Court Opinion

ID: 8899917
Source: CourtListenerOpinion
Date Created: 2022-11-27 00:54:31.208836+00
Date Added: 2024-06-11T17:07:46.044072
License: Public Domain

TRASK, Circuit Judge
(dissenting):
My examination of the law as applied to the facts leads me to a different conclusion than that adopted by the majority. I would agree with the essential facts as stated, but would conclude that the decision of the Interior Board of Land Appeals (IBLA) was arbitrary and capricious. Thus, I would reinstate the judgment of the Director of the Bureau of Land Management (BLM), which validated the patent.
The principal issue revolves around the stipulation of facts entered into between the parties, and its sufficiency to support the application.
We are concerned with a group of limestone placer claims on Heceta Island within the Tongass National Forest in Alaska. An application for a patent to the claims was made by Ideal Basic Industries (Ideal). The application was based upon an agreed stipulation of facts between Ideal and the Forest Service in lieu of a hearing and determination of facts. No question has been raised by the parties as to the validity or accuracy of that stipulation. There is no suggestion of fraud in the case. The good faith of Ideal in acquiring the claims is not in issue. (Stipulation No. 6.) The timber has been removed pursuant to license issued by the Forest Service and the land is not considered satisfactory for recreation, residence or industrial use because of terrain. (Stipulation No. 7.)
The contest is limited to the “marketability” part of the two-part test for patentability and no question has been raised as to the “prudent-man” part of the test. The Forest Service as contestant has charged that
“No discovery of a valuable mineral has been made within the limits of the claims because the mineral materials present cannot be marketed at a profit and it has not been shown that there exists an actual market for these materials.”
The two questions are:
1. Can the mineral materials be marketed at a profit; and,
2. Has it been shown that an actual market exists for these materials.
The solution of this controversy does not depend upon an evaluation of conflicting expert testimony or the sufficiency of oral testimony as in Melluzzo v. Morton, 534 F.2d 860 (9th Cir. 1976), No. 74-2683; Clear Gravel Enterprises, Inc. v. Keil, 505 F.2d 180 (9th Cir. 1974); or, Verrue v. United States, 457 F.2d 1202 (9th Cir. 1972). The case before us has as its foundation a precise delineation of facts.
In arriving at its conclusion that the marketability test has not been met, the majority appear to argue that the “profit over cost must be realizable from the material itself.” In the next paragraph, the majority state that the fact that Ideal could presently use the limestone “in the manufacture and sale of cement at a profit” is not sufficient to meet the marketability test. No authority is cited for this assertion and I *1372have been able to find none. Melluzzo v. Morton, supra, does not so hold. That issue does not appear in Melluzzo. In United States v. Gibbs, 13 IBLA 382 (1973), the Interior Board of Land Review recognizes the practice of processing a mineral or material sought to be patented and then selling the processed material. Said the Board:
“In 1966 Gibbs and his co-owner filed an application for patent (Nevada 067140) covering the south half of both claims, which were leased that year to Stock Mill & Supply Company, Inc. . . . The company uses most of the concrete aggregate which is delivered to its ready-mix concrete plant at a different location. Its operation has been profitable since its inception.” Id. at 386.
Here, Ideal proposes to extract the limestone, deliver it to its cement plant “at a different location,” and the parties have stipulated that the operation would be profitable.
To the same effect is United States v. Harenberg, 9 IBLA 77. There the validity of a placer claim to a deposit of volcanic cinders was contested by the Forest Service for the reason that the cinders are a common variety within the meaning of Act of July 23, 1955, 30 U.S.C. § 611 (1972). The Board found that the cinders were of common variety and thus the critical issue became whether the location was validated by the discovery of a valuable deposit prior to July 23, 1955. Valid discovery was measured by the prudent man and marketability tests. In Harenberg, as here, the deposit was to be used by its owner to process and sell a finished product. In Harenberg the product was cinder block. The court applied the marketability test.
“Judge: Perhaps I should ask you this question. Could you have made in 1955 cinder blocks from the Harenberg No. 1 cinder and sold it at a profit?
“Harenberg: Yes, Right. We could have, very, very definitely.
“No evidence was introduced by the Forest Service to show that the cinders could not have been profitably extracted and used by Harenberg in 1955.” 9 IBLA at 85.
The majority here contend that stipulations 8 and 9 are ambiguous. “A reasonable interpretation of them is that Ideal could use limestone costing $1.94 f.o.b. Seattle in the manufacture and sale of cement at a profit because of large profits it derives from either the manufacturing or selling processes or from both.” In some bewilderment, I point out that there is absolutely no evidence of “large profits it derives from either the manufacturing or selling processes or from both.” Again, just how relevant is such a speculation? If the limestone is an essential ingredient what difference does it make that other costs are low or high? Even if the limestone cost $3.00 f.o.b. Seattle, if it is an essential ingredient and the cement can be sold at a profit, then the limestone as a part of the operation, is being extracted and marketed at a profit.
It appears clear that the two questions raised by the contestant are answered directly and unequivocally by the stipulation:
“8. The limestone on the subject claims can be presently used in the manufacturing and sale of cement at a profit.
. (Emphasis supplied.)
“9. The Seattle, Washington, plant of Ideal is a market for limestone from the subject claims, together with other plants of Ideal on the Pacific coast. . . . ”
In addition to the substantive reasons which require a reversal in this case, there appears to be a procedural step which IBLA and the district court have ignored. When the Government contests a mining claim, its duty as contestant is to establish a prima facie claim of invalidity, and then the burden shifts to the locator to establish the requirements of a valid claim. United States v. Zweifel, 508 F.2d 1150, 1157 (10th Cir. 1975); United States v. Springer, 491 F.2d 239, 242 (9th Cir. 1974); Foster v. Seaton, 106 U.S.App.D.C. 253, 271 F.2d 836, 838 (1959). The BLM, in holding that the claims were valid, referred to the asserted grounds of the contest, which were that there had been no discovery because the minerals could not be marketed at a profit *1373and that it was not shown that there exists a market for them, and then stated:
“After having made this charge the Forest Service, acting in behalf of the Government, then stipulated that the mining claimant could use the limestone at a profit (see stipulation No. 8) and then stipulated that the mining claimant had a market for the limestone in Seattle (see stipulation No. 9). It is therefore apparent that the very bases of the contest have, by stipulation, been established not to exist. The Government has not made out a prima facie case of invalidity. On the contrary, the Government seems to have stipulated that the claims are valid, and we are bound by the record.” C.T. at 164.
The IBLA recognized this responsibility of the Government in its subsequent “reconsideration opinion.” 79 I.D., at 120. However, the IBLA argued that it must take the agreement as a whole and, reading the entire agreement, found for the Government. In doing so, however, the IBLA abandoned the requirement that the Government bears the burden of establishing a prima facie case of invalidity and proceeded directly to urge that Ideal had the entire burden. “The main question presented then,” it says, “is whether it has been demonstrated by a preponderance of the evidence that full compliance has been made with the requirements of the mining laws . . . Given the wide latitude that the Secretary of Interior has in insisting that the qualifications for patentability be met, it is a difficult task for a locator, however bona fide he may be, to persuade the Department of Interior to grant a patent. But before the Department can impose that burden upon the applicant, the Government-contestant must at least make out a prima facie case of invalidity. Here, it did not do so by the stipulation and produced no evidence of its own aliunde.
Not only did the Government fail to make out a prima facie case of invalidity, it seems to have stipulated that the claims are in fact valid.
It seems apparent that the IBLA in its decision of March 13, 1972, while giving lip service to the rule that a prima facie case of invalidity must be proved by the Government, fails to require it specifically; and when it considers the “instrument as a whole,” its consideration is on the basis that the applicant has the burden — not just the ultimate burden, but the initial burden as well.
I would reverse and remand with directions to reinstate the judgment of the Director of the Bureau of Land Management which validated the patent.
APPENDIX
Stipulation of Ideal and the Forest Service before the Hearing Examiner
1. Ideal Cement Company (“Ideal”) is a Colorado corporation with cement plants, terminal facilities and quarries in 14 states. It has been producing cement from limestone since 1904, and its productive capacity in 1967 was 41,-000,000 barrels.
2. The date of location of the limestone placer mining claims involved in this contest and the exploration activity by Ideal are as stated in the patent application.
3. The limestone in the deposit is suitable for making cement.
4. There are approximately 200,000,000 tons of limestone within the subject claims.
5. Ideal has performed the required $500 expenditure per claim.
6. The good faith of Ideal in acquiring these claims is not in issue.
7. The subject claims are chiefly valuable for limestone. The timber has been removed pursuant to license issued by the Forest Service, and the Forest Service at the present time does not have a program of reseeding or replanting. New growth is dependent upon natural propagation. Neither is the land at the present time included in any recreation or other development plan and is not considered particularly *1374satisfactory for recreation, residence or industrial use because of terrain and surface baldness.
8. The limestone on the subject claims can be presently used in the manufacture and sale of cement at a profit. The agreed estimated per-ton cost of limestone from these claims delivered at Ideal’s Seattle plant is $1.94, including a 25-year amortization charge. Presently Ideal is supplying its Seattle plant from its own and other limestone sources on Texada, British Columbia, at a per-ton delivered cost of $1.48.
9. The Seattle, Washington, plant of Ideal is a market for limestone from the subject claims, together with other plants of Ideal along the Pacific coast. The Seattle plant site was used by Ideal as’a terminal beginning in 1959; the present plant construction began in 1965 and the plant commenced operation March 15, 1967.
10. Ideal considers the subject claims as a source of limestone for the Seattle plant as well as for the Pacific Northwest, California and Alaska areas.
11. The subject claims are readily accessible by water to the limestone market in the Pacific Northwest, Northern California and Alaska. The quarry operation contemplated by Ideal at the subject claims includes facilities to load ships and barges. The claims adjoin a deep-water harbor.
12. A potential general market exists for limestone from southwestern Alaska. There have been no sales of limestone from the subject claims or from any other southeastern Alaska source since 1949 when Permanente Cement Company briefly operated a quarry on Dali Island. Claims are being located in the same general area as the subject claims and presumably patents have been or will be applied for by others, including U. S. Steel, Sinclair Oil Company, and Lone Star Cement Company. The limestone in this deposit is chemical grade quality, being at least equal to most deposits of chemical grade limestone.
13. Based on population projections made by Ideal from data obtained from the U. S. Bureau of the Census, it is estimated that cement consumption in the Pacific Northwest and Northern California will increase 300% in the next 50 years. Present productive capacity of Ideal in the area is 6.0 million barrels annually. Thus 50 years hence Ideal projects it will need 18,000,000 barrels annual capacity in the Pacific Northwest and Northern California. On a nation-wide basis present production for the entire cement industry is, on an annual average, utilizing about 76% total capacity, but Ideal exceeds this industry figure.
14. The Redwood City, California plant of Ideal uses shell dredged from San Francisco Bay as a source of calcium carbonate. There is a distinct possibility that Congressional legislation will prohibit use of such a source of calcium carbonate for cement production. It is also possible that British Columbia may by legislation forbid exports of limestone. Ideal believes that the subject claims are a legitimate and necessary domestic reserve against these possibilities.
15. Cement plant operators in the Pacific Northwest and Northern California are faced with dwindling supplies of suitable limestone to meet the growing demand for cement. Before the expectant life of many of these plants has expired the presently-used sources of raw materials will be depleted. Southeast Alaska affords an excellent quality material, the deposit being superior to most deposits found in the lower states, and the material can be delivered economically and feasibly by water.
16. Ideal has a master plan for development of the subject claims. However, the Forest Service is concerned that there will be no incentive for Ideal to *1375develop the subject claims as a source of limestone.