Carter v. Certain-Teed Products Corp., Civ. No. 508.

• Citation: 102 F. Supp. 280
• Decision Date: 30 January 1952
• Docket Number: Civ. No. 508.
• Parties: CARTER et al. v. CERTAIN-TEED PRODUCTS CORP.
• Court: United States District Courts. 8th Circuit. Northern District of Iowa

102 F. Supp. 280

CARTER et al. v. CERTAIN-TEED PRODUCTS CORP.

Civ. No. 508.

United States District Court N. D. Iowa, Central Division.

January 30, 1952.

Alan Loth, Fort Dodge, Iowa, for plaintiffs.

A. B. Howland, Des Moines, Iowa, Norman A. Miller, Chicago, Ill., for defendant.

GRAVEN, District Judge.

The defendant Certain-Teed Products Corporation is a corporation organized and existing under the laws of the State of Maryland. Prior to 1948 its general offices were in Chicago, Illinois. Since 1948 its general offices have been at Ardmore, Pennsylvania. It has been and is engaged in the processing and selling of gypsum and gypsum products. For many years it has had a gypsum plant in the near vicinity of Fort Dodge, Iowa.

In the vicinity of the defendant's gypsum plant at Fort Dodge there is an 80 acre tract of land described as the South Half of the Northwest Quarter of Section Twenty-six, Township Eighty-nine North, Range Twenty-eight West of the Fifth Principal Meridian, Webster County, Iowa.

On August 22d, 1945, the ownership of such land was as follows: Clara O. Carter, the wife of the plaintiff William J. Carter, was the owner of an undivided 3/5 ths interest; Maurice J. Breen, individually, owned an undivided 4/60ths interest; William O. Merritt, Harriett Merritt Stevens, Ben Merritt and Doris O. Merritt were each the owners of an undivided 5/60ths interest therein. Clara O. Carter subsequently died and William J. Carter as her sole devisee and as the executor of her will succeeded to her interest therein. Maurice J. Breen, as Trustee under the will of one W. N. Merritt, deceased, holds title to the interests of William O. Merritt, Harriett Merritt Stevens, Ben Merritt and Doris O. Merritt therein. The trusteeship is under the jurisdiction of the District Court of Iowa in and for Webster County. The plaintiffs William J. Carter and Maurice J. Breen are citizens of the State of Iowa. Some of the other plaintiffs are citizens of the State of Iowa and the balance are citizens of the State of California. The plaintiff Gretchen Merritt is the wife of the plaintiff William O. Merritt. The plaintiff Halsen Stevens is the husband of the plaintiff Harriett Merritt Stevens.

On August 22d, 1945, William J. Carter and Maurice J. Breen, as representatives of the owners of the tract referred to, and the defendant entered into an option agreement relating thereto, and on September 24th, 1945, the owners of the tract and the defendant entered into another agreement relating thereto. A substantial portion of the tract is underlaid with gypsum rock and the agreements referred to had to do with the extraction of that rock. On October 22d, 1951, the plaintiffs commenced this action. In their complaint they ask for a declaration of their rights under the agreement of September 24th, 1945, under the provisions of the Federal Declaratory Judgments Act, 28 U.S.C.A. §§ 2201 and 2202. They also ask recovery of damages and other coercive relief. Jurisdiction is based upon diversity of citizenship. The amount in controversy in this case, exclusive of interest and costs, is in excess of $3,000.00. The parties are in agreement that Iowa law is applicable.

Gypsum rock has an interesting history, unique characteristics, and manifold uses. It is commonly known as plaster rock. It is known to chemists as calcium sulphate. Its geological origin is not certain. It has been termed the "rock nobody knows,"¹ Gypsum has been in use for thousands of years. It was used in the pyramids of Egypt. It is referred to in the ancient cuneiform script of the Assyrians. The Greeks used it extensively. Gypsum has thousands of present day uses. In 1950 more than nine million tons of gypsum were used in the United States. Substantial quantities are used in the manufacture of cement and plaster. Its greatest use is in the manufacture of wall board and lath. The processing of gypsum involves heating the rock in large kettles to drive off the water of crystallization and grinding it into a fine powder commonly known as "Plaster of Paris." If water is added to this powder it becomes pliable and can be molded into any shape into which it will set when it dries. Gypsum is the only natural substance known that can be restored to its original rocklike state by the addition of water alone. Gypsum deposits in the United States are found in two principal belts. The first belt starts in southwestern Texas, runs up through central Kansas, across Iowa, into southern Michigan, then turns and runs along the northern edge of Ohio and ends in New York. The second belt starts in the Imperial Valley in California, runs up through Nevada and spreads out into Utah. Gypsum usually occurs in veins or ledges. Fort Dodge, Iowa, is now and for a great many years has been an important gypsum center. At the present time five gypsum plants or mills are located in the vicinity of Fort Dodge.

The tract in question, hereafter referred to as the Carter-Merritt tract, was and is underlaid with a substantial quantity of gypsum rock. The tract is about two miles from the gypsum plant of the defendant known as its Fort Dodge plant. In the month of August, 1945, William J. Carter and Maurice J. Breen, in behalf of the owners of that tract, entered into negotiations with the defendant relative to the removal of gypsum rock. The defendant was represented in the negotiations by Rawson Lizars, its president, and its secretary, Arthur O. Graves. The first result of the negotiations was the execution of an agreement referred to by the parties as the "option agreement." In that option agreement the owners of the Carter-Merritt tract, referred to in the agreement as Lessors, granted and conveyed to the defendant, referred to in the agreement as the Lessee, the right to enter upon the Carter-Merritt tract for a period of forty-five days for the purpose of exploring for gypsum. The option agreement further provided that if within the forty-five day period the defendant notified the Lessors of its desire to mine and quarry gypsum rock on the tract, the Lessors would enter into a lease with respect to such mining and quarrying. The option agreement further states in substance that if the privilege of mining and quarrying is availed of by the Lessee, the Lessee shall have the right to mine or quarry to any extent and in any manner desired and to use the surface of the land. The option agreement further provides: "The Lessee agrees to extract 60% of all of its rock requirements from said property, and agrees to pay to the Lessors, for and on behalf of the owners of said property, 12 cents per ton on all rock mined, and 10 cents per ton on all rock quarried. The weights of the gypsum rock withdrawn from the property is to be calculated on scales either at the plant of the Lessee or at the crushing plant."

The option agreement also contained a provision relative to the matter of advance royalties.

On September 19th, 1945, the defendant notified the owners of the tract of its election to exercise the option given it in the agreement. On or about September 24th, 1945, the parties executed the agreement which is the subject matter of this action. The execution of it by Maurice J. Breen in his capacity of Trustee was approved by the District Court of Iowa for Webster County. The present litigation was occasioned by disagreement between the parties as to the construction of that agreement.

The parties are in controversy as to whether or not the instrument in question is a lease. The Court is of the view that it is a lease. See, Lacey v. Newcomb, 1895, 95 Iowa 287, 63 N.W. 704; Berg v. Commissioner, 1929, 59 App.D.C. 86, 33 F.2d 641; Del Valle v. Rossy, 1 Cir., 1928, 29 F.2d 353.

The lease is dated September 24th, 1945. In it the owners of the Carter-Merritt tract are referred to as the "Lessors" and the defendant is referred to as the "Lessee." The forepart of the agreement contains recitals as to the ownership of the premises and as to the option agreement. The principal controversy between the parties is as to the construction to be placed upon certain language used in Paragraph 10 of the lease. In that connection the plaintiffs in their written briefs and on oral argument stressed certain language used in Paragraphs 6, 7, 10, and 15 thereof. The provisions of the lease, through Paragraph 15, are next set forth with the words most stressed in connection with the construction of the lease italicized:

"Now, therefore, for and in consideration of the mutual agreements and covenants herein contained, it is agreed by and between Lessors and Lessee, each with the other, as follows:

"1) Lessors, by their signing this agreement, acknowledge and accept the exercise by Lessee of the option given to Lessee in the said agreement as of the date hereof, hereby confirms its exercise of the option granted to it in and by the said agreement dated August 22, 1945.

"2) Lessors hereby lease and demise to Lessee, its successors and assigns, the following decribed real estate and premises situated in Webster County, Iowa: `The South one-half (½) of the Northwest one-quarter (¼) of Section 26, Township 89 North, Range 28 West of the 5th P. M.' and hereby grant and convey to Lessee, its successors and assigns, the exclusive right and privilege of mining and removing gypsum or plaster rock under, upon or from said real estate and premises to any extent and in any manner desired by Lessee, including the quarrying and removal from said real estate and premises of said gypsum or plaster rock, of sinking all necessary and proper shafts and/or slopes, of storing on said real estate and premises any amount of said gypsum or plaster rock when mined or quarried, of occupying and using the surface of said real estate and premises for the full enjoyment of and with the right to conduct such mining or quarrying operations and of laying all necessary switch tracks or connections with railroads and of constructing and...