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Robert G. Fowler v. Lac Minerals (Usa)

September 12, 2012

ROBERT G. FOWLER
PLAINTIFF - APPELLEE
v.
LAC MINERALS (USA), LLC, A DELAWARE LIMITED LIABILITY COMPANY
DEFENDANT -APPELLANT



Appeal from United States District Court for the District of South Dakota - Rapid City

The opinion of the court was delivered by: Gruender, Circuit Judge.

Submitted: March 13, 2012

Before MURPHY and GRUENDER, Circuit Judges, and ROSS,*fn1 District Judge.

LAC Minerals (USA), LLC ("LAC") and Robert Fowler are bound by an agreement relating to 944 acres of property once targeted for mining development.

Fowler filed suit, arguing that the agreement required LAC to assign to Fowler certain portions of the property no longer needed for mining operations. LAC counterclaimed, seeking to quiet title. After resolving certain issues on cross motions for summary judgment and the remaining issues at a bench trial, the district court*fn2 held that LAC's current refusal to assign any land to Fowler did not breach the agreement but that Fowler retains a reversionary interest in the land. LAC now appeals, arguing that the district court erred in not declaring Fowler's interest in the land extinguished. For the reasons that follow, we affirm.

I. BACKGROUND

Fowler's predecessor-in-interest, Viable Resources, Inc. ("Viable"), and LAC's predecessor company, St. Joe American Corporation, entered into a joint venture agreement in 1984 with the goal of developing certain mining prospects in Lawrence County, South Dakota.*fn3 As part of the joint venture, in 1985 Viable deeded 90 mining claims involving approximately 944 acres of land to LAC. In the deed, Viable reserved a right "to obtain a reconveyance in the property . . . as specified in" an amended joint venture agreement.*fn4 The parties agree that a 1988 Restated Joint Venture Agreement ("RJVA") superseded the amended joint venture agreement referenced in the deed and that the RJVA is the controlling agreement. The parties also agree that the right to obtain a reconveyance referred to in the deed is defined in section 4.3 of the RJVA, which reads as follows:

Release of Property - During the course of the conduct of mineral exploration under this Agreement the Manager [LAC] may in its sole discretion determine that certain portions of the Property have little potential for containing minerals of economic value or will not be required for mineral development or mining facilities. Upon annual review the Manager may eliminate such portions of the Property from the terms of this Agreement, and in such event [LAC] will reassign any such portions to Viable.

Section 2.1 of the RJVA establishes a minimum term of fifty years for the agreement, subject to extension under certain conditions. In 1992, however, state mining regulators issued a "stop order" for all mining operations on the property because of problems with acid drainage. There is no dispute that, as a result of the "stop order," no mineral exploration has occurred since 1993. LAC is obligated by state regulations to continue environmental reclamation and monitoring on certain portions of the property for the indefinite future.

Fowler, one of the original organizers of Viable, succeeded to Viable's rights in the property in November 1999.*fn5 On October 11, 2001, Fowler formally requested the release of land not being used for mining purposes. Over the next several years, LAC sent occasional communications indicating that it was in the process of determining which portions of the 944 acres could be released, but it never made such a determination. In 2008, Fowler sued (1) for a declaratory judgment that LAC was obligated to reassign any portion of the property that became unneeded for mining or reclamation efforts, (2) for specific performance of that obligation with respect to portions currently not needed, and (3) to quiet title for such portions. LAC counterclaimed for a declaratory judgment that it owned the 944 acres "absolutely . . . as against Fowler and all persons claiming under him" and to quiet title "against all claims of Fowler and all persons claiming under him."

On cross motions for summary judgment, the district court concluded that LAC held the property in fee simple subject to a condition subsequent requiring it "to reassign the property back to" Fowler "when the mining deed's purposes are exhausted." After an ensuing bench trial, the district court found that the transfer of Viable's reversionary rights to Fowler was not precluded by S.D.C.L. § 43-4-3, which states that "[a] mere right of re-entry, or of repossession for breach of a condition subsequent, cannot be transferred to anyone except the owner of the property affected thereby," because the deeds and RJVA established a covenant running with the land, rather than a "mere" right of re-entry. However, the district court held that LAC had "acted in good faith in its decision to not release any of the [land] for reversion under Section 4.3 . . . at this time" and that LAC was not required to release any of the land at that time.

LAC now appeals, arguing that the district court erred in holding that Fowler retains an interest in the land. In support, it contends that (i) section 4.3 of the RJVA did not create a condition subsequent, but rather a contractual covenant for which damages would be the only remedy for breach; (ii) even if the RJVA did create a condition subsequent in favor of Viable, Viable was precluded from transferring its associated rights by S.D.C.L. § 43-4-3; and (iii) whatever rights Fowler might have had under the RJVA to obtain the property are a nullity because mineral exploration ended in 1993.

II. DISCUSSION

"When the district court conducts a bench trial as it did here, we review the district court's fact finding for clear error, and we review legal conclusions and mixed questions of law and fact de novo." Eckert v. Titan Tire Corp., 514 F.3d 801, 804 (8th Cir. 2008). Our jurisdiction in this case is based on diversity of citizenship, and the parties agree that South Dakota ...


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