Price v. Stonega Coke & Coal Co.

• Decision Date: 19 December 1938
• Docket Number: No. 3235.,3235.
• Citation: 26 F. Supp. 172
• Court: U.S. District Court — Southern District of West Virginia
• Parties: PRICE et al. v. STONEGA COKE & COAL CO. et al.

26 F. Supp. 172

PRICE et al. v. STONEGA COKE & COAL CO. et al.

No. 3235.

District Court, S. D. West Virginia, at Charleston.

December 19, 1938.

COPYRIGHT MATERIAL OMITTED

William L. Lee, of Fayetteville, W. Va., and Robert G. Kelly and Edward W. Knight, both of Charleston, W. Va., for plaintiffs.

R. T. Hubard, of Fayetteville, W. Va., Mercer B. Tate, Jr., and E. H. Molthan, both of Philadelphia, Pa., and J. L. Camblos, of Big Stone Gap, Va., for defendants.

McCLINTIC, District Judge.

This suit was brought in the Circuit Court of Fayette County in equity upon an attachment, pursuant to the West Virginia statute in such case made and provided. The controversy involved being wholly between citizens of different states and the amount in controversy exceeding $3,000, exclusive of interest and costs, the suit was removed to this Court by the principal defendant, Stonega Coke and Coal Company, which hereinafter may be referred to as the "defendant" or as "Stonega".

The suit is for the recovery, with interest, of three quarterly installments of $3,000 each of minimum or fixed rent, covering the first three quarters of the year 1932, claimed by plaintiffs as due under three coal leases, together covering about 2,000 acres of land in one boundary in Fayette County, made by some of the plaintiffs and the predecessors in title of the others to one James Laing. Two leases were dated August 1, 1895, and the third (an option subsequently accepted) July 22, 1895. The three leases were assigned by Laing (by an instrument in the form of a lease but technically an assignment and treated as such) to the Sun Coal and Coke Company, by that Company to The New River Collieries Company and by The New River Collieries Company to Stonega. The three leases have been treated by the parties successively interested and considered in the proceedings in this suit as one, and are hereinafter referred to as "the lease".

The lease was modified and supplemented from time to time by subsequent deeds between the parties, among which may be mentioned a deed of February 26, 1906 (Exhibit No. 7 with plaintiffs' bill), extending the period of the lease until all coal in the seam under operation by the lessee should be taken therefrom, a deed dated July 9, 1908 (Exhibit No. 10 with bill), increasing the aggregate of the fixed rents payable under the several instruments constituting the lease to $12,000 per annum, and a deed dated August 24, 1923 (Exhibit No. 17 with bill), but delivered and effective in September, 1923, whereby New River Collieries Company with the consent of the lessors, parties thereto, assigned to Stonega the lease as the same had been modified and supplemented, and was then in effect.

The original leases required the payment of "a fixed money rent", not minimum royalties, for each year of the leases, with the right to mine free coal sufficient at the rate of 8 cents per gross ton of 2240 pounds to equal the fixed rent, and provided a royalty of 8 cents per gross ton on all additional coal mined. The lease was for the period of twenty-one years with provision that if at the termination of the lease all available coal should not have been taken therefrom, then, unless the lessors should elect, as they might, to pay the lessee the value of all improvements other than the branch railroad necessary for the operation of the mine, "the term of this lease shall in that event be extended and continued in force in all respects, and the lessee agrees to continue his mining operations under the provisions of this lease until all the remaining coal is mined and taken from the leased premises".

They also contained a provision, in the proceedings in the suit and hereinafter referred to as the "withdrawal clause", the interpretation of which appears to be the primary and most important question presented in the case. It is as follows: "In case the lessee finds he cannot work this lease at a profit he is to have the right to withdraw from this lease, and remove all improvements placed on the premises if the lessors who shall have have the option to take said improvements or not, elect not to take or pay for said improvements, or any part of same. If lessors elect to take said improvements or any part of same, the value to be paid therefor shall be settled and determined by arbitrators chosen in the manner hereinbefore provided for".

The deed of February 26, 1906, recited that the lessors released their right to terminate the lease at the expiration of twenty-one years and extended and continued "in force the terms of said original leases for the mining of said leased premises until all coal in said premises in said Sewell seam, by which is meant the seam on said leased premises, now being worked by the Sun Coal and Coke Company, shall be taken therefrom".

The deed of July 9, 1908, increasing the aggregate of the annual minimum or fixed rents provided, "But should the coal in said land become so nearly exhausted by proper mining as to render it impracticable, without fault on its part, to skillfully and properly mine sufficient coal to reimburse said Company as provided in said leases and contract for the minimum or fixed rent hereby agreed on, then and in that event said minimum hereby agreed on shall be thereafter subject to an equitable reduction, so that said Company shall not be required to thereafter pay a greater minimum or fixed rent than it can by energetic, skillful and proper mining reimburse itself for as provided in said leases and contract".

Stonega contended that, having the right under the withdrawal clause to do so, it had withdrawn from the lease and terminated its obligations thereunder on December 1, 1931; that the coal in the leased premises had become so nearly exhausted as to render it impracticable for it to skillfully and properly mine sufficient coal to reimburse it for any part of the minimum or fixed royalties provided in the deed of July 9, 1908; and that by a deed dated April 15, 1932 (Exhibit No. 1 with Stonega's answer), between the plaintiffs and The New River Collieries Company, in the proceedings and hereinafter referred to as the "release", releasing The New River Collieries Company and Stonega from liability for any failure of The New River Collieries Company or its predecessors in title to comply with, or for any violation of the terms, conditions and provisions of the lease prior to the assignment thereof to Stonega, Stonega was released from its obligation to discharge and perform the duties and obligations of the lessee under the lease from and after the assignment to it.

The plaintiffs contended that the withdrawal clause gave an option or right to the lessee to withdraw from the lease when he should have reached and proven the coal (which was susceptible of operation only by a slope of considerable length or by a shaft about 100 feet deep) if he should then find that he could not profitably work the same, but that right must be exercised, if at all, when he had sufficiently determined the character of the coal to enable him to make a finding whether he could profitably operate it or not, and was not a right coterminous with the lease; that the right of withdrawal lapsed when the lessee on reaching and proving the coal found that he could profitably operate it and proceeded to do so; that in any event the right of withdrawal if still existing was surrendered when the leases were extended by the deed of February 26, 1906; that the clause providing for the reduction of the fixed or minimum rent contained in the deed of July 9, 1908, increasing the fixed or minimum rent has no application to the facts in the case; that more than 4,000,000 tons of coal remain in the leased premises and the lease is, and will continue, in effect until such coal has been mined; that if Stonega had been entitled to withdraw from and terminate its obligations under the lease on December 1, 1931, it had not done so, having continued in possession of the leased premises by numerous tenants until after the institution of this suit; and that the release of April 15, 1932, released Stonega only from its obligation as surety of The New River Collieries Company on the liability of the latter for damages due to improper mining prior to the assignment of the lease to Stonega, and did not release any obligation of Stonega as lessee under the lease arising or accruing after such assignment.

The case was referred to Frank Lively, Esquire, as Special Master to make a report for the advice and assistance of the Court. Special Master Lively filed his report on the 17th day of May, 1938. Exceptions to the report were filed, one by the plaintiffs and one hundred and eighty-three by Stonega, and the case has been heard by the Court upon the report of the Special Master and the exceptions thereto. Counsel on each side in briefs and orally argued the case broadly, and no point arising upon any exception was specifically presented. The Court is of opinion to and doth overrule all and singular the exceptions and approve and adopt the report of the Special Master, but deems it proper to supplement the same as follows:

The land demised, afterwards known and frequently referred to as the "Sun property", was in a part of the New River coal field which had been developed by the construction of the Loup Creek Branch of the Chesapeake and Ohio Railway only about one year before the making of the lease, and the coal — the Sewell seam — which it was proposed to mine under the lease nowhere outcropped on the leased land or near the same. Where it was developed by a slope and a shaft on a tributary of Loup Creek the coal was about 100 feet below the surface and deeper elsewhere on the property.

Development of the property required a short railroad built by lessee from the Loup Creek Branch of the C. & O. Railway. In July-August, 1895, the mines which had been opened on that branch were few in number and new, only partially developed and too...