Killebrew v. Murray

• Court: Kentucky Court of Appeals
• Writing for the Court: SETTLE, J.
• Citation: Killebrew v. Murray, 151 Ky. 345, 151 S.W. 662 (Ky. Ct. App. 1912)
• Decision Date: 20 December 1912
• Parties: KILLEBREW et al. v. MURRAY.

151 S.W. 662

151 Ky. 345

KILLEBREW et al. v. MURRAY.

Court of Appeals of Kentucky.

December 20, 1912

Appeal from Circuit Court, Woodford County.

Action by Margaret H. Murray against George W. Killebrew and others. From a judgment for plaintiff, defendants appeal. Affirmed.

Richard Godson, of Midway, Bruce & Bullitt, of Louisville, W. O Davis, of Versailles, and Helm Bruce, of Louisville, for appellants.

D. L Thornton, Field McLeod, and Wallace & Harriss, all of Versailles, for appellee.

SETTLE J.

This is an appeal from a judgment of the Woodford circuit court declaring invalid and canceling a certain lease held by appellants upon the land of appellee. Such parts of the lease as are pertinent to the questions involved are here copied "This phosphate lease made this the second day of September, 1908, by and between Mrs. Margaret Murray (unmarried), party of the first part, and George W. Killebrew of Mt. Pleasant, Tennessee, party of the second part, witnesseth as follows: The party of the first part for and in consideration of one dollar ($100), and of the covenants hereinafter contained on the party of the second part, has leased unto the party of the second part, for the sole and only purpose of mining and excavating for phosphate and phosphate-bearing rock, all that certain tract of land situate in Woodford county, in the state of Kentucky, containing one hundred and fifty-five (155) acres, more or less, described as follows. *** To have and to hold said premises above described unto the party of the second part for and during the term of ten years from the date hereof, and so long thereafter as phosphate or phosphate-bearing rock may be found in what shall be considered by the party of the second part as paying quantities. When the party of the second part shall conclude that phosphate or phosphate rock is not found on said premises in paying quantities, he shall notify the party of the first part thereof in writing, and such notice shall terminate this lease, which, however, shall continue until such notice. The party of the second part hereby covenants and agrees, in consideration of this lease, to pay unto the party of the first part 25 cents per ton of 2,240 pounds as royalty for the phosphate when mined and removed, and agrees to pay a minimum of $5.00 per annum, whether the lands are mined or not, such payments to be considered an advance on the royalty and to be deducted from the royalty on the first phosphate mined thereafter. The party of the second part shall have the right to determine when and how much of said land shall be mined during each year during the continuance of this lease, provided always that said minimum sum of $5.00 per annum shall be paid each year during the continuance thereof, which amounts, as aforesaid, shall be considered as advancements and shall be deducted from the royalty on the phosphate thereafter mined. ***"

The lease was signed by appellee alone, and her attack upon it was based on the grounds: (1) That it was without consideration, and so lacking in mutuality as to render it per se invalid. (2) That it was procured by fraud. (3) That if appellants ever had any intention of carrying out the lease it had been abandoned by them; and that their continuing to claim under the lease was not in good faith, but for the purpose of finding a purchaser of the lease to whom they could sell it at a profit.

It is insisted for appellants that the ground of attack last mentioned should have been ignored by the circuit court, as it was set up by appellee's reply, when it should have been relied on in the petition, or by an amended petition. This contention is without force, in view of the fact that appellants did not demur to that part of the reply, or move to strike it out, but by rejoinder traversed its affirmative allegations. This was a waiver of appellee's error and an election on appellants' part to treat that part of the reply as an amended petition; and, as the circuit court so held, its ruling thereon was not error. Ruffner v. Ridley, 81 Ky. 165.

It must be taken for granted that the purpose of appellee in granting the lease was to obtain an income or profit in royalties from appellants' mining of her land, in the purchase of which she had expended $23,000. It even appears from the admissions of some of the appellants that they represented to her before the lease was executed that the mining of the phosphate on her land would pay her in royalties $500 per acre. It could not have been contemplated by her that she would receive no part of this royalty for 10 years after the execution of the lease. On the contrary, she was assured by appellants before its execution that they would begin the work of getting out the phosphate within a year or 18 months, yet, though more than 3 years intervened between the date of the lease and the institution of this action, nothing was done by them.

It is, however, appellants' contention that such nonaction was allowed by the contract, and that it may, indeed, continue for 10 years, if appellee be paid by them the $5 per annum which the lease provides shall be received by her, whether the lands are mined or not. Is this the meaning of the contract, and, if so, is the contract a valid one?

It was alleged in the petition and proved by appellee that the consideration of $1, recited in the lease, was never paid; nor is its payment acknowledged in the writing. The only matter relied upon by appellants as showing a consideration is the sum of $5, which they agreed to pay appellee annually, whether the land was mined or not, and she only accepted one such payment, which was made one year from the date of the contract; others, though tendered, being refused because of appellants' failure to begin work under the lease.

It is not to be presumed that appellee would have incumbered her farm with the lease for these annual payments of $5, in view of its insignificance as a return upon her investment of $23,000 in the farm. It is manifest, therefore, that the real consideration or inducement for the granting of the lease was the mining of the phosphate upon the land, which she supposed, and was led by appellants to believe, they would commence within a reasonable time; and this conclusion is sustained by the fact that the annual payments of $5 were to be regarded as mere advancements upon the royalty that appellee would receive from the mining of the land, to be credited to appellants upon the royalty first thereafter due appellee.

We do not concur in the conclusion of appellants' counsel that the contract in question is an executed contract. In our opinion it must be classed as an executory contract merely. Under it nothing had been done; everything required by its terms of appellants was to be thereafter done. All that it required of appellee was that she should furnish the land, and this was done when the lease was executed. On the other hand, what it required of the appellants--payment of the consideration, mining of the land for phosphates, accounting to the appellee for the royalties--was to be thereafter done in fulfillment of the contract. The insignificant $5 per year it obligates appellants to pay appellee, whether the land is mined or not, is not, of itself, sufficient to place the lease in that class of contracts known as executed contracts.

But whether it be denominated an executed or an executory contract, it is manifestly lacking in mutuality. It obligates the lessor, in unequivocal language, to continue the lease for 10 years, all the while holding the leased premises in readiness for the lessee's mining operations, but gives her no right to terminate the lease, to compel the lessee to begin mining the land, or to continue the work, if abandoned, after being commenced. On the other hand, the lease does not bind the lessees to do anything. It permits them to begin the work of mining phosphate on the leased premises at any time within 10 years that may be selected by them, to quit when they choose, or not to begin at all, and also the right to terminate the lease at any time upon their mere ipse dixit that the land does not contain phosphate in "paying quantities"; it being left to them alone to decide whether it is in quantity sufficient to make the mining thereof profitable to them.

Reduced to its last analysis, this lease is but a unilateral executory contract, such as is, in Berry v. Frisbie, etc. 120 Ky. 337, 86 S.W. 558, 27 Ky. Law Rep. 724, declared void, and in Young v. McIlhenney, 116 S.W. 728, held to be unenforceable. In Berry v. Frisbie, etc., supra, the lease, while in some respects dissimilar to that in the case under consideration, was, in others, closely akin to it. For instance, it contained the provision: "Should minerals, coals, ores, oils, gases, etc., be found on the leased land in quantities which in the judgment of the said Frisbie and his associates or assignees will pay to work," etc. While in the lease here involved a similar provision is thus expressed: "When the party of the second part [lessee] shall conclude that phosphate or phosphate-bearing rock is not found on said premises in paying quantities," etc. It is manifest that each of these provisions put it in the power of the lessees to begin or discontinue mining operations upon the leased premises as they might elect. The meaning and effect of the provision quoted from the lease in the case of Berry v. Frisbie, etc., is explained in the opinion in that case as follows: "But if his lessees were not bound in fact to sink a well or wells upon the land to test its mineral properties, yet could keep appellant and all others from doing so, it would be in the power of the lessees to prevent its development indefinitely or forever. In that way the lessor would get...