High court awards Hughes company mineral royalties

Friday, April 28, 2000 | 11:01 a.m.

CARSON CITY -- The Nevada Supreme Court Thursday ruled that Summa Corp., which was owned by the late Howard Hughes, was entitled to an estimated $13 million in royalties from gold and silver production from mines once owned by the company.

The court send the case back to District Court in Las Vegas to determine the exact amount Echo Bay Exploration Inc. and its associated companies owe Summa, which alleges it has been shortchanged in annual payments.

After the death of Hughes in 1976, Summa Corp. decided to sell its 40 mining properties. It worked out an agreement with Houston Oil and Minerals Co. for the sale. As part of the $2.4 million sale, the mining company would pay Summa 2 percent royalties on the gold and silver production.

Houston then sold to Tenneco Mineral Co., which felt that the royalty payments being made to Summa had been improperly computed. Tenneco said it was entitled to deduct more of its production expenses before giving Summa its share of the profits.

In 1987 Echo Bay Exploration purchased Tenneco's mining properties and continued the practice of taking additional expenses before sending Summa its share.

From 1987 to 1997, Summa said Tenneco and Echo Bay improperly deducted expenses that resulted in underpayments of about $8.9 million. It filed a breach of contract suit seeking past due royalty payments plus interest, which amounted to about $13 million.

Summa lost its case in District Court but the Supreme Court ruled that the extra expenses deducted by Echo Bay should not have reduced Summa's payments.