Hodges v. Georgia Kaolin Co., 40016

• Decision Date: 30 May 1963
• Docket Number: No. 40016,No. 1,40016,1
• Citation: 132 S.E.2d 86,108 Ga. App. 115
• Parties: M. R. HODGES v. GEORGIA KAOLIN COMPANY
• Court: Georgia Court of Appeals

Page 86

132 S.E.2d 86

108 Ga.App. 115

M. R. HODGES v.GEORGIA KAOLIN COMPANY.

No. 40016.

Court of Appeals of Georgia, Division No. 1.

May 30, 1963.

Rehearing Denied June 27, 1963.

Syllabus by the Court

1.(a) Where a lease of lands for the mining of minerals provides to the lessee 'for the purpose of mining and removing kaolin or other clays, and for the purpose of carrying on similar mining operations on other neighboring lands' the right, inter alia, to cause timber on the land to be cut, the overburden to be removed, to make excavations thereon and to pile waste earth thereon, this right is dependent upon a purpose on the part of the lessee to proceed with reasonable diligence in the mining operation.The is particularly true where the payment for the mined minerals is to be made to lessor on a royalty basis.

(b) Where the lessee notifies the lessor to remove the timber from the land and then proceeds itself to remove the overburden on a substantial portion thereof, the obligation immediately arises on its part under the provisions of the lease to proceed with reasonable diligence in a mining operation.

2.Whether a measure of damages is proper is a matter for special demurrer, and is not reached by general demurrer.

G. L. Dickens, Jr., Milledgeville, for plaintiff in error.

Harris, Russell & Watkins, John B. Harris, Jr., Macon, James G. Maddox, Jeffersonville, for defendant in error.

Hodges brought suit against the Georgia Kaolin Company.The pertinent allegations of the amended petition are summarized as follows:

In 1947, Hodges leased to the Georgia Kaolin Company, (variously referred to as 'Kaolin' and 'the Company' hereinafter) 222 acres of land lying both in Twiggs and Wilkinson counties near Dry Branch, for a term of 50 years.A royalty of 15cents per ton of kaolin mined was specified.For the first five years of the lease, a 'minimum rental' of $222 per year was to be paid to Hodges and credited on any royalties due for that year.After the first five years, a 'minimum rental' of $500 per year was to be paid but the amounts paid were to be 'cumulative, and * * * be deducted from future royalties.'Kaolin had the right to terminate the contract on 30 days notice to Hodges, but Hodges could terminate only in the event of Kaolin's failure to pay the rentals or royalties.

During 1954, the defendant advised Hodges that it was ready to commence mining operations and requested him to cut all the timber and trees on the property.Shortly thereafter, in August, 1954, Kaolin 'entered upon said land with men and machinery and removed the overburden.'In Decmber, 1954, Hodges conveyed to defendant by warranty deed 2.94 acres of the leased property so that the Company could set up a deep well and pumping station in order to transport the mined kaolin by pipeline from the leased property to defendant's processing plant.Because the per ton basis was not suitable for computing the royalties on kaolin moved by pipeline, the Company proposed and plaintiff accepted in January, 1955 an amendment to the lease making the royalty 16.2cents per cubic yard.Since removing the overburden in 1954, Kaolin has done nothing on plaintiff's land.

Hodges seeks $167,612 principal and $136,902.36 interest for the kaolin that could have been mined from the land but wasn't, one dollar in nominal damages and costs and expenses of litigation including reasonable attorney's fees.Kaolin's general demurrer was sustained and plaintiff excepted.

EBERHARDT, Judge.

1.The battleground of the parties here presents the problem of whether the Company was under obligation to mine any kaolin from the leased premises prior to the bringing of this action in 1961.The plaintiff Hodges asks that we hold that there was an implied covenant in the lease obligating the Company to begin mining operations within a reasonable time after it was executed.On the other hand, the Company advances a number of reasons why no such covenant should be found, asserting that the contract language is clear and unambiguous.

The provisions in the lease that payment of rentals during the first five years would not cumulate as credits applicable to royalties for the mined clays and for a different rental thereafter indicates, we think, that at least for that period the parties contemplated that there might not be any mining operation during that period, and hence as to it there was no implied covenant.We find it unnecessary to decide whether, after the expiration of the first five years, when the rentals paid did accumulate as credits against royalties to be paid, there was any implied covenant to proceed, since we do hold that the events transpiring in 1954 and 1955(notice by Kaolin to Hodges to remove his timber, removal of the overburden, amendment of the lease changing the method of determining royalty payments, and the sale to Kaolin of a site for the sinking of a deep well for mining operations on the property) gave rise to an obligation on the part of Kaolin to proceed with the mining within a reasonable time.The argument that Hodges still had the use of his land fails, for a substantial portion of his land fails, for a substantial portion that of mining when the overburden was removed.

In this connection the language of the lease is pertinent.It provides that 'for the purpose [of mining and removing kaolin or other clays] and for the purpose of carrying on similar mining operations on other neighboring lands Lessee shall have full and complete rights of ingress and egress to, from and over all parts of said land; the right to search for kaolin or other clays, the right to make excavations and pile waste earth from this or adjacent property on any part of said land * * *' It seems abundantly clear to us that the right to remove the timber and overburden, to make excavations and pile waste earth on the leased lands is dependent upon a purpose of the lessee to proceed with a mining operation, and that this should be done with reasonable diligence.What is 'reasonable diligence' What is 'reasonable the circumstances here is a factual question for determination by the jury.Grant v. Haymes, 164 Ga. 371(4), 138 S.E. 892.It may well be that when the lessee engages in an exploratory operation it will be discovered that there is no kaolin to be mined from the land, or that it can not be done in quantities sufficient to make it a profitable operation, in which event we think that the lessee's duty to mine will have been exhausted.The fact that those operations may render the land without value for farming would not give rise to any cause of action, for that is a risk that the lessor took when he entered into the lease agreement.But if the lessee causes the timber to be cut and the overburden to be removed and stops there without doing more, we think it has gone beyond the authority of the lease and has stopped short of its obligation thereunder.Further, it is alleged in the petition here that this was done with no intention of doing any mining.These...