Erceg v. Fairbanks Exploration Co.

• Decision Date: 30 March 1938
• Docket Number: No. 8107.,8107.
• Citation: 95 F.2d 850
• Parties: ERCEG v. FAIRBANKS EXPLORATION CO.
• Court: U.S. Court of Appeals — Ninth Circuit

95 F.2d 850 (1938)

ERCEG v. FAIRBANKS EXPLORATION CO.

No. 8107.

Circuit Court of Appeals, Ninth Circuit.

March 30, 1938.

Pillsbury, Madison & Sutro, of San Francisco, Cal. (Alfred Sutro, Francis N. Marshall, and Francis R. Kirkham, all of San Francisco, Cal., of counsel), for Fairbanks Exploration Co.

John L. McGinn and Julien A. Hurley, both of Fairbanks, Alaska, and Robert L. McWilliams, of San Francisco, Cal. (Morgan V. Spicer and Vincent Surr, both of San Francisco, Cal., of counsel), for Erceg.

Before DENMAN, MATHEWS, and HEALY, Circuit Judges.

HEALY, Circuit Judge.

This is a suit to recover damages for injury to a group of placer mining claims situate in Fairbanks Recording District, Alaska. The trial was had to the court without a jury, resulting in a judgment in favor of plaintiff in the amount of $30,000, plus attorney's fees and costs.

Both parties have appealed. For convenience they will be referred to as plaintiff and defendant, as in the court below.

The suit was brought by Mike Erceg as guardian of the estate of George Gartner, an insane person. Erceg was appointed such guardian in August, 1927. Gartner owns three placer claims on Goldstream creek. About the year 1924 the defendant Fairbanks Exploration Company acquired placer ground on that stream above the Gartner claims and carried on operations there through the ensuing years. The gold content of the stream is in the gravels, which are frozen. Covering the gravel is an overburden of frozen muck consisting of black mud which contains roots and vegetable matter. The overburden varies in depth from 10 to 60 feet. The method pursued by defendant in its mining operations consists of three general steps, (1) removing or stripping away the muck with giants, (2) thawing the gravels by the cold water method, and (3) dredging the thawed gravels and sluicing the same to extract the gold content.

It was found by the court that for the purpose of removing the overburden and for thawing and mining purposes the defendant has conducted to Goldstream creek, from other watersheds, large quantities of water, thus greatly increasing the natural flow of the stream. These alien waters, together with the waters of the creek, were diverted from their natural channels and carried by ditches to a high level and thence conducted by pipes to the places of use. Jets of water are there discharged against the overburden, under great pressure, through converging nozzles denominated giants or monitors, thus causing the muck to be excavated and disintegrated. The stripping operations have been so carried on that the resulting debris has completely filled and obliterated the channel of the creek and the defendant has caused large quantities of debris and silt to be carried upon and deposited over the Gartner claims for their entire length and for virtually their entire width. It was found that in the conduct of its operations the defendant acted willfully and in utter disregard of the rights of the plaintiff.

The trial court determined that the cost of sluicing away the overlying silt deposited through the acts of the defendant would exceed the value of the Gartner ground as it was before the injury occurred. It found that the claims contain somewhat in excess of a million cubic yards of auriferous gravels of an average value of 30.7 cents per cubic yard, based on a gold value of $20.67 per fine troy ounce. The expense of mining, it was found, would not exceed 27 cents per cubic yard, thus leaving an operating profit of approximately 3.7 cents. Allowing for a period of five years for mining out the claims, the court determined that the fair and reasonable value of the Gartner property was the sum of $30,000, based on the value of an ounce of gold prior to January, 1934.

1. The appeal of the plaintiff involves three main contentions: (1) That in computing the sum to be awarded him the court erred in deducting from the value of the gold content of his claims the cost of mining; (2) that the court erred in deducting any amount on account of the length of time which it was thought would be required to work out the plaintiff's properties; and (3) that the court should have determined the gold in the claims to be of the value of $35 per ounce instead of $20.67 per ounce.

Under his first point the plaintiff urges that the acts of the defendant amounted to a "taking" of his property. It is claimed that the case is analogous to those involving the removal by a willful trespasser of ore from another's mine. Reliance is placed on the familiar holding of many authorities that, where a trespasser removes oil or other mineral from the land of another, the taking being reckless or intentional, or without claim of right, the measure of damages is the enhanced value of the product when and where it is finally converted to the use of the trespasser, without any deduction for expense incurred or for any value the trespasser may have added to the mineral by his labor. It is sufficient to observe that the defendant has not removed any mineral from the ground. There was no conversion and the gold is still in place. Since the claims were valuable only for their mineral content, such value as they had was the value of the gold less the cost of extracting it.

The second point is not well taken. It was for the trial court, on all the evidence, to determine the value of the plaintiff's property. The finding as to value is not assailed as unsupported by substantial evidence, nor is it claimed that it would require less or more than five years to mine out the property. In determining value the court might properly consider all relevant factors, including the element of time normally required to realize on the values which the claims contain.

With respect to the third point, the plaintiff again relies on the assumption that the acts of the defendant amounted to a "taking" of his property. It is said that the Alaska statutes, sections 1568 to 1583, Comp.Laws Alaska 1933, authorize the exercise by the defendant of the power of eminent domain. It is urged that this suit was, in effect, an action for just compensation for the taking of property by a party having the power of condemnation. By treating the suit as a quasi eminent domain proceeding the plaintiff asserts the right to recover the value of the claims as of the time of the trial, thus giving himself the advantage of the increase in the price of gold.¹ The trial court treated the action as one of trespass and applied the ordinary measure of damages, which has been stated as follows: "As to the land available exclusively for mining purposes, if the cost of repairing the injury by removing the debris deposited by defendant would amount to less than the value of the property as it was prior to the injury, such cost would be the proper measure of damage; but, if such cost of repair or of restoration would exceed such value, then the value of the property would be the proper measure." Salstrom v. Orleans Bar Gold Mining Co., 153 Cal. 551, 96 P. 292, 296, quoted in Lindley on Mines, 3d Ed., § 844; Sutherland on Damages, 4th Ed., § 1017.

At the common law, the right of a landowner to recover just compensation for property appropriated by another without the formality of condemnation proceedings was well established. Lewis on Eminent Domain, 3d Ed., § 889; United States v. Lynah, 188 U.S. 445, 23 S.Ct. 349, 47 L.Ed. 539; Doyle v. Kansas City & S. Ry. Co., 113 Mo. 280, 20 S.W. 970; Richmond, N., I. & B. R. Co. v. Thomas, Ky., 43 S.W. 466; City of Huntington v. Kenower, 12 Ind.App. 456, 40 N.E. 550. In such actions it has sometimes been said that the landowner is entitled to recover the value of the property as of the time of trial. Morin v. St. Paul, M. & M. Ry. Co., 30 Minn. 100, 14 N. W. 460; Texas Western Ry. Co. v. Cave, 80 Tex. 137, 15 S.W. 786; Blankenship v. State, 160 Wash. 514, 295 P. 480. See, contra, McDougald v. Southern Pacific Co., 162 Cal. 1, 120 P. 766.

Whether or not, in the class of cases just considered, the proper measure of recovery is the enhanced value of the property at the time of trial, we need not stop to inquire.² A continuing trespass is not involved. While the injury was cumulative, it was determined by the court and is assumed by plaintiff that the damage to his property was complete prior to the commencement of the action. The suit was tried and determined on the theory that it is an action in trespass, not one involving the power of eminent domain. The pleadings frame no issue of appropriation for a public use. The judgment does not purport to vest in the defendant any title or right of possession. In all the cases we have found bearing on the right of a party to recover just compensation for the taking of property, the theory of recovery relied on was clearly apparent. In many of them the right of condemnation was specifically alleged. Jacobs v. United States, 290 U.S. 13, 54 S.Ct. 26, 78 L.Ed. 142, 96 A.L.R. 1; United States v. Lynah, supra; Faulk v. Missouri River & N. W. Ry. Co., 28 S.D. 1, 132 N.W. 233, Ann.Cas.1913E, 1130; Organ v. Memphis & L. R. R. Co., 51 Ark. 235, 11 S.W. 96; City of Huntington v. Kenower, supra; Richmond, N., I. & B. R. Co. v. Thomas, supra; Blankenship v. State, supra. In others the issue was raised by answer or cross bill seeking condemnation. Pumpelly v. Green Bay & M. Canal Co., 13 Wall. 166, 80 U.S. 166, 20 L.Ed. 557; Doyle v. Kansas City & S. Ry. Co., supra; Morin v. St. Paul, M. & M. Ry. Co., supra; San Antonio & A. P. Ry. Co. v. Ruby, 80 Tex. 172, 15 S.W. 1040; Texas Western Ry. Co. v. Cave, supra; San Antonio & A. P. Ry. Co. v. Hunnicutt, 18 Tex.Civ.App. 310, 44 S.W. 535; Canton, A. & N. R. Co. v. French, 68 Miss. 22, 8 So. 512; County Com'rs of Blue Earth County v. St. Paul & S. C. R. Co., 28 Minn. 503, 11 N.W. 73.

The trial court properly found the measure of damage to be the value of the claims at the time of the injury. The injury being permanent, plaintiff was...