Bennett v. Hebener

• Decision Date: 02 June 1982
• Docket Number: No. 7978,7978
• Citation: 643 P.2d 393,56 Or.App. 770
• Parties: Audrey BENNETT and Dorothy Starbuck, Respondents, v. Robert HEBENER and LaVerne Hebener, husband and wife, Appellants. ; CA A21690.
• Court: Oregon Court of Appeals

Page 393

643 P.2d 393

56 Or.App. 770

Audrey BENNETT and Dorothy Starbuck, Respondents, v. Robert HEBENER and LaVerne Hebener, husband and wife, Appellants.

No. 7978; CA A21690.

Court of Appeals of Oregon.

Argued and Submitted Jan. 18, 1982.

Decided April 12, 1982.

Reconsideration Denied June 2, 1982.

Bradley D. Fancher, Bend, argued the cause for appellants. With him on the briefs were Brian J. MacRitchie and Gray, Fancher, Holmes & Hurley, Bend.

Forrest E. Cooper, Lakeview, argued the cause and filed the brief for respondents.

Before RICHARDSON, P. J., and THORNTON and VAN HOOMISSEN, JJ.

THORNTON, Judge.

This is an action to terminate a mineral lease between plaintiffs-lessors and defendants-lessees. Defendants appeal from a decree extinguishing their rights under the lease. We affirm.

Plaintiffs' parents entered into the lease with defendant Robert Hebener and his business partner, Elmer Jenkins, in 1958. The lease concerned a gravel pit and gravel stockpile located about 5 miles north of Burns. The lease for removal of gravel from the pit was for 30 years with an option in lessees to renew for an additional 30 years. Lessees were to pay lessors rental "of 5cents per cubic yard of gravel mined upon the premises." Lessors were given the right to declare the lease "null and void if any year period shall elapse without payment by the lessees of a minimum of $100.00 per year." The lessees also agreed "not to commit any waste or destruction on the premises other than what might be absolutely necessary to their gravel and stock pile operation." Finally, the lease provided:

"10. In the event the Lessees, their administrators, executors, heirs or assigns should violate any of the terms or covenants of this lease, the Lessors shall have the right to enter upon the premises and repossess themselves of their former estate and expel the Lessees therefrom and said right shall not prejudice their right to sure (sic) for any delinquent rental."

Plaintiffs' parents, Mr. and Mrs. Cowing, owners of the 160-acre parcel where the gravel pit is located, held the property until Mr. Cowing's death in 1970. Mrs. Cowing deeded the property to plaintiffs in 1978. Mr. Hebener obtained Mr. Jenkins's interest in the lease in 1969, after Mr. Jenkins petitioned for dissolution of their partnership.

During the 23 years before this action, substantial extraction of gravel was intermittent and at times resulted in litigation. See, e.g., Babler Bros., Inc. v. Hebener, 267 Or. 414, 517 P.2d 653 (1973). According to defendants' records, during 15 of the 23 years only the $100 yearly minimum rental was paid. After the mid-1960s, defendants had no equipment on the leased premises to crush rock and did not operate a truck to haul crushed rock after 1974. Jenkins petitioned to dissolve of the partnership in 1968 on the grounds that Hebener had not accounted for proceeds of some sales and that the parties had had numerous disputes over the operation. In 1979, total royalties for the rock removed amounted to 15 cents. The last substantial royalty payment to plaintiffs was the result of an agreement with Harney Rock and Paving Company in December, 1979, for Harney Rock to conduct its own operation on the premises and to remove the gravel needed. In a letter to Harney Rock, Hebener described the agreement as a desperation maneuver made to pay off a mortgage foreclosure. During 1980, continual disputes arose between Hebener and Harney Rock and at the time of trial in the present action liens on the project had been filed by Hebener. Mr. Hooker, from Harney Rock, testified that as a result of his dealings with Hebener, he would not want to negotiate any more contracts with Mr. Hebener. Defendants made no other sales in 1980 and, at time of trial, had gross sales in 1981 requiring them to pay plaintiffs less than $20 in royalties. In short, as Hebener admitted, the lease had not been a financial success.

Plaintiffs filed the present suit in March, 1981, to terminate the lease. Plaintiffs alleged that defendants had failed to pursue the gravel lease in an economically reasonable manner and that defendants had committed waste on the premises by erecting a three-foot high barrier over an access road. Defendants answered generally, denying the allegations. At trial, evidence concerning the lease and Hebener's business transactions was admitted. Evidence was also admitted detailing a strong market demand for the particular rock found at the gravel pit. The unavailability of rock from the gravel pit had led to development and use of alternative sites in the area.

The trial court found that defendants had failed and refused to develop the rock quarry to the extent that a reasonable person would have and that defendants have no present financial ability to proceed with any development. The court also found that defendants destroyed a portion of a road on the premises, thereby blocking plaintiffs' access, and that this was in violation of the lease agreement not to commit any waste or destruction on the premises. Pursuant to Section 10 of the lease, the court granted plaintiffs the right to repossess the gravel pit to the exclusion of defendants and ordered defendants' interests terminated.

On appeal, defendants contend that the trial court erred in finding an implied agreement to develop the gravel pit and in the finding that defendants committed waste. Defendants also assert that they were entitled to notice of plaintiffs' intent to terminate the lease.

In Fremont Lbr. Co. v. Starrell Pet. Co., 228 Or. 180, 364 P.2d 773 (1961), the defendant leased the plaintiff's land to develop the oil, gas and minerals. The principal consideration for the lease was to be the royalties from minerals taken from the land. The Supreme Court held that, because of the nature of the agreement, there existed an implied promise by the lessee to "proceed with reasonable diligence to obtain production." 228 Or. at 199, 364 P.2d 773. See also Bussard v. Binder, 277 Or. 21, 23, 558 P.2d 845 (1977); Yeadon v. Graham, 273 Or. 234, 236, 540 P.2d 1007 (1975).

In the present case, consideration for the lease was the five-cent per cubic yard royalty. Although there was no express provision requiring defendants to remove gravel from the pit, defendants as lessees impliedly agreed to proceed diligently. Fremont Lbr. Co. v. Starrell Pet. Co., supra. Hebener's conduct over the 23 years that he operated under the lease does not evidence reasonable diligence. Defendants removed less than the $100 minimum royalty volume in 15 of the 23 years. Hebener's litigious character and his financial difficulties resulted in a substantial loss of business. At the time...