Bullion Monarch Mining, Inc. v. Barrick Goldstrike Mines, Inc. , 686 F.3d 1041 ( 2012 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BULLION MONARCH MINING, INC.,  No. 11-15479
Plaintiff-Appellant, D.C. No.
v. 3:09-cv-00612-
BARRICK GOLDSTRIKE MINES, INC., ECR-VPC
District of Nevada,
Defendant-Appellee.
 Reno
ORDER
CERTIFYING
A QUESTION TO
THE NEVADA
 SUPREME COURT
Filed June 13, 2012
Before: Sidney R. Thomas, M. Margaret McKeown, and
William A. Fletcher, Circuit Judges.
ORDER
We respectfully certify to the Nevada Supreme Court the
questions of law set forth in Section III of this order, pursuant
to Nevada Rule of Appellate Procedure 5. The answer will be
determinative of an issue pending before this court, and there
is no clearly controlling precedent in the decisions of the
Nevada Supreme Court.
I. Background
Plaintiff-Appellant Bullion Monarch Mining, Inc.
(“Bullion”) alleges that Barrick Goldstrike Mines, Inc.
(“Barrick”) owes Bullion mineral royalty payments pursuant
6761
6762 BULLION v. BARRICK
to an area-of-interest provision contained in a 1979 agree-
ment. According to Bullion, its predecessor-in-interest and
several other entities entered into the agreement with a mine
operator, Barrick’s predecessor-in-interest, to develop mining
claims in the Carlin Trend in Nevada.
The agreement contains an area-of-interest provision
requiring the operator to pay Bullion a royalty on production
from mining claims the operator might subsequently acquire
within the area of interest. The agreement restricts Bullion’s
ability to purchase or develop mineral interests in the area of
interest. Under the agreement, Bullion is to receive royalty
payments on production from after-acquired claims in the area
of interest for ninety-nine years.
Bullion filed suit in Nevada federal district court seeking
royalty payments on production from after-acquired claims in
the area of interest. Barrick contended that the area-of-interest
provision is void under the Rule Against Perpetuities. Bullion
contended that the Rule does not apply to royalties on produc-
tion from after-acquired claims within an area of interest. In
the alternative, Bullion sought reformation of the agreement
under Nevada Revised Statute § 111.1039(2).
The district court granted summary judgment to Barrick
based on the Rule Against Perpetuities. Bullion timely
appealed.
II. Discussion
A. Applicability of the Rule Against Perpetuities
The Nevada Constitution expressly adopts the Rule Against
Perpetuities. Nev. Const. art. 15 § 4 (“No perpetuities shall be
allowed except for eleemosynary [charitable] purposes.”).
Nevada courts have interpreted this constitutional provision as
applying the common law Rule Against Perpetuities. See Sar-
razin v. First Nat’l Bank of Nev., 111 P.2d 49, 51 (Nev. 1941)
BULLION v. BARRICK 6763
(“‘No interest is good unless it must vest, if at all, not later
than twenty-one years after some life in being at the creation
of the interest.’ ” (citing John Chipman Gray, The Rule
Against Perpetuities, § 201 (3d ed. 1915))).
The Nevada legislature enacted a Statutory Rule Against
Perpetuities in 1987. Nev. Rev. Stat. §§ 111.103-1039. The
statute, however, purports to affect only interests created on
or after July 1, 1987. Id. § 111.1039(1).
The Nevada Supreme Court has not addressed the question
whether the Rule Against Perpetuities applies to an area-of-
interest provision in a mining agreement. Cf. Hennessey v.
Price, 604 P.2d 355, 357 (Nev. 1980) (declining to reach the
perpetuities defense because it was not raised as a defense
below); Eagle Thrifty Drugs & Mkts., Inc. v. Incline Vill.,
Inc., 517 P.2d 786, 788 (Nev. 1973) (same); Nev. ex rel. Bren-
nan v. Bownman, 503 P.2d 454, 456-57 (Nev. 1972) (noting
that Nevada’s constitution exempts charitable gifts from the
Rule Against Perpetuities); Mohr Park Manor, Inc. v. Mohr,
424 P.2d 101, 105-06 (Nev. 1967) (noting, and rejecting,
potential perpetuities problem with a real estate option con-
tract); Tsirikos v. Hatton, 116 P.2d 189, 191 (Nev. 1941)
(analyzing applicability of the Rule Against Perpetuities in the
construction of a will); Sarrazin, 111 P.2d at 51 (same),
Aikins v. Nev. Placer, 13 P.2d 1103, 1105-06 (Nev. 1932)
(analyzing a challenge to a mining claim option contract
under the Rule Against Perpetuities); Nixon v. Brown, 214 P.
524, 531 (Nev. 1923) (applying charitable exception to the
Rule Against Perpetuities); Hunter v. Sutton, 205 P. 785, 789
(Nev. 1922) (finding it unnecessary to reach the Rule Against
Perpetuities issue); In re Hartung’s Estate, 160 P. 782, 784
(Nev. 1916) (applying charitable exception to the Rule
Against Perpetuities).
The parties have particularly directed our attention to two
out-of-state cases. An Indiana court applied the Rule Against
Perpetuities to an area-of-interest provision, holding that “roy-
6764 BULLION v. BARRICK
alty interests are real property interests which vest immedi-
ately in the royalty holder only to the extent that such interests
are granted in property owned by the grantor at the time of
conveyance, otherwise such royalty interests will not vest
until acquisition by the grantor.” Wedel v. Am. Elect. Power
Serv., 681 N.E. 2d 1122, 1137-38 (Ind. Ct. App. 1997). Wedel
treats an area-of-interest royalty as a contingent, future inter-
est because it is uncertain, at the time the agreement is signed,
whether and when any claims will be acquired within the area
of interest. Wedel holds that an area-of-interest provision vio-
lates the Rule if the period between the signing of the agree-
ment and the acquisition of the claim may exceed the
applicable perpetuities period.
A Missouri court reached the opposite conclusion, holding
that the Rule Against Perpetuities does not apply to an area-
of-interest provision because such a provision “tends to pro-
mote, not inhibit, the leasing of the minerals and hence, the
profitable use of land.” Commerce Bank of Kansas City, N.A.
v. Peabody Coal Co., 861 S.W.2d 569, 571 (Mo. Ct. App.
1993) (citing Charles Meyers, The Effect of the Rule Against
Perpetuities on Perpetual Non-Participating Royalty and Kin-
dred Interests, 32 Tex. L. Rev. 369 (1954)). The Sixth Circuit
adopted the reasoning of Commerce Bank in an unpublished
memorandum disposition. Willits v. Peabody Coal Co., 188
F.3d 510 (Table), 1999 WL 701916, at *19-20 (6th Cir.
1999).
The Missouri court pointed out the uneasy fit between the
Rule Against Perpetuities and area-of-interest provisions. The
classic aims of the Rule Against Perpetuities are two-fold:
First, the Rule seeks to limit the dead-hand control of grantors
in the settlement of family estates. Second, and relatedly, it
seeks to limit the period during which property can be ren-
dered inalienable. See, e.g., Meyers, 32 Tex. L. Rev. at 416
(“ ‘Excessively long family settlements were the threat which
produced the Rule; and the period of perpetuities was tailored
to fit the needs of family gift transactions.’ ” (quoting W. Bar-
BULLION v. BARRICK 6765
ton Leach, Perpetuities in Perspective: Ending the Rule’s
Reign of Terror, 65 Harv. L. Rev. 721, 725-26 (1952))). Area-
of-interest provisions are contained in commercial agreements
rather than in family property settlements. Further, area-of-
interest provisions do not limit alienability of either the under-
lying estate or the royalty interest. In this sense, one may even
question whether area-of-interest provisions create property
interests, as they create enforceable rights only against the
contracting parties. According to Dean Meyers, royalty inter-
ests such as those contained in area-of-interest agreements
encourage the productive use of mineral land because individ-
ual owners may not have sufficient capital to fully exploit
subsurface minerals, gas, or oil, such that the power to
explore and develop land is often placed in the hands of a sin-
gle operator. Id. at 420 (“[T]he policy of the Rule against Per-
petuities is fostered, not infringed, by sustaining the executive
right, which keeps the power to lease in the hands of a single
person.”).
We are not in a position to predict with confidence whether
the Nevada Supreme Court would agree with the analysis of
Wedel, with that of Commerce Bank, or with that of some
other decision.
B. Reformation
In the alternative, Bullion argues that if its royalty interest
in after-acquired claims in the area of interest violates the
Rule, Nevada’s Statutory Rule Against Perpetuities gives a
court the power to reform the agreement. The Nevada
Supreme Court has not published an opinion addressing this
question.
III. Questions of Law
We certify two questions to the Nevada Supreme Court:
6766 BULLION v. BARRICK
1. Under Nevada law, does the Rule Against Perpetuities
apply to an area-of-interest provision in a commercial mining
agreement?
2. If the Rule Against Perpetuities does apply, is reforma-
tion available under Nevada Revised Statute § 111.1039(2)?
We recognize that the Nevada Supreme Court may, in its
discretion, reword the certified questions. Palmer v. Pioneer
Inn Assocs. Ltd., 59 P.3d 1237, 1238 (Nev. 2002) (per curiam)
(rephrasing and answering our certified question).
IV. Conclusion
This appeal presents issues of Nevada state law that will be
determinative of an issue essential to the parties’ dispute. In
our view, there is no clearly controlling precedent of the
Nevada Supreme Court. For this reason, we request that the
Nevada Supreme Court accept and decide the question(s)
herein certified. We agree to abide by the Nevada Supreme
Court’s decision as specified by Rule 5 of the Nevada Rules
of Appellate Procedure, which states that “[t]he written opin-
ion of the Supreme Court stating the law governing the ques-
tion certified . . . shall be res judicata as to the parties.” Nev.
R. App. P. 5(h)
The Clerk of this court is hereby directed to file in the
Nevada Supreme Court, under official seal of the Ninth Cir-
cuit Court of Appeals, copies of all relevant briefs and an
original and ten copies of this request with certificate of ser-
vice on the parties. The opening brief remains under seal dur-
ing the period of certification to the Nevada Supreme Court.
All further proceedings in this case are stayed pending
receipt of the answer from the Nevada Supreme Court. This
appeal is withdrawn from submission and will be resubmitted
after receipt of the Nevada Supreme Court’s opinion. The
panel retains jurisdiction over further proceedings in this
BULLION v. BARRICK 6767
court. The parties are directed to notify the Clerk of this court
within one week after the Nevada Supreme Court accepts or
rejects the certification, and if it accepts certification, again to
notify this court within one week after that court renders its
opinion.
If the Nevada Supreme Court accepts certification,
Plaintiff-Appellant Bullion shall be the appellant in that court,
and Defendant-Appellee Barrick shall be the respondent. As
required by Nevada Rule of Appellate Procedure 5(c)(5), the
names and addresses of counsel appear in the appendix.
IT IS SO ORDERED.
Respectfully submitted, Sidney R. Thomas, M. Margaret
McKeown, William A. Fletcher, Circuit Judges.
6768 BULLION v. BARRICK
APPENDIX
Clayton P. Brust, Robison, Belaustegui, Sharp & Low, 71
Washington Street, Reno, NV 89503, for the plaintiff-
appellant. Francis M. Wikstrom, Michael P. Petrogeorge,
Brandon J. Mark, Parsons, Behle & Latimer, 201 South
Maine Street, Suite 1800, Salt Lake City, UT 84111; Michael
R. Kealy, Parsons Behle & Latimer, 50 West Liberty Street,
Suite 750, Reno NV 89501, for the defendants-appellees.