Judge rules DPL chief erred in mining permit dispute

The Superior Court has ruled that Public Lands Secretary John S. Del Rosario Jr. erred in his finding that JG Sablan Rock Quarry Inc.’s joint venture agreement with another company violated a provision of its mining permit.

Associate Judge David A. Wiseman said that, as a matter of law, the joint venture inked between JGS and Bridgecreek International Corp. failed to constitute an assignment of permit rights in violation of the mining permit.

“And because the court cannot anticipate the introduction of any new material facts on this issue, it shall adjudicate this claim in favor of JGS and hold that the Secretary of DPL erred in finding that the Joint Venture Agreement violated article 14 of the Mining Permit such that termination was warranted,” said Wiseman in his order issued Wednesday.

Article 14 of the permit provides that “This permit or any interest therein shall not be assigned, or in any way transferred, without first obtaining the prior written consent of the Government. Otherwise, any purported assignment or transfer of this permit, written or verbal, shall be null and void, and of no effect.”

In his order, the judge determined that DPL is not entitled to a summary judgment on the issue of whether JGS violated article 14 of the permit.

Because he does not deem it prudent to deprive JGS of a legal theory before a complete record is assembled, Wiseman said he shall reserve granting summary judgment in DPL’s favor.

Wiseman set a status conference in the case on July 10, 2008.

The government sued JGS, asking the court to declare as unconstitutional Public Law 15-21, the law that reinstated JGS’s permit to mine pozzolan from Pagan Island. JGS filed a counter lawsuit against DPL.

DPL filed a motion for partial summary judgment on the portions of JGS’ administrative complaint which alleges the following:

* That DPL’s determination that JG Sablan’s joint venture agreement with Bridgecreek violated Article 14 of the Mining Permit was unlawful.

* That DPL should be estopped from terminating JGS’ mining permit for violation of the permit terms because DPL’s predecessor’s in interest failed to take similar action when JGS’ actions were not in conformity with the permit terms before the termination.

The court heard the motion in August 2007. Assistant attorney general Howard Willens and deputy attorney general Gregory Baka appeared on behalf of DPL. Attorneys Michael Dotts and Vincent Torres represented JGS.

The issue presented to the court in the motion was whether JGS violated article 14 of the permit when it entered into a joint venture agreement with Bridgecreek such that termination of the mining permit was warranted.

The other issue was whether the doctrines of estoppel or waiver prevent DPL from terminating JGS’ mining permit for violations of permit terms when previous administrations failed to sanction JGS for such violations.

DPL argued that JGS’ joint venture agreement with Bridgecreek violated the terms of its mining permit because it assigned permit rights to another party without first obtaining the CNMI government’s approval.

In response, JGS asserted that such a violation does not warrant terminating the mining permit, but only made any assignment in contravention of the term voidable.

In his decision, Wiseman said he is not convinced that it needs to reach the issue of whether a violation of article 14 of the permit warranted termination because the joint venture agreement with Bridgecreek failed to constitute an assignment of rights to the permit.

Whether taken individually or as a whole, none of the terms of the joint venture agreement between JGS and Bridgecreek creates an assignment of JGS’ rights in its permit to another party, he said.

“None of the language extinguishes any right or interest to mine on Pagan that JGS has obtained through the mining permit,” he pointed out.

Moreover, Wiseman added, the joint venture agreement “transfers no rights to mine pozzolan on Pagan to Bridgecreek, nor does it create any privity between the governing agency and Bridgecreek.”

“The agreement simply creates a business deal between JGS and Bridgecreek, whereby JGS obtains financing and additional support to continue its pursuit to mine pozzolan on Pagan in exchange for certain agreed upon disbursement of revenue,” he said.

Wiseman pointed out this is an investment agreement, not an assignment of rights.

On the second issue, Wiseman said to succeed in estopping the government from terminating its mining permit on the basis of its alleged breach of the permit terms, JGS “must not only demonstrate the elements of traditional estoppel, but it also must show that its reasonable reliance on the government to his detriment resulted from the government’s affirmative misconduct.”

Though he agrees with DPL’s statement of the law, and can find no serious defects in the presentation of the facts, Wiseman said he “ will reserve judgment until a complete record has been presented by the parties, or at least until JGS has fully weighed in on the facts.”