PEABODY COAL COMPANY v. Pasco, 71-1187.

• Decision Date: 15 December 1971
• Docket Number: No. 71-1187.,71-1187.
• Citation: 452 F.2d 1126
• Parties: PEABODY COAL COMPANY, Plaintiff-Appellee, v. P. C. PASCO et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

452 F.2d 1126 (1971)

PEABODY COAL COMPANY, Plaintiff-Appellee, v. P. C. PASCO et al., Defendants-Appellants.

No. 71-1187.

United States Court of Appeals, Sixth Circuit.

December 15, 1971.

James O. Overby, Murray, Ky. (Donald A. Jones, Overby & Jones, Murray, Ky., on the brief), for appellants.

Daniel Cornette, Greenville, Ky. (Jarvis, Cornette & Payton, Greenville, Ky., on the brief), for appellee.

Before CELEBREZZE, PECK and MILLER, Circuit Judges.

WILLIAM E. MILLER, Circuit Judge.

Peabody Coal Company in a diversity action in the district court sought a declaratory judgment granting it the right to strip mine three tracts of land in which Peabody holds the coal rights. Peabody traces its title to the coal underlying the land involved here from two mineral deeds. A 1919 deed conveyed all the coal underlying tract #1 and granted certain mining rights; a 1914 deed conveyed the coal underneath tracts #2 and #3 and also granted mining privileges. Peabody contended in the court below that the mining rights granted by the two deeds included the right to strip mine the surface of the land involved. The defendants below, P. C. Pasco, et al., own and occupy the surface of the three tracts of land and denied that the mineral deeds granted the right to strip mine. Both parties moved for summary judgment and the district court, finding no genuine issue of material fact, granted judgment for Peabody declaring that the coal company had the right to strip the subject property. From that judgment, Pasco, et al., appeal.

Because this case is in federal court solely on diversity of citizenship grounds, Kentucky law will, of course, apply. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). It should be noted at the outset that ordinarily a conveyance of mineral rights creates two separate and distinct estates in land. Asher v. Gibson, 198 Ky. 285, 248 S.W. 862 (1923). One person may own the surface estate while another person owns the mineral estate, and each estate is subject to the laws of descent, and may be devised or conveyed. Kincaid v. McGowan, 88 Ky. 91, 4 S.W. 802 (1887). The Kentucky courts have found, however, that some deeds grant such overwhelming mining rights that the mineral owner in fact has the right to destroy the surface estate. Martin v. Kentucky Oak Mining Co., 429 S.W.2d 395, 399 (1968).

The leading case of Buchanan v. Watson, 290 S.W.2d 40 (1956), was the first Kentucky decision specifically holding that a particular deed allowed the mineral owner to use the strip mining process. The mineral deed in that case was a standard "broad form" deed commonly used in the Appalachian region in the early 1900's. The Buchanan deed, the pertinent language of which is set forth below, granted the mineral owner extensive rights in the use of the surface for mining purposes.¹ In particular, that deed granted rights in, of, to, on, and under the land; allowed the grantee to use the surface in any and every manner deemed necessary or convenient for mining; released the grantee from liability for damage done to the surface; and reserved to the grantor the use of the land for agricultural purposes only to the extent that such use would be consistent with the rights conveyed to the mineral owner.

The two mineral deeds in question in the instant case differ in varying degrees from the typical "broad form" deed.² Appellant Pasco contends that the cases following the Buchanan decision were based on "broad form" deeds and maintains that the present deeds are not so broad and thus do not grant the right to strip. Peabody argues that it is immaterial whether the mineral severances here are "broad form" because the deeds indicate that the mineral owner has the paramount right to the use of the surface. To determine the question whether the two deeds allow the coal owner to strip the land it will be necessary to examine the Kentucky decisions, first to determine the controlling considerations and second, to interpret the present deeds in light of such considerations.

Our examination of the Kentucky decisions involving the right to strip indicates that the Kentucky Court of Appeals has been in a process of crystallizing its approach to this question. Each party to this case pinpoints isolated excerpts from particular cases in support of its position. Although we find the parties' reliance upon such isolated language from the early cases unhelpful, it is necessary to place these decisions in perspective.

In the earliest case involving the issue of the mineral owner's right to strip mine, the court did not decide the question but rather remanded the action to the trial court to allow the surface owner to file an answer. Treadway v. Wilson, 301 Ky. 702, 192 S.W.2d 949 (1946). The Treadway deed conveyed the following surface rights:

"room on the surface of the lands above described for tipples, entries, shafts, wells, slate pits, prospect holes, roads, passways and all easements necessary in mining and removing all said mineral at any and all times, and second party is also granted enough small timber from the surface of the lands described to supply the mines with props and caps and all mine timbers." 192 S.W.2d at 949.

The Court of Appeals in a dictum stated that the rights of the respective owners of the surface and of the minerals had been declared in the case of Case v. Elk Horn Coal Co., 210 Ky. 700, 276 S.W. 573 (1925). That case involved a determination of whether the surface owner or the mineral owner had the paramount right to use a portion of the surface. The deed was clearly "broad form" in nature and, as the court noted, conveyed to the mineral grantee among other rights, the following privileges:

"In this deed the minerals and so much of the standing timber as the grantee may deem necessary or convenient for mining purposes are conveyed; also vendee is granted the use of the surface for every purpose that it may deem necessary or convenient in the prosecution of its mining business, with the right to remove all pillars and other lateral supports in its mines without leaving any support to the roof or surface, and it is expressly given unlimited time in which to commence and complete its operations, with a provision against forfeiture in delay in so doing. The vendor reserves to himself the timber not necessary for the purposes mentioned, and the use of the land for agricultural purposes, so far as such use is consistent with the rights conveyed; and the right to mine and use coal for domestic purposes." 276 S.W. at 574.

In Treadway, the court found the deed "similar" to the Case deed and quoted the Case holding:

"Clearly the defendant (mineral owner) has the paramount right to the use of the surface in the prosecution of its business for any purpose of necessity or convenience, and of this it is to be the judge, unless it exercises this power oppressively, arbitrarily, wantonly, or maliciously." 192 S.W.2d at 950.

Appellant Pasco questions the similarity of the two deeds and argues that the holding in Case that the mineral owner had the paramount right to a portion of the surface for the construction of a transmission line does not support the contention that the surface may be destroyed. Peabody, on the other hand, argues that Treadway indicates that a non-"broad form" deed may allow stripping. We do not think the disputed dictum has been accorded particular significance by the Court of Appeals. In fact, the dictum has been characterized as stating that "strip mining can be done under the broad form deed so long as it is not done `oppressively'". Martin v. Kentucky Oak Mining Co., supra, 429 S.W.2d at 396. Such in fact was the holding of Buchanan. 290 S.W.2d at 42-43.

The Buchanan case interpreted a "broad form" deed as granting the right to strip but apparently based its decision on the following reasoning:

". . . the appellant had the right to remove all of the coal in, on, and under the surface of this tract, the particular method contemplated by the parties (in the absence of language prohibiting other methods) does not preclude him from utilizing the only feasible process of extracting the coal. . . . `Mining\' is not limited to the sinking of a shaft but may include other methods, including strip, which may be necessary to take possession of and remove the minerals conveyed." 290 S.W.2d 42, 43.

This rationale and the expansive language used by the Court of Appeals could reasonably be interpreted as indicating that any deed of all coal also granted the right to strip. Subsequent to the Buchanan decision, a number of Kentucky cases concurred in the holding that under a "broad form" deed, the mineral owner has the right to strip mine and is liable to the surface owner only in the event of an arbitrary, wanton, or malicious exercise of that right. Bevander Coal Co. v. Matney, 320 S.W.2d 301 (1959); Blue Diamond Coal Co. v. Neace, 337 S.W.2d 725 (1960); Kodak Coal Co. v. Smith, 338 S.W.2d 699 (1960); Ritchie v. Midland Mining Co., 347 S.W.2d 548 (1961); Blue Diamond Coal Co. v. Campbell, 371 S.W.2d 483 (1963); Croley v. Round Mountain Coal Co., 374 S.W.2d 852 (1964); Martin v. Kentucky Oak Mining Co., 429 S.W.2d 395 (1968).

In Croley v. Round Mountain Coal Co., supra, the Court of Appeals considered a reservation of mineral rights and the question whether the terms of the reservation allowed the grantor of the surface the right to extract the coal by strip mining. The owner of the land in that case deeded the surface estate to Croley's predecessor in title, with the following reservation:

"Reserving all coal, oil, gas, stone, water and any other minerals in, on or under the land, together with the right of ingress and egress to take, enter, mine, cut and remove any and all minerals in, on or under the land. In the event any of the operation in the reservation aforesaid injures or damages any growing crop on the surface, then the person so damaging the growing crop

...