Appeal from the Appellate Court for the Fifth District; heard
in that court on appeal from the Circuit Court of Jasper County,
the Hon. Michael R. Weber, Judge, presiding.
JUSTICE RYAN DELIVERED THE OPINION OF THE COURT:
Rehearing denied December 2, 1985.
Plaintiffs, Walter and June Fay Newkirk, filed a declaratory judgment action in the circuit court of Jasper County requesting the court to declare an order of the State mining board void ab initio in its entirety. Plaintiffs' complaint also requested that title to the mineral estate be quieted in plaintiffs. The circuit court granted the defendants' motion to dismiss the action. The appellate court reversed the circuit court's decision but held the order invalid only in part. (125 Ill. App.3d 454.) Plaintiffs' petition for leave to appeal to this court was granted pursuant to our Rule 315(a) (94 Ill.2d R. 315(a)).
The order at issue in this case involves a 40-acre tract of land in Jasper County. The land was originally owned by defendants Paul and Mildred Lucas and Cora Lucas. On May 4, 1961, the Lucases conveyed the north 30 acres of the tract to the plaintiff Walter Newkirk, reserving one-half of the mineral interests for 20 years and for as long thereafter as oil and gas and other minerals were produced from operations commenced during the 20-year period. Paul and Mildred Lucas later acquired Cora Lucas' interest in the property.
As the end of the 20-year period drew near, Walter Newkirk refused the Lucases requests to enter into an oil and gas lease. On November 13, 1980, the Lucases unilaterally leased their mineral interests to defendant Joseph Bigard. The Lucases and Bigard then petitioned the mining board to integrate all the interests in the tract so that drilling operations could be commenced in accordance with "An Act in relation to oil, gas, coal and other underground resources * * *." (See Ill. Rev. Stat. 1979, ch. 96 1/2, par. 5436.) The petition contained the information required by statute and requested the board to provide one or more equitable alternatives whereby the plaintiff Walter Newkirk could surrender his interest for reasonable compensation if he elected not to participate in the cost and risk of the drilling and operation of the unit. See Ill. Rev. Stat. 1979, ch. 96 1/2, par. 5436(d).
A hearing on the petition was held on December 1, 1980. Newkirk was given advance notice of the hearing, and his presence was requested. Newkirk did not attend the hearing, nor did he appear through counsel. On December 11, 1980, the mining board issued an order integrating the interests and permitting Bigard to commence drilling operations. The order also stated that Newkirk would participate in the costs and risks of the drilling units and set out the participation factors. Bigard commenced drilling operations on January 11, 1980, and began selling fractional interests. The first oil produced from these operations was sold on April 30, 1981.
Approximately two years after the commencement of the drilling, the plaintiffs, Newkirk and his wife, filed the present declaratory judgment action attacking the mining board's jurisdiction to issue the order. Plaintiffs allege that the mining board was without jurisdiction to issue the order because the order failed to include certain provisions required by statute. The integration statute provides in part:
"[E]ach such integration order shall * * * prescribe the time and manner in which all the owners in the drilling unit may elect to participate therein; and make provision for the payment by all those who elect to participate therein of the reasonable actual cost thereof, plus a reasonable charge for supervision and interest. If requested, each such integration order shall further provide for one or more just and equitable alternatives whereby an owner who does not elect to participate in the risk and cost of the drilling and operation, or operation, of a well may elect to surrender his leasehold interest to the participating owners on some reasonable basis and for a reasonable consideration * * *." (Emphasis added.) (Ill. Rev. Stat. 1979, ch. 96 1/2, par. 5436(d).)
The order at issue in the present case failed to state the time and manner in which Newkirk could elect to participate in the unit and did not provide, as requested by the defendants, one or more equitable alternatives if Newkirk elected not to participate in the risk and cost of the drilling and operations.
The integration statute unequivocally states that each order "shall" include the election provisions and "shall," if requested, include the equitable alternatives. Generally, the use of the word "shall" in a statute indicates a mandatory obligation, unless the context indicates otherwise. (People v. Richardson (1984), 104 Ill.2d 8, 15; Andrews v. Foxworthy (1978), 71 Ill.2d 13, 21.) Furthermore, the word "shall" will not be given a permissive meaning where it is used with reference to any right or benefit to anyone, and the right and benefit depends upon giving a mandatory meaning to the word. (Andrews v. Foxworthy (1978) 71 Ill.2d 13, 21.) The integration statute gives the mining board the power to require an unwilling interest owner to integrate his interest into a drilling unit. (See Ill. Rev. Stat. 1979, ch. 96 1/2, par. 5436(a).) The word "shall" is used in the integration statute in reference to the right of the unwilling interest owner to choose whether or not he wishes to participate in the costs and risks of the drilling and operation of the unit. The word "shall" is also used in reference to the right of the unwilling owner to choose an equitable alternative whereby he can surrender his interest for just compensation if he does not wish to participate in the costs and risks of the drilling and operation. The statute does not require that the unwilling interest owner request the equitable alternatives; the equitable alternatives may be requested in the petition for the order, whomever the petitioner may be. (Ill. Rev. Stat. 1979, ch. 96 1/2, par. 5436(d).) The unwilling interest holder's right to choose between the options concerning participation in the costs and risks of the drilling and operation of the unit is dependent upon the term "shall" being given a mandatory meaning. The mining board's order in the present case is defective because it does not give the plaintiff Walter Newkirk the option of not participating in the costs and risks and does not give him an equitable alternative whereby he could surrender his interest for just compensation in lieu of participating in the costs and risks. The fact that the order is defective, however, does not mean that the mining board was without jurisdiction to issue the order.
It should be noted that some confusion has existed over whether this is a declaratory judgment action or an action for judicial review brought pursuant to the provisions of the mining act. (Ill. Rev. Stat. 1979, ch. 96 1/2, par. 5416.) The appellate court treated the action as one brought pursuant to the judicial review section of the statute. (125 Ill. App.3d 454, 459.) The complaint, however, was filed as a declaratory judgment action. The record shows that the plaintiffs have vigorously contended that this is not a judicial review action under the statute but is a declaratory judgment action attacking the entire order of the mining board as being void ab initio.
Plaintiffs are seeking to have the entire order declared void ab initio through a declaratory judgment action, so as to breath life into their quiet title action. Plaintiffs request the court to declare them sole owners of the mineral estate underlying the north 30 acres of the tract. Plaintiffs contend that if the entire order is void ab initio then the drilling permits issued pursuant to the order are also void and thus the operations commenced on the tract were done illegally. Plaintiffs argue that the provision of the deed extending the Lucases' reservation of one-half of the mineral estate beyond the 20-year primary term for "as long as oil, gas or other minerals are produced from operations commenced within said 20-year period" means operations legally commenced during that period. Thus the basis of plaintiffs' quiet title action is that the extension clause in the deed requires commencement of de jure rather than merely de facto operations during the primary term. Our purpose in explaining plaintiffs' theory is not to rule on its validity but merely to point out why the plaintiffs have chosen to attack the validity of the entire order by challenging the jurisdiction of the mining board instead of merely bringing an action for judicial review of the order pursuant to the statute. See Ill. Rev. Stat. 1979, ch. 96 1/2, par. 5416.
The general rule is that a party must exhaust its administrative review remedies, including statutory certiorari, before seeking equitable relief. (Graham v. Illinois Racing Board (1979), 76 Ill.2d 566, 573; Illinois Bell Telephone Co. v. Allphin (1975), 60 Ill.2d 350, 357-59.) An exception to the general rule exists, however, where the agency rule or order is being challenged on its face as not being authorized by statute. (Landfill, Inc. v. Pollution Control Board (1978), 74 Ill.2d 541, 550-51; Bio-Medical Laboratories, Inc. v. Trainor (1977), 68 Ill.2d 540, 548.) The plaintiffs allege that the mining board's order was not authorized by statute. This is a proper issue to be determined by a declaratory judgment action rather than as an action for judicial review.
Plaintiffs allege that the order was not authorized by statute because it did not contain the election provisions and equitable alternatives. While we agree that the failure to include these provisions left the order subject to challenge in some other proceeding, we do not ...