Murray v. Bej Minerals, LLC

• Decision Date: 20 May 2020
• Docket Number: OP 19-0304
• Citation: 2020 MT 131,464 P.3d 80,400 Mont. 135
• Parties: Mary Ann MURRAY and Lige M. Murray, Plaintiffs, Counter-Defendants, and Appellees, v. BEJ MINERALS, LLC, and RTWF LLC, Defendants, Counter-Claimants, and Appellants.
• Court: Montana Supreme Court

400 Mont. 135

464 P.3d 80

2020 MT 131

Mary Ann MURRAY and Lige M. Murray, Plaintiffs, Counter-Defendants, and Appellees,

v.BEJ MINERALS, LLC, and RTWF LLC, Defendants, Counter-Claimants, and Appellants.

OP 19-0304

Supreme Court of Montana.

Argued and Submitted: November 7, 2019

Decided: May 20, 2020

For Appellants: Eric B. Wolff (argued), Stephanie M. Regenold, Perkins Coie LLP, Seattle, Washington

For Appellees: Harlan B. Krogh (argued), Eric Edward Nord, Crist, Krogh & Nord, PLLC, Billings, Montana

Justice Laurie McKinnon delivered the Opinion of the Court.

¶1 On May 20, 2019, the United States Court of Appeals for the Ninth Circuit issued an order pursuant to M. R. App. P. 15, certifying to this Court a question of first impression under Montana law:

Whether, under Montana law, dinosaur fossils constitute "minerals" for the purpose of a mineral reservation?

We entered an order on June 4, 2019, accepting the certified question as written. We observe the importance of the state law question, the public policy ramifications, and the need for clarity in the law governing similar and subsequent property interest disputes in Montana.

¶2 We conclude that the answer to the question is no.

FACTUAL AND PROCEDURAL BACKGROUND

¶3 The following facts and procedural history were supplied by the Ninth Circuit in the certification order and its attachments. The attachments contained the federal district court opinion, Murray v. Billings Garfield Land Co. , 187 F. Supp. 3d 1203 (D. Mont. 2016) [hereinafter Murray I ], and the Ninth Circuit panel decision, Murray v. BEJ Minerals, LLC , 908 F.3d 437 (9th Cir. 2018) [hereinafter Murray II ].

¶4 George Severson owned and operated a sizeable farm and ranch in Garfield County, Montana, until 1983 when he began leasing the land to Mary Ann and Lige Murray (Murrays), who worked there as ranchers. From that point, George Severson periodically transferred portions of his interest in the property to his sons, Jerry and Robert Severson (Seversons), and sold his remaining interests to the Murrays. From approximately 1991 until mid-2005, nearly fifteen years, the Murrays ran the property in partnership with the Seversons under the Murray Severson Ranch Partnership.

¶5 In 2005, the Seversons severed the surface estate of the property from the mineral estate and sold their remaining interests in the surface estate to the Murrays. The purchase agreement required the parties to execute a mineral deed at closing, apportioning one-third of the mineral rights to Robert Severson, one-third to Jerry Severson, and one-third to the Murrays. The Murrays thereafter owned the entire surface estate and a minority interest in the mineral estate.

¶6 The recorded mineral deed expressly provided for the parties’ ownership, together as tenants in common, of:

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 [property] ... together with the right, if any, to ingress and egress at all times for the purpose of mining, drilling, exploring, operating, and developing said lands for oil, gas, hydrocarbons, and minerals, and storing, handling, transporting, and marketing the same therefrom with the rights to remove from said lands all of Grantors’ property and improvements.

The purchase agreement for the transaction obligated both 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 facts indicate that when the sale was completed in 2005, neither the Murrays nor the Seversons: (1) suspected that there were valuable dinosaur fossils on the property; (2) considered whether dinosaur fossils would be included in the mineral estate as defined in their 2005 mineral deed; or (3) expressed any specific intent about who would be entitled to ownership of any dinosaur fossils found on the property. The Seversons’ majority interest in the mineral estate is presently held by two entities. Robert Severson's one-third interest is owned by BEJ Minerals, LLC (BEJ), and Jerry Severson's one-third interest is owned by RTWF LLC (RTWF). Hereinafter, the Seversons, BEJ, and RTWF are collectively referred to as "BEJ."

¶7 In the fall of 2005, shortly after the conveyance, the Murrays happened upon a "spike cluster" fossil on the property, a finding they thought to be insignificant at the time. However, following that initial discovery, the Murrays found and excavated several valuable dinosaur fossils on the property, including: the fossilized remains of two dinosaurs locked in combat (the Dueling Dinosaurs), discovered in 2006; a Triceratops foot, discovered in 2007; a large Triceratops skull, discovered in 2011; and the nearly complete fossilized remains of a Tyrannosaurus rex (the Murray T. Rex), discovered in 2013. The parties do not dispute that these discoveries are extremely rare and highly valuable. For instance, the parties stipulate that the Dueling Dinosaurs are worth several million dollars, given their "huge scientific value" as a "one-of-a-kind find." The Murrays sold the Triceratops foot for $20,000 and have offered to sell the skull for between $200,000 and $250,000. Lastly, the Murray T. Rex is one of only a dozen intact Tyrannosaurus rex skeletons of its quality ever found and was sold by the Murrays to a Dutch museum in 2014 for several million dollars. The funds are being held in escrow pending resolution of this litigation. BEJ represents that the Murrays first notified the other mineral titleholders of the fossil discoveries in 2008.

¶8 In 2013, BEJ claimed an ownership interest in the fossils, given its stake as a mineral titleholder. The Murrays, as owners of the entire surface estate, thereafter sought a declaratory judgment in Montana's Sixteenth Judicial District Court, Garfield County, affirming that the fossils found on the property are owned solely by the Murrays. BEJ removed the case to the United States District Court for the District of Montana, Billings Division, on August 21, 2014, asserting diversity jurisdiction. BEJ then filed a counterclaim, requesting a declaratory judgment that, under Montana law, the fossils are "minerals" and part of the mineral estate. BEJ also sought an order directing the Murrays to provide BEJ with a full accounting of all unearthed fossils and any contracts formed, and expenses and profits incurred, as a result of the excavated fossilized dinosaurs. Both parties moved for summary judgment.

¶9 In considering summary judgment, the federal district court recounted the two previous occasions in which this Court addressed whether a particular material qualified as a "mineral" in property conveyances. In Farley v. Booth Bros. Land & Livestock Co. , 270 Mont. 1, 4, 890 P.2d 377, 378-79 (1995), this Court was informed by the reasoning of the Texas Supreme Court in Heinatz v. Allen , 147 Tex. 512, 217 S.W.2d 994 (Tex. 1949), when we were called upon to decide whether scoria, a material used for road construction, should be characterized as a mineral in land transfers. However, we declined to expressly adopt the Heinatz test for all mineral disputes moving forward. Years later, in Hart v. Craig , 2009 MT 283, ¶¶ 4-6, 352 Mont. 209, 216 P.3d 197, we addressed whether sandstone, a material used for landscaping, should be included in a general mineral reservation in a surface deed transfer, and drew upon the Farley court's reasoning—citing Heinatz —to resolve the question. In both instances, we adhered to ordinary principles of contract interpretation to effectuate the intent of the contracting parties, ultimately concluding the materials in question were outside the ordinary and natural meaning of the term "mineral."

¶10 Using these same principles, the Murray I court granted summary judgment to the Murrays, reasoning that fossils "are not included in the natural and ordinary meaning of ‘mineral’ " and declaring the Murrays the sole owners of the dinosaur fossils because of their undivided ownership of the surface estate. Murray I , 187 F. Supp. 3d at 1212. On appeal, a Ninth Circuit panel reversed the district court decision. Murray II , 908 F.3d at 448. Following the panel decision, the Murrays filed a petition for rehearing and rehearing en banc. Pursuant to F. R. App. P. 35(a), the Ninth Circuit, proceeding en banc, entered a stay and certified the question to this Court for resolution of the dispositive issue under Montana law.

STANDARD OF REVIEW

¶11 M. R. App. P. 15(3) permits this Court to answer a question of law certified to it by another qualifying court. Our review of the certified question of law is "purely an interpretation of the law as applied to the agreed facts underlying the action." BNSF Ry. Co. v. Feit , 2012 MT 147, ¶ 6, 365 Mont. 359, 281 P.3d 225 (quoting State Farm Fire & Cas. Co. v. Bush Hog, LLC , 2009 MT 349, ¶ 4, 353 Mont. 173, 219 P.3d 1249 ).

DISCUSSION

¶12 Whether, under Montana law, dinosaur fossils constitute "minerals" for the purpose of a mineral reservation?

¶13 Notably, the Ninth Circuit declined to structure its question in a way that would limit the scope of our determination to those dinosaur fossils presently at issue, and instead chose to broadly formulate the question using all-inclusive legal terms. We determine the Ninth Circuit seeks a reliable and consistent construction of what a general mineral reservation is thought to contain—whether fossils or not—in an effort to guide subsequent parties drafting mineral deeds and the courts that inevitably interpret those deeds.¹

¶14 BEJ argues that this Court's "settled test" under Farley and Hart for determining mineral status involves a two-part inquiry: (1) whether the material at issue is technically a mineral; and, if yes, (2) whether that material is "exceptionally rare and valuable." The Murrays respond that BEJ mischaracterizes the test from Farley and Hart . They assert instead that the...