MARY ANN MURRAY; LIGE M. MURRAY, Plaintiffs-Counter-Defendants-Appellees, v. BEJ MINERALS, LLC; RTWF, LLC, Defendants-Counter-Claimants-Appellants.
No. 16-35506
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
November 6, 2018
D.C. No. 1:14-cv-00106-SPW. Appeal from the United States District Court for the District of Montana, Susan P. Watters, District Judge, Presiding. Argued and Submitted February 6, 2018, Seattle, Washington. Before: Milan D. Smith, Jr. and Mary H. Murguia, Circuit Judges, and Eduardo C. Robreno, District Judge. Opinion by Judge Robreno; Dissent by Judge Murguia.
* The Honorable Eduardo C. Robreno, United States District Judge for the Eastern District of Pennsylvania, sitting by designation.
Montana Law
The panel reversed the district court‘s summary judgment in favor of Lige and Mary Ann Murray, owners of a Montana ranch, who brought the action seeking a declaratory judgment that dinosaur fossils found on the ranch belonged to them as owners of the surface estate.
In 2005, prior to the discovery of the fossils, Jerry and Robert Severson, the previous owners of the ranch, sold their surface and one-third of the mineral estate to the Murrays. In the conveyance, the Seversons expressly reserved the remaining two-thirds of the mineral estate.
The panel held, as an initial matter, that definitions of “mineral” found in Montana statutes, like dictionary definitions, were contradictory and therefore inconclusive. The panel further held that the Montana Supreme Court has generally adopted the test in Heinatz v. Allen, 217 S.W.2d 994 (Tex. 1940), for determining whether a particular substance was a mineral in the context of deeds and agreements regarding mineral rights to land. The panel held that under this test, the dinosaur fossils, which were rare and exceptional, were “minerals” pursuant to the terms of the deed, and belonged to the owners of the mineral estate. The panel rejected the Murrays’ policy-driven arguments to the Heinatz test. The panel remanded for further proceedings.
** This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader.
COUNSEL
Eric D. Miller (argued), Perkins Coie LLP, Seattle, Washington; Shane R. Swindle, Perkins Coie LLP, Phoenix, Arizona; for Defendants-Counter-Claimants-Appellants.
Harlan B. Krogh (argued) and Eric Edward Nord, Crist Krogh & Nord PLLC, Billings, Montana, for Plaintiffs-Counter-Defendants-Appellees.
OPINION
ROBRENO, District Judge:
Once upon a time, in a place now known as Montana, dinosaurs roamed the land. On a fateful day, some 66 million years ago, two such creatures, a 22-foot-long theropod and a 28-foot-long ceratopsian, engaged in mortal combat. While history has not recorded the circumstances surrounding this encounter, the remnants of these Cretaceous species, interlocked in combat, became entombed under a pile of sandstone. That was then . . . this is now.
In 2006, an amateur paleontologist uncovered the well-preserved fossils of the “Dueling Dinosaurs” on a Montana ranch (“the Ranch“) in an area known as Hell Creek. Lige
These fossils are now quite valuable. After a dispute arose regarding the true owner of the Dueling Dinosaurs and several other valuable dinosaur fossils found on the Ranch (including a nearly intact Tyrannosaurus rex skeleton, one of only twelve ever found) (collectively, “the Montana Fossils“), the Murrays filed this action seeking a declaratory judgment that the Montana Fossils belonged to them as owners of the surface estate.1 In turn, the Seversons asserted a counterclaim seeking a declaratory judgment that the Montana Fossils belong to the mineral estate. The answer turns on whether the Montana Fossils are deemed “minerals”
Following the filing of cross-motions for summary judgment, the district court granted summary judgment for the Murrays, holding that, under Montana law, the Montana Fossils are not “minerals” within the meaning of the mineral deed. The Seversons now appeal. The district court had jurisdiction over this diversity action pursuant to
I.
The facts of this case are largely undisputed. George Severson previously owned property used as a farm and ranch in Garfield County, Montana (“the Ranch“). In 1983, he began leasing the Ranch to Mary Ann and Lige Murray
The Seversons and the Murrays jointly owned and operated the Ranch until 2005, when the Seversons sold their surface ownership rights and a portion of their mineral rights to the Murrays.3 The mineral deed that the parties executed and recorded in connection with the 2005 transaction (“the Deed“) stated that the Seversons and Murrays would own, as tenants in common, “all right title and interest in and to all of the oil, gas, hydrocarbons, and minerals in, on and under, and that may be produced from the [Ranch].” The purchase agreement for the 2005 transaction required the parties “to inform all of the other parties of any material event which may [affect] the mineral interests and [to] share all communications and contracts with all other Parties.”
The Seversons and the Murrays have represented that, at the time of the sale, they did not suspect that there were any valuable dinosaur fossils buried beneath the surface of the Ranch. However, beginning a few months after the sale, the Murrays discovered several rare dinosaur fossils on the
The parties agree that the Montana Fossils are rare and extremely valuable. The Murrays’ experts testified that, because fossils of dinosaurs interacting are rare, the Dueling Dinosaurs are a “one-of-a-kind find” with “huge scientific value.” Although the Dueling Dinosaurs have not yet been sold, they were appraised at between seven million and nine million dollars, and the parties have stipulated that the set is worth several million dollars. The Murrays sold the Triceratops foot for $20,000 and have offered to sell the skull for $200,000 to $250,000. Their expert, in an email attempting to sell the skull, described it as “one of the best if not the best Triceratops skull ever found.” Finally, the Murray T. Rex is one of only a dozen intact Tyrannosaurus rex skeletons ever found. The Murrays sold it to a Dutch museum in 2014 for several million dollars. The proceeds are being held in escrow pending the outcome of the instant litigation.
During discovery, both parties produced experts who testified regarding the composition of the Montana Fossils. The Seversons’ expert, Raymond Rogers, testified that bones and teeth, including in living vertebrates, naturally contain the mineral hydroxylapatite. Rogers performed an x-ray diffraction test on the Montana Fossils and determined that they had recrystallized from hydroxylapatite into the mineral francolite during the fossilization process that occurred over millions of years. The Murrays’ expert, Peter Larson, agreed with Rogers regarding the fossilization process in general. However, Larson concluded that the Montana Fossils had not been replaced by francolite, and instead contained the same patterns of the mineral hydroxylapatite as a modern bison bone, “just as when [the dinosaurs were] alive.”
Following discovery, the parties filed cross-motions for summary judgment. In an opinion dated May 20, 2016, the district court found that the Montana Fossils are not included
II.
We review a district court‘s ruling on motions for summary judgment de novo. Guatay Christian Fellowship v. Cty. of San Diego, 670 F.3d 957, 970 (9th Cir. 2011). Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
III.
Under Montana law, the interpretation of a deed conveying an interest in real property is governed by the rules of contract interpretation. Mary J. Baker Revocable Tr. v. Cenex Harvest States, Coops., Inc., 164 P.3d 851, 857 (Mont. 2007) (citing
In order to determine the ordinary meaning of a word used in a contract, we typically begin with dictionary definitions. However, as the Supreme Court has recognized and is particularly applicable to this case, “[t]he word ‘mineral’ is used in so many senses, dependent upon the context, that the ordinary definitions of the dictionary throw but little light upon its signification in a given case.” N. Pac. Ry. Co. v. Soderberg, 188 U.S. 526, 530 (1903). In this case, for example, the parties do not dispute that the Montana Fossils are minerals in a scientific sense, as they are composed entirely of the minerals hydroxylapatite and/or francolite.6 The Montana Fossils thus fit within definitions of the word “mineral” that focus on a substance‘s chemical composition. See, e.g., Webster‘s Third New International Dictionary, Unabridged 1437 (3d ed. 2008) [hereinafter Webster‘s] (“an inorganic substance; especially: a mineral element whether in the form of an ion, compound, or complex“); New Oxford American Dictionary 1113 (3d ed. 2010) (“a solid inorganic substance of natural occurrence“); Mineral, Black‘s Law Dictionary (10th ed. 2014) (“Any
Although the Montana Fossils clearly fall within these dictionary definitions of the word “mineral,” our analysis does not end there. Under traditional principles of contract interpretation, words are interpreted “in their ordinary and popular sense unless the parties use the words in a technical sense or unless the parties give a special meaning to them by usage.” Dollar Plus Stores, 209 P.3d at 219. While the above-cited definitions of the word “mineral” are quite broad, other dictionary definitions are more narrow, relating to the manner in which a substance is used, as opposed to its chemical composition. For example, Webster‘s includes the following secondary definition of “mineral“:
any of various naturally occurring homogeneous or apparently homogeneous and usually but not necessarily solid substances (as ore, coal, asbestos, asphalt, borax, clay, fuller‘s earth, pigments, precious stones, rock phosphate, salt, soapstone, sulfur, building stone, cement rock, peat, sand, gravel, slate, salts extracted from river, lake, and ocean waters, petroleum, water, natural gas, air, and gases extracted from the air) obtained for man‘s use usually from the ground[.]
Webster‘s 1437. Similarly, Black‘s Law Dictionary provides one definition of mineral as including “[a] subsurface material that is explored for, mined, and exploited for its useful properties and commercial value.” Mineral, Black‘s Law Dictionary (10th ed. 2014).
[T]he common understanding of “mineral” includes the mining of a hard compound or oil and gas for refinement and economic exploitation. In contrast, dinosaur fossils are the remains of once-living vertebrates. The fossils’ properties are not what make them valuable. Fossils are not subject to further refinement before becoming economically exploitable. Instead, the fossils are valuable because of their very existence. Dinosaur bones are not economically valuable to be processed into fuel or materials or manufactured into jewelry. Further, dinosaur fossils are not mined in the traditional sense, but rather discovered by happenstance.
The definition that the court created – “the mining of a hard compound or oil and gas for refinement and economic exploitation” – did not itself appear in any of the dictionary or statutory definitions the court cited, but instead represented the court‘s own interpretation of what it believed to be the relevant portions of those dictionary and statutory definitions.
On appeal, the Seversons argue that the district court‘s interpretation of the dictionary definitions is disconnected
First, the fact that the narrower dictionary definitions found in Webster‘s and Black‘s Law Dictionary emphasize the “use” of a substance does not exclude the Montana Fossils. Some of the Montana Fossils are being “used” for economic or commercial purposes: they were sold (or offered for sale) for millions of dollars and subsequently displayed in a museum that charges admission to view them. Further, certain of the definitions do not limit the “use” of the substance to use for economic or commercial purposes; surely the Montana Fossils are being “used” in the general sense. For example, under the Webster‘s definition, the Montana Fossils are clearly “naturally occurring homogeneous . . . solid substances . . . obtained for man‘s use.” Webster‘s 1437. Although it could be argued that dinosaur fossils are unlike oil, gas, coal, and other substances traditionally thought of as minerals because they are not used as fuel, neither are many of the other substances specifically listed in the Webster‘s definition, such as salt, sand, and gravel. In addition, as the Seversons point out, oil, gas, and coal all derive from the remains of plants and animals,7 just like dinosaur fossils, and should not be treated any differently because they are valuable for a different reason.
Second, there are other definitions of the word “mineral” not considered by the district court that explicitly include fossils in general. For example, an older edition of Black‘s
Given the inconsistencies in dictionary definitions of “minerals,” and recognizing that at least one of the definitions explicitly includes fossils as minerals, we disagree with the district court‘s conclusion that the word “minerals” in the Deed did not encompass dinosaur fossils. As the parties agree that the Deed must be interpreted under Montana law, we next rehearse Montana law.
B.
The Montana Supreme Court, when tasked with interpreting the meaning of the word “minerals” in a similar deed, noted that the need to determine the ordinary and popular meaning of the term “mineral” has created “considerable confusion in mineral law litigation nationwide.” Farley v. Booth Brothers Land & Livestock Co., 890 P.2d 377, 379 (Mont. 1995).
Attempting to make sense of the legal morass regarding the term “mineral,” the court observed:
[t]he only reliable rule which surfaces from the confusing and inconsistent approaches taken by those courts attempting to ferret out the subjective intent of the parties is that the word ‘mineral’ means what the court says it means. The result is title uncertainty and the need to litigate each general reservation of minerals to determine which minerals it encompasses.
[S]ubstances such as sand, gravel and limestone are not minerals within the ordinary and natural meaning of the word unless they are rare and exceptional in character or possess a peculiar property
giving them special value, as for example sand that is valuable for making glass and limestone of such quality that it may be profitably be manufactured into cement. Such substances, when they are useful only for building and road-making purposes, are not regarded as minerals in the ordinary and generally accepted meaning of the word.
Id. at 380 (quoting Holland v. Dolese Co., 540 P.2d 549, 550–51 (Okla. 1975) (citing Heinatz, 217 S.W.2d at 997)).
The particular question at issue in Farley was whether “scoria,” a local term referring to the baked roof rock (composed of shale, sandstone and clay) that results from the burning of coal outcropping, was a mineral within the meaning of a mineral reservation in a lease agreement. Id. at 380. Like the Montana Fossils, scoria is a mineral in the scientific sense, that is, it is composed of minerals. Applying the Heinatz test, the court noted that the scoria at issue was used in road construction, and then found that “[t]he use of scoria in constructing roadways does not elevate scoria to the status of a compound which is ‘rare and exceptional in character’ and therefore, a ‘mineral.‘” Id. (quoting Holland, 540 P.2d at 550–51).
On appeal, the Seversons argue, as they did below, that the Montana Fossils are minerals under the test adopted by the Montana Supreme Court in Farley. The Seversons claim that, pursuant to Farley, a substance that is technically a mineral in the scientific sense is also a mineral within the meaning of a real property agreement if it is rare and exceptional in character or possesses a peculiar property giving it special value. The Seversons then argue that the Montana Fossils satisfy that test because the Montana
In response, the Murrays first argue that the Montana Supreme Court did not adopt the Heinatz test in Farley as a general universally applicable measure to determine whether a substance is a mineral, and instead the court merely used the Heinatz test as a “secondary reference” to determine whether scoria was a mineral. They next argue that, to the extent Farley did adopt Heinatz‘s “rare and exceptional” test, the test is a categorical one: a particular dinosaur fossil cannot be a mineral unless all dinosaur fossils, in general, are minerals. Because the Seversons admit that not all dinosaur fossils are rare and valuable – and that, in fact, many are virtually worthless – the Murrays contend that dinosaur fossils, including the Montana Fossils at issue in this case, are not minerals under Heinatz. The Murrays also argue that the test the Seversons ask this Court to adopt would create a confusing distinction between rare and valuable mineral fossils and common and worthless non-mineral fossils, requiring litigation with respect to each individual fossil. Instead, the Murrays urge the Court to focus its legal analysis on definitions of minerals found in various Montana statutes and regulations, under which, the Murrays claim, dinosaur fossils have “never” been defined as minerals under Montana law.
We address each of these arguments in turn.
C.
As an initial matter, we agree with the Seversons that definitions of “mineral” found in Montana statutes, like dictionary definitions, are contradictory and therefore inconclusive. Contrary to the Murrays’ assertions, the
fundamentally, these definitions relate to a particular statutory scheme and are not relevant here.
Finally, the Murrays cite the federal Paleontological Resources Preservation Act (“the PRPA“),
The Murrays do not argue that the Montana Fossils are not rare and exceptional or have special value. Instead, they contend that Farley did not address whether the test is categorical or not, and that we should reject the “non-categorical” approach as confusing and unworkable.
It may well be that the non-categorical approach generates some unpredictability regarding which substances are rare and valuable enough to be considered minerals within the context of a mineral deed. Regardless, it is clear from the explanation provided in Heinatz, which the Montana Supreme Court quoted in Farley, that the test is non-categorical. The court gave the examples of “sand that is valuable for making glass” and “limestone of such quality that it may be profitably be manufactured into cement,” Farley, 890 P.2d at 380 (quoting Heinatz, 217 S.W.2d at 997), suggesting that there exist sand that is not valuable for making glass and limestone that is not of such quality that it can become cement, neither of which would qualify as minerals under the test. Likewise, although many dinosaur
quotation marks omitted) (quoting Glendale Assocs., Ltd. v. Nat‘l Labor Relations Bd., 347 F.3d 1145, 1154 (9th Cir. 2003)).
The remainder of the Murrays’ arguments are policy-based criticisms of the Heinatz/Farley test. The Murrays argue that the test is disconnected from the ordinary and natural meaning of the word “minerals;” creates needless litigation to determine which substances are valuable enough to be considered minerals; and leads to absurd results in the case of dinosaur fossils, including jeopardizing museums’ ownership of their fossil collections. Of course, as a federal court sitting in diversity, in matters of state law we are not free to impose our policy preferences over those of the Montana Supreme Court. In any case, the Murrays’ assertions lack merit. The Farley test is connected to the ordinary and natural meaning of the term “minerals” as used in a deed, because the purpose of retaining or acquiring a mineral estate is to extract something valuable from the land. In a mineral estate transaction where the quantity, quality, or type of substances present underneath the land may be unknown to both the seller and purchaser of the mineral estate, it is logical to tie the definition of the material conveyed to whether or not it is valuable. Further, it is unlikely that the Farley test will result in much, if any, needless litigation, given the extremely broad definition of “value” provided in Heinatz, which included both glass and cement as examples of materials made of rare and valuable
IV.
For the foregoing reasons, we reverse the decision of the district court granting summary judgment for the Murrays and remand for further proceedings consistent with this disposition.
REVERSED AND REMANDED.
MURGUIA, Circuit Judge, dissenting:
Because I disagree with the majority‘s conclusion that dinosaur fossils fall within the ordinary and natural meaning of the word “mineral” and that they accordingly pertain to the mineral estate, I respectfully dissent.
The present case involves a dispute over ownership of several valuable dinosaur fossils that were found on a large ranch in Garfield County, Montana. The Severson family owned the ranch until 2005, when the mineral and surface estates were severed through a mineral deed that transferred
all right title and interest in and to all of the oil, gas, hydrocarbons, and minerals in, on and under, and that may be produced from the lands situated in Garfield County, Montana . . . together with the right, if any, to ingress and egress at all times for the purpose of mining, drilling, exploring, operating, and developing said lands for oil, gas, hydrocarbons, and minerals, and storing, handling, transporting, and marketing the same therefrom together with the rights to remove from said lands all of Grantors’ property and improvements.
After the transfer was executed, the Murrays—now owners of the surface estate and a portion of the mineral estate—discovered the first dinosaur fossil: a Pachycephalosaur spike cluster. Thereafter, the Murrays discovered and excavated more valuable fossils, including the “Dueling Dinosaurs” and the “Murray T-Rex.” The question presented in this case is whether these rare and valuable dinosaur fossils are “minerals” under the 2005 mineral deed.
The question whether dinosaur fossils constitute “minerals” is a question of first impression under Montana law.1 The Montana Supreme Court has twice considered
The “ordinary and natural meaning” test, as applied to minerals conveyed through a property transfer, was first set forth in a 1949 Texas Supreme Court case, Heinatz v. Allen, 217 S.W.2d 994 (Tex. 1949). The Texas court held that “mineral,” for the purposes of property transfers, is to be understood as used in its “ordinary and natural meaning unless there is a clear indication that it was intended to have a more or less extended signification.” Id. at 997. The driving principle behind this test is to effectuate the intent of the contracting parties. Id. (“The words ‘the mineral rights’ used in the will are to be interpreted according to their ordinary and natural meaning, there being nothing in the will manifesting an intention on the part of the testatrix to use them in a scientific or technical sense.“). In other words,
As in Heinatz, in Farley and Hart, the Montana court considered several factors, such as the substance‘s particular properties and use, in order to determine whether that substance was a mineral. Specifically, Farley and Hart relied on the principle that “substances such as sand, gravel and limestone are not minerals within the ordinary and natural meaning of the word unless they are rare and exceptional in character or possess a peculiar property giving them special value . . . . Such substances, when they are useful only for building and road-making purposes, are not regarded as minerals in the ordinary and generally accepted meaning of the word.” Hart, 216 P.3d at 211 (quoting Heinatz, 217 S.W.2d at 997); Farley, 890 P.2d at 380 (quoting Holland, 540 P.2d at 550–51).
Here, the district court began by considering definitions of the term “mineral,” including dictionary, statutory, and regulatory definitions.2 See, e.g., Mineral, Black‘s Law
The district court went on to consider the unique properties of dinosaur fossils that distinguish them from those substances that we typically think of as minerals. The district court explained that fossils’ mineral properties are not what make them valuable, but instead the value turns on characteristics other than mineral composition, such as the completeness of the specimen, the species of dinosaur, and how well the fossil is preserved. The district court further noted that fossils are the remains of once-living vertebrates, with paleontological value, and that they are not refined for economic purposes or mined in the traditional sense, but rather are discovered by happenstance. These are precisely the same types of factors that were determinative in Farley,
of them. While I would agree that no single definition cited by the district court or the parties on appeal is wholly dispositive here, I see no error in the district court‘s use of these statutes in an effort to discern whether any similar properties exist among these definitions that might shed light on the scope of the term “mineral.” See Dollar Plus Stores, 209 P.3d at 219; Newman v. Wittmer, 917 P.2d 926, 930 (Mont. 1996) (“[S]tatutory definitions provide guidance in interpreting the ordinary and popular meaning of undefined terms in a restrictive covenant.“).
Indeed, if we only apply the factors applied by the Texas Supreme Court under Heinatz—“the evidence as to the nature of the [substance], its relation to the surface of the land, its use and value, and the method and effect of its removal“—we would still reach the district court‘s conclusion that dinosaur fossils are not minerals.3 Heinatz, 217 S.W.2d 995–96. First, the nature of the substance here is organic matter that has fossilized over time into a mineral compound. This factor weighs in favor of finding that fossils are minerals. Second, however, fossils pertain much more closely to the surface of the land. Like the quarried limestone in Heinatz, fossils are not “mined” but rather excavated. A large excavation would interfere with the use of the surface estate—a factor which the Heinatz court found weighed heavily against a finding that limestone was a mineral. Third, the use and value of fossils are not akin to other substances deemed minerals, such as coal, gas, or oil, which are typically extracted for some economic purpose. Collectively, these factors lead to the conclusion reached by the district court here—that dinosaurs are not “minerals” as that term is ordinarily understood.
In sum, the district court correctly concluded that dinosaur fossils do not fall within the ordinary and natural meaning of the term “minerals,” as that term is used in the mineral deed in this case. I would accordingly affirm the
Notes
any ore, rock, or substance, other than oil, gas, bentonite, clay, coal, sand, gravel, phosphate rock, or uranium, taken from below the surface or from the surface of the earth for the purpose of milling, concentration, refinement, smelting, manufacturing, or other subsequent use or processing or for stockpiling for future use, refinement, or smelting.Farley, 380 P.2d at 379 (quoting
The Murrays next argue that “minerals” cannot include dinosaur fossils in general because certain Montana statutes and regulations differentiate between “fossils” and “minerals.” The Murrays point to the definition for “general recreational use” within the Montana Department of Natural Resource‘s regulations regarding surface management rules for leasing of state-owned land, which contains separate exclusions for the “collection, disturbance, alteration, or removal of archeological, historical, or paleontological cites or specimens (e.g. fossils, dinosaur bones . . .)” and “mineral exploration, development, or mining,” and notes that the former requires an antiquities permit and the latter requires a mineral lease or license. See