Opinion ID: 746404
Heading Depth: 3
Heading Rank: 3

Heading: Effect of the Conveyances Pursuant to the Settlement Agreements

Text: 15 Despite the intent of the parties, the instruments of title executed pursuant to the settlements do not effectively preserve the federal leases. The patents were issued without reservation of oil, gas and coal. The Ertl settlement agreement specifically describes the patent to be issued as a standard mining patent: 16 2.3 The form of the patents to be issued by the Department of the Interior to the Claimowners shall be that of a standard mining claim patent granting the Claimowners fee ownership of the entire claim, subject only to a right-of-way thereon for ditches and canals constructed by the authority of the United States, pursuant to the Act of August 30, 1890 (43 U.S.C. 945). 17 Rec., vol. II at 397-98 (emphasis added). 18 The rights accorded holders of such unreserved patents are clear: 19 [W]hen a mining claim has been perfected under the law, it is in effect a grant from the United States of the exclusive right of possession to the same. It constitutes property to its fullest extent, and is real property subject to be sold, transferred, mortgaged, taxed, and inherited without infringing any right or title of the United States. 20 Etcheverry, 230 F.2d at 195. Upon issuance of a patent, title relates back to the date of original entry. Id. at 196.  'A patent from the United States operates to transfer the title, not merely from the date of the patent, but from the inception of the equitable right upon which it is based.'  Id. (quoting United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 334-35, 26 S.Ct. 282, 286, 50 L.Ed. 499 (1906)). The consequence of relation back is that the claimant's rights and those of the claimant's assignee date from the time the claim was made, not from the time the patent was issued. Reed v. Munn, 148 F. 737, 757 (8th Cir.1906). Under general mining law, the issuance of federal mineral patents to Ertl and to Marathon related back to the date of the original claim and validated the private leases conveyed to Munson prior to the execution of the settlements or the issuance of the patents. See id. Moreover, the issuance of patents to holders of valid mining claims ordinarily voids federal leases. See, e.g. Union Oil Co. of Cal., 289 F.2d at 791 n. 1 (federal oil and gas leases issued pursuant to the Mineral Leasing Act of 1920 not valid if the holder of a valid mining claim subsequently receives a patent); 1 ROCKY MTN. MIN. L. FOUND., LAW OF FEDERAL OIL AND GAS LEASES § 3.10 (1996); cf. Letter from Thomas L. Sansonetti, Associate Solicitor, Energy and Resources, United States Dep't of the Interior, to Assistant Secretary, Land and Minerals Management, United States Dep't of the Interior (Feb. 23, 1989) (rec., vol. I at 293). 21 Because Munson's rights under the Marathon lease relate back, the issuance of the Marathon patent voided the federal leases, regardless whether the patent is considered to have issued in 1991 or 1994. Thus, contrary to the district court's conclusion, rec., vol. II at 739, delivery of the patent to an agent was not effective to preserve the federal leases. Similarly, the fiction engaged in by Ertl and the United States that the patent issuance and the warranty deed were executed simultaneously so as to preserve the federal leases and to cut off Munson's rights under the private leases is simply not legally effective. Despite the recitals of the settlement, the conveyances could not be made simultaneously. Ertl must have received a patent before it could deed oil, gas and coal to the government. As the special warranty deed acknowledges, Ertl could not convey title to oil, gas and coal unless Ertl at least momentarily held legal title. This title held by Ertl related back, and thus validated Ertl's lease to Munson. When Ertl did make the conveyance, it conveyed to the government only what it had at the time it signed the deed: rights to oil, gas and coal encumbered by a lease to Munson. 22 We hold that the instruments of conveyance employed to effectuate the Ertl and Marathon settlements did not cut off the rights of Munson under the private leases, notwithstanding the intent of the settling parties. Ordinarily, we would therefore conclude under general mining law that Munson has no obligation to pay the Barlows royalty on leases voided by the issuance of patents. The Barlows argue, however, and the district court held, that Munson is barred for other reasons from asserting the validity of its private leases. We address these arguments in turn.