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Kothe v. Jefferson

OPINION FILED OCTOBER 4, 1983.

SHUBRICK T. KOTHE, EX'R, APPELLANT,

v.

MARY ANN JEFFERSON ET AL., APPELLEES.



Appeal from the Appellate Court for the Fourth District; heard in that court on appeal from the Circuit Court of Clark County, the Hon. Caslon K. Bennett, Judge, presiding.

JUSTICE MORAN DELIVERED THE OPINION OF THE COURT:

The plaintiff, Vera Shaw, filed suit in the circuit court of Clark County against numerous individuals seeking to cancel portions of an oil and gas lease due to an alleged breach of the implied covenant to reasonably develop the property. She sought cancellation of the lease as it applied to 318.5 acres of the 438.5-acre leasehold which she owned. A number of the original defendants defaulted and, pursuant to plaintiff's motion, the circuit court cancelled the lease as to those individuals. Plaintiff also moved for, and was granted, summary judgment against the remaining defendants, Mary Jefferson and her heirs and John Ryan (defendants), with respect to 120 acres (hereinafter referred to as the subject tract), of the 318.5 acres, in which they claimed an interest. A divided appellate court reversed, holding that the implied covenant to develop is indivisible and therefore development of some tracts of the leasehold property served as compliance with the covenant on all other tracts. (109 Ill. App.3d 247.) We granted plaintiff leave to appeal.

Three issues are raised for review: (1) Did defendants waive the right to challenge the sufficiency of the complaint? (2) Do defendants have standing to contest plaintiff's motion for a summary judgment? (3) Should the implied covenant to develop be construed as indivisible or divisible?

On February 19, 1959, Shaw leased 11 parcels of real estate, consisting of 438.5 acres, to John Jefferson for the production of oil and gas. The lease agreement provided that the lease would remain in effect for a primary term of three years, and as long thereafter as oil or gas is produced "from said leased premises" or operations for drilling are continued. In consideration for the lease, Shaw received one dollar and a 1/8 royalty interest in any gas or oil produced.

In 1964, Jefferson and his wife assigned their interest in 120 of the acres, located in the northeast quarter of section 4, township 11 north, range 14 west, Clark County (the subject tract), to J.L. Cowan. They reserved an overriding royalty interest in the property. Prior to his death in 1967, Cowan made numerous assignments of his working interest in the subject tract.

In January of 1980, plaintiff filed a complaint against all individuals who "have or may claim a record interest in" 318.5 acres of the leasehold (including the subject tract), seeking to cancel the lease as it applied to that property. Plaintiff alleged in the complaint that these individuals "have wholly failed" to develop and produce the leasehold property, and that there has been no activity directed toward production during the preceding 10 years. The remaining 120 acres of the leasehold (40 of which are located in section 4), upon which oil and gas were being produced, were not affected by the complaint.

On March 20, 1980, the heirs of John Jefferson, now deceased, purportedly assigned a working interest in the subject tract to John Ryan, and reserved an overriding royalty interest in the property. The Jefferson heirs claimed that the working interest in the property reverted to them when Cowan ceased to develop the subject tract. Pursuant to plaintiff's motion, Ryan was subsequently joined as a defendant.

With the exception of the Jefferson heirs and Ryan, none of the individuals named in the complaint appeared or filed an answer. Default judgments were entered against them, including the Cowan heirs and assigns. Shubrick T. Kothe (who, as executor of Vera Shaw's estate, was substituted as plaintiff following Shaw's death in February of 1980) subsequently filed a motion requesting cancellation of the lease as to all individuals who claim to have working interests in the subject tract. He also moved for summary judgment against the non-defaulting defendants. He alleged in the motion that the only individuals who owned a working interest in the subject tract (the Cowan heirs and assigns) had been defaulted. The non-defaulting defendants owned only overriding royalty interests, which cannot exist apart from the working interests.

Defendants filed objections to the motion for summary judgment, alleging that oil and gas leases are indivisible, and that plaintiff therefore cannot seek cancellation of the lease as to certain property if there is production on other tracts in the leasehold. Defendants submitted affidavits indicating there has been continuous development on portions of the leased premises. In defendants' brief opposing the motion for summary judgment, they argued that plaintiff's complaint was insufficient to state a cause of action. The trial court determined that defendants waived the right to raise this issue because they answered the complaint instead of challenging it by motion. The court therefore granted plaintiff's motion for summary judgment and cancelled the lease as to the 120 acres. In reversing, the appellate court determined that defendants adequately raised the issue of indivisibility, which, it stated, could be construed as an affirmative defense.

Plaintiff first contends, as he did in the appellate court, that defendants waived the right to challenge the sufficiency of the complaint. It is argued that section 45 of the Civil Practice Act required defendants to object to the pleadings by motion, and specify wherein the complaint is insufficient. (Ill. Rev. Stat. 1979, ch. 110, par. 45.) We agree that where a complaint allegedly fails to state a cause of action, meticulous procedure dictates that the opposing party file a motion to dismiss. Under the circumstances of this case, however, the purpose underlying section 45 was satisfied.

"The necessity for [filing a motion and] delimiting an objection to the complaint is designed to allow the plaintiff to prepare a response thereto or to amend the complaint in order to satisfy the objection." (Berry v. G.D. Searle & Co. (1974), 56 Ill.2d 548, 556, citing Central Illinois Electric & Gas Co. v. Scully (1959), 17 Ill.2d 348, 353.) Here, plaintiff was adequately apprised of defendants' objection to the complaint prior to the trial court's judgment. As previously related, defendants opposed the motion for summary judgment on the grounds that oil and gas leases are indivisible and supported their position with affidavits. Plaintiff subsequently filed a response in which he argued that the lease was divisible, but he made no attempt to amend the complaint. Because plaintiff was afforded an opportunity to, and did, respond to defendants' theory prior to the court's ruling, we fail to see how he was prejudiced by defendants' failure to file a motion to dismiss. Cf. Swager v. Couri (1979), 77 Ill.2d 173 (failure to object to a complaint until after the verdict does not completely waive the question of whether the complaint states a cause of action).

Further, as noted by the appellate court, defendants' theory of indivisibility may be construed as an affirmative defense rather than simply an attack on plaintiff's pleadings. If the implied covenant to develop is indivisible, as defendants alleged, this would be a defense by which plaintiff's "apparent right could be defeated." (Baylor v. Thiess (1971), 2 Ill. App.3d 582, 583; see Brewer v. Stovall (1977), 54 Ill. App.3d 261.) There is no requirement that such defenses must be raised by motion. See Ill. Rev. Stat. 1979, ch. 110, par. 43(4); People ex rel. Casey v. Health & Hospitals Governing Com. (1977), 69 Ill.2d 108.

We next consider whether the covenant to reasonably develop the premises, implied in oil and gas leases, should be construed as indivisible or divisible. Where the covenant is deemed indivisible, compliance therewith on one tract of the leased premises serves to perpetuate the lease as to all tracts. If the covenant is divisible, failure to reasonably develop one tract will not affect other tracts subject to the lease. (R. Hemingway, Oil and Gas sec. 9.10 (1971).) Plaintiff relies on Baker v. Collins (1963), 29 Ill.2d 410, and Elliott v. Pure Oil Co. (1956), 10 Ill.2d 146, for ...


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