## Facts

- Musselshell County acquired certain real property through tax proceedings and later agreed to sell it to A.D. Shields by a 1933 contract for deed.
- The 1933 contract for deed reserved to the County “an undivided two and one-half percent of all oil, gas and other minerals lying in, under and beneath” the premises.
- In 1943, Shields obtained a quiet title decree recognizing the County’s reservation as stated in the contract for deed.
- In 1944, the County delivered a warranty deed to Shields reserving “an undivided two and one-half percent royalty of all oil, gas, and other minerals ... that may be produced ... delivered free of cost.”
- In 1976, the County executed oil-and-gas leases to Donald McSweyn covering the County’s retained interest; the lease included a clause preserving the County’s right to claim its interest was a royalty, not a mineral interest.
- McSweyn sought declaratory relief that the County’s retained interest was a mineral interest, which would support the validity of his leases.
- The district court ruled for McSweyn, treating the deed’s royalty language as an unconstitutional gift and declaring the leases valid.
- The County and Hougen Land, Inc. appealed.

## Issues

1. Whether the contract-for-deed mineral reservation was merged into, and superseded by, the later deed reserving a royalty interest.
2. Whether the 1943 quiet title decree barred litigation over the nature of the County’s retained interest after the 1944 deed.
3. Whether the deed’s royalty reservation constituted an unconstitutional gift of public property.
4. Whether estoppel, laches, or waiver barred McSweyn from asserting the County held a mineral interest.

## Decision

- The court reversed the district court.
- The 1944 deed controlled under the merger doctrine and reserved only a 2.5% royalty interest to the County, not a mineral interest.
- The 1943 quiet title decree was not res judicata as to the effect of the subsequently executed 1944 deed.
- The deed did not constitute an unconstitutional gift; it was treated as the parties’ final transaction absent proof warranting reformation.
- Because the County held only a royalty interest, McSweyn’s leases, which depended on the County owning a mineral interest, were ineffective.

## Legal Principles

- Provisions in a contract for deed generally merge into a subsequently delivered deed, and the deed is treated as the final expression of the parties’ agreement absent fraud, mistake, or a contrary agreement.
- “Mineral interest” language (interest in minerals “lying in, under and beneath”) differs from “royalty” language (a share of production, commonly described as “royalty” and “delivered free of cost”), and text controls classification.
- Res judicata does not preclude litigation over rights created or altered by a later instrument executed after a prior judgment.
- A public entity’s conveyance is not an unconstitutional gift merely because its final deed differs from an earlier contract term, absent a sufficient showing that the transaction was an impermissible gratuity or otherwise unlawful.

## Conclusion

The court held the deed’s express royalty reservation superseded the earlier contract’s mineral reservation, the prior quiet title decree did not control the effect of the later deed, and the County retained only a royalty interest; therefore, leases premised on the County owning a mineral interest were invalid.


McSweyn v. Musselshell County, 632 P.2d 1095 (Mont. 1981)