Black Hills Institut v. Maurice Williams ( 1996 )

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No. 95-3312
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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. *
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Submitted: May 15, 1996
Filed: July 5, 1996
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Before RICHARD S. ARNOLD, Chief Judge, MAGILL, Circuit Judge, and VAN
SICKLE,* District Judge.
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MAGILL, Circuit Judge.
The Black Hills Institute of Geological Research, Inc. (the
1
Institute) appeals the district court's holding that it was not entitled
to a $209,000 lien against a tyrannosaurus rex fossil for work performed
in excavating and preparing the fossil. We affirm.
*THE HONORABLE BRUCE M. VAN SICKLE, United States
District Judge for the District of North Dakota,
sitting by designation.
1
The Honorable Richard H. Battey, Chief Judge, United States
District Court for the District of South Dakota.
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.
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