NL Industries, Inc. v. Eisenman Chemical Co., 13646

Decision Date03 June 1982
Docket NumberNo. 13646,13646
Citation645 P.2d 976,98 Nev. 253
PartiesNL INDUSTRIES, INC.; and the 25 Corporation, Inc., Appellants, v. EISENMAN CHEMICAL COMPANY; and Marvel-Jenkins Ranches, a copartnership composed of Louise M. Marvel, the Estate of Ernest R. Marvel, Richard T. Marvel, Mary(aka Mary O.) Marvel, Thomas J. Marvel, Rosita (aka Rosita P.) Marvel, John W. Marvel and Wilburta Marvel, Respondents.
CourtNevada Supreme Court

Hill, Cassas, deLipkau & Erwin, Reno, Marshall, Bratter, Greene, Allison & Tucker and Richard L. Bond, New York City, for appellant NL Industries, Inc.

C. E. Horton, Ely, Davis, Graham & Stubbs and Neil Peck, Denver, Colo., for appellant The 25 Corp., Inc.

Hoy & Miller, Chartered, Elko, Van Cott, Bagley, Cornwall & McCarthy and E. Scott Savage, Salt Lake City, Utah, for respondent Eisenman Chemical Co.

John E. Marvel, Elko, F. Alan Fletcher, Salt Lake City, Utah, for respondent Marvel-Jenkins Ranches.

Evans, Kitchel & Jenckes, Phoenix, Ariz., Smith & Gamble, Carson City, for amici curiae Phelps Dodge Corp., ASARCO, Inc., Sunshine Mining Co., Milchem, Inc., Noranda Exploration, Inc. and Genstar Cement and Lime Co.

Durney, Guinan & Brennan, Reno, for amicus curiae Dresser Industries, inc Vargas & Bartlett and Robert W. Marshall, Reno, for amicus curiae duval corp.

Ross P. Eardley, Elko, for amici curiae Bullion Monarch Co., and Metals Inc.

Charles M. McGee, Reno, for amicus curiae Western Gas, Oil & Mining, Ltd.

OPINION

MANOUKIAN, Justice:

Appellants NL Industries and The 25 Corporation, 1 appeal from a district court order granting respondent Eisenman Chemical Company exclusive and immediate occupancy of a portion of disputed mining property near Carlin, Nevada. The order grants respondent Eisenman the right to extract and sell barite ore from the property and to use its surface areas to complete extraction from a nearly exhausted claim. The district court issued the order pursuant to NRS 37.100, which provides for immediate occupancy pending judgment in a condemnation proceeding if the equities favor the plaintiff and if the relative damages which may accrue indicate a need for immediate relief.

Appellants contend that the order was improper in this case. They allege, inter alia, that because the disputed property was already appropriated for mining use and Eisenman's proposed action would destroy that use, condemnation of mineral deposits was impermissible and therefore, immediate occupancy was improperly granted. Under the circumstances revealed by the record now before us, we agree with appellants' contention.

NL and Eisenman are competitors in the barite mining industry. Since 1973, Eisenman has actively mined and processed barite from property known as the Lakes No. 1 unpatented lode mining claim (hereinafter "Claim").

Since 1964, The 25 Corporation, through predecessors in interest, has owned the fee interest in the surface estate of a large cattle ranch in northeastern Nevada. The mineral rights to The 25 Corporation's ranch are shared between The 25 Corporation and respondent Marvel-Jenkins, each owning a 50 percent undivided interest. The 25 Corporation has the exclusive right to lease the mineral rights and did so lease eight sections of land known as the Lakes Property (hereinafter "Property") in October 1980 to NL. NL had held contractual rights to prospect for minerals on the ranch since 1979. The Property includes and surrounds the smaller Claim area. The NL lease will terminate in 10 years if no minerals from the Property have been put into commercial production by that time. The Marvel-Jenkins 50 percent interest is subject to defeasance (reverting to The 25 Corporation) if minerals are not produced by mid-1984.

In its complaint, Eisenman alleges that under theories of reformation, equitable estoppel and adverse possession, it owns a 75 percent undivided mineral interest in the Claim, including extralateral and appurtenant rights, and seeks to condemn the remaining 25 percent. 2 Alternatively, Eisenman seeks to condemn all of appellants' interest in the Claim (including extralateral/appurtenant rights) if it is determined that Eisenman does not otherwise own a 75 percent interest. Eisenman also alleges that the lease between NL and The 25 Corporation should be abrogated, because the two corporations were engaged in a conspiracy to deprive Eisenman of the lease and the Marvel-Jenkins group of their 50 percent interest in the Property's mineral rights. The only part of the complaint relevant to this appeal concerns Eisenman's alleged right to condemn the mineral interest in the Property. Without a right to condemn, there can be no right to immediate occupancy. Shaklee v. District Court, 636 P.2d 715 (Colo.1981).

The Property contains an estimated eight million tons of barite ore, worth approximately $40,000,000. The immediate occupancy order grants Eisenman the right to extract approximately 190,000 tons of ore on the Property outside the Claim. The order also grants Eisenman exclusive access to surface areas on the Property to conduct ancillary mining activities to extract the ore that remains within the Claim's vertical boundaries.

Based on testimony and other evidence presented at the hearing on the immediate occupancy order below, the district court made two findings pertinent to this appeal: (1) that appellant NL had no plans to mine the Property immediately, but was holding the barite in reserve for up to ten years (the initial lease period); and (2) that respondent Eisenman had a comprehensive mining plan calling for immediate extraction of the disputed ore.

The district court based its decision to grant the order permitting immediate occupancy on its conclusion that "the holding of mineral reserves is a mining use, but the development and mining of mineral rights or a mineral deposit is a more necessary public use." 3

We agree that the holding of mineral reserves is a mining use, but we reject the lower court's determination that immediate extraction and production of mineral resources is a more necessary public use than holding ore in reserve for future mining. It is beyond question that Eisenman's proposed use, extraction of the barite ore, will entirely destroy NL's intended use, namely, to maintain a reserve of barite for future production. Nevada's eminent domain statutes do not authorize condemnation of property for mining purposes when such property is already devoted to a legitimate mining purpose and the condemnor's proposed activities would extinguish or seriously interfere with the condemnee's mining use.

It is well established in this state that mining, being of paramount interest, is a public use and that the power of eminent domain can be exercised on behalf of that industry. NRS 37.010(6). 4 See also, State ex rel. Standard Slag Co. v. District Court, 62 Nev. 113, 143 P.2d 467 (1943); Goldfield Consolidated Milling & Transportation Co. v. Old Sandstorm Annex Gold Mining Co., 38 Nev. 426, 150 P. 313 (1915); Dayton Gold & Silver Mining Co. v. Seawell, 11 Nev. 394 (1876). The circumstances of this case, however, create an issue of first impression for this court. Despite respondent's contentions to the contrary, in no case has the right to condemn mineral deposits been at issue. In the Nevada cases noted above, this court was concerned only with the right to condemn property to conduct ancillary mining purposes for development of the condemnor's existing mine. And we are aware of no case from any other jurisdiction which directly addresses the issue confronting us in this appeal.

We find nothing in Nevada statutes or prior case law that would absolutely preclude condemnation of property for the purpose of extracting the mineral deposits contained therein. See Milchem, Inc. v. District Court, 84 Nev. 541, 445 P.2d 148 (1968). Nor do we find that appellants seriously question this general authority to condemn mineral deposits; they claim, instead, that Chapter 37 does not authorize one mining company to condemn another mining company's ore. That argument improperly focuses on the label attached to the condemnee and condemnor. The essential determinant is the purpose which the condemnee and condemnor intend for the property. It is conceivable that a mining company might purchase and hold land for a non-mining, non-public purpose. Under such circumstances, we see no justification for exempting property from condemnation simply because the owner is a mining entity. Ultimately, when the allegations of Eisenman's complaint are fully litigated at trial, perhaps proof will be adduced that NL is not, in fact, holding the property in question for the purpose of mining. However, the district court found, on the basis of the record as presently developed, that NL's use of the property was mining-related and therefore, a...

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