Lively v. Elkhorn Coal Co.

• Decision Date: 11 January 1952
• Docket Number: No. 283.,283.
• Parties: LIVELY v. ELKHORN COAL CO., Inc.
• Court: U.S. District Court — Eastern District of Kentucky

101 F. Supp. 1014

LIVELY v. ELKHORN COAL CO., Inc.

No. 283.

United States District Court E. D. Kentucky, Pikeville Division.

January 11, 1952.

Robert T. Winston, Jr., Norton, Va., Napier & Napier, Hazard, Ky., for plaintiff.

J. W. Howard, Prestonsburg, Ky., H. L. Moore, Whitesburg, Ky., Herman L. Taylor, Chicago, Ill., for defendant.

SWINFORD, District Judge.

This case is before the court on the motion of the defendant for a judgment notwithstanding the verdict. Fed.Rules Civ. Proc. rule 50(b), 28 U.S.C.A.

The plaintiff sued the defendant Elkhorn for damages growing out of the following facts:

Elkhorn was engaged in producing coal. Lively was an employee with the designation, Assistant Manager. Elkhorn owned certain coal lands which it desired to develop. Lively entered into an arrangement with Elkhorn whereby he was to go upon the leasehold, remove the overburden, strip mine the coal, build necessary roads, approaches and bins, and deliver the coal to Elkhorn at its tipple, bins or ramps at a certain sum per ton. It was understood that all expense of roads, stripping and other work incidental to such operation was to be borne by Lively and the coal was not to be accepted unless it was of merchantable quality.

There was no written contract or memorandum of the agreement.

Lively took his machinery upon the property and began his prospecting in the fall of 1946. He began loading and delivering coal in small quantities and as he said in a "spotty" fashion in the winter or spring of 1947. He began loading coal in large quantities and "in earnest" in June of 1947. The enterprise was very successful and Lively employed other contractors to strip mine the coal. This operation continued until January 24, 1950. One of the contracting companies which Lively had employed was a firm by the name of Blair and Oldham. It is disclosed by the record that Lively delivered between 110,000 and 115,000 tons of coal and that Blair and Oldham had produced for him an additional 60,000 tons. A stock pile of about 2,000 tons had accummulated without being loaded, which was a circumstance leading up to the incident of January 24, 1950. On that date Lively entered into a written contract with Blair and Oldham whereby they were to produce all of the coal on the lands in question and were to give him the sum of fifteen (15) cents per ton. Prior to this contract Lively was receiving fifty-two (52) cents per ton. Lively contends that he was forced to make this contract by Elkhorn because it had repudiated its contract with him and was giving Blair and Oldham the exclusive right to produce and deliver the coal.

Lively filed this action claiming $25,000 loss of profit in coal remaining in place which he could have produced and the further sum of $19,000 for money which he expended in building and maintaining roads and bins for his use in producing and delivering the coal and of which he only got the partial benefit.

The case was tried by a jury which returned a verdict for the plaintiff in the sum of $15,000. It has been several months since the case was tried. Many pages of briefs have been filed. The court has reviewed the record, read and re-read the depositions, briefs and exhibits and has listened to recordings of parts of the evidence at the trial and had parts of the proceedings at the trial transcribed.

I must conclude that the defendant's motion should be sustained and a judgment entered for the defendant.

The contract on which the action was brought should have been in writing. The Kentucky statute of frauds, Section 371.010 (6) (7), KRS, provides as follows:

"No action shall be brought to charge any person: "(6) Upon any contract for the sale of real estate, or any lease thereof for longer than one year; or "(7) Upon any agreement that is not to be performed within one year from the making thereof; unless the promise, contract, agreement, representation, assurance or ratification, or some memorandum or note thereof, be in writing and signed by the party to be charged therewith, or by his authorized agent. The consideration need not be expressed in the writing, but it may be proved when necessary or disproved by parol or other evidence."

The contract was clearly a lease of coal lands and was not to be performed within a year. The Kentucky courts have expressly passed upon an almost identical question in the case of Beckett-Iseman Oil Co. v. Backer, 165 Ky. 818, 178 S.W. 1084. In that case the court said: "It is well settled that oil and gas are minerals, and are a part of the realty, and a lease giving to the lessee the right to explore certain lands and remove therefrom the oil and gas is a contract for the transfer and sale of an interest in lands, and is required to be in writing. Thornton on the Law Relating to Oil and Gas, § 291; 20 Cyc. 215; Williamson et al. v. Jones, 39 W.Va. 231, 19 S.E. 436, 25 L.R.A. 222; Wilson v. Youst, 43 W.Va. 826, 28 S.E. 781, 39 L.R.A. 292; Riddle v. Brown, 20 Ala. 412, 56 Am.Dec. 202; Lear v. Chouteau, 23 Ill. 39; Huff v. McCauley, 53 Pa. 206, 91 Am. Dec. 203; Entwhistle v. Henke, 211 Ill. 273, 71 N.E. 990, 103 Am.St.Rep. 196; Ramage v. Wilson, 37 Ind.App. 532, 77 N.E. 368; Henry v. Colby, 3 Brewst.Pa. 171, cited in 10 Ann.Cas. 100."

To sustain the plaintiff's position in the case at bar it would be necessary to ignore this Kentucky case, which I cannot find has ever been reversed or modified. It seems to me conclusive of the issue. Lively, like the Beckett-Iseman Oil Company, was prospecting for minerals. If he found coal of merchantable quality he was to produce it. If he could not produce merchantable coal he was to stand the loss of whatever money he had expended in the enterprise.

Neither was it a contract for services which were to be performed within a year. The plaintiff contends that it could have been performed within a year and is therefore without the statute. It is true the rule of law provides if a contract could be performed within a year even though it was not so performed it is not subject to the statute of frauds. This rule, however, is subject to the exception that where it is obvious from all surrounding facts and circumstances that it was not within the contemplation of the parties or within reason that it would be performed within a year the statute applies. As is disclosed by the record, the circumstances in the instant case clearly disclose that it was impossible from all practical purposes to perform this contract within a year. The plaintiff worked on the development for over three years and it was not concluded then. Our Kentucky courts have frequently had the matter before them. The rule is stated in the following quotation from Williamson v. Stafford, 301 Ky. 59, 190 S.W.2d 859, 860: "But there is a well-recognized exception to the rule above recited, and that is that when it was contemplated by the parties that the contract would not, and could not, be performed within the year, even though it was possible of performance within that time, it comes within the inhibition of the Statute. Cumberland & Manchester R. Co. v. Posey, supra 196 Ky. 379, 244 S.W. 770; East Tennessee Tel. Co. v. Paris Electric Co., 156 Ky. 762, 162 S.W. 530, Ann.Cas. 1915C, 543; Kentucky Utilities Co. v. Hurst, 207 Ky. 448, 269 S.W. 525; King v. McMillan, 293 Ky. 399, 169 S.W.2d 10."

The plaintiff insists that even though the statute of frauds applies to this case that there is sufficient memoranda of the transaction to meet the test of a written contract. I cannot agree. I have searched diligently among the exhibits. Most of the correspondence set forth with the deposition of Mr. Putnam is inter-office...