Silver Syndicate, Inc. v. Sunshine Min. Co.

• Decision Date: 02 October 1979
• Docket Number: 12306,Nos. 12277,s. 12277
• Citation: 101 Idaho 226,611 P.2d 1011
• Parties: SILVER SYNDICATE, INC., an Idaho Corporation, Plaintiff-Respondent, v. SUNSHINE MINING COMPANY, a Washington Corporation, Hecla Mining Company, a Washington Corporation (successor to or assignee of Polaris Mining Company, a Delaware Corporation), Silver Dollar Mining Company, an Idaho Corporation, Defendants-Appellants.
• Court: Idaho Supreme Court

Page 1011

611 P.2d 1011

101 Idaho 226

SILVER SYNDICATE, INC., an Idaho Corporation, Plaintiff-Respondent, v. SUNSHINE MINING COMPANY, a Washington Corporation, Hecla Mining Company, a Washington Corporation (successor to or assignee of Polaris Mining Company, a Delaware Corporation), Silver Dollar Mining Company, an Idaho Corporation, Defendants-Appellants.

Nos. 12277, 12306.

Supreme Court of Idaho.

Oct. 2, 1979.

John S. Simko, of Elam, Burke, Jeppesen, Evans & Boyd, Boise, and Piatt Hull, of Hull & Hull, Wallace, for defendant-appellant Sunshine Min. Co.

James P. Keane, of Brown, Peacock, Keane & Boyd, Kellogg, for defendants-appellants Hecla Min. Co. and Silver Dollar Min. Co.

Robert W. Mullen, Wallace, for defendant-appellant Hecla Min. Co.

Robert L. Magnuson, of Witherspoon, Kelley, Davenport & Toole, Spokane, Wash., for defendant-appellant Silver Dollar Min. Co.

Donald R. Kunz, of Kunz & Waigh Ltd., Phoenix, Ariz., and E. L. Miller, of Miller & Knudson, Coeur d'Alene, for plaintiff-respondent Silver Syndicate, Inc.

SHEPARD, Justice.

This is an appeal from a judgment in favor of plaintiff-respondent Silver Syndicate in an action by it seeking a declaratory judgment as to the interpretation of certain contracts entered into in the 1940's, and further for a decree quieting title to certain underground ores and/or the profits resulting from the mining of said ores. We affirm.

Sunshine Mining Company owns a group of mining claims located in the westerly end of what is known as the Silver Belt in Shoshone County, Idaho. Sunshine is one of the largest producers of silver and antimony in the United States and operates an extensively developed mining system. The shafts of such mines may extend 6,000 feet below the surface of the earth and contain in excess of a hundred miles of underground tunnels.

Silver Syndicate owns mining claims lying to the north of Sunshine's claims. East of the Silver Syndicate claims lie the Eleventh Hour Group mining claims owned jointly by Sunshine and Hecla Mining Company. Southeast of the Eleventh Hour and Syndicate claims lie the "Polaris" claims owned by Hecla as the successor of Polaris Mining Company.

Two major fault structures course through the foregoing general area, one of which is presently known as the "Silver Syndicate Fault." It trends in a general northwesterly direction and dips to the south. The precise surface location of that fault over most of its strike length had not been determined as of the time of trial, but underground that fault crosses the Syndicate claims, a small portion of the Eleventh Hour claims, and the Polaris claims. As the Silver Syndicate Fault dips downward, it curves southerly.

Prior to 1938, Sunshine had become a large silver producing property with extensive and deep workings. In 1938, Sunshine and Silver Syndicate entered into two agreements which provided that Sunshine would drive a crosscut from Sunshine's shaft 1700 feet below the surface in a northerly direction toward the property of Silver Syndicate. Although the parties hoped thereby to encounter commercial ores, they met with negative results. At about that same time, Polaris and Sunshine negotiated for the development of the east end of the Sunshine-Polaris Vein System, which was situated to the south of the Silver Syndicate Fault. An agreement was reached between Sunshine and Polaris establishing a so-called "Intervening Area" in which certain rights were allocated to Sunshine and certain to Polaris. Sunshine drove a crosscut from its shaft beginning at a level of 1900 feet below the surface. That crosscut intercepted an extension of the Silver Syndicate Fault lying in the Sunshine ground, but also with negative results.

In 1943, Polaris requested Sunshine to drive a crosscut northerly from the 2700 foot level of the Sunshine Mine shaft, hoping to intercept an extension of the Chester Vein. The Chester Vein connects the Silver Syndicate Fault and the Polaris Fault. While driving that crosscut, Sunshine intercepted a high grade ore body within the Chester Vein lying within Sunshine's claims. When that ore body was discovered almost a half mile below the surface, it became apparent to all parties that "extralateral rights" problems could develop in the event the apex of those veins or ore bodies lay outside the northerly boundary of Sunshine's property.

"Extralateral rights" were created and are governed by the Congressional Act of May 10, 1872, now codified as 30 U.S.C. § 26 (1971), which provides:

"The locators of all mining locations made on any mineral vein, lode, or ledge . . . shall have the exclusive right of possession and enjoyment of all the surface included within the lines of their locations, and of all veins, lodes, and ledges throughout their entire depth, the top or apex of which lies inside of such surface lines extended downward vertically, although such veins, lodes, or ledges may so far depart from a perpendicular in their course downward as to extend outside the vertical side lines of such surface locations. But their right of possession to such outside parts of such veins or ledges shall be confined to such portions thereof as lie between vertical planes drawn downward as above described, through the end lines of their locations, so continued in their own direction that such planes will intersect such exterior parts of such veins or ledges."

The law grants the locator of a mining claim ownership rights which extend beyond the defined boundaries of his claim and thus it is clear that the said act of May 10, 1872 effects traditional notions of ownership of real property.

"The apex clause in the Act modifies the common law by enlargement to the extent that the claimant owns and may follow any lode whose apex he covers, beyond his sidelines under land adjoining. On the other hand, he is not the owner of lodes found within his lines extended downward vertically where such lodes have their apices outside of his surveyed lines." Morrison's Mining Rights, 199 (16th ed.1936).

"Property rights conferred by lode locations may be subdivided for the purpose of convenience into two classes:

(1) Those which are confined to things embraced within the boundaries of the location. By the term 'boundaries,' as we here employ it, we include not only the surface lines, but the vertical planes drawn downward through them. If we may be excused for introducing into the mining vocabulary coined and eccentric words, we would classify these rights as intralimital ;

(2) Those which, while depending for their existence upon the ownership of things within the boundaries, may be exercised under certain conditions and restrictions out of, and beyond, those boundaries. These rights may be classified as extralimital." 2 Lindley on Mines (549 (3d ed.1914) (emphasis original). Most authorities denominate these rights as extralateral.)

It is also clear that extralateral rights only exist within the intralimital area of rights of an adjoining property owner.

"The grant of the right of lateral pursuit is, in legal effect, a severance of the estate in the vein from the ownership of the soil into which it penetrates after passing on its downward course beyond the vertical planes drawn through the surface boundaries of the location or patent." 2 Lindley on Mines § 568 (3d ed.1914).

See also Silver Surprize, Inc. v. Sunshine Mining Co., 15 Wash.App. 1, 547 P.2d 1240 (1976), for a scholarly and thorough analysis of the apex law in a case much similar to the one at bar.

On June 24, 1943, shortly after the ore body discovery on the 2700 foot level crosscut ("2719 crosscut"), Syndicate and Sunshine entered into a lease agreement, which recited that it was "possible that veins, lodes and ledges apexing in the Lessor's (Silver Syndicate's) ground may pass into the Lessee's (Sunshine's) ground on their downward course, and which veins, lodes or ledges the Lessor (Silver Syndicate) may have the right to pursue on their downward course." Therein was established a vertical plane which was dropped through the westerly end lines of Sunshine's Majestic and Rambo mining claims. Sunshine was granted the right to mine east of that vertical plane any and all veins, lodes, ledges or bodies that Syndicate might own by virtue of extralateral rights. Sunshine agreed to prospect and develop the so-called "Chester-Silver Syndicate Vein" east of that vertical plane. Silver Syndicate, as lessor, was to receive 40% of the net proceeds of the mining operations, and Sunshine was to retain the balance. It was agreed that if any reasonable doubt should exist as to the legal ownership of any of the mined ore or mineral values, Sunshine could, nevertheless, mine the ores and place 40% of the proceeds in a trust fund account until such time as the ownership was definitely determined.

That lease of 1943 did not, of course, settle the questions of ownership surrounding the vein under the aforementioned apex law. The parties to that lease recognized that the determination of the exact location of the apex of that vein and the proof of continuity of the vein to the surface would require a substantial amount of time, money and litigation. Silver Syndicate, Sunshine and Polaris believed common sense dictated the reaching of a compromise.

It appears that such a compromise was affected on August 4, 1943, when the parties entered into what will hereafter be referred to as the "1943 Contract." That contract noted that Sunshine had encountered a vein and fault zone within its workings which was identified as the "Chester Vein." In the recitals of that contract, it was stated that only Sunshine, with its extensive mining facilities, could explore and mine the Chester Vein. It was further recited that the Chester Vein could be mined under "working agreements with Syndicate and with Polaris if the parties can reach agreement as to a division of their rights without resorting to litigation." It was then stated that the...