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Northern Improvement Co. v. United States

United States District Court, D. Arizona

June 10, 2019

Northern Improvement Company, et al., Plaintiffs/Counterdefendants,
v.
United States of America, Defendant/Counterclaimant.

          ORDER

          David G. Campbell Senior United States District Judge.

         Plaintiffs Northern Improvement Company (“NIC”), Alfred Jay Schritter, and Tomma Schritter filed this action against the United States to quiet title to the sand and gravel in two Arizona parcels of land pursuant to the Quiet Title Act, 28 U.S.C. § 2409a (“the QTA”). Doc. 12. The government has filed motions to dismiss for lack of subject matter jurisdiction and for summary judgment, and Plaintiffs have cross-moved for summary judgment. Docs. 127, 134. The motions are fully briefed, and no party has requested oral argument. Docs. 128, 135, 136, 138, 140-43. The parties submitted supplemental briefing at the Court's request. Docs. 142, 143. For the following reasons, the Court finds that subject matter jurisdiction exists and will grant summary judgment for NIC as to the NIC Parcel and against the Schritters as to the Schritter Parcel.

         I. Background.

         The parties dispute the right of Plaintiffs NIC and the Schritters to mine for and remove sand, gravel, and decorative rock from two properties in Mohave County, Arizona. Both properties were once owned in their entirety by Santa Fe Pacific Railroad Company (“Santa Fe”). Santa Fe obtained title to the properties through patents issued by the United States in 1923 for the Schritter parcel and 1924 for the NIC parcel. The patents issued to Santa Fe did not contain a mineral reservation in the United States, but the properties have since been severed into separately owned surface and mineral estates. The government has reacquired the surface estate in both properties, and NIC and the Schritters have acquired the mineral estate.

         This dispute arose when Plaintiffs applied to the Bureau of Land Management (“BLM”) for a permit to use the surface of the properties to remove sand, gravel, and decorative rock. The BLM refused to grant the permit based on its determination that NIC and the Schritters did not own the sand and gravel. Doc. 12 at 5-6. The Interior Board of Land Appeals (“IBLA”) affirmed the BLM's decision, but declined to decide ownership of the sand and gravel. Id. Plaintiffs then filed this action to quiet title in the sand and gravel on the two parcels.

         This case was assigned to another judge of this Court when it was filed in 2012. It remained there, with the parties conducting some discovery and seeking stays to complete an attempted settlement, until it was reassigned to the undersigned judge in 2018. Doc. 90. The parties have now completed additional discovery and summary judgement briefing.

         A. The Schritter Parcel.

         In 1923, the government patented the surface and mineral estates of certain federal lands, including the Schritter Parcel, to Santa Fe.[1] Id. at 1. In a 1950 warranty deed, Santa Fe conveyed the surface estate in some of these lands, including the Schritter Parcel, to George F. Getz Jr. Id. at 2. This order will refer to this as the Getz Deed. The Getz Deed included two provisions by which Santa Fe reserved the mineral estate and other rights. The parties refer to the first provision as the Schritter Mineral Reservation and to the second as the Schritter Railroad Reservation. See Id. at 2-3.

         In 1988, as part of a land exchange, the government reacquired various lands from a successor in interest to Getz, including the same interest in the Schritter Parcel that Getz had received from Santa Fe in the Getz Deed. Id. at 3. This order will refer to the deed in this 1988 transaction as the West Wing Deed. The West Wing Deed excepted “all oil, gas, coal and minerals, as reserved” in the Getz Deed. Id. Thus, the 1988 conveyance of the Schritter Parcel to the government was subject to Santa Fe's reservations in the Schritter Mineral Reservation and the Schritter Railroad Reservation.

         In an October 2003 quitclaim deed, Santa Fe conveyed to the Schritters its “right, title and interest, if any, in and to decorative rock, sand, and gravel” in the Schritter Parcel. Id. In a March 2004 quitclaim deed, Santa Fe conveyed to the Schritters “all Santa Fe's right, title and interest, if any” in the Schritter Parcel. Id.

         B. The NIC Parcel.

         In 1924, the government patented its interest in certain federal lands, including the NIC Parcel, to Santa Fe. Id. In a 1938 Indenture, Santa Fe conveyed the surface estate in these lands, including the NIC Parcel, to Willie Wall. Id. at 4. This order will refer to this deed as the Wall Deed. The Wall Deed also included two provisions by which Santa Fe reserved the mineral estate and other rights. The parties refer to these provisions as the NIC Mineral Reservation and the NIC Railroad Reservation.[2]

         The NIC parcel was also part of the 1988 West Wing Deed. In that deed, the government reacquired from a successor in interest to Wall the surface estate in the NIC Parcel that had been conveyed to Wall. Id. at 5. The West Wing Deed excepted “all oil, gas, coal and minerals, as reserved in” the Wall Deed with respect to the NIC Parcel. Id. Thus, the 1988 conveyance of the NIC Parcel to the government was subject to Santa Fe's reservations in the NIC Mineral Reservation and the NIC Railroad Reservation.

         In 2002, Santa Fe quitclaimed to Tri-R Construction, Inc. (“Tri-R”) “all of Santa Fe Pacific Railroad Company's right, title and interest, if any, in and to sand, gravel and decorative rock located within 100 feet of the surface” of land, including the NIC Parcel. Id. at 5. Tri-R quitclaimed that same interest in the NIC Parcel to NIC in 2004. Id.

         C. The Reservations.

         The parties agree that no relevant differences exist between the NIC and Schritter Mineral Reservations, which this order will refer to collectively as the Mineral Reservations. Id. at 4. The parties also agree that no relevant differences exist between the NIC and Schritter Railroad Reservations, which this order will refer to collectively as the Railroad Reservations. Id. at 5. Because the reservations are substantially the same, the Court will refer only to the Getz Deed language for purposes of this order.

         In the Getz Deed, Santa Fe was the grantor, Getz was the grantee. The deed included the following Mineral Reservation:

Grantor expressly reserves and excepts all oil, gas, coal and minerals whatsoever, already found or which may hereafter be found, upon or under said lands, with the right to prospect for, mine, and remove the same and to use so much of the surface of said lands, as shall be necessary and convenient for shafts, wells, tanks, pipe lines, rights of way, railroad tracks, storage purposes and other and different structures and purposes necessary and convenient for the digging, drilling, and working of any mines or wells which may be operated on said lands. Grantor or its successors and assigns, will pay to Grantee, or [the] successors or assigns of grantee, a fixed price per acre for the surface of all lands appropriated under this exception and reservation, which price shall be equal to the average price per acre paid for all the lands above described, together with the fair market value of the buildings and permanent improvements, if any, on the land the surface of which is so appropriated. If the parties cannot agree on such fair value it shall be fixed by three appraisers, of whom each party shall appoint one and the two so appointed shall appoint the third.

Doc. 126 at 2 (emphasis added). The Getz Deed also included the following Railroad Reservation:

This conveyance is made subject to and upon the condition that in the event that Grantor, or its successors or assigns, or The Atchison, Topeka and Santa Fe Railway Company, or its successors or assigns, or any railway company at least a majority of whose stock it owns, may at any time hereafter desire to construct across the premises hereinabove described, any railroad tracks, telegraph and telephone lines, or other electric wire lines, oil or water pipe lines, roadways, ditches, flumes or aqueducts, or to operate on said premises gravel and ballast pits and quarries and take material therefrom for railroad purposes, the right of way for any such tracks, telegraph, telephone or other electric wire lines, pipelines, roadways, ditches, flumes and aqueducts, of sufficient width for the proper protection, maintenance and operation thereof, and the land necessary and convenient for the operation of such gravel and ballast pits and quarries and the taking of material therefrom for railroad purposes, may be appropriated by any such Company desiring to construct such tracks, wire lines, pipelines, roadways, ditches, flumes or aqueducts, or to operate such gravel and ballast pits and quarries, upon such Company paying or offering to pay Grantee, or the legal representatives, heirs, successors or assigns of Grantee, a fixed price per acre for all the land above described, together with the fair value of all buildings and permanent improvements constructed upon the land so appropriated; and Grantee, or their legal representatives, heirs, successors or assigns or Grantee, will convey to such Company such appropriated right of way upon demand and tender of payment as aforesaid.

Id. at 2-3 (emphasis added).

         II. Subject Matter Jurisdiction.

         Plaintiffs sued to quiet title in the Schritter and NIC Parcels on January 18, 2012. Doc. 1. The government argues that this action is untimely under the QTA's 12-year statute of limitations because Plaintiffs' predecessors in interest knew or should have known before January 18, 2000, that the government claimed an interest in the sand and gravel on the two parcels. Doc. 127 at 2-8. The government does not substantially challenge the truth of facts alleged in Plaintiffs' complaint. The Court therefore will treat this as a facial attack under Rule 12(b)(1) and accept the alleged facts as true. Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004).

         A. The Quiet Title Act.

         1. Waiver of Sovereign Immunity Under §2409a(a).

         Section 2409a(a) of the QTA “waives the federal government's sovereign immunity to certain civil actions by plaintiffs seeking to quiet title to [real] property in which the United States claims an interest.” Kingman Reef Atoll Invs., LLC v. United States, 541 F.3d 1189, 1195 (9th Cir. 2008) (citing 28 U.S.C. § 2409a). “[T]wo conditions must exist before a district court can exercise jurisdiction over an action under the Quiet Title Act: 1) the United States must claim an interest in the property at issue; and 2) there must be a disputed title to real property.” Leisnoi, Inc. v. United States, 267 F.3d 1019, 1022 (9th Cir. 2001); see also Robinson v. United States, 586 F.3d 683, 686 (9th Cir. 2009) (same).

         The government claims an interest in the surface estates of the Schritter and NIC Parcels, and the parties dispute whether the surface estates include title to the sand and gravel. The QTA's two jurisdictional requirements are satisfied, and the government does not argue otherwise. See Doc. 127 at 1-3.

         2. Statute of Limitations under § 2409a(g).

         Even with these two conditions satisfied, the Court lacks subject matter jurisdiction if Plaintiffs' claims are untimely under § 2409a(g). Kingman Reef, 541 F.3d at 1196. That section bars a civil action under § 2409a(a) unless “it is commenced within twelve years of the date upon which it accrued.” 28 U.S.C. § 2409a(g).

         The government argues that because the statute of limitations is jurisdictional, Plaintiffs bear the burden of proving that their claims are timely. Doc. 138 at 2. The Ninth Circuit law on this issue is not clear. The Court of Appeals did hold in Kingman Reef that the QTA statute of limitations is jurisdictional, and a plaintiff typically has the burden of establishing subject matter jurisdiction. 541 F.3d at 1195-96. But Kingman Reef expressly declined to decide “who bears the burden of proving timeliness for purposes of the QTA.” Id. at 1197.[3] Another the Ninth Circuit case has suggested that the QTA statute of limitations is not jurisdictional and that plaintiffs need not show timely filing. See Leisnoi, 267 F.3d at 1025 n.3. The Court need not attempt to resolve this confusion because this case is not time barred regardless of who bears the burden of proof.

         The 12-year limitations period begins running “on the date the plaintiff or his predecessor in interest knew or should have known of the claim of the United States.” 28 U.S.C. § 2409a(g) (emphasis added). “The statutory term ‘should have known' imparts a test of reasonableness. The question is whether the United States' actions would have alerted a reasonable landowner that the government claimed an interest in the land.” Shultz v. Dep't of Army, U.S., 886 F.2d 1157, 1160 (9th Cir. 1989) (emphasis added).

         Ninth Circuit cases have announced inconsistent standards for determining when a claim has accrued.[4] Rather than attempt to sort through and reconcile these inconsistencies, the Court will rely on the language of the statute and the basic test articulated in Schultz: “whether the United States' actions would have alerted a reasonable landowner that the government claimed an interest in the land.” Shultz, 886 F.2d at 1160. This statement comports with the issue posed by the government in this case: “whether Plaintiffs, or their predecessor in interest, Santa Fe, knew or should have known that the United States claimed an interest in the sand and gravel on or in the NIC and Schritter Parcels prior to January 18, 2000.” Doc. 127 at 4. Applying this standard, the Court concludes that Plaintiffs' cause of action did not accrue more than 12 years before this case was filed.

         B. Accrual of Plaintiffs' Claims. 1. West Wing Deed.

         The government first argues that Plaintiffs' successor in interest, Santa Fe, had notice of the government's claim from the recording of the West Wing Deed in 1988. The government asserts that the deed specifically referred to the Getz and Wall Deeds, which in turn contain the Mineral and Railroad Reservations that determine title to the sand and gravel. Doc. 127 at 4-5. Although it is true that recording of the West Wing Deed would give constructive notice of the deed to Santa Fe, the Court cannot conclude that knowledge of the deed would provide actual or constructive notice that the government claimed an interest in the sand and gravel on the Schritter and NIC parcels. Santa Fe expressly reserved a mineral estate in both parcels, which eventually was transferred to Plaintiffs. Whether the Railroad Reservation in the Getz and Wall Deeds reserved the right to sand and gravel is the very issue disputed in this case. The parties read the Railroad Reservation quite differently. The Court sees no basis for finding that Santa Fe - from mere recording of the West Wing Deed - knew or should have known that the government read the Railroad Reservation in the Getz and Wall deeds as giving it the right to sand and gravel.

         Although recording of the West Wing Deed clearly provided notice that the government had acquired the surface interest in the Schritter and NIC parcels, that is not the issue in this case. The issue is whether Santa Fe reasonably knew that the government claimed an interest in the subsurface sand and gravel. Recording of the deed did not reveal such a claim because a reserved mineral interest like Santa Fe's can coexist with a surface interest like the government's. The government's general acquisition of the surface ...


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