May v. Johnson Family Coal Co., No. 2008-CA-001047-MR (Ky. App. 2/19/2010)
| Decision Date | 19 February 2010 |
| Docket Number | No. 2008-CA-001072-MR.,No. 2008-CA-001047-MR.,2008-CA-001047-MR.,2008-CA-001072-MR. |
| Parties | Millicent MAY; Ruth Bruning; Robert Crooks; Tom Self; Robert G. Self; Sydney (Self) Phillips; Thelma Seals; Gretchen Bogan; Marjorie Wendt; Janice Tanksley; William C. Robinson; Rebecca Q. Logue; John H. Robinson; and H.L. Robinson, Jr., Appellants. v. JOHNSON FAMILY COAL CO.; Linda Anderson; and Dr. William Johnson, Appellees. and Kenny Trivette; Sidney Trivette; Marilyn May; and Patty Blair, Appellants v. Johnson Family Coal Co. Linda Anderson and Dr. William Johnson, Appellees. |
| Court | Kentucky Court of Appeals |
Appeal from Pike Circuit Court, Honorable Steven D. Combs, Judge. Action No. 02-CI-00104.
W. Sidney Trivette, Pikeville, Kentucky, Wayne F. Collier, Lexington, Kentucky, Briefs for Appellants.
James P. Pruitt, Jr., Pikeville, Kentucky, Brief for Appellees.
Before: ACREE and DIXON, Judges, GRAVES,1 Senior Judge.
In consolidated appeals, Millicent May, et al., and Kenny Trivette, et al., (collectively May and Trivette, or Lessors) seek reversal of a Pike Circuit Court judgment that a coal lease between May and Trivette, as lessors, and Johnson Family Coal Company (JFCC, or Lessees), as lessees, remains in full force and effect. Because the judgment is not supported by substantial evidence and is contrary to law, we reverse.
This is the second time these parties have appeared before this Court regarding the subject lease. See May v. Johnson Family Coal Co., 2003 WL 21554968 (Ky. App. July 11, 2003)(2002-CA-001493-MR), disc. rev. denied May 12, 2004; hereafter "May I"). However, the prior appeal was from a different judgment. Nevertheless, JFCC's assertion that the doctrine of res judicata should have barred the case now before us makes the prior case relevant to our decision here. We will discuss May I as necessary.
On April 1, 1956, May's and Trivette's predecessors-in-title entered into a coal lease with JFCC's predecessors-in-title. The lease provided for payment of a royalty of $0.25 per ton of coal mined by the parties. In 1965, the lease was amended to reduce the royalty, but later informally amended to return the royalty rate to the original figure and to allow for assignment or sublease by the lessee. A minimum royalty of $2,000 per year was payable under the lease regardless of the amount of coal mined. As successors, May and Trivette are entitled to approximately half the subject mineral estate, and JFCC is entitled to the other half. Consequently, in addition to the lessor-lessee relationship, the parties are co-tenants.
Specific provisions of this lease largely determine the outcome of this
case. We here quote those provisions in pertinent part.
II. RENTS AND ROYALTIES
The Lessee agrees to pay to the Lessors [a certain royalty] for each and every ton of coal mined and produced from any other property not contained in this lease which may be hauled through or over any of the leased premises . . . until this lease is terminated.
. . . Lessees shall make a report to the Lessors at the end of each and every month of the coal mined from or hauled over or through the leased premises, during the preceding month and the monthly tonnage and/or haulage royalties shall be paid on the basis of said reports . . . but it is understood and agreed that the amount of tonnage royalties due under this lease shall be ascertained and calculated at the end of each lease year by survey made by a competent engineer approved by Lessors and the royalty adjusted on the basis of said survey at the next succeeding monthly royalty payment date after said survey is completed, said survey and calculation to be made at the expense of the Lessees.
III. MINING METHODS
The Lessee agrees to pursue a plan of mining in accordance with a plan projected by a competent mining engineer [and] to maintain at all times a map showing such plan and workings of the mine as it progresses, and to furnish the Lessors a blueprint of same at the commencement of mining and at least every six (6) months . . . .
VII. TERMINATION
[F]ailure on the part of the Lessees to pay any installment of rents or royalties herein for a period of thirty (30) days after the due date thereof, or upon any breach of any other covenants or conditions herein provided, this lease shall automatically terminate and be canceled and no forbearance or failure to declare a forfeiture or to enter upon or repossess the leased premises on the part of Lessors shall in any wise waive this provision or prevent the cancellation or termination of this lease.
Additionally, section IX of the lease granted the Lessees, but not the Lessors, the right to cancel the contract on ninety (90) days' notice. And finally, the 1965 lease amendment provided:
That the Lessee may assign or sub-lease any portion of the lease coal without the written consent of the Lessors; provided, a verified copy of any such assignment or sublease is promptly furnished to [Lessors or their agent] and provided further that no such assignment or sub-lease shall relieve the Lessees from the obligations to pay royalties or from any other provision of this Lease.
In 1992, JFCC entered into a sub-lease with Enterprise Coal Company. Mining began during this time but ended in the mid-1990s. No claim of abandonment was ever asserted.2 In 1997, JFCC provided to May and Trivette a notice that its rights under the lease had been assigned,3 and in November 2000, Pike-Letcher Land Company resumed the mining operation previously suspended.
From the inception of the lease, JFCC timely tendered all royalty payments required by the lease. However, it is significant that, beginning with the second payment tendered after Pike-Letcher resumed mining, around December 2000, May and Trivette expressed to JFCC's attorney their refusal to accept royalty payments, and those royalties have been held in escrow since that time.
In January 2002, May and Trivette filed an action against JFCC to terminate the lease under section VII for JFCC's failure to provide: (1) monthly reports of the amount of coal mined (section II); (2) year-end reconciliation reports performed by an engineer approved by May and Trivette (section II); (3) mining maps upon the commencement of mining and every six months thereafter (section III); and (4) notice of assignments of the lease (1965 amendment).
The case proceeded to trial before the court, Judge Charles E. Lowe presiding, on October 31, 2002. Judge Lowe resigned from the bench before rendering a judgment. Judge Steven Daniel Combs replaced Judge Lowe and, on August 15, 2005, May and Trivette moved the circuit court for entry of judgment. On May 26, 2007, JFCC filed a Motion for Court to Conclude Adjudication. The Pike Circuit Court's Findings of Fact, Conclusions of Law and Judgment were finally entered on May 6, 2008.4 This appeal followed.
May and Trevitte assert the circuit court erred in two ways. First, they claim that certain of the circuit court's findings of fact lack the support of substantial evidence. Second, they argue the court misapplied Cameron v. Lebow, 338 S.W.2d 399 (Ky. 1960), thereby committing reversible error. We agree with both contentions.
When reviewing a trial court's findings of fact, we apply the clearly erroneous standard of review. Moore v. Asente, 110 S.W.3d 336, 354 (Ky. 2003). Under this standard, the Court will uphold the factual findings of a trial court if those findings are supported by substantial evidence on the record. Owens-Corning Fiberglas Corp. v. Golightly, 976 S.W.2d 409, 414 (Ky. 1998). Substantial evidence means "evidence of substance and relevant consequence having the fitness to induce conviction in the minds of reasonable men." Id.
May and Trivette claim seven of the trial court's findings of fact lack the support of substantial evidence. We will narrow the objections to those that are necessary to our analysis.
One specific finding of fact merits particular attention. The circuit court found that "all mining maps required under the Lease were provided by JFCC to" May and Trivette. This is clearly contrary to the evidence. May's and Trivette's agent under the lease presented uncontradicted testimony that from November 2000 until after May and Trivette filed suit in January 2002, JFCC provided no maps whatsoever to May and Trivette. There is clearly no substantial evidence supporting the circuit court's finding to the contrary.
The circuit court's error in this regard is not inconsequential. As a condition of the right to continue mining the property, the lease requires JFCC to provide the Lessors with a map of mining operations "at the commencement of mining and at least every six (6) months" thereafter. Generally, the purpose of such a requirement in a coal lease is to assist the property owners in determining how and to what extent the mining operation is affecting their property, to confirm that no waste is being committed, and to help assure the recovery of coal is maximized under the lease. Specifically, the provision in this lease allowed May and Trivette to independently assess whether the coal operator was "conduct[ing] the mining in a workmanlike manner and in accordance with modern and approved mining methods." Therefore, when JFCC failed to comply with the requirements of section III, it was in breach of this condition of the lease.
Many of the other challenges to the circuit court's findings of fact center on its determination that May and Trivette failed to notify JFCC of their objections to certain of JFCC's breaches of the lease. Consistent with their complaint, these objections were to JFCC's failure: (1) to provide an annual reconciliation under section II of the lease; (2) to engage a competent engineer approved by May and Trivette to conduct the reconciliation; (3) to provide those mining maps under section III of the lease; and (4) to provide a verified copy...
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