Nease v. Coal & Coke Ry. Co.

• Decision Date: 23 April 1912
• Citation: 195 F. 987
• Court: U.S. Court of Appeals — Fourth Circuit
• Parties: NEASE v. COAL & COKE RY. CO. et al.

195 F. 987

NEASE v. COAL & COKE RY. CO. et al.

United States District Court, N.D. West Virginia.

April 23, 1912

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W. E. Chilton and C. D. Merrick, for complainant.

Van Winkle & Ambler, for defendants.

DAYTON District Judge (after stating the facts as above).

This controversy must depend primarily upon the construction to be given the contract of May 5, 1900. Two preliminary questions raised seem to me to be clearly determined.

First. That whatever rights thereunder vested in Nease, Kelsey, and Hadley are now owned by Nease. The interests of Hadley and Kelsey were originally only contingent ones derived from Nease. Hadley conceded this, and, by his own sworn answer filed in the injunction cause instituted by Kelsey, admitted he had not complied with the contingent requirements, and therefore disclaimed any interest. As to Kelsey's interest, a compromise agreement, a trustee's sale, and deed made thereunder fully vested it in Nease.

Second. The defense of want of notice of the rights of Nease under this contract of May 5, 1900, sought to be asserted by the subsequent purchasers, Kerens, Elkins, Davis, the Washington Coal & Coke Company, and the Coal & Coke Railway Company, cannot be maintained. This for the very plain reason that this contract had been properly acknowledged by the parties and duly admitted to record in the three counties of Lewis, Gilmer, and Braxton where said coal lands were situate, on November 21, 22, and 23, 1900, respectively.

The deed of Gillmor, trustee, to the Braxton Coal Company, was not executed until five days after, November 28th, and was not admitted to record until December 29, 1900. The deed of the Braxton Coal Company to Kerens, trustee, was not executed until a year after. Thus, under our state statute, these subsequent purchasers were bound to take notice of this contract. They had to take notice, not only of one, but of all, of its clauses and provisions.

In construing this contract of May 5, 1900, for the purpose of determining what rights were secured to Nease therein, we may well remember that it must receive that construction which will best effectuate the intention of the parties. This intention must be ascertained, not from detached parts, but from the whole agreement. 'Greater regard is to be had to the clear intent of the parties than to any particular words which they may have used in the expression of their intent. ' If the meaning is not clear, we must consider the circumstances under which the contract was made, the subject-matter, and the relation of the parties to aid us in ascertaining its true intent and purpose. Parol evidence is admissible to show these. Clark on Contracts, 590.

It is very clear that Jackson and his associates, owning the majority stock of the Little Kanawha Railroad Company, a corporation greatly involved and unable to extend its line so as to be profitable in operation, primarily desired to secure for it sufficient funds to liquidate its outstanding obligations, extend its line, and put it on a paying basis. The first contract between them and Nease, that of November 25, 1899, was executed with this purpose in view. Both sides under it, had the right to negotiate the $600,000 mortgage loan necessary to finance the railroad. Both failed, and disagreement and litigation followed. In the meantime they had secured options on the 25,000-acre coal field. Nease had put his money in this to the extent of at least $5,000 under the contract. He had nothing in the railroad except a speculative profit, contingent upon his ability to secure some one else to finance it. This was the condition of things at the time the compromise agreement of May 5, 1900, was executed. A careful analysis of this contract its purposes to be (a) to settle all disputes and disagreement and dismiss all pending litigation inter partes; (b) to define the interests of the parties in and to the coal interests and options; (c) to provide for the taking up of such options and securing the coal in fee; (d) to take away from Nease all right to negotiate the financing of the railroad and vest such right in Jackson and his associates alone. To carry out these purposes, the contract provided: (1) That the coal rights should be held by Gillmor in trust only for the parties in accord with the terms of the contract. (2) Jackson and his associates should organize a coal corporation to which Gillmor, at their request, should convey the options and coal rights obtained. (3) Pending the organization and financing of the corporation, each party was to contribute equally the necessary funds to pay for the coal rights as payments therefor matured, and for the expenses incident to the taking up thereof. (4) That Gillmor, as trustee, should not convey to the corporation until it, by agreement duly executed and acknowledged, should bind itself (a) to make payment of all unpaid purchase money due under the terms of the option; (b) agreeing not to lease the coal or any part thereof to any concern or persons, retaining to the corporation, or any of its officers, any financial interest; (c) to pay monthly to Nease and associates a one-fifth average prevailing royalty on all coal mined; (d) allowing Nease's representative free access to the coal lands and rights and to the corporation's books of account and records of shipment; (e) agreeing that the corporation should not mine other coal as long as the 25,000 acres could be mined as profitably. (5) The contract further provides that Gillmor, before conveying such coal rights to the corporation, should further require it to refund to him all moneys paid by the parties in the securing of such rights which he was to pay over to the parties in the amounts contributed by them. (6) That Jackson and associates should make immediate and diligent efforts to (a) finance the coal corporation; and (b) to finance and cause the construction of a railroad to the coal lands. (7) In case they failed in these two undertakings and in having the money advanced to secure the coal rights refunded to the parties on or before December 1, 1900, then the rights of parties were to be 'finally fixed, determined, and defined' to be that Nease and associates were to have 'in lieu of any royalties or other interest an undivided .49 of all such coal rights and coal property' and Jackson and associates the remaining .51 thereof. Two plans, in the alternative, seem clearly to have been provided for, the primary one the extension of a railroad into and the mining of the coal. Within what time? The securing of the financial backing, necessary for these purposes, by Jackson and associates, was expressly limited to December 1, 1900, less than seven months from the contract's date. No limit, by express terms, was fixed wherein the railroad should be built and the mining operations commence. Was such limit implied? In my judgment, yes, a reasonable limit. The contract provided that 'immediate and diligent' efforts should be put forth to secure the necessary means to build the road and commence mining operations; that royalty should be paid monthly; that access to the field, to the books of account, and the records of shipment should be granted; that no part of the coal field should be leased; and that no other coal should be mined by...