Yuba Natural Resources, Inc. v. U.S.

Decision Date06 June 1990
Docket NumberNo. 89-1591,89-1591
Citation904 F.2d 1577
PartiesYUBA NATURAL RESOURCES, INC., Plaintiff-Appellant, v. The UNITED STATES, Defendant/Cross-Appellant.
CourtU.S. Court of Appeals — Federal Circuit

John J. Dacey, of Goldstein, Barceloux & Goldstein, San Francisco, Cal., argued for plaintiff-appellant. Of counsel were Burton J. Goldstein and Janet A. Econome.

M. Alice Thurston, of the Dept. of Justice, Washington, D.C., argued for defendant/cross-appellant. With her on the brief were George W. Van Cleeve, Acting Asst. Atty. Gen., Glen R. Goodsell, and Dirk D. Snel.

Before MARKEY, Chief Judge, FRIEDMAN, Senior Circuit Judge, and NIES, Circuit Judge.

FRIEDMAN, Senior Circuit Judge.

The issue in this case, here on appeal from the United States Claims Court, is whether that court correctly calculated the amount the appellant Yuba Natural Resources, Inc. ("Yuba"), is entitled to receive as just compensation for the temporary taking of its mineral rights in certain land. The Claims Court based its award on the amount Yuba would have received as rent and minimum royalties during the taking period under a proposed joint venture agreement with the appellant Placer Service Corporation ("Placer"), and rejected Yuba's claim that the proper measure of damages was the income Yuba would have realized under the joint venture from goldmining operations that Placer would have conducted on the land. We affirm.

I
A. In 1905, Yuba acquired by quitclaim deed the mineral rights in a tract of land (the " '442") that the United States owned in fee.

Yuba mined the tract for gold continuously until 1968, by which time, most, if not all, of the tract had been dredged at least once, and in some areas as many as five or six times. Yuba ceased mining in 1968 because the price of gold made mining unprofitable.

Also in 1968, because of some question about possible expiration of its rights, Yuba began a correspondence with the Army Corps of Engineers ("Corps") to ascertain "what steps should be taken by Yuba in order to obtain the mining rights" to this land. In 1969, the Corps responded that the title to lands in that area was being studied and that "dredging rights on [the '442] tract must be withheld until all studies in that area have been completed and the plan has been submitted and approved by the Chief of Engineers."

Because of the low price of gold, Yuba made no effort to resume dredge mining in the tract from 1968 to 1975. It maintained the property, as well as one of its dredges (dredge 21), and derived income from gravel sales, land sales, fishing permits, and sightseeing.

In April 1975, when the price of gold had risen substantially, Yuba started up dredge 21 on its property in an area northeast and outside the '442.

At that time Yuba lacked both the money and the expertise to conduct mining operations alone. Yuba then explored with a number of companies their interest in undertaking a joint venture or partnership with regards to mining the property. Only one, Placer, evidenced interest. In August 1975, Yuba and Placer began negotiations which resulted in a proposed joint venture agreement which Placer submitted to Yuba in March of 1976. As the Claims Court found in an earlier decision, at that time, "Yuba and Placer had reached substantial agreement on the terms of [the] joint venture." Yuba Natural Resources, Inc. v. United States, 10 Cl.Ct. 486, 491 (1986).

The detailed agreement took the form of a lease by Yuba to Placer "for mining purposes only" of Yuba's interest in specified real property, including the '442. The agreement provided that Placer would immediately pay Yuba rent of $25,000 for the right to investigate for six months the possibilities of successful mining. This "evaluation period" could be extended for two successive three-month periods for additional rent. At the end of the evaluation period, Placer could purchase dredges from Yuba for $1,450,000 or it could terminate the agreement without further cost, Yuba keeping the rent it had already received. The agreement required Placer to complete within two years after the evaluation period the equipping work necessary to begin mining.

The agreement further provided that Placer would pay Yuba certain minimum royalties during the time of mining and if the equipping period should exceed two years. In addition to the foregoing amounts, Placer would pay Yuba royalties of four percent of net sales for the first four years of mining, and six percent of net sales for the remainder.

If, after six years, Placer had not commenced mining, Yuba could terminate the agreement and retain all amounts received.

In an April 1975 letter, the Corps informed Yuba that the United States "does have valid interests in portions of the lands upon which you are apparently conducting your gold mining activities, as well as lands upon which you apparently plan to conduct future operations.... You are further notified that you will be held accountable for any removal of precious metals, sand, gravel, and other materials which may legally be the property of the United States." In a letter dated April 9, 1976, the Corps stated that the '442 tract is "owned outright in fee by the United States ... with no reservations in the title. Dredging activity or removal of any material, including precious metals is prohibited." As a result of this latter letter, Yuba and Placer did not execute the joint venture.

On January 29, 1982, after Yuba was successful in a quiet title action, the government withdrew its April 9, 1976 letter.

B. In 1980, Yuba and Placer filed suit against the United States in the Claims Court, alleging that the government had taken their mineral rights under the Fifth Amendment, and seeking just compensation.

In 1983, the Claims Court granted summary judgment in favor of the government on the ground that no taking had occurred because the United States acted in good faith in its proprietary rather than in its sovereign capacity to protect what it deemed to be its own property, and the government neither took possession of the property nor physically barred plaintiffs from its use. Yuba Goldfields, Inc. v. United States, 1 Cl.Ct. 421 (1983). On appeal, this court reversed and remanded for trial to determine, on a complete record, whether there was a taking. Yuba Goldfields, Inc. v. United States, 723 F.2d 884, 891 (Fed.Cir.1983).

After a trial, at which evidence was introduced regarding the amount of gold that would have been mined and its putative market value at that time, see Yuba Natural Resources, Inc. v. United States, 10 Cl.Ct. 486, 497 (1986), the Claims Court determined that there had been a permanent taking. Id. at 498.

In the second appeal, we again reversed. We held that the mineral rights in the '442 tract had been temporarily taken by the government from the time of the Corps' April 9, 1976 letter to Yuba until the government withdrew that letter on January 29, 1982. Yuba Natural Resources, Inc. v. United States, 821 F.2d 638, 641-42 (Fed.Cir.1987). We remanded the case for a determination of damages.

On the second remand, the Claims Court awarded Yuba damages of $580,555.40 plus interest. This, the court calculated, was the minimum amount in rent and royalties that Yuba would have received under the joint venture agreement covering the almost six-year period for which the government had taken Yuba's property. Yuba Natural Resources, Inc. v. United States, No. 460-80L, slip op. at 7 (Cl.Ct. Mar. 9, 1989) [hereinafter "Order of Mar. 9, 1989"].

The court stated: "The law is well-settled that the measure of just compensation for a temporary taking is the fair rental value of the property taken for the period involved." Id. at 3. The court rejected Yuba's contention that "just compensation consists of the difference in value of the gold during the taking period compared to the value of that gold subsequently," because

[j]ust compensation for a temporary taking does not take into account the fair market value of the property either before or after it is taken. Indeed, the property was not taken in a permanent sense, as if it had been involuntarily sold to the Government. Rather, the Government's actions in the context of a temporary taking amount to the taking of a leasehold interest for a set period of time. Thus, compensation is satisfied by the payment of fair rental value.

Id. at 4-5. The court ruled that the provisions of the joint operating agreement specifying the rent and minimum royalties to be paid

constitutes evidence of what a reasonable lessee would have agreed to pay Yuba in rent for a 6-year period. Reviewing the proposal as a whole, it appears that the parties envisioned that Placer would pay Yuba the equivalent of $25,000 on a quarterly basis. Thus, considering that the taking was for a period just short of 6 years, of precisely 23 quarters and 20 days, a lessee would have paid Yuba $575,000 plus daily rent for 20 days of $277.77 a day, or $5,555.40. The total rent for the taking period would have amounted to $580,555.40.

Id. at 7 (emphasis in original, footnote omitted).

The court previously had refused to reconsider an earlier decision, made when the court had erroneously held that the taking was permanent, that Placer had no standing to participate in the case. It stated: "The Joint Venture Agreement of October 15, 1979, between Placer and Yuba fully defines Placer's property rights in the event of a taking. Since the language of the agreement clearly terminates Placer's mineral rights to the extent of a taking, during the temporary taking period, Placer did not have a compensable property interest in the minerals." Yuba Natural Resources, Inc. v. United States, No. 460-80L, slip op. at 18-19 (Cl.Ct. Feb. 28, 1989).

II

A. Normally, the proper measure of just compensation for the government's permanent taking of private property is "the fair market value of [the] property at the time of the...

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