons, learned of the County's reservation, and whether the delay between such knowledge and the filing of this suit warrants the application of laches.

The County argues that the Ericksons had constructive notice of the reservation from the time the confirmation deed was executed in 1949. Further, it argues plaintiffs knew of the reservation at least by 1978 when Rosemary Pederson signed the Pennzoil division orders.

The Pedersons counter that they did not learn of the reservation until 1983, and that the Ericksons were not aware of the reservation at all.

Therefore, we remand this case to the district court for trial and a determination of the applicability of the doctrine of laches.

REVERSED AND REMANDED.