American Min. Co. v. Himrod-Kimball Mines Co.

Decision Date27 August 1951
Docket NumberHIMROD-KIMBALL,No. 16459,16459
PartiesAMERICAN MINING CO. v.MINES CO. et al.
CourtColorado Supreme Court

Carle Whitehead and Albert L. Vogl, Denver, for plaintiff in error.

Charles Oscar Erbaugh, Denver, John R. Wolff, Boulder, for defendants in error.

CLARK, Justice.

Plaintiff in error, as plaintiff in the court below and hereinafter so designated, brought suit to obtain a decree of specific performance upon the instrument hereinafter set forth, or in the alternative, a money judgment for damages.

The instrument sued upon, and appearing in this proceeding as Exhibit A, is in the form of a letter bearing date May 1, 1947. Plaintiff claims thereunder as assignee of G. C. Ridland. From the record it appears that plaintiff was not in existence on May 1, 1947, but was incorporated shortly thereafter. Said instrument, Exhibit A, is as follows:

'1022 Colorado

'Idaho Springs, Colorado

'May 1, 1947

'Dr. G. C. Ridland

'130 West High Street

'Somerville, N. J.

'This is to confirm our conversation that the Himrod-Kimball Mines Company shall grant to you and your associates a Lease and Bond on its Old Town mining property situated in the Russell Mining District, Gilpin County, under the following conditions:

'1. Royalty on all ores mined and sold to be as follows:

10% of the net returns on ores up to $40,00 in value

15% of the net returns on ores over $40.00 and up to $60.00

20% of the net returns on ores over $60.00.

'2. You are to guarantee the Company a minimum yearly royalty of $1000 and if royalties in each year do not amount to this sum, you are to pay the company the difference.

'3. All royalty and additional payments to the Company will apply on the purchase price.

'4. The purchase price will be $75,000.

'5. The agreement to run for a period of 5 years and if royalty and other payments during this period amount to $20,000 or more, the agreement will be renewed automatically for an additional 7 years.

'6. A $25,000 equity in the Lease and Bond to be reserved for the undersigned, George K. Kimball, for sums paid by him in recent years to keep the workings in good order and for taxes.

'7. Upon execution of the Lease and Bond, you will make an advance payment to George K. Kimball of $1000 on his equity in the agreement.

(number 8 crossed out)

'The undersigned hereby reserves this proposition for you for 15 days from this date, and upon payment to George K. Kimball of $100 before expiration of this 15 day period, he will extend the time another 20 days.

'Yours very truly,

'Himrod-Kimball Mines Company

'/s/ Geo K. Kimball

'George K. Kimball, Pres.

'P.S. After payment of $1000 to George K. Kimball (see 7 above) his equity will be retired by a 50-50 split in operating profits.'

It is the contention of plaintiff that Exhibit A is of and within itself a complete and unambiguous contract, sufficient for all purposes within the intent and objective of the parties, and, therefore, capable of specific performance, and that plaintiff is accordingly entitled to judgment so directing. In view of this position plaintiff asserts as its principal specification of error that the trial court was wrong in receiving and considering evidence, the purpose or effect of which was in any way or manner to add to, vary or modify said contract (Exhibit A). The formal specification of error in this respect incorporates as subparagraphs a number of reasons in support of the general proposition, which, for present purposes, are not necessary to detail, but all of which were considered in our study of this general assignment.

'In construing a contract to give a lease, the controlling consideration is the intention of the parties to be collected from the whole instrument.' 51 C.J.S., Landlord and Tenant, § 193, page 792. General rules of construction follow the foregoing quotation, among which is that which requires enforcement as written of an instrument complete, clear in its terms, and free from ambiguity. It then is said to express the intention of the parties, and strained construction must not be employed, nor extrinsic evidence permitted in modification thereof.

Counsel for plaintiff insist that all necessary requirements are here present, and that if there be details lacking, they are only such as are general and so usual in their nature that their presence will be implied. In support of this position they cite Reno Club v. Young Investment Co., 64 Nev. 312, 182 P.2d 1011, 173 A.L.R. 1145, and quote at considerable length therefrom. The Nevada court in that case held that the lease there under consideration contained all the requisite elements to constitute a complete agreement; that general and usual provisions ordinarily contained in such a lease might be implied, and granted specific performance.

In the Reno Club case, supra, the court set forth specifically what it considered to be the 'essential terms' of a lease. This classification, however, we do not adopt, since it is entirely too restrictive. Our research discloses a lack of unanimity among decisions of courts of last resort as to what constitutes 'essential terms' in contracts generally, and particularly in instruments executed as preliminaries to contracts therein specified to be executed later. In such instances, we adhere to that which we believe to be the better and most generally accepted rule, that the 'essential terms' must, in each case, be determined from the intention of the parties as disclosed upon consideration of all surrounding facts and circumstances there prevailing.

The Nevada court, in the Reno Club case, in discussing the topic of further negotiations, said: 'This presents a question which has been much litigated, and concerning which there is some conflict in the authorities. The authorities very generally, we believe, adhere to the rule that when in the option agreement, or in the negotiations of the parties, there appears the intention that further negotiations shall be had as to the terms of the proposed lease,--that there remain questions as to terms and provisions yet to be settled in the future negotiations as contemplated, then and in that event, the proposed lease is incomplete and not yet sufficiently developed upon which to establish the basis of a decree of specific performance.' 182 P.2d 1019.

Furthermore, in the matter now before us, an analysis of Exhibit A discloses that even the limited 'essential elements' as defined in the Reno Club case are not all clearly present. For instance:

(1) The names of all parties are not given specifically. It is addressed to Dr. J. C. Ridland, but is to grant to 'you and your associates.' The associates are unnamed.

(2) The percentages of rental, or royalties, are named, but the method of calculation is not stated. The purchase price is specific in amount, but, aside from the first payment, the instrument is wholly silent as to time or manner of payment of either rental or purchase price. It clearly shows its incompleteness, not only with respect to these things, but likewise in regard to other features which must from their very nature have been in the contemplation of the parties at that time, and intended to be specifically worked out in detail in later further conferences.

As in all cases where the issue of completed contract vel non arises, 'Whether or not the parties have completed their negotiations, or whether they designed that their argreement should be expressed in a formal written contract, is always dependent upon the circumstances of the particular case.' Pierce v. Maryland Oil Co., 86 Colo. 59, 65, 278 P. 804, 806.

Equity will not decree specific performance of a contract uncertain in its terms, and 'No criterion can be formulated which shall be a test of certainty in every instance. As a general proposition * * * the terms of a contract must be expressed with a reasonable certainty, and what is reasonable in any case must depend upon the subject-matter of the agreement, the purpose for which it was entered into, the situation and relations of the parties, and the circumstances under which it was made.' Mestas v. Martini, 113 Colo. 108, 118, 155 P.2d 161, 165, quoting with approval from Pomeroy's Specific Performance of Contracts, (3d ed.).

In the instant case there is involved a mining lease with option to purchase, commonly referred to among mining men as a Lease and Bond, involving property, supposedly of $75,000 valuation. Leases and options of such nature are usually variable as to form, depending upon existing conditions. They ordinarily contain certain specific provisions applicable exclusively...

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