Saddle Mountain Minerals, LLC, et al. v. Arun

SCHULTHEIS, J. -- Saddle Mountain Minerals, L.L.C., a family company
owned by Gary and Carol Maughan, appeals the trial court's summary judgment
dismissal of its complaint for damages filed against Arun and Vandana
Joshi, doing business as A&V Enterprises, Inc., the developers of a
residential subdivision in Benton County. The trial court dismissed the
complaint after determining Saddle Mountain could not prove damages.
Because there were genuine issues of material fact that should have been
addressed, the trial court erred in granting summary judgment.
Accordingly, we reverse.

Facts
This appeal is the result of the co-existent rights to 18.16 acres of
undeveloped property located in a residential subdivision in Benton County
known as Gage Galaxy. The parcel had been zoned R-2 (high density
residential use) by the Richland city council in 1993. Chapter 23.24
Richland Municipal Code (R.M.C.). Mining is neither a permitted nor
special use under the code. R.M.C. sec.sec. 23.24.020, .030, .035.

The Maughans had acquired only the mineral rights to this 18.16 parcel
of land in 1995 and quitclaimed their ownership interest in it to Saddle
Mountain in 2000. The same property, minus the mineral rights, was
purchased for residential development by the Joshis in 1999. The Joshis
were aware that they did not own the mineral rights to the proposed
subdivision prior to purchase. Their offer to purchase the property in
question was contingent on receiving preliminary plat approval from the
Richland city council to construct Gage Galaxy. Approval was granted on
November 3, 1999.

Upon learning of the preliminary plat approval, Saddle Mountain sent a
letter to the Richland city attorney regarding its mineral ownership
interest in the proposed subdivision. This occurred approximately one week
prior to final approval of the subdivision plat. The Joshis were made
aware of the Saddle Mountain letter only a few hours before the Richland
city council held a public hearing on their final plat approval. Although
the city council had before it evidence of an alleged ownership problem
between the landowner and the legal owner of the mineral rights beneath
Gage Galaxy, final approval of the subdivision was granted on November 7,
2000. There is no evidence Saddle Mountain took part in the public hearing
on the plat approval.

Because the land was undeveloped, prior to the construction of homes
in Gage Galaxy, some areas of the subdivision had to be graded, or cut down
to the proper elevation, while other areas had to be built up, or filled.
This was accomplished by moving topsoil from a cut area to an area that
needed filling. An access road connects Gage Galaxy to the major arterial
connecting with the neighborhood. The Joshis do not own the property on
which the access road lies. The access road lies across an abandoned
railroad right of way and property that had been previously deeded to the
city. The Joshis contend no fill material was cut and exported from the
area of the subdivision to the access road; however, Saddle Mountain
asserts otherwise.

On April 11, 2001, after the Joshis had begun preparing the property
for the construction of homes in Gage Galaxy, Saddle Mountain filed a
summons and complaint for damages claiming the Joshis were liable for
exporting minerals (i.e., sand and gravel) from Gage Galaxy without the
consent of, and without compensating, Saddle Mountain. The Joshis sought
summary judgment dismissal contending the lawsuit lacked factual and legal
merit. Saddle Mountain vehemently disagrees.

Saddle Mountain filed a cross-motion for summary judgment on the
issues of intentional trespass and conversion pursuant to RCW 4.24.630. It
later requested a continuance of the summary judgment hearing in order to
gather information related to the Joshis' claim they had not moved sand and
gravel off the Gage Galaxy site. Although the Joshis would not agree to
the continuance, they agreed the alleged conversion claim was not
appropriate for a summary judgment hearing because the conversion claim was
a disputed material fact.

As a result, at the summary judgment hearing the court agreed to
consider only two issues: (1) whether the current zoning ordinance
effectively extinguished Saddle Mountain's mineral rights to the Gage
Galaxy property; and (2) whether the Joshis' property rights allow them to
develop Gage Galaxy as a residential subdivision. At the conclusion of the
hearing the court determined that no reasonable juror would find that
Saddle Mountain had been damaged by construction of Gage Galaxy because
Saddle Mountain's mineral rights were worthless at the time they were
acquired due to the zoning prohibition against mining on the property. It
also found that the Joshis had the absolute right to subjacent support
under the residential subdivision, which precluded mining the sand and
gravel underneath. Finally, the court concluded that the Joshis had the
lawful right to utilize the surface soil in developing their property. The
entire Saddle Mountain lawsuit was dismissed, including the trespass and
conversion claims, on summary judgment on November 9, 2001. That same date
the court entered an order denying Saddle Mountain's motion to continue the
summary judgment hearing on the issue of whether the Joshis had improperly
removed sand and gravel off the Gage Galaxy site. Procedurally, Saddle
Mountain appealed only the summary judgment dismissal yet it also briefed
for us the issue regarding the court's denial of its request for a
continuance. This anomaly does not affect our decision.

Analysis
We are asked to determine whether the trial court erred in granting
summary judgment dismissal in favor of the Joshis and whether Saddle
Mountain should have been allowed a continuance to gather information
pertinent to an issue that was relevant to the summary judgment hearing.
Our decision regarding summary judgment renders moot the continuance issue.

This court reviews motions for summary judgment de novo, engaging in
the same inquiry as did the trial court and treating all facts and
inferences in the light most favorable to the nonmoving party, in this case
Saddle Mountain. Green v. A.P.C., 136 Wn.2d 87, 94, 960 P.2d 912 (1998).
Summary judgment is proper only if there are no genuine issues of material
fact and the moving party is entitled to judgment as a matter of law. CR
56(c).

Saddle Mountain maintains the trial court's decision on summary
judgment was incorrect because there is a genuine issue of material fact
regarding whether it continues to hold legal title to the mineral rights on
the land in question. It contends the mineral rights reservation was not
transferred or extinguished as a result of the residential zone change in
1993, which also creates a question of fact regarding whether Saddle
Mountain is owed remuneration by the Joshis for fill (sand and gravel) that
was allegedly removed from the co-owned property.

The Joshis disagree, citing I Wash. State Bar Ass'n, Real Property
Deskbook sec. 17.7(5), at 17-27 (3d ed. 1997):

There is a distinct tendency at the level of county zoning ordinances,
by restriction of land use, to restrict, or in some instances actually
destroy, mineral rights. This is particularly true of sand and gravel
mining. To the extent that land use regulation destroys the mineral value
of land a constitutional question of taking arises. See Pennsylvania Coal
Co. v. Mahon, 260 U.S. 393{, 43 S. Ct. 158, 67 L. Ed. 322} (1922); Keystone
Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470{, 107 S. Ct. 1232, 94
L. Ed. 2d 472} (1987). This subject is generally treated under discussions
of the limits of police power as opposed to eminent domain, but
appropriately must be mentioned in regard to minerals because of the
current emphasis on restricting mineral exploitation by land use planning.

As legal support for their position that the mineral rights were destroyed,
the Joshis presented the trial court with a 1959 case from Tennessee that
held a mineral rights owner was precluded from claiming any right to use
property in a manner that was prohibited by a zoning ordinance. Moore v.
Memphis Stone & Gravel Co., 47 Tenn. App. 461, 480, 339 S.W.2d 29 (1959).
Important to the Moore holding was the fact that the mineral rights holder
acquired its rights after the enactment of the zoning ordinance that
prohibited the mining activity, which made those rights subject to the
limitations and restrictions on usage as found in the zoning ordinance.
Id. The Joshis urged the trial court to follow the Moore holding. The
court agreed with them and found, as a matter of law, that Saddle
Mountain's mineral rights were destroyed once the high density housing
ordinance was passed. As a result, it determined summary judgment was
appropriate because Saddle Mountain had no right to mine sand and gravel
from the Gage Galaxy development and thus had no right to reimbursement for
the Joshis' alleged use of fill that was taken off site to build the access
road.

This is a case of first impression as there is no legal precedent in
this state for either Saddle Mountain's or the Joshis' positions. 'In
Washington, the law in the state courts construing mineral grants and
reservations is embryonic at best.' I Real Property Deskbook, supra, sec.
17.4, at 17-16. There is no doubt that Saddle Mountain's ability to mine
sand and gravel was restricted because the city ordinance states: 'All uses
not expressly permitted in an R-2 district are prohibited.' R.M.C. sec.
23.24.080. However, what is not clear under these facts is whether the
mineral rights were actually destroyed through the rezone or whether they
were merely restricted, leaving a genuine issue of material fact regarding
whether Saddle Mountain is entitled to remuneration if it is determined the
Joshis improperly moved fill from the co-owned property to another site.

We believe summary judgment was improperly granted based on facts that
are subject to more than one interpretation. The decision in Moore is one
way the issue could be resolved. On the other hand, these facts could
allow a reasonable juror to determine that only certain methods of
acquiring sand and gravel from the Gage Galaxy site were prohibited by the
Richland Municipal Code. There is nothing in the code that states or
implies that Saddle Mountain's legal title to the mineral rights was
destroyed as a matter of law by the rezone.

On the facts presented, genuine issues of material fact remain
regarding the status of the legal title to the mineral rights to the co-
owned land and whether Saddle Mountain is entitled to remuneration for fill
(the sand and gravel to which it still retained legal title) that was
allegedly improperly removed from the co-owned property. Reviewing the
facts in the light most favorable to Saddle Mountain, the evidence suggests
that the Joshis excavated between 4,000 and 5,000 cubic yards of fill that
was taken off site by the Joshis in order to even out the access road into
the Gage Galaxy subdivision. Because even the parties agreed this alleged
removal of sand and gravel from the building site was a disputed material
fact, we respectfully disagree with the dissent's analysis. We agree the
Joshis had the right to move sand and gravel around the residential site.
The problem arises only to the sand and gravel, if any, that was taken off
site to build an access road. Saddle Mountain should have been given the
opportunity to provide evidence regarding its conversion claim. Under the
factual scenario before us, we find the summary judgment was granted in
error.

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