Oliver v. Polson

• Decision Date: 21 October 1921
• Docket Number: 16449.
• Citation: 201 P. 289,117 Wash. 385
• Parties: OLIVER et al. v. POLSON et al.
• Court: Washington Supreme Court

201 P. 289

117 Wash. 385

OLIVER et al. v. POLSON et al.

No. 16449.

Supreme Court of Washington

October 21, 1921

Department 2.

Appeal from Superior Court, King County; Mitchell Gilliam, Judge.

Action by Angus J. Oliver and others, associated together as the Glacier Coal Company, unincorporated, and another, against Alex Polson and another. Judgment for plaintiffs against the named defendant, and the latter appeals. Affirmed.

Kerr, McCord & Ivey, of Seattle, for appellant.

Flick &amp Paul and Peters & Powell, all of Seattle, for respondents.

MITCHELL J.

In February, 1920, plaintiffs, Angus J. Oliver and others, as owners, entered into a miner's lease of certain portions of sections 16, 17, 20, and 21, township 39 N., range 7 E. W M., with defendant Alex Polson, for a term of years. For the purpose of this case the conditions of the lease were substantially, a cash payment (which was made) with the right of entry for the purpose of coal mining and the making of any and all improvements on and means of transportation on any and all of the lands as might be necessary or convenient for searching for, working, getting, preparing, carrying away and disposing of the coal to be got from the lands. The lessee was given the right to the use of water, water power, timber, rock, stone, and so forth as found necessary or convenient in mining and transportation operations. Section 4 of the lease provides:

'The party of the second part shall pay to the parties of the first part, or their heirs and assigns, as royalties:

'First: For pea coal and sizes above, sixty-five (65) cents per ton.

'Second: For buckwheat coal, twenty-five (25) cents per ton.

'Third: For rice coal, ten (10) cents per ton.

'Fourth: For all coal other than anthracite mined and marketed, twenty-five (25) cents per ton.

'Long ton is contemplated in all cases.

'Such payments to be made for each ton that is mined and marketed from the said lands, during the term of this agreement, such mining and marketing to be done and royalties paid during the full term of this lease, to wit, the term of ninety-nine (99) years, unless the coal in said land shall be sooner exhausted or it shall be ascertained that merchantable coal does not exist thereon in quantities sufficient to be profitably mined.'

Section 6 of the lease provides:

'The minimum amount of royalties to be paid by the second party under this agreement in any one year, after issuance of the patent, or in any event beginning not later than May 1, 1911, shall not be less than four thousand dollars ($4,000). If the royalties accruing under the provisions of this agreement for coal mined and marketed shall aggregate in any one year less than the sum of four thousand dollars ($4,000), yet, nevertheless, second party shall pay to first parties or their assigns on account of royalties the full sum of four thousand dollars ($4,000), provided, however, that in the event the royalties accruing shall be less in any one year than the sum of four thousand dollars ($4,000), the difference between the royalties so accruing and the said sum of four thousand dollars ($4,000) shall be advanced and paid on account of royalties on coal to be mined and marketed in subsequent years, and if thereafter the royalties accruing in any one year shall exceed the sum of four thousand dollars ($4,000) there shall be deducted from any such excess of royalties accruing, the sum or amount paid in any prior year, in excess of royalties accruing, in each year of payment; provided further, that except as hereinbefore in this paragraph limited, the parties of the first part shall be entitled to and shall receive from the second party, in addition to the sum of four thousand dollars ($4,000) per year, all royalties that may accrue in excess of that sum.'

Section 10 provides:

'The party of the second part shall begin the development of the coal deposits upon said lands hereinbefore described within nine months from the date hereof, and shall thereafter prosecute the same with reasonable diligence and shall mine and market the coal from said lands as rapidly and extensively as the conditions and the market for coal shall permit.'

The parties bound their heirs, representatives, assigns, and successors in interest, jointly and severally, with permission to assign the lease as a whole to any party desired by the lessee, he being responsible, nevertheless, for the performance of the conditions and terms of the lease.

The lease was assigned by the lessee to the Washington Development Company, a corporation, of which the lessee is president and principal stockholder. Immediate possession was taken of the property, and thereafter, for a number of years, a large amount of money was spent in prospecting and attempting to develop the coal prospects on the lands and other lands adjacent thereto under the control of the lessee and his assignee, within the so-called coal field. At the expiration of several years the lessee, claiming to be satisfied by his investigations and the advice of competent geologists, coal mining engineers, and experts that the lands were destitute of merchantable coal in quantities sufficient to be profitably mined, abandoned the field, including the lands involved in this section, and gave his lessors notice accordingly. The owners, having received no pay other than the cash consideration at the date of the contract, commenced this action against the defendants, Alex Polson and the Washington Development Company, on December 16, 1915, to recover $20,000 as minimum royalties for the years May 1, 1911, to May 1, 1915, and the further sum of $100,000 for failure of the defendants to properly prospect the lands for coal and put them in producing condition alleging the lands contained valuable deposits of coal capable of production in such quantities that royalties would far exceed $4,000 per annum during the term of the lease.

On November 5, 1917, the plaintiffs filed an amended complaint containing two causes of action separately stated, the one to recover $28,000 claimed due under the contract for minimum royalties at $4,000 per annum from May 1, 1911, and the other to recover $120,000 damages for the failure of defendants to open and develop the coal mine or mines on the lands alleged to have been available and sufficient in quantity and quality to warrant large profits in the market as conditions then existed, and to have reasonably furnished an output of $400 tons daily, which would have made an average of 25 cents per ton royalty under the terms of the lease. To the amended complaint the defendants interposed a motion to require the plaintiffs to elect as between the first and second causes of action, on the ground, as claimed by the defendants, that they were inconsistent. The court required the plaintiffs to elect, and thereupon they chose their first cause of action, comprising the annual minimum royalties. In the amended answer to the amended complaint, it is admitted that the defendant, Washington Development Company, is a corporation, that the lease between the parties, a copy of which was set out in the complaint, was entered into by the parties thereto, that it had been assigned by Alex Polson to the Washington Development Company, and that he is president and principal stockholder of the corporation. All other essential allegations of the amended complaint were denied, and affirmatively it was alleged that at the date of the lease, and at all times since, no coal in merchantable quality and sufficient quantity existed in the lands; that no consideration existed for the execution of the lease; that there has been a total failure of consideration for the lease; that royalties were to be paid only in the event coal existed in sufficient quantities to be profitably mined; and that no royalties in any sum whatever have accrued or have been owing from defendants or either of them to the plaintiffs.

The reply denied the affirmative allegations in the amended answer.

There was a jury trial, which resulted in a verdict for the plaintiffs in the sum of $28,000. By consent of plaintiffs in open court the defendant the Washington Development Company, a corporation, was dismissed from the action. From a judgment on the verdict with interest defendant, Alex Polson, has appealed.

1. The principal controversy in this case depends upon the construction of the lease, and consequently upon which side the burden of proof rested in the trial of the case. The jury was instructed that the burden of proof was upon the defendants to prove, by a fair preponderance of the evidence, that they made reasonable search and exploration of the lands in question for the purpose of determining the existence or nonexistence of coal, and to prove, by a fair preponderance of the evidence, that merchantable coal in sufficient quantities to be profitably mined does not exist upon such lands. Appellant claims the instruction was erroneous, and that the burden was on plaintiffs, who were not entitled to recover anything until they fairly met the burden. Elaborate arguments have been made and many authorities cited by respondent's counsel upon this subject. It would be unprofitable to write with attempted clearness upon all such authorities.

In the annotation, page 1078, L. R. A. 1917E, following the decision in the case of Bennett v. Howard by the Kentucky Court of Appeals, it is said:

'It is very frequently provided in mining leases that the lessee shall pay a designated royalty on a certain tonnage of coal or ore produced, whether the same is mined or not, and very frequently the lease also contains a provision relieving the lessee of the liability for this minimum royalty under designated circumstances or conditions. In construing leases of

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