Va. Iron. Coal & Coke Co v. Graham

• Decision Date: 13 March 1919
• Citation: 98 S.E. 659
• Court: Virginia Supreme Court
• Parties: VIRGINIA IRON. COAL & COKE CO. v. GRAHAM et al.

98 S.E. 659

VIRGINIA IRON. COAL & COKE CO.

v.GRAHAM et al.

Supreme Court of Appeals of Virginia.

March 13, 1919.

Appeal from Corporation Court of Roanoke.

Suit by the Virginia Iron, Coal & Coke Company against Nannie M. Graham and others. From a decree for defendants, plaintiff appeals. Reversed and remanded.

W. B. Kegley, of Wytheville, and Jackson & Henson and D. D. Hull, Jr., all of Roanoke, for appellant.

Stuart B. Campbell and Robert Sayers, both of Wytheville, and Waller R. Staples, of Roanoke, for appellees.

PRENTIS, J. The briefs herein filed are unique in that (either purposely or inadvertently) counsel have observed rule 2 (120 Va. v, 94 S. E. vi). This rule requires the briefs to contain a concise abstract or statement of the facts admitted and controverted, which are disclosed by the record. When fairly observed, the precise questions Involved are manifest, and much subsequent labor for the court and counsel will be thereby avoided.

The facts here to be considered are: That by indenture of December 31, 1S97, David P. Graham and wife demised unto Carter Coal & Iron Company for 40 years from Janu ary 1, 1898, that certain iron ore property in Wythe county, Va., known as "Cedar Run, " theretofore granted to Graham by Franklin Carter and wife, said to contain about 3, 600 acres, with the right during the term to mine and remove all the iron ore which the lessee might or could mine on these lauds, with certain easements and privileges fully set forth in the instrument. By deed of January 27, 1899, Carter Coal & Iron Company conveyed unto Virginia Iron, Coal & Coke Company (appellant, hereinafter called the lessee), together with other property, the rights and privileges granted by the said lease. Theretofore, on October 1, 1898, the Carter Coal & Iron Company executed a deed of trust to the Continental Trust Company of the city of New York, conveying the leased property and privileges to secure a bond issue of $2,000, 000. The New York Trust Company has succeeded the Continental Trust Company as trustee in that conveyance. On February 23, 1899, the lessee (Virginia Iron, Coal & Coke Company) conveyed the leased estate, together with much other property, to the Manhattan Trust Company, trustee, to secure a bond issue of $10,000, 000. David P. Graham, the original lessor, having died, his successors in title, Nannie M. Graham, his widow, and others (hereinafter called the lessors), on May 13, 1903, modified the lease so as to reduce the minimum quantity of ore required to be shipped from 20, 000 tons to 12, 000 tons per annum. A partial partition of the real estate of the original lessor has been made, whereby the rights of his widow and heirs to participate in royalties under the lease are fully set forth and established by conveyance of August 20, 1904.

The original lease fixed a royalty of 50 cents per long ton (N. & W. Ry. Co. or its successor's weight) for each ton of good merchantable ore mined and shipped from the leased premises, to he paid to the lessor oh or about the 25th days of April, July, October and January of each year for the ore shipped the preceding three months, with the following provisions as to minimum:

"Not less than twenty thousand tons to be shipped each year. If less is shipped, royalty is to be paid on twenty thousand tons, and if more than twenty thousand tons are shipped in one year, and less than that quantity in the next preceding or succeeding year, the surplus of the one year, and the royalty paid thereon, may be carried to the credit of the other year, either preceding or succeeding, to make the required minimum. If the minimum quantity is not shipped in any year or paid for in sixty days after the expiration of the year, or if the ore shipped is not paid for in sixty days after the rent therefor is due, the said David P. Graham, his heirs, representatives, or assigns, may terminate this lease on ten days' notice of intention so to do."

And the following clause:

"The said David P. Graham, his representatives, heirs or assigns, or their agent, may enter the property at any time for the purpose of inspecting the mining operations, and of requiring the same to be carried on in a proper way, and with due regard to the rights of each party."

The lessee is given the right to remove, at the end of the term, all tramways, machinery and appliances, all pipes, sluices and troughs, and everything used in connection with the mining and washing operations, except the houses and the timber used as supports in the mines, and except pipe lines, tramways and washing plant which were there prior to October 1, 1897. Provided, however, that nothing put on the property by the lessee for use in mining and washing operations shall be removed until the rents are paid; and the privileges and easements granted are to be enjoyed in the operation of the mines leased. The mine had been in operation prior to the date of the lease, and was operated at that time.

The Carter Coal & Iron Company took possession and continued to operate the mine until it conveyed its rights to the Virginia Iron, Coal & Coke Company, and thereafter the last-named company continued to operate it until July 25, 1916, upon which date it gave written notice to Nannie M. Graham and others, the lessors, of the cancellation or surrender of the original lease of December 31, 1897, to become effective as of September 1, 1916. The reason therefor stated in the notice was that iron ores could no longer be found on the leased premises, either of the quality or in the quantity that could be profitably mined; the cost of such tonnage as could be gotten out being altogether prohibitive. The lessors replied to this notice August 29, 1916, advising that they intended to hold the lessee strictly to the terms of the contract, and conceded no authority to cancel it.

The lessee, in accordance with such notice, ceased operations upon the leased premises, has abandoned possession thereof for all the purposes of the lease, though it has not removed its property therefrom, has paid all royalties accrued up to the date designated for the cancellation and surrender to become effective, and has not since that time occupied the property or exercised any of the privileges granted by the lease. After the attempted cancellation and surrender, the lessee undertook to remove from the leased premises the machinery, rails, and equipment placed thereon by its predecessor, which under the terms of the lease it had the right to remove upon its termination, but, under threat of proceedings by the lessors to secure an injunction, has for the present abandoned its claim of right to remove such property. It seems that this allegation of threatened injunction proceedings is made in an amendment to the bill, and that this threat was made after the institution of this suit. The cancellation and surrender of the lease has been ratified by the board of directors of the lessee, and the deed of release tendered to the lessors with the bill and amended bill.

The lessee, on January 30, 1917, filed its original bill, and thereafter filed an amended bill against Nannie M. Graham and others, successors in title to the original lessor, and the trustees in the deeds of trust referred to, setting forth these facts, and praying for a decree canceling the lease, permitting it to remove its personal property from the premises, enjoining the lessors from prosecuting any actions for the recovery of royalties under the lease, and for general relief. The lessors, defendants, filed their demurrer and answer, and the trial court sustained the demurrer and dismissed the bill. Of this action the lessee is here complaining.

Fairly stated, the demurrer is based upon two grounds:

(1) That the bill and exhibits filed show that the contract between the parties is a contract of hazard, that the risk as to the quantity and quality of ore was assumed by the lessee, and that this appears from the lease itself; that it also appears therefrom that it is a definite contract, under seal, for the rental of the property for 40 years, including the right to the lessee to mine ore and do certain other things on the land; that the consideration of the lease is a sum certain as rent reserved; and that there is no warranty on the part of the lessors that the ore will be found of any particular quantity or quality, and hence that the existence or nonexistence of such ore in any quantity or of any quality is immaterial.

(2) That even if the lessee is entitled to be relieved from paying the royalty on account of exhaustion of the ore in the premises, a court of equity has no jurisdiction to grant such relief, upon the ground that the complainant has a complete and adequate remedy at law.

The trial court sustained the demurrer upon the ground last stated.

(a) Taking up these grounds in the order in which we have just stated them, we come to consider whether the bill is demurrable upon the ground that the contract was one of hazard as to the lessee.

The question is quite an interesting one, and we have been greatly enlightened by the exhaustive briefs of the learned counsel on both sides. While no precisely similar question has ever been decided in Virginia, we have been referred to many cases in other jurisdictions, and the principles involved seem to be fairly well established.

As to contracts in general, this is said in 13 Corpus Juris, p. 376:

"Where certain facts assumed by both parties are the basis of a contract, and it subsequently appears that such facts did not exist, there is no agreement."

And many oases are cited in support of that general statement.

Applying this to mining leases, this is said in 27 Cyc. p. 718:

"Mining leases frequently contain a provision for the release of the lessee from payment of rents or royalties in case the mineral becomes exhausted or is found not to exist in paying quantities, and in such case the happening of such contingencies releases the lessee. Even in the...