Murray v. BEJ Minerals, LLC, 110618 FED9, 16-35506

Docket Nº:16-35506
Opinion Judge:ROBRENO, DISTRICT JUDGE.
Party Name:Mary Ann Murray; Lige M. Murray, Plaintiffs-Counter-Defendants-Appellees, v. BEJ Minerals, LLC; RTWF, LLC, Defendants-Counter-Claimants-Appellants.
Attorney:Eric D. Miller (argued), Perkins Coie LLP, Seattle, Washington; Shane R. Swindle, Perkins Coie LLP, Phoenix, Arizona; for Defendants-Counter-Claimants-Appellants. Harlan B. Krogh (argued) and Eric Edward Nord, Crist Krogh & Nord PLLC, Billings, Montana, for Plaintiffs-Counter-Defendants-Appellees.
Judge Panel:Before: Milan D. Smith, Jr. and Mary H. Murguia, Circuit Judges, and Eduardo C. Robreno, District Judge. MURGUIA, Circuit Judge, dissenting.
Case Date:November 06, 2018
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Mary Ann Murray; Lige M. Murray, Plaintiffs-Counter-Defendants-Appellees,

v.

BEJ Minerals, LLC; RTWF, LLC, Defendants-Counter-Claimants-Appellants.

No. 16-35506

United States Court of Appeals, Ninth Circuit

November 6, 2018

Argued and Submitted February 6, 2018 Seattle, Washington

Appeal from the United States District Court for the District of Montana D.C. No. 1:14-cv-00106-SPW Susan P. Watters, District Judge, Presiding

Eric D. Miller (argued), Perkins Coie LLP, Seattle, Washington; Shane R. Swindle, Perkins Coie LLP, Phoenix, Arizona; for Defendants-Counter-Claimants-Appellants.

Harlan B. Krogh (argued) and Eric Edward Nord, Crist Krogh & Nord PLLC, Billings, Montana, for Plaintiffs-Counter-Defendants-Appellees.

Before: Milan D. Smith, Jr. and Mary H. Murguia, Circuit Judges, and Eduardo C. Robreno, [*] District Judge.

SUMMARY[**]

Montana Law

The panel reversed the district court's summary judgment in favor of Lige and Mary Ann Murray, owners of a Montana ranch, who brought the action seeking a declaratory judgment that dinosaur fossils found on the ranch belonged to them as owners of the surface estate.

In 2005, prior to the discovery of the fossils, Jerry and Robert Severson, the previous owners of the ranch, sold their surface and one-third of the mineral estate to the Murrays. In the conveyance, the Seversons expressly reserved the remaining two-thirds of the mineral estate.

The panel held, as an initial matter, that definitions of "mineral" found in Montana statutes, like dictionary definitions, were contradictory and therefore inconclusive. The panel further held that the Montana Supreme Court has generally adopted the test in Heinatz v. Allen, 217 S.W.2d 994 (Tex. 1940), for determining whether a particular substance was a mineral in the context of deeds and agreements regarding mineral rights to land. The panel held that under this test, the dinosaur fossils, which were rare and exceptional, were "minerals" pursuant to the terms of the deed, and belonged to the owners of the mineral estate. The panel rejected the Murrays' policy-driven arguments to the Heinatz test. The panel remanded for further proceedings.

Judge Murguia dissented, and she would hold that the district court correctly concluded that dinosaur fossils do not fall within the ordinary and natural meaning of the terms "minerals," as that term was used in the mineral deed in this case. Judge Murguia would affirm the district court's grant of summary judgment for the Murrays.

OPINION

ROBRENO, DISTRICT JUDGE.

Once upon a time, in a place now known as Montana, dinosaurs roamed the land. On a fateful day, some 66 million years ago, two such creatures, a 22-foot-long theropod and a 28-foot-long ceratopsian, engaged in mortal combat. While history has not recorded the circumstances surrounding this encounter, the remnants of these Cretaceous species, interlocked in combat, became entombed under a pile of sandstone. That was then . . . this is now.

In 2006, an amateur paleontologist uncovered the well-preserved fossils of the "Dueling Dinosaurs" on a Montana ranch ("the Ranch") in an area known as Hell Creek. Lige and Mary Ann Murray ("the Murrays"), the plaintiffs in this action, own the surface estate of the ranch where the fossils were found. In 2005, prior to the discovery of the fossils, Jerry and Robert Severson ("the Seversons"), the defendants and previous owners of the ranch, sold their surface estate and one-third of the mineral estate to the Murrays. In the conveyance, the Seversons expressly reserved the remaining two-thirds of the mineral estate, giving them ownership, as tenants in common with the Murrays, of all right, title, and interest in any "minerals" found in, on, and under the conveyed land.

These fossils are now quite valuable. After a dispute arose regarding the true owner of the Dueling Dinosaurs and several other valuable dinosaur fossils found on the Ranch (including a nearly intact Tyrannosaurus rex skeleton, one of only twelve ever found) (collectively, "the Montana Fossils"), the Murrays filed this action seeking a declaratory judgment that the Montana Fossils belonged to them as owners of the surface estate.1 In turn, the Seversons asserted a counterclaim seeking a declaratory judgment that the Montana Fossils belong to the mineral estate. The answer turns on whether the Montana Fossils are deemed "minerals" within the meaning of the mineral deed under Montana law. If the Montana Fossils are minerals, the Seversons, as majority owners of the mineral estate, will own two-thirds of the Montana Fossils. If the Montana Fossils are not minerals, they will belong to the Murrays in their entirety.

Following the filing of cross-motions for summary judgment, the district court granted summary judgment for the Murrays, holding that, under Montana law, the Montana Fossils are not "minerals" within the meaning of the mineral deed. The Seversons now appeal. The district court had jurisdiction over this diversity action pursuant to 28 U.S.C. § 1332(a)(1).2 We have jurisdiction pursuant to 28 U.S.C. § 1291, and for the reasons set forth below, we reverse the district court's order granting summary judgment for the Murrays, and remand for further proceedings consistent with this opinion.

I.

The facts of this case are largely undisputed. George Severson previously owned property used as a farm and ranch in Garfield County, Montana ("the Ranch"). In 1983, he began leasing the Ranch to Mary Ann and Lige Murray ("the Murrays"), who worked there as ranchers. George Severson later transferred a portion of his property interest in the Ranch to his sons, Jerry and Robert Severson ("the Seversons"), and sold the remainder of his interest to the Murrays.

The Seversons and the Murrays jointly owned and operated the Ranch until 2005, when the Seversons sold their surface ownership rights and a portion of their mineral rights to the Murrays.3 The mineral deed that the parties executed and recorded in connection with the 2005 transaction ("the Deed") stated that the Seversons and Murrays would own, as tenants in common, "all right title and interest in and to all of the oil, gas, hydrocarbons, and minerals in, on and under, and that may be produced from the [Ranch]." The purchase agreement for the 2005 transaction required the parties "to inform all of the other parties of any material event which may [affect] the mineral interests and [to] share all communications and contracts with all other Parties."

The Seversons and the Murrays have represented that, at the time of the sale, they did not suspect that there were any valuable dinosaur fossils buried beneath the surface of the Ranch. However, beginning a few months after the sale, the Murrays discovered several rare dinosaur fossils on the property, including: (1) the fossils of two separate dinosaurs locked in battle when they died, nicknamed "the Dueling Dinosaurs," discovered in 2006; (2) a fossilized Triceratops foot and skull, discovered in 2007 and 2011, respectively; and (3) a nearly complete fossilized Tyrannosaurus rex skeleton, nicknamed the "Murray T. Rex," discovered in 2013.4 The ownership of all of these fossils (previously defined as "the Montana Fossils") is implicated in this litigation.

The parties agree that the Montana Fossils are rare and extremely valuable. The Murrays' experts testified that, because fossils of dinosaurs interacting are rare, the Dueling Dinosaurs are a "one-of-a-kind find" with "huge scientific value." Although the Dueling Dinosaurs have not yet been sold, they were appraised at between seven million and nine million dollars, and the parties have stipulated that the set is worth several million dollars. The Murrays sold the Triceratops foot for $20, 000 and have offered to sell the skull for $200, 000 to $250, 000. Their expert, in an email attempting to sell the skull, described it as "one of the best if not the best Triceratops skull ever found." Finally, the Murray T. Rex is one of only a dozen intact Tyrannosaurus rex skeletons ever found. The Murrays sold it to a Dutch museum in 2014 for several million dollars. The proceeds are being held in escrow pending the outcome of the instant litigation.

The Murrays first informed the Seversons about the Montana Fossils in 2008. After the Seversons asserted an ownership interest, the Murrays filed this action in Montana state court seeking a declaratory judgment that, as owners of the surface estate (i.e., all of the Ranch's property other than the mineral estate, see supra note 1), they are the sole owners of the Montana Fossils. The Seversons removed the action to federal court and asserted a counterclaim seeking a declaratory judgment that the Montana Fossils are part of the mineral estate.[5]

During...

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