Clift v. RDP Co., CIVIL ACTION NO. 5:14-CV-00057-TBR-LLK

• Decision Date: 01 August 2016
• Docket Number: CIVIL ACTION NO. 5:14-CV-00057-TBR-LLK
• Parties: William Ralph CLIFT, et al., Plaintiffs, v. RDP COMPANY, et al., Defendants, RDP Company, Counterclaimant, v. William Ralph Clift, et al., Counterclaim Defendants, RDP Company, Crossclaimant, v. Lafarge West, Inc., Crossclaim Defendant, Lafarge West, Inc., Crossclaimant, v. RDP Company, Crossclaim Defendant RDP Company, Third-Party Plaintiff, v. Martin Marietta Materials, Inc., Third-Party Defendant.
• Court: U.S. District Court — Western District of Kentucky

200 F.Supp.3d 660

William Ralph CLIFT, et al., Plaintiffs,

v.RDP COMPANY, et al., Defendants,RDP Company, Counterclaimant,

v.William Ralph Clift, et al., Counterclaim Defendants,RDP Company, Crossclaimant,

v.Lafarge West, Inc., Crossclaim Defendant,Lafarge West, Inc., Crossclaimant,

v.RDP Company, Crossclaim Defendant

RDP Company, Third-Party Plaintiff,

v.Martin Marietta Materials, Inc., Third-Party Defendant.

CIVIL ACTION NO. 5:14-CV-00057-TBR-LLK

United States District Court, W.D. Kentucky, Paducah Division .

Signed August 1, 2016

George E. Stigger, III, St. Mary's, GA, Vance W. Cook, Princeton, KY, John C. Whitfield, Whitfield Bryson & Mason, LLP, Madisonville, KY, for William Ralph Clift, et al., Plaintiffs/William Ralph Clift, et al., Counterclaim Defendants

Christopher W. Brooker, Cornelius E. Coryell, II, Wyatt, Tarrant & Combs LLP, Louisville, KY, for RDP Company, Counterclaimant/RDP Company, Crossclaimant/RDP Company, Third-Party Plaintiff/RDP Company, et al., Defendants/RDP Company, Crossclaim Defendant.

Luke P. Cantrell, Whitney M. Harmon, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Memphis, TN, for RDP Company, et al., Defendants/Lafarge West, Inc., Crossclaim Defendant.

Clark C. Johnson, John Lewis Tate, Cassandra J. Wiemken, Stites & Harbison, PLLC, Louisville, KY, for Martin Marietta Materials, Inc., Third-Party Defendant.

MEMORANDUM OPINION

Thomas B. Russell, Senior Judge

The Clift family filed this action against RDP Company and Lafarge West, Inc., alleging various claims arising out of, or connected to, a mineral rights lease dating back to 1977. With discovery at an end, the Clifts, RDP Company, and Lafarge West filed competing motions for summary judgment. (To the extent RDP Company prevails, Martin Marietta Materials, Inc., whom RDP Company impleaded, seeks summary judgment too.) For reasons discussed at length below, the Clifts' Motion for Summary Judgment, R. 84, is DENIED , and RDP Company's Motion for Summary Judgment, R. 83, Martin Marietta Materials, Inc.'s Motion for Summary Judgment, R. 85, and Lafarge West, Inc.'s Motion for Summary Judgment, R. 86, are GRANTED .

I.

A.

1.

Between 1967 and 1977, Clifton, Sr. and Margaret Clift executed three leases granting Fredonia Valley Quarries, Inc. the right to quarry "all merchantable limestone rock and other kindred substances in, under and upon" a seventy-two acre tract of land in Caldwell County, Kentucky. R. 84-2 at 1 (1967 Lease); R. 84-3 at 1 (1972 Lease); R. 84-4 at 1 (1977 Lease).

The 1967 Lease. Clifton, Sr. and Margaret signed the first lease on August 9, 1967. See R. 84-2 at 4. In detail, the lease granted to Fredonia Valley Quarries

the right and license to enter upon the premises hereinbefore described at all times and to use so much of the surface thereof as may be reasonably necessary in searching for and [exploring] for limestone rock and other kindred substances and in determining the thickness thereof, and for the establishment of Quarries and Quarry buildings and for the deposit of waste material from such Quarries; also the right and license to quarry and remove said limestone and/or kindred substances from said premises together with the rights, privileges, license and easements necessary, incidental or in any manner appertaining to the proper prosecution of the business of quarrying and removing said limestone and other kindred substances; also the right to occupy so much of the surface of said premises as may be reasonably necessary for storing of said limestone rock or other kindred substances, and depositing the refuse therefrom, and the right to erect on said premises such buildings, structures and fixtures as may be necessary or incidental to the proper prosecution of said business of quarrying.

Id. at 1–2. The lease reserved to the Clifts the "right to remove all timber ... from [the] premises thirty days before quarry operations" commenced. Id. at 2.

In exchange, the lease guaranteed the Clifts a minimum payment of $50.00 per month without regard to whether Fredonia Valley Quarries quarried the Clifts' tract. Id. Once Fredonia Valley Quarries began excavating the Clifts' land, though, it guaranteed a minimum royalty of $500.00 for each acre mined or stripped, or on which it disposed of waste, to be paid from a production royalty. Id. at 3. The production royalty consisted of 5¢ per ton for the first 2,000 tons of limestone, and of 3¢ for each ton thereafter, removed during any particular month, less the guaranteed minimum payment of $50.00. Id. at 2.

The initial term of the lease was for five years with an option to renew in perpetuity if Fredonia Valley Quarries "well and truly kept and performed ... all the stipulations, covenants and agreements" in the lease. Id. at 3. Fredonia Valley Quarries reserved the right to terminate the lease "at the end of any month upon written notice to the [Clifts] and the payment of $250.00." Id. If Fredonia Valley Quarries failed to pay "rent for a period of six months beyond [the] due date," the Clifts retained the right to declare "a forfeiture of [the] lease." Id.

The 1972 Lease. A little over five years later, on August 16, 1972, Clifton, Sr. and Margaret executed a second lease identical in all respects to the lease signed in 1967. Compare R. 84-3 at 1–4, with R. 84-2 at 1–4.

The 1977 Lease. Clifton, Sr. and Margaret executed the third and operative lease with Fredonia Valley Quarries on August 1, 1977. See R. 84-4 at 4. The third lease granted to Fredonia Valley Quarries

the right and license to enter upon the premises hereinbefore described at all times and to use so much of the surface thereof as may be reasonably necessary in searching for and exploring for limestone rock and other kindred substances and in determining the thickness thereof, and for the establishment of Quarries and Quarry building and for the deposit of waste material from such quarries; also the right and license to quarry and removed said limestone and/or kindred substances from said premises together with the rights, privileges, license and easements necessary, incidental or in any manner appertaining to the proper prosecution of the business of quarrying and removing said limestone and other kindred substances; also the right of way for necessary pads and railroads over said premises, and the right to occupy so much of the surface of said premises as may be reasonably necessary for the [storing] of said limestone rock or other kindred substances, and depositing the refuse therefrom, and the right to erect on said premises such buildings, structures and fixtures as may be necessary or incidental to the proper prosecute of said business of quarrying.

Id. at 2. Similar to the prior leases, the third lease reserved to the Clifts the "right to all timber cut by [Fredonia Valley Quarries] on the premises in the course of operation." Id. at 3.

In return, the third lease guaranteed the Clifts a minimum royalty payment of $50.00 per month, excluding the months from December to April unless the quarries operated during those months. Id. at 2–3. It also provided a production royalty of 7.5¢ per ton for the first 4,000 tons of limestone, and of 4.5¢ for each ton thereafter, removed during any particular month. Id. at 2. Unlike the prior leases, the third lease further obligated Fredonia Valley Quarries "to deliver to [the Clifts] at the Quarries, fifteen ton[s] (15) of agricultural lime each year for and during the life of [the] lease, free of any cost." Id. at 3.

Again, the initial term of the third lease was five years, with an option to renew:

It is mutually agreed by the parties hereto that this lease shall run for five (5) years from and after this date and if all the stipulations, covenants and agreements herein contained have been well and truly kept and performed by the [lessee] as herein provided, this lease may be renewed according to the terms hereof and for the same consideration for five (5) additional years and at intervals of five (5) years thereafter for a period not exceeding ninety nine (99) years, and so long as said conditions have been kept and performed.

Id. If the lessee failed either "to operate the Quarries or to pay rent for a period of ninety (90) days," the Clifts retained the right to declare "a forfeiture of [the] lease." Id. Other than that, the lease did not include any provision allowing the lessee to terminate the lease prior to expiration. See id. at 1–5.

2.

From at least 1977, the Clifts have farmed the tract of land at issue, growing wheat, corn, soybeans, and alfalfa. See R. 83-5 at 27–28 (William Clift's Deposition Excerpt). Clifton Clift, Sr. died testate on October 16, 1988, and devised the tract of land to his two sons, William Clift and Clifton Clift, Jr. See R. 84-7 at 1–3 (Last Will and Testament); R. 83-5 at 10. Subsequently, in 2011, William and Judith Clift (his wife) conveyed the entire tract to Clifton, Jr., and Barbara Clift (his wife), with a reservation of an undivided one-half interest "in all of the minerals and limestone in, on or under" the tract. R. 84-8 at 1 (Deed). William Clift, II, the son of William and Judith Clift, continues to farm the portion of the tract that has not yet been mined. See R. 88-3 at 23 (William Clift, II's Deposition Excerpt).

3.

Sometime between 1977 and 1986, Fredonia Valley Quarries, Inc. merged with Basic Incorporated. See R. 84-9 at 11, ¶ 13 (Assignment and Assumption of Leases); R. 83-6 at 70–72 (Hastie's Deposition). Under Basic Incorporated's management, the quarry fell into a state of unprofitability and "disarray." R. 83-6 at 75–76. In exchange for $450,000, see id. , Basic Incorporated assigned the quarry (including the third lease) on January 28, 1986 to Rock Dust Products, see R. 84-9 at 11, ¶ 13, a general partnership consisting of Denny and Simpson Stone Company, Inc., Rigsby and Barnard Quarry, Inc., and Hastie Mining and Trucking Company, see id. at 1; R. 83-6 at 29–20.

Within the following six months, Rock Dust Products invested...