Higginbottom v. Thiele Kaolin Co.
| Decision Date | 23 June 1983 |
| Docket Number | No. 39278,39278 |
| Citation | 251 Ga. 148,304 S.E.2d 365 |
| Parties | HIGGINBOTTOM et al. v. THIELE KAOLIN COMPANY. |
| Court | Georgia Supreme Court |
Stephen E. Curry, Augusta, for James R. Higginbottom et al.
Albert P. Reichert, Jr., Macon, Clarke C. Avant, Sandersville, for Thiele Kaolin Co.
Harry L. Cashin, Jr., William T. McKenzie, John B. Harris, Jr., William C. Harris, D. Robert Cumming, Jr., C. Christopher Hagy, Patricia B. Cunningham, Ronald T. Knight, George C. Grant, Robert T. Knight, Geogrge C. Grant, Robert M. Margeson, III, amici curiae.
This case involves the questions whether a lessee under a mineral lease has an implied duty to mine and whether the mineral leases in question are the result of inceptive fraud.
The appellants are landowners in the McDuffie County area whose properties are subject to mineral leases entered into with Thiele Kaolin Company (Thiele) in the early nineteen sixties. The leases are essentially the same, providing for an initial term of fifty years with an option to renew for an additional term of forty-nine years. The leases grant to Thiele the right to mine, process, or manufacture all kaolin and bauxite on the properties which it deems "to be commercially profitable ...." Thiele may exercise this right "at any time and from time to time during the continuance of this contract in force." Thiele was also granted full rights of ingress to and egress from the properties and full rights to conduct any operations on the properties necessary to mining the kaolin and bauxite. In exchange, Thiele agreed to pay a royalty of $.25 for each ton of refined clay and bauxite removed and to pay one dollar per acre each year of the contract. The leases provide that these latter payments "shall be advance payments to cover the succeeding twelve months and shall be credited against amounts due as royalties ... for kaolin and bauxite removed during the twelve (12) months to which such payment applies." The landowners also retained the right to use and occupy their lands so long as such use did not interfere with the exercise of the rights granted to Thiele.
It is undisputed that Thiele has not mined the lands in question since the inception of the leases. Because of this inaction, the appellants filed suit against Thiele, seeking to rescind the leases on two grounds: first, for breach of an implied duty to mine within a reasonable time, and second, for fraudulent inducement. The landowners and Thiele filed motions for summary judgment. Thiele's motion was granted, and the landowners' was denied. The landowners now appeal.
1) The landowners first contend that the trial court erred in ruling that Thiele did not have an implied duty to mine. They wish to have the leases rescinded on the theory that Thiele has breached an implied duty to mine by not mining during the more than twenty years since the inception of the leases, which they contend is an unreasonable length of time. Consequently, if, as the trial court found, there is not an implied duty to mine within a reasonable time, the appellants are not entitled to relief under this theory. We affirm.
In deciding whether to imply promises or duties to the terms of a contract, " 'the introduction of an implied term into the contract of the parties ... can only be justified when the implied term is not inconsistent with some express term of the contract and where there arises from the language of the contract itself, and the circumstances under which it was entered into, an inference that it is absolutely necessary to introduce the term to effectuate the intention of the parties.' " Williston on Contracts, 3rd Ed., § 1295; accord, Weatherly v. American Agricultural Chemical Co., 16 Tenn.App. 613, 65 S.W.2d 592, 598 (Tenn.App.1933). Consequently, though courts are generally reluctant to make contracts for the parties, they will imply promises or duties when justice, good faith, or fairness so demand. Williston on Contracts, supra; 3 Corbin on Contracts, §§ 541, 561.
Georgia courts have discussed several factors which should be considered in deciding whether to imply a duty to mine on the part of a lessee. Hodges v. Georgia Kaolin Company, 108 Ga.App. 115, 132 S.E.2d 86 (1963); Palmer Brick Company v. Woodward, 138 Ga.App. 289, 75 S.E. 480 (1912).
In Palmer Brick, the mining company took possession of the leased property for the purposes of establishing a brick manufacturing plant there and mining clay to use in manufacturing the brick. A royalty of 12 1/2 cents per 1,000 bricks produced was to be paid. In addition, Palmer Brick was obligated to make an initial payment of $250.00 followed by $100.00 payments on the first of each month for the duration of the twenty year lease. At the end of each year, there was to be an accounting to determine if Palmer Brick's minimum monthly payments amounted to an overpayment or an underpayment in comparison to the royalties, if any, due for that year.
In determining the lessee's duties under this contract, we held that Palmer Brick was bound either to exercise reasonable diligence in mining clay or else to pay the minimum alternative sum of $100.00 per month. The implication was that if a minimum annual rental is paid and is credited only to royalties due for the year it is made, then there is no implied duty to mine. Accord, Sewell v. Aggregate Supply Co., 214 Ga. 543(3)(5), 106 S.E.2d 16 (1958), and Smith v. Aggregate Supply Co., 214 Ga. 20, 23-24, 102 S.E.2d 539 (1958). This conclusion is based on the premise that where such an annual rental is provided for by the parties, it indicates that they knew that mining might not occur for some time and intended that in that event the rental would be sufficient consideration. Hodges, supra, 108 Ga.App. p. 117, 132 S.E.2d 86; Tennessee Valley Kaolin Corp. v. Perry, 526 S.W.2d 488, 491 (Tenn.App.1975).
Conversely, the implication in Palmer Brick was that if the lease does not provide for a minimum rental, but instead makes rent contingent on royalties, there is an implied duty to mine within a reasonable time. The theory is that if the parties have entered into such a lease they must have contemplated a duty to mine, since otherwise the lessor would receive no benefits at all from the contract, thus frustrating his or her intention in entering the agreement. 3 Corbin on Contracts, 541; Crain v. Pure Oil Co., 25 F.2d 824, 829 (8th Cir.1928).
The impact of a lessee's contractual duty to pay a minimum rental on a judicial decision whether to impose a duty to mine was also addressed in Hodges. In that case, Georgia Kaolin leased 222 acres of land in 1947 for a term of fifty years. A royalty of $.15 per ton was specified, and the company was obligated to pay a "minimum rental" of one dollar per acre per year for the first five years of the lease. These rental payments were to be credited to royalties due for the year for which a payment was made. In 1954, Georgia Kaolin notified Hodges that it intended to mine, and his timber was cut, and the land cleared. For several years after removing the overburden, Georgia Kaolin did no mining. This inaction prompted Hodges to file suit. The issue on appeal was whether Georgia Kaolin had an implied duty to mine within a reasonable time after the inception of the lease.
In dicta, the Court considered whether such a duty existed during the first five years of the lease. It found such a duty didn't exist, because the provision that the minimum rental payments for those years were to be credited only to royalties due for the year each payment was made indicated that "at least for that period the parties contemplated that there might not be any mining operations ..., and hence as to it there was no implied covenant." Hodges, supra, 108 Ga.App. p. 117, 132 S.E.2d 86. This reasoning is consistent with Palmer Brick and the other authorities cited therein.
However, the Court went on to establish an additional principle by holding that once ...
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