Charlestone Stone Products Co., Inc. v. Andrus

• Citation: 553 F.2d 1209
• Decision Date: 12 May 1977
• Docket Number: No. 75-1532,75-1532
• Parties: CHARLESTONE STONE PRODUCTS CO., INC., a corporation, Plaintiff-Appellee, v. Cecil D. ANDRUS, Secretary of the Interior, * and United States of America, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1209

553 F.2d 1209

CHARLESTONE STONE PRODUCTS CO., INC., a corporation, Plaintiff-Appellee, v. Cecil D. ANDRUS, Secretary of the Interior, ^* and United States of America, Defendants-Appellants.

No. 75-1532.

United States Court of Appeals, Ninth Circuit.

May 12, 1977.

Larry A. Boggs, Appellate Section, Land & National Resources Division, Dept. of Justice, Washington, D. C., argued for defendants-appellants.

W. C. Lamoreauz, Salt Lake City, Utah, argued for plaintiff-appellee.

Appeal from the United States District Court For the District of Nevada.

Before TRASK and GOODWIN, Circuit Judges, and EAST, ^** District Judge.

EAST, Senior District Judge:

The Cause:

Cecil D. Andrus, for the defendants-appellants, as Secretary of Interior, (Secretary) appeals the judgment of the District Court holding valid and granting access to certain placer sand and gravel mining claims located in the Las Vegas Valley in Nevada. We affirm.

The Secretary on November 17, 1965 initiated a contest complaint against the plaintiff-appellee Charlestone Stone Products Co., Inc. (Charlestone), attacking the validity of Charlestone's placer mining locations for sand and gravel numbered 1 through 22 and numbered 12A and 13A. ¹ The Administrative Law Judge found Claims 9 and 10 to be valid. On cross-appeals, however, the Secretary's Board of Land Appeals (Board) found only Claim 10 to be valid. Upon judicial review, the District Court, believing an injustice had been accomplished, held that "at least the claims 1 through 16" were valid. It also held that Charlestone should be granted access to Claim 22 in order to utilize, in the operations of the valid claims, the water produced from a well driven on Claim 22.

Issues on Review:

While the Secretary asserts the issues on review in different terms, we deem the pertinent issues to be:

(1) Whether, upon construing the record as a whole, the Secretary's finding that only Claim 10 was valid is supported by substantial evidence. Multiple Use, Inc. v. Morton, 504 F.2d 448, 452 (9th Cir. 1974); White v. Udall, 404 F.2d 334, 335 (9th Cir. 1968); and Henrikson v. Udall, 350 F.2d 949, 950 (9th Cir. 1965), cert. denied, 384 U.S. 940, 86 S.Ct. 1457, 16 L.Ed.2d 1538 (1966).

(2) Whether Charlestone met the two prong test of establishing: (a) A discovery of a valuable deposit of sand and gravel on each of its claims; and (b) The intrinsic value of the sand and gravel deposits was such as "would justify a person of reasonable prudence in making further expenditures upon the property with a reasonable prospect of success in developing a valuable mine. ² United States v. Coleman, 390 U.S. 599, 88 S.Ct. 1327, 20 L.Ed.2d 170 . . . (1968)." Clear Gravel Enterprises, Inc. v. Keil, 505 F.2d 180 (9th Cir. 1974), cert. denied, 421 U.S. 930, 95 S.Ct. 1657, 44 L.Ed.2d 87 (1975); and Verrue v. United States, 457 F.2d 1202, 1203 (9th Cir. 1972). "The reasonably prudent man we are concerned with is the miner who has made his discovery and not the prospector who is still looking." Humboldt Placer Mining Co. v. Secretary of Interior, 549 F.2d 622, 624 (9th Cir. 1977).

Filing and Operations of Claims :

Pursuant to the existing statute, A. M. Murphy and Fred Pine (Murphy) filed placer mining claims numbered 1 through 22 on February 18, 1942 in a surface water wash of the Las Vegas Valley some 15 miles distant from the then center of the city of Las Vegas. The aggregate acreage of the several claims approximated 450 acres and contained a later estimated 20 million cubic yards of sand and gravel.

The evidentiary record is replete with eyewitness testimony that the sand and gravel contained in the area of the claims was of excellent quality for various construction uses and had value as such.

Shortly after the location and filing of the claims, Murphy's assignee, Southern Nevada Industries, Inc. (Southern), began operation within the confines of the claims and removed some 100,000 yards of material from a number of places up and down the wash. Due to the absence of washing water, Southern transported the raw materials to a site some five miles distant for crushing, screening, and washing. The refined material was used in the construction of an air force base situated northeast of Las Vegas. Southern closed the operation in 1943 and moved to an area near Henderson, Nevada for participation in a World War II construction project in that area. Thereafter, during the remainder of World War II and its aftermath, private construction in the area was curtailed.

From September, 1954 until during the year 1957, one E. H. Brawner (Brawner), as lessee of the claims, operated under a royalty agreement of not less than $200 per month. It is undisputed that at this time Brawner's sand and gravel operation was farther from Las Vegas than were the operations of his competitors. Brawner's operation was also hampered to some extent by the absence of a water supply. Nevertheless he continued to operate the crushing plant within the limits of Claim 10 and materials were extracted from the crusher area and "pit" located within that claim and from other claims in the canyon. The market demand for the various types of sand and gravel, together with the lay of the various materials, dictated the location of the extractions. Brawner made profitable sales of the extracted materials through the year 1957.

The foregoing narration carries the operation on the claims through the critical pre-July 23, 1955 discovery period. ³ The following narration of operations subsequent to July 23, 1955 is pertinent, first, to the extent that the facts might bear upon the proper application, at the time of the contest proceedings, of the two prong "value" and "prudent man" or marketability test enunciated above; and, secondly, to the continuity of the marketability of the extracted materials.

On April 9, 1959, Frank R. Sullivan obtained title to the claims, extracted materials which were later stockpiled on the property, and sold some of the material as roofing granules.

On January 5, 1960, Charlestone acquired title to the claims and during 1961 Morrison-Knudsen, Inc., as lessee, entered the claims, constructed a screening plant within the confines of Claim 10 and carried on processing operations. Unsuccessful efforts were made to drill screening water wells within Claims 9 and 10, and in 1962, at the cost of some $3,000, a well supplying adequate washing water was located within Claim 22. On July 15, 1964, Charlestone leased Claims 1 through 16 to Arden Sand and Gravel Co. (Arden) for a period of five years with an annual royalty of $12,000. Although Charlestone retained Claims 17 through 22, it agreed to furnish Arden with electrical power and washing water from the well within Claim 22.

Action of the Secretary :

During the summer of 1956 while the Brawner operations were in progress, the United States Bureau of Land Management in Nevada employed Messrs. Hill and Lovejoy (Hill), competent engineers and surveyors, to investigate the validity of the instant claims. Hill reported that Claims 1 through 22 encompassed a valuable discovery of sand and gravel deposits and were valid. The report constituted a comprehensive and informative discussion of the factors bearing upon a determination of marketability of sand and gravel deposits and of the quality of particular sand and gravel deposits as of July 23, 1955. After submission of the Hill report, the Bureau of Land Management affirmed the validity of the Brawner claims and removed the area of the claims from an open small tract classification.

Nine years later the Secretary employed Donald G. Fisher (Fisher), ⁴ a mining engineer, to investigate and report on the validity of the Charlestone claims. Fisher gathered hearsay information from competing sand and gravel operators in the area and made a visual examination of the claims in 1965, some ten years after the crucial date of July 23, 1955. Based upon his investigation, Fisher opined that all of the Charlestone claims were invalid for want of a discovery. The Secretary then used the Fisher report as a basis for the contest proceedings.

Administrative Proceedings :

Fisher was the Secretary's sole witness and his testimony comprised the only evidence in support of the contest. Fisher testified to the effect that his opinion was based upon information gained as a result of visual examination of apparent extractions from each of the claims in 1965 and again in 1969; review of all mineral reports, as well as the Hill report; and interviews with local sand and gravel dealers, including the present owners and the past operators of the claims. Further, he testified that his opinion was also based upon his familiarity with the Las Vegas area, where he had previously been employed by the Government in making validity determinations and market studies in mining contest cases. Fisher, using his version of the test of discovery, opined that "this was a very sporadic operation . . . (I)t didn't appear to be an operation that could sustain a continuous operation over the years" and the claims were invalid for want of discovery. In his opinion, the crucial factors in the invalidity of the claims were the excessive distance of the claims from a market and the lack of washing facilities.

To rebut Fisher's testimony, Charlestone produced the deposition testimony of Hill. Hill's testimony reaffirmed the conclusion in his 1956 report that all of the claims were valid. He testified that his opinion of validity was based upon a personal inspection of the claims, an investigation of the actual history of the operation of the claims, and his knowledge of the marketability of the product resulting from the thorough study he had made in conjunction with Mr. Lovejoy.

Charlestone buttressed Hill's conclusions with the eyewitness testimony of several workers who had been employed at the extraction operations by Southern and Brawner. ⁵

The decisions of the Administrative...