Rice v. Rice

• Decision Date: 17 May 1932
• Citation: 50 S.W.2d 26,243 Ky. 837
• Parties: RICE et al. v. RICE et al.
• Court: Kentucky Court of Appeals

50 S.W.2d 26

243 Ky. 837

RICE et al. v. RICE et al.

Court of Appeals of Kentucky

May 17, 1932

Appeal from Circuit Court, Johnson County.

Suit by Crate Rice and others against Sherman Rice and others. Judgment for plaintiffs, and defendants appeal.

Reversed.

Fred Howes, of Paintsville, for appellants.

Kirk &amp Wells, of Paintsville, for appellees.

RICHARDSON J.

This appeal requires the construction of a lease executed and delivered for the purpose of mining coal, and the determination of the right of a lessor to re-enter and take possession of the leased premises under the facts presented. A synopsis of the material facts is presented in the brief of the appellant, the correctness of which is concurred in in the brief of appellees. The facts are substantially as follows:

Sherman Rice and Emma Rice executed and delivered to Crate Rice on January 12, 1924, the lease involved, wherein it was stipulated that a rental of 12 1/2 cents per ton for each ton of 2,000 pounds of coal mined and sold from the premises was to be paid by the lessee.

Therein "it is further agreed by the parties of the second part that they will use reasonable diligence, means and methods to mine a reasonable amount of coal from said premises during the first twelve months from the date hereof to make the same a paying operation, and thereafter they hereby agree to pay first parties a minimum sum of four hundred ($400.00) dollars, as royalty for the second year of the life of this lease whether the coal mined will amount to such sum or not at the aforesaid price of twelve and one-half cents per ton and for the third and each subsequent year of the tenure of this lease, the second party agrees to pay the first parties a minimum royalty of six hundred ($600.00) dollars per annum while operated by Crate Rice, but if for some means this lease changes hands the minimum royalty shall advance to eight hundred ($800) dollars per annum, whether the coal mined in any such year amounts to said sum or not at the said rate per ton, but if the second party shall not mine in each year as much coal as shall at the rate of royalty above mentioned amount to the minimum royalty for said year, they shall have the right during the next succeeding year to mine free from royalty enough coal at the rate of royalty aforesaid to make up the difference without interest, between the rate of royalty aforesaid on coal actually mined in such year and the minimum royalty paid for such year, provided that no coal shall be mined free in any year on account of any deficiency in any preceding year until the same amount of coal required to pay the minimum royalty for the year in which said coal is mined free shall have been first mined, and no payment in excess of the minimum of any year shall be credited as against the deficiency of any subsequent year."

The lease also provided that "all payments hereunder shall be made on the 15th day of each month for the coal mined during the preceding month." It was further agreed: "That the rents and royalties hereinbefore mentioned shall be deemed a lien reserved upon the demised premises or property and the improvements thereon, and this lease and leasehold estate shall be subject to a lien for all unpaid rents and royalties in favor of the first parties and may be sold when same shall become due and unpaid for a period of ninety (90) days or more and, at the election of first parties, such lien shall be enforced by a suit in any court of competent jurisdiction."

The lessee also agreed to furnish the lessor such maps of the mine as are required to be made by the statutes of Kentucky, and to keep correct amounts of all coal mined and removed from the premises, which accounts were to be open to the inspection of the lessor, his agent or attorney, at all reasonable times.

To protect the lessor against violation of the covenants of the lease, this provision was inserted in it: "It is further understood and agreed that, if said parties of the second part shall fail to pay any of the royalties or other payments at the time or in the manner hereinbefore provided or shall fail to keep and perform any of the covenants and agreements on their part to be kept and performed hereunder, then this lease shall become null and void at the option of said parties of the first part; and said parties of the first part shall have the right to enter upon said premises and expel said parties of the second part therefrom and again have, repossess and enjoy the same as if this lease had not been executed."

In April, 1924, Crate Rice began operations which were suspended in June of the same year. During this period, he shipped 12 or 13 cars of coal. He resumed operations in September, 1924, and continued until January or February, 1925, during this time he mined and shipped about the same number of cars. On October 24, 1926, he transferred the lease to E. E. George. From the time Crate Rice suspended operations in January or February, 1925, no coal was mined or shipped by him. George owned the lease and actually had charge of the mine and its operation from the date of his purchase until some time in December, 1925. During the period of his ownership he mined and shipped 10 or 12 cars of coal. On January 2, 1926, George transferred the lease to L. O. Knipp. At the time Knipp acquired ownership he was a nonresident, and absent from the state of Kentucky, residing at Philadelphia, Pa.

After Knipp acquired title to the lease and mining equipment, Lawrence Conley who had been foreman of the mine under George, was employed by Knipp to run the mine for him, Knipp agreeing to pay him $100 per month, house rent, and coal for the use of his dwelling. Conley thereafter merely lived in the house. No operation of the mine was engaged in by Knipp. Conley continued to occupy the dwelling and engage in other employment. No wages were ever paid by Knipp to Conley. Crate Rice claims that, for about two months before Sherman Rice re-entered and took possession of the leased premises, he had been in the employ of Knipp; that Knipp was supposed to pay him wages of $100 per month which were not paid. Crate Rice, after he was employed by Knipp, engaged in no work at the mine. He claims that in August, 1926, he employed Sherman Rice to perform certain services at the mine for which he agreed to pay him $50, and which he paid by cash $25 and the balance by his individual accounts against Sam Conley and R. T. Hackworth. It is not shown that Knipp had any knowledge of this transaction.

We may here state that, notwithstanding Crate Rice admits his employment by Knipp, and Knipp's ownership of the lease and mining equipment, Crate Rice claimed at that time "to be the owner of the lease." He does not explain how he became the owner after his sale to George and after Knipp acquired title. It is apparent that he regarded the lease as abandoned by Knipp, and his claim of ownership was by virtue thereof, and not by reason of the acquisition of the title of Knipp. He had not seen either George or Knipp for two years, nor does he claim that he even heard from them during that time.

No coal was mined or shipped after Knipp acquired title to the lease and equipment, except 4 cars which were mined and shipped by Wayne Rice, and the royalty rental to which Sherman Rice was entitled on these 4 cars was not paid to him. Wayne claims that he had an arrangement with Crate Rice to mine and ship these 4 cars, and that he sold 1 car to Crate Rice and the other 3 to the Tildesley Coal Company. It does not appear that Knipp had any knowledge thereof. By his arrangement with Crate Rice, Wayne Rice was to retain whatever profit was made on the coal mined by him. During Crate Rice's ownership of the lease he acquired by purchase and placed on the leased premises mining equipment and supplies including rails, cars and mining tools at a cost of $9,500. On his sale of the lease to George, he sold the equipment and supplies to him. By the sale of the lease by George to Knipp, the title to the equipment and supplies passed to Knipp, with the obligation on him to pay any unpaid balance of the existing debts of Crate Rice against the lease and equipment, with the privilege of taking credit therefor on the note which was delivered to Crate Rice as evidence of the consideration. During the time Crate Rice was operating the mine, Sherman Rice paid for him and furnished merchandise to his employees to the amount of about $800. At the time Crate Rice sold the lease and equipment to George, he was owing Sherman Rice a balance of $150 of the minimum rental for the second year of the lease. This was a portion of the indebtedness of Crate Rice which George assumed and agreed to pay as a part of the consideration for the lease and equipment and which Knipp assumed and agreed to pay as a part of the consideration to George for the lease and equipment. While George owned and operated the lease he became indebted to Sherman Rice for money advanced to assist him in defraying the expenses of the mining operations. After Knipp became the owner of the property, Clark was a representative of Knipp in his ownership of the property, and as such representative he obtained from Sherman Rice, for the benefit of Knipp, $125, for which he executed and delivered to Sherman Rice, Knipp's check. The check was presented for payment in the usual course of business, payment was refused by the bank upon which it was drawn, and is yet unpaid. The amounts advanced by Sherman Rice and paid for Crate Rice, George, and Knipp equaled, if they did not exceed, the royalty received by Sherman Rice during their operations. During the summer and fall of 1926, prior to the 27th day of October, Crate Rice purchased, and caused to be delivered on the leased...