Stichting Mayflower Recreational Fonds v. Newpark Resources, Inc.

• Decision Date: 11 May 1990
• Docket Number: Nos. 88-1102,88-1293 and 88-1387,s. 88-1102
• Citation: 903 F.2d 741
• Parties: STICHTING MAYFLOWER RECREATIONAL FONDS and Stichting Mayflower Mountain Fonds, Plaintiffs-Appellants/Cross-Appellees, v. NEWPARK RESOURCES, INC., Consolidated Mayflower Mines, Inc., and B.F.C. Oil Company, Defendants-Appellees/Cross-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 741

903 F.2d 741

STICHTING MAYFLOWER RECREATIONAL FONDS and Stichting Mayflower Mountain Fonds Plaintiffs-Appellants/Cross-Appellees, v. NEWPARK RESOURCES, INC., Consolidated Mayflower Mines, Inc. and B.F.C. Oil Company Defendants-Appellees/Cross-Appellants.

Nos. 88-1102, 88-1293 and 88-1387.

United States Court of Appeals Tenth Circuit.

May 11, 1990.

Rehearing Denied Nov. 9, 1990.

E. Craig Smay, Sessions & Moore, Salt Lake City, Utah, for plaintiffs-appellants/cross-appellees.

Michael F. Richman, Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, Utah, (David L. Arrington, with him on the brief), for defendants-appellees/cross-appellants.

Before HOLLOWAY, Chief Judge, LOGAN, Circuit Judge, and BROWN, ^* District Judge.

WESLEY E. BROWN, Senior District Judge.

This action concerns a dispute over rights in the "Mayflower Properties," an area of some 4,600 acres in Wasatch and Summit Counties, Utah. Plaintiffs-Appellants (hereinafter "Stichting") are developing the surface of the property for use as a resort. Defendants-Appellees have certain rights in the mineral estate of the Mayflower Properties. Stichting filed this action alleging slander of title and seeking a declaratory judgment of its rights and obligations under a 1975 mining lease. Stichting also sought quiet title to a disputed parcel of land and requested attorney's fees. Defendants filed various counterclaims.

The district court's diligent efforts to resolve the disputes and contentions of the parties resulted in the following: The district court dismissed Stichting's claim for slander of title; the court then quieted title to the disputed parcel in favor of Stichting, but held that Stichting was required to reimburse defendant Newpark to the extent that Newpark had incurred expenses for the disputed property; the court also determined the parties' rights under the 1975 mining lease and awarded both sides attorney's fees for certain claims.

On appeal, Stichting raises the following three issues: whether the court erred in requiring Stichting to pay Newpark on the quiet title claim; whether the district court misconstrued the language of the 1975 mining lease; and whether the district court erred in refusing to permit Stichting to amend its complaint to allege a claim for abuse of process. Additionally, both sides appeal the district court's award of attorney's fees.

I. FACTS

Newpark and/or its predecessor corporations acquired the Mayflower Properties prior to 1961. The Properties included the NE 1/4 of Section 25 in Township 2 South, Range 4 East, Salt Lake Base and Meridian, and was the site of the Mayflower Mine from 1933 to 1972. In 1961, Newpark entered into a joint operating agreement with the Hecla Mining Company ("Hecla") respecting the Mayflower Mine. In 1962, Hecla discovered that a portion of the surface of the NE 1/4 of Section 25 that was included in the joint operating agreement and which was needed for the construction of a mill had previously been sold to the Union Pacific Railroad as a portion of a railroad right-of-way. Hecla approached the Union Pacific to inquire about purchasing a 4.2 acre parcel from the railroad. This 4.2 acre parcel (described in Exhibit A attached to the district court opinion) is referred to by the parties as the "Hecla parcel." In March of 1962, Hecla advised Newpark that Hecla would buy the Hecla parcel in its own name, charge the cost of purchase to the operating account under the joint operating agreement, and thereafter convey the Hecla parcel to Newpark subject to the joint operating agreement. Hecla in fact purchased the parcel and a mill was constructed and operated on it. In 1972, the joint operating agreement was terminated. For undisclosed reasons, Hecla did not convey title to the Hecla parcel to Newpark.

In August, 1972, an individual named Leonard Lewis acquired an option to purchase the Mayflower Properties from Newpark. The option agreement described the covered properties and expressly excluded "the rights of Hecla Mining Company under the [1961 Joint] operating agreement." In September, 1972, Lewis assigned the option to LON Investment Company ("LON"). In 1972, Newpark conveyed title to the surface of the Mayflower Properties to LON by means of special warranty deeds that reserved to Newpark certain veins of minerals therein "together with the right of access to and from said veins from adjoining properties." The deeds provided that the conveyance was subject to the rights of the Hecla Mining Company under the 1961 agreement. LON had constructive notice of the fact that record title to the Hecla parcel was held by Hecla. LON executed two promissory notes in favor of Newpark as part of the purchase price and gave Newpark two mortgages on the Mayflower Properties to secure the notes. LON planned to develop the surface of the property into a resort. By 1975, LON was in arrears on its mortgage payments and LON entered into negotiations with Newpark concerning the properties. Newpark did not want to reacquire the Mayflower Properties but decided to seek sufficient surface rights in the properties to permit access for mining. Pursuant to a June 30, 1975 agreement, a new corporation--Consolidated Mayflower Mines, Inc. ("CMMI")--was formed, with Newpark owning 70 percent of the stock and LON owning 30 per cent. LON and Newpark each executed a long-term mining lease by which mineral rights in the properties were leased to CMMI.

The 1975 Mining Lease provided that CMMI had no right to use the surface of a parcel referred to by the parties as the "Village Area." The lease also placed certain restrictions on CMMI's use of the remainder of the property under the lease, which are discussed in section III of this opinion. Additionally, Newpark sought to obtain a parcel of land from LON contiguous to the old Mayflower Mine portal for use in future mining operations, but LON refused to lease any land contiguous to the portal because it was well suited for resort development. LON feared that a mining operation within this area would be unduly disruptive of its resort. LON and Newpark eventually found a parcel within the Mayflower Properties that was suitable for construction of a mining and milling operation. This parcel (referred to as the "25 Acre Parcel") was conveyed by LON to Newpark for $50,000.00.

LON continued to pursue its plans for development of a resort on the Mayflower Properties. As part of a plan to sell limited partnerships in the venture, LON had a title report prepared for the properties. The report indicated that LON's title to the NE 1/4 of Section 25 in Township 2 South, Range 4 East was subject to certain exceptions, one of which was the Hecla parcel. In 1977, LON decided to sell the Mayflower Properties. LON conveyed the property to Ross Lare Realty in August, 1977, who in turn conveyed it to appellant Stichting. The deed conveying the property to Ross Lare Realty and the instrument conveying the property to Stichting both excluded the Hecla Parcel. The purchase price paid by Stichting for the property did not include obtaining the Hecla Parcel.

No later than May, 1981, Stichting discovered that record title to the Hecla Parcel was held by the Hecla Mining Company. Recognizing that there were certain title defects affecting the Mayflower Properties, LON entered into an agreement with Stichting under which LON agreed to convey certain "omitted properties" to Stichting. This agreement was apparently not drafted with the Hecla Parcel in mind, however. On July 2, 1981, LON executed a Special Warranty Deed by which it conveyed to Stichting certain properties, including "all of the Grantor's right, title and interest in and to ... Section 25 ... Township 2 South, Range 4 East...." The Hecla Parcel is located in the NE 1/4 of Section 25. The only warranty contained in the deed was a warranty by LON that they "have not heretofore conveyed, hypothecated, or otherwise diminished any title they have had in any property conveyed hereby." The deed provided that it was made subject to the rights of the Hecla Mining Company under the 1961 operating agreement.

At the time LON conveyed the Mayflower Properties to Ross Lare Realty, the Hecla Mining Company was the record title holder to the Hecla Parcel. On various occasions between 1981 and 1984, Stichting attempted to purchase the parcel from Hecla. In May 1983, Newpark contacted Hecla to demand that Hecla convey the parcel to Newpark, asserting a right to the property under the parties' 1961 Joint Operating Agreement. Hecla initially denied that Newpark had any right to the parcel, but in 1984 Hecla agreed to convey and Newpark agreed to accept an undivided one-half interest in the Hecla Parcel. The interest was conveyed by a quitclaim deed dated March 29, 1984. Thereafter, Hecla notified both Newpark and Stichting that Hecla would sell its remaining one-half interest in the Hecla Parcel to the highest bidder. Newpark submitted a bid of $31,500.00 for the property, while Stichting bid $30,301.00. Hecla accepted Newpark's bid and conveyed the remaining one-half interest to B.F.C. Oil Company, a subsidiary of Newpark. ¹

In April 1984, the Wasatch County Planning Commission held hearings on Stichting's plans for resort development of the Mayflower Properties. The defendants appeared at these hearings and voiced objections to the plans, contending that the plans did not recognize their right to conduct mining operations on the property. Stichting told the Commission that under the 1975 Mining Lease, Stichting had the power to restrict all mining development on the Mayflower Property to avoid any interference with Stichting's resort plans. The defendants disputed this view of the Mining Lease.

Stichting filed this action in the district court, claiming that under the 1975 Mining Lease CMMI could not use the surface of Stichting's property without the prior written consent of Stichting. Further, Stichting maintained...