Hayes v. AJ Associates, Inc.

Citations: 846 P.2d 131; 126 Oil & Gas Rep. 459; 1993 Alas. LEXIS 19; 1993 WL 32520Docket: S-4837

Court: Alaska Supreme Court; February 12, 1993; Alaska; State Supreme Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

A lessee of mining rights on filled tidelands, Michael Hayes, staked a claim to the mineral estate after discovering the state reserved mineral rights in the patent. The surface owner, A.J. Associates Inc., sought ejectment, while Hayes counterclaimed for royalties, alleging fraud. The superior court initially ruled in favor of A.J., stating the state did not reserve minerals in the fill material, but this decision was reversed on appeal, which found that the state did reserve these rights. Upon remand, the superior court again granted summary judgment to A.J., declaring Hayes's mining claim void ab initio due to his lack of good faith in locating it. This ruling was reversed again on appeal.

The factual background includes previous decisions involving the property, created over 25 years by the dumping of rock and tailings from A.J. Industries’ mining operations. The state conveyed the property to A.J. in 1967, reserving mineral rights. Hayes entered into a lease in September 1981 that expired in December 1981, and continued mining under an oral extension during failed renewal negotiations. Hayes subsequently staked mining claims in July 1982, asserting that the minerals were state-owned. The Department of Natural Resources ultimately issued a production license for the claims, but determined a lease was also necessary for mining.

In procedural developments, A.J. filed for ejectment, and the trial court granted partial summary judgment in favor of A.J., asserting that title to the fill material and mineral rights remained with A.J. This was reversed in a previous case, which recognized that title to the tailings passed to the state upon statehood, with mineral rights reserved. On remand, the superior court ruled against Hayes, citing his failure to act in good faith regarding the mining claim. Hayes later claimed state ownership of ATS 201 and invoked the public trust doctrine, which was introduced in a motion for reconsideration.

The superior court denied Hayes' motion for reconsideration, affirming that the 1967 patent granted title in fee simple with mineral rights reserved for the state. The court referenced CWC Fisheries, Inc. v. Bunker, stating the public trust doctrine is limited to lands under navigable waters, thus inapplicable to the lands in question. In reviewing the summary judgment, the court emphasized that a genuine issue of material fact must exist for the non-moving party to contest the judgment and must view facts favorably for that party.

Hayes argued that the "filled tidelands" were subject to a public trust easement for navigation, commerce, and fishing, contending that mining should also be considered a public trust activity. The court disagreed, reaffirming that while private title holders may use their property without unreasonably interfering with public easements, mining does not qualify as a public trust purpose. The distinction was made that mining is an exclusive and depleting use of resources for private gain, not a public use.

Additionally, the superior court found that Hayes did not meet the good faith requirement for mineral claim locators. This conclusion was based on Hayes' reliance on exploratory activities conducted as a lessee and the use of proprietary information to stake competing claims, alongside a violation of statutory and regulatory requirements concerning bond posting before mining activities.

A valid mining claim under federal law requires the locator to act in good faith. This concept allows courts to address gaps in outdated statutes. The court incorrectly applied the good faith location doctrine in this case, which is intended to resolve disputes between parties with competing mineral claims. The doctrine typically applies when a subsequent locator engages in fraud, breaches a fiduciary duty, or knows of an existing claim, as demonstrated in various cases. However, since A.J. does not assert a competing claim and Hayes is not a subsequent locator, the good faith doctrine should not invalidate Hayes' claim. Additionally, applying this doctrine would hinder rather than promote the development of public mineral resources since there are no conflicting claims. A.J.'s own good faith is questionable; it leased mining rights to Hayes and collected royalties without disclosing that its state patent reserved mineral rights to the state, which undermines its argument for the application of the good faith doctrine.

Equity mandates that parties seeking relief must have acted honestly and without deceit concerning the relevant dispute. In the case of Sea Lion Corp. v. Air Logistics of Alaska, the court reversed the trial court's summary judgment favoring A.J. and remanded the case to ascertain Hayes' rights resulting from his staking and recording of claims. The appellate court noted that Hayes' argument against A.J.’s fee simple interest in ATS 201 lacked merit, affirming that public trust land conveyances under Class I preference rights are valid title transfers, subject to ongoing public easements. The summary also highlighted that California courts recognize public trust easements encompassing various recreational and ecological uses of navigable waters. The remand was necessary due to insufficient presentation and discussion of relevant statutes and regulations in the trial court, particularly regarding internal DNR procedures for mining claims on private property with state-held mineral rights. The court advised notifying the State Attorney General's office to ensure the state could articulate its position on the matter.