25 Corp., Inc. v. Eisenman Chemical Co.

• Citation: 101 Nev. 664,709 P.2d 164
• Decision Date: 05 November 1985
• Docket Number: No. 15982,15982
• Parties: The 25 CORPORATION, INC., A Kansas Corporation and NL Industries, Inc., a corporation, Appellants, v. EISENMAN CHEMICAL COMPANY, a Colorado Corporation, Respondent.
• Court: Supreme Court of Nevada

Page 164

709 P.2d 164

101 Nev. 664

The 25 CORPORATION, INC., A Kansas Corporation and NL

Industries, Inc., a corporation, Appellants, v. EISENMAN CHEMICAL COMPANY, a Colorado Corporation, Respondent.

No. 15982.

Supreme Court of Nevada.

Nov. 5, 1985.

Wilson & Barrows, Elko; Davis, Graham & Stubbs, Denver, Colorado, for appellant 25 Corp.

Hill, Cassas, de Lipkau & Erwin, Reno, Dorsey & Whitney, New York City, for appellant NL Industries Inc.

Hoy & Miller, Blohm Building, Elko, Van Cott, Bagley, Cornwall, & McCarthy, Salt Lake City, Utah, for respondent.

OPINION

PER CURIAM:

The 25 Corporation and NL Industries appeal from a summary judgment granted to Eisenman Chemical Company (ECCO), in which ECCO was declared to be a 75 percent owner in certain mineral rights. The judgment was granted on equitable theories of estoppel and reformation. This summary judgment is reversed.

25 Corporation and NL Industries also appeal from the trial court's denial of their motions for summary judgment. The court's denial of these motions is affirmed except for its denial of summary judgment and dismissal of ECCO's fourth cause of action claiming reformation. We hold that ECCO's action for reformation cannot lie, as a matter of law, and order the district court to grant summary judgment dismissing this cause of action.

I. FACTS

The factual background in this case is quite complex, and we set it out in some detail. In the 1940's the Marvel family, through a corporation, W.T. Jenkins Company, owned the 25 Ranch, located in portions of Elko, Lander, and Humboldt counties, Nevada. The 25 Ranch included approximately 125,000 acres of fee land (acquired in a state selection land sale) and approximately 300,000 acres of public domain on which cattle was grazed.

The Marvels employed Melvin Jones as a ranchhand, and the two parties had an agreement that if Jones located any barite while working on the ranch property, Jones would be entitled to an undivided fifty percent interest in whatever he discovered. On April 10, 1955, Jones and the Marvels "located" a claim of barite mineral (Lakes Claim # 1). On June 24, 1955, a location On July 23, 1964, appellant 25 Corporation ¹ purchased the 25 Ranch, including all mineral interests, from the Marvels. The deed from the Marvels describes all of the land being conveyed, and after 27 pages of legal descriptions, the following language appears:

certificate was recorded for Lakes Claim # 1, naming Jones and the Marvels as co-locators.

Together with all oil, gas and minerals and rights thereto and all royalties in connection therewith now held, owned or claimed by the W.T. JENKINS COMPANY, or in, on or under the above described lands or any portions thereof ...; and all interest of the W.T. JENKINS COMPANY in those unpatented lode mining claims located in Elko County, Nevada, known as Lakes # 1....

As part of the same transaction 25 Corporation granted back to the Marvels an undivided fifty percent (50%) of any and all mineral, oil, and gas rights in the 25 Ranch. 25 Corporation retained the exclusive right to lease the mineral rights on the property. This mineral deed from the 25 Corporation to the Marvels included a reference to an "unpatented lode mining claim located in Elko County, Nevada known at Lakes # 1 ... in which MELVIN R. JONES owns an undivided one-half interest." As a result of these transfers 25 Corporation owned all of the land in the 25 Ranch, and the Marvels owned a 50 percent interest in all of the minerals. As to the distribution of ownership of the Lakes # 1 claim, 25 Corporation owned 25 percent, the Marvels owned 25 percent, and Jones owned 50 percent of the claim. (See diagram below.)

In 1973, respondent ECCO leased from Jones his 50 percent interest in the Lakes # 1 Claim. On January 9, 1974, ECCO exercised an option to purchase that interest and purchased, by quitclaim deed, all of Jones's "right, title and interest" in Lakes # 1. On January 11, 1974, ECCO purchased, by quitclaim deed "whatever right, title interest and estate" the Marvels had in Lakes # 1. ² From these transfers, ECCO believed it had a 75 percent interest in lakes # 1. Here is a diagram of the supposed interests:

In 1975, by letter agreement, the 25 Corporation leased its 25 percent interest in Lakes # 1 to ECCO for one year. ECCO paid 25 Corporation a royalty based on a 25 percent interest in the claim. Although the 1975 letter agreement had a stated one-year term, ECCO continued to make payments to 25 Corporation after the one-year term.

In 1977, ECCO sought a loan from ITT Financial and offered its purported 75 percent interest in the Lakes # 1 claim as collateral. ITT's Nevada lawyer, Earl Hill, rendered a title opinion to ITT regarding the Lakes # 1 claim, and ITT sent a copy of this opinion to ECCO. It was at this time that ECCO was informed that the Lakes # 1 claim had been located on fee land and was not a valid claim. ³ The title opinion contained the following conclusions:

Lakes # 1 Lode Claim is and was void from its inception, and cannot be the legal basis for any mineral rights in the locators or their successors in interest.

....

Legal title to [the Lakes # 1 Claim], including all mineral rights is now vested in the 25 Corporation, Inc., subject to a 20 year mineral interest of 50% in favor of [the Marvels].

....

Consequently, Lakes # 1 Lode Claim did not create any mineral rights in its locators [Jones and the Marvels] and the locators had no mineral rights to convey.

After receipt of this 1977 Title Opinion, ECCO stopped filing affidavits of annual assessment work which are necessary to retain unpatented mining claims. Apparently, this decision to stop filing proofs of labor was made because of the newly acquired information that the Lakes # 1 claim was not on federal claim land. ECCO never disclosed to 25 Corporation In August, 1979, ECCO was acquired by Newpark Resources, Inc. (Newpark), a New York stock exchange company. In the fall of 1980 Newpark was preparing to make a public offering of its securities and because of that, sought a title opinion from John C. Miller, Esq., as to the Lakes # 1 claim. On September 18, 1980, Newpark and ECCO received that opinion, which states in part: "[T]he Lakes # 1 unpatented mining claim has been void ab initio as being located on lands unavailable for location."

that the Lakes # 1 claim was void and that 25 Corporation owned legal title to all mineral rights in the claim area subject only to the Marvels' 50 percent claim. Instead, ECCO continued to pay 25 Corporation a royalty based on a 25 percent interest. 25 Corporation still believed it owned only a 25 percent interest in the Lakes # 1 claim. However, because the claim was on "fee" land, it was void ab initio, and the minerals covered by the "claim" were simply part of all the fee lands on the 25 Ranch, which the 25 Corporation owned in full, subject only to Marvel's 50 percent interest.

The opinion letter also advised ECCO to negotiate a new arrangement with 25 Corporation since the previous lease had terminated in 1976. ECCO contacted 25 Corporation on September 22, 1980, (just days after receiving the above-referenced title opinion) and proposed to enter into a new lease for property including the Lakes # 1 claim area, continuing to offer 25 Corporation a royalty based on a 25 percent interest and not informing 25 Corporation of the two title opinions.

In October, 1980, soon after ECCO had proposed its lease, appellant NL Industries approached 25 Corporation and proposed to lease lands for barite mining, including the claim area. ⁴ NL Industries informed 25 Corporation that it had done a title search of the Lakes claim and had discovered that the Lakes claim was void, and that 25 Corporation actually owned all of the mineral interests in the claim area, subject only to the Marvels' 50 percent interest. This was the first time 25 Corporation suspected or had reason to believe the Lakes claim was void.

On October 9, 1980, 25 Corporation executed a lease to NL Industries of lands including the claim area for barite mining. 25 Corporation notified ECCO of the NL Industries mining lease and demanded that ECCO vacate 25 Corporation's property. ECCO filed this action a few days later seeking a declaration of its purported 75 percent interest in the Lakes # 1 claim. ⁵

In 1981, the district court held that the Lakes claim was void ab initio, which in effect dismissed ECCO's first and second causes of action. In August, 1981, ECCO moved for immediate occupancy of a portion of the Lakes property beyond the claim, seeking to extract 190,000 tons of barite on the outside of the claim. The motion was granted by district court but was vacated by this court on June 3, 1982. NL Industries, Inc., v. Eisenman Chemical Co., 98 Nev. 253, 645 P.2d 976 (1982).

Following extensive discovery, 25 Corporation and NL Industries filed a motion for summary judgment to dismiss ECCO's "equitable" claims based on estoppel, reformation, and adverse possession. ECCO filed a cross-motion seeking summary judgment in its favor as to these same claims, and also seeking summary judgment dismissing 25 Corporation's counterclaim for quiet title. The district court granted the summary judgment in favor of ECCO, finding ECCO owned an "equitable" 75 percent interest in the Lakes # 1 claim. This appeal followed.

II. THE ECCO SUMMARY JUDGMENT

A. ESTOPPEL

The trial court in granting summary judgment relied on two equitable doctrines, estoppel and reformation. With regard to estoppel the trial court stated:

Justice and equity require the court to estop 25 Corp. and NL Industries from asserting that the Lakes Claim is or was void as to the barite mined within the vertical boundaries of the claim, except as to 25 Corp.'s 25% interest.

On the estoppel issue the court relied on Noble Gold Mines Co. v. Olsen, 57 Nev. 448, 66 P.2d 1005 (1937). Noble is similar to this case in that the defendants had located a...