*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 VAN

SICKLE, District Judge. *

___________

MAGILL, Circuit Judge.

The Black Hills Institute of Geological Research, Inc. (the

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.
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I.

The facts surrounding the discovery, excavation, and preparation of

the fossil are discussed at length in Black Hills Inst. of Geological

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 discuss

herein only those facts necessary for this appeal.

In August 1990, employees of the Institute discovered a tyrannosaurus

rex fossil on Maurice Williams's land. The Institute excavated the fossil

and gave $5000 to Williams, allegedly in exchange 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 held in trust for Williams by

the United States. On December 15, 1993, this Court concluded that the

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

Interior (DOI). See id. at 742-44 (applying 25 U.S.C. §§ 464 and 483).

Because the fossil was removed from the land without the knowledge or

consent of the United States, the attempted sale was void and the Institute

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 filed a complaint in South Dakota state court seeking either a

statutory or common law lien on the fossil for the work performed in

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 requirements 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 law of this case is that the fossil, even after severance from

the land, is held in trust by the United States for Williams and is not

alienable by Williams absent DOI approval. See id. The Institute conceded

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 an

equitable or statutory lien. We disagree.

A.

An equitable lien "is implied and declared by a court of equity out

of general considerations of right and justice as applied to the relations

of the parties and the circumstances of their dealings." In re Doyen, 56

B.R. 632, 633 (Bankr. D.S.D. 1986) (citing Farmers & Merchants Bank v.

Commissioner of Internal Revenue, 175 F.2d 846, 849 (8th Cir. 1949)); see

also Dorman v. Crooks State Bank, 225 N.W. 661, 664 (S.D. 1929) (describing

equitable lien). While 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

improvements knowing that title is in another. See 41 Am. Jur. 2d,

Improvements § 11 (1995).

In the present case, the district court concluded that the Institute

did not act in good faith in excavating the fossil,
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noting that

[The Institute] was willfully blind to the existing statutes

and regulations governing Indian trust land. Had [the

institute] spent the time necessary to research the law, the

only inescapable conclusion would have been that [the

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 the

Institute acted in bad faith is a factual determination, we review only for

clear error. See Garwood v. American Motorists Ins. Co., 775 F.2d 228, 231

(8th Cir. 1985).

This Court has already noted that the 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 of the Cheyenne River Sioux

Indian Reservation should have alerted Black Hills to the possibility that

the federal government had some interest in [the fossil]." Black Hills

III, 12 F.3d at 744. It is a long settled rule that a party who has

knowledge of facts that would cast doubt upon the transferability of title

has a duty to investigate that title, and that a lack of caution and

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 of

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) (bona

fide nature of transaction depends in part on reasonable diligence in

ascertaining whether transfer is a "mere speculative chance in the

property"); Brush v. Ware, 40 U.S. 93, 111 (1841) (having failed to

diligently investigate known facts which cast doubt upon validity of title,

the purchaser cannot prejudice the rights of innocent persons through his

negligence). Given the Institute's failure to diligently investigate

whether the fossil could be alienated absent government approval, it cannot

be
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considered a good faith, bona fide purchaser. It is therefore not entitled

to an equitable lien in its favor.

B.

The Institute also contends that a statutory lien may be imposed in

its favor. Under South Dakota law, the lien ceases 120 days after any

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 filed

until February 8, 1994, well after the expiration of the filing period.

Because the statute is quite clear that the 120-day clock begins to run

upon the completion of the work, and not upon the date when the parties'

interests in the item are finally adjudicated, the Institute does not meet

the requirements for a statutory lien.

III.

The Institute 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.