Rosette Incorporated v. United States

                                                                F I L E D
                                                          United States Court of Appeals
                                                                  Tenth Circuit
                                  PUBLISH
                                                                  APR 7 1998
                 UNITED STATES COURT OF APPEALS
                                                            PATRICK FISHER
                                                                      Clerk
                               TENTH CIRCUIT



ROSETTE INC., a New Mexico
corporation, BURGETT
INVESTMENT, INC., a New Mexico
corporation, BURGETT
GEOTHERMAL GREENHOUSE,
INC., a New Mexico corporation,             No. 96-2126

      Plaintiffs-Appellants,

v.

UNITED STATES OF AMERICA;
JANET RENO, as Attorney General;
DEPARTMENT OF INTERIOR;
BRUCE BABBITT, Secretary of
Interior of the United States; JAMES
BACA, in his official capacity as
Director of Bureau of Land
Management; WILLIAM CALKINS,
in his official capacity as State
Director of Bureau of Land
Management; LINDA RUNDELL, in
her offical capacity as Las Cruces
District Manager of Bureau of Land
Management,

      Defendants-Appellees.


       APPEAL FROM THE UNITED STATES DISTRICT COURT
              FOR THE DISTRICT OF NEW MEXICO
                   (D.C. No. CIV-93-1379-BB)
Stephen E. Hosford, Hubert & Hernandez, Las Cruces, New Mexico, for
Plaintiffs-Appellants.

Jared A. Goldstein, United States Department of Justice, Washington, D.C. (Lois
J. Schiffer, Assistant Attorney General, State of New Mexico, Santa Fe, New
Mexico, John J. Kelly, United States Attorney, John Zavitz, Assistant United
States Attorney, Albuquerque, New Mexico, Robert L. Klarquist, Jonathan F.
Klein, United States Department of Justice, Grant L. Vaughn, Office of the
Solicitor, Department of the Interior, Santa Fe, New Mexico, Of Counsel, on the
brief) for Defendants-Appellees.


Before EBEL, McWILLIAMS, and HENRY, Circuit Judges.


HENRY, Circuit Judge.


      Plaintiffs-Appellants (collectively referred to as “Rosette”) appeal the

district court’s dismissal, on statute of limitations grounds, of their claim alleging

ownership of geothermal resources. The court’s determination of subject matter

jurisdiction is a question of law, which we review de novo. Williams v. United

States, 957 F.2d 742, 743 (10th Cir. 1992). Because the Quiet Title Act, 28

U.S.C. § 2409a, controls Rosette’s lawsuit, and because Rosette did not file suit

within the Act’s statute of limitations, we affirm.



                                I. BACKGROUND

      Rosette owns the surface estate to certain real property in Hidalgo County,

New Mexico by virtue of two United States patents issued under the Stock


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Raising Homestead Act of 1916, 43 U.S.C. §§ 299, 301 (remainder of the Act

repealed by Act of Oct. 21, 1976, Pub. L. No. 94-579, 90 Stat. 2787 & 2792).

The patents reserve the “coal and other minerals” to the United States. Aplt’s

App. vol. I at 25; see also 43 U.S.C. § 299 (all patents issued under the Stock

Raising Homestead Act shall “contain a reservation to the United States of all the

coal and other minerals in the lands so entered and patented.”)

      Rosette operates a business growing roses in greenhouses on the property.

Several wells are used to irrigate the operation, and separate geothermal wells are

used to heat the greenhouses. Rosette has obtained permits for “beneficial use” of

the wells under New Mexico law. The United States, claiming an interest in the

geothermal resources pursuant to the Geothermal Steam Act of 1970, 30 U.S.C.

§§ 1001-1028, leased these resources to an entity known as Amax Exploration,

Inc. Rosette is one of the designated operators under this lease. Rosette uses the

geothermal steam in its greenhouse operation and, accordingly, makes royalty

payments.

      In 1993, the Bureau of Land Management (“BLM”) requested Rosette to

install new metering devices in order to record its consumption of geothermal

resources. Rosette challenged the BLM’s authority to require installation of the

new metering devices. The BLM, finding that Rosette’s then-current metering

system did not meet BLM specifications, issued a “shutdown order” requiring


                                          3
Rosette to cease using the geothermal resources. Rosette filed suit, claiming that

geothermal resources are not reserved minerals under the Stock Raising

Homestead Act, and, therefore, that the United States lacks the authority to

regulate them. Because we resolve this case on statute of limitations grounds, we

need not reach the merits. 1

      Rosette’s complaint is styled as one for quiet title, ejectment, declaratory

judgment and permanent injunction. Rosette invokes the Quiet Title Act and the

Declaratory Judgment Act, 28 U.S.C. § 2201 as jurisdictional bases. Count I of

the complaint seeks a declaration that the United States has no interest in the

geothermal resources. Count I also seeks to quiet title in Rosette to those

resources. Count II likewise seeks a declaration that the United States has no

interest in the geothermal resources because it has failed to quiet title to those

resources. In Count III, Rosette again seeks a declaration that the United States

has no interest in the geothermal resources. Finally, Count IV asks the court to

quiet title to the geothermal resources and to enjoin the United States from

asserting authority over them. The district court observed that the extent of the

United States’ authority to regulate the geothermal resources is inextricably


      1
        We note that the Ninth Circuit decided this issue on the merits in favor of the
government. See United States v. Union Oil Co. of California, 549 F.2d 1271, 1272 (9th
Cir. 1977) (holding that “the mineral reservation in patents issued under the Stock-
Raising Homestead Act of 1916 reserved to the United States geothermal resources
underlying the patented lands”) (citations omitted).

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related to the question of ownership of those resources. Aplt’s App. vol. I at 170.

Thus, the district court found that the Quiet Title Act controlled Rosette’s lawsuit,

notwithstanding the fact that the complaint also sought declaratory and injunctive

relief, as well.



                                 II. DISCUSSION

A. The Quiet Title Act provides Rosette’s exclusive remedy.

       On appeal, Rosette argues that its lawsuit is primarily one for declaratory

relief. Rosette claims that it is merely seeking a declaration of the United States’

authority to regulate the heat in the water which comes from the state-permitted

wells. Because the United States purports to hold the authority to regulate the

geothermal resources, and because it has exercised this authority, Rosette argues

that its lawsuit is, in actuality, a defense to government agency action. Rosette

cites the well-settled maxim that limitations do not normally run against a

defense, or, in other words, that a statute of limitations may be used only as a

shield, not as a sword. See Northern Pac. Ry. v. United States, 277 F.2d 615,

623-24 (10th Cir. 1960). Furthermore, Rosette argues that a statute of limitations

cannot bar a claim for declaratory relief.

       In support of these arguments, Rosette cites Luckenbach S.S. v. United

States, 312 F.2d 545 (2d Cir. 1963). In Luckenbach, the plaintiff sought a


                                             5
declaration of nonliability on a debt claimed by the defendant (but on which the

defendant had not filed suit). Id. at 547. The district court granted summary

judgment in favor of the defendant, holding that the plaintiff’s claim was time-

barred. Id. The Second Circuit reversed, explaining that if the underlying claim

was not time-barred, then an action seeking a declaration regarding that claim

would not be barred either. Id. at 549. Conversely, if the claim underlying a

declaratory action was time-barred, then a declaratory judgment action would also

be barred. Id.

        Luckenbach is not helpful to Rosette here. First of all, as discussed below,

this is really not a declaratory judgment action but, rather, an action to quiet title

to real property in which the United States claims an interest. Second, unlike in

Luckenbach, the merits of the underlying claim are time-barred in the instant

case.

        Rosette may characterize its lawsuit as a declaratory judgment action, but it

nonetheless seeks a declaration as to the ownership of the geothermal resources.

Moreover, Rosette may characterize its lawsuit as a defensive measure, but its

lawsuit nonetheless is an affirmative step taken to quiet title to the geothermal

resources. As discussed above, the district court found that Rosette’s request for

declaratory relief leads directly back to the question of title, and, as such, is

inextricably linked to that question. The district court reasoned that since the


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Quiet Title Act contains a limited waiver of sovereign immunity, it provides

Rosette’s exclusive remedy. We agree with the district court on this point and

conclude that the Quiet Title Act controls Rosette’s lawsuit.

      This conclusion is buttressed by the Supreme Court’s pronouncement in

Block v. North Dakota ex rel. Bd. of Univ. and School Lands, 461 U.S. 273

(1983). In Block, North Dakota sought to resolve a dispute over ownership of the

Little Missouri riverbed. Id. at 277-78. It filed a complaint against the United

States, invoking, among other statutes, the Declaratory Judgment Act and the

Administrative Procedures Act as jurisdictional bases. Id. at 278. The complaint

did not mention the Quiet Title Act. Id. The district court, however, required

North Dakota to amend its complaint to aver a quiet title claim. Id. At trial, the

United States raised the Quiet Title Act’s statute of limitations as a defense. The

district court found that the statute of limitations did not apply to sovereigns, and

it accordingly entered judgment quieting North Dakota’s title to the riverbed. Id.

at 279.

      The United States petitioned for certiorari, and North Dakota cross-

petitioned, arguing that even if the Quiet Title Act’s statute of limitations did

apply, the judgment should be affirmed because the Quiet Title Act did not

provide North Dakota’s exclusive remedy. Id. at 280. The Supreme Court

disagreed with North Dakota. The Court first observed that, absent an express


                                           7
waiver of sovereign immunity, suits against the United States are barred. Id. at

280. The Court then considered the Senate bill that served as the framework for

the Quiet Title Act. It noted that the bill waived immunity when a party asserted

an interest in lands the United States claimed. Id. at 282. After further

consideration of the legislative history, the Court held that “Congress intended the

[Quiet Title Act] to provide the exclusive means by which adverse claimants

could challenge the United States’ title to real property.” Id. at 286.

      The Quiet Title Act, therefore, is Rosette’s only recourse for haling the

United States into court on the issue of ownership of the geothermal resources.

Insofar as Rosette’s current claims are all linked to the question of title, the Quiet

Title Act provides the exclusive remedy. Allowing Rosette to maintain a

declaratory judgment action under these circumstances would undermine the

policies set forth in Block and would render the Quiet Title Act’s statute of

limitations meaningless. Cf. Nevada v. United States, 731 F.2d 633 (9th Cir.

1984) (holding Property Clause claim time-barred under the Quiet Title Act’s

statute of limitations because claim requires resolution of quiet title issues); 118

East 60th Owners, Inc. v. Bonner Properties, Inc., 677 F.2d 200 (2d Cir. 1982)

(disallowing declaratory judgment action seeking declaration of nonliability

where use of federal declaratory judgment procedure would undermine state

substantive statute of limitations policies). Having found that the Quiet Title Act


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provides Rosette’s exclusive remedy, we turn now to a discussion of the Act’s

statute of limitations.

B. The Quiet Title Act’s Statute of Limitations bars Rosette’s lawsuit.

      Actions brought pursuant to the Quiet Title Act are subject to a twelve-year

statute of limitations. 28 U.S.C. § 2409a(g). That is, an action must be brought

within twelve years of when the plaintiff “knew or should have known of the

claim of the United States.” Id. The Quiet Title Act’s statute of limitations is

strictly construed in favor of the United States. Vincent Murphy Chevrolet Co. v.

United States, 766 F.2d 449, 452 (10th Cir. 1985); Knapp v. United States, 636

F.2d 279, 282 (10th Cir. 1980).

      Defendants argue that Rosette’s action accrued in 1978, and, therefore, the

statute of limitations bars its claims. We agree that Rosette’s cause of action

accrued in 1978. Mr. Burgett 2 himself bid on the geothermal lease in September

1978 when the Department of Interior offered to lease the geothermal resources at

issue. In October 1978, after Amax Exploration was selected as the winning

bidder, Mr. Burgett met with BLM officials to discuss calculation of royalty

payments for his operations under Amax Exploration’s lease. In addition, in

December 1978, Rosette entered into an agreement with Amax Exploration



      2
       Dale Burgett or a member of his immediate family controls each of the appellant
corporations.

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whereby Rosette agreed to be bound by the terms of the lease and to make royalty

payments. Finally, in February 1979, Rosette was formally designated as an

operator under the lease. Thus, in 1978, Rosette knew or should have known that

the United States claimed an interest in the geothermal resources. Rosette did not

file suit until 1993, fifteen years later.

       Rosette advances two reasons why its lawsuit should not be time-barred.

First, Rosette claims that its cause of action accrued in 1993 when the BLM

issued the shutdown order. Second, Rosette claims that the Quiet Title Act’s

statute of limitations was tolled by certain provisions of the Geothermal Steam

Act of 1970, 30 U.S.C. §§ 1001-1028. We shall address each contention in turn.

       1. Did Rosette’s claim accrue in 1993?

       Rosette argues that it was the Secretary’s shutdown order, issued in 1993,

that gave rise to its lawsuit. Regardless of what prompted Rosette to file suit, it

now seeks to quiet title to the geothermal resources. Rosette did not file suit

pursuant to the Administrative Procedures Act. Under the circumstances and the

claims contained in its complaint, the Quiet Title Act provides Rosette’s exclusive

remedy. The Quiet Title Act is clear that a claim accrues when the plaintiff knew

or should have known of the United States’ interest. Rosette knew of the United

States’ interest in 1978, and it does not dispute this. The fact that it decided not

to contest that interest until a disagreement arose cannot defeat the workings of


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the statute of limitations.

      2. Was the statute of limitations tolled by the Geothermal Steam Act?

      In the alternative, Rosette argues that even if its claim accrued in 1978, the

Quiet Title Act’s statute of limitations was tolled because the United States failed

to comply with the requirements of the Geothermal Steam Act, 30 U.S.C. §§

1001-1028. According to Rosette, the Geothermal Steam Act requires the United

States to quiet title to geothermal resources when development is imminent.

Rosette argues that because the United States failed to do so, it cannot now claim

the benefit of the Quiet Title Act’s statute of limitations.

      The Geothermal Steam Act provides in relevant part as follows:

      Geothermal resources in lands the surface of which has passed from
      Federal ownership but in which the minerals have been reserved to
      the United States shall not be developed or produced except under
      geothermal leases made pursuant to this chapter. If the Secretary of
      the Interior finds that such development is imminent, or that
      production from a well heretofore drilled on such lands is imminent,
      he shall so report to the Attorney General, and the Attorney General
      is authorized and directed to institute an appropriate proceeding in
      the United States district court of the district in which such lands are
      located, to quiet the title of the United States in such resources, and
      if the court determines that the reservation of minerals to the United
      States in the lands involved included the geothermal resources, to
      enjoin their production otherwise than under the terms of this
      chapter: Provided, That upon an authoritative judicial determination
      that Federal mineral reservation does not include geothermal steam
      and associated geothermal resources the duties of the Secretary of the
      Interior to report and of the Attorney General to institute
      proceedings, as hereinbefore set forth, shall cease.

30 U.S.C. § 1020(b) (first emphasis added). Rosette’s tolling argument is

                                          11
unconvincing. If Rosette wanted to challenge the United States’ authority to enter

into the lease, it needed to file suit within the statute of limitations. We conclude

that the Geothermal Steam Act did not toll the Quiet Title Act’s statute of

limitations.



                                  III. CONCLUSION

      In sum, we conclude that Rosette’s claim accrued in 1978, and its suit was

not filed within the Quiet Title Act’s twelve-year statute of limitations. Thus, the

district court lacked subject matter jurisdiction. Accordingly, we AFFIRM the

judgment of the district court.




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