Bullion Monarch v. Barrick Goldstrike (Nev. Supreme Ct. – Mar. 26, 2015)

Does Nevada’s Rule Against Perpetuities apply to an area-of-interest provision in a commercial mining agreement?

The Ninth Circuit Court of Appeals certified two questions to the Nevada Supreme Court concerning Nevada’s rule against perpetuities. The first question asked whether Nevada’s Rule Against Perpetuities applies to an area-of-interest provision in a commercial mining agreement. The second asked whether, if the rule applies, courts may reform such agreements under NRS 111.1039(2).

Bullion Monarch Mining, Inc. (Bullion), alleged that Barrick Goldstrike Mines, Inc. (Barrick), owes royalty payments to Bullion under an area-of-interest provision in a 1979 agreement. According to Bullion, its predecessor-in-interest entered into the agreement with a mine operator, Barrick’s predecessor-in interest, to develop Bullion’s predecessor’s mining claims in the Carlin Trend.

The area-of-interest provision required the mine operator to pay Bullion a royalty on production resulting from the operator’s mining claims that the operator might subsequently acquire within 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 99 years

Bullion filed suit in Nevada federal district court seeking royalty payments on production from after-acquired claims in the area of interest. Barrick argued that it did not owe royalties because the area-of-interest provision was void under the rule against perpetuities. Bullion responded that the rule did not apply to area-of-interest royalty agreements. In the alternative, Bullion sought reformation of the agreement under NRS 111.1039(2).

The federal district court granted summary judgment to Barrick based on the rule against perpetuities. Bullion appealed. The Ninth Circuit Court of Appeals then certified the questions to the Nevada Supreme Court.

The Court noted that the rule against perpetuities was developed to promote public policy by ensuring that property remained alienable and that applying the rule to area-of-interest royalty agreements does not further public policy. The Court further reasoned that the Nevada Legislature has said as much by exempting commercial, nondonative transfers from the statutory rule against perpetuities. Thus, the Court held that Nevada’s common-law rule against perpetuities does not extend to area of-interest royalties created by commercial mining agreements. Since the Court answered the first question in the negative, it did not consider the second.