McSweyn v. Musselshell County, Montana

Musselshell County (the County) (defendant) sold property to A.D. Shields, but reserved a mineral interest in “an undivided two and one-half percent of all oil, gas and other mineral lying in, under and beneath the premises hereinbefore described.” The County sent Shields a deed for the property, which stated that reserved for the County was “an undivided two and one-half percent royalty of all oil, gas, and other minerals lying in, and that may be produced from the premises hereinbefore described, delivered free of cost.” The County leased its reserved interests to McSweyn (plaintiff). The McSweyn lease was only valid if the interest leased was a mineral interest and not a royalty interest. However, the lease also contained the following provision: “The execution of this instrument shall in no way prejudice the right of Musselshell County to claim its interest is a royalty interest rather than a mineral interest.” McSweyn filed suit seeking a declaratory judgment regarding his interests under the lease. The District Court for the Fourteenth Judicial District in Musselshell County, without being presented the issue, found that a mineral interest is more valuable than a royalty interest. The district court thus found that because the County initially reserved a mineral interest in its sale to Shields, but then reserved only a royalty interest in its deed to Shields, the deed was an unconstitutional gift as it deeded a more than Shields bargained for. The district court held that McSweyn’s lease was for a mineral interest and thus was valid. The County appealed.