Mines Mgmt., Inc. v. Fus

• Decision Date: 26 November 2019
• Docket Number: DA 19-0131
• Citation: 453 P.3d 371,2019 MT 276,398 Mont. 15
• Parties: MINES MANAGEMENT, INC., Newhi, Inc., and Montanore Minerals Corp., Plaintiffs and Appellants, v. Tracie FUS, Lucille Penny, Desiree Hann, Walter Lindsey, Merlin Rogers, Rocky Bakie, Louise Voves, Estate of Arnold Bakie, Frank Wall and Libby Creek Ventures, L.L.C., Defendants and Appellees, Optima, Inc., Defendant, Intervenor, and Appellee.
• Court: Montana Supreme Court

398 Mont. 15

453 P.3d 371

2019 MT 276

MINES MANAGEMENT, INC., Newhi, Inc., and Montanore Minerals Corp., Plaintiffs and Appellants,

v. Tracie FUS, Lucille Penny, Desiree Hann, Walter Lindsey, Merlin Rogers, Rocky Bakie, Louise Voves, Estate of Arnold Bakie, Frank Wall and Libby Creek Ventures, L.L.C., Defendants and Appellees,Optima, Inc., Defendant, Intervenor, and Appellee.

DA 19-0131

Supreme Court of Montana.

Submitted on Briefs: October 2, 2019

Decided: November 26, 2019

For Appellants: Mark L. Stermitz, Matthew A. Baldassin, Crowley Fleck PLLP, Missoula, Montana, Dale Schowengerdt, Crowley Fleck PLLP, Helena, Montana

For Appellee Estate of Arnold Bakie: Amy N. Guth, Attorney at Law, P.C., Libby, Montana

For Intervenor and Appellee Optima, Inc: Alan F. McCormick, Katelyn J. Hepburn, Garlington, Lohn & Robinson, PLLP, Missoula, Montana

Chief Justice Mike McGrath delivered the Opinion of the Court.

¶1 Mines Management, Inc. ("MMI"), Newhi, Inc. ("Newhi"), and Montanore Minerals Corp. ("MMC") appeal a March 12, 2013 Nineteenth Judicial District Court order granting summary judgment to Arnold Bakie ("Bakie"), and the District Court’s determination that MMI’s use of an adit and underground tunnel traversing Appellees’ unpatented mining claims constituted trespass. We reverse and remand.

¶2 We restate the issues on appeal as follows:

Issue One: Whether the District Court erred in determining Bakie possessed valid unpatented mining claims, thus entitling him to summary judgment.

Issue Two: Whether the District Court erred in determining MMI’s use of the adit and underground tunnel constituted a trespass on Appellees’ mining claims .

FACTUAL AND PROCEDURAL BACKGROUND

The Montanore Project

¶3 This dispute concerns MMI’s right to access its valid patented mining claims on the Montanore Project, a multibillion-dollar copper and silver deposit within the boundary of the Cabinet Mountain Wilderness ("CMW") in Lincoln and Sanders Counties near Libby, Montana. The Montanore Project is owned by MMI through its subsidiary, MMC.¹ The Project includes two patented lode mining claims, HR 133 and 134 ("HR Claims"),² the Johnstone placer claim, as well as an adit³ and underground tunnel ("Libby Creek Tunnel").

The Subject Claims

¶4 The Libby Creek Tunnel originates as an adit on the Johnstone Placer claim outside the boundary of the CMW, traversing underground a contiguous block of 1,126 unpatented mining claims, including the four unpatented mining claims at issue in this case, POPS 12, 13, 14, and 15 ("Subject Claims"). These claims are located on approximately 23,000 acres of United States Forest Service land in Lincoln County. MMI is seeking to use the adit and Libby Creek Tunnel to access its HR Claims.

¶5 In 1984, Appellees’ predecessors in interest, Ralph Bakie and Dan Reid, filed "blanket" locations of quartz deposits for this entire block of claims with the Lincoln County Clerk and Recorder. The purpose of this blanket filing—covering an entire section with claims—was to block competing locators in an area in case of a mineral discovery.⁴ Subsequently, Big John Mining Company ("Big John") and Rodan, Inc. ("Rodan") became record owners of these claims. In 2003, Big John conveyed its interest in the unpatented mining claims to Louise Voves. Voves then conveyed various claims to Tracie Fus, Desiree Hann, Walter Lindsey, and Rocky Bakie. In February 2008, Arnold Bakie became record owner of the Subject Claims at issue in this case. In October 2013, Bakie conveyed his interest in the Subject Claims by quitclaim to Optima, Inc. ("Optima").

¶6 A major focus of this controversy concerns whether the Subject Claims possess valuable mineral deposits. In April 2008, Bakie and Lindsey filed amended location certificates with the Lincoln County Clerk and BLM for various POPS claims, including the Subject Claims, to correct errors in the original locations of these claims. Bakie testified in a 2008 deposition that he had no knowledge of the manner in which the original locations of the POPS claims were made. Bakie submitted records of quartz deposits on various claims to the trial court, although none of these records indicate the presence of quartz deposits on the Subject Claims at issue. Additionally, Bakie submitted affidavits and assay reports to the District Court purportedly establishing discovery of valuable mineral deposits on the Subject Claims; however, the reports reflect a total of only three discovery points throughout the entire 1,126 claim block, none of which are located on the Subject Claims. Although Bakie originally claimed in an affidavit that an assay he submitted was from a single discovery on POPS 12, he recanted this claim at a 2008 deposition when he clarified that his discoveries were actually on POPS 11 and 24. Bakie further testified that he was unaware of valuable mineral discoveries on any other Subject Claims.

Mining Lease

¶7 In April 1989, the Montana Department of State Lands issued a license and permits to Noranda for construction of the adit and Libby Creek Tunnel to access its HR Claims. In the same year, Noranda entered a mining lease with Big John and Rodan, then the record owners of the 1,126 unpatented mining claims, for a term of 20 years. In addition, Noranda obtained an easement across the unpatented mining claims.⁵ The lease and easement included the right to construct the adit and Libby Creek Tunnel underneath the Subject Claims in order to access its HR claims. Section 5.2(a) of the lease states, "Lessor is the sole legal and equitable owner of a one hundred percent (100%) undivided ownership interest in the Property ...." However, the lease itself contains no acknowledgement, warranty, or concession by Noranda regarding the ownership or validity of Lessors’ claims. Rather, the lease contemplates that Big John and Rodan may not own an exclusive possessory interest in the Subject Claims. Section 5.7 of the lease provides:

Lessor Interest. If Lessor owns less than the entire and undivided estate in the Property (as warranted in Section 5.2) or in the minerals in, on and underlying the lands covered by the Subject Claims, then all Payments provided for in this Agreement ... shall be due the Lessor only in the proportion that Lessor’s actual interest bears to the entire undivided interest. Lessee shall be entitled to offset all overpayments or monies wrongfully paid to Lessor against any and all subsequent Payments to Lessor.

Similarly, Section 5.10 of the lease acknowledges that lessees may acquire interests that may conflict with the Subject Claims:

Acquisition Of Other Property Interests . Nothing in this Agreement shall be construed to limit Lessee’s right to locate on its own behalf, to hold or to acquire or lease from persons or entities other than Lessor, any mining claims, mill sites or other real property interests (including without limitation those that may overlap or be in conflict with the Subject Claims), and such mining claims, mill sites or other real property interests shall not be subject to the terms and conditions of this Agreement. Lessee shall not be estopped from asserting the validity or seniority of any such mining claims, mill sites or other real property interests (including without limitation those that may be held by Lessee as of the Effective Date).

Noranda subsequently began construction of the adit and 14,000 feet of the Libby Creek Tunnel, traversing the Subject Claims to a point inside the CMW boundary.

¶8 In 1991, Noranda halted construction of the tunnel due to elevated nitrate concentrations in surface water and depressed mineral prices.⁶ In June 2002, Noranda terminated the lease by formal notice, relinquishing its interest in the easement to Big John and Rodan.

Litigation

¶9 In 2006, as a result of Newhi’s acquisition of Noranda, MMI assumed the patented Johnstone and HR claims. MMI then proceeded with the Montanore Project and began using the adit for access purposes, engaging in dewatering and rehabilitation activities in preparation for actual mining operations. On September 26, 2007, MMI filed a Complaint in District Court against Bakie and other defendants, seeking a declaratory judgment that the mining claims owned by defendants were invalid.⁷ In November 2007, the defendants countersued, alleging that MMI’s use of the adit and Libby Creek Tunnel following termination of the lease constituted a trespass, and sought a declaration that their unpatented mining claims were valid and superior to MMI’s.⁸ In February 2008, upon his acquisition of interest in the Subject Claims, the court granted Bakie leave to amend his Complaint and join these counterclaims.

¶10 In 2012, the parties filed cross-motions for summary judgment. On March 12, 2013, the District Court granted summary judgment to Bakie and denied MMI’s motion. The court determined that the Subject Claims were valid unpatented mining claims because Bakie and his predecessors made valuable mineral discoveries on the Subject Claims, thus providing Bakie with an interest superior to MMI’s in those claims. The District Court also concluded that Noranda’s abandonment of the lease and easement terminated its interest in the Subject Claims, leaving MMI without access rights to the adit and Libby Creek Tunnel.⁹ MMI appealed to the Montana Supreme Court, which refused to consider the interlocutory appeal and remanded the matter for further proceedings on the injunction. Mines Mgmt. Inc. v. Fus , No. DA 13-0240, Or. (Mont. Jan. 7, 2014).

¶11 On August 15, 2013, MMI filed a new lawsuit in federal district court seeking to condemn the mining claims. The state court stayed this lawsuit until resolution of the federal action. The federal court entered a preliminary condemnation order for an easement, granting MMI access to the subsurface of the Subject Claims and confirming that MMI had a right of access to the Subject Claims under federal law. Montanore Minerals Corp. v. Easements & Rights of Way , No. 9:13-CV-00133-DLC,...