Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-87-01997/USCOURTS-ca10-87-01997-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

DIANA WEBB, in her capacity as 

personal representative of the 

Estate of George Schultz, 

Plaintiff-Appellee, 

v. 

) 

) 

) 

) 

) 

) 

) 

) 

DONALD P. HODEL, Secretary of the ) 

United States Department of the ) 

Interior; DAVID K. GRAYSON, ) 

Assistant Regional Solicitor, ) 

United States Department of the ) 

Interior; ROBERT F. BURFORD, ) 

Director, Bureau of Land Manage- ) 

ment, United States Department of ) 

the Interior; ROLAND ROBISON, Utah) 

State Director, Bureau of Land ) 

Management, United States Depart- ) 

ment of the Interior; and the ) 

UNITED STATES DEPARTMENT OF THE ) 

INTERIOR, ) 

Defendants-Appellants. 

) 

) 

No. 87-1997 

FILED 

United Stat.es Court of Aprwals 

Tenth Circuit 

JUN 1 91989 

ROB.ERT L. HOECKER 

Clerk 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF UTAH 

(DeC. No. CIV 85-1293-J) 

Craig s. Cook, Salt Lake City, Utah, for Plaintiff-Appellee. 

Sarah P. Robinson, Department of Justice, Washington, D.C. (Roger 

J. Marzulla, Assistant Attorney General, Department of Justice, 

Washington, D.C.; Brent D. Ward, United States Attorney, and 

Kathleen B. Barrett, Assistant United States Attorney, Salt Lake 

City, Utah; Gerald S. Fish, and Martin W. Matzen, Department of 

Justice, Washington, D.C., with her on the briefs), for 

Defendants-Appellants. 

Before MCKAY, SETH and BRORBY, Circuit Judges. 

BRORBY, Circuit Judge. 

Appellate Case: 87-1997 Document: 01019784553 Date Filed: 06/19/1989 Page: 1 
~-

This case arose out of the Bureau of Land Management's (BLM} 

voiding of 359 unpatented mining claims which belonged to George 

R. Schultz, because of Schultz's location of the claims while he 

was married to a BLM employee violated 43 u.s.c. § 11 (1976) and 

43 C.F.R. § 20.735-24 (1982). Schultz appealed the agency 

decision to the Interior Board of Land Appeals (IBLA), which 

affirmed. George R. Schultz, 92 Interior Dec. 83, 85 IBLA 77 

(1985). Schultz next sought judicial review from the United 

States District Court for the District of Utah. The government 

moved for summary judgment contending the 

supported by a reasonable interpretation of 

agency action was 

the statute and 

regulations. The district court denied the government's motion 

and granted judgment for Schultz finding the agency action voiding 

Schultz's claims was in excess of the statutory authority granted 

by Congress in 43 u.s.c. § 11 (1983). The government appeals. We 

AFFIRM. 

Facts 

Diana Webb has been an employee of the Moab District of the 

·utah State BLM since November 5, 1978. On February 16, 1979 she 

married Schultz. From 1982 to 1983 Schultz entered the public 

lands administered by the Moab District of the BLM under the 

Department of Interior, and the federal lands administered by the 

Forest Service under the United States Department of Agriculture, 

and located unpatented mining claims pursuant to the mining laws 

contained at 30 u.s.c. § 22 (1983). These claims were properly 

marked and recorded under the applicable state and federal mining 

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laws. In July 1982 Schultz formed Chinle Associates, a sole 

proprietorship, to manage his claims. Webb had no role in Chinle 

Associates. Complaint~~ 9-15. 

On December 21, 1983 the Utah State BLM Office issued a first 

decision declaring 353 of the claims void ab initio, stating "the 

attempted mining locations by a spouse of a [BLM] employee is a 

violation of [43 u.s.c.] § 11 (1976) and [43 C~F.R.] § 20.735-24 

(1982) e • 0 0 

II Complaint exhibit C. On January 10, 1984 the Utah 

State BLM office issued a second, decision declaring the remaining 

three claims void ab initio for the same reason stated in the 

first decision. Complaint exhibit D. 

Schultz filed a timely appeal with the Department's Interior 

Board of Land Appeals (IBLA). On .February 14, 1985 the IBLA 

issued a decision affirming the BLM decisions, George R. Schultz, 

92 Interior Dec. 83, 85 IBLA 77 (1985). The IBLA found the 

evidence inconclusive as to whether Webb had indirectly purchased 

or become interested in any public lands as prohibited under the 

terms of the statute. Id. 85-86. Rather the IBLA found Schultz's 

holding of mining claims while his wife was employed by the BLM 

was proscribed by the Department regulations, stating: 

43 CFR 20.735-24(b)(l) prohibits a "member" of BLM from 

"voluntarily acquiring a direct or indirect interest in 

federal lands." "Indirect interest" is defined to 

include "[h]oldings in land, mineral rights, grazing 

rights or livestock which in any manner is connected 

with or involves the substantial use of the resources or 

facilities of the federal lands" and specifically 

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( includes "[s]ubstantial holdings of a spouse." 43 CFR 

20.735-24(a)(4). 

Id. at 86. It concluded under the regulations Webb had "acquired 

an indirect interest in Federal lands via her spouse's locating a 

substantial number of mining claims" making the claims void. Id. 

at 88. 

On November 22, 1985 Schultz appealed the IBLA decision to 

the United States District Court for the District of Utah pursuant 

to 28 U.S.C. § 1331 (1982). While the appeal was pending Schultz 

died and Webb was substituted as plaintiff in her capacity as 

general personal representative of the estate. 1 The government 

moved for summary judgment contending its decisions were supported 

by a reasonable interpretation of the governing statute and 

regulations. The district court denied the government's motion 

holding the agency action was in excess of the statutory authority 

granted the Department by Congress. The court set aside the 

action voiding the claims and remanded the case to the IBLA for 

action consistent with its opinion. 

The government appeals and asserts the following issue for 

review: 

1 Nothing in the record presented to us indicates any interest 

Webb acquired in the mining claims by virtue of Schultz's death. 

We will refer to Schultz in discussing the interests of his estate 

and only refer to Webb in her individual capacity unless otherwise 

specified. 

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Appellate Case: 87-1997 Document: 01019784553 Date Filed: 06/19/1989 Page: 4 
Whether the location of 359 mining claims on 

federal lands by the spouse of an employee of the Bureau 

of Land Management (BLM) violates 43 u.s.c. 11 which 

prohibits BLM employees from, inter alia, "directly or 

indirectly purchasing or becoming interested in the 

purchase of any of the public land" and the Department 

of Interior's conflict of interest regulations, 43 

C.F.R. Part 20, which implement, inter alia, 43 u.s.c. 

11, and, if so, whether the mining claims~e void ab 

initio. 

Appellants Brief at 2. 

Analysis 

On appeal from a district court's review of an agency's 

action, the appellate court '"must render an independent decision 

on the basis of the same administrative record as that before the 

district court; the identical standard of review is employed at· 

both levels; and once appealed, the district court decision is 

accorded no particula·r deference.'" Brown v. United States Dept. 

of Interior, 679 F.2d 747, 748-49 (8th Cir. 1982) (quoting First 

Nat'l Bank of Fayetteville v. Smith, 508 F.2d 1371, 1374 (8th Cir. 

1974), cert. denied, 421 U.S. 930, (1975)). The facts in this 

case are undisputed. The issues posed for review are strictly 

legal ones. In our review of the IBLA's application of legal 

concepts to the undisputed facts, it is the duty of this court to 

set aside the decision of the IBLA if it is "arbitrary, 

capricious, an abuse of discretion, or otherwise not in accordance 

with law." 5 u.s.c. § 706(2)(A) (1983); Hurley v. United States, 

575 F.2d 792, 793 (10th Cir. 1978). Review under the "arbitrary 

and capricious standard" requires the court to decide whether the 

agency acted within the scope of its authority, whether the actual 

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choice made was based on a consideration of the relevant factors, 

whether there has been a clear error of judgment, and whether the 

agency's action followed the necessary procedural requirements. 

Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 415-17 

(1971). Applying this standard we conclude, like the district 

court, that the IBLA decision must be reversed. 

The issue in this case involves statutory construction. The 

court is required to give substantial weight to the interpretation 

made by the agency which is charged with the statute's 

administration. Griggs v. Duke Power Co., 401 U.S. 424, 433-34 

(1971). We are obligated to regard as controlling a reasonah~e, 

consistently applied interpretation of the government. Ehlert v. 

United States, 402 U.S. 99, 105 (1971). While administrative 

agency regulations are entitled to judicial deference, they are 

not legally binding on the court. Newmon v. Delta Air Lines, 

Inc., 374 F. Supp. 238, 245 (N.D. Ga. 1973). Regulations are 

entitled to no deference if they are inconsistent with 

congressional intent, Espinoza v. Farah Mfg. Co., 414 U.S. 86, 94 

(1973), or if there are compelling indications that the 

regulations are wrong. Red Lion Broadcasting Co. v. Federal Comm. 

Comm'n, 395 U.S. 367, 381 (1969). 

In construing a statute, the court must begin with the 

statutory language itself. United States v. Turkette, 452 U.S. 

576, 580 (1981); Wilson v. Stocker, 819 F.2d 943, 948 (10th Cir. 

1987). If the statute is unambiguous, the literal language of the 

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statute controls. Glenpool Util. Servs. Auth. v. Creek Co. Rural 

Water Dist. No. 2, 861 F.2d 1211, 1214 (10th Cir. 1988), cert. 

denied, 107 s.ct. 2068 (1989). 43 u.s.c.A. § 11 (1986) states: 

The officers, clerks, and employees in the 

Bureau of Land Management are prohibited from 

directly or indirectly purchasing or becoming 

interested in the purchase of any of the public 

land; and any person who violates this section 

shall forthwith be removed from his office. 

A plain reading of this statute indicates its prohibitions are 

directed at BLM officers, clerks, and employees. Herbert 

McMicken, 11 Interior Dec. 96, 98 (1890). The BLM is given no 

jurisdiction over the spouses of BLM officers, clerks, and 

employees. If Congress had intended the prohibitions of this 

statute to apply to the spouses of BLM employees, it would have 

explicitly included spouses. See ~' 18 u.s.c. § 208 (1983) 

(any executive employee who participates in a government matter in 

which, to his knowledge, his spouse has a financial interest shall 

be fined or imprisoned). Under a plain reading of the statute, 

the BLM was without statutory authority to void Schultz's claims. 

This construction is consistent with the revised agency 

regulation which no longer prohibits spouses of BLM employees from 

acquiring interests in federal lands. In 1981 the BLM regulations 

on conflicts of interest were revised. The provisions of 43 

C.F.R. Part 7 were modified and incorporated into 43 C.F.R. Part 

20. 46 F.R. 58420. At the time of incorporation, 43 C.F.R. § 7.3 

stated in pertinent part: 

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(a) An employee and the spouse of an employee .•. are 

prohibited from: 

(1) Voluntarily acqu1r1ng an interest in the lands or 

resources administered by the Bureau of Land Management 

(Emphasis added.) The revised section deletes the prohibition 

against the spouse and reads in pertinent part: 

(a) (4) "Indirect interest in federal lands" means any 

ownership or part ownership of an interest in federal 

lands by an employee in the name of another where the 

employee still reaps the benefits. Indirect interest in 

federal lands also includes: 

(ii) Substantial holdings of a spouse or dependent 

child. 

(b} Prohibitions. (1) The Director and members of the 

Bureau of Land Management ••• are prohibited from: 

(i) Voluntarily acquiring a direct or indirect interest 

in federal lands 

43 C.F.R. § 20.735-24 (1986). The revised regulation is 

consistent with the original regulation which recognized the 

statute gave the agency no authority to void the claims of 

spouses, but cautioned the spouse's purchase of federal lands 

would be cause for dismissal of the employee. 2 

2 On May 12, 1906 the Department of Interior approved a circular 

on the "Right of Wife of Employee of General Land Office to 

Purchase Public Land" which stated in part: 

While section 452 of the Revised Statutes [recodified as 

43 U.S.C. § 11] does not prohibit the acquisition of 

title to the public lands of the United States under 

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The government argues Schultz's claims are void because Webb 

acquired a prohibited indirect interest in the claims by virtue of 

her.marriag~ to Schultz at the time of the location of the claims. 

Although the IBLA was aware that w. William Howard and James L. 

Schultz received deeds dated July 18, 1983, from George R. and 

Mary Schultz, "husband and wife," quitclaiming undivided interest 

in several of the claims, 92 Interior Dec. at 84, n.l, it did not 

find under the statute that Webb had an indirect interest in the 

claims. 92 Interior Dec. at 85-86. The district court agreed 

with this conclusion. Memorandum Opinion and Order. Based on the 

record presented on appeal by the parties we also agree. 

The phrase ''indirectly purchasing or becoming· interested in 

the purchase of any of the_ public lanai• is not defined in the 

statute. Nor have we found help in review of the legislative 

history3 or the case law. The government suggests this case 

appropriate laws by the wives of officers, clerks, and 

employees of the land department it is not deemed 

advisable or proper in the interest of good 

administration that they should do so. Accordingly, 

such officers, clerks, and employees; are advised that 

the application, entry, purchase, or acquisition of 

title, directly or indirectly, to any of the public 

lands by their wives, prior to the separation from the 

service of such officers, clerks, or employees, will be 

deemed a sufficient cause upon which to base a 

recommendation for removal or dismissal from the service 

of the officer, clerk, or employee whose wife acquires 

or seeks to acquire title to any of the public lands. 

is 

Circulars and Regulations of the General Land 

(1930) (also reported as 34 Land Dec. 605). 

Office, at p. 1026 

3 This statute was originally enacted in 1812, Act of April 25, 

1812, ch. 68, § 10, 2 Stat. 717, and has remained substantially 

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controlled by Waskey v. Hammer, 223 U.S. 85 (1912), and Prosser v. 

Finn, 208 U.S. 67 (1908). Both cases are distinguishable because 

they involve an employee's direct acquisition of mining claims 

unchanged over the years. The original prohibition in the Act 

stated: 

That no person appointed to an office instituted by this 

act, or employed in any such office, shall directly or 

indirectly be concerned in the purchase of any right, 

title or interest, in any public land, either in his own 

right, or in trust for any other person, or in the name 

or right of any other person in trust for himself, nor 

shall take or receive any fee or emolument for 

negotiating or transacting the business of the office. 

And any person offending in the premises against the 

prohibitions of this act, shall forfeit and pay one 

hundred dollars; and, upon conviction, shall be removed 

from office. 

An Act for the establishment of a General Land Office, Act of 

April 25, 1812, ch. 68, § 10, 2 Stat. 717. This provision was 

adopted without comment in the debates of Congress. 23 Annals of 

Congress 1108, 1240, 1327, 1329; 12 Cong., 1st .Sess. (1812). 

The Act of 1812 was superseded when the General Land Office 

was reorganized in the Act of July 4, 1836, ch. 352, § 14, 5 Stat. 

112. The new Act contained the following modified language: 

That all and every of the officers whose salaries are 

hereinbefore provided for, are hereby prohibited form 

directly or indirectly purchasing, or in any way 

becoming interested in the purchase of any of the public 

land; and in case of a violation of this section by such 

officer, and on proof thereof being made to the 

President of the United States, such officer, so 

offending, shall be forthwith removed from office. 

Id. This section was adopted when the House committee considered 

this bill from the Senate, "Mr. HAWES submitted an amendment 

prohibiting officers of the General Land Office from purchasing 

public lands. Agreed to." 67 Debates of Congress 4606, 24th 

Cong., 1st Sess. (1836). 

The 

enlarged 

provided: 

Revised Statutes § 

upon the language 

452, adopted December 1, 1873, 

of § 14 of the Act of 1836 and 

The officers, clerks and employees in the General Land 

Office are prohibited from directly or indirectly 

purchasing or becoming interested in the purchase of any 

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while employed by the General Land Office (reorganized as the 

Bureau of Land Management). Neither case defines an indirect 

interest nor do they involve actions by the spouse of an employee. 

The only case on indirect interest the parties cited is 

United States v. Mississippi Valley Generating Co., 364 U.S. 520 

(1961). The Supreme Court was called on to construe a similar 

term in a general, government conflict of interest statute. The 

government sought to avoid a contract because the government 

agent, Wenzell, who negotiated the terms of the contract was 

"directly or indirectly" interested in the contract, a violation 

of 18 u.s.c. § 434. 4 Id. at 524, n.2. In determining whether 

Wenzell's activities fell within the prohibitions of the statute 

the Court stated: 

We think that the findings of 

demonstrate that, at the very 

indirect interest in the contract 

the lower court 

least, Wenzell had an 

which the sponsors 

of the public land; and any person who violates this 

section shall forthwith be removed form his office. 

The language of§ 452 remained substantially without· change when 

it was recodified at 43 U.S.C. § 11. 

4 The statute reads as follows: 

Whoever, being an officer, agent or member of, or 

directly or indirectly interested in the pecuniary 

profits or contracts of any corporation, joint-stock 

company, or association, or any firm or partnership, or 

other business entity, is employed or acts as an officer 

or agent of the United States for the transaction of 

business with such business entity, shall be fined not 

more than $2,000 or imprisoned not more than two years, 

or both. 

(Section repealed October 23, 1962.) 

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were attempting to obtain. That interest may be 

described as follows: Wenzell was an officer and 

executive of First Boston; he not only shared in the 

profits which First Boston made during the year, but he 

also received a bonus for any business which he brought 

to the firm; if a contract between the Government and 

the sponsors was ultimately agreed upon, there was a 

substantial probability that, because· of its prior 

experience in the area of private power financing, First 

Boston would be hired to secure the financing for the 

proposed Memphis project; if First Boston did receive 

the contract, it might not only profit directly from 

that contract, but it would achieve great prestige and 

would thereby be likely to receive other business of the 

same kind in the future; therefore, Wenzell, as an 

officer and profit-sharer of First Boston, could expect 

to benefit from any agreement that might be made between 

the Government and the sponsors. 

364 U.S. at 555. The Court's analysis focuses on the benefits 

Wenzell would receive as a result of his negotiation of a 

government contract that would benefit First Boston. These 

benefits flow directly from his interest in First Boston as a 

profit sharer. 

The evidence in the record before us fails to establish 

Webb's relationship to Schultz's claims through their marriage 

created a substantial likelihood that Webb would reap benefits 

from these claims. 5 There is no evidence that Webb was a locator, 

5 The district court's opinion indicates at the hearing on 

summary judgment the government presented evidence that Webb 

possessed some direct interest in the claims, specifically a check 

addressed to George and Mary Schultz for $15,000 from the lessees 

of some of the claims. There is no indication in the record that 

this evidence was ever presented to the BLM or IBLA. Generally, 

under an "arbitrary and capricious" review the courts are not 

entitled to review evidence beyond the administrative record. See 

Camp v. Pitts, 411 U.S. 138, 142 (1973); Asarco Inc. v. u:-S:-

Environmental Protection Agency, 616 F.2d 1153, 1158-60 (9th Cir. 

1980). We are bound by the IBLA's conclusion that the evidence 

was insufficient to establish Webb's interest under the statute. 

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( co-owner or owner of any of the claims, or that she had any other 

business relationship to the claims which would result in her 

receipt of income or other benefits from the claims. We are not 

persuaded that Webb had an indirect interest under the statute. 

The IBLA's coriclusion that Webb had an indirect interest is 

based solely on the regulation defining "indirect interest'' as 

''substantial holdings of a spouse", 43 C.F.R. 20.735-24(a)(4)(ii). 

92 Interior Dec. at 86. The government contends the financial 

interdependence of spouses under state law amply supports the 

agency's determination that an employee is indirectly interested 

in the property of her spouse. Appellant's Brief at 24. This 

contention is based on Utah statutes which provide: spouses are 

jointly liable for family expenses (Utah Code Ann. §30-2-9); each 

spouse has the duty to support the other in time of need (Utah 

Code Ann. §§ 78-45-3 and 78-45-4); upon divorce marital property 

is distributed as reasonable and necessary (Utah Code Ann. § 30-3-

5); and upon death the surviving spouse has an elective share of 

the estate (Utah Code Ann. § 75-2-201). Appellant's Brief at 25. 

We do not agree that these state statutes give the spouse an 

indirect interest in an unpatented mining claim. 

The locator of an unpatented mining claim, properly located, 

has -a vested property interest. Cole v. Ralph, 252 U.S. 286, 295 

(1920); Shell Oil Co. v. Andrus, 591 F.2d 597, 603 (10th Cir. 

1979), aff'd, 446 U.S. 657 (1980). The Supreme Court rejected the 

92 Interior Dec. at 85-86. 

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( argument that a Montana statute, which gave a widow an elective 

share in her husband's estate under dower, gave the widow a right 

of dower in an unpatented mining claim that her husband had owned 

during their marriage. Black v. Elkhorn Mining Co., 163 U.S. 445 

(1896). In coming to this conclusion the Court recognized that 

the states treat a locator's possessory interest in an unpatented 

mining claim as property which may be sold, mortgaged or 

inherited. Id. at 449. However, the Court relied solely on the 

federal laws to determine the rights of the locator and his 

spouse, stating: 

It does not by its terms grant any right 

wife of the locator either present or contingent. 

the owner of the lands, the government could of 

impose its own terms upon which to grant any 

whether of possession or of purchase. 

to the 

Being 

course 

right, 

Id. at 448. The Court concluded, "[w]e do not think that under 

the Federal statute the locator takes such an estate in the claim 

that dower attaches to it." Id. at 450. Based on the reasoning 

in Black, we are not persuaded that a spouse's rights in a 

locator's unpatented mining claim may be defined by state law. 

The regulation prohibits an employee from "[v]oluntarily 

acquiring a direct or indirect interest in federal lands." 43 

C.F.R. § 20.735-24(b)(i). Our review of the record presented on 

appeal fails to establish Webb voluntarily participated in the 

acquisition of Schultz's mining claims. 

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There is no evidence that Webb directed Schultz to locate the 

claims on her behalf or participated in the location of the 

claims. The regulation defines indirect interest as the ownership 

of an interest in federal lands by an employee in the name of 

another where the employee reaps the benefits. 43 C.F.R. § 

20.735-24(a)(4). This requirement that the employee reap the 

benefits applies to an employee's indirect interests held by the 

employee's spouse. Without a showing that Webb is entitled to 

reap the benefits of her spouse's holdings, we cannot conclude 

that their relationship alone causes Webb to have an indirect 

interest. The mere ownership of the claims by Webb's spouse 

standing alone is not enough to establish an indirect interest. 

Where the IBLA determined there was not sufficient evidence 

in the record to establish Webb's indirect interest under the 

statute, it would be arbitrary and capricious to find sufficient 

evidence of her indirect interest under the regulation. To 

support a finding of an employee's indirect interest under the 

statute or regulation the agency must establish the employee is 

entitled to receive the benefit of the interest in the federal 

lands. 

The government argues that if Webb has an indirect interest 

in a claim, then the claim is void ab initio. If it were 

determined that Webb was the sole owner and beneficiary of an 

indirect interest in a claim held in the name of another, then the 

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\----

entire claim could be voided, as provided in Waskey, 223 U.S. 94-

95, because the other party's interest in the claim is a mere 

subterfuge. However, if it is determined that Webb's indirect 

·interest is that of a co-owner, then only Webb's interest can be 

voided and the other co-owner's interest remains intact. floyd v. 

Montgomery, 26 Interior Dec. 122, 

undivided one-twentieth interest in 

deputy mineral surveyor at the time 

139 

a 

of 

(1898) (Co-owner of 

mining claim, who was a 

acquisition, was not 

permitted to patent the claim. Co-owner's name was stricken from 

the entry and the patent was issued to the others.); Alfred 

Baltzell, 29 Interior Dec. 333, 334 (1899) (Baltzell was a deputy 

mineral surveyor at the time he made a mineral entry for himself 

and the California Consolidated Iron Mine. His name was stricken 

from the entry and omitted from the patent.) If Webb has an 

indirect interest in the claims as a co-owner, then the proper 

remedy is to void her interest while leaving Schultz's interest 

intact. If the BLM finds the administration of Schultz's mining 

claims creates a conflict of interest, it may still remove Webb 

according to its procedures. 

We AFFIRM the district court decision and REMAND to the 

District Court with instructions to order the claims reinstated. 

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