Homestake Mining Co. v. Mid-Continent Exploration Co., 6203
| Decision Date | 07 September 1960 |
| Docket Number | 6244-6247.,No. 6203,6203 |
| Citation | 282 F.2d 787 |
| Parties | HOMESTAKE MINING COMPANY and Homestake-New Mexico Partners, Appellants, v. MID-CONTINENT EXPLORATION COMPANY, Appellee. RIO DE ORO URANIUM MINES, INC., Appellant, v. HOMESTAKE MINING COMPANY, Appellee. J. H. WHITNEY & CO., White, Weld & Co., and San Jacinto Petroleum Corp., Appellants, v. HOMESTAKE MINING COMPANY, Appellee. UNITED WESTERN MINERALS COMPANY, Appellant, v. RIO DE ORO URANIUM MINES, INC., J. H. Whitney & Co., White, Weld & Co., San Jacinto Petroleum Corp., Clyde Osborn, and Homestake Mining Company, Appellees. HOMESTAKE MINING COMPANY, Appellant, v. RIO DE ORO URANIUM MINES, INC., United Western Minerals Company, J. H. Whitney & Co., White, Weld & Co., San Jacinto Petroleum Corp., and Clyde Osborn, Appellees. |
| Court | U.S. Court of Appeals — Tenth Circuit |
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Harry L. Bigbee, Santa Fe, N. M. (Donnan Stephenson, Harl D. Byrd, Santiago E. Campos, Santa Fe, N. M., Kenneth C. Kellar, Robert E. Driscoll, Jr., Lead, S. D., Herman Phleger and Alvin J. Rockwell, San Francisco, Cal., were with him on the brief), for Homestake Mining Co. and Homestake-New Mexico Partners.
Chester C. Davis, New York City (Modrall, Seymour, Sperling, Roehl & Harris, Albuquerque, N. M., Simpson, Thacher & Bartlett, New York City, and J. R. Modrall, Albuquerque, N. M., Richard Hawkins, Maxwell E. Cox and Rogers M. Doering, New York City, of counsel, were with him on the brief), for Mid-Continent Exploration Co.
Chester C. Davis, New York City (Iden & Johnson, Albuquerque, N. M., and Simpson, Thacher & Bartlett, New York City, and James T. Paulantis, Albuquerque, N. M., Richard Hawkins, Maxwell E. Cox and Rogers M. Doering, New York City, of counsel, were with him on the brief), for Rio De Oro Uranium Mines, Inc.
Robert G. Zeller, New York City (C. Kenneth Clark, Jr., New York City, was with him on the brief), for J. H. Whitney & Co., White, Weld & Co., and San Jacinto Petroleum Corp.
John D. Robb, Albuquerque, N. M. (Rodey, Dickason, Sloan, Akin & Robb, Albuquerque, N. M., were with him on the brief), for United Western Minerals Co.
No appearance for Clyde Osborn.
Before MURRAH, Chief Judge, and PHILLIPS and BREITENSTEIN, Circuit Judges.
These consolidated appeals present a variety of issues dealing with the respective rights of the parties in the mining and milling of uranium ore in the Ambrosia Lake region of New Mexico.
Mid-Continent Exploration Company, the lessee of an area herein referred to as Section 11, entered into an agreement with Dunn Brothers for the operation of the leases by Dunn Brothers. Rio de Oro Uranium Mines, herein referred to as Rio, succeeded to the rights and obligations of Dunn Brothers.
J. H. Whitney & Co., White, Weld & Co., San Jacinto Petroleum Corp., and United Western Minerals Company1 held undivided fractional interests2 in an area known as Section 32.
The production, processing and sale of uranium and uranium ore are controlled by the Atomic Energy Act of 1954, as amended.3 After removal from its place of deposit in nature, uranium ore may be disposed of only to a licensee of the Atomic Energy Commission, herein referred to as the AEC.4 The only market for uranium is the AEC which is authorized to establish guaranteed prices therefor.5
In 1956, Rio and the United Western Group sought a market for ore produced from Sections 11 and 32. In cooperation with Clyde Osborn they made a proposal to the AEC which contemplated the construction of a mill where their ore might be processed and the product sold to the AEC as uranium concentrate. The financing of such a venture presented difficulties which were overcome by the willingness of Homestake Mining Company to participate in the enterprise.
On September 21, 1956, Homestake, Rio, the members of the United Western Group and Osborn entered into a limited partnership agreement under New Mexico law. Homestake is the general partner and the others are limited partners. Such limited partnership, known as Homestake-New Mexico Partners and herein referred to as New Mexico Partners, made a contract with the AEC whereby New Mexico Partners was licensed to construct a mill in the Ambrosia Lake area to process uranium ore and to engage in other activities incident thereto. The contract terminates March 31, 1962. The mill has a capacity of 750 tons daily, of which 20% is set apart for custom ore, i. e., ore in which neither the partnership nor any of its members holds an economic interest. The mill has been in operation since February 3, 1958.
On December 6, 1956, without the express consent or approval of the other members of New Mexico Partners, Homestake entered into a limited partnership agreement with Sabre-Pinon Corporation. In this partnership, herein referred to as Sapin, Homestake is the general partner and Sabre-Pinon the limited partner. The Sapin partnership agreement contemplated a contract with the AEC, the mining of ore by Homestake on lands of Sabre-Pinon, and the processing of that ore in a mill to be constructed by Homestake. The necessary AEC contract was secured and a mill with a capacity of 1,500 tons daily was constructed near the mill of New Mexico Partners and has since been in operation. In the financing, construction, and early operation of the Sapin mill, Homestake used assets and facilities of New Mexico Partners without the knowledge of the limited partners.
From these basic facts controversies arose which culminated in two lawsuits brought in the United States District Court for the District of New Mexico. In each case jurisdiction was predicated on diversity. The two cases were consolidated for trial but separate judgments were entered.
Appeal No. 6203 involves the first of those cases. It was brought by Mid-Continent against Homestake and New Mexico Partners to obtain a declaration of the rights of the parties to Section 11 ore and to secure incidental relief. Mid-Continent prevailed below. Homestake and New Mexico Partners have appealed.
Appeals Nos. 6244-6247 arise out of the second case, which was filed by Rio against Homestake. Three basic claims are asserted. The first relates to the respective rights of the parties to Section 11 ore. The second charges Homestake with the breach of fiducial duties and seeks the imposition of a constructive trust. The third is for an accounting because of the breach of fiducial duties.
The members of United Western Group intervened in the second case as plaintiffs and filed a cross-claim against Rio asserting the dedication of Section 11 ore by Rio to New Mexico Partners. Osborn entered an appearance submitting to the jurisdiction of the court. The suit resulted in a judgment in favor of Rio as to the Section 11 ore issue; a finding that Homestake had breached its fiducial duties but the denial of a constructive trust on the ground that the complaining parties had been guilty of laches; an order requiring Homestake to make money payments to New Mexico Partners for the use of assets and facilities of New Mexico Partners in the furtherance of the Sapin partnership; protective orders to assure the independent operation of New Mexico Partners; the denial of an accounting; and the retention of jurisdiction to determine at a later date the question of damages and the sufficiency of a contractual accounting.6
Nos. 6244 and 6245 are appeals by Rio and the members of the Farmout Group, respectively. They assert that the trial court erred in sustaining the defense of laches and denying the imposition of a constructive trust.
No. 6246 is an appeal by United Western which contends that the judgment is wrong in the disposition of the Section 11 ore issue and in the denial of the constructive trust because of laches.
No. 6247 is an appeal by Homestake which complains of the judgment in so far as it relates to the Section 11 ore dispute and to that part of the judgment requiring the milling of custom ore at the mill of New Mexico Partners.
The question of the respective rights of the parties to Section 11 ore is common to Nos. 6203, 6246, and 6247. Homestake, New Mexico Partners, and United Western claim that this ore was contributed to New Mexico Partners as capital of that partnership and may be disposed of only to New Mexico Partners and processed only in the mill of that partnership. Mid-Continent and Rio deny that such ore went to New Mexico Partners as a capital contribution, concede that the ore is committed to New Mexico Partners to the extent of the capacity of the mill allocated or allocable to Section 11 ore, and assert that Section 11 ore in excess of the amount that can be milled by New Mexico Partners may be disposed of to other mills. The trial court held that Section 11 ore did not go to New Mexico Partners as a capital contribution and permitted the disposition of the ore elsewhere under conditions which will be later noted. The consideration of the Section 11 ore issue requires a more detailed study of the facts than heretofore presented.
By two separate instruments, Stella Dysart leased to Mid-Continent substantially all of the South Half of Section 11 for a term of 5 years commencing February 1, 1955, and "as long thereafter as mining operations are diligently pursued and as long as uranium or other minerals are produced in commercial quantities." These leases granted to Mid-Continent the exclusive right to develop, mine, mill, and market minerals and ores from the demised premises. Mid-Continent was required to mine diligently and properly and to pay Dysart a royalty of 17½% on all ores sold. This royalty was not payable in kind. The leases could not be assigned without the written consent of Dysart.
On May 3, 1955, Mid-Continent entered into an operating agreement with Dunn Brothers covering the leased land. Dunn agreed to mine the ore from Section 11 at its own expense with reimbursement...
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