Pittsburgh Nat. Bank v. Allison Engineering Co.
| Decision Date | 11 July 1980 |
| Citation | 279 Pa.Super. 442,421 A.2d 281 |
| Parties | PITTSBURGH NATIONAL BANK, Trustee under the Wills of William R. Marshall, and Lloyd N. Tatem, Assignee of Garrettsville Lumber Company, v. ALLISON ENGINEERING COMPANY, A Partnership, Appellant. |
| Court | Pennsylvania Superior Court |
Argued Nov. 14, 1979.
Zeno Fritz, Pittsburgh, for appellant.
Michael W. Balfe, Pittsburgh, for appellees.
Before SPAETH, HOFFMAN and VAN der VOORT, JJ.
VAN der VOORT, Judge:
The issue in this case is the correct interpretation of two coal leases each of which provided for a minimum royalty of $50.00 a month prior to the commencement of mining operations, payable quarterly in advance, and thereafter a tonnage royalty of twenty cents a ton for coal mined and removed from the premises.
The leases were entered into February 26, 1949 between Garrettsville Lumber Company, a partnership composed of William R. Marshall and Lloyd N. Tatem as lessors and Allison Engineering Company, the appellant herein, as lessee. Mr. Tatem died September 29, 1950 and Mr. Marshall on June 14, 1966. Pittsburgh National Bank, the appellee herein, is a trustee under the Wills of both men, and instituted this action in that capacity.
The royalty provisions of the leases were identical and read as follows:
The leases were prepared on identical printed forms, with typewritten provisions filled in. No time period was inserted in the blank space in Paragraph 3. There was no elaboration of, or reference to, either royalty paragraph elsewhere in the lease, and no explanation or definition of the intended nature of the minimum royalty. There was no reference to a right of recoupment of the minimum royalty against later tonnage royalties.
The appellant did not begin mining operations under the leases until 1973 but made minimum royalty payments totalling $29,100 between 1949 and 1973. In making the subsequent tonnage royalty payments, the appellant took the position that the earlier minimum royalty payments had been an advance payment against tonnage royalties to be recouped when the coal was later mined and removed. Consequently, it deducted the tonnage royalties of twenty cents a ton from the earlier minimum royalty payments, and only after it had recouped its aggregate minimum royalty payments of $29,100 did it pay the tonnage royalties called for by the leases. The appellee disputed this recoupment, contending that the earlier minimum royalties were in the nature of a penalty or rent for the period of delay in mining the coal and, consequently, not to be treated as an advance payment on the tonnage royalties. Failing to resolve the dispute by negotiation, the appellee brought suit in assumpsit to recover the $29,100 that had been withheld by the appellant by way of recoupment.
Before trial the appellee moved for Summary Judgment, which was opposed by the appellant on the contention that it should be allowed to introduce checks and correspondence with the appellee and its predecessors in interest for the purpose of showing the intent of the parties. The Court, speaking through Judge J. Warren Watson, denied the Motion for Summary Judgment, stating that the contract language was capable of either interpretation, and concluding that there should be a trial "to ascertain the intent of the contracting parties" and "to determine the custom and usage of the coal mining industry."
In December 1978, the case was tried before Judge Joseph A. Del Sole, sitting without a jury. The appellee offered the testimony of one of its officers that it had consistently treated the minimum royalty payments received by it as a penalty for the period that coal was not mined, and consequently, they were treated as income on its accounts. It also introduced evidence that by long and well-established Pennsylvania usage and custom, minimum royalties in a coal lease payable prior to mining are considered to be a liquidated rent or a penalty for failure to mine coal, and are not to be credited against subsequent tonnage royalties unless the lease specifically so provides.
The appellant offered evidence that in making its quarter-yearly minimum royalty payments, it had consistently labeled them as "advance royalties" on its checks, and that neither the appellee nor its predecessors in interest had contested the characterization until the appellant sought to recoup such payments against the later tonnage royalties. The appellant likewise offered evidence that it had used the term "advance royalties" in some earlier correspondence with the original lessors, and that the lessors had used the same terminology in responding. However, there is nothing in appellant's testimony to indicate that the parties had ever addressed themselves to the question of whether there was a distinction intended between the "minimum royalty" of the leases and an "advance royalty" as it was referred to on the checks and in the correspondence, or whether the royalty under either name could be recouped against the later tonnage payments for coal removed.
In January 1979, the court entered a verdict for the appellee in the amount claimed, with interest. The court en banc dismissed appellant's Exceptions on May 7, 1979, and entered judgment for the appellee in the amount of $37,155.11. An appeal followed. We affirm the ruling for the reasons hereinafter stated.
It is appellant's initial contention that the appellee should not have been permitted to introduce evidence as to the meaning of the leases, because their terms were clear and unambiguous. This is a reversal of appellant's original position in successfully opposing appellee's Motion for Summary Judgment so that it could introduce evidence bearing on the intent of the parties. It is likewise inconsistent with the appellant's introduction of evidence to show that it had characterized minimum royalty payments as advance royalties without objection from appellant. If it was appropriate for appellant to offer testimony as to the meaning of the leases, it was equally appropriate for the appellee.
Appellant's testimony consisted of its unilateral characterization of the minimum royalty payments as "advance royalty" payments on checks and in some correspondence, and the appellee's apparent acquiescence in the use of that language. However, appellant's testimony fell short of establishing what distinction, if any, it had intended to convey by the use of this language. We find no more basis for concluding that an "advance royalty" implies a right of recoupment than does a "minimum royalty." It could imply a royalty in advance of mining operations quite as well as an advance payment on tonnage royalties. In any event, it was not the contract...
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