### *THE HONORABLE BRUCE M. VAN SICKLE, United States

District Judge for the District of North Dakota, sitting by designation. The Honorable Richard H. Battey, Chief Judge, United States 1 

### District Court for the District of South Dakota. ___________ No. 95-3312

___________ Black Hills Institute of * Geological Research, Inc., a * South Dakota corporation, * * Appellant, * * Appeal from the United States v. * District Court for the District * of South Dakota. Maurice Williams, * * Appellee. *

__________ Submitted: May 15, 1996 Filed: July 5, 1996

__________ Before RICHARD S. ARNOLD, Chief Judge, MAGILL, Circuit Judge, and VA N SICKLE, District Judge.

*

___________ MAGILL, Circuit Judge.

The Bla ck Hills Institute of Geological Research, Inc. (th e Institute) appeals the district court's holding that it was not entitled 1 to a $209,000 lien against a tyrannosaurus rex fossil for work performed in excavating and preparing the fossil. We affirm.

### -2- I.

The facts surrounding the discovery, excavation, and preparation of the fossil are discussed at length in Black Hills Inst. of Geologica l Research v. South Dakota Sch. of Mines & Tech. , 12 F.3d 737 (8th Cir. 1993 ) ( Black Hills III ), cert. denied , 115 S. Ct. 61 (1994). We will discus s herein only those facts necessary for this appeal.
In August 1990, employees of the Institute discovered a tyranno saurus rex fossil on Maurice Williams's land. The Inst itute excavated the fossil and gave $5000 to Williams, allegedly in exchang e for title to the fossil. Over the course of the next few years, the Institute spent approximately $209,000 in excavating and preparing the fossil.
Williams's land, however, is located within the Cheyenne River Sioux Indian Reservation of South Dakota, which is hel d in trust for Williams by the Unite d States. On December 15, 1993, this Court concluded that th e fossil was held in trust by the United States for Williams and, as such, it was not alienable by Williams absent approval by the Department of the Interio r (DOI). See id. at 742-44 (applying 25 U.S.C. §§ 464 and 483)
. Because th e fossil was removed from the land without the knowledge o r consent of the United States, the attempted sale was void and the Institut e had no legal right, title, or interest in the fossil as severed from the land.
On February 8, 1994, the Institute filed a lien statement under South Dakota law, asserting a $209,000 lien against the fossil. The Institute then file d a complaint in South Dakota state court seeking either a statut ory or common law lien on the fossil for the work performed i n excavating and preparing it. The case was removed to the federal district court for the District of South Dakota. The district court granted summary

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judgment in favor of the defendants. The court noted that the Institute did not meet the requ irements for a statutory lien, and the court refused to impose an equitable lien on the grounds that the Institute acted with willful blindness to statutes which clearly precluded the Institute from gaining rights to the fossil absent government permission. The Institute now appeals.

II.

The la w of this case is that the fossil, even after severance fro m the l and, is held in trust by the United States for Williams and is no t alienable by Williams absent DOI approval. See id. The Institute concede d this at oral argument, but nevertheless contends that because it spent a considerable amount of money in excavating the fossil while under a mistaken belief that the fossil was alienable, it is entitled to a n equitable or statutory lien. We disagree.

A.
An equita ble lien "is implied and declared by a court of equity out of general considerations of right and justice a s applied to the relations of the parties and th e circumstances of their dealings." In re Doyen , 56 B.R. 632, 633 (Bankr. D.S.D. 1986) (citing Farmers & Merchants Bank v
. Commissioner of Inter nal Revenue , 175 F.2d 846, 849 (8th Cir. 1949)); see also Dorman v. Crooks State Bank , 225 N.W. 661, 664 (S.D. 1929) (describin g equitable lien). Whi le equity will impose a lien in favor of a bona fide purchaser who improves the purchased item in the mistaken belief that he is the true owner, equity will not impose a lien in favor of one who makes improveme nts knowing that title is in another. See 41 Am. Jur. 2d , Improvements § 11 (1995).
In the present case, the district co urt concluded that the Institute did not act in good faith in excavating the fossil,

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noting that
[The I nstitute] was willfully blind to the existing statute s and regulations governing Indian trust land. Had [th e ins titute] spent the time necessary to research the law, th e on ly inescapable conclusion would have been that [th e Institute] had no right to the fossil without the government's permission.

Mem. Op. at 8 (D.S.D. Aug. 11, 1995). Because the conclusion that th e Institute acted in bad faith is a factual determination, we review only fo r clear error. See Garwood v. American Motorists Ins. Co. , 775 F.2d 228, 23 1 (8th Cir. 1985).
This Court has already noted that th e Institute could have taken any number of steps to protect itself and that the fact "that the fossil was embedded in land located within the boundaries o f the Cheyenne River Sioux Indian Reservation should have alerted Black Hil ls to the possibility that the federal government had some interest in [the fossil]." Black Hill s II I , 12 F.3d at 744. It is a long settled rule that a party who ha s knowledge of facts that would cast doubt upon th e transferability of title has a duty to investigate that title, and that a lack of caution an d diligence in such situations amounts to bad faith. See State ex. rel
. Dept. of Revenue v. Karras , 515 N.W.2d 248, 251 (S.D. 1994) ("notice o f facts which would put a prudent person upon inquiry[] impeaches the good faith of the subsequent purchaser") (quoting Betts v. Letcher , 46 N.W. 193 , 196 (S.D. 1890)); see also Moelle v. Sherwood , 148 U.S. 21, 30 (1893) (bon a fide na ture of transaction depends in part on reasonable diligence i n ascert aining whether transfer is a "mere speculative chance in th e property" ); Brush v. Ware , 40 U.S. 93, 111 (1841) (having failed t o diligently investigate known facts which cast doubt upon validity of title , the purchaser cannot prejudice the rights of innocent persons through his neglige nce). Given the Institute's failure to diligently investigat e whether the fossil could be alienated absent government approval, it canno t be

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considered a good faith, bona fide purchaser. It is therefore not entitle d to an equitable lien in its favor.

B.

The Insti tute also contends that a statutory lien may be imposed in its favo r. Under South Dakota law, the lien ceases 120 days after an y work, skill, services, or material was furnished to the fossil, unless a statement of lien is filed within this period. S.D.C.L. § 44-9-15 (1983). The last day any work was performed on the fossil--the day it was seized by federal authorities--was May 14, 1992. The lien statement was not file d until February 8, 1994, well after the expiration of the filing period
. Because t he statute is quite clear that the 120-day clock begins to ru n upon the completion of the work, and not upon the date when the parties' interests in the item are finally adjudicated, t he Institute does not meet the requirements for a statutory lien.

III.

The I nstitute is not entitled to either an equitable lien or a statutory lien. Therefore, the decision of the district court is affirmed
.
A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.