Norken Corp. v. McGahan

823 P.2d 622, 117 Oil & Gas Rep. 407, 1991 Alas. LEXIS 131, 1991 WL 238685
CourtAlaska Supreme Court
DecidedNovember 15, 1991
DocketS-3052, S-3053
StatusPublished
Cited by36 cases

This text of 823 P.2d 622 (Norken Corp. v. McGahan) is published on Counsel Stack Legal Research, covering Alaska Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Norken Corp. v. McGahan, 823 P.2d 622, 117 Oil & Gas Rep. 407, 1991 Alas. LEXIS 131, 1991 WL 238685 (Ala. 1991).

Opinions

OPINION

BURKE, Justice.

This dispute is between Norken Corporation, the current owner of three parcels of land in North Kenai Borough, and Mazie M. McGahan, the original grantor of those parcels. Although both parties agree that McGahan owns the gravel deposits on the parcels by virtue of deed reservations, they vigorously dispute the scope of that ownership. After protracted legal wrangling and a lengthy bench trial, the superior court held that the intent of the deed reservations was that McGahan retain mining rights to a portion of one parcel, but only royalty rights to the gravel underlying the rest of that parcel and the other two properties. Norken appealed; McGahan cross-appealed. We affirm in part and reverse in part.

I

Mazie M. McGahan moved to Alaska from Michigan in 1952 and homesteaded 160 acres of land in the North Kenai area. In 1956 he received a patent to the land from the United States. One characteristic of the patented land, apparently important to McGahan in choosing where to settle, was the presence of extensive gravel deposits. Another important characteristic of McGahan’s homestead was its bisection by the North Kenai Road.

In the early sixties, McGahan subdivided eighty acres of his homestead into a residential area called Aurora Heights. As he sold off the Aurora Heights properties, he routinely reserved the gravel rights. At trial, he testified that his -intention in so doing was to prevent any future grantee from ruining the residential character of the neighborhood by extracting gravel.

In contrast to his plans for Aurora Heights, McGahan removed small quantities of gravel from the property involved in this lawsuit as early as 1954, although the superior court found that this operation [624]*624was embryonic as of 1966. In that year Stan Best, a principal in Peninsula Ready Mix, negotiated with McGahan for Peninsula to extract gravel it needed to fulfill a sizeable concrete supply contract. In 1967 Peninsula bought Tract 1 from McGahan for a purchase price of $10,000. A portion of Tract 1 — an irregularly shaped, three acre parcel — encompassed at least part of the pit from which Peninsula was already extracting gravel. On the remaining portion, which included frontage on North Ke-nai Road, Peninsula erected buildings and established a storage area to support its concrete production operations.

The sale contract and the warranty deed to Tract 1 included essentially the same reservation of rights:

The Sellers expressly reserve to themselves, their heirs, executors, administrators and assigns all oil, gas, coal, gravel and non-fissionable minerals in, on or under the surface of said land.

Peninsula continued to pay McGahan for gravel it extracted from the pit.

By June 1973, Kenneth Mearkle, d/b/a Northern Steel, was using an adjoining lot, Tract A, as the location for a gravel screening plant and a small machine parts store. At that time, Northern Steel bought Tract A (a 1.1 acre parcel with more road frontage than Tract 1) from McGahan for $12,-000. The warranty deed for Tract A contained a reservation similar to the Tract 1 deed:

Grantors expressly reserve to themselves, their heirs, executors, administrators and assigns all oil, gas, coal and non-fissionable minerals in, on or under the surface of said land. Grantors also reserve all gravel rights.

McGahan testified at trial that he and Mearkle had an oral agreement that a specified portion of the property would be free from McGahan’s right to mine gravel.

Peninsula apparently needed more space for its operations. In October 1973, with McGahan acting as intermediary, Peninsula bought Tract A from Northern Steel for $15,000. In January 1975 Peninsula bought another acre, Tract C, from McGa-han for $4,000. The warranty deed for Tract C contained a reservation clause identical to that in the deed for Tract A.

According to the superior court, by 1980 or 1981 the gravel pit, which covered the rear of Tract 1 as well as land still owned by McGahan, had been mined to a depth of thirty or thirty-five feet below the grade level of North Kenai Road. Although some gravel may have been removed from the rest of the subject property, the court found that “[generally, the front portions of Tract 1 and Tracts A and C were maintained at the grade level of the North Ke-nai Road.”

Peninsula sold the three parcels to David Simonson in 1980. Although the record is unclear as to whether Simonson extracted any gravel between 1980 and 1982, it is clear that they did not extract gravel after 1982. Rather, they established a plant to manufacture ready-mix concrete, to which they brought gravel extracted from a pit several miles away. After shutting down the ready-mix operation, Simonson built a building on the property for use as a shop to paint their heavy equipment. Throughout this period, McGahan and his son extracted gravel from the pit and authorized periodic extractions by third parties. In order to gain access to the pit, one had to first get the permission of Simonson’s agent and then cross the level portion of Tract 1.

Simonson sold the parcels to Ron Johnson in March 1987 for about $125,000. Johnson eventually conveyed the property to Norken Corporation, formed by him and others to develop the property. As Norken pursued plans to build a shopping mall on the land, McGahan initiated legal action to protect his access to the gravel and define his rights under the reservation clauses. After several court orders intended to preserve the status quo, the case finally came to trial in May 1988.

In a Memorandum of Decision and Judgment dated June 22, 1988, the superior court held that

Norken owns Tracts A and C free from any right of McGahan to mine any gravel on those tracts. Similarly, Norken owns that portion of Tract 1 north of a certain [625]*625described line free from any right of McGahan to mine any gravel on Tract 1_ Norken’s ownership of the remainder of Tract 1 is subject to McGa-han’s right to remove gravel from the tract with no liability of McGahan for breach of the covenant of quiet enjoyment or breach of any obligation to provide for subjacent support.

This holding allowed McGahan to continue extraction in the area that had been used for that purpose for the two decades since Peninsula first started mining on McGa-han’s property. However, the court forbade any expansion of the pit to land which had been maintained level with North Ke-nai Road. As for McGahan’s right of access to the pit, the court found that an ^implied easement existed that ran along the south border of Tract C;1 the court thus denied McGahan’s claimed right of access across the front portion of Tract 1.

The crux of the court’s decision concerning interpretation of the reservations consisted of reconciling them with warranties of quiet enjoyment that appeared in each deed.2 To resolve the apparent conflict between the warranties and the reservations, the court looked to the circumstances surrounding the grants and to the conduct of the parties. After considering the oral agreement between Mearkle and McGahan concerning the front part of Tract A, as well as the “actual practice on the remainder of Tract A and Tract C and the front portion of Tract 1,” the court concluded that

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Bluebook (online)
823 P.2d 622, 117 Oil & Gas Rep. 407, 1991 Alas. LEXIS 131, 1991 WL 238685, Counsel Stack Legal Research, https://law.counselstack.com/opinion/norken-corp-v-mcgahan-alaska-1991.