Rock Springs Corp. v. Pierre, 14667

• Decision Date: 11 August 1980
• Docket Number: No. 14667,14667
• Citation: 189 Mont. 137,615 P.2d 206,37 St.Rep. 1378
• Parties: ROCK SPRINGS CORPORATION, and Lawrence McCune, Plaintiffs and Respondents, v. W. H. PIERRE, d/b/a W. H. Pierre & Associates, Lts., and L.B.M. Construction, Inc., Defendants and Third Party Plaintiffs and Appellants.
• Court: Montana Supreme Court

Page 206

615 P.2d 206

189 Mont. 137

ROCK SPRINGS CORPORATION, and Lawrence McCune, Plaintiffs and Respondents, v. W. H. PIERRE, d/b/a W. H. Pierre & Associates, Lts., and L.B.M. Construction, Inc., Defendants and Third

Party Plaintiffs and Appellants.

No. 14667.

Supreme Court of Montana.

Submitted May 23, 1980.

Decided Aug. 11, 1980.

Richard J. Llewellyn, argued, Helena, for defendants and third party plaintiffs and appellants.

R. Thomas Garrison, argued, Virginia City, for plaintiffs and respondents.

HASWELL, Chief Justice.

Rock Springs Corporation (Rock Springs) and Lawrence McCune, not parties in this appeal, brought this action in the Fifth Judicial District for conversion of mine tailings in Madison County, Montana. Defendants-appellants, W. H. Pierre d/b/a W. H. Pierre & Associates and L.B.M. Construction (Pierre and L.B.M.), filed a third party complaint against Camilla Gage, respondent herein, seeking to hold her liable based on her claims of ownership. The jury returned a verdict in favor of Rock Springs and McCune and against Pierre and L.B.M., and further found in favor of Gage in the third party action. Pierre and L.B.M. now appeal solely from the verdict in the third party action.

In the Rochester Basin, west of Twin Bridges, Montana, there are tailings from the Watseca Mine which are located on the "Concentrator Tailings Placer Unpatented Mining Claim." The competing claims of ownership of the tailings gave rise to the District Court action. The mining claim had been located on federal land in 1934 by William Gage and relocated by his wife, Camilla Gage, in 1941 following his death. The tailings resulted from the processing of materials from the Watseca Mine and other claims located approximately one mile north of Camilla Gage's claim. The mill, known as the Clark Concentrator, processed the minerals and deposited the tailings upon what is now Mrs. Gage's claim between the late 1860's and 1898.

Lawrence McCune is the successor in interest to the Watseca Mine and other claims near it which will be referred to cumulatively as the "Watseca." Tailings are also located on McCune's "Concentrator Quartz Lode Mining Claim." These tailings will be referred to as the "upper tailings" while the tailings located on Mrs. Gage's claim will be called the "lower tailings."

Third party plaintiff-appellant W. H. Pierre met third party defendant-respondent Camilla Gage in 1967 while he was attending the School of Mines in Butte. Mrs. Gage was and presently is a real estate broker in Twin Bridges. Pierre was very interested in testing both the lower tailings and the upper tailings in 1967, and he contacted both Mrs. Gage and Lawrence McCune. Mrs. Gage authorized Pierre to test the lower tailings, and McCune authorized him to test the upper tailings during a limited time period which ended in December 1967. Pierre's tests came out negative; the cost of removing, hauling and processing the material would exceed any revenues to be derived from the minerals.

In 1969 the predecessor in interest to Rock Springs acquired a lease and option to the Watseca claims from Lawrence McCune.

Between 1968 and 1972, Pierre worked in various capacities in the United States and Canada. In 1972 he once again contacted Mrs. Gage concerning the lower tailings. Pierre had discovered a method which would make the extraction of the minerals profitable. The method involved the transporting of the tailings to Butte where they would be mixed with silica. When silica was added in sufficient quantity, free smelting could be obtained which resulted in the extraction of the minerals in the tailings with only the incurrence of costs for transportation and the silica itself. The cost of shipping the tailings to the smelter was approximately $6.50 per ton, while the cost of silica was $.10 per ton.

Mrs. Gage represented that she owned the tailings as a result of her claim. She continued to assert this ownership through trial. Pierre testified that he never questioned her ownership. In late 1972 or early 1973 Mrs. Gage and L.B.M. Construction, Inc., a company comprised of Pierre and two others, entered into an oral agreement for the removal of the lower tailings. A written agreement was entered into in May 1973. It recited that Mrs. Gage was to receive $.50 per ton of tailings removed. It was anticipated that there were 15,000 tons of tailings.

In 1973 Pierre began extracting the tailings and transporting them for smelting. Expert testimony revealed that 3539 cubic yards of tailings were removed. Also, according to expert testimony, the amount of gold and silver removed was estimated to be 694.4 troy ounces of gold and 4539 troy ounces of silver. The highest value of gold between the time of extraction in 1973 and the initiation of this suit was $195.25 per troy ounce on December 30, 1974, while the highest price for silver was $6.06 in May 1974. According to this expert testimony the gross value of the minerals taken at the highest price was $163,087.

Further evidence was introduced revealing the disbursements made by the Anaconda Company. This information, supplied by Anaconda, shows that for the months of February through June, 1973, Anaconda paid Pierre approximately $70,000 for the minerals processed at the smelter. This figure is the net disbursement after the cost of the silica was deducted. Pierre also made shipments to Anaconda in July through October, 1973; however, Anaconda did not supply the amount disbursed for this period. Mrs. Gage received $3,000 from L.B.M. for the removal of the tailings.

Also introduced at trial were two reports prepared by mining engineers in the 1930's. The reports were prepared by Uuno Sahinen and William S. Gage, Camilla Gage's deceased husband, and they disclose the quality and quantity of the tailings in question. The reports disclosed that the lower tailings belonged to the Watseca mining operation. Pierre testified that he had read the reports and was familiar with them.

Testimony was also adduced concerning Pierre's degree in mining engineering and his extensive experience in mining. His experience in mining dates back to 1958, and he received his degree from the School of Mines in 1968.

Several exhibits of correspondence between Pierre, McCune, Rock Springs Corporation, and Camilla Gage were introduced into evidence. These exhibits reflect, to a certain extent, the knowledge of the parties concerning the ownership of the claims. This correspondence is summarized as follows:

September 25, 1967 Letter McCune to Pierre. McCune referred to a telephone conversation with Pierre in which Pierre sought authorization to test mine tailings in the Rochester Basin. McCune gave Pierre permission "to sample and test the Watseca Mine tailings and the Concentrator tailings . . . subject to the following: . . . You will agree to work at least one-half of the approximately 46,000 tons of tailings, in the event a working contract is entered into . . ." (This reference to 46,000 tons is derived from the Sahinen Report which states that the two tailings dumps in the area contain the following quantity of tonnage: "Watseca tailings" (upper tailings) 31,000 tons, and "Concentrator tailings" (lower tailings) 15,000 tons.)

October 30, 1972 Letter Pierre to McCune. Pierre attempted to secure an option on the Watseca property. He gave a brief history of his prior dealings and testings in the area and his prior contract with Camilla Gage. Pierre stated that he was currently "shipping tailings from another mine in the same general area as the Wasecca (sic) and would like to re-option the Wasecca (sic)."

November 2, 1972 Letter McCune to Pierre. McCune informed Pierre that Camilla Gage at no time had "authority to option my Watseca property", and that any action to lease the property was precluded at this time as a result of an existing lease.

January 2, 1973 Letter Pierre to Rock Springs Corporation. Pierre referred to the receipt of a letter from Mr. McLean, the president of Rock Springs. Unfortunately, the letter written by McLean was not introduced as an exhibit. Pierre in the January 2 letter stated, "I greatly appreciated receiving your letter as Mrs. Gage led me to believe conditions were quite the contrary." The letter's purpose was to again obtain an option to the Watseca.

January 30, 1973 Letter Pierre to McCune. This letter also sought an option on the Watseca property and contained the following statement: "Unfortunately I was misled by Mrs. Camillia (sic) Gage of Twin Bridges, Montana as to the ownership."

May 25, 1973 Agreement to Purchase Mining Tailings. This agreement was executed between Pierre and Gage. It purported to sell mine tailings known as "The Concentrator Tailings" for $7,500 payable at a rate of $.50 per ton.

September 17, 1975 Letter Gage to Pierre. Camilla Gage stated that she believed this lawsuit to be "perfectly ridiculous", that she still felt that she owned the tailings, and that "we both acted in good faith when you hauled the tailings to the smelter."

The following jury instructions were given by the District Court. Instruction No. 19 was given without objection, and Instruction No. 20 was given over appellant's objection.

Instruction No. 19:

"You are instructed that if you find in favor of ...